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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 19, 1998
REGAL CINEMAS, INC.
(Exact name of registrant as specified in its charter)
TENNESSEE 0-21772 62-1412720
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
7132 Commercial Park Drive 37918
Knoxville, Tennessee (Zip Code)
(address of principal executive offices)
Registrant's telephone number, including area code: (423) 922-1123
N/A
(Former name or former address, if changed since last report)
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<PAGE>
Item 5. Other Events
Regal Cinemas, Inc., a Tennessee corporation (the "Company"), has
entered into an Agreement and Plan of Merger, dated as of January 19, 1998
(the "Merger Agreement"), among Screen Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of KKR 1996 Fund L.P. (the "KKR
Fund"), Monarch Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Hicks, Muse, Tate & Furst Equity Fund III, L.P. (the
"HTMF Fund" and together with the KKR Fund, the "Funds"), and the Company.
Pursuant to and subject to the terms and conditions of the Merger
Agreement, each of Screen Acquisition Corp. and Monarch Acquisition Corp.
will be merged with and into the Company (collectively, the "Merger") and
the Company will continue after the Merger as a corporation owned
by the Funds (the "Surviving Corporation"). Each share of Company common
stock will be converted into the right to receive $31.00 in cash from the
Surviving Corporation.
The Merger is subject to termination or expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
approval by Company shareholders, the obtaining of necessary financing to
consummate the Merger and certain other conditions.
On January 20, 1998, the Company and affiliates of the Funds
issued a press release (the "Press Release") concerning the Merger and the
execution of the Merger Agreement.
The foregoing description of the Merger and related transactions
does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement and the Press Release, which are attached
hereto and incorporated herein by reference.
<PAGE>
Item 7. Financial Statement and Exhibits.
(c) Exhibits.
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as
of January 19, 1998, among Regal
Cinemas, Inc., Screen Acquisition Corp.
and Monarch Acquisition Corp.
99.1 Press Release dated January 20, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Date: January 20, 1998 REGAL CINEMAS, INC.
(Registrant)
By: /s/ Michael L. Campbell
------------------------------------
(Signature)
Name: Michael L. Campbell
Title: Chairman, President and
Chief Executive Officer
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as
of January 19, 1998, among Regal
Cinemas, Inc., Screen Acquisition Corp.
and Monarch Acquisition Corp.
99.1 Press Release dated January 20, 1998.
EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
dated as of January 19, 1998
Among
REGAL CINEMAS, INC.,
SCREEN ACQUISITION CORP.
and
MONARCH ACQUISITION CORP.
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. The Merger............................................2
SECTION 1.02. Closing...............................................2
SECTION 1.03. Effective Time........................................2
SECTION 1.04. Effects of the Merger.................................3
SECTION 1.05. Articles of Incorporation and By-laws.................3
SECTION 1.06. Directors.............................................3
SECTION 1.07. Officers..............................................3
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock...............................3
SECTION 2.02. Exchange of Certificates..............................4
SECTION 2.03. The Debt Offer........................................7
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company.........9
SECTION 3.02. Representations and Warranties of the Holdcos........22
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Covenants of the Company.............................25
SECTION 4.02. Covenants of Holdcos.................................29
SECTION 4.03. No Solicitation......................................30
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement...................32
SECTION 5.02. Access to Information................................33
SECTION 5.03. Company Stockholders Meeting.........................33
SECTION 5.04. Reasonable Best Efforts..............................33
SECTION 5.05. Benefits Matters.....................................34
SECTION 5.06. Stock-Based Compensation.............................35
SECTION 5.07. Fees and Expenses....................................35
SECTION 5.08. Indemnification, Exculpation and Insurance...........37
SECTION 5.09. Financing............................................38
SECTION 5.10. Transfer Taxes.......................................38
SECTION 5.11. Resignation of Directors.............................38
SECTION 5.12. Solvency at Closing..................................38
SECTION 5.13. Investment by Management Personnel...................39
SECTION 5.14. Company Warrants.....................................39
<PAGE>
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Merger....................................39
SECTION 6.02. Conditions to Obligation of the Holdcos To
Effect the Merger....................................40
SECTION 6.03. Conditions to Obligation of the Company To
Effect the Merger....................................42
SECTION 6.04. Frustration of Closing Conditions....................43
ARTICLE VII
Termination and Amendment
SECTION 7.01. Termination..........................................43
SECTION 7.02. Effect of Termination................................44
SECTION 7.03. Amendment............................................45
SECTION 7.04. Extension; Waiver....................................45
SECTION 7.05. Procedure for Termination, Amendment, Extension
or Waiver............................................45
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties........45
SECTION 8.02. Notices..............................................46
SECTION 8.03. Definitions; Interpretation..........................47
SECTION 8.04. Counterparts.........................................49
SECTION 8.05. Entire Agreement; No Third-Party
Beneficiaries; Rights of Ownership...................49
SECTION 8.06. Governing Law........................................49
SECTION 8.07. Publicity............................................49
SECTION 8.08. Assignment...........................................49
SECTION 8.09. Enforcement..........................................50
SECTION 8.10. Several Obligations..................................49
<PAGE>
1
AGREEMENT AND PLAN OF MERGER dated as of
January 19, 1998 (this "Agreement"), among REGAL
CINEMAS, INC., a Tennessee corporation (the
"Company"), SCREEN ACQUISITION CORP., a Delaware
corporation ("Holdco I"), and MONARCH ACQUISITION
CORP., a Delaware corporation ("Holdco II", and
together with Holdco I, the "Holdcos").
WHEREAS the respective Boards of Directors of each Holdco
and the Company have approved the mergers of each Holdco with and into
the Company (together, the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, no par value, of the Company
("Company Common Stock") not owned by either Holdco or by the Company
will be converted into the right to receive $31.00 in cash;
WHEREAS all of the issued and outstanding common stock, par
value $.01 per share, of Holdco I ("Holdco I Common Stock") is owned
by KKR 1996 Fund L.P. (the "KKR Fund") or an affiliate thereof;
WHEREAS all of the issued and outstanding common stock, par
value $.01 per share, of Holdco II ("Holdco II Common Stock" and,
together with Holdco I Common Stock, "Holdco Common Stock") is owned
by Hicks, Muse, Tate & Furst Equity Fund III, L.P. (the "HMTF Fund"
and, together with the KKR Fund, the "Funds") or an affiliate thereof;
WHEREAS the Merger requires the approval of this Agreement
by the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock (the "Company Stockholder
Approval"); and
WHEREAS the Holdcos and the Company desire to make certain
representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants
<PAGE>
and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
Tennessee Business Corporation Act (the "TBCA") and the Delaware
General Corporation Law (the "DGCL"), each Holdco shall be merged with
and into the Company at the Effective Time (as defined in Section
1.03). Following the Merger, the separate corporate existence of each
Holdco shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of each Holdco in accordance
with the TBCA and the DGCL. If a Holdco shall assign its rights under
this Agreement as permitted by Section 8.08, then the parties hereto
shall enter into a reasonable and appropriate amendment to this
Agreement to reflect such assignment and the substitution of the
assignee as Holdco I or Holdco II, respectively, for purposes of this
Agreement.
SECTION 1.02. Closing. Unless this Agreement shall have been
terminated and the transactions contemplated herein abandoned pursuant
to Section 7.01, and subject to the satisfaction or waiver of the
conditions set forth in Article VI, the closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by
the parties, which shall be no later than the second business day
following the satisfaction or waiver of all the conditions set forth
in Article VI which by their terms are capable of being satisfied
prior to the Closing (the "Closing Date"), at the offices of Cravath,
Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, NY
10019, unless another time, date or place is agreed to by the parties
hereto.
SECTION 1.03. Effective Time. Subject to the provisions of
this Agreement, as soon as practicable on the Closing Date, articles
of merger and all other appropriate documents (in any such case, the
"Articles of Merger") shall be duly prepared, executed, acknowledged
and filed by the parties in accordance with the relevant provisions of
the TBCA and the DGCL with the Secretary of State of the State of
Tennessee and the Secretary of State of the State of Delaware,
respectively. The Merger shall become effective upon the filing of the
Articles of Merger with the Secretary
<PAGE>
of State of the State of Tennessee and the Secretary of State of the
State of Delaware or at such time thereafter as is provided in the
Articles of Merger (the time the Merger becomes effective being
hereinafter referred to as the "Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have
the effects set forth in Section 21-108 of the TBCA and Section 259 of
the DGCL.
SECTION 1.05. Articles of Incorporation and By- laws. (a)
The charter of the Company as in effect immediately prior to the
Effective Time shall be the charter of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable
law.
(b) The by-laws of the Company as in effect immediately
prior to the Effective Time shall be the by-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or
by applicable law.
SECTION 1.06. Directors. The directors of each Holdco at the
Effective Time shall be the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may
be.
SECTION 1.07. Officers. The officers of the Company
immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, until the earlier of their resignation or
removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of
the Company, either Holdco or the holders of Company Common Stock or
any shares of capital stock of either Holdco:
(a) Cancelation of Certain Stock. Each share of Company
Common Stock that is owned by either Holdco or by the Company
(other than those held in connection with the Company Stock Plans
(as defined in Section 3.01(b)) shall automatically be canceled
and
<PAGE>
retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(b) Conversion of Company Common Stock. Each issued and
outstanding share of Company Common Stock (other than shares to
be canceled in accordance with Section 2.01(a)) shall be
converted into the right to receive from the Surviving
Corporation following the Merger an amount in cash equal to
$31.00 (the "Merger Consideration").
(c) Cancelation and Retirement of Company Common Stock. All
shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares referred to in
Section 2.01(a), which shall be canceled and retired in
connection therewith) shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect
thereto except the right to receive the Merger Consideration,
without interest thereon.
(d) Holdco I Capital Stock. Each share of Holdco I Common
Stock issued and outstanding immediately prior to the Effective
Time shall be converted into one share of Common Stock of the
Surviving Corporation, no par value ("Surviving Corporation
Common Stock").
(e) Holdco II Capital Stock. Each share of Holdco II Common
Stock issued and outstanding immediately prior to the Effective
Time shall be converted into one share of Surviving Corporation
Common Stock.
SECTION 2.02. Exchange of Certificates. (a) Paying Agent.
Prior to the Effective Time, the Holdcos shall appoint a bank or trust
company that is reasonably satisfactory to the Company to act as
paying agent (the "Paying Agent") for the payment of the Merger
Consideration. As of the Effective Time, the Surviving Corporation
shall deposit with the Paying Agent, for the benefit of the holders of
shares of Company Common Stock, cash in an amount sufficient to pay
the Merger Consideration required to be paid pursuant to Section 2.01
in exchange for outstanding shares of Company Common Stock (such cash
being hereinafter referred to as the "Exchange Fund").
<PAGE>
(b) Exchange Procedures. As soon as reasonably practicable
(and in any event no later than ten days) after the Effective Time,
the Surviving Corporation shall cause the Paying Agent to mail to each
holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding shares of Company
Common Stock (the "Certificates") whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 2.01(b)
(i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying
Agent and which shall be in customary form and contain customary
provisions) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration. Each
holder of record of a Certificate shall, upon surrender to the Paying
Agent of such Certificate, be entitled to receive in exchange therefor
the amount of cash which the number of shares of Company Common Stock
previously represented by such Certificate has been converted into the
right to receive pursuant to Section 2.01(b), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment of the Merger Consideration
may be made to a person (as defined in Section 8.03) other than the
person in whose name the Certificate so surrendered is registered if,
and only if, such Certificate shall be properly endorsed or otherwise
be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the
payment of the Merger Consideration to a person other than the
registered holder of such Certificate or establish to the satisfaction
of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.02,
each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the Merger
Consideration which the holder thereof has the right to receive in
respect of such Certificate pursuant to this Article II. No interest
shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) No Further Ownership Rights in Company Common Stock. All
cash paid upon the surrender therefor of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in
full satisfaction of all rights pertaining to the shares of Company
Common Stock exchanged for cash theretofore represented by such
<PAGE>
Certificates, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a
record date prior to the Effective Time which may have been declared
or made by the Company on such shares of Company Common Stock which
remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time, and if after the
Effective Time such Certificates are presented to the Company for
transfer, they shall be canceled against delivery for cash as provided
in this Article II.
