<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d)of the
Securities Exchange Act 1934 for the fiscal year ended
December 31, 1996.
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number: 33-55400
ACT III THEATRES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-4211629
- ------------------------------ --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
919 SW TAYLOR STREET, SUITE 900
PORTLAND, OREGON 97205
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(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (503) 221-0213
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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
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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. [X]
The Company's voting stock is not publicly traded and does not have a
quantifiable market value.
At December 31, 1996, there were 100 shares of the registrant's common stock
outstanding.
<PAGE>
TABLE OF CONTENTS
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PART I PAGE
Item 1. BUSINESS................................................. 3
Item 2. PROPERTIES............................................... 6
Item 3. LEGAL PROCEEDINGS........................................ 6
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...... 6
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................... 7
Item 6. SELECTED FINANCIAL DATA.................................. 8
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.................... 9
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............. 14
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...................... 14
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....... 15
Item 11. EXECUTIVE COMPENSATION................................... 18
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT........................................... 22
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........... 24
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K...................................... 24
SIGNATURES.............................................................. 26
<PAGE>
PART I
ITEM 1: BUSINESS
THEATRE OPERATIONS
Act III Theatres, Inc. and its subsidiaries (collectively, unless the
context otherwise requires, the "Company"), is one of the leading motion picture
exhibitors in the United States in terms of screens operated. At December 31,
1996, the Company operated 122 theatres with an aggregate of 673 screens. The
Company's theatres are strategically located in concentrated areas in three
regions of the country, the Pacific Northwest (Washington, Oregon, Idaho and
Alaska), Texas (Austin and San Antonio)and Nevada (Las Vegas).
The Company's strategic grouping of its theatres in cities other than the
largest U.S. cities has also enabled the Company to achieve a strong market
presence in those regions in which the Company competes. The Company estimates
that a majority of its screens operate in areas in which the Company is the
leading exhibitor, thereby enhancing the Company's ability to license the films
that it finds desirable. The Company has a particularly strong presence in the
Portland, Oregon and San Antonio markets.
The Company, in operating its theatres, attempts to maximize attendance in
order to cover fixed operating costs and increase concession sales. The Company
accomplishes this by maintaining moderate regular admission prices and offering
reduced pricing at certain non-peak times of the week.
The Company attempts to own the underlying real property of its theatres
whenever possible and financially prudent. The Company's ownership of its real
property enables it to control occupancy costs and mitigate the effects of
increasing rents. In addition, the Company has greater flexibility in operating
its theatres that are owned in that it can expand popular theatres or close
unprofitable theatres. On December 31, 1996, the Company owned a majority of
its theatres (including theatres that are subject to ground leases).
The Company was incorporated in Delaware in March, 1989 to facilitate, in
1989, the combination of theatre operations in San Antonio and Austin, Texas,
owned by A 3 Theatres of San Antonio, Ltd., a Texas limited partnership ("A 3"),
with two concurrent acquisitions of theatres in the Pacific Northwest and
Austin, Texas.
Consistent with industry practice, the Company primarily relies on
advertisements and movie schedules published in newspapers to inform its patrons
of film titles and show times. Radio, television and full page newspaper
advertisements are used on a regular basis to promote new releases and special
events. These expenses generally are paid for by film distributors; however,
the Company occasionally contributes to the cost of such advertisements. The
Company pays for directory advertisements which display information on films at
the Company's theatres within a particular geographic area. The Company
exhibits "Coming Soon" and "Now Playing" spots in advance of feature film
presentations to promote films currently playing on the Company's screens or
films not yet released.
<PAGE>
FILM LICENSING
The Company's film licensing activities are conducted from its offices in
Portland, Oregon and Los Angeles, California by the Company's executives
responsible for film bookings and settlement. Prior to negotiating or bidding
for a film license, the Company evaluates the prospects for upcoming films. The
criteria considered for each film include cast, director, plot, performance of
similar films, estimated film rental costs and expected Motion Picture
Association America rating. Successful licensing depends greatly upon the
knowledge of the tastes of residents in markets served by each theatre and
insight into the trends in those tastes, as well as the availability of
commercially popular motion pictures. The Company at no time licenses any one
film for all its theatre complexes, which reduces its risk with respect to any
single film.
The Company licenses films from distributors on a film-by-film and
theatre-by-theatre basis. Film licenses entered into in either a negotiated or
bidding process typically specify rental fees based on the higher of a gross
receipts formula or theatre admissions revenue formula. Under the gross
receipts formula, the distributor receives a specified percentage of box office
receipts, with the percentages declining over the term of the run. The
distributor receives film rentals based on a straight percentage which, for
first-run film rental, usually begins at a minimum of 70% of box office
admissions and gradually declines to as low as 30% over a period of four to
seven weeks. Second-run film rental typically begins at 35% of box office
admissions and declines to 30% after the first or second week. Under the
theatre admissions revenue formula (commonly known as a "90/10" clause), the
distributor receives a specified percentage (e.g., 90%) of the excess of box
office receipts over a negotiated allowance for theatre expenses.
License fees actually paid by the Company under a negotiated film license
generally are adjusted by the distributors subsequent to the exhibition of a
film in a process known as settlement (although there are currently two
distributors that do not adjust rental fees). Factors taken into account in the
settlement process include the commercial success of a film relative to original
expectations and an exhibitor's commitment to the film. Because of the
settlement process, negotiated film licenses typically are more favorable to
exhibitors than bid licenses (which are not adjusted) with respect to the
percentage of revenue paid to license a film.
The Company's business is dependent upon the availability of marketable
motion pictures. There are six distributors which provide a substantial
portion of quality first run movies to the exhibition industry. They are
Paramount Pictures, Universal Film Exchanges, Inc., Buena Vista Pictures
Distribution (Disney), Warner Bros. Distribution, Sony Pictures and Twentieth
Century Fox. There are also numerous smaller distributors. Poor
relationships with distributors or poor performance or disruption in the
production of motion pictures by the major studios and/or independent
producers may have an adverse effect upon the business of the Company. No
single distributor dominates the market. From year to year, the Company's
revenues attributable to individual distributors vary significantly depending
upon the commercial success of such distributor's films in any given year.
The Company believes that its relationships with distributors generally are
satisfactory.
<PAGE>
CONCESSIONS
Concession sales are the second largest source of revenue for the Company
after box office attendance and provide the Company with superior margins
compared to box office receipts. Concession items include popcorn, soft drinks,
candy, hot dogs and other items. The Company's strategy emphasizes prominent
and appealing concession counters designed for rapid service and efficiency.
Some of the Company's larger multiplex theatres have two or three refreshment
stands to make it easier for larger numbers of patrons to gain access to the
counters. The Company is continuing its efforts to increase concession sales
through optimizing product mix, introducing new products, training staff to
cross sell products and ensuring proper deployment of existing concession
equipment at its theatres.
Although many exhibitors utilize outside vendors for concession supplies,
the Company reduces its cost of concessions by operating two leased computerized
warehouses that supply concession supplies to its theatres. One warehouse is
located in Texas and supplies all of the Company's theatres located in that
state. The other warehouse is located in Oregon and supplies all of the
Company's theatres located in the Pacific Northwest. For the Company's theatres
located in Alaska, the Oregon warehouse supplies all non perishable products and
each theatre purchases perishable products from local vendors. Each warehouse
generally supplies all concession supplies required by the Company's theatres
located in its territory. All purchasing for the warehouses is done from the
Company's offices in Portland, Oregon. The Company believes that by supplying
its own warehouse facilities its total concession costs (including freight
costs) are lower than they would be if the Company was required to pay an
outside third party. The Company believes that concession supplies for the
Company's theatres are readily available from many sources.
COMPETITION
The Company's theatres are subject to varying degrees of competition in the
geographic areas in which they operate. Competition is often intense with
respect to licensing films, attracting patrons and obtaining new theatre sites.
The Company competes against local and national exhibitors, some of whom have
greater financial resources than the Company.
The Company believes that the principal competitive factors with respect to
film licensing include licensing terms, seating capacity, location and prestige
of an exhibitor's theatres, the quality of projection and sound equipment at the
theatres and the exhibitor's ability and willingness to promote the films. The
competition for patrons is dependent upon factors such as the availability of
popular films, the location of theatres, the comfort and quality of theatres,
and ticket prices. The Company believes that its admission prices are
competitive with admission prices of competing theatres.
EMPLOYEES
At January 31, 1997, the Company had approximately 284 full-time and 3,292
part-time employees.
The Company's employees are generally not subject to collective bargaining
agreements. However, two of the Company's employees in Bellingham, Washington
and Longview-Kelso, Washington (both film projectionists) are represented by the
International Alliance of Theatrical Stagehand Employees and Motion Picture
Machine Operators. The Company considers its relations with this union and the
two union employees to be satisfactory.
<PAGE>
ITEM 2: PROPERTIES
Of the 122 theatres operated by the Company on December 31, 1996, 69
theatres with 355 screens were owned by the Company, of which 14 theatres with
108 screens were leased pursuant to ground leases. The other 53 theatres with
318 screens were leased pursuant to building leases.
The Company's building leases have original terms ranging from 15 to 25
years and, in most cases, renewal options for up to an additional 20 years at an
increased rent. Four of the Company's theatres are leased jointly pursuant to a
month-to-month lease. The Company's ground leases have original terms ranging
from 18 to 50 years and, in most cases, renewal options for up to an additional
15 years at an increased rent. Both building and ground leases provide for
minimum annual rentals and generally require additional rental payments based on
a percentage of revenues over a base amount. In some cases where the Company
leases a theatre, the Company's rights as tenant are subject and subordinate to
the mortgage loans of the lessors under such leases. Therefore, if a mortgage
were foreclosed, the Company could lose its lease, although the Company has
never lost a lease under such circumstances. Substantially all of the
concession, projection, seating and other equipment required for each of the
Company's theatres is owned by the Company.
In addition to the 122 theatres operated by the Company, as of December 31,
1996, seven theatres previously operated by the Company were closed. Two of
these theatres are owned by the Company and five are leased, of which 2 of the
leased theatres are jointly leased pursuant to a four-theatre month-to-month
lease. The Company is attempting to either sell or lease the owned theatres.
All the Company's owned real property is subject to a first priority lien
securing the Company's obligations to General Electric Capital Corporation ("GE
Capital"). In addition, there are 6 theatres subject to liens that secure
non-recourse promissory notes of a subsidiary of the Company in the principal
amount of $12.3 million as of December 31, 1996.
The Company has two warehouses for its concessions which are located in San
Antonio and Portland and are leased pursuant to building leases.
The Company believes that its properties are adequate for its current and
anticipated future needs.
ITEM 3: LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
arising from the ordinary course of its business operations, such as personal
injury claims, employment matters and contractual disputes. Management believes
that the Company's potential liability with respect to such proceedings
currently pending is not material in the aggregate to the Company's consolidated
financial position or results of operations.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders during
the quarter ended December 31, 1996.
<PAGE>
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMMON EQUITY
There is no established public trading market for the Company's common
stock. As of December 31, 1996, there was one shareholder of the Company's
common stock. The Company paid $0, $300,000 and $0 of dividends on its common
stock for years ended December 31, 1994, 1995 and 1996, respectively. Certain of
the Company's debt instruments restrict payment of dividends on its common
stock. See "Management Discussion and Analysis --- Liquidity and Capital
Resources" regarding limitations on dividends.
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
The table below sets forth selected consolidated financial data regarding
the Company as of and for each of its most recent five fiscal years. The
financial information for the years ended December 31, 1992 and 1993 were
derived from the Company's Consolidated Financial Statements for such period,
which were audited by Arthur Andersen LLP. The report of Price Waterhouse LLP
with respect to the Consolidated Financial Statements for the fiscal years ended
December 31, 1994, 1995 and 1996 is included elsewhere herein. The information
set forth in this table should be read in conjunction with, and is qualified by
reference to, the audited Consolidated Financial Statements and the related
notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
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(IN THOUSANDS)
INCOME STATEMENT DATA: 1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues...................... $148,446 $175,853 $187,751 $196,191 $223,549
Costs of operation....... 103,657 120,680 127,499 135,010 157,539
General and admini-
strative expenses........ 4,663 6,125 5,882 6,166 6,981
Depreciation and
amortization............. 19,092 21,229 20,637 22,162 25,817
------ ------ ------ ------ ------
Income from
operations................. $ 21,034 $ 27,819 $ 33,733 $ 32,853 33,212
Gain (loss)on sale of assets.. -- 1,392 240 (22) --
Provision for income taxes.... 2,130 2,275 4,315 3,759 4,690
Interest expense, net......... 18,854 22,536 23,225 23,886 22,637
Income before extraordinary
items and cumulative effect 50 4,400 6,433 5,186 5,885
Net income (loss)............. 2,016 ( 9,920) 6,433 5,186 5,885
EBITDA(a) 40,146 49,048 54,370 55,015 59,029
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 3,522 $ 18,177 $ 27,431 $ 19,002 $ 8,720
Property and equipment, net... 148,032 154,700 160,406 177,873 231,621
Total assets.................. 227,468 237,721 241,926 243,004 281,427
Total indebtedness............ 195,550 244,600 240,006 231,559 256,108
Mandatorily redeemable
securities................. 54,960 8,553 9,880 11,396 13,132
Common shareholder's
equity (deficit)........... (38,486) (45,904) (40,798) (37,428) (33,279)
</TABLE>
The net income for fiscal year ended December 31, 1992, includes an
extraordinary gain of $1,966 for the utilization of net operating loss
carryforwards. The net loss for fiscal year ended December 31, 1993 include a
tax adjusted extraordinary loss of $l,508 relating to the extinguishment of
debt. The net loss for fiscal year ended December 31, 1993 also includes the
cumulative effect of charge in accounting for income taxes resulting in a charge
of $12,812.
(a) EBITDA is defined as net income before interest, amortization of debt
discount, income taxes, depreciation and amortization. EBITDA is provided
because management believes EBITDA provides useful information for some
investors for evaluating the Company's operations. EBITDA is not a measure of
financial performance under generally accepted accounting principles and should
not be construed as an alternative to operating income (as a measure of
operating performance) or as an alternative to cash flows from operating
activities (as measure of liquidity).
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
The Company's revenues are derived principally from box office admissions
and theatre concessions sales. Additional revenues are derived from rent and
other sources. The Company's principal costs of operations are film rentals,
concessions costs and other expenses (such as payroll, advertising, theatre
rentals, maintenance, supplies, insurance, utilities, sales and admission
tax). In general, costs of operations are variable and general and
administrative costs are fixed in relation to changes in revenues. A
significant percentage of the Company's revenue growth since its formation has
been due to the opening and acquisition of theatres.
RESULTS OF OPERATIONS
The following table presents a summary of certain income statement items as
a percentage of total revenues and other key ratios.
RESULTS OF OPERATIONS
-----------------------------------
YEARS ENDED DECEMBER 31,
1994 1995 1996
---- ---- ----
REVENUES:
Admissions...................... 68.6% 68.1% 68.1%
Concessions and other........... 31.4 31.9 31.9
---- ---- ----
Total Revenues............... 100.0% 100.0% 100.0%
Cost of operations................... 67.9 68.8 70.5
General and administrative
expenses........................... 3.1 3.1 3.1
Depreciation and amortization........ 11.0 11.3 11.5
Income from operations............... 18.0 16.8 14.9
Interest expense, net................ 12.4 12.2 10.1
Net income........................... 3.4 2.6 2.6
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
REVENUES
Revenues for 1996 increased 13.9% to $223.5 million from $196.2 million for
1995. This increase was attributable to an increase in attendance and concession
sales resulting from the operation of 48 additional screens in operation at year
end 1996, as compared to the number of screens in operation at the end of 1995
and an increase in the number of films that were box office successes.
COSTS OF OPERATIONS:
Costs of operations for 1996 increased 16.7% to $157.5 million from $135.0
million for 1995. The increase was primarily attributable to the increase in
total revenues for the year which resulted in an increase in various costs tied
to revenues, including sales tax, admission tax and concessions, and an increase
in operating costs associated with the additional 48 screens operated by the
Company during 1996.
Cost of operations as a percentage of revenues increased for 1996 when
compared with 1995 due primarily to higher film rental, rent expense at the new
facilities and an increase in labor costs due to the increase in minimum wage
law.
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES:
General and administrative expenses for 1996 increased 13.2% to $7.0
million from $6.2 million for 1995. The increase was primarily attributable to
higher compensation expenses including the expense of granting stock options to
certain officers of the Company.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization expense, which includes amortization of
intangibles and other assets, increased 16.5% for 1996 to $25.8 million from
$22.2 million in 1995. The increase was the result of an increase in
depreciation due to opening new theatres and the renovation of existing theatres
by the Company.
INTEREST EXPENSE (NET):
Interest expense (net) decreased 5.2% to $22.6 million for 1996 from $23.9
million in 1995. This decrease was primarily related to the capitalization of
interest relative to new theatre construction.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
REVENUES
Revenues for 1995 increased 4.5% to $196.2 million from $187.8 million in
1994. This increase was primarily the result of an increase in attendance from
an additional 59 screens in operation at year end 1995, as compared to the
number of screens in operation at the end of 1994 and an increase in concession
prices.
COST OF OPERATIONS
Cost of operations for 1995 increased 5.9% to $135.0 million from $127.5 in
1994. The increase was primarily attributable to the increase in total revenues
for the year which resulted in an increase in various costs tied to revenues,
including sales tax, admission tax and concessions, and an increase in operating
costs associated with the additional 59 screens (including 5 theatres with 27
screens acquired on September 22, 1995) operated by the Company during 1995.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for 1995 increased 4.8% to $6.2 million
from $5.9 million for 1994. The increase was primarily due to increased payroll
costs and professional fees.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense, which includes amortization of
intangibles and other assets, increased 7.4% for 1995 to $22.2 million from
$20.6 million in 1994. These increases were primarily the result of remodeling,
opening and acquisition of new theatres by the Company.
INTEREST EXPENSE, (NET)
Interest expense increased slightly for 1995, as compared to the same
period in 1994. The increase is due to the fluctuation of the LIBOR Rates in
1995 partially offset by a decrease in the applicable margin rate added to the
LIBOR.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues are collected in cash, principally through box
office admissions and theatre concessions revenues. The Company has an
operating "float" which partially finances its operations and which permits the
Company to maintain a small amount of working capital capacity. This "float"
exists because admissions are received in cash, while exhibition costs
(primarily film rentals) are ordinarily paid to distributors within 15 to 45
days following receipt of admissions revenues.
The Company's primary capital requirements are for theatre openings and
acquisitions and for remodeling, expansion and maintenance of existing theatres.
The Company prefers to develop theatres on a fee-owned (or ground lease) basis
rather than on a leasehold basis, notwithstanding that the capital requirements
associated with developing a theatre on a fee-owned (or ground lease) basis are
significantly higher than developing a theatre on a leasehold basis. The
Company historically has financed its primary capital requirements with funds
generated from its operations and through financing activities. The table below
summarizes net cash provided by operating activities and net cash used for
investing activities.
YEARS ENDED DECEMBER 31,
------------------------------------
(IN THOUSANDS)
1994 1995 1996
---- ---- ----
Net cash provided by operating
activities.............................. $31,344 $32,869 $39,706
------- ------- -------
Net cash used by investing
activities:
Capital expenditures:
Theatre openings and
acquisitions..................... (13,156) (30,212) (68,216)
Remodeling, expansion and
improvements..................... (1,096) (1,722) (5,396)
Other................................ 2,156 421 12
------- ------- -------
Net cash used by investing
activities.............................. (12,096) (31,513) (73,600)
-------- -------- --------
Excess (deficiency)of net cash provided
by operating activities over net cash
used for investing activities........... $19,248 $ 1,356 ($33,894)
------- -------- --------
------- -------- --------
<PAGE>
Since January 1, 1994, the Company's principal investing activities have
been for new theatre openings and acquisitions, totaling approximately $111.6
million, consisting of approximately $13.1 million for 1994, $30.2 million for
1995 and $68.2 million for 1996. During that time, the Company has increased the
number of its theatres and screens, from 115 theatres and 543 screens at the
beginning of 1994 to 122 theatres with 673 screens at December 31, 1996. In
December 31, 1994, the Company opened two theatres (15 screens) and acquired 2
theatres (18 screens); for the year ended December 31, 1995, the Company opened
four theatres (39 screens) and acquired five theatres (27 screens); and for the
year ended December 31, 1996 the Company opened six theatres (70 screens). In
addition, since the beginning of 1994, the Company expanded one theatre, adding
four screens, and closed or sold 12 theatres (43 screens).
The Company's capital expenditures for remodeling, expansion and
improvements were approximately $1.1 million for 1994, $1.7 million for 1995 and
$5.4 million for 1996. Other cash provided by investing activities was $2.1
million for 1994, $.4 million in 1995 and $.01 million for 1996, primarily
resulting from proceeds from the sale of assets.
Net cash provided by operating activities was in excess of net cash used
for investing activities by approximately $19.2 million in 1994, and $1.4
million in 1995 and was insufficient to meet net cash used for investing
activities by approximately $33.8 million for 1996. Due to the insufficiency of
cash provided by operating activities in 1996, the Company amended its revolving
credit agreement with GE Capital (the "Revolving Credit Agreement") and
borrowed an additional $25 million, increasing the credit availability under the
Revolving Credit Agreement from $130 million to $155 million.
On February 14, 1997, the Company amended and restated the Revolving Credit
Agreement to provide an additional $95 million, for an aggregate borrowing
availability of $250 million. Pursuant to this amendment CIBC Inc., Bank of
America National Trust & Savings Association and Morgan Gua were added with
GE Capital as lenders under the Revolving Credit Agreement and the
termination date of the Revolving Credit Agreement was extended to
September 30, 2001. The amount available under the Revolving Credit
Agreement will reduce in amounts varying from $5 million to $10 million on a
quarterly basis commencing December 31, 1998. At December 31, 1996, there
was $135 million outstanding under the Revolving Credit Agreement. Interest
under the Revolving Credit Agreement is payable monthly at a rate based on
either prime or LIBOR at the Company's option, and determined based upon
certain financial ratios of the Company. At December 31, 1996, the interest
rate on borrowing was 6.8%.
The Revolving Credit Agreement contains certain covenants, including
limitations on capital expenditures, limitations on the incurrence of debt or
liens and restrictions on the sale of assets, payment of dividends, change in
control of the Company and transactions with affiliates. These covenants could
limit the operating flexibility of the Company. At December 3l, 1996, the
Company was in compliance with all existing covenants relating to the Revolving
Credit Agreement. Additionally, under certain circumstances, the Revolving
Credit Agreement requires mandatory prepayments of scheduled debt maturities.
Within 120 days after each fiscal year, the Company could be required to prepay
a portion of consolidated available cash flow, as defined in the Revolving
Credit Agreement, and in general is required to prepay debt maturities equal to
the net proceeds of any asset sales. No mandatory prepayments have been
required.
In February 1993, the Company sold Notes in a public offering. The net
proceeds from the sale of the Notes were used for (i) the repayment of the fixed
rate portion of the obligations under its loan agreement; (ii) the funding of
the purchase by the Company's parent Act III Cinemas, Inc., a Delaware
corporation ("Cinemas") of (a) all of the outstanding shares of Cinemas' senior
preferred stock, (b) certain of the outstanding shares of Cinemas' senior
subordinated convertible preferred stock (together with Cinemas senior preferred
stock, "preferred stock"), and (c) an outstanding warrant to purchase shares of
Cinemas common stock ("warrant"); and (iii) the repayment of the revolving
credit facility under its loan agreement.
<PAGE>
The Notes will mature on February 1, 2003. Interest on the Notes is
payable semiannually on February l and August l of each year, commencing on
August l, 1993. The Notes will be redeemable, in whole or in part, at the
option of the Company at any time on or after February l, 1998 at the agreed
upon redemption prices, together with accrued and unpaid interest to the date of
redemption. In addition, a sinking fund provides for the redemption of 50% of
the Notes on February l, 2002. The holders of the Notes may require the Company
to repurchase the Notes in certain circumstances involving a change of Control
(as defined in the indenture relating to the Notes)at a price equal to 101
percent of the principal amount plus accrued and unpaid interest to the date of
repurchase.
The Notes are general unsecured obligations of the Company and will be
subordinated to all existing and future Senior Indebtedness (as defined) of the
Company. The Notes will also be effectively subordinated to all of the
indebtedness and trade payables of the Company's subsidiaries.
The Company believes its existing cash, cash generated from operations
and available credit facilities will be sufficient to meet its cash requirements
for at least the next 12 months.
INFLATION
For the years ended December 31, 1994, 1995 and 1996, inflation and
changing prices have not had a significant impact on the Company's results of
operations and financial condition.
FACTORS AFFECTING FORWARD-LOOKING INFORMATION
The statements contained in the report that are not statements of
historical fact may include forward-looking statement (as defined in Section 27A
of the Securities Act of 1933, as amended) that involve a number of risks and
uncertainties. Moreover, from time to time the Company may issue other
forward-looking statements. The following factors are among the factors that
could cause actual results to differ materially from the forward-looking
statements and should be considered in evaluating forward-looking statements.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
The Company's admissions and concessions revenues are subject to seasonal
fluctuations which affect all motion picture exhibitors. These fluctuations are
the result of the distribution practice of the major motion picture studios
which have historically concentrated the release of films during the summer and
holiday seasons. The unexpected emergence of a hit film during other periods
can alter the traditional trend. The timing of such releases can have a
significant effect on the Company's results of operations, and the results of
one quarter are not necessarily indicative of results of the next quarter.
RESTRICTIONS IMPOSED BY CERTAIN DEBT OBLIGATIONS
Existing financing agreements including the Revolving Credit Agreement and
the Indenture to the Notes imposed certain operating and financial restrictions
on the Company which affect, and in many respects significantly limit or
prohibit, the ability of the Company to, among other things, incur additional
indebtedness, create liens, sell assets, make certain investments, engage in
transactions with affiliates, effect changes in control of the Company, and make
certain capital expenditures or pay dividends.
<PAGE>
UNCERTAINTIES RELATING TO FUTURE EXPANSION PLANS
The Company's acquisitions and new theatre openings have greatly expanded
the operation of the Company over the last five years. The Company intends to
continue to pursue a strategy of expansion that will involve the development of
new theatres and may involve acquisition of existing theatres and theatre
circuits. Acquisitions generally would be made to provide initial entry into a
new market or to strengthen the Company's position in an existing market. The
Company may not be able to develop and acquire suitable theatres in the future
and the Company's expansion strategy may not result in improvements to the
business, financial condition or profitability of the Company. There is
significant competition for potential site locations in existing theatre and
theatre circuit acquisition opportunities. As a result of such competition, the
Company may be unable to acquire attractive site locations for existing theatres
or theatre circuits on terms it considers acceptable. Furthermore, the
Company's expansion programs may require additional financing. There can be no
assurances such financing will be available to the Company on acceptable terms.
COMPETITION
The entertainment business generally and the motion picture exhibition
business in particular are highly competitive. The Company competes against
local and national exhibitors, some of whom have greater financial resources
than the Company. The Company's theatres face competition from a number of
motion picture delivery systems such as network, syndicated and pay television,
pay per view and home video systems. The Company also faces competition from
other forms of entertainment which compete for the public's leisure time and
disposable income.
DEPENDENCE ON KEY PERSONNEL
The Company's future success will depend in significant part upon the
continued service of certain key management and other personnel and the
Company's continuing ability to attract and retain highly qualified managerial,
sales and marketing personnel. Competition for such personnel is intense and
there can be no assurance the Company can retain its existing key personnel or
that it can attract such employees in the future. The loss of key personnel or
the inability to hire or retain qualified personnel in the future could have a
material adverse effect upon the Company's results of operations.
GEOGRAPHIC CONCENTRATION
The Company's theatres are currently concentrated in the Pacific Northwest,
Texas and Nevada. As a result, the Company's success will depend in part upon
factors affecting general economic conditions and discretionary consumer
spending in these regions. Any economic downturn or reduction in consumer
spending in these regions could have a material adverse effect on the Company.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this item are
listed in Item 14 of Part IV of this report which begins at page 24.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
Executive Officers and Directors of the Company.
NAME AGE POSITION
---- --- --------
Norman Lear 74 Chairman of the Board
Hal Gaba 51 Chief Executive Officer and Director
Walter S. Aman 69 President, Chief Financial Officer
and Director
David Goldhill 36 Vice President and Director
Robert J. Lenihan 42 Vice President - Film and Head Buyer
Timothy G. Wood 44 Vice President - Operations
Timothy L. Reed 42 Vice President - Real Estate
William E. Spencer 61 Vice President of Film
Wade L. Canning 37 Vice President -
Finance and Assistant Secretary
John L. Pouschine 40 Director
Pieter A. Ruig 52 Director
<PAGE>
The following is a brief description of the business experience of the
Executive Officers and Directors of the Company for at least the past five
years.
Mr. Norman Lear has served as Chairman of the Board of Directors of the
Company since its inception in March 1989. In 1986, Mr. Lear founded the
predecessor of Act III Communications Holdings, L.P., a Delaware limited
partnership ("Holdings"), to pursue the acquisition and creation of business
interests in trade publishing, television broadcasting, motion picture theatre
exhibition and television and motion picture production. Mr. Lear has been
Chairman of the Board of Directors of the general partner of Holdings, Act III
Communications Holding GP, Inc., a Delaware corporation ("Holdings GP"), since
its formation. From 1974 to 1985, Mr. Lear was a founding partner of T.A.T.
Communications Company (which was succeeded by Embassy Communications) which
produced the television series "The Jeffersons," "One Day at a Time," "Mary
Hartman, Mary Hartman," "Fernwood 2Night" and "America 2Night." From 1959 to
1986, Mr. Lear was a founding partner of Tandem Productions which produced a
number of motion pictures and series, including "All in the Family," "Sanford
and Son," "Maude" and "Good Times." Pieter A. Ruig is Mr. Lear's son-in-law.
Mr. Hal Gaba has served as Director of the Company since August 1990 and
Chief Executive Officer of the Company since 1992. Since 1990, Mr. Gaba has also
served as (i) President and Director of Holdings and certain other affiliates of
the Company and (ii) Director of all subsidiaries of the Company and certain
other affiliates of the Company. Since 1989, Mr. Gaba has been a partner of HR
Broadcasting Corporation and its successor company, Hark Television Corporation,
and owner and President of HG Associates, Inc.
Mr. Walter S. Aman has served as President and Director of the Company
since January 1992 and Chief Financial Officer since May 1989. From 1981 until
its sale to the Company in May 1989, Mr. Aman was Executive Vice President and
Chief Financial Officer of Eastgate Theatre, Inc., an Oregon corporation
("Eastgate").
Mr. David Goldhill has served as a Vice President and a Director of the
Company and Cinemas since March 1996. He has served as Vice President and
Chief Financial Officer of Act III Communications L.L.C., a predecesssor of
Holdings GP since December 1996. From 1993 to 1996, Mr. Goldhill served as
Vice President of Strategic Planning of Act III Broadcasting, Inc.and
Holdings GP.
He has served as Vice President of Lambert Television, Inc. since 1993. Mr.
Goldhill is also the Chief Financial Officer of Partners Stations Network, L.P.
and of Las Vegas Channel 21, Inc. Mr. Goldhill currently serves on the board of
MV Holdings and Las Vegas Channel 21, Inc.
Mr. Robert J. Lenihan has served as Vice President and Head Film Buyer of
the Company since June 1988. From 1986 to June 1988, Mr. Lenihan was Head Film
Buyer for Mann Theatres.
Mr. Timothy G. Wood has served as Vice President of Operations of the
Company since June 1987. From 1978 to 1987, Mr. Wood worked for American Multi
Cinema, in various locations and positions, including Theatre Manager and
Training Director. Mr. Wood left as the Southern California District Manager.
Mr. Timothy L. Reed has served as Vice President of Real Estate and
Facilities of the Company since May 1989. From 1987 to May 1989, Mr. Reed was a
Director of Construction and Real Estate for the Company. Prior to joining the
Company, Mr. Reed acted in the capacity of Director of Technical Services and
Construction for Dubinsky Bros. Theatres from 1979 to 1987 and with Paramount
Pictures Distribution Co. from 1975 to 1979.
<PAGE>
Mr. William E. Spencer has served as Vice President of Film of the Company
since May 1989. From 1973 to May 1989, Mr. Spencer was Vice President and Head
Film Buyer for Eastgate.
Mr. Wade L. Canning is the Vice President of Finance and Assistant
Secretary for the Company. Mr. Canning joined the Company in January, 1993.
Previously, Mr. Canning was a manager for the accounting firm of Price
Waterhouse LLP, in Portland, Oregon. Mr. Canning is a certified public
accountant.
Mr. John L. Pouschine has served as Director of the Company and Cinemas
since February 1990. Since January 1997 Mr. Pouschine has been Managing
Director of Ampton Investments, Inc. From 1989 to August 1996, Mr. Pouschine
served as a Senior Vice President of Electra Inc. ("Electra"). From 1985 to
1988, Mr. Pouschine was a Vice President of Bradford Ventures Ltd. Mr.
Pouschine was elected as a Director of Cinemas as a nominee of Electra
pursuant to the terms of the Convertible Preferred Stock held by Electra.
Mr. Pieter A. Ruig has served as Director of the Company and Cinemas
since March 1996. Mr. Ruig has served as Senior Managing Director of Ruig
Capital Management, L.L.C., an investment advisory and capital management
services business since February 1996. From 1989 to 1994, he served as
President of BOC's Specialty Products Division. Norman Lear is Mr. Ruig's
father-in-law.
The Company has an Audit Committee and Compensation Committee. The members
of the Audit Committee are Messrs. Gaba (Chairman), Pouschine and Ruig. The
principal functions of the Audit Committee are to recommend to the Board of
Directors a firm of independent certified public accountants to conduct the
annual audit of the Company's books and records and review with such
accounting firm the scope and results of the annual audit, the performance by
such accountants of professional services in addition to those related to the
annual audit, and the adequacy of the Company's internal controls. The
members of the Compensation Committee are Messrs. Gaba, Pouschine and Lear.
The principal functions of the Compensation Committee are to review and
recommend to the Board of Directors compensation of the senior management of
the Company, review and submit its recommendations with respect to new
executive compensation programs, and administer the Company's compensation
programs, including the Cinemas 1991 Management Stock Option Plan as amended.
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION
The following table sets forth the annual salary and bonuses and all other
compensation awards and payouts to the Chief Executive Officer and the four
most highly paid executive officers (the "Named Executive Officers") for the
years ended December 31, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
Name and Principal Salary Bonus Options/
Position Year ($) ($) Awards (#)(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hal Gaba 1994 $200,000(l) $50,000 0
CEO 1995 $200,000 $50,000 0
1996 $200,000 $60,000 0
Walter S. Aman 1994 $250,000 $200,000 0
President 1995 $275,000 $250,000 14
1996 $285,000 $250,000 12
Robert J. Lenihan 1994 $150,000 $48,000 0
V.P. Film and 1995 $150,000 $55,000 4
Head Buyer 1996 $163,000 $63,000 3
Timothy G. Wood 1994 $95,000 $65,000 0
V.P. Operations 1995 $100,000 $75,000 5
1996 $105,000 $85,000 5
David Goldhill 1994 -0- -0- 0
Vice President and 1995 -0- -0- 0
Director 1996 $145,820 $75,000 0
</TABLE>
(1) Represents the amount reimbursed by the Company to Holdings
for a portion of Mr. Gaba's compensation paid by Holdings
that is properly allocable to the Company.
(2) Represents option grants exercisable for shares of Common Stock
of Cinemas.
<PAGE>
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1996 to the Chief Executive
Officer and the Named Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANT
-------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE POTENTIAL REALIZATION VALUE
UNDERLYING EMPLOYEES IN PRICE MARKET EXPIRATION AT ASSUMED ANNUAL RATES OF STOCK PRICE
NAME OPTIONS FISCAL YEAR ($/SHARE) PRICE DATE (1) APPRECIATION FOR OPTION TERM (2)
---- ---------- ----------- --------- ------- ---------- --------------------------------------
0% 5% 10%
--- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hal Gaba 0 -- -- -- -- -- -- --
Walter S. Aman 12 36.9% $20,000 $60,000 9/30/06 $480,000 $932,804 $1,627,494
Robert J. Lenihan 3 9.2% $20,000 $60,000 9/30/06 $120,000 $233,201 $406,873
Timothy G. Wood 5 15.4% $20,000 $60,000 9/30/06 $200,000 $388,668 $678,123
David Goldhill 0 -- -- -- -- -- -- --
</TABLE>
(1) Provided the holder remains employed by the Company, one-third of the
options vest one year from the date of grant, another one-third vest
two years from the date of grant and the options become fully
exercisable three years from the date of grant. The options terminate
ten years from the date of grant.
(2) Future value of current year grants assuming appreciation of 5% and
10% per year over the ten year option period. The actual value
realilzed may be greater than or less than the potential realizable
values set forth in the table.
<PAGE>
The following table sets forth the gain realized by the Chief Executive
Officer and the Named Executive Officers through option
exercises, as well as the value of unexercised in-the-money options.
FISCAL YEAR-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END (#) AT FY-END ($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE (1)
- --------------------------------------------------------------------------------
HAL GABA 0/0 $ 0/0
WALTER S. AMAN 16/22 $828,000/$900,000
ROBERT J. LENIHAN 4/6 $207,000/$246,000
TIMOTHY G. WOOD 7/9 $372,000/$368,000
DAVID GOLDHILL 0/0 $0/$0
(1) The per share fair market value for Cinema's Common Stock was $60,000 at
December 31, 1996.
COMPENSATION OF DIRECTORS
The Directors of the Company are elected each year by the stockholders
to serve for a one-year term and until their successors are elected and
qualified. Executive Officers and other officers of the Company are appointed
annually by the Board of Directors and serve at the Board's discretion. Each
Director who is not an employee of the Company is reimbursed for his expenses in
attending each meeting of the Board and any committee thereof. In 1996, outside
Directors received director fees of $25,000 each.
EMPLOYMENT AGREEMENTS
In 1995, the Company entered into employment agreements with Messrs. Aman,
Lenihan and Wood.
Mr. Aman's agreement terminates on December 3l, 1999 and the agreements
with Messrs. Lenihan and Wood terminate on December 3l, 1998. The Company has
the option to extend the term of the agreements with Messrs. Aman, Lenihan
and Wood for one additional year. All of the employment agreements terminate
upon death, upon disability (as defined in the employment agreement) or upon
breach of any provision of the Agreement. Additionally, the Company may
terminate, at any time, for any reason, upon at least thirty (30) days prior
notice. In such event, the Company is required to pay in cash to the
employee an amount equal to the base annual salary of the employee, as
described in the employment agreement.
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Gaba, Pouschine and Lear served on the Compensation Committee for
the year ended December 31, 1996. Messrs. Gaba and Lear were officers and
Directors of the Company and Mr. Pouschine was Director of the Company for
the year ended December 31, 1996.
1991 MANAGEMENT STOCK OPTION PLAN
The 1991 Management Stock Option Plan of Cinemas, as amended (the "Stock
Option Plan") provides for the granting of incentive options or non-qualified
stock options to officers and key employees of Cinemas and its subsidiaries.
The Stock Option Plan is intended to permit the Company to retain and attract
qualified individuals who will contribute to the overall success of the
Company and the achievement of performance measures. The Stock Option Plan
is administered by the Compensation Committee of the Board of Directors of
Cinemas which has the authority to determine, among other things, optionees,
whether options granted will be incentive stock options or non-qualified
options, the number of shares to which options relate, the period over which
options are exercisable and the exercise price; provided that for incentive
options, the exercise price may not be less than the fair market value of the
Common Stock on the date of grant and the option period may not be more than
ten years. A total of 100 shares of common stock of Cinemas have been
reserved for issuance under the Stock Option Plan and as of December 31,
1996, options, for an aggregate of 98 shares of Common Stock have been
granted under the Stock Option Plan and remain outstanding. The exercise
price for the 30.5 options granted in 1992 and 1993 is $5,000 per share. The
exercise price for the 35 options granted in 1995 is $18,000 per share. The
exercise price for the 32.5 options granted in 1996 is $20,000 per share.
MANAGEMENT INCENTIVE COMPENSATION PLAN
The Company has a Management Incentive Compensation Plan (the "Compensation
Plan") which is administered by the Compensation Committee of the Company.
The purpose of the Compensation Plan is to define incentives for designated
executives and key employees of the Company. Pursuant to the Compensation
Plan, a maximum aggregate amount of 3.5% of the earnings of the Company
before income taxes and interest is allocable to participants and any portion
of such maximum amount not allocated ceases to be subject to the Compensation
Plan. The Compensation Committee has sole and complete authority to make all
determinations under the Compensation Plan. Unless altered by the
Compensation Committee, any amounts granted to participants becomes fully
vested on the last day of the year in which such amount was granted.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation limits the personal liability of a director for
monetary damages for breach of fiduciary duty of care as a director.
Liability is not eliminated for (i) any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) unlawful payment of dividends or stock purchases or redemptions
pursuant to Section 174 of the Delaware General Corporation Law, or (iv) any
transaction from which the director derived an improper personal benefit.
The Company's Bylaws provide for indemnification of directors, officers and
agents to the maximum extent permitted by the Delaware General Corporation Law.
<PAGE>
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS OF CINEMAS VOTING SECURITIES
Cinemas' owns all of the outstanding common stock of the Company. The
following table sets forth certain information as of March 1, 1997, with
respect to beneficial ownership of any class of the voting securities of
Cinemas by (i) each person known by Cinemas to own beneficially 5% or more of
Cinemas' outstanding stock, (ii) each of Cinemas' directors and nominees,
(iii) each of the Named Executive Officers and (iv) all of the Company's
directors and executive officers as a group. Unless otherwise specified, the
named beneficial owner claims sole investment and voting power as to the
shares indicated.
Amount and Nature
Name and Address of Beneficial Percent
of Beneficial Owner Ownership of Class
- ------------------------------------- -------------------- ------------
COMMON STOCK
Norman Lear (l) 754.32 82.3%
1999 Avenue of the Stars
Suite 500
Los Angeles, CA 90067
Electra Investment Trust PLC 80.00 8.7%
65 Kingsway
London, England WC2 B6QT
St. Paul Fire and Marine Insurance Co. 48.24 5.3%
8500 Normandale Blvd.
Suite 1940
Bloomington, MN 55437
Hal Gaba - -
1999 Avenue of the Stars
Suite 500
Los Angeles, CA 90067
John Pouschine - -
399 Park Avenue
New York, NY 10022
Robert J. Lenihan (2) 4.0 *
1999 Avenue of the Stars
Suite 500
Los Angeles, CA 90067
Walter S. Aman(3)(4) 16.0 1.7%
Timothy Wood(3)(5) 7.0 *
David Goldhill - -
1999 Avenue of the Stars
Suite 500
Los Angeles, CA 90067
<PAGE>
Pieter A. Ruig - -
420 Lexington Avenue, Suite 300
New York, NY 10170
All Directors and Executive Officers
as a group 795.82 83.0%
(11 persons)(6)
SERIES B SENIOR SUBORDINATED CONVERTIBLE
PREFERRED STOCK
Electra Investment Trust PLC 200.00(7) l00.0%
65 Kingsway
London, England WC2 B6QT
- -------------------
* Less than 1%
(1) Includes 754.32 shares held by Act III Theatres, L.P. ("Theatres
L.P."), a Delaware limited partnership. Act III Theatres GP, Inc., a
Delaware corporation ("Theatres GP") is the sole general partner (1% equity
interest) of Theatres L.P. and Act III Communications Holdings, L.P., a
Delaware limited partnership ("Holdings"), is the limited partner (99%
equity interest) of Theatres L.P.; Theatres GP is a wholly owned subsidiary
of Act III Communications, LLC, a California limited liability corporation
("Act III LLC"). "Act III LLC" is wholly owned by Mr. Norman Lear and is
the sole general partner of Holdings. The limited partner of Holdings is a
corporation wholly owned by Mr. Lear.
(2) Includes 4 shares subject to options exercisable within 60 days after March
l, 1997. Excludes 6 shares subject to options exercisable more than 60
days after March 1, 1996.
(3) The business address of each of these individuals is Act III Theatres,
Inc., 919 S.W. Taylor, Suite 900, Portland, Oregon 97205.
(4) Includes 16 shares subject to options exercisable within 60 days after
March l, 1996. Excludes 22 shares subject to options exercisable more than
60 days after March l, 1997.
(5) Includes 7 shares subject to options exercisable within 60 days after March
l, 1997. Excludes 9 shares subject to options exercisable more that 60
days after March l, 1997.
(6) Includes 41.5 shares subject to options exercisable within 60 days after
March l, 1997. Excludes 56.5 shares subject to options exercisable more
than 60 days after March l, 1997.
(7) The Senior Subordinated Convertible Preferred Stock is convertible into
Cinemas' Common Stock on a share-for-share basis. If Electra were to
convert all of its Senior Subordinated Convertible Preferred Stock, Electra
would hold 280 shares of Cinemas' Common Stock representing 25% of the
outstanding Common Stock assuming, in accordance with SEC Rules, that the
only shares converted are those shares reflected opposite Electra. The
terms of Electra's Senior Subordinated Convertible Preferred Stock permit
it to elect one director.
<PAGE>
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Holdings have entered into an agreement that provides for
the provision by Holdings of certain management services to the Company (the
"Management Agreement"). Under the Management Agreement, Holdings will be
engaged by the Company until February, 2003 to advise, consult and assist the
Company in the management, administration and supervision of its business. The
Company may pay Holdings an annual management fee up to $1.2 million under the
Management Agreement. In addition, it is anticipated that the Company will (a)
reimburse Holdings for certain costs incurred by Holdings that are properly
allocable to the Company, including salaries, consultant fees, rent and
telephone charges and (b) any out-of-pocket expenses not otherwise covered by
clause (a) that are incurred by Holdings exclusively for the Company. Pursuant
to the Revolving Credit Agreement, such costs are subject to a maximum $1.8
million per year. During the year ended December 31, 1996, the Company has paid
to Holdings approximately $0.6 million for management services and an additional
amount of $0.68 million. Messrs. Lear and Gaba are both officers of Holdings and
Mr. Lear also serves as chairman of the board for Holdings. Messsrs. Lear and
Gaba and certain other management personnel provide services to the Company on
behalf of Holdings, under the Management Agreement.
In December 1996, the Company made a personal loan to Robert J. Lenihan,
the Company's Vice President of Film and Head Buyer, in the amount of $.35
million secured by Mr. Lenihan's stock options. The loan bears interest at a
rate of 8% per annum.
In March 1997, the Company made a personal loan to Timothy C. Reed, the
Company's Vice President of Real Estate, in the amount of $.3 million secured
by Mr. Reed's stock options. The loan bears interest at a rate of 8% per
annum.
The Company believes that each of the transactions described in this
section are on terms no less favorable to the Company than would be available
from an unrelated third party.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES SEQUENTIALLY
AND REPORTS ON FORM 8-K. NUMBERED
PAGE
(a) (1) FINANCIAL STATEMENTS.
Title Page 27
Report of Independent Accountants 28
Consolidated Balance Sheet at December 31, 1996 and 1995 29
Consolidated Statement of Operations for the years ended
December 31, 1996, 1995 and 1994 30
Consolidated Statement of Changes in Common Shareholders'
Equity (Deficit) for the years ended December 31, 1996,
1995 and 1994 31
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 32
<PAGE>
Notes to Consolidated Financial Statements 33
(a) (2) FINANCIAL STATEMENT SCHEDULES. There are no required Financial
Statement Schedules that are applicable to the Company.
(a)(3) EXHIBITS.
See Index to Exhibits
(b) Reports on Form 8-K:
NONE
<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 report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ACT III THEATRES, INC.
By: /S/ Hal Gaba
-------------------------------
Hal Gaba, Chief Executive Officer
Date: MARCH 26, 1997
----------------------------
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 the dates indicated.
/s/ Hal Gaba 3/26/97 Chief Executive Officer and Director
- ----------------------- ------------
Hal Gaba Date (principal executive officer)
/s/ Walter S. Aman 3/26/97 President, Chief Financial
Officer and Director
- ----------------------- ------------
Walter S. Aman Date (principal financial officer and
principal accounting officer)
/s/ Norman Lear 3/26/97 Chairman of the Board and Director
- ----------------------- ------------
Norman Lear Date
/s/ David J. Goldhill 3/26/97 Vice President and Director
- ----------------------- ------------
David J. Goldhill Date
/s/ John L. Pouschine 3/26/97 Director
- ----------------------- ------------
John L. Pouschine Date
/s/ Pieter A. Ruig 3/26/97 Director
- ----------------------- ------------
Pieter A. Ruig Date
<PAGE>
ACT III THEATRES, INC.
REPORT AND CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
[LETTERHEAD] [LOGO]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Act III Theatres, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in common shareholder's equity
(deficit) and of cash flows present fairly, in all material respects, the
financial position of Act III Theatres, Inc. (a wholly owned subsidiary of Act
III Cinemas, Inc.) and its subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Portland, Oregon
February 28, 1997
<PAGE>
ACT III THEATRES, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
DECEMBER 31,
1996 1995
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 8,720 $ 19,002
Accounts receivable 1,324 866
Inventories 2,122 1,854
Prepaids and other current assets (Note 2) 641 423
---------- ---------
Total current assets 12,807 22,145
Contracts receivable (Note 2) 2,007 2,037
Property and equipment, net (Note 3) 231,621 177,873
Intangible assets:
Noncompetition agreements, net of accumulated
amortization of zero and $43,500 - 1,894
Favorable lease terms acquired, net of accumulated
amortization of $19,789 and $17,528 26,791 29,093
Excess of purchase price over the fair value of
net tangible assets acquired, net of accumulated
amortization of $3,751 and $3,415 4,962 5,897
Other assets, net 3,239 4,065
---------- ---------
$ 281,427 $ 243,004
---------- ---------
---------- ---------
LIABILITIES, MANDATORILY REDEEMABLE SECURITIES AND
COMMON SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt and capital
lease obligations (Note 4) $ 1,978 $ 1,408
Accounts payable 10,042 4,424
Accrued film rentals 10,063 8,932
Interest payable 5,089 5,029
Taxes other than income taxes 2,839 3,157
Other current liabilities (Note 1) 6,650 5,248
Income taxes payable 1,610 3,016
---------- ---------
Total current liabilities 38,271 31,214
Long-term debt and capital lease obligations (Note 4) 254,130 230,151
Deferred income taxes (Note 8) 9,173 7,671
---------- ---------
301,574 269,036
---------- ---------
Mandatorily redeemable securities of Act III
Cinemas, Inc., redemption
value of $13,158 and $11,441 (Note 5) 13,132 11,396
---------- ---------
Commitments and contingencies (Notes 9 and 10)
Common shareholder's equity (deficit):
Common stock, $.01 par value, 1,000 shares
authorized, 100 shares issued and outstanding
(Note 6) 1 1
Additional paid-in capital 4,979 4,979
Accumulated deficit (38,259) (42,408)
---------- ---------
(33,279) (37,428)
---------- ---------
$ 281,427 $ 243,004
---------- ---------
---------- ---------
The accompanying notes are an integral part of this financial statement.
<PAGE>
ACT III THEATRES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1996 1995 1994
---------- ---------- ----------
Revenues:
Admissions $ 152,257 $ 133,522 $ 128,834
Concessions 69,184 60,554 56,944
Other 2,108 2,115 1,973
---------- ---------- ----------
223,549 196,191 187,751
---------- ---------- ----------
Expenses:
Costs of operations -
Film rental 81,015 70,232 68,028
Cost of concessions 10,589 9,292 8,484
Other theatre operating expenses 65,935 55,486 50,987
---------- ---------- ----------
157,539 135,010 127,499
General and administrative expenses
(Notes 6 and 9) 6,981 6,166 5,882
Depreciation and amortization 19,862 12,705 11,348
Amortization of intangibles and
other assets 5,955 9,457 9,289
---------- ---------- ----------
190,337 163,338 154,018
---------- ---------- ----------
Income from operations 33,212 32,853 33,733
---------- ---------- ----------
Other income (expense):
Interest income 838 1,395 1,102
Interest expense (Note 4) (23,475) (25,281) (24,327)
(Loss) gain on sale of assets - (22) 240
---------- ---------- ----------
(22,637) (23,908) (22,985)
---------- ---------- ----------
Income before income taxes 10,575 8,945 10,748
Provision for income taxes (Note 8) 4,690 3,759 4,315
---------- ---------- ----------
Net income 5,885 5,186 6,433
Accretion of mandatorily redeemable
securities (Note 5) 19 24 29
Preferred dividends (Note 5) 1,717 1,492 1,298
---------- ---------- ----------
Net income applicable to common stock $ 4,149 $ 3,670 $ 5,106
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes are an integral part of this financial statement.
<PAGE>
ACT III THEATRES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 100 $ 1 $ 4,979 $ (50,884) $ (45,904)
Accretion of mandatorily redeem-
able securities - - - (29) (29)
Preferred dividends - - - (1,298) (1,298)
Net income - - - 6,433 6,433
------ ---------- ---------- ---------- ----------
Balance, December 31, 1994 100 1 4,979 (45,778) (40,798)
Accretion of mandatorily redeem-
able securities - - - (24) (24)
Preferred dividends - - - (1,492) (1,492)
Net income - - - 5,186 5,186
Payment of common stock dividend - - - (300) (300)
------ ---------- ---------- ---------- ----------
Balance, December 31, 1995 100 1 4,979 (42,408) (37,428)
Accretion of mandatorily redeem-
able securities - - - (19) (19)
Preferred dividends - - - (1,717) (1,717)
Net income - - - 5,885 5,885
------ ---------- ---------- ---------- ----------
Balance, December 31, 1996 100 $ 1 $ 4,979 $ (38,259) $ (33,279)
------ ---------- ---------- ---------- ----------
------ ---------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
ACT III THEATRES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,885 $ 5,186 $ 6,433
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 25,817 22,162 20,637
Amortization of debt discount 937 1,038 1,129
Loss (gain) on sale of assets - 22 (240)
Deferred income taxes 1,502 674 1,159
Changes in current assets and liabilities:
Accounts receivable (458) 371 (61)
Inventories (268) (502) 60
Prepaids and other current assets (196) (63) (30)
Accounts payable 5,618 69 (833)
Accrued film rentals 1,131 850 1,265
Interest payable 60 832 (93)
Taxes other than income taxes (318) 452 (254)
Other current liabilities 1,402 103 1,122
Income taxes (1,406) 1,675 1,050
---------- ---------- ----------
Net cash provided by operating activities 39,706 32,869 31,344
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures (73,608) (32,222) (14,252)
Proceeds from sale of assets - 329 1,710
Net change in contracts receivable 8 380 446
---------- ---------- ----------
Net cash used for investing activities (73,600) (31,513) (12,096)
---------- ---------- ----------
Cash flows from financing activities:
Long-term debt borrowings (Note 4) 25,000 - 4,069
Payments made on long-term debt (Note 4) (1,388) (9,485) (14,063)
Dividends paid on common stock - (300) -
---------- ---------- ----------
Net cash provided (used) by financing activities 23,612 (9,785) (9,994)
---------- ---------- ----------
(Decrease) increase in cash and cash equivalents (10,282) (8,429) 9,254
Cash and cash equivalents at beginning of year 19,002 27,431 18,177
---------- ---------- ----------
Cash and cash equivalents at end of year $ 8,720 $ 19,002 $ 27,431
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
ACT III THEATRES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING
POLICIES
SUMMARY OF OPERATIONS AND BASIS OF PRESENTATION
Act III Theatres, Inc. (the Company) was incorporated as a wholly owned
subsidiary of Act III Cinemas, Inc. (Cinemas) on March 16, 1989 in the
state of Delaware. The Company owns and operates movie theatres in the
states of Alaska, Idaho, Nevada, Oregon, Texas and Washington.
Act III Communications Holdings, L.P. (Holdings L.P.), Cinemas' indirect
parent, owns approximately 82 percent of Cinemas' common stock. The common
stock ownership of Cinemas may be diluted by the conversion of the
mandatorily redeemable senior subordinated convertible preferred stock
(Note 5). If the preferred stock was converted, Holdings L.P. would retain
an approximate 67 percent ownership share of Cinemas.
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles which require
management to make certain estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as of 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.
