-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QalUrNanRFY/NtlVvrVh20Qgoe4Nxo7FckelGlW2Rru31ngcqscHzjSPQPFL6Cv2 5RQmFlNIib3dbDZw8iU+Qw== 0000909518-01-500502.txt : 20020412 0000909518-01-500502.hdr.sgml : 20020412 ACCESSION NUMBER: 0000909518-01-500502 CONFORMED SUBMISSION TYPE: T-3 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20011211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARMIKE CINEMAS INC CENTRAL INDEX KEY: 0000799088 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 581469127 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22605 FILM NUMBER: 1812339 BUSINESS ADDRESS: STREET 1: 1301 FIRST AVE CITY: COLUMBUS STATE: GA ZIP: 31901 BUSINESS PHONE: 7065763400 MAIL ADDRESS: STREET 1: P O BOX 391 CITY: COLUMBUS STATE: GA ZIP: 31994 T-3 1 a12-10_t3.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------- FORM T-3 APPLICATION FOR QUALIFICATION OF INDENTURE UNDER THE TRUST INDENTURE ACT OF 1939 -------------------------------- CARMIKE CINEMAS, INC. (Name of Applicant) 1301 First Avenue Columbus, Georgia 31901-2109 (Address of Principal Executive Offices) Securities to be Issued Under the Indenture to be Qualified: Title of Class Amount -------------- ------ 10 3/8% Senior Subordinated Notes Due 2009 Up to a maximum aggregate principal amount of $154,315,000 -------------------------------- Approximate date of proposed public offering: Upon the Effective Date under the Plan (as defined herein), presently anticipated to be on or about January 15, 2001. -------------------------------- Martin A. Durant Senior Vice President of Finance, Chief Financial Officer and Treasurer Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901-2109 (Name and Address of Agent for Service) With copies to: George A. Davis, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 - -------------------------------------------------------------------------------- The Applicant hereby amends this Application for Qualification on such date or dates as may be necessary to delay its effectiveness until (i) the 20th day after the filing of an amendment that specifically states that it shall supersede this Application for Qualification or (ii) such date as the Securities and Exchange Commission, acting pursuant to Section 307(c) of the Trust Indenture Act of 1939, may determine upon the written request of the Applicant. FORM T-3 general ITEM 1. GENERAL INFORMATION. (a) The Applicant, Carmike Cinemas, Inc., is a corporation. Certain subsidiaries of the Applicant will guarantee the New Senior Subordinated Notes (defined below). (b) The Applicant is a Delaware corporation. ITEM 2. Securities Act Exemption Applicable. The Applicant intends to offer, under the terms and subject to the conditions set forth in the Disclosure Statement (the "Disclosure Statement") and an accompanying Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the "Plan") of Applicant and certain of its subsidiaries (collectively, the "Debtors"), copies of which are included as exhibits T3E-1 and T3E-2 to this application, 10 3/8% Senior Subordinated Notes due 2009 (the "New Senior Subordinated Notes"), up to a maximum aggregate principal amount equal to $154,315,000. Because pursuant to the Plan, holders of Subordinated Note Claims have the option to either exchange such claims for equity of the Applicant or New Senior Subordinated Notes, the aggregate principal amount of the New Senior Subordinated Notes will not be known until all such holders have made their election, but in no event will the aggregate principal amount of the New Senior Subordinated Notes be greater than $154,315,000. The New Senior Subordinated Notes will be issued pursuant to the indenture to be qualified under this Form T-3 (the "Indenture"), a copy of which is included as Exhibit T3C to this application. The New Senior Subordinated Notes are being offered by the Applicant in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), afforded by section 1145 of title 11 of the United States Code, as amended (the "Bankruptcy Code"). Generally, section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale of securities under a bankruptcy plan of reorganization from registration under the Securities Act and under equivalent state securities and "blue sky" laws if the following requirements are satisfied: (i) the securities are issued by the debtor (or its successor) under a plan of reorganization; (ii) the recipients of the securities hold a claim against the debtor, an interest in the debtor or a claim for an administrative expense against the debtor; and (iii) the securities are issued entirely in exchange for the recipient's clam against or interest in the debtor or are issued "principally" in such exchange and "partly" for cash or property. The Applicant believes that the offer and exchange of the New Senior Subordinated Notes under the Plan will satisfy such requirements of section 1145(a)(1) of the Bankruptcy Code and, therefore, such offer and exchange is exempt from the registration requirements referred to above. Pursuant to the Plan, New Senior Subordinated Notes will be issued to the holders of Subordinated Note Claims in satisfaction of their claims against all of the Debtors. For a more complete description of the New Senior Subordinated Notes, reference is made in the Indenture. 2 AFFILIATIONS ITEM 3. Affiliates. (a) Set forth below are all subsidiaries of the Applicant, all of which are wholly owned by the Applicant unless otherwise indicated. Eastwynn Theatres, Inc. (AL) Wooden Nickel Pub, Inc. (DE) Military Services, Inc. (DE) 80% WMT-CKE, LLC 50% Conway Theatres Company, LLC 50% Video Shawnee Theatres 50% Video Enid Theatres Conventional 50% Video Enid Theatres Drive-Ins 33.33% Item 5 of this Application sets forth the names and addresses of (i) those stockholders of the Applicant holding 10% or more of the Applicant's voting securities as of December 7, 2001 and (ii) those stockholders expected to hold 10% or more of the Applicants voting securities as of the effective date of the Plan (the "Effective Date"). Except as set forth in Item 5 of this Application, the Applicant's affiliates, including the bases of control with respect thereto, will be unchanged upon the Effective Date. 3 MANAGEMENT AND CONTROL ITEM 4. Directors and Executive Officers. (a) The following table sets forth the names of and all offices held by all current directors and executive officers of the Applicant. Except as otherwise noted below, the address for each director and officer listed below is c/o Carmike Cinemas, Inc., 1301 First Avenue, Columbus, Georgia 31901-2109.
Name Office Address ---- ------ ------- C.L. Patrick Chairman of the Board of Directors Michael W. Patrick President, Chief Executive Officer and Director F. Lee Champion, III Senior Vice President, General Counsel, Secretary and Director Martin A. Durant Senior Vice President of Finance, Chief Financial Officer and Treasurer Fred W. VanNoy Senior Vice President of Operations and Chief Operating Officer Anthony J. Rhead Senior Vice President of Film P. Lamar Fields Senior Vice President of Real Estate H. Madison Shirley Senior Vice President of Concessions and Assistant Secretary Marilyn B. Grant Vice President of Advertising Philip A. Smitley Assistant Vice President and Controller Denis F. Cronin Director c/o Cronin & Vris, LLP 380 Madison Avenue, 24th Floor New York, NY 10017 Elizabeth C. Fascitelli Director c/o Goldman, Sachs & Company 85 Broad Street New York, NY 10004 Richard A. Friedman Director c/o Goldman, Sachs & Company 85 Broad Street New York, NY 10004 John W. Jordan, II Director c/o Jordan Industries, Inc. 875 N. Michigan Avenue, Suite 4020 Chicago, IL 60611 Carl L. Patrick , Jr. Director c/o PGL Entertainment Corporation 4423 Glengary Drive Atlanta, GA 30342 Jane L. Vris Director c/o Cronin & Vris, LLP 380 Madison Avenue, 24th Floor New York, NY 10017 David W. Zalaznick Director c/o The Jordan Company 767 Fifth Avenue, Suite 4800 New York, New York 10153
4 (b) The following table sets forth the names of those persons chosen to serve as directors of the Applicant's reorganized Board of Directors and executive officers, as of the Effective Date.*
Name Office Address ---- ------ ------- Michael W. Patrick President, Chief Executive Officer and Chairman of the Board of Directors Martin A. Durant Senior Vice President of Finance, Chief Financial Officer and Treasurer Fred W. VanNoy Senior Vice President of Operations and Chief Operating Officer Anthony J. Rhead Senior Vice President of Film P. Lamar Fields Senior Vice President of Real Estate H. Madison Shirley Senior Vice President of Concessions and Assistant Secretary Marilyn B. Grant Vice President of Advertising Philip A. Smitley Assistant Vice President and Controller Denis F. Cronin Director c/o Cronin & Vris, LLP 380 Madison Avenue, 24th Floor New York, NY 10017 Elizabeth C. Fascitelli Director c/o Goldman, Sachs & Company 85 Broad Street New York, NY 10004 Richard A. Friedman Director c/o Goldman, Sachs & Company 85 Broad Street New York, NY 10004 John W. Jordan, II Director c/o Jordan Industries, Inc. 875 N. Michigan Avenue, Suite 4020 Chicago, IL 60611 Carl L. Patrick , Jr. Director c/o PGL Entertainment Corporation 4423 Glengary Drive Atlanta, GA 30342 Jane L. Vris Director c/o Cronin & Vris, LLP 380 Madison Avenue, 24th Floor New York, NY 10017 David W. Zalaznick Director c/o The Jordan Company 767 Fifth Avenue, Suite 4800 New York, New York 10153
- ---------- * Additional directors to be designated to serve as of the Effective Date. 5 ITEM 5. Principal Owners of Voting Securities. (a) Presented below is certain information regarding each person owning 10% or more of the Applicant voting securities as of December 7, 2001.
Name and Percentage of Voting -------- -------------------- Complete Mailing Address Title of Class Owned Amount Owned Securities Owned ------------------------ -------------------- ------------ ---------------- Michael W. Patrick Class B Common Stock 651,913 25.1% c/o Carmike Cinemas, Inc. 1301 First Avenue Columbus, GA 31901-2109 Carl L. Patrick, Jr. Class B Common Stock 543,644 21% c/o PGL Entertainment Corporation 4423 Glengary Drive Atlanta, GA 30342
(b) Presented below is certain information regarding each person expected, on the basis of present holdings, commitments and information, to own 10% or more of the Applicant voting securities to be outstanding as of the Effective Date.
Name and Percentage of Voting -------- -------------------- Complete Mailing Address Title of Class Owned Amount Owned Securities Owned ------------------------ -------------------- ------------ ---------------- GS Capital Partners III, L.P. Common Stock 4,066,294 40.7% c/o Goldman, Sachs & Company 85 Broad Street New York, NY 10004 John W. Jordan, II Common Stock 1,194,763 11.9% c/o Jordan Industries, Inc. 875 N. Michigan Avenue Suite 4020 Chicago, IL 60611
UNDERWRITERS ITEM 6. Underwriters. (a) Within the three years prior to the date of the filing of this application, no person acted as an underwriter of any securities of the Applicant which were outstanding on the date of this application. (b) No person is acting as principal underwriter of the securities proposed to be offered pursuant to the Indenture. CAPITAL SECURITIES ITEM 7. Capitalization. (a) (1) The following table sets forth certain information with respect to each authorized class of securities of the Applicant as of December 7, 2001. 6
Title of Class Amount Authorized Amount Outstanding -------------- ----------------- ------------------ Class A Common Stock, par value $0.03 per share(1) 22,500,000 10,018,287 Class B Common Stock, par value $0.03 per share(2) 5,000,000 1,370,700 Series A Preferred Stock, par value $1.00 per share 1,000,000 550,000 (2) The following table sets forth certain information with respect to authorized class of securities of the Applicant, to be authorized, as of the Effective Date. Title of Class Amount Authorized Amount Outstanding -------------- ----------------- ------------------ New Common Stock, par value $0.03 per share(3) 20,000,000 9,500,000 Preferred Stock 1,000,000 0
(b) (1) Each share of the Applicant's Class A Common Stock entitles the holder thereof to one vote on each matter submitted to a vote at all meetings of the Applicant's common stockholders. (2) Each share of the Applicant's Class B Common Stock entitles the holder thereof to ten votes on each matter submitted to a vote at all meetings of the Applicant's common stockholders. (3) As of the Effective Date, each share of New Common Stock will entitle the holder thereof to one vote on each matter submitted to a vote at all meetings of holders of Applicant's New Common Stock. INDENTURE SECURITIES ITEM 8. Analysis of Indenture Provisions. The following is a general description of certain provisions of the Indenture to be qualified. The description is qualified in its entirety by reference to the form of Indenture filed as an exhibit hereto. Capitalized terms used below and not defined herein have the same meanings as in the Indenture. Events of Default; Withholding of Notice. Events of Default under the Indenture occur if: (1) default for 30 days in the payment of any interest on the New Senior Subordinated Notes after such interest becomes due and payable; (2) there is a default in the payment of any principal of, or premium, if any, on the New Senior Subordinated Notes when the same becomes due and payable; (3) the Applicant or any of its Restricted Subsidiaries fails to comply with the restrictions concerning certain payments, incurrence of certain indebtedness and issuance of preferred stock, offer to repurchase the New Senior Subordinated Notes upon a change of control, asset sales, limitations on dividend and other payment restrictions affecting subsidiaries, and merger, consolidation, or sale of assets contained in the Indenture; (4) the Applicant or any of its Restricted Subsidiaries defaults in the observance or performance of any other covenant, representation, warranty or agreement contained in the New Senior Subordinated Notes or the Indenture for 60 days after notice from the Trustee or the holders of at least 25% in aggregate principal amount of the New Senior Subordinated Notes then outstanding; (5) a default occurs under the Plan Trade Payable or any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries, which default (A) is caused by a failure to pay principal of, or interest or premium, if any, on such Plan Trade Payables or 7 Indebtedness prior to the expiration of the grace period, if any on the date of such default (a "Payment Default") or (B) results in the acceleration of such Indebtedness prior to the express maturity thereof and, in each case, the principal amount of such Plan Trade Payables or Indebtedness, together with the principal amount of any other Plan Trade Payables or such Indebtedness which has so had a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more; (6) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Applicant or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 consecutive days, provided that the aggregate of all such undischarged judgments exceeds $10.0 million; (7) the Applicant or any Subsidiary pursuant to or within the meaning of any bankruptcy law, other than the Plan and the proceedings related thereto: (A) commences a voluntary case or proceeding, (B) consents to the entry of an order for relief against it in an involuntary case or proceeding, (C) consents to the appointment of a custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors or (E) generally is not paying its debts as they become due; (8) a court of competent jurisdiction enters an order or decree under any bankruptcy law that remains unstayed and in effect for 60 consecutive days and: (A) is for relief against the Applicant or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary in an involuntary case, (B) appoints a custodian of the Applicant or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary or for all or substantially all of the property of the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary, or (C) orders the liquidation of the Applicant or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary; and (9) except as permitted by the Indenture, any Note Guarantee of any Significant Restricted Subsidiary is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Restricted Subsidiary, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under such Guarantor's Note Guarantee. The Trustee may withhold from holders of the New Senior Subordinated Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. Authentication and Delivery of New Secured Notes; Application of Proceeds. The New Senior Subordinated Notes shall be executed on behalf of the Applicant by two Officers (as this term is defined in the Indenture) of the Applicant. Such signatures may be either manual or facsimile. The Applicant's seal shall be reproduced on the New Senior Subordinated Notes and may be in facsimile form. If an Officer whose signature is on a New Senior Subordinated Note no longer holds that office at the time the Trustee authenticates the New Senior Subordinated Note or at any time thereafter, the New Senior Subordinated Note shall be valid nevertheless. A New Senior Subordinated Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. The New Senior Subordinated Notes shall be issuable only in denominations of $1,000 and integral multiples thereof. The Trustee shall issue New Senior Subordinated Notes upon a written order of the Applicant signed by two Officers. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate New Senior Subordinated Notes. An authenticating agent may authenticate New Senior Subordinated Notes whenever the Trustee may do so. There will be no proceeds (and therefore no application of proceeds) from the issuance of the New Senior Subordinated Notes because the New Senior Subordinated Notes will be issued as part of an exchange for currently outstanding indebtedness, as provided in the Plan. Release or Release and Substitution of Property. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital 8 stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee. Upon delivery by the Applicant to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale, other disposition or designation was made by the Company in accordance with the provisions of this Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture. Satisfaction and Discharge of the Indenture. (i) The Applicant and the Guarantors may terminate their obligations under the New Senior Subordinated Notes, the Guarantees and the Indenture, except the obligations referred to in paragraph (ii) hereof, if the Applicant has paid and discharged the entire Indebtedness represented by the outstanding New Senior Subordinated Notes or deposited all required sums under the Indenture with the Trustee. (ii) Notwithstanding the satisfaction and discharge of the Indenture, the obligations of the Applicant in Article 2 (including Replacement of Senior Subordinated Notes under Sections 2.7), Section 4.02 (Maintenance of Office or Agency), Section 7.07 (Compensation and Indemnity), and Article 8 (Legal Defeasance and Covenant Defeasance) of the Indenture shall survive. Statement as to Compliance. The Applicant and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to the Indenture shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 of the Indenture or Article 5 of the Indenture or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any person for any failure to obtain knowledge of any such violation. The Applicant will, so long as any of the New Senior Subordinated Notes are outstanding, deliver to the Trustee, forthwith upon, but in any event within five Business Days, of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. 9 ITEM 9. Other Obligors. The Applicant's obligations with respect to the New Senior Subordinated Notes will be guaranteed by the Applicant's Domestic Restricted Subsidiaries (as defined in the Indenture), which shall be Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc., and Military Services, Inc. on the issue date. Contents of Application for Qualification. This Application for Qualification comprises-- (a) Pages numbered 1 to 12, consecutively (including an attached Exhibit Index). (b) The statement of eligibility and qualification of the trustee under the indenture to be qualified. (c) The following exhibits in addition to those filed as a part of the statement of eligibility and qualification of the trustee: Exhibit T3A-1 Amended and Restated Articles of Incorporation of Applicant (incorporated by reference to the Applicant's Form 10-K for the year ended December 31, 1998). Exhibit T3B-1 Amended and Restated Bylaws of Applicant (incorporated by reference to the Applicant's Form 10-K for the year ended December 31, 2000). Exhibit T3C* Form of Indenture between Applicant, the Guarantors and the Trustee. Exhibit T3D Not Applicable. Exhibit T3E-1* Disclosure Statement for Debtors' Joint Plan of Reorganization, dated November 14, 2001. Exhibit T3E-2* Debtors' Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated November 14, 2001. Exhibit T3F* Cross reference sheet showing the location in the Indenture of the provisions inserted therein pursuant to Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939 (included as part of Exhibit T3C). Exhibit T3G* Statement of eligibility and qualification of the Trustee on Form T-1. - -------------------------------- * Filed herewith. 10 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Applicant, Carmike Cinemas, Inc., a Delaware corporation, has duly caused this Application for Qualification to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Columbus, and State of Georgia, on the 10th day of December, 2001. CARMIKE CINEMAS, INC. By: /s/ Martin A. Durant ------------------------------------ Name: Martin A. Durant Title: Senior Vice President Attest: /s/ F. Lee Champion, III --------------------------- Name: F. Lee Champion, III Title: Secretary 11 Exhibit Index ------------- Exhibit No. Description - ----------- ----------- Exhibit T3A-1 Amended and Restated Articles of Incorporation of Applicant (incorporated by reference to the Applicant's Form 10-K for the year ended December 31, 1998). Exhibit T3B-1 Amended and Restated Bylaws of Applicant (incorporated by reference to the Applicant's Form 10-K for the year ended December 31, 2000). Exhibit T3C* Form of Indenture between Applicant, the Guarantors and the Trustee. Exhibit T3D Not Applicable. Exhibit T3E-1* Disclosure Statement for Debtors' Joint Plan of Reorganization, dated November 14, 2001. Exhibit T3E-2* Debtors' Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated November 14, 2001. Exhibit T3F* Cross reference sheet showing the location in the Indenture of the provisions inserted therein pursuant to Sections 310 through 318(a), inclusive, of the Trust Indenture Act of 1939 (included as part of Exhibit T3C). Exhibit T3G* Statement of eligibility and qualification of the Trustee on Form T-1. - -------------------------------- * Filed herewith. 12 EX-99 3 a12-10ext3c.txt EXHIBIT T3C Exhibit T3C ----------------------------------- CARMIKE CINEMAS, INC. 10 3/8% Senior Subordinated Notes due 2009 ----------------------------------- ----------------------------------- INDENTURE Dated as of ________ ___, 2002 ----------------------------------- ----------------------------------- WILMINGTON TRUST COMPANY, Trustee ----------------------------------- CROSS-REFERENCE TABLE* Provisions of Trust Indenture Act of 1939 and Indenture dated as ________ __, 2002 among Carmike Cinemas, Inc., a Delaware corporation, the Guarantors party thereto and Wilmington Trust Company, as trustee: Trust Indenture Act Section Indenture Section 310 (a)(1)............................ 7.10 (a)(2)......................... 7.10 (a)(3)......................... N.A. (a)(4)......................... N.A. (a)(5)......................... 7.10 (b)............................ 7.10 (c)............................ N.A. 311 (a)............................... 7.11 (b)............................ 7.11 (c)............................ N.A. 312 (a)............................... 2.05 (b)............................ 12.03 (c)............................ 12.03 313 (a)............................... 7.06 (b)(1)......................... N.A. (b)(2)......................... 7.07 (c)............................ 7.06,12.02 (d)............................ 7.06 314 (a)............................... 4.03,12.02 (b)............................ N.A. (c)(1)......................... 12.04 (c)(2)......................... 12.04 (c)(3)......................... N.A. (d)............................ N.A. (e)............................ 12.05 (f)............................ N.A. 315 (a)............................... 7.01 (b)............................ 7.05,12.02 (c)............................ 7.01 (d)............................ 7.01 (e)............................ 6.11 316 (a) (last sentence)............... 2.09 (a)(1)(A)...................... 6.05 (a)(1)(B)...................... 6.04 (a)(2)......................... N.A. (b)............................ 6.07 (c)............................ 2.12 317 (a)(1)............................ 6.08 (a)(2)......................... 6.09 (b)............................ 2.04 318 (a)............................... 12.01 (b)............................ N.A. (c)............................ 12.01 N.A. means not applicable. *This Cross Reference Table is not part of the Indenture. ii TABLE OF CONTENTS Article 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions.................................................................................2 Section 1.02 Other Definitions..........................................................................17 Section 1.03 Incorporation by Reference of Trust Indenture Act..........................................18 Section 1.04 Rules of Construction......................................................................18 Article 2 THE NOTES Section 2.01 Form and Dating............................................................................18 Section 2.02 Execution and Authentication...............................................................19 Section 2.03 Registrar and Paying Agent.................................................................19 Section 2.04 Paying Agent to Hold Money in Trust........................................................20 Section 2.05 Holder Lists...............................................................................20 Section 2.06 Transfer and Exchange......................................................................20 Section 2.07 Replacement Notes..........................................................................23 Section 2.08 Outstanding Notes..........................................................................23 Section 2.09 Treasury Notes.............................................................................24 Section 2.10 Temporary Notes............................................................................24 Section 2.11 Cancellation...............................................................................24 Section 2.12 Defaulted Interest.........................................................................24 Section 2.13 CUSIP Numbers..............................................................................25 Article 3 REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee.........................................................................25 Section 3.02 Selection of Notes to Be Redeemed..........................................................25 Section 3.03 Notice of Redemption.......................................................................25 Section 3.04 Effect of Notice of Redemption.............................................................26 Section 3.05 Deposit of Redemption Price................................................................26 Section 3.06 Notes Redeemed in Part.....................................................................27 Section 3.07 Optional Redemption........................................................................27 Section 3.08 Mandatory Redemption.......................................................................27 Article 4 COVENANTS Section 4.01 Payment of Notes...........................................................................28 Section 4.02 Maintenance of Office or Agency............................................................28 Section 4.03 Reports....................................................................................28 Section 4.04 Compliance Certificate.....................................................................29 Section 4.05 Taxes......................................................................................30 Section 4.06 Stay, Extension and Usury Laws.............................................................30 Section 4.07 Restricted Payments........................................................................30 Section 4.08 [Reserved.]................................................................................32 Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock.................................32 Section 4.10 Fall-Away Event............................................................................35 Section 4.11 Transactions with Affiliates...............................................................35 Section 4.12 Corporate Existence........................................................................36 Section 4.13 Payments for Consent.......................................................................37 Section 4.14 Additional Note Guarantees.................................................................37 Section 4.15 Offer to Repurchase Upon Change of Control.................................................37 Section 4.16 No Senior Subordinated Debt................................................................38 Section 4.17 Limitation on Asset Sales..................................................................38 Section 4.18 Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries..............39 Article 5 SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets...................................................39 Section 5.02 Successor Corporation Substituted..........................................................40 Article 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default..........................................................................41 Section 6.02 Acceleration...............................................................................42 Section 6.03 Other Remedies.............................................................................43 Section 6.04 Waiver of Past Defaults....................................................................43 Section 6.05 Control by Majority........................................................................44 Section 6.06 Limitation on Suits........................................................................44 Section 6.07 Rights of Holders of Notes to Receive Payment..............................................44 Section 6.08 Collection Suit by Trustee.................................................................44 Section 6.09 Trustee May File Proofs of Claim...........................................................45 Section 6.10 Priorities.................................................................................45 Section 6.11 Undertaking for Costs......................................................................46 Article 7 TRUSTEE Section 7.01 Duties of Trustee..........................................................................46 Section 7.02 Rights of Trustee..........................................................................47 Section 7.03 Individual Rights of Trustee...............................................................48 Section 7.04 Trustee's Disclaimer.......................................................................48 Section 7.05 Notice of Defaults.........................................................................48 Section 7.06 Reports by Trustee to Holders of the Notes.................................................48 Section 7.07 Compensation and Indemnity.................................................................49 Section 7.08 Replacement of Trustee.....................................................................50 Section 7.09 Successor Trustee by Merger, etc...........................................................50 Section 7.10 Eligibility; Disqualification..............................................................51 Section 7.11 Preferential Collection of Claims Against Company..........................................51 ii Section 7.12 Trustee's Application for Instructions from the Company....................................51 Article 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance...................................51 Section 8.02 Legal Defeasance and Discharge.............................................................51 Section 8.03 Covenant Defeasance........................................................................52 Section 8.04 Conditions to Legal or Covenant Defeasance.................................................52 Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.................................................................................53 Section 8.06 Repayment to Company.......................................................................54 Section 8.07 Reinstatement..............................................................................54 Article 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes........................................................55 Section 9.02 With Consent of Holders of Notes...........................................................55 Section 9.03 Compliance with Trust Indenture Act........................................................57 Section 9.04 Revocation and Effect of Consents..........................................................57 Section 9.05 Notation on or Exchange of Notes...........................................................57 Section 9.06 Trustee to Sign Amendments, etc............................................................57 Article 10 SUBORDINATION Section 10.01 Agreement to Subordinate...................................................................57 Section 10.02 Liquidation; Dissolution; Bankruptcy.......................................................58 Section 10.03 Default on Designated Senior Debt..........................................................58 Section 10.04 Acceleration of Notes......................................................................59 Section 10.05 When Distribution Must Be Paid Over........................................................59 Section 10.06 Notice by Company..........................................................................59 Section 10.07 Subrogation................................................................................59 Section 10.08 Relative Rights............................................................................60 Section 10.09 Subordination May Not Be Impaired by Company...............................................60 Section 10.10 Distribution or Notice to Representative...................................................60 Section 10.11 Rights of Trustee and Paying Agent.........................................................60 Section 10.12 Authorization to Effect Subordination......................................................61 Section 10.13 Amendments.................................................................................61 Section 10.14 Trustee Not Fiduciary for Holders of Senior Indebtedness...................................61 Article 11 NOTE GUARANTEES Section 11.01 Guarantee..................................................................................61 Section 11.02 Subordination of Note Guarantee............................................................62 Section 11.03 Limitation on Guarantor Liability..........................................................62 Section 11.04 Execution and Delivery of Note Guarantee...................................................63 iii Section 11.05 Guarantors May Consolidate, etc., on Certain Terms.........................................63 Section 11.06 Releases Following Sale of Assets..........................................................64 Article 12 MISCELLANEOUS Section 12.01 Trust Indenture Act Controls...............................................................64 Section 12.02 Notices....................................................................................64 Section 12.03 Communication by Holders of Notes with Other Holders of Notes..............................66 Section 12.04 Certificate and Opinion as to Conditions Precedent.........................................66 Section 12.05 Statements Required in Certificate or Opinion..............................................66 Section 12.06 Rules by Trustee and Agents................................................................66 Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders...................66 Section 12.08 Governing Law..............................................................................67 Section 12.09 No Adverse Interpretation of Other Agreements..............................................67 Section 12.10 Successors.................................................................................67 Section 12.11 Severability...............................................................................67 Section 12.12 Counterpart Originals......................................................................67 Section 12.13 Table of Contents, Headings, etc...........................................................67 Section 12.14 Plan of Reorganization.....................................................................67
EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF NOTE GUARANTEE Exhibit C FORM OF SUPPLEMENTAL INDENTURE SCHEDULES Schedule I Schedule of Guarantors iv INDENTURE dated as of ________ __, 2002 among Carmike Cinemas, Inc., a Delaware corporation (the "Company"), the Guarantors named on Schedule I hereto (the "Original Guarantors") and Wilmington Trust Company, a Delaware banking corporation, as trustee (the "Trustee"). R E C I T A L S WHEREAS, the Company and the Trustee previously entered into an Indenture (the "Original Indenture") pursuant to which $200,000,000 aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2009 (the "Original Notes") of the Company have been issued; and WHEREAS, the Company defaulted on an interest payment with respect to the Original Notes; and the Company and the Original Guarantors subsequently filed for reorganization under Chapter 11 of the United States Bankruptcy Code; and WHEREAS, pursuant to the Amended Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code for the Company and the Original Guarantors (as it may be altered, amended or modified from time to time, the "Plan of Reorganization"), which Plan of Reorganization was confirmed by Order of the United States Bankruptcy Court for the District of Delaware on January ___, 2002 (the "Confirmation Order"), (i) on the effective date of the Plan of Reorganization, $___,000,000 aggregate principal amount of Notes (as defined below) are to be issued under this Indenture in exchange for $___,000,000 aggregate principal amount of the Original Notes and (ii) shares of the common Capital Stock of the Company (the "Plan Exchanged Capital Stock") are to be issued in exchange for the remaining $__,000,000 aggregate principal amount of the Original Notes (the "Original Exchanged Notes"); and WHEREAS, pursuant to the Plan of Reorganization and the Confirmation Order, the Company and the Original Guarantors have duly authorized this Indenture and the execution and delivery hereof; and WHEREAS, this Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act; and WHEREAS, pursuant to the Plan of Reorganization and the Confirmation Order, all acts and things necessary have been done to make the Notes, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid, binding and legal obligations of the Company, and to make this Indenture a valid agreement of the Company and the Original Guarantors in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: The Company, the Original Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 10 3/8% Senior Subordinated Notes due 2009 (the "Notes") issued hereunder: Article 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "Acquired Debt" means, with respect to any specified Person: (a) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (b) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control", as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling", "controlled by" and "under common control with" shall have correlative meanings. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary that apply to such transfer or exchange. "Asset Acquisition" means: (a) any transaction pursuant to which any Person shall become a Subsidiary of the Company or shall be consolidated or merged with the Company or any Subsidiary of the Company; or (b) the acquisition by the Company or any Subsidiary of the Company of assets of any Person comprising a division, line of business or theatre site of such Person. "Asset Sale" by any Person means any transfer, conveyance, sale, lease or other disposition by such Person or any of its Restricted Subsidiaries (including any issuance or sale by a Restricted Subsidiary of Capital Stock of such Restricted Subsidiary, and including a consolidation or merger or other sale of any such Restricted Subsidiary with, into or to another Person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a disposition by a Restricted Subsidiary of such Person to such Person or a Wholly Owned Restricted Subsidiary of such Person that is a Guarantor or by such Person to a Wholly Owned Restricted Subsidiary of such Person that is a Guarantor) of (i) shares of Capital Stock (other than 2 directors' qualifying shares) or other ownership interests of a Restricted Subsidiary of such Person, (ii) substantially all of the assets of such Person or any of its Restricted Subsidiaries representing a division or line of business or (iii) other assets or rights of such Person or any of its Restricted Subsidiaries outside of the ordinary course of business. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (a) in the case of a corporation, corporate stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Change of Control" means the occurrence of any of the following: (a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than to the Principal, a Related Party of the Principal, PIA, any of PIA's officers or directors or any Affiliate of PIA or any of PIA's officers or directors (collectively, the "Permitted Holders"); or 3 (b) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Permitted Holders or any direct or indirect Subsidiary of any Permitted Holder or any Permitted Group, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares. "Company" means Carmike Cinemas, Inc., and any and all successors thereto. "Consolidated EBITDA" means, for any period: (i) the aggregate of the TLCF of all Theatres operated by the Company and its Restricted Subsidiaries for such period less, (ii) the consolidated selling and general administrative expense (other than any compensation expense arising from grants to management of the Company and its Restricted Subsidiaries of Equity Interests in the Company) of the Company and its Restricted Subsidiaries for such period, all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP; provided that, Consolidated EBITDA shall not include: (x) the TLCF of any Theatre accrued at any time when such Theatre is not operated by the Company or any of its Restricted Subsidiaries, including, without limitation, the TLCF of any Theatre operated by any Person that accrued prior to the date such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; and (y) the TLCF of any Theatre that is operated by any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such TLCF is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary (other than any agreement or instrument evidencing Indebtedness or Preferred Stock that (I) is outstanding on the Issue Date or incurred or issued thereafter in compliance with Section 4.09 hereof and (II) has not been created and does not exist in violation of Section 4.18 hereof; provided that the terms of any such agreement restricting the declaration and payment of dividends or similar distributions apply only in the event of a default with respect to a financial covenant or a covenant relating to payment (beyond any applicable period of grace) contained in such agreement or instrument and provided such terms are determined by the Company to be customary in comparable financings and such restrictions are determined by the Company not to 4 materially affect the Company's ability to make principal or interest payments on the Notes when due). "Consolidated Indebtedness" means, with respect to any Person as of any date of determination, the sum, without duplication, of: (a) the total amount of Indebtedness of such Person and its Restricted Subsidiaries, plus (b) the total amount of Indebtedness of any other Person, to the extent that such Indebtedness has been Guaranteed by the referent Person or one or more of its Restricted Subsidiaries, plus (c) the aggregate liquidation value of all Disqualified Stock of such Person and all Preferred Stock of Restricted Subsidiaries of such Person, in each case, determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of: (a) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization or original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations); and (b) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, and (c) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon); excluding, however, any amount of such interest of any Restricted Subsidiary if (i) neither the Company nor any other Restricted Subsidiary is obligated therefor and (ii) the TLCF of Theatres operated by such Restricted Subsidiary is excluded in the calculation of Consolidated EBITDA pursuant to clause (y) of the definition thereof (but only in the same proportion as the TLCF of Theatres operated by such Restricted Subsidiary is excluded from the calculation of Consolidated EBITDA pursuant to clause (y) of the definition thereof), in each case, on a consolidated basis and in accordance with GAAP. "Construction Indebtedness Amount" shall mean, as of any date, an amount equal to the lesser of: (a) $100.0 million; and 5 (b) the total Indebtedness of any Person and its Restricted Subsidiaries outstanding on the last day of the most recently ended period of the Company for which internal financial statements are available incurred in connection with the construction or enhancement of Theatres or screens that, on such date, are not yet open for business. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Exit Facilities" means the credit facilities with ________ and certain other banks and other institutional lenders initially established on the Issue Date to provide for revolving credit loans, term loans and letters of credit having an aggregate principal (or face) amount not to exceed $50 million at any one time outstanding, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Debt Rating" shall mean the rating assigned to the Notes by Moody's or S&P, as the case may be. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Senior Debt" means: (a) any Indebtedness outstanding under Credit Exit Facilities; and (b) after payment in full of all Obligations under Credit Exit Facilities, any other Senior Debt permitted under this Indenture the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt". "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the 6 holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. "Domestic Subsidiary" means, with respect to the Company, any Subsidiary of the Company that: (a) was formed under the laws of the United States of America, any state thereof or the District of Columbia; or (b) guarantees or otherwise becomes obligated with respect to any Indebtedness of the Company or any Plan Trade Payables. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security or other Indebtedness that is convertible into, or exchangeable for, or otherwise constitutes the right to acquire, Capital Stock). "Equity Offering" means any underwritten offering of Qualified Capital Stock of the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Capital Lease Obligations" means the Capital Lease Obligations in respect of the Company's Theatres existing on the Issue Date, including the Company's Theatres under construction in Fort Wayne, Indiana, and Jacksonville, North Carolina on the Issue Date, each as in existence on the Issue Date, less any amounts repaid in connection with Asset Sales, scheduled or optional principal payments, cash flow sweeps or other repayments (no such repaid amounts permitted to be reborrowed hereunder pursuant to clause (b) of the second paragraph of Section 4.09). "Existing Indebtedness" means (i) the Plan Term Loan Bank Debt and (ii) the Existing Capital Lease Obligations. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. "Global Notes" means, individually and collectively, each permanent global Note substantially in the form of Exhibit A hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary and issued in accordance with Section 2.01 hereof. 7 "Global Note Legend" means the legend set forth in Section 2.06(g), which is required to be placed on all Global Notes issued under this Indenture. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" means each of: (a) the Company's Domestic Restricted Subsidiaries; and (b) any other subsidiary that executes a Note Guarantee in accordance with the provisions of this Indenture; and their respective successors and assigns. The Company's Domestic Restricted Subsidiaries on the Issue Date consist of each of the Subsidiaries of the Company named on Schedule I hereto. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (a) in respect of borrowed money; (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (c) in respect of banker's acceptances; (d) representing Capital Lease Obligations; (e) in respect of the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or 8 (f) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP; provided, however, that, in the case of the Company or any Subsidiary thereof, the term "Indebtedness" shall not include the Plan Trade Payables. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be: (a) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (b) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness; For purposes of calculating the amount of any Indebtedness hereunder, (a) there shall be no double-counting of direct obligations, Guarantees and reimbursement obligations for letters of credit; (b) the principal amount of any Indebtedness of any Person arising by reason of such Person having granted or assumed a Lien on its property to secure Indebtedness of others shall be the lower of the fair market value of such property and the principal amount of such Indebtedness outstanding (or committed to be advanced) at the time of determination; (c) the principal amount of any Indebtedness of any Person arising by reason of such Person having Guaranteed Indebtedness of others where the amount of such Guarantee is limited to an amount less than the principal amount of the Indebtedness Guaranteed, shall be such amount as so limited; (d) the payment obligation for non-interest rate Hedging Obligations shall be equal to (i) zero, to the extent the notional amount of the Hedging Obligation is not greater than the reasonably anticipated requirements of the Company and its Subsidiaries for the asset that is the subject of the Hedging Obligation, as such needs are projected by management of the Company at the time the Hedging Obligation is entered into or (ii) the notional amount of such Hedging Obligation, to the extent such notional amount exceeds such reasonably anticipated requirements. "Indenture" means this Indenture, as amended or supplemented from time to time. "Independent Financial Advisor" means an accounting, appraisal, investment banking firm or consultant to Persons engaged in the motion picture exhibition and distribution business of nationally recognized standing that is, in the judgment of the Board of Directors, qualified to perform the task for which it has been engaged. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. 9 "Investment Grade Status" exists as of a date and thereafter if at such date either (i) the Debt Rating of Moody's is at least Baa3 (or the equivalent) or higher; or (ii) the Debt Rating of S&P is at least BBB- (or the equivalent) or higher. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Issue Date" means ________ __, 2002, the effective date of the Plan of Reorganization. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Leverage Ratio" means, as of any date, the ratio of: (a) Consolidated Indebtedness (excluding any Construction Indebtedness Amount and net of any cash and cash equivalents) of the Company on such date to (b) the aggregate amount of Consolidated EBITDA of the Company for the most recently ended four full fiscal quarter period of the Company for which internal financial statements are available (the "Reference Period"). In addition to the foregoing, for purposes of this definition, "Consolidated EBITDA" shall be calculated on a pro forma basis after giving effect to: (a) the incurrence of the Indebtedness or the issuance of the Disqualified Stock or other Preferred Stock (and the application of the proceeds therefrom) giving rise to the need to make such calculation and any incurrence or issuance (and the application of the proceeds therefrom) or repayment of other Indebtedness or Preferred Stock, other than the incurrence or repayment of Indebtedness for ordinary working capital purposes, at any time subsequent to the beginning of the Reference Period and on or prior to the date of determination, as if such incurrence (and the application of the proceeds thereof), or the repayment, as the case may be, occurred on the first day of the Reference Period; (b) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person that becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring, assuming or otherwise becoming liable for or issuing Indebtedness or Preferred Stock) at any time on or subsequent to the first day of the Reference Period and on or prior to the date of determination, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness or Preferred Stock and also including any 10 Consolidated EBITDA associated with such Asset Acquisition) had occurred on the first day of the Reference Period; and (c) any Theatre that was permanently closed for business at any time on or subsequent to the first day of the Reference Period and on or prior to the date of determination as if such Theatre was closed on the first day of the Reference Period. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset securing Indebtedness, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Net Cash Proceeds" from any Asset Sale by any Person means cash or readily marketable cash equivalents received (including by way of sale or discounting of a note, installment receivable or other receivable, but excluding any other consideration received in the form of assumption by the acquiree of Indebtedness or other obligations relating to such properties or assets) therefrom by such Person, net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred and all federal, state, provincial, foreign and local taxes required to be accrued as a liability as a consequence of such Asset Sale, (ii) all payments made by such Person or its Restricted Subsidiaries on any Indebtedness which is secured by such assets in accordance with the terms of any Lien upon or with respect to such assets or which must by the terms of such Lien, or in order to obtain a necessary consent to such Asset Sale or by applicable law, be repaid out of the proceeds from such Asset Sale, (iii) all distributions and other payments made to minority interest holders in Restricted Subsidiaries of such Person or joint ventures as a result of such Asset Sale and (iv) appropriate amounts to be provided by such Person or any Restricted Subsidiary thereof, as the case may be, as a reserve in accordance with GAAP against any liabilities associated with such assets and retained by such Person or any Restricted Subsidiary thereof, as the case may be, after such Asset Sale, including, without limitation, liabilities under any indemnification obligations and severance and other employee termination costs associated with such Asset Sale, in each case as determined by the Board of Directors, in its reasonable good faith judgment evidenced by a resolution of the Board of Directors filed with the Trustee; provided, however, that any reduction in such reserve following the consummation of such Asset Sale will be treated for all purposes of this Indenture and the Notes as a new Asset Sale at the time of such reduction with Net Cash Proceeds equal to the amount of such reduction. "Note Guarantee" means the Guarantee by each Guarantor of the Company's payment obligations under this Indenture and on the Notes, executed pursuant to the provisions of this Indenture. "Notes" has the meaning assigned to such term in the Recitals to this Indenture. 11 "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means, with respect to any Person, a certificate signed on behalf of such Person by two Officers of such Person, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of such Person, that meets the requirements of Section 12.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Original Exchanged Notes" has the meaning assigned to such term in the Recitals to this Indenture. "Original Guarantors" means each of the Subsidiaries of the Company named on Schedule I hereto, which constitute all of the Company's Domestic Restricted Subsidiaries on the Issue Date. "Original Indenture" has the meaning assigned to such term in the Recitals to this Indenture. "Original Notes" means the 9 3/8% Senior Subordinated Notes due 2009 of the Company issued pursuant to the Original Indenture. "Participant" means, with respect to the Depositary, a Person who has an account with the Depositary. "Permitted Group" means any group of investors that is deemed to be a "person" (as that term is used in Section 13(d)(3) of the Exchange Act) by virtue of the Stockholders' Agreement, as the same may be amended, modified or supplemented from time to time, provided that no single Person (other than the Principal and the Principal's Related Parties) Beneficially Owns (together with its Affiliates) more of the Voting Stock of the Company that is Beneficially Owned by such group of investors than is then collectively Beneficially Owned by the Principal and the Principal's Related Parties in the aggregate. "Permitted Junior Securities" means: (a) Equity Interests in the Company or any Guarantor; or 12 (b) debt securities that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Debt under this Indenture. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all customary expenses and premiums incurred in connection therewith); (b) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (c) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (d) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "PIA" means Goldman, Sachs & Co. and its Affiliates. "Plan Exchanged Capital Stock" has the meaning assigned to such term in the Recitals to this Indenture. "Plan of Reorganization" has the meaning assigned to such term in the Recitals to this Indenture. "Plan Term Loan Bank Debt" means term loan bank Indebtedness of the Company owing to certain banks in an aggregate principal amount of $264,977,449.00 million on the Issue Date issued pursuant to Section 4.4(b) of the Plan of Reorganization in exchange for Allowed Class 4 Claims (as defined in the Plan of Reorganization), as in existence on the Issue Date, less any amounts 13 repaid in connection with Asset Sales, scheduled or optional principal payments, cash flow sweeps or other repayments (no such repaid amounts permitted to be reborrowed hereunder pursuant to clause (b) of the second paragraph of Section 4.09). "Plan Trade Payables" means the unsecured trade payables provided for pursuant to Section 4.5(b) of the Plan of Reorganization in satisfaction of Allowed Class 5 Claims (as defined in the Plan of Reorganization) and bearing interest at the annual rate of 9.4%, each as in existence on the Issue Date, less any amounts repaid in connection with refinancing of the Plan Term Loan Bank Debt, with Asset Sales, scheduled or optional principal payments, cash flow sweeps or other repayments (no such repaid amounts permitted to be reborrowed hereunder pursuant to clause (b) or (d) of the second paragraph of Section 4.09). "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Principal" means Michael W. Patrick. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Stock. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Issue Date, executed by the Company for the benefit of certain holders of the common Capital Stock of the Company pursuant to Section 5.9 of the Plan of Reorganization, as in effect on the Issue Date. "Related Party" means: (a) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of the Principal; or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of the Principal and/or such other Persons referred to in the immediately preceding clause (a). "Representative" means the indenture trustee or other trustee, agent or representative for any Senior Debt. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Department of the Trustee (or any successor group of the Trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means each Subsidiary of the Company. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor to the rating agency business thereof. 14 "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means: (a) all Indebtedness of the Company or any Guarantor outstanding under the Credit Exit Facilities and the Plan Term Loan Bank Debt and all Hedging Obligations with respect thereto; (b) any other Indebtedness of the Company or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or any Note Guarantee; and (c) all Obligations with respect to the items listed in the preceding clauses (a) and (b). Notwithstanding anything to the contrary in the preceding, Senior Debt will not include: (a) any liability for federal, state, local or other taxes owed or owing by the Company; (b) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates; (c) the Plan Trade Payables or any trade payables; or (d) the portion of any Indebtedness that is incurred in violation of this Indenture. "Senior Guarantees" means the Guarantees by the Guarantors of Obligations under the Senior Debt. "Significant Restricted Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Significant Subsidiary" means any Subsidiary that would be a "Significant Subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Stockholders' Agreement" means the Stockholders' Agreement, dated as of the Issue Date, among the Company and holders of the common Capital Stock of 15 the Company on the Issue Date, entered into pursuant to Section 5.8 of the Plan of Reorganization, as in effect on the Issue Date. "Subsidiary" means, with respect to any specified Person: (a) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (b) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Surviving Person" means, with respect to any Person involved in or that makes any Disposition, the Person formed by or surviving such Disposition or the Person to which such Disposition is made. "Theatre" means any building and related improvements or complex of buildings and related improvements containing one or more movie screens and operated as a movie theatre by the Company or any Restricted Subsidiary. "Theatre Level Cash Flow" or "TLCF" means, with respect to any Theatre, for any period: (a) the revenues of the Company and its Subsidiaries generated for such period by such Theatre, less (b) the costs and expenses of operations (including, without limitation, film exhibition costs, concession costs, salaries and wages, facility leases, advertising, utilities and other theatre operating costs but excluding depreciation and amortization and general and administrative expenses) of the Company and its Subsidiaries allocable to such Theatre for such period, less (c) if the Company and its Subsidiaries do not own such Theatre and the lease in respect thereof is a Capital Lease Obligation, all interest and principal amounts on such Capital Lease Obligations for such period, all determined on a consolidated basis (i) with any volume discounts or similar pricing matters associated with film exhibition costs, advertising or other expenses incurred as a cost of operating such Theatre and one or more other Theatres being allocated equitably on a pro rata basis among all such Theatres and (ii) otherwise in conformity with GAAP. "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA; provided, however, that in the event such Act is further amended after such date, "TIA" means, to the extent required by any such amendment, such Act as so further amended. 16 "Total Tangible Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, less total consolidated intangible assets of the Company and its Restricted Subsidiaries, in each case, as shown on the most recent balance sheet of the Company that is as of a date after the Issue Date. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. Section 1.02 Other Definitions. Defined in Term Section ------------------------------------------------------ ---------------- "Affiliate Transaction"............................. 4.11 "Authentication Order".............................. 2.02 "Change of Control Offer"........................... 4.15 "Change of Control Payment"......................... 4.15 "Change of Control Payment Date".................... 4.15 "Covenant Defeasance"............................... 8.03 "DTC"............................................... 2.03 "Event of Default".................................. 6.01 "Fall-Away Event"................................... 4.10 "incur"............................................. 4.09 "Legal Defeasance".................................. 8.02 "Payment Default"................................... 6.01 "Paying Agent"...................................... 2.03 "Permitted Debt".................................... 4.09 "Registrar"......................................... 2.03 17 "Restricted Payments"............................... 4.07 Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) provisions apply to successive events and transactions; and (f) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. 18 The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with written instructions given by the Holder thereof as required by Section 2.06 hereof. Section 2.02 Execution and Authentication. Two Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional 19 paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.04 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.05 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA ss. 312(a). Section 2.06 Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company, in its sole discretion, determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of 20 the preceding events in clause (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. If any holder of a beneficial interest in a Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, (i) the transferor of such beneficial interest must deliver to the Registrar (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; and (ii) upon satisfaction of such conditions, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar in writing through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. A Holder of a Definitive Note may exchange such Note for a beneficial interest in a Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Global Note at any time. Upon receipt of a written request for such an exchange or transfer, the Trustee shall cancel the applicable Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Global Notes. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. 21 (f) [Reserved.] (g) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF CARMIKE CINEMAS, INC." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a Global Note have been exchanged for Definitive Notes or a Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes 22 or Definitive Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to the due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07 Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08 Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof. 23 If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Section 2.10 Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of such canceled Notes in its customary manner (subject to the record retention requirement of the Exchange Act). The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special 24 record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. Section 2.13 CUSIP Numbers. The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP" numbers. ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days (unless a shorter period shall be acceptable to the Trustee) but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02 Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03 Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. 25 The notice shall identify the Notes (including applicable CUSIP Numbers) to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption Price. On or prior to 10:00 a.m., New York City time, on the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest 26 payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 Notes Redeemed in Part. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. Section 3.07 Optional Redemption. (a) Except as set forth in clause (b) of this Section 3.07, the Notes shall not be redeemable at the Company's option pursuant to this Section 3.07 prior to February 1, 2004. After February 1, 2004, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below: Year Percentage ------------------------------ -------------------- 2004......................... 104.688% 2005......................... 103.125% 2006......................... 101.563% 2007 and thereafter.......... 100.000% (b) Notwithstanding the provisions of clause (a) of this Section 3.07, at any time prior to February 1, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price equal to 109.375% of the principal amount thereof plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes issued under this Indenture remain outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and that such redemption must occur within 60 days of the date of the closing of such Equity Offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08 Mandatory Redemption. The Company shall not be required to make mandatory redemption payments with respect to the Notes. 27 ARTICLE 4 COVENANTS Section 4.01 Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Trustee's drop agent, Computershare Trust Company of New York, Wall Street Plaza, 88 Pine Street, 19th Floor, New York, New York 10005 as one such office or agency of the Company in accordance with Section 2.03 hereof. Section 4.03 Reports. (a) Whether or not required by the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes and to the Trustee, within the time periods specified in the SEC's rules and regulations (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the 28 annual information only, a report on the annual financial statements by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. The Company shall at all times comply with TIA ss. 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). (b) Whether or not required by the SEC, the Company shall file a copy of all of the information and reports referred to in clauses (a)(i) and (a)(ii) above with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (c) For so long as any Notes remain outstanding, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04 Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being 29 understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon, but in any event within five Business Days, of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06 Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07 Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (a) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company); (b) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; or (c) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Note Guarantees, except a payment of interest or principal at the Stated Maturity thereof (all such payments and other actions set forth in clauses (a) through (c) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and 30 (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to the Leverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made after the Issue Date, shall not exceed, at the date of determination, the sum of: (i) an amount equal to 100% of the Company's Consolidated EBITDA since the Issue Date to the end of the Company's most recently ended full fiscal quarter for which internal financial statements are available, taken as a single accounting period, plus the interest component of all payments associated with Capital Lease Obligations included in Consolidated Interest Expense for such period to the extent deducted in computing Consolidated EBITDA for such period, less the product of 2.0 times the Company's Consolidated Interest Expense since the Issue Date to the end of the Company's most recently ended full fiscal quarter for which internal financial statements are available, taken as a single accounting period, plus (ii) an amount equal to 100% of the aggregate net proceeds, including the fair market value of property other than cash, received by the Company from the sale of Equity Interests since the Issue Date other than (A) sales of Disqualified Stock, (B) Equity Interests sold to any of the Company's Subsidiaries, and (C) any Equity Interests sold or otherwise issued pursuant to the Plan of Reorganization (including, without limitation, the Plan Exchanged Capital Stock issued in exchange for the Original Exchanged Notes), plus (iii) the greater of (i) $60.0 million and (ii) 10% of Total Tangible Assets of the Company and its consolidated Subsidiaries as determined in accordance with GAAP as of the date of the most recently prepared internal balance sheet of the Company that is as of a date after the Issue Date. So long as no Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit: (a) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (b) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph; 31 (c) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (d) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Subsidiary of the Company held by any employee, director or consultant of the Company (or any of its Subsidiaries) pursuant to any equity subscription agreement or stock option or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $2.5 million in any twelve-month period; (e) repurchases of Equity Interests deemed to occur upon exercise of Equity Interests if such Equity Interests represent a portion of the exercise price of such warrants, options or rights; provided that the portion of such exercise price represented by such Equity Interests so exercised shall be excluded from the aggregate net proceeds from the sale of Equity Interests upon exercise of such warrants, options or rights; and (f) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Company or any of its Restricted Subsidiaries or any class or series of Preferred Stock of Restricted Subsidiaries of the Company, in each case, issued in accordance with Section 4.09 hereof. The amount of all Restricted Payments, other than cash, shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors in good faith whose resolution with respect thereto shall be delivered to the Trustee. Section 4.08 [Reserved.] Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly, or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock, and the Company's Restricted Subsidiaries may incur Indebtedness or issue shares of Preferred Stock, if the Company's Leverage Ratio at the time of incurrence of such Indebtedness or the issuance of such Disqualified Stock or Preferred Stock, after giving pro forma effect to such incurrence or issuance as set forth in the definition of "Leverage Ratio", would have been no greater than 7.0 to 1. The first paragraph of this Section 4.09 shall not prohibit the incurrence of any of the following items of Indebtedness, issuances of Preferred Stock, or acquisitions of Indebtedness, Disqualified Stock or Preferred Stock (collectively, "Permitted Debt"): 32 (a) the incurrence by the Company and any of its Restricted Subsidiaries of additional Indebtedness and letters of credit pursuant to the Credit Exit Facilities (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) in an aggregate principal amount at any one time outstanding under this clause (a) not to exceed $50.0 million; (b) to the extent the Company or any Restricted Subsidiary is deemed to incur any Existing Indebtedness or Plan Trade Payables on the Issue Date, the incurrence by the Company and its Restricted Subsidiaries of such Existing Indebtedness or Plan Trade Payables on the Issue Date; (c) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes to be issued on the Issue Date (including the Note Guarantees); (d) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace, Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under the first paragraph of this Section 4.09 or clauses (b), (c) or (d) of this paragraph; (e) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that: (i) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and (ii) (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (e); (f) the issuance by the Company or any of its Restricted Subsidiaries of Preferred Stock that is held solely by the Company and/or any of its Restricted Subsidiaries; provided, however, that: (i) if the Company or any Guarantor is the issuer of such Preferred Stock, such Preferred Stock (A) must not be mandatorily redeemable or redeemable at the option of the issuer thereof or the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; (B) if such Preferred Stock is exchangeable into Indebtedness, such Indebtedness shall not be Permitted Debt unless it meets the criteria of one or more of the categories of Permitted Debt described in clauses (a) through (j); and 33 (ii) (A) any subsequent issuance or transfer of Equity Interests that results in any such Preferred Stock being held by a Person other than the Company or a Restricted Subsidiary thereof and (B) any sale or other transfer of any such Preferred Stock to a Person that is not either the Company or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an issuance of such Preferred Stock by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (f); (g) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any Indebtedness the incurrence of which was not prohibited by the terms of this Indenture or currency exchange risk other than solely for speculative purposes; (h) Indebtedness not constituting Indebtedness for borrowed money in respect of performance bonds, reimbursement obligations with respect to letters of credit, bankers' acceptances, completion guarantees and surety or appeal bonds provided by the Company or any of its Restricted Subsidiaries in the ordinary course of their business or Indebtedness not constituting Indebtedness for borrowed money with respect to reimbursement type obligations regarding workers' compensation claims; (i) Indebtedness not constituting Indebtedness for borrowed money arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in each case incurred in connection with the disposition of any business assets or Subsidiaries of the Company (other than guarantees of Indebtedness or other obligations incurred by any Person acquiring all or any portion of such business assets or Restricted Subsidiaries of the Company for the purpose of financing such acquisition) in a principal amount not to exceed the gross proceeds, including non-cash proceeds, actually received by the Company or any of its Restricted Subsidiaries in connection with such disposition; provided, however, that such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (i)); and (j) Capital Lease Obligations incurred after the Issue Date in an aggregate principal amount at any one time outstanding under this clause (j) not to exceed (i) if such time is prior to January 1, 2004, $50 million, (ii) if such time is after December 31, 2003 and prior to January 1, 2006, $75 million or (iii) if such time is after December 31, 2005, $100 million. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (a) through (j) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion thereof, in any manner that complies with this Section 4.09. Indebtedness under Credit Exit Facilities outstanding on the Issue Date shall be deemed to have been incurred on such date in reliance on the exception provided by clause (a) of the definition of Permitted Debt. 34 Section 4.10 Fall-Away Event. The Company's and its Restricted Subsidiaries' obligations to comply with the provisions of Sections 4.07, 4.09, 4.11, 4.16, 4.17 and 4.18 and Section 5.01 hereof will terminate if and when the Notes achieve Investment Grade Status (a "Fall-Away Event"); provided, however, that, if the Notes thereafter cease to be of Investment Grade Status, the Company's and its Restricted Subsidiaries' obligations to comply with such provisions shall automatically be reinstated as to events occurring after the date the Notes again are not of Investment Grade Status (with all amounts specified in clause (c) of Section 4.07 to be calculated at any time thereafter as if the Fall-Away Event had not occurred), subject to the terms, conditions and obligations set forth in this Indenture. Section 4.11 Transactions with Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate in any single transaction or series of related transactions involving aggregate payments or consideration in excess of $5.0 million (each, an "Affiliate Transaction"), unless: (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (b) the Company delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors. The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph: (a) reasonable and customary directors' fees, indemnification and similar arrangements and payments thereunder; (b) any obligations of the Company under any employment agreement, non-competition or confidentiality agreement with any officer of the Company, as in effect on the Issue Date (provided that each amendment of any of the foregoing agreements shall be subject to the limitations of this Section 4.11); (c) Restricted Payments that are permitted by the provisions of Section 4.07 hereof; (d) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors; (e) loans or advances to employees in the ordinary course of business of the Company or any of its Restricted Subsidiaries consistent with the past practices; 35 (f) payments by the Company or any of its Restricted Subsidiaries to PIA or its Affiliates made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking or similar services, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Board of Directors in good faith; (g) transactions in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or that it is on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction on an arms-length basis from a person that is not an Affiliate; (h) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, the Stockholders' Agreement or the Registration Rights Agreement to which it is a party as of the Issue Date and any similar agreements that it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (h) to the extent that the terms, taken as a whole, of any such amendment or new agreement are not otherwise disadvantageous to the Holders in any material respect; (i) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors or the management thereof, or are on terms, taken as a whole, at least as favorable as might reasonably have been obtained at such time from a person that is not an Affiliate; (j) any agreement as in effect since the Issue Date or any amendment thereto (so long as any such amendment, taken as a whole, is not disadvantageous to the Holders in any material respect) or any transaction contemplated thereby; and (k) any purchase of Capital Stock (other than Disqualified Stock) of the Company by Affiliates thereof. Section 4.12 Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of 36 the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.13 Payments for Consent. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.14 Additional Note Guarantees. If the Company or any of its Subsidiaries acquires or creates another Subsidiary after the Issue Date, then the Company shall cause that newly acquired or created Subsidiary, prior to, or contemporaneously with the acquisition or creation of such Subsidiary, to become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel to the Trustee, which Opinion of Counsel shall state that the execution of such supplemental indenture is authorized or permitted by this Indenture and that such Subsidiary has become a Guarantor hereunder. The form of such Supplemental Indenture is attached as Exhibit C hereto. Section 4.15 Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company shall mail a notice to each Holder stating: (i) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (ii) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (iii) that any Note not tendered will continue to accrue interest; (iv) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and 37 regulations are applicable in connection with the repurchase of Notes in connection with a Change of Control. To the extent that the provisions of any Securities laws or regulations conflict with this Section 4.15, the Company shall comply with the applicable Securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.15 by virtue of such conflict. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered by such Holder, if any; provided, that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) Prior to complying with any of the provisions of this Section 4.15, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.15. (d) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Sections 3.01 through 3.06 hereof and all other provisions of this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Section 4.16 No Senior Subordinated Debt. The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor's Note Guarantee. Section 4.17 Limitation on Asset Sales. The Company shall not, and shall not permit any Restricted Subsidiary to, make any Asset Sale in one or more related transactions unless: (i) the Company or the Restricted Subsidiary, as the case may be, receives consideration for such disposition at least equal to the fair market value for the assets sold or disposed of as determined by the Board of Directors in good faith; and (ii) all Net Cash Proceeds of such Asset Sale are applied in a manner permitted under the terms of the instruments or agreements governing the Senior Debt then outstanding. 38 Section 4.18 Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrances or restriction on the ability of any Restricted Subsidiary of the Company (i) to pay dividends (in cash or otherwise) or make any other distributions in respect of its Capital Stock or pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary; (ii) to make any Investment in or to the Company or any other Restricted Subsidiary; or (iii) to transfer any of its property or assets to the Company or any other Restricted Subsidiary. Notwithstanding the foregoing, the Company may, and may permit any Restricted Subsidiary to, suffer to exist any such encumbrances or restriction (a) pursuant to any agreement or instrument governing the Credit Exit Facilities or the Plan Term Loan Bank Debt; (b) pursuant to an agreement relating to any Indebtedness incurred by a Person (other than a Restricted Subsidiary of the Company existing on the Issue Date or any Restricted Subsidiary carrying on any of the businesses of any such Restricted Subsidiary) prior to the date on which such Person became a Restricted Subsidiary of the Company and outstanding on such date and not incurred in anticipation of becoming a Restricted Subsidiary, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired; (c) pursuant to an agreement effecting a renewal, refunding or extension of Debt incurred pursuant to an agreement referred to in clause (a) or (b) above, provided, however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the Board of Directors; (d) in the case of clause (iii) above, contained in any security agreement (including a capital lease) securing Indebtedness of a Restricted Subsidiary otherwise permitted under this Indenture, but only to the extent such restrictions restrict the transfer of the property subject to such security agreement; (e) in the case of clause (iii) above, constituting a customary nonassignment provision entered into in the ordinary course of business consistent with past practices in a lease or other contract to the extent such provision restricts the transfer or subletting or licensing of any such lease or the assignment of rights under any such contract; (f) with respect to a Restricted Subsidiary of the Company imposed pursuant to an agreement which has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary, provided that consummation of such transaction would not result in an Event of Default or a Default, that such restriction terminates if such transaction is closed or abandoned and that the closing or abandonment of such transaction occurs within one year of the date such agreement was entered into; or (g) to the extent such encumbrance or restriction is the result of applicable corporate law or regulation relating to the payment of dividends or distributions. ARTICLE 5 SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets. The Company may not, directly or indirectly: (i) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: 39 (a) either: (i) the Company is the surviving corporation; or (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to agreements reasonably satisfactory to the Trustee; (c) immediately after such transaction no Default or Event of Default exists; (d) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made will either: (i) on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to the Leverage Ratio test set forth in the first paragraph of Section 4.09 hereof; or (ii) have a Leverage Ratio less than the Leverage Ratio of the Company immediately prior to such transaction; and (e) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that such merger, consolidation, or sale of assets complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with. Notwithstanding the foregoing clauses (b) and (d), (i) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company or to another Restricted Subsidiary and (ii) the Company may merge with an Affiliate of the Company organized solely for the purposes of reorganizing the Company in another jurisdiction in the United States to realize tax or other benefits. In addition, the Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of its Wholly Owned Restricted Subsidiaries. Section 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such 40 consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on the Notes whether or not prohibited by Article 10 hereof and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise whether or not prohibited by Article 10 hereof; (c) the Company or any of its Restricted Subsidiaries fails to comply with any of the provisions of Sections 4.07, 4.09, 4.15, 4.17, 4.18 or 5.01 hereof; (d) the Company or any of its Restricted Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default (i) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period, if any, provided in such Indebtedness on the date of such default (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to the express maturity thereof and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness which has so had a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 consecutive days, provided that the aggregate of all such undischarged judgments exceeds $10.0 million; 41 (g) the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary in an involuntary case; (ii) appoints a custodian of the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary or for all or substantially all of the property of the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by this Indenture, any Note Guarantee of any Significant Restricted Subsidiary is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Restricted Subsidiary, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under such Guarantor's Note Guarantee. Section 6.02 Acceleration. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof with respect to the Company, any Significant Restricted Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01 hereof 42 occurs with respect to the Company, any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary, all outstanding Notes shall be due and payable immediately without further action or notice. The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may on behalf of all of the Holders rescind an acceleration and its consequences if (i) the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived and (iii) the Company shall have paid to the Trustee all amounts due under Section 7.07 hereof. If an Event of Default occurs on or after February 1, 2004 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to February 1, 2004 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on February 1 of the years set forth below, as set forth below (expressed as a percentage of the principal amount of the Notes on the date of payment that would otherwise be due but for the provisions of this sentence): Year Percentage ------------------------- -------------------- 2001 107.500% 2002 106.563% 2003 105.625% Section 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults. Subject to Section 6.02, holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the 43 principal of, premium and, if any, or interest on, the Notes (including in connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Notwithstanding any provision to the contrary in this Indenture, the Trustee shall not be obligated to take any action with respect to the provisions of the last paragraph of Section 6.02 unless directed to do so pursuant to this Section 6.05. Section 6.06 Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express 44 trust against the Company for the whole amount of principal of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amount due the Trustee under Section 7.07 hereof. Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct by a final, non-appealable judgment or order. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. 45 Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE Section 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. 46 (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, including, without limitation, the provisions of Section 6.05 hereof, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed (whether in its original or facsimile form) by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the advice of such counsel of its own selection or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. 47 (h) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. (i) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (j) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty except to the extent expressly provided herein, and the Trustee shall not be answerable for other than negligence or willful misconduct. Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with the May 15 following the Issue Date, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). 48 The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or delisted therefrom. Section 7.07 Compensation and Indemnity. The Company shall pay to the Trustee as agreed upon in writing from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall fully indemnify the Trustee against any and all losses, claims, damages, liabilities or expenses (including taxes other than taxes based on the income of the Trustee) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section 12.04, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. 49 Section 7.08 Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee and its agents and counsel hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. 50 Section 7.10 Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. Section 7.12 Trustee's Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive 51 solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of, premium and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03 Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.09, 4.11, 4.13, 4.14, 4.15, 4.16, 4.17 and 4.18 hereof and clause (d) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the applicable 52 federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel (which may be subject to customary exceptions) to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (i) the Company shall have delivered to the Trustee the written consent of the holders of each series of Senior Debt or their designated representative. Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such 53 Notes of all sums due and to become due thereon in respect of principal, premium and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or interest on any Note and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. 54 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. Notwithstanding Section 9.02 hereof, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Note Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 or Article 11 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under this Indenture of any Holder of the Notes; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; or (f) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 12.04 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture (including Section 4.15 hereof), the Note Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. 55 Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 12.04 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment, supplement, or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Section 4.15 hereof; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or interest on the Notes; (g) waive a redemption payment with respect to any Note other than a payment required under Section 4.15 hereof; 56 (h) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions; or (i) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture. In addition, without the consent of at least 75% in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, such Notes), no waiver or amendment to this Indenture may make any change in the provisions of Article 10 hereof that adversely affects the rights of any Holder of Notes. Section 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBORDINATION Section 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in 57 this Article 10, to the prior payment in full of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. Section 10.02 Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (i) holders of Senior Debt shall be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before Holders of the Notes shall be entitled to receive any payment with respect to the Notes (except that Holders may receive (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof); and (ii) until all Obligations with respect to Senior Debt (as provided in clause (i) above) are paid in full, any distribution to which Holders would be entitled but for this Article 10 shall be made to holders of Senior Debt (except that Holders of Notes may receive (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof), as their interests may appear. Section 10.03 Default on Designated Senior Debt. (a) The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the Trustee or any Holder any Notes for cash or property (other than (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Debt; or (ii) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of the Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from a Person who may give it pursuant to Section 10.10 hereof. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or 58 was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived for a period of not less than 180 days. (b) The Company may and shall resume payments on and distributions in respect of the Notes and may acquire them upon the earlier of: (i) the date upon which the default is cured or waived, or (ii) in the case of a default referred to in clause (ii) of Section 10.03(a) hereof, 179 days pass after the applicable Payment Blockage Notice is received if the maturity of such Designated Senior Debt has not been accelerated, if this Article 10 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. Section 10.04 Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. Section 10.05 When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder, as applicable, has been notified (as a result of the receipt of a Payment Blockage Notice or otherwise) that such payment is prohibited by this Article 10, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.06 Notice by Company. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. Section 10.07 Subrogation. After all Senior Debt is paid in full and until the Notes are paid in full, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights 59 of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.08 Relative Rights. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: (i) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (ii) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (iii) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 10.09 Subordination May Not Be Impaired by Company. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 10.10 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Section 10.11 Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that 60 would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 10.12 Authorization to Effect Subordination. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. Section 10.13 Amendments. The provisions of this Article 10 shall not be amended or modified without the written consent of the holders of all Senior Debt. In addition, without the consent of at least 75% in principal amount of the Notes then outstanding (including such consents obtained in connection with a tender offer or exchange offer for, or purchase of, such Notes), no waiver or amendment to this Indenture may make any change in the provisions of this Article 10 that adversely affects the rights of any Holder of Notes. Section 10.14 Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article and no implied covenants or obligations with respect to holders of Senior Indebtedness shall be read into this Indenture against the Trustee. ARTICLE 11 NOTE GUARANTEES Section 11.01 Guarantee. Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated 61 maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. Section 11.02 Subordination of Note Guarantee. The Obligations of each Guarantor under its Note Guarantee pursuant to this Article 11 shall be junior and subordinated to the Senior Guarantee of such Guarantor on the same basis as the Notes are junior and subordinated to Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. Section 11.03 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or 62 any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Section 11.04 Execution and Delivery of Note Guarantee. To evidence its Note Guarantee set forth in Section 11.01 hereof, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form included in Exhibit B shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. Each Guarantor hereby agrees that its Note Guarantee set forth in Section 11.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any new Subsidiaries subsequent to the Issue Date, if required by Section 4.14 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Note Guarantees in accordance with Section 4.14 hereof and this Article 11, to the extent applicable. Section 11.05 Guarantors May Consolidate, etc., on Certain Terms. Except as otherwise provided in Section 11.06 hereof, no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person (other than the Company or another Guarantor) whether or not affiliated with such Guarantor unless: (a) subject to Section 11.06 hereof, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture and the Note Guarantee on the terms set forth herein or therein; and (b) immediately after giving effect to such transaction, no Default or Event of Default exists. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the 63 Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the Issue Date. Except as set forth in Article 4 and Article 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 11.06 Releases Following Sale of Assets. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale, other disposition or designation was made by the Company in accordance with the provisions of this Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. ARTICLE 12 MISCELLANEOUS Section 12.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss.318(c), the imposed duties shall control. Section 12.02 Notices. Any notice or communication by the Company , any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: 64 If to the Company and/or any Guarantor: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31902-2109 Telecopier No.: (706) 576-3419 Attention: President With a copy to: Troutman Sanders LLP Bank of America Plaza 600 Peachtree Street, N.E., Suite 5200 Atlanta, GA 30308 Telecopier No.: (404) 885-3900 Attention: Terry C. Bridges If to the Trustee: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Telecopier No.: (302) 636-4140 Attention: Corporate Trust Administration The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, postage prepaid, certified or registered mail, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. 65 If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 12.03 Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). Section 12.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, such action is authorized or permitted by this Indenture and that all such conditions precedent and covenants have been satisfied. Section 12.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 12.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Note Guarantees or this Indenture or for any claim based on, in 66 respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Section 12.08 Governing Law. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. Section 12.09 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 12.10 Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 11.06 hereof. Section 12.11 Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 12.12 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 12.13 Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. Section 12.14 Plan of Reorganization. Pursuant to the Plan of Reorganization, the Original Indenture has been terminated and cancelled and, in connection therewith, (i) any and all obligations of the Company under the Original Indenture to the holders of Original Notes or the Trustee immediately prior to the execution and delivery of this Indenture on the Issue Date are discharged in full except for the $___,000,000 in aggregate principal amount evidenced by the 10 3/8% Senior Subordinated Notes due 2009 issued hereunder on the Issue Date, and (ii) any existing Defaults or Events of Default immediately prior to the execution and delivery of this Indenture on the Issue Date (and any of the consequences thereof) are waived in their entirety. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, effective as of ________ __, 2002. 67 CARMIKE CINEMAS, INC. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- EASTWYNN THEATRES, INC. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- WOODEN NICKEL PUB, INC. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- MILITARY SERVICES, INC. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- WILMINGTON TRUST COMPANY, as Trustee By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- 68 EXHIBIT A [Face of Note] CUSIP/CINS ------------- 10 3/8% Senior Subordinated Notes due 2009 No. ___ $____________ Carmike Cinemas, Inc. promises to pay to Cede & Co. or registered assigns, the principal sum of $___________ Dollars on February 1, 2009. Interest Payment Dates: February 1 and August 1 Record Dates: January 15 and July 15 Dated: Indenture Signature Page A-1 Dated as of ________ __, 200_ CARMIKE CINEMAS, INC. By: ----------------------- Name: Title: By: ----------------------- Name: Title: (SEAL) This is one of the Global Notes referred to in the within-mentioned Indenture: WILMINGTON TRUST COMPANY, as Trustee By: ----------------------------------------------------------- (Authorized Signer) A-2 [Back of Note] 10 3/8% Senior Subordinated Notes due 2009 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Carmike Cinemas, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 10 3/8% per annum from the Issue Date until maturity. The Company will pay interest semi-annually in arrears on February 1 and August 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be February 1, 2002. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the January 15 or July 15 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest and premium on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Wilmington Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. A-3 4. INDENTURE. The Company issued the Notes under an Indenture dated as of ________ __, 2002 ("Indenture") among the Company, the Guarantors named therein and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the indenture shall govern and be controlling. The Notes are obligations of the Company limited to $___.0 million in aggregate principal amount. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this Paragraph 5, the Notes shall not be redeemable at the Company's option pursuant to this Paragraph 5 prior to February 1, 2004. On or after February 1, 2004, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below: Year Percentage --------------------------------- -------------------- 2004............................ 104.688% 2005............................ 103.125% 2006............................ 101.563% 2007 and thereafter............. 100.000% (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to February 1, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes of the redemption price equal to 109.375% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% in aggregate principal amount of Notes issued under the Indenture remain outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and that such redemption must occur within 60 days of the date of the closing of such Equity Offering. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase (the "Change of Control Payment"). A-4 Within 10 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. 8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or Guarantor's obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on the Notes whether or not prohibited by the subordination provisions of the Indenture; (ii) default in payment when due of principal of, or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection A-5 with an offer to purchase) or otherwise whether or not prohibited by the subordination provisions of the Indenture, (iii) failure by the Company to comply with Section 4.07, 4.09, 4.15, 4.17, 4.18 or 5.01 of the Indenture; (iv) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding voting as a single class to comply with certain other agreements in the Indenture or the Notes; (v) default under certain other agreements relating to Indebtedness of the Company which default (a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity; (vi) certain final judgments for the payment of money that remain undischarged for a period of 60 consecutive days; (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries, that taken as a whole, would constitute a Significant Restricted Subsidiary; and (viii) except as permitted by the Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Restricted Subsidiary or any Person acting on its behalf shall deny or disaffirm its obligations under such Guarantor's Note Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder, of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture or the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. A-6 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 Attention: President A-7 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: -------------------------------- (Insert assignee's legal name) - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint ------------------------------------------------------ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: ----------------------------------------------- Your Signature: ------------------------------------ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: ---------------------------------------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-8 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.15 of the Indenture, state the amount you elect to have purchased: $ ----------------------- Date: --------------------- Your Signature: ---------------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: Signature Guarantee*: ----------------------- * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-9 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE* The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made: Principal Amount Signature of Amount of decrease in Amount of increase in of this Global Note authorized officer of Principal Amount Principal Amount following such decrease Trustee or Note Date of Exchange of this Global Note of this Global Note (or increase) Custodian - ---------------- ------------------- ------------------- ------------- ---------