(d) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of the
Certificates for six months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any holders
of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to the Surviving Corporation (as
general creditors thereof) for payment of their claim for Merger
Consideration.
(e) No Liability. None of the Company, either Holdco, the
Surviving Corporation or the Paying Agent shall be liable to any
person in respect of any cash from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat
or similar law. If any Certificate shall not have been surrendered
prior to two years after the Effective Time (or immediately prior to
such earlier date on which any Merger Consideration would otherwise
escheat to or become the property of any Governmental Entity (as
defined in Section 3.01(c)), any such Merger Consideration shall, to
the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
(f) Investment of Exchange Fund. The Paying Agent shall
invest any cash included in the Exchange Fund as directed by the
Surviving Corporation, provided that such investment shall be in (i)
securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof and
having maturities of not more than one month from the date of
investment, (ii) certificates of deposit, eurodollar time deposits and
bankers' acceptances with maturities not exceeding one month and
overnight bank deposits with any commercial bank, depository
institution or trust company incorporated or doing business under the
laws of the United
<PAGE>
States of America, any state thereof or the District of Columbia,
provided that such commercial bank, depository institution or trust
company has, at the time of investment, (A) capital and surplus
exceeding $250,000,000 and (B) outstanding short-term debt securities
which are rated at least A-1 by Standard & Poor's Rating Group
Division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody's
Investors Services, Inc., (iii) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described
in clauses (i) and (ii) above entered into with any financial
institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper having a rating in the highest rating categories
from Standard & Poor's Rating Group Division of The McGraw-Hill
Companies, Inc. or Moody's Investors Services, Inc. and in each case
maturing within one month from the date of investment and (v) money
market mutual or similar funds having assets in excess of
$1,000,000,000. Any interest and other income resulting from such
investments shall be paid to the Surviving Corporation.
(g) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such reasonable and customary amount as
the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the
Paying Agent shall deliver in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Consideration with respect
thereto.
(h) Withholding Rights. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise
payable to any holder of Company Common Stock pursuant to this
Agreement such amounts as may be required to be deducted and withheld
with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or under any provision of
state, local or foreign tax law.
SECTION 2.03. The Debt Offer. (a) Provided that this
Agreement shall not have been terminated in accordance with Section
7.01, the Company shall, as soon as practicable after receiving a
written request (the "Debt Offer Request") by both Holdcos to do so
(but in no event earlier than 20 days after the date hereof), commence
an offer to purchase all of the Company's 8-1/2% Senior Subordinated
Notes due 2007 (the "Subordinated Notes") on the terms set forth in
Section 2.03 of the Company Disclosure Schedule (as defined
<PAGE>
in Section 3.01) and such other customary terms and conditions as are
reasonably acceptable to the Holdcos (the "Debt Offer"). The Company
shall waive any of the conditions to the Debt Offer and make any other
changes in the terms and conditions of the Debt Offer as may be
reasonably requested by both Holdcos, and the Company shall not,
without the Holdcos' prior consent, waive any condition to the Debt
Offer, make any changes to the terms and conditions of the Debt Offer
set forth in Section 2.03 of the Disclosure Schedule or make any other
changes to the terms and conditions of the Debt Offer. Notwithstanding
anything in this Agreement, including the immediately preceding
sentence, to the contrary, (i) the Holdcos shall not request that the
Company make any change to the terms or conditions of the Debt Offer
which decreases the price per Subordinated Note payable in the Debt
Offer, changes the form of consideration payable in the Debt Offer
(other than by adding consideration) or imposes conditions to or
changes any of the terms of the Debt Offer in any manner that is
adverse to holders of the Subordinated Notes or which would be
reasonably likely to prevent or materially delay the Closing (it being
agreed that a request by the Holdcos that the Company waive any
condition in whole or in part at any time and from time to time in its
sole discretion shall not be deemed to be adverse to any holder of
Subordinated Notes), in any such case unless such change was
previously approved by the Company in writing, and the Company shall
not be required to make any such change and (ii) the Company shall not
be required to accept for payment or pay for any Subordinated Notes
prior to the Closing.
(b) Promptly following the date of this Agreement, the
Company shall prepare, subject to advice and comments of the Holdcos,
an offer to purchase the Subordinated Notes (or portions thereof) and
forms of the related letter of transmittal (the "Letter of
Transmittal") (collectively, the "Offer to Purchase"), as well as all
other information and exhibits required in connection therewith
(collectively, the "Offer Documents"). All mailings to the holders of
Subordinated Notes in connection with the Debt Offer shall be subject
to the prior review, comment and approval (which will not be
unreasonably withheld) of the Holdcos. The Company will use its
reasonable best efforts to cause the Offer Documents to be mailed to
the holders of the Subordinated Notes as promptly as practicable
following commencement of the Debt Offer in accordance with Section
2.03(a). The Company agrees promptly to correct any information in the
Offer Documents that shall be or have become false or misleading in
any material respect.
<PAGE>
(c) The Company covenants and agrees that if a Debt Offer
Request has been made on or prior to the twenty-fifth business day
prior to May 31, 1998, subject to the terms and conditions of this
Agreement, including but not limited to the conditions to the Debt
Offer, on the Closing Date it will accept for payment the Subordinated
Notes.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company.
Except as set forth in the Company SEC Documents (as defined in
Section 3.01(d)) filed and publicly available prior to the date hereof
(the "Company Filed SEC Documents") or on the Disclosure Schedule
delivered by the Company to each Holdco prior to the execution of this
Agreement (the "Company Disclosure Schedule"), the Company represents
and warrants to each Holdco as follows:
(a) Organization and Authority. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite corporate, company or partnership
power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and is duly qualified and
in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure thereof,
individually or in the aggregate, would not have a material adverse
effect (as defined in Section 8.03(a)) on the Company. The Company has
made available to the Holdcos complete and correct copies of its
charter and by-laws and the charter and by-laws (or other
organizational documents) of each of its subsidiaries, in each case as
amended to the date of this Agreement.
(b) Capital Structure. The authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock and
1,000,000 shares of preferred stock, no par value, of the Company
("Company Preferred Stock", and together with the Company Common
Stock, the "Company Capital Stock"). At the close of business on
January 16, 1998, (A) 36,115,774 shares of Company Common Stock were
outstanding, of which 8,375 shares constituted shares of Company
Restricted Stock (as defined in Section 5.06(a)), (B) no shares of
Company Preferred Stock
<PAGE>
were outstanding, (C) options to acquire 4,096,414 shares of Company
Common Stock from the Company pursuant to the 1993 Employee Stock
Incentive Plan, the Regal Cinemas, Inc. Employee Stock Option Plan,
the Regal Cinemas, Inc. Participant Stock Option Plan, and the 1993
Outside Directors Stock Option Plan of the Company (the "Company Stock
Plans") were outstanding, and (D) warrants (the "Company Warrants") to
acquire 158,455 shares of Company Common Stock from the Company were
outstanding. Other than as set forth above, at the close of business
on January 16, 1998, there were outstanding no shares of Company
Capital Stock or options, warrants or other rights to acquire Company
Capital Stock from the Company. Since January 16, 1998, (x) there have
been no issuances by the Company of shares of Company Capital Stock
other than issuances of shares of Company Common Stock pursuant to the
exercise of Company Stock Options (as defined in Section 5.06)
outstanding as of January 16, 1998, or the exercise of Company
Warrants and (y) there have been no issuances by the Company of
options, warrants or other rights to acquire capital stock from the
Company except as expressly permitted by this Agreement. No bonds,
debentures, notes or other indebtedness having the right to vote (or
convertible into or exchangeable for securities having the right to
vote) on any matters on which stockholders of the Company may vote are
issued or outstanding. All outstanding shares of Company Common Stock
are, and any shares of Company Common Stock which may be issued upon
the exercise of Company Stock Options or Company Warrants when issued
will be, duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims,
liens, encumbrances, pledges or security interests (collectively,
"Liens") and not subject to preemptive rights. Other than as set forth
above, and except for this Agreement, the Company Stock Plans, the
Company Stock Options and the Company Warrants, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements or undertakings of any kind to which the Company or any
subsidiary of the Company is a party or by which the Company or any
subsidiary of the Company is bound obligating the Company or any
subsidiary of the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
equity or voting securities of the Company or of any subsidiary of the
Company or obligating the Company or any subsidiary of the Company to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement or undertaking. There are no
outstanding obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its subsidiaries and,
<PAGE>
to the knowledge of the executive officers of the Company, as of the
date hereof, no irrevocable proxies have been granted with respect to
shares of Company Common Stock or equity of subsidiaries of the
Company. Section 3.01(b) of the Company Disclosure Schedule sets forth
all of the indebtedness for borrowed money or capitalized lease
obligations of the Company and its subsidiaries outstanding as of the
date hereof except for such indebtedness or capital leases with an
aggregate principal or capitalized amount not in excess of $2,000,000
individually or $10,000,000 in the aggregate.
(c) Authorization. The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to
obtaining the Company Stockholder Approval with respect to the Merger,
to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to obtaining the
Company Stockholder Approval with respect to the Merger. This
Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, fraudulent transfer and other similar laws from
time to time in effect. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any breach or violation of, or
default (with or without notice or lapse of time or both) under, or
result in the termination of, or accelerate the performance required
by, or give rise to a right of termination, cancelation or
acceleration of any obligation under, or the creation of a Lien
pursuant to, (i) any provision of the charter (or similar
organizational documents) or by-laws of the Company or any subsidiary
of the Company or (ii) subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and
filings referred to in the following sentence, any loan or credit
agreement, note, mortgage, indenture, lease, Company Benefit Plan (as
defined in Section 3.01(m)) or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company or any subsidiary of the Company or their respective
properties or assets, in any case under this clause (ii) which would,
individually or in the aggregate, have a material adverse effect on
the Company. No consent, approval, order or authorization of,
<PAGE>
or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or
instrumentality (a "Governmental Entity") is required by or with
respect to the Company or any subsidiary of the Company in connection
with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated
hereby, the failure of which to be obtained or made would,
individually or in the aggregate, have a material adverse effect on
the Company or would prevent or materially delay the consummation of
the transactions contemplated hereby, except for (A) the filing with
the SEC of (i) a proxy statement relating to the consideration of the
Company Stockholder Approval at a meeting (the "Company Stockholders
Meeting") of the stockholders of the Company duly called and convened
to consider the approval of this Agreement (such proxy statement as
amended or supplemented from time to time, the "Proxy Statement") and
(ii) such reports under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), as may be required in connection with this Agreement
and the Merger, the Debt Offer and the other transactions contemplated
hereby, (B) the filing of the Articles of Merger with the Secretary of
State of the State of Tennessee and appropriate documents with the
relevant authorities of other states in which the Company is qualified
to do business, (C) filings required pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder (the "HSR Act"), (D) filings
necessary to satisfy the applicable requirements of state securities
or "blue sky" laws and (E) those required under the rules and
regulations of the Nasdaq National Market ("Nasdaq") (collectively,
the "Required Filings").