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The Company's parent, Cinemas, is a holding company only, the assets and
operations of which consist solely of its investment in and the earnings or
(losses) of the Company. As discussed in Note 5, Cinemas has issued
mandatorily redeemable securities. These securities are recorded in the
financial statements of the Company because the proceeds were used in the
Company's operations and management expects that these securities will be
redeemed from the Company's cash flow.
The consolidated financial statements include the accounts of Act III
Theatres, Inc., all of its wholly owned subsidiaries, and the mandatorily
redeemable securities of Cinemas. All material intercompany accounts and
transactions have been eliminated.
REVENUE RECOGNITION AND FILM RENTAL COSTS
Revenues are recognized when admissions and concession sales are collected
at the theatres. Film rental costs are accrued based on the applicable box
office receipts and the terms of the film licenses.
The Company licenses approximately 90% of its films from seven film
distributors.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term investments with an original
maturity of less than ninety days. The carrying amount of cash and cash
equivalents approximates fair value because of the short maturity of those
instruments.
<PAGE>
1. SUMMARY OF OPERATIONS AND BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE AND ADVERTISING EXPENSES
Accounts receivable consist primarily of amounts which will be deducted
from final film payments under the terms of co-op advertising arrangements
with film distributors. The Company records its share of advertising
expense under the co-op arrangements at the time the advertisements are
first run. Advertising expense aggregated $5,080, $4,410 and $3,606 for
the years ended December 31, 1996, 1995 and 1994, respectively, and is
included in other theatre operating expenses in the accompanying
consolidated statement of operations. The co-op advertising receivables
aggregated $1,286 and $842 at December 31, 1996 and 1995, respectively.
PREPAIDS AND OTHER CURRENT ASSETS
Prepaids and other current assets consist primarily of theatre leasehold
improvements paid by the Company, which will be reimbursed by the lessor.
INVENTORIES
Inventories consist of concession and theatre supplies and are stated at
the lower of cost or market. The Company uses the first-in, first-out
(FIFO) method to determine cost.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company uses the straight-
line method to compute depreciation and amortization over the estimated
useful lives of the assets as follows:
Buildings and improvements 20 to 31.5 years
Fixtures and equipment 5 to 7 years
Leasehold improvements 4 to 20 years
Leasehold improvements are amortized using the lesser of the useful life of
the improvement or the remaining lease term.
INTANGIBLES
The Company uses the straight-line method to compute amortization of the
assets as follows:
Noncompetition agreements 7 years
Favorable lease terms acquired 20 years
Excess of purchase price over fair value
of net tangible assets acquired 20 years
The Company believes the above useful lives are appropriate based on the
factors influencing acquisition decisions. These factors include theatre
location, profitability and general industry outlook. The Company reviews
its intangible assets for asset impairment at the end of each quarter, or
more frequently when events or changes in circumstances indicate that the
carrying amount of intangibles may not be recoverable. To perform that
review, the Company estimates the sum of expected future undiscounted pre-
interest expense net cash flows from the related theatre operations.
<PAGE>
1. SUMMARY OF OPERATIONS AND BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
INTANGIBLES (CONTINUED)
If the estimated net cash flows are less than the carrying amount of
intangibles, the Company would recognize an impairment loss in an amount
necessary to write the intangibles down to fair value as determined by the
expected discounted future cash flows. The Company has not recognized an
impairment loss to date.
OTHER ASSETS
Other assets consist primarily of deferred financing charges which are
being amortized over 10 years using the straight-line method, which
approximates the effective interest method.
OTHER CURRENT LIABILITIES
Other current liabilities include deferred revenues of $2,117 and $1,914 at
December 31, 1996 and 1995, respectively, and also include payroll related
liabilities and accrued percentage rents.
EARNINGS PER SHARE
Earnings per share information is not presented because the Company is a
wholly owned subsidiary.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 utilizes the liability method so that deferred taxes are
determined based on the estimated future tax effects of differences between
the financial statement and tax basis of assets and liabilities given the
provisions of the enacted tax laws and tax rates. Deferred income tax
expense or benefit is based on the changes in the financial statement basis
versus the tax basis in the Company's assets or liabilities from period to
period.
STATEMENT OF CASH FLOWS
The Company made the following cash payments:
YEAR ENDED DECEMBER 31,
1996 1995 1994
----------- ----------- -----------
Interest $ 23,342 $ 23,411 $ 23,292
Income taxes 4,364 1,979 2,102
NONCASH INVESTING AND FINANCING ACTIVITIES
During January 1994, the Company purchased two theatres by assuming $1,900
in debt. Additionally, during June 1994, the Company signed an option-to-
buy agreement related to a theatre property under an operating lease. As a
result, the operating lease was converted to a capital lease and the
Company's property and long-term debt increased by $2,371.
<PAGE>
1. SUMMARY OF OPERATIONS AND BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
NONCASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)
As reported in the consolidated statement of changes in common
shareholder's equity (deficit), the Company's preferred stock has accrued
dividends and accretion in all periods.
All of the above noncash items have been excluded from the accompanying
consolidated statement of cash flows.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," (SFAS 123) allows companies to choose whether to
account for stock-based compensation on a fair value method, or to continue
accounting for such compensation under the method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25). The Company has chosen to continue to account for stock
compensation using APB 25 (see Note 6). If the provisions of SFAS 123 had
been adopted as of the beginning of 1995, the effect on 1995 and 1996 net
income would have been immaterial.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform with 1996 presentation. These reclassifications had
no impact on previously reported results of operations or common
shareholder's equity (deficit).
2. CONTRACTS RECEIVABLE
Contracts receivable consist primarily of the following items:
In November 1991, the Company effectively sold six theatres to a then
former senior executive officer under a sales contract in the gross amount
of $4,034 in settlement of claims previously filed by the officer and the
Company against each other. The terms of the contract require the former
officer to make monthly payments of $37.5 which began in August 1992 and
escalated to $45 per month in January 1994 through November 1998. Payments
include interest at eight percent and require a final balloon payment of
$2,758 on December 31, 1998. Although title to the six theatres does not
legally transfer to the former senior executive officer until 50 percent of
the sales price has been paid, the Company has no involvement in the
continuing operations of the six theatres and has no voting power or
management control over the purchaser. The Company recorded a deferred
gain on this sale of $2,802 which is being recognized over the term of the
contract under the instalment method as cash is received. This deferred
gain is included as an offset to contracts receivable in the accompanying
consolidated balance sheet. The purchaser has made all payments when due
and management believes that the operation of the six theatres will provide
sufficient cash flow to service the note. At December 31, 1996, the
balance of this contract, net of the deferred gain of $2,301, was $1,036.
At December 31, 1995, the balance of this contract, net of the deferred
gain of $2,476, was $1,126.
<PAGE>
2. CONTRACTS RECEIVABLE (CONTINUED)
In March 1992, the Company loaned $2,350 in cash to a Texas corporation in
exchange for a noninterest bearing note to settle a claim previously
brought against Act III Theatres, L.P. (Theatres L.P.), Cinemas' majority
shareholder. The Texas corporation used such funds to equip and operate a
theatre in Texas and is repaying the note in instalments of up to $500 per
year from the theatre's cash flow, as defined, until such time that the
note is fully repaid. Management believes the theatre will provide
sufficient cash flow to fully repay the note. The note is secured by the
theatre. At December 31, 1996, the balance of this note, net of a $210
discount, was $910. At December 31, 1995, the balance of this note, net of
a $300 discount was $1,176.
In 1996, the Company loaned $348 in cash to an executive in exchange for a
eight percent interest bearing note secured by the executive's stock
options. This loan is due the earlier of December 2006 or upon termination
of employment. At December 31, 1996, the balance of this loan was $348.
The current portion of these contracts, aggregating $287 and $265 at
December 31, 1996 and 1995, respectively, has been included with prepaids
and other current assets in the accompanying consolidated balance sheet.
The carrying amounts of the Company's contracts receivable approximate fair
value since the notes bear interest at competitive rates or are discounted
to approximate a proper interest rate (see Note 11).
3. PROPERTY AND EQUIPMENT
Property and equipment consist of:
DECEMBER 31,
1996 1995
---------- ----------
Land $ 39,389 $ 32,711
Buildings and improvements 156,007 121,591
Fixtures and equipment 89,981 65,757
Leasehold improvements 17,805 20,257
---------- ----------
303,182 240,316
Less accumulated depreciation and amortization (71,561) (62,443)
---------- ----------
$ 231,621 $ 177,873
---------- ----------
---------- ----------
At December 31, 1996 and 1995, property and equipment include $23,127 of
buildings and improvements held under capital leases with related
accumulated amortization aggregating $10,198 and $9,017, respectively.
Substantially all property and equipment serve as collateral for long-term
debt (Note 4).
<PAGE>
4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
---------- -----------
<S> <C> <C>
Revolving line of credit, interest payable monthly at a
variable rate (based on certain financial ratios of the Company)
over prime or LIBOR (7.80% at December 31, 1996); principal
payable in semi-annual instalments beginning in December
1998 through February 2002 $ 135,025 $ 110,025
11-7/8% Senior Subordinated Notes, due February 1, 2003,
with interest payable semiannually on February 1 and August 1 85,000 85,000
---------- ----------
220,025 195,025
Less debt discount (1,442) (2,379)
Other recourse debt, generally payable in monthly instalments,
plus interest at approximately 10% 12,619 13,481
---------- ----------
231,202 206,127
Capital lease obligations, payable in monthly instalments, plus
interest at approximately 14% 24,906 25,432
---------- ----------
256,108 231,559
Less current portion of long-term debt (1,978) (1,408)
---------- ----------
$ 254,130 $ 230,151
---------- ----------
---------- ----------
</TABLE>
Subsequent to December 31, 1996, the Company and its principal creditor
amended the terms of its revolving credit facility. Formerly, the Company
had a $155,000 revolving loan with an additional $20,000 available at the
discretion of the Company's principal creditor. Under this credit
facility, interest was payable monthly at prime plus .25% or LIBOR plus
1.75% (at the Company's option). The margin added to prime or LIBOR was
determined based upon certain financial ratios of the Company. Under the
terms of the new revolving credit agreement the revolving loan was
increased to $250,000. At December 31, 1996 the interest rate on the
Company=s credit facility was 6.81%. The amendment also extended the
principal repayment terms such that principal is payable in variable
quarterly instalments beginning in December 1998 and extending through
ultimate maturity on February 14, 2002. At December 31, 1996, the
Company's outstanding balance under this credit facility was $135,025; this
amount has been classified as long-term debt in the accompanying financial
statements in accordance with the amended terms of the Company's loan
agreement.
<PAGE>
4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
The provisions of the loan agreement between the Company and its principal
creditor contain debt covenants with which the Company must comply. These
provisions include prohibition of all dividend payments if the Company is
in violation of any covenants. For the year ended December 31, 1996, the
Company was not in violation of its debt covenants. Additionally, under
certain circumstances, the loan agreement provides for mandatory
prepayments of scheduled debt maturities. Within 120 days after each year,
the Company could be required to prepay a portion of consolidated available
cash flow, as defined in the loan agreement, and in general is required to
prepay debt maturities equal to the net proceeds of any asset sales. No
mandatory prepayments have been required by the creditor.
Long-term debt is secured by substantially all assets of the Company.
In February 1993, the Company sold $85,000 of 11-7/8 percent Senior
Subordinated Notes (the Notes) in a public offering. The net proceeds from
the sale of the Notes were used for (i) the repayment of a $30,000 fixed
rate loan from the Company's principal creditor, (ii) the funding of the
purchase by Cinemas of (a) all of the outstanding shares of Cinemas' senior
preferred stock, (b) certain of the outstanding shares of Cinemas' senior
subordinated convertible preferred stock, and (c) an outstanding warrant
held by the principal creditor to purchase shares of Cinemas' common stock,
and (iii) the repayment of a revolving credit facility.
The Notes mature on February 1, 2003. Interest on the Notes is payable
semiannually on February 1 and August 1 of each year. The Notes are
redeemable, in whole or in part, at the Company's option at any time on or
after February 1, 1998 at the agreed upon redemption prices, together with
accrued and unpaid interest at the date of redemption. In addition, a
sinking fund provides for the redemption of 50 percent of the Notes on
February 1, 2002. The holders of the Notes may require the Company to
repurchase the Notes in certain circumstances involving a change of control
(as defined) at a price equal to 101 percent of the principal amount plus
accrued and unpaid interest at the date of repurchase. However, the loan
agreement with the Company's principal creditor prohibits the purchase of
the Notes by the Company in the event of a change of control unless and
until such time as loans under such loan agreement are repaid in full. The
Notes contain debt covenants with which the Company must comply.
The Notes are general unsecured obligations of the Company and will be
subordinated to all existing and future senior indebtedness (as defined) of
the Company, including indebtedness under the Company's loan agreement (as
defined). The Notes are also effectively subordinated to all of the
indebtedness and trade payables of the Company's subsidiaries.
Excluding the $1,442 of debt discount, the fair value of which is not
practicable to estimate, and the $85,000 of Notes, the carrying amounts of
the Company's long-term debt at December 31, 1996 approximates its fair
value, since the debt is primarily variable rate debt. Based on the quoted
market price for the Company's Notes, the fair value of the Notes at
December 31, 1996 approximates $91,800. See Note 11.
<PAGE>
4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
The average interest rates on the Company's aggregate debt balances,
including capital lease obligations, were 10.3 percent, 10.8 percent and
10.7 percent for the years ended December 31, 1996, 1995 and 1994,
respectively.
As of December 31, 1996, scheduled maturities of long-term debt, including
capital lease obligations, are summarized as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES
----------------------------------------
LONG-TERM TOTAL
YEAR ENDING DECEMBER 31, DEBT PAYMENTS INTEREST PRINCIPAL PRINCIPAL
------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1997 $ 966 $ 4,329 $ 3,317 $ 1,012 $ 1,978
1998 1,060 4,360 3,167 1,193 2,253
1999 1,083 4,377 2,989 1,388 2,471
2000 945 4,377 2,643 1,734 2,679
2001 1,014 4,403 2,532 1,871 2,885
Thereafter 227,576 25,147 7,439 17,708 245,284
Less debt discount (1,442) - - - (1,442)
---------- ---------- ---------- ---------- ----------
$ 231,202 $ 46,993 $ 22,087 $ 24,906 256,108
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Less current portion (1,978)
----------
Long-term portion $ 254,130
----------
----------
</TABLE>
<PAGE>
5. MANDATORILY REDEEMABLE SECURITIES OF ACT III CINEMAS, INC.
Mandatorily redeemable securities of Act III Cinemas, Inc. consist of:
MANDATORILY REDEEMABLE
SENIOR SUBORDINATED
CONVERTIBLE PREFERRED STOCK, $.01 PAR VALUE
-------------------------------------------
CARRYING REDEMPTION
SHARES VALUE VALUE
--------- ---------- ----------
Balance, December 31, 1993 200.00 $ 8,553 $ 8,651
Accretion to redemption value - 29 -
Accretion of dividends - 1,298 1,298
--------- ---------- ---------
Balance, December 31, 1994 200.00 9,880 9,949
Accretion to redemption value - 24 -
Accretion of dividends - 1,492 1,492
--------- ---------- ---------
Balance, December 31, 1995 200.00 11,396 11,441
Accretion to redemption value - 19 -
Accretion of dividends - 1,717 1,717
--------- ---------- ---------
Balance, December 31, 1996 200.00 $ 13,132 $ 13,158
--------- ---------- ---------
--------- ---------- ---------
MANDATORILY REDEEMABLE SENIOR SUBORDINATED CONVERTIBLE PREFERRED STOCK
During 1990, Cinemas authorized 571.43 shares of mandatorily redeemable
senior subordinated convertible preferred stock (Senior Subordinated
Convertible Preferred Stock), par value $.01 per share. Effective February
8, 1990, Cinemas issued 400 shares, including 200 shares to a minority
common stock shareholder of Cinemas, of Senior Subordinated Convertible
Preferred Stock for $10,000, less stock issuance costs aggregating $750.
In addition, Cinemas issued 171.43 shares of Senior Subordinated
Convertible Preferred Stock to the Company's principal creditor, for no
consideration but in lieu of the antidilution adjustments required under
the Mandatorily Redeemable Common Stock Warrant issued to the creditor.
The holders of the Senior Subordinated Convertible Preferred Stock are
entitled to annual dividends, payable on September 30, at the rate of 15
percent per annum of the base amount of each share. The base amount is
defined as $25,000 per share, adjusted by the amount of any dividends on
such shares accrued to date and not previously paid or added to the base
amount.
Cinemas is required to redeem the Senior Subordinated Convertible Preferred
Stock as of February 8, 2000 at the base amount per share. Accretion to
record the value of the Senior Subordinated Convertible Preferred Stock at
its redemption value on its scheduled redemption date is calculated using
the effective interest method.
<PAGE>
5. MANDATORILY REDEEMABLE SECURITIES OF ACT III CINEMAS, INC. (CONTINUED)
Each share of Senior Subordinated Convertible Preferred Stock is
convertible into one share of Cinemas' common stock at the holder's option.
Additionally, the shares of the Senior Subordinated Convertible Preferred
Stock are automatically converted to common stock on a share-for-share
basis upon an initial public offering of 15 percent or more of Cinemas'
issued and outstanding common stock, in which the public offering price is
equal to or greater than the Senior Subordinated Convertible Preferred
Stock liquidation value. The conversion ratio to common stock is subject
to certain adjustments as defined by the terms of the stock agreement.
Under certain conditions, primarily related to ownership changes of
Cinemas' securities, the holders of the Senior Subordinated Convertible
Preferred Stock may require Cinemas to repurchase their shares at the
appraised value as defined by the terms of the stock agreement. Under the
terms of the stock agreement, the holders of Senior Subordinated
Convertible Preferred Stock have certain voting rights.
In the event of any liquidation or dissolution of Cinemas, the holders of
Senior Subordinated Convertible Preferred Stock are entitled to the base
amount per share, and have liquidation preference over Cinemas' common
stock.
In February 1993, approximately $14,702 of the proceeds from the sale of
the 11-7/8 percent Senior Subordinated Notes discussed in Note 4 were used
by the Company to repurchase 371.43 shares of the Senior Subordinated
Convertible Preferred Stock, including accrued but unpaid dividends.
It is not practicable to determine the fair value of the Senior
Subordinated Convertible Preferred Stock due to the lack of a readily
available market for this security.
PREFERRED STOCK
Cinemas has authorized 300,000 shares of preferred stock, $.01 par value
per share, of which 200 shares, designated as Series B Senior Subordinated
Converted Preferred Stock, are issued and outstanding at December 31, 1996.
6. SHAREHOLDER'S EQUITY (DEFICIT)
COMMON STOCK
During 1995, the Company paid Cinemas a $300 dividend which was used by
Cinemas to repurchase five shares of its common stock for $300. At
December 31, 1996, the Company had 1,000 shares of common stock authorized;
100 shares were issued and outstanding. At December 31, 1996, Cinemas had
500,000 shares of common stock authorized; 916.95 shares were issued and
outstanding.
<PAGE>
6. SHAREHOLDER'S EQUITY (DEFICIT) (CONTINUED)
MANAGEMENT STOCK OPTION AND INCENTIVE COMPENSATION PLANS
Cinemas has established a Management Stock Option Plan whereby certain
members of management of Cinemas and its subsidiaries may be granted either
nonqualified stock options or incentive stock options to purchase shares of
Cinemas' common stock. A total of 100 shares of Cinemas' common stock has
been reserved for issuance under the plan. The purchase price per share is
determined by a committee appointed by the Board of Directors of Cinemas,
provided that, in the case of incentive stock options, the purchase price
per share shall not be less than 100 percent of the fair market value of
Cinemas' common stock on the grant date.
On December 24, 1991, Cinemas granted to certain members of the Company's
management, nonqualified stock options exercisable into 19 shares of
Cinemas' common stock at an exercise price of $5,000 per share. The
Company recognized $152 of compensation expense related to these options
over the vesting period which ended in June 1994.
On December 31, 1993, Cinemas granted nonqualified stock options to certain
members of the Company's management, exercisable into 11.5 shares of
Cinemas' common stock at an exercise price of $5,000 per share. The
Company recognized $230 of compensation expense related to these options
over the vesting period which ended in June 1996.
On December 31, 1995, Cinemas granted nonqualified stock options to certain
members of the Company's management, exercisable into 35 shares of Cinemas'
common stock at an exercise price of $18,000 per share. The Company will
recognize $1,470 of compensation expense related to these options over the
vesting period ending in December 1998.
On October 1, 1996, Cinemas granted nonqualifed stock options to certain
members of the Company's management, excercisable into 32.5 shares of
Cinemas common stock at an exercise price of $20,000 per share. The
Company will recognize $1,300 of compensation expense related to these
options over the vesting periods ending in September 1999.
For the years ended December 31, 1996, 1995 and 1994, the Company
recognized $630, $77 and $100, respectively, of compensation expense
related to these options.
The Company has a discretionary interest Management Incentive Compensation
Plan whereby designated executives and key employees may be awarded an
incentive amount based on 3.5 percent of earnings before income taxes and
interest, as defined per the agreement. Compensation expense related to
this plan was $951, $782 and $661 for the years ended December 31, 1996,
1995 and 1994, respectively.
Compensation expense related to the Management Stock Option Plan and the
Management Incentive Compensation Plan is included in general and
administrative expenses in the accompanying consolidated statement of
operations. At December 31, 1996, options exercisable into 98 shares of
Cinemas' common stock were outstanding, of which 30.5 shares were fully
vested. No options have been exercised to date.
<PAGE>
7. ACQUISITIONS
Effective September 22, 1995, the Company paid $11,400 to acquire five
theatres and related assets. The acquisition has been accounted for using
the purchase method of accounting. The results of operations of the
theatres acquired have been included in the consolidated results of
operations of the Company since the acquisition date. The acquisition of
these theatres has been included in capital expenditures in the
accompanying consolidated statement of cash flows.
During January 1994, the Company purchased two theatres and assumed $1,900
in debt.
8. INCOME TAXES
PROVISION FOR INCOME TAXES
The income tax provision consists of the following:
YEAR ENDED DECEMBER 31,
1996 1995 1994
---------- ---------- ----------
Current:
Federal $ 2,945 $ 2,838 $ 2,857
State 243 247 299
---------- ---------- ----------
3,188 3,085 3,156
---------- ---------- ----------
Deferred:
Federal 1,386 620 958
State 116 54 201
---------- ---------- ----------
1,502 674 1,159
---------- ---------- ----------
Total $ 4,690 $ 3,759 $ 4,315
---------- ---------- ----------
---------- ---------- ----------
The effective income tax rate for the years ended December 31, 1996, 1995
and 1994 differs from the statutory rate of 34 percent as follows:
1996 1995 1994
----- ----- -----
Federal statutory tax rate 34.0% 34.0% 34.0%
Purchase accounting amortization adjustments 4.6 2.4 2.3
State taxes, net of federal effect 2.8 3.1 3.8
Other 2.9 2.5 -
---- ---- ----
Effective rate 44.3% 42.0% 40.1%
---- ---- ----
---- ---- ----
<PAGE>
8. INCOME TAXES (CONTINUED)
DEFERRED INCOME TAXES
The components of the net deferred tax liability are:
DECEMBER 31,
1996 1995
---------- ----------
Deferred tax assets:
Capital lease obligation $ 9,215 $ 9,410
Intangibles 206 232
Debt discount associated with warrants 2,459 2,038
Other 503 -
---------- ----------
Total deferred tax asset 12,383 11,680
---------- ----------
Deferred tax liabilities:
Property and equipment and
accumulated depreciation 17,536 16,881
Intangibles and accumulated amortization 4,020 2,418
Other - 52
---------- ----------
Total deferred tax liability 21,556 19,351
---------- ----------
Net deferred tax liability $ 9,173 $ 7,671
---------- ----------
---------- ----------
9. RELATED PARTY TRANSACTIONS
Pursuant to a management agreement between the Company and Holdings L.P.,
beginning in 1993, for a term of ten years, Holdings L.P. will charge an
annual management fee of $600.
Holdings L.P. has also charged the Company additional amounts of $677, $517
and $492 for the years ended December 31, 1996, 1995 and 1994,
respectively, for the allocation of salaries of certain Holdings L.P.
employees, including Cinema's Chief Executive Officer, rent and other
charges. The annual base fee and additional charges, which were permitted
by the principal creditor, are included in general and administrative
expenses in the accompanying consolidated statement of operations.
10. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Company utilizes land, building and equipment under various long-term
rental and lease agreements which expire in varying years through
approximately 2035. All of these leases represent operating leases and,
accordingly, rental payments are recorded as rent expense when incurred.
In addition to specified minimum lease payments, certain of these leases
require rents based on specified theatre revenues.
<PAGE>
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
At December 31, 1996, minimum annual rentals under long-term operating
leases are:
1997 $ 9,678
1998 9,587
1999 9,446
2000 9,125
2001 8,255
Thereafter 101,021
----------
$ 147,112
----------
----------
Rent expense under these long-term operating leases aggregated $12,964,
$10,472 and $9,749 and included $3,161, $1,389 and $1,182 of rents based
on specified theatre revenues for the years ended December 31, 1996, 1995
and 1994, respectively. Operating lease rent expense is included in other
theatre operating expenses and general and administrative expenses in the
accompanying consolidated statement of operations.
CONTINGENCIES
From time to time, the Company is involved in legal proceedings arising in
the ordinary course of its business operations, such as personal injury
claims, employment matters and contractual disputes. Management believes
that the Company's potential liability with respect to such proceedings
currently pending is not material in the aggregate to the Company's
consolidated financial position or results of operations.
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 8,720 $ 8,720 $ 19,002 $ 19,002
Contracts receivable 2,294 2,294 2,302 2,302
Long-term debt:
Practicable to estimate fair value (Note 4) 257,550 264,350 233,938 239,038
Not practicable to estimate (Note 4) (1,442) - (2,379) -
Mandatorily redeemable securities:
Not practicable to estimate (Note 5) 13,132 11,396 -
</TABLE>
<PAGE>
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly results for the years ended December 31, 1996 and
1995 are set forth in the following table:
<TABLE>
<CAPTION>
1996 BY QUARTER
---------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 51,209 $ 53,783 $ 63,069 $ 55,488 $ 223,549
Income from operations 9,192 7,941 12,660 3,419 33,212
Net income (loss) applicable
to common stock 1,746 852 3,479 (1,928) 4,149
1995 BY QUARTER
---------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
---------- ---------- ----------- ----------- ------------
Revenues $ 37,963 $ 46,473 $ 58,234 $ 53,521 $ 196,191
Income from operations 5,117 7,315 12,670 7,751 32,853
Net income (loss) applicable
to common stock (1,072) 531 3,292 919 3,670
</TABLE>
<PAGE>
ACT III THEATRES, INC.
1996 FORM 10-K
INDEX TO EXHIBITS
THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS ANNUAL REPORT ON FORM L0-K.
Sequentially
Exhibit Numbered
Number Exhibit Page
- --------------------------------------------------------------------------------
3.1 Certificate of Incorporation.......................... *
3.2 Bylaws, as amended and restated on November 24,
1992.................................................. *
4.1 Form of Indenture for Senior Subordinated Notes,
with form of Note attached............................ *
10.1 Third Amendment to Loan Agreement, dated as of
July 31, 1992, by and between Act III Theatres, Inc.
and General Electric Capital Corporation,
as Agent and Lender................................... *
10.2 Cineplex-Washington Term Note, dated July 31, 1992,
from Act III Theatres, Inc. to General Electric
Capital Corporation................................... *
10.3 Agreement, dated as of January 8, 1993, by and among
General Electric Capital Corporation, Act III Cinemas,
Inc. and Act III Theatres, Inc........................ *
10.4 Form of Fourth Amendment to Loan Agreement by and
between General Electric Capital Corporation and
Act III Theatres, Inc................................. *
10.5 Form of Agreement by and among General Electric
Capital Corporation, Act III Cinemas, Inc. and
Act III Theatres, Inc................................. *
10.6 Assignment and Assumption of Landlord's Interest in
Lease, dated as of June 30, 1992, by and between
Security Service Federal Credit union and A3 Theatres
of Texas, Inc......................................... *
10.7 Promissory Note, dated June 30, 1992, from A3 Theatres
of Texas, Inc. to Security Service Federal Credit Union *
<PAGE>
10.8 Deed of Trust, Assignment of Rents and Security
Agreement, dated June 30, 1992, from A3 Theatres
of Texas, Inc. to Security Service Federal Credit
Union................................................. *
10.9 Confidential Settlement Agreement with Mutual
Releases, dated March 13, 1992, by and among
Cinemark USA, Inc. and Act III Theatres, L.P., Act
III Theatres GP, Inc., Act III Theatres, Inc., A3
Theatres of San Antonio, Ltd., A3 Theatres, Inc.,
NL Communications, Inc. (formerly Act III
Communications, Inc.), Act III Communications
Holdings GP, Inc., Act III Communications, L.P.,
Act III Communications Holdings, L.P.,
Act III Cinemas, Inc., A3 Theatres of Texas, Inc.,
and Norman Lear....................................... *
10.10 Confidential Settlement Agreement with Mutual Releases
as between Certain Parties dated March 13, 1992, among
Cinemark USA, Inc., Schroder Center Management, Inc.,
and Bexar McCreless Corporation and Act III Theatres,
L.P., Act III Theatres, GP, Inc., Act III Theatres,
Inc., A3 Theatres of San Antonio, Ltd., A3 Theatres,
Inc., NL Communications, Inc. (formerly Act III
Communications, Inc.), Act III Communications
Holdings, L.P., Act III Cinemas, Inc., A3 Theatres
of Texas, Inc., and Norman Lear....................... *
10.11 Agreement, dated June 3, 1992, by and between
Plitt Theatres, Inc. and Eastgate Theatre, Inc.
and schedules thereto................................. *
+10.12 1991 Management Stock Option Plan of Act III
Cinemas, Inc.......................................... *
+10.13 Management Compensation Incentive Plan................ *
10.14 Letter of Intent, dated November 19, 1992, among
Act III Theatres, Inc., Act III Cinemas, Inc. and
General Electric Capital Corporation.................. *
10.15 Letter Agreement, dated October 22, 1992, by and
between Adam Press and Act III Theatres, Inc.......... *
10.16 Management Agreement, dated as of November 1, 1992
by and between Act III Communications Holdings
L.P. and Act III Theatres, Inc........................ *
+10.18 Employment Agreement, dated as of December 4, 1995
by and between Act III Theatres, Inc.
and Walter S. Aman....................................
<PAGE>
+10.19 Employment Agreement, dated as of February 12, 1996
by and between Act III Theatres, Inc.
and Robert J. Lenihan.................................
+10.20 Employment Agreement, dated as of December 6, 1995 by
and between Act III Theatres, Inc. and Timothy G. Wood
+10.21 Employment Agreement, dated as of December 14, 1995 by
and between Act III Theatres, Inc. and William Spencer
++10.23 Form of Fifth Loan Amendment by and between General
Electric Capital Corporation and Act III Theatres, Inc
++10.24 Amended and Restated Loan Agreement
(Dated February 14, 1997)
++27.1 Financial Data Schedule
- -------------------------------------------------------------------
* Incorporated herein by reference from the Company's
registration statement on Form S-1 dated as of
January 26, 1993.
+ Management contract or compensatory plan or arrangement.
++ Filed herewith
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT, dated as of September 10, 1996,
between ACT III THEATRES, INC., a Delaware corporation having an office at 919
S.W. Taylor Street, Suite 900, Portland, Oregon 97205 ("Borrower"), the lenders
("Lenders") listed on the signature pages hereof, and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation having an office at 201 High Ridge Road,
Stamford, Connecticut 06927 ("GE Capital"), as agent for the Lenders hereunder
(GE Capital, in such capacity, being "Agent").
W I T N E S S E T H
WHEREAS, Borrower has entered into a Loan Agreement, dated as of May
1, 1989, as amended (the "Original Loan Agreement") with GE Capital as agent and
sole lender; and
WHEREAS, Borrower and GE Capital, as agent and sole lender under the
Original Loan Agreement, desire to amend and restate such Original Loan
Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree that the Original Loan
Agreement is hereby amended and restated in its entirety to read as follows:
1. DEFINITIONS
In addition to the defined terms appearing above, capitalized terms
used in this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"A 3 Ltd." shall mean A 3 Theatres of San Antonio, Ltd., a Texas
limited partnership and an Affiliate of Borrower.
"Accrued and unpaid Management Fee" shall have the meaning assigned to
it in Section 7.7(c).
"Act III" shall mean Act III Communications, L.P., a Delaware limited
partnership and an Affiliate of Borrower.
"Adverse Environmental Condition" shall mean any of the matters
referred to in clause (i) or (ii) of the definition of Environmental Claim.
"Affiliate" shall mean with respect to any Person (i) each Person
that, directly or indirectly, owns or Controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 10% or more of the Stock having ordinary
voting power in the election of directors of such Person, (ii) each Person that
Controls, is Controlled by or is under common Control with such Person or any
Affiliate of such Person or (iii) each of such Person's executive officers,
directors,
<PAGE>
joint venturers and general partners. For the purpose of this definition GE
Capital and its Affiliates shall not be deemed an Affiliate of the Borrower.
"Agency Fee" shall have the meaning assigned to it in Section 2.10(a)
hereof.
"Agent" shall mean GE Capital, as Agent for Lenders hereunder, and any
successor Agent appointed pursuant to Section 10.6.
"Agreement" shall mean this Loan Agreement, including all amendments,
modifications and supplements hereto and any appendices, exhibits or schedules
to any of the foregoing, and shall refer to this Agreement as the same may be in
effect at the time such reference becomes operative.
"AMC-Austin Leases" shall mean all of the leasehold estates in real
property acquired by Borrower or any of its Subsidiaries in connection with the
Asset Purchase Agreement, dated May 26, 1989, among Borrower, American Multi-
Cinema, Inc. and Durwood, Inc.
"Ancillary Agreements" shall mean any supplemental agreement,
undertaking, instrument, document or other writing executed by Parent, Borrower
or by any of Borrower's Subsidiaries or Stockholders as a condition to advances
or funding under this Agreement or otherwise in connection herewith, including,
without limitation, the Loan Documents and all amendments or supplements
thereto.
"Asset Sale" shall mean any sale or other disposition (including by
merger or consolidation) made after the date hereof by Borrower or any of its
Subsidiaries to any Person (other than Borrower or any of its Subsidiaries) of
(i) all or substantially all of the Stock of any of Borrower's Subsidiaries,
(ii) all or substantially all the assets of Borrower or any of its Subsidiaries
or any division of any of them, or (iii) any other asset of Borrower or any of
its Subsidiaries not made in the ordinary course of business (including, without
limitation, a termination or surrender of any lease prior to its stated
expiration date).
"Available Cash" shall mean, with respect to Borrower for any given
Fiscal Year, an amount equal to Borrower's Consolidated Available Cash Flow with
respect to such Fiscal Year, less the amount of such Consolidated Available Cash
Flow required to be utilized to prepay the Loans pursuant to Section 2.4(a)
hereof.
"Borrower" shall mean Act III Theatres, Inc., a Delaware corporation,
having an office at 919 S.W. Taylor Street, Suite 900, Portland, Oregon 97205.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in either the state
of California or the state of New York.
2
<PAGE>
"Capital Expenditures" shall mean all payments for any fixed assets or
improvements or for replacements, substitutions or additions thereto, that have
a useful life of more than one year and which are required to be capitalized
under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property, other than the Leases, by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as such in a note to such balance sheet, other than, in the case of
Borrower or a Subsidiary of Borrower, any such lease under which Borrower or
such Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) taxes
at the time due and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Collateral, (ii) Borrower's or any of
its Subsidiaries' employees, payroll, income or gross receipts, (iii) Borrower's
or any of its Subsidiaries' ownership or use of any of its assets, or (iv) any
other aspect of Borrower's or any of the Subsidiaries' business.
"Closing Date" shall mean May 1, 1989.
"Code" shall mean the Uniform Commercial Code of the jurisdiction with
respect to which such term is used, as in effect from time to time.
"Collateral" shall mean the Collateral covered by the Security
Agreement and the Trademark Assignment Agreement, the Pledged Collateral covered
by the Pledge Agreement and the properties and interests covered by the
Mortgages and the Leasehold Mortgages.
"Collateral Documents" shall mean the Guaranty, the Security
Agreement, the Pledge Agreement, the Trademark Assignment Agreement, the
Mortgages and the Leasehold Mortgages.
"Commitments" shall mean, the obligation of Lenders to make Revolving
Credit Advances, and the "Commitment" of any Lender shall mean the obligation of
such Lender to make Revolving Credit Advances pursuant to Section 2.1 hereof in
the aggregate principal amount outstanding not to exceed the amount set forth
opposite such Lender's name on the signature pages hereof under the caption
"Commitment", as such amount may be reduced or modified pursuant to this
Agreement.
3
<PAGE>
"Commitment Termination Date" shall mean the earliest of (i) June 30,
2001 and (ii) the date of termination of the Commitments pursuant to Section
9.2.
"Common Stock" shall mean the common stock, $.001 par value, of
Parent.
"Compensation" shall mean, with respect to any Person, all payments
and accruals commonly considered to be compensation, including, without
limitation, all wages, salary, deferred payment arrangements, bonus payments and
accruals, profit sharing arrangements, payments in respect of stock option or
phantom stock option or similar arrangements, stock appreciation rights or
similar rights, incentive payments, pension or employment benefit contributions
or similar payments, made to or accrued for the account of such Person or
otherwise for the direct or indirect benefit of such Person; PROVIDED, HOWEVER,
that, Compensation shall not include payments and accruals payable by Borrower
to employees of Borrower pursuant to that certain Compensation Plan as in effect
on the Closing Date or as replaced by that certain Compensation Plan
substantially in the form provided to Agent prior to the Closing Date.
"Compensation Plan" shall mean the Management Incentive Compensation
Plan of Borrower, a copy of which has been delivered to Agent and the Lenders.
"Consolidated Available Cash Flow" shall mean, with respect to any
Person for any period, Consolidated Cash Flow MINUS payments made in respect of
Capital Expenditures permitted hereunder except any such payments made out of
Net Cash Proceeds to the extent permitted by Section 2.4(b), cash interest,
scheduled principal payments on the Notes, principal payments permitted
hereunder on other Indebtedness (other than, with respect to Borrower, the
Revolving Credit Loan to the extent that such payments do not result in a
reduction in availability thereunder), payments made with respect to the
management fee payable to Act III to the extent permitted to be paid by Section
7.7(c) hereof, and payment of taxes.
"Consolidated Cash Flow" shall mean, with respect to any Person for
any period, the consolidated operating income (before extraordinary items,
including any Net Cash Proceeds, interest, taxes, depreciation and amortization)
less all cash obligations paid or accrued with respect to Capital Leases of such
Person and its consolidated Subsidiaries determined in accordance with GAAP and
in a manner consistent with the projections referred to in Section 4.7 hereof.
"Consolidated Cash Flow to Consolidated Fixed Charges Ratio" shall
mean, at any date of calculation thereof, the ratio of (a) Consolidated Cash
Flow of Borrower for the immediately preceding four consecutive fiscal quarters
to (b) Consolidated Fixed Charges of Borrower for such period.
"Consolidated Fixed Charges" shall mean, with respect to any Person
for any period, the sum of (i) cash interest payable on all Indebtedness of such
Person and its consolidated Subsidiaries during such period plus (ii) principal
amounts of all Indebtedness of such Person and its consolidated Subsidiaries
payable during such period resulting from borrowings or the granting
4
<PAGE>
of credit (other than normal trade credit) plus (iii) the amount of any
reduction of the Revolving Credit Loans during such period as provided in
Section 2.1(c).
"Consolidated Interest Charges" shall mean, with respect to any Person
for any period, the amount which, in conformity with GAAP, would be set forth
opposite the caption "interest expense" (or any like caption) on a consolidated
income statement of such Person and all other Persons with which such Person's
financial statements are to be consolidated in accordance with GAAP for the
relevant period ended on such date (excluding interest payable with respect to
any Capitalized Lease Obligation).
"Consolidated Interest Coverage Ratio" shall mean, at any date of
calculation thereof, the ratio of (a) Consolidated Cash Flow of Borrower for the
immediately preceding four consecutive fiscal quarters to (b) Consolidated
Interest Charges of Borrower for such period.
"Consolidated Theatre Cash Flow" shall mean, with respect to Borrower
and its consolidated Subsidiaries for any period, the sum of Consolidated Cash
Flow of Borrower and its consolidated Subsidiaries for such period plus
Corporate Overhead of Borrower and its consolidated Subsidiaries for such
period.
"Consolidated Total Funded Debt" shall mean, with respect to any
Person at any date of determination, the total of all Funded Debt (excluding
Capital Lease Obligations) of such Person and its consolidated Subsidiaries
outstanding on such date determined in accordance with GAAP, after eliminating
all intercompany transactions.
"Consolidated Total Funded Debt to Consolidated Cash Flow Ratio" shall
mean, at any date of calculation thereof, the ratio of (a) Consolidated Total
Funded Debt of Borrower to (b) Consolidated Cash Flow of Borrower for the
immediately preceding four consecutive fiscal quarters; PROVIDED, HOWEVER, that
solely for purposes of this calculation, in the event that Borrower shall
construct or acquire any motion picture theatre and related assets, the
Consolidated Total Funded Debt incurred by Borrower in connection therewith and
the Consolidated Cash Flow related thereto shall be excluded therefrom for the
first two full calendar quarters (and any partial calendar quarter commencing on
the date of acquisition or construction if the acquisition or construction is
not completed on the first day of a calendar quarter) following the date of such
acquisition or completion of construction, as the case may be, and thereafter
such Consolidated Total Funded Debt and Consolidated Cash Flow shall be
included; PROVIDED, FURTHER, HOWEVER, that until four consecutive quarters of
Consolidated Cash Flow for such theatre and related assets while owned by
Borrower is available, such Consolidated Cash Flow to be included in such
calculation shall be computed on an annualized basis for the period after
Borrower's acquisition or construction thereof.
"Contaminant" shall mean those substances which are regulated by or
form the basis of liability under any Environmental Laws including, without
limitation, asbestos, polychlorinated biphenyls ("PCBs"), and radioactive
substances, or any other material or substance which constitutes a health,
safety or environmental hazard to any person or property.
5
<PAGE>
"Continuing Directors" shall mean any member of the Board of Directors
of Borrower who (i) is a member of that Board of Directors on the date of the
Indenture or (ii) was nominated for election or elected to the Board of
Directors with the affirmative vote of a majority of the Continuing Directors
who were members of the Board at the time of such nomination or election.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise and "Controlled by" shall have the concomitant meaning; PROVIDED,
HOWEVER, that a Person shall not be deemed to lack or to have failed to maintain
Control of another Person by reason of the existence of rights of approval or
veto rights held by any third party, including, without limitation, any
stockholder, director, partner, lender or landlord.
"Corporate Overhead" shall mean, for any period, all customary and
routine overhead costs, expenses and liabilities of Borrower or any of its
Subsidiaries, including, without limitation, all accounting and legal fees,
telephone expenses, rent or other office overhead payable by Borrower or such
Subsidiary, and all Compensation payable by Borrower or such Subsidiary, to the
employees, officers or directors of Borrower or such Subsidiary, all of which
are incurred in connection with the conduct of the business of Borrower or such
Subsidiary; PROVIDED, HOWEVER, that Corporate Overhead shall not include any of
the foregoing costs, expenses or liabilities incurred by Borrower or any of its
Subsidiaries in connection with the day to day operations of any Theatre or
management fees paid by Borrower pursuant to Section 7.7(c).
"Debt" shall mean all principal of and premium, if any, and interest
on, and all other amounts of any nature whatsoever owing in respect of the
Revolving Credit Loan hereunder.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"Derivative Ownership Interest" shall mean an ownership interest held
either directly or indirectly and determined by reference to the diluted
percentage interest that is derived through intermediate Persons. For instance,
an 80% interest in a Person that, in turn, owns 80% of an underlying entity,
would be computed as a 64% Derivative Ownership Interest in the underlying
entity.
"Disclosure Documents" means, collectively, the Registration Statement
on Form S-1 filed by Borrower with the Securities and Exchange Commission, as
amended from time to time through the date hereof, including, without
limitation, the Prospectus dated January 26, 1993 constituting a part thereof.
"DOL" shall mean the United States Department of Labor.
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"Eastgate" shall mean Eastgate Theatre, Inc., an Oregon corporation.
"Environmental Claim" shall mean any accusation, allegation, notice of
violation, claim, demand, abatement or other order or direction (conditional or
otherwise) by any governmental authority or any person for personal injury
(including sickness, disease or death), tangible or intangible property damage,
damage to the environment, nuisance, pollution, contamination or other adverse
effects on the environment, or for fines, penalties or restrictions, resulting
from or based upon (i) the existence, or the continuation of the existence, of a
Release (including, without limitation, sudden or non-sudden, accidental or non-
accidental Releases), of, or exposure to, any Contaminant in, into or onto the
environment (including, without limitation, the air, ground, water or any
surface) at, in, by, from, or related to the Facilities, (ii) the
transportation, storage, treatment or disposal of Contaminants in connection
with the operation of the Facilities or any other tangible assets of the
Borrower or any of its subsidiaries, or (iii) the violation, or alleged
violation, of any statutes, ordinances, orders, rules, regulations, permits or
licenses of or from any governmental authority, agency or court relating to
environmental matters connected with the Facilities.
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the
Hazardous Material Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the
Federal Water Pollution Control Act (33 U.S.C.Section 1251 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the
Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control
Act, as amended (15 U.S.C. Section 2601 ET SEQ.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), and the
Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.), as these
laws have been amended or supplemented and any analogous state or local statutes
and the regulations promulgated pursuant thereto including, without limitation,
the Safe Drinking Water and Toxic Enforcement Act (Cal. Health and safety Code
Section 25249.5 ET SEQ.).
"ERISA" shall mean the Employee Retirement Income security Act of
1974, as amended from time to time, and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Borrower or any of its
subsidiaries, all trades or businesses (whether or not incorporated) which are
under common control with Borrower or any of its Subsidiaries and which,
together with Borrower or any of its Subsidiaries, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to Borrower, any of its
Subsidiaries or any ERISA Affiliate, (a) a Reportable Event (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under regulations issued under Section 4043 of ERISA), (b) the withdrawal of
Borrower, any of its Subsidiaries or any ERISA Affiliate from a Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or
the treatment of a Plan amendment as a termination under Section 4041(c) of
ERISA, (d) the institution of proceedings to terminate a
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Plan by the PBGC under Section 4042 of ERISA, (e) the failure to make required
contributions which would result in the imposition of a lien under Section 412
of the IRC or Section 302 of ERISA, or (f) any other event or condition which
might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan
or to cause the imposition of any liability under Title IV of ERISA.
"Eurodollar Business Day" shall mean a Business Day on which banks in
the City of London are required or permitted to be open for interbank or foreign
exchange transactions.
"Event of Default" shall have the meaning assigned to it in Section
9.1 hereof.
"Exhibition Contract" shall mean any contract or other agreement,
whether or not written, with a motion picture distributor for the exhibition of
a motion picture.
"Facilities" shall mean any and all real property owned or leased or
used by Borrower or any of its Subsidiaries.
"Federal Reserve Board" shall have the meaning assigned to it in
Section 4.13 hereof.
"Fiscal Year" shall mean the calendar year. Subsequent changes of the
fiscal year of Borrower shall not change the term "Fiscal Year," unless the
Required Lenders shall consent in writing to such changes.
"Funded Debt" shall mean, with respect to any Person, all Indebtedness
of such Person which by the terms of the agreement governing or instrument
evidencing such Indebtedness matures more than one year from, or is directly or
indirectly renewable or extendible at the option of the debtor under a revolving
credit or similar agreement obligating the lender or lenders to extend credit
over a period of more than one year from, the date of creation thereof,
including current maturities of long-term debt, revolving credit, and short-term
debt extendible beyond one year at the option of the debtor and. in respect of
Borrower, including the Revolving Credit Loan.
"Funding Arrangements" shall have the meaning assigned to it in
Section 2.15(b) hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"GE Capital" shall mean General Electric Capital Corporation, a New
York corporation, having an office at 201 High Ridge Road, Stamford, Connecticut
06927.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligations") of any other Person (the "primary obligor")
in any manner including, without limitation, any
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obligation or arrangement of such Person (a) to purchase or repurchase any such
primary obligation, (b) to advance or supply funds (i) for the purchase or
payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Guarantor" shall mean Parent and each Subsidiary of Borrower, each of
which is executing and delivering to Agent the Guaranty.
"Guaranty" shall mean the Guaranty made in favor of Agent, as agent
for itself and the other Lenders, by each Guarantor, dated as of May 1, 1989,
including all amendments, modifications and supplements thereto, and shall refer
to the Guaranty as the same may be in effect at the time such reference becomes
operative.
"Improvements" shall have the meaning assigned to such term in Section
4.8(d) hereof.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (iv) all Guaranteed Indebtedness, (v)
all Indebtedness referred to in clause (i), (ii), (iii) or (iv) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or in property (including, without
limitation, accounts and contracts rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness, (vi) the Obligations, and (vii) all liabilities under Title IV of
ERISA.
"Indenture" means the Indenture, dated as of February 2, 1993, between
Borrower and The First National Bank of Boston, as Trustee, pursuant to which
the Senior Subordinated Notes are to be issued, as the same may be hereafter
amended, supplemented or modified from time to time to the extent permitted by
the Loan Agreement.
"Index Rate" shall mean the greater of (i) the highest prime or base
rate of interest publicly announced on any given Business Day by any of
Citibank, N.A., Chemical Bank, Morgan Guaranty Trust Company of New York and The
Chase Manhattan Bank, N.A. (whether or not such rate is actually charged by any
such bank), and (ii) the most recent published annual yield on
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90 day commercial paper (or the average of such yields if more than one is
published) placed by dealers, as quoted either in the Federal Reserve Rate
Report which customarily appears in the Friday issue of the Wall Street Journal
(Eastern Edition) under "Money Rates" or in the event such report shall not so
appear, in such other nationally recognized publication as Agent may, from time
to time, specify to Borrower in writing.
"Index Rate Loan" shall mean any Loan that bears interest at the Index
Rate.
"Interest Payment Date" shall have the meaning assigned to such term
in Section 2.8(a) hereof.
"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service.
"Lear" shall mean Norman Lear.
"Leases" shall mean all of those leases of real property now owned or
hereafter acquired by Borrower or any Subsidiary of Borrower, as lessee.
"Leasehold Mortgage" shall mean the leasehold mortgages, leasehold
deeds of trust or other similar leasehold security agreements substantially in
the form of Exhibit C, made or to be made by Borrower and each of its
Subsidiaries having an interest in the Lease to be encumbered, in favor of Agent
to secure the Obligations creating a lien on the Leases particularly designated
on Schedule 4.8(b) or for which Leasehold Mortgages are required in accordance
with the terms of this Agreement, as the same may be amended, modified or
supplemented, from time to time.
"Lender" shall mean each Lender, including GE Capital, listed on the
signature pages hereof and any future holder of all or any portion of the Notes.
"LIBOR Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "LIBOR Lending Office" opposite its name
on Schedule 1.1 hereto (or, if no such office is specified, its domestic lending
office) or such other office of such Lender as such Lender may from time to time
specify to Borrower and Agent.
"LIBOR Period" shall mean, with respect to any LIBOR Rate Loan, each
period commencing on the last day of the next preceding LIBOR Period applicable
to such LIBOR Rate Loan and ending 30 days thereafter, as selected by Borrower's
irrevocable notice to Agent as set
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forth in Section 2.8(e) hereof; PROVIDED that the foregoing provision relating
to LIBOR Periods is subject to the following:
(1) if any LIBOR Period pertaining to a LIBOR Rate Loan would
otherwise end on a day that is not a Eurodollar Business Day, such LIBOR
Period shall be extended to the next succeeding Eurodollar Business Day
unless the result of such extension would be to carry such LIBOR Period
into another calendar month in which event such LIBOR Period shall end on
the immediately preceding Eurodollar Business Day;
(2) any LIBOR Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(3) any LIBOR Period pertaining to a LIBOR Rate Loan that begins on
the last Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such LIBOR Period) shall end on the last Eurodollar Business Day of a
calendar month;
(4) Borrower shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Rate Loan during a LIBOR Period for such
Loan; and
(5) Borrower shall select LIBOR Periods so that there shall be no
more than three tranches in existence at any one time and each tranche
shall be in an amount of at least $5,000,000.
"LIBOR Rate" shall mean for any LIBOR Period the average of the four
rates, reported from time to time by Telerate News Service page 3750 or such
other page as may replace page 3750 on that service or such other service or
services as may be designated by the British Bankers' Association for the
purpose of displaying such rate (or such other number of rates as such service
may from time to time report), at which foreign branches of major United States
banks offer United States dollar deposits to other banks for such LIBOR Period
at approximately 9:00 a.m., New York City time, on the second full Eurodollar
Business Day next preceding such LIBOR Period. If such interest rates shall
cease to be available from Telerate News Service, the LIBOR Rate shall be
determined from such financial reporting service or other information as shall
be mutually acceptable to Agent and Borrower.
"LIBOR Rate Loan" shall mean any loan that bears interest at the LIBOR
Rate.
"Lien" shall mean any mortgage or deed of trust (including any
Mortgage and Leasehold Mortgage), pledge, hypothecation, assignment, deposit
arrangement, lien, Charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Code or comparable
law of any jurisdiction).
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"Loans" shall mean the Revolving Credit Loan.
"Loan Documents" shall mean this Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates,
including, without limitation, pledges, powers of attorney, consents,
assignments, contracts, notices, whether now or hereafter executed by or on
behalf of Borrower or any other Loan Party, or any employee of Borrower or any
other Loan Party, and delivered to Agent or any Lender, in connection with this
Agreement or the transactions contemplated hereby.
"Loan Party" shall mean Parent, Borrower and each Subsidiary of
Borrower.
"Market Segment" shall mean the geographic regions in which the
Borrower and/or its Subsidiaries own, lease or operate Theatres broken down as
follows: (i) Alaska, (ii) Austin, Texas, (iii) San Antonio, Texas, (iv)
Washington and Idaho and (v) Oregon, California and Nevada.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, operations, financial or other condition of Borrower and
its Subsidiaries, taken as a whole or in any given Market Segment, taken as a
whole, (ii) the Borrower's and its Subsidiaries' collective ability to pay the
Obligations in accordance with the terms thereof, (iii) the Collateral,
determined by reference to Borrower and its subsidiaries, taken as a whole or in
any given Market segment, taken as a whole or (iv) Lenders' Liens on the
Collateral or the priority thereof, determined by reference to Borrower and its
Subsidiaries, taken as a whole or in any given Market Segment, taken as a whole.
"Maximum Lawful Rate" shall have the meaning assigned to it in Section
2.8(d) hereof.
"Maximum Revolving Credit Loan" shall mean, at any particular time, an
amount equal to $155,000,000, as such amount may be limited or reduced from time
to time pursuant to Section 2.1(c), 2.1(d), 2.1(e), 2.4 and 2.6 hereof.
"Mortgage" shall mean each mortgage, deed of trust or similar security
agreement made or to be made by Borrower and each of its subsidiaries having an
interest in the Real Estate to be encumbered in favor of Lender, creating a lien
against any portion of the real estate described in Schedule 4.8(a) hereto to
secure the payment of the Obligations, substantially in the form of Exhibit D,
as the same may be amended, modified or supplemented from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA and to which Borrower, any of its subsidiaries or
any ERISA Affiliate is making, or is obligated to make, contributions or has
made, or been obligated to make, contributions.
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"Net Cash Proceeds" shall mean cash payments received by Borrower or
any of its Subsidiaries (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received) from any Asset Sale made after the Closing Date,
in each case net of the amount of (i) brokers' fees, legal fees, accountants'
fees and related expenses payable in connection with such Asset Sale and (ii)
federal, state and local taxes payable as a consequence of such Asset Sale.
"New Build" shall have the meaning assigned to it in Section 7.10(b)
hereof.
"Note Documents" means the Indenture, the Senior Subordinated Notes,
each agreement entered into and certificate or other document executed with
respect to the Indenture or the Senior Subordinated Notes, including, without
limitation, the Disclosure Documents.
"Notes" shall mean the Revolving Credit Notes.
"Notice of Revolving Credit Advance" shall have the meaning assigned
to it in Section 2.1(a) hereof.