* This schedule should be included only if the Note is issued in global form. A-10 EXHIBIT B FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in and subject to the provisions in the Indenture dated as of ________ __, 2002 (the "Indenture") among Carmike Cinemas, Inc., the Guarantors listed on Schedule I thereto and Wilmington Trust Company, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. EASTWYNN THEATRES, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ WOODEN NICKEL PUB, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ MILITARY SERVICES, INC. By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ EXHIBIT C FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Carmike Cinemas, Inc. (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and Wilmington Trust Company, as trustee under the indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of ________ __, 2002 providing for the issuance of an aggregate principal amount of up to $___.0 million of 10 3/8% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and C-1 (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 11.03 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the C-2 obligations of such other Guarantor under Article Eleven of the Indenture, this new Note Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guarantor under this Note Guarantee will not constitute a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not sell or otherwise dispose of all or substantially all of its assets or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Sections 11.05 and 11.06 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Note Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles Four and Five and Section 11.06 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the Capital Stock of any Guarantor, in each case to C-3 a Person that is not (either before or after giving effect to such transaction) a Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale, other disposition or designation was made by the Company in accordance with the provisions of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. (b) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article Eleven of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. C-4 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, ____ [GUARANTEEING SUBSIDIARY] By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- CARMIKE CINEMAS, INC. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- EASTWYNN THEATRES, INC. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- WOODEN NICKEL PUB, INC. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- MILITARY SERVICES, INC. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- WILMINGTON TRUST COMPANY, as Trustee By: ------------------------------------------ Authorized Signatory C-5 SCHEDULE I SCHEDULE OF GUARANTORS The following schedule lists each Guarantor under the Indenture as of the Issue Date: 1. Eastwynn Theatres, Inc. 2. Wooden Nickel Pub, Inc. 3. Military Services, Inc. EX-99 4 a12-10ext3e1.txt EXHIBIT T3E-1 Exhibit T3E-1 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE - -------------------------------------x : In re : Chapter 11 Case Nos. : CARMIKE CINEMAS, INC., et al., : 00-3302 (SLR) through -- -- : 00-3305 (SLR) Debtors. : : Jointly Administered - -------------------------------------x DEBTORS' AMENDED DISCLOSURE STATEMENT PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE ----------------------------------------------- WEIL, GOTSHAL & MANGES LLP Attorneys For The Debtors 767 Fifth Avenue New York, New York 10153 (212) 310-8000 - and - RICHARDS, LAYTON & FINGER, P.A. Attorneys For The Debtors One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 (302) 658-6541 Dated: Wilmington, Delaware November 14, 2001
TABLE OF CONTENTS Page I. INTRODUCTION...................................................................................1 A. HOLDERS OF CLAIMS AND EQUITY INTERESTS ENTITLED TO VOTE...............................2 B. VOTING PROCEDURES.....................................................................3 C. CONFIRMATION HEARING..................................................................4 II. OVERVIEW OF THE PLAN...........................................................................6 III. GENERAL INFORMATION...........................................................................16 A. OVERVIEW OF CHAPTER 11...............................................................16 B. Description and History of Business..................................................17 1. The Debtors.................................................................17 2. Business....................................................................17 3. Market Information..........................................................18 4. Significant Indebtedness and Other Obligations..............................19 C. EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASES...........................20 IV. EVENTS DURING THE CHAPTER 11 CASES............................................................21 A. APPOINTMENT OF THE COMMITTEE.........................................................22 B. STABILIZATION OF BUSINESS............................................................23 1. First Day Orders............................................................23 2. Settlement with Studios.....................................................23 3. Stabilizing Operations......................................................23 4. Cash Collateral / Adequate Protection Agreement.............................24 5. Retention and Severance Program; Mr. Patrick's Employment Agreement.........24 C. REAL ESTATE RATIONALIZATION AND TRANSACTIONS.........................................24 1. Lease Rejections............................................................25 2. Disposition of Personal Property Relating to Rejected Leases................25 3. Settlement with MoviePlex Lenders...........................................25 4. Rent Reductions and Other Concessions.......................................26 i TABLE OF CONTENTS (continued) Page 5. Assumptions of Leases; Extensions of Time to Assume or Reject Leases........26 6. Thoroughbred Partners.......................................................26 7. Sale of Real Property.......................................................27 D. CLAIMS PROCESS AND BAR DATE..........................................................28 1. Schedules and Statements....................................................28 2. Bar Date....................................................................28 3. Claims Settlement Authority.................................................28 4. Settlement with Rawlins Construction Company................................29 5. Settlement with Anthony Properties..........................................29 E. OTHER MATERIAL LITIGATION............................................................29 F. DEVELOPMENT OF BUSINESS PLAN AND PLAN NEGOTIATIONS...................................29 G. STATUS OF EXIT FACILITY NEGOTIATIONS.................................................30 V. THE PLAN OF REORGANIZATION....................................................................30 A. CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS..........................31 1. Administrative Expense Claims...............................................31 2. Compensation and Reimbursement Claims.......................................31 3. Priority Tax Claims.........................................................32 4. Class 1 - Other Priority Claims.............................................33 5. Class 2 - Secured Tax Claims................................................33 6. Class 3 - Other Secured Claims..............................................34 7. Class 4 - Bank Claims.......................................................34 8. Class 5 - General Unsecured Claims (Other than Convenience Claims)..........36 9. Class 6 - Convenience Claims................................................38 10. Class 7 - Subordinated Note Claims..........................................39 11. Class 8 - Preferred Stock Equity Interests..................................41 12. Class 9 - Common Stock Equity Interests.....................................42 ii TABLE OF CONTENTS (continued) Page 13. Class 10 - Subsidiary Equity Interests......................................42 B. SECURITIES AND DEBT INSTRUMENTS TO BE ISSUED UNDER THE PLAN..........................42 1. New Common Stock............................................................42 2. New Bank Debt...............................................................43 3. New Subordinated Notes......................................................43 C. METHOD OF DISTRIBUTION UNDER THE PLAN................................................43 D. TIMING OF DISTRIBUTIONS UNDER THE PLAN...............................................44 1. Distributions on the Effective Date.........................................44 2. Distributions on Subsequent Distribution Dates..............................45 E. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES................................45 F. SUBSTANTIVE CONSOLIDATION OF THE DEBTORS.............................................47 G. PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS..........................................48 H. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THE PLAN....................................50 I. IMPLEMENTATION AND EFFECT OF CONFIRMATION OF THE PLAN................................50 J. DISCHARGE, RELEASE AND INJUNCTION....................................................51 K. SUMMARY OF OTHER PROVISIONS OF THE PLAN..............................................52 1. Retiree Benefits............................................................52 2. By-laws and Certificates of Incorporation...................................53 3. Amendment or Modification of the Plan.......................................53 4. Indemnification Obligations.................................................53 5. Nonenforcement of Subordination Provisions..................................54 6. Cancellation of Existing Securities and Agreements..........................54 7. Revocation or Withdrawal of the Plan........................................54 8. Termination of Committee....................................................54 9. Claims Preserved............................................................55 10. Effectuating Documents and Further Transactions.............................55 iii TABLE OF CONTENTS (continued) Page 11. Corporate Action............................................................55 12. Exculpation.................................................................55 13. Plan Supplement.............................................................56 VI. CONFIRMATION AND CONSUMMATION PROCEDURE.......................................................56 A. SOLICITATION OF VOTES................................................................56 B. THE CONFIRMATION HEARING.............................................................57 C. CONFIRMATION.........................................................................58 1. Acceptance..................................................................58 2. Unfair Discrimination and Fair and Equitable Tests..........................58 3. Feasibility.................................................................59 4. Best Interests Test.........................................................60 D. CONSUMMATION.........................................................................62 VII. MANAGEMENT OF REORGANIZED CARMIKE AND REORGANIZED SUBSIDIARIES................................62 A. BOARD OF DIRECTORS AND MANAGEMENT....................................................62 1. Reorganized Carmike.........................................................62 a. Board of Directors.................................................62 b. Officers...........................................................63 2. Reorganized Subsidiaries....................................................63 a. Boards of Directors................................................63 b. Officers...........................................................63 3. Identity of Carmike's Executive Officers....................................63 B. COMPENSATION OF CARMIKE'S EXECUTIVE OFFICERS.........................................64 C. REORGANIZED CARMIKE MANAGEMENT SHARES................................................65 1. Description.................................................................65 a. Approval of the Incentive Plan.....................................65 b. Administration of the Incentive Plan...............................65 c. Awards under the Incentive Plan....................................65 d. Payment of the Exercise Price of an Award..........................66 iv TABLE OF CONTENTS (continued) Page e. Limit on the Number of Shares Subject to the Incentive Plan........66 f. Adjustments to Awards or the Number of Shares Available under the Incentive Plan.....................................................66 g. Effect Under the Incentive Plan of a Change in Control of the Company.67 h. CEO Award..........................................................67 2. Certain Federal Income Tax Consequences.....................................68 a. Stock Options......................................................68 b. Incentive Stock Options............................................68 c. Non-Qualified Stock Options........................................68 d. Stock Awards.......................................................69 e. Change in Control..................................................69 f. Certain Limitations on Deductibility of Executive Compensation.....69 3. Securities Law Compliance...................................................70 D. CHIEF EXECUTIVE OFFICER EMPLOYMENT CONTRACT..........................................70 E. CONTINUATION OF EXISTING BENEFIT PLANS AND D&O INSURANCE.............................71 F. POST-EFFECTIVE DATE SECURITY OWNERSHIP OF CERTAIN OWNERS.............................71 G. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................72 VIII. SECURITIES LAWS MATTERS.......................................................................73 A. BANKRUPTCY CODE EXEMPTIONS FROM REGISTRATION REQUIREMENTS............................73 B. STOCKHOLDERS' AGREEMENT..............................................................77 C. REGISTRATION RIGHTS AGREEMENT........................................................77 IX. VALUATION.....................................................................................77 X. CERTAIN RISK FACTORS TO BE CONSIDERED.........................................................80 A. CERTAIN BANKRUPTCY LAW CONSIDERATIONS................................................81 1. Risk of Non-Confirmation of the Plan........................................81 v TABLE OF CONTENTS (continued) Page 2. Non-Consensual Confirmation.................................................81 3. Risk of Non-Occurrence of the Effective Date................................81 B. RISKS TO RECOVERY BY HOLDERS OF CLAIMS AND EQUITY INTERESTS..........................81 1. Competitive Conditions......................................................81 2. Dependence Upon Motion Picture Production and Performance...................82 3. Dependence on Relationships with Motion Picture Distributors................82 4. Seasonality.................................................................83 5. Governmental Regulation.....................................................83 6. Ability to Service Debt.....................................................84 7. Lack of Active Trading Market...............................................84 8. Significant Holders.........................................................84 9. Projected Financial Information.............................................85 10. Hart-Scott-Rodino Act Requirements..........................................85 XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN...........................................86 A. CONSEQUENCES TO THE DEBTORS..........................................................87 1. Cancellation of Debt........................................................87 2. Limitation on NOL Carryforwards and Other Tax Attributes....................88 3. Alternative Minimum Tax.....................................................90 4. Non-Deductibility of OID on the New Subordinated Notes......................90 B. CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS............................................91 1. Consequences to Holders of Allowed Convenience Claims.......................91 2. Consequences to Holders of Allowed General Unsecured Claims.................91 3. Consequences to Holders of Subordinated Note Claims.........................93 4. Distribution in Discharge of Accrued Interest...............................97 5. Information Reporting and Withholding.......................................97 vi TABLE OF CONTENTS (continued) Page C. CONSEQUENCES TO HOLDERS OF EQUITY INTERESTS..........................................98 1. Holders of Preferred Stock Equity Interests.................................98 2. Holders of Common Stock Equity Interests....................................98 XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN.....................................99 A. LIQUIDATION UNDER CHAPTER 7..........................................................99 B. ALTERNATIVE PLAN OF REORGANIZATION...................................................99 XIII. CONCLUSION AND RECOMMENDATION................................................................100
vii TABLE OF CONTENTS (continued) EXHIBIT A Plan of Reorganization EXHIBIT B Disclosure Statement Order EXHIBIT C Carmike Cinemas, Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and as amended by Form 10-K/A EXHIBIT D Carmike Cinemas, Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001 EXHIBIT E Projected Financial Information EXHIBIT F Liquidation Analysis EXHIBIT G Amended Subordinated Notes Indenture Term Sheet viii I. INTRODUCTION Carmike Cinemas, Inc. ("Carmike"), Eastwynn Theatres, Inc. ("Eastwynn"), Wooden Nickel Pub, Inc. ("Wooden Nickel") and Military Services, Inc. ("Military Services") (collectively, the "Debtors") submit this Disclosure Statement pursuant to section 1125 of title 11 of the United States Code (the "Bankruptcy Code") to holders of claims against and equity interests in the Debtors in connection with (i) the solicitation of acceptances of the Debtors' Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated November 14, 2001, as the same may be amended (the "Plan"), filed by the Debtors with the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") and (ii) the hearing to consider confirmation of the Plan (the "Confirmation Hearing") scheduled for January 3, 2002, commencing at 10:00 a.m. Eastern Time. Unless otherwise defined herein, all capitalized terms contained herein have the meanings ascribed to them in the Plan. Attached as Exhibits to this Disclosure Statement are copies of the following documents: o The Plan (Exhibit A); o Order of the Bankruptcy Court dated November 14, 2001 (the "Disclosure Statement Order"), among other things, approving this Disclosure Statement and establishing certain procedures with respect to the solicitation and tabulation of votes to accept or reject the Plan (Exhibit B); o Carmike's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 and as amended by Form 10-K/A (Exhibit C); o Carmike's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001 (Exhibit D); o The Debtors' Projected Financial Information (Exhibit E); o The Debtors' Liquidation Analysis (Exhibit F); and o Amended Subordinated Notes Indenture Term Sheet (Exhibit G). In addition, a Ballot for the acceptance or rejection of the Plan is enclosed with the Disclosure Statement submitted to the holders of Claims and Equity Interests that are entitled to vote to accept or reject the Plan. On November 14, 2001, after notice and a hearing, the Bankruptcy Court signed the Disclosure Statement Order, approving this Disclosure Statement as containing adequate information of a kind and in sufficient detail to enable hypothetical, reasonable investors typical of the Debtors' creditors to make an informed judgment whether to accept or reject the Plan. APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN. The Disclosure Statement Order, a copy of which is annexed hereto as Exhibit B, sets forth in detail the deadlines, procedures and instructions for voting to accept or reject the Plan and for filing objections to confirmation of the Plan, the record date for voting purposes and the applicable standards for tabulating Ballots. In addition, detailed voting instructions accompany each Ballot. Each holder of a Claim or Equity Interest entitled to vote on the Plan should read this Disclosure Statement, the Plan, the Disclosure Statement Order and the instructions accompanying the Ballot in their entirety before voting on the Plan. These documents contain important information concerning the classification of Claims and Equity Interests for voting purposes and the tabulation of votes. No solicitation of votes to accept the Plan may be made except pursuant to section 1125 of the Bankruptcy Code. A. HOLDERS OF CLAIMS AND EQUITY INTERESTS ENTITLED TO VOTE ------------------------------------------------------- Pursuant to the provisions of the Bankruptcy Code, only holders of allowed claims or equity interests in classes of claims or equity interests that are impaired and that are not deemed to have rejected the Plan are entitled to vote to accept or reject a proposed plan. Classes of claims or equity interests in which the holders of claims or equity interests are unimpaired under a chapter 11 plan are deemed to have accepted the plan and are not entitled to vote to accept or reject the plan. Classes of claims or equity interests in which the holders of claims or equity interests will receive no recovery under a chapter 11 plan are deemed to have rejected the Plan and are not entitled to vote to accept or reject the Plan. For a detailed description of the treatment of Claims and Equity Interests under the Plan, see Section V. of the Disclosure Statement. Classes 2, 4, 5, 6, 7, 8 and 9 of the Plan are impaired and, to the extent Claims and Equity Interests in such Classes are Allowed Claims and Equity Interests, the holders of such Claims and Equity Interests will receive distributions under the Plan. As a result, holders of Claims and Equity Interests in those Classes are entitled to vote to accept or reject the Plan. Classes 1, 3 and 10 of the Plan are unimpaired. As a result, holders of Claims and Equity Interests in those Classes are conclusively presumed to have accepted the Plan. The Bankruptcy Code defines "acceptance" of a plan by a class of claims as acceptance by creditors in that class that hold at least two-thirds in dollar amount and more than one-half in number of the claims that cast ballots for acceptance or rejection of the plan. Thus, acceptance of the Plan by Classes 2, 4, 5, 6 and 7 will occur only if at least two-thirds in dollar amount and a majority in number of the holders of such Claims in each Class that cast their Ballots vote in favor of acceptance. The Bankruptcy Code defines "acceptance" of a plan by a class of interest holders as acceptance by holders of at least two-thirds in amount of the allowed interests in such classes that 2 cast ballots for acceptance or rejection of the plan. Thus, acceptance of the Plan by Classes 8 and 9 will occur only if at least two-thirds in amount of the Allowed Equity Interests in each Class that cast their Ballots vote in favor of acceptance. A vote may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that such acceptance or rejection was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. For a more detailed description of the requirements for confirmation of the Plan, see Section VI. of the Disclosure Statement. If a Class of Claims or Equity Interests entitled to vote on the Plan rejects the Plan, the Debtors reserve the right to amend the Plan or request confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code or both. Section 1129(b) permits the confirmation of a plan of reorganization notwithstanding the nonacceptance of a plan by one or more impaired classes of claims or equity interests. Under that section, a plan may be confirmed by a bankruptcy court if it does not "discriminate unfairly" and is "fair and equitable" with respect to each nonaccepting class. For a more detailed description of the requirements for confirmation of a nonconsensual plan, see Section VI. C.2. of the Disclosure Statement. In the event that a Class of Claims or Equity Interests entitled to vote votes to reject the Plan, the Debtors' determination whether to request confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code will be announced prior to or at the Confirmation Hearing. B. VOTING PROCEDURES ----------------- If you are entitled to vote to accept or reject the Plan, a Ballot is enclosed for the purpose of voting on the Plan. If you hold Claims or Equity Interests in more than one Class and you are entitled to vote Claims or Equity Interests in more than one Class, you will receive separate Ballots, which must be used for each separate Class of Claims or Equity Interests. Please vote and return your Ballot(s) to: Carmike Cinemas Ballot Processing c/o Bankruptcy Services LLC P.O. Box 5014 F.D.R. Station New York, New York 10150-5014 DO NOT RETURN ANY NOTES OR SECURITIES WITH YOUR BALLOT. TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION OF THE PLAN MUST BE RECEIVED BY NO LATER THAN 4:00 P.M., EASTERN TIME, ON DECEMBER 20, 2001. ANY EXECUTED BALLOT RECEIVED THAT DOES NOT INDICATE EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL NOT BE COUNTED. 3 Any Claim in an impaired Class as to which an objection or request for estimation is pending or which is scheduled by the Debtors as unliquidated, disputed or contingent and for which no proof of claim has been filed is not entitled to vote unless the holder of such Claim has obtained an order of the Bankruptcy Court temporarily allowing such Claim for the purpose of voting on the Plan. Pursuant to the Disclosure Statement Order, the Bankruptcy Court set November 9, 2001 as the record date for voting on the Plan. Accordingly, only holders of record as of November 9, 2001 that otherwise are entitled to vote under the Plan will receive a Ballot and may vote on the Plan. If you are a holder of a Claim or Equity Interest entitled to vote on the Plan and did not receive a Ballot, received a damaged Ballot or lost your Ballot, or if you have any questions concerning the Disclosure Statement, the Plan or the procedures for voting on the Plan, please call Carmike Cinemas Ballot Processing of Bankruptcy Services LLC at (212) 376-8494. C. CONFIRMATION HEARING -------------------- Pursuant to section 1128 of the Bankruptcy Code, the Confirmation Hearing will be held on January 3, 2002, commencing at 10:00 a.m. Eastern Time, before the Honorable Sue L. Robinson, United States District Judge, at the United States District Court for the District of Delaware, 844 King Street, Wilmington, Delaware 19801. The Bankruptcy Court has directed that objections, if any, to confirmation of the Plan be served and filed so that they are received on or before December 20, 2001 at 4:00 p.m., Eastern Time, in the manner described below in Section VI. B. of the Disclosure Statement. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice except for the announcement of the adjournment date made at the Confirmation Hearing or at any subsequent adjourned Confirmation Hearing. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF THE DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN, AND THE DELIVERY OF THIS DISCLOSURE STATEMENT SHALL NOT CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION STATED SINCE THE DATE HEREOF. HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD CAREFULLY READ THIS DISCLOSURE STATEMENT IN ITS ENTIRETY, INCLUDING THE PLAN, PRIOR TO VOTING ON THE PLAN. THIS DISCLOSURE STATEMENT HAS NOT BEEN FILED WITH, REVIEWED, OR APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION AND THE COMMISSION HAS NEITHER PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN. 4 FOR THE CONVENIENCE OF HOLDERS OF CLAIMS AND EQUITY INTERESTS, THIS DISCLOSURE STATEMENT SUMMARIZES THE TERMS OF THE PLAN. IF ANY INCONSISTENCY EXISTS BETWEEN THE PLAN AND THIS DISCLOSURE STATEMENT, THE TERMS OF THE PLAN ARE CONTROLLING. THIS DISCLOSURE STATEMENT MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN, AND NOTHING STATED HEREIN SHALL CONSTITUTE AN ADMISSION OF ANY FACT OR LIABILITY BY ANY PARTY, OR BE ADMISSIBLE IN ANY PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE EVIDENCE OF THE TAX OR OTHER LEGAL EFFECTS OF THE PLAN ON THE DEBTORS OR HOLDERS OF CLAIMS OR EQUITY INTERESTS. CERTAIN OF THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, BY NATURE, ARE FORWARD-LOOKING AND CONTAIN ESTIMATES AND ASSUMPTIONS. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL BE REFLECTIVE OF ACTUAL OUTCOMES. ALL HOLDERS OF CLAIMS SHOULD CAREFULLY READ AND CONSIDER FULLY THE RISK FACTORS SET FORTH IN ARTICLE X. OF THIS DISCLOSURE STATEMENT BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. SUMMARIES OF CERTAIN PROVISIONS OF AGREEMENTS REFERRED TO IN THIS DISCLOSURE STATEMENT DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, THE FULL TEXT OF THE APPLICABLE AGREEMENT, INCLUDING THE DEFINITIONS OF TERMS CONTAINED IN SUCH AGREEMENT. THE CREDITORS' COMMITTEE FULLY SUPPORTS THE PLAN AND ENCOURAGES ALL HOLDERS OF GENERAL UNSECURED CLAIMS, CONVENIENCE CLAIMS AND SUBORDINATED NOTE CLAIMS TO VOTE TO ACCEPT THE PLAN. THE DEBTORS BELIEVE THE PLAN WILL ENABLE THEM TO SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS, THEIR CREDITORS AND EQUITY INTEREST HOLDERS. THE DEBTORS AND THE CREDITORS' COMMITTEE URGE THAT CREDITORS VOTE TO ACCEPT THE PLAN. 5 II. OVERVIEW OF THE PLAN The following table briefly summarizes the classification and treatment of Claims and Equity Interests under the Plan: SUMMARY OF CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN
Type of Claim Estimated Class or Equity Interest Treatment Recovery Status - ----- ------------------ --------- -------- ------ N/A Administrative Expense Except to the extent that any entity entitled to 100% Unimpaired Claims payment of any Allowed Administrative Expense Claim agrees to a less favorable treatment, each holder of an Allowed Administrative Expense Claim shall receive Cash in an amount equal to such Allowed Administrative Expense Claim on the later of the Effective Date and the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or as soon thereafter as is practicable; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtors in Possession or liabilities arising under loans or advances to or other obligations incurred by the Debtors in Possession will be paid in full and performed by the applicable Reorganized Debtor in the ordinary course of business in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing or other documents relating to such transactions. N/A Priority Tax Claims Except to the extent a holder of an Allowed Priority 100% Unimpaired Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Priority Tax Claim will receive at the sole option of Reorganized Carmike, (a) Cash in an amount equal to such Allowed Priority Tax Claim on the later of the Effective Date and the date such Priority Tax Claim becomes an Allowed 6 Priority Tax Claim, or as soon thereafter as is practicable or (b) equal annual Cash payments in an aggregate amount equal to such Allowed Priority Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth anniversary of the date of assessment of such Allowed Priority Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Priority Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Priority Tax Claim. 1 Other Priority Claims Except to the extent that a holder of an Allowed 100% Unimpaired Other Priority Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Other Priority Claim as of the Record Date will receive, in full and complete settlement, satisfaction and discharge of its Allowed Other Priority Claim, Cash in an amount equal to such Allowed Other Priority Claim on the Effective Date or as soon thereafter as is practicable. 2 Secured Tax Claims Except to the extent that a holder of an Allowed 100% Impaired Secured Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Secured Tax Claim as of the Record Date will receive, in full and complete settlement, satisfaction and discharge of its Allowed Secured Tax Claim, at the sole option of Reorganized Carmike, (i) Cash in an amount equal to such Allowed Secured Tax Claim, including any interest on such Allowed Secured Tax Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, if any, on the later of the Effective Date and the date such Allowed Secured Tax Claim becomes an Allowed Secured Tax Claim, or as soon thereafter as is practicable or (ii) equal 7 annual Cash payments in an aggregate amount equal to such Allowed Secured Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth anniversary of the date of assessment of such Allowed Secured Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Secured Tax Claim. 3 Other Secured Claims Except to the extent that a holder of an Other 100% Unimpaired Secured Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Other Secured Claim as of the Record Date will, in full and complete settlement, satisfaction and discharge of its Other Secured Claim, at the sole option of the Reorganized Debtors, (i) be reinstated and rendered unimpaired in accordance with section 1124 of the Bankruptcy Code, (ii) receive Cash in an amount equal to such Other Secured Claim, including any interest on such Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, if any, on the Effective Date or as soon thereafter as is practicable or (iii) receive the Collateral securing its Other Secured Claim and any interest on such Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, if any, on the Effective Date or as soon thereafter as is practicable. 4 Bank Claims Each holder of a Bank Claim as of the Record Date 100% Impaired shall receive on the Effective Date, in full and complete settlement, satisfaction and discharge of its Bank Claim, its Pro Rata Share of: (i) New Bank Debt and (ii) Cash in an amount equal to the sum of (w) $35,000,000 on account of all accrued and unpaid post-petition interest on the Bank Claims through the 8 Effective Date, provided, however, that in the event the Effective Date occurs after January 15, 2002, such $35,000,000 amount shall be increased by the interest accruing on the Allowed Bank Claims from January 15, 2002 through and including the Effective Date at a per annum rate equal to "LIBOR" plus 3.00%, as defined in and pursuant to the Bank Revolver Agreement, or "LIBOR" plus 3.50%, as defined in and pursuant to the Bank Term Loan Agreement, as applicable; (x) the Effective Date Net Cash; (y) the Exit Financing Net Cash; and (z) all reasonable professional fees and expenses incurred by the Banks' retained professionals, Jones, Day, Reavis & Pogue, FTI/Policano & Manzo, and Duane, Morris & Hecksher LLP, in connection with these Chapter 11 Cases (including reasonable prepetiton fees and expenses of Jones, Day Reavis & Pogue) and all agent fees required to be paid by the Debtors under the Bank Credit Agreements through such time as is necessary to fully complete the implementation of the New Bank Debt under the Plan. The New Bank Debt will bear interest, at the greater of: (a) at the option of Reorganized Carmike, (i) the Base Rate plus 3.5% or (ii) LIBOR plus 4.5%; and (b) 7.75% per annum. Interest will be payable monthly in arrears. The New Bank Debt will mature on the fifth anniversary of the Effective Date. Reorganized Carmike shall repay the principal amount of the New Bank Debt prior to maturity as follows: Date Amortization ---- ------------ June 30, 2002 $10,000,000 December 31, 2002 $10,000,000 June 30, 2003 $12,500,000 December 31, 2003 $12,500,000 June 30, 2004 $15,000,000 December 31, 2004 $15,000,000 9 June 30, 2005 $20,000,000 December 31, 2005 $20,000,000 June 30, 2006 $20,000,000 As more specifically described in the Post-Confirmation Credit Agreement, the New Bank Debt will be entitled to additional amortization payments on March 31 of each calendar year while the New Bank Debt is outstanding in the amount by which (a) the greater of (i) 50% of the Reorganized Debtors' EBITDA for the previous calendar year exceeds the projected EBITDA set forth in Exhibit E to the Disclosure Statement for such previous calendar year, and (ii) 50% of cash and cash equivalents of the Reorganized Debtors in excess of $15 million as of the end of the previous calendar year, exceeds (b) the amount then outstanding under the Exit Financing Facility (including, without limitation, undrawn letters of credit). In addition, the New Bank Debt will, subject to the terms of the Exit Financing Facility, be entitled to amortization payments equal to 50% of the net proceeds of asset sales permitted by the Post-Confirmation Credit Agreement (subject to customary reserves and reinvestment rights), in excess of such amount as is required to be paid on account of the Exit Financing Facility as a permanent reduction of the commitments thereunder. The New Bank Debt will be entitled to such other terms and conditions as set forth in the Post-Confirmation Credit Agreement. The New Bank Debt will be secured by a security interest, lien, and mortgage on all assets of the Reorganized Debtors (except, upon approval of any settlement of the Debtors' obligations relating to the Amended and Restated Master Lease between Carmike and MoviePlex Realty Leasing LLC, the property at or related to the MoviePlex sites which secure the MoviePlex obligations so long as the MoviePlex obligations are secured by no other 10 property). Such security interest, lien, and mortgage shall (1) be junior only to the security interests, liens and mortgages granted pursuant to the Exit Financing Facility and any security interests, liens and mortgages retained by holders of Secured Claims under the Plan, which liens had priority over the liens securing the Bank Claims as of the Commencement Date, and (2) attach to the Debtors' real estate leases only to the extent that the Debtors or Reorganized Debtors are able to obtain the required consents from landlords, which consents the Debtors and Reorganized Debtors shall use their reasonable best efforts to obtain without an obligation to make payments to landlords (other than reimbursement of reasonable legal costs and minimal administrative costs as may be agreed to in the Post-Confirmation Credit Agreement) to obtain such consents. In addition to the allowance of the Bank Claims in the amount set forth in Section 4.4(a) of the Plan, the Debtors will provide the release set forth in Section 9.6 of the Plan on account of Bank Claims. 5 General Unsecured Except to the extent that a holder of a General 100% Impaired Claims (Other than Unsecured Claim has been paid by the Debtors prior to Convenience Claims)1 the Effective Date or agrees to a different treatment, each holder of an Allowed General Unsecured Claim as of the Record Date, other than a Convenience Claim treated in accordance with Section 4.6(b)(i) of the Plan, shall receive, in full and complete settlement, satisfaction and discharge of such Allowed General Unsecured Claim, Cash in the aggregate amount of its Allowed General Unsecured Claim, together with interest from the - -------- 1 The Debtors estimate the amount of Allowed General Unsecured Claims will, upon the final reconciliation and resolution of all General Unsecured Claims, aggregate between approximately $40,000,000 and $50,000,000. 11 Commencement Date to the Effective Date at a fixed annual rate equal to 9.4% (which amount for purposes of Section 4.5(b) of the Plan shall be added to the amount of its Allowed General Unsecured Claim, provided, however, that interest on lease rejection Claims shall commence accruing on the date following the effective date of such lease rejection) payable as follows: (i) on the Effective Date, or as soon thereafter as is practicable, a principal payment equal to its Pro Rata Share of $10 million, (ii) commencing on the first Subsequent Distribution Date after the Effective Date or as soon thereafter as is practicable, and on each Subsequent Distribution Date thereafter, such holder shall receive payments of interest on its Allowed General Unsecured Claim at a fixed annual rate equal to 9.4%, plus principal payments equal to its Pro Rata Share of $2,500,000 and (iii) on the fifth anniversary of the Effective Date, the outstanding principal balance of such Allowed General Unsecured Claim together with all accrued and unpaid interest thereon as of such date. In addition, in the event the Debtors refinance the New Bank Debt after the Effective Date, each holder of an Allowed General Unsecured Claim shall receive from the proceeds of such refinancing, as an additional amortization payment of principal, 20% of the then outstanding principal balance of its Allowed General Unsecured Claim, which payment shall be applied in satisfaction of the remaining payment obligations due to such holder under the Plan in the inverse order of maturity of such payments. 6 Convenience Claims (i) If the holders of Class 6 Convenience Claims vote 80%2 Impaired to accept the Plan by the requisite majorities set forth in section 1126(c) of the Bankruptcy Code, - ---------- 2 Recovery estimate assumes that holders of Class 6 Convenience Claims vote to accept the Plan by the requisite majorities set forth in section 1126(c) of the Bankruptcy Code. 12 except to the extent that a holder of a Convenience Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Convenience Claim as of the Record Date shall receive on the Effective Date, or as soon thereafter as is practicable, in full and complete settlement, satisfaction and discharge of such Allowed Convenience Claim, Cash in an amount equal to 80% of its Allowed Convenience Claim. (ii) If the holders of Class 6 Convenience Claims do not accept the Plan by the requisite majorities set forth in section 1126(c) of the Bankruptcy Code, then the holders of Allowed Convenience Claims shall be treated as holders of Allowed General Unsecured Claims and treated in accordance with Section 4.5(b) of the Plan, provided, however, that in such event any election by a holder of an Allowed Convenience Claim to reduce the amount of its Allowed Claim to $1,000 shall be null and void. 7 Subordinated Note Except to the extent that a holder of an Allowed 100% Impaired Claims Subordinated Note Claim agrees to different treatment or elects the treatment pursuant to Section 4.7(c) of the Plan, on the Effective Date, or as soon thereafter as is practicable, each holder of an Allowed Subordinated Note Claim as of the Record Date shall receive, in full and complete settlement, satisfaction and discharge of its Allowed Subordinated Note Claim (i) a New Subordinated Note in a principal amount equal to the principal amount of its Allowed Subordinated Note Claim, and (ii) its Pro Rata Share of Cash in the amount of the accrued and unpaid interest which is due and payable as of the Effective Date on the Subordinated Notes under the Subordinated Notes Indenture at the non-default rate. Assuming an Effective 13 Date of January 15, 2002, the accrued and unpaid interest which is due and payable as of such date under the Subordinated Notes Indenture at the non-default rate will be $22,983,364 (assuming the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000). The Amended Subordinated Notes Indenture will contain certain covenants and undertakings not contained in the Subordinated Notes Indenture relating to restricted payments, permitted incurrence of debt, payment restrictions and asset sales. See Exhibit G "Amended Subordinated Notes Indenture Term Sheet." Each holder of an Allowed Subordinated Note Claim may, at its option, elect on the Ballot to receive on account of such Claim shares of New Common Stock, in which event such holder shall forego any right to receive a distribution under Section 4.7(b) of the Plan and such consideration shall revest in Reorganized Carmike on the Effective Date; provided, however, that the aggregate principal amount of Allowed Subordinated Note Claims that may be exchanged for New Common Stock pursuant to Section 4.7(c) of the Plan shall not exceed $50,000,000 in the aggregate. Each Electing Noteholder shall receive its Pro Rata Share of New Common Stock representing, in the aggregate, the percentage of the New Common Stock as set forth at Section V.A.10 of the Disclosure Statement based upon the aggregate amount of Allowed Subordinated Note Claims held by all such Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000, each Electing Noteholder will receive its Pro Rata Share of New Common Stock representing 28.1% of the New Common Stock on a fully diluted basis. 14 8 Preferred Stock Equity On the Effective Date, or as soon thereafter as is 100% Impaired Interests practicable, each holder of an Allowed Preferred Stock Equity Interest as of the Record Date shall receive in full and complete settlement, satisfaction and discharge of such Allowed Preferred Stock Equity Interest, its Pro Rata Share of New Common Stock representing the percentage of the New Common Stock described at Section V. A.10 of the Disclosure Statement based upon the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims is $50,000,000, each holder of an Allowed Preferred Stock Equity Interest will receive its Pro Rata Share of New Common Stock representing 39.9% of the New Common Stock on a fully diluted basis. On the Effective Date, all Preferred Stock Equity Interests shall be extinguished. 9 Common Stock Equity On the Effective Date, or as soon thereafter as is N/A Impaired Interests practicable, each holder of an Allowed Common Stock Equity Interest as of the Record Date shall receive in full and complete satisfaction of such Allowed Common Stock Equity Interest, its Pro Rata Share of New Common Stock representing the percentage of the New Common Stock described at Section V. A.10 of the Disclosure Statement based upon the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000, each holder of an Allowed Common Stock Equity Interest will receive its Pro Rata Share of New Common Stock representing 22.0% of the New Common Stock 15 on a fully diluted basis. On the Effective Date, all Common Stock Equity Interests shall be extinguished. 10 Subsidiary Equity Each holder of a Subsidiary Equity Interest will 100% Unimpaired Interests retain such Subsidiary Equity Interest. The Subsidiary Equity Interests will be reinstated pursuant to section 1124(1) of the Bankruptcy Code and the legal, equitable or contractual rights to which such Subsidiary Equity Interests entitles a holder of a Subsidiary Equity Interest will not be altered.