(d) SEC Documents; Financial Statements. The Company has
filed and made available to the Holdcos a true and complete copy of
each report, schedule, registration statement and definitive proxy
statement required to be filed by the Company with the SEC since
January 1, 1995 (the "Company SEC Documents"). As of their respective
dates, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as
the case may be, applicable to such Company SEC Documents. None of the
Company SEC Documents when filed contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the
Company SEC Documents comply as to form in
<PAGE>
all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") during the periods
involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q of the
SEC, or for normal year-end adjustments) and fairly present in all
material respects the consolidated financial position of the Company
and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended. Except as set forth in the Company Filed SEC
Documents (including any item accounted for in the financial
statements contained in the Company Filed SEC Documents or set forth
in the notes thereto), as of October 2, 1997, neither the Company nor
any of its subsidiaries had, and since such date neither the Company
nor any of such subsidiaries has incurred, any claims, liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) which, individually or in the aggregate, would have a
material adverse effect on the Company (other than claims, liabilities
or obligations contemplated by this Agreement or expressly permitted
to be incurred pursuant to this Agreement).
(e) Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by
reference in (i) the Proxy Statement will, at the date it is first
mailed to stockholders of the Company or at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (ii) the
Offer Documents will, at the time the Offer Documents or any
amendments or supplements thereto are first published, sent or given
to holders of Subordinated Notes, as the case may be, or at the time
the Debt Offer is consummated, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading,
except that in each case no representation or warranty is made by the
Company with respect to statements made or incorporated by reference
therein based on information supplied by either Holdco specifically
for inclusion or incorporation by reference therein. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act, except that in each case
<PAGE>
no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on
information supplied by either Holdco specifically for inclusion or
incorporation by reference therein.
(f) Absence of Certain Changes or Events. Since October 2,
1997, (i) the Company and its subsidiaries have conducted their
businesses only in the ordinary course of business consistent with
past practice in all material respects, (ii) there has not occurred
any change, effect, event, occurrence or development that,
individually or in the aggregate, would have a material adverse effect
on the Company and (iii) the Company has not changed its fiscal year
or its methods, principles or practices of accounting in effect at
October 2, 1997, except as required by changes in GAAP, or altered or
changed in any material respect its practices and policies relating to
the payment of film costs, accrued liabilities or accounts payable or
collection of box office or concession revenues.
(g) Compliance with Laws; Litigation. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions,
authorizations, orders and approvals of all Governmental Entities (the
"Company Permits") that are required for them to own, lease or operate
their properties and assets and to carry on their businesses as
presently conducted, and there has occurred no default under any such
Company Permit, except for the lack of any Company Permit or for
defaults under any Company Permit which lack or default would not have
a material adverse effect on the Company. Except as disclosed in the
Company Filed SEC Documents, the Company and its subsidiaries are in
compliance with all applicable statutes, laws, ordinances, rules,
orders and regulations of any Governmental Entity except for any such
noncompliance which would not have a material adverse effect on the
Company. As of the date hereof, there is no suit, action or proceeding
pending or, to the knowledge of the executive officers of the Company
or any subsidiary of the Company, threatened, against the Company or
any subsidiary of the Company that would, individually or in the
aggregate, have a material adverse effect on the Company, nor is there
any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any subsidiary
of the Company having a material adverse effect on the Company.
(h) Taxes. (i) (A) The Company and its subsidiaries have
filed, or have caused to be filed on their behalf, all tax returns
required to be filed by them
<PAGE>
(collectively, "Company Returns"), and as of the time of filing, all
the Company Returns were complete and accurate except to the extent
that any failure to file or any inaccuracies in any filed Company
Returns would not have a material adverse effect on the Company, (B)
the Company and its subsidiaries have paid or the Company has made
adequate reserves in its financial statements included in the Company
Filed SEC Documents (other than reserves for deferred income taxes
established to reflect differences between book basis and tax basis of
assets and liabilities) for all taxes payable by the Company and its
subsidiaries except to the extent that any failure to pay or reserve
would not have a material adverse effect on the Company, (C) the
Company and its subsidiaries have made or the Company will make
provision in its financial statements for all taxes payable for any
periods that end before the Effective Time for which no Company
Returns have yet been filed and for any periods that begin before the
Effective Time and end after the Effective Time to the extent such
taxes are attributable to the portion of any such period ending at the
Effective Time except to the extent that any failure to make such
provision would not have a material adverse effect on the Company, (D)
neither the Company nor any subsidiary has requested any extension of
time within which to file or send any Company Return, which Company
Return has not since been filed or sent, except to the extent that any
such request for an extension would not have a material adverse effect
on the Company, (E) no deficiency for any taxes has been proposed,
asserted or assessed in writing against the Company or any of its
subsidiaries except to the extent that any such deficiency would not
have a material adverse effect on the Company, (F) the Federal income
tax returns of the Company or any consolidated group to which it
belongs have been examined by and settled with the United States
Internal Revenue Service (the "IRS") for all years through 1994, (G)
no claim for unpaid taxes has become a lien or encumbrance of any kind
against the property of the Company or any of its subsidiaries or is
being asserted against the Company or any of its subsidiaries except
to the extent that any such lien or encumbrance would not have,
individually or in the aggregate, a material adverse effect on the
Company, (H) neither the Company nor any of its subsidiaries is a
party to or is otherwise bound by (or has any assets bound by) any tax
sharing agreement, tax indemnity obligation or similar agreement or
arrangement, (I) neither the Company nor any of its subsidiaries has
been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period
specified in section 897(c)(1)(A)(ii) of the Code and (J) each of the
Company and its subsidiaries has duly and timely withheld from
employee salaries, wages and other compensation and
<PAGE>
paid over to the appropriate tax authorities all taxes required to be
so withheld and paid over for all periods for which the statutory
period of limitations for the assessment of tax has not yet expired
except to the extent that any failure to so withhold and pay over
would not have a material adverse effect on the Company.
(ii) For the purpose of this Agreement, the term (A) "tax"
(including, with correlative meaning, the terms "taxes" and "taxable")
shall include, except where the context otherwise requires, all
Federal, state, local, provincial and foreign income, profits,
franchise, gross receipts, payroll, sales, use, property, withholding,
excise, occupancy and other taxes of any nature whatsoever, together
with all interest, penalties and additions imposed with respect to
such amounts and (B) "tax return" shall mean all Federal, state,
local, provincial and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amended tax
return relating to taxes.
(i) Certain Agreements. Neither the Company nor any of its
subsidiaries is in default under any material agreement, commitment,
lease or other instrument to which it or any of its properties is
subject, and there has not occurred any event that, with the giving of
notice or the lapse of time or both, would constitute such a default
by the Company or any of its subsidiaries or, to the knowledge of the
executive officers of the Company, a default thereunder by any other
party thereto, except in all cases where such defaults, individually
or in the aggregate, would not have a material adverse effect on the
Company. Neither the Company nor any of its subsidiaries is a party to
any contract (other than leases) containing any covenant restricting
its ability to conduct its business as currently conducted except for
any such covenants that would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. Neither the Company nor
any of its subsidiaries is in breach in any material respect under its
charter, by-laws or other organizational documents.
(j) Properties. (i) Owned Real Property. Section 3.01(j)(i)
of the Company Disclosure Schedule sets forth a list of all material
real property owned by the Company or any of its subsidiaries
(collectively, the "Owned Real Property"). Except as disclosed in
Section 3.01(j)(i) of the Company Disclosure Schedule, each of the
Company and its subsidiaries has good, valid and marketable title to
the Owned Real Property free of all Liens, in each case except,
individually or in the aggregate, as would have a material adverse
effect on the Company. Except as set forth in
<PAGE>
Section 3.01(j)(i) of the Company Disclosure Schedule, there are no
outstanding contracts for the sale of any of the Owned Real Property,
except those contracts relating to property the value in respect of
which does not exceed $5,000,000 individually or $15,000,000 in the
aggregate.
(ii) Leased Real Property. Section 3.01(j)(ii) of the
Company Disclosure Schedule sets forth a list of all leases and
subleases (the "Real Property Leases") of the Company with respect to
all material real property which is leased or subleased by the Company
or its subsidiaries (the "Leased Real Property"; the Owned Real
Property and the Leased Real Property collectively, the "Real
Property"). Pursuant to the Real Property Leases, the Company and its
subsidiaries hold good and valid leasehold title to the Leased Real
Property, in each case in accordance with the provisions of the
applicable Real Property Lease and free of all Liens, in each case
except, individually or in the aggregate, as would not have a material
adverse effect on the Company. Each of the Real Property Leases is
enforceable against the Company and, to the knowledge of the Company,
against the other party thereto, in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditor's rights and to general equity principles and
except for such failures to be enforceable as would not, individually
or in the aggregate, have a material adverse effect on the Company.
Other than such exceptions which would not have a material adverse
effect on the Company, all Real Property Leases are in full force and
effect and grant in all respects the leasehold estates or rights of
occupancy or use they purport to grant.
(k) Environmental Matters. Except as disclosed in the
Company Filed SEC Documents, and except for items referred to below
that would not, individually or in the aggregate, have a material
adverse effect on the Company:
(i) the Company and its subsidiaries hold and to the best
knowledge of the Company are in compliance with all Environmental
Permits, and the Company and its subsidiaries are otherwise in
compliance with all Environmental Laws;
(ii) none of the Company or its subsidiaries has received
any Environmental Claim, and none of the Company or its
subsidiaries is aware after reasonable inquiry, of any threatened
Environmental Claim against the Company or any of its
subsidiaries;
<PAGE>
(iii) none of the Company or its subsidiaries has entered
into or agreed to any consent decree, order or agreement under
any Environmental Law, and none of the Company or its
subsidiaries is subject to any judgment, decree or order relating
to compliance with any Environmental Law or to investigation,
cleanup, remediation or removal of regulated substances under any
Environmental Law;
(iv) except in compliance with all applicable Environmental
Laws there are no (A) underground storage tanks, (B)
polychlorinated biphenyls, (C) urea- formaldehyde insulation, (D)
sumps, (E) surface impoundments, (F) landfills, or (G) Hazardous
Materials present at any facility currently owned, leased or
operated by the Company or any of its subsidiaries that would
give rise to liability of the Company or any of its subsidiaries
under any Environmental Laws; and
(v) Hazardous Materials have not been generated,
transported, treated, stored, disposed of, released or threatened
to be released at, on, from or under any of the properties or
facilities currently owned, leased or operated by the Company or
any of its subsidiaries in violation of any Environmental Laws
nor have Hazardous Materials been released at or from any
properties or facilities currently owned, leased or operated by
the Company or any of its subsidiaries.
For purposes of this Agreement, the following terms shall have
the following meanings:
"Environmental Claim" means any written notice, claim,
demand, action, suit, complaint, proceeding or other communication by
any person alleging liability or potential liability (including
without limitation liability or potential liability or investigatory
costs, cleanup costs, governmental response costs, natural resource
damages, property damage, personal injury, fines or penalties) arising
out of, relating to, based on or resulting from (A) the presence,
discharge, emission, release or threatened release of any Hazardous
Materials at any location, whether or not owned, leased or operated by
the Company or any of its subsidiaries or (B) circumstances forming
the basis of any violation or alleged violation of any Environmental
Law or Environmental Permit or (C) otherwise relating to obligations
or liabilities under any Environmental Laws.
"Environmental Laws" means all applicable federal, state and
local statutes, rules, regulations, ordinances, orders, decrees and
other legally binding requirements
<PAGE>
relating to contamination, pollution or protection of human health or
the environment, including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act, the Solid
Waste Disposal Act, the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act and the
Occupational Safety and Health Act (to the extent it regulates
occupational exposure to Hazardous Materials), all as amended, and
comparable state laws.
"Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations required under
Environmental Laws for the Company and its subsidiaries to conduct
their operations and businesses.
"Hazardous Materials" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum (including crude
oil or any fraction thereof) and petroleum products, asbestos and
asbestos-containing materials, pollutants, contaminants and forces,
including electromagnetic fields, regulated pursuant to or forming the
basis of liability under any Environmental Law.
(l) Labor Matters. As of the date hereof, (i) to the
knowledge of the Company there are no representation or certification
proceedings, or petitions seeking a representation proceeding pending
or threatened to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority and (ii) to
the knowledge of the Company there are no organizing activities or
strikes involving the Company or any of its subsidiaries with respect
to any group of employees of the Company or its subsidiaries, in each
case that would be expected, individually or in the aggregate, to have
a material adverse effect on the Company.
(m) Benefit Plans. (i) Section 3.01(m) of the Company
Disclosure Schedule sets forth a true and complete list of all
"employee benefit plans" (as defined in Section 3(3) of ERISA) and all
other compensation bonus, pension, profit sharing, deferred
compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, employment, change-in-control, welfare, collective
bargaining, severance, disability, death benefit, hospitalization and
medical plans, agreements, arrangements or understandings that are
maintained or contributed to (or previously contributed to) for the
benefit of any current or former employee, officer or director of the
Company or any of its subsidiaries and with respect to which the
Company or
<PAGE>
any of its subsidiaries would reasonably be expected to have direct or
contingent liability (the "Company Benefit Plans"). The Company has
heretofore delivered or made available to the Holdcos true and
complete copies of all Company Benefit Plans and, with respect to each
Company Benefit Plan, true and complete copies of the following
documents: the most recent actuarial report, if any; the most recent
annual report, if any; any related trust agreement, annuity contract
or other funding instrument, if any; the most recent determination
letter, if any; and the most recent summary plan description, if any.
(ii) Except as disclosed in Section 3.01(m) of the Company
Disclosure Schedule: (A) none of the Company Benefit Plans is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA
or is otherwise subject to Title IV of ERISA; (B) none of the
Company Benefit Plans promises or provides retiree medical or
life insurance benefits to any person; (C) neither the Company
nor any of its subsidiaries has any obligation to adopt or has
taken any corporate action to adopt, any new Company Benefit Plan
or, except as required by law, to amend any existing Company
Benefit Plan; (D) each Company Benefit Plan has been administered
in compliance with its terms and the applicable provisions of
ERISA, the Code and all other applicable laws, rules and
regulations except for any failures to so administer any Company
Benefit Plan as would not have a material adverse effect on the
Company; (E) each Company Benefit Plan that is intended to be
qualified within the meaning of Section 401(a) of the Code is so
qualified and has received a favorable determination letter as to
its qualification and, to the Company's knowledge, nothing has
occurred that would be reasonably likely to cause the loss of
such qualification; (F) neither the Company nor any entity
required to be treated as a single employer with the Company
under Section 414 of the Code has any unsatisfied liability under
Title IV of ERISA that would have a material adverse effect on
the Company, (G) other than funding obligations and benefits
claims payable in the ordinary course, no event has occurred and
no circumstance exists with respect to any Company Benefit Plan
that could give rise to any liability that would have a material
adverse effect on the Company, whether directly or by reason of
its affiliation with any entity required to be treated as a
single employer with the Company under Section 414 of the Code;
(H) as of the date hereof there are no pending or, to the
knowledge of the executive officers of the Company, threatened
investigations, claims or lawsuits in
<PAGE>
respect of any Company Benefit Plan that would have a material
adverse effect on the Company; (I) no amount payable pursuant to
a Company Benefit Plan or any other plan, contract or arrangement
of the Company would be considered an "excess parachute payment"
under Section 280G of the Code; and (J) except as provided in
Section 5.06(a) of this Agreement, no Company Benefit Plan exists
that could result in the payment to any current or former
employee, officer or director of the Company of any money or
other property or accelerate or provide any other rights or
benefits as a result of the transactions contemplated by this
Agreement whether or not such payment would constitute a
parachute payment within the meaning of Section 280G of the Code.
(n) Subsidiaries. The Company has previously made available
to the Holdcos a list of all the subsidiaries of the Company as of the
date of this Agreement and their respective jurisdictions of
organization. All the shares of capital stock of each of the
subsidiaries of the Company are duly authorized and issued, fully paid
and nonassessable and (except for directors' qualifying shares, if
any) are owned by the Company or another subsidiary of the Company
free and clear of all Liens. Except for the capital stock of its
subsidiaries, the Company does not own, directly or indirectly, any
capital stock or other ownership interest in any person.
(o) Vote Required. The Company Stockholder Approval is the
only vote of the holders of any class or series of the Company's
securities necessary to approve this Agreement and the transactions
contemplated hereby (assuming for purposes of this representation the
accuracy of the representations contained in Section 3.02(g)).
(p) Board Recommendation. On the date hereof, the Board of
Directors of the Company, at a meeting duly called and held, by the
unanimous vote of the directors present at such meeting, (i)
determined that this Agreement and the Merger and the other
transactions contemplated hereby are fair to and in the best interests
of the stockholders of the Company, (ii) adopted this Agreement and
approved the Merger and (iii) resolved to recommend that the holders
of shares of Company Common Stock approve this Agreement.
(q) Tennessee Business Combination Act. Assuming the
accuracy of the representation and warranty of each Holdco contained
in Section 3.02(g), the approval of the Merger by the Board of
Directors of the Company referred to in Section 3.01(p) constitutes
approval of the Merger for
<PAGE>
purposes of the TBCA and represents all the actions necessary to
ensure that Part 2 of Chapter 35 of the TBCA does not apply to the
Merger.
(r) Brokers. No broker, investment banker, financial advisor
or other person, other than Goldman Sachs & Co., the fees and expenses
of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company. The Company's
arrangements with Goldman Sachs & Co. have been disclosed to the
Holdcos prior to the date hereof.
(s) Opinion of Financial Advisor. The Company has received
the opinion of Goldman, Sachs & Co., dated as of the date hereof, to
the effect that the consideration to be received by holders of Company
Common Stock in the Merger is fair to such holders from a financial
point of view.
SECTION 3.02. Representations and Warranties of the Holdcos.
Except as set forth on the Disclosure Schedules delivered by each
Holdco to the Company prior to the execution of this Agreement (each,
a "Holdco Disclosure Schedule"), each Holdco represents and warrants
to the Company, severally and not jointly, and as to itself only, as
follows:
(a) Organization and Authority. Holdco is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good
standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification
necessary, except where the failure thereof would not have a material
adverse effect on Holdco.
(b) Capital Structure. The authorized capital stock of
Holdco I consists of 100 shares of Holdco I Common Stock; the
authorized capital stock of the Holdco II consists of 1,000 shares of
Holdco II Common Stock; and all of the authorized shares of common
stock of Holdco I and 100 shares of common stock of Holdco II have
been issued, are fully paid and nonassessable and are owned by the KKR
Fund, in the case of the Holdco I Common Stock, or the HMTF Fund, in
the case of the Holdco II Common Stock, or an affiliate of either
thereof.
<PAGE>
(c) Authorization. Holdco has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the
part of Holdco. This Agreement has been duly executed and delivered by
Holdco and constitutes a valid and binding obligation of Holdco. The
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not,
conflict with, or result in any breach or violation of, or default
(with or without notice or lapse of time or both) under, or result in
the termination of, or accelerate the performance required by, or give
rise to a right of termination, cancelation or acceleration of any
obligation under, or the creation of a Lien pursuant to, (i) any
provision of the certificate of incorporation (or similar constitutive
documents) or by-laws of Holdco or (ii) subject to obtaining or making
the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in the following sentence, any
loan or credit agreement, note, mortgage, indenture, lease or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Holdco or any subsidiary of Holdco or their
respective properties or assets, in any case under this clause (ii)
which would have a material adverse effect on Holdco. No consent,
approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to
Holdco or any subsidiary of Holdco in connection with the execution
and delivery of this Agreement by Holdco or the consummation by Holdco
of the transactions contemplated hereby, the failure of which to be
obtained or made would have a material adverse effect on Holdco,
except for the Required Filings.
(d) Information Supplied. None of the information supplied
or to be supplied by Holdco for inclusion or incorporation by
reference in (i) the Proxy Statement will, at the date it is first
mailed to stockholders of the Company or at the time of the Company
Stockholders Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (ii) the
Offer Documents will, at the time the Offer Documents or any
amendments or supplements thereto are first published, sent or given
to noteholders, as the case may be, contain any untrue statement of a
material fact or omit to state any
<PAGE>
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, except that in each case no
representation or warranty is made by Holdco with respect to
statements made or incorporated by reference therein based on
information supplied by the Company or the other Holdco specifically
for inclusion or incorporation by reference therein.
(e) Subsidiaries. Holdco does not own, directly or
indirectly, any capital stock or other ownership interest in any
person.
(f) Brokers. No broker, investment banker, financial advisor
or other person, other than Kohlberg Kravis Roberts & Co., in the case
of Holdco I, or Hicks, Muse & Co. Partners, L.P., in the case of
Holdco II, the fees and expenses of which will be paid by such Holdco,
is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of Holdco.
(g) Ownership of Company Common Stock. Neither Holdco or
Fund nor any affiliate or associate (as such terms are defined under
the Exchange Act) thereof beneficially owns, directly or indirectly,
any shares of Company Common Stock or is a party to any agreement,
arrangement or understanding (other than this Agreement) for the
purpose of acquiring, holding, voting or disposing of any shares of
Company Common Stock.
(h) Financing. Prior to the execution of this Agreement,
Holdco has delivered to the Company (A) a true and complete copy of
each commitment letter relating to the provision by The Bank of Nova
Scotia and Bank of America National Trust & Savings Association of all
senior debt financing required in connection with the Merger and all
agreements, arrangements or undertakings related to such commitment
letters to which either Holdco or either Fund or any affiliate thereof
is a party and all schedules, annexes, exhibits or other attachments
to any thereof; (B) a true and complete copy of each commitment letter
relating to the provision by the Fund that is affiliated with each
Holdco of not less than $375 million of common equity financing in
connection with the Merger and all agreements, arrangements or
undertakings related to such commitment letters to which Holdco or
such Fund or any affiliate thereof is a party and all schedules,
annexes, exhibits or other attachments to any thereof; and (C) a
"highly confident" letter from Morgan Stanley & Co. Incorporated
relating to the arrangement of
<PAGE>
subordinated debt financing in connection with the transactions
contemplated hereby; in each case other than such documents relating
solely to fee arrangements in connection with such letters.
(i) Absence of Certain Changes. Since the date hereof, there
has not occurred a material adverse effect on Holdco.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Covenants of the Company. During the period
from the date of this Agreement until the Effective Time, the Company
agrees as to itself and its subsidiaries that (except as expressly
contemplated, required or permitted by this Agreement or as set forth
in the Company Disclosure Schedule):
(a) Ordinary Course. The Company and its subsidiaries shall
carry on their respective businesses only in the usual, regular and
ordinary course consistent with past practice in all material respects
and use their reasonable best efforts to preserve intact their present
business organizations, maintain their rights and franchises, keep
available the services of their current officers and employees and
preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their goodwill and
ongoing businesses shall not be impaired at the Effective Time. The
Company shall not, nor shall it permit any of its subsidiaries to,
enter into any new line of business, or incur or commit to any capital
expenditures, or any obligations or liabilities in connection with any
capital expenditures, other than capital expenditures and obligations
or liabilities incurred or committed to that are either (i)
contemplated in the Company's current capital budget, a copy of which
has been furnished to the Holdcos prior to the date hereof (the
"Capital Budget") or (ii) not in excess of $15,000,000 individually or
in the aggregate.