"Number" shall mean, in respect of shares of Common Stock, the number
thereof, and in respect of the shares of Senior Subordinated Convertible
Preferred Stock, the number of shares of Common Stock issuable upon the exercise
or conversion thereof.
"Obligations" shall mean all loans, advances, debts, liabilities, and
obligations, for monetary amounts (whether or not such amounts are liquidated or
determinable) owing by Borrower or any or all of its subsidiaries or all of them
to Agent or Lenders, and all covenants and duties of Borrower or any of its
Subsidiaries regarding such amounts, of any kind or nature, present or future,
whether or not evidenced by any note, agreement or other instrument, arising
under any of the Loan Documents. This term includes, without limitation, all
interest, charges, expenses, reasonable attorneys' fees and any other sum
chargeable to Borrower or any or all of its Subsidiaries under any of the Loan
Documents.
"Parent" shall mean Act III Cinemas, Inc., a Delaware corporation and
the owner of all of the issued and outstanding capital stock of Borrower.
"Partnership Agreement" shall mean that certain Second Amended and
Restated Agreement of Limited Partnership of A 3 Ltd., dated as of October 29,
1987, as amended, and the Certificate of Limited Partnership of A 3 Ltd., as
amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"Permit" shall mean any permit, approval, authorization, license,
variance, or permission required from a governmental authority under any
applicable Environmental Laws.
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"Permitted Encumbrances" shall mean the following encumbrances: (i)
Liens for taxes or assessments or other governmental charges or levies, either
not yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of this Agreement; (ii) pledges or deposits securing obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which Borrower or any of its subsidiaries is a party as lessee made in the
ordinary course of business; (iv) deposits securing public or statutory
obligations of Borrower or any of its subsidiaries; (v) workers', mechanics',
suppliers', carriers', warehousemen's or other similar liens arising in the
ordinary course of business not yet due and payable; (vi) non-consensual
statutory, contractual (provided that such contractual liens are subordinate to
the Lien in favor of the Agent, on behalf of the Lenders) or common law
landlords' liens under any Lease hereafter executed by Borrower or any of its
Subsidiaries and any statutory, contractual or common law landlord's lien under
the Leases set forth on Schedule 4.8(b) (other than those which have been
subordinated to the Lien in favor of the Agent, on behalf of the Lenders); (vii)
Liens under concession or license agreements arising in the ordinary course of
business not yet due and payable; (viii) deposits securing or in lieu of surety,
appeal or customs bonds in proceedings to which Borrower or any of its
Subsidiaries is a party; (ix) any attachment or judgment Lien, unless the
judgment it secures shall not, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have been
discharged within 60 days after the expiration of any such stay; (x) easements,
licenses, or other restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto so long as the same
do not materially impair the use, value, or marketability of such real property,
leases or leasehold estates; (xi) Liens existing as of the Closing Date securing
Indebtedness listed on Schedule 4.26 hereto; (xii) purchase money liens or
purchase money security interests upon or in any property (other than any real
property) acquired or held by Borrower or any of its Subsidiaries in the
ordinary course of its business to secure the purchase price of such property or
to secure the indebtedness incurred solely for the purpose of financing the
acquisition of such property, or Liens existing on such property at the time of
its acquisition (provided that such existing Liens would otherwise constitute a
Permitted Encumbrance); PROVIDED, HOWEVER, that the aggregate principal amount
of Indebtedness secured by such Liens shall not in the aggregate exceed the
amount of Indebtedness of Borrower and its Subsidiaries permitted to be incurred
in connection therewith under Section 7.3(a)(i) hereof; (xiii) presently
existing Liens listed on Schedule 1.2 hereto, other than the general survey
exception, (xiv) upon delivery of the surveys referred to in Section 6.16
hereto, any defect in title disclosed by such surveys, other than a defect in
title that has a Material Adverse Effect; PROVIDED, HOWEVER, that with respect
to a defect in title disclosed by any such survey that does not have a Material
Adverse Effect, Borrower promptly shall take and diligently pursue such actions
as shall be reasonably required by Agent to remove such defects; (xv) such
landlord's consents, nondisturbance agreements and such other agreements as may
be required by Agent to be recorded in connection with the transactions
contemplated by this Agreement; and (xvi) the leases in which Borrower or any of
its Subsidiaries is a lessor described in Part Two of Schedule 4.8(b) hereto.
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"Permitted Transferee" shall mean, with respect to a Person, (a) the
spouse or child of such Person, (b) such Person's heirs, executors or legal
representatives, (c) trustees of an inter vivos trust or testamentary trust for
the benefit of such Person or Persons identified in subparagraph (a) of this
definition, or (d) another Person Controlled by such Person or by any Person
identified in clauses (a) through (c) of this definition.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean, with respect to Borrower, any of its Subsidiaries
or any ERISA Affiliate, at any time, an employee pension benefit plan as defined
in Section 3(2) of ERISA (including a Multiemployer Plan) that is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the IRC and is maintained for the employees of Borrower, any of its
Subsidiaries or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement entered into
between Agent, as agent for itself and the other Lenders, and each of Parent,
Borrower and those Subsidiaries owning Stock of other Subsidiaries of Borrower,
dated as of May 1, 1989, including all amendments, modifications and supplements
thereto, and shall refer to the Pledge Agreement as the same may be in effect at
the time such reference becomes operative.
"Qualified Issuer" means any money center or first tier regional
commercial bank (i) which has capital and surplus in excess of $200,000,000, and
(ii) the outstanding long term debt securities of which are rated at least A by
Standard & Poor's Corporation or at least A-1 by Moody's Investors Service,
Inc., or carry an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease publishing ratings of investments or
any other bank or first tier investment bank reasonably acceptable to Agent.
"Quarterly Payment Date" shall have the meaning assigned to it in
Section 2.2(c) hereof.
"Ratable Portion" or ratably shall mean, with respect to any Lender,
the quotient obtained by dividing the Commitment of such Lender by the
Commitments of all Lenders.
"Real Estate" shall mean all of those plots, pieces or parcels of land
now owned or hereafter acquired by Borrower or any Subsidiary (the "Land"),
including, without limitation, those listed on Schedule 4.8(a) hereto and more
particularly described in the Mortgages, together with the right, title and
interest of Borrower or any Subsidiary, if any, in and to the streets, the land
lying in the bed of any streets, roads or avenues, opened or proposed, in front
of, adjoining, or abutting the Land to the center line thereof, the air space
and development rights pertaining to the Land and right to use such air space
and development rights, all rights of way, privileges, liberties, tenements,
hereditaments, and appurtenances belonging or in any way appertaining
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thereto, all fixtures, all easements now or hereafter benefiting the Land and
all royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil,
and gas rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, and all fixtures and articles of personal
property appertaining thereto and all additions thereto and substitution and
replacement thereof.
"Real Estate Permits" shall have the meaning assigned to it in Section
4.8(e) hereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migration into
the indoor or outdoor environment, or into or out of any property owned or
leased by the Borrower or any of its Subsidiaries, including the movement of any
Contaminant through or in the air, soil, surface water, groundwater, or
property.
"Remedial Action" shall mean all actions required under any
Environmental Law to (1) clean up, remove, treat, or in any other way address
any Contaminant in the indoor or outdoor environment; (2) prevent the Release or
threat of Release, or minimize the further Release of any Contaminant so it does
not migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"Reportable Event" shall have the meaning assigned to it in Section
4043 of ERISA.
"Required Lenders" shall mean, as of any date and so long as any Debt
is outstanding, the holders of Revolving Credit Notes evidencing at least a
majority of the aggregate unpaid principal amount of the Revolving Credit Loan;
PROVIDED, HOWEVER, that any amendment to, modification of or supplement to this
Agreement or waiver of a Default or an Event of Default hereunder that would
have the effect of reinstating the obligations to make Revolving Credit Advances
from and after the date such obligations have been terminated or changing the
terms of, amount of or obligation to make Revolving Credit Advances shall
require the affirmative consent thereto of holders of Notes evidencing at least
a majority of the aggregate unpaid principal amount of the Revolving Credit Loan
then outstanding or, in the event that at such date there is no Revolving Credit
Loan then outstanding, then the holders of Notes evidencing at least a majority
of the unused portion of the Maximum Revolving Credit Loan.
"Reserves" shall mean such reserves for doubtful accounts, returns,
allowances and the like as may be established by Borrower or any Subsidiary or
as may otherwise be required in accordance with GAAP.
"Restricted Lease" shall mean any lease of any property, but excluding
the Leases, by Borrower or such subsidiary as lessee, other than any such lease
under which Borrower or such Subsidiary is the lessor.
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"Restricted Payment" shall mean (i) the declaration of any dividends
or the incurrence of any liability to make any other payment or distribution of
cash or other property or assets in respect of Borrower's Stock or (ii) any
payment on account of the purchase, redemption or other retirement of Borrower's
Stock or any other payment or distribution made in respect thereof, either
directly or indirectly.
"Revolving Credit Advance" shall have the meaning assigned to it in
Section 2.1(a) hereof.
"Revolving Credit Loan" shall mean the aggregate amount of Revolving
Credit Advances outstanding at any time.
"Revolving Credit Note" shall have the meaning assigned to it in
Section 2.1(b) hereof.
"Security Agreement" shall mean the Security Agreement entered into
between Agent, as agent for itself and the other Lenders, and Borrower and its
Subsidiaries, dated as of May 1, 1989, including all amendments, modifications
and supplements thereto, and shall refer to the Security Agreement as the same
may be in effect at the time such reference becomes operative.
"Senior Subordinated Convertible Preferred Stock" shall mean the 200
shares of Senior Subordinated Convertible Preferred Stock, Series A, originally
issued to Electra Investment Trust P.L.C. pursuant to the Electra/Thybo Purchase
Agreement, dated February 8, 1990, and the Stockholders Agreement.
"Senior Subordinated Notes" means the 11-7/8% Senior Subordinated
Notes due 2003, issued in an aggregate principal amount of $85,000,000.
"Solvent" shall mean, when used with respect to any Person, that:
(a) the present fair salable value of such Person's assets is in
excess of the total amount of such Person' s liabilities;
(b) such Person is able to pay its debts as they become due; and
(c) such Person does not have unreasonably small capital to
carry on such Person's business as theretofore operated and all businesses
in which such Person is about to engage.
"Stated Rate" shall mean, so long as no Event of Default has occurred
and is continuing, a floating rate, which shall be determined as of the second
Business Day following, but shall be effective as of the date of, Agent's
receipt of the quarterly financial statements
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referred to in Section 5.1(b) hereof (the "Quarterly Financial Statements")
equal to the Index Rate or LIBOR Rate, as the case may be, plus the applicable
margin set forth below for the Borrower's Consolidated Total Funded Debt to
Consolidated Cash Flow Ratio, as set forth on the most recent Quarterly
Financial Statements received by Agent:
Applicable Applicable
Margin for Margin for
Index Rate LIBOR Rate
Ratio Loans Loans
----- ----- -----
Greater than 5.5 to 1.0 1.00% 2.50%
Equal to or greater than .75% 2.25%
5.0 to 1.0 but not greater
than 5.5 to 1.0
Equal to or greater than .50% 2.00%
4.5 to 1.0 but less than
5.0 to 1.0
Equal to or greater than .25% 1.75%
4.0 to 1.0 but less than
4.5 to 1.0
Equal to or greater than 0% 1.50%
3.5 to 1.0 but less than
4.0 to 1.0
Equal to or greater than 0% 1.25%
3.0 to 1.0 but less than
3.5 to 1.0
Less than 3.0 to 1.0 0% 1.25%
; PROVIDED, HOWEVER, that in the event Agent shall receive any Quarterly
Financial Statements after the applicable time period set forth in Section
5.1(b), then the Stated Rate as previously determined shall remain in effect
until such time as such Quarterly Financial Statements are delivered, and when
so delivered, the Stated Rate determined as set forth above shall be effective,
retroactively, on and as of the last day on which such Quarterly Financial
Statements could have been timely delivered pursuant to Section 5.1(b), except
that in no event shall any Lender be required to refund any interest payment
already received by such Lender; and PROVIDED, FURTHER, HOWEVER, that solely for
purposes of this definition, in the event that Borrower shall construct or
acquire any motion picture theatre and related assets, the Consolidated Total
Funded Debt incurred by Borrower in connection therewith and the Consolidated
Cash Flow related thereto shall be excluded from the calculation of Borrower's
Consolidated Total Funded Debt to Consolidated Cash Flow Ratio for the first two
full calendar quarters (and any partial calendar quarter commencing on the date
of acquisition or construction if the acquisition or construction is not
completed on the first day of a calendar quarter) following the date of such
acquisition or completion of construction, as the case may be, and thereafter
such Consolidated Total Funded Debt and Consolidated Cash Flow shall be
included; PROVIDED, HOWEVER, that until four con-
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secutive quarters of Consolidated Cash Flow for such theatre and related assets
while owned by Borrower is available, such Consolidated Cash Flow to be included
in the calculation of such Ratio shall be computed on an annualized basis for
the period after Borrower's acquisition or construction thereof.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests (regardless of how designated) of or in a corporation,
partnership or equivalent entity whether voting or nonvoting, including, without
limitation, common stock, preferred stock, or any other "equity security" (as
such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).
"Stockholders" shall mean, with respect to any Loan Party, all of the
holders of stock of such Loan Party immediately following the Closing Date.
"Stockholders Agreement" shall mean the Stockholders Agreement, dated
as of February 8, 1990, among Parent, Act III Theatres, L.P., Electra Investment
Trust P.L.C., Thybo Gamma Limited and certain holders from time to time of
capital stock.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% and
which such Person or one or more Subsidiaries of such Person shall Control.
"Termination Date" shall mean the date on which all Debt and any other
Obligations hereunder have been completely discharged and Borrower shall have no
further right to borrow any monies hereunder.
"Theatres" shall mean each of the motion picture theatres and related
assets owned or leased and operated by Borrower or any of its Subsidiaries.
"Trademark Assignment Agreement" shall mean the Grant of Security
Interest (Trademarks, Trademark Applications and Trademark Licenses) made in
favor of Agent, on behalf of the Lenders, by Borrower and its Subsidiaries,
dated as of May 1, 1989.
"Voting Stock" shall mean outstanding shares of stock having voting
power for the election of directors, whether at all times or only so long as no
senior class of stock has such voting power because of default in dividends or
some other default.
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Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly
modified by the phrase "in accordance with GAAP" shall in no way be construed to
limit the foregoing.
All other undefined terms contained in this Agreement shall, unless
the context indicates otherwise, have the meanings provided for by the Code as
in effect in the State of New York to the extent the same are used or defined
therein.
The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
schedules hereto, as the same may from time to time be amended, modified or
supplemented and not to any particular section, subsection or clause contained
in this Agreement.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. AMOUNT AND TERMS OF CREDIT
1. REVOLVING CREDIT ADVANCES. (a) Upon and subject to the terms and
conditions hereof, each Lender agrees to make available, from time to time,
until the Commitment Termination Date, for Borrower's use and upon the request
of Borrower therefor, advances (each, a "Revolving Credit Advance") in an
aggregate amount outstanding which shall not at any given time exceed such
Lender's Ratable Portion of the Maximum Revolving Credit Loan. Subject to the
provisions of Section 2.4 and 2.6 hereof and until all amounts outstanding in
respect of the Revolving Credit Loan shall become due and payable on the
Commitment Termination Date, Borrower may from time to time borrow, repay and
reborrow under this Section 2.1(a) within the limits of each Lender's
Commitment; PROVIDED, HOWEVER, that all repayments of any LIBOR Rate Loans shall
be made on, and only on, the last day of the LIBOR Period for such Loan. Each
Revolving Credit Advance shall be made on notice, given no later than 11:00 A.M.
(New York City time) on the Business Day of the proposed Revolving Credit
Advance, by Borrower to Agent. Each such notice (a "Notice of Revolving Credit
Advance") shall be in writing or by telephone to account executive (203) 357-
6300, telecopy, telex or cable, confirmed immediately in writing, in
substantially the form of Exhibit B hereto, specifying therein (i) the requested
date of such Revolving Credit Advance, (ii) the amount of such Revolving Credit
Advance, including, the amount, if any, requested to be LIBOR Rate Loans, (iii)
for which purpose under Section 2.6 hereof such Advance is being requested and
(iv) the bank to which the proceeds of such proposed Advance should be wired,
and certifying therein that after giving effect to such borrowing, (x) the
aggregate amount of all Revolving Credit Advances outstanding with respect to
such purpose will not exceed the maximum amount permitted to be borrowed for
such purpose and (y) the aggregate amount of all Revolving Credit Advances
outstanding will not exceed the Maximum
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Revolving Credit Loan. Agent shall give to each Lender prompt notice of Agent's
receipt of a Notice of Revolving Credit Advance. Each Lender shall, before 2:00
P.M. (New York City time) on the date of the proposed Revolving Credit Advance
make available for the account of its applicable lending office to Agent at such
account as Agent may specify, in immediately available funds, such Lender's
Ratable Portion of the proposed aggregate amount of such Revolving Credit
Advance. After Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Section 3, Agent will make such funds
available to Borrower by wire transfer to any bank listed on Schedule 2.1, or
any other bank reasonably acceptable to Agent and designated by Borrower in the
Notice of Revolving Credit Advance.
(a) The Revolving Credit Loan made by each Lender shall be evidenced
by a promissory note to be executed and delivered by Borrower to each Lender at
the time of the initial Revolving Credit Loan, the form of which is attached
hereto and made a part hereof as Exhibit A (such note, as the same may be
amended, extended or renewed from time to time being the "Revolving Credit
Note"). The Revolving Credit Note shall be payable to the order of each Lender
and shall represent the obligation of Borrower to pay the amount of such
Lender's Ratable Portion of the Maximum Revolving Credit Loan or, if less, the
aggregate unpaid principal amount of all Revolving Credit Advances made by each
Lender to Borrower with interest thereon as prescribed in Section 2.8(a). The
date and amount of each Revolving Credit Advance and each payment of principal
with respect thereto shall be recorded on the books and records of each Lender,
which books and records shall constitute PRIMA FACIE evidence of the accuracy of
the information therein recorded. The entire unpaid balance of the Revolving
Credit Loan shall be due and payable on the Commitment Termination Date.
(b) Unless theretofore reduced pursuant to subsection (e) below, the
Maximum Revolving Credit Loan shall automatically be reduced on each date set
forth below (a "Commitment Reduction Date") to the amount set forth below
opposite such Commitment Reduction Date (or such lesser amount required by
Section 2.1(e) below):
Commitment
Reduction Reduced
Date Amount
---- ------
December 31, 1996 $155,000,000
June 30, 1997 155,000,000
December 31, 1997 155,000,000
June 30, 1998 145,000,000
December 31, 1998 135,000,000
June 30, 1999 120,000,000
December 31, 1999 105,000,000
June 30, 2000 90,000,000
December 31, 2000 75,000,000
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The Maximum Revolving Credit Loan shall be reduced to zero on the Commitment
Termination Date.
(c) Borrower shall have the right to reduce to zero the Maximum
Revolving Credit Loan from time to time upon not less than 60 days prior notice
to Agent of such reduction, which notice shall specify the effective date
thereof and shall be irrevocable and effective only upon receipt by Agent;
PROVIDED, HOWEVER, that any such reduction of any Index Rate Loan shall be made
on, and only on, an Interest Payment Date, and any such reduction of any LIBOR
Rate Loan shall be made on and only on, the last day of the LIBOR Period for
such Loan.
(d) Each reduction of the Maximum Revolving Credit Loan pursuant to
Section 2.4 during any period from and including a Reduction Date set forth in
subsection (c) above to but excluding the next Reduction Date (the "Commitment
Period") shall result in an automatic and simultaneous reduction of the Maximum
Revolving Credit Loan in a pro rata amount for each subsequent Commitment
Period. The Maximum Revolving Credit Loan once reduced may not be reinstated.
2. Intentionally Omitted.
3. Intentionally Omitted.
4. MANDATORY PREPAYMENT. (a) On or before 120 days after the end of
each Fiscal Year, commencing with the Fiscal Year ending December 31, 1989,
Borrower shall prepay the Loans in an amount equal to 50% of Borrower's
Consolidated Available Cash Flow for such Fiscal Year.
(a) Borrower shall prepay the Loans upon receipt by Borrower or any of
its Subsidiaries of Net Cash Proceeds in excess of $1,000,000 during any Fiscal
Year in an amount equal to such Net Cash Proceeds (it being understood that
no Asset Sales yielding Net Cash Proceeds in excess of $1,000,000 individually
or in the aggregate during any Fiscal Year may be made unless any such Asset
Sale is consented to in writing by the Required Lenders).
(b) All prepayments pursuant to clause (a) or (b) above shall be, so
long as interest is charged on the Revolving Credit Loan based on the LIBOR
Rate, made only on the last day of the LIBOR Period for such Loan, and shall be
applied to repay the Revolving Credit Loan, in which event the Maximum Revolving
Credit Loan will be permanently reduced by the amount of each such repayment.
(c) If, at any time, the aggregate principal amount of Revolving
Credit Loans outstanding exceeds the Maximum Revolving Credit Loan, then
Borrower shall immediately repay the Revolving Credit Loans by the amount of
such excess.
(d) No prepayment premium shall be payable in respect of any
mandatory prepayment under this Section 2.4.
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5. Intentionally Omitted.
6. USE OF PROCEEDS. The proceeds of the Revolving Credit Advances
outstanding at any time shall be used by Borrower only as follows: (i) for
working capital needs of Borrower and/or its Subsidiaries and (ii) up to the
maximum amounts set forth in Section 7.10 may be used by Borrower during any
Fiscal Year commencing prior to the Commitment Termination Date to make Capital
Expenditures (including Capital Lease Obligations) without the necessity of
obtaining the prior consent of any Lender; PROVIDED, HOWEVER, that upon any
acquisition or construction of any motion picture theatre and related assets,
Borrower shall grant to Lenders Liens on all of the assets so acquired as
required by Section 6.12 and in accordance with the provisions of the other Loan
Documents.
7. SINGLE LOAN. The Debt and all of the other Obligations of Borrower
arising under this Agreement and the other Loan Documents shall constitute one
general obligation of Borrower secured, until the Termination Date, by all of
the Collateral.
8. INTEREST ON REVOLVING CREDIT LOAN. (a) Borrower shall pay
interest to Agent on the unpaid principal amount of each Revolving Credit
Advance from the date of such Revolving Credit Advance until the unpaid
principal amount thereof shall be paid in full, at a rate based on either the
Index Rate or LIBOR Rate as follows: (i) with respect to each Revolving Credit
Advance which bears interest at a rate based upon the Index Rate, at a rate per
annum equal to the Index Rate plus the Applicable Margin for Index Rate Loans
set forth in the definition of Stated Rate, monthly in arrears on the last day
of each calendar month, commencing on the first such date after the Closing Date
(each, an "Interest Payment Date") and on the date such Revolving Credit Loan is
paid in full, and (ii) with respect to each Revolving Credit Advance which bears
interest at a rate based upon the LIBOR Rate, at a rate per annum equal at all
times during the LIBOR Period therefor at the LIBOR Rate for such LIBOR Period
plus the Applicable Margin for LIBOR Rate Loans set forth in the definition of
Stated Rate, payable in arrears on the last day of such LIBOR Period and on the
date such Revolving Credit Loan is paid in full.
(a) All computations of interest shall be made by the Agent and on a
basis of a three hundred and sixty (360) day year, in each case for the actual
number of days occurring in the period for which such interest is payable. The
Index Rate shall be determined by the Agent on each Business Day, and any change
in the interest rate on the Notes resulting from a change in the Index Rate
shall become effective as of the opening of business on the day on which such
change in the Index Rate occurs. The LIBOR Rate shall be determined by the
Agent on the second full Eurodollar Business Day prior to the first day of the
applicable LIBOR Period. If any payment on the Revolving Credit Loan becomes
due and payable on a day other than a Business Day, or a Eurodollar Business Day
in the event that the Revolving Credit Loan shall bear interest based upon the
LIBOR Rate, the maturity thereof shall be extended to the next succeeding
Business Day or Eurodollar Business Day, as the case may be (except as provided
in clause (1) of the definition of LIBOR Period), and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension.
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(b) So long as any Event of Default shall be continuing, the interest
rate applicable to the Revolving Credit Loan shall be increased by 2% per annum
above the rate otherwise applicable.
(c) Notwithstanding anything to the contrary set forth in this Section
2.8, if at any time until payment in full of all of the Obligations, the Stated
Rate or 13-1/2% exceeds the highest rate of interest permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto (the "Maximum Lawful Rate"), then in such event and so long as
the Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; PROVIDED, HOWEVER, that if
at any time thereafter the Stated Rate or 13-1/2% is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Lenders from the
making of advances hereunder is equal to the total interest which Lenders would
have received had the Stated Rate or 13-1/2%, as the case may be, been (but for
the operation of this paragraph) the interest rate payable since the Closing
Date. Thereafter, the interest rate payable hereunder shall be the Stated Rate
or 13-1/2%, as the case may be, unless and until the Stated Rate or 13-1/2%, as
the case may be, again exceeds the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest received by
any Lenders pursuant to the terms hereof exceed the amount which such Lenders
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate. In the event the Maximum
Lawful Rate is calculated pursuant to this paragraph, such interest shall be
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made. In the event that
a court of competent jurisdiction, notwithstanding the provisions of this
Section 2.8(d), shall make a final determination that any Lender has received
interest hereunder or under any of the Loan Documents in excess of the Maximum
Lawful Rate, such Lender shall, to the extent permitted by applicable law,
promptly apply such excess first to any interest due and not yet paid under its
Note, then to the principal amount of its Note (without premium or penalty),
then to other unpaid Obligations and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.
(d) So long as no Event of Default has occurred and is continuing (i)
Borrower may elect on at least three Eurodollar Business Days' prior notice to
convert Index Rate Loans to LIBOR Rate Loans and (ii) Borrower may elect on or
before the third Eurodollar Business Day prior to the end of each LIBOR Period
with respect to any LIBOR Rate Loan to have such LIBOR Rate Loan bear interest
based upon the LIBOR Rate for the next succeeding LIBOR Period. In each of
clauses (i) and (ii), Borrower shall make such election by notice to Agent in
writing, by telecopy, telex or cable. If no such notice is received with
respect to a LIBOR Rate Loan on the third Eurodollar Business Day prior to the
end of the LIBOR Period with respect to such LIBOR Rate Loan, such LIBOR Rate
Loan shall be converted to an Index Rate Loan at the end of the LIBOR Period.
9. Intentionally Omitted.
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10. FEES. (a) Borrower shall pay to Agent on the last day of each
fiscal quarter ending on March 31, June 30, September 30 and December 31,
commencing on September 30, 1996 an agency fee (the "Agency Fee") in an amount
equal to $12,500, payable quarterly in arrears, for services to be rendered by
Agent in connection with this Agreement.
(a) Borrower shall pay to each Lender an unused line fee on the
average daily unused portion of such Lender's Commitment to make a Revolving
Credit Loan from the date hereof until the Commitment Termination Date at the
rate of .25% per annum, payable monthly in arrears on each Interest Payment
Date.
11. RECEIPT OF PAYMENTS. Borrower shall make each payment under this
Agreement not later than 2:00 F.M. (New York City time) on the day when due in
lawful money of the United States of America in immediately available funds to
Agent's depository bank in the state of New York as designated by Agent from
time to time for deposit in Agent's depositary account or, if Agent so notifies
Borrower at least one Business Day prior to the date on which such payment is
due, directly to each Lender, ratably based on the respective principal amounts
of the Notes held by each Lender that relate to the Loan in respect of which
such payment is made or applied. Agent will, upon any such deposit to its
depositary account, promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest (other than interest or
principal payments on the Revolving Credit Loan) ratably to Lenders as provided
above, and like funds relating to the payment of any amount payable to any
Lender to such Lender, in each case to be applied in accordance with the terms
of this Agreement. For purposes only of computing interest hereunder, all
payments shall be applied by Agent to the Revolving Credit Loan on the day
payment has been credited by Agent's depository bank to Agent's account in
immediately available funds or, if Agent has notified Borrower to make any such
payments directly to Lenders, such payments shall be applied by each Lender to
its Revolving Credit Loan on the day payment has been received by such Lender in
immediately available funds. For purposes of determining the amount of funds
available for borrowing by Borrower pursuant to Section 2.1(a) hereof, such
payments shall be applied by Agent against the outstanding amount of the
Revolving Credit Loan at the time they are credited to its account.
12. APPLICATION OF PAYMENTS. Subject to the provisions of 2.4(c),
Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times hereafter received by Agent or any Lender from or
on behalf of Borrower pursuant to the terms of this Agreement, and Borrower
irrevocably agrees that Agent and Lenders shall have the continuing exclusive
right to apply any and all such payments against the then due and payable
Obligations of Borrower and in repayment of the Revolving Credit Loan as they
each may deem advisable. In the absence of a specific determination by Agent
and Lenders with respect thereto, the same shall be applied in the following
order: (i) then due and payable fees and expenses; (ii) then due and payable
interest payments on the Debt; and (iii) then due and payable principal payments
on the Debt. Agent is authorized to, and at its option may, make advances on
behalf of Borrower for payment of all fees, expenses, charges, costs, principal
and interest incurred by Borrower hereunder. Such advances shall be made when
and as Borrower falls to promptly pay
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such fees, expenses, charges, costs, principal and interest and, at Agent's
option and to the extent permitted by law, shall be deemed Revolving Credit
Advances constituting part of the Revolving Credit Loan hereunder.
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 any Loan made by it in excess of its ratable share
of payments on account on the Loan obtained by all Lenders, such Lender shall
forthwith purchase from each other Lender such participations in the Loan made
by it as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each other Lender; 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 Borrower agrees that any Lender so purchasing a participation from
another Lender pursuant to this Section 2.13 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 Borrower in the amount of such participation.
14. ACCOUNTING. Agent will provide a monthly written accounting of
transactions under the Revolving Credit Loan to Borrower. Each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon Borrower in all respects as to all matters reflected therein, unless
Borrower, within 45 days after the date any such accounting is rendered, shall
notify Agent in writing of any objection which Borrower may have to any such
accounting, describing the basis for such objection with specificity. In that
event, only those items expressly objected to in such notice shall be deemed to
be disputed by Borrower. Agent's determination, based upon the facts available,
of any item objected to by Borrower in such notice shall (absent manifest error)
be final, binding and conclusive on Borrower, unless Borrower shall commence a
judicial proceeding to resolve such objection within 45 days following Agent's
notifying Borrower of such determination.
15. INDEMNITY. (a) Borrower shall indemnify and hold Agent and each
Lender harmless, whether or not the transactions contemplated hereby have been
consummated, from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including, without limitation,
reasonable attorneys' fees and disbursements, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by Agent or any
Lender as the result of its having entered into any of the Loan Documents or
Ancillary Agreements or extended credit hereunder; PROVIDED, HOWEVER, that
Borrower shall not be liable for such indemnification to such indemnified Person
to the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from such indemnified Person's gross negligence or
willful misconduct or any breach by Agent or any Lender of any of its
obligations
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under the Loan Documents or as a result of any reallocation by the IRS of any
allocation under Section 2.09 hereof.
(a) Borrower understands that in connection with Lenders' arranging to
provide the LIBOR Rate interest option with respect to the Revolving Credit Loan
from time to time at the option of the Borrower on the terms provided herein,
Lenders may enter into funding arrangements with third parties ("Funding
Arrangements") on terms and conditions which could result in substantial losses
to such Lenders if such LIBOR Rate funds do not remain outstanding at the
interest rates provided herein for the entire monthly interest period with
respect to which the LIBOR Rate has been fixed. Consequently, in order to
induce Lenders to provide such LIBOR Rate option on the terms provided herein
and in consideration for the entering into by Lenders of Funding Arrangements
from time to time in contemplation thereof, if any LIBOR Rate funds are repaid
in whole or in part prior to the last day of such monthly interest period
therefor (whether such repayment is made pursuant to any provision of this
Agreement or any other Loan Document or is the result of acceleration, by
operation of law or otherwise), Borrower shall indemnify and hold harmless each
Lender from and against and in respect of any and all losses, costs and expenses
resulting from, or arising out of or imposed upon or incurred by such Lender by
reason of the liquidation or reemployment of funds acquired or committed to be
acquired by such Lender to fund such LIBOR Rate Option pursuant to the Funding
Arrangements. The amount of any losses, costs or expenses resulting in an
obligation of Borrower to make a payment pursuant to the foregoing sentence
shall not include any losses attributable to lost profit to Lenders but shall
represent the excess, if any, of (A) such Lender's cost of borrowing the LIBOR
Rate funds pursuant to the Funding Arrangements over (B) the return to such
Lender on its reinvestment of such funds; PROVIDED, HOWEVER, that if any Lender
terminates any Funding Arrangements in respect of the LIBOR Rate funds as a
result of any repayment of LIBOR Rate Loans by Borrower prior to the end of any
monthly interest period, the amount of such losses, costs and expenses shall
include the cost to such Lender of such termination. In reinvesting any funds
borrowed by any Lender pursuant to the Funding Arrangements, such Lender shall
take into consideration the remaining maturity of such borrowings. As promptly
as practicable under the circumstances, each Lender shall provide Borrower with
its written calculation of all amounts payable pursuant to the next preceding
sentence, and such calculation shall be binding on the parties hereto unless
Borrower shall object thereto in writing within ten Business Days of receipt
thereof.
16. ACCESS. Agent and each Lender and any of their officers,
employees and/or agents, at the expense of Agent or such Lender, as the case may
be (unless there shall exist an Event of Default, in which event all costs and
expenses shall be borne by Borrower), shall have the right, exercisable as
frequently as Agent or any Lender reasonably determines to be appropriate,
during normal business hours (or at such other times as may reasonably be
requested by Agent or any Lender) to inspect the properties and facilities of
Borrower and its Subsidiaries and to inspect, audit and make extracts from all
of Borrower's and its Subsidiaries' records, files and books of account.
Borrower shall deliver any document or instrument reasonably necessary for Agent
or any Lender, as any of them may request, to obtain records from any service
bureau maintaining records for Borrower or its Subsidiaries, including, without
limitation, computer tapes
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and discs owned by Borrower and its Subsidiaries. Borrower shall instruct its
and its Subsidiaries' banking and other financial institutions to make available
to Agent and each Lender such information and records as Agent and each Lender
may reasonably request. In connection with such investigations, Agent and each
Lender may interview Borrower's and its Subsidiaries' employees, during normal
business hours and as Agent or any Lender may reasonably request, and Borrower
and its Subsidiaries agree to make their employees available for such interviews
and shall instruct such employees to cooperate with Agent or such Lender for
purposes of such investigation. With respect to all of the foregoing, Agent and
each Lender shall maintain the confidentiality of any information received and
the contents of all records reviewed by it and shall not disclose any such
information or the contents of any such records to any Person other than (i) to
Agent's or such Lender's accountants or attorneys, in which event such
accountants or attorneys shall similarly agree not to disclose such information
or the contents of such records, (ii) to a potential purchaser of a Note or
participant in the Loans, in which event such potential purchaser or participant
shall similarly agree not to disclose such information or the contents of such
records, (iii) except as provided in subparagraph (iv) below, upon the
occurrence and continuance of an Event of Default, in which event the recipient
thereof shall similarly agree not to disclose such information or the contents
of such records, (iv) in connection with the exercise of any remedies of Agent
or any Lender, as the case may be, under any Collateral Document and (v) to the
extent any such disclosure is required by applicable law.
17. CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY. (a) If any Lender
shall determine that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof or compliance by such Lender (or its lending office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's capital as a
consequence of its obligations hereunder or credit extended by it hereunder to a
level below that which such Lender could have achieved but for such adoption,
change or compliance by an amount deemed by such Lender to be material, then
from time to time as specified by such Lender, Borrower shall pay such
additional amount or amounts as will compensate such Lender for such reduction
upon written notice to Borrower specifying such amounts and the calculation
thereof.
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation 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), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or maintaining of any
Loan or portion thereof bearing interest based on the LIBOR Rate, then Borrower
shall from time to time, upon demand by such Lender (with a copy of such demand
to Agent), pay to 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 Borrower and Agent by such
Lender, shall be conclusive and binding on Borrower for all purposes, absent
manifest error. Each Lender agrees that, as promptly as practicable after it
becomes aware of any
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circumstances referred to in clause (i) or (ii) above which would result in any
such increased cost to such Lender, such Lender shall, to the extent not
inconsistent with such Lender's internal policies of general application, use
reasonable commercial efforts to minimize costs and expenses incurred by it and
payable to it by Borrower pursuant to this Section 2.17(b).
(b) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender to agree to make or
to make or to continue to fund or maintain such Loan bearing interest based on
the LIBOR Rate, then, unless such Lender is able to agree to make or to continue
to fund or to maintain such Loans which bear interest based on the LIBOR Rate at
another branch or office of such Lender without, in such Lender's opinion,
adversely affecting it or its Loans or the income obtained therefrom, on notice
thereof and demand therefor by such Lender to Borrower through Agent, (i) the
obligation of such Lender to agree to make or to make or to continue to fund or
maintain Loans or any portions thereof bearing interest based on the LIBOR Rate
shall terminate and (ii) Borrower shall forthwith prepay in full all outstanding
Loans or any portions thereof then bearing interest based on the LIBOR Rate,
together with interest accrued thereon, of such Lender unless Borrower, within
five Business Days, after the delivery of such notice and demand, converts all
such Loans into a Loan bearing interest based on the Index Rate.
(c) Upon the occurrence of any of the events set forth in this Section
2.17, Agent shall promptly notify Borrower in writing of the occurrence of such
event. Borrower shall have the right within 5 days of receipt of such notice to
convert any outstanding LIBOR Rate Loans to an Index Rate Loan.
CONDITIONS PRECEDENT
1. CONDITIONS TO EACH SUBSEQUENT REVOLVING CREDIT ADVANCE. It shall
be a condition precedent to each subsequent Revolving Credit Advance that Agent
shall have received a Notice of Revolving Credit Advance and that the following
statements shall be true on the date of each such funding or advance:
(a) All of the representations and warranties of the Loan Parties
contained herein or in any of the Loan Documents shall be correct on and as of
the Closing Date and the date of each such Revolving Credit Advance as though
made on and as of such date, except to the extent that any such representation
or warranty expressly relates to an earlier date and for changes therein
permitted or contemplated by this Agreement.
(b) No event shall have occurred and be continuing, or would result
from the funding of any Revolving Credit Advance, which constitutes or would
constitute a Default or an Event of Default.
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(c) The aggregate unpaid principal amount of the Revolving Credit Loan
after giving effect to such Revolving Credit Advance, shall not exceed the
Maximum Revolving Credit Loan, as such amount may be reduced from time to time.
The acceptance by Borrower of the proceeds of any Revolving Credit
Advance shall be deemed to constitute, as of the date of such acceptance, (i) a
representation and warranty by Borrower that the conditions in this Section 3.1
have been satisfied and (ii) a confirmation by Borrower of the granting and
continuance of Agent's Lien pursuant to the Collateral Documents.
4. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Revolving Credit Loan as herein provided
for, Borrower makes the following representations and warranties to Agent and
Lenders, each and all of which shall be true and correct as of the date of
execution and delivery of this Agreement, except to the extent that any such
representation or warranty expressly relates to an earlier date and for changes
therein since May 1, 1989 permitted or contemplated by this Agreement, and shall
survive the execution and delivery of this Agreement:
1. CORPORATE OR PARTNERSHIP EXISTENCE; COMPLIANCE WITH LAW. Parent,
Borrower and each Subsidiary of the Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation (except for A 3 Ltd., which is a limited partnership duly formed
under the laws of the state of Texas); (ii) is duly qualified to do business and
is in good standing under the laws of each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification
(except for jurisdictions in which such failure so to qualify or to be in good
standing would not have a Material Adverse Effect); (iii) has the requisite
corporate power and authority (except for A 3 Ltd., which has the requisite
partnership power and authority) and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease, and to conduct its business as now, heretofore and proposed to be
conducted; (iv) has all material licenses, permits, consents or approvals from
or by, and has made all material filings with, and has given all material
notices to, all governmental authorities having jurisdiction, to the extent
required for such ownership, operation and conduct; (v) is in compliance with
its certificate of incorporation and by-laws (except for A 3 Ltd., which is in
compliance with all terms and provisions of the Partnership Agreement) other
than where the failure to so comply would not have a Material Adverse Effect;
and (vi) except as set forth in Schedule 4.1 hereto, is in compliance with all
applicable provisions of law where the failure to comply would have a Material
Adverse Effect.
2. EXECUTIVE OFFICES. The current location of Borrower's and each of
its Subsidiary's executive offices and principal place of business is set forth
on Schedule 4.2 hereto.
3. SUBSIDIARIES. There currently exist no Subsidiaries of Borrower
other than as set forth on Schedule 4.3 hereto, which sets forth such
Subsidiaries, together with their respective jurisdictions of organization, and
the authorized and outstanding capital Stock of each such Subsidiary, by class
and number and percentage of each class legally owned by Borrower or a
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Subsidiary of Borrower or any other Person, owned by the Closing Date. Except
as set forth on Schedule 4.3, there are no options, warrants, rights to purchase
or similar rights covering capital Stock for any such Subsidiary. Schedules
4.8(a) and 4.8(b) set forth a complete and correct list of each Theatre owned by
Borrower and/or any of its Subsidiaries, including the address and number of
screens of each such Theatre, and the ownership thereof.
4. CORPORATE AND PARTNERSHIP POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. The execution, delivery and performance by Parent, Borrower and
its Subsidiaries of the Loan Documents, Ancillary Agreements and all instruments
and documents to be delivered by Parent, Borrower and its Subsidiaries, to the
extent they are parties thereto, hereunder and thereunder and the creation of
all Liens provided for herein and therein: (i) are within Parent's, Borrower's
and its Subsidiaries' corporate (or, with respect to A 3 Ltd., partnership)
power; (ii) have been duly authorized by all necessary or proper corporate (or,
with respect to A 3 Ltd., partnership) action; (iii) are not in contravention of
any provision of Parent's, Borrower's or its Subsidiaries' respective
certificates or articles of incorporation or by-laws (or, with respect to A 3
Ltd., the Partnership Agreement); (iv) will not violate any law or regulation
applicable to such party, or any order or decree of any court or governmental
instrumentality binding such party; (v) will not conflict with or result in the
breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument (other than Exhibition Contracts) to which Parent,
Borrower or any of its Subsidiaries is a party or by which Parent, Borrower or
any of its Subsidiaries or any of their property is bound which reasonably could
be expected to have a Material Adverse Effect; (vi) will not result in the
creation or imposition of any Lien upon any of the property of Parent, Borrower
or any of its Subsidiaries other than those in favor of Lenders, all pursuant to
the Loan Documents; and (vii) do not require the consent or approval of any
governmental body, agency, authority or, except as set forth on Schedule 4.4
hereto, any other Person other than those which may be required under Exhibition
Contracts or those which have been obtained and copies of which have been
delivered to the Agent pursuant to Section 3.1(y) hereof or which the failure to
have obtained could not reasonably be expected to have a Material Adverse
Effect, each of which is in full force and effect. Each of the Loan Documents
and other Ancillary Agreements have been duly executed and delivered for the
benefit of or on behalf of Parent, Borrower or its Subsidiaries, as the case may
be, and each constitute a legal, valid and binding obligation of Parent,
Borrower or its Subsidiaries, to the extent they are parties thereto,
enforceable against them in accordance with its terms subject to bankruptcy,
insolvency, and other laws affecting creditors' rights generally and to the
application of equitable remedies.
5. SOLVENCY. After giving effect to the initial Revolving Credit
Advance and the payment of all estimated legal, investment banking, accounting
and other fees related hereto, Borrower and each of its Subsidiaries was Solvent
as of and on the Closing Date.
6. FINANCIAL STATEMENTS.
(a) The audited financial statements of Borrower and its Subsidiaries
as of December 31, 1995, a copy of each of which has been furnished to Agent
prior to the date of this
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Agreement, have been prepared in accordance with GAAP and have been certified
without qualification by Price Waterhouse L.L.P.
(b) The unaudited balance sheets as at June 30, 1996 and the related
unaudited profit and loss statements and cash flow statements of Borrower and
its Subsidiaries, as the case may be, for the six months then ended, copies of
which have been furnished to Agent prior to the date of this Agreement, have
been prepared in conformity with GAAP consistently applied throughout the
periods involved and present fairly in all material respects the consolidated
and consolidating financial position of Borrower and its Subsidiaries, as the
case may be, at the date thereof, and the results of operations and changes in
financial position for the period then ended subject to normal year-end audit
adjustments.
(c) None of Borrower or any of its Subsidiaries, as of the Closing
Date, had any obligations, contingent liability or liabilities for Charges or
unusual forward or long-term commitments which are not reflected in the pro
forma consolidated balance sheet of Borrower and its Subsidiaries and which
would have a Material Adverse Effect.
(d) Except as previously disclosed in writing by Borrower to Agent,
there has been no material adverse change in the business, assets, operations,
financial or other condition of Borrower and its Subsidiaries, taken as a whole
or in any given Market Segment, taken as a whole, in each case, since December
31, 1988 (it being understood that, subsequent to the Closing Date, this
representation and warranty shall be subject to the fact that Borrower shall
have incurred the Obligations hereunder). No dividends or other distributions
have been declared, paid or made upon any shares of capital Stock of Borrower or
any of its Subsidiaries nor have any shares of capital Stock of Borrower or any
of its Subsidiaries been redeemed, retired, purchased or otherwise acquired for
value by Borrower or its Subsidiaries since December 31, 1988, otherwise than
(i) as permitted by this Agreement, (ii) as reflected in the pro forma
consolidated balance sheet of Borrower and its Subsidiaries or as set forth in
Schedule 4.6(d) hereto or (iii) as previously disclosed in writing by Borrower
to, or consented to in writing by, Agent.
7. PROJECTIONS. The projected balance sheet, income statement and
statement of cash flows of Borrower and its consolidated Subsidiaries as at the
end of each month during the period commencing January 1, 1996, on a monthly
basis for Fiscal Year 1996 and on an annual basis for each of Fiscal Years 1996
through 2001, copies of which projections have been furnished to the Agent prior
to the date hereof, disclose all assumptions made with respect to general
economic, financial and market conditions in formulating such projections. To
the knowledge of Borrower no facts exist on the date hereof which would result
in any material change in any of such projections. The projections are based
upon reasonable estimates and assumptions on the date hereof, all of which are
fair in light of current conditions on such date, have been prepared on the
basis of the assumptions stated therein, and reflect the reasonable estimate of
Borrower on such date and the results of operations and other information
projected therein.
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8. OWNERSHIP OF PROPERTY; LIENS. (a) (i) Borrower or its
Subsidiaries owns good and marketable fee simple title to all of the Real Estate
described on Schedule 4.8(a) hereto, and good and valid leasehold interests in
the Leases described in Schedule 4.8(b) hereto, and good and marketable title
to, or valid leasehold interests, licenses or other similar interests in, all of
its other properties and assets; (ii) none of the properties and assets of
Borrower or its Subsidiaries including, without limitation, the Real Estate and
Leases are subject to any Liens, except (x) Permitted Encumbrances and (y) from
and after the Closing Date, the Lien in favor of Agent, for its benefit and the
ratable benefit of Lenders, pursuant to the Collateral Documents; PROVIDED,
HOWEVER, that Borrower and its Subsidiaries make no warranty regarding and shall
have no liability for, any encumbrance, survey or title matter which relates to
the fee title or other interest in or to the premises leased under the Leases
except only encumbrances, surveys or other title matters related strictly to the
Leases; and (iii) Borrower and its Subsidiaries have received all deeds,
assignments, waivers, consents, bills of sale and other documents, and duly
effected all recordings, filings and other actions necessary to establish,
protect and perfect Borrower's and its Subsidiaries' right, title and interest
in and to all such property except where the failure to have received such
documents or effected such actions will not, in the aggregate, have a Material
Adverse Effect.
(a) All real property owned or leased by Borrower and its
Subsidiaries is listed on Schedules 4.8(a) and 4.8(b) respectively. Neither
Borrower nor its Subsidiaries owns any other Real Estate or is a lessee or
lessor under any real property leases other than as set forth therein.
Schedules 4.8(a) and 4.8(b) are true and correct in all material respects. Part
One of Schedule 4.8(b) hereto sets forth all leases of real property held by
Borrower or any Subsidiary as lessee and Part Two of Schedule 4.8(b) describes
all leases of real property held by Borrower or any Subsidiary as lessor. Each
of such leases is valid and enforceable against Borrower or its Subsidiary, as
the case may be, and to Borrower's knowledge against the other party to such
lease in accordance with its terms, subject to bankruptcy, insolvency, and other
laws affecting creditors' rights generally and to the application of equitable
remedies, and is in full force and effect. Borrower has delivered to Agent true
and complete copies of each of such leases set forth on Part One and Part Two of
Schedule 4.8(b) and all documents affecting the rights or obligations of
Borrower or any Subsidiary which is a party thereto, including, without
limitation, any non-disturbance and recognition agreements, subordination
agreements, attornment agreements and agreements regarding the term or rental of
any of the leases. Neither Borrower nor the applicable Subsidiary nor, to the
best of Borrower's knowledge, any other party to any such lease, is in default
of its obligations thereunder or has delivered or received any notice of default
under any such lease, nor has any event occurred which, with the giving of
notice, the passage of time or both, would constitute a default under any such
lease, except for any default which could not reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth in the Leases or in the title reports
delivered to Agent on the Closing Date or on Schedule 4.8(c) hereto neither
Borrower nor any of its Subsidiaries owns or holds, or is obligated under or a
party to, any option, right of first refusal or other contractual right to
purchase, acquire, sell, assign, lease or dispose of any of the real property
owned or leased by Borrower or any of its Subsidiaries.
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(c) Except as set forth in Schedule 4.8(d), all components of all
improvements included within the real property owned or leased by Borrower or
its Subsidiaries (hereinafter collectively referred to as the "Improvements"),
including, without limitation, the roofs and structural elements thereof and the
heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer,
waste water, storm water, paving and parking equipment, systems and facilities
included therein, are in good working order and repair, except to the extent
that such failure to be in good working order and repair does not have a
Material Adverse Effect. Except as set forth on Schedule 4.8(d) hereof all
water, gas, electrical, steam, compressed air, telecommunication, sanitary and
storm sewage lines and systems and other similar systems serving the real
property owned or leased by Borrower or its Subsidiaries are installed and
operating and are sufficient to enable the real property owned or leased by
Borrower or its Subsidiaries to continue to be used and operated in the manner
currently being used and operated except where such failure does not have a
Material Adverse Effect and neither Borrower nor any of its Subsidiaries has any
knowledge of any factor or condition that could result in the termination or
material impairment of the furnishing thereof, except where such failure does
not have a Material Adverse Effect. No improvement or portion thereof is
dependent for its access, operation or utility on any land, building or other
Improvement not included in the real property owned or leased by Borrower or its
Subsidiaries other than pursuant to valid, written and enforceable easements
which are in full force and effect, except where such failure does not have a
Material Adverse Effect. None of Borrower, or any of its Subsidiaries or, to
the best of Borrower's knowledge, any other party is in default under any such
easement and no event has occurred which, with the giving of notice, lapse of
time or both, could constitute a default under any such easement, except where
such failure does not have a Material Adverse Effect.
(d) Except as set forth on Schedule 4.8(e) hereto, all certificates of
occupancy, permits, licenses, franchises, approvals and authorizations
(hereinafter collectively referred to as the "Real Estate Permits") of all
governmental authorities having jurisdiction over the real property owned or
leased by Borrower or its Subsidiaries required to have been issued or
appropriate to enable the real property owned or leased by Borrower or its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used, have been lawfully issued and are, as of
the date hereof, in full force and effect except where the failure of such Real
Estate Permit to have been so issued or to be in full force and effect would not
have a Material Adverse Effect.
(e) Except as set forth on Schedule 4.8(f) hereto, neither the
Borrower nor any of its Subsidiaries has received any notice, nor has any
knowledge, of any pending, threatened or contemplated condemnation proceeding
affecting any real property owned or leased by Borrower or any of its
Subsidiaries or any part thereof, or any proposed termination or impairment of
any parking at any such owned or leased real property or of any sale or other
disposition of any real property owned or leased by Borrower or any of its
Subsidiaries or any part thereof in lieu of condemnation.
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9. NO DEFAULT. Neither Borrower nor any of its Subsidiaries is in
default, nor to Borrower's knowledge is any third party in default, under or
with respect to any contract, agreement or other instrument (other than the
Leases) to which it is a party, except for any default which (either
individually or collectively with other defaults arising out of the same event
or events) would not have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
10. LABOR MATTERS. There are no strikes or other labor disputes
against Borrower or any of its Subsidiaries pending or, to Borrower's knowledge,
threatened which could be reasonably expected to have a Material Adverse Effect.
Hours worked by and payments made to employees of Borrower and its Subsidiaries
have not been in violation of the Fair Labor Standards Act or any other
applicable law dealing with such matters which could reasonably be expected to
have a Material Adverse Effect. All payments due from Borrower or any of its
Subsidiaries on account of employee health and welfare insurance which could
reasonably be expected to have a Material Adverse Effect if not paid have been
paid or accrued as a liability on the books of Borrower or such Subsidiary.
11. OTHER VENTURES. Except as set forth in Schedule 4.11, neither
Borrower nor any Subsidiary is engaged in any joint venture or partnership with
any other Person.
12. INVESTMENT COMPANY ACT. None of Parent, Borrower nor any
Subsidiary is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended. The making
of the Revolving Credit Advances by Lenders, the application of the proceeds and
repayment thereof by Borrower and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents will not violate any
provision of such Act or any rule, regulation or order issued by the Securities
and Exchange Commission thereunder.
13. MARGIN REGULATIONS. Borrower does not own any margin stock," as
that term is defined in Regulations G and U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), and the proceeds of the
Revolving Credit Advances will be used only for the purposes contemplated
hereunder. None of the Revolving Credit Advances will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin stock, for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin stock or for any other purpose which might cause
any of the loans under this Agreement to be considered a "purpose credit" within
the meaning of Regulation G, T, U or X of the Federal Reserve Board. Borrower
will not take or permit any agent acting on its behalf to take any action which
might cause this Agreement or any document or instrument delivered pursuant
hereto to violate any regulation of the Federal Reserve Board.
14. TAXES. All federal, state, local and foreign tax returns, reports
and statements required to be filed by Borrower and its Subsidiaries (and each
Affiliate with which Borrower or any of its Subsidiaries files consolidated,
combined or unitary returns) have been filed with the
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appropriate governmental agencies and all Charges and other impositions shown
thereon to be due and payable have been paid prior to the date on which any
fine, penalty, interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest, late charge or loss has been paid,
except where contested in good faith by appropriate proceedings and for which
adequate reserves have been established and maintained on the books of Borrower,
its Subsidiary or Affiliate, as the case may be, in accordance with and to the
extent required by GAAP. Each of Borrower and its Subsidiaries has paid when
due and payable all Charges required to be paid by it, except where being
contested in good faith by appropriate proceedings. Proper and accurate amounts
have been withheld by Borrower and its Subsidiaries from their respective
employees for all periods in full and complete compliance with the tax, social
security and unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid to the
respective governmental agencies. Schedule 4.14 sets forth, for each of
Borrower and its Subsidiaries, those taxable years for which its tax returns are
currently being audited by the IRS or any other applicable governmental
authority. Except as described in Schedule 4.14 hereto, neither Borrower nor
any of its Subsidiaries has executed or filed with the IRS or any other
governmental authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges.
Neither Borrower nor any of its Subsidiaries has filed a consent pursuant to IRC
Section 341(f) or agreed to have IRC Section 341(f)(2) apply to any dispositions
of subsection (f) assets (as such term is defined in IRC Section 341(f)(4)).
None of the property owned by Borrower or any of its Subsidiaries is property
which such company is required to treat as being owned by any other Person
pursuant to the provisions of IRC Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended, and in effect immediately prior to the enactment of the Tax
Reform Act of 1986 or is "tax-exempt use property" within the meaning of IRC
Section 168(h). Neither Borrower nor any of its Subsidiaries has agreed or has
been requested to make any adjustment under IRC Section 481(a) by reason of a
change in accounting method or otherwise. Except as set forth on Schedule 4.14,
neither Borrower nor any of its Subsidiaries has any obligation under any
written tax sharing agreement.