III. GENERAL INFORMATION A. OVERVIEW OF CHAPTER 11 ---------------------- Chapter 11 is the principal business reorganization chapter of the Bankruptcy Code. Under chapter 11 of the Bankruptcy Code, a debtor is authorized to reorganize its business for the benefit of itself, its creditors and its equity interest holders. In addition to permitting the rehabilitation of a debtor, another goal of chapter 11 is to promote equality of treatment for similarly situated creditors and similarly situated equity interest holders with respect to the distribution of a debtor's assets. The commencement of a chapter 11 case creates an estate that is comprised of all of the legal and equitable interests of the debtor as of the commencement date. The Bankruptcy Code provides that the debtor may continue to operate its business and remain in possession of its property as a "debtor in possession." The consummation of a plan of reorganization is the principal objective of a chapter 11 reorganization case. A plan of reorganization sets forth the means for satisfying claims against and interests in a debtor. Confirmation of a plan of reorganization by the bankruptcy court binds the debtor, any issuer of securities under the plan, any person acquiring property under the plan and any creditor or equity interest holder of a debtor. Subject to certain limited exceptions, the order approving confirmation of a plan discharges a debtor from any debt that arose prior to the date of confirmation of the plan and substitutes therefor the obligations specified under the confirmed plan. Certain holders of claims against and interests in a debtor are permitted to vote to accept or reject the plan. Prior to soliciting acceptances of the proposed plan, however, section 1125 of the Bankruptcy Code requires a debtor to prepare a disclosure statement containing adequate information of a kind, and in sufficient detail, to enable a hypothetical reasonable investor to make an informed judgment regarding the plan. The Debtors are submitting this Disclosure Statement to holders of Claims against and Equity 16 Interests in the Debtors to satisfy the requirements of section 1125 of the Bankruptcy Code. B. Description and History of Business ----------------------------------- 1. The Debtors The Debtors operate their business through a group of affiliated entities. The Debtors in these Chapter 11 Cases are: Carmike Cinemas, Inc., a Delaware corporation Eastwynn Theatres, Inc., an Alabama corporation Wooden Nickel Pub, Inc., a Delaware corporation Military Services, Inc., a Delaware corporation Carmike, a public company, directly owns 100% of the outstanding shares of common stock of Eastwynn and Wooden Nickel and 80% of the outstanding shares of common stock of Military Services. F. Lee Champion, III, Senior Vice President, General Counsel and Corporate Secretary of Carmike and Eastwynn, Secretary of Wooden Nickel, and President of Military Services, and Richard D. Thompson, each own 10% of the outstanding shares of common stock of Military Services. 2. Business Carmike, along with its subsidiaries Eastwynn, Wooden Nickel and Military Services, is one of the largest motion picture exhibitors in the United States. As of the Commencement Date, the Debtors were the largest motion picture exhibitor in terms of the number of theatres operated (448) and the third largest motion picture exhibitor in terms of the number of available screens (2,860). The Debtors currently operate 327 theaters located in 35 states. The theatres operated by the Debtors are generally located in small to mid-sized communities ranging in population size from approximately 8,000 to 1,000,000. The Debtors predominantly license and exhibit "first-run" motion pictures. From time to time, the Debtors convert marginally profitable theatres to "discount theatres" for the exhibition of films that have previously been shown on a first-run basis. The Debtors also operate certain theatres for the exhibition of first-run films at a reduced admission price. Such theatres are typically in smaller markets where Carmike is the only exhibitor in those markets. At December 31, 2000, the Debtors operated 43 discount theatres with 168 screens. The Debtors' revenues are generated primarily from admissions and concessions sales. For the fiscal year ending December 31, 2000, the Debtors, on a consolidated basis, reported revenue of $462.3 million. As of December 31, 2000, on a consolidated basis, the Debtors' books and records reflected assets totaling approximately $777.0 million and liabilities totaling 17 approximately $647.9 million. As of December 31, 2000 Carmike had approximately 9,097 employees. 3. Market Information As of August 6, 2001, there were approximately 10,018,287 shares of Carmike's Class A common stock issued and outstanding held by approximately 745 holders of record. All Carmike's Equity Interests, including all shares of Carmike's common stock, will be cancelled on the Effective Date pursuant to the Plan. Prior to January 12, 2001, Carmike's Class A common stock traded on the New York Stock Exchange ("NYSE") under the symbol "CKE." As of January 19, 2001, the Carmike's Class A common stock traded in the over-the-counter market, in the "pink sheets" published by the National Quotation Bureau, and was listed on the OTC Bulletin Board under the symbol "CKECQ." The following table sets forth, for the periods indicated, the high and low sale prices per share for Carmike's Class A common stock as reported by a market maker for Carmike's common stock:
High Low ---- --- FYE 12/31/00 First Fiscal Quarter $7 15/16 $5 7/16 Second Fiscal Quarter $6 1/16 $3 7/16 Third Fiscal Quarter $4 1/16 $0 11/16 Fourth Fiscal Quarter $0 7/8 $0 5/16 FYE 12/31/99 First Fiscal Quarter $20 1/8 $15 1/2 Second Fiscal Quarter $21 9/16 $15 5/8 Third Fiscal Quarter $15 7/8 $12 13/16 Fourth Fiscal Quarter $13 3/16 $6 23/32
In addition to the Class A Common Stock, Carmike has issued and outstanding one other class of common stock, Class B Common Stock, and one series of preferred stock, 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock (the "Series A Preferred Stock"). As of August 6, 2001, there were 1,370,700 shares of Class B Common Stock outstanding, all of which shares were held by affiliates of Carmike. As of August 6, 2001, there were 550,000 shares of Series A Preferred Stock outstanding, all of which were held by certain affiliates of Goldman Sachs & Co. 18 Each outstanding share of (i) Class A Common Stock is afforded one vote (10,018,287 votes in the aggregate), (ii) Class B Common Stock is afforded ten votes (13,707,000 votes in the aggregate), and (iii) Series A Preferred Stock is afforded four votes (2,200,000 votes in the aggregate). The Series A Preferred Stock is convertible into four shares of Class A Common Stock (subject to adjustments) or into convertible debt in certain instances at Carmike's option. 4. Significant Indebtedness and Other Obligations As of the Commencement Date, Carmike had the following Bank debt: (i) approximately $192,000,000 in principal amount of senior revolving debt under that certain Amended and Restated Credit Agreement among Carmike, the Banks party thereto and Wachovia Bank, N A., as agent, dated as of January 29, 1999, and amended as of March 31, 2000; and (ii) approximately $71,272,500 in principal amount of senior term debt under that certain Term Loan Credit Agreement among Carmike, the Banks parties thereto, Wachovia Bank, NA., as administrative agent, Goldman Sachs Credit Partners L.P., as syndication agent, and First Union National Bank, as documentation agent, dated as of February 25, 1999, as amended as of July 13, 1999, and further amended as of March 31, 2000 (the revolving credit agreement and the term loan are referred to as the "Bank Credit Agreements"). The Bank Credit Agreements are guaranteed by all the Debtors and secured by substantially all the personal property of Carmike and Eastwynn. Carmike also has issued and outstanding 9 3/8% Senior Subordinated Notes due 2009 in the principal amount of $200,000,000. The Subordinated Notes are guaranteed on a subordinated basis by Carmike's wholly-owned subsidiaries and are subordinate in right of payment to the prior payment of the amounts due to the Banks under the Bank Credit Agreements. As of the Commencement Date, Carmike leased six theatres pursuant to that certain Amended and Restated Master Lease between Movieplex Realty Leasing, L.L.C. ("MoviePlex") and Carmike, dated as of January 29, 1999, as amended as of November 19, 1999, and further amended as of March 31, 2000 (the "MoviePlex Lease"). Carmike's obligations under the MoviePlex Lease are guaranteed by all of the Debtors and are secured by substantially all of the personal property of Carmike and Eastwynn. In connection with the MoviePlex Lease, MoviePlex issued bonds in the amount of approximately $72,750,000. The bonds were secured, in part, by letters of credit issued by certain financial institutions (the "MoviePlex Lenders"). The MoviePlex Lenders are the collateral assignee of the MoviePlex Lease and are the mortgagees of the six theatres. On May 16, 2001, the Bankruptcy Court entered an order deeming the MoviePlex Lease to be a true lease. 19 Carmike also is an obligor under capital leases in the principal amount of $47,894,000 (less then-current maturities and $2,085,000 classified as subject to compromise) as of September 30, 2001. The Downtown Development Authority of Columbus, Georgia issued industrial revenue bonds to fund a loan that enabled Carmike's predecessor to construct its headquarters building. Carmike has guaranteed the payment of the industrial revenue bonds (the obligation of Carmike under such guarantee, the "IRB Debt"). The loan from the Downtown Development Authority to Carmike is secured by the headquarters building, and the industrial revenue bonds are secured by an assignment of the note relating to the loan and a security deed on the headquarters building. By order dated October 27, 2000, the Debtors were authorized to make post petition payments with respect to the IRB Debt to preserve a low interest rate on the this indebtedness. As of September 30, 2001, the outstanding principal amount under such loan was approximately $1,500,000. Carmike is indebted to Columbus Bank and Trust in the approximately amount of $1,546,621. This obligation is secured by a certificate of deposit in the principal amount of $2,247,921. C. EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER 11 CASES ---------------------------------------------------------- The motion picture exhibition business has undergone significant changes in recent years. The major exhibitors, including the Debtors, over the last several years have opened a substantial number of large multiplexes and theatres featuring stadium seating and improved sound systems in an effort to attract larger audiences. To remain competitive given the trends in the industry, during the past several years, the Debtors have adopted a strategy of developing new theatres, improving older theatres and selectively acquiring theatres. As these theatres were coming on-line, the growth in the number of screens far exceeded audience growth. These new theatres required the expenditure of significant funds both for the initial cost and upkeep. The Debtors, and other major motion picture exhibitors, incurred significant levels of debt to finance the construction. The recapture of the investment in such theatres takes a significant amount of time as the theatres have to develop a following. At the same time, the new theatres have drawn audiences away from older theatres and reduced per screen attendance. Thus, the Debtors and other exhibitors found it necessary to close underperforming theatres and to reduce the total number of screens. In the fourth quarter of 1999, the Debtors recognized a non-cash impairment charge of approximately $33,000,000 to reduce the carrying value of approximately 82 theatres with 432 screens and to reduce the value of its investment in certain joint-venture movie complexes. Following the recognition of the 1999 impairment charge, the Debtors sought and obtained a 20 waiver of the resulting default in certain financial covenants contained in the Bank Credit Agreements and the MoviePlex Lease. Recognizing the challenges in the movie industry, the Debtors sought to improve their financial position by contracting movie theatre development not required by existing obligations, curtailing to the extent feasible renovation and expansion of existing theatres and theatre acquisitions, tightening control over expenditures, and aggressively marketing surplus assets. However, these efforts were insufficient to offset the poor operating results during the month of June 2000. Carmike's business is seasonal. The high seasons are the summer months and Thanksgiving and Christmas holidays. Normally, after schools adjourn for the summer, there is a significant increase in Carmike's revenues. That did not happen in 2000. June 2000's revenues were substantially below projections. The resulting reductions in revenue and operating profits caused a prospective default of the financial ratio covenants contained in the Bank Credit Agreements as of June 30, 2000. On July 25, 2000, the agents under the Bank Credit Agreements delivered a notice of default to Carmike. The agents declared an event of default under the Bank Credit Agreements based upon such technical noncompliance with financial covenants. The notice expressly reserved the Banks' rights and remedies under the Bank Credit Agreements. Thereafter, and on July 28, 2000, the agents under the Bank Credit Agreements also issued a payment blockage notice to Carmike and the Indenture Trustee for the 9 3/8% Subordinated Notes, prohibiting the payment by Carmike of the semi-annual interest payment in the amount of approximately $9,375,000 due to the holders of the 9 3/8% Subordinated Notes on August 1, 2000. The request of Carmike that the Banks waive the technical defaults and allow the payment of the semi-annual interest to the 9 3/8% Subordinated Noteholders and negotiate an appropriate amendment to the Bank Credit Agreements to allow Carmike to operative effectively in the changed circumstances of the industry was rejected. By issuing the payment blockage notice, the agents under the Bank Credit Agreements exposed the Debtors to the substantial risks as to their future viability. Signs of tightening trade credit and increasing requests for security deposits emerged. Consequently in the interests of preserving and enhancing value of their assets and business for all parties in interest and to minimize any potential disruption to their business, the Debtors determined that their need to restructure would be best accomplished within the context of a case under chapter 11 of the Bankruptcy Code. IV. EVENTS DURING THE CHAPTER 11 CASES On August 8, 2000, the Debtors commenced the Chapter 11 Cases in the Bankruptcy Court. The Debtors continue to operate their business and manage their properties as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 21 The following is a brief description of certain major events that have occurred during the Chapter 11 Cases. A. APPOINTMENT OF THE COMMITTEE ---------------------------- On August 23, 2000, the United States Trustee, pursuant to section 1102(a)(1) of the Bankruptcy Code, appointed a nine-member committee to represent the interests of unsecured creditors of the Debtors (the "Committee"). General Electric Capital Corporation, Dreamworks, SKG, Disney Enterprises, Inc. and Bank of New York have resigned as members of the Committee, and Wilmington Trust Company was added to the Committee following the resignation of Bank of New York. As a result, the Committee currently consists of 6 members. The current members of, and the attorneys and financial advisors retained by, the Committee are set forth below: COMMITTEE MEMBERS ----------------- Aegon USA Investment Management, Inc. Capital City Supply Company 4333 Edgewood Road, NE 14499 North Dale Mabry Highway Cedar Rapids, IA 52499 Suite 201 Tampa, FL 33618 The Capital Group Companies Coca-Cola Co. North America 33 S. Hope Street One Coca-Cola Plaza Los Angeles, CA 0071 Atlanta, GA 30313 Festival, Inc. Wilmington Trust Company 5555 Melrose Avenue Rodney Square North Hollywood, CA 90038 1100 North Market Street Wilmington, Delaware 19890 COMMITTEE PROFESSIONALS ----------------------- Attorneys Financial Advisors - --------- ------------------ Akin, Gump, Strauss, Hauer & Feld, L.L.P. Houlihan, Lokey Howard & Zukin Capital 590 Madison Avenue 1930 Century Park West New York, New York 10022 Los Angeles, California 90067-6802 Since the Committee's formation, the Debtors have consulted with the Committee concerning the administration of the Chapter 11 Cases. The Debtors have kept the Committee informed with respect to their operations and have sought the concurrence of the Committee for actions and transactions outside of the ordinary course of the Debtors' business. The Committee has participated actively, together with the Debtors' management and professionals, in, among other things, reviewing the Debtors' business operations, operating 22 performance and business plan. The Debtors and their professionals have met with the Committee and its professionals on regular occasions during the Chapter 11 Cases, including in connection with the Debtors' business plan and the negotiation of the Plan. B. STABILIZATION OF BUSINESS ------------------------- During the initial stages of the Chapter 11 Cases, the Debtors devoted substantial efforts to stabilizing their operations and restoring their relationship with vendors, newspapers, and utilities that had been harmed by the commencement of the Chapter 11 Cases. 1. First Day Orders On the Commencement Date and shortly thereafter, the Bankruptcy Court entered several orders authorizing the Debtors to pay various prepetition claims. These orders were designed to ease the strain of the Debtors' relationships with employees and vendors as a consequence of the commencement of the Chapter 11 Cases. The Bankruptcy Court entered orders authorizing the Debtors to, among other things, pay prepetition wages and benefits to employees and certain prepetition claims held by trade vendors deemed by the Debtors to be "critical" to the operation of their business. 2. Settlement with Studios Upon the commencement of the Chapter 11 Cases, the Debtors experienced a disruption in the flow of films from the motion picture studios (the "Studios") to its theatres as a result of the cessation of payments to the Studios for prepetition license fees. Not only were the Debtors faced with the possibility of not obtaining new films, they were also faced with a dwindling supply of films in hand because certain Studios refused to extend the licenses of even those films and demanded the return of such films. To stabilize their business operations, the Debtors devoted substantial time and resources to negotiations with the Studios, upon whose films the Debtors depend for their survival. To that end, the Debtors negotiated agreements with the Studios pursuant to which the Debtors would pay the prepetition licensing fees, in the approximate aggregate amount of $37 million, over a 17-week period. By Order dated September 14, 2000, the Court approved the agreements with the Studios. The Debtors have since paid all prepetition licensing fees due to the Studios. Following the Court's approval of the agreements with the Studios, the Debtors' relationship with the Studios normalized, and the Debtors now receive a fair allocation of new films. 3. Stabilizing Operations Following the commencement of the Chapter 11 Cases, the Debtors experienced disruptions in the supply of goods and services from vendors and utility companies, and from the inability to place advertisements in certain newspapers. The Debtors devoted substantial efforts to responding to these disruptions and stabilizing their business operations. The Debtors believe that 23 they have recovered from the adverse impact of the commencement of the Chapter 11 Cases. 4. Cash Collateral / Adequate Protection Agreement To secure their obligations under the Bank Credit Agreements and the MoviePlex Lease, Carmike and Eastwynn granted to the collateral agent, for the benefit of the Banks and the MoviePlex Lenders, liens on substantially all of their personal property. On January 30, 2001, the Bankruptcy Court approved the Debtors' agreement with the Banks and the MoviePlex Lenders concerning issues relating to cash collateral and adequate protection, as those terms are defined in the Bankruptcy Code. The Debtors made payments to the Banks and MoviePlex Lenders in the aggregate amount of $8,272,821 on March 5, 2001 and have made payments to the Banks of $500,000 per month as adequate protection payments since March 15, 2000. All such payments to the Banks are treated as principal payments under the Bank Credit Agreements. Amounts allocated to the MoviePlex Lease are treated as post-petition rent. 5. Retention and Severance Program; Mr. Patrick's Employment Agreement After the commencement of the Chapter 11 Cases, the Debtors experienced an increased rate of employee turnover, including the resignations of certain key employees. To combat uncertainties stemming from the Chapter 11 Cases, to reward employees for shouldering the burdens imposed upon them by the Chapter 11 Cases and to maintain employee morale, the Debtors implemented, with the approval of the Bankruptcy Court, an Employee Retention and Severance Plan. The Employee Retention and Severance Plan provides for retention bonuses for 51 key employees contingent upon their employment with the Debtors on February 28, 2001 and August 31, 2001, and for 9 senior executives based, in part, on the Debtors' financial performance. In addition, these key employees and senior executives are entitled to severance payments in the event they are terminated without cause. Since the implementation of the Employee Retention and Severance, there has been virtually no turnover among these key employees. The Debtors have also continued their annual bonus plan in the ordinary course of business (to the extent that bonus objectives can be met during the fiscal year). In connection with the Employee Retention and Severance Plan, the Bankruptcy Court approved the Debtors' assumption of the pre-petition executory employment agreement of Carmike's chief executive officer Michael W. Patrick, subject to certain modifications. C. REAL ESTATE RATIONALIZATION AND TRANSACTIONS -------------------------------------------- Shortly after the Commencement Date, the Debtors, together with their financial advisors, commenced the process of reviewing and analyzing each of their theatre locations and geographic markets to determine which, if any, of such theatres and geographic markets should be divested or closed during the Chapter 11 Cases. The Debtors have consummated the following real estate 24 transactions and theatre closures during the pendency of the Chapter 11 Cases: 1. Lease Rejections Since the commencement of the Chapter 11 Cases, the Debtors with the assistance of their financial advisors, Dresdner Kleinwort Wasserstein, Inc. ("DrKW"), have engaged in an extensive analysis of the operating performance of each of their theatres and the markets in which they operate. As part of this analysis, the Debtors analyzed their leased-theatre portfolio. This lease rationalization process, an integral component in the development of the Debtors' long-range business plan, involved an analysis of the operating performance of their theatres to determine which theatres should be closed and which underlying leases should be rejected. As part of this process, the Debtors analyzed a number of factors including, among other things, (i) the profitability of each of the theatres, (ii) the carrying costs of the associated leases, (iii) the ability to negotiate rent concessions to improve the profitability of such theatres, (iv) the demographic makeup of the area in which each theatre is located, (v) changes or potential changes in the competitive landscape of each market by reason of announced or anticipated actions by their competitors, and, in many instances, and (vi) the benefit closure of certain theatres will have on neighboring theatres operated by the Debtors. The Bankruptcy Court has authorized the Debtors' rejection of approximately 130 leases. The Debtors have also closed 12 theatres following the expiration of the underlying leases, and 10 theatres that the Debtors own. 2. Disposition of Personal Property Relating to Rejected Leases In connection with the lease rejections, the Debtors have made various arrangements with respect to the furniture, fixtures and equipment located on the premises of such closed theatres. In some instances, the Debtors have transferred all of their right, title and interest to such personal property located on such leased premises to the lessor in exchange for a reduction or waiver of the lessor's claim against the Debtors or for other consideration. These agreements, to date, have resulted in the release or waiver of claims estimated to exceed $2,580,000. In other instances, the Debtors have arranged with the lessor to have the Debtors remove their personal property or have abandoned same. 3. Settlement with MoviePlex Lenders On February 13, 2001, the agent for the MoviePlex Lenders commenced an adversary proceeding in the Bankruptcy Court seeking a declaration that the MoviePlex Lease is a true lease. The Debtors agreed to an interim settlement regarding the MoviePlex Lease that the Bankruptcy Court approved by order dated May 10, 2001. The interim settlement provided that the MoviePlex Lease would be deemed to be a true lease for bankruptcy law purposes, authorized the payment by the Debtors to the MoviePlex Lenders of $4.2 million (in addition to the approximately $1.9 million received under the adequate protection/cash 25 collateral agreement) in satisfaction of all post-petition rent (other than certain triple net lease charges) through March 31, 2001, and authorized the payment of postpetition rent from April 1, 2001 through August 31, 2001 at the rate of $409,000 per month. The Debtors and MoviePlex Lenders have reached an agreement in principle to restructure the MoviePlex Lease, which is subject to approval by the Bankruptcy Court. The agreement in principle contemplates that Carmike would enter into a new 15 year lease for the six MoviePlex properties with an option to extend the term for an additional five years. The existing lease will be terminated and prepetition defaults will be cured up to a maximum amount of $493,680. The initial base rent for the six theatres would be an aggregate of $5.4 million per annum, subject to periodic increases thereafter and certain additional rent obligations such as percentage rent. At the end of the lease term, or if the lease is terminated by reason of a default by Carmike, the furniture, fixtures and equipment located in the theatres would become property of the MoviePlex Lenders. In addition, the MoviePlex Lenders would release their liens on the Debtors' other assets that secured the MoviePlex obligations. 4. Rent Reductions and Other Concessions The Debtors also have been negotiating diligently with their landlords in an effort to obtain rent reductions and lease amendments. Such negotiations have resulted in the consummation of certain lease amendments under which landlords have reduced the rent and related expenses under their leases with the Debtors or granted to the Debtors other rights under the leases. 5. Assumptions of Leases; Extensions of Time to Assume or Reject Leases To date, the Debtors have assumed approximately 185 unexpired leases of nonresidential real property. Approximately 15 of these lease assumptions related to agreements with landlords for the assumption of the lease in exchange for amendments to either the lease to be assumed or to other leases the Debtors have with the landlord. Pursuant to section 365(d)(4) of the Bankruptcy Code, absent an extension of time by the Bankruptcy Court, the Debtors were required to assume or reject their unexpired leases of nonresidential real property on or before October 10, 2000. By order dated October 3, 2000, the Bankruptcy Court extended the Debtors' time to assume or reject their unexpired leases through April 10, 2001. By order dated November 1, 2001, the Bankruptcy Court granted the Debtors an extension of time to assume or reject the majority of their remaining unexpired leases through February 6, 2002. 6. Thoroughbred Partners On or about May 13, 1998, Carmike and Brookside Properties, Inc., a Tennessee corporation ("Brookside"), executed a contract (the "Contract") which, among other things, contemplated the formation of a limited 26 liability company to be owned by Carmike and an affiliate of Brookside for the purpose of acquiring, selling, leasing and operating certain real property consisting of seven outparcels surrounding Carmike's Thoroughbred Square Theatre located in Franklin, Tennessee. Carmike's participation in the limited liability company was a condition precedent to Carmike's acquisition of the real property on which the Thoroughbred Square Theatre was constructed. Pursuant to the Contract, on or about June 18, 1998, Carmike and an affiliate of Brookside, Thoroughbred Partners, LLC (which was subsequently merged into Thoroughbred Partners, a Tennessee general partnership) ("TP"), formed Thoroughbred Square, LLC to own the seven outparcels. Carmike and Thoroughbred Partners are the sole members of Thoroughbred Square, LLC, owning a 45% and 55% membership interest, respectively. By orders dated October 18, 2000, November 30, 2000, March 8, 2001, and May 31, 2001, the Bankruptcy Court authorized Carmike to sell its interests in five of the outparcels to TP for the aggregate purchase price of approximately $3.46 million. In addition, on January 19, 2001, Thoroughbred Partners executed an agreement for the sale of one of the outparcels, which sale did not require Carmike's or the Bankruptcy Court's approval. Carmike's share of the proceeds of such sale was approximately $600,000. 7. Sale of Real Property On or about March 1, 1999, Carmike purchased three outparcels surrounding a theatre it owns in Kennewick, Washington with the intent to resell or lease the properties. By orders dated October 27, 2000 and March 2, 2001, the Bankruptcy Court authorized Carmike to sell two of the three outparcels for an aggregate purchase price of $1,265,381. In January, 1999, Carmike purchased approximately 19.42 acres of real property located in West Des Moines, Iowa with the intent of constructing a family entertainment center, including a movie theatre, on the site. As a result of changes in market and competitive factors subsequent to Carmike's purchase of the property, Carmike determined not to proceed with its construction plans and determined to sell the property. By order dated March 7, 2001, the Bankruptcy Court authorized Carmike to sell the property for $4.75 million. In September, 1991, Carmike acquired several theatres in connection with the purchase of substantially all of the assets of CinAmerica Theatres, L.P., including a one-screen theatre known as the Villa and surrounding parcels located in Salt Lake City, Utah. As part of their real estate rationalization process, Carmike determined to sell the premises. By order dated May 31, 2001, the Bankruptcy Court authorized Carmike to sell the property for $2,400,000. 27 D. CLAIMS PROCESS AND BAR DATE --------------------------- 1. Schedules and Statements The Debtors filed with the Bankruptcy Court their Statements of Financial Affairs, Schedules of Assets and Liabilities, Schedules of Executory Contracts and Unexpired Leases and Lists of Equity Security Holders (collectively, the "Schedules") for Wooden Nickel and Military Services on September 19, 2000, and for Carmike and Eastwynn on October 18, 2000. On April 16, 2001, the Debtors filed amended Schedules. 2. Bar Date By order dated March 2, 2001 (the "Bar Date Order"), pursuant to Bankruptcy Rule 3003(c)(3), the Bankruptcy Court fixed May 8, 2001 (the "Bar Date") as the date by which proofs of claim were required to be filed in the Chapter 11 Cases. In accordance with the Bar Date Order, on or about March 23, 2001, a proof of claim form, a notice regarding the scheduling of each Claim and a notice regarding the Bar Date and the Bar Date Order were mailed to all creditors listed on the Debtors' Schedules. A proof of claim form, a notice regarding the Bar Date and the Bar Date Order were also mailed, in accordance with the Bar Date Order, to, among others, the members of the Committee and all persons and entities requesting notice pursuant to Bankruptcy Rule 2002 as of the entry of the Bar Date Order. Approximately 1,800 proofs of claim asserting claims against the Debtors have been filed with the claims agent appointed by the Bankruptcy Court. The aggregate amount of claims filed and scheduled exceeds $2.1 billion, including duplication. The Debtors are currently reviewing, analyzing and reconciling the filed claims and will object to a substantial portion of the filed claims. The Debtors estimate that the aggregate amount of scheduled and filed claims that ultimately will become Allowed General Unsecured Claims in the Chapter 11 Cases is less than $50,000,000. 3. Claims Settlement Authority By orders dated October 27, 2000 and September 5, 2001 (the "Litigation Claims Settlement Orders"), the Bankruptcy Court authorized the Debtors to adopt procedures for the settlement and payment of certain litigation-related claims, without the need for further Bankruptcy Court approval. Pursuant to the Litigation Claims Settlement Orders, the Debtors are authorized to pay (a) up to $10,000, in Cash, per claim, to settle federal discrimination claims based upon pre-Commencement Date lawsuits, (b) up to $5,000, in Cash, per claim, to settle state law discrimination claims based upon pre-Commencement Date lawsuits, (c) up to $3,000, in Cash, per claim, to settle discrimination claims filed with the Equal Employment Opportunity Commission, (d) up to $15,000, in Cash, per claim, to settle certain personal injury claims, and (e) up to $25,000, in Cash, per claim, to settle certain construction and other claims. The aggregate cap on Cash payable by the Debtors to any single claimant with respect to discrimination claims is $10,000, with respect to 28 personal injury claims is $25,000 and with respect to any multiple Plaintiff lawsuit is $35,000. As of October 16, 2001, pursuant to the Litigation Claims Settlement Orders, the Debtors have settled 22 claims through the payment of approximately $155,696.40, in the aggregate. Approximately 55 litigation claims have been asserted against the Debtors. 4. Settlement with Rawlins Construction Company Rawlins Construction Company ("Rawlins") asserted mechanics' liens in excess of $1.1 million on two theatres owned by the Debtors. On November 15, 2000, Rawlins commenced an adversary proceeding to impose a constructive trust on the Debtors' general funds. The Debtors moved to dismiss the adversary proceeding. Thereafter, the parties negotiated a settlement of the adversary proceeding. By order dated August 29, 2001, the Bankruptcy Court approved the settlement whereby the Debtors paid Rawlins approximated $934,268.31 in full satisfaction of their claims. In connection therewith, Rawlins agreed to release its liens and to discharge all liens filed by subcontractors against the two theatres and to indemnify the Debtors for such claims and liens. 5. Settlement with Anthony Properties At a hearing held on August 28, 2001, the Bankruptcy Court approved a stipulation and agreement between the Debtors and Anthony Properties Management, Inc. and its affiliates ("Anthony Properties"), their largest landlord, providing for a global settlement of issues whereby the Debtors assumed or rejected all but one of the Anthony Properties' leases, received reductions in lease obligations for four such assumed leases, and, regarding the one remaining lease, obtained additional time to attempt to negotiate favorable modifications that will facilitate assumption of a lease for the contemplated construction of a new theatre. E. OTHER MATERIAL LITIGATION ------------------------- There is no material litigation or administrative proceeding to which the Debtors are parties that the Debtors must disclose in accordance with generally accepted accounting principles. The Debtors do not believe they have any claims against officers, directors, advisors or consultants of or to the Debtors. F. DEVELOPMENT OF BUSINESS PLAN AND PLAN NEGOTIATIONS -------------------------------------------------- After achieving an initial stabilization of their business operations during the early stages of the Chapter 11 Cases, the Debtors engaged in an extensive review and evaluation of the constituent parts of their business in the context of formulating a long-range business plan and, eventually, a plan of reorganization. On April 18, 2001, the Debtors presented their Business Plan to the Committee and the Banks. The Business Plan incorporates, among other things, certain strategic and business initiatives. The projections accompanying 29 this Disclosure Statement are premised upon the operation of approximately 305 theatres on and after the Effective Date of the Plan. In late summer 2001, the Debtors analyzed the results of the summer 2001 season. Based on this analysis, the Debtors made certain revisions to their Business Plan. The Debtors also revised their five year projections downward to reflect higher than projected expenses in 2001. The Debtors' discussions with the Committee and the Banks regarding the Business Plan naturally evolved into negotiations regarding the development of a chapter 11 plan. These negotiations addressed, among other things, the treatment of Claims under the Plan and the amount and form of consideration to be distributed under the Plan to holders of Allowed Bank Claims and Allowed General Unsecured Claims. G. STATUS OF EXIT FACILITY NEGOTIATIONS ------------------------------------ The Debtors have had discussions with several lenders with respect to obtaining an Exit Financing Facility. As of November 9, 2001, the Debtors have received proposals from three lenders, and have signed a non-binding letter of interest with one such lender. It is contemplated that the Exit Financing Facility will be secured by a first priority lien on substantially all of the Debtors' real and personal property. To the extent the Debtors obtain an acceptable commitment for an Exit Financing Facility, the Debtors will file the documents relating thereto as part of the Plan Supplement. V. THE PLAN OF REORGANIZATION The Plan provides for the restructuring of the Bank Credit Agreements and the Subordinated Notes Indenture, the payment in full of all other Allowed Claims, a reduction of debt through the conversion of up to $50,000,000 of Subordinated Note Claims and the conversion of the Preferred Stock Equity Interests to New Common Stock. The Debtors believe that (i) through the Plan, holders of Allowed Claims will obtain a greater recovery from the estates of the Debtors than the recovery that they would receive if the assets of the Debtors were liquidated under chapter 7 of the Bankruptcy Code and (ii) the Plan will afford the Debtors the opportunity and ability to continue in business as a viable going concern and preserve ongoing employment for the Debtors' employees. The Plan is annexed hereto as Exhibit A and forms a part of this Disclosure Statement. The summary of the Plan set forth below is qualified in its entirety by reference to the provisions of the Plan. 30 A. CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS ----------------------------------------------------------- The Plan classifies Claims and Equity Interests separately and provides different treatment for different Classes of Claims and Equity Interests in accordance with the Bankruptcy Code. As described more fully below, the Plan provides, separately for each Class, that holders of certain Claims will receive various amounts and types of consideration, thereby giving effect to the different rights of holders of Claims and Equity Interests in each Class. 1. Administrative Expense Claims Administrative Expense Claims are Claims constituting a cost or expense of administration of the Chapter 11 Cases allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code. Such Claims include all actual and necessary costs and expenses of preserving the estates of the Debtors, all actual and necessary costs and expenses of operating the business of the Debtors in Possession, any indebtedness or obligations incurred or assumed by the Debtors in Possession in connection with the conduct of their business, all cure amounts owed in respect of leases and contracts assumed by the Debtors in Possession, all compensation and reimbursement of expenses to the extent Allowed by the Bankruptcy Court under sections 330 or 503 of the Bankruptcy Code, and any fees or charges assessed against the estates of the Debtors under section 1930 of chapter 123 of title 28 of the United States Code. Except as provided in the next sentence with respect to ordinary course obligations and in Section V. A.2. of the Disclosure Statement with respect to professional compensation and reimbursement Claims, Administrative Expense Claims will be paid in full, in Cash, on the later of the Effective Date and the date the Administrative Expense Claim becomes an Allowed Claim, or as soon thereafter as is practicable. Allowed Administrative Expense Claims representing obligations incurred in the ordinary course of business by the Debtors in Possession (including, without limitation, amounts owed to vendors and suppliers that have sold goods or furnished services to the Debtors in Possession since the Commencement Date) will be assumed and paid by the applicable Reorganized Debtor in accordance with the terms and conditions of the particular transactions and any agreements relating thereto. The Debtors estimate that Allowed Administrative Expense Claims payable on the Effective Date, exclusive of compensation and reimbursement of expenses payable to professionals retained in the Chapter 11 Cases, but inclusive of amounts payable in respect of reconciled cure payments under executory contracts and unexpired leases assumed pursuant to the Plan, will be approximately $5,400,000. 2. Compensation and Reimbursement Claims Compensation and reimbursement Claims are Administrative Expense Claims for the compensation of professionals and reimbursement of expenses incurred by such professionals pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4) and 503(b)(5) of the Bankruptcy Code (the "Compensation and 31 Reimbursement Claims"). All payments to professionals for Compensation and Reimbursement Claims will be made in accordance with the procedures established by the Bankruptcy Code, the Bankruptcy Rules and the Bankruptcy Court relating to the payment of interim and final compensation for services rendered and reimbursement of expenses. The aggregate amount paid by the Debtors in respect of compensation for services rendered and reimbursement of expenses incurred by professionals (including professionals employed by the Debtors and the Committee) through September 30, 2001 is approximately $6,738,000. The Bankruptcy Court will review and determine all applications for compensation for services rendered and reimbursement of expenses. Section 503(b) of the Bankruptcy Code provides for payment of compensation to creditors, indenture trustees and other entities making a "substantial contribution" to a reorganization case and to attorneys for and other professional advisors to such entities. The amounts, if any, which may be sought by entities for such compensation are not known by the Debtors at this time. Requests for compensation must be approved by the Bankruptcy Court after a hearing on notice at which the Debtors and other parties in interest may participate and object to the allowance of any claims for compensation and reimbursement of expenses. Pursuant to the Plan, each holder of a Compensation and Reimbursement Claim will (a) file its final application for the allowance of compensation for services rendered and reimbursement of expenses incurred by no later than the date that is 60 days after the Effective Date or such other date as may be fixed by the Bankruptcy Court and (b) if granted such an award by the Bankruptcy Court, be paid in full in such amounts as are Allowed by the Bankruptcy Court (i) on the date such Compensation and Reimbursement Claim becomes an Allowed Claim, or as soon thereafter as is practicable or (ii) upon such other terms as may be mutually agreed upon between such holder of a Compensation and Reimbursement Claim and the Reorganized Debtors. 3. Priority Tax Claims Priority Tax Claims are Claims for taxes entitled to priority in payment under section 507(a)(8) of the Bankruptcy Code. The Debtors estimate that the amount of Allowed Priority Tax Claims that have not previously been paid pursuant to an order of the Bankruptcy Court will aggregate approximately $1,225,417. Pursuant to the Plan, except to the extent that a holder of an Allowed Priority Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Priority Tax Claim will receive, at the sole option of the Debtors, (a) Cash in an amount equal to such Allowed Priority Tax Claim on the later of the Effective Date and the date such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon thereafter as is practicable or (b) equal annual Cash payments in an aggregate amount equal to such Allowed Priority Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth anniversary of the date of assessment of such Allowed Priority Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder 32 of such Allowed Priority Tax Claim with deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Priority Tax Claim. 4. Class 1 - Other Priority Claims Other Priority Claims are Claims that are entitled to priority in accordance with section 507(a) of the Bankruptcy Code (other than Administrative Expense Claims and Priority Tax Claims). Such Claims include Claims for (a) accrued employee compensation earned within 90 days prior to commencement of the Chapter 11 Cases to the extent of $4,300 per employee and (b) contributions to employee benefit plans arising from services rendered within 180 days prior to the commencement of the Chapter 11 Cases, but only for each such plan to the extent of (i) the number of employees covered by such plan multiplied by $4,300, less (ii) the aggregate amount paid to such employees from the estates for wages, salaries or commissions during the 90 days prior to the Commencement Date. The Debtors believe that all Other Priority Claims previously have been paid pursuant to an order of the Bankruptcy Court. Accordingly, the Debtors believe that there should be no Allowed Other Priority Claims. Pursuant to the Plan, holders of Allowed Other Priority Claims, if any exist, will be paid in full, in Cash, on the later of the Effective Date and the date such Other Priority Claims becomes Allowed Claims, or as soon thereafter as is practicable. The legal, equitable and contractual rights of the holders of Other Priority Claims, if any exist, are not altered by the Plan. 5. Class 2 - Secured Tax Claims Secured Tax Claims are Secured Claims which, absent their status as Secured Claims, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code. The Debtors estimate that the amount of Allowed Secured Tax Claims that have not previously been paid pursuant to an order of the Bankruptcy Court will aggregate approximately $4,159,002. Pursuant to the Plan, except to the extent that a holder of an Allowed Secured Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Secured Tax Claim as of the Record Date will receive, in full and complete settlement, satisfaction and discharge of its Allowed Secured Tax Claim, at the sole option of Reorganized Carmike, (i) Cash in an amount equal to such Allowed Secured Tax Claim, including any interest on such Allowed Secured Tax Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, if any, on the later of the Effective Date and the date such Allowed Secured Tax Claim becomes an Allowed Secured Tax Claim, or as soon thereafter as is practicable or (ii) equal annual Cash payments in an aggregate amount equal to such Allowed Secured Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth anniversary of the date of assessment of such Allowed Secured Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments 33 having a value, as of the Effective Date, equal to such Allowed Secured Tax Claim. Each holder of an Allowed Secured Tax Claim will retain the Liens (or replacement Liens as may be contemplated under nonbankruptcy law) securing its Allowed Secured Tax Claim as of the Effective Date until full and final payment of such Allowed Secured Tax Claim is made as provided herein, and upon such full and final payment, such Liens will be deemed null and void and will be unenforceable for all purposes. 6. Class 3 - Other Secured Claims Other Secured Claims consist of all Secured Claims other than Secured Tax Claims and Bank Claims. Based upon the Debtors' Schedules and the proofs of claim filed in the Chapter 11 Cases, the Debtors believe that the Other Secured Claims include, among other Claims, Claims relating to mechanics' and materialmen's liens and claims, and the industrial revenue bond and related loan secured by the Debtors' headquarters building. Certain Other Secured Claims have been paid pursuant to orders of the Bankruptcy Court. Pursuant to the Plan, except to the extent that a holder of an Allowed Other Secured Claim agrees to a different treatment, at the sole option of Reorganized Carmike, (a) each Allowed Other Secured Claim will be reinstated and rendered unimpaired in accordance with section 1124(2) of the Bankruptcy Code, notwithstanding any contractual provision or applicable nonbankruptcy law that entitles the holder of an Allowed Other Secured Claim to demand or receive payment of such Allowed Other Secured Claim prior to the stated maturity of such Allowed Other Secured Claim from and after the occurrence of a default, (b) each holder of an Allowed Other Secured Claim will receive Cash in an amount equal to such Allowed Other Secured Claim, including any interest on such Allowed Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, on the later of the Effective Date and the date such Allowed Other Secured Claim becomes an Allowed Other Secured Claim, or as soon thereafter as is practicable or (c) each holder of an Allowed Other Secured Claim will receive the Collateral securing its Allowed Other Secured Claim and any interest on such Allowed Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, in full and complete satisfaction of such Allowed Other Secured Claim on the later of the Effective Date and the date such Allowed Other Secured Claim becomes an Allowed Other Secured Claim, or as soon thereafter as is practicable. The legal, equitable and contractual rights of the holders of Allowed Other Secured Claims, if any exist, are not altered by the Plan. 7. Class 4 - Bank Claims The Bank Claims consist of all Claims of the Banks arising under the Bank Credit Agreements. The Bank Credit Agreements means (i) that certain Amended and Restated Credit Agreement among Carmike, the Banks party thereto and Wachovia Bank, N A., as agent, dated as of January 29, 1999, and amended as of March 31, 2000; and (ii) that certain Term Loan Credit Agreement among Carmike, the Banks party thereto, Wachovia Bank, NA., as administrative 34 agent, Goldman Sachs Credit Partners L.P., as syndication agent, and First Union National Bank, as documentation agent, dated as of February 25, 1999, as amended as of July 13, 1999, and further amended as of March 31, 2000, and any of the documents and instruments relating to either (i) or (ii) above, as amended, supplemented, modified or restated as of the Commencement Date. The principal amount of the Bank Claims is estimated to be approximately $254,545,081 as of January 15, 2002 (assuming Adequate Protection Payments cease as of December 31, 2001). Pursuant to the Plan, each holder of a Bank Claim as of the Record Date shall receive on the Effective Date, in full and complete settlement, satisfaction and discharge of its Bank Claim, its Pro Rata Share of: (i) New Bank Debt and (ii) Cash in an amount equal to the sum of (w) $35,000,000 on account of all accrued and unpaid post-petition interest on the Bank Claims through the Effective Date, provided, however, that in the event the Effective Date occurs after January 15, 2002, such $35,000,000 amount shall be increased by the interest accruing on the Allowed Bank Claims from January 15, 2002 through and including the Effective Date at a per annum rate equal to "LIBOR" plus 3.00%, as defined in and pursuant to the Bank Revolver Agreement, or "LIBOR" plus 3.50%, as defined in and pursuant to the Bank Term Loan Agreement, as applicable; (x) the Effective Date Net Cash; (y) the Exit Financing Net Cash; and (z) all reasonable professional fees and expenses incurred by the Banks' retained professionals, Jones, Day, Reavis & Pogue, FTI/Policano & Manzo, and Duane, Morris & Hecksher LLP, in connection with these Chapter 11 Cases (including reasonable prepetiton fees and expenses of Jones, Day Reavis & Pogue) and all agent fees required to be paid by the Debtors under the Bank Credit Agreements through such time as is necessary to fully complete the implementation of the New Bank Debt under the Plan. The payment of Effective Date Net Cash shall be made on the Effective Date based upon a reasonable estimate of Effective Date Net Cash by the Debtors as of such date. The Agent and the Reorganized Debtors shall attempt to reconcile the actual amount of Effective Date Net Cash by June 30, 2002, with any agreed increase or decrease to be reflected in the June 30, 2002 amortization payment to be made on account of the New Bank Debt. The New Bank Debt will bear interest, at the greater of: (a) at the option of Reorganized Carmike, (i) the Base Rate plus 3.5% or (ii) LIBOR plus 4.5%; and (b) 7.75% per annum. Interest will be payable monthly in arrears. The New Bank Debt will mature on the fifth anniversary of the Effective Date. Reorganized Carmike shall repay the principal amount of the New Bank Debt prior to maturity as follows: Date Amortization ---- ------------ June 30, 2002 $10,000,000 December 31, 2002 $10,000,000 June 30, 2003 $12,500,000 December 31, 2003 $12,500,000 June 30, 2004 $15,000,000 December 31, 2004 $15,000,000 June 30, 2005 $20,000,000 35 December 31, 2005 $20,000,000 June 30, 2006 $20,000,000 As more specifically described in the Post-Confirmation Credit Agreement, the New Bank Debt will be entitled to additional amortization payments on March 31 of each calendar year while the New Bank Debt is outstanding in the amount by which (a) the greater of (i) 50% of the Reorganized Debtors' EBITDA for the previous calendar year exceeds the projected EBITDA set forth in Exhibit E to the Disclosure Statement for such previous calendar year, and (ii) 50% of cash and cash equivalents of the Reorganized Debtors in excess of $15 million as of the end of the previous calendar year, exceeds (b) the amount then outstanding under the Exit Financing Facility (including, without limitation, undrawn letters of credit). In addition, the New Bank Debt will, subject to the terms of the Exit Financing Facility, be entitled to amortization payments equal to 50% of the net proceeds of asset sales permitted by the Post-Confirmation Credit Agreement (subject to customary reserves and reinvestment rights), in excess of such amount as is required to be paid on account of the Exit Financing Facility as a permanent reduction of the commitments thereunder. The New Bank Debt will be entitled to such other terms and conditions as set forth in the Post-Confirmation Credit Agreement. The New Bank Debt will be secured by a security interest, lien, and mortgage on all assets of the Reorganized Debtors (except, upon approval of any settlement of the Debtors' obligations relating to the Amended and Restated Master Lease between Carmike and MoviePlex Realty Leasing LLC, the property at or related to the MoviePlex sites which secure the MoviePlex obligations so long as the MoviePlex obligations are secured by no other property). Such security interest, lien, and mortgage shall (1) be junior only to the security interests, liens and mortgages granted pursuant to the Exit Financing Facility and any security interests, liens and mortgages retained by holders of Secured Claims under the Plan, which liens had priority over the liens securing the Bank Claims as of the Commencement Date, and (2) attach to the Debtors' real estate leases only to the extent that the Debtors or Reorganized Debtors are able to obtain the required consents from landlords, which consents the Debtors and Reorganized Debtors shall use their reasonable best efforts to obtain without an obligation to make payments to landlords (other than reimbursement of reasonable legal costs and minimal administrative costs as may be agreed to in the Post-Confirmation Credit Agreement) to obtain such consents. In addition to the allowance of the Bank Claims in the amount set forth in Section 4.4(a) of the Plan, the Debtors will provide the release set forth in Section 9.6 of the Plan on account of Bank Claims. 