(b) Dividends; Changes in Stock. The Company shall not, nor
shall it permit any of its subsidiaries to, nor shall it propose to,
(i) declare, set aside or pay any dividends on or make other
distributions in respect of any capital stock, (ii) adjust, split,
combine or reclassify any capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of
or in substitution for capital stock or (iii) except for the Debt
<PAGE>
Offer and the purchase of Subordinated Notes, and subject to Section
5.06 hereof, repurchase, redeem or otherwise acquire, or permit any
subsidiary to purchase or otherwise acquire, any shares of capital
stock or any debt securities, warrants or options, in each case issued
by the Company or any of its subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall
it permit any of its subsidiaries to, issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of
its or any of its subsidiaries' capital stock of any class or any
securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any of the foregoing, or any other
securities or equity equivalents (including stock appreciation
rights),or enter into any agreement with respect to any of the
foregoing, other than the issuance of Company Common Stock upon the
exercise of Company Stock Options or Company Warrants that are
outstanding on the date of this Agreement.
(d) Governing Documents. The Company shall not amend or
propose to amend, nor shall it permit any of its subsidiaries to
amend, the charter (or similar constitutive documents) or by-laws of
the Company or any of its subsidiaries.
(e) No Acquisitions. The Company shall not, nor shall it
permit any of its subsidiaries to, merge or consolidate with, or
purchase an equity interest in or a substantial portion of the assets
of, any corporation, partnership, association or other business
organization or any division or business thereof, if the aggregate
amount of the consideration paid or transferred by the Company in
connection with all such transactions would exceed $15,000,000.
(f) No Dispositions. The Company shall not, nor shall it
permit any of its subsidiaries to, sell, lease, mortgage, encumber or
otherwise dispose of, any material assets (including capital stock of
subsidiaries).
(g) Indebtedness. The Company shall not, nor shall it permit
any of its subsidiaries to, incur any indebtedness for borrowed money
or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the
Company or any of its subsidiaries or guarantee any debt securities of
others or enter into any "keepwell" or similar arrangement, other than
revolving credit borrowings or borrowings to fund capital expenditures
contemplated by
<PAGE>
Section 4.01(a), in each case under the Company's existing credit
agreement.
(h) Other Actions. The Company shall not, nor shall it
permit any of its subsidiaries to, take any action that would result
in any of the representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality being untrue,
any of such representations and warranties that are not so qualified
being untrue in any material respect or any of the conditions to the
Merger set forth in Article VI not being satisfied.
(i) Advice of Changes; Filings. The Company shall advise the
Holdcos of any change or event which would cause or constitute a
material breach of any of the representations or warranties of the
Company contained herein. The Company shall file all reports required
to be filed by it with the SEC or Nasdaq between the date of this
Agreement and the Effective Time and shall deliver to the Holdcos
copies of all such reports promptly after the same are filed.
(j) Accounting Methods. The Company shall not change its
fiscal year or its methods, principles or practices of accounting in
effect at October 2, 1997, except as required by changes in GAAP, or
alter or change in any material respect its practices and policies
relating to the payment of film costs, accrued liabilities or accounts
payable or collection of box office or concession revenues.
(k) Compensation; Benefit Plans. Neither the Company nor any
of its subsidiaries will (i) enter into, adopt, amend or terminate any
Company Benefit Plan or any other employee benefit plan or any
agreement, arrangement, plan or policy between such party and one or
more of its directors, officers or employees, except for any such
actions taken in the ordinary course of business consistent with past
practice, (ii) increase in any manner the compensation or fringe
benefits of any of its directors, officers or employees or provide any
other benefit not required by any plan and arrangement as in effect as
of the date hereof, except for normal salary compensation increases,
benefit changes or cash bonus awards made in the ordinary course of
business consistent with past practice or (iii) create or amend any
Company Stock Plan or grant any equity based award pursuant to any
Company Stock Plan or otherwise.
(l) Discharges or Waivers of Claims. The Company shall not,
nor shall it permit any of its subsidiaries to,
<PAGE>
(i) except as set forth in clause (iii) below, pay, discharge or
satisfy any claims (including claims of stockholders), liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except for the payment, discharge or satisfaction of
liabilities or obligations in the ordinary course of business
consistent with past practice or in accordance with their terms as in
effect on the date hereof, (ii) waive, release, grant, or transfer any
rights of material value or modify or change in any material respect
any existing license, lease, contract or other document, other than in
the ordinary course of business consistent with past practice, (iii)
settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement) other than settlements or compromises of
litigation where the amount paid (after giving effect to insurance
proceeds actually received) in settlement or compromise does not
exceed $1,000,000, provided that the aggregate amount paid in
connection with the settlement or compromise of all such litigation
matters shall not exceed $5,000,000.
(m) Leases and Lease Commitments. The Company shall not, nor
shall it permit any of its subsidiaries to, enter into or commit to
enter into, or assume, any operating or capital lease, other than (i)
any such lease contemplated by the Capital Budget or the Company's
operating budget, a copy of which has been provided to the Holdcos
prior to the date hereof or (ii) any such operating lease which is not
material to the Company and its subsidiaries, taken as a whole.
(n) Liquidation Plan, Etc. The Company shall not, nor shall
it permit any of its subsidiaries to, adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such a
liquidation or a dissolution, consolidation, recapitalization or
bankruptcy reorganization.
(o) Collective Bargaining Agreements. The Company shall not,
nor shall it permit any of its subsidiaries to, enter into any
collective bargaining agreement or any successor collective bargaining
agreement to any collective bargaining agreement.
(p) Affiliate Transactions. The Company shall not, nor shall
it permit any of its subsidiaries to, engage in any transaction with,
or enter into any agreement, arrangement, or understanding with,
directly or indirectly, any of the Company's affiliates, including,
without limitation, any transactions, agreements, arrangements or
understandings with any affiliate or other person covered
<PAGE>
under Item 404 of SEC Regulation S-K that would be required to be
disclosed under such Item 404 other than such transactions of the same
general nature, scope and magnitude as are disclosed in the Company
Filed SEC Documents.
(q) Tax Matters. The Company and its subsidiaries shall not
make any material income tax election, amend any material tax return
or settle or compromise any material tax liability.
(r) Cobb Subsidiaries. The Company shall not liquidate, or
cause to be liquidated, any of R.C. Cobb, Inc., Cobb Theatres II, Inc.
or Cobb Finance Corp. (the "Cobb Subsidiaries") and shall not merge,
or cause to be merged, any of the Cobb Subsidiaries with and into
another corporation.
(s) No General Authorization, Etc. The Company shall not,
nor shall it permit any of its subsidiaries to, authorize any of, or
commit or agree to take any of, the foregoing actions.
SECTION 4.02. Covenants of Holdcos. During the period from
the date of this Agreement until the Effective Time, each Holdco
agrees that:
(a) Other Actions. It shall not take any action that would
result in any of its representations and warranties set forth in
this Agreement that are qualified as to materiality being untrue,
any of such representations and warranties that are not so
qualified being untrue in any material respect or any of the
conditions to the Merger set forth in Article VI not being
satisfied.
(b) Advice of Changes. It shall advise the Company of any
change or event which would cause or constitute a material breach
of any of its representations or warranties contained herein or
which it believes will result in any of the debt or equity
financing necessary for the consummation of the Merger and the
other transactions contemplated hereby not being available to it
on terms comparable to those set forth in the letters referred to
in Section 3.02(h) prior to May 31, 1998.
SECTION 4.03. No Solicitation. (a) The Company shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize
or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of, the Company or
any of its
<PAGE>
subsidiaries to, directly or indirectly, (i) solicit, initiate,
encourage or knowingly facilitate the submission of any takeover
proposal or (ii) enter into or participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, any takeover proposal; provided, however, that prior to
the receipt of the Company Stockholder Approval the Company may, in
response to a bona fide takeover proposal that constitutes a superior
proposal (as defined in Section 4.03(b)) and that was made after the
date hereof (and not solicited by the Company after the date hereof)
by any person, and subject to compliance with Section 4.03(c), (A)
furnish information with respect to the Company and its subsidiaries
to such person and its representatives pursuant to a customary
confidentiality agreement and discuss such information with such
person and its representatives and (B) participate in negotiations
regarding such takeover proposal. For purposes of this Agreement
(except as set forth in Section 5.07(b)), the term "takeover proposal"
means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of 20% or more of the
assets (based on the fair market value thereof) of the Company and its
subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement, or of 20% or more of any class of
equity securities of the Company or any of its subsidiaries or any
tender offer or exchange offer (including by the Company or any of its
subsidiaries) that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of
the Company or any of its subsidiaries, or any merger, consolidation,
business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries other than the
transactions contemplated by this Agreement. The Company will
immediately cease and cause to be terminated any existing activities,
discussions and negotiations conducted heretofore with respect to any
takeover proposal.
(b) Except as set forth in this Section 4.03, the Board of
Directors of the Company shall not (i) withdraw or modify, or publicly
propose to withdraw or modify, in a manner adverse to the Holdcos, the
approval or recommendation by such Board of Directors of the Merger or
this Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any takeover proposal or (iii) cause or agree to
cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or similar agreement related to any
takeover proposal. Notwithstanding the foregoing, if the Board of
Directors of the Company receives a superior proposal, such
<PAGE>
Board of Directors may, prior to the receipt of the Company
Stockholder Approval and subject to compliance with Section 5.07(b),
withdraw or modify its approval or recommendation of the Merger and
this Agreement, approve or recommend a superior proposal or terminate
this Agreement, but in each case only at a time that is at least five
business days after receipt by both Holdcos of written notice advising
them that the Board of Directors of the Company has resolved to accept
a superior proposal if it continues to be a superior proposal at the
end of such five business day period. For purposes of this Agreement,
the term "superior proposal" means any bona fide takeover proposal
(which, for purposes of Section 4.03(a) only, may be subject to a due
diligence condition), which proposal was not solicited by the Company
after the date hereof, made by a third party to acquire, directly or
indirectly, for consideration consisting of cash and/or securities,
more than 50% of the shares of Company Common Stock then outstanding
or all or substantially all the assets of the Company and its
subsidiaries and otherwise on terms which the Board of Directors of
the Company determines in good faith (after consultation with a
financial advisor of nationally recognized reputation) to be more
favorable to the Company's stockholders than the Merger and for which
financing, to the extent required, is then committed or which, in the
good faith judgment of such Board of Directors, is reasonably capable
of being financed by such third party.
(c) In addition to the obligations of the Company set forth
in paragraphs (a) and (b) above, the Company promptly shall advise the
Holdcos orally and in writing of any request for information or of any
takeover proposal, the material terms and conditions of such request
or takeover proposal and the identity of the person making any such
request or takeover proposal and any determination by the Board of
Directors of the Company that a takeover proposal is or may be a
superior proposal. The Company will keep both Holdcos informed as to
the status and material details (including amendments or proposed
amendments) of any such request or takeover proposal.
(d) Nothing contained in this Section 4.03 shall prohibit
the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
from making any disclosure to the Company's stockholders if, in the
good faith judgment of the Board of Directors of the Company after
consultation with outside counsel, failure to do so would be
inconsistent with its obligations under applicable law.