15. ERISA. None of Borrower, any of its Subsidiaries or any ERISA
Affiliate maintains or contributes to any Plan other than those listed on
Schedule 4.15 hereto. Each Plan of the Borrower, any of its Subsidiaries or any
ERISA Affiliate which is not a Multiemployer Plan, and which is intended to be
tax qualified under IRC Section 401(a) has been determined by the IRS to qualify
under IRC Section 401, and the trusts created thereunder have been determined to
be exempt from tax under the provisions of IRC Section 501, and nothing has
occurred which would cause the loss of such qualification or the imposition of
any IRC or ERISA tax liability or penalty in excess of $500,000. With respect
to each Plan other than a Multiemployer Plan, all reports required under ERISA
or any other applicable law or regulation to be filed by Borrower, any of its
Subsidiaries or any ERISA Affiliate with the relevant governmental authority the
failure of which to file could reasonably result in a liability of Borrower, any
of its Subsidiaries or such ERISA Affiliate in excess of $500,000 have been duly
filed and all such reports are true and correct in all material respects as of
the date given. None of Borrower, any of its Subsidiaries or any ERISA
Affiliate has engaged in a "prohibited transaction," as such term is defined in
IRC Section 4975, Section 502 of ERISA and Title I of ERISA, in connection with
any Plan which
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would subject Borrower, such Subsidiary or such ERISA Affiliate (after giving
effect to any exemption) to the tax or penalty on prohibited transactions
imposed by IRC Section 4975, Section 502 of ERISA or any other liability,
provided that the "amount involved" under said section is in excess of $500,000.
No Plan has been terminated which resulted in any liability to Borrower, any of
its Subsidiaries or any ERISA Affiliate which has not been satisfied, nor has
any accumulated funding deficiency (as defined in IRC Section 412(a)) been
incurred (without regard to any waiver granted under IRC Section 412), nor has
any funding waiver from the IRS been received or requested, nor has Borrower,
any of its Subsidiaries or any ERISA Affiliate failed to make any contributions
or to pay any amounts due and owing as required by Section 412 of the IRC,
Section 302 of ERISA or the terms of any Plan prior to the due date of such
contribution under Section 412 of the IRC or Section 302 of ERISA which are
still outstanding or which would result in the imposition of a Lien under such
Sections, nor has there been any Reportable Event or any event requiring
disclosure under Section 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA with respect
to any Plan (other than a Multiemployer Plan) which would result in liability to
Borrower, any of its Subsidiaries or any ERISA Affiliate in excess of $500,000.
The present value of the "benefit liabilities" as defined in Title IV of ERISA
of each such Plan as of the end of the preceding plan year using Plan actuarial
assumptions as in effect for such plan year do not exceed the value of the
assets of each Plan (other than a Multiemployer Plan) by more than $500,000.
There are no claims (other than claims for benefits in the normal course),
actions or lawsuits asserted or instituted against, and none of Borrower, any of
its Subsidiaries or any ERISA Affiliate has knowledge of any threatened
litigation or claims against (i) the assets of any Plan (other than a
Multiemployer Plan) or against any fiduciary of such Plan with respect to the
operation of such Plan or (ii) the assets of any employee welfare benefit plan
within the meaning of ERISA Section 3(1) or against any fiduciary thereof with
respect to the operation of any such Plan, which, if adversely determined, could
have a material effect on the business, operations, properties, assets or
condition (financial or otherwise) of Borrower, any of its Subsidiaries or any
ERISA Affiliate, taken as a whole. Any bond required to be obtained by
Borrower, any of its Subsidiaries or any ERISA Affiliate under ERISA with
respect to any Plan has been obtained and is in full force and effect. None of
Borrower, any of its Subsidiaries or any ERISA Affiliate has incurred (a) any
liability to the PBGC, (b) any withdrawal liability (and no event has occurred
which, with the giving of notice under Section 4219 of ERISA, would result in
such liability) under Section 4201 of ERISA as a result of a complete or partial
withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a
Multiemployer Plan or (c) any liability under ERISA Section 4062 to the PBGC or
to a trustee appointed under ERISA Section 4042, any of which liability would
exceed $500,000. None of Borrower, any of its Subsidiaries or any ERISA
Affiliate nor any organization to which Borrower, any of its Subsidiaries or any
such ERISA Affiliate is a successor or parent corporation within the meaning of
ERISA Section 4069(b) has engaged in a transaction within the meaning of ERISA
Section 4069. None of Borrower, any of its Subsidiaries or any ERISA Affiliate
maintains or has established any welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment except as may be required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), and the regulations
thereunder, and at the expense of the participant or the
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beneficiary of the participant. Borrower, any of its Subsidiaries and each
ERISA Affiliate maintain a welfare benefit plan within the meaning of Section
3(1) of ERISA and has complied with the notice and continuation coverage
requirements of COBRA and the regulations thereunder.
16. NO LITIGATION. Except as set forth on Schedule 4.16 hereto, no
action, claim or proceeding is now pending or, to the knowledge of Borrower,
threatened against Parent, Borrower or any of its Subsidiaries, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators, which, if
determined adversely, could reasonably be expected to have a Material Adverse
Effect, nor to the knowledge of Borrower does a state of facts exist which is
reasonably likely to give rise to such proceedings. None of the matters set
forth therein questions the validity of any of the Loan Documents or any action
taken or to be taken pursuant thereto.
17. BROKERS. Except as set forth on Schedule 4.17, no broker or
finder acting on behalf of Borrower brought about the obtaining, making or
closing of the loans made pursuant to this Agreement and Borrower has no
obligation to any Person, except as set forth on Schedule 4.17, in respect of
any finder's or brokerage fees in connection with the Loans contemplated by this
Agreement.
18. Intentionally Omitted.
19. OUTSTANDING STOCK; OPTIONS; WARRANTS; ETC. The Stock of Borrower
owned by Parent and the Stock of Parent owned by the Stockholders of Parent
named on Schedule 4.19 at the Closing Date constitute all of the issued and
outstanding Stock of Borrower and Parent, respectively, immediately following
the Closing Date. Borrower has no outstanding rights, options, warrants or
agreements pursuant to which it may be required to issue or sell any Stock.
Except as set forth on Schedule 4.19, Parent has no outstanding rights, options,
warrants or agreements pursuant to which it may be required to issue or sell any
stock.
20. EMPLOYMENT AND LABOR AGREEMENTS. Except as set forth on Schedule
4.20, there are no employment or management agreements covering management of
Borrower or any of its Subsidiaries and there are no collective bargaining
agreements or other labor agreements covering any employees of Borrower or any
of its Subsidiaries. A true and complete copy of each such agreement has been
furnished to Agent.
21. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. To the best of
Borrower's knowledge, Borrower and its Subsidiaries own all material licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, and trade names necessary to continue to conduct their business as
heretofore conducted by them, now conducted by them and proposed to be conducted
by them, each of which is listed, together with Patent and Trademark Office
application or registration numbers, where applicable, on Schedule 4.21 hereto.
To the best of Borrower's knowledge, except as set forth on Schedule 4.21
hereto, Borrower and its
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Subsidiaries conduct their respective businesses without infringement or claim
of infringement of any license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property right of others, except
where such infringement or claim of infringement could not reasonably be
expected to have a Material Adverse Effect. To the best of Borrower's
knowledge, except as set forth in Schedule 4.21 hereto, there is no infringement
or claim of infringement by others of any material license, patent, copyright,
service mark, trademark, trade name, trade secret or other intellectual property
right of Borrower or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
22. FULL DISCLOSURE. No representation or warranty of any Loan Party
contained in this Agreement, including the Schedules hereto, or in the other
Loan Documents or Ancillary Agreements furnished by or on behalf of Parent,
Borrower or any of Borrower's Subsidiaries to Agent pursuant to the terms of
this Agreement is untrue or incorrect in any material respect and none of such
Loan Documents or Ancillary Agreements contains any untrue statement of any Loan
Party of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which made.
23. LIENS. The Liens granted to the Lenders pursuant to the Mortgages
and the Leasehold Mortgages were at the Closing Date fully perfected first
priority Liens, subject to Permitted Encumbrances, in and to the Collateral
therein described upon their recording.
24. NO MATERIAL ADVERSE EFFECT. To the best of Borrower's knowledge,
except as set forth on Schedule 4.24, no event has occurred since December 31,
1988 and is continuing which has had or could reasonably be expected to have a
Material Adverse Effect.
25. ENVIRONMENTAL PROTECTION. To the best of Borrower's knowledge,
the operations of the Borrower and each of its Subsidiaries comply in all
material respects with all Environmental Laws; and to the best of Borrower's
knowledge and except as set forth on Schedule 4.25 (i) the Borrower and each of
its Subsidiaries have obtained all material environmental, health and safety
Permits necessary for their respective operations, and all such Permits are in
good standing, and the Borrower and each of its Subsidiaries are in compliance
with all material terms and conditions of such Permits; (ii) none of the
operations of the Borrower or any of its Subsidiaries is subject to any judicial
or administrative proceeding alleging the violation of any Environmental Laws
which if adversely determined could reasonably be expected to have a Material
Adverse Effect; (iii) the Borrower and each of its Subsidiaries and all of their
present Facilities or operations, as well as their past Facilities or
operations, are not subject to any outstanding written order or agreement with
any governmental authority or private party respecting (A) any Environmental
Laws, (B) any Remedial Action, or (C) any Environmental Claims; (iv) none of the
operations of the Borrower or any of its Subsidiaries is the subject of any
Federal or state investigation evaluating whether any Remedial Action is needed
to respond to a Release of any Contaminant into the environment; (v) neither the
39
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Borrower nor any of its Subsidiaries or any predecessor of the Borrower or any
Subsidiary has filed any notice under any Federal or state law indicating past
or present treatment, storage, or disposal of a hazardous waste or reporting a
spill or Release of a Contaminant into the environment; (vi) neither the
Borrower nor any of its Subsidiaries has any contingent liability in connection
with any Release by Borrower or any of its Subsidiaries of any Contaminant into
the environment; (vii) none of the Borrower's or any of its Subsidiary's
operations involve the generation, transportation, treatment or disposal of
hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state
equivalent; (viii) neither the Borrower nor any of its Subsidiaries has disposed
of any Contaminant by placing it in or on the ground or waters of any premises
owned, leased or used by the Borrower or such Subsidiary and neither has any
lessee, prior owner, or other Person; (ix) no underground storage tanks or
surface impoundments are on the Borrower's Facilities or the Facilities of any
of its Subsidiaries; and (x) no Lien in favor of any governmental authority for
(A) any liability under Environmental Laws, or (B) damages arising from or costs
incurred by such governmental authority in response to a Release of a
Contaminant into the environment has been filed or attached to the Borrower's
Facilities or the Facilities of any Subsidiary of the Borrower.
26. PRIOR LIENS. Schedule 4.26 sets forth a true, correct and
complete list of Indebtedness outstanding as at the Closing Date which is
secured by any Lien on any of Borrower's or any Subsidiaries' interest in the
Real Estate and Leases which is superior to the Lien granted to Agent pursuant
to the Loan Documents, the outstanding principal balance due and payable on such
Indebtedness as of the respective dates set forth on Schedule 4.26, the interest
rate presently payable on such Indebtedness and the monthly payment required to
be made in respect thereof; PROVIDED, HOWEVER, that failure to list any
Indebtedness secured by any Lien which otherwise constitutes a Permitted
Encumbrance shall not constitute an Event of Default. Neither Borrower nor any
Subsidiary is in default under any loan document Securing such Indebtedness and
no event has Occurred which with the giving of notice, lapse of time or both,
would constitute a default thereunder, except for any such default which would
not have a Material Adverse Effect.
5. FINANCIAL STATEMENTS AND INFORMATION
1. REPORTS AND NOTICES. Borrower covenants and agrees that from and
after the Closing Date and until the Termination Date, it shall deliver to each
Lender:
(a) Within 37 days after the end of each fiscal month, (i) a copy of
the unaudited consolidated balance sheet of Borrower and its Subsidiaries as of
the end of such month and the related consolidated and consolidating profit and
loss (including attendance figures) statements of Borrower and its Subsidiaries
broken down by Market Segment, and consolidated statement of Corporate Overhead,
for that portion of the Fiscal Year ending as of the end of such month and (ii)
a copy of the unaudited consolidated and consolidating profit and loss
(including attendance figures) statements of Borrower and its Subsidiaries
broken down by Market Segment, consolidated statement of cash flows of Borrower
and its Subsidiaries, and consolidated statement of Corporate Overhead for such
month, all prepared in accordance with GAAP (subject to normal year end
adjustments and footnotes), setting forth, in comparative form, the projected
and historical consolidated and consolidating figures for such period.
40
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(b) Within 45 days after the end of each fiscal quarter of each Fiscal
Year, (i) a copy of the unaudited consolidated balance sheet of Borrower and its
Subsidiaries as of the close of such quarter and the related consolidated and
consolidating profit and loss (including attendance figures) statements of
Borrower and its Subsidiaries broken down by Market Segment, and statements of
Corporate Overhead for that portion of the Fiscal Year ending as of the close of
such quarter and (ii) a copy of the unaudited consolidated and consolidating
profit and loss (including attendance figures) statements of Borrower and its
Subsidiaries broken down by Market Segment, consolidated statement of cash flows
of Borrower and its Subsidiaries, and consolidated statement of Corporate
Overhead for such quarter, all prepared in accordance with GAAP (subject to
normal year end adjustments and footnotes), setting forth, in comparative form,
the projected and historical consolidated and consolidating figures for such
period and accompanied by (A) a statement in reasonable detail showing the
calculations used in determining the financial covenants under Sections 6.3 and
7.10 hereof, and (B) the certification of the chief financial officer of
Borrower that all such financial statements present fairly in all material
respects in accordance with GAAP (subject to normal year end adjustments) the
consolidated and consolidating financial position of Borrower, its Subsidiaries,
the Market Segments as at the end of such quarter and for the period then ended,
and that there was no Default or Event of Default in existence as of such time.
(c) Within 90 days after the end of each Fiscal Year, (i) a copy of
the annual audited consolidated financial statements of Borrower and its
Subsidiaries consisting of the annual consolidated balance sheet and
consolidated profit and loss statements and statements of cash flows and
retained earnings as of the end of such Fiscal Year, (ii) a copy of the annual
unaudited consolidated and consolidating financial statements of Borrower and
its Subsidiaries, consisting of the consolidated and consolidating profit and
loss (including attendance figures) statements of Borrower and its Subsidiaries
broken down by Market Segment, and consolidated statement of Corporate Overhead,
for the Fiscal Year then ended and (iii) a summary of the profit and loss
statement for each Theatre (including attendance figures) for the Fiscal Year
then ended, setting forth, in comparative form, the historical consolidated and
consolidating figures for the previous Fiscal Year, which financial statements
shall be prepared in accordance with GAAP, certified (only with respect to the
consolidated financial statements) without qualification by Price Waterhouse, or
any other firm of independent certified public accountants of recognized
national standing selected by Borrower and reasonably acceptable to Agent, and
accompanied by (A) a statement in reasonable detail showing the calculations
used in determining the financial covenants under Sections 6.3 and 7.10 hereof,
(B) a report from such accountants to the effect that in connection with their
audit examination, nothing has come to their attention to cause them to believe
that a Default or Event of Default had occurred and (C) a certification of the
chief executive officer or chief financial officer of Borrower that all such
financial statements are complete and correct and present fairly in accordance
with GAAP the consolidated and consolidating financial position of Borrower, its
Subsidiaries and the Market Segments as at the end of such year and for the
period then ended and that there was no Default or Event of Default in existence
as of such time.
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(d) As soon as Practicable, but in any event within two (2) Business
Days after Borrower becomes aware of the existence of any Default or Event of
Default, or any development or other information which would have a Material
Adverse Effect, notice by telephone or telecopy specifying the nature of such
Default or Event of Default or development or information, including the
anticipated effect thereof, which notice shall be promptly confirmed in writing
within five (5) days.
(e) Not later than 45 days prior to the beginning of each Fiscal Year:
(i) a projected consolidated balance sheet of Borrower and its
Subsidiaries for such Fiscal Year, on a monthly basis, and on an
annual basis for each remaining Fiscal Year through the Commitment
Termination Date;
(ii) projected consolidated and consolidating profit and loss
statements of Borrower and its Subsidiaries broken down by Market
Segment, consolidated statement of cash flow of Borrower and its
Subsidiaries, and consolidated statement of Corporate Overhead,
including summary details of cash disbursements, including for Capital
Expenditures, and a summary of Funded Debt, for such Fiscal Year, on a
monthly basis, and on an annual basis for each remaining Fiscal Year
through the Commitment Termination Date; and
(iii) an annual business plan approved by the board of directors
of Borrower, setting forth in reasonable detail (A) the annual budget
for Borrower and its Subsidiaries broken down by Market Segment, and
(B) the operating profit and loss (including attendance figures) and
cash flow projections for Borrower and its Subsidiaries broken down by
Market Segment and statements of Corporate Overhead, in each case for
the following Fiscal Year and for each remaining Fiscal Year through
the Commitment Termination Date;
together with appropriate Supporting details as reasonably requested by Agent.
(f) If requested by Agent or any Lender, copies of all federal, state,
local and foreign tax returns and reports in respect of income, franchise or
other taxes on or measured by income (excluding sales, use or like taxes) filed
by Borrower or any of its Subsidiaries.
(g) Such other information respecting Borrower's, any of its
Subsidiaries', or any of the Theatres' business, assets, operations or financial
condition as Agent may, from time to time, reasonably request.
(h) As soon as practicable, a list of the participants in the
Compensation Plan and all amounts to be paid annually under the Compensation
Plan and, as soon as practicable following any changes in the participants in
or the amounts to be paid annually under the Compensation Plan, a list of the
participants added to and the changes in the amounts to be paid
42
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under the Compensation Plan, as well as a list of those participants removed
from the Compensation Plan.
(j) Within one fiscal month plus five Business Days following the end
of each fiscal month following the Closing Date, an itemized report of all fees,
costs and expenditures paid or incurred by the Borrower pursuant to Section
7.7(a) hereof.
2. COMMUNICATION WITH ACCOUNTANTS. Borrower authorizes Agent, on
behalf of itself and on behalf of Lenders (at Agent's and Lenders' sole expense
unless an Event of Default shall have occurred and be continuing), to
communicate directly with Borrower's independent certified public accountants
and Borrower authorizes those accountants to disclose to Agent any and all
financial statements and other supporting financial documents and schedules
including copies of any management letter with respect to the business,
financial condition and other affairs of Borrower and any of its Subsidiaries.
Agent and each Lender shall maintain the confidentiality of any information
received by it as a result of any such communication and shall not disclose any
such information to any Person other than (a) to a potential purchaser of a Note
or a participant, in which event such potential purchaser or participant shall
similarly agree not to disclose such information received by it, (b) upon the
Occurrence and continuance of an Event of Default, in which event the recipient
thereof shall similarly agree not to disclose such information, (c) in
connection with the exercise of any remedies of Agent or any Lender, as the case
may be under any Collateral Document and (d) to the extent any such disclosure
is required by law. At or before the Closing Date, Borrower delivered a letter
addressed to such accountants instructing them to comply with the provisions of
this Section 5.2.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless the Required Lenders shall
otherwise consent in writing, from and after the date hereof and until the
Termination Date:
1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Borrower shall
and shall cause each of its Subsidiaries to (a) do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence or its existence as a general or limited partnership, as the case may
be, and its rights, licenses, privileges and franchises material to the conduct
of its business; (b) continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder; (c) at all times maintain,
preserve and protect all of its trademarks and trade names, and preserve all the
remainder of its property, in use or useful in the conduct of its business and
keep the same in good repair, working order and condition (taking into
consideration ordinary wear and tear) and from time to time make, or cause to be
made, all needful and proper repairs, renewals and replacements, betterments and
improvements thereto consistent with motion picture theatre industry practices,
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; and (d) transact business in such names
as Borrower or such Subsidiary may from time to time use in conducting its
businesses.
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2. PAYMENT OF OBLIGATIONS. (a) Subject to the provisions of Section
6.2(b), Borrower shall and shall cause each of its Subsidiaries to (i) pay and
discharge or cause to be paid and discharged all its Indebtedness and all of its
payment obligations under any Lease including, without limitation, all the
Obligations, as and when due and payable, (ii) pay and discharge or cause to be
paid and discharged promptly all (A) Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed), and (B) lawful claims
for labor, materials, supplies and services or otherwise before any thereof
shall become in default, and (iii) pay and discharge all present and future
documentary or stamp taxes or other excise or property taxes, charges or similar
levies of the United States or any state or political subdivision thereof, or
any applicable foreign jurisdiction that arise from the execution, delivery or
registration of the Notes or any of the other Loan Documents.
(a) Borrower and its Subsidiaries may in good faith contest, by
appropriate proceedings, the validity or amount of any Indebtedness (other than
the Obligations) or any payment obligation under any Lease, Charges or claims
arising under Section 6.2(a)(i), (ii) or (iii), provided that at the time of
commencement of any such proceeding, and during the pendency thereof (i) no
Default or Event of Default shall have occurred; (ii) adequate Reserves with
respect thereto are maintained on the books of Borrower or such Subsidiary, in
accordance with and to the extent required by GAAP; (iii) an adverse
determination of such proceeding could not reasonably be expected to have a
Material Adverse Effect or result in a forfeiture or loss of Collateral, which
forfeiture or loss could reasonably be expected to have a Material Adverse
Effect; and (iv) Borrower or such Subsidiary shall promptly pay or discharge
such contested Charges and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Agent evidence acceptable to Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to Borrower or such Subsidiary.
(b) Notwithstanding anything to the contrary contained in Section
6.2(b) above, Borrower and each of its Subsidiaries shall have the right to pay
the Indebtedness, obligations, Charges or claims arising under Section 6.2(a)
and in good faith contest, by appropriate proceedings, the validity or amount of
such Indebtedness, obligations, Charges or claims.
3. FINANCIAL COVENANTS. Borrower and its Subsidiaries shall, on a
consolidated basis:
(a) maintain at the end of each fiscal quarter set forth below a
Consolidated Total Funded Debt to Consolidated Cash Flow Ratio equal to or less
than the ratio set forth below:
For Each Fiscal Quarter
Ending: Maximum Ratio:
------------------- --------------
September 30, 1996 4.25:1.00
December 31, 1996 4.00:1:00
March 30, 1997 3.80:1.00
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June 30, 1997 3.70:1.00
September 30, 1997 3.60:1.00
December 31, 1997 3.40:1:00
March 30, 1998 3.20:1.00
June 30, 1998
and thereafter 3.00:1.00
(c) maintain at the end of each fiscal quarter set forth below a Consolidated
Interest Coverage Ratio equal to or greater than the ratio set forth below:
For Each Fiscal Quarter
Ending: Minimum Ratio:
------------------ --------------
September 30, 1996 2.30:1.00
December 31, 1996 2.40:1:00
March 30, 1997 2.45:1.00
June 30, 1997 2.55:1.00
September 30, 1997 2.65:1.00
December 31, 1997 2.75:1:00
March 30, 1998 2.85:1.00
June 30, 1998 3.00:1.00
and thereafter
(c) maintain at the end of each fiscal quarter set forth below a
Consolidated Cash Flow to Consolidated Fixed Charges Ratio equal to or greater
than the ratio set forth below:
For Each Fiscal Quarter
Ending: Minimum Ratio:
------------------ --------------
September 30, 1996 2.00:1.00
December 31, 1996 2.00:1.00
March 30, 1997 2.00:1.00
June 30, 1997 2.00:1.00
September 30, 1997 2.00:1.00
December 31, 1997 2.00:1.00
March 30, 1998 1.50:1.00
June 30, 1998 1.50:1.00
September 30, 1998 1.50:1.00
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December 31, 1998 1.50:1.00
March 30, 1999 1.00:1.00
and thereafter
4. LENDER'S FEES. Borrower shall pay to Agent, on demand, any and all
fees, costs or expenses that Agent shall pay to a bank or other similar
institution arising out of or in connection with the forwarding to Borrower or
any other Person on behalf of Borrower by Agent of proceeds of the Revolving
Credit Advances.
5. BOOKS AND RECORDS. Borrower shall and shall cause each of its
Subsidiaries to keep adequate records and books of account with respect to its
business activities, in which proper entries, reflecting all of their financial
transactions, are made in accordance with GAAP and on a basis consistent with
the financial statements referred to in Section 4.6(b) hereof.
6. LITIGATION. Borrower shall notify Agent in writing, promptly upon
learning thereof, of any litigation commenced against Borrower and/or any of the
Subsidiaries, and of the institution against any of them of any suit or
administrative proceeding that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
7. INSURANCE. Schedule 6.7 lists all insurance of any nature
maintained by Borrower and each Subsidiary of Borrower, as well as a summary of
the terms of such insurance. Borrower shall and shall cause each Subsidiary of
Borrower to maintain insurance in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which Borrower and such Subsidiary
operates, including, without limitation, fire, theft, burglary, public
liability, property damage, product liability, workers' compensation and
insurance on all property and assets, all under policies issued by insurers
reasonably satisfactory to Agent and with a lender's loss payable clause in
favor of Agent for the benefit of the Lenders and in accordance with the
provisions of Schedule 6.7B. Borrower shall and shall cause each of its
Subsidiaries to pay all insurance premiums payable by them as and when due and
payable.
8. COMPLIANCE WITH LAW. Borrower shall and shall cause each of its
Subsidiaries to comply with all federal, state and local laws and regulations
applicable to it, including, without limitation, ERISA, those regarding the
collection, payment and deposit of employees' income, unemployment and social
security taxes and those relating to environmental matters where the failure to
comply could reasonably be expected to have a Material Adverse Effect.
9. AGREEMENTS. Subject to the provisions of Section 6.2(b) hereof,
Borrower shall and shall cause each of its Subsidiaries to perform and comply,
within all required time periods (after giving effect to any applicable grace
periods), all of its obligations and enforce all of its rights under each
agreement to which it is a party, including, without limitation, any Lease or
Restricted Lease to which any such Loan Party is a party, whether now or
hereafter entered into
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by such party, where the failure to so perform, comply and enforce could
reasonably be expected to have a Material Adverse Effect.
10. SUPPLEMENTAL DISCLOSURE. From time to time as may be necessary
(in the event that such information is not otherwise delivered by Borrower to
Lenders pursuant to this Agreement), so long as there are Obligations
outstanding hereunder, Borrower will supplement or amend each Schedule or
representation herein with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedule or as an exception to such
representation or which is necessary to correct any information in such Schedule
or representation which has been rendered inaccurate thereby.
11. EMPLOYEE PLANS. (a) With respect to other than a Multiemployer
Plan, or each Plan hereafter adopted or maintained by Borrower, or any of its
Subsidiaries or any ERISA Affiliate of Borrower, Borrower shall or shall cause
such Subsidiary and ERISA Affiliate to (i) use its best efforts to seek and
receive determination letters from the IRS to the effect that such Plan is
qualified within the meaning of IRC Section 401(a); (ii) from and after the
adoption of any Plan, use its best efforts to cause such Plan to be qualified
within the meaning of IRC Section 401(a) and to be administered in all material
respects in accordance with the requirements of ERISA and IRC Section 401(a);
(iii) make all required contributions to such Plans by the due date under
Section 412 of the IRC and Section 302 of ERISA in order to avoid the imposition
of a Lien under such Sections; and (iv) not take any action which would cause
such Plan not to be qualified within the meaning of IRC Section 401(a) or not to
be administered in all material respects in accordance with the requirements of
ERISA and IRC Section 401(a).
(a) Borrower shall and shall cause each Subsidiary and ERISA Affiliate
to deliver to Lender: (i) (A) as soon as possible and in any event within 30
days, after Borrower, or any of its Subsidiaries or any such ERISA Affiliate
knows or has reason to know that any ERISA Event described in clause (a) of the
definition of ERISA Event or any event requiring disclosure under Section
4063(a) of ERISA with respect to any Plan has occurred, and (B) within 10 days
after the Borrower, or any of its Subsidiaries or any ERISA Affiliate knows or
has reason to know that any other ERISA Event with respect to any Plan has
occurred or a request for a minimum funding waiver under IRC Section 412 with
respect to any Plan or any Multiemployer Plan, a statement of the chief
financial officer of Borrower, or any of its Subsidiaries or such ERISA
Affiliate setting forth details as to such ERISA Event or other event and the
action which Borrower, or any of its Subsidiaries or such ERISA Affiliate
proposes to take with respect thereto, together with a copy of the notice of
such ERISA Event or other event, if required by the applicable regulations under
ERISA, given to the PBGC; (ii) promptly after the filing thereof by Borrower, or
any of its Subsidiaries or such ERISA Affiliate with the DOL, IRS or the PBGC,
copies of each annual and other report with respect to each Plan; (iii) promptly
after receipt thereof, a copy of any notice, determination letter, ruling or
opinion Borrower, or any of its Subsidiaries or such ERISA Affiliate may receive
from the PBGC, DOL or IRS with respect to any Plan; (iv) promptly, and in any
event within ten Business Days, after receipt thereof, a copy of any
correspondence Borrower, or any of its Subsidiaries or such ERISA Affiliate
receives from the Plan Sponsor (as
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defined by ERISA Section 4001(a)(10)) of any Plan concerning potential
withdrawal liability pursuant to ERISA Section 4219 and/or Section 4202, and a
statement from the chief financial officer of Borrower, or any of its
Subsidiaries or such ERISA Affiliate setting forth details as to the events
giving rise to such potential withdrawal liability and the action which
Borrower, or any of its Subsidiaries or such ERISA Affiliate proposes to take
with respect thereto; (v) notification within 30 days of any material increases
in the benefits of any existing Plan which is not a Multiemployer Plan, or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which Borrower, or any of its Subsidiaries or such ERISA Affiliate was not
previously contributing within 30 days; (vi) promptly, and in any event within
ten Business Days, after receipt thereof by Borrower, or any of its Subsidiaries
or such ERISA Affiliate from the PBGC, copies of each notice received by
Borrower, or any of its Subsidiaries or such ERISA Affiliate of the PBGC's
intention to terminate any Plan or to have a trustee appointed to administer any
Plan; (vii) notification within ten days of a request for a minimum funding
waiver under IRC Section 412 with respect to any Plan and a copy of such
request; (viii) notification within two Business Days after Borrower, or any of
its Subsidiaries or any ERISA Affiliate knows or has reason to know that
Borrower or such ERISA Affiliate has or intends to file a notice of intent to
terminate any Plan under a distress termination within the meaning of Section
4041(c) of ERISA and a copy of such notice; and (ix) promptly after the
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting Borrower, any of its
Subsidiaries or any ERISA Affiliate or any Plan except those which, if adversely
determined, would not have a reasonable likelihood of having a Material Adverse
Effect.
12. LEASES; NEW REAL ESTATE. (a) Borrower shall provide, or shall
cause the applicable Subsidiary to provide, Agent with copies of all leases of
real property or similar agreements (and all amendments thereto) entered into by
Borrower or any Subsidiary after the Closing Date, whether as lessor or lessee.
Any new lease of real property entered into by Borrower or any of its
Subsidiaries in respect of any Theatre shall expressly permit the mortgaging
thereof to Agent, on behalf of Lenders, and shall contain such customary
leasehold lender protections as may be reasonably required by Agent, it being
understood that the leasehold lender protections in substantially the form set
forth in Schedule 6.12 hereof shall be deemed to satisfy such leasehold lender
protection requirements and such non-disturbance and other provisions as shall
be reasonably satisfactory to Agent other than a provision requiring Agent's
consent to any modification, amendment, termination or surrender of such Lease;
PROVIDED, HOWEVER, that the foregoing shall not be construed as limiting or
modifying Borrower's covenants under Section 7.16(c) hereof. Borrower shall, or
shall cause the appropriate Subsidiary to, (i) provide Agent with a copy of each
notice of default received by Borrower or such Subsidiary under any such lease
upon receipt of any such notice and deliver to Agent a copy of each notice of
default sent by Borrower or such Subsidiary under any such lease simultaneously
with its delivery of such notice under such lease; (ii) use its best efforts to
notify Agent, not later than 30 days prior to the date of the expiration of the
term of any such lease, of intention either to renew or not renew any such
lease, and, if Borrower or such Subsidiary shall intend to renew such lease, the
terms and conditions of such renewal lease; and (iii) use its best efforts to
notify Agent at least 14 days prior to the date Borrower or such Subsidiary
takes possession of or becomes liable
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under any new leased premises or lease, whichever is earlier. With respect to
the Leases subject to any Leasehold Mortgage, Borrower and the appropriate
Subsidiary shall comply with the provisions of the applicable Leasehold Mortgage
with respect to the applicable Leases; PROVIDED, HOWEVER, that in the event of
any conflict between the provisions of this Agreement and the provisions of the
applicable Leasehold Mortgage, the provisions hereof shall control.
(a) If at any time prior to the Termination Date, Borrower or any of
its Subsidiaries shall acquire any Real Estate or enter into a Lease for a
Theatre, Borrower or any such Subsidiary shall cause such Lease or a memorandum
thereof to be recorded in the appropriate recording office and shall execute a
first priority Mortgage or Leasehold Mortgage, as the case may be, subject to
Permitted Encumbrances, in favor of Agent on behalf of Lenders covering such
Real Estate, substantially in the form of Exhibit C or D, as the case may be,
with respect to the applicable states referred to in such exhibit, or if with
respect to a state not referred to in such exhibit, in form and substance
reasonably satisfactory to Agent. Borrower or any applicable Subsidiary shall
also deliver to Agent copies of the following documents, each in form and
substance satisfactory to Agent and each dated the date of such Mortgage or
Leasehold Mortgage, as the case may be, with respect to any such Real Estate or
Leases, (i) ALTA Form B (1970 & 1984 revisions) mortgage title insurance
policies or the equivalent form used in the applicable state in which such Real
Estate or the leasehold estate covered by such Lease which shall be subject to a
Leasehold Mortgage is located, issued by a title company acceptable to Agent
insuring that each such Mortgage (and with respect to such Lease which shall be
subject thereto, each such Leasehold Mortgage), is a valid first priority Lien
on such Real Estate or leasehold estate described in such Mortgage or Leasehold
Mortgage, subject only to such exceptions to title as shall be acceptable to
Agent in its reasonable discretion and containing such endorsements and
affirmative insurance as Agent may require and which may be available in the
applicable state in which such Real Estate or the leasehold estate covered by
such Lease is located, and true copies of each document, instrument or
certificate referred to in or required by the terms of each such title insurance
policy, Mortgage and/or Leasehold Mortgage, to be, or to have been, filed,
recorded, executed or delivered in connection therewith, (ii) UCC-1 Financing
Statements filed in connection with such Mortgages and Leasehold Mortgages
required hereunder in each state where the same may be filed and (iii) subject
to the provisions of Section 6.16 hereof, current ALTA survey (or footprint
surveys if such surveys permit the title insurance company to delete the survey
exception from the applicable title insurance policy) and surveyor's
certification satisfactory in form and substance to Agent as to such Real Estate
and Leases (other than Leases for Theatres located in a mall).
(b) Any construction, architectural or similar building agreement
entered into by Borrower or any of its Subsidiaries in respect of any
construction to occur at any of the Real Estate or the real property leased by
Borrower or any of its Subsidiaries (other than a Lease for which the landlord
thereof performs the construction) for a cost to Borrower or any of its
Subsidiaries in excess of $100,000 for any one such agreement or $500,000 in the
aggregate for all such agreements entered into by Borrower or any of its
Subsidiaries during any Fiscal Year, shall provide that such agreement may be
assigned to Agent or any subsequent assignee who shall be financially capable of
performing the Borrower's or any of its Subsidiaries' obligations under
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such Agreement without additional compensation to such contractor or architect
who shall recognize Agent or such subsequent assignee as the contract party
thereto from and after the date of such assignment provided that Agent or such
assignee shall cure all defaults susceptible to being cured by Agent and shall
assume all of the Borrower's or its Subsidiaries' obligations arising from and
after the date of such assignment but only for so long as Agent or such assignee
shall have title to such Real Estate or leasehold interest.
13. ENVIRONMENTAL MATTERS. (a) Borrower shall and shall cause each
of its Subsidiaries to (i) comply in all material respects with the
Environmental Laws applicable to it, (ii) notify Agent promptly after knowledge
in the event of any Release of any Contaminant upon or affecting any premises
owned or occupied by such Person which Release is reasonably expected to have a
Material Adverse Effect, and (iii) promptly forward to Agent a copy of any
order, notice, permit, application, or any other written communication or report
received by Borrower or any of its Subsidiaries in connection with any such
Release or any other matter relating to the Environmental Laws as they may
adversely affect such premises.
(a) Borrower shall fully and promptly pay, perform, discharge, defend,
indemnify and hold harmless Agent and Lenders, their Subsidiaries and
Affiliates, and their respective directors, officers and employees from and
against any action, suit, proceeding, claim or loss suffered or incurred by
Agent, any Lender or any such other indemnified party, whether as mortgagee
pursuant to any Leasehold Mortgage other than as a result of Agent's, such
Lender's or such other indemnified party's gross negligence or willful
misconduct, as mortgagee in possession, or as successor in interest to Borrower
or any of its Subsidiaries as owner or lessee of any Facilities by virtue of
foreclosure or acceptance in lieu of foreclosure, or otherwise: (i) under or on
account of any Environmental Laws, including the assertion of any Lien
thereunder; (ii) with respect to any Release of a Contaminant, prior to such
foreclosure or acceptance in lieu of foreclosure, affecting such Facilities,
whether or not the same originates or emanates from such Facilities or any
contiguous real estate; and (iii) with respect to any other matter affecting
such Facilities pursuant to any Environmental Laws.
(b) In the event of any Release of any Contaminant or other Adverse
Environmental Condition upon or affecting any premises occupied by Borrower or
any of its Subsidiaries, whether or not the same originates or emanates from
such premises or any contiguous real estate, and if Borrower or such Subsidiary
shall fail to comply with any of the requirements of the Environmental Laws, if
required to do so under the applicable lease, Agent or any Lender may, upon
consent of the Required Lenders, but shall not be obligated to, give such
notices or cause such work to be performed or take any and all actions deemed
necessary or desirable to remedy such Adverse Environmental Condition or cure
such failure to comply and any amounts paid as a result thereof, together with
interest thereon at the rate set forth in Section 2.8 hereof with respect to the
Revolving Credit Loan, shall be immediately due and payable by Borrower and,
until paid, shall be added to the Obligations. Nothing in this Agreement shall
be construed as limiting or impeding Borrower's rights or obligations to take
any and all actions necessary or desirable to remedy any matter set forth in the
definition of Environmental Claim.
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14. SEC FILINGS; CERTAIN OTHER NOTICES. Borrower shall furnish to
Agent (i) promptly after the filing thereof with the Securities and Exchange
Commission, a copy of each report, notice or other filing, if any, by Borrower
with the Securities and Exchange Commission, and, if requested by Agent, (ii) a
copy of each written communication received by Borrower from or delivered by
Borrower to (A) the Securities and Exchange Commission or (B) any other holder
of Stock or other securities of the Borrower pursuant to the terms thereof, in
each case promptly after each such receipt or delivery.
15. REORGANIZATION OF SUBSIDIARIES. Borrower has, and has caused each
of its Subsidiaries to, use its best efforts, by no later than 90 days following
the Closing Date, to assign the Leases set forth on Schedule 6.15 to the
Subsidiaries set forth on such Schedule, and Borrower shall, and shall cause
each of its Subsidiaries to, execute and deliver or take such other action as
the Agent may reasonably require to insure the continuance and validity of the
Collateral Documents and the Liens created thereby.
16. SURVEYS. Borrower has complied with the provisions of Section
3.1(ii) hereof within sixty (60) days following the Closing Date, to the extent
such condition was not fulfilled prior to the Closing Date.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without the Required Lenders'
prior written consent, from and after the date hereof and until the Termination
Date:
1. MERGERS, ETC. Neither Borrower nor any Subsidiary of Borrower
shall directly or indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock (or partnership interests) of, or otherwise combine with, any Person nor
form any Subsidiary, unless with respect to the formation of any Subsidiary, (i)
any such newly formed Subsidiary shall have executed and delivered to Agent such
of the Collateral Documents and taken such other action as Agent shall
reasonably require in connection therewith, (ii) the stock of such Subsidiary
shall have been pledged to Agent, for the benefit of Lenders, pursuant to the
Pledge Agreement, and (iii) Agent shall have reasonably determined that the
formation of such Subsidiary would not result in a Material Adverse Effect.
Nothing in this Section 7.1 shall be deemed to prevent Borrower or any of its
Subsidiaries from forming any Subsidiary, or from acquiring any entity,
substantially all of the assets of which newly-formed Subsidiary or entity
consist of Leases and/or Real Estate which the Borrower or a Subsidiary of
Borrower would then be permitted to enter into or acquire directly under Section
6.12, provided that Borrower and/or any such Subsidiary companies with the
provisions of Section 6.12 with respect to any such Leases and/or Real Estate
and with the provisions of clauses (i) and (ii) of the immediately preceding
sentence with respect to any such newly-formed Subsidiary or acquired entity.
2. INVESTMENTS; LOANS AND ADVANCES. Except as otherwise permitted by
Section 7.3 or 7.4 hereof, Borrower shall not and shall not permit any
Subsidiary of Borrower to make
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any investment in, or make or accrue loans or advances of money to any Person,
through the direct or indirect holding of securities or otherwise; PROVIDED,
HOWEVER, that Borrower shall be permitted hereunder and may permit hereunder its
Subsidiaries to make one or more investments in, or make or accrue loans or
advances of money to, Borrower or any other Subsidiary and PROVIDED FURTHER,
that Borrower and its Subsidiaries may make and own investments in (i)
marketable direct obligations issued or unconditionally guaranteed by the United
States of America or any agency thereof maturing within one year from the date
of acquisition thereof, (ii) commercial paper maturing no more than one year
from the date of creation thereof and at the time of their acquisition having
one of the two highest ratings obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., (iii) certificates of deposit,
maturing no more than one year from the date of creation thereof, issued by
banks listed on Schedule 7.2 hereof, (iv) certificates of deposit maturing no
more than one year from the date of creation thereof, issued by the banks listed
in Schedule 7.2 hereof provided that the aggregate amount invested in such
certificates of deposit shall not at any time exceed $100,000 for any one such
certificate of deposit and $200,000 for any one such bank, (v) time deposits,
maturing no more than 30 days from the date of creation thereof with commercial
banks or savings banks or savings and loan associations each having membership
either in the Federal Deposit Insurance Corporation or in the Federal Savings
and Loan Insurance Corporation (or their respective successor entities) and in
amounts not exceeding the maximum amounts of insurance thereunder, and (vi)
agreements for the sale and repurchase of securities entered into with banks or
other financial institutions listed on Schedule 7.2 hereof.
3. INDEBTEDNESS. (a) Except as otherwise expressly permitted by this
Section 7.3 or by any other section of this Agreement, Borrower shall not, nor
shall it permit any of its Subsidiaries to, create, incur, assume or permit to
exist any Indebtedness, whether recourse or nonrecourse, and whether superior or
junior, resulting from borrowings, loans, advances or the granting of credit,
whether secured or unsecured, except (i) Indebtedness secured by Liens permitted
under Section 7.9 hereof, including, without limitation, Indebtedness secured by
purchase money Liens or purchase money security interests, the aggregate
principal amount of which Indebtedness at any time outstanding shall not exceed
$5,000,000, (ii) the Revolving Credit Loan, (iii) lease payment obligations
under leases which Borrower or such Subsidiary is not prohibited from entering
into under the Loan Documents, (iv) all deferred taxes, (v) all unfunded pension
fund and other employee benefit plan obligations and liabilities but only to the
extent they are permitted to remain unfunded under applicable law, (vi)
intercompany debt to any Guarantor or to Borrower, (vii) Indebtedness of
Subsidiaries of Borrower created under the Guaranty, and (viii) Indebtedness of
Borrower in an aggregate principal amount not exceeding $85,000,000 represented
by the Senior Subordinated Notes, including interest payable thereon.
(a) Except as provided in Section 7.11, Borrower shall not and shall
not permit any Subsidiary of Borrower to sell or transfer, either with or
without recourse, any assets, of any nature whatsoever, in respect of which a
Lien is granted or to be granted pursuant to any Loan Document or engage in any
sale-leaseback or similar transaction involving any of such assets.
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4. EMPLOYEE LOANS. Borrower shall not and shall not permit any
Subsidiary of Borrower to make or accrue any loans or other advances of money to
any employee of Borrower or such Subsidiary in excess at any one time of
$350,000 in the aggregate for all such loans and advances, which loans or
advances shall bear interest at a rate per annum so as to avoid the application
of Section 7872 of the IRC.
5. CAPITAL STRUCTURE. Borrower shall not and shall not permit any
Subsidiary of Borrower to issue or agree to issue any of their respective
authorized but not outstanding shares of Stock (including treasury shares),
except for Stock issued upon the exercise of stock options and/or warrants
granted to employees of Borrower and any of its Subsidiaries as approved from
time to time by the Board of Directors of Borrower.
6. MAINTENANCE OF BUSINESS. Borrower shall not and shall not permit
any Subsidiary of Borrower to engage in any business other than the business of
managing, owning, leasing and/or operating motion picture theatres and all
reasonably related and ancillary businesses and activities, including the
operation of food, arcade and other concessions and game and amusement devices.
In addition, Borrower or any Subsidiary of Borrower may lease, as lessor,
various premises owned or leased by Borrower or such Subsidiary that are not
being used by it for the foregoing purposes to any Person, including, without
limitation, pursuant to the leases set forth on Schedule 4.8(b) under which
Borrower and its Subsidiaries are lessors.
7. TRANSACTIONS WITH AFFILIATES. (a) Borrower shall not and shall
not permit any Subsidiary of Borrower to enter into or be a party to any
transaction with any Affiliate of Borrower or such Subsidiary, except (i) the
payment of certain management fees to the extent permitted under subsection (c)
hereof, (ii) as expressly provided herein, or (iii) subject to Section 7.7(d),
in the ordinary course of and pursuant to the reasonable requirements of
Borrower's or such Subsidiary's business and upon fair and reasonable terms that
are disclosed to Agent and that are no less favorable to Borrower or such
Subsidiary than would be obtained at the time of such transaction in a
comparable arm's length transaction with a Person not an Affiliate of Borrower
or such Subsidiary.
(a) Borrower shall not and shall not permit any Subsidiary of Borrower
to enter into any agreement or transaction to pay to any Person (other than
pursuant to employee compensation or similar plans) any management or similar
fee based on or related to Borrower's or any of its Subsidiaries' operating
performance or income or any percentage thereof, nor pay any management or
similar fee to an Affiliate, except (i) to the extent disclosed on Schedule 7.7
and (ii) to the extent permitted by subsection 7.7(c) hereof.
(b) Borrower may pay a management fee to Act III or any of its
Affiliates of up to $800,000 in any Fiscal Year; PROVIDED, HOWEVER, that (i) no
Default or Event of Default has occurred and is continuing or would result
therefrom and (ii) with respect to the management fees payable in connection
with services rendered by Act III or any of its Affiliates during any Fiscal
Year commencing with the Fiscal Year ending December 31, 1996, such fees may be
payable throughout such Fiscal Year but in an amount not to exceed $200,000 with
respect to any given
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fiscal quarter plus amounts not paid in prior quarters. In the event that all
or any portion of the management fees otherwise payable by Borrower to Act III
or any of its Affiliates during any given Fiscal Year shall not have been paid
to Act III or any of its Affiliates by reason of the restrictions set forth in
the provisos to this Subsection 7.7(c) (the "Accrued and Unpaid Management
Fee"), then any such Accrued and Unpaid Management Fee shall accrue, without
interest, and may be paid by Borrower to Act III or any of its Affiliates during
any subsequent Fiscal Year solely to the extent that (i) no Default or Event of
Default has occurred and is continuing or would result therefrom and (ii) such
Accrued and Unpaid Management Fee to be paid in any given Fiscal Year does not
exceed $800,000.
(c) Borrower shall not and shall not permit any Subsidiary of Borrower
to pay to Act III or any Affiliate thereof more than $1,200,000 in any Fiscal
Year pursuant to Section 7.7(a)(iii) in respect of all goods and services
provided by Act III or such Affiliate to Borrower.
8. GUARANTEED INDEBTEDNESS. Borrower shall not and shall not permit
any Subsidiary of Borrower to incur any Guaranteed Indebtedness (excluding the
Guaranteed Indebtedness pursuant to the Guaranty) except (i) by endorsement of
instruments or items of payment for deposit to the general account of Borrower
or such Subsidiary, and (ii) for Guaranteed Indebtedness incurred for the
benefit of Borrower or any Subsidiary of Borrower if the primary obligation or
transaction is permitted by this Agreement.
9. LIENS. Borrower shall not and shall not permit any Subsidiary of
Borrower to create or permit any Lien on any of its properties or assets except:
(a) presently existing or hereinafter created Liens in favor of
Lenders; and
(b) Permitted Encumbrances.
10. CAPITAL EXPENDITURES. Borrower shall not and shall not permit any
of its Subsidiaries to make Capital Expenditures (including Capital Lease
Obligations) in an aggregate amount during any Fiscal Year in excess of the
maximum amount set forth below opposite such Fiscal Year without the consent of
the Required Lenders:
Fiscal Year Maximum Amount
----------- --------------
1996 $80,000,000
1997 $60,000,000
1998 and $25,000,000
thereafter
PROVIDED, HOWEVER, that to the extent that the amount of actual Capital
Expenditures for any Fiscal Year shall be less than the maximum amount set forth
above for such Fiscal Year (without giving effect to the carryover permitted by
this proviso), then 50% of the difference between (i) such maximum amount for
such Fiscal Year and (ii) the amount of actual Capital Expenditures for
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such Fiscal Year shall, in addition, be available for Capital Expenditures in
the next succeeding Fiscal Year.
11. SALE OF ASSETS. Borrower shall not and shall not permit any
Subsidiary of Borrower to sell, transfer, convey or otherwise dispose of any
assets or properties; PROVIDED, HOWEVER, that the foregoing shall not prohibit
(i) Asset Sales yielding Net Cash Proceeds of up to $1,000,000 individually or
in the aggregate during any Fiscal Year, (ii) the sale of inventory in the
ordinary course of business, (iii) the sale of surplus or obsolete,
nonfunctioning equipment and fixtures, and (iv) transfers resulting from any
casualty or condemnation of assets or properties; provided that the Net Cash
Proceeds derived from any such sale or transfer resulting from a casualty or
condemnation shall be used (x) as required pursuant to any applicable Mortgage
or Lease, (y) to repair or replace the property or asset so sold or transferred
or (z) to prepay the Loans.
12. CANCELLATION OF INDEBTEDNESS. Borrower shall not and shall not
permit any Subsidiary of Borrower to cancel any claim or debt owing to it,
except for reasonable consideration and in the ordinary course of business.
13. EVENTS OF DEFAULT. Borrower shall not and shall not permit any
Subsidiary of Borrower to take or omit to take any action, which act or omission
would constitute (i) a default or an event of default pursuant to, or
noncompliance with any of, the terms of any of the Loan Documents or the
Ancillary Agreements or (ii) a default or an event of default pursuant to, or
noncompliance with any other contract, lease, mortgage, deed of trust or
instrument to which it is a party or by which it or any of its property is
bound, or any document creating a Lien, unless such default, event of default or
non-compliance could not be reasonably expected to have a Material Adverse
Effect.
14. HEDGING TRANSACTIONS. Borrower shall not, and shall not permit
any of its Subsidiaries to, engage in any interest rate hedging, swaps, caps or
similar transaction except that Borrower may enter into an Interest Rate
Contract or Contracts with a Qualified Issuer, on terms reasonably satisfactory
to Agent, providing protection over a period of not less than 2 years; PROVIDED,
that in no event shall Borrower enter into any such contract if the cost thereof
shall in the aggregate exceed 7/10 of 1% of the amount so protected.
15. RESTRICTED PAYMENTS. Borrower shall not directly or indirectly
make any Restricted Payments, other than:
(A) so long as no Default or Event of Default has occurred and
is continuing, or would exist after giving effect to such Restricted
Payment, Borrower may declare and pay cash dividends on its common stock to
the extent utilized by Parent (i) to effect mandatory repurchases of Stock
of Parent issued as compensation to (or in connection with the employment
of) employees of Borrower, (ii) to make dividend payments on its common
stock, and (iii) to make dividend payments on the Senior Subordinated
Convertible Preferred Stock in accordance with the terms thereof relating
to the payment of dividends as in effect on February 14, 1990;
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(B) in the event that one or more events of the type specified
in clauses (i), (ii) or (iii) of Subsection 9.1(j) of the Loan Agreement (a
"Change in Control") shall have occurred and the Required Lenders shall
have affirmatively waived in writing the Event of Default under the Loan
Agreement which would otherwise result from such Change in Control, then,
provided that no Default or Event of Default (other than a Default or Event
of Default due solely to the occurrence of a Change in Control and which
shall have been waived by the Required Lenders as set forth above) has
occurred and is continuing, or would exist after giving effect to such
Restricted Payment, Borrower may declare and pay cash dividends on its
common stock to the extent utilized by Parent to perform its obligations
with respect to the put rights granted to Electra Investment Trust
P.L.C.(and its permitted successors and assigns) with respect to the Senior
Subordinated Convertible Preferred Stock originally issued to Electra
Investment Trust P.L.C. pursuant to the Stockholders Agreement as in effect
on February 14, 1990 (other than the put rights granted in respect of the
Electra Preferred Stock (as such term is defined in the Stockholders
Agreement as in effect on February 14, 1990) pursuant to Section 13.4 of
the Stockholders Agreement); and
(C) so long as no Default or Event of Default has occurred and
is continuing, or would exist after giving effect to such Restricted
Payment, Borrower may declare and pay cash dividends on its common stock to
the extent utilized by Parent to perform its obligations with respect to
the put rights granted in respect of the Electra Preferred Stock (as such
term is defined in the Stockholders Agreement as in effect on February 14,
1990) pursuant to Section 13.4 of the Stockholders Agreement as in effect
on February 14, 1990;
PROVIDED, HOWEVER, that (1) dividends paid by Borrower pursuant to clauses
(A)(ii), (A)(iii), (B) and (C) above shall be payable only to the extent that
Borrower's Consolidated Total Funded Debt to Consolidated Cash Flow Ratio for
the Fiscal Year during which any such dividend would be paid is less than or
equal to 3.5 to 1; and (2) Borrower may declare dividends referred to in clauses
(A)(i), (A)(ii), (A)(iii), (B) and (C) above only in an amount which does not
exceed, in the aggregate, the amount of Borrower's Available Cash.
16. RESTRICTED LEASES AND LEASES. (a) Borrower shall not, and shall
not permit any Subsidiary of Borrower to become, directly or indirectly, or
remain liable as lessee or as guarantor or other surety with respect to any
Restricted Lease, unless, on the date Borrower or such Subsidiary becomes liable
with respect to any Restricted Lease and immediately after giving effect to the
incurrence of such liability, the aggregate amount of all obligations payable by
Borrower and its Subsidiaries under such Restricted Leases and all other
Restricted Leases during the four consecutive calendar quarters next succeeding
such date shall not exceed $1,500,000 (increasing by 5% each Fiscal Year
beginning with the Fiscal Year ending December 31, 1990).
(a) Borrower shall not, and shall not permit any Subsidiary of
Borrower to become or remain, directly or indirectly, liable as lessee or as
guarantor or other surety with
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respect to any Lease or any non-motion picture theatre lease other than (i) any
such Leases or any such non-motion picture theatre leases with respect to which
Borrower or any of its Subsidiaries was liable on or prior to the date hereof or
(ii) as otherwise consented to by the Agent. Borrower shall comply with the
provisions of Section 6.12 prior to entering into any new Lease permitted under
this Section 7.16 and any new Lease permitted under this Section 7.16 shall be
entered into by either a newly formed Subsidiary of Borrower, which Subsidiary
shall have been formed in compliance with Section 7.1 hereof for the purpose of
operating the motion picture theatre covered by such Lease, or an existing
Subsidiary of Borrower the other Theatres owned or leased by which are located
in the same Market Segment as the motion picture theatre subject to such new
Lease.