8. Class 5 - General Unsecured Claims (Other than Convenience Claims) The General Unsecured Claims consist of all Claims other than Secured Claims, Administrative Expense Claims, Priority Tax Claims, Other Priority Claims, Bank Claims and Subordinated Note Claims. General Unsecured Claims include, without limitation, (a) Claims arising from the rejection of 36 leases of nonresidential real property and executory contracts, (b) Claims relating to personal injury, property damage, products liability, discrimination, employment or any other similar litigation Claims asserted against any of the Debtors (the "Tort Claims"), (c) Claims relating to other prepetition litigation against the Debtors, and (d) Claims of the Debtors' trade vendors, suppliers and service providers. The aggregate amount of General Unsecured Claims, as reflected in proofs of claim filed by holders of General Unsecured Claims or, in the event no proof of claim was filed, in the Debtors' Schedules is $125,000,000, excluding claims for which no amounts were specified, otherwise unliquidated Claims, Claims against multiple Debtors, amended Claims, duplicate Claims and guarantee Claims. For purposes of the Plan, through the substantive consolidation of the Debtors, Claims against multiple Debtors are treated as one Claim against the consolidated Debtors and guarantee Claims are eliminated. See Section V. F. The Debtors estimate that the amount of Allowed General Unsecured Claims will aggregate between approximately $40,000,000 and $50,000,000. The Debtors' estimate of Allowed General Unsecured Claims is based upon an analysis of the General Unsecured Claims and the Debtors' experience to date in resolving disputes concerning the amount of such General Unsecured Claims. The ultimate resolution of General Unsecured Claims could result in Allowed General Unsecured Claims in amounts less than or greater than those estimated by the Debtors for purposes of this Disclosure Statement. Pursuant to the Plan, on the Effective Date, or as soon thereafter as is practicable, except to the extent that a holder of a General Unsecured Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed General Unsecured Claim as of the Record Date, other than a Convenience Claim treated in accordance with Section 4.6(b)(i) of the Plan, shall receive, in full and complete settlement, satisfaction and discharge of such Allowed General Unsecured Claim, Cash in the aggregate amount of its Allowed General Unsecured Claim, together with interest from the Commencement Date to the Effective Date at a fixed annual rate equal to 9.4% (which amount for purposes of Section 4.5(b) of the Plan shall be added to the amount of its Allowed General Unsecured Claim, provided, however, that interest on lease rejection Claims shall commence accruing on the date following the effective date of such lease rejection) payable as follows: (i) on the Effective Date, or as soon thereafter as is practicable, a principal payment equal to its Pro Rata Share of $10 million, (ii) commencing on the first Subsequent Distribution Date after the Effective Date or as soon thereafter as is practicable, and on each Subsequent Distribution Date thereafter, such holder shall receive payments of interest on its Allowed General Unsecured Claim at a fixed annual rate equal to 9.4%, plus principal payments equal to its Pro Rata Share of $2,500,000 and (iii) on the fifth anniversary of the Effective Date, the outstanding principal balance of such Allowed General Unsecured Claim together with all accrued and unpaid interest thereon as of such date. In addition, in the event the Debtors refinance the New Bank Debt after the Effective Date, each holder of an Allowed 37 General Unsecured Claim shall receive from the proceeds of such refinancing, as an additional amortization payment of principal, 20% of the then outstanding principal balance of its Allowed General Unsecured Claim, which payment shall be applied in satisfaction of the remaining payment obligations due to such holder under the Plan in the inverse order of maturity of such payments. If a portion of a General Unsecured Claim is in part Allowed, a distribution will be made on account of the Allowed Portion of the General Unsecured Claim in accordance with the Plan. All Tort Claims are Disputed Claims. Any Tort Claim as to which a proof of claim was timely filed in the Chapter 11 Cases will be determined and liquidated in the administrative or judicial tribunal(s) in which it is pending on the Effective Date or, if no action was pending on the Effective Date, in any administrative or judicial tribunal of appropriate jurisdiction, or in accordance with any alternative dispute resolution or similar proceeding as may be approved by order of a court of competent jurisdiction. Any Tort Claim determined and liquidated (a) pursuant to a judgment obtained in accordance with the preceding sentence and applicable nonbankruptcy law that has become a Final Order or (b) in any alternative dispute resolution or similar proceeding as may be approved by order of a court of competent jurisdiction, will be deemed an Allowed General Unsecured Claim in such liquidated amount and satisfied in accordance with the Plan. 9. Class 6 - Convenience Claims The Convenience Claims consist of General Unsecured Claims (i) in the amount of $1,000 or less, or (ii) which the holder of such Claim irrevocably elects on the Ballot to reduce to $1,000. Pursuant to the Plan, if the holders of Class 6 Convenience Claims vote to accept the Plan by the requisite majorities set forth in section 1126(c) of the Bankruptcy Code, except to the extent that a holder of a Convenience Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Convenience Claim as of the Record Date shall receive on the Effective Date, or as soon thereafter as is practicable, in full and complete settlement, satisfaction and discharge of such Allowed Convenience Claim, Cash in an amount equal to 80% of its Allowed Convenience Claim. However, if the holders of Class 6 Convenience Claims do not accept the Plan by the requisite majorities set forth in section 1126(c) of the Bankruptcy Code, then the holders of Allowed Convenience Claims shall be treated as holders of Allowed General Unsecured Claims and treated in accordance with Section 4.5(b) of the Plan, provided, however, that in such event any election by a holder of an Allowed Convenience Claim to reduce the amount of such Allowed Claim to $1,000 shall be null and void. 38 10. Class 7 - Subordinated Note Claims The Subordinated Note Claims consist of all Claims arising under the Subordinated Notes Indenture. The Subordinated Notes Indenture means the trust indenture, dated February 3, 1999, between Carmike, as issuer of the Subordinated Notes, and The Bank of New York, as Indenture Trustee, and any of the documents and instruments relating thereto, as amended, supplemented, modified or restated as of the Commencement Date. Pursuant to the Plan, the Subordinated Note Claims shall be Allowed in the aggregate amount of $209,739,583, consisting of $200,000,000 in principal and $9,739,583 of accrued and unpaid interest as of the Commencement Date. Pursuant to the Plan, except to the extent that a holder of an Allowed Subordinated Note Claim agrees to different treatment or elects the treatment pursuant to Section 4.7(c) of the Plan, on the Effective Date, or as soon thereafter as is practicable, each holder of an Allowed Subordinated Note Claim as of the Record Date shall receive, in full and complete settlement, satisfaction and discharge of its Allowed Subordinated Note Claim (i) a New Subordinated Note in a principal amount equal to the principal amount of its Allowed Subordinated Note Claim, and (ii) its Pro Rata Share of Cash in the amount of the accrued and unpaid interest which is due and payable as of the Effective Date on the Subordinated Notes under the Subordinated Notes Indenture at the non-default rate. Assuming an Effective Date of January 15, 2002, the accrued and unpaid interest which is due and payable as of such date under the Subordinated Notes Indenture at the non-default rate will be $22,983,364 (assuming the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000). The Amended Subordinated Notes Indenture will contain certain covenants and undertakings not contained in the Subordinated Notes Indenture relating to restricted payments, permitted incurrence of debt, payment restrictions and asset sales. See Exhibit G "Amended Subordinated Notes Indenture Term Sheet." Each holder of an Allowed Subordinated Note Claim may, at its option, elect on the Ballot to receive on account of such Claim shares of New Common Stock, in which event such holder shall forego any right to receive a distribution under Section 4.7(b) of the Plan and such consideration shall revest in Reorganized Carmike on the Effective Date; provided, however, that the aggregate principal amount of Allowed Subordinated Note Claims that may be exchanged for New Common Stock pursuant to Section 4.7(c) of the Plan shall not exceed $50,000,000 in the aggregate. Each Electing Noteholder shall receive its Pro Rata Share of New Common Stock representing, in the aggregate, the percentage of the New Common Stock as set forth at Section V.A.10 of the Disclosure Statement based upon the aggregate amount of Allowed Subordinated Note Claims held by all such Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000, each Electing Noteholder will receive its Pro Rata Share of New Common Stock representing 28.1% of the New Common Stock on a fully diluted basis. 39 In the event that the Electing Noteholders hold greater than $50,000,000 in principal amount of Allowed Subordinated Note Claims, each such holder (A) shall be permitted to tender such portion of its Allowed Subordinated Note Claim equal to the product of $50,000,000 multiplied by the quotient of (x) the principal amount of such holder's Allowed Subordinated Note Claim divided by (y) the aggregate principal amount of Allowed Subordinated Note Claims held by all Electing Noteholders; provided, however, that the principal amount of each Electing Noteholder's Allowed Subordinated Note Claim that may be tendered for New Common Stock shall be reduced to the nearest $1,000 denomination, and (B) shall receive on account of the principal amount of its Allowed Subordinated Note Claims not tendered for New Common Stock pursuant to Section 4.7(c) of the Plan, the distribution of Cash and New Subordinated Notes provided under Section 4.7(b) of the Plan; provided further, however, that if the amount of Allowed Subordinated Note Claims to be tendered would be reduced to less than $50,000,000 as a result of the reduction to denominations of $1,000 in clause (A), then the Debtors may, in their sole discretion, eliminate such shortfall (such that the aggregate principal amount of tendered Allowed Subordinated Note Claims equals $50,000,000) by choosing one or more Electing Noteholders to tender the remainder of their Allowed Subordinated Note Claims for New Common Stock under Section 4.7(c) of the Plan. Certain holders of Allowed Subordinated Note Claims (David W. Zalaznick, Bermuda Investment Co., an affiliate of John W. Jordan, II, and Leucadia National Corporation) have committed to elect to receive New Common Stock in the aggregate principal amount of $45,685,000 to New Common Stock pursuant to Section 4.7(c) of the Plan. Messrs. Jordan and Zalaznick are members of the Board of Directors of Carmike and Mr. Zalaznick is a member of a sub-committee of the Board charged with the responsibility of negotiating the plan of reorganization with the Debtors' creditor constituencies. In their capacities as members of the Board of Directors of Carmike, Messrs. Jordan and Zalaznick were involved in the negotiation and approval by the Board of the Plan. 40
- ---------------------------------------------------------------------------------------------------------------------------- Face Amount of Subordinated Note Claims Electing New Common Stock ($MM) - ---------------------------------------------------------------------------------------------------------------------------- $45.7 $46.0 $46.5 $47.0 $47.5 $48.0 $48.5 $49.0 $49.5 $50.0 - ---------------------------------------------------------------------------------------------------------------------------- Management 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Incentive Plan - ---------------------------------------------------------------------------------------------------------------------------- Electing Noteholders 26.6% 26.7% 26.9% 27.1% 27.2% 27.4% 27.6% 27.8% 28.0% 28.1% - ---------------------------------------------------------------------------------------------------------------------------- Preferred Stock Equity 41.2% 41.1% 41.0% 40.8% 40.6% 40.5% 40.3% 40.2% 40.0% 39.9% Interests - ---------------------------------------------------------------------------------------------------------------------------- Common Stock Equity 22.2% 22.2% 22.2% 22.2% 22.1% 22.1% 22.1% 22.1% 22.0% 22.0% Interests - ---------------------------------------------------------------------------------------------------------------------------- Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% - ----------------------------------------------------------------------------------------------------------------------------
On the Effective Date, or as soon after as practicable, the Debtors will pay the reasonable fees and expenses of the Indenture Trustee to the extent required by the Subordinated Notes Indenture. 11. Class 8 - Preferred Stock Equity Interests The Preferred Stock Equity Interests consist of 550,000 shares of issued and outstanding Series A Preferred Stock and any designation, option, warrant or right, contractual or otherwise, to acquire any such interest. Pursuant to the Plan, on the Effective Date, or as soon thereafter as is practicable, each holder of an Allowed Preferred Stock Equity Interest as of the Record Date shall receive in full and complete settlement, satisfaction and discharge of such Allowed Preferred Stock Equity Interest, its Pro Rata Share of New Common Stock representing the percentage of the New Common Stock described at Section V. A.10 of the Disclosure Statement based upon the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims is $50,000,000, each holder of an Allowed Preferred Stock Equity Interest will receive its Pro Rata Share of New Common Stock representing 39.9% of the New Common Stock on a fully diluted basis. On the Effective Date, all Preferred Stock Equity Interests shall be extinguished. 41 12. Class 9 - Common Stock Equity Interests The Common Stock interests consist of its 10,018,287 shares issued and outstanding of Class A Common Stock and 1,370,700 shares issued and outstanding of Class B Common Stock, and any option, warrant or right, contractual or otherwise, to acquire any such interest. Pursuant to the Plan, on the Effective Date, or as soon thereafter as is practicable, each holder of an Allowed Common Stock Equity Interest as of the Record Date shall receive in full and complete satisfaction of such Allowed Common Stock Equity Interest, its Pro Rata Share of New Common Stock representing the percentage of the New Common Stock described at Section V. A.10 of the Disclosure Statement based upon the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000, each holder of an Allowed Common Stock Equity Interest will receive its Pro Rata Share of New Common Stock representing 22.0% of the New Common Stock on a fully diluted basis. On the Effective Date, all Common Stock Equity Interests shall be extinguished. 13. Class 10 - Subsidiary Equity Interests The Subsidiary Equity Interests consist of the issued and outstanding shares of common stock of Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc., and Military Services, Inc. and any option, warrant or right, contractual or otherwise, to acquire any such interest. Pursuant to the Plan, on the Effective Date, each holder of an Allowed Subsidiary Equity Interest as of the Record Date will retain such Subsidiary Equity Interest and the Subsidiary Equity Interest will be reinstated pursuant to section 1124(1) of the Bankruptcy Code. The legal, equitable or contractual rights of a holder of a Subsidiary Equity Interest will not be altered by the Plan. B. SECURITIES AND DEBT INSTRUMENTS TO BE ISSUED UNDER THE PLAN ----------------------------------------------------------- 1. New Common Stock Pursuant to the Plan, on the Effective Date, all of Carmike's Equity Interests will be cancelled. Pursuant to the Plan, an aggregate of 10,000,000 shares of New Common Stock of Reorganized Carmike will be issued. Such shares will constitute 100% of the shares of New Common Stock to be issued under the Plan and to management pursuant to the Incentive Plan described in Section VII. C. hereof. The rights of the holders of New Common Stock will be subject to the Amended Certificate of Incorporation and Amended By-laws, the 42 Stockholders' Agreement, and the Registration Rights Agreement, copies of which will be included in the Plan Supplement, and applicable Delaware law. 2. New Bank Debt Pursuant to the Plan, Reorganized Carmike will issue secured term debt in the principal amount of $264,977,449 less (a) all Adequate Protection Payments, and (b) any payments of Effective Date Net Cash and Exit Financing Net Cash made to the holders of Bank Claims pursuant to Section 4.4(b) of the Plan, on the terms and conditions described in Section 4.4(b) of the Plan and the Plan Supplement. It is anticipated that as of an assumed Effective Date of January 15, 2002, the principal amount of New Bank Debt will be $254,545,081. The New Bank Debt will be guaranteed by the Reorganized Subsidiaries. 3. New Subordinated Notes Pursuant to the Plan, on the Effective Date, all of Carmike's Subordinated Notes will be cancelled. Pursuant to the Plan, Reorganized Carmike will issue New Subordinated Notes pursuant to the Amended Subordinated Notes Indenture in the principal amount of $200,000,000 less the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders under Section 4.7(c) of the Plan. The Subsidiaries of Carmike that are guarantors under the Subordinated Notes Indenture will be guarantors under the Amended Subordinated Notes Indenture. C. METHOD OF DISTRIBUTION UNDER THE PLAN ------------------------------------- All distributions under the Plan will be made by the Disbursing Agent, except for distributions on account of Allowed Subordinated Notes Claims (excluding such Claims held by Electing Noteholders) will be made by the Indenture Trustee and distributions on account of Allowed Bank Claims will be made by the Agent. Subject to Bankruptcy Rule 9010, all distributions under the Plan will be made to the holder of each Allowed Claim or each Allowed Interest at the address of such holder as listed on the Schedules as of the Record Date or, with respect to Equity Interests, with the registrar or transfer agent for such Equity Interests, as of the Record Date, unless the Debtors or, on and after the Effective Date, the Reorganized Debtors, have been notified in writing of a change of address, including, without limitation, by the filing of a proof of Claim by such holder that provides an address for such holder different from the address reflected on the Schedules. As at the close of business on the Record Date, the claims register and the equity register, as applicable, will be closed, and there will be no further changes in the record holder of any Claim. The Reorganized Debtors will have no obligation to recognize any transfer of any Claim occurring after the Record Date. The Reorganized Debtors will instead be authorized and entitled to recognize and deal for all purposes under the Plan with only those record 43 holders stated on the claims register as of the close of business on the Record Date. Any payment of Cash made by the Reorganized Debtors pursuant to the Plan will, at the Reorganized Debtors' option, be made by check drawn on a domestic bank or wire transfer, except that the payment of Cash to the holders of Allowed Subordinated Note Claims and Allowed Bank Claims shall be made by wire transfer of immediately available funds to the Indenture Trustee under the Amended Subordinated Notes Indenture and the Agent, respectively. No payment of Cash less than twenty-five dollars will be made by the Reorganized Debtors to any holder of a Claim unless a request therefor is made in writing to Reorganized Carmike at the address set forth in Section 12.12 of the Plan. No fractional shares of New Common Stock, or Cash in lieu thereof, will be distributed under the Plan. When any distribution pursuant to the Plan on account of an Allowed Claim or Allowed Equity Interest would otherwise result in the issuance of a number of shares of New Common Stock that is not a whole number, the actual distribution of shares of New Common Stock will be rounded as follows: (i) fractions of 1/2 or greater will be rounded to the next higher whole number; and (ii) fractions of less than 1/2 will be rounded to the next lower whole number. The total number of shares of New Common Stock to be distributed under the Plan will be adjusted as necessary to account for rounding. Any payment or distribution required to be made under the Plan on a day other than a Business Day will be made on the next succeeding Business Day. All distributions under the Plan that are unclaimed for a period of one year after distribution thereof will be deemed unclaimed property under section 347(b) of the Bankruptcy Code and revested in Reorganized Carmike and any entitlement of any holder of any Claim or Equity Interest to such distributions will be extinguished and forever barred. The Disbursing Agent may require, as a condition to making any distribution under the Plan, that each holder of an Allowed Subordinated Note Claim and Allowed Equity Interest surrender the note or certificate evidencing such Claim or Equity Interest to Reorganized Carmike or its designee. In that event, any holder of an Allowed Subordinated Note Claim or Allowed Equity Interest that fails to (a) surrender such note or certificate or (b) execute and furnish a bond in form, substance, and amount reasonably satisfactory to the Disbursing Agent before the first anniversary of the Effective Date shall be deemed to have forfeited all rights and may not participate in any distribution under the Plan. D. TIMING OF DISTRIBUTIONS UNDER THE PLAN -------------------------------------- 1. Distributions on the Effective Date Payments and distributions to holders of Allowed Administrative Expense Claims, Allowed Priority Tax Claims, Allowed Other Priority Claims, Allowed Secured Tax Claims, Allowed Other Secured Claims, 44 Allowed Bank Claims, Allowed Subordinated Notes Claims, and Allowed Convenience Claims that are Allowed Claims on the Effective Date will be made on the Effective Date, or as soon thereafter as is practicable. 2. Distributions on Subsequent Distribution Dates The holder of a Disputed Claim that becomes an Allowed Claim subsequent to the Effective Date will receive the distribution of Cash that would have been made to such holder under the Plan if the Disputed Claim had been an Allowed Claim on or prior to the Effective Date, without any post-Effective Date interest thereon, on the next Subsequent Distribution Date that follows the month during which such Disputed Claim becomes an Allowed Claim. E. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES ----------------------------------------------------- The Bankruptcy Code grants the Debtors the power, subject to the approval of the Bankruptcy Court, to assume or reject executory contracts and unexpired leases. If an executory contract or unexpired lease is rejected, the counter party to the agreement may file a claim for damages incurred by reason of the rejection. In the case of rejection of leases of real property, such damage claims are subject to certain limitations imposed by the Bankruptcy Code. Pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, all executory contracts and unexpired leases that exist between the Debtors and any person (including, without limitation, the Coca-Cola Contract) will be deemed assumed by the applicable Debtor, except for any executory contract or unexpired lease (i) that has been rejected pursuant to an order of the Bankruptcy Court entered prior to the Confirmation Date, (ii) as to which a motion for approval of the rejection of such executory contract or unexpired lease has been filed and served prior to the Confirmation Date or (iii) that is set forth in Schedule 6.1(a)(x) (executory contracts) or Schedule 6.1(a)(y) (unexpired leases), which Schedules will be included in the Plan Supplement. The Debtors reserve the right, on or prior to the Confirmation Date, to amend Schedules 6.1(a)(x) or 6.1(a)(y) to delete any executory contract or unexpired lease therefrom or add any executory contract or unexpired lease thereto, in which event such executory contract(s) or unexpired lease(s) will be deemed to be, respectively, assumed by the Debtors or rejected. The Debtors will provide notice of any amendments to Schedules 6.1(a)(x) or 6.1(a)(y) to the parties to the executory contracts and unexpired leases affected thereby. The listing of a document on Schedules 6.1(a)(x) and 6.1(a)(y) will not constitute an admission by the Debtors that such document is an executory contract or an unexpired lease or that the Debtors have any liability thereunder. Pursuant to the Plan, each executory contract and unexpired lease listed or to be listed on Schedules 6.1(a)(x) or 6.1(a)(y) that relates to the use or occupancy of real property will include (i) modifications, amendments, supplements, restatements, or other agreements made directly or 45 indirectly by any agreement, instrument, or other document that in any manner affects such executory contract or unexpired lease, without regard to whether such agreement, instrument or other document is listed on Schedules 6.1(a)(x) or 6.1(a)(y) and (ii) executory contracts or unexpired leases appurtenant to the premises listed on Schedules 6.1(a)(x) or 6.1(a)(y), including, without limitation, all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, powers, uses, usufructs, reciprocal easement agreements, vault, tunnel or bridge agreements or franchises, and any other interests in real estate or rights in rem relating to such premises to the extent any of the foregoing are executory contracts or unexpired leases, unless any of the foregoing agreements previously has been assumed or assumed and assigned by the Debtors. Pursuant to the Plan, all of the Debtors' insurance policies and any agreements, documents or instruments relating thereto are treated as executory contracts under the Plan. The treatment of the Debtors' insurance policies and any agreements, documents or instruments relating thereto as executory contracts under the Plan will not constitute or be deemed a waiver of any Cause of Action that the Debtors may hold against any entity, including, without limitation, the insurer under any of the Debtors' policies of insurance. Except as provided in Section 6.1(a) of the Plan, all savings plans, retirement plans or benefits, if any, health care plans, performance-based incentive plans, workers' compensation programs and life, disability, directors and officers liability and other insurance plans are treated as executory contracts under the Plan and will, on the Effective Date, be deemed assumed by the Debtors, in accordance with sections 365(a) and 1123(b)(2) of the Bankruptcy Code. Pursuant to the Plan, entry of the Confirmation Order will, subject to and upon the occurrence of the Effective Date, constitute (i) the approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the assumption of the executory contracts and unexpired leases assumed pursuant to Section 6.1(a) of the Plan, and (ii) the approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the rejection of the executory contracts and unexpired leases listed on Schedule 6.1(a)(x) and Schedule 6.1(a)(y) to the Plan Except as may otherwise be agreed to by the parties, within 30 days after the Effective Date, the Reorganized Debtors will cure any and all undisputed defaults under any executory contract or unexpired lease assumed by the Debtors pursuant to the Plan, in accordance with section 365(b)(1) of the Bankruptcy Code. All disputed defaults that are required to be cured will be cured either within 30 days of the entry of a Final Order determining the amount, if any, of the Reorganized Debtor's liability with respect thereto or as may otherwise be agreed to by the parties. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to the Plan must be filed with the Bankruptcy Court and served upon the Debtors or, on and after the Effective Date, Reorganized Carmike, no later than 30 days after the later of (i) notice of entry of an 46 order approving the rejection of such executory contract or unexpired lease, (ii) notice of entry of the Confirmation Order and (iii) notice of an amendment to Schedule 6.1(a)(x) or 6.1(a)(y). All such Claims not filed within such time will be forever barred from assertion against the Debtors, their estates, the Reorganized Debtors and their property. Unless otherwise ordered by the Bankruptcy Court, all claims arising from the rejection of executory contracts or unexpired leases will be treated as General Unsecured Claims under the Plan. F. SUBSTANTIVE CONSOLIDATION OF THE DEBTORS ---------------------------------------- Substantive consolidation is an equitable remedy that a bankruptcy court may be asked to apply in chapter 11 cases involving affiliated debtors. Substantive consolidation involves the pooling and merging of the assets and liabilities of the affected debtors. All of the debtors in the substantively consolidated group are treated as if they were a single corporate and economic entity. Consequently, a creditor of one of the substantively consolidated debtors is treated as a creditor of the substantively consolidated group of debtors, and issues of individual corporate ownership of property and individual corporate liability on obligations are ignored. Substantive consolidation of two or more debtors' estates generally results in (i) the deemed consolidation of the assets and liabilities of the debtors; (ii) the deemed elimination of intercompany claims, subsidiary equity or ownership interests, multiple and duplicative creditor claims, joint and several liability claims and guarantees; and (iii) the payment of allowed claims from a common fund. It is well-established that section 105(a) of the Bankruptcy Code empowers a bankruptcy court to authorize substantive consolidation. 11 U.S.C.ss. 105(a). Although the United States Court of Appeals for the Third Circuit, the circuit in which the Chapter 11 Cases are pending, has not articulated a specific test or standard for evaluating a request for substantive consolidation, other Circuit Courts of Appeal have developed substantially similar tests for evaluating such requests. See, e.g., United Sav. Bank v. Augie/Restivo Baking Co. (In re Augie/Restivo Baking Co.), 860 F.2d 515 (2d Cir. 1988); Reider v. F.D.I.C. (In re Reider) 31 F.3d 1102 (11th Cir. 1994); Drabkin v. Midland-Ross Corp. (In re Auto-Train Corp.), 810 F.2d 270 (D.C. Cir. 1987). Although phrased differently, such tests identify two general factors that must be evaluated in the context of a substantive consolidation analysis: (i) whether there is a "substantial identity" or an inseparable "interrelationship" or "entanglement" between the debtors to be consolidated; and (ii) whether the benefits of consolidation outweigh the harm or prejudice to creditors, if any, including whether individual creditors relied upon the separate identity of one of the entities to be consolidated such that they would be prejudiced by substantive consolidation. In these Chapter 11 Cases, both of the above-described factors are satisfied. The applicable facts demonstrate a substantial identity and an extensive and inseparable interrelationship and entanglement between and among the Debtors. For example: the Debtors file consolidated federal income tax returns and prepare financial statements, annual reports and other documents 47 filed with the Securities and Exchange Commission on a consolidated basis; all financial information disseminated to the public, including to customers, suppliers, landlords, lenders and credit rating agencies, is prepared and presented on a consolidated basis. The applicable facts also demonstrate that no creditors will be harmed or prejudiced by virtue of the substantive consolidation of the Debtors, particularly in light of the fact that the Plan provides for payment in full of all Allowed Claims. No creditor relied upon the separate identity of one or more of the Debtors in extending credit to the Debtors inasmuch as (a) all financial information disseminated by the Debtors to the creditors was and is prepared and presented on a consolidated basis and (b) substantially all of the Debtors' obligations, other than the Subsidiaries' guarantees of Carmike's obligations to the Banks, are, in fact, obligations of Carmike. Based upon the foregoing, the substantive consolidation of the Debtors' estates, for Plan purposes (as set forth below), is warranted and appropriate. Accordingly, pursuant to the Plan, entry of the Confirmation Order will constitute the approval, pursuant to section 105(a) of the Bankruptcy Code, effective as of the Effective Date, of the substantive consolidation of the Chapter 11 Cases for purposes of voting on, confirmation of and distribution under the Plan. On and after the Effective Date, (i) all assets and liabilities of the Subsidiaries will be deemed merged or treated as though they were merged into and with the assets and liabilities of Carmike, (ii) no distributions will be made under the Plan on account of intercompany claims among the Debtors, (iii) all guarantees of the Debtors of the obligations of any other Debtor will be eliminated so that any claim against any Debtor and any guarantee thereof executed by any other Debtor and any joint or several liability of any of the Debtors will be deemed to be one obligation of the consolidated Debtors and (iv) each and every Claim filed or to be filed in the Chapter 11 Case of any of the Debtors will be deemed filed against the consolidated Debtors, and will be deemed one Claim against and obligation of the consolidated Debtors. As set forth above, the substantive consolidation of the Chapter 11 Cases will be for Plan purposes only and will not effect the corporate structure and organization of the Reorganized Debtors. In addition, the substantive consolidation of the Debtors' estates will not affect the fees payable pursuant to section 1930 of title 28 of the United States Code, as determined by the Bankruptcy Court at the Confirmation Hearing. G. PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS ------------------------------------------- Except as to applications for allowance of compensation and reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code, Reorganized Carmike will, on and after the Effective Date, have the exclusive right to make and file objections to Claims. On and after the Effective Date, Reorganized Carmike will have the authority to compromise, settle, otherwise resolve or withdraw any objections to Claims and compromise, settle or otherwise resolve Disputed Claims without approval of the Bankruptcy Court. Unless otherwise ordered by the Bankruptcy Court, the Debtors and, on and after the Effective Date, Reorganized Carmike will file all objections to Claims that are the subject of proofs of claim or requests for payment filed with the Bankruptcy 48 Court (other than applications for allowances of compensation and reimbursement of expenses) and serve such objections upon the holder of the Claim as to which the objection is made as soon as is practicable, but in no event later than 120 days after the Effective Date or such later date as may be approved by the Bankruptcy Court. The holder of a Disputed Claim that becomes an Allowed Claim subsequent to the Effective Date will receive the distribution that would have been made to such holder under the Plan, if the Disputed Claim had been an Allowed Claim on or prior to the Effective Date, without any additional post-Effective Date interest thereon (except as otherwise expressly provided under the Plan), on the first Business Day of the next succeeding month that is at least ten Business Days after the date such Disputed Claim becomes an Allowed Claim. See Section V. D.2. Pursuant to Section 5.5(c) of the Plan, upon the disallowance of any Disputed Claim, each holder of an Allowed General Unsecured Claim shall be entitled to its Pro Rata Share of Cash equal to the distribution that would have been made in accordance with Section 4.5(b) (and 4.6(b) if applicable) of the Plan to the holder of such Disputed Claim had such Disputed Claim been an Allowed Claim on or prior to the Effective Date. Such distributions on account of disallowed Claims shall be made on the next Subsequent Distribution Date. In the event that the amount to be distributed pursuant to Section 5.5(c) of the Plan at any time exceeds $3 million, then such distribution shall be made on the first Business Day of the next succeeding month that is at least ten Business Days after the first date on which the amount of such distribution exceeds $3 million, provided, however, that any such additional distribution under Section 5.5(c) of the Plan which would otherwise be made on a date that is within 35 days prior to any Subsequent Distribution Date shall be made on the next Subsequent Distribution Date. All amounts of Cash withheld from distributions on the Effective Date or any Subsequent Distribution Date on account of Disputed General Unsecured Claims in Class 5 shall be maintained in a trust or escrow account to be established on the Effective Date. Upon allowance or disallowance of all or any portion of such Disputed Claims, Reorganized Carmike shall make distributions from the segregated account in accordance with the Plan, provided that the amount of Cash remaining in such account shall be equal or exceed the aggregate amount of distributions that would have been made under the Plan on account of the then remaining Disputed General Unsecured Claims in Class 5 had such Disputed Claims been Allowed Claims as of the Effective Date. If a portion of a Claim is in part Allowed and in part Disputed or otherwise not Allowed, a distribution will be made on account of the Allowed portion of the Claim in accordance with the Plan. Payments and distributions to each holder of a Claim that is Disputed or that is not Allowed, to the extent that such Claim ultimately becomes Allowed, will be made in accordance with the provisions of the Plan governing such Claim. See Sections V. C. and V. D. 49 H. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THE PLAN ------------------------------------------------- The Plan will not become effective unless and until the following conditions will have been satisfied pursuant to Section 10.1 of the Plan: o the Confirmation Order, in form and substance acceptable to the Debtors shall have been signed by the judge presiding over the Chapter 11 Cases, and there shall not be a stay or injunction in effect with respect thereto; o all actions, documents and agreements necessary to implement the Plan shall have been effected or executed; o the holders of at least $45,685,000 in principal amount of Allowed Subordinated Note Claims receive shares of New Common Stock on account of such Allowed Claims in accordance with Section 4.7(c) of the Plan; and o the Debtors shall have received all authorizations, consents, regulatory approvals, rulings, letters, no-action letters, opinions or documents that are determined by the Debtors to be necessary to implement the Plan. The Debtors may waive, by a writing signed by an authorized representative of the Debtors and subsequently filed with the Bankruptcy Court, one or more of the conditions precedent to effectiveness of the Plan set forth above with the prior written consent of the Required Banks and the Committee. In the event that one or more of the conditions set forth above have not occurred on or before 120 days after the Confirmation Date, (a) the Confirmation Order will be vacated, (b) no distributions under the Plan will be made, (c) the Debtors and all holders of Claims and Equity Interests will be restored to the status quo ante as of the day immediately preceding the Confirmation Date as though the Confirmation Date never occurred and (d) the Debtors' obligations with respect to Claims and Equity Interests will remain unchanged and nothing contained herein shall constitute or be deemed a waiver or release of any Claims or Equity Interests by or against the Debtors or any other person or to prejudice in any manner the rights of the Debtors or any person in any further proceedings involving the Debtors. I. IMPLEMENTATION AND EFFECT OF CONFIRMATION OF THE PLAN ----------------------------------------------------- On the Effective Date, the property of the estates of the Debtors, will vest in the applicable Reorganized Debtors, except as otherwise provided in the Plan. From and after the Effective Date, the Reorganized Debtors may operate their businesses, and may use, acquire and dispose of property free of any restrictions imposed under the Bankruptcy Code. As of the Effective Date, all property of the Reorganized Debtors will be free and clear of all liens, 50 claims and interests of holders of Claims and Equity Interests, except as otherwise provided in the Plan. All injunctions and stays provided for in the Chapter 11 Cases under sections 105 and 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, will remain in full force and effect until the Effective Date. J. DISCHARGE, RELEASE AND INJUNCTION --------------------------------- The rights afforded pursuant to the Plan and the treatment of all Claims and Equity Interests under the Plan will be in exchange for and in complete satisfaction, discharge and release of Claims and Equity Interests of any nature whatsoever, including any interest accrued on such Claims from and after the Commencement Date, against the Debtors and the Debtors in Possession, or any of their assets or properties. Except as otherwise provided in the Plan, (i) on the Effective Date, all such Claims against and Equity Interests in the Debtors will be satisfied, discharged and released in full and (ii) all persons will be precluded from asserting against the Reorganized Debtors, their successors, or their assets or properties any other or further Claims or Equity Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. In consideration of the efforts expended and to be expended by the individual members of the Debtors' officers and directors in conjunction with their operational and financial restructuring during the Chapter 11 Cases, on the Effective Date, the Debtors and the Reorganized Debtors automatically will release and will be deemed to release any and all claims that they have or may have against such officers and directors, in their capacities as such, arising or based upon any actions, conduct or omissions occurring prior to the Effective Date and in connection with the Chapter 11 Cases. The Confirmation Order will constitute an order approving the compromise, settlement and release of any and all such claims pursuant to section 1123(b)(3)(A) of the Bankruptcy Code. As of the Effective Date, the Debtors, on behalf of themselves and all of their successors and assigns, and each of the Debtors' estates (collectively, including the Debtors and their estates, the "Releasing Parties") will be deemed to have forever released, waived and discharged Wachovia, each of the Banks, and each of the foregoing's respective officers, directors, principals, employees, agents, advisors, and attorneys, and all of the successors and assigns of the foregoing (collectively, including Wachovia and each Bank, the "Released Parties") from all claims (as such term is defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, demands, debts, rights, causes of action, liabilities, rights of contribution and rights of indemnification, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising in law, equity or otherwise (collectively, "Claims"), that are based in whole or in part on any act, omission, transaction, or other occurrence taking place on, or prior to, the Effective Date in any way relating to the Chapter 11 Cases, the Plan, the Bank Credit Agreements, any document or agreement related thereto, the Bank Claims, or any Bank's loan 51 relationship relating to the Bank Credit Agreements with the Debtors, which any Releasing Party has, had or may have against Released Party; provided, however, that such release will not apply to any obligations of the Banks or the Agent under the Post-Confirmation Credit Agreement. Such release will be effective notwithstanding that any Releasing Party or other person or entity may hereafter discover facts in addition to, or different from, those which that party now knows or believes to be true, and without regard to the subsequent discovery or existence of such different or additional facts, and the Releasing Parties are hereby expressly deemed to have waived any and all rights that they may have under any statute or common law principle which would limit the effect of the foregoing release, waiver, and discharge to those Claims actually known or suspected to exist on the Effective Date. Except as otherwise expressly provided in the Plan, the Confirmation Order or a separate order of the Bankruptcy Court, all entities who have held, hold or may hold Claims against or Equity Interests in any or all of the Debtors, are permanently enjoined, on and after the Effective Date, from (i) commencing or continuing in any manner any action or other proceeding of any kind against the Debtors with respect to any such Claim or Equity Interest, (ii) the enforcement, attachment, collection or recovery by any manner or means of any judgment, award, decree or order against the Debtors on account of any such Claim or Equity Interest, (iii) creating, perfecting or enforcing any encumbrance of any kind against the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest, (iv) asserting any right of setoff, subrogation or recoupment of any kind against any obligation due from the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest and (v) commencing or continuing in any manner any action or other proceeding of any kind with respect to any claims and causes of action which are extinguished or released pursuant to the Plan. Such injunction will extend to successors of the Debtors, including, without limitation, the Reorganized Debtors and their respective properties and interests in property. K. SUMMARY OF OTHER PROVISIONS OF THE PLAN --------------------------------------- The following subsections summarize certain other significant provisions of the Plan. The Plan should be referred to for the complete text of these and other provisions of the Plan. 1. Retiree Benefits The Debtors have not maintained and do not now maintain any retiree benefits plans. Nevertheless, pursuant to section 1114(a) of the Bankruptcy Code, payments, if any, due to any person for the purpose of providing or reimbursing payments for retired employees and their spouses and dependents for medical, surgical, or hospital care benefits, or benefits in the event of sickness, accident, disability, or death under any plan, fund, or program (through the purchase of insurance or otherwise) maintained or established in whole or in part by the Debtors prior to the Commencement Date, if any, shall be continued for the duration of the period the Debtors have obligated themselves to provide such benefits. 52 2. By-laws and Certificates of Incorporation The Reorganized Carmike By-laws, the Reorganized Carmike Certificate of Incorporation, and the by-laws and certificates of incorporation of each of the Reorganized Subsidiaries, shall contain provisions necessary (a) to prohibit the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code, subject to further amendment of such certificates of incorporation and by-laws as permitted by applicable law and (b) to effectuate the provisions of the Plan, in each case without any further action by the stockholders or directors of the Debtors, the Debtors in Possession or the Reorganized Debtors. The proposed forms of the Reorganized Carmike By-laws and the Reorganized Carmike Certificate of Incorporation will be included in the Plan Supplement. 3. Amendment or Modification of the Plan Alterations, amendments or modifications of or to the Plan may be proposed in writing by the Debtors at any time prior to the Confirmation Date, provided that the Plan, as altered, amended or modified, satisfies the conditions of sections 1122 and 1123 of the Bankruptcy Code, and the Debtors shall have complied with section 1125 of the Bankruptcy Code. The Plan may be altered, amended or modified at any time after the Confirmation Date and before substantial consummation, provided that the Plan, as altered, amended or modified, satisfies the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan, as altered, amended or modified, under section 1129 of the Bankruptcy Code. A holder of a Claim or Equity Interest that has accepted the Plan shall be deemed to have accepted the Plan, as altered, amended or modified, if the proposed alteration, amendment or modification does not materially and adversely change the treatment of the Claim or Equity Interest of such holder. 4. Indemnification Obligations Pursuant to the Plan, the obligations of the Debtors to defend, indemnify, reimburse or limit the liability of their present and any former directors, officers or employees who were directors, officers or employees, respectively, on or after the Commencement Date, solely in their capacity as directors, officers or employees, against any claims or obligations pursuant to the Debtors' certificates of incorporation or by-laws, applicable state law or specific agreement, or any combination of the foregoing, shall survive confirmation of the Plan, remain unaffected thereby, and not be discharged irrespective of whether indemnification, defense, reimbursement or limitation is owed in connection with an event occurring before, on or after the Commencement Date. 53 5. Nonenforcement of Subordination Provisions Pursuant to the Plan, the treatment provided to the holders of Bank Claims shall be in full and complete settlement, satisfaction and discharge of such Claims. The Confirmation Order shall operate as a permanent injunction enjoining any holder of a Bank Claim (prior to the Effective Date) and the holders of New Bank Debt from enforcing the subordination provisions in the Subordinated Notes Indenture after the Effective Date with respect, and solely with respect, to defaults or other events arising on or before substantial consummation of the Plan on the Effective Date. The New Bank Debt shall be "Senior Debt" as defined in the Amended Subordinated Notes Indenture and, notwithstanding anything to the contrary in the Plan, the rights of holders of New Bank Debt shall not be altered in any manner in the Amended Subordinated Notes Indenture from that which existed under the Subordinated Notes Indenture with respect to any act, event, or circumstances occurring after substantial consummation of the Plan on the Effective Date. 6. Cancellation of Existing Securities and Agreements Pursuant to the Plan, on the Effective Date, the promissory notes, share certificates, bonds and other instruments evidencing any Allowed Claim or Allowed Equity Interest, other than an Allowed Other Secured Claim or an Allowed Subsidiary Equity Interest that is reinstated and rendered unimpaired pursuant to Sections 4.3(b) and 4.10 of the Plan, respectively, shall be deemed cancelled without further act or action under any applicable agreement, law, regulation, order or rule and the obligations of the Debtors under the agreements, indentures and certificates of designations governing such Claims and Equity Interests, as the case may be, shall be discharged. Holders of promissory notes, share certificates, bonds and other instruments evidencing any Claim or Subsidiary Equity Interest that is reinstated and rendered unimpaired under the Plan shall not be required to surrender such instruments pursuant to the Plan. 7. Revocation or Withdrawal of the Plan The Debtors reserve the right to revoke or withdraw the Plan prior to the Confirmation Date. If the Debtors revoke or withdraw the Plan prior to the Confirmation Date, then the Plan shall be deemed null and void. In such event, nothing contained in the Plan shall constitute or be deemed a waiver or release of any claims by or against the Debtors or any other person or to prejudice in any manner the rights of the Debtors or any person in any further proceedings involving the Debtors. 8. Termination of Committee Pursuant to the Plan, the appointment of the Committee shall terminate on the Effective Date, except the Committee may appear at the hearing 54 to consider applications for final allowances of compensation and reimbursement of expenses and prosecute any objections to such applications, if appropriate. 