<PAGE>
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement. As soon as
practicable following the date of this Agreement, the Company shall
prepare and file with the SEC the Proxy Statement. Each Holdco will
cooperate with the Company in connection with the preparation of the
Proxy Statement, including furnishing to the Company all information
regarding the Funds and their affiliates as may be required to be
disclosed therein. The Company will use its reasonable best efforts to
cause the Proxy Statement to be mailed to the Company's stockholders
as promptly as practicable after the date hereof. No filing of, or
amendment or supplement to, the Proxy Statement will be made by the
Company without providing the Holdcos the opportunity to review and
comment thereon and to approve the same, provided that such approvals
shall not be unreasonably withheld. The Company will advise the
Holdcos, promptly after it receives notice thereof, of any request by
the SEC for amendment of the Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
If at any time prior to the Effective Time any information relating to
the Company or the Holdcos, or any of their respective affiliates,
officers or directors, should be discovered by the Company or either
Holdco which should be set forth in an amendment or supplement to the
Proxy Statement, so that the Proxy Statement would not include any
misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other
parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of the
Company.
SECTION 5.02. Access to Information. The Company
shall, and shall cause each of its subsidiaries to, afford
to the other parties hereto and to its officers, employees,
accountants, counsel and other representatives (including
environmental consultants), reasonable access, during normal
business hours during the period prior to the Effective
Time, to their respective properties, books, records and
personnel and, during such period, the Company shall, and
shall cause each of its subsidiaries to, furnish promptly to
the other party hereto (a) a copy of each report, schedule,
registration statement and other document filed or received
<PAGE>
by it during such period pursuant to the requirements of Federal or
state securities laws and (b) such other information concerning its
business, properties and personnel as the Holdcos may reasonably
request. Each Holdco will, and will cause its advisors and
representatives who receive nonpublic information regarding the
Company to agree to, hold any such information in confidence to the
extent required by, and in accordance with, the terms of the
Confidentiality Agreement between the Company and Kohlberg Kravis
Roberts & Co., L.P. or Hicks, Muse, Tate & Furst, Incorporated, as the
case may be (the "Confidentiality Agreements").
SECTION 5.03. Company Stockholders Meeting. The Company
shall, as promptly as practicable after the date hereof, (a) duly
call, give notice of, convene and hold the Company Stockholders
Meeting for the purpose of obtaining the Company Stockholder Approval
and (b) subject to Section 4.03, through its Board of Directors,
recommend to its stockholders that they grant the Company Stockholder
Approval.
SECTION 5.04. Reasonable Best Efforts. (a) Subject to the
terms and conditions of this Agreement, each of the Company and each
Holdco shall, and shall cause its subsidiaries to, use all reasonable
best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the
Merger, the Debt Offer and the other transactions contemplated by this
Agreement, including (i) the obtaining of any necessary consent,
authorization, order or approval of, or any exemption by, any
Governmental Entity and/or any other public or private third party
which is required to be obtained by such party or any of its
subsidiaries in connection with the Merger, the Debt Offer and the
other transactions contemplated by this Agreement (provided that the
Company shall not pay or agree to pay any material amount to obtain a
consent without the prior approval of the Holdcos, which approval
shall not be unreasonably withheld or delayed), and the making or
obtaining of all necessary filings and registrations with respect
thereto, (ii) the defending of any lawsuits or other legal proceedings
challenging this Agreement, and (iii) the execution and delivery of
any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this
Agreement.
(b) The Company agrees to, and to cause its subsidiaries and
its and their respective officers,
<PAGE>
employees, advisors and accountants to, reasonably cooperate with the
Holdcos in connection with the arrangement of any financing to be
consummated prior to or contemporaneously with the Closing in respect
of the transactions contemplated by this Agreement, including
participation in meetings, due diligence sessions, road shows, the
preparation of offering memoranda, private placement memoranda,
prospectuses and similar documents, comfort letters of accountants and
legal opinions, as may be reasonably requested by the Holdcos. In
conjunction with the obtaining of any such financing, the Company
agrees, at the reasonable request of the Holdcos, to call for
prepayment or redemption, or to prepay or redeem, or to attempt to
renegotiate the terms of, any then existing indebtedness of the
Company; provided that no such prepayment or redemption or call for
prepayment or redemption or renegotiated terms shall actually be made
or become effective (nor shall the Company be required to incur any
liability in respect of any such prepayment or redemption or call
therefor or renegotiation thereof) prior to the Effective Time. The
Holdcos will promptly inform the Company of all material developments
relating to arranging such financing.
(c) Each Holdco shall use its reasonable best efforts to
cause a valuation firm referred to in Section 6.03(c) to deliver to
the Company the letter referred to in such Section 6.03(c).
SECTION 5.05. Benefits Matters. Following the Effective
Time, the Surviving Corporation shall honor, or cause to be honored,
all obligations under employment agreements, Company Benefit Plans and
all other employee benefit plans, programs, policies and arrangements
of the Company in accordance with the terms thereof. Nothing herein
shall be construed to prohibit the Surviving Corporation from amending
or terminating such agreements, programs, policies and arrangements in
accordance with the terms thereof and with applicable law.
SECTION 5.06. Stock-Based Compensation. (a) Except as
otherwise agreed by the Holdcos and the holders of options under
Company Stock Plans with respect to such options, as soon as
practicable following the date of this Agreement, the Board of
Directors of the Company (or, if appropriate, any committee
administering the Company Stock Plans) shall adopt such resolutions or
take other actions as may be required to effect the cancelation of (A)
all outstanding options granted pursuant to the Company Stock Plans to
purchase Company Common Stock (the "Canceled Options") and (B) all
outstanding grants of Company Common Stock that are subject to a
vesting requirement (the
<PAGE>
"Company Restricted Stock") in exchange for a cash payment equal to
the following: (I) in the case of each Canceled Option, the product of
(x) the excess of the Merger Consideration per share over the exercise
price per share of the Company Common Stock subject to the Canceled
Option and (y) the number of shares of Company Common Stock subject to
such Canceled Option and (II) in the case of each share of Company
Restricted Stock, the Merger Consideration per share.
(b) The Company shall continue to sponsor the Company Stock Plans
after the Effective Time or shall adopt a new stock plan after the
Effective Time.
(c) All amounts payable pursuant to Section 5.06(a) shall be
subject to any required withholding of taxes and shall be paid without
interest.
SECTION 5.07. Fees and Expenses. (a) Whether or not the
Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs or expenses, except as provided
in Section 5.07.
(b) In the event that (i) this Agreement is terminated by a
Holdco pursuant to Section 7.01(c), (ii) this Agreement is terminated
by the Company pursuant to Section 7.01(d) or (iii)(x) any person
shall have made a bona fide takeover proposal with respect to the
Company after the date hereof and thereafter this Agreement is
terminated by the Company pursuant to Section 7.01(b)(iii) or by
either party pursuant to Section 7.01(b)(iv) and (y) within 12 months
after such termination a takeover agreement (as defined below) is
executed by the Company or a takeover transaction (as defined below)
is consummated, then the Company shall (A) pay to the Holdcos a fee
(the "Termination Fee") of $28,000,000 in the aggregate for both
Holdcos (to be divided equally between the Holdcos) and (B) other than
in the case of a termination pursuant to Section 7.01(b)(iv) (which is
addressed in paragraph (c) below), reimburse the Holdcos for the
documented out-of-pocket fees and expenses reasonably incurred thereby
in connection with this Agreement and the transactions contemplated
hereby (including those which may be incurred in connection with
enforcing the terms of this Section 5.07) in an aggregate amount for
both Holdcos, taken together, not in excess of $4,000,000 (the
"Expenses"). The Company shall pay the Termination Fee to the Holdcos
promptly (and in any event within two business days) following a
termination referred to in clause (i) above, concurrently with or
prior to a
<PAGE>
termination referred to in clause (ii) above or promptly (and in any
event within two business days) after the first to occur of the
execution of a takeover agreement or the consummation of a takeover
transaction referred to in clause (iii) above. The Company shall
reimburse the Expenses to the Holdcos concurrently with, prior to or
after the payment of the Termination Fee but in no event prior to the
delivery by the Holdcos to the Company of a reasonably detailed
statement of the Expenses and any supporting documentation reasonably
requested by the Company (the "Expense Information"). For purposes of
this Section 5.07(b), the term "takeover transaction" shall mean any
transaction if a proposal to consummate such transaction would
constitute a takeover proposal, the term "takeover agreement" shall
mean any letter of intent, agreement in principle, acquisition
agreement or similar agreement to consummate a takeover transaction
and the term "takeover proposal" shall have the meaning assigned to
such term in Section 4.03 except that (1) references to "20%" in the
definition of such term contained in Section 4.03 shall be deemed to
be references to "50%" and (2) the term "takeover proposal" shall only
be deemed to refer to a transaction involving the Company, or with
respect to assets (including the shares of any subsidiary), the
Company and its subsidiaries taken as a whole. Notwithstanding the
immediately preceding sentence, if any bona fide takeover proposal (as
defined in this Section 5.07(b) but without regard to clause (1)
above) made by a person with respect to the Company is made after the
date hereof and the Company accepts such proposal or any other
takeover proposal (as defined in this Section 5.07(b) but without
regard to clause (1) above) made by such person after the termination
of this Agreement, then such accepted proposal shall constitute a
"takeover proposal" for purposes of Section 5.07(b)(iii).
(c) In the event that this Agreement is terminated by either
party pursuant to Section 7.01(b)(iv), then the Company shall
reimburse the Holders for the Expenses incurred to the date of
termination on the later of (i) the day that is two business days
after such termination and (ii) the day that is two business days
after the delivery by the Holdcos to the Company of the Expense
Information. To the extent the amount of Expenses initially reimbursed
pursuant to this paragraph (c) is less than $4,000,000, the Holdcos
shall be entitled to be reimbursed for Expenses, if any, thereafter
incurred by them in connection with enforcing their right to receive a
Termination Fee pursuant to this Section 5.07, with such additional
Expenses to be reimbursed concurrently with the payment of any
Termination Fee that may be due pursuant to clause (iii) of paragraph
(b) above (or, if later, two
<PAGE>
business days after the relevant Expense Information is provided to
the Company); provided that in no event shall the aggregate amount of
Expenses reimbursed pursuant to this paragraph (c) exceed $4,000,000.
SECTION 5.08. Indemnification, Exculpation and Insurance.
(a) The Holdcos and the Company agree that all rights to
indemnification and exculpation from liability for acts or omissions
occurring at or prior to the Effective Time and rights to advancement
of expenses relating thereto now existing in favor of the current or
former directors or officers of the Company and its subsidiaries (such
persons, "Indemnified Persons") as provided in their respective
charter (or similar constitutive documents) or by-laws and any
existing indemnification agreements or arrangements of the Company
shall survive the Merger and shall not be amended, repealed or
otherwise modified in any manner that would in any manner adversely
affect the rights thereunder of any such Indemnified Persons. The
parties hereto agree that the Surviving Corporation shall maintain,
for a period of six years from the Effective Time, the Company's
current directors' and officers' insurance and indemnification policy
to the extent that it provides coverage for events occurring at or
prior to the Effective Time (the "D&O Insurance") for all Indemnified
Persons so long as the annual premium therefor would not be in excess
of 250% (the "Maximum Premium") of the premium payable with respect to
the D&O Insurance for 1997 which the Company represents and warrants
was $65,000; provided, however, that the Surviving Corporation may, in
lieu of maintaining such existing D&O Insurance as provided above,
cause comparable coverage to be provided under any policy issued by an
insurer substantially comparable to the insurer with respect to the
existing D&O Insurance, so long as the terms thereof are no less
advantageous to the Indemnified Parties than the existing D&O
Insurance. If the existing D&O Insurance expires, is terminated or
canceled during such six-year period, the Surviving Corporation will
use its reasonable best efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such period for an
annualized premium not in excess of the Maximum Premium, on terms and
conditions no less advantageous in any material respect than the
existing D&O Insurance.
(b) The parties hereto agree that the provisions of this
Section 5.08 are (i) intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and each Indemnified Party's
heirs and representatives and (ii) in addition to, and not in
substitution for, any other rights to indemnification or contribution
that any such person may have by contract or otherwise.
<PAGE>
(c) The parties hereto agree that in the event that the
Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such case,
proper provision will be made by such person so that the successors
and assigns of the Surviving Corporation assume the obligations of the
parties hereto and the Surviving Corporation set forth in this Section
5.08.
SECTION 5.09. Financing. Each Holdco shall use its
reasonable best efforts to obtain the debt and equity financing
necessary to consummate the Merger.
SECTION 5.10. Transfer Taxes. All state, local, foreign or
provincial sales, use, real property transfer, stock transfer or
similar taxes (including any interest or penalties with respect
thereto, but not including any shareholder-level taxes based upon net
income) attributable to the Merger shall be timely paid by the
Company.
SECTION 5.11. Resignation of Directors. Prior to the
Effective Time, the Company shall deliver to each Holdco evidence
satisfactory to such Holdco of the resignation of all directors of the
Company, effective at the Effective Time.
SECTION 5.12. Solvency at Closing. Each Holdco agrees for
the benefit of the directors of the Company to take all actions
necessary to ensure that immediately following the Effective Time the
Surviving Corporation will be solvent for all purposes under federal
bankruptcy and applicable state fraudulent transfer and fraudulent
conveyance laws.
SECTION 5.13. Investment by Management Personnel. The
Company shall use reasonable efforts to cooperate with the Holdcos and
to assist the Holdcos in entering into agreements with management
personnel of the Company (other than the individuals listed on Section
6.02(g) of the Company Disclosure Schedule) to be designated by the
Holdcos in consultation with the Chief Executive Officer of the
Company (the "Designated Executives"), which agreements will provide
for the investment by such Designated Executives of either 40% or 50%
(depending on their respective positions) of the aggregate value of
the shares of Company Common Stock (other than de minimis
shareholdings) and the unrealized gain on stock options currently
owned by the Designated
<PAGE>
Executives in the Company or an entity controlling the Company after
the Effective Time.
SECTION 5.14. Company Warrants. The Company shall offer to
purchase each Company Warrant for a purchase price equal to the
product of (i) $31.00 minus the per share exercise price of such
Company Warrant and (ii) the number of shares of Company Common Stock
which may be purchased pursuant to such Company Warrant.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Merger. The respective obligations of each party to effect
the Merger shall be subject to the satisfaction or waiver at or prior
to the Effective Time of the following conditions:
(a) Company Stockholder Approval. The Company Stockholder
Approval shall have been obtained.
(b) HSR Act. Any waiting period applicable to the Merger
under the HSR Act shall have expired or been terminated.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other
order or decree issued by any Governmental Entity of competent
jurisdiction enjoining or otherwise preventing the consummation
of the Merger shall be in effect; provided, however, that each of
the -------- ------- parties shall use reasonable best efforts to
prevent the entry of any such injunction or other order or decree
and to cause any such injunction or other order or decree that
may be entered to be vacated or otherwise rendered of no effect.
SECTION 6.02. Conditions to Obligation of the Holdcos To
Effect the Merger. The obligation of each Holdco to effect the Merger
is subject to the satisfaction of the following conditions unless
waived by such Holdco:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (i) to the
extent qualified by material adverse effect shall be true and
correct, and (ii) to the extent not qualified by material adverse
effect shall be true and correct, except that this
<PAGE>
clause (ii) shall be deemed satisfied so long as any failures of
such representations and warranties to be true and correct do not
individually or in the aggregate have a material adverse effect
on the Company, in each of cases (i) and (ii), as of the date of
this Agreement and as of the Closing Date as though made on and
as of the Closing Date, except as otherwise contemplated by this
Agreement, and such Holdco shall have received a certificate to
such effect signed on behalf of the Company by its Chief
Executive Officer or its Chief Financial Officer.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all material
obligations required to be performed by it under this Agreement
at or prior to the Closing Date, and such Holdco shall have
received a certificate to such effect signed on behalf of the
Company by its Chief Executive Officer or Chief Financial
Officer.
(c) Consents, etc. Such Holdco shall have received evidence,
in form and substance reasonably satisfactory to it, that such
consents, approvals, authorizations, qualifications and orders of
Governmental Entities and other third parties as are necessary in
connection with the transactions contemplated hereby have been
obtained, other than those the failure of which to be obtained,
individually or in the aggregate, would not have a material
adverse effect on the Company.
(d) No Litigation. There shall not be pending any suit,
action or proceeding brought by any Governmental Entity seeking
to prohibit or limit in any material respect the ownership or
operation by the Company, such Holdco or any of their respective
affiliates of a substantial portion of the business or assets of
the Company and its subsidiaries, taken as a whole, or to require
any such person to dispose of or hold separate any material
portion of the business or assets of the Company and its
subsidiaries, taken as a whole, as a result of the Merger or any
of the other transactions contemplated by this Agreement or
seeking to impose limitations on the ability of KKR or HMTF, as
the case may be, or any of its affiliates to acquire or hold, or
exercise full rights of ownership of, any shares of Company
Common Stock, including, without limitation, the right to vote
the Company Common Stock on all matters properly presented to the
stockholders of the Company or seeking to prohibit KKR or HMTF,
as
<PAGE>
the case may be, or any of its affiliates from effectively
controlling in any material respect a substantial portion of the
business or operations of the Company or its subsidiaries, in
each case after giving effect to any actions required to be taken
pursuant to Section 5.04.
(e) Debt Offer. If a Debt Offer Request shall have been made
on or prior to the twenty-fifth business day prior to May 31,
1998, the Company shall have accepted for payment Subordinated
Notes with an aggregate principal amount of not less than the
minimum tender condition in the Debt Offer.
(f) Other Holdco. The conditions to the other Holdco's
obligations shall have been satisfied or waived by such other
Holdco, and such Holdco shall have received from such other
Holdco a certificate to such effect signed by a director thereof
who shall also be an executive officer of the applicable Fund.
(g) Certain Agreements. The individuals listed in Section
6.02(g) of the Company Disclosure Schedule shall have entered
into definitive agreements relating to their respective ongoing
equity interests in the Company or an entity controlling the
Company after the Effective Time on terms and conditions
substantially consistent with the agreements or agreements in
principle, as the case may be, relating to such individuals
delivered to the Company on the date hereof or in the form
attached as Annex 6.02(g) to the Company Disclosure Schedule or
otherwise satisfactory to the Holdcos, and the equity investments
contemplated by such agreements shall have been effected
contemporaneously with the Closing.
(h) Financing. The Holdcos shall have received the proceeds
of financings on the terms and conditions set forth in the
letters referred to in Section 3.02(h) or upon the terms and
conditions which are, in the reasonable judgment of the Holdcos,
substantially equivalent thereto, and to the extent that any
terms and conditions are not set forth in the letters referred to
in Section 3.02(h), on terms and conditions reasonably
satisfactory to the Holdcos.
SECTION 6.03. Conditions to Obligation of the Company To
Effect the Merger. The obligation of the Company
<PAGE>
to effect the Merger is subject to the satisfaction of the following
conditions unless waived by the Company:
(a) Representations and Warranties. The representations and
warranties of each Holdco set forth in this Agreement (i) to the
extent qualified by material adverse effect shall be true and
correct, and (ii) to the extent not qualified by material adverse
effect shall be true and correct, except that this clause (ii)
shall be deemed satisfied so long as any failures of such
representations and warranties to be true and correct do not
individually or in the aggregate have a material adverse effect
on such Holdco, in each of cases (i) and (ii), as of the date of
this Agreement and as of the Closing Date as though made on and
as of the Closing Date, except as otherwise contemplated by this
Agreement, and the Company shall have received a certificate to
such effect signed on behalf of such Holdco by a director thereof
who shall also be an executive officer of the KKR Fund, in the
case of Holdco I, or the HMTF Fund, in the case of Holdco II.
(b) Performance of Obligations of Holdcos. Each Holdco shall
have performed in all material respects all material obligations
required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company shall have received a
certificate to such effect signed on behalf of such Holdco by a
director thereof.
(c) Solvency Letter. The Holdcos shall have caused the
valuation firm which has delivered a solvency letter to the
financial institutions providing the debt financing for the
Merger (or, if no such letter has been provided thereto, a
valuation firm reasonably acceptable to the Company) to have
delivered to the Company a letter addressed to its Board of
Directors in form and substance reasonably satisfactory thereto
as to the solvency of the Company and its subsidiaries after
giving effect to the Merger, the financing arrangements
contemplated by the Holdcos with respect to the Merger and the
other transactions contemplated hereby.
SECTION 6.04. Frustration of Closing Conditions. Neither
Holdco nor the Company may rely on the failure of any condition set
forth in Section 6.01, 6.02 or 6.03, as the case may be, to be
satisfied if such failure was caused by such party's failure to use
all reasonable best efforts
<PAGE>
to consummate the Merger and the other transactions contemplated by
this Agreement.
ARTICLE VII
Termination and Amendment
SECTION 7.01. Termination. This Agreement may be terminated
at any time prior to the Effective Time, whether before or after the
Company Stockholder Approval is received:
(a) by mutual written consent of the Holdcos and the
Company;
(b) by either Holdco or the Company upon written notice to
the other party:
(i) if any Governmental Entity of competent
jurisdiction shall have issued a permanent injunction or
other order or decree enjoining or otherwise preventing the
consummation of the Merger or the Debt Offer and such
injunction or other order or decree shall have become final
and nonappealable; provided that the party seeking to
terminate this Agreement pursuant to this clause (i) shall
have used its reasonable best efforts to prevent or contest
the imposition of, or seek the lifting or stay of, such
injunction, order or decree;
(ii) unless the party seeking to terminate this
Agreement is in material breach of its obligations
hereunder, if the Company or a Holdco breaches or fails to
perform any of its representations, warranties, covenants or
other agreements hereunder, which breach or failure to
perform (A) would give rise to the failure of a condition
set forth in Section 6.02(a) or 6.02(b) in the case of such
a breach or failure to perform on the part of the Company or
6.03(a) or 6.03(b) in the case of such a breach or failure
to perform on the part of a Holdco and (B) is incapable of
being cured by the party so breaching or failing to perform
or is not cured within 30 days after the terminating party
gives written notice of such breach to the other party and
such a cure is not effected during such period;
<PAGE>
(iii) if the Merger shall not have been consummated on
or before May 31, 1998, unless the failure to consummate the
Merger is the result of a material breach of this Agreement
by the party seeking to terminate this Agreement; or
(iv) if, upon a vote at a duly held Company
Stockholders Meeting or any adjournment thereof, the Company
Stockholder Approval shall not have been obtained;
(c) by either Holdco upon written notice to the Company:
(i) if the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a
manner adverse to the Holdcos its approval or recommendation
of the Merger or this Agreement, approved or recommended any
takeover proposal or resolved to do any of the foregoing; or
(ii) if the Company shall have entered into any
agreement (other than a confidentiality agreement in
accordance with Section 4.03(a)) with respect to a superior
proposal or shall have resolved to do so; or
(d) by the Company pursuant to Section 4.03(b) prior to the
receipt of the Company Stockholder Approval.
SECTION 7.02. Effect of Termination. In the event of
termination of this Agreement by either the Company or a Holdco as
provided in Section 7.01, this Agreement shall forthwith become void
and have no effect, and, except to the extent that such termination
results from the wilful and material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, there shall be no liability or obligation on the part of
either Holdco or the Company, except with respect to Section 3.01(r),
Section 3.02(f), the second sentence of Section 5.02, Section 5.07,
this Section 7.02 and Article VIII, which provisions shall survive
such termination.
SECTION 7.03. Amendment. This Agreement may be amended by
the parties hereto at any time before or after the Company Stockholder
Approval is received, provided that after receipt of the Company
Stockholder Approval, no amendment shall be made which by law requires
further
<PAGE>
approval by such stockholders without such further approval. This
Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.
SECTION 7.04. Extension; Waiver. At any time prior to the
Effective Time, the parties hereto may, to the extent legally allowed,
(a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) subject to the proviso of Section
7.03, waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver. A termination of this Agreement pursuant to
Section 7.01, an amendment of this Agreement pursuant to Section 7.03
or an extension or waiver pursuant to Section 7.04 shall, in order to
be effective, require, in the case of the Company, action by its Board
of Directors or the duly authorized committee of its Board of
Directors to the extent permitted by law.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the
Effective Time. This Section 8.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance
after the Effective Time.
SECTION 8.02. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation) or sent by overnight or
same-day courier
<PAGE>
(providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to the Company, to:
Wagner, Myers & Sanger, P.C.
1801 Plaza Tower
Knoxville, Tennessee 37929
Attention: Herbert S. Sanger, Jr., Esq.
Facsimile: (423) 524-5731;
Bass, Berry & Sims PLC
2700 First American Center
Nashville, Tennessee 37238
Attention: F. Mitchell Walker, Jr., Esq.
Facsimile: (615) 742-2775; and
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert I. Townsend, III., Esq.
Facsimile: (212) 474-3700; and
(b) if to Holdco I, to:
Screen Acquisition Corp.
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
Suite 4200
New York, New York 10019
Attention: Clifton S. Robbins
Facsimile: (212) 750-0003
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Charles I. Cogut, Esq.
Facsimile: (212) 455-2502; and
<PAGE>
(c) if to Holdco II, to:
Monarch Acquisition Corp.
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Facsimile: (214) 740-7313
with copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10151
Attention: Stephen E. Jacobs, Esq.
Facsimile: (212) 310-8007
and
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attention: Jeremy W. Dickens, Esq.
Facsimile: (214) 746-7777.
SECTION 8.03. Definitions; Interpretation. (a) As used in
this Agreement:
(i) unless otherwise expressly provided herein, an
"affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first
person, where "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of
voting securities, by contract or otherwise;
(ii) "business day" means any day on which banks are not
required or authorized to close in the City of New York;
(iii) "material adverse effect" means, when used in
connection with the Company, any change, effect, event,
occurrence or development that is, or is reasonably likely to be,
materially adverse to the business, results of operations or
financial condition of the Company and its subsidiaries, taken as
a whole, other
<PAGE>
than any change, effect, event or occurrence relating to or
arising out of (A) the economy or securities markets in general,
(B) this Agreement or the transactions contemplated hereby or the
announcement thereof or (C) the movie exhibitor industry in
general, and not specifically relating to the Company or its
subsidiaries, attributable solely to quarterly fluctuations in
box office receipts based on the available films; "material
adverse effect" means, when used in connection with either
Holdco, any change, effect, event, occurrence or development that
is, or is reasonably likely to be, materially adverse to its
ability to consummate the transactions contemplated hereby;
(iv) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(v) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or,
if there are not such voting interests, more than 50% of the
equity interests of which) is owned directly or indirectly by
such first person.
(b) When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an
Article, Section of or Exhibit or Schedule to this Agreement unless
otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. Whenever the
words "include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation".
The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The term
"or" when used in this Agreement is not exclusive. All terms defined
in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless
otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such
terms. Any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or
<PAGE>
statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to
its permitted successors and assigns.
SECTION 8.04. Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to
the other party.
SECTION 8.05. Entire Agreement; No Third-Party
Beneficiaries; Rights of Ownership. This Agreement, together with the
Confidentiality Agreement, (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and
of the Confidentiality Agreement, provided that the Confidentiality
Agreement shall survive the execution and delivery of this Agreement,
and (b) other than Sections 5.08 and 5.12 of this Agreement, is not
intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
SECTION 8.06. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New York, without regard to any principles of conflicts of law of such
State, except that provisions of this Agreement relating to the Merger
shall be governed by and construed in accordance with the laws of the
State of Tennessee or the State of Delaware to the extent required
thereunder.
SECTION 8.07. Publicity. Except as otherwise permitted by
this Agreement or required by law or the rules of the Nasdaq, so long
as this Agreement is in effect, neither the Company nor either Holdco
shall, or shall permit any of its affiliates to, issue or cause the
publication of any press release or other public announcement or
statement with respect to this Agreement or the transactions
contemplated hereby without first obtaining the consent of the other
parties hereto. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement
shall be in the form heretofore agreed to by the parties.
SECTION 8.08. Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder
<PAGE>
shall be assigned, in whole or in part, by any of the parties hereto
(whether by operation of law or otherwise) without the prior written
consent of the other parties, and any such assignment that is not so
consented to shall be null and void; provided that either Holdco may
assign its rights hereunder to any of its affiliates or any affiliate
of the other Holdco, but no such assignment shall relieve such Holdco
of its obligations hereunder. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and
assigns.
SECTION 8.09. Enforcement. The parties agree that
irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any Federal court located in the State
of New York or in any New York state court, this being in addition to
any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any Federal court located in the State of
New York or any New York state court in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this
Agreement and (b) agrees
<PAGE>
that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court.
SECTION 8.10 Several Obligations. The representations,
warranties, covenants and obligations of each Holdco under this
Agreement are several and not joint.
IN WITNESS WHEREOF, the Company, Holdco I and Holdco II have
caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first above written.
REGAL CINEMAS, INC.,
by /s/ Michael L. Campbell
---------------------------
Name: Michael L. Campbell
Title: Chairman, President and
Chief Executive Officer
SCREEN ACQUISITION CORP.,
by /s/ Clifton S. Robbins
---------------------------
Name: Clifton S. Robbins
Title: President
MONARCH ACQUISITION CORP.,
by /s/ Patrick K. McGee
---------------------------
Name: Patrick K. McGee
Title: Vice President
EXHIBIT 99.1
Contacts:
For KKR: For Hicks Muse For Regal Cinemas:
Ruth Pachman Roy Winnick Michael L. Campbell
Josh Pekarsky Mark Semer Lewis Frazer III
Kekst and Company Kekst and Company Regal Cinemas
(212) 521-4891 or 4877 (212) 521-4842 or 4802 (423) 925-9523
HICKS, MUSE, TATE & FURST AND KKR JOINTLY TO ACQUIRE REGAL
CINEMAS, INC. FOR $31.00 PER SHARE IN CASH
-- Partnership of Two Leading Investment Firms to Create
World's Largest Theatrical Exhibition Chain in Transactions
With Total Value of $3 Billion --
-- Regal Cinemas to Be Acquired in $1.5 Billion Transaction,
Then Combined with Hicks Muse's United Artists Theatre Group
and KKR's Act III Cinemas --
KNOXVILLE, TENNESSEE, NEW YORK, NY and DALLAS, TEXAS, January 20,
1998 -- Hicks, Muse, Tate & Furst Incorporated and Kohlberg
Kravis Roberts & Co. (KKR) today announced that they have signed
a definitive merger agreement to jointly acquire Regal Cinemas
(NASDAQ: REGL), the nation's second-largest motion picture
exhibitor, in an all-cash transaction valued at approximately
$1.5 billion. Each of Regal's common shares will be purchased
for $31.00 per share in cash. The transaction includes the
assumption of approximately $290 million of Regal debt. Regal
has approximately 40 million fully diluted shares outstanding.
Following the acquisition of Regal, which is expected to occur
before mid-year 1998, Hicks Muse and KKR plan to combine it with
United Artists Theatre Group, which Hicks Muse recently agreed to
acquire, and with Act III Cinemas, which KKR acquired in
December 1997. The combined enterprise, with 5,347 screens at
727 theatres in 35 states, will be the world's largest theatrical
exhibition company.
The three transactions, which total over $3 billion, will be
financed in part by equity investments by KKR and Hicks Muse of
approximately $600 million each. This is the first time Hicks
Muse and KKR have made a joint investment.
Following the completion of the three-way combination of Act III,
Regal Cinemas and United Artists Theatre Group, Hicks Muse and
KKR will each own approximately 45% of the combined company, with
the balance owned by the company's management and certain other
investors. The combined company will be led by Regal Chairman
and Chief Executive Officer Michael L. Campbell and a management
team that will likely include senior executives from all three
companies.
<PAGE>
2
Clifton S. Robbins, a KKR general partner, said: "We're delighted
to be investing in Regal, which is a superbly managed and
fast-growing theater operator. The partnership with Hicks Muse
allows each of us to commit significant equity capital to
accelerate our respective strategies to lead the consolidation of
the motion picture exhibition industry. And it makes possible
the combination of Regal, UA and Act III, which have highly
complementary operations. Importantly, we have designed the
capital structure of the new company to facilitate an aggressive
growth plan. With $1.3 billion in equity, we will have
considerable flexibility to invest in the business, make new
acquisitions, and drive future growth."
John R. Muse, Chief Operating Officer of Hicks Muse, said: "We
entered this industry in the belief that with the right
collection of assets and the right people, there was a
significant opportunity to be a major consolidator. This
transaction accelerates the achievement of that objective, and we
believe creates the most attractive company in its sector. Under
a management team headed by Mike Campbell, we believe this is a
winning combination and a strong platform for the future in this
industry."
Michael L. Campbell, Chairman, President and Chief Executive
Officer of Regal Cinemas, said, "We're thrilled to be in
partnership with KKR and Hicks Muse -- two firms with proven
creativity, significant financial resources and a demonstrated
commitment to building value. We believe this transaction
provides a very attractive return to our shareholders and an
expanded range of opportunities for the employees of Regal, UA
and Act III as we move to realize our full potential.
"Our objectives for the combined Regal/UA/Act III will be the
same as they have been for Regal Cinemas: to build an
organization that can sustain a substantial growth rate for the
foreseeable future; to always be one of the most profitable
companies in the industry; and to maintain one of the strongest
financial positions relative to our peers. We are very excited
about this transaction and the future of our company."
Completion of the Regal transaction and of the merger of Act III,
Regal and United Artists Theatre Group are subject to expiration
of the applicable Hart-Scott-Rodino waiting periods and other
customary closing conditions. The Regal acquisition is also
subject to approval by Regal shareholders.
Regal Cinemas is currently the second-largest exhibitor in North
America operating 2,333 screens at 257 locations in 22 states.
The company, founded in 1989, is headquartered in Knoxville,
Tennessee. Regal Cinemas currently operates facilities in the
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following states: Alabama, Arkansas, California, Delaware,
Florida, Georgia, Indiana, Kentucky, Louisiana, Maryland,
Mississippi, New Jersey, New York, North Carolina, Ohio,
Oklahoma, Pennsylvania, South Carolina, Tennessee, Virginia,
Washington and West Virginia.
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Goldman, Sachs & Co. acted as Regal's financial advisor in the
transaction.
United Artists Theatre Group, headquartered in Englewood,
Colorado, is a leading operator of motion picture theaters with
2,174 screens in 339 locations in 25 states.
Act III operates 131 theaters with 840 screens in the states of
Oregon, Washington, Texas, Nevada, Idaho, Alaska and Missouri.
KKR is a private investment firm headquartered in New York and
Menlo Park, California.
Hicks, Muse, Tate & Furst Incorporated is a private investment
firm headquartered in Dallas, Texas.
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