(b) Borrower shall not, and shall not permit any of its Subsidiaries
to, modify, amend, cancel, extend (except pursuant to any rights granted to
Borrower or any of its Subsidiaries under any Lease) or otherwise change any of
the terms, covenants or conditions contained in any Lease which would increase
any monetary obligations of Borrower or such Subsidiary thereunder or materially
increase any of the other obligations of Borrower or such Subsidiary thereunder
or materially and adversely affect the rights of Borrower or such Subsidiary
thereunder without the consent of Agent, except where such modification,
amendment, cancellation, extension or other change could not reasonably be
expected to have a Material Adverse Effect. Except with respect to those Leases
set forth on Schedule 7.16 hereto (all of which Leases may be freely assigned or
subleased) and any non-motion picture theatre Leases, Borrower shall not permit
and shall not permit any of its Subsidiaries to assign any Leases or sublet any
portion of the premises described therein other than to Borrower or any of its
Subsidiaries, except that Borrower or any of its Subsidiaries shall have the
right to license, sublease or enter into a concession agreement with respect to
any portion of the premises described therein to any other Person for the
purpose of operating food, arcade and other concessions and game and amusement
devices in connection with the operation by Borrower or any of its Subsidiaries
of the leased premises as a motion picture theatre.
17. ERISA. Borrower shall not directly or indirectly, and will not
permit any of its Subsidiaries or any ERISA Affiliate to directly or indirectly
(i) terminate, any Plan subject to Title IV of ERISA so as to result in
liability to Borrower, any of its Subsidiaries or any ERISA Affiliate in excess
of $500,000, or (ii) permit to exist any ERISA Event or any other event or
condition, which presents the risk of liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $500,000, or (iii) make or
permit any of its Subsidiaries or any ERISA Affiliate to make a complete or
partial withdrawal (within the meaning of Section 4201 of ERISA) from any
Multiemployer Plan so as to result in liability to Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $500,000, or (iv) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder, except in the ordinary course of business consistent with past
practice, which could result in liability to Borrower, any of its Subsidiaries
or any ERISA Affiliate in excess of $500,000, or (v) permit the present value of
all nonforfeitable accrued benefits under each Plan (using the actuarial
assumptions utilized by the PBGC upon termination of a plan) to exceed the fair
market value of Plan assets allocable to such
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benefits by more than $500,000, all as determined as of the most recent
valuation date for each such Plan.
18. PAYMENT OF BROKERS FEES, ETC. Borrower shall not and shall not
permit any Subsidiary to pay any broker's, finder's, "break up", or investment
banker's fees or commissions to any person in connection with the transactions
contemplated hereby, other than (i) amounts payable to any real estate brokers
in connection with entering into any Lease or the purchase of any Real Estate
and (ii) amounts payable to the Agent pursuant to this Agreement.
19. CORPORATE OVERHEAD. Borrower shall not make, and shall not permit
any of its Subsidiaries to make, expenditures for Corporate Overhead of Borrower
and its Subsidiaries in excess of $4,800,000 for the Fiscal Year ending December
31, 1993.
20. Intentionally Omitted.
21. PAYMENT OR MODIFICATION OF NOTE DOCUMENTS. (a) Borrower shall
not, and shall not permit any of its Subsidiaries to, make any payments on, or
with respect to, any Senior Subordinated Notes, including any payments in
redemption or repurchase thereof, except mandatory payments of interest, fees
and expenses required by the terms of the Note Documents, but only to the extent
permitted under the subordination provisions applicable thereto.
(a) Borrower shall not, and shall not permit any Subsidiary of
Borrower to, amend, supplement or otherwise modify any of the provisions of the
Note Documents:
(i) which amends or modifies the subordination provisions contained
therein,
(ii) which shortens the fixed maturity or increases the principal
amount of, or increases the rate or shortens the time of payment of
interest on, or increases the amount or shortens the time of payment of any
principal or premium payable whether at maturity, at a date fixed for
prepayment or by acceleration or otherwise of the Senior Subordinated
Notes, or increases the amount of, or accelerates the time of payment of,
any fees payable in connection therewith,
(iii) which relates to the affirmative or negative covenants, events of
default or remedies under the Indenture and the effect of which is to
subject Borrower or any of its Subsidiaries, to any more onerous or more
restrictive provisions, or
(iv) which adversely affects the interests of Lenders as senior
creditors with respect to the Senior Subordinated Notes or the interests of
Lenders under this Agreement or any other Loan Document in any respect.
22. MODIFICATION OF COMPENSATION PLAN. Borrower shall not amend,
supplement or otherwise modify any of the terms and conditions of the
Compensation Plan (i) which increases the amount of, or accelerates the time of
payment of, any compensation or other amounts payable
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in connection therewith or (ii) which adversely affects the interests of the
Agent or any Lender under this Agreement or under any other Loan Document in any
respect.
8. TERM
1. TERMINATION. Subject to the provisions of Section 2 hereof, the
financing arrangement contemplated hereby in respect of the Revolving Credit
Loan shall be in effect until the Commitment Termination Date; PROVIDED,
HOWEVER, that in the event of a prepayment of any part or the entire Revolving
Credit Loan prior to the Commitment Termination Date with funds borrowed from
any Person other than Lenders, Borrower shall simultaneously therewith pay to
Lenders, in immediately available funds, all Obligations in full, in accordance
with the terms of the agreements creating and instruments evidencing such
Obligations.
2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENT.
Except as otherwise expressly provided for in the Loan Documents, no termination
or cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the powers, obligations,
duties, rights and liabilities of Borrower or the rights of Agent or any Lender
relating to any transaction or event occurring prior to such termination.
Except as otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations contained in
the Loan Documents shall survive such termination or cancellation and shall
continue in full force and effect until such time as all of the Obligations have
been paid in full in accordance with the terms of the agreements creating such
Obligations, at which time the same shall terminate.
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9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower shall fail to make any payment of principal of, or
interest on or any other amount owing in respect of, the Revolving Credit Loan,
or any of the other Obligations when due and payable or declared due and
payable, except that with respect to expenses payable under this Agreement, or
other Obligations owing under any Loan Document other than this Agreement, such
failure shall have remained unremedied for a period of five (5) days after
Borrower has received notice of such failure from Agent.
(b) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of Section 6.3 or Article 7 of this Agreement.
(c) Borrower shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents, or any
other Loan Party shall fail or neglect to perform, keep or observe any of the
provisions of any other Loan Document and the same shall remain unremedied for a
period ending on the first to occur of ten (10) days after Borrower shall
receive written notice of any such failure from Agent or thirty (30) days after
Borrower shall become aware thereof.
(d) (Except where the same is being contested in good faith as
permitted under Section 6.2(b) hereof) a default shall occur under any other
agreement, document or instrument (including, without limitation, any Lease) to
which any Loan Party is a party or by which any such Loan Party or any such Loan
Party's property is bound, and such default (i) involves the failure to make any
payment (whether of principal, interest or otherwise) due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) in respect of
any Indebtedness of any Loan Party (or any payment obligation of any Loan Party
under any Lease) after giving effect to the applicable grace period, if any, in
an aggregate amount exceeding $1,000,000; or (ii) causes (or permits any holder
of such Indebtedness or a trustee or party to any Lease to cause) such
Indebtedness (or payment obligation under any Lease) or a portion thereof in an
aggregate amount exceeding $1,000,000, to become due prior to its stated
maturity or prior to its regularly scheduled dates of payment.
(e) Any representation or warranty of any Loan Party contained in this
Agreement, including the Schedules hereto, or in the other Loan Documents or
Ancillary Agreements furnished by or on behalf of Parent, Borrower or any of
Borrower's Subsidiaries pursuant to the terms of this Agreement shall be untrue
or incorrect in any material respect, as of the date when made or deemed made
(including those made or deemed made pursuant to Section 3.3 hereof).
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(f) All or any material portion of the assets of any Loan Party shall
be attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of any Loan Party and shall remain unstayed or
undismissed for sixty (60) consecutive days; or any Person other than any Loan
Party shall apply for the appointment of a receiver, trustee or custodian for
any of the assets of any Loan Party and such application shall remain unstayed
or undismissed for sixty (60) consecutive days; or any Loan Party shall have
concealed, removed or permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its creditors or any of them
or made or suffered a transfer of any of its property or the incurring of an
obligation which may be fraudulent under any bankruptcy, fraudulent conveyance
or other similar law.
(g) A case or proceeding shall have been commenced against any Loan
Party in a court having competent jurisdiction seeking a decree or order in
respect of such Loan Party (i) under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of such Loan
Party or of any substantial part of its or their properties, or (iii) ordering
the winding-up or liquidation of the affairs of such Loan Party, and such case
or proceeding shall remain undismissed or unstayed for sixty (60) consecutive
days or such court shall enter a decree or order granting the relief sought in
such case or proceeding.
(h) Any Loan Party shall (i) file a petition seeking relief under
title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) consent to the institution of proceedings thereunder or to the filing of
any such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
Borrower or such Loan Party or of any substantial part of its properties, (iii)
fail generally to pay its debts as such debts become due, or (iv) take any
corporate action authorizing any such action.
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $500,000 in the
aggregate shall be rendered against Borrower or any of its Subsidiaries and the
same shall not be (i) fully covered by insurance in accordance with Section 6.7
hereof, or (ii) vacated, stayed, bonded, paid or discharged for a period of
thirty (30) days.
(j) Any of the following events shall have occurred and shall not have
been cured within ten (10) days thereafter:
(i) Lear shall have failed to maintain Control of Parent or Act III
Theatres, L.P. other than by virtue of any involuntary transfer or
disposition or by reason of Lear's death, disability, incapacity,
bankruptcy or by operation of law;
(ii) Lear shall have failed to maintain a minimum 10% Derivative
Ownership Interest in Parent other than by reason of any involuntary
transfer or
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disposition or by reason of Lear's death, disability, incapacity,
bankruptcy or by operation of law;
(iii) Act III Theatres, L.P., shall have assigned,
transferred or otherwise disposed of in excess of 50% of the
Common Stock owned by it immediately following February 14, 1990,
other than to Permitted Transferees;
(iv) any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) other than Lear, any
Affiliate of Lear, any executor, heir or successor appointed to take
control of Lear's affairs in the event of his death, disability,
incapacity, bankruptcy, or by operation of law, any Subsidiary or any
employee benefit plan of Borrower is or becomes the direct or indirect
beneficial owner of 50% or more of Borrower's Voting Stock;
(v) Borrower sells, transfers or otherwise disposes of
all or substantially all of the assets of Borrower; or
(vi) the Continuing Directors cease for any reason to
constitute a majority of the directors of Borrower then in office.
For the purposes of this Section 9.1(j), ownership interests held by Permitted
Transferees of Lear, whether directly or through a Derivative Ownership
Interest, shall be deemed to be ownership interests held by Lear.
(k) With respect to any Plan: (i) Borrower, or any of its
Subsidiaries or any other party-in-interest or disqualified person shall engage
in any transactions which in the aggregate would reasonably result in a direct
or indirect liability to Borrower, or any of its Subsidiaries or any ERISA
Affiliate in excess of $500,000 under Section 409 or 502 of ERISA or IRC Section
4975; (ii) Borrower, or any of its Subsidiaries or any ERISA Affiliate shall
incur any accumulated funding deficiency, as defined in IRC Section 412, in the
aggregate in excess of $500,000, or request a funding waiver from the IRS for
contributions in the aggregate in excess of $500,000; (iii) Borrower, or any of
its Subsidiaries or any ERISA Affiliate shall incur any withdrawal liability in
the aggregate in excess of $500,000 as a result of a complete or partial
withdrawal within the meaning of Section 4203 or 4205 of ERISA; (iv) Borrower,
or any of its Subsidiaries or any ERISA Affiliate shall fail to make a required
contribution by the due date under Section 412 of the IRC or Section 302 of
ERISA which would result in the imposition of a lien under such Sections; (v)
Borrower, or any of its Subsidiaries or any ERISA Affiliate shall notify the
PBGC of an intent to terminate, or the PBGC shall institute proceedings to
terminate, a Plan; (vi) a Reportable Event shall occur with respect to a Plan,
and within 15 days after the reporting of such Reportable Event to any Lender,
such Lender shall have notified Borrower in writing that (A) it has made a
determination that, on the basis of such Reportable Event, there are reasonable
grounds for the termination of such Plan by the PBGC or for the appointment by
the appropriate United States District Court of a trustee to administer such
Plan and (B) as a result thereof a Default or an Event of Default shall occur
hereunder; (vii) a trustee shall be appointed by a court
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of competent jurisdiction to administer any Plan or the assets thereof; (viii)
the benefits of any Plan shall be increased, or Borrower, or any of its
Subsidiaries or any ERISA Affiliate shall begin to maintain, or begin to
contribute to, any Plan, without the prior written consent of Lender; or (ix)
any ERISA Event with respect to a Plan shall have occurred, and 30 days
thereafter (A) such ERISA Event, other than such event described in clause (e)
of the definition of ERISA Event herein (if correctable) shall not have been
corrected and (B) the then present value of such Plan's vested benefits shall
exceed the then current value of assets accumulated in such Plan; PROVIDED,
HOWEVER, that the events listed in subsections (iv)-(ix) shall constitute Events
of Default only if, as of the date thereof or any subsequent date, the maximum
amount of liability Borrower, any of its Subsidiaries or any ERISA Affiliate
could incur in the aggregate under Section 4062, 4063, 4064, 4219 or 4243 of
ERISA or any other provision of law with respect to all such Plans, computed by
the actuary of the Plan taking into account any applicable rules and regulations
of the PBGC at such time, and based on the actuarial assumptions used by the
Plan, resulting from or otherwise associated with such event exceeds $500,000.
(l) Any material provision of any Collateral Document, after delivery
thereof pursuant to Section 3.1 and/or 3.2 shall for any reason cease to be
valid or enforceable in accordance with its terms, or any security interest
created under any Collateral Document shall cease to be a valid and perfected
first priority security interest or Lien (subject to Permitted Encumbrances) in
any of the Collateral purported to be covered thereby.
2. REMEDIES. If any Event of Default specified in Section 9.1 shall
have occurred and be continuing, (i) GE Capital may, without notice, terminate
this facility with respect to further Revolving Credit Advances, whereupon no
Revolving Credit Advances may be made hereunder, and/or (ii) Agent shall at the
request, or may with the consent, of the Required Lenders, without notice,
declare all Obligations to be forthwith due and payable, whereupon all such
Obligations shall become and be due and payable, without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default
specified in Section 9.1(f), (g) or (h) hereof, such obligations shall become
due and payable without declaration, notice or demand by Agent or any Lender.
Agent shall take such action with respect to any Default or Event of
Default specified in Section 9.1 as shall be directed by the Required Lenders;
PROVIDED, THAT, unless and until Agent shall have received such directions,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of Agent and Lenders, taken as a whole,
including any action (or the failure to act) pursuant to the Loan Documents.
3. WAIVERS BY BORROWER. Except as otherwise provided for in this
Agreement or by applicable law, Borrower waives (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and guaranties
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at any time held by Agent or any Lender on which Borrower may in any way be
liable and hereby ratifies and confirms whatever Agent or any Lender may do in
this regard, (ii) all rights to notice and a hearing prior to Agent's or any
Lender's taking possession or control of, or to Agent's or any Lender's replevy,
attachment or levy upon, the Collateral or any bond or security which might be
required by any court prior to allowing Agent or any Lender to exercise any of
its remedies, and (iii) the benefit of all valuation, appraisal and exemption
laws. Borrower acknowledges that it has been advised by counsel of its choice
with respect to this Agreement, the other Loan Documents and the transactions
evidenced by this Agreement and the other Loan Documents.
4. RIGHT OF SET-OFF. Upon the occurrence and during the continuance
of any Event of Default and, except in the case of an event referred to in
Section 9.1(f), (g) or (h), the making of the request or the granting of the
consent specified by Section 9.2 to authorize Agent to declare the Notes due and
payable pursuant to the provisions of Section 9.2, 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 Borrower
against any and all of the obligations of Borrower now or hereafter existing
under this Agreement, and the Notes held by such Lender irrespective of whether
or not such Lender shall have made any demand under this Agreement or any such
Note and although such obligations may be unmatured. Each Lender agrees
promptly to notify Borrower after any such set-off and application made by such
Lender; PROVIDED, HOWEVER, that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of each Lender under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
10. THE AGENT
1. AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes Agent to take such action on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to Agent by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Notes), Agent shall not be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Required Lenders, and such instructions
shall be binding upon all Lenders; PROVIDED, HOWEVER, that Agent shall not be
required to take any action which exposes Agent to personal liability or which
is contrary to this Agreement or the other Loan Documents or applicable law.
Agent agrees to give each Lender prompt notice of each notice given to it by
Borrower pursuant to the terms of this Agreement and the other Loan Documents.
2. AGENT'S RELIANCE, ETC. Neither Agent nor any of its directors,
officers, agents or employees shall be liable to any Lender for any action taken
or omitted to be taken by it or them under or in connection with this Agreement
or the other Loan Documents, except for its or
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their own gross negligence or wilful misconduct. Without limitation of the
generality of the foregoing, Agent: (i) may treat the payee of any Note as the
holder thereof until Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to Agent; (ii) may consult
with legal counsel (including counsel for any Loan Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representations to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (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 the other Loan Documents 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 the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; and (vi) shall incur no liability under or
in respect of this Agreement or the other Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
3. GE CAPITAL AND AFFILIATES. With respect to its commitment
hereunder to make Revolving Credit Advances made by it, GE Capital shall have
the same rights and powers under this Agreement and the other Loan Documents as
any other Lender and may exercise the same as though it were not Agent; and the
term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include
GE Capital in its individual capacity. GE Capital and its affiliates may lend
money to, and generally engage in any kind of business with, any Loan Party, any
of its Subsidiaries and any Person who may do business with or own securities of
any Loan Party or any such Subsidiary, all as if GE Capital were not Agent and
without any duty to account therefor to Lenders.
4. LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to in Section 4.6 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 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.
5. INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrower), ratably according to the respective principal
amounts of the Notes then held by each of them, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted by Agent under this Agreement; PROVIDED, HOWEVER, that no Lender shall
be liable for any portion
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of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence or wilful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse Agent promptly upon demand for its ratable share of
any out-of-pocket expenses (including counsel fees) incurred by 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 each other Loan Document, to the
extent that Agent is not reimbursed for such expenses by Borrower.
6. SUCCESSOR AGENT. Agent may resign at any time by giving written
notice thereof to Lenders and Borrower. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Required Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent's giving
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be a commercial bank organized under the
laws of the United States of America or of any state thereof and having a
combined capital and surplus of at least $200,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it, while it was Agent under this Agreement and the
other Loan Documents.
11. MISCELLANEOUS
1. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT; SALE OF INTEREST.
(a) The Loan Documents constitute the complete agreement between the parties
with respect to the subject matter hereof and may not be modified, altered or
amended, except by an agreement in writing signed by Borrower, Agent and Lenders
as required by Section 11.1(d) below. Borrower may not sell, assign or transfer
any of the Loan Documents or any portion thereof, including, without limitation,
Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to Agent's and any Lender's sale of
participations, assignment, transfer or other disposition, at any time or times,
of any of the Loan Documents or of any portion thereof or interest therein,
including, without limitation, Agent's and any Lender's rights, title,
interests, remedies, powers or duties thereunder, whether evidenced by a writing
or not. Borrower agrees that it will use its best efforts to assist and
cooperate with Agent in any manner reasonably requested by Agent to effect the
sale of participations in or assignments of any of the Loan Documents or of any
portion thereof or interest therein, including, without limitation, assistance
in the preparation of appropriate disclosure documents or placement memoranda.
(a) In the event Agent or any Lender assigns or otherwise transfers
all or any part of the Revolving Credit Note, Borrower shall, upon the request
of Agent or such Lender issue new Revolving Credit Notes to effectuate such
assignment or transfer.
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(b) Each Lender may sell, assign, transfer or negotiate to one or more
other Lenders, commercial banks, insurance companies, other financial
institutions or any other Person acceptable to Agent all or a portion of its
rights and obligations under any Note held by such Lender and this Agreement;
PROVIDED, HOWEVER, that (i) each such sale, assignment, transfer or negotiation
shall be of a constant, and not a varying, percentage of all of the assigning
Lender's rights and obligations under such Note and this Agreement, (ii) any
such sale, assignment, transfer or negotiation shall not require Borrower to
file a registration statement with the Securities and Exchange Commission or
apply to qualify the Notes under the blue sky law of any state, (iii) any such
sale, assignment or transfer shall be in an aggregate principal amount of not
less than $5,000,000 and any assigning Lender shall have retained a Commitment
in a minimum amount equal to $5,000,000 unless such assignment represents 100%
of the assigning Lender's Commitment, (iv) acceptance of such assignment by any
assignees shall constitute the agreement of such assignee to be bound by the
terms of this Agreement applicable to Lender, and (v) the assigning Lender pays
to the Agent an assignment fee of $3,500. From and after the effective date of
such an assignment, (x) the assignees thereunder shall, in addition to the
rights and obligations hereunder held by it immediately prior to such effective
date, have the rights and obligations hereunder that have been assigned to it
pursuant to such assignment and (y) the assignor Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such assignment, relinquish its rights and be released from its obligations
under the 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).
(c) No amendment or waiver of any provision of this Agreement or the
Notes or any other Loan Document, nor consent to any departure by Borrower
therefrom, nor release of any Collateral or Guaranty, shall in any event be
effective unless the same shall be in writing and signed by the Required
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; PROVIDED, HOWEVER, that
no amendment, waiver or consent shall, unless in writing and signed by each
Lender affected thereby do any of the following: (i) increase the Maximum
Revolving Credit Loan, (ii) reduce the principal of, or interest on, the Notes
or other amounts payable hereunder or release or discharge the Borrower from its
obligations to make such payments, other than those payable only to Agent which
may be reduced by Agent unilaterally, (iii) postpone any date fixed for any
payment of principal of, or interest on, the Notes or other amounts payable
hereunder, other than those payable only to Agent which may be postponed by
Agent unilaterally, (iv) change the aggregate unpaid principal amount of the
Notes, or the number of Lenders, which shall be required for the Lenders or any
of them to take any action hereunder, or (v) amend this Section 11.1; and
PROVIDED, FURTHER, HOWEVER, that no amendment, waiver or consent shall unless in
writing and signed by the Agent in addition to the Required Lenders required
above to take such action, affect the rights or duties of the Agent under this
Agreement, any Note or any Loan Document.
2. FEES AND EXPENSES. Borrower shall pay all reasonable out-of-pocket
expenses of Agent in connection with the preparation of the Loan Documents
(including the reasonable fees
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and expenses of all of its counsel retained in connection with the Loan
Documents and the transactions contemplated thereby). If, at any time or times,
regardless of the existence of an Event of Default (except with respect to
paragraphs (iii) and (iv) below, which shall be subject to an Event of Default
having occurred and be continuing), Agent (or in the case of paragraphs (iii)
and (iv) below, Agent or any Lender) shall employ counsel for advice or other
representation or shall incur reasonable legal or other costs and expenses in
connection with:
(i) any amendment, modification or waiver, or consent with
respect to, any of the Loan Documents or advice in connection with the
administration of the loans made pursuant hereto or its rights
hereunder or thereunder;
(ii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent or any Lender, Borrower, any
Subsidiary of Borrower or any other Person) in any way relating to the
Collateral, any of the Loan Documents or any other agreements to be
executed or delivered in connection herewith;
(iii) any attempt to enforce any rights of Agent or any
Lender against Borrower, any Subsidiary of Borrower or any other
Person, that may be obligated to any Lender by virtue of any of
the Loan Documents or, with respect to Agent only, determining
what actions, if any, to take upon the occurrence of an Event of
Default;
(iv) any attempt to verify, protect, collect, sell, liquidate
or otherwise dispose of the Collateral;
then, and in any such event, the reasonable attorneys' fees and other third
party fees arising from such services, including those of any appellate
proceedings, and all reasonable expenses, costs, charges and other fees incurred
by such counsel and third parties in any way or respect arising in connection
with or relating to any of the events or actions described in this Section shall
be payable, on demand, by Borrower to Agent or such Lender and shall be
additional Obligations secured under this Agreement and the other Loan
Documents. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include: paralegal fees, costs and expenses;
accountants' and investment bankers' fees, costs and expenses which fees, costs
and expenses shall be payable upon an Event of Default having occurred and
continuing when incurred (to the extent such accountants' and investment
bankers' fees, costs and expenses shall have been incurred); court costs and
expenses; photocopying and duplicating expenses; court reporter fees, costs and
expenses; long distance telephone charges; air express charges; telegram
charges; secretarial overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such services.
3. NO WAIVER BY AGENT OR ANY LENDER. Agent's or any Lender's failure,
at any time or times, to require strict performance by any Loan Party of any
provision of this Agreement and any of the other Loan Documents shall not waive,
affect or diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by Agent or
Lenders of an Event of Default by any Loan Party under the Loan
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<PAGE>
Documents shall not suspend, waive or affect any other Event of Default by any
Loan Party under this Agreement and any of the other Loan Documents, whether the
same is prior or subsequent thereto and whether of the same or of a different
type. None of the undertakings, agreements, warranties, covenants and
representations of any Loan Party contained in this Agreement or any of the
other Loan Documents and no Event of Default by Borrower under this Agreement
and no defaults by any Loan Party under any of the other Loan Documents shall be
deemed to have been suspended or waived by Agent or Lenders, unless such
suspension or waiver is by an instrument in writing signed by an officer of
Agent and Required Lenders (as such term is defined in the applicable provision
hereof) and directed to such Loan Party specifying such suspension or waiver.
4. REMEDIES. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and non- exclusive of any other rights and
remedies which Agent and Lenders may have under any other agreement, including
without limitation, the Loan Documents, by operation of law or otherwise.
Recourse to the Collateral shall not be required.
5. WAIVER OF JURY TRIAL. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under the
Loan Documents.
6 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
7. PARTIES. This Agreement and the other Loan Documents shall be
binding upon, and inure to the benefit of, the successors of Borrower, Agent and
Lenders and the assigns, transferees and endorsees of Agent and Lenders.
8. CONFLICT OF TERMS. Except as otherwise provided in this Agreement
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
9. AUTHORIZED SIGNATURE. Until Agent shall be notified by Borrower to
the contrary, the signature upon any document or instrument delivered pursuant
hereto of an officer of Borrower listed in Schedule 11.9 hereto shall bind
Borrower and be deemed to be the act of Borrower affixed pursuant to and in
accordance with resolutions duly adopted by Borrower's Board of Directors.
10. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS
69
<PAGE>
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE
PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. AGENT, EACH LENDER AND BORROWER EACH HEREBY
IRREVOCABLY AGREE THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT ARISING OUT OF
OR RELATING TO ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE SUPREME COURT OF
THE STATE OF NEW YORK, COUNTY OF NEW YORK, STATE OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. BORROWER, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY CONSENTS TO
THE PERSONAL JURISDICTION OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING.
BORROWER EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT BASED ON ANY ALLEGED LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS.
SERVICE OF SUMMONS, NOTICE OR OTHER PROCESS ON BORROWER, AGENT OR ANY LENDER IN
ANY ACTION ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS SHALL BE
EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS LISTED IN SECTION 11.11 HEREOF
OR DELIVERED TO ANY SUCH PARTY BY HAND. NOTHING HEREIN SHALL PRECLUDE AGENT,
ANY LENDER OR BORROWER FROM BRINGING SUIT OR SERVING PROCESS OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION.
11. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give or serve upon
another any communication with respect to this Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and either shall be delivered in person or by registered or certified
mail, return receipt requested, postage prepaid, by telecopy or by overnight air
courier guaranteeing next day delivery, directed to the party to receive the
same at its address stated below:
(a) If to Agent at:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Commercial Finance -
Act III Account Manager
Telephone No.: (203) 316-7583
Telecopy No.: (203) 316-7894
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With copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Commercial Finance -
Legal Counsel
Telephone No.: (203) 316-7630
Telecopy No.: (203) 316-7889
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telephone No.: (212) 310-8000
Telecopy No.: (212) 310-8007
(b) If to Borrower at:
Act III Theatres, Inc.
919 S.W. Taylor Street, Suite 900
Portland, Oregon 97205
Attention.: Walt S. Aman
Telephone No.: (503) 221-0213
Telecopy No.: (503) 228-5032
With a copy to:
Schwabe Williamson & Wyatt P.C.
Pacwest Center, Suites 1600-1800
Portland, Oregon 97204-3795
Attention: Mark A. Manulik
Telephone No.: (503) 796-2990
Telecopy No: (503) 796-2900
(c) If to any Lender, at its address indicated on the signature
pages hereof
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication
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hereunder shall be deemed to have been duly given or served on the date on which
personally delivered, on the date actually received, if sent by telecopy or
overnight courier service, with receipt acknowledged or three (3) Business Days
after the same shall have been deposited in the United States mail. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
12. SURVIVAL. The representations and warranties of Borrower in this
Agreement shall survive the execution, delivery and acceptance hereof by the
parties hereto and the closing of the transactions described herein or related
hereto.
13. SECTION TITLES. The Section titles and Table of Contents contained
in this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not part of the agreement between the parties hereto.
14. COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered in New York, New York as of the date first above written.
ACT III THEATRES, INC.
By: /s/ W.S. Aman
------------------------
Name: W.S. Aman
Title: President
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
By: /s/ Michael McGonigle
------------------------
Name: Michael McGonigle
Title: Duly Authorized
Commitment Lenders:
- ---------- -------
$155,000,000.00 GENERAL ELECTRIC CAPITAL CORPORATION
201 High Ridge Road
Stamford, CT 06927
Attention: Commercial Finance -
Act III Account Manager
Telecopy No.: (203) 316-7894
By: /s/ Michael McGonigle
------------------------
Name: Michael McGonigle
Title: Duly Authorized
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<PAGE>
U.S. $155,000,000
AMENDED AND RESTATED LOAN AGREEMENT
Dated as of September 10, 1996,
between
ACT III THEATRES, INC.
as Borrower
and
THE LENDERS NAMED HEREIN
as Lenders
and
GENERAL ELECTRIC CAPITAL CORPORATION
as Agent and Lender
<PAGE>
TABLE OF CONTENTS
Section PAGE
- ------- ----
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. AMOUNT AND TERMS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . 23
2.1. Revolving Credit Advances . . . . . . . . . . . . . . 23
2.2. Intentionally Omitted . . . . . . . . . . . . . . . . 25
2.3. Intentionally Omitted . . . . . . . . . . . . . . . . 25
2.4. Mandatory Prepayment. . . . . . . . . . . . . . . . . 26
2.5. Intentionally Omitted.. . . . . . . . . . . . . . . . 26
2.6. Use of Proceeds . . . . . . . . . . . . . . . . . . . 26
2.7. Single Loan . . . . . . . . . . . . . . . . . . . . . 26
2.8. Interest on Revolving Credit Loan . . . . . . . . . . 27
2.9. Intentionally Omitted . . . . . . . . . . . . . . . . 29
2.10. Fees. . . . . . . . . . . . . . . . . . . . . . . . . 29
2.11. Receipt of Payments . . . . . . . . . . . . . . . . . 29
2.12. Application of Payments . . . . . . . . . . . . . . . 29
2.13. Sharing of Payments, Etc. . . . . . . . . . . . . . . 30
2.14. Accounting. . . . . . . . . . . . . . . . . . . . . . 30
2.15. Indemnity . . . . . . . . . . . . . . . . . . . . . . 31
2.16. Access. . . . . . . . . . . . . . . . . . . . . . . . 32
2.17. Capital Adequacy; Increased Costs;
Illegality . . . . . . . . . . . . . . . . . . . . 33
3. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.1. Conditions to Each Subsequent
Revolving Credit Advance . . . . . . . . . . . . . 34
4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 35
4.1. Corporate or Partnership Existence;
Compliance with Law. . . . . . . . . . . . . . . . 35
4.2. Executive Offices . . . . . . . . . . . . . . . . . . 36
4.3. Subsidiaries. . . . . . . . . . . . . . . . . . . . . 36
4.4. Corporate and Partnership Power;
Authorization; Enforceable Obligations . . . . . . 36
4.5. Solvency. . . . . . . . . . . . . . . . . . . . . . . 37
4.6. Financial Statements. . . . . . . . . . . . . . . . . 37
4.7. Projections.. . . . . . . . . . . . . . . . . . . . . 38
4.8. Ownership of Property; Liens. . . . . . . . . . . . . 38
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4.9. No Default. . . . . . . . . . . . . . . . . . . . . . 41
4.10. Labor Matters . . . . . . . . . . . . . . . . . . . . 41
4.11. Other Ventures. . . . . . . . . . . . . . . . . . . . 41
4.12. Investment Company Act. . . . . . . . . . . . . . . . 41
4.13. Margin Regulations. . . . . . . . . . . . . . . . . . 42
4.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 42
4.15. ERISA . . . . . . . . . . . . . . . . . . . . . . . . 43
4.16. No Litigation . . . . . . . . . . . . . . . . . . . . 45
4.17. Brokers . . . . . . . . . . . . . . . . . . . . . . . 45
4.18. Intentionally Omitted . . . . . . . . . . . . . . . . 45
4.19. Outstanding Stock; Options; Warrants;
Etc. . . . . . . . . . . . . . . . . . . . . . . . 45
4.20. Employment and Labor Agreements . . . . . . . . . . . 45
4.21. Patents, Trademarks, Copyrights and
Licenses . . . . . . . . . . . . . . . . . . . . . 46
4.22. Full Disclosure . . . . . . . . . . . . . . . . . . . 46
4.23. Liens . . . . . . . . . . . . . . . . . . . . . . . . 46
4.24. No Material Adverse Effect. . . . . . . . . . . . . . 46
4.25. Environmental Protection. . . . . . . . . . . . . . . 47
4.26. Prior Liens . . . . . . . . . . . . . . . . . . . . . 47
5. FINANCIAL STATEMENTS AND INFORMATION . . . . . . . . . . . . . . . . . 48
5.1. Reports and Notices . . . . . . . . . . . . . . . . . 48
5.2. Communication with Accountants. . . . . . . . . . . . 51
6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 51
6.1. Maintenance of Existence and Conduct
of Business. . . . . . . . . . . . . . . . . . . . 51
6.2. Payment of Obligations. . . . . . . . . . . . . . . . 52
6.3. Financial Covenants . . . . . . . . . . . . . . . . . 53
6.4. Lender's Fees . . . . . . . . . . . . . . . . . . . . 54
6.5. Books and Records . . . . . . . . . . . . . . . . . . 54
6.6. Litigation. . . . . . . . . . . . . . . . . . . . . . 54
6.7. Insurance . . . . . . . . . . . . . . . . . . . . . . 54
6.8. Compliance with Law . . . . . . . . . . . . . . . . . 55
6.9. Agreements. . . . . . . . . . . . . . . . . . . . . . 55
6.10. Supplemental Disclosure . . . . . . . . . . . . . . . 55
6.11. Employee Plans. . . . . . . . . . . . . . . . . . . . 55
6.12. Leases; New Real Estate . . . . . . . . . . . . . . . 57
6.13. Environmental Matters . . . . . . . . . . . . . . . . 59
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6.14. SEC Filings; Certain Other Notices. . . . . . . . . . 60
6.15. Reorganization of Subsidiaries. . . . . . . . . . . . 60
6.16. Surveys . . . . . . . . . . . . . . . . . . . . . . . 61
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.1. Mergers, Etc. . . . . . . . . . . . . . . . . . . . . 61
7.2. Investments; Loans and Advances . . . . . . . . . . . 61
7.3. Indebtedness. . . . . . . . . . . . . . . . . . . . . 62
7.4. Employee Loans. . . . . . . . . . . . . . . . . . . . 63
7.5. Capital Structure . . . . . . . . . . . . . . . . . . 63
7.6. Maintenance of Business . . . . . . . . . . . . . . . 63
7.7. Transactions with Affiliates. . . . . . . . . . . . . 63
7.8. Guaranteed Indebtedness . . . . . . . . . . . . . . . 64
7.9. Liens . . . . . . . . . . . . . . . . . . . . . . . . 64
7.10. Capital Expenditures. . . . . . . . . . . . . . . . . 65
7.11. Sale of Assets. . . . . . . . . . . . . . . . . . . . 65
7.12. Cancellation of Indebtedness. . . . . . . . . . . . . 65
7.13. Events of Default . . . . . . . . . . . . . . . . . . 65
7.14. Hedging Transactions. . . . . . . . . . . . . . . . . 66
7.15. Restricted Payments . . . . . . . . . . . . . . . . . 66
7.16. Restricted Leases and Leases. . . . . . . . . . . . . 67
7.17. ERISA . . . . . . . . . . . . . . . . . . . . . . . . 68
7.18. Payment of Brokers Fees, Etc. . . . . . . . . . . . . 69
7.19. Corporate Overhead. . . . . . . . . . . . . . . . . . 69
7.20. Intentionally Omitted . . . . . . . . . . . . . . . . 69
7.21. Payment or Modification of Note
Documents. . . . . . . . . . . . . . . . . . . . . 69
7.22. Modification of Compensation Plan . . . . . . . . . . 70
8. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.1. Termination . . . . . . . . . . . . . . . . . . . . . 70
8.2. Survival of Obligations Upon
Termination of Financing Arrangement . . . . . . . 70
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . 71
9.1. Events of Default . . . . . . . . . . . . . . . . . . 71
9.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . 75
9.3. Waivers by Borrower . . . . . . . . . . . . . . . . . 75
9.4. Right of Set-Off. . . . . . . . . . . . . . . . . . . 76
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10. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.1. Authorization and Action . . . . . . . . . . . . . . 76
10.2. Agent's Reliance, Etc. . . . . . . . . . . . . . . . 77
10.3. GE Capital and Affiliates. . . . . . . . . . . . . . 77
10.4. Lender Credit Decision . . . . . . . . . . . . . . . 77
10.5. Indemnification. . . . . . . . . . . . . . . . . . . 78
10.6. Successor Agent. . . . . . . . . . . . . . . . . . . 78
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
11.1. Complete Agreement; Modification of
Agreement; Sale of Interest . . . . . . . . . . . 79
11.2. Fees and Expenses. . . . . . . . . . . . . . . . . . 80
11.3. No Waiver by Agent or Any Lender . . . . . . . . . . 80
11.4. Remedies . . . . . . . . . . . . . . . . . . . . . . 80
11.5. Waiver of Jury Trial . . . . . . . . . . . . . . . . 80
11.6. Severability . . . . . . . . . . . . . . . . . . . . 80
11.7. Parties. . . . . . . . . . . . . . . . . . . . . . . 80
11.8. Conflict of Terms. . . . . . . . . . . . . . . . . . 80
11.9. Authorized Signature . . . . . . . . . . . . . . . . 83
11.10. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . 83
11.11. Notices. . . . . . . . . . . . . . . . . . . . . . . 83
11.12. Survival . . . . . . . . . . . . . . . . . . . . . . 85
11.13. Section Titles . . . . . . . . . . . . . . . . . . . 85
11.14. Counterparts . . . . . . . . . . . . . . . . . . . . 85
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
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INDEX OF EXHIBITS AND SCHEDULES
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Revolving Credit Advance Exhibit C
- Form of Leasehold Mortgage
Exhibit D - Form of Mortgage
Schedule 1.1 - LIBOR Lending Offices
Schedule 1.2 - Permitted Encumbrances
Schedule 2.1 - Permitted Depository Banks
Schedule 4.1 - Compliance With Law
Schedule 4.2 - Executive Offices
Schedule 4.3 - Subsidiaries
Schedule 4.4 - Required Consents
Schedule 4.6(d) - Dividends and Distributions
Schedule 4.8(a) - Owned Real Estate
Schedule 4.8(b) - Leases
Schedule 4.8(c) - Real Property Options, Rights, etc.
Schedule 4.8(d) - Improvements
Schedule 4.8(e) - Real Estate Permits
Schedule 4.8(f) - Condemnation Proceedings
Schedule 4.11 - Other Ventures
Schedule 4.14 - Tax Matters
Schedule 4.15 - ERISA Matters
Schedule 4.16 - Litigation
Schedule 4.17 - Brokers and Brokerage Fees
Schedule 4.19 - Outstanding Stock; Options, Warrants;
etc.
Schedule 4.20 - Employment and Labor Agreements
Schedule 4.21 - Patents and Trademarks
Schedule 4.24 - Events Subsequent to December 31, 1988
Schedule 4.25 - Environmental Matters
Schedule 4.26 - Prior Liens
Schedule 6.7 - Insurance
Schedule 6.7B - Insurance Requirements
Schedule 6.12 - Mandatory Leasehold Language
Schedule 6.15 - Subsidiaries to be Reorganized
Schedule 7.2 - Permitted Banks and Other Financial
Institutions for Investments
Schedule 7.7 - Management Fee
Schedule 7.16 - Assignable Leases
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Schedule 11.9 - Authorized Signatures
iv
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AMENDED AND RESTATED LOAN AGREEMENT, dated as of February , 1997,
among ACT III THEATRES, INC., a Delaware corporation having an office at 919
S.W. Taylor Street, Suite 900, Portland, Oregon 97205 ("Borrower"), the lenders
("Lenders") listed on the signature pages hereof as Lenders and Co-Agents, and
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation having an office at
201 High Ridge Road, Stamford, Connecticut 06927 ("GE Capital"), as agent for
the Lenders hereunder (GE Capital, in such capacity, being "Agent").
W I T N E S S E T H
-------------------
WHEREAS, Borrower has entered into an Amended and Restated Loan
Agreement, dated as of September 10, 1996 (the "Original Loan Agreement") with
GE Capital as agent and sole lender, which amended and restated the Loan
Agreement dated as of May 1, 1989 between them; and
WHEREAS, Borrower and GE Capital, as agent and sole lender under the
Original Loan Agreement, desire to amend and restate such Original Loan
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the parties hereto agree that the Original Loan
Agreement is hereby amended and restated in its entirety to read as follows:
1. DEFINITIONS
In addition to the defined terms appearing above, capitalized terms
used in this Agreement shall have (unless otherwise provided elsewhere in this
Agreement) the following respective meanings when used herein:
"A 3 Ltd." shall mean A 3 Theatres of San Antonio, Ltd., a Texas
limited partnership and an Affiliate of Borrower.
"Accrued and Unpaid Management Fee" shall have the meaning assigned to
it in Section 7.7(c).
"Act III" shall mean Act III Communications, L.P., a Delaware limited
partnership and an Affiliate of Borrower.
"Adverse Environmental Condition" shall mean any of the matters
referred to in clause (i) or (ii) of the definition of Environmental Claim.
<PAGE>
"Affiliate" shall mean with respect to any Person (i) each Person
that, directly or indirectly, owns or Controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 10% or more of the Stock having ordinary
voting power in the election of directors of such Person, (ii) each Person that
Controls, is Controlled by or is under common Control with such Person or any
Affiliate of such Person or (iii) each of such Person's executive officers,
directors, joint venturers and general partners. For the purpose of this
definition GE Capital and its Affiliates shall not be deemed an Affiliate of the
Borrower.
"Agent" shall mean GE Capital, as Agent for Lenders hereunder, and any
successor Agent appointed pursuant to Section 10.6.
"Agreement" shall mean this Loan Agreement, including all amendments,
modifications and supplements hereto and any appendices, exhibits or schedules
to any of the foregoing, and shall refer to this Agreement as the same may be in
effect at the time such reference becomes operative.
"AMC-Austin Leases" shall mean all of the leasehold estates in real
property acquired by Borrower or any of its Subsidiaries in connection with the
Asset Purchase Agreement, dated May 26, 1989, among Borrower, American Multi-
Cinema, Inc. and Durwood, Inc.
"Ancillary Agreements" shall mean any supplemental agreement,
undertaking, instrument, document or other writing executed by Parent, Borrower
or by any of Borrower's Subsidiaries or Stockholders as a condition to advances
or funding under this Agreement or otherwise in connection herewith, including,
without limitation, the Loan Documents and all amendments or supplements
thereto.
"Asset Sale" shall mean any sale or other disposition (including by
merger or consolidation) made after the date hereof by Borrower or any of its
Subsidiaries to any Person (other than Borrower or any of its Subsidiaries) of
(i) all or substantially all of the Stock of any of Borrower's Subsidiaries,
(ii) all or substantially all the assets of Borrower or any of its Subsidiaries
or any division of any of them, or (iii) any other asset of Borrower or any of
its Subsidiaries not made in the ordinary course of business (including, without
limitation, a termination or surrender of any lease prior to its stated
expiration date).
"Available Cash" shall mean, with respect to Borrower for any given
Fiscal Year, an amount equal to Borrower's Consolidated Available Cash Flow with
respect to such Fiscal Year, less the amount of such Consolidated Available Cash
Flow required to be utilized to prepay the Loans pursuant to Section 2.4(a)
hereof.
"Borrower" shall mean Act III Theatres, Inc., a Delaware corporation,
having an office at 919 S.W. Taylor Street, Suite 900, Portland, Oregon 97205.
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"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in either the state
of California or the state of New York.
"Capital Expenditures" shall mean all payments for any fixed assets or
improvements or for replacements, substitutions or additions thereto, that have
a useful life of more than one year and which are required to be capitalized
under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property, other than the Leases, by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as such in a note to such balance sheet, other than, in the case of
Borrower or a Subsidiary of Borrower, any such lease under which Borrower or
such Subsidiary is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) taxes
at the time due and payable, levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Collateral, (ii) Borrower's or any of
its Subsidiaries' employees, payroll, income or gross receipts, (iii) Borrower's
or any of its Subsidiaries' ownership or use of any of its assets, or (iv) any
other aspect of Borrower's or any of the Subsidiaries' business.
"Closing Date" shall mean the date on which the Restated Loan
Agreement becomes effective, as provided in Section 3.1 hereof.
"Code" shall mean the Uniform Commercial Code of the jurisdiction with
respect to which such term is used, as in effect from time to time.
"Collateral" shall mean the Collateral covered by the Security
Agreement and the Trademark Assignment Agreement, the Pledged Collateral covered
by the Pledge Agreement and the properties and interests covered by the
Mortgages and the Leasehold Mortgages.
"Collateral Documents" shall mean the Guaranty, the Security
Agreement, the Pledge Agreement, the Trademark Assignment Agreement, the
Mortgages and the Leasehold Mortgages.
"Commitments" shall mean, the obligation of Lenders to make Revolving
Credit Advances, and the "Commitment" of any Lender shall mean the obligation of
such Lender to
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make Revolving Credit Advances pursuant to Section 2.1 hereof in the aggregate
principal amount outstanding not to exceed the amount set forth opposite such
Lender's name on the signature pages hereof under the caption "Commitment", as
such amount may be reduced or modified pursuant to this Agreement.
"Commitment Termination Date" shall mean the earliest of (i) February
14, 2002 and (ii) the date of termination of the Commitments pursuant to Section
9.2.
"Common Stock" shall mean the common stock, $.001 par value, of
Parent.
"Compensation" shall mean, with respect to any Person, all payments
and accruals commonly considered to be compensation, including, without
limitation, all wages, salary, deferred payment arrangements, bonus payments and
accruals, profit sharing arrangements, payments in respect of stock option or
phantom stock option or similar arrangements, stock appreciation rights or
similar rights, incentive payments, pension or employment benefit contributions
or similar payments, made to or accrued for the account of such Person or
otherwise for the direct or indirect benefit of such Person; PROVIDED, HOWEVER,
that, Compensation shall not include payments and accruals payable by Borrower
to employees of Borrower pursuant to that certain Compensation Plan as in effect
on the Closing Date or as replaced by that certain Compensation Plan
substantially in the form provided to Agent prior to the Closing Date.
"Compensation Plan" shall mean the Management Incentive Compensation
Plan of Borrower, a copy of which has been delivered to Agent and the Lenders.
"Consolidated Available Cash Flow" shall mean, with respect to any
Person for any period, Consolidated Cash Flow MINUS payments made in respect of
Capital Expenditures permitted hereunder except any such payments made out of
Net Cash Proceeds to the extent permitted by Section 2.4(b), cash interest,
scheduled principal payments on the Notes, principal payments permitted
hereunder on other Indebtedness (other than, with respect to Borrower, the
Revolving Credit Loan to the extent that such payments do not result in a
reduction in availability thereunder), payments made with respect to the
management fee payable to Act III to the extent permitted to be paid by Section
7.7(c) hereof, payment of taxes, amounts used to repurchase Senior Subordinated
Notes to the extent permitted by Section 7.21(a) hereof, and amounts used to
declare and pay cash dividends to the extent permitted by Section 7.15(D)
hereof.
"Consolidated Cash Flow" shall mean, with respect to any Person for
any period, the consolidated operating income (before extraordinary items
(including any Net Cash Proceeds), interest, taxes, depreciation and
amortization) of such Person and its consolidated Subsidiaries determined in
accordance with GAAP and in a manner consistent with the projections referred to
in Section 4.7 hereof.
"Consolidated Cash Flow to Consolidated Fixed Charges Ratio" shall
mean, at any date of calculation thereof, the ratio of (a) Consolidated Cash
Flow of Borrower for the
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immediately preceding four consecutive fiscal quarters to (b) Consolidated Fixed
Charges of Borrower for such period.
"Consolidated Fixed Charges" shall mean, with respect to any Person
for any period, the sum of (i) Consolidated Interest Charges of such Person and
its consolidated Subsidiaries during such period plus (ii) principal amounts of
all Indebtedness (including Capital Lease Obligations) of such Person and its
consolidated Subsidiaries payable during such period resulting from borrowings
or the granting of credit (other than normal trade credit) plus (iii) the amount
of any reduction of the Revolving Credit Loans during such period as provided in
Section 2.1(c).
"Consolidated Interest Charges" shall mean, with respect to any Person
for any period, the amount which, in conformity with GAAP, would be set forth
opposite the caption "interest expense" (or any like caption) on a consolidated
income statement of such Person and all other Persons with which such Person's
financial statements are to be consolidated in accordance with GAAP for the
relevant period ended on such date (including interest payable with respect to
any Capitalized Lease Obligation).
"Consolidated Interest Coverage Ratio" shall mean, at any date of
calculation thereof, the ratio of (a) Consolidated Cash Flow of Borrower for the
immediately preceding four consecutive fiscal quarters to (b) Consolidated
Interest Charges of Borrower for such period.
"Consolidated Senior Debt" shall mean Consolidated Total Funded Debt
other than the Senior Subordinated Notes.
"Consolidated Senior Debt to Consolidated Cash Flow Ratio" shall mean,
at any date of calculation thereof, the ratio of (a) Consolidated Senior Debt of
Borrower to (b) Consolidated Cash Flow of Borrower for the immediately preceding
four consecutive fiscal quarters.
"Consolidated Theatre Cash Flow" shall mean, with respect to Borrower
and its consolidated Subsidiaries for any period, the sum of Consolidated Cash
Flow of Borrower and its consolidated Subsidiaries for such period plus
Corporate Overhead of Borrower and its consolidated Subsidiaries for such
period.
"Consolidated Total Funded Debt" shall mean, with respect to any
Person at any date of determination, the total of all Funded Debt (including
Capital Lease Obligations) of such Person and its consolidated Subsidiaries
outstanding on such date determined in accordance with GAAP, after eliminating
all intercompany transactions.
"Consolidated Total Funded Debt to Consolidated Cash Flow Ratio" shall
mean, at any date of calculation thereof, the ratio of (a) Consolidated Total
Funded Debt of Borrower to (b) Consolidated Cash Flow of Borrower for the
immediately preceding four consecutive fiscal
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quarters; PROVIDED, HOWEVER, that solely for the purposes of this calculation,
in the event that Borrower acquires any Theatre, Consolidated Cash Flow of
Borrower shall include the operating income (before extraordinary items,
interest, taxes, depreciation and amortization) of such acquired Theatre for the
immediately preceding four consecutive fiscal quarters.
"Contaminant" shall mean those substances which are regulated by or
form the basis of liability under any Environmental Laws including, without
limitation, asbestos, polychlorinated biphenyls ("PCBs"), and radioactive
substances, or any other material or substance which constitutes a health,
safety or environmental hazard to any person or property.
"Continuing Directors" shall mean any member of the Board of Directors
of Borrower who (i) is a member of that Board of Directors on the date hereof or
(ii) was nominated for election or elected to the Board of Directors with the
affirmative vote of a majority of the Continuing Directors who were members of
the Board at the time of such nomination or election.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise and "Controlled by" shall have the concomitant meaning; PROVIDED,
HOWEVER, that a Person shall not be deemed to lack or to have failed to maintain
Control of another Person by reason of the existence of rights of approval or
veto rights held by any third party, including, without limitation, any
stockholder, director, partner, lender or landlord.
"Corporate Overhead" shall mean, for any period, all customary and
routine overhead costs, expenses and liabilities of Borrower or any of its
Subsidiaries, including, without limitation, all accounting and legal fees,
telephone expenses, rent or other office overhead payable by Borrower or such
Subsidiary, and all Compensation payable by Borrower or such Subsidiary, to the
employees, officers or directors of Borrower or such Subsidiary, all of which
are incurred in connection with the conduct of the business of Borrower or such
Subsidiary; PROVIDED, HOWEVER, that Corporate Overhead shall not include any of
the foregoing costs, expenses or liabilities incurred by Borrower or any of its
Subsidiaries in connection with the day to day operations of any Theatre or
management fees paid by Borrower pursuant to Section 7.7(c).
"Debt" shall mean all principal of and premium, if any, and interest
on, and all other amounts of any nature whatsoever owing in respect of the
Revolving Credit Loan hereunder.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"Derivative Ownership Interest" shall mean an ownership interest held
either directly or indirectly and determined by reference to the diluted
percentage interest that is derived through intermediate Persons. For instance,
an 80% interest in a Person that, in turn, owns 80%
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of an underlying entity, would be computed as a 64% Derivative Ownership
Interest in the underlying entity.
"Disclosure Documents" means, collectively, the Registration Statement
on Form S-1 filed by Borrower with the Securities and Exchange Commission, as
amended from time to time through the date hereof, including, without
limitation, the Prospectus dated January 26, 1993 constituting a part thereof.
"DOL" shall mean the United States Department of Labor.
"Eastgate" shall mean Eastgate Theatre, Inc., an Oregon corporation.
"Environmental Claim" shall mean any accusation, allegation, notice of
violation, claim, demand, abatement or other order or direction (conditional or
otherwise) by any governmental authority or any Person for personal injury
(including sickness, disease or death), tangible or intangible property damage,
damage to the environment, nuisance, pollution, contamination or other adverse
effects on the environment, or for fines, penalties, interest, costs and
expenses, or restrictions, resulting from or based upon (i) the existence, or
the continuation of the existence, of a Release (including, without limitation,
sudden or non-sudden, accidental or non-accidental Releases), of, or exposure
to, any Contaminant in, into or onto the environment (including, without
limitation, the air, ground, water or any surface) at, in, by, from, or related
to the Facilities, (ii) the transportation, storage, treatment or disposal of
Contaminants in connection with the operation of the Facilities or any other
tangible assets of the Borrower or any of its subsidiaries, or (iii) the
violation, or alleged violation, of any statutes, ordinances, orders, rules,
regulations, permits or licenses of or from any governmental authority, agency
or court relating to environmental matters connected with the Facilities.
"Environmental Laws" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.),
the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C.
Section 5101 ET SEQ.), the Federal Water Pollution Control Act
(33 U.S.C.Section 1251 ET SEQ.), the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401
ET SEQ.), the Toxic Substances Control Act, as amended (15 U.S.C.
Section 2601 ET SEQ.), the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. Section 136 ET SEQ.), and the Occupational Safety and Health Act
(29 U.S.C. Section 651 ET SEQ.), as these laws have been amended or
supplemented and any analogous state or local statutes and the regulations
promulgated pursuant thereto.
"ERISA" shall mean the Employee Retirement Income security Act of
1974, as amended from time to time, and any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to Borrower or any of its
subsidiaries, all trades or businesses (whether or not incorporated) which are
under common control with
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Borrower or any of its Subsidiaries and which, together with Borrower or any of
its Subsidiaries, are treated as a single employer under Section 414(b), (c),
(m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to Borrower, any of its
Subsidiaries or any ERISA Affiliate, (a) a Reportable Event (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under regulations issued under Section 4043 of ERISA), (b) the withdrawal of
Borrower, any of its Subsidiaries or any ERISA Affiliate from a Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or
the treatment of a Plan amendment as a termination under Section 4041(c) of
ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC under
Section 4042 of ERISA, (e) the failure to make required contributions which
would result in the imposition of a lien under Section 412 of the IRC or Section
302 of ERISA, or (f) any other event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan or to cause the
imposition of any liability under Title IV of ERISA.
"Eurodollar Business Day" shall mean a Business Day on which banks in
the City of London are required or permitted to be open for interbank or foreign
exchange transactions.
"Event of Default" shall have the meaning assigned to it in Section
9.1 hereof.
"Exhibition Contract" shall mean any contract or other agreement,
whether or not written, with a motion picture distributor for the exhibition of
a motion picture.
"Facilities" shall mean any and all real property owned or leased or
used by Borrower or any of its Subsidiaries.
"Federal Funds Rate" shall mean, for any day, a floating rate equal to
the weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Agent.
"Federal Reserve Board" shall have the meaning assigned to it in
Section 4.13 hereof.
"Fiscal Year" shall mean the calendar year. Subsequent changes of the
fiscal year of Borrower shall not change the term "Fiscal Year," unless the
Required Lenders shall consent in writing to such changes.
"Funded Debt" shall mean, with respect to any Person, all Indebtedness
of such Person which by the terms of the agreement governing or instrument
evidencing such Indebtedness matures more than one year from, or is directly or
indirectly renewable or extendible at the option of the debtor under a revolving
credit or similar agreement obligating the lender or lenders to extend credit
over a period of more than one year from, the date of creation thereof,
including
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current maturities of long-term debt, revolving credit, and short-term debt
extendible beyond one year at the option of the debtor and, in respect of
Borrower, including the Revolving Credit Loan.
"Funding Arrangements" shall have the meaning assigned to it in
Section 2.15(b) hereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"GE Capital" shall mean General Electric Capital Corporation, a New
York corporation, having an office at 201 High Ridge Road, Stamford, Connecticut
06927.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligations") of any other Person (the "primary obligor")
in any manner including, without limitation, any obligation or arrangement of
such Person (a) to purchase or repurchase any such primary obligation, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation, or (d) to indemnify the owner of such primary obligation against
loss in respect thereof.
"Guarantor" shall mean Parent and each Subsidiary of Borrower, each of
which is executing and delivering to Agent the Guaranty.
"Guaranty" shall mean the Guaranty made in favor of Agent, as agent
for itself and the other Lenders, by each Guarantor, dated as of May 1, 1989,
including all amendments, modifications and supplements thereto, and shall refer
to the Guaranty as the same may be in effect at the time such reference becomes
operative.
"Improvements" shall have the meaning assigned to such term in Section
4.8(d) hereof.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (including, without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers' acceptances,
whether or not matured, but not including obligations to trade creditors
incurred in the ordinary course of business), (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments, (iii) all indebtedness created
or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
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are limited to repossession or sale of such property), (iv) all Guaranteed
Indebtedness, (v) all Indebtedness referred to in clause (i), (ii), (iii) or
(iv) above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (vi) the Obligations, and (vii) all liabilities
under Title IV of ERISA.
"Indenture" means the Indenture, dated as of February 2, 1993, between
Borrower and The First National Bank of Boston, as Trustee, pursuant to which
the Senior Subordinated Notes are to be issued, as the same may be hereafter
amended, supplemented or modified from time to time to the extent permitted by
the Loan Agreement.
"Index Rate" shall mean, for any day, a floating rate equal to the
higher of (i) the highest prime or base rate of interest publicly announced on
any given Business Day by any of Citibank, N.A., Morgan Guaranty Trust Company
of New York and The Chase Manhattan Bank (whether or not such rate is actually
charged by any such bank) and (ii) the Federal Funds Rate plus fifty (50) basis
points per annum. Each change in any interest rate provided for in the
Agreement based upon the Index Rate shall take effect at the time of such change
in the Index Rate.
"Index Rate Loan" shall mean any Loan that bears interest at the Index
Rate.
"Interest Payment Date" shall have the meaning assigned to such term
in Section 2.8(a) hereof.
"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance, and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service.
"Lear" shall mean Norman Lear.
"Leases" shall mean all of those leases of real property now owned or
hereafter acquired by Borrower or any Subsidiary of Borrower, as lessee.
"Leasehold Mortgage" shall mean the leasehold mortgages, leasehold
deeds of trust or other similar leasehold security agreements substantially in
the form of Exhibit C, made or to be made by Borrower and each of its
Subsidiaries having an interest in the Lease to be encumbered, in favor of Agent
to secure the Obligations creating a lien on the Leases particularly
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designated on Schedule 4.8(b) or for which Leasehold Mortgages are required in
accordance with the terms of this Agreement, as the same may be amended,
modified or supplemented, from time to time.
"Lender" shall mean each Lender, including GE Capital, listed on the
signature pages hereof and any future holder of all or any portion of the Notes.
"LIBOR Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "LIBOR Lending Office" opposite its name
on Schedule 1.1 hereto (or, if no such office is specified, its domestic lending
office) or such other office of such Lender as such Lender may from time to time
specify to Borrower and Agent.
"LIBOR Period" shall mean, with respect to any LIBOR Rate Loan, each
period commencing on the last day of the next preceding LIBOR Period applicable
to such LIBOR Rate Loan and ending 30 days thereafter, as selected by Borrower's
irrevocable notice to Agent as set forth in Section 2.8(e) hereof; PROVIDED that
the foregoing provision relating to LIBOR Periods is subject to the following:
(1) if any LIBOR Period pertaining to a LIBOR Rate Loan would
otherwise end on a day that is not a Eurodollar Business Day, such LIBOR
Period shall be extended to the next succeeding Eurodollar Business Day
unless the result of such extension would be to carry such LIBOR Period
into another calendar month in which event such LIBOR Period shall end on
the immediately preceding Eurodollar Business Day;
(2) any LIBOR Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(3) any LIBOR Period pertaining to a LIBOR Rate Loan that begins on
the last Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such LIBOR Period) shall end on the last Eurodollar Business Day of a
calendar month;
(4) Borrower shall select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Rate Loan during a LIBOR Period for such
Loan; and
(5) Borrower shall select LIBOR Periods so that there shall be no
more than three tranches in existence at any one time and each tranche
shall be in an amount of at least $5,000,000.
"LIBOR Rate" shall mean for any LIBOR Period the average of the four
rates, reported from time to time by Telerate News Service page 3750 or such
other page as may replace page 3750 on that service or such other service or
services as may be designated by the British Bankers' Association for the
purpose of displaying such rate (or such other number of
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rates as such service may from time to time report), at which foreign branches
of major United States banks offer United States dollar deposits to other banks
for such LIBOR Period at approximately 9:00 a.m., New York City time, on the
second full Eurodollar Business Day next preceding such LIBOR Period. If such
interest rates shall cease to be available from Telerate News Service, the LIBOR
Rate shall be determined from such financial reporting service or other
information as shall be mutually acceptable to Agent and Borrower.
"LIBOR Rate Loan" shall mean any loan that bears interest at the LIBOR
Rate.
"Lien" shall mean any mortgage or deed of trust (including any
Mortgage and Leasehold Mortgage), pledge, hypothecation, assignment, deposit
arrangement, lien, Charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Code or comparable
law of any jurisdiction).
"Loans" shall mean the Revolving Credit Loan.
"Loan Documents" shall mean this Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates,
including, without limitation, pledges, powers of attorney, consents,
assignments, contracts, notices, whether now or hereafter executed by or on
behalf of Borrower or any other Loan Party, or any employee of Borrower or any
other Loan Party, and delivered to Agent or any Lender, in connection with this
Agreement or the transactions contemplated hereby.
"Loan Party" shall mean Parent, Borrower and each Subsidiary of
Borrower.
"Market Segment" shall mean the geographic regions in which the
Borrower and/or its Subsidiaries own, lease or operate Theatres broken down as
follows: (i) Alaska, (ii) Austin, Texas, (iii) San Antonio, Texas, (iv)
Washington and Idaho, (v) Oregon and (vi) Nevada and Missouri.
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, assets, operations, financial or other condition of Parent,
Borrower and its Subsidiaries, taken as a whole, (ii) the Parent's, Borrower's
and its Subsidiaries' collective ability to pay the Obligations in accordance
with the terms thereof, (iii) the Collateral, determined by reference to Parent,
Borrower and its Subsidiaries, taken as a whole or (iv) Lenders' Liens on the
Collateral or the priority thereof, determined by reference to Parent, Borrower
and its Subsidiaries, taken as a whole.
"Maximum Lawful Rate" shall have the meaning assigned to it in Section
2.8(d) hereof.
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"Maximum Revolving Credit Loan" shall mean, at any particular time, an
amount equal to $250,000,000, as such amount may be limited or reduced from time
to time pursuant to Sections 2.1(c), 2.1(d), 2.1(e) and 2.4 hereof.
"Mortgage" shall mean each mortgage, deed of trust or similar security
agreement made or to be made by Borrower and each of its subsidiaries having an
interest in the Real Estate to be encumbered in favor of Lender, creating a lien
against any portion of the real estate described in Schedule 4.8(a) hereto to
secure the payment of the Obligations, substantially in the form of Exhibit D,
as the same may be amended, modified or supplemented from time to time.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA and to which Borrower, any of its subsidiaries or
any ERISA Affiliate is making, or is obligated to make, contributions or has
made, or been obligated to make, contributions.
"Net Cash Proceeds" shall mean cash payments received by Borrower or
any of its Subsidiaries (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received) from any Asset Sale made after the Closing Date,
in each case net of the amount of (i) brokers' fees, legal fees, accountants'
fees and related expenses payable in connection with such Asset Sale and (ii)
federal, state and local taxes payable as a consequence of such Asset Sale.
"Note Documents" means the Indenture, the Senior Subordinated Notes,
each agreement entered into and certificate or other document executed with
respect to the Indenture or the Senior Subordinated Notes, including, without
limitation, the Disclosure Documents.
"Notes" shall mean the Revolving Credit Notes.
"Notice of Revolving Credit Advance" shall have the meaning assigned
to it in Section 2.1(a) hereof.
"Number" shall mean, in respect of shares of Common Stock, the number
thereof, and in respect of the shares of Senior Subordinated Convertible
Preferred Stock, the number of shares of Common Stock issuable upon the exercise
or conversion thereof.
"Obligations" shall mean all loans, advances, debts, liabilities, and
obligations, for monetary amounts (whether or not such amounts are liquidated or
determinable) owing by Borrower or any or all of its subsidiaries or all of them
to Agent or Lenders or, if pursuant to interest rate hedging contracts, to any
Lender or any Affiliate of a Lender, and all covenants and duties of Borrower or
any of its Subsidiaries regarding such amounts, of any kind or nature, present
or future, whether or not evidenced by any note, agreement or other instrument,
arising under any of the Loan Documents, or pursuant to any interest rate
hedging contracts entered into
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by any Lender or any Affiliate of a Lender. This term includes, without
limitation, all interest, charges, expenses, reasonable attorneys' fees and any
other sum chargeable to Borrower or any or all of its Subsidiaries under any of
the Loan Documents.
"Parent" shall mean Act III Cinemas, Inc., a Delaware corporation and
the owner of all of the issued and outstanding capital stock of Borrower.
"Partnership Agreement" shall mean that certain Second Amended and
Restated Agreement of Limited Partnership of A 3 Ltd., dated as of October 29,
1987, as amended, and the Certificate of Limited Partnership of A 3 Ltd., as
amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"Permit" shall mean any permit, certificate, registration, approval,
authorization, license, variance, or permission required from a governmental
authority under any applicable Environmental Laws.
"Permitted Encumbrances" shall mean the following encumbrances: (i)
Liens for taxes or assessments or other governmental charges or levies, either
not yet due and payable or to the extent that nonpayment thereof is permitted by
the terms of this Agreement; (ii) pledges or deposits securing obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation; (iii) pledges or deposits securing bids,
tenders, contracts (other than contracts for the payment of money) or leases to
which Borrower or any of its subsidiaries is a party as lessee made in the
ordinary course of business; (iv) deposits securing public or statutory
obligations of Borrower or any of its subsidiaries; (v) workers', mechanics',
suppliers', carriers', warehousemen's or other similar liens arising in the
ordinary course of business not yet due and payable; (vi) non-consensual
statutory, contractual (provided that such contractual liens are subordinate to
the Lien in favor of the Agent, on behalf of the Lenders) or common law
landlords' liens under any Lease hereafter executed by Borrower or any of its
Subsidiaries and any statutory, contractual or common law landlord's lien under
the Leases set forth on Schedule 4.8(b) (other than those which have been
subordinated to the Lien in favor of the Agent, on behalf of the Lenders); (vii)
Liens under concession or license agreements arising in the ordinary course of
business not yet due and payable; (viii) deposits securing or in lieu of surety,
appeal or customs bonds in proceedings to which Borrower or any of its
Subsidiaries is a party; (ix) any attachment or judgment Lien, unless the
judgment it secures shall not, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not have been
discharged within 60 days after the expiration of any such stay; (x) easements,
licenses, or other restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto so long as the same
do not materially impair the use, value, or marketability of such real property,
leases or leasehold estates; (xi) Liens existing as of the Closing Date securing
Indebtedness listed on Schedule 4.26 hereto; (xii) purchase money liens or
purchase money security interests upon or in any property (other than any real
property) acquired
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or held by Borrower or any of its Subsidiaries in the ordinary course of its
business to secure the purchase price of such property or to secure the
indebtedness incurred solely for the purpose of financing the acquisition of
such property, or Liens existing on such property at the time of its acquisition
(provided that such existing Liens would otherwise constitute a Permitted
Encumbrance); PROVIDED, HOWEVER, that the aggregate principal amount of
Indebtedness secured by such Liens shall not in the aggregate exceed the amount
of Indebtedness of Borrower and its Subsidiaries permitted to be incurred in
connection therewith under Section 7.3(a)(i) hereof; (xiii) presently existing
Liens listed on Schedule 1.2 hereto, other than the general survey exception,
(xiv) any defect in title disclosed by surveys, other than a defect in title
that has a Material Adverse Effect; PROVIDED, HOWEVER, that with respect to a
defect in title disclosed by any such survey that does not have a Material
Adverse Effect, Borrower promptly shall take and diligently pursue such actions
as shall be reasonably required by Agent to remove such defects; (xv) such
landlord's consents, nondisturbance agreements and such other agreements as may
be required by Agent to be recorded in connection with the transactions
contemplated by this Agreement; and (xvi) the leases in which Borrower or any of
its Subsidiaries is a lessor described in Part Two of Schedule 4.8(b) hereto.
"Permitted Transferee" shall mean, with respect to a Person, (a) the
spouse or child of such Person, (b) such Person's heirs, executors or legal
representatives, (c) trustees of an inter vivos trust or testamentary trust for
the benefit of such Person or Persons identified in subparagraph (a) of this
definition, or (d) another Person Controlled by such Person or by any Person
identified in clauses (a) through (c) of this definition.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean, with respect to Borrower, any of its Subsidiaries
or any ERISA Affiliate, at any time, an employee pension benefit plan as defined
in Section 3(2) of ERISA (including a Multiemployer Plan) that is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the IRC and is maintained for the employees of Borrower, any of its
Subsidiaries or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement entered into
between Agent, as agent for itself and the other Lenders, and each of Parent,
Borrower and those Subsidiaries owning Stock of other Subsidiaries of Borrower,
dated as of May 1, 1989, including all amendments, modifications and supplements
thereto, and shall refer to the Pledge Agreement as the same may be in effect at
the time such reference becomes operative.
"Qualified Issuer" means any money center or first tier regional
commercial bank (i) which has capital and surplus in excess of $200,000,000, and
(ii) the outstanding long term debt securities of which are rated at least A by
Standard & Poor's Corporation or at least A-1 by
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Moody's Investors Service, Inc., or carry an equivalent rating by a nationally
recognized rating agency if both of the two named rating agencies cease
publishing ratings of investments or any other bank or first tier investment
bank reasonably acceptable to Agent.
"Ratable Portion" or ratably shall mean, with respect to any Lender,
the quotient obtained by dividing the Commitment of such Lender by the
Commitments of all Lenders.
"Real Estate" shall mean all of those plots, pieces or parcels of land
now owned or hereafter acquired by Borrower or any Subsidiary (the "Land"),
including, without limitation, those listed on Schedule 4.8(a) hereto and more
particularly described in the Mortgages, together with the right, title and
interest of Borrower or any Subsidiary, if any, in and to the streets, the land
lying in the bed of any streets, roads or avenues, opened or proposed, in front
of, adjoining, or abutting the Land to the center line thereof, the air space
and development rights pertaining to the Land and right to use such air space
and development rights, all rights of way, privileges, liberties, tenements,
hereditaments, and appurtenances belonging or in any way appertaining thereto,
all fixtures, all easements now or hereafter benefiting the Land and all
royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil,
and gas rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, and all fixtures and articles of personal
property appertaining thereto and all additions thereto and substitution and
replacement thereof.
"Real Estate Permits" shall have the meaning assigned to it in Section
4.8(e) hereof.
"Release" shall mean any release, threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching,
or migration into the indoor or outdoor environment, or into or out of any
property owned or leased by the Borrower or any of its Subsidiaries, including
the movement of any Contaminant through or in the air, soil, surface water,
groundwater, or property.
"Remedial Action" shall mean all actions required under any
Environmental Law to (1) clean up, remove, treat, or in any other way address
any Contaminant in the indoor or outdoor environment; (2) prevent the Release or
threat of Release, or minimize the further Release of any Contaminant so it does
not migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (3) perform pre-remedial studies and
investigations and post-remedial monitoring and care.
"Reportable Event" shall have the meaning assigned to it in Section
4043 of ERISA.
"Required Lenders" shall mean, as of any date and so long as any Debt
is outstanding, the holders of Notes evidencing at least 60% of the aggregate
unpaid principal amount of the Revolving Credit Loan or, in the event that at
such date there is no Revolving
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Credit Loan then outstanding, then the holders of Notes evidencing at least 60%
of the unused portion of the Maximum Revolving Credit Loan, and in each case, at
least two Lenders, so long as there are two or more Lenders; PROVIDED, HOWEVER,
that such references to 60% shall be changed to a majority at such times as GE
Capital holds a Commitment of less than $75,000,000.
"Reserves" shall mean such reserves for doubtful accounts, returns,
allowances and the like as may be established by Borrower or any Subsidiary or
as may otherwise be required in accordance with GAAP.
"Restated Loan Agreement" shall mean the Amended and Restated Loan
Agreement dated February 14, 1997 among Borrower, the Lenders party thereto and
GE Capital as Agent for the Lenders.
"Restricted Lease" shall mean any lease of any property, but excluding
the Leases, by Borrower or such subsidiary as lessee, other than any such lease
under which Borrower or such Subsidiary is the lessor.
"Restricted Payment" shall mean (i) the declaration of any dividends
or the incurrence of any liability to make any other payment or distribution of
cash or other property or assets in respect of Borrower's Stock or (ii) any
payment on account of the purchase, redemption or other retirement of Borrower's
Stock or any other payment or distribution made in respect thereof, either
directly or indirectly.
"Revolving Credit Advance" shall have the meaning assigned to it in
Section 2.1(a) hereof.
"Revolving Credit Loan" shall mean the aggregate amount of Revolving
Credit Advances outstanding at any time.
"Revolving Credit Note" shall have the meaning assigned to it in
Section 2.1(b) hereof.
"Security Agreement" shall mean the Security Agreement entered into
between Agent, as agent for itself and the other Lenders, and Borrower and its
Subsidiaries, dated as of May 1, 1989, including all amendments, modifications
and supplements thereto, and shall refer to the Security Agreement as the same
may be in effect at the time such reference becomes operative.
"Senior Management" shall mean Walt S. Aman, Hal Gaba, David Goldhill,
Timothy Wood, Timothy Reed and Robert Lenihan.
"Senior Subordinated Convertible Preferred Stock" shall mean the 200
shares of Senior Subordinated Convertible Preferred Stock, Series A, originally
issued to Electra
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Investment Trust P.L.C. pursuant to the Electra/Thybo Purchase Agreement, dated
February 8, 1990, and the Stockholders Agreement.
"Senior Subordinated Notes" means the 11-7/8% Senior Subordinated
Notes due 2003, issued in an aggregate principal amount of $85,000,000 and any
refinancings thereof which comply with the provisions of Section 7.21(b);
PROVIDED, HOWEVER, that the terms and conditions of any such refinancings shall
be no more onerous to Borrower than existing terms in all material respects as
reasonably determined by Agent; and PROVIDED, FURTHER, HOWEVER, that the total
principal amount of Senior Subordinated Notes outstanding at any one time shall
not exceed $100,000,000.
"Solvent" shall mean, when used with respect to any Person, that:
(a) the present fair salable value of such Person's assets is in
excess of the total amount of such Person' s liabilities;
(b) such Person is able to pay its debts as they become due; and
(c) such Person does not have unreasonably small capital to carry on
such Person's business as theretofore operated and all businesses in which
such Person is about to engage.
"Stated Rate" shall mean, so long as no Event of Default has occurred
and is continuing, a floating rate, which shall be determined as of the second
Business Day following, but shall be effective as of the date of, Agent's
receipt of the quarterly financial statements referred to in Section 5.1(b)
hereof (the "Quarterly Financial Statements") equal to the Index Rate or LIBOR
Rate, as the case may be, plus the applicable margin set forth below for the
Borrower's Consolidated Total Funded Debt to Consolidated Cash Flow Ratio, as
set forth on the most recent Quarterly Financial Statements received by Agent:
Applicable Applicable
Margin for Margin for
Index Rate LIBOR Rate
Ratio Loans Loans
----- ----- -----
Greater than 5.0 to 1.0 .75 2.25%
Equal to or greater than
4.5 to 1.0 but not greater .25% 1.75%
than 5.0 to 1.0
Equal to or greater than 0% 1.50%
4.0 to 1.0 but less than
4.5 to 1.0
Equal to or greater than 0% 1.25%
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3.5 to 1.0 but less than
4.0 to 1.0
Less than 3.5 to 1.0 0% 1.00%
; PROVIDED, HOWEVER, that in the event Agent shall receive any Quarterly
Financial Statements after the applicable time period set forth in Section
5.1(b), then the Stated Rate as previously determined shall remain in effect
until such time as such Quarterly Financial Statements are delivered, and when
so delivered, the Stated Rate determined as set forth above shall be effective,
retroactively, on and as of the last day on which such Quarterly Financial
Statements could have been timely delivered pursuant to Section 5.1(b), except
that in no event shall any Lender be required to refund any interest payment
already received by such Lender; and PROVIDED, FURTHER, HOWEVER, that solely for
purposes of this calculation, in the event that Borrower shall construct any
motion picture theatre and related assets, there shall be deducted from
Consolidated Total Funded Debt the Capital Expenditures (up to an aggregate
amount of $30,000,000) incurred by Borrower in connection therewith for the
first twelve months following the date of such commencement of construction.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests (regardless of how designated) of or in a corporation,
partnership or equivalent entity whether voting or nonvoting, including, without
limitation, common stock, preferred stock, or any other "equity security" (as
such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).
"Stockholders" shall mean, with respect to any Loan Party, all of the
holders of stock of such Loan Party immediately following the Closing Date.
"Stockholders Agreement" shall mean the Stockholders Agreement, dated
as of February 8, 1990, among Parent, Act III Theatres, L.P., Electra Investment
Trust P.L.C., Thybo Gamma Limited and certain holders from time to time of
capital stock.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, and (b) any partnership in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% and
which such Person or one or more Subsidiaries of such Person shall Control.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income
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of Agent or a Lender by the jurisdictions under the laws of which Agent and
Lenders are organized or any political subdivision thereof.
"Termination Date" shall mean the date on which all Debt and any other
Obligations hereunder have been completely discharged and Borrower shall have no
further right to borrow any monies hereunder.
"Theatres" shall mean each of the motion picture theatres and related
assets owned or leased and operated by Borrower or any of its Subsidiaries.
"Trademark Assignment Agreement" shall mean the Grant of Security
Interest (Trademarks, Trademark Applications and Trademark Licenses) made in
favor of Agent, on behalf of the Lenders, by Borrower and its Subsidiaries,
dated as of May 1, 1989.
"Voting Stock" shall mean outstanding shares of stock having voting
power for the election of directors, whether at all times or only so long as no
senior class of stock has such voting power because of default in dividends or
some other default.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly
modified by the phrase "in accordance with GAAP" shall in no way be construed to
limit the foregoing.
All other undefined terms contained in this Agreement shall, unless
the context indicates otherwise, have the meanings provided for by the Code as
in effect in the State of New York to the extent the same are used or defined
therein.
The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
schedules hereto, as the same may from time to time be amended, modified or
supplemented and not to any particular section, subsection or clause contained
in this Agreement.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. AMOUNT AND TERMS OF CREDIT
1. REVOLVING CREDIT ADVANCES. (a) Upon and subject to the terms and
conditions hereof, each Lender agrees to make available, from time to time,
until the Commitment Termination Date, for Borrower's use and upon the request
of Borrower therefor, advances(each,
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a "Revolving Credit Advance") in an aggregate amount outstanding which shall not
at any given time exceed such Lender's Ratable Portion of the Maximum Revolving
Credit Loan. Subject to the provisions of Section 2.4 and 2.6 hereof and until
all amounts outstanding in respect of the Revolving Credit Loan shall become due
and payable on the Commitment Termination Date, Borrower may from time to time
borrow, repay and reborrow under this Section 2.1(a) within the limits of each
Lender's Commitment; PROVIDED, HOWEVER, that all repayments of any LIBOR Rate
Loans shall be made on, and only on, the last day of the LIBOR Period for such
Loan. Each Revolving Credit Advance shall be made on notice,(i) in the case of
LIBOR Rate Loans, given no later than 12:00 P.M. (New York City time) three
Business Days prior to the Business Day of the proposed Revolving Credit
Advance, by Borrower to Agent, and (ii) in the case of Index Rate Loans, given
no later than 12:00 P.M. (New York City time) on the Business Day of the
proposed Revolving Credit Advance, by Borrower to Agent. Each such notice (a
"Notice of Revolving Credit Advance") shall be in writing or by telephone to
account executive (203) 316-7500, telecopy, telex or cable, confirmed
immediately in writing, in substantially the form of Exhibit B hereto,
specifying therein (i) the requested date of such Revolving Credit Advance, (ii)
the amount of such Revolving Credit Advance, including, the amount, if any,
requested to be LIBOR Rate Loans, (iii) for which purpose under Section 2.6
hereof such Advance is being requested and (iv) the bank to which the proceeds
of such proposed Advance should be wired, and certifying therein that after
giving effect to such borrowing, (x) the aggregate amount of all Revolving
Credit Advances outstanding with respect to such purpose will not exceed the
maximum amount permitted to be borrowed for such purpose and (y) the aggregate
amount of all Revolving Credit Advances outstanding will not exceed the Maximum
Revolving Credit Loan. Agent shall give to each Lender prompt notice of Agent's
receipt of a Notice of Revolving Credit Advance. Each Lender shall, before 2:00
P.M. (New York City time) on the date of the proposed Revolving Credit Advance
make available for the account of its applicable lending office to Agent at such
account as Agent may specify, in immediately available funds, such Lender's
Ratable Portion of the proposed aggregate amount of such Revolving Credit
Advance. After Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Section 3, Agent will make such funds
available to Borrower by wire transfer to any bank listed on Schedule 2.1, or
any other bank reasonably acceptable to Agent and designated by Borrower in the
Notice of Revolving Credit Advance.
(a) The Revolving Credit Loan made by each Lender shall be evidenced
by a promissory note to be executed and delivered by Borrower to each Lender on
the Closing Date, the form of which is attached hereto and made a part hereof as
Exhibit A (such note, as the same may be amended, extended or renewed from time
to time being the "Revolving Credit Note"). The Revolving Credit Note shall be
payable to the order of each Lender and shall represent the obligation of
Borrower to pay the amount of such Lender's Ratable Portion of the Maximum
Revolving Credit Loan or, if less, the aggregate unpaid principal amount of all
Revolving Credit Advances made by each Lender to Borrower with interest thereon
as prescribed in Section 2.8(a). The date and amount of each Revolving Credit
Advance and each payment of principal with respect thereto shall be recorded on
the books and records of each Lender, which books and records shall constitute
PRIMA FACIE evidence of the accuracy of the information therein recorded.
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The entire unpaid balance of the Revolving Credit Loan shall be due and payable
on the Commitment Termination Date.
(b) Unless theretofore reduced pursuant to subsection (e) below, the
Maximum Revolving Credit Loan shall automatically be reduced on each date set
forth below (a "Commitment Reduction Date") to the amount set forth below
opposite such Commitment Reduction Date (or such lesser amount required by
Section 2.1(e) below):
Commitment
Reduction Reduced
DATE AMOUNT
---- ------
December 31, 1998 $245,000,000
March 31, 1999 240,000,000
June 30, 1999 235,000,000
September 30, 1999 230,000,000
December 31, 1999 222,500,000
March 31, 2000 215,000,000
June 30, 2000 207,500,000
September 30, 2000 200,000,000
December 31, 2000 190,000,000
March 31, 2001 180,000,000
June 30, 2001 170,000,000
September 30, 2001 160,000,000
The Maximum Revolving Credit Loan shall be reduced to zero on the Commitment
Termination Date.
(c) Borrower shall have the right to reduce to zero the Maximum
Revolving Credit Loan from time to time upon not less than 60 days prior notice
to Agent of such reduction, which notice shall specify the effective date
thereof and shall be irrevocable and effective only upon receipt by Agent;
PROVIDED, HOWEVER, that any such reduction of any Index Rate Loan shall be made
on, and only on, an Interest Payment Date, and any such reduction of any LIBOR
Rate Loan shall be made on and only on, the last day of the LIBOR Period for
such Loan.
(d) Each reduction of the Maximum Revolving Credit Loan pursuant to
Section 2.4 during any period from and including a Reduction Date set forth in
subsection (c) above to but excluding the next Reduction Date (the "Commitment
Period") shall result in an automatic and simultaneous reduction of the Maximum
Revolving Credit Loan in a pro rata amount as to each Lender for each subsequent
Commitment Period. The Maximum Revolving Credit Loan once reduced may not be
reinstated.
2. Intentionally Omitted.
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3. Intentionally Omitted.
4. MANDATORY PREPAYMENT. (a) On or before 120 days after the end
of each Fiscal Year, commencing with the Fiscal Year ending December 31, 1997
Borrower shall prepay the Loans in an amount equal to 50% of Borrower's
Consolidated Available Cash Flow for such Fiscal Year.
(a) Borrower shall prepay the Loans upon receipt by Borrower or any
of its Subsidiaries of Net Cash Proceeds in excess of $1,000,000 during any
Fiscal Year in an amount equal to such Net Cash Proceeds (it being understood
that no Asset Sales yielding Net Cash Proceeds in excess of $15,000,000
individually or in the aggregate during any Fiscal Year may be made unless any
such Asset Sale is consented to in writing by the Required Lenders).
(b) All prepayments pursuant to clause (a) or (b) above shall be, so
long as interest is charged on the Revolving Credit Loan based on the LIBOR
Rate, made only on the last day of the LIBOR Period for such Loan, and shall be
applied to repay the Revolving Credit Loan, in which event the Maximum Revolving
Credit Loan will be permanently reduced (i) in the case of prepayments pursuant
to clause (a) above, by the amount of each such repayment and (ii) in the case
of prepayments pursuant to clause (b) above, by the amount of such repayments
above $15,000,000 in any one Fiscal Year.
(c) If, at any time, the aggregate principal amount of Revolving
Credit Loans outstanding exceeds the Maximum Revolving Credit Loan, then
Borrower shall immediately repay the Revolving Credit Loans by the amount of
such excess.
(d) No prepayment premium shall be payable in respect of any
mandatory prepayment under this Section 2.4.
Intentionally Omitted.
6. USE OF PROCEEDS. The proceeds of the Revolving Credit Advances
outstanding at any time shall be used by Borrower only as follows: (i) for
working capital needs of Borrower and/or its Subsidiaries; (ii) up to the
maximum amounts set forth in Section 7.10 may be used by Borrower during any
Fiscal Year commencing prior to the Commitment Termination Date to make Capital
Expenditures without the necessity of obtaining the prior consent of any Lender;
(iii) to repurchase Senior Subordinated Notes to the extent permitted by Section
7.21(a); and (iv) to pay cash dividends to Parent to the extent permitted by
Section 7.15.
7. SINGLE LOAN. The Debt and all of the other Obligations of
Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of Borrower secured, until the Termination
Date, by all of the Collateral.
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8. INTEREST ON REVOLVING CREDIT LOAN. (a) Borrower shall pay
interest to Agent on the unpaid principal amount of each Revolving Credit
Advance from the date of such Revolving Credit Advance until the unpaid
principal amount thereof shall be paid in full, at a rate based on either the
Index Rate or LIBOR Rate as follows: (i) with respect to each Revolving Credit
Advance which bears interest at a rate based upon the Index Rate, at a rate per
annum equal to the Index Rate plus the applicable margin for Index Rate Loans
set forth in the definition of Stated Rate, monthly in arrears on the last day
of each calendar month, commencing on the first such date after the Closing Date
(each, an "Interest Payment Date") and on the date such Revolving Credit Loan is
paid in full, and (ii) with respect to each Revolving Credit Advance which bears
interest at a rate based upon the LIBOR Rate, at a rate per annum equal at all
times during the LIBOR Period therefor at the LIBOR Rate for such LIBOR Period
plus the applicable margin for LIBOR Rate Loans set forth in the definition of
Stated Rate, payable in arrears on the last day of such LIBOR Period and on the
date such Revolving Credit Loan is paid in full.
(a) All computations of interest shall be made by the Agent and on a
basis of a three hundred and sixty (360) day year, in each case for the actual
number of days occurring in the period for which such interest is payable. The
Index Rate shall be determined by the Agent on each Business Day, and any change
in the interest rate on the Notes resulting from a change in the Index Rate
shall become effective as of the opening of business on the day on which such
change in the Index Rate occurs. The LIBOR Rate shall be determined by the
Agent on the second full Eurodollar Business Day prior to the first day of the
applicable LIBOR Period. If any payment on the Revolving Credit Loan becomes
due and payable on a day other than a Business Day, or a Eurodollar Business Day
in the event that the Revolving Credit Loan shall bear interest based upon the
LIBOR Rate, the maturity thereof shall be extended to the next succeeding
Business Day or Eurodollar Business Day, as the case may be (except as provided
in clause (1) of the definition of LIBOR Period), and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension.
(b) So long as any Event of Default shall be continuing, the
interest rate applicable to the Revolving Credit Loan shall be increased by 2%
per annum above the rate otherwise applicable.
(c) Notwithstanding anything to the contrary set forth in this
Section 2.8, if at any time until payment in full of all of the Obligations, the
Stated Rate exceeds the highest rate of interest permissible under any law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto (the "Maximum Lawful Rate"), then in such event and so long as
the Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; PROVIDED, HOWEVER, that if
at any time thereafter the Stated Rate is less than the Maximum Lawful Rate,
Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by Lenders from the making of
advances hereunder is equal to the total interest which Lenders would have
received had the Stated Rate been (but for the operation of this paragraph) the
interest rate payable since the Closing Date. Thereafter, the interest rate
payable hereunder shall be the Stated
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Rate unless and until the Stated Rate again exceeds the Maximum Lawful Rate, in
which event this paragraph shall again apply. In no event shall the total
interest received by any Lenders pursuant to the terms hereof exceed the amount
which such Lenders could lawfully have received had the interest due hereunder
been calculated for the full term hereof at the Maximum Lawful Rate. In the
event the Maximum Lawful Rate is calculated pursuant to this paragraph, such
interest shall be calculated at a daily rate equal to the Maximum Lawful Rate
divided by the number of days in the year in which such calculation is made. In
the event that a court of competent jurisdiction, notwithstanding the provisions
of this Section 2.8(d), shall make a final determination that any Lender has
received interest hereunder or under any of the Loan Documents in excess of the
Maximum Lawful Rate, such Lender shall, to the extent permitted by applicable
law, promptly apply such excess first to any interest due and not yet paid under
its Note, then to the principal amount of its Note (without premium or penalty),
then to other unpaid Obligations and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.
(d) So long as no Event of Default has occurred and is continuing
(i) Borrower may elect on at least three Eurodollar Business Days' prior notice
to convert Index Rate Loans to LIBOR Rate Loans and (ii) Borrower may elect on
or before the third Eurodollar Business Day prior to the end of each LIBOR
Period with respect to any LIBOR Rate Loan to have such LIBOR Rate Loan bear
interest based upon the LIBOR Rate for the next succeeding LIBOR Period. In
each of clauses (i) and (ii), Borrower shall make such election by notice to
Agent in writing, by telecopy, telex or cable. If no such notice is received
with respect to a LIBOR Rate Loan on the third Eurodollar Business Day prior to
the end of the LIBOR Period with respect to such LIBOR Rate Loan, such LIBOR
Rate Loan shall be converted to an Index Rate Loan at the end of the LIBOR
Period.
9. Intentionally Omitted.
10. FEES. (a) Borrower shall pay (i) to GE Capital the fees
specified in that certain fee letter dated the date hereof between Borrower and
GE Capital, at the times specified for payment therein and (ii) to Lenders the
fees as previously agreed to by Borrower and Lenders.
(a) Borrower shall pay to each Lender an unused line fee on the
average daily unused portion of such Lender's Commitment to make a Revolving
Credit Loan from the date hereof until the Commitment Termination Date payable
monthly in arrears on each Interest Payment Date, at the rate of .375% per annum
when Borrower's Consolidated Total Funded Debt to Consolidated Cash Flow Ratio
is greater than 4.0 to 1.0 and at the rate of .250% per annum when such Ratio is
less than or equal to 4.0 to 1.0. Such Ratios shall be determined as provided
in the definition of Stated Rate (without regard to the second proviso thereof).
11. RECEIPT OF PAYMENTS. Borrower shall make each payment under this
Agreement not later than 2:00 P.M. (New York City time) on the day when due in
lawful money of the United States of America in immediately available funds to
Agent's depository bank in the
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state of New York as designated by Agent from time to time for deposit in
Agent's depositary account or, if Agent so notifies Borrower at least one
Business Day prior to the date on which such payment is due, directly to each
Lender, ratably based on the respective principal amounts of the Notes held by
each Lender that relate to the Loan in respect of which such payment is made or
applied. Agent will, upon any such deposit to its depositary account, promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest (other than interest or principal payments on the
Revolving Credit Loan) ratably to Lenders as provided above, and like funds
relating to the payment of any amount payable to any Lender to such Lender, in
each case to be applied in accordance with the terms of this Agreement. For
purposes only of computing interest hereunder, all payments shall be applied by
Agent to the Revolving Credit Loan on the day payment has been credited by
Agent's depository bank to Agent's account in immediately available funds or, if
Agent has notified Borrower to make any such payments directly to Lenders, such
payments shall be applied by each Lender to its Revolving Credit Loan on the day
payment has been received by such Lender in immediately available funds. For
purposes of determining the amount of funds available for borrowing by Borrower
pursuant to Section 2.1(a) hereof, such payments shall be applied by Agent
against the outstanding amount of the Revolving Credit Loan at the time they are
credited to its account.
12. APPLICATION OF PAYMENTS. Subject to the provisions of 2.4(c),
Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times hereafter received by Agent or any Lender from or
on behalf of Borrower pursuant to the terms of this Agreement, and Borrower
irrevocably agrees that Agent and Lenders shall have the continuing exclusive
right to apply any and all such payments against the then due and payable
Obligations of Borrower and in repayment of the Revolving Credit Loan as they
each may deem advisable. In the absence of a specific determination by Agent
and Lenders with respect thereto, the same shall be applied in the following
order: (i) then due and payable fees and expenses; (ii) then due and payable
interest payments on the Debt; and (iii) then due and payable principal payments
on the Debt. Agent is authorized to, and at its option may, make advances on
behalf of Borrower for payment of all fees, expenses, charges, costs, principal
and interest incurred by Borrower hereunder. Such advances shall be made when
and as Borrower falls to promptly pay such fees, expenses, charges, costs,
principal and interest and, at Agent's option and to the extent permitted by
law, shall be deemed Revolving Credit Advances constituting part of the
Revolving Credit Loan hereunder.
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 any Loan made by it in excess of its ratable share
of payments on account on the Loan obtained by all Lenders, such Lender shall
forthwith purchase from each other Lender such participations in the Loan made
by it as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each other Lender; 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
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(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 Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 2.13 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 Borrower in the amount of such participation.
14. ACCOUNTING. Agent will provide a monthly written accounting of
transactions under the Revolving Credit Loan to Borrower. Each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon Borrower in all respects as to all matters reflected therein, unless
Borrower, within 45 days after the date any such accounting is rendered, shall
notify Agent in writing of any objection which Borrower may have to any such
accounting, describing the basis for such objection with specificity. In that
event, only those items expressly objected to in such notice shall be deemed to
be disputed by Borrower. Agent's determination, based upon the facts available,
of any item objected to by Borrower in such notice shall (absent manifest error)
be final, binding and conclusive on Borrower, unless Borrower shall commence a
judicial proceeding to resolve such objection within 45 days following Agent's
notifying Borrower of such determination.
15. INDEMNITY. (a) Borrower shall indemnify and hold Agent and each
Lender harmless, whether or not the transactions contemplated hereby have been
consummated, from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including, without limitation,
reasonable attorneys' fees and disbursements, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by Agent or any
Lender as the result of its having entered into any of the Loan Documents or
Ancillary Agreements or extended credit hereunder; PROVIDED, HOWEVER, that
Borrower shall not be liable for such indemnification to such indemnified Person
to the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from such indemnified Person's gross negligence or
willful misconduct or any breach by Agent or any Lender of any of its
obligations under the Loan Documents.
(a) Borrower understands that in connection with Lenders' arranging
to provide the LIBOR Rate interest option with respect to the Revolving Credit
Loan from time to time at the option of the Borrower on the terms provided
herein, Lenders may enter into funding arrangements with third parties ("Funding
Arrangements") on terms and conditions which could result in substantial losses
to such Lenders if such LIBOR Rate funds do not remain outstanding at the
interest rates provided herein for the entire monthly interest period with
respect to which the LIBOR Rate has been fixed. Consequently, in order to
induce Lenders to provide such LIBOR Rate option on the terms provided herein
and in consideration for the entering into by Lenders of Funding Arrangements
from time to time in contemplation thereof, if any LIBOR Rate funds are repaid
in whole or in part prior to the last day of such monthly interest period
therefor (whether such repayment is made pursuant to any provision of this
Agreement or any other Loan
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Document or is the result of acceleration, by operation of law or otherwise),
Borrower shall indemnify and hold harmless each Lender from and against and in
respect of any and all losses, costs and expenses resulting from, or arising out
of or imposed upon or incurred by such Lender by reason of the liquidation or
reemployment of funds acquired or committed to be acquired by such Lender to
fund such LIBOR Rate Option pursuant to the Funding Arrangements. The amount of
any losses, costs or expenses resulting in an obligation of Borrower to make a
payment pursuant to the foregoing sentence shall not include any losses
attributable to lost profit to Lenders but shall represent the excess, if any,
of (A) such Lender's cost of borrowing the LIBOR Rate funds pursuant to the
Funding Arrangements over (B) the return to such Lender on its reinvestment of
such funds; PROVIDED, HOWEVER, that if any Lender terminates any Funding
Arrangements in respect of the LIBOR Rate funds as a result of any repayment of
LIBOR Rate Loans by Borrower prior to the end of any monthly interest period,
the amount of such losses, costs and expenses shall include the cost to such
Lender of such termination. In reinvesting any funds borrowed by any Lender
pursuant to the Funding Arrangements, such Lender shall take into consideration
the remaining maturity of such borrowings. As promptly as practicable under the
circumstances, each Lender shall provide Borrower with its written calculation
of all amounts payable pursuant to the next preceding sentence, and such
calculation shall be binding on the parties hereto unless Borrower shall object
thereto in writing within ten Business Days of receipt thereof.
16. ACCESS. Agent and each Lender and any of their officers,
employees and/or agents, at the expense of Agent or such Lender, as the case may
be (unless there shall exist an Event of Default, in which event all costs and
expenses shall be borne by Borrower), shall have the right, exercisable as
frequently as Agent or any Lender reasonably determines to be appropriate,
during normal business hours (or at such other times as may reasonably be
requested by Agent or any Lender) to inspect the properties and facilities of
Borrower and its Subsidiaries and to inspect, audit and make extracts from all
of Borrower's and its Subsidiaries' records, files and books of account.
Borrower shall deliver any document or instrument reasonably necessary for Agent
or any Lender, as any of them may request, to obtain records from any service
bureau maintaining records for Borrower or its Subsidiaries, including, without
limitation, computer tapes and discs owned by Borrower and its Subsidiaries.
Borrower shall instruct its and its Subsidiaries' banking and other financial
institutions to make available to Agent and each Lender such information and
records as Agent and each Lender may reasonably request. In connection with
such investigations, Agent and each Lender may interview Borrower's and its
Subsidiaries' employees, during normal business hours and as Agent or any Lender
may reasonably request, and Borrower and its Subsidiaries agree to make their
employees available for such interviews and shall instruct such employees to
cooperate with Agent or such Lender for purposes of such investigation. With
respect to all of the foregoing, Agent and each Lender shall maintain the
confidentiality of any information received and the contents of all records
reviewed by it and shall not disclose any such information or the contents of
any such records to any Person other than (i) to Agent's or such Lender's
accountants or attorneys, in which event such accountants or attorneys shall
similarly agree not to disclose such information or the contents of such
records, (ii) to a potential purchaser of a Note or participant in the Loans, in
which event such potential
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purchaser or participant shall similarly agree not to disclose such
information or the contents of such records, (iii) except as provided in
subparagraph (iv) below, upon the occurrence and continuance of an Event of
Default, in which event the recipient thereof shall similarly agree not to
disclose such information or the contents of such records, (iv) in connection
with the exercise of any remedies of Agent or any Lender, as the case may be,
under any Collateral Document and (v) to the extent any such disclosure is
required by applicable law.
17. CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY. (a) If any Lender
shall determine that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof or compliance by such Lender (or its lending office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on such Lender's capital as a
consequence of its obligations hereunder or credit extended by it hereunder to a
level below that which such Lender could have achieved but for such adoption,
change or compliance by an amount deemed by such Lender to be material, then
from time to time as specified by such Lender, Borrower shall pay such
additional amount or amounts as will compensate such Lender for such reduction
upon written notice to Borrower specifying such amounts and the calculation
thereof.
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation 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), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding or maintaining of any
Loan or portion thereof bearing interest based on the LIBOR Rate, then Borrower
shall from time to time, upon demand by such Lender (with a copy of such demand
to Agent), pay to 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 Borrower and Agent by such
Lender, shall be conclusive and binding on Borrower for all purposes, absent
manifest error. Each Lender agrees that, as promptly as practicable after it
becomes aware of any circumstances referred to in clause (i) or (ii) above which
would result in any such increased cost to such Lender, such Lender shall, to
the extent not inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrower pursuant to this Section 2.17(b).
(b) Notwithstanding anything to the contrary contained herein, if
the introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for any Lender to agree to make or
to make or to continue to fund or maintain such Loan bearing interest based on
the LIBOR Rate, then, unless such Lender is able to agree to make or to continue
to fund or to maintain such Loans which bear interest based on the LIBOR Rate at
another branch or office of such Lender without, in such Lender's opinion,
adversely affecting it or its Loans or the income
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obtained therefrom, on notice thereof and demand therefor by such Lender to
Borrower through Agent, (i) the obligation of such Lender to agree to make or to
make or to continue to fund or maintain Loans or any portions thereof bearing
interest based on the LIBOR Rate shall terminate and (ii) Borrower shall
forthwith prepay in full all outstanding Loans or any portions thereof then
bearing interest based on the LIBOR Rate, together with interest accrued
thereon, of such Lender unless Borrower, within five Business Days, after the
delivery of such notice and demand, converts all such Loans into a Loan bearing
interest based on the Index Rate.
(c) Upon the occurrence of any of the events set forth in this
Section 2.17, Agent shall promptly notify Borrower in writing of the occurrence
of such event. Borrower shall have the right within 5 days of receipt of such
notice to convert any outstanding LIBOR Rate Loans to an Index Rate Loan.
(d) Within fifteen (15) days after receipt by Borrower of written
notice and demand from any Lender (an "AFFECTED LENDER") for payment of
additional amounts or increased costs as provided in Section 2.17(a) or (b)
above, Borrower may, at its option, notify Agent and such Affected Lender of its
intention to replace the Affected Lender. So long as no Default or Event of
Default shall have occurred and be continuing, Borrower, with the consent of
Agent, may obtain, at Borrower's expense, a replacement Lender ("REPLACEMENT
LENDER") for the Affected Lender, which Replacement Lender must be acceptable to
Agent. If Borrower obtains a Replacement Lender within ninety (90) days
following notice of its intention to do so, the Affected Lender must sell and
assign its Note and Commitments to such Replacement Lender for an amount equal
to the principal balance of the Note held by the Affected Lender and all accrued
interest and fees with respect thereto through the date of such sale, PROVIDED
that Borrower shall have reimbursed such Affected Lender for the additional
amounts or increased costs that it is entitled to receive under this Agreement
through the date of such sale and assignment.
Notwithstanding the foregoing, Borrower shall not have the right to obtain a
Replacement Lender if the Affected Lender rescinds its demand for increased
costs or additional amounts within fifteen (15) days following its receipt of
Borrower's notice of intention to replace such Affected Lender. Furthermore, if
Borrower gives a notice of intention to replace and does not so replace such
Affected Lender within ninety (90) days thereafter, Borrower's rights under this
Section 2.17(e) shall terminate and Borrower shall promptly pay all increased
costs or additional amounts demanded by such Affected Lender pursuant to
Sections 2.17(a) and (b).
18. TAXES. (a) Any and all payments by Borrower hereunder or under
the Notes shall be made, in accordance with this Section 2.18, free and clear of
and without deduction for any and all present or future Taxes. If Borrower
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under the Notes, (i) the sum payable shall be increased as
much as shall be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.18) Agent or Lenders, as applicable, receive an amount equal to the sum they
would have received had no such deductions been made, (ii) Borrower shall make
such deductions, and (iii) Borrower shall pay the full amount
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deducted to the relevant taxing or other authority in accordance with applicable
law. Within thirty (30) days after the date of any payment of Taxes, Borrower
shall furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof.
(a) Borrower shall indemnify and, within ten (10) days of demand
therefor, pay Agent and each Lender for the full amount of Taxes (including any
Taxes imposed by any jurisdiction on amounts payable under this Section 2.18)
paid by Agent or such Lender, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally asserted.
(b) Each Lender organized under the laws of a jurisdiction outside
the United States (a "Foreign Lender") as to which payments to be made under
this Agreement or under the Notes are exempt from United States withholding tax
under an applicable statute or tax treaty shall provide to Borrower and Agent a
properly completed and executed IRS Form 4224 or Form 1001 or other applicable
form, certificate or document prescribed by the IRS or the United States
certifying as to such Foreign Lender's entitlement to such exemption (a
"Certificate of Exemption"). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Borrower and
Agent prior to becoming a Lender hereunder. No foreign Person may become a
Lender hereunder if such Person is unable to deliver a Certificate of Exemption.
(c) Borrower agrees to pay all present or future Taxes that arise
from any payment made under this Agreement, the Notes or any other Loan Document
or with respect to this Agreement, the Notes, the other Loan Documents or any
other agreements and instruments contemplated hereby or thereby.
3. CONDITIONS PRECEDENT
1. CONDITIONS TO EFFECTIVENESS OF RESTATED LOAN AGREEMENT. This
Restated Loan Agreement shall become effective on the date (the "Closing Date")
upon which each of the following conditions have been satisfied, including the
delivery to Agent, with sufficient copies (other than the new Notes) for each
Lender, of each of the documents set forth below in form and substance
satisfactory to Agent, each dated the Closing Date:
(a) Counterparts of this Restated Loan Agreement duly executed by
Borrower, Lenders and Agent.
(b) New Revolving Credit Notes of Borrower payable to the order of
each Lender, in a principal amount equal to its Commitment as in effect after
giving effect to this Restated Loan Agreement, which new Revolving Credit Notes
shall be in substitution for all of the Revolving Credit Notes existing and as
in effect before giving effect to this Restated Loan Agreement.
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(c) Each Lender, other than GE Capital, shall have purchased from GE
Capital, by wire transfer of federal funds to an account designated by GE
Capital, its Ratable Portion of the outstanding Revolving Credit Loan, and
Borrower shall have similarly paid to GE Capital all accrued and unpaid interest
thereon through the Closing Date.
(d) Duly executed and acknowledged amendments to each Leasehold
Mortgage and/or Mortgage in form and substance acceptable to Agent and in
recordable form.
(e) Date-down and revolving credit endorsements to each title
insurance policy (or new mortgagee title insurance policies where such
endorsements are unavailable) insuring Lenders as first priority mortgagee
lienholders and showing the title to be free and clear of all encumbrances
except those reasonably acceptable to Agent.
(f) A favorable opinion of Schwabe Williamson & Wyatt P.C., counsel
to Borrower, and favorable opinions of special local counsel of Borrower in each
of the states of Alaska, Idaho, Oregon, Texas and Washington, as selected by
Borrower and approved by the Lenders, in each case in form and substance
satisfactory to Agent and as to such matters as Agent may reasonably request.
(g) (i) An Acknowledgment and Consent duly executed by each
Guarantor party to the Guaranty, each Grantor party to the Security Agreement
and each Pledgor party to the Pledge Agreement, consenting to the terms of this
Restated Loan Agreement and confirming that the Guaranty, the Security Agreement
and the Pledge Agreement, as applicable, remain in full force and effect and
continue to secure the Obligations pursuant to the terms thereof and (ii) an
Acknowledgment and Consent duly executed by TEMT Alaska, Inc. ("TEMT"), as
guarantor under that certain Agreement, dated as of May 1, 1989 (the "TEMT
Guaranty Agreement"), by and between TEMT, Borrower and GE Capital (as lender
and Agent) as beneficiary, consenting to the terms of this Restated Loan
Agreement and confirming that the TEMT Guaranty Agreement remains in full force
and effect and that each of Borrower and TEMT continue to remain personally
liable for the amount due under the Revolving Credit Notes and the Guaranty.
(h) Certified copy of the resolutions of the Board of Directors of
Borrower approving this Restated Loan Agreement, the new Revolving Credit Notes
and the Mortgage amendments and the consummation of the transactions
contemplated hereby and thereby and the execution of the documents to be
delivered in connection herewith and therewith.
(i) A Certificate of an officer of Borrower certifying as to the
accuracy, as of the Closing Date as though made on and as of such date, of the
representations and warranties of Borrower in this Agreement and the other Loan
Documents, after giving effect to this Restated Loan Agreement and the
transactions contemplated hereby, except to the extent it expressly relates to
an earlier date and for changes permitted or contemplated hereby.
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(j) A Certificate of the Secretary or Assistant Secretary of
Borrower as to incumbency and signatures of the officers of Borrower executing
this Restated Loan Agreement, the new Revolving Credit Notes, the Mortgage
amendments and any other certificate or other document to be delivered pursuant
hereto or thereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(k) Borrower shall have paid (i) to Agent all of the fees and
expenses required to be paid pursuant hereto and the fee letter referred to in
Section 2.10(a)(i) hereof and (ii) to Lenders all fees required to be paid
pursuant to Section 2.10(a)(ii) hereof.
(l) Such additional documents, opinions, consents, information and
materials as Agent may reasonably request.
2. CONDITIONS TO THE INITIAL AND EACH SUBSEQUENT REVOLVING CREDIT
ADVANCE. It shall be a condition precedent to the initial Revolving Credit
Advance made on or after the Closing Date and each subsequent Revolving Credit
Advance that Agent shall have received a Notice of Revolving Credit Advance and
that the following statements shall be true on the date of each such funding or
advance:
(a) All of the representations and warranties of the Loan Parties
contained herein or in any of the Loan Documents shall be correct on and as of
the Closing Date and the date of each such Revolving Credit Advance as though
made on and as of such date, except to the extent that any such representation
or warranty expressly relates to an earlier date and for changes therein
permitted or contemplated by this Agreement.
(b) No event shall have occurred and be continuing, or would result
from the funding of any Revolving Credit Advance, which constitutes or would
constitute a Default or an Event of Default.
(c) The aggregate unpaid principal amount of the Revolving Credit
Loan after giving effect to such Revolving Credit Advance, shall not exceed the
Maximum Revolving Credit Loan, as such amount may be reduced from time to time.
The acceptance by Borrower of the proceeds of any Revolving Credit
Advance shall be deemed to constitute, as of the date of such acceptance, (i) a
representation and warranty by Borrower that the conditions in this Section 3.2
have been satisfied and (ii) a confirmation by Borrower of the granting and
continuance of Agent's Lien pursuant to the Collateral Documents.
4. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Revolving Credit Loan as herein
provided for, Borrower makes the following representations and warranties to
Agent and Lenders, each and all of which shall be true and correct as of the
date of execution and delivery of this Agreement,
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except to the extent that any such representation or warranty expressly relates
to an earlier date and for changes therein since September 10, 1996 permitted or
contemplated by this Agreement, and shall survive the execution and delivery of
this Agreement:
1. CORPORATE OR PARTNERSHIP EXISTENCE; COMPLIANCE WITH LAW. Parent,
Borrower and each Subsidiary of the Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation (except for A 3 Ltd., which is a limited partnership duly formed
under the laws of the state of Texas); (ii) is duly qualified to do business and
is in good standing under the laws of each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification
(except for jurisdictions in which such failure so to qualify or to be in good
standing would not have a Material Adverse Effect); (iii) has the requisite
corporate power and authority (except for A 3 Ltd., which has the requisite
partnership power and authority) and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease, and to conduct its business as now, heretofore and proposed to be
conducted; (iv) has all material licenses, permits, consents or approvals from
or by, and has made all material filings with, and has given all material
notices to, all governmental authorities having jurisdiction, to the extent
required for such ownership, operation and conduct; (v) is in compliance with
its certificate of incorporation and by-laws (except for A 3 Ltd., which is in
compliance with all terms and provisions of the Partnership Agreement) other
than where the failure to so comply would not have a Material Adverse Effect;
and (vi) except as set forth in Schedule 4.1 hereto, is in compliance with all
applicable provisions of law where the failure to comply would have a Material
Adverse Effect.
2. EXECUTIVE OFFICES. The current location of Borrower's and each
of its Subsidiary's executive offices and principal place of business is set
forth on Schedule 4.2 hereto.
3. SUBSIDIARIES. There currently exist no Subsidiaries of Borrower
other than as set forth on Schedule 4.3 hereto, which sets forth such
Subsidiaries, together with their respective jurisdictions of organization, and
the authorized and outstanding capital Stock of each such Subsidiary, by class
and number and percentage of each class legally owned by Borrower or a
Subsidiary of Borrower or any other Person, owned as of the Closing Date.
Except as set forth on Schedule 4.3, there are no options, warrants, rights to
purchase or similar rights covering capital Stock for any such Subsidiary.
Schedules 4.8(a) and 4.8(b) set forth a complete and correct list of each
Theatre owned by Borrower and/or any of its Subsidiaries, including the address
and number of screens of each such Theatre, and the ownership thereof.
4. CORPORATE AND PARTNERSHIP POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. The execution, delivery and performance by Parent, Borrower and
its Subsidiaries of the Loan Documents, Ancillary Agreements and all instruments
and documents to be delivered by Parent, Borrower and its Subsidiaries, to the
extent they are parties thereto, hereunder and thereunder and the creation of
all Liens provided for herein and therein: (i) are within Parent's, Borrower's
and its Subsidiaries' corporate (or, with respect to A 3 Ltd., partnership)
power; (ii) have been duly authorized by all necessary or proper corporate (or,
with respect to A 3 Ltd., partnership)
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action; (iii) are not in contravention of any provision of Parent's, Borrower's
or its Subsidiaries' respective certificates or articles of incorporation or by-
laws (or, with respect to A 3 Ltd., the Partnership Agreement); (iv) will not
violate any law or regulation applicable to such party, or any order or decree
of any court or governmental instrumentality binding such party; (v) will not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument (other than Exhibition Contracts)
to which Parent, Borrower or any of its Subsidiaries is a party or by which
Parent, Borrower or any of its Subsidiaries or any of their property is bound
which reasonably could be expected to have a Material Adverse Effect; (vi) will
not result in the creation or imposition of any Lien upon any of the property of
Parent, Borrower or any of its Subsidiaries other than those in favor of
Lenders, all pursuant to the Loan Documents; and (vii) do not require the
consent or approval of any governmental body, agency, authority or, except as
set forth on Schedule 4.4 hereto, any other Person other than those which may be
required under Exhibition Contracts or those which have been obtained and copies
of which have been delivered to the Agent pursuant to Section 3.1(y) hereof or
which the failure to have obtained could not reasonably be expected to have a
Material Adverse Effect, each of which is in full force and effect. Each of the
Loan Documents and other Ancillary Agreements have been duly executed and
delivered for the benefit of or on behalf of Parent, Borrower or its
Subsidiaries, as the case may be, and each constitute a legal, valid and binding
obligation of Parent, Borrower or its Subsidiaries, to the extent they are
parties thereto, enforceable against them in accordance with its terms subject
to bankruptcy, insolvency, and other laws affecting creditors' rights generally
and to the application of equitable remedies.
5. SOLVENCY. After giving effect to the outstanding Revolving
Credit Loan and the payment of all estimated legal and other fees related
hereto, Borrower and each of its Subsidiaries is Solvent.
6. FINANCIAL STATEMENTS.
(a) The audited financial statements of Borrower and its
Subsidiaries as of December 31, 1995, a copy of which has been furnished to
Agent prior to the date of this Agreement, have been prepared in accordance with
GAAP and have been certified without qualification by Price Waterhouse L.L.P.
(b) The consolidated unaudited balance sheet as at September 30,
1996 and the related consolidated and consolidating unaudited profit and loss
statements and consolidated cash flow statement of Borrower and its
Subsidiaries, as the case may be, for the nine months then ended, copies of
which have been furnished to Agent prior to the date of this Agreement, have
been prepared in conformity with GAAP consistently applied throughout the
periods involved and present fairly in all material respects the consolidated
financial position of Borrower and its Subsidiaries at the date thereof, and the
results of operations and cash flows for the period then ended subject to normal
year-end audit adjustments.
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(c) None of Borrower or any of its Subsidiaries has any obligations,
contingent liability or liabilities for Charges or unusual forward or long-term
commitments which are not reflected in the September 30, 1996 consolidated
balance sheet of Borrower and its Subsidiaries, except those incurred in the
ordinary course of business since such date, none of which would have a Material
Adverse Effect.
(d) Except as previously disclosed in writing by Borrower to Agent
and Lenders, there has been no material adverse change in the business, assets,
operations, financial or other condition of Borrower and its Subsidiaries, taken
as a whole or in any given Market Segment, taken as a whole, in each case, since
December 31, 1995 (it being understood that, subsequent to the Closing Date,
this representation and warranty shall be subject to the fact that Borrower
shall have incurred the Obligations hereunder). No dividends or other
distributions have been declared, paid or made upon any shares of capital Stock
of Borrower or any of its Subsidiaries nor have any shares of capital Stock of
Borrower or any of its Subsidiaries been redeemed, retired, purchased or
otherwise acquired for value by Borrower or its Subsidiaries since December 31,
1995, otherwise than (i) as permitted by this Agreement, (ii) as reflected in
the September 30, 1996 consolidated balance sheet of Borrower and its
Subsidiaries or as set forth in Schedule 4.6(d) hereto or (iii) as previously
disclosed in writing by Borrower to, or consented to in writing by, Agent.
7. PROJECTIONS. The projected balance sheet, income statement and
statement of cash flows of Borrower and its consolidated Subsidiaries as at the
end of each month during the period commencing January 1, 1997, on a monthly
basis for Fiscal Year 1997 and on an annual basis for each of Fiscal Years 1998
through 2002, copies of which projections have been furnished to the Agent prior
to the date hereof, disclose all assumptions made with respect to general
economic, financial and market conditions in formulating such projections. To
the knowledge of Borrower no facts exist on the date hereof which would result
in any material change in any of such projections. The projections are based
upon reasonable estimates and assumptions on the date hereof, all of which are
fair in light of current conditions on such date, have been prepared on the
basis of the assumptions stated therein, and reflect the reasonable estimate of
Borrower on such date and the results of operations and other information
projected therein.
8. OWNERSHIP OF PROPERTY; LIENS. (a) (i) Borrower or its
Subsidiaries owns good and marketable fee simple title to all of the Real Estate
described on Schedule 4.8(a) hereto, and good and valid leasehold interests in
the Leases described in Schedule 4.8(b) hereto, and good and marketable title
to, or valid leasehold interests, licenses or other similar interests in, all of
its other properties and assets; (ii) none of the properties and assets of
Borrower or its Subsidiaries including, without limitation, the Real Estate and
Leases are subject to any Liens, except (x) Permitted Encumbrances and (y) from
and after the Closing Date, the Lien in favor of Agent, for its benefit and the
ratable benefit of Lenders, pursuant to the Collateral Documents; PROVIDED,
HOWEVER, that Borrower and its Subsidiaries make no warranty regarding and shall
have no liability for, any encumbrance, survey or title matter which relates to
the fee title or other interest
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in or to the premises leased under the Leases except only encumbrances, surveys
or other title matters related strictly to the Leases; and (iii) Borrower and
its Subsidiaries have received all deeds, assignments, waivers, consents, bills
of sale and other documents, and duly effected all recordings, filings and other
actions necessary to establish, protect and perfect Borrower's and its
Subsidiaries' right, title and interest in and to all such property except where
the failure to have received such documents or effected such actions will not,
in the aggregate, have a Material Adverse Effect.
(a) All real property owned or leased by Borrower and its
Subsidiaries is listed on Schedules 4.8(a) and 4.8(b) respectively. Neither
Borrower nor its Subsidiaries owns any other Real Estate or is a lessee or
lessor under any real property leases other than as set forth therein.
Schedules 4.8(a) and 4.8(b) are true and correct in all material respects. Part
One of Schedule 4.8(b) hereto sets forth all leases of real property held by
Borrower or any Subsidiary as lessee and Part Two of Schedule 4.8(b) describes
all leases of real property held by Borrower or any Subsidiary as lessor. Each
of such leases is valid and enforceable against Borrower or its Subsidiary, as
the case may be, and to Borrower's knowledge against the other party to such
lease in accordance with its terms, subject to bankruptcy, insolvency, and other
laws affecting creditors' rights generally and to the application of equitable
remedies, and is in full force and effect. Borrower has delivered to Agent true
and complete copies of each of such leases set forth on Part One and Part Two of
Schedule 4.8(b) and all documents affecting the rights or obligations of
Borrower or any Subsidiary which is a party thereto, including, without
limitation, any non-disturbance and recognition agreements, subordination
agreements, attornment agreements and agreements regarding the term or rental of
any of the leases. Neither Borrower nor the applicable Subsidiary nor, to the
best of Borrower's knowledge, any other party to any such lease, is in default
of its obligations thereunder or has delivered or received any notice of default
under any such lease, nor has any event occurred which, with the giving of
notice, the passage of time or both, would constitute a default under any such
lease, except for any default which could not reasonably be expected to have a
Material Adverse Effect.
(b) Except as set forth in the Leases or in the title reports
delivered to Agent on the Closing Date or on Schedule 4.8(c) hereto neither
Borrower nor any of its Subsidiaries owns or holds, or is obligated under or a
party to, any option, right of first refusal or other contractual right to
purchase, acquire, sell, assign, lease or dispose of any of the real property
owned or leased by Borrower or any of its Subsidiaries.
(c) Except as set forth in Schedule 4.8(d), all components of all
improvements included within the real property owned or leased by Borrower or
its Subsidiaries (hereinafter collectively referred to as the "Improvements"),
including, without limitation, the roofs and structural elements thereof and the
heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer,
waste water, storm water, paving and parking equipment, systems and facilities
included therein, are in good working order and repair, except to the extent
that such failure to be in good working order and repair does not have a
Material Adverse Effect. Except as set forth on Schedule 4.8(d) hereof all
water, gas, electrical, steam, compressed air, tele-
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communication, sanitary and storm sewage lines and systems and other similar
systems serving the real property owned or leased by Borrower or its
Subsidiaries are installed and operating and are sufficient to enable the real
property owned or leased by Borrower or its Subsidiaries to continue to be used
and operated in the manner currently being used and operated except where such
failure does not have a Material Adverse Effect and neither Borrower nor any of
its Subsidiaries has any knowledge of any factor or condition that could result
in the termination or material impairment of the furnishing thereof, except
where such failure does not have a Material Adverse Effect. No improvement or
portion thereof is dependent for its access, operation or utility on any land,
building or other Improvement not included in the real property owned or leased
by Borrower or its Subsidiaries other than pursuant to valid, written and
enforceable easements which are in full force and effect, except where such
failure does not have a Material Adverse Effect. None of Borrower, or any of
its Subsidiaries or, to the best of Borrower's knowledge, any other party is in
default under any such easement and no event has occurred which, with the giving
of notice, lapse of time or both, could constitute a default under any such
easement, except where such failure does not have a Material Adverse Effect.
(d) Except as set forth on Schedule 4.8(e) hereto, all certificates
of occupancy, permits, licenses, franchises, approvals and authorizations
(hereinafter collectively referred to as the "Real Estate Permits") of all
governmental authorities having jurisdiction over the real property owned or
leased by Borrower or its Subsidiaries required to have been issued or
appropriate to enable the real property owned or leased by Borrower or its
Subsidiaries to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used, have been lawfully issued and are, as of
the date hereof, in full force and effect except where the failure of such Real
Estate Permit to have been so issued or to be in full force and effect would not
have a Material Adverse Effect.
(e) Except as set forth on Schedule 4.8(f) hereto, neither the
Borrower nor any of its Subsidiaries has received any notice, nor has any
knowledge, of any pending, threatened or contemplated condemnation proceeding
affecting any real property owned or leased by Borrower or any of its
Subsidiaries or any part thereof, or any proposed termination or impairment of
any parking at any such owned or leased real property or of any sale or other
disposition of any real property owned or leased by Borrower or any of its
Subsidiaries or any part thereof in lieu of condemnation.
9.NO DEFAULT. Neither Borrower nor any of its Subsidiaries is in
default, nor to Borrower's knowledge is any third party in default, under or
with respect to any contract, agreement or other instrument (other than the
Leases) to which it is a party, except for any default which (either
individually or collectively with other defaults arising out of the same event
or events) would not have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
10. LABOR MATTERS. There are no strikes or other labor disputes
against Borrower or any of its Subsidiaries pending or, to Borrower's knowledge,
threatened which could be
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reasonably expected to have a Material Adverse Effect. Hours worked by and
payments made to employees of Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters which could reasonably be expected to have a Material Adverse
Effect. All payments due from Borrower or any of its Subsidiaries on account of
employee health and welfare insurance which could reasonably be expected to have
a Material Adverse Effect if not paid have been paid or accrued as a liability
on the books of Borrower or such Subsidiary.
11. OTHER VENTURES. Except as set forth in Schedule 4.11, neither
Borrower nor any Subsidiary is engaged in any joint venture or partnership with
any other Person.
12. INVESTMENT COMPANY ACT. None of Parent, Borrower nor any
Subsidiary is an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended. The making
of the Revolving Credit Advances by Lenders, the application of the proceeds and
repayment thereof by Borrower and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents will not violate any
provision of such Act or any rule, regulation or order issued by the Securities
and Exchange Commission thereunder.
13. MARGIN REGULATIONS. Borrower does not own any margin stock," as
that term is defined in Regulations G and U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), and the proceeds of the
Revolving Credit Advances will be used only for the purposes contemplated
hereunder. None of the Revolving Credit Advances will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin stock, for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin stock or for any other purpose which might cause
any of the loans under this Agreement to be considered a "purpose credit" within
the meaning of Regulation G, T, U or X of the Federal Reserve Board. Borrower
will not take or permit any agent acting on its behalf to take any action which
might cause this Agreement or any document or instrument delivered pursuant
hereto to violate any regulation of the Federal Reserve Board.
14. TAXES. All federal, state, local and foreign tax returns,
reports and statements required to be filed by Borrower and its Subsidiaries
(and each Affiliate with which Borrower or any of its Subsidiaries files
consolidated, combined or unitary returns) have been filed with the appropriate
governmental agencies and all Charges and other impositions shown thereon to be
due and payable have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof, or any such
fine, penalty, interest, late charge or loss has been paid, except where
contested in good faith by appropriate proceedings and for which adequate
reserves have been established and maintained on the books of Borrower, its
Subsidiary or Affiliate, as the case may be, in accordance with and to the
extent required by GAAP. Each of Borrower and its Subsidiaries has paid when
due and payable all Charges required to be paid by it, except where being
contested in good faith by appropriate proceedings.
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Proper and accurate amounts have been withheld by Borrower and its Subsidiaries
from their respective employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective governmental agencies. Schedule 4.14 sets forth,
for each of Borrower and its Subsidiaries, those taxable years for which its tax
returns are currently being audited by the IRS or any other applicable
governmental authority. Except as described in Schedule 4.14 hereto, neither
Borrower nor any of its Subsidiaries has executed or filed with the IRS or any
other governmental authority any agreement or other document extending, or
having the effect of extending, the period for assessment or collection of any
Charges. Neither Borrower nor any of its Subsidiaries has filed a consent
pursuant to IRC Section 341(f) or agreed to have IRC Section 341(f)(2) apply to
any dispositions of subsection (f) assets (as such term is defined in IRC
Section 341(f)(4)). None of the property owned by Borrower or any of its
Subsidiaries is property which such company is required to treat as being owned
by any other Person pursuant to the provisions of IRC Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, and in effect immediately prior to
the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of IRC Section 168(h). Neither Borrower nor any of its
Subsidiaries has agreed or has been requested to make any adjustment under IRC
Section 481(a) by reason of a change in accounting method or otherwise. Except
as set forth on Schedule 4.14, neither Borrower nor any of its Subsidiaries has
any obligation under any written tax sharing agreement.
15. ERISA. None of Borrower, any of its Subsidiaries or any ERISA
Affiliate maintains or contributes to any Plan other than those listed on
Schedule 4.15 hereto. Each Plan of the Borrower, any of its Subsidiaries or any
ERISA Affiliate which is not a Multiemployer Plan, and which is intended to be
tax qualified under IRC Section 401(a) has been determined by the IRS to qualify
under IRC Section 401, and the trusts created thereunder have been determined to
be exempt from tax under the provisions of IRC Section 501, and nothing has
occurred which would cause the loss of such qualification or the imposition of
any IRC or ERISA tax liability or penalty in excess of $500,000. With respect
to each Plan other than a Multiemployer Plan, all reports required under ERISA
or any other applicable law or regulation to be filed by Borrower, any of its
Subsidiaries or any ERISA Affiliate with the relevant governmental authority the
failure of which to file could reasonably result in a liability of Borrower, any
of its Subsidiaries or such ERISA Affiliate in excess of $500,000 have been duly
filed and all such reports are true and correct in all material respects as of
the date given. None of Borrower, any of its Subsidiaries or any ERISA
Affiliate has engaged in a "prohibited transaction," as such term is defined in
IRC Section 4975, Section 502 of ERISA and Title I of ERISA, in connection with
any Plan which would subject Borrower, such Subsidiary or such ERISA Affiliate
(after giving effect to any exemption) to the tax or penalty on prohibited
transactions imposed by IRC Section 4975, Section 502 of ERISA or any other
liability, provided that the "amount involved" under said section is in excess
of $500,000. No Plan has been terminated which resulted in any liability to
Borrower, any of its Subsidiaries or any ERISA Affiliate which has not been
satisfied, nor has any accumulated funding deficiency (as defined in IRC Section
412(a)) been incurred (without regard to any waiver granted under IRC Section
412), nor has any funding waiver from the IRS been
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received or requested, nor has Borrower, any of its Subsidiaries or any ERISA
Affiliate failed to make any contributions or to pay any amounts due and owing
as required by Section 412 of the IRC, Section 302 of ERISA or the terms of any
Plan prior to the due date of such contribution under Section 412 of the IRC or
Section 302 of ERISA which are still outstanding or which would result in the
imposition of a Lien under such Sections, nor has there been any Reportable
Event or any event requiring disclosure under Section 4041(c)(3)(C), 4063(a) or
4068(f) of ERISA with respect to any Plan (other than a Multiemployer Plan)
which would result in liability to Borrower, any of its Subsidiaries or any
ERISA Affiliate in excess of $500,000.
The present value of the "benefit liabilities" as defined in Title
IV of ERISA of each such Plan as of the end of the preceding plan year using
Plan actuarial assumptions as in effect for such plan year do not exceed the
value of the assets of each Plan (other than a Multiemployer Plan) by more than
$500,000. There are no claims (other than claims for benefits in the normal
course), actions or lawsuits asserted or instituted against, and none of
Borrower, any of its Subsidiaries or any ERISA Affiliate has knowledge of any
threatened litigation or claims against (i) the assets of any Plan (other than a
Multiemployer Plan) or against any fiduciary of such Plan with respect to the
operation of such Plan or (ii) the assets of any employee welfare benefit plan
within the meaning of ERISA Section 3(1) or against any fiduciary thereof with
respect to the operation of any such Plan, which, if adversely determined, could
have a material effect on the business, operations, properties, assets or
condition (financial or otherwise) of Borrower, any of its Subsidiaries or any
ERISA Affiliate, taken as a whole. Any bond required to be obtained by
Borrower, any of its Subsidiaries or any ERISA Affiliate under ERISA with
respect to any Plan has been obtained and is in full force and effect. None of
Borrower, any of its Subsidiaries or any ERISA Affiliate has incurred (a) any
liability to the PBGC, (b) any withdrawal liability (and no event has occurred
which, with the giving of notice under Section 4219 of ERISA, would result in
such liability) under Section 4201 of ERISA as a result of a complete or partial
withdrawal (within the meaning of Section 4203 or 4205 of ERISA) from a
Multiemployer Plan or (c) any liability under ERISA Section 4062 to the PBGC or
to a trustee appointed under ERISA Section 4042, any of which liability would
exceed $500,000. None of Borrower, any of its Subsidiaries or any ERISA
Affiliate nor any organization to which Borrower, any of its Subsidiaries or any
such ERISA Affiliate is a successor or parent corporation within the meaning of
ERISA Section 4069(b) has engaged in a transaction within the meaning of ERISA
Section 4069. None of Borrower, any of its Subsidiaries or any ERISA Affiliate
maintains or has established any welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment except as may be required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), and the regulations
thereunder, and at the expense of the participant or the beneficiary of the
participant. Borrower, any of its Subsidiaries and each ERISA Affiliate
maintain a welfare benefit plan within the meaning of Section 3(1) of ERISA and
has complied with the notice and continuation coverage requirements of COBRA and
the regulations thereunder.
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16. NO LITIGATION. Except as set forth on Schedule 4.16 hereto, no
action, claim or proceeding is now pending or, to the knowledge of Borrower,
threatened against Parent, Borrower or any of its Subsidiaries, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators, which, if
determined adversely, could reasonably be expected to have a Material Adverse
Effect, nor to the knowledge of Borrower does a state of facts exist which is
reasonably likely to give rise to such proceedings. None of the matters set
forth therein questions the validity of any of the Loan Documents or any action
taken or to be taken pursuant thereto.
17. BROKERS. Except as set forth on Schedule 4.17, no broker or
finder acting on behalf of Borrower brought about the obtaining, making or
closing of the loans made pursuant to this Agreement and Borrower has no
obligation to any Person, except as set forth on Schedule 4.17, in respect of
any finder's or brokerage fees in connection with the Loans contemplated by this
Agreement.
18. Intentionally Omitted.
19. OUTSTANDING STOCK; OPTIONS; WARRANTS; ETC. The Stock of Borrower
owned by Parent and the Stock of Parent owned by the Stockholders of Parent
named on Schedule 4.19 at the Closing Date constitute all of the issued and
outstanding Stock of Borrower and Parent, respectively, immediately following
the Closing Date. Borrower has no outstanding rights, options, warrants or
agreements pursuant to which it may be required to issue or sell any Stock.
Except as set forth on Schedule 4.19, Parent has no outstanding rights, options,
warrants or agreements pursuant to which it may be required to issue or sell any
stock.
20. EMPLOYMENT AND LABOR AGREEMENTS. Except as set forth on Schedule
4.20, there are no employment or management agreements covering management of
Borrower or any of its Subsidiaries and there are no collective bargaining
agreements or other labor agreements covering any employees of Borrower or any
of its Subsidiaries. A true and complete copy of each such agreement has been
furnished to Agent.
21. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. To the best of
Borrower's knowledge, Borrower and its Subsidiaries own all material licenses,
patents, patent applications, copyrights, service marks, trademarks, trademark
applications, and trade names necessary to continue to conduct their business as
heretofore conducted by them, now conducted by them and proposed to be conducted
by them, each of which is listed, together with Patent and Trademark Office
application or registration numbers, where applicable, on Schedule 4.21 hereto.
To the best of Borrower's knowledge, except as set forth on Schedule 4.21
hereto, Borrower and its Subsidiaries conduct their respective businesses
without infringement or claim of infringement of any license, patent, copyright,
service mark, trademark, trade name, trade secret or other intellectual property
right of others, except where such infringement or claim of infringement could
not reasonably be expected to have a Material Adverse Effect. To the best of
Borrower's
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knowledge, except as set forth in Schedule 4.21 hereto, there is no infringement
or claim of infringement by others of any material license, patent, copyright,
service mark, trademark, trade name, trade secret or other intellectual property
right of Borrower or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
22. FULL DISCLOSURE. No representation or warranty of any Loan Party
contained in this Agreement, including the Schedules hereto, or in the other
Loan Documents or Ancillary Agreements furnished by or on behalf of Parent,
Borrower or any of Borrower's Subsidiaries to Agent or any Lender pursuant to
the terms of this Agreement is untrue or incorrect in any material respect and
none of such Loan Documents or Ancillary Agreements contains any untrue
statement of any Loan Party of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which made.
23. LIENS. The Liens granted to the Lenders pursuant to the
Mortgages and the Leasehold Mortgages were at the Closing Date fully perfected
first priority Liens, subject to Permitted Encumbrances, in and to the
Collateral therein described upon their recording.
24. NO MATERIAL ADVERSE EFFECT. To the best of Borrower's knowledge,
except as set forth on Schedule 4.24, no event has occurred since December 31,
1995 and is continuing which has had or could reasonably be expected to have a
Material Adverse Effect.
25. ENVIRONMENTAL PROTECTION. To the best of Borrower's knowledge,
the operations of the Borrower and each of its Subsidiaries comply in all
material respects with all Environmental Laws; and to the best of Borrower's
knowledge and except as set forth on Schedule 4.25 (i) the Borrower and each of
its Subsidiaries have obtained all material environmental, health and safety
Permits necessary for their respective operations, and all such Permits are in
good standing, and the Borrower and each of its Subsidiaries are in compliance
with all material terms and conditions of such Permits; (ii) none of the
operations of the Borrower or any of its Subsidiaries is subject to any judicial
or administrative proceeding alleging the violation of any Environmental Laws
which if adversely determined could reasonably be expected to have a Material
Adverse Effect; (iii) the Borrower and each of its Subsidiaries and all of their
present Facilities or operations, as well as their past Facilities or
operations, are not subject to any outstanding written order or agreement with
any governmental authority or private party respecting (A) any Environmental
Laws, (B) any Remedial Action, or (C) any Environmental Claims; (iv) none of the
operations of the Borrower or any of its Subsidiaries is the subject of any
Federal or state investigation evaluating whether any Remedial Action is needed
to respond to a Release of any Contaminant into the environment; (v) neither the
Borrower nor any of its Subsidiaries or any predecessor of the Borrower or any
Subsidiary has filed any notice under any Federal or state law indicating past
or present treatment, storage, or disposal of a hazardous waste or reporting a
spill or Release of a Contaminant into the environment; (vi) neither the
Borrower nor any of its Subsidiaries has any contingent liability in connection
with any Release by Borrower or any of its Subsidiaries of any Contaminant into
the environment; (vii) none of the
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Borrower's or any of its Subsidiary's operations involve the generation,
transportation, treatment or disposal of hazardous waste, as defined under 40
C.F.R. Parts 260-270 or any state equivalent; (viii) neither the Borrower nor
any of its Subsidiaries has disposed of any Contaminant by placing it in or on
the ground or waters of any premises owned, leased or used by the Borrower or
such Subsidiary and neither has any lessee, prior owner, or other Person; (ix)
no underground storage tanks or surface impoundments are on the Borrower's
Facilities or the Facilities of any of its Subsidiaries; and (x) no Lien in
favor of any governmental authority for (A) any liability under Environmental
Laws, or (B) damages arising from or costs incurred by such governmental
authority in response to a Release of a Contaminant into the environment has
been filed or attached to the Borrower's Facilities or the Facilities of any
Subsidiary of the Borrower.
26. PRIOR LIENS. Schedule 4.26 sets forth a true, correct and
complete list of Indebtedness outstanding as at the Closing Date which is
secured by any Lien on any of Borrower's or any Subsidiaries' interest in the
Real Estate and Leases which is superior to the Lien granted to Agent pursuant
to the Loan Documents, the outstanding principal balance due and payable on such
Indebtedness as of the respective dates set forth on Schedule 4.26, the interest
rate presently payable on such Indebtedness and the monthly payment required to
be made in respect thereof; PROVIDED, HOWEVER, that failure to list any
Indebtedness secured by any Lien which otherwise constitutes a Permitted
Encumbrance shall not constitute an Event of Default. Neither Borrower nor any
Subsidiary is in default under any loan document securing such Indebtedness and
no event has occurred which with the giving of notice, lapse of time or both,
would constitute a default thereunder, except for any such default which would
not have a Material Adverse Effect.
5. FINANCIAL STATEMENTS AND INFORMATION
1. REPORTS AND NOTICES. Borrower covenants and agrees that from and
after the Closing Date and until the Termination Date, it shall deliver to each
Lender:
(a) Within 37 days after the end of each fiscal month, (i) a copy of
the unaudited consolidated balance sheet of Borrower and its Subsidiaries as of
the end of such month and the related consolidated and consolidating profit and
loss (including attendance figures) statements of Borrower and its Subsidiaries
broken down by Market Segment, and consolidated statement of Corporate Overhead,
for that portion of the Fiscal Year ending as of the end of such month and (ii)
a copy of the unaudited consolidated and consolidating profit and loss
(including attendance figures) statements of Borrower and its Subsidiaries
broken down by Market Segment, consolidated statement of cash flows of Borrower
and its Subsidiaries, and consolidated statement of Corporate Overhead for such
month, all prepared in accordance with GAAP (subject to normal year end
adjustments and footnotes), setting forth, in comparative form, the projected
and historical consolidated and consolidating figures for such period.
(b) Within 45 days after the end of each fiscal quarter of each
Fiscal Year, (i) a copy of the unaudited consolidated balance sheet of Borrower
and its Subsidiaries as of the close
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of such quarter and the related consolidated and consolidating profit and loss
(including attendance figures) statements of Borrower and its Subsidiaries
broken down by Market Segment, and statements of Corporate Overhead for that
portion of the Fiscal Year ending as of the close of such quarter and (ii) a
copy of the unaudited consolidated and consolidating profit and loss (including
attendance figures) statements of Borrower and its Subsidiaries broken down by
Market Segment, consolidated statement of cash flows of Borrower and its
Subsidiaries, and consolidated statement of Corporate Overhead for such quarter,
all prepared in accordance with GAAP (subject to normal year end adjustments and
footnotes), setting forth, in comparative form, the projected and historical
consolidated and consolidating figures for such period and accompanied by (A) a
statement in reasonable detail showing the calculations used in determining the
financial covenants under Sections 6.3 and 7.10 hereof, and (B) the
certification of the chief financial officer of Borrower that all such financial
statements present fairly in all material respects in accordance with GAAP
(subject to normal year end adjustments) the consolidated and consolidating
financial position of Borrower, its Subsidiaries, the Market Segments as at the
end of such quarter and for the period then ended, and that there was no Default
or Event of Default in existence as of such time.
(c) Within 90 days after the end of each Fiscal Year, (i) a copy of
the annual audited consolidated financial statements of Borrower and its
Subsidiaries consisting of the annual consolidated balance sheet and
consolidated profit and loss statements and statements of cash flows and
retained earnings as of the end of such Fiscal Year, (ii) a copy of the annual
unaudited consolidated and consolidating financial statements of Borrower and
its Subsidiaries, consisting of the consolidated and consolidating profit and
loss (including attendance figures) statements of Borrower and its Subsidiaries
broken down by Market Segment, and consolidated statement of Corporate Overhead,
for the Fiscal Year then ended and (iii) a summary of the profit and loss
statement for each Theatre (including attendance figures) for the Fiscal Year
then ended, setting forth, in comparative form, the historical consolidated and
consolidating figures for the previous Fiscal Year, which financial statements
shall be prepared in accordance with GAAP, certified (only with respect to the
consolidated financial statements) without qualification by Price Waterhouse, or
any other firm of independent certified public accountants of recognized
national standing selected by Borrower and reasonably acceptable to Agent, and
accompanied by (A) a statement in reasonable detail showing the calculations
used in determining the financial covenants under Sections 6.3 and 7.10 hereof,
(B) a report from such accountants to the effect that in connection with their
audit examination, nothing has come to their attention to cause them to believe
that a Default or Event of Default had occurred and (C) a certification of the
chief executive officer or chief financial officer of Borrower that all such
financial statements are complete and correct and present fairly in accordance
with GAAP the consolidated and consolidating financial position of Borrower, its
Subsidiaries and the Market Segments as at the end of such year and for the
period then ended and that there was no Default or Event of Default in existence
as of such time.
(d) As soon as practicable, but in any event within two (2) Business
Days after Borrower becomes aware of the existence of any Default or Event of
Default, or any development
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or other information which would have a Material Adverse Effect, notice by
telephone or telecopy specifying the nature of such Default or Event of Default
or development or information, including the anticipated effect thereof, which
notice shall be promptly confirmed in writing within five (5) days.
(e) Not later than 45 days prior to the beginning of each Fiscal
Year:
(i) a projected consolidated balance sheet of Borrower and
its Subsidiaries for such Fiscal Year, on a monthly basis, and on an annual
basis for each remaining Fiscal Year through the Commitment Termination
Date;
(ii) projected consolidated and consolidating profit and
loss statements of Borrower and its Subsidiaries broken down by Market
Segment, consolidated statement of cash flow of Borrower and its
Subsidiaries, and consolidated statement of Corporate Overhead, including
summary details of cash disbursements, including for Capital Expenditures,
and a summary of Funded Debt, for such Fiscal Year, on a monthly basis, and
on an annual basis for each remaining Fiscal Year through the Commitment
Termination Date; and
(iii) an annual business plan approved by the board of
directors of Borrower, setting forth in reasonable detail (A) the
annual budget for Borrower and its Subsidiaries broken down by
Market Segment, and (B) the operating profit and loss (including
attendance figures) and cash flow projections for Borrower and its
Subsidiaries broken down by Market Segment and statements of
Corporate Overhead, in each case for the following Fiscal Year and
for each remaining Fiscal Year through the Commitment Termination
Date;
together with appropriate supporting details as reasonably requested by Agent.
(f) If requested by Agent or any Lender, copies of all federal,
state, local and foreign tax returns and reports in respect of income, franchise
or other taxes on or measured by income (excluding sales, use or like taxes)
filed by Borrower or any of its Subsidiaries.
(g) Such other information respecting Borrower's, any of its
Subsidiaries', or any of the Theatres' business, assets, operations or financial
condition as Agent may, from time to time, reasonably request.
(h) As soon as practicable, a list of the participants in the
Compensation Plan and all amounts to be paid annually under the Compensation
Plan and, as soon as practicable following any changes in the participants in or
the amounts to be paid annually under the Compensation Plan, a list of the
participants added to and the changes in the amounts to be paid under the
Compensation Plan, as well as a list of those participants removed from the
Compensation Plan.
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(i) Within one fiscal month plus five Business Days following the
end of each fiscal month following the Closing Date, an itemized report of all
fees, costs and expenditures paid or incurred by the Borrower pursuant to
Section 7.7(a) hereof.
2. COMMUNICATION WITH ACCOUNTANTS. Borrower authorizes Agent, on
behalf of itself and on behalf of Lenders (at Agent's and Lenders' sole expense
unless an Event of Default shall have occurred and be continuing), to
communicate directly with Borrower's independent certified public accountants
and Borrower authorizes those accountants to disclose to Agent any and all
financial statements and other supporting financial documents and schedules
including copies of any management letter with respect to the business,
financial condition and other affairs of Borrower and any of its Subsidiaries.
Agent and each Lender shall maintain the confidentiality of any information
received by it as a result of any such communication and shall not disclose any
such information to any Person other than (a) to a potential purchaser of a Note
or a participant, in which event such potential purchaser or participant shall
similarly agree not to disclose such information received by it, (b) upon the
Occurrence and continuance of an Event of Default, in which event the recipient
thereof shall similarly agree not to disclose such information, (c) in
connection with the exercise of any remedies of Agent or any Lender, as the case
may be under any Collateral Document and (d) to the extent any such disclosure
is required by law. At or before the Closing Date, Borrower delivered a letter
addressed to such accountants instructing them to comply with the provisions of
this Section 5.2.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless the Required Lenders
shall otherwise consent in writing, from and after the date hereof and until the
Termination Date:
1. MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Borrower
shall and shall cause each of its Subsidiaries to (a) do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence or its existence as a general or limited partnership, as the case may
be, and its rights, licenses, privileges and franchises material to the conduct
of its business; (b) continue to conduct its business substantially as now
conducted or as otherwise permitted hereunder; (c) at all times maintain,
preserve and protect all of its trademarks and trade names, and preserve all the
remainder of its property, in use or useful in the conduct of its business and
keep the same in good repair, working order and condition (taking into
consideration ordinary wear and tear) and from time to time make, or cause to be
made, all needful and proper repairs, renewals and replacements, betterments and
improvements thereto consistent with motion picture theatre industry practices,
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times; and (d) transact business in such names
as Borrower or such Subsidiary may from time to time use in conducting its
businesses.
2. PAYMENT OF OBLIGATIONS. (a) Subject to the provisions of
Section 6.2(b), Borrower shall and shall cause each of its Subsidiaries to (i)
pay and discharge or cause to be paid
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and discharged all its Indebtedness and all of its payment obligations under any
Lease including, without limitation, all the Obligations, as and when due and
payable, (ii) pay and discharge or cause to be paid and discharged promptly all
(A) Charges imposed upon it, its income and profits, or any of its property
(real, personal or mixed), and (B) lawful claims for labor, materials, supplies
and services or otherwise before any thereof shall become in default, and (iii)
pay and discharge all present and future documentary or stamp taxes or other
excise or property taxes, charges or similar levies of the United States or any
state or political subdivision thereof, or any applicable foreign jurisdiction
that arise from the execution, delivery or registration of the Notes or any of
the other Loan Documents.
(a) Borrower and its Subsidiaries may in good faith contest, by
appropriate proceedings, the validity or amount of any Indebtedness (other than
the Obligations) or any payment obligation under any Lease, Charges or claims
arising under Section 6.2(a)(i), (ii) or (iii), provided that at the time of
commencement of any such proceeding, and during the pendency thereof (i) no
Default or Event of Default shall have occurred; (ii) adequate Reserves with
respect thereto are maintained on the books of Borrower or such Subsidiary, in
accordance with and to the extent required by GAAP; (iii) an adverse
determination of such proceeding could not reasonably be expected to have a
Material Adverse Effect or result in a forfeiture or loss of Collateral, which
forfeiture or loss could reasonably be expected to have a Material Adverse
Effect; and (iv) Borrower or such Subsidiary shall promptly pay or discharge
such contested Charges and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Agent evidence acceptable to Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to Borrower or such Subsidiary.
(b) Notwithstanding anything to the contrary contained in Section
6.2(b) above, Borrower and each of its Subsidiaries shall have the right to pay
the Indebtedness, obligations, Charges or claims arising under Section 6.2(a)
and in good faith contest, by appropriate proceedings, the validity or amount of
such Indebtedness, obligations, Charges or claims.
3. FINANCIAL COVENANTS. Borrower and its Subsidiaries shall, on a
consolidated basis:
(a) maintain at the end of each fiscal quarter set forth below a
Consolidated Total Funded Debt to Consolidated Cash Flow Ratio equal to or less
than the ratio set forth below:
For Each Fiscal Quarter
Ending: Maximum Ratio:
-------------------- --------------
March 31, 1997 5.50:1.00
June 30, 1997 5.50:1.00
September 30, 1997 5.50:1.00
December 31, 1997 5.50:1:00
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March 31, 1998 5.50:1.00
June 30, 1998 5.50:1.00
September 30, 1998 5.50:1.00
December 31, 1998 5.00:1.00
and thereafter
(b) maintain at the end of each fiscal quarter set forth below a
Consolidated Interest Coverage Ratio equal to or greater than the ratio set
forth below:
For Each Fiscal Quarter
Ending: Minimum Ratio:
-------------------- --------------
March 31, 1997 2.15:1.00
June 30, 1997 2.15:1.00
September 30, 1997 2.15:1.00
December 31, 1997 2.15:1:00
March 31, 1998 2.15:1.00
June 30, 1998 2.25:1.00
September 30, 1998 2.40:1.00
December 31, 1998 2.50:1.00
and thereafter
(c) maintain at the end of each fiscal quarter set forth below a
Consolidated Cash Flow to Consolidated Fixed Charges Ratio equal to or greater
than the ratio set forth below:
For Each Fiscal Quarter
Ending: Minimum Ratio:
-------------------- --------------
during 1997 2.00:1.00
March 31, 1998 2.00:1.00
June 30, 1998 2.10:1.00
September 30, 1998 2.25:1.00
December 31, 1998 2.25:1.00
during 1999 1.75:1.00
during 2000 1.50:1.00
and thereafter
4. LENDER'S FEES. Borrower shall pay to Agent, on demand, any and
all fees, costs or expenses that Agent shall pay to a bank or other similar
institution arising out of or in
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connection with the forwarding to Borrower or any other Person on behalf of
Borrower by Agent of proceeds of the Revolving Credit Advances.
5. BOOKS AND RECORDS. Borrower shall and shall cause each of its
Subsidiaries to keep adequate records and books of account with respect to its
business activities, in which proper entries, reflecting all of their financial
transactions, are made in accordance with GAAP and on a basis consistent with
the financial statements referred to in Section 4.6(b) hereof.
6. LITIGATION. Borrower shall notify Agent in writing, promptly upon
learning thereof, of any litigation commenced against Borrower and/or any of the
Subsidiaries, and of the institution against any of them of any suit or
administrative proceeding that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
7. INSURANCE. Schedule 6.7 lists all insurance of any nature
maintained by Borrower and each Subsidiary of Borrower, as well as a summary of
the terms of such insurance. Borrower shall and shall cause each Subsidiary of
Borrower to maintain insurance in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which Borrower and such Subsidiary
operates, including, without limitation, fire, theft, burglary, public
liability, property damage, product liability, workers' compensation and
insurance on all property and assets, all under policies issued by insurers
reasonably satisfactory to Agent and with a lender's loss payable clause in
favor of Agent for the benefit of the Lenders and in accordance with the
provisions of Schedule 6.7B. Borrower shall and shall cause each of its
Subsidiaries to pay all insurance premiums payable by them as and when due and
payable.
8. COMPLIANCE WITH LAW. Borrower shall and shall cause each of its
Subsidiaries to comply with all federal, state and local laws and regulations
applicable to it, including, without limitation, ERISA, those regarding the
collection, payment and deposit of employees' income, unemployment and social
security taxes and those relating to environmental matters where the failure to
comply could reasonably be expected to have a Material Adverse Effect.
9. AGREEMENTS. Subject to the provisions of Section 6.2(b) hereof,
Borrower shall and shall cause each of its Subsidiaries to perform and comply,
within all required time periods (after giving effect to any applicable grace
periods), all of its obligations and enforce all of its rights under each
agreement to which it is a party, including, without limitation, any Lease or
Restricted Lease to which any such Loan Party is a party, whether now or
hereafter entered into by such party, where the failure to so perform, comply
and enforce could reasonably be expected to have a Material Adverse Effect.
10. SUPPLEMENTAL DISCLOSURE. Upon request of Agent or any Lender,
from time to time as may be necessary (in the event that such information is not
otherwise delivered by Borrower to Lenders pursuant to this Agreement), so long
as there are Obligations outstanding hereunder, Borrower will supplement or
amend each Schedule or representation herein with
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respect to any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
such Schedule or as an exception to such representation or which is necessary to
correct any information in such Schedule or representation which has been
rendered inaccurate thereby. Delivery of any supplemental information pursuant
to this Section 6.10 shall not be deemed an amendment to the representations and
warranties of this Agreement.
11. EMPLOYEE PLANS. (a) With respect to other than a Multiemployer
Plan, or each Plan hereafter adopted or maintained by Borrower, or any of its
Subsidiaries or any ERISA Affiliate of Borrower, Borrower shall or shall cause
such Subsidiary and ERISA Affiliate to (i) use its best efforts to seek and
receive determination letters from the IRS to the effect that such Plan is
qualified within the meaning of IRC Section 401(a); (ii) from and after the
adoption of any Plan, use its best efforts to cause such Plan to be qualified
within the meaning of IRC Section 401(a) and to be administered in all material
respects in accordance with the requirements of ERISA and IRC Section 401(a);
(iii) make all required contributions to such Plans by the due date under
Section 412 of the IRC and Section 302 of ERISA in order to avoid the imposition
of a Lien under such Sections; and (iv) not take any action which would cause
such Plan not to be qualified within the meaning of IRC Section 401(a) or not to
be administered in all material respects in accordance with the requirements of
ERISA and IRC Section 401(a).
(a) Borrower shall and shall cause each Subsidiary and ERISA
Affiliate to deliver to Lender: (i) (A) as soon as possible and in any event
within 30 days, after Borrower, or any of its Subsidiaries or any such ERISA
Affiliate knows or has reason to know that any ERISA Event described in clause
(a) of the definition of ERISA Event or any event requiring disclosure under
Section 4063(a) of ERISA with respect to any Plan has occurred, and (B) within
10 days after the Borrower, or any of its Subsidiaries or any ERISA Affiliate
knows or has reason to know that any other ERISA Event with respect to any Plan
has occurred or a request for a minimum funding waiver under IRC Section 412
with respect to any Plan or any Multiemployer Plan, a statement of the chief
financial officer of Borrower, or any of its Subsidiaries or such ERISA
Affiliate setting forth details as to such ERISA Event or other event and the
action which Borrower, or any of its Subsidiaries or such ERISA Affiliate
proposes to take with respect thereto, together with a copy of the notice of
such ERISA Event or other event, if required by the applicable regulations under
ERISA, given to the PBGC; (ii) promptly after the filing thereof by Borrower, or
any of its Subsidiaries or such ERISA Affiliate with the DOL, IRS or the PBGC,
copies of each annual and other report with respect to each Plan; (iii) promptly
after receipt thereof, a copy of any notice, determination letter, ruling or
opinion Borrower, or any of its Subsidiaries or such ERISA Affiliate may receive
from the PBGC, DOL or IRS with respect to any Plan; (iv) promptly, and in any
event within ten Business Days, after receipt thereof, a copy of any
correspondence Borrower, or any of its Subsidiaries or such ERISA Affiliate
receives from the Plan Sponsor (as defined by ERISA Section 4001(a)(10)) of any
Plan concerning potential withdrawal liability pursuant to ERISA Section 4219
and/or Section 4202, and a statement from the chief financial officer of
Borrower, or any of its Subsidiaries or such ERISA Affiliate setting forth
details as to the events giving rise to such potential withdrawal liability and
the action which Borrower, or any
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of its Subsidiaries or such ERISA Affiliate proposes to take with respect
thereto; (v) notification within 30 days of any material increases in the
benefits of any existing Plan which is not a Multiemployer Plan, or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which Borrower, or any of its Subsidiaries or such ERISA Affiliate was not
previously contributing within 30 days; (vi) promptly, and in any event within
ten Business Days, after receipt thereof by Borrower, or any of its Subsidiaries
or such ERISA Affiliate from the PBGC, copies of each notice received by
Borrower, or any of its Subsidiaries or such ERISA Affiliate of the PBGC's
intention to terminate any Plan or to have a trustee appointed to administer any
Plan; (vii) notification within ten days of a request for a minimum funding
waiver under IRC Section 412 with respect to any Plan and a copy of such
request; (viii) notification within two Business Days after Borrower, or any of
its Subsidiaries or any ERISA Affiliate knows or has reason to know that
Borrower or such ERISA Affiliate has or intends to file a notice of intent to
terminate any Plan under a distress termination within the meaning of Section
4041(c) of ERISA and a copy of such notice; and (ix) promptly after the
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting Borrower, any of its
Subsidiaries or any ERISA Affiliate or any Plan except those which, if adversely
determined, would not have a reasonable likelihood of having a Material Adverse
Effect.
12. LEASES; NEW REAL ESTATE. (a) Borrower shall provide, or shall
cause the applicable Subsidiary to provide, Agent with copies of all leases of
real property or similar agreements (and all amendments thereto) entered into by
Borrower or any Subsidiary after the Closing Date, whether as lessor or lessee.
Any new lease of real property entered into by Borrower or any of its
Subsidiaries in respect of any Theatre shall expressly permit the mortgaging
thereof to Agent, on behalf of Lenders, and shall contain such customary
leasehold lender protections as may be reasonably required by Agent, it being
understood that the leasehold lender protections in substantially the form set
forth in Schedule 6.12 hereof shall be deemed to satisfy such leasehold lender
protection requirements and such non-disturbance and other provisions as shall
be reasonably satisfactory to Agent other than a provision requiring Agent's
consent to any modification, amendment, termination or surrender of such Lease;
PROVIDED, HOWEVER, that the foregoing shall not be construed as limiting or
modifying Borrower's covenants under Section 7.16(c) hereof. Borrower shall, or
shall cause the appropriate Subsidiary to, (i) provide Agent with a copy of each
notice of default received by Borrower or such Subsidiary under any such lease
upon receipt of any such notice and deliver to Agent a copy of each notice of
default sent by Borrower or such Subsidiary under any such lease simultaneously
with its delivery of such notice under such lease; (ii) use its best efforts to
notify Agent, not later than 30 days prior to the date of the expiration of the
term of any such lease, of intention either to renew or not renew any such
lease, and, if Borrower or such Subsidiary shall intend to renew such lease, the
terms and conditions of such renewal lease; and (iii) use its best efforts to
notify Agent at least 14 days prior to the date Borrower or such Subsidiary
takes possession of or becomes liable under any new leased premises or lease,
whichever is earlier. With respect to the Leases subject to any Leasehold
Mortgage, Borrower and the appropriate Subsidiary shall comply with the
provisions of the applicable Leasehold Mortgage with respect to the applicable
Leases; PROVIDED,
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HOWEVER, that in the event of any conflict between the provisions of this
Agreement and the provisions of the applicable Leasehold Mortgage, the
provisions hereof shall control.
(a) If at any time prior to the Termination Date, Borrower or any of
its Subsidiaries shall acquire any Real Estate or enter into a Lease for a
Theatre, Borrower or any such Subsidiary shall cause such Lease or a memorandum
thereof to be recorded in the appropriate recording office.
(b) Any construction, architectural or similar building agreement
entered into by Borrower or any of its Subsidiaries in respect of any
construction to occur at any of the Real Estate or the real property leased by
Borrower or any of its Subsidiaries (other than a Lease for which the landlord
thereof performs the construction) for a cost to Borrower or any of its
Subsidiaries in excess of $500,000 for any one such agreement shall provide that
such agreement may be assigned to Agent or any subsequent assignee who shall be
financially capable of performing the Borrower's or any of its Subsidiaries'
obligations under such Agreement without additional compensation to such
contractor or architect who shall recognize Agent or such subsequent assignee as
the contract party thereto from and after the date of such assignment provided
that Agent or such assignee shall cure all defaults susceptible to being cured
by Agent and shall assume all of the Borrower's or its Subsidiaries' obligations
arising from and after the date of such assignment but only for so long as Agent
or such assignee shall have title to such Real Estate or leasehold interest.
13. ENVIRONMENTAL MATTERS. (a) Borrower shall and shall cause each
of its Subsidiaries to (i) comply in all material respects with the
Environmental Laws applicable to it, (ii) notify Agent promptly after knowledge
in the event of any Release of any Contaminant upon or affecting any premises
owned or occupied by such Person which Release is reasonably expected to have a
Material Adverse Effect, and (iii) promptly forward to Agent a copy of any
order, notice, permit, application, or any other written communication or report
received by Borrower or any of its Subsidiaries in connection with any such
Release or any other matter relating to the Environmental Laws as they may
materially adversely affect such premises.
(a) Borrower shall fully and promptly pay, perform, discharge,
defend, indemnify and hold harmless Agent and Lenders, their Subsidiaries and
Affiliates, and their respective directors, officers and employees from and
against any action, suit, proceeding, claim or loss suffered or incurred by
Agent, any Lender or any such other indemnified party, whether as mortgagee
pursuant to any Leasehold Mortgage other than as a result of Agent's, such
Lender's or such other indemnified party's gross negligence or willful
misconduct, as mortgagee in possession, or as successor in interest to Borrower
or any of its Subsidiaries as owner or lessee of any Facilities by virtue of
foreclosure or acceptance in lieu of foreclosure, or otherwise: (i) under or on
account of any Environmental Laws, including the assertion of any Lien
thereunder; (ii) with respect to any Release of a Contaminant, prior to such
foreclosure or acceptance in lieu of foreclosure, affecting such Facilities,
whether or not the same originates or emanates from such
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Facilities or any contiguous real estate; and (iii) with respect to any other
matter affecting such Facilities pursuant to any Environmental Laws.
(b) In the event of any Release of any Contaminant or other Adverse
Environmental Condition upon or affecting any premises occupied by Borrower or
any of its Subsidiaries, whether or not the same originates or emanates from
such premises or any contiguous real estate, and if Borrower or such Subsidiary
shall fail to comply with any of the requirements of the Environmental Laws, if
required to do so under the applicable lease, Agent or any Lender may, upon
consent of the Required Lenders, but shall not be obligated to, give such
notices or cause such work to be performed or take any and all actions deemed
necessary or desirable to remedy such Adverse Environmental Condition or cure
such failure to comply and any amounts paid as a result thereof, together with
interest thereon at the rate set forth in Section 2.8 hereof with respect to the
Revolving Credit Loan, shall be immediately due and payable by Borrower and,
until paid, shall be added to the Obligations. Nothing in this Agreement shall
be construed as limiting or impeding Borrower's rights or obligations to take
any and all actions necessary or desirable to remedy any matter set forth in the
definition of Environmental Claim.
14. SEC FILINGS; CERTAIN OTHER NOTICES. Borrower shall furnish to
Agent (i) promptly after the filing thereof with the Securities and Exchange
Commission, a copy of each report, notice or other filing, if any, by Borrower
with the Securities and Exchange Commission, and, if requested by Agent, (ii) a
copy of each written communication received by Borrower from or delivered by
Borrower to (A) the Securities and Exchange Commission or (B) any other holder
of Stock or other securities of the Borrower pursuant to the terms thereof, in
each case promptly after each such receipt or delivery.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without the Required Lenders'
prior written consent, from and after the date hereof and until the Termination
Date:
1. MERGERS, ETC. Neither Borrower nor any Subsidiary of Borrower
shall directly or indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock (or partnership interests) of, or otherwise combine with, any Person nor
form any Subsidiary, unless with respect to the formation of any Subsidiary, (i)
any such newly formed Subsidiary shall have become a party to and have executed
and delivered to Agent such of the Collateral Documents and taken such other
action as Agent shall reasonably require in connection therewith, other than as
to Real Estate and Leases, (ii) the stock of such Subsidiary shall have been
pledged to Agent, for the benefit of Lenders, pursuant to the Pledge Agreement,
and (iii) Agent shall have reasonably determined that the formation of such
Subsidiary would not result in a Material Adverse Effect. Nothing in this
Section 7.1 shall be deemed to prevent Borrower or any of its Subsidiaries from
forming any Subsidiary, or from acquiring any entity, substantially all of the
assets of which newly-formed Subsidiary or entity consist of Leases and/or Real
Estate, provided that Borrower and/or any such Subsidiary complies
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with the provisions of Section 6.12 with respect to any such Leases and/or Real
Estate and with the provisions of clauses (i) and (ii) of the immediately
preceding sentence with respect to any such newly-formed Subsidiary or acquired
entity, and after giving effect thereto Borrower shall be in compliance with
Sections 6.3 and 7.6 and no Default or Event of Default shall have occurred and
be continuing or would result therefrom.
2. INVESTMENTS; LOANS AND ADVANCES. Except as otherwise permitted by
Section 7.3 or 7.4 hereof, Borrower shall not and shall not permit any
Subsidiary of Borrower to make any investment in, or make or accrue loans or
advances of money to any Person, through the direct or indirect holding of
securities or otherwise; PROVIDED, HOWEVER, that Borrower shall be permitted
hereunder and may permit hereunder its Subsidiaries to make one or more
investments in, or make or accrue loans or advances of money to, Borrower or any
other Subsidiary and PROVIDED FURTHER, that Borrower and its Subsidiaries may
make and own investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within one year from the date of acquisition thereof, (ii) commercial
paper maturing no more than one year from the date of creation thereof and at
the time of their acquisition having a rating of A-1 or better from Standard &
Poor's Corporation or a rating of P-1 or better from Moody's Investors Service,
Inc., (iii) debt securities having a rating of A or better from Standard &
Poor's Corporation or a rating of A-2 or better from Moody's Investors Service,
Inc., (iv) certificates of deposit, maturing no more than one year from the date
of creation thereof, issued by banks listed on Schedule 7.2 hereof, (v)
certificates of deposit maturing no more than one year from the date of creation
thereof, issued by the banks listed in Schedule 7.2 hereof provided that the
aggregate amount invested in such certificates of deposit shall not at any time
exceed $100,000 for any one such certificate of deposit and $200,000 for any one
such bank, (vi) time deposits, maturing no more than 30 days from the date of
creation thereof with commercial banks or savings banks or savings and loan
associations each having membership either in the Federal Deposit Insurance
Corporation or in the Federal Savings and Loan Insurance Corporation (or their
respective successor entities) and in amounts not exceeding the maximum amounts
of insurance thereunder, (vii) agreements for the sale and repurchase of
securities entered into with banks or other financial institutions listed on
Schedule 7.2 hereof, and (viii) other investments with an aggregate cost at any
one time not to exceed $5,000,000; PROVIDED, HOWEVER, that any investments made
pursuant to this clause (viii) that are unrelated to the business of managing,
owning, leasing and/or operating motion picture theatres and all reasonably
related and ancillary businesses and activities, including the operation of
food, arcade and other concessions and game and amusement devices shall be made
by a Subsidiary of Borrower.
3. INDEBTEDNESS. (a) Except as otherwise expressly permitted by this
Section 7.3 or by any other section of this Agreement, Borrower shall not, nor
shall it permit any of its Subsidiaries to, create, incur, assume or permit to
exist any Indebtedness, whether recourse or nonrecourse, and whether superior or
junior, resulting from borrowings, loans, advances or the granting of credit,
whether secured or unsecured, except (i) Indebtedness secured by Liens permitted
under Section 7.9 hereof, including, without limitation, Indebtedness secured by
purchase money Liens or purchase money security interests, the aggregate
principal amount of which Indebtedness at any time outstanding shall not exceed
$5,000,000, (ii) the Revolving Credit Loan, (iii) lease payment obligations
under leases which Borrower or such Subsidiary is not prohibited from entering
into under the Loan Documents, (iv) all deferred taxes, (v) all unfunded pension
fund and other employee benefit plan obligations and liabilities but only to the
extent they are permitted to remain unfunded under applicable law, (vi)
intercompany debt to any Guarantor or to Borrower, (vii) Indebtedness of
Subsidiaries of Borrower created under the Guaranty, and (viii) Indebtedness of
Borrower in an aggregate principal amount not exceeding $85,000,000 represented
by the Senior Subordinated Notes, including interest payable thereon.
(a) Except as provided in Section 7.11, Borrower shall not and shall
not permit any Subsidiary of Borrower to sell or transfer, either with or
without recourse, any assets, of any nature whatsoever, in respect of which a
Lien is granted or to be granted pursuant to any Loan Document or engage in any
sale-leaseback or similar transaction involving any of such assets.
4. EMPLOYEE LOANS. Borrower shall not and shall not permit any
Subsidiary of Borrower to make or accrue any loans or other advances of money to
any employee of Borrower or such Subsidiary in excess at any one time
outstanding of $2,000,000 in the aggregate for all such loans and advances,
which loans or advances shall bear interest at a rate per annum so as to avoid
the application of Section 7872 of the IRC.
5. CAPITAL STRUCTURE. Borrower shall not and shall not permit any
Subsidiary of Borrower to issue or agree to issue any of their respective
authorized but not outstanding shares of Stock (including treasury shares),
except for Stock issued upon the exercise of stock options and/or warrants
granted to employees of Borrower and any of its Subsidiaries as approved from
time to time by the Board of Directors of Borrower.
6. MAINTENANCE OF BUSINESS. Borrower shall not and shall not permit
any Subsidiary of Borrower to engage in any business other than the business of
managing, owning, leasing and/or operating motion picture theatres and all
reasonably related and ancillary businesses and activities, including the
operation of food, arcade and other concessions and game and amusement devices.
In addition, Borrower or any Subsidiary of Borrower may lease, as lessor,
various premises owned or leased by Borrower or such Subsidiary that are not
being used by it for the foregoing purposes to any Person, including, without
limitation, pursuant to the leases set forth on Schedule 4.8(b) under which
Borrower and its Subsidiaries are lessors.
7. TRANSACTIONS WITH AFFILIATES. (a) Borrower shall not and shall
not permit any Subsidiary of Borrower to enter into or be a party to any
transaction with any Affiliate of Borrower or such Subsidiary, except (i) the
payment of certain management fees to the extent permitted under subsection (c)
hereof, (ii) as expressly provided herein, or (iii) subject to Section 7.7(d),
in the ordinary course of and pursuant to the reasonable requirements of
Borrower's or such Subsidiary's business and upon fair and reasonable terms that
are disclosed to Agent and that are no less favorable to Borrower or such
Subsidiary than would be obtained at the time of such
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transaction in a comparable arm's length transaction with a Person not an
Affiliate of Borrower or such Subsidiary.
(a) Borrower shall not and shall not permit any Subsidiary of
Borrower to enter into any agreement or transaction to pay to any Person (other
than pursuant to employee compensation or similar plans) any management or
similar fee based on or related to Borrower's or any of its Subsidiaries'
operating performance or income or any percentage thereof, nor pay any
management or similar fee to an Affiliate, except (i) to the extent disclosed on
Schedule 7.7 and (ii) to the extent permitted by subsection 7.7(c) hereof.
(b) Borrower may pay a management fee to Act III or any of its
Affiliates of up to $1,200,000 in any Fiscal Year; PROVIDED, HOWEVER, that (i)
no Default or Event of Default has occurred and is continuing or would result
therefrom and (ii) with respect to the management fees payable in connection
with services rendered by Act III or any of its Affiliates during any Fiscal
Year commencing with the Fiscal Year ending December 31, 1996, such fees may be
payable throughout such Fiscal Year but in an amount not to exceed $300,000 with
respect to any given fiscal quarter plus amounts not paid in prior quarters. In
the event that all or any portion of the management fees otherwise payable by
Borrower to Act III or any of its Affiliates during any given Fiscal Year shall
not have been paid to Act III or any of its Affiliates by reason of the
restrictions set forth in the provisos to this Subsection 7.7(c) (the "Accrued
and Unpaid Management Fee"), then any such Accrued and Unpaid Management Fee
shall accrue, without interest, and may be paid by Borrower to Act III or any of
its Affiliates during any subsequent Fiscal Year solely to the extent that
(i) no Default or Event of Default has occurred and is continuing or would
result therefrom and (ii) such Accrued and Unpaid Management Fee to be paid in
any given Fiscal Year does not exceed $1,200,000.
(c) Borrower shall not and shall not permit any Subsidiary of
Borrower to pay to Act III or any Affiliate thereof more than $1,800,000 in any
Fiscal Year pursuant to Section 7.7(a)(iii) in respect of all goods and services
provided by Act III or such Affiliate to Borrower.
8. GUARANTEED INDEBTEDNESS. Borrower shall not and shall not permit
any Subsidiary of Borrower to incur any Guaranteed Indebtedness (excluding the
Guaranteed Indebtedness pursuant to the Guaranty) except (i) by endorsement of
instruments or items of payment for deposit to the general account of Borrower
or such Subsidiary, and (ii) for Guaranteed Indebtedness incurred for the
benefit of Borrower or any Subsidiary of Borrower if the primary obligation or
transaction is permitted by this Agreement.
9. LIENS. Borrower shall not and shall not permit any Subsidiary of
Borrower to create or permit any Lien on any of its properties or assets except:
(a) presently existing or hereafter created Liens in favor of
Lenders; and
(b) Permitted Encumbrances.
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10. CAPITAL EXPENDITURES. Borrower shall not and shall not permit
any of its Subsidiaries to make Capital Expenditures (including Capital Lease
Obligations) in an aggregate amount during any Fiscal Year in excess of the
maximum amount set forth below opposite such Fiscal Year without the consent of
the Required Lenders:
FISCAL YEAR MAXIMUM AMOUNT
----------- --------------
1997 $135,000,000
1998 and $ 35,000,000
thereafter
PROVIDED, HOWEVER, that to the extent that the amount of actual Capital
Expenditures for any Fiscal Year shall be less than the maximum amount set forth
above for such Fiscal Year (without giving effect to the carryover permitted by
this proviso), then 50% of the difference between (i) such maximum amount for
such Fiscal Year and (ii) the amount of actual Capital Expenditures for such
Fiscal Year shall, in addition, be available for Capital Expenditures in the
next succeeding Fiscal Year.
11. SALE OF ASSETS. Borrower shall not and shall not permit any
Subsidiary of Borrower to sell, assign, transfer, convey or otherwise dispose of
any assets or properties; PROVIDED, HOWEVER, that the foregoing shall not
prohibit (i) Asset Sales yielding Net Cash Proceeds of up to $15,000,000
individually or in the aggregate during any Fiscal Year, (ii) the sale of
inventory in the ordinary course of business, (iii) the sale of surplus or
obsolete, nonfunctioning equipment and fixtures, and (iv) transfers resulting
from any casualty or condemnation of assets or properties; provided that the Net
Cash Proceeds derived from any such sale or transfer resulting from a casualty
or condemnation shall be used (x) as required pursuant to any applicable
Mortgage or Lease, (y) to repair or replace the property or asset so sold or
transferred or (z) to prepay the Loans.
12. CANCELLATION OF INDEBTEDNESS. Borrower shall not and shall not
permit any Subsidiary of Borrower to cancel any claim or debt owing to it,
except for reasonable consideration and in the ordinary course of business.
13. EVENTS OF DEFAULT. Borrower shall not and shall not permit any
Subsidiary of Borrower to take or omit to take any action, which act or omission
would constitute (i) a default or an event of default pursuant to, or
noncompliance with any of, the terms of any of the Loan Documents or the
Ancillary Agreements or (ii) a default or an event of default pursuant to, or
noncompliance with any other contract, lease, mortgage, deed of trust or
instrument to which it is a party or by which it or any of its property is
bound, or any document creating a Lien, unless such default, event of default or
non-compliance could not be reasonably expected to have a Material Adverse
Effect.
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14. HEDGING TRANSACTIONS. Borrower shall not, and shall not permit
any of its Subsidiaries to, engage in any interest rate hedging, swaps, caps or
similar transaction except that Borrower may enter into an Interest Rate
Contract or Contracts with a Qualified Issuer, on terms reasonably satisfactory
to Agent, providing protection over a period of not less than 2 years; PROVIDED,
that in no event shall Borrower enter into any such contract if the cost thereof
shall in the aggregate exceed 7/10 of 1% of the amount so protected.
15. RESTRICTED PAYMENTS. Borrower shall not directly or indirectly
make any Restricted Payments, other than:
(A) so long as no Default or Event of Default has occurred
and is continuing, or would exist after giving effect to such
Restricted Payment, Borrower may declare and pay cash dividends on
its common stock to the extent utilized by Parent (i) to effect
mandatory repurchases of Stock of Parent issued as compensation to
(or in connection with the employment of) employees of Borrower,
(ii) to make dividend payments on its common stock, and (iii) to
make dividend payments on the Senior Subordinated Convertible
Preferred Stock in accordance with the terms thereof relating to the
payment of dividends as in effect on February 14, 1990;
(B) in the event that one or more events of the type
specified in clauses (i) or (ii) of Subsection 9.1(j) of this
Agreement (a "Change in Control") shall have occurred and the
Required Lenders shall have affirmatively waived in writing the
Event of Default under this Agreement which would otherwise result
from such Change in Control, then, provided that no Default or Event
of Default (other than a Default or Event of Default due solely to
the occurrence of a Change in Control and which shall have been
waived by the Required Lenders as set forth above) has occurred and
is continuing, or would exist after giving effect to such Restricted
Payment, Borrower may declare and pay cash dividends on its common
stock to the extent utilized by Parent to perform its obligations
with respect to the put rights granted to Electra Investment Trust
P.L.C.(and its permitted successors and assigns) with respect to the
Senior Subordinated Convertible Preferred Stock originally issued to
Electra Investment Trust P.L.C. pursuant to the Stockholders
Agreement as in effect on February 14, 1990 (other than the put
rights granted in respect of the Electra Preferred Stock (as such
term is defined in the Stockholders Agreement as in effect on
February 14, 1990) pursuant to Section 13.4 of the Stockholders
Agreement); and
(C) so long as no Default or Event of Default has occurred
and is continuing, or would exist after giving effect to such
Restricted Payment, Borrower may declare and pay cash dividends on
its common stock to the extent utilized by Parent to perform its
obligations with respect to the put rights granted in respect of the
Electra Preferred Stock (as such term is defined in the Stockholders
Agreement as in effect on February 14, 1990) pursuant to Section
13.4 of the Stockholders Agreement as in effect on February 14,
1990;
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PROVIDED, HOWEVER, that (1) dividends paid by Borrower pursuant to clauses
(A)(ii), (A)(iii), (B) and (C) above shall be payable only to the extent that
Borrower's Consolidated Total Funded Debt to Consolidated Cash Flow Ratio for
the Fiscal Year during which any such dividend would be paid is less than or
equal to 3.5 to 1; and (2) Borrower may declare dividends referred to in clauses
(A)(i), (A)(ii), (A)(iii), (B) and (C) above only in an amount which does not
exceed, in the aggregate, the amount of Borrower's Available Cash.
(D) Borrower may declare and pay cash dividends on its common
stock to the extent utilized by Parent to repurchase Stock of Parent owned
on the Closing Date by Persons other than Lear, his Permitted Transferees
and Affiliates and members of Senior Management; PROVIDED, HOWEVER, that
(i) no Default or Event of Default has occurred and is continuing or would
result therefrom, (ii) after giving effect thereto the Consolidated Senior
Debt to Consolidated Cash Flow Ratio would not exceed 4.5:1.00, (iii) no
Default or Event of Default would occur under the financial covenants
contained in Section 6.3 hereof determined on a pro forma basis as if such
repurchase had occurred on the first day of the full four fiscal quarter
period ending prior to such repurchase and (iv) Borrower shall deliver to
Agent a certificate of an appropriate officer certifying compliance with
each of the provisions of this clause (D) and showing the calculations of
such financial tests.
16. RESTRICTED LEASES AND LEASES. (a) Borrower shall not, and
shall not permit any Subsidiary of Borrower to become, directly or
indirectly, or remain liable as lessee or as guarantor or other surety with
respect to any Restricted Lease, unless, on the date Borrower or such
Subsidiary becomes liable with respect to any Restricted Lease and
immediately after giving effect to the incurrence of such liability, the
aggregate amount of all obligations payable by Borrower and its Subsidiaries
under such Restricted Leases and all other Restricted Leases during the four
consecutive calendar quarters next succeeding such date shall not exceed
$2,000,000 (increasing by 5% each Fiscal Year beginning with the Fiscal Year
ending December 31, 1997).
(a) Borrower shall comply with the provisions of Section 6.12 prior
to entering into any new Lease permitted under this Section 7.16 and any new
Lease permitted under this Section 7.16 shall be entered into by either a newly
formed Subsidiary of Borrower, which Subsidiary shall have been formed in
compliance with Section 7.1 hereof for the purpose of operating the motion
picture theatre covered by such Lease, or an existing Subsidiary of Borrower the
other Theatres owned or leased by which are located in the same Market Segment
as the motion picture theatre subject to such new Lease.
(b) Borrower shall not, and shall not permit any of its Subsidiaries
to, modify, amend, cancel, extend (except pursuant to any rights granted to
Borrower or any of its Subsidiaries under any Lease) or otherwise change any
of the terms, covenants or conditions contained in any Lease which would
increase any monetary obligations of Borrower or such
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Subsidiary thereunder or materially increase any of the other obligations of
Borrower or such Subsidiary thereunder or materially and adversely affect the
rights of Borrower or such Subsidiary thereunder without the consent of
Agent, except where such modification, amendment, cancellation, extension or
other change could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except with respect to those
Leases set forth on Schedule 7.16 hereto (all of which Leases may be freely
assigned or subleased) and any non-motion picture theatre Leases, Borrower
shall not permit and shall not permit any of its Subsidiaries to assign any
Leases or sublet any portion of the premises described therein other than to
Borrower or any of its Subsidiaries, except that (i) Borrower or any of its
Subsidiaries may enter into such assignments and subleases to the extent
permitted by Section 7.11 and (ii) Borrower or any of its Subsidiaries shall
have the right to license, sublease or enter into a concession agreement with
respect to any portion of the premises described therein to any other Person
for the purpose of operating food, arcade and other concessions and game and
amusement devices in connection with the operation by Borrower or any of its
Subsidiaries of the leased premises as a motion picture theatre.
17. ERISA. Borrower shall not directly or indirectly, and will not
permit any of its Subsidiaries or any ERISA Affiliate to directly or indirectly
(i) terminate, any Plan subject to Title IV of ERISA so as to result in
liability to Borrower, any of its Subsidiaries or any ERISA Affiliate in excess
of $500,000, or (ii) permit to exist any ERISA Event or any other event or
condition, which presents the risk of liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $500,000, or (iii) make or
permit any of its Subsidiaries or any ERISA Affiliate to make a complete or
partial withdrawal (within the meaning of Section 4201 of ERISA) from any
Multiemployer Plan so as to result in liability to Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $500,000, or (iv) enter into
any new Plan or modify any existing Plan so as to increase its obligations
thereunder, except in the ordinary course of business consistent with past
practice, which could result in liability to Borrower, any of its Subsidiaries
or any ERISA Affiliate in excess of $500,000, or (v) permit the present value of
all nonforfeitable accrued benefits under each Plan (using the actuarial
assumptions utilized by the PBGC upon termination of a plan) to exceed the fair
market value of Plan assets allocable to such benefits by more than $500,000,
all as determined as of the most recent valuation date for each such Plan.
18. PAYMENT OF BROKERS FEES, ETC. Borrower shall not and shall not
permit any Subsidiary to pay any broker's, finder's, "break up", or investment
banker's fees or commissions to any person in connection with the transactions
contemplated hereby, other than (i) amounts payable to any real estate brokers
in connection with entering into any Lease or the purchase of any Real Estate
and (ii) amounts payable to the Agent pursuant to this Agreement.
19. Intentionally Omitted.
20. Intentionally Omitted.
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21. PAYMENT OR MODIFICATION OF NOTE DOCUMENTS. (a) Borrower shall
not, and shall not permit any of its Subsidiaries to, make any payments on,
or with respect to, any Senior Subordinated Notes, including any payments in
redemption or repurchase thereof, except (i) mandatory payments of interest,
fees and expenses required by the terms of the Note Documents, but only to
the extent permitted under the subordination provisions applicable thereto,
and (ii) repurchases of up to $85,000,000 thereof provided that (A) no
Default or Event of Default has occurred and is continuing or would result
therefrom, (B) after giving effect thereto the Consolidated Senior Debt to
Consolidated Cash Flow Ratio would not exceed 4.5:1.00, (C) no Default or
Event of Default would occur under the financial covenants contained in
Section 6.3 hereof determined on a pro forma basis as if such repurchase had
occurred on the first day of the full four fiscal quarter period ending prior
to such repurchase and (D) Borrower shall deliver to Agent a certificate of
an appropriate officer certifying compliance with each of the provisions of
this clause (ii) and showing the calculations of such financial tests.
(a) Borrower shall not, and shall not permit any Subsidiary of
Borrower to, amend, supplement or otherwise modify any of the provisions of
the Note Documents:
(i) which amends or modifies the subordination provisions contained
therein,
(ii) which shortens the fixed maturity or increases the principal
amount of, or increases the rate or shortens the time of payment of
interest on, or increases the amount or shortens the time of payment of any
principal or premium payable whether at maturity, at a date fixed for
prepayment or by acceleration or otherwise of the Senior Subordinated
Notes, or increases the amount of, or accelerates the time of payment of,
any fees payable in connection therewith,
(iii) which relates to the affirmative or negative covenants, events
of default or remedies under the Indenture and the effect of which is to
subject Borrower or any of its Subsidiaries, to any more onerous or more
restrictive provisions, or
(iv) which adversely affects the interests of Lenders as senior
creditors with respect to the Senior Subordinated Notes or the interests of
Lenders under this Agreement or any other Loan Document in any respect.
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22. MODIFICATION OF COMPENSATION PLAN. Borrower shall not amend,
supplement or otherwise modify any of the terms and conditions of the
Compensation Plan (i) which increases the amount of, or accelerates the time
of payment of, any compensation or other amounts payable in connection
therewith or (ii) which adversely affects the interests of the Agent or any
Lender under this Agreement or under any other Loan Document in any respect.
8. TERM
1. TERMINATION. Subject to the provisions of Section 2 hereof,
the financing arrangement contemplated hereby in respect of the Revolving
Credit Loan shall be in effect until the Commitment Termination Date;
PROVIDED, HOWEVER, that in the event of a prepayment of any part or the
entire Revolving Credit Loan prior to the Commitment Termination Date with
funds borrowed from any Person other than Lenders, Borrower shall
simultaneously therewith pay to Lenders, in immediately available funds, all
Obligations in full, in accordance with the terms of the agreements creating
and instruments evidencing such Obligations.
2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING
ARRANGEMENT. Except as otherwise expressly provided for in the Loan
Documents, no termination or cancellation (regardless of cause or procedure)
of any financing arrangement under this Agreement shall in any way affect or
impair the powers, obligations, duties, rights and liabilities of Borrower or
the rights of Agent or any Lender relating to any transaction or event
occurring prior to such termination. Except as otherwise expressly provided
herein or in any other Loan Document, all undertakings, agreements,
covenants, warranties and representations contained in the Loan Documents
shall survive such termination or cancellation and shall continue in full
force and effect until such time as all of the Obligations have been paid in
full in accordance with the terms of the agreements creating such
Obligations, at which time the same shall terminate.
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder:
(a) Borrower shall fail to (i) make any payment of principal of, or
interest on, or fees owing in respect of, the Revolving Credit Loan or any of
the other Obligations when due and payable or declared due and payable or (ii)
pay or reimburse Agent or Lenders for any expense reimbursable hereunder or
under any other Loan Document within five (5) days following Borrower's receipt
of Agent's written demand for such reimbursement or payment of expenses.
(b) Borrower shall fail or neglect to perform, keep or observe any
of the provisions of Section 6.3 or Article 7 of this Agreement.
(c) Borrower shall fail or neglect to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents, or any
other Loan Party shall fail or
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neglect to perform, keep or observe any of the provisions of any other Loan
Document and the same shall remain unremedied for a period ending on the
first to occur of ten (10) days after Borrower shall receive written notice
of any such failure from Agent or thirty (30) days after Borrower shall
become aware thereof.
(d) (Except where the same is being contested in good faith as
permitted under Section 6.2(b) hereof) a default shall occur under any other
agreement, document or instrument (including, without limitation, any Lease)
to which any Loan Party is a party or by which any such Loan Party or any
such Loan Party's property is bound, and such default (i) involves the
failure to make any payment (whether of principal, interest or otherwise) due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) in respect of any Indebtedness of any Loan Party (or any payment
obligation of any Loan Party under any Lease) after giving effect to the
applicable grace period, if any, in an aggregate amount exceeding $1,000,000;
or (ii) causes (or permits any holder of such Indebtedness or a trustee or
party to any Lease to cause) such Indebtedness (or payment obligation under
any Lease) or a portion thereof in an aggregate amount exceeding $1,000,000,
to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment.
(e) Any representation or warranty of any Loan Party contained in
this Agreement, including the Schedules hereto, or in the other Loan
Documents or Ancillary Agreements furnished by or on behalf of Parent,
Borrower or any of Borrower's Subsidiaries pursuant to the terms of this
Agreement shall be untrue or incorrect in any material respect, as of the
date when made or deemed made (including those made or deemed made pursuant
to Section 3.3 hereof).
(f) All or any material portion of the assets of any Loan Party
shall be attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors of any Loan Party and shall remain
unstayed or undismissed for sixty (60) consecutive days; or any Person other
than any Loan Party shall apply for the appointment of a receiver, trustee or
custodian for any of the assets of any Loan Party and such application shall
remain unstayed or undismissed for sixty (60) consecutive days; or any Loan
Party shall have concealed, removed or permitted to be concealed or removed,
any material part of its property, with intent to hinder, delay or defraud
its creditors or any of them or made or suffered a transfer of any of its
property or the incurring of an obligation which is fraudulent under any
bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against any
Loan Party in a court having competent jurisdiction seeking a decree or order
in respect of such Loan Party (i) under title 11 of the United States Code,
as now constituted or hereafter amended, or any other applicable federal,
state or foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or
similar official) of such Loan Party or of any substantial part of its or
their properties, or (iii) ordering the winding-up or liquidation of the
affairs of such Loan Party, and such case or proceeding shall remain
undismissed or unstayed for
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sixty (60) consecutive days or such court shall enter a decree or order
granting the relief sought in such case or proceeding.
(h) Any Loan Party shall (i) file a petition seeking relief under
title 11 of the United States Code, as now constituted or hereafter amended,
or any other applicable federal, state or foreign bankruptcy or other similar
law, (ii) consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee or sequestrator (or
similar official) of Borrower or such Loan Party or of any substantial part
of its properties, (iii) fail generally to pay its debts as such debts become
due, or (iv) take any corporate action authorizing any such action.
(i) Final judgment or judgments (after the expiration of all times
to appeal therefrom) for the payment of money in excess of $500,000 in the
aggregate shall be rendered against Borrower or any of its Subsidiaries and
the same shall not be (i) fully covered by insurance in accordance with
Section 6.7 hereof, or (ii) vacated, stayed, bonded, paid or discharged for a
period of thirty (30) days.
(j) Any of the following events shall have occurred and shall not
have been cured within ten (10) days thereafter:
(i) Lear, any of his Permitted Transferees (including through
a Derivative Ownership Interest) and Affiliates, any executor, heir or
successor appointed to take control of Lear's affairs in the event of his
death disability, incapacity, bankruptcy or by operation of law, and Senior
Management shall, taken as a group, cease to own, in the aggregate, at
least a majority of each of Parent's Voting Stock and Common Stock;
(ii) Parent shall cease to own all of Borrower's outstanding
Capital Stock;
(iv) Borrower sells, transfers or otherwise disposes of all or substantially
all of the assets of Borrower; or
(v) the Continuing Directors cease for any reason to
constitute a majority of the directors of Borrower then in office.
(k) With respect to any Plan: (i) Borrower, or any of its
Subsidiaries or any other party-in-interest or disqualified person shall
engage in any transactions which in the aggregate would reasonably result in
a direct or indirect liability to Borrower, or any of its Subsidiaries or any
ERISA Affiliate in excess of $500,000 under Section 409 or 502 of ERISA or
IRC Section 4975; (ii) Borrower, or any of its Subsidiaries or any ERISA
Affiliate shall incur any accumulated funding deficiency, as defined in IRC
Section 412, in the aggregate in excess of $500,000, or request a funding
waiver from the IRS for contributions in the aggregate in excess of $500,000;
(iii) Borrower, or any of its Subsidiaries or any ERISA Affiliate shall incur
any withdrawal liability
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in the aggregate in excess of $500,000 as a result of a complete or partial
withdrawal within the meaning of Section 4203 or 4205 of ERISA; (iv)
Borrower, or any of its Subsidiaries or any ERISA Affiliate shall fail to
make a required contribution by the due date under Section 412 of the IRC or
Section 302 of ERISA which would result in the imposition of a lien under
such Sections; (v) Borrower, or any of its Subsidiaries or any ERISA
Affiliate shall notify the PBGC of an intent to terminate, or the PBGC shall
institute proceedings to terminate, a Plan; (vi) a Reportable Event shall
occur with respect to a Plan, and within 15 days after the reporting of such
Reportable Event to any Lender, such Lender shall have notified Borrower in
writing that (A) it has made a determination that, on the basis of such
Reportable Event, there are reasonable grounds for the termination of such
Plan by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Plan and (B) as a result
thereof a Default or an Event of Default shall occur hereunder; (vii) a
trustee shall be appointed by a court of competent jurisdiction to administer
any Plan or the assets thereof; (viii) the benefits of any Plan shall be
increased, or Borrower, or any of its Subsidiaries or any ERISA Affiliate
shall begin to maintain, or begin to contribute to, any Plan, without the
prior written consent of Lender; or (ix) any ERISA Event with respect to a
Plan shall have occurred, and 30 days thereafter (A) such ERISA Event, other
than such event described in clause (e) of the definition of ERISA Event
herein (if correctable) shall not have been corrected and (B) the then
present value of such Plan's vested benefits shall exceed the then current
value of assets accumulated in such Plan; PROVIDED, HOWEVER, that the events
listed in subsections (iv)-(ix) shall constitute Events of Default only if,
as of the date thereof or any subsequent date, the maximum amount of
liability Borrower, any of its Subsidiaries or any ERISA Affiliate could
incur in the aggregate under Section 4062, 4063, 4064, 4219 or 4243 of ERISA
or any other provision of law with respect to all such Plans, computed by the
actuary of the Plan taking into account any applicable rules and regulations
of the PBGC at such time, and based on the actuarial assumptions used by the
Plan, resulting from or otherwise associated with such event exceeds $500,000.
(l) Any material provision of any Collateral Document, after
delivery thereof pursuant to Section 3.1 and/or 3.2 shall for any reason
cease to be valid or enforceable in accordance with its terms, or any
security interest created under any Collateral Document shall cease to be a
valid and perfected first priority security interest or Lien (subject to
Permitted Encumbrances) in any of the Collateral purported to be covered
thereby.
2. REMEDIES. If any Event of Default specified in Section 9.1 shall
have occurred and be continuing, (i) GE Capital may, without notice, terminate
this facility with respect to further Revolving Credit Advances, whereupon no
Revolving Credit Advances may be made hereunder, and/or (ii) Agent shall at the
request, or may with the consent, of the Required Lenders, without notice,
declare all Obligations to be forthwith due and payable, whereupon all such
Obligations shall become and be due and payable, without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower; PROVIDED, HOWEVER, that upon the occurrence of an Event of Default
specified in Section 9.1(f), (g) or (h) hereof, such obligations shall become
due and payable without declaration, notice or demand by Agent or any Lender.
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Agent shall take such action with respect to any Default or Event of
Default specified in Section 9.1 as shall be directed by the Required Lenders;
PROVIDED, THAT, unless and until Agent shall have received such directions,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of Agent and Lenders, taken as a whole,
including any action (or the failure to act) pursuant to the Loan Documents.
3. WAIVERS BY BORROWER. Except as otherwise provided for in this
Agreement or by applicable law, Borrower waives (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all commercial paper,
accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agent or any Lender on which Borrower may in
any way be liable and hereby ratifies and confirms whatever Agent or any
Lender may do in this regard, (ii) all rights to notice and a hearing prior
to Agent's or any Lender's taking possession or control of, or to Agent's or
any Lender's replevy, attachment or levy upon, the Collateral or any bond or
security which might be required by any court prior to allowing Agent or any
Lender to exercise any of its remedies, and (iii) the benefit of all
valuation, appraisal and exemption laws. Borrower acknowledges that it has
been advised by counsel of its choice with respect to this Agreement, the
other Loan Documents and the transactions evidenced by this Agreement and the
other Loan Documents.
4. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default and, except in the case of an event
referred to in Section 9.1(f), (g) or (h), the making of the request or the
granting of the consent specified by Section 9.2 to authorize Agent to
declare the Notes due and payable pursuant to the provisions of Section 9.2,
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 Borrower against any and all of the obligations of Borrower
now or hereafter existing under this Agreement, and the Notes held by such
Lender irrespective of whether or not such Lender shall have made any demand
under this Agreement or any such Note and although such obligations may be
unmatured. Each Lender agrees promptly to notify Borrower after any such
set-off and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which such Lender may have.
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10. THE AGENT
1. AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes Agent to take such action on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for
by this Agreement and the other Loan Documents (including, without
limitation, enforcement or collection of the Notes), Agent shall not be
required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting
or refraining from acting) upon the instructions of the Required Lenders, and
such instructions shall be binding upon all Lenders; PROVIDED, HOWEVER, that
Agent shall not be required to take any action which exposes Agent to
personal liability or which is contrary to this Agreement or the other Loan
Documents or applicable law. Agent agrees to give each Lender prompt notice
of each notice given to it by Borrower pursuant to the terms of this
Agreement and the other Loan Documents.
2. AGENT'S RELIANCE, ETC. Neither Agent nor any of its directors,
officers, agents or employees shall be liable to any Lender for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement or the other Loan Documents, except for its or their own gross
negligence or wilful misconduct. Without limitation of the generality of the
foregoing, Agent: (i) may treat the payee of any Note as the holder thereof
until Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form satisfactory to Agent; (ii) may consult with
legal counsel (including counsel for any Loan Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty
or representations to any Lender and shall not be responsible to any Lender
for any statements, warranties or representations made in or in connection
with this Agreement or the other Loan Documents; (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 the other Loan Documents
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 the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; and (vi)
shall incur no liability under or in respect of this Agreement or the other
Loan Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper party or
parties.
3. GE CAPITAL AND AFFILIATES. With respect to its commitment
hereunder to make Revolving Credit Advances made by it, GE Capital shall have
the same rights and powers under this Agreement and the other Loan Documents
as any other Lender and may exercise the same as
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though it were not Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include GE Capital in its individual capacity.
GE Capital and its affiliates may lend money to, and generally engage in any
kind of business with, any Loan Party, any of its Subsidiaries and any Person
who may do business with or own securities of any Loan Party or any such
Subsidiary, all as if GE Capital were not Agent and without any duty to
account therefor to Lenders.
4. LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based
on the financial statements referred to in Section 4.6 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 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.
5. INDEMNIFICATION. Lenders agree to indemnify Agent (to the
extent not reimbursed by Borrower), ratably according to the respective
principal amounts of the Notes then held by each of them, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent in
any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by Agent under this Agreement;
PROVIDED, HOWEVER, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross
negligence or wilful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by 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 each other Loan Document, to the
extent that Agent is not reimbursed for such expenses by Borrower.
6. SUCCESSOR AGENT. Agent may resign at any time by giving
written notice thereof to Lenders and Borrower. Upon any such resignation,
the Required Lenders shall have the right to appoint a successor Agent. If
no successor Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Agent's giving notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any state
thereof and having a combined capital and surplus of at least $200,000,000 or
a subsidiary of such a commercial bank. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any retiring Agent's resignation hereunder as
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Agent, the provisions of this Article 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it, while it was Agent under this
Agreement and the other Loan Documents.
11. MISCELLANEOUS
1. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT; SALE OF INTEREST.
(a) The Loan Documents constitute the complete agreement between the parties
with respect to the subject matter hereof and may not be modified, altered or
amended, except by an agreement in writing signed by Borrower, Agent and Lenders
as required by Section 11.1(d) below. Borrower may not sell, assign or transfer
any of the Loan Documents or any portion thereof, including, without limitation,
Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to Agent's and any Lender's sale of
participations, assignment, transfer or other disposition, at any time or times,
of any of the Loan Documents or of any portion thereof or interest therein,
including, without limitation, Agent's and any Lender's rights, title,
interests, remedies, powers or duties thereunder, whether evidenced by a writing
or not. Borrower agrees that it will use its best efforts to assist and
cooperate with Agent in any manner reasonably requested by Agent to effect the
sale of participations in or assignments of any of the Loan Documents or of any
portion thereof or interest therein, including, without limitation, assistance
in the preparation of appropriate disclosure documents or placement memoranda.
(a) In the event Agent or any Lender assigns or otherwise transfers
all or any part of the Revolving Credit Note, Borrower shall, upon the request
of Agent or such Lender issue new Revolving Credit Notes to effectuate such
assignment or transfer.
(b) Each Lender may sell, assign, transfer or negotiate to one or
more other Lenders, commercial banks, insurance companies, other financial
institutions or any other Person acceptable to Agent all or a portion of its
rights and obligations under any Note held by such Lender and this Agreement;
PROVIDED, HOWEVER, that (i) each such sale, assignment, transfer or negotiation
shall be of a constant, and not a varying, percentage of all of the assigning
Lender's rights and obligations under such Note and this Agreement, (ii) any
such sale, assignment, transfer or negotiation shall not require Borrower to
file a registration statement with the Securities and Exchange Commission or
apply to qualify the Notes under the blue sky law of any state, (iii) any such
sale, assignment or transfer shall be in an aggregate principal amount of not
less than $5,000,000 and any assigning Lender shall have retained a Commitment
in a minimum amount equal to $5,000,000 unless such assignment represents 100%
of the assigning Lender's Commitment, (iv) acceptance of such assignment by any
assignees shall constitute the agreement of such assignee to be bound by the
terms of this Agreement applicable to Lender, and (v) the assigning Lender pays
to the Agent an assignment fee of $3,500. From and after the effective date of
such an assignment, (x) the assignees thereunder shall, in addition to the
rights and obligations hereunder held by it immediately prior to such effective
date, have the rights and obligations hereunder that have been assigned to it
pursuant to such assignment and (y) the assignor Lender thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such assignment, relinquish its rights and be released from its
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obligations under the 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).
(c) No amendment or waiver of any provision of this Agreement or
the Notes or any other Loan Document, nor consent to any departure by Borrower
therefrom, nor release of any Collateral or Guaranty, shall in any event be
effective unless the same shall be in writing and signed by the Required
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; PROVIDED, HOWEVER, that
no amendment, waiver or consent shall, unless in writing and signed by each
Lender affected thereby do any of the following: (i) increase the Maximum
Revolving Credit Loan, (ii) reduce the principal of, or interest on, the Notes
or other amounts payable hereunder or release or discharge the Borrower from its
obligations to make such payments, other than those payable only to Agent which
may be reduced by Agent unilaterally, (iii) postpone any date fixed for any
payment of principal of, or interest on, the Notes or other amounts payable
hereunder, other than those payable only to Agent which may be postponed by
Agent unilaterally, or change the definition of Commitment Termination Date,
(iv) release any Collateral, except in connection with transactions permitted by
Section 7.11 or as otherwise contemplated hereby or by the Collateral Documents,
(v) change the aggregate unpaid principal amount of the Notes, or the number of
Lenders, which shall be required for the Lenders or any of them to take any
action hereunder, or change the definition of Required Lenders, or (vi) amend
this Section 11.1(d); and PROVIDED, FURTHER, HOWEVER, that no amendment, waiver
or consent shall unless in writing and signed by the Agent in addition to the
Required Lenders required above to take such action, affect the rights or duties
of the Agent under this Agreement, any Note or any Loan Document.
2. FEES AND EXPENSES. Borrower shall pay all reasonable out-of-
pocket expenses of Agent in connection with the preparation of the Loan
Documents (including the reasonable fees and expenses of all of its counsel
retained in connection with the Loan Documents and the transactions
contemplated thereby). If, at any time or times, regardless of the existence
of an Event of Default (except with respect to paragraphs (iii) and (iv)
below, which shall be subject to an Event of Default having occurred and be
continuing), Agent (or in the case of paragraphs (iii) and (iv) below, Agent
or any Lender) shall employ counsel for advice or other representation or
shall incur reasonable legal or other costs and expenses in connection with:
(ii) any amendment, modification or waiver, or consent with respect to, any of
the Loan Documents or advice in connection with the administration of the
loans made pursuant hereto or its rights hereunder or thereunder;
(iii) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Agent or any Lender, Borrower, any Subsidiary of Borrower
or any other Person) in any way relating to the Collateral, any of the
Loan Documents or any other agreements to be executed or delivered in
connection herewith;
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(iv) any attempt to enforce any rights of Agent or any Lender against Borrower,
any Subsidiary of Borrower or any other Person, that may be obligated to
any Lender by virtue of any of the Loan Documents or, with respect to
Agent only, determining what actions, if any, to take upon the occurrence
of an Event of Default;
(v) any attempt to verify, protect, collect, sell, liquidate or otherwise
dispose of the Collateral;
then, and in any such event, the reasonable attorneys' fees and other third
party fees arising from such services, including those of any appellate
proceedings, and all reasonable expenses, costs, charges and other fees
incurred by such counsel and third parties in any way or respect arising in
connection with or relating to any of the events or actions described in this
Section shall be payable, on demand, by Borrower to Agent or such Lender and
shall be additional Obligations secured under this Agreement and the other
Loan Documents. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: paralegal fees, costs and
expenses; accountants' and investment bankers' fees, costs and expenses which
fees, costs and expenses shall be payable upon an Event of Default having
occurred and continuing when incurred (to the extent such accountants' and
investment bankers' fees, costs and expenses shall have been incurred); court
costs and expenses; photocopying and duplicating expenses; court reporter
fees, costs and expenses; long distance telephone charges; air express
charges; telegram charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance
of such services.
3. NO WAIVER BY AGENT OR ANY LENDER. Agent's or any Lender's
failure, at any time or times, to require strict performance by any Loan
Party of any provision of this Agreement and any of the other Loan Documents
shall not waive, affect or diminish any right of Agent or such Lender
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Agent or Lenders of an Event of Default by any Loan
Party under the Loan Documents shall not suspend, waive or affect any other
Event of Default by any Loan Party under this Agreement and any of the other
Loan Documents, whether the same is prior or subsequent thereto and whether
of the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of any Loan Party contained in this
Agreement or any of the other Loan Documents and no Event of Default by
Borrower under this Agreement and no defaults by any Loan Party under any of
the other Loan Documents shall be deemed to have been suspended or waived by
Agent or Lenders, unless such suspension or waiver is by an instrument in
writing signed by an officer of Agent and Required Lenders (as such term is
defined in the applicable provision hereof) and directed to such Loan Party
specifying such suspension or waiver.
4. REMEDIES. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and non-exclusive of any other rights and
remedies which Agent and Lenders may
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have under any other agreement, including without limitation, the Loan
Documents, by operation of law or otherwise. Recourse to the Collateral shall
not be required.
5. WAIVER OF JURY TRIAL. The parties hereto waive all right to
trial by jury in any action or proceeding to enforce or defend any rights
under the Loan Documents.
6. SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
7. PARTIES. This Agreement and the other Loan Documents shall be
binding upon, and inure to the benefit of, the successors of Borrower, Agent
and Lenders and the assigns, transferees and endorsees of Agent and Lenders.
8. CONFLICT OF TERMS. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of
the other Loan Documents, the provision contained in this Agreement shall
govern and control.
9. AUTHORIZED SIGNATURE. Until Agent shall be notified by
Borrower to the contrary, the signature upon any document or instrument
delivered pursuant hereto of an officer of Borrower listed in Schedule 11.9
hereto shall bind Borrower and be deemed to be the act of Borrower affixed
pursuant to and in accordance with resolutions duly adopted by Borrower's
Board of Directors.
10. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY
OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. AGENT, EACH LENDER AND BORROWER EACH HEREBY IRREVOCABLY AGREE THAT
ANY LEGAL ACTION OR PROCEEDING AGAINST IT ARISING OUT OF OR RELATING TO ANY
OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW
YORK, COUNTY OF NEW YORK, STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. BORROWER, BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY
73
<PAGE>
CONSENTS TO THE PERSONAL JURISDICTION OF SUCH COURTS IN ANY SUCH ACTION OR
PROCEEDING. BORROWER EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE
IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT BASED ON ANY ALLEGED LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY
SIMILAR BASIS. SERVICE OF SUMMONS, NOTICE OR OTHER PROCESS ON BORROWER,
AGENT OR ANY LENDER IN ANY ACTION ARISING OUT OF OR RELATING TO ANY OF THE
LOAN DOCUMENTS SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS
LISTED IN SECTION 11.11 HEREOF OR DELIVERED TO ANY SUCH PARTY BY HAND.
NOTHING HEREIN SHALL PRECLUDE AGENT, ANY LENDER OR BORROWER FROM BRINGING
SUIT OR SERVING PROCESS OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION.
11. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon
any of the parties by another, or whenever any of the parties desires to give
or serve upon another any communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person or
by registered or certified mail, return receipt requested, postage prepaid,
by telecopy or by overnight air courier guaranteeing next day delivery,
directed to the party to receive the same at its address stated below:
(a) If to Agent at:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Commercial Finance - Act III Account Manager
Telephone No.: (203) 316-7583
Telecopy No.: (203) 316-7894
With copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Commercial Finance - Legal Counsel
Telephone No.: (203) 316-7552
Telecopy No.: (203) 316-7889
and
74
<PAGE>
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telephone No.: (212) 310-8000
Telecopy No.: (212) 310-8007
(b) If to Borrower at:
Act III Theatres, Inc.
919 S.W. Taylor Street, Suite 900
Portland, Oregon 97205
Attention.: Walt S. Aman
Telephone No.: (503) 221-0213
Telecopy No.: (503) 228-5032
With a copy to:
Schwabe Williamson & Wyatt P.C.
Pacwest Center, Suites 1600-1800
Portland, Oregon 97204-3795
Attention: Mark A. Manulik
Telephone No.: (503) 796-2990
Telecopy No: (503) 796-2900
(c) If to any Lender, at its address indicated on the signature
pages hereof
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, on the date actually received, if sent by telecopy or
overnight courier service, with receipt acknowledged or three (3) Business
Days after the same shall have been deposited in the United States mail.
Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration
or other communication.
12. SURVIVAL. The representations and warranties of Borrower in
this Agreement shall survive the execution, delivery and acceptance hereof by
the parties hereto and the closing of the transactions described herein or
related hereto.
75
<PAGE>
13. SECTION TITLES. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not part of the agreement between the
parties hereto.
14. COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
76
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
in New York, New York as of the date first above written.
ACT III THEATRES, INC.
By: /s/ W.S. Aman
--------------------------------
Name: W.S. Aman
Title: President
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent
By: /s/ Marshall N. Dudley
--------------------------------
Name: Marshall N. Dudley, Jr.
Title: Duly Authorized Signatory
Commitment Lenders:
---------- --------
$125,000,000 GENERAL ELECTRIC CAPITAL CORPORATION
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Commercial Finance - Act III
Account Manager
Telephone No.: (203) 316-7583
Telecopy No.: (203) 316-7894
By: /s/ Marshall N. Dudley
--------------------------------
Name: Marshall N. Dudley, Jr.
Title: Duly Authorized Signatory
$42,000,000 CIBC INC.
425 Lexington Avenue
New York, New York 10017
Attention: Martin Friedman
Telephone No.: (212) 856-3617
Telecopy No.: (212) 856-3558
By: /s/ Martin Friedman
--------------------------------
Name: Martin Friedman
Title: Managing Director, CIBC Wood Gundy
<PAGE>
Securities Corp., as Agent
<PAGE>
$42,000,000 BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION
55 South Flower Street
10th Floor, Unit 3283
Los Angeles, California 90071
Attention: Madeline W. Lee
Telephone No.: (213) 228-6377
Telecopy No.: (213) 228-2641
By: /s/ MADELINE W. LEE
-----------------------------------
Name: Madeline W. Lee
Title: Vice President
$41,000,000 MORGAN GUA
60 Wall Street
New York, New York 10260
Attention: Michael Leder
Telephone No.: (212) 648-7602
Telecopy No.: (212) 648-5348
By: /s/ R. BLAKE WITHERINGTON
-----------------------------------
Name: R. Blake Witherington
Title: Vice President
<PAGE>
EXECUTION COPY
U.S. $250,000,000
AMENDED AND RESTATED LOAN AGREEMENT
Dated as of February 14, 1997,
among
ACT III THEATRES, INC.
as Borrower
and
GENERAL ELECTRIC CAPITAL CORPORATION
as Agent and Lender
and
THE LENDERS NAMED HEREIN
as Lenders and Co-Agents
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. DEFINITIONS............................................................. 1
2. AMOUNT AND TERMS OF CREDIT ............................................. 23
2.1. Revolving Credit Advances................................. 23
2.2. Intentionally Omitted..................................... 25
2.3. Intentionally Omitted..................................... 25
2.4. Mandatory Prepayment...................................... 25
2.5. Intentionally Omitted..................................... 26
2.6. Use of Proceeds........................................... 26
2.7. Single Loan............................................... 26
2.8. Interest on Revolving Credit Loan......................... 26
2.9. Intentionally Omitted..................................... 28
2.10. Fees...................................................... 28
2.11. Receipt of Payments....................................... 29
2.12. Application of Payments................................... 29
2.13. Sharing of Payments, Etc. ................................ 30
2.14. Accounting ............................................... 30
2.15. Indemnity................................................. 31
2.16. Access ................................................... 32
2.17. Capital Adequacy; Increased Costs; Illegality............. 33
2.18. Taxes..................................................... 35
3. CONDITIONS PRECEDENT
3.1. Conditions to Effectiveness of Restated Loan Agreement.... 36
3.2. Conditions to the Initial and Each Subsequent Revolving
Credit Advance.......................................... 38
4. REPRESENTATIONS AND WARRANTIES ......................................... 38
4.1. Corporate or Partnership Existence; Compliance with Law... 38
4.2. Executive Offices......................................... 39
4.3. Subsidiaries ............................................. 39
4.4. Corporate and Partnership Power; Authorization;
Enforceable Obligations................................. 39
4.5. Solvency.................................................. 40
i
<PAGE>
PAGE
----
4.6. Financial Statements...................................... 40
4.7. Projections............................................... 41
4.8. Ownership of Property; Liens.............................. 42
4.9. No Default................................................ 44
4.10. Labor Matters............................................. 44
4.11. Other Ventures............................................ 45
4.12. Investment Company Act.................................... 45
4.13. Margin Regulations........................................ 45
4.14. Taxes..................................................... 45
4.15. ERISA..................................................... 46
4.16. No Litigation............................................. 48
4.17. Brokers................................................... 48
4.18. Intentionally Omitted..................................... 48
4.19. Outstanding Stock; Options; Warrants; Etc. ............... 48
4.20. Employment and Labor Agreements........................... 49
4.21. Patents, Trademarks, Copyrights and Licenses.............. 49
4.22. Full Disclosure........................................... 49
4.23. Liens..................................................... 50
4.24. No Material Adverse Effect................................ 50
4.25. Environmental Protection.................................. 50
4.26. Prior Liens............................................... 51
5. FINANCIAL STATEMENTS AND INFORMATION.................................... 51
5.1. Reports and Notices....................................... 51
5.2. Communication with Accountants............................ 54
6. AFFIRMATIVE COVENANTS................................................... 55
6.1. Maintenance of Existence and Conduct of Business.......... 55
6.2. Payment of Obligations.................................... 55
6.3. Financial Covenants....................................... 56
6.4. Lender's Fees............................................. 57
6.5. Books and Records......................................... 57
6.6. Litigation................................................ 57
6.7. Insurance................................................. 58
6.8. Compliance with Law....................................... 58
6.9. Agreements................................................ 58
6.10. Supplemental Disclosure................................... 58
6.11. Employee Plans............................................ 59
6.12. Leases; New Real Estate................................... 60
ii
<PAGE>
PAGE
----
6.13. Environmental Matters..................................... 62
6.14. SEC Filings; Certain Other Notices........................ 63
7. NEGATIVE COVENANTS...................................................... 63
7.1. Mergers, Etc. ............................................ 63
7.2. Investments; Loans and Advances........................... 63
7.3. Indebtedness.............................................. 64
7.4. Employee Loans............................................ 65
7.5. Capital Structure......................................... 65
7.6. Maintenance of Business................................... 65
7.7. Transactions with Affiliates.............................. 65
7.8. Guaranteed Indebtedness................................... 66
7.9. Liens..................................................... 67
7.10. Capital Expenditures...................................... 67
7.11. Sale of Assets............................................ 67
7.12. Cancellation of Indebtedness.............................. 68
7.13. Events of Default......................................... 68
7.14. Hedging Transactions...................................... 68
7.15. Restricted Payments....................................... 68
7.16. Restricted Leases and Leases.............................. 70
7.17. ERISA..................................................... 71
7.18. Payment of Brokers Fees, Etc. ............................ 71
7.19. Intentionally Omitted..................................... 71
7.20. Intentionally Omitted..................................... 71
7.21. Payment or Modification of Note Documents................. 72
7.22. Modification of Compensation Plan......................... 72
8. TERM.................................................................... 73
8.1. Termination............................................... 73
8.2. Survival of Obligations Upon Termination of
Financing Arrangement................................... 73
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.................................. 73
9.1. Events of Default......................................... 73
9.2. Remedies.................................................. 77
9.3. Waivers by Borrower....................................... 78
9.4. Right of Set-Off.......................................... 78
10. THE AGENT............................................................... 78
10.1. Authorization and Action.................................. 78
iii
<PAGE>
PAGE
----
10.2. Agent's Reliance, Etc. ................................... 79
10.3. GE Capital and Affiliates................................. 79
10.4. Lender Credit Decision.................................... 80
10.5. Indemnification........................................... 80
10.6. Successor Agent........................................... 80
11. MISCELLANEOUS........................................................... 81
11.1. Complete Agreement; Modification of Agreement; Sale of
Interest................................................ 81
11.2. Fees and Expenses......................................... 83
11.3. No Waiver by Agent or Any Lender.......................... 84
11.4. Remedies.................................................. 84
11.5. Waiver of Jury Trial...................................... 85
11.6. Severability.............................................. 85
11.7. Parties................................................... 85
11.8. Conflict of Terms......................................... 85
11.9. Authorized Signature...................................... 85
11.10. GOVERNING LAW............................................. 85
11.11. Notices................................................... 86
11.12. Survival.................................................. 87
11.13. Section Titles............................................ 87
11.14. Counterparts.............................................. 87
iv
<PAGE>
PAGE
----
INDEX OF EXHIBITS AND SCHEDULES
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Revolving Credit Advance
Exhibit C - Form of Leasehold Mortgage
Exhibit D - Form of Mortgage
Schedule 1.1 - LIBOR Lending Offices
Schedule 1.2 - Permitted Encumbrances
Schedule 2.1 - Permitted Depository Banks
Schedule 4.1 - Compliance With Law
Schedule 4.2 - Executive Offices
Schedule 4.3 - Subsidiaries
Schedule 4.4 - Required Consents
Schedule 4.6(d) - Dividends and Distributions
Schedule 4.8(a) - Owned Real Estate
Schedule 4.8(b) - Leases
Schedule 4.8(c) - Real Property Options, Rights, etc.
Schedule 4.8(d) - Improvements
Schedule 4.8(e) - Real Estate Permits
Schedule 4.8(f) Condemnation Proceedings
Schedule 4.11 - Other Ventures
Schedule 4.14 - Tax Matters
Schedule 4.15 - ERISA Matters
Schedule 4.16 - Litigation
Schedule 4.17 - Brokers and Brokerage Fees
Schedule 4.19 - Outstanding Stock; Options, Warrants;
etc.
Schedule 4.20 - Employment and Labor Agreements
Schedule 4.21 - Patents and Trademarks
Schedule 4.24 - Events Subsequent to December 31, 1988
Schedule 4.25 - Environmental Matters
Schedule 4.26 - Prior Liens
Schedule 6.7 - Insurance
v
<PAGE>
Schedule 6.7B - Insurance Requirements
Schedule 6.12 - Mandatory Leasehold Language
Schedule 7.2 - Permitted Banks and Other Financial
Institutions for Investments
Schedule 7.7 - Management Fee
Schedule 7.16 - Assignable Leases
Schedule 11.9 - Authorized Signatures
vi
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,720
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13,132
0
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