9. Claims Preserved As of the Effective Date, any and all avoidance claims accruing to the Debtors and Debtors in Possession under sections 502(d), 544, 545, 547, 548, 549, 550 and 551 of the Bankruptcy Code shall be preserved for the Debtors. 10. Effectuating Documents and Further Transactions Pursuant to the Plan, each of the Debtors and the Reorganized Debtors is authorized to execute, deliver, file or record such contracts, instruments, releases, indentures and other agreements or documents and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan and any securities issued pursuant to the Plan. 11. Corporate Action Pursuant to the Plan, on the Effective Date, all matters provided for under the Plan that would otherwise require approval of the stockholders or directors of one or more of the Debtors or Reorganized Debtors, including, without limitation, the authorization to issue or cause to be issued New Bank Debt, New Subordinated Notes and New Common Stock (including the Reorganized Carmike Management Shares), the effectiveness of the Reorganized Carmike Certificate of Incorporation, the Reorganized Carmike By-laws, the certificates of incorporation of the Reorganized Subsidiaries, the by-laws of the Reorganized Subsidiaries, the Stockholders' Agreement, the Registration Rights Agreement, the Amended Subordinated Notes Indenture, and the election or appointment, as the case may be, of directors and officers of the Reorganized Debtors pursuant to the Plan and the authorization and approval of the Reorganized Carmike Employment Contract, shall be deemed to have occurred and shall be in effect from and after the Effective Date pursuant to the applicable general corporation law of the states in which the Debtors and the Reorganized Debtors are incorporated, without any requirement of further action by the stockholders or directors of the Debtors or Reorganized Debtors. On the Effective Date, or as soon thereafter as is practicable, the Reorganized Debtors shall, if required, file their amended certificates of incorporation with the Secretary of State of the state in which each such entity is incorporated, in accordance with the applicable general corporation law of each such state. 12. Exculpation Pursuant to the Plan, none of the Debtors, the Reorganized Debtors, the Committee, or any of their respective members, officers, directors, employees, advisors, professionals or agents shall have or incur any liability to any holder of a Claim or Equity Interest for any act or omission in connection with, related to, or arising out of, the Chapter 11 Cases, the pursuit of confirmation of the Plan, the consummation of the Plan or the 55 administration of the Plan or the property to be distributed under the Plan, except for willful misconduct and gross negligence, and, in all respects, the Debtors, the Reorganized Debtors, the Committee and each of their respective members, officers, directors, employees, advisors, professionals and agents shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Plan. 13. Plan Supplement The Reorganized Carmike Certificate of Incorporation, the Reorganized Carmike By-laws, Schedules 6.1(a)(x) and 6.1(a)(y) referred to in Section 6.1 of the Plan, the Stockholders' Agreement, the Registration Rights Agreement, the Reorganized Carmike Employment Contract, the Post-Confirmation Credit Agreement, the Amended Subordinated Notes Indenture and the loan documents for the Exit Financing Facility shall be contained in the Plan Supplement and filed with the Clerk of the Bankruptcy Court at least 10 days prior to the last day upon which holders of Claims and Equity Interests may vote to accept or reject the Plan. Upon its filing with the Bankruptcy Court, the Plan Supplement may be inspected in the office of the Clerk of the Bankruptcy Court during normal court hours. Holders of Claims or Equity Interests may obtain a copy of the Plan Supplement upon written request to Carmike in accordance with Section 12.12 of the Plan. VI. CONFIRMATION AND CONSUMMATION PROCEDURE Under the Bankruptcy Code, the following steps must be taken to confirm the Plan: A. SOLICITATION OF VOTES --------------------- In accordance with sections 1126 and 1129 of the Bankruptcy Code, the Claims in Classes 2, 4, 5, 6 and 7, and the Equity Interests in Classes 8 and 9 of the Plan are impaired, and the holders of Allowed Claims and Equity Interests in each of these Classes are entitled to vote to accept or reject the Plan. Claims in Classes 1 and 3 and Equity Interests in Class 10 are unimpaired. The holders of Allowed Claims and Equity Interests in each of such Classes are conclusively presumed to have accepted the Plan, and the solicitation of acceptances with respect to such Classes is not required under section 1126(f) of the Bankruptcy Code. As to the classes of claims entitled to vote on a plan, the Bankruptcy Code defines acceptance of a plan by a class of creditors as acceptance by holders of at least two-thirds in dollar amount and more than one-half in number of the claims of that class that have timely voted to accept or reject a plan. As to the classes of equity interests entitled to vote on a plan, the Bankruptcy Code defines acceptance of a plan by a class of equity interest holders by holders of at least two-thirds in dollar amount of the equity interests of that class that have timely voted to accept or reject a plan. 56 A vote may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that acceptance or rejection was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. Any creditor in an impaired Class (i) whose Claim has been listed by the Debtors in the Schedules filed with the Bankruptcy Court (provided that such Claim has not been scheduled as disputed, contingent or unliquidated) or (ii) who filed a proof of claim on or before the Bar Date (May 8, 2001) or any proof of claim filed within any other applicable period of limitations or with leave of the Bankruptcy Court, which Claim is not the subject of an objection or request for estimation, is entitled to vote on the Plan. Any equity interest holder in an impaired Class (i) whose Equity Interest is registered in the stock register maintained by or on behalf of the Debtors as of the Record Date and (ii) whose Equity Interest (a) has not been timely objected to or (b) has been Allowed, is entitled to vote on the Plan. B. THE CONFIRMATION HEARING ------------------------ The Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a confirmation hearing. The Confirmation Hearing in respect of the Plan has been scheduled for January 3, 2002, commencing at 10:00 a.m. Eastern Time, before the Honorable Sue L. Robinson, United States Bankruptcy Judge at the United States Bankruptcy Court, 824 Market Street, 6th Floor, Wilmington, Delaware 19801. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice except for an announcement of the adjourned date made at the Confirmation Hearing. Any objection to confirmation must be made in writing and specify in detail the name and address of the objector, all grounds for the objection and the amount of the Claim or number of shares of common stock of Carmike held by the objector. Any such objection must be filed with the Bankruptcy Court and served so that it is received by the Bankruptcy Court and the following parties on or before December 20, 2001 at 4:00 p.m., Eastern Time: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 Attn: Martin A. Durant F. Lee Champion, III, Esq. Weil, Gotshal & Manges LLP Richards, Layton & Finger P.A. Attorneys for the Debtors One Rodney Square 767 Fifth Avenue P.O. Box 551 New York, New York 10153 Wilmington, Delaware 19899 Attn: Harvey R. Miller, Esq. Attn: Mark D. Collins, Esq. George A. Davis, Esq. 57 Akin, Gump, Strauss, Hauer Pepper Hamilton LLP & Feld, L.L.P. 100 Renaissance Center 590 Madison Avenue Detroit, Michigan 48243 New York, New York 10022 Attn: David M. Fournier, Esq. Attn: Fred S. Hodara Esq. Jones, Day, Reavis & Pogue Duane Morris & Hecksher, LLP North Point, 901 Lakeside Avenue 1201 Orange Street, Suite 1001 Cleveland, Ohio 44114 Wilmington, Delaware 19801-0195 Attn: David G. Heiman, Esq. Attn: Michael Lastowski, Esq. Jones, Day, Reavis & Pogue 77 W. Wacker Drive Chicago, Illinois 60601 Attn: Brad B. Erens, Esq. Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014. C. CONFIRMATION ------------ At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if all of the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for confirmation of a plan are that the plan is (i) accepted by all impaired classes of claims and equity interests or, if rejected by an impaired class, that the plan "does not discriminate unfairly" and is "fair and equitable" as to such class, (ii) feasible and (iii) in the "best interests" of creditors and stockholders that are impaired under the plan. 1. Acceptance Classes 2, 4, 5, 6, 7, 8 and 9 of the Plan are impaired under the Plan and are entitled to vote to accept or reject the Plan. Classes 1, 3 and 10 of the Plan are unimpaired and, therefore, are conclusively presumed to have voted to accept the Plan. The Debtors reserve the right to amend the Plan in accordance with Section 12.8 of the Plan or seek nonconsensual confirmation of the Plan under section 1129(b) of the Bankruptcy Code or both with respect to any Class of Claims or Equity Interests that is entitled to vote to accept or reject the Plan, if such Class rejects the Plan. The determination as to whether to seek confirmation of the Plan under such circumstances will be announced before or at the Confirmation Hearing. 2. Unfair Discrimination and Fair and Equitable Tests To obtain nonconsensual confirmation of the Plan, it must be demonstrated to the Bankruptcy Court that the Plan "does not discriminate unfairly" and is "fair and equitable" with respect to each impaired, nonaccepting Class. The Bankruptcy Code provides a non-exclusive definition of 58 the phrase "fair and equitable." The Bankruptcy Code establishes "cram down" tests for secured creditors, unsecured creditors and equity holders, as follows: o Secured Creditors. Either (i) each impaired secured creditor retains its liens securing its secured claim and receives on account of its secured claim deferred cash payments having a present value equal to the amount of its allowed secured claim, (ii) each impaired secured creditor realizes the "indubitable equivalent" of its allowed secured claim or (iii) the property securing the claim is sold free and clear of liens with such liens to attach to the proceeds of the sale and the treatment of such liens on proceeds to be as provided in clause (i) or (ii) above. o Unsecured Creditors. Either (i) each impaired unsecured creditor receives or retains under the plan property of a value equal to the amount of its allowed claim or (ii) the holders of claims and interests that are junior to the claims of the dissenting class will not receive any property under the plan. o Equity Interests. Either (i) each holder of an equity interest will receive or retain under the plan property of a value equal to the greater of the fixed liquidation preference to which such holder is entitled, or the fixed redemption price to which such holder is entitled or the value of the interest or (ii) the holder of an interest that is junior to the nonaccepting class will not receive or retain any property under the plan. A plan of reorganization does not "discriminate unfairly" with respect to a nonaccepting class if the value of the cash and/or securities to be distributed to the nonaccepting class is equal to, or otherwise fair when compared to, the value of the distributions to other classes whose legal rights are the same as those of the nonaccepting class. 3. Feasibility The Bankruptcy Code permits a plan to be confirmed if it is not likely to be followed by liquidation or the need for further financial reorganization. For purposes of determining whether the Plan meets this requirement, the Debtors have analyzed their ability to meet their obligations under the Plan. As part of this analysis, the Debtors have prepared projections of their financial performance for each of the five fiscal years in the period ending December 31, 2005 (the "Projection Period"). These projections, and the assumptions on which they are based, are included in the Debtors' Projected Financial Information, annexed hereto as Exhibit E. Based upon such projections, the Debtors believe that they will be able to make all payments required 59 pursuant to the Plan and, therefore, that confirmation of the Plan is not likely to be followed by liquidation or the need for further reorganization. The financial information and projections appended to the Disclosure Statement include for the five fiscal years in the Projection Period: o Projected Consolidated Balance Sheets of Reorganized Debtors as of December 31, 2001; o Projected Consolidated Statements of Operation of Reorganized Debtors as of December 31, 2001; and o Projected Consolidated Statements of Cash Flow of Reorganized Debtors as of December 31, 2001. The pro forma financial information and the projections are based on the assumption that the Plan will be confirmed by the Bankruptcy Court and, for projection purposes, that the Effective Date under the Plan will occur on January 15, 2002. The Debtors have prepared these financial projections, with the assistance of DrKW, based upon certain assumptions that they believe to be reasonable under the circumstances. Those assumptions considered to be significant are described in the financial projections, which are annexed hereto as Exhibit E. The financial projections have not been examined or compiled by independent accountants. The Debtors make no representation as to the accuracy of the projections or their ability to achieve the projected results. Many of the assumptions on which the projections are based are subject to significant uncertainties. Inevitably, some assumptions will not materialize and unanticipated events and circumstances may affect the actual financial results. Therefore, the actual results achieved throughout the Projection Period may vary from the projected results and the variations may be material. All holders of Claims and Equity Interests that are entitled to vote to accept or reject the Plan are urged to examine carefully all of the assumptions on which the financial projections are based in connection with their evaluation of the Plan. 4. Best Interests Test With respect to each impaired Class of Claims and Equity Interests, confirmation of the Plan requires that each holder of a Claim or Equity Interest either (i) accept the Plan or (ii) receive or retain under the Plan property of a value, as of the Effective Date, that is not less than the value such holder would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. To determine what holders of Claims and Equity Interests in each impaired Class would receive if the Debtors were liquidated under chapter 7, the Bankruptcy Court must determine the dollar amount that would be generated from the liquidation of the Debtors' assets and properties in the context of a chapter 7 liquidation case. The Cash amount that would be available for satisfaction of Claims and Equity Interests would consist of the proceeds resulting from the disposition of the unencumbered assets and properties of the 60 Debtors, augmented by the unencumbered Cash held by the Debtors at the time of the commencement of the liquidation case. Such Cash amount would be reduced by the costs and expenses of liquidation and by such additional administrative and priority claims that might result from the termination of the Debtors' business and the use of chapter 7 for the purposes of liquidation. The Debtors' costs of liquidation under chapter 7 would include the fees payable to a trustee in bankruptcy, as well as those fees that might be payable to attorneys and other professionals that such a trustee might engage. In addition, claims would arise by reason of the breach or rejection of obligations incurred and leases and executory contracts assumed or entered into by the Debtors during the pendency of the Chapter 11 Cases. The foregoing types of claims and other claims that might arise in a liquidation case or result from the pending Chapter 11 Cases, including any unpaid expenses incurred by the Debtors during the Chapter 11 Cases, such as compensation for attorneys, financial advisors and accountants, would be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay prepetition Claims. To determine if the Plan is in the best interests of each impaired class, the present value of the distributions from the proceeds of a liquidation of the Debtors' unencumbered assets and properties, after subtracting the amounts attributable to the foregoing claims, must be compared with the value of the property offered to such Classes of Claims under the Plan. After considering the effects that a chapter 7 liquidation would have on the ultimate proceeds available for distribution to creditors in the Chapter 11 Cases, including (i) the increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy and professional advisors to such trustee, (ii) the erosion in value of assets in a chapter 7 case in the context of the expeditious liquidation required under chapter 7 and the "forced sale" atmosphere that would prevail and (iii) the substantial increases in claims that would be satisfied on a priority basis or on parity with creditors in the Chapter 11 Cases, the Debtors have determined that confirmation of the Plan will provide each holder of an Allowed Claim with a recovery that is not less than such holder would receive pursuant to the liquidation of the Debtors under chapter 7. The Debtors also believe that the value of any distributions to each Class of Allowed Claims in a chapter 7 case, including all Secured Claims, would be less than the value of distributions under the Plan because such distributions in a chapter 7 case would not occur for a substantial period of time. It is likely that distribution of the proceeds of the liquidation could be delayed for a year or more after the completion of such liquidation in order to resolve claims and prepare for distributions. In the likely event litigation was necessary to resolve claims asserted in the chapter 7 case, the delay could be prolonged. 61 The Carmike Cinemas, Inc., et al. Liquidation Analysis is annexed hereto as Exhibit F. The information set forth in Exhibit F provides a summary of the liquidation values of the Debtors' assets, assuming a chapter 7 liquidation in which a trustee appointed by the Bankruptcy Court would liquidate the assets of the Debtors' estates. Reference should be made to the Liquidation Analysis for a complete discussion and presentation of the Liquidation Analysis. The Liquidation Analysis was prepared by the Debtors with the assistance of DrKW. Underlying the Liquidation Analysis are a number of estimates and assumptions that, although developed and considered reasonable by the Debtors' management and DrKW, are inherently subject to significant economic and competitive uncertainties and contingencies beyond the control of the Debtors and their management. The Liquidation Analysis also is based on assumptions with regard to liquidation decisions that are subject to change. Accordingly, the values reflected might not be realized if the Debtors were, in fact, to undergo such a liquidation. The chapter 7 liquidation period is assumed to be a period of six months, allowing for, among other things, the discontinuation and wind-down of operations, the sale of assets and the collection of receivables. D. CONSUMMATION ------------ The Plan will be consummated on the Effective Date. The Effective Date of the Plan will occur on the first Business Day on which the conditions precedent to the effectiveness of the Plan, as set forth in Section 10.1 of the Plan, have been satisfied or waived by the Debtors pursuant to Section 10.3 of the Plan. For a more detailed discussion of the conditions precedent to the Plan and the consequences of the failure to meet such conditions, see Section V. H. of the Disclosure Statement. The Plan is to be implemented pursuant to its terms, consistent with the provisions of the Bankruptcy Code. VII. MANAGEMENT OF REORGANIZED CARMIKE AND REORGANIZED SUBSIDIARIES A. BOARD OF DIRECTORS AND MANAGEMENT --------------------------------- 1. Reorganized Carmike a. Board of Directors The initial Board of Directors of Reorganized Carmike shall consist of ten individuals, three of whom shall be independent directors. Of the directors of Reorganized Carmike not required to be independent directors, one shall be the Chief Executive Officer of Reorganized Carmike, one shall be Carl Patrick, Jr., two shall be appointed by Jordan/Zalaznick Advisers, Inc. (an affiliate of John W. Jordan, II and David W. Zalaznick) and its affiliates, three shall be appointed by GS Capital Partners III, L.P. and its affiliates, and of the three independent directors, one shall be designated by Jordan/Zalaznick Advisers, Inc. and its affiliates, one shall be designated by GS Capital Partners III, L.P. and its affiliates, and one shall 62 be identified by the Chief Executive Officer of Reorganized Carmike and agreed upon by the Board of Directors of Reorganized Carmike. The names of the members of the initial Board of Directors of Reorganized Carmike shall be disclosed at or prior to the Confirmation Hearing, provided that the Debtors shall file a list of names of such members with the Plan Supplement to the extent then known. Each of the members of such initial Board of Directors shall serve in accordance with the Reorganized Carmike Certificate of Incorporation or Reorganized Carmike's By-laws, as the same may be amended from time to time. b. Officers. The officers of Carmike immediately prior to the Effective Date shall serve as the initial officers of Reorganized Carmike on and after the Effective Date. Such officers shall serve in accordance with any employment agreement with Reorganized Carmike and applicable nonbankruptcy law. 2. Reorganized Subsidiaries a. Boards of Directors. The members of the Boards of Directors of the Subsidiaries immediately prior to the Effective Date shall serve as the initial members of the Boards of Directors of the Reorganized Subsidiaries. Each of the members of such initial Boards of Directors shall serve in accordance with the Certificate of Incorporation or By-laws of such Reorganized Subsidiary, as the same may be amended from time to time. b. Officers. The initial officers of the Reorganized Subsidiaries immediately prior to the Effective Date shall serve as the initial officers of the Reorganized Subsidiaries. Such officers shall serve in accordance with any employment agreement with the Reorganized Subsidiaries and applicable nonbankruptcy law. 3. Identity of Carmike's Executive Officers Set forth below is the name, age and position with Carmike of each executive officer of Carmike:
Name Age Title ---- --- ----- Carl L. Patrick 83 Chairman of the Board of Directors since 1982. Michael W. Patrick 51 President since October 1981 and Chief Executive Officer since March 1989. Fred W. Van Noy 45 Senior Vice President - Chief Operating Officer since November 2000 63 Martin A. Durant 53 Senior Vice President - Finance, Treasurer and Chief Financial Officer since July 1999. F. Lee Champion, III 51 Senior Vice President, General Counsel, and Secretary since January 1998. Anthony J. Rhead 60 Senior Vice President - Film since December 1997. P. Lamar Fields 47 Senior Vice President - Real Estate since December 1997. H. Madison Shirley 50 Senior Vice President - Concessions, and Assistant Secretary since December 1997. Marilyn B. Grant 54 Vice President - Advertising since August 1990. Philip A. Smitley 43 Controller since April 1997.
B. COMPENSATION OF CARMIKE'S EXECUTIVE OFFICERS -------------------------------------------- The following table sets forth all cash compensation paid by Carmike to each of the five most highly compensated executive officers of Carmike, for services rendered in their respective capacities for the fiscal year ended December 31, 2000:
Compensation 3 ------------ Name Capacity in Which Served Salary Bonus ---- ------------------------ ------ ----- Michael W. Patrick President and Chief Executive Officer $589,719 $14,000 Martin A. Durant Senior Vice President - Finance, $200,000 $267,000 Treasurer and Chief Financial Officer F. Lee Champion, III Senior Vice President, General $169,000 $8,750 Counsel, and Secretary - ---------- 3 Each of the executive officers received certain other benefits and/or compensation in addition to the amounts listed herein. The aggregate amount of such other benefits and/or compensation of each of the listed executive officers is less than the lesser of (a) 10% of such officer's total salary and bonus for the year ended December 31, 2000 and (b) $50,000. 64 Anthony J. Rhead Senior Vice President - Film $100,000 $35,104 Fred W. Van Noy Senior Vice President - Chief $100,000 $24,000 Operating Officer
C. REORGANIZED CARMIKE MANAGEMENT SHARES ------------------------------------- 1. Description Pursuant to the Plan, the Reorganized Carmike Management Shares, representing ten percent (10%) of the New Common Stock on a fully diluted basis, will be reserved for issuance to key employees pursuant to the Plan or an employee incentive compensation plan substantially in the form to be included in the Plan Supplement (the "Incentive Plan"). a. Approval of the Incentive Plan. The Incentive Plan is proposed to be adopted as of the Effective Date by the Board of Directors of Reorganized Carmike subject to requisite approval of holders of New Common Stock on the Effective Date. All awards under the Incentive Plan will be subject to obtaining the requisite approvals. No more than 50% of the Reorganized Carmike Management Shares can be awarded to any single key employee during any calendar year, subject to equitable adjustment in the event of any stock split, stock combination, stock dividend, merger, extraordinary dividend or similar event. b. Administration of the Incentive Plan. The Incentive Plan will be administered by a committee (the "Compensation Committee") appointed by the Board of Directors of Reorganized Carmike from among its members who shall be (i) "non-employee directors" within the meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934, as amended and (ii) "outside directors" within the meaning of Treasury Regulation Section 1.162-27(e)(3) under Section 162(m) of the Tax Code. c. Awards under the Incentive Plan. The Compensation Committee will determine, in its sole discretion, (i) the officers, key employees or consultants performing services for Reorganized Carmike or its subsidiaries who shall receive an award under the Incentive Plan and (ii) the amount, type, conditions for vesting or exercisability, and other terms and conditions of such awards. Awards may be made in the form of stock options, stock grants, stock appreciation rights, stock units, performance-based awards or any combination thereof. In limited circumstances, the Incentive Plan will restrict the discretion of the Compensation Committee to set the exercise price of Reorganized Carmike Management Shares subject to a stock option. Under the Incentive Plan, the exercise price of Reorganized Carmike Management Shares subject to a stock option must be at least 85% of the fair market value of any such shares on the 65 date of the award and, in the case of a "restorative" stock option, must be equal to the fair market value of any such shares on the date of the award. A "restorative" stock option is a stock option covering up to the same number of previously owned shares of New Common Stock that are delivered by a participant as payment of the exercise price of shares subject to a stock option. d. Payment of the Exercise Price of an Award. The purchase price of Reorganized Carmike Management Shares subject to a stock option may be paid in cash or, in the discretion of the Compensation Committee, by the delivery of shares of New Common Stock then owned by the participant, by the withholding of shares of New Common Stock for which a stock option is exercisable or by a combination of these methods. The Compensation Committee may also permit payment to be made by delivering a properly executed exercise notice to Reorganized Carmike together with a copy of irrevocable instructions to a broker to deliver promptly to Reorganized Carmike the amount of sale or loan proceeds to pay the exercise price. e. Limit on the Number of Shares Subject to the Incentive Plan. The aggregate number of shares of New Common Stock available for awards under the Incentive Plan will be limited to the number of Reorganized Carmike Management Shares (including the CEO Award described below). However, any Reorganized Carmike Management Shares subject to an award under the Incentive Plan which for any reason are forfeited, cancelled or terminated without having been fully exercised or are settled in cash or are delivered to Reorganized Carmike as payment in connection with an award shall again be available for awards under the Incentive Plan. f. Adjustments to Awards or the Number of Shares Available under the Incentive Plan. In the case of any change in the New Common Stock through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, split up, spin-off, combination of shares, exchange of shares, dividend in kind or other like change in capital structure or distribution (other than normal cash dividends to stockholders of the Reorganized Carmike), an adjustment shall be made with respect to the Reorganized Carmike Management Shares subject to any outstanding award so that the participant shall receive such securities, cash and/or other property as would have been received in respect of the Reorganized Carmike Management Shares subject to such award had such award been exercised in full immediately prior to such change or distribution. In addition, in order to prevent dilution or enlargement of any participant's rights under the Incentive Plan, the Committee will have authority to adjust, in an equitable manner, the number and kind of shares that may be issued under the Incentive Plan, the number and kind of shares subject to outstanding awards, the exercise price applicable to outstanding awards, and the fair market value of the New Common Stock and other value determinations or other terms applicable to outstanding awards; provided, 66 however, that any such arithmetic adjustment to a performance-based award shall not cause the amount of compensation payable thereunder to be increased from what otherwise would have been due upon attainment of the unadjusted award. g. Effect Under the Incentive Plan of a Change in Control of the Company. Upon a Change in Control (as defined in the Incentive Plan) of Reorganized Carmike, all then outstanding stock options, stock appreciation rights, stock awards and stock units shall immediately vest and become non-forfeitable. Further, the Compensation Committee may determine that each outstanding stock option and stock appreciation right shall terminate within a specified number of days after notice to the holder, and such holder shall receive, with respect to each Reorganized Carmike Management Share subject thereto, an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of such Change in Control over the exercise price per share of such stock option or stock appreciation right; such amount to be payable in cash, in one or more kinds of property (including the property, if any, payable in the transaction) or in a combination thereof, as the Compensation Committee shall determine. h. CEO Award. Pursuant to the Plan, Michael W. Patrick will be awarded as of the Effective Date a fully vested and non-forfeitable entitlement to 50% of the Reorganized Carmike Management Shares representing 5% of the New Common Stock on a fully diluted basis, or the equivalent thereof (the "CEO Award"), to encourage Mr. Patrick to continue his valuable contributions to the success of Reorganized Carmike. The CEO Award may be made in the form of Reorganized Carmike Management Shares, an unsecured but fully vested and absolute contractual right to receive such shares or the value of such shares, or any equivalent or other similar arrangements or combination thereof, as reasonably determined prior to the Effective Date in consultation with the Compensation Committee. Further, Mr. Patrick may be permitted to defer receipt of awards or payments in respect of the CEO Award until an event or events designated by him prior to the Effective Date. The amount, timing and character of income, if any, realized by Mr. Patrick as a result of the CEO Award depends upon the form or forms in which such award is structured and the timing of payments pursuant to the CEO Award. In that regard, Mr. Patrick is expected to be an individual to whom the limitations of section 162 of the Internal Revenue Code of 1986, as amended (the "Tax Code") will apply, particularly section 162(m) (briefly explained below). By reason of such limitations, all or a portion of ordinary income realized, if any, by Mr. Patrick as a result of the CEO Award might not be deductible for federal income tax purposes by Reorganized Carmike. 67 2. Certain Federal Income Tax Consequences THE STATEMENTS IN THE FOLLOWING PARAGRAPHS OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES OF REORGANIZED CARMIKE MANAGEMENT SHARES ARE BASED ON STATUTORY AUTHORITY AND JUDICIAL AND ADMINISTRATIVE INTERPRETATIONS AS OF THE DATE OF THIS DISCLOSURE STATEMENT, WHICH ARE SUBJECT TO CHANGE AT ANY TIME (POSSIBLY WITH RETROACTIVE EFFECT). THE LAW IS TECHNICAL AND COMPLEX, AND THE DISCUSSION BELOW REPRESENTS ONLY A GENERAL SUMMARY. a. Stock Options. Options granted under the Incentive Plan will be either "incentive stock options" under section 422(b) of the Tax Code or non-qualified stock options. Among other requirements necessary to qualify as an incentive stock option, a stock option must have an exercise price that is not less than the fair market value of the underlying stock at the time of grant. b. Incentive Stock Options. A deduction will not be allowed to Reorganized Carmike or any of its subsidiaries for federal income tax purposes with respect to the grant or exercise of an option qualifying as an incentive stock option or the disposition, after the expiration of the applicable holding period (as specified in section 422 of the Tax Code), of the shares of Reorganized Carmike Management Shares acquired upon exercise of such Option. In the event of a disposition of such shares prior to the expiration of the applicable holding period (a "disqualifying disposition"), a federal income tax deduction will be allowed to Reorganized Carmike in an amount equal to the ordinary income included in gross income by the optionee, provided that such amount constitutes an ordinary and necessary business expense to Reorganized Carmike and is reasonable and the limitations of sections 162(m) and 280G of the Tax Code (discussed below) do not apply. An employee who exercises an option qualifying as an incentive stock option by delivering shares previously acquired pursuant to the exercise of another option that qualified as an incentive stock option is treated as making a disqualifying disposition of such shares if the employee delivers such shares before the expiration of the applicable holding period with respect to such shares. Upon the exercise of an option with previously acquired shares as to which no disqualifying disposition occurs, it would appear that the employee would not recognize gain or loss with respect to such previously acquired shares. c. Non-Qualified Stock Options ("NQSO"). A NQSO is an option that does not qualify as an "incentive stock option" under section 422(b) of the Tax Code. An individual who receives a NQSO will not recognize any taxable income upon the grant of such NQSO. Generally, upon exercise of a NQSO, an individual will be treated as having received ordinary income in an amount equal to the excess of the fair market value of the shares of stock at the time of exercise over the exercise price. 68 The ordinary income recognized with respect to the transfer of shares of New Common Stock upon exercise of a NQSO under the Incentive Plan will be subject to both wage withholding and employment taxes. In addition to the customary methods of satisfying the withholding tax liabilities that arise upon the exercise of a NQSO, if an individual may satisfy the liability in whole or in part by tendering other shares of Reorganized Carmike Management Shares owned by the individual, such shares will be valued at their fair market value as of the date the tax obligation arises. A deduction for federal income tax purposes will be allowed to Reorganized Carmike or a subsidiary thereof in an amount equal to the ordinary income included in gross income by the individual in connection with the exercise of such option, provided that such amount constitutes an ordinary and necessary business expense and is reasonable and the limitations of sections 162(m) and 280G of the Tax Code do not apply. d. Stock Awards. An individual who receives Reorganized Carmike Management Shares pursuant to a stock award under the Incentive Plan will realize ordinary income for federal income tax purposes to the extent the value of such shares exceeds the amount paid, if any, by such individual for such shares at the time such shares are transferable or not subject to a substantial risk of forfeiture. Reorganized Carmike may be entitled to deduct up to a similar amount subject to the limitations of section 162 and 280G of the Tax Code. e. Change in Control. Upon a "change in control" of Reorganized Carmike (not including any change of control occurring as a result of the distribution of New Common Stock to holders of Allowed Claims and Allowed Equity Interests on the Effective Date), the then outstanding awards under the Incentive Plan might become fully vested and exercisable pursuant to the terms of the applicable grant or other agreement, or at the discretion of the Compensation Committee. In general, if the total amount of payments to certain individuals that are contingent upon a "change of control" of Reorganized Carmike (as determined for purposes of section 280G of the Tax Code), including compensation arising from the vesting of awards under the Incentive Plan as a result of the change of control, equals or exceeds three times the individual's "base amount" (generally, such individual's average annual compensation for the five years preceding the change in control), then, subject to certain exceptions, such compensation may be treated as "parachute payments" under the Tax Code, in which case a portion of such compensation would be nondeductible to Reorganized Carmike, and the recipient would be subject to a 20% excise tax on such portion. No assurance can be given that the awards granted under the Incentive Plan will not be subject to section 280G of the Tax Code. f. Certain Limitations on Deductibility of Executive Compensation. With certain exceptions, section 162(m) of the Tax Code denies a deduction to publicly held corporations for compensation paid to certain executive officers in excess of $1 million per executive per taxable year (including, in some cases, any deduction with respect to the exercise of a NQSO or the disqualifying disposition of stock purchased pursuant to an option). An 69 exception applies to compensation paid pursuant to a plan or agreement that existed during the period in which the corporation was not publicly held. The Incentive Plan is intended to be effective following the requisite approvals but prior to the Effective Date. Another exception to section 162(m) of the Tax Code applies to certain performance-based compensation which, among other requirements, is disclosed to and separately approved by the shareholders of the publicly held corporation. Compensation attributable to options granted under the Incentive Plan is intended to qualify for an exception to the section 162(m) limitations. The Incentive Plan will be submitted for approval by the requisite majority of the holders of New Common Stock in a manner intended to satisfy the shareholder approval requirement for certain performance-based compensation for purposes of section 162(m) of the Tax Code. However, there are no assurances that option grants under the Incentive Plan will qualify for the performance-based or other exception to the section 162(m) limitations. 3. Securities Law Compliance. Reorganized Carmike is not relying on the exemption from the registration requirements of the federal securities laws set forth in section 1145 of the Bankruptcy Code for the offering and issuance of Reorganized Carmike Management Shares pursuant to the Incentive Plan. As a result, the offering and issuance of Reorganized Carmike Management Shares pursuant to the Incentive Plan will be made by Reorganized Carmike in compliance with federal securities laws. D. CHIEF EXECUTIVE OFFICER EMPLOYMENT CONTRACT ------------------------------------------- Pursuant to the Plan, on the Effective Date, Reorganized Carmike will enter into an employment contract with Michael W. Patrick (the "Reorganized Carmike Employment Contract"). The Reorganized Carmike Employment Contract will be in substantially the form included in the Plan Supplement. The term of the Reorganized Carmike Employment Contract will be five years. Under the Reorganized Carmike Employment Contract, Mr. Patrick will receive an annual salary of $850,000 and, at the discretion of the Reorganized Carmike Board of Directors, may receive performance-based bonuses in an amount up to 50% of the annual base salary. In the event of termination of Mr. Patrick's employment by Reorganized Carmike without Cause (as defined in the Reorganized Carmike Employment Contract), other than by reason of death or disability, or by the executive for Good Reason (as defined in the Reorganized Carmike Employment Contract), Mr. Patrick is entitled to severance for the greater of (i) five years and (ii) the remainder of the term of the Reorganized Carmike Employment Contract. Severance generally means (i) Base Salary (as defined in the Reorganized Carmike Employment Contract), (ii) Target Bonus (as defined in the Reorganized Carmike Employment Contract) and (iii) continued coverage under certain welfare benefit plans. 70 E. CONTINUATION OF EXISTING BENEFIT PLANS AND D&O INSURANCE -------------------------------------------------------- Except as provided in Section V. E. of the Disclosure Statement, all savings plans, retirement plans or benefits, if any, health care plans, performance-based incentive plans, workers' compensation programs and life, disability, directors and officers liability and other insurance plans are treated as executory contracts under the Plan and will be assumed by the Debtors under the Plan. The Debtors have maintained and will continue to maintain appropriate insurance on behalf of their officers and directors. F. POST-EFFECTIVE DATE SECURITY OWNERSHIP OF CERTAIN OWNERS -------------------------------------------------------- The following table sets forth those holders of Claims and Equity Interests (including affiliates and related entities) which, based upon the most recent information regarding the ownership of Claims or Equity Interests available to Carmike and assuming the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000, will own beneficially more than 5.0% of the New Common Stock as of the Effective Date: 71
Name and Address of Estimated Amount of Estimated % of Beneficial Holder Beneficial Ownership Beneficial Ownership ----------------- -------------------- -------------------- GS Capital Partners III, L.P. 4,066,294 40.7%(4) c/o Goldman Sachs & Co. 85 Broad Street New York, New York 10004 Attn: David J. Greenwald, Esq. John W. Jordan, II 1,194,763 11.9% 767 Fifth Avenue, 48th Floor New York, New York 10153 David W. Zalaznick 899,778 9.0% 767 Fifth Avenue, 48th Floor New York, New York 10153 Leucadia Investors, Inc. 970,586 9.7% 315 Park Avenue South, 20th Floor New York, New York 10010 Michael W. Patrick 618,303 6.2%5
G. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- As disclosed in the Debtors' monthly operating report for October 2000, after the filing by Carmike of its quarterly financial report on Form 10Q on September 29, 2000 and the expiration of a blackout period, David W. Zalaznick, a director of Carmike, on October 5, 2000 purchased $15,228,000 (at face value) of Carmike's 9 3/8 % Senior Subordinated Notes due 2009 in an open market transaction at a price of $.26056/per dollar of face amount thereof. On the same day, TJT (B) Bermuda Investment Co., an affiliate of John W. Jordan II who is also a director of Carmike, similarly purchased the same amount of 9 3/8 % Senior Subordinated Notes at the same price. On the same day, Leucadia National Corporation, a public corporation ("Leucadia"), similarly purchased the same amount of 9 3/8 % Senior Subordinated Notes at the same price. Messrs. - ---------- 4 The estimated percentage of beneficial ownership provided for GS Capital Partners III, L.P. includes amounts owned by certain of its affiliated investment funds: Bridge Street Fund 1998, L.P., Stone Street Fund 1998, L.P., Goldman Sachs & Co. Verwaltungs GmbH, and GS Capital Partners III Offshore, L.P. 5 In addition, as of the Effective Date Carl L. Patrick, Sr. and Carl L. Patrick, Jr., relatives of Mr. Michael W. Patrick and members of the Board of Directors of Carmike, will own approximately 165,000 shares of New Common Stock (representing approximately 1.7% of the fully diluted shares). 72 Jordan and Zalaznick directly or indirectly are stockholders in Leucadia corporation. Neither jointly nor severally do they hold a controlling interest in Leucadia. Messrs. Jordan and Zalaznick notified Carmike of such purchases by letter dated October 9, 2000. Additionally, on October 12, 2000, Mr. Zalaznick sold 20,000 shares of Carmike Class A Common Stock at a price of $.625/per share and 2,000 shares at a price of $.6875/per share. On October 13, 2000, Mr. Zalaznick sold 44,000 shares of Class A Common Stock at a price of $.625/per share. Mr. Zalaznick notified Carmike of such sales by letter dated October 18, 2000. For additional information regarding certain affiliate relationships and related transactions, see the Amendment to the Debtors' Annual Report for fiscal year 2000, Form 10-K/A filed with the Securities Exchange Commission on April 30, 2001 and annexed hereto as Exhibit C. VIII. SECURITIES LAWS MATTERS ----------------------------- A. BANKRUPTCY CODE EXEMPTIONS FROM REGISTRATION REQUIREMENTS --------------------------------------------------------- In reliance upon section 1145 of the Bankruptcy Code, New Common Stock to be issued to holders of Common Stock and Preferred Stock (collectively, "Old Carmike Equity Holders") and to Electing Noteholders under Section 4.7(c) of the Plan and New Subordinated Notes to be issued to the holders of Subordinated Note Claims under Section 4.7(b) of the Plan on the Effective Date will be exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act") and equivalent provisions in state securities laws. Section 1145(a) of the Bankruptcy Code generally exempts from such registration the issuance of securities if the following conditions are satisfied: (i) the securities are issued by a debtor (or its successor) under a plan of reorganization; (ii) the recipients of the securities hold a claim against, an interest in, or a claim for an administrative expense against the debtor; and (iii) the securities are issued entirely in exchange for the recipient's claim against or interest in the debtor, or are issued principally in such exchange and partly for cash or property. The Debtors believe that the exchange of New Common Stock for Equity Interests of Old Carmike Equity Holders, the exchange of New Common Stock for Subordinated Note Claims of Electing Noteholders and the exchange of New Subordinated Notes for Subordinated Note Claims under the circumstances provided in the Plan will satisfy the requirements of section 1145(a) of the Bankruptcy Code. The shares of New Common Stock to be issued to Old Carmike Equity Holders and Electing Noteholders and New Subordinated Notes to be issued to the holders of Subordinated Note Claims pursuant to the Plan on the Effective Date would be deemed to have been issued in a registered public offering under the Securities Act and, therefore, may be resold by any holder thereof without registration under the Securities Act pursuant to the exemption provided by section 4(1) thereof, unless the holder is an "underwriter" with respect to such 73 securities, as that term is defined in section 1145(b)(1) of the Bankruptcy Code (a "statutory underwriter"). In addition, such securities generally may be resold by the recipients thereof without registration under state securities or "blue sky" laws pursuant to various exemptions provided by the respective laws of the individual states. However, recipients of securities issued under the Plan are advised to consult with their own counsel as to the availability of any such exemption from registration under federal securities laws and any relevant state securities laws in any given instance and as to any applicable requirements or conditions to the availability thereof. Section 1145(b)(i) of the Bankruptcy Code defines "underwriter" for purposes of the Securities Act as one who (a) purchases a claim with a view to distribution of any security to be received in exchange for the claim, or (b) offers to sell securities issued under a plan for the holders of such securities, or (c) offers to buy securities issued under a plan from persons receiving such securities, if the offer to buy is made with a view to distribution of such securities, or (d) is an issuer of the securities within the meaning of section 2(11) of the Securities Act. The term "issuer" is defined in section 2(4) of the Securities Act; however, the reference contained in section 1145(b)(1)(D) of the Bankruptcy Code to section 2(11) of the Securities Act purports to include as statutory underwriters all persons who, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with, an issuer of securities. "Control" (as defined in Rule 405 under the Securities Act) means the possession, direct or indirect, of the power to direct or cause the direction of the policies of a person, whether through the ownership of voting securities, by contract, or otherwise. Accordingly, an officer or director of a reorganized debtor or its successor under a plan of reorganization may be deemed to be a "control person" of such debtor or successor, particularly if the management position or directorship is coupled with ownership of a significant percentage of the reorganized debtor's or its successor's voting securities. Moreover, the legislative history of section 1145 of the Bankruptcy Code suggests that a creditor who owns at least ten percent (10%) of the voting securities of a reorganized debtor may be presumed to be a "control person." The Debtors believe that the Reorganized Carmike Management Shares to be issued under the Plan will be exempt from the registration requirements of the Securities Act, pursuant to section 4(2) of the Securities Act, as transactions by an issuer not involving any public offering, and equivalent exemptions in state securities laws. To the extent that persons deemed to be "underwriters" receive New Common Stock, New Subordinated Notes or persons receive Reorganized Carmike Management Shares, in each case pursuant to the Plan (collectively, "Restricted Holders"), resales by Restricted Holders would not be exempted by section 1145 of the Bankruptcy Code from registration under the Securities Act or other applicable law. Restricted Holders may, however, be able, at a future time and under certain conditions described below, to sell securities without 74 registration pursuant to the resale provisions of Rule 144 and Rule 144A under the Securities Act. Under certain circumstances, Restricted Holders may be entitled to resell their securities pursuant to the limited safe harbor resale provisions of Rule 144. Generally, Rule 144 provides that if certain conditions are met (e.g., the availability of current public information with respect to the issuer, volume limitations and notice and manner of sale requirements), specified persons who resell "restricted securities" or who resell securities which are not restricted but who are "affiliates" of the issuer of the securities sought to be resold, will not be deemed to be "underwriters" as defined in section 2(11) of the Securities Act. Under paragraph (k) of Rule 144, the aforementioned conditions will not limit the resale of restricted securities that are sold for the account of a holder who is not an affiliate of the company at the time of such resale and was not an affiliate of the company during the three (3) month period preceding such sale, so long as a period of at least two years has elapsed since the later of (i) the Effective Date and (ii) the date on which such holder acquired his or its securities from Reorganized Carmike or an affiliate of Reorganized Carmike. Rule 144A provides a non-exclusive safe harbor exemption from the registration requirements of the Securities Act for resales to certain "qualified institutional buyers" of securities which are "restricted securities" within the meaning of the Securities Act, irrespective of whether the seller of such securities purchased its securities with a view towards reselling such securities, if certain other conditions are met (e.g., the availability of information required by paragraph (d)(4) of Rule 144A and certain notice provisions). Under Rule 144A, a "qualified institutional buyer" is defined to include, among other persons, "dealers" registered as such pursuant to section 15 of the Securities Exchange Act of 1934 (the "Exchange Act"), and entities which purchase securities for their own account or for the account of another qualified institutional buyer and which (in the aggregate) own and invest on a discretionary basis at least $100 million in the securities of unaffiliated issuers. Subject to certain qualifications, Rule 144A does not exempt the offer or sale of securities which, at the time of their issuance, were securities of the same class of securities then listed on a national securities exchange (registered as such pursuant to section 6 of the Exchange Act) or quoted in a U.S. automated inter-dealer quotation system. Pursuant to the Plan, certificates evidencing shares of New Common Stock or New Subordinated Notes received by Restricted Holders or holders of five percent (5%) or more of the outstanding New Common Stock or by holders that request legended certificates and who certify that they may be deemed to be underwriters within the meaning of section 1145 of the Bankruptcy Code, will bear a legend substantially in the form below: THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED 75 UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED. Any person or entity, other than (i) David W. Zalaznick, (ii) Bermuda Investment Co., an affiliate of John W. Jordan, II, (iii) Leucadia National Corporation, (iv) GS Capital Partners III, L.P. and its affiliates or (v) recipients of Reorganized Carmike Management Shares, that would receive legended securities as provided above may instead receive certificates evidencing New Common Stock or New Subordinated Notes, as applicable, without such legend if, prior to the Effective Date, such person or entity delivers to Reorganized Carmike, (i) an opinion of counsel reasonably satisfactory to Reorganized Carmike to the effect that the shares of New Common Stock or New Subordinated Notes, as applicable, to be received by such person or entity are not subject to the restrictions applicable to "underwriters" under section 1145 of the Bankruptcy Code and may be sold without registration under the Securities Act and (ii) a certification that such person or entity is not an "underwriter" within the meaning of section 1145 of the Bankruptcy Code. Any holder of a certificate evidencing shares of New Common Stock or New Subordinated Notes, as applicable, bearing such legend may present such certificate to the transfer agent for the shares of New Common Stock or the Indenture Trustee, as applicable, for exchange for one or more new certificates not bearing such legend or for transfer to a new holder without such legend at such time as (a) such securities are sold pursuant to an effective registration statement under the Securities Act or (b) such holder delivers to Reorganized Carmike an opinion of counsel reasonably satisfactory to Reorganized Carmike to the effect that such securities are no longer subject to the restrictions applicable to "underwriters" under section 1145 of the Bankruptcy Code or (c) such holder delivers to Reorganized Carmike an opinion of counsel reasonably satisfactory to Reorganized Carmike to the effect that such securities are no longer subject to the restrictions pursuant to an exemption under the Securities Act or the Exchange Act and such securities may be sold without registration under the Securities Act or to the effect that such transfer is exempt from registration under the Securities Act, in which event the certificate issued to the transferee shall not bear such legend. IN VIEW OF THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A RECIPIENT OF SECURITIES MAY BE AN UNDERWRITER OR AN AFFILIATE OF REORGANIZED CARMIKE, CARMIKE MAKES NO REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN SECURITIES TO BE DISTRIBUTED PURSUANT TO THE PLAN. ACCORDINGLY, CARMIKE 76 RECOMMENDS THAT POTENTIAL RECIPIENTS OF SECURITIES CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES. B. STOCKHOLDERS' AGREEMENT ----------------------- Certain Electing Noteholders (David W. Zalaznick, Bermuda Investment Co., an affiliate of John W. Jordan, II, and Leucadia National Corporation), holders of Preferred Stock Equity Interests, and Michael W. Patrick, in their capacities as holders of New Common Stock on and after the Effective Date pursuant to the Plan shall be required to become a party to a stockholders' agreement (the "Stockholders' Agreement") and, accordingly, will be afforded the rights provided thereby and will be subject to the obligations provided therein. The Stockholders' Agreement will provide, among other things, that so long as the parties to the Stockholders' Agreement hold shares of New Common Stock, the Board of Directors of Reorganized Carmike shall be composed as follows: one director shall be the Chief Executive Officer of Reorganized Carmike, one director shall be Carl Patrick, Jr., three directors shall be appointed by Jordan/Zalaznick Advisers, Inc. and its affiliates, at least one of which shall be an independent director, four directors shall be appointed by GS Capital Partners III, L.P. and its affiliates, at least one of which shall be an independent director, and one independent director shall be identified by the Chief Executive Officer of Reorganized Carmike and agreed upon by the Board of Directors of Reorganized Carmike. The Stockholders' Agreement may also restrict the amount of New Common Stock that the parties thereto can transfer initially. The certificates representing shares of New Common Stock issued to the parties to the Stockholders' Agreement will bear a legend reflecting the fact that such shares are subject to the terms of the Stockholders' Agreement. C. REGISTRATION RIGHTS AGREEMENT ----------------------------- To the extent that a party receiving a distribution of New Common Stock pursuant to the Plan becomes a party to the Stockholders' Agreement, such party shall have the option to become a party to a registration rights agreement (the "Registration Rights Agreement") and, accordingly, will be afforded the rights provided thereby and will be subject to the obligations provided therein. The Registration Rights Agreement will provide, among other things, that the parties thereto will have the right to request Reorganized Carmike to register their shares of New Common Stock. The form of Registration Rights Agreement will be included in the Plan Supplement. IX. VALUATION The Debtors have been advised by DrKW with respect to the aggregate value of the Reorganized Debtors. DrKW has undertaken its valuation analysis for the purpose of determining value available for distribution to creditors and equity interest holders pursuant to the Plan and to analyze the relative recoveries to creditors and equity interest holders thereunder. 77 The reorganization value is as of an assumed Effective Date of January 15, 2002 and reflects the going concern value of the Debtors' business after giving effect to the implementation of the Plan. Based upon the foregoing assumptions, the reorganization value of the Reorganized Debtors was assumed for purposes of the Plan by the Debtors, based upon advice from DrKW, to be approximately $585,000,000. The reorganization value does not include excess Cash, if any, remaining in the Reorganized Debtors after the projected Cash distributions to be made under the Plan. The Debtors are of the view that such excess Cash, if any, is necessary to run the business and, therefore, should not be included as excess Cash for valuation purposes. Based upon the reorganization value set forth above, the Debtors' estimate of the aggregate amount of all Allowed Claims as of the Effective Date and assuming the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000, the Debtors have employed an assumed equity value of approximately $156,800,000. Based upon the distribution of 10,000,000 shares of New Common Stock under the Plan, the value per share of the New Common Stock is estimated to be $15.68. For purposes of determining the value per share of New Common Stock, DrKW assumed that the impact on the equity value of the New Common Stock of the Management Shares issued on the Effective Date pursuant to the Plan, and the Management Shares reserved for future issuance pursuant to the Plan, would be minimal. This assumption is based on, among other things, the fact that the estimated value of New Common Stock was made on a fully-diluted basis after issuance of all Management Shares, and that 50% of the Management Shares will have been distributed on the Effective Date. The estimated value represents a hypothetical reorganization value for the Reorganized Debtors. Such estimate reflects the application of various valuation techniques and does not purport to reflect or constitute an appraisal, a liquidation value or an estimate of the actual market value that may be realized through the sale of any securities to be issued pursuant to the Plan, which may be significantly different from the amounts set forth herein. The value of an operating business such as the Debtors' business is subject to uncertainties and contingencies that are difficult to predict and will fluctuate with changes in factors affecting the financial conditions and prospects of such a business. AS A RESULT, THE ESTIMATE OF REORGANIZATION VALUE SET FORTH HEREIN IS NOT NECESSARILY INDICATIVE OF ANY ACTUAL VALUE, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE THAN THAT SET FORTH HEREIN. BECAUSE SUCH ESTIMATE IS INHERENTLY SUBJECT TO UNCERTAINTIES, NONE OF CARMIKE, THE REORGANIZED DEBTORS, DrKW OR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR ITS ACCURACY. IN ADDITION, THE VALUATION OF NEWLY-ISSUED SECURITIES SUCH AS THE NEW COMMON STOCK IS SUBJECT TO ADDITIONAL UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT. Actual market prices of such securities at issuance will depend upon, among other things, conditions in the financial markets, the anticipated initial securities holdings of prepetition creditors, some of which may prefer to 78 liquidate their investment rather than hold it on a long-term basis, and other factors that generally influence the prices of securities. DrKW has undertaken its valuation analysis for purposes of determining the value available to distribute to creditors pursuant to the Plan and analyzing relative recoveries to creditors thereunder. The analysis is based on the financial projections annexed hereto as Exhibit E, as well as current market conditions and statistics. DrKW used the comparable public company, discounted cash flow and comparable acquisition methodologies to arrive at the reorganization value of the Reorganized Debtors, collectively. In preparing an estimate of reorganization value, DrKW (i) reviewed certain historical financial information of the Debtors for recent years and interim periods, (ii) reviewed certain internal financial and operating data of the Debtors, including financial projections provided by management relating to the Debtors' business and prospects, (iii) met with certain members of senior management of the Debtors to discuss operations and future prospects, (iv) reviewed publicly available financial data and considered the market values of public companies deemed generally comparable to the Debtors, (v) considered certain economic and industry information relevant to the Debtors' operating business, and conducted such other analyses as DrKW deemed appropriate. Although DrKW conducted a review and analysis of the Debtors' business, operating assets, liabilities and business plans, DrKW assumed and relied on the accuracy and completeness of all (i) financial and other information furnished to it by the Debtors and (ii) publicly available information. DrKW did not independently verify management's projections in connection with such valuation and no independent evaluations or appraisals of the Debtors' assets were sought or were obtained in connection therewith. DrKW's valuation is based on the assumption that the operating results anticipated by management can be achieved in all material respects, including attendance levels, revenue growth, and improvements in operating margins, earnings, and cash flow. To the extent that the valuation is dependent upon the Debtors' achievement of the projections contained in the Disclosure Statement, the valuation should be considered speculative. In addition to relying on management's projection assumptions, DrKW's valuation analysis is based on a number of assumptions including, but not limited to: (a) a successful and timely reorganization of the Debtors' capital structure, (b) the plan becoming effective in accordance with its proposed terms, and (c) the continuity of present operating management of the Debtors following consummation of the Plan. DrKW's valuation analysis further assumes that the Debtors (i) are successful in disposing of its non-core theatres in accordance with the timeline reflected in the operating projections and (ii) have the financial flexibility to invest capital in upgrading its existing theatre base to remain competitive. 79 Methodology In preparing its valuation, DrKW performed a variety of analyses and considered a variety of factors. The summary of the analyses and factors contained herein does not purport to be a complete description of the analyses and factors considered. In determining estimated reorganization value, DrKW made judgments as to the weight to be afforded to and the significance and relevance of each analysis and factor. DrKW did not consider any one analysis or factor to the exclusion of any other analysis or factor. Accordingly, DrKW believes that its valuation must be considered as a whole and that selecting portions of its analyses, without considering all such analyses, could create a misleading or incomplete view of the processes underlying the preparation of its findings and conclusions. In its analyses, DrKW made numerous assumptions with respect to the Debtors' industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond the Debtors' control. In addition, analyses relating to the value of the Debtors' business or securities do not purport to be appraisals or to reflect the prices at which such business or securities will trade. THE VALUATION REPRESENTS THE ESTIMATED REORGANIZATION VALUE OF THE REORGANIZED DEBTORS, COLLECTIVELY, AND DOES NOT NECESSARILY REFLECT THE VALUE THAT COULD BE ATTAINABLE IN PUBLIC OR PRIVATE MARKETS. THE EQUITY VALUE ASCRIBED IN THE ANALYSIS DOES NOT PURPORT TO BE AN ESTIMATE OF THE POST-REORGANIZATION MARKET TRADING VALUE. SUCH TRADING VALUE, IF ANY, MAY BE MATERIALLY DIFFERENT FROM THE EQUITY VALUE SET FORTH IN THIS VALUATION ANALYSIS. X. CERTAIN RISK FACTORS TO BE CONSIDERED HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTORS SHOULD READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE HEREIN), PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION. 80 A. CERTAIN BANKRUPTCY LAW CONSIDERATIONS ------------------------------------- 1. Risk of Non-Confirmation of the Plan Although the Debtors believe that the Plan will satisfy all requirements necessary for confirmation by the Bankruptcy Court, there can be no assurance that the Bankruptcy Court will reach the same conclusion. Moreover, there can be no assurance that modifications to the Plan will not be required for confirmation or that such modifications would not necessitate the resolicitation of votes. 2. Non-Consensual Confirmation In the event any impaired Class of Claims or Equity Interests does not accept the Plan, the Bankruptcy Court may nevertheless confirm the Plan at the Debtors' request if at least one impaired Class has accepted the Plan (such acceptance being determined without including the vote of any "insider" in such Class), and as to each impaired Class that has not accepted the Plan, if the Bankruptcy Court determines that the Plan "does not discriminate unfairly" and is "fair and equitable" with respect to the dissenting impaired classes. See Section VI. C.2. The Debtors believe that the Plan satisfies these requirements. 3. Risk of Non-Occurrence of the Effective Date Although the Debtors believe that the Effective Date will occur soon after the Confirmation Date, there can be no assurance as to the timing of the Effective Date. If the conditions precedent to the Effective Date set forth in Section 10.1 of the Plan have not occurred or been waived by the Debtors within 120 days after the Confirmation Date, the Confirmation Order shall be vacated, in which event no distributions under the Plan would be made, the Debtors and all holders of Claims and Equity Interests would be restored to the status quo ante as of the day immediately preceding the Confirmation Date and the Debtors' obligations with respect to Claims and Equity Interests would remain unchanged. B. RISKS TO RECOVERY BY HOLDERS OF CLAIMS AND EQUITY INTERESTS ----------------------------------------------------------- 1. Competitive Conditions The motion picture exhibition industry is fragmented and highly competitive. In markets where it is not the sole exhibitor, the Reorganized Debtors compete against regional and independent operators as well as the larger theatre circuit operators. The Reorganized Debtors' operations are subject to significant competitive pressures. The opening of large multiplexes and theatres with stadium seating by the Debtors and certain of their competitors has tended to, and is expected to continue to, draw audiences away from certain older theatres, 81 including theatres operated by the Reorganized Debtors. In addition, demographic changes and competitive pressures can lead to the impairment of a theatre. Further, the Debtors have closed certain theatres since the commencement of the Chapter 11 Cases and competitors or smaller entrepreneurial developers may purchase or lease the abandoned buildings and reopen them as theatres in competition with the Reorganized Debtors. In addition to competition from other motion picture exhibitors, the Reorganized Debtors face competition from other forms of entertainment. The Reorganized Debtors face varying degrees of competition with respect to licensing films, attracting customers, obtaining new theatre sites and acquiring theatre circuits. There have been a number of consolidations in the movie theatre industry, and the impact of these consolidations could have an adverse effect on the Reorganized Debtor's business. Even where any of the Reorganized Debtors are the only exhibitor in a film licensing zone, the Reorganized Debtors may still experience competition for moviegoers from theatres in a neighboring zone. In addition, theatres compete with a number of other types of motion picture delivery systems, such as pay television, pay-per-view, satellite and home video systems. While the impact of these delivery systems on the motion picture industry is difficult to determine precisely, there is a risk that they could adversely affect attendance at motion pictures shown in theatres. Movie theatres also face competition from a variety of other forms of entertainment competing for the public's leisure time and disposable income, including sporting events, concerts, live theatre and restaurants. Because theatres depend upon discretionary consumer spending, they may be adversely affected by a downturn in the economy. 2. Dependence Upon Motion Picture Production and Performance The Reorganized Debtors' business depends on the availability of suitable motion pictures for screening in their theatres and the appeal of these motion pictures in their markets. The results of operations will vary from period to period based upon the quantity and quality of the motion pictures shown in theatres. A disruption in the production of motion pictures, lack of motion pictures or poor performance of motion pictures in theatres could adversely affect the Reorganized Debtors' business and results of operations. 3. Dependence on Relationships with Motion Picture Distributors The Reorganized Debtor's business depends to a significant degree on maintaining good relations with the major film distributors that license films to our theatres. While there are numerous motion picture distributors that provide quality first-run movies to the motion picture exhibition industry, the following ten distributors accounted for approximately 98.8% of the Reorganized Debtors' admission revenues for the fiscal year ended December 31, 2000: Buena Vista, DreamWorks, Fox, MGM/UA, Miramax, New Line Cinema, Paramount, Sony, Universal and Warner Brothers. No single distributor dominates the market. A deterioration in the Reorganized Debtors' relationships 82 with any of the major film distributors could adversely affect access to commercially successful films and could adversely affect the Reorganized Debtors' business and results of operations. 4. Seasonality Revenues are dependent upon the timing of motion picture releases by distributors. The motion picture exhibition business is generally seasonal, with higher revenues generated during the summer and holiday seasons. While motion picture distributors have begun to release major motion pictures evenly throughout the year, the most marketable motion pictures are usually released during the summer and the year-end holiday periods. Additionally, the unexpected emergence of a hit film may occur in these or other periods. As a result, the timing of motion picture releases affects the results of operations, which may vary significantly from quarter to quarter. 5. Governmental Regulation Like others in the motion picture exhibition industry, the Reorganized Debtors are subject to certain federal, state and local laws and regulations which limit the manner in which it may conduct business. The distribution of motion pictures is in large part regulated by federal and state antitrust laws and has been the subject of numerous antitrust cases. As a result of these laws and cases, the Reorganized Debtors cannot ensure a supply of motion pictures by entering into long term arrangements with major distributors. Instead, the Reorganized Debtors must compete for film licenses on a film-by-film and theatre-by-theatre basis. Theatre operations are also subject to federal, state and local laws governing matters such as construction, renovation and operation of theatres, as well as wages, working conditions, citizenship, and health and sanitation requirements and licensing. The Reorganized Debtors believe that their theatres are in material compliance with these requirements. At December 31, 2000, approximately 60% of the Reorganized Debtors' employees were paid at the federal minimum wage and, accordingly, the minimum wage largely determines labor costs for those employees. The Americans with Disabilities Act (the "ADA") and certain state statutes and local ordinances, among other things, require that places of public accommodation, including both existing and newly constructed theatres, be accessible to customers with disabilities. The ADA may require that certain modifications be made to existing theatres in order to make them accessible to patrons and employees who are disabled. The ADA requires that theatres be constructed to permit persons with disabilities full use of a theatre and its facilities. The Reorganized Debtors are aware of several lawsuits that have been filed against other exhibitors by disabled moviegoers alleging that certain stadium seating designs violated the ADA. The Reorganized Debtors have established a program to review and evaluate theatres and to make changes that may be required by law. Although the Reorganized Debtors believe that the cost of complying with the ADA will not adversely affect business and results of 83 operations, it cannot predict the extent to which the ADA or any future laws or regulations regarding the needs of the disabled will impact operations. 6. Ability to Service Debt The Reorganized Debtors' ability to make scheduled payments of principal, to pay the interest on, to refinance their indebtedness, or to fund planned capital expenditures for theatre construction, expansion or renovation will depend on future performance. Future performance is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond their control. While no assurance can be provided, based upon the current level of operations and anticipated increases in revenues and cash flow described in the Projections attached as Exhibit E hereto, the Debtors believe that cash flow from operations, available cash, and sales of surplus assets will be adequate to fund the Plan and meet their future liquidity needs. 7. Lack of Active Trading Market There is no existing market for the New Common Stock. Carmike intends to attempt to have the New Common Stock listed on a national stock exchange or national quotation system. However, there can be no assurance that the New Common Stock will be listed on a national exchange or quoted on a national quotation system. Further, there can be no assurance that an active trading market for the New Common Stock will develop, and if developed, that it will continue. In addition, there can be no assurance as to the degree of price volatility in any market for the New Common Stock that does develop. Accordingly, no assurance can be given that a holder of New Common stock will be able to sell such securities in the future or as to the price at which such sale may occur. If such markets were to exist, the New Common Stock could trade at prices higher or lower than the value ascribed to such security herein depending on many factors, including prevailing interest rates, the market for similar securities, general economic and industry conditions, and the performance of, and investor expectations for Reorganized Carmike. In addition, holders of New Common Stock who are deemed to be statutory underwriters pursuant to section 1145(b) of the Bankruptcy Code or who otherwise are deemed to be "affiliates" or "control persons" of Reorganized Carmike within the meaning of the Securities Act, will be unable to transfer or sell their securities after the Effective Date, except pursuant to an available exemption from registration under the Securities Act and under equivalent state securities or "blue sky" laws. See Section VIII. A. 8. Significant Holders The Debtors anticipate that as of the Effective Date, approximately 79.1% of the shares of New Common Stock will be held by approximately seven holders or their affiliates. Such holders, acting as a 84 group, will be in a position to control the outcome of actions requiring stockholder approval, including the election of directors. Indeed, such parties intend to enter in the Stockholders' Agreement (the form of which shall be contained in the Plan Supplement), which will provide for, among other things, that so long as the parties to the Stockholders' Agreement hold shares of New Common Stock, the Board of Directors of Reorganized Carmike shall be composed as follows: one director shall be the Chief Executive Officer of Reorganized Carmike, one director shall be Carl Patrick, Jr., three directors shall be appointed by Jordan/Zalaznick Advisers, Inc. and its affiliates, at least one of which shall be an independent director, four directors shall be appointed by GS Capital Partners III, L.P. and its affiliates, at least one of which shall be an independent director, and one independent director shall be identified by the Chief Executive Officer of Reorganized Carmike and agreed upon by the Board of Directors of Reorganized Carmike. This concentration of ownership also could facilitate or hinder a negotiated change of control of Reorganized Carmike and, consequently, have an impact upon the value of the New Common Stock. Further, the possibility that one or more of the holders of significant numbers of shares of New Common Stock may determine to sell all or a large portion of their shares in a short period of time may adversely affect the value of the New Common Stock and the Reorganized Debtors' ability to use their favorable tax attributes. See Article XI. 9. Projected Financial Information The financial projections included in this Disclosure Statement are dependent upon the successful implementation of the Business Plan and the validity of the other assumptions contained therein. These projections reflect numerous assumptions, including confirmation and consummation of the Plan in accordance with its terms, the anticipated future performance of the Reorganized Debtors, industry performance, certain assumptions with respect to competitors of the Reorganized Debtors, general business and economic conditions and other matters, many of which are beyond the control of the Reorganized Debtors. In addition, unanticipated events and circumstances occurring subsequent to the preparation of the projections may affect the actual financial results of the Reorganized Debtors. Although the Debtors believe that the projections are reasonably attainable, variations between the actual financial results and those projected may occur and be material. 10. Hart-Scott-Rodino Act Requirements Holders of Allowed Subordinated Note Claims electing the treatment on account of such Claims provided under Section 4.7(c) of the Plan and Preferred Stock Interests that acquired such Claims or Equity Interests after the commencement of the Chapter 11 Cases and that are to receive New Common Stock under the Plan may have to observe the filing and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). Electing Noteholders and holders of Preferred Stock Interests required to make HSR Act filings cannot receive any such distribution of New Common Stock until the expiration or early termination of the waiting periods 85 under the HSR Act. Such Electing Noteholders and holders of Preferred Stock Interests should consult their own counsel regarding their potential responsibilities under the HSR Act. XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN The following discussion summarizes certain federal income tax consequences of the implementation of the Plan to the Debtors and certain holders of Claims and Equity Interests. The following summary does not address the federal income tax consequences to (i) holders whose Claims are entitled to reinstatement or payment in full in cash under the Plan or are otherwise unimpaired under the Plan (e.g., holders of Administrative Expense Claims, Priority Tax Claims, Other Priority Claims, Secured Tax Claims and Other Secured Claims) or (ii) holders of Subsidiary Equity Interests. The following summary also does not address the federal income tax consequences to the holders of Secured Bank Claims, who the Debtors understand have independent counsel to advise them with respect to the consequences of the Plan. The following summary is based on the Tax Code, Treasury Regulations promulgated thereunder, judicial decisions, and published administrative rules and pronouncements of the Internal Revenue Service ("IRS") as in effect on the date hereof. Changes in such rules or new interpretations thereof may have retroactive effect and could significantly affect the federal income tax consequences described below. The federal income tax consequences of the Plan are complex and are subject to significant uncertainties. The Debtors have not requested a ruling from the IRS or an opinion of counsel with respect to any of the tax aspects of the Plan. Thus, no assurance can be given as to the interpretation that the IRS will adopt. In addition, this summary does not address foreign, state or local tax consequences of the Plan, nor does it purport to address the federal income tax consequences of the Plan to special classes of taxpayers (such as foreign taxpayers, broker-dealers, banks, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, tax-exempt organizations, and investors in pass-through entities). This discussion assumes that the various debt and other arrangements to which the Debtors are a party will be respected for federal income tax purposes in accordance with their form. In addition, this discussion of the federal income tax consequences of ownership of the New Subordinated Notes only applies to holders receiving such notes pursuant to the Plan and not to subsequent holders. ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM OR EQUITY INTEREST. ALL HOLDERS OF CLAIMS AND 86 EQUITY INTERESTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN. A. CONSEQUENCES TO THE DEBTORS --------------------------- The Debtors have reported a consolidated net operating loss ("NOL") carryforward for regular federal income tax purposes of approximately $70 million and for federal alternative minimum tax ("AMT") purposes of approximately $62 million as of December 31, 2000 (all of which is attributable to the taxable year then ended), and expect to incur substantial additional NOLs during their current taxable year. The amount of such NOL carryforwards remains subject to adjustment by the IRS. In addition, the NOLs and other tax benefits of a corporation may be subject to limitation following an "ownership change" of the corporation within the meaning of section 382 of the Tax Code. Although the Debtors believe that they underwent an "ownership change" within the meaning of section 382 of the Tax Code in December 1999, the Debtors do not believe that a significant portion of their regular federal income tax NOLs and deductions are subject to this limitation. For AMT purposes, however, potentially up to $15 million of the Debtors' NOLs and a portion of their future deductions are subject to this limitation, resulting in an effective deferral of the utility of such losses and deductions. Although not free from doubt, the Debtors do not believe that they have undergone a subsequent ownership change. However, as discussed below, the amount of the Debtors' NOL carryforwards, and possibly certain other tax attributes, will be reduced, and the subsequent utilization of such NOL carryforwards and other tax attributes may be restricted upon the implementation of the Plan. 1. Cancellation of Debt In general, the Tax Code provides that a debtor in a bankruptcy case must reduce certain of its tax attributes -- such as NOL carryforwards, current year NOLs, tax credits and tax basis in assets -- by the amount of any cancellation of debt ("COD"). COD is the amount by which the indebtedness discharged exceeds any consideration given in exchange therefor, subject to certain statutory or judicial exceptions that can apply to limit the amount of COD (such as where the payment of the cancelled debt would have given rise to a tax deduction). To the extent the amount of COD exceeds the tax attributes available for reduction, the remaining COD is simply ignored for federal income tax purposes. It is unclear whether the reduction in tax attributes will occur on a separate company basis, even though the Debtors file consolidated federal income tax returns with the other members of their respective groups. The Debtors are aware that the IRS has, in certain cases, asserted that such reduction generally should occur on a consolidated basis. Any reduction in tax attributes does not effectively occur until the first day of the taxable year following the year the COD occurs. If advantageous, a debtor could elect to reduce the basis of depreciable property prior to any reduction in their loss carryforwards. 87 The extent of such COD and resulting attribute reduction will depend primarily on the amount of Allowed Convenience Claims and the fair market value of the New Common Stock and the New Subordinated Notes distributed to the holders of Allowed Subordinated Note Claims pursuant to the Plan. Based on the assumed reorganization value of the Debtor (see Section IX, "Valuation"), the Debtors do not expect to incur significant COD, and thus significant attribute reduction, for federal income tax purposes. 2. Limitation on NOL Carryforwards and Other Tax Attributes Following the implementation of the Plan, any consolidated NOLs and carryforwards thereof, and possibly certain other tax attributes, of the Debtors allocable to periods prior to the Effective Date will be subject to the limitations imposed by section 382 of the Tax Code. Under section 382 of the Tax Code, if a corporation undergoes an "ownership change" and the corporation does not qualify for (or elects out of) the special bankruptcy exception discussed below, the amount of its pre-change losses that may be utilized to offset future taxable income is, in general, subject to an annual limitation. Such limitation also may apply to certain losses or deductions which are "built-in" (i.e., economically accrued but unrecognized) as of the date of the ownership change that are subsequently recognized. The Debtors anticipate that the issuance of the New Common Stock pursuant to the Plan will constitute an ownership change of the Debtors. a. General Section 382 Limitation. In general, the amount of the annual limitation to which a corporation (or consolidated group) would be subject would be equal to the product of (i) the fair market value of the stock of the corporation (or, in the case of a consolidated group, the common parent) immediately before the ownership change (with certain adjustments) multiplied by (ii) the "long-term tax-exempt rate" in effect for the month in which the ownership change (4.85% for ownership changes occurring in November 2001). For a corporation (or a consolidated group) in bankruptcy that undergoes the ownership change pursuant to a confirmed plan, the stock value generally is determined immediately after (rather than before) the ownership change, and certain adjustments that ordinarily would apply do not apply. Any unused limitation may be carried forward, thereby increasing the annual limitation in the subsequent taxable year. However, if the corporation (or consolidated group) does not continue its historic business or use a significant portion of its assets in a new business for two years after the ownership change, the annual limitation resulting from the ownership change is zero (subject to the discussion below regarding the special bankruptcy exception). b. Built-In Gains and Losses. If a loss corporation (or consolidated group) has a "net unrealized built-in loss" at the time of an ownership change (taking into account most assets and items of "built-in" income and deductions), then any built-in losses recognized during the following five years (up to the amount of the original net built-in loss) generally will be 88 treated as pre-change losses and similarly will be subject to the annual limitation. Conversely, if the loss corporation (or consolidated group) has a "net unrealized built-in gain" at the time of an ownership change, any built-in gains recognized during the following five years (up to the amount of the original net built-in gain) generally will increase the annual limitation in the year recognized, such that the loss corporation (or consolidated group) would be permitted to use its pre-change losses against such built-in gain income in addition to its regular annual allowance. Although the rule applicable to net unrealized built-in losses generally applies to consolidated groups on a consolidated basis, certain corporations that join the consolidated group within the preceding five years may not be able to be taken into account in the group computation of net unrealized built-in loss. Such corporations would nevertheless still be taken into account in determining whether the consolidated group has a net unrealized built-in gain. Thus, although somewhat counterintuitive, a consolidated group can be considered to have both a net unrealized built-in loss and a net unrealized built-in gain. In general, a loss corporation's (or consolidated group's) net unrealized built-in gain or loss will be deemed to be zero unless it is greater than the lesser of (i) $10 million or (ii) 15% of the fair market value of its assets (with certain adjustments) before the ownership change. Based on the assumed reorganized value, it is likely that the Debtors will be in a net unrealized built-in loss position on the Effective Date. c. Special Bankruptcy Exception. An exception to the general annual limitation (including the described built-in gain and loss rules) applies where the stockholders and/or qualified creditors of the debtor retain or receive (other than for new value) at least 50% of the vote and value of the stock of the reorganized debtor pursuant to a confirmed bankruptcy plan. Under this exception, a debtor's pre-change losses are not limited on an annual basis, but are required to be reduced by the amount of any interest deductions claimed during the three taxable years preceding the date of the reorganization, and during the part of the taxable year prior to and including the reorganization, in respect of the debt converted into stock in the reorganization. Moreover, if this exception applies, any further ownership change of the debtor within a two-year period will preclude the debtor's utilization of any pre-change losses at the time of the subsequent ownership change against future taxable income. The Debtors anticipate that the retention and receipt of New Common Stock by the holders of Equity Interests will qualify for this exception. The statute does not address, however, whether this exception can be applied on a consolidated basis or only on a separate company basis. Even if the Debtors qualify for this exception, the Debtors may, if they so desire, elect not to have the exception apply and instead remain subject to the annual limitation and built-in gain and loss rules described above. Such election would have to be made in the Debtors' federal income tax return for the taxable year in which the change occurs. 89 3. Alternative Minimum Tax In general, an AMT is imposed on a corporation's alternative minimum taxable income at a 20% rate to the extent that such tax exceeds the corporation's regular federal income tax. For purposes of computing taxable income for AMT purposes, certain tax deductions and other beneficial allowances are modified or eliminated. In particular, even though a corporation otherwise might be able to offset all of its taxable income for regular tax purposes by available NOL carryforwards, only 90% of a corporation's taxable income for AMT purposes may be offset by available NOL carryforwards (as computed for AMT purposes). In addition, if a corporation (or consolidated group) undergoes an "ownership change" within the meaning of section 382 of the Tax Code and is in a net unrealized built-in loss position on the date of the ownership change, the corporation's (or group's) aggregate tax basis in its assets would be reduced for certain AMT purposes to reflect the fair market value of such assets as of the change date. The application of this provision to the Debtors is unaffected by whether the Debtors otherwise qualify for the special bankruptcy exception to the annual limitation (and built-in gain and loss) rules of section 382 of the Tax Code discussed in the preceding section. Any AMT that a corporation pays generally will be allowed as a nonrefundable credit against its regular federal income tax liability in future taxable years when the corporation is no longer subject to the AMT. Congress is currently considering a tax stimulus bill that, if enacted in its current form, would, among other things, repeal the AMT, possibly retroactively to 1986. Whether the repeal of the AMT will remain a feature of the legislation is uncertain. 4. Non-Deductibility of OID on the New Subordinated Notes In the event the New Subordinated Notes are issued with original issue discount ("OID") (see "Consequences to Holders of Subordinated Note Claims - Interest and Original Issue Discount With Respect to the New Subordinated Notes," below), the New Subordinated Notes may be subject to the "applicable high yield discount obligation" provisions of the Tax Code. An "applicable high yield discount obligation" is any debt instrument that (1) has a maturity date which is more than five years from the date of issue, (2) has a yield to maturity which equals or exceeds the applicable federal rate ("AFR") released by the IRS for the calendar month in which the obligation was issued (4.09% for November 2001) plus five percentage points and (3) has "significant original issue discount." A debt instrument generally has "significant original issue discount" if, as of the close of any accrual period ending more than five years after the date of issue, the excess of the interest (including OID) that has accrued on the obligation over the interest that is required to be paid thereon exceeds the product of the issue price of the instrument and its yield to maturity. 90 In the event the New Subordinated Notes are applicable high yield discount obligations, the OID on the New Subordinated Notes likely would only be deductible, if at all, by the Debtors when paid. Moreover, if the New Subordinated Notes' yield to maturity exceeds the AFR plus six percentage points, a ratable portion of the OID (based on the portion of the yield to maturity that exceeds the AFR plus six percentage points) would be non-deductible by the Debtors. B. CONSEQUENCES TO HOLDERS OF CERTAIN CLAIMS ----------------------------------------- 1. Consequences to Holders of Allowed Convenience Claims Pursuant to the Plan, if holders of Allowed Convenience Claims vote to accept the Plan, each holder will receive, in satisfaction and discharge of its Claim, cash in an amount equal to 80% of its Allowed Convenience Claim. In general, a holder of an Allowed Convenience Claim will recognize gain or loss in an amount equal to the difference between (i) the amount of cash received by such holder in satisfaction of its Claim (other than any Claim for accrued but unpaid interest) and (ii) the holder's adjusted tax basis in its Claim (other than any Claim for accrued but unpaid interest). For a discussion of the treatment of any Claim for accrued but unpaid interest, see "Distribution in Discharge of Accrued Interest," below. Where gain or loss is recognized by a holder, the character of such gain or loss as long-term or short-term capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the holder, whether the Claim constitutes a capital asset in the hands of the holder and how long it has been held, whether the Claim was acquired at a market discount, and whether and to what extent the holder previously had claimed a bad debt deduction. 2. Consequences to Holders of Allowed General Unsecured Claims Pursuant to the Plan, a holder of an Allowed General Unsecured Claim (and a holder of an Allowed Convenience Claim if the holders of such Claims do not vote to accept the Plan) will receive over time payment in full, with an initial cash payment upon implementation of the Plan and additional cash payments over approximately five years with interest at 9.4% annually (such additional cash payments herein referred to as the "Deferred Payment Obligation"). For federal income tax purposes, the Deferred Payment Obligation should be treated - and, the following discussion assumes, would be treated - in a similar fashion to the receipt of an actual note amortizable over five years. a. Gain or Loss. In general, a holder of an Allowed General Unsecured Claim will recognize gain or loss in an amount equal to the difference between (i) the "amount realized" by the holder in satisfaction of its Claim (other than any Claim for accrued but unpaid interest) and (ii) the holder's adjusted tax basis in its Claim (other than any Claim for accrued but unpaid interest). For a discussion of the treatment of any Claim for accrued but 91 unpaid interest, see "Distribution in Discharge of Accrued Interest," below. The amount realized by a holder will equal the sum of the initial cash payment and the "issue price" of the Deferred Payment Obligation received by such holder (see "Interest and Original Issue Discount," below). Each holder of General Unsecured Claims is urged to consult its tax advisor regarding the possible application of (or the ability to elect out of) the "installment method" of reporting any gain that might otherwise be recognized by the holder upon receipt of the Deferred Payment Obligation. Where gain or loss is recognized by a holder of an Allowed General Unsecured Claim, the character of such gain or loss as long-term or short-term capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the holder, whether the Claim constitutes a capital asset in the hands of the holder and how long it has been held, whether the Claim was acquired at a market discount and whether and to what extent the holder had previously claimed a bad debt deduction. A holder's tax basis in a Deferred Payment Obligation will equal the "issue price" of such obligation, and the holding period for a Deferred Payment Obligation generally will begin the day after such obligation is treated as issued. b. Interest and Original Issue Discount With Respect to the Deferred Payment Obligation. Pursuant to the Plan, the Deferred Payment Obligation provides for the annual payment of interest at a rate of 9.4%. Such interest should be includible in income by a holder in accordance with the holder's regular method of accounting. In addition, under certain circumstances, a holder of a Deferred Payment Obligation may be required to recognize imputed interest in the event the Deferred Payment Obligations are treated as issued with OID. In general, a debt instrument is treated as having OID to the extent its "stated redemption price at maturity" (in this case, the stated principal amount of the Deferred Payment Obligation) exceeds its "issue price." The "issue price" of a Deferred Payment Obligation will depend upon whether such obligation is traded on an "established securities market" during the sixty day period ending thirty days after the Effective Date. Pursuant to Treasury Regulations, an "established securities market" includes, among other things, a system of general circulation (including a computer listing disseminated to subscribing brokers, dealers or traders) that provides a reasonable basis to determine fair market value by disseminating either recent price quotations or actual prices of recent sales transactions. If the Deferred Payment Obligations are not traded on an established securities market and, as the Debtors anticipate, the stated interest rate of 9.4% is greater than the AFR for five-year obligations in effect on the Confirmation Date (4.09% for November 2001), the issue price of the Deferred Payment Obligations will be their stated principal amount. If the Deferred Payment Obligations are traded on an established securities market, the "issue price" will be their fair market value. 92 If the Deferred Payment Obligation is treated as issued with OID, each holder will be required to accrue the OID in respect of its Deferred Payment Obligation, and include such amount in gross income as interest, over the term of such obligations based on the constant interest method. Accordingly, each holder generally will be required to include amounts in gross income in advance of the payment of cash in respect of such income. A holder's tax basis in a Deferred Payment Obligation will be increased by the amount of any OID included in income and reduced by any cash payments (other than payment of stated interest) made with respect to such Deferred Payment Obligation. 3. Consequences to Holders of Subordinated Note Claims Pursuant to the Plan, holders of Allowed Subordinated Note Claims will receive, in satisfaction and discharge of their Claims, New Subordinated Notes and cash, unless they elect to receive solely New Common Stock. In the event that the Electing Noteholders hold greater than $50,000,000 in principal amount of Allowed Subordinated Note Claims, the Electing Noteholders will receive a combination of New Common Stock, New Subordinated Notes and cash. The federal income tax consequences of the Plan to holders of Allowed Subordinated Note Claims depend, in part, on whether the Subordinated Notes underlying such Claims and/or the New Subordinated Notes constitute "securities" for federal income tax purposes. The term "security" is not defined in the Tax Code or in the regulations issued thereunder and has not been clearly defined by judicial decisions. The determination of whether a particular debt constitutes a "security" depends on an overall evaluation of the nature of the debt. One of the most significant factors considered in determining whether a particular debt is a security is its original term. In general, debt obligations issued with a weighted average maturity at issuance of five years or less (e.g., trade debt and revolving credit obligations) do not constitute securities, whereas debt obligations with a weighted average maturity at issuance of ten years or more constitute securities. The Subordinated Notes had an original maturity of approximately 10 years, whereas the New Subordinated Notes will have a maturity of approximately seven years. The Debtors intend to take the position - - and the following discussion assumes - that both the Subordinated Notes and the New Subordinated Notes constitute "securities" for federal income tax purposes. Each holder of an Allowed Subordinated Note Claim and Electing Noteholder is urged to consult its tax advisor regarding the classification of the Subordinated Notes and the New Subordinated Notes. a. Recapitalization Treatment. The distribution of New Common Stock and/or New Subordinated Notes in satisfaction of an Allowed Subordinated Note Claim should constitute a "recapitalization" for federal income tax purposes. Accordingly, in general, the holder of an Allowed Subordinated Note Claim will not recognize loss upon such exchange, but will recognize gain, if any (computed as described below), up to the amount of any cash received (other than any portion of such cash allocable to accrued but unpaid interest). Although the Debtors intend, to the extent possible, to allocate the cash entirely to accrued but unpaid interest with respect to the Allowed Subordinated Note Claims, there is no assurance that the IRS will respect such allocation. In addition, if New Common Stock is received, a portion 93 of the New Common Stock will be treated as allocable to accrued but unpaid interest. For a discussion of the treatment of accrued but unpaid interest, see "Distribution in Discharge of Accrued Interest," below. In general, the amount of gain a holder of an Allowed Subordinated Note Claim will realize is equal to the excess, if any, of (i) the "amount realized" by the holder in satisfaction of its Claim (other than any Claim for accrued but unpaid interest) over (ii) the holder's adjusted tax basis in its Claim (other than any Claim for accrued but unpaid interest). The "amount realized" by a holder will equal the sum of the amount of any cash, the "issue price" of any New Subordinated Notes and the fair market value of any New Common Stock received by such holder in satisfaction of its Allowed Subordinated Note Claim (see "Interest and Original Issue Discount With Respect to the New Subordinated Notes," below). Each holder of an Allowed Subordinated Note Claim is urged to consult its tax advisor regarding the possible application of (or the ability to elect out of) the "installment method" of reporting any gain that might otherwise be recognized by the holder upon receipt of the New Subordinated Note. Where gain or loss is recognized by a holder of an Allowed Subordinated Note Claim, the character of such gain or loss as long-term or short-term capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the holder, whether the Claim constitutes a capital asset in the hands of the holder and how long it has been held, whether the Claim was acquired at a market discount and whether and to what extent the holder had previously claimed a bad debt deduction. Where gain or loss is recognized by an Electing Noteholder, the character of such gain or loss as long-term or short-term capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the Electing Noteholder, whether the Claim constitutes a capital asset in the hands of the Electing Noteholder and how long it has been held, whether the Claim was acquired at a market discount and whether and to what extent the Electing Noteholder had previously claimed a bad debt deduction. A holder's aggregate tax basis in any New Common Stock and New Subordinated Notes received in respect of its Claim generally will equal the holder's aggregate adjusted tax basis in its Claim (including any Claim for accrued but unpaid interest), increased by any gain and interest income recognized in respect of its Claim, and decreased by any cash received and any deductions claimed upon satisfaction and discharge of its Claim for any previously accrued but unpaid interest. In general, the aggregate tax basis should be allocated between any New Common Stock and any New Subordinated Notes received based on their relative fair market values. The holder's holding period for any New Common Stock and New Subordinated Notes received generally will include the holder's holding period for the Claim, except to the extent that any 94 New Common Stock and New Subordinated Notes was received in satisfaction of a Claim for accrued but unpaid interest. b. Interest and Original Issue Discount With Respect to the New Subordinated Notes. Pursuant to the Plan, the New Subordinated Notes provide for the semi-annual payment of interest at a rate of 10.375% per annum. Such interest generally will be includible in income by a holder in accordance with the holder's regular method of accounting. In addition, under certain circumstances, a holder of a New Subordinated Note may be required to recognize imputed interest in the event the New Subordinated Notes are treated as issued with OID. In general, a debt instrument is treated as having OID to the extent its "stated redemption price at maturity" (in this case, the stated principal amount of the New Subordinated Notes) exceeds its "issue price" by more than a de minimis amount. The "issue price" of a New Subordinated Note will depend upon whether (i) the current Subordinated Notes are traded on an "established securities market" or (ii) the New Subordinated Notes will be traded on an "established securities market" during the sixty day period ending thirty days after the Effective Date. Pursuant to Treasury Regulations, an "established securities market" includes, among other things, a system of general circulation (including a computer listing disseminated to subscribing brokers, dealers or traders) that provides a reasonable basis to determine fair market value by disseminating either recent price quotations or actual prices of recent sales transactions. If either the current Subordinated Notes or the New Subordinated Notes are traded on an "established securities market" (as the Debtors believe will be the case), the "issue price" will be equal to (or approximate) the fair market value of the New Subordinated Notes. If neither are traded on an established securities market and, as the Debtors anticipate, the stated interest rate of 10.375% is greater than the AFR for seven-year obligations in effect on the Confirmation Date (4.09% for November 2001), the issue price of the New Subordinated Notes will be their stated principal amount. If the New Subordinated Notes are treated as issued with OID, each holder generally will be required to accrue the OID in respect of its New Subordinated Note, and include such amount in gross income as interest, over the term of such note based on the constant interest method. Accordingly, each holder generally will be required to include amounts in gross income in advance of the payment of cash in respect of such income. A holder's tax basis in a New Subordinated Note will be increased by the amount of any OID included in income and reduced by any cash payments (other than payments of stated interest) made with respect to such New Subordinated Note. A holder may be permitted to exclude all or a portion of this OID from gross income in the event the holder's tax basis in the New Subordinated Note exceeds the issue price of the New Subordinated Note (see, "Treatment of Premium," below). As discussed above at "Consequences to the Debtors - Non-Deductibility of OID on New Subordinated Notes," the New Subordinated Notes may be subject to the applicable high yield discount obligation provisions of the Tax Code. If such provisions apply, and the New Subordinated Notes' yield to 95 maturity exceeds the AFR plus six percentage points, a ratable portion of a corporate holder's OID (based on the portion of the yield to maturity that exceeds the AFR plus six percentage points) should be treated, for purposes of the dividends-received deduction, as a dividend to the same extent it would have been had such amount been distributed by Reorganized Carmike with respect to its stock for federal income tax purposes. c. Treatment of Premium. Generally, if a holder's tax basis in any New Subordinated Note received is greater than the New Subordinated Note's issue price, but is less than or equal to the stated principal amount of the New Subordinated Note, the amount of OID that the holder must include in income is reduced. In general, the amount of the reduction is equal to the amount of the OID multiplied by a fraction, the numerator of which is the excess of the holder's tax basis in the New Subordinated Note over its issue price, and the denominator of which is the excess of the stated principal amount of the New Subordinated Note over the issue price. Alternatively, a holder may elect to amortize the premium using the constant yield method. If a holder's tax basis in the New Subordinated Note exceeds the stated principal amount of the New Subordinated Note, the holder is not required to include any OID in income. In addition, the holder generally would be able to amortize the excess over the term of the New Subordinated Note as an offset to stated interest. d. Market Discount With Respect to New Subordinated Notes and New Common Stock. The Treasury Department is expected to promulgate regulations that will provide that any accrued market discount not treated as ordinary income upon a tax-free exchange (including a "recapitalization" exchange) of market discount bonds would carry over to the nonrecognition property received in the exchange. If such regulations are promulgated and applicable to the Plan (and, likely, even without the issuance of regulations), any holder of an Allowed Subordinated Note Claim would be required to carry over any accrued market discount incurred in respect of such Claim to the New Subordinated Notes and/or New Common Stock received for such Claim pursuant to the Plan, such that any gain recognized by the holder upon a subsequent disposition of such New Subordinated Notes or New Common Stock would be treated as ordinary income to the extent of any accrued market discount that is allocable to such notes or stock and not previously included in income. In general, a Claim will have "accrued market discount" if such Claim was acquired after its original issuance at a discount to its adjusted issue price. In addition, a holder likely would have market discount with respect to its New Subordinated Note if it has a tax basis in its note that is less than the note's issue price. The amount of market discount on the New Subordinated Note should equal the excess of issue price over the holder's tax basis (unless the excess is less than a de minimis amount), presumably reduced by any accrued market discount carried over from the holder's Allowed Subordinated Note Claim. 96 e. Subsequent Sale of New Common Stock. Any gain recognized by a holder upon a subsequent taxable disposition of New Common Stock received pursuant to the Plan, or any stock or property received for such New Common Stock in a later tax-free exchange, will be treated as ordinary income to the extent of (i) any bad debt deductions (or additions to a bad debt reserve) claimed with respect to its Claim and any ordinary loss deductions incurred upon satisfaction of its Claim, less any income (other than interest income) recognized by the holder upon satisfaction of its Claim and (ii) with respect to a cash-basis holder, also any amounts which would have been included in its gross income if the holder's claim had been satisfied in full but which were not included by reason of the cash method of accounting. In addition, any gain recognized upon a subsequent disposition of New Common Stock received pursuant to the Plan, may be treated as ordinary income to the extent, if any, the holder had accrued market discount with respect to its Allowed Subordinated Note Claim that was not previously included in income. See the preceding section, "Market Discount With Respect to New Subordinated Notes and New Common Stock." 4. Distribution in Discharge of Accrued Interest Pursuant to the Plan, all distributions in respect of an Allowed Claim will be allocated first to any portion of such Claim for accrued interest, with any excess allocated to the principal amount of such Claim to the extent thereof, and then to the remaining portions of such Claim. In general, to the extent that any amount received by a holder of a debt (whether paid in cash, stock or notes) is received in satisfaction of accrued interest during its holding period, such amount will be taxable to the holder as interest income (if not previously included in the holder's gross income). Conversely, a holder generally recognizes a deductible loss to the extent any accrued interest claimed was previously included in its gross income and is not paid in full. Each holder of a Claim is urged to consult its tax advisor regarding the allocation of consideration and the deductibility of unpaid interest for tax purposes. 5. Information Reporting and Withholding All distributions to holders of Allowed Claims under the Plan are subject to any applicable withholding (including employment tax withholding). Under federal income tax law, interest, dividends, and other reportable payments may, under certain circumstances, be subject to "backup withholding" at a rate of up to 30.5%. Backup withholding generally applies if the holder (a) fails to furnish its social security number or other taxpayer identification number ("TIN"), (b) furnishes an incorrect TIN, (c) fails properly to report interest or dividends, or (d) under certain circumstances, fails to provide a certified statement, signed under penalty of perjury, that the TIN provided is its correct number and that it is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of 97 tax. Certain persons are exempt from backup withholding, including, in certain circumstances, corporations and financial institutions. C. CONSEQUENCES TO HOLDERS OF EQUITY INTERESTS ------------------------------------------- 1. Holders of Preferred Stock Equity Interests Pursuant to the Plan, the receipt of New Common Stock in exchange for an Allowed Preferred Stock Equity Interest will constitute a "recapitalization" for federal income tax purposes. Accordingly, in general, the holder of an Allowed Preferred Equity Interest will not recognize gain or loss upon such exchange. If there are dividends in arrears in respect of the Preferred Stock and the fair market value of the New Common Stock received in the exchange exceeds the issue price of the Preferred Stock surrendered, the holder may recognize ordinary (dividend) income with respect to such excess value up to the amount of the dividends in arrears. In general, such excess value will be treated as a dividend to the extent of the holder's share of current or accumulated earnings and profits of the Debtors as of the end of the taxable year in which the distribution occurs, with any remainder treated as a return of capital to the extent of the holder's tax basis in its Preferred Stock and, thereafter, as gain from the sale or exchange of its Preferred Stock. A holder's aggregate tax basis in the New Common Stock received in the exchange will equal the holder's aggregate adjusted tax basis in the Preferred Stock increased by any deemed dividends included in income. In general, the holder's holding period for the New Common Stock received will include the holder's holding period for its Preferred Stock. 2. Holders of Common Stock Equity Interests Pursuant to the Plan, holders of Allowed Common Stock Equity Interests will retain their Interests subject to certain modifications to the charter provisions with respect to such Interests. The modifications to the charter provisions may constitute a "recapitalization" for federal income tax purposes. Whether or not so treated, the holder of an Allowed Common Stock Equity Interest generally should not recognize gain or loss as a result of such modifications and should retain its aggregate tax basis and holding period in its Interest. THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL HOLDERS OF CLAIMS AND EQUITY INTERESTS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL, AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN. 98 XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN If the Plan is not confirmed and consummated, the Debtors' alternatives include (i) liquidation of the Debtors under chapter 7 of the Bankruptcy Code and (ii) the preparation and presentation of an alternative plan or plans of reorganization. A. LIQUIDATION UNDER CHAPTER 7 --------------------------- If no chapter 11 plan can be confirmed, the Chapter 11 Cases may be converted to cases under chapter 7 of the Bankruptcy Code in which a trustee would be elected or appointed to liquidate the assets of the Debtors. A discussion of the effect that a chapter 7 liquidation would have on the recoveries of holders of Claims and Equity Interests is set forth in Section VI. C.4. of the Disclosure Statement. The Debtors believe that liquidation under chapter 7 would result in, among other things, (i) smaller distributions being made to creditors and equity interest holders than those provided for in the Plan because of additional administrative expenses attendant to the appointment of a trustee and the trustee's employment of attorneys and other professionals, (ii) additional expenses and claims, some of which would be entitled to priority, which would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of the Debtors' operations and (iii) the failure to realize the greater, going concern value of the Debtors' assets. B. ALTERNATIVE PLAN OF REORGANIZATION ---------------------------------- If the Plan is not confirmed, the Debtors or any other party in interest could attempt to formulate a different plan of reorganization. Such a plan might involve either a reorganization and continuation of the Debtors' business or an orderly liquidation of the Debtors' assets. The Debtors have concluded that the Plan represents the best alternative to protect the interests of creditors, equity interest holders and other parties in interest. The Debtors believe that the Plan enables the Debtors to successfully and expeditiously emerge from chapter 11, preserves their business and allows creditors to realize the highest recoveries under the circumstances. In a liquidation under chapter 11 of the Bankruptcy Code, the assets of the Debtors would be sold in an orderly fashion which could occur over a more extended period of time than in a liquidation under chapter 7 and a trustee need not be appointed. Accordingly, creditors would receive greater recoveries than in a chapter 7 liquidation. Although a chapter 11 liquidation is preferable to a chapter 7 liquidation, the Debtors believe that a liquidation under chapter 11 is a much less attractive alternative to creditors and equity interest holders because a greater return to creditors and equity interest holders is provided for in the Plan. 99 XIII. CONCLUSION AND RECOMMENDATION The Debtors believe that confirmation and implementation of the Plan is preferable to any of the alternatives described above because it will provide the greatest recoveries to holders of Claims and Equity Interests. Other alternatives would involve significant delay, uncertainty and substantial additional administrative costs. The Debtors urge holders of impaired Claims and Equity Interests entitled to vote on the Plan to accept the Plan and to evidence such acceptance by returning their Ballots so that they will be received no later than 4:00 p.m., Eastern Time, on December 20, 2001. Dated: Wilmington, Delaware November 14, 2001 CARMIKE CINEMAS, INC., a Delaware corporation (for itself and on behalf of each of the Subsidiaries) By: /s/ Michael W. Patrick ---------------------------------------------- Name: Michael W. Patrick Title: President and Chief Executive Officer 100 EX-99 5 a12-10ext3e2.txt EXHIBIT T3E-2 Exhibit T3E-2 UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE - -----------------------------------x : In re : Chapter 11 Case Nos. : CARMIKE CINEMAS, INC., et al., : 00-3302 (SLR) through -- -- : 00-3305 (SLR) Debtors. : : Jointly Administered - -----------------------------------x DEBTORS' AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE --------------------------------------- WEIL, GOTSHAL & MANGES LLP Attorneys For The Debtors 767 Fifth Avenue New York, New York 10153 (212) 310-8000 - and - RICHARDS, LAYTON & FINGER, P.A. Attorneys For The Debtors One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 (302) 658-6541 Dated: Wilmington, Delaware November 14, 2001 TABLE OF CONTENTS Page Article I DEFINITIONS AND CONSTRUCTION OF TERMS......................................................1 1.1 Adequate Protection Payments...................................................................1 1.2 Administrative Expense Claim...................................................................1 1.3 Agent..........................................................................................1 1.4 Allowed........................................................................................1 1.5 Amended Subordinated Notes Indenture...........................................................1 1.6 Ballot.........................................................................................2 1.7 Bank Claims....................................................................................2 1.8 Bank Credit Agreements.........................................................................2 1.9 Bank Revolver Agreement........................................................................2 1.10 Bank Term Loan Agreement.......................................................................2 1.11 Banks..........................................................................................2 1.12 Bankruptcy Code................................................................................2 1.13 Bankruptcy Court...............................................................................2 1.14 Bankruptcy Rules...............................................................................2 1.15 Base Rate......................................................................................2 1.16 Business Day...................................................................................2 1.17 Carmike........................................................................................2 1.18 Cash...........................................................................................2 1.19 Causes of Action...............................................................................3 1.20 Chapter 11 Cases...............................................................................3 1.21 Claim..........................................................................................3 1.22 Class..........................................................................................3 1.23 Coca-Cola Contract.............................................................................3 1.24 Collateral.....................................................................................3 1.25 Commencement Date..............................................................................3 1.26 Committee......................................................................................3 1.27 Common Stock...................................................................................3 1.28 Confirmation Date..............................................................................3 1.29 Confirmation Hearing...........................................................................3 TABLE OF CONTENTS (continued) Page 1.30 Confirmation Order.............................................................................3 1.31 Convenience Claims.............................................................................3 1.32 Debtors........................................................................................3 1.33 Debtors in Possession..........................................................................3 1.34 Disbursing Agent...............................................................................4 1.35 Disclosure Statement...........................................................................4 1.36 Disputed.......................................................................................4 1.37 Disputed Claim Amount..........................................................................4 1.38 EBITDA.........................................................................................4 1.39 Effective Date.................................................................................4 1.40 Effective Date Net Cash........................................................................4 1.41 Electing Noteholders...........................................................................5 1.42 Equity Interest................................................................................5 1.43 Euro-Dollar Business Day.......................................................................5 1.44 Exit Financing Facility........................................................................5 1.45 Exit Financing Net Cash........................................................................5 1.46 Federal Funds Rate.............................................................................5 1.47 Final Order....................................................................................5 1.48 General Unsecured Claim........................................................................6 1.49 Indenture Trustee..............................................................................6 1.50 LIBOR..........................................................................................6 1.51 Lien...........................................................................................6 1.52 New Bank Debt..................................................................................6 1.53 New Common Stock...............................................................................6 1.54 New Subordinated Notes.........................................................................6 1.55 Other Priority Claim...........................................................................6 1.56 Other Secured Claim............................................................................6 1.57 Plan...........................................................................................6 1.58 Plan Supplement................................................................................6 1.59 Post-Confirmation Credit Agreement.............................................................6 1.60 Preferred Stock................................................................................7 ii TABLE OF CONTENTS (continued) Page 1.61 Prime Rate.....................................................................................7 1.62 Priority Tax Claim.............................................................................7 1.63 Pro Rata Share.................................................................................7 1.64 Record Date....................................................................................7 1.65 Registration Rights Agreement..................................................................7 1.66 Reorganized Carmike............................................................................7 1.67 Reorganized Carmike By-laws....................................................................7 1.68 Reorganized Carmike Certificate of Incorporation...............................................7 1.69 Reorganized Carmike Employment Contract........................................................7 1.70 Reorganized Carmike Management Shares..........................................................7 1.71 Reorganized Debtors............................................................................7 1.72 Reorganized Subsidiaries.......................................................................7 1.73 Required Banks.................................................................................8 1.74 Schedules......................................................................................8 1.75 Secured Claim..................................................................................8 1.76 Secured Tax Claim..............................................................................8 1.77 Stockholders' Agreement........................................................................8 1.78 Subordinated Note Claims.......................................................................8 1.79 Subordinated Notes.............................................................................8 1.80 Subordinated Notes Indenture...................................................................8 1.81 Subsequent Distribution Date...................................................................8 1.82 Subsidiary.....................................................................................8 1.83 Subsidiary Equity Interest.....................................................................8 1.84 Tort Claim.....................................................................................8 1.85 Wachovia.......................................................................................8 Article II TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS.........................9 2.1 Administrative Expense Claims..................................................................9 2.2 Professional Compensation and Reimbursement Claims.............................................9 2.3 Priority Tax Claims............................................................................9 Article III CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.............................................10 Article IV TREATMENT OF CLAIMS AND EQUITY INTERESTS..................................................10 iii TABLE OF CONTENTS (continued) Page 4.1 CLASS 1 -- OTHER PRIORITY CLAIMS..............................................................10 (a) Impairment and Voting.......................................................10 (b) Distributions...............................................................10 4.2 CLASS 2 -- SECURED TAX CLAIMS.................................................................11 (a) Impairment and Voting.......................................................11 (b) Distributions...............................................................11 (c) Retention of Liens..........................................................11 4.3 CLASS 3 -- OTHER SECURED CLAIMS...............................................................11 (a) Impairment and Voting.......................................................11 (b) Distributions/Reinstatement of Claims.......................................11 4.4 CLASS 4 -- BANK CLAIMS........................................................................11 (a) Impairment, Voting and Allowance............................................11 (b) Distributions...............................................................11 4.5 CLASS 5 -- GENERAL UNSECURED CLAIMS (OTHER THAN CONVENIENCE CLAIMS)...........................13 (a) Impairment and Voting.......................................................13 (b) Distributions...............................................................13 4.6 CLASS 6 - CONVENIENCE CLAIMS..................................................................13 (a) Impairment and Voting.......................................................13 (b) Distributions...............................................................13 4.7 CLASS 7 -- SUBORDINATED NOTE CLAIMS...........................................................14 (a) Impairment, Voting and Allowance............................................14 (b) Distributions...............................................................14 (c) Election to Receive New Common Stock........................................14 (d) Distribution to Indenture Trustee...........................................15 4.8 CLASS 8 - PREFERRED STOCK EQUITY INTERESTS....................................................15 (a) Impairment and Voting.......................................................15 (b) Distributions...............................................................15 4.9 CLASS 9 - COMMON STOCK EQUITY INTERESTS......................................................15 (a) Impairment and Voting.......................................................15 (b) Distributions...............................................................15 4.10 CLASS 10 - SUBSIDIARY EQUITY INTERESTS........................................................15 iv TABLE OF CONTENTS (continued) Page (a) Impairment and Voting.......................................................15 (b) Reinstatement of Subsidiary Equity Interests................................16 Article V PROVISIONS REGARDING VOTING AND DISTRIBUTIONS UNDER THE PLAN AND TREATMENT OF DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS..............................................16 5.1 Voting of Claims..............................................................................16 5.2 Nonconsensual Confirmation....................................................................16 5.3 Nonenforcement of Subordination Provision.....................................................16 5.4 Method of Distributions Under the Plan........................................................16 (a) Disbursing Agent............................................................16 (b) Surrender of Certificates...................................................16 (c) Delivery of Distributions...................................................17 (d) Distributions of Cash.......................................................17 (e) Timing of Distributions.....................................................17 (f) Hart-Scott-Rodino Compliance................................................17 (g) Minimum Distributions.......................................................17 (h) Fractional Shares...........................................................17 (i) Unclaimed Distributions.....................................................17 (j) Distributions to Holders as of the Record Date..............................17 5.5 Disputed Claims...............................................................................18 (a) Distributions as to Allowed Portion of Disputed Claims......................18 (b) Distributions Upon Allowance of Disputed Claims.............................18 (c) Distributions to Holders of Allowed Claims Upon Disallowance of Disputed Claims......................................................................18 (d) Tort Claims.................................................................18 5.6 Objections to and Resolution of Claims........................................................19 5.7 Cancellation of Existing Securities and Agreements............................................19 5.8 Stockholders' Agreement.......................................................................19 5.9 Registration Rights Agreement.................................................................19 Article VI EXECUTORY CONTRACTS AND UNEXPIRED LEASES..................................................19 6.1 Assumption or Rejection of Executory Contracts and Unexpired Leases...........................19 (a) Executory Contracts and Unexpired Leases....................................19 v TABLE OF CONTENTS (continued) Page (b) Schedules of Rejected Executory Contracts and Unexpired Leases; Inclusiveness...............................................................20 (c) Insurance Policies..........................................................20 (d) Approval of Assumption or Rejection of Executory Contracts and Unexpired Leases......................................................................20 (e) Cure of Defaults............................................................20 (f) Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Plan..............................20 6.2 Continuation of Officer, Director and Employee Indemnification................................20 6.3 Compensation and Benefit Programs.............................................................21 Article VII IMPLEMENTATION OF THE PLAN................................................................21 7.1 Substantive Consolidation.....................................................................21 Article VIII PROVISIONS REGARDING CORPORATE GOVERNANCE AND MANAGEMENT OF REORGANIZED DEBTORS..........21 8.1 General.......................................................................................21 8.2 Directors and Officers of the Reorganized Debtors.............................................21 (a) Reorganized Carmike.........................................................21 (i) Board of Directors..................................................21 (ii) Officers............................................................22 (b) Reorganized Subsidiaries....................................................22 (i) Boards of Directors.................................................22 (ii) Officers............................................................22 8.3 By-laws and Certificates of Incorporation.....................................................22 8.4 Issuance of New Securities and Debt Instruments...............................................22 8.5 Reorganized Carmike Management Shares.........................................................22 8.6 Reorganized Carmike Employment Contract.......................................................22 Article IX EFFECT OF CONFIRMATION OF PLAN............................................................23 9.1 Term of Bankruptcy Injunction or Stays........................................................23 9.2 Revesting of Assets...........................................................................23 9.3 Claims Preserved..............................................................................23 9.4 Discharge of Debtors..........................................................................23 9.5 Limited Release of Debtors' Officers and Directors............................................23 9.6 Release of Banks..............................................................................23 vi TABLE OF CONTENTS (continued) Page 9.7 Injunction....................................................................................24 Article X EFFECTIVENESS OF THE PLAN.................................................................24 10.1 Conditions Precedent to Effectiveness.........................................................24 10.2 Effect of Failure of Conditions...............................................................25 10.3 Waiver of Conditions..........................................................................25 Article XI RETENTION OF JURISDICTION.................................................................25 Article XII MISCELLANEOUS PROVISIONS..................................................................26 12.1 Effectuating Documents and Further Transactions...............................................26 12.2 Corporate Action..............................................................................26 12.3 Exemption from Transfer Taxes.................................................................26 12.4 Exculpation...................................................................................27 12.5 Termination of Committee......................................................................27 12.6 Post-Effective Date Fees and Expenses.........................................................27 12.7 Payment of Statutory Fees.....................................................................27 12.8 Amendment or Modification of the Plan.........................................................27 12.9 Severability..................................................................................27 12.10 Revocation or Withdrawal of the Plan..........................................................27 12.11 Binding Effect................................................................................28 12.12 Notices.......................................................................................28 12.13 Governing Law.................................................................................29 12.14 Withholding and Reporting Requirements........................................................29 12.15 Plan Supplement...............................................................................29 12.16 Allocation of Plan Distributions Between Principal and Interest...............................29 12.17 Headings......................................................................................29 12.18 Exhibits/Schedules............................................................................29
vii Carmike Cinemas, Inc., Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. propose the following joint plan of reorganization under section 1121(a) of title 11 of the United States Code: ARTICLE I DEFINITIONS AND CONSTRUCTION OF TERMS Definitions. As used herein, the following terms have the respective meanings specified below: 1.1 Adequate Protection Payments means payments actually received by the Banks (in such capacity) as of the Effective Date pursuant to the February 21, 2001 order of the Bankruptcy Court regarding adequate protection and cash collateral. 1.2 Administrative Expense Claim means any right to payment constituting a cost or expense of administration of any of the Chapter 11 Cases under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without limitation, any actual and necessary costs and expenses of preserving the estates of the Debtors, any actual and necessary costs and expenses of operating the business of the Debtors, any indebtedness or obligations incurred or assumed by the Debtors in Possession in connection with the conduct of their business, including, without limitation, for the acquisition or lease of property or an interest in property or the rendition of services, all compensation and reimbursement of expenses to the extent Allowed by the Bankruptcy Court under sections 330 or 503 of the Bankruptcy Code and any fees or charges assessed against the estates of the Debtors under section 1930 of chapter 123 of title 28 of the United States Code. 1.3 Agent means the administrative and collateral agent for the Banks pursuant to the Post-Confirmation Credit Agreement. 1.4 Allowed means, (i) with reference to any Claim, (a) any Claim against the Debtors which has been listed by the Debtors in their Schedules, as such Schedules may be amended by the Debtors from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim has been filed, (b) any Claim allowed pursuant to the Plan, (c) any Claim which is not Disputed, (d) any Claim that is compromised, settled or otherwise resolved pursuant to the authority granted to Reorganized Carmike pursuant to a Final Order of the Bankruptcy Court or under Section 5.6 of the Plan or (e) any Claim which, if Disputed, has been Allowed by Final Order; provided, however, that Claims allowed solely for the purpose of voting to accept or reject the Plan pursuant to an order of the Bankruptcy Court shall not be considered "Allowed Claims" hereunder, and (ii) with reference to any Equity Interest, (a) any Equity Interest registered in the stock register maintained by or on behalf of the Debtors as of the Record Date and (b) either (x) not timely objected to or (y) Allowed by Final Order. Unless otherwise specified herein or by order of the Bankruptcy Court, "Allowed Claim" shall not, for any purpose under the Plan, include interest on such Claim from and after the Commencement Date. 1.5 Amended Subordinated Notes Indenture means an amendment to the Subordinated Notes Indenture or a new or amended and restated trust indenture among Carmike, as issuer of the New Subordinated Notes, the Subsidiaries of Carmike that are guarantors under the Subordinated Notes Indenture, as guarantors, and the trustee designated therein which shall be in form and substance the same as the Subordinated Notes Indenture and all documents and instruments relating thereto, dated as of the Effective Date, which shall (i) increase the non-default interest rate stated in the Subordinated Notes Indenture by 1.0% over the non-default interest rate stated in the Subordinated Notes Indenture, and (ii) contain certain covenants and undertakings of Carmike 1 not contained in the Subordinated Notes Indenture and such other modifications as are necessary to permit the transactions contemplated by the Plan. 1.6 Ballot means the form distributed to each holder of an impaired Claim on which is to be indicated acceptance or rejection of the Plan. 1.7 Bank Claims means all Claims of the Banks arising under the Bank Credit Agreements, including any Secured Claim. All Bank Claims constitute Allowed Claims under the Plan in the amount set forth in Section 4.4 of the Plan. 1.8 Bank Credit Agreements means the Bank Revolver Agreement and the Bank Term Loan Agreement. 1.9 Bank Revolver Agreement means that certain Amended and Restated Credit Agreement among Carmike, Wachovia and the Banks party thereto, dated as of January 29, 1999, and any of the documents and instruments relating thereto, as amended, supplemented, modified or restated as of the Commencement Date, including, without limitation, the amendment thereto dated March 31, 2000. 1.10 Bank Term Loan Agreement means that certain Term Loan Credit Agreement among Carmike, Wachovia, the Banks party thereto, Goldman Sachs Credit Partners L.P. as syndication agent, and First Union National Bank as documentation agent, dated as of February 25, 1999, and any of the documents and instruments relating thereto, as amended, supplemented, modified or restated as of the Commencement Date, including, without limitation, the amendments thereto dated July 13, 1999 and March 31, 2000. 1.11 Banks means, collectively, the banks and financial institutions that are parties to the Bank Credit Agreements and their successors and assigns. 1.12 Bankruptcy Code means title 11 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases. 1.13 Bankruptcy Court means the United States District Court for the District of Delaware having jurisdiction over the Chapter 11 Cases and, to the extent of any reference under section 157 of title 28 of the United States Code, the unit of such District Court under section 151 of title 28 of the United States Code. 1.14 Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure as promulgated by the United States Supreme Court under section 2075 of title 28 of the United States Code, and any Local Rules of the Bankruptcy Court. 1.15 Base Rate means for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half of one percent above the Federal Funds Rate. For purposes of determining the Base Rate for any day, changes in the Prime Rate or the Federal Funds Rate shall be effective on the date of each such change. 1.16 Business Day means any day other than a Saturday, Sunday or any other day on which commercial banks in New York, New York are required or authorized to close by law or executive order. 1.17 Carmike means Carmike Cinemas, Inc., a Delaware corporation. 1.18 Cash means legal tender of the United States of America. 2 1.19 Causes of Action means, without limitation, any and all actions, causes of action, liabilities, obligations, rights, suits, damages, judgments, claims and demands whatsoever, whether known or unknown, existing of hereafter arising, in law, equity or otherwise, based in whole or in part upon any act or omission or other event occurring prior to the Commencement Date or during the course of the Chapter 11 Cases, including through the Effective Date. 1.20 Chapter 11 Cases means the cases under chapter 11 of the Bankruptcy Code commenced by the Debtors, styled In re Carmike Cinemas, Inc. et al., Chapter 11 Case Nos. 00-3302 through 00-3305 (SLR) inclusive, Jointly Administered, currently pending before the Bankruptcy Court. 1.21 Claim has the meaning set forth in section 101 of the Bankruptcy Code. 1.22 Class means a category of holders of Claims or Equity Interests as set forth in Article III of the Plan. 1.23 Coca-Cola Contract means that certain agreement dated December 10, 1998, as amended, between Carmike and Coca-Cola USA, a division of The Coca-Cola Company, relating to the purchase and sale of Coca-Cola related products. 1.24 Collateral means any property or interest in property of the estates of the Debtors subject to a Lien to secure the payment or performance of a Claim, which Lien is not subject to avoidance or otherwise invalid under the Bankruptcy Code or applicable state law. 1.25 Commencement Date means August 8, 2000, the date on which the Debtors commenced the Chapter 11 Cases. 1.26 Committee means the statutory committee of unsecured creditors appointed in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code. 1.27 Common Stock means the Class A and Class B common stock of Carmike issued and outstanding as of the Commencement Date. 1.28 Confirmation Date means the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order on the docket. 1.29 Confirmation Hearing means the hearing held by the Bankruptcy Court to consider confirmation of the Plan pursuant to section 1129 of the Bankruptcy Code, as such hearing may be adjourned or continued from time to time. 1.30 Confirmation Order means the order of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code. 1.31 Convenience Claims means General Unsecured Claims (i) in the amount of $1,000 or less, or (ii) which the holder of such Claim irrevocably elects on the Ballot to reduce to $1,000. 1.32 Debtors means, collectively, Carmike Cinemas, Inc., Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. 1.33 Debtors in Possession means the Debtors in their capacity as debtors in possession in the Chapter 11 Cases pursuant to sections 1101, 1107(a) and 1108 of the Bankruptcy Code. 3 1.34 Disbursing Agent means the Debtors or their designee in the capacity as disbursing agent under Section 5.4(a) of the Plan. 1.35 Disclosure Statement means the disclosure statement relating to the Plan, including, without limitation, all exhibits and schedules thereto, as approved by the Bankruptcy Court pursuant to section 1125 of the Bankruptcy Code. 1.36 Disputed means, with reference to any Claim, (i) any Claim proof of which was timely and properly filed, and in such case or in the case of an Administrative Expense Claim, any Administrative Expense Claim or Claim which is disputed under the Plan or as to which the Debtors have interposed a timely objection and/or request for estimation in accordance with section 502(c) of the Bankruptcy Code and Bankruptcy Rule 3018, which objection and/or request for estimation has not been withdrawn or determined by a Final Order, and (ii) any Claim proof of which was required to be filed by order of the Bankruptcy Court but as to which a proof of claim was not timely or properly filed. A Claim that is Disputed by the Debtors as to its amount only, shall be deemed Allowed in the amount the Debtors admit owing, if any, and Disputed as to the excess. 1.37 Disputed Claim Amount means the amount set forth in the proof of claim relating to a Disputed Claim or, if an amount is estimated in respect of a Disputed Claim in accordance with section 502(c) of the Bankruptcy Code and Bankruptcy Rule 3018, the amount so estimated pursuant to an order of the Bankruptcy Court. 1.38 EBITDA means, for any period, the net income of Reorganized Carmike and the Reorganized Subsidiaries for such period plus, to the extent such amount was deducted in calculating such net income: (a) interest expense; (b) income and franchise taxes; (c) depreciation expense; (d) amortization expense; (e) all other non-cash items, extraordinary items, non-recurring and unusual items and the cumulative effects of changes in accounting principles reducing such net income, less all non-cash items, extraordinary items, nonrecurring and unusual items and the cumulative effects of changes in accounting principles increasing such net income, all as determined on a consolidated basis for Reorganized Carmike and the Reorganized Subsidiaries in conformity with generally accepted accounting principles; (f) upfront expenses resulting from equity offerings, investments, mergers, recapitalizations, option buyouts, asset dispositions, asset acquisitions, and similar transactions to the extent such expenses reduce net income; (g) restructuring charges reducing net income; (h) charges arising from the grant of stock or options to management; and (i) gains or losses on asset dispositions. 1.39 Effective Date means the first Business Day on which the conditions specified in Section 10.1 of the Plan have been satisfied or waived. 1.40 Effective Date Net Cash means the amount, if any, by which the Debtors' Cash and Cash equivalents on the Effective Date exceed $20 million, less the amount of Cash necessary to fund the payments including funds retained on account of Disputed Claims to be made under the Plan on or about the Effective Date, including, without limitation, the following: (1) professional fees incurred through the Effective Date, cure payments, and retention payments under the Debtors' current severance and retention plan approved by the Court; (2) fees and expenses relating to the Exit Financing Facility; (3) post-petition interest on the Bank Claims and other amounts payable to the Banks under the Plan (other than the Effective Date Net Cash and the Exit Financing Net Cash); (4) pre-petition interest on the Subordinated Note Claims at the non-default rate of interest; (5) post-petition interest due on the Subordinated Note Claims at the non-default rate of interest through the Effective Date but excluding the interest payment in the amount of $9,375,000 due on February 1, 2002 under the Subordinated Notes Indenture; (6) $10 million of payments to holders of Class 5 Claims; (7) payments to holders of Class 6 Claims; and (8) payments to the United States Trustee pursuant to section 1930 of title 28 of the United States Code incurred through the Effective Date. Effective Date Net Cash shall not 4 include any amounts borrowed by or available to the Debtors under the Exit Financing Facility. 1.41 Electing Noteholders means the holders of Allowed Subordinated Note Claims that elect the treatment on account of such Claims provided under Section 4.7(c) of the Plan. 1.42 Equity Interest means any share of Preferred Stock, Common Stock or other instrument evidencing an ownership interest in any of the Debtors, whether or not transferable, and any option, warrant or right, contractual or otherwise, to acquire any such interest. 1.43 Euro-Dollar Business Day means any Business Day on which dealings in dollar deposits are carried out in the London interbank market. 1.44 Exit Financing Facility means a revolving credit facility with availability of up to $50 million and secured by a first lien on substantially all of the Debtors' assets on terms and conditions satisfactory to the Debtors and the Required Banks. 1.45 Exit Financing Net Cash means the amount by which the commitment under the Exit Financing Facility, as that facility exists on the Effective Date, exceeds $30 million; provided, however, that if, after the Effective Date, the Exit Financing Facility is (i) amended, supplemented, or modified at any time to increase the commitment, or (ii) is completely or partially replaced with a facility having a higher commitment, in each case with such consent of the Banks, if any, as is required by the Post-Confirmation Credit Agreement, it also means and includes the additional amount by which such increased or higher commitment exceeds $30 million, less the amount of the Exit Financing Net Cash paid on the Effective Date, and such additional amount shall be payable at the time of such increase in commitment or closing of such replacement facility; provided, however, that in no event shall Exit Financing Net Cash exceed $20 million. 1.46 Federal Funds Rate means, for any day, the rate per annum (rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to the Agent on such day on such transactions, as determined by the Agent. 1.47 Final Order means an order of the Bankruptcy Court or any other court of competent jurisdiction as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending or as to which any right to appeal, petition for certiorari, reargue, or rehear shall have been waived in writing in form and substance satisfactory to the Debtors or, on and after the Effective Date, Reorganized Carmike, or, in the event that an appeal, writ of certiorari, or reargument or rehearing thereof has been sought, such order of the Bankruptcy Court or other court of competent jurisdiction shall have been determined by the highest court to which such order was appealed, or certiorari, reargument or rehearing shall have been denied and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired; provided, however, that the possibility that a motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules or applicable state court rules of civil procedure, may be filed with respect to such order shall not cause such order not to be a Final Order. 5 1.48 General Unsecured Claim means any Claim other than a Secured Claim, Administrative Expense Claim, Priority Tax Claim, Other Priority Claim, Bank Claim, or Subordinated Note Claim. 1.49 Indenture Trustee means the Wilmington Trust Company, successor to the Bank of New York, as indenture trustee under the Subordinated Notes Indenture. 1.50 LIBOR applicable to any principal amount means for any interest period the offered rate for deposits in dollars for an amount equal or comparable to such principal amount for a one month interest period which appears on the Dow Jones Market Telerate Page 3750 two Euro-Dollar Business Days prior to the first day of such interest period, provided that if no such offered rate appear on such page, LIBOR for an interest period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted by the principal London offices of not less than two leading money center banks in New York City, selected by the Agent, at approximately 11:00 A.M., London time, two Euro-Dollar Business Days prior to the first day of such interest period, for deposits in United States dollars offered by leading European banks for a one month interest period in an amount comparable to such principal amount. 1.51 Lien has the meaning set forth in section 101 of the Bankruptcy Code. 1.52 New Bank Debt means the secured term debt authorized and to be issued by Reorganized Carmike on the Effective Date under the Post-Confirmation Credit Agreement and on the terms and conditions described in Section 4.4(b) hereof and guaranteed by the Reorganized Subsidiaries, which secured term debt will be in the principal amount of $264,977,449 as of the Effective Date less (a) all Adequate Protection Payments and (b) any payments of Effective Date Net Cash and Exit Financing Net Cash made to the holders of Bank Claims pursuant to Section 4.4(b) of the Plan on the Effective Date. 1.53 New Common Stock means the common stock of Reorganized Carmike authorized and to be issued pursuant to the Plan. The New Common Stock shall have a par value of $.01 per share and such rights with respect to dividends, liquidation, voting and other matters as are provided for in the Reorganized Carmike Certificate of Incorporation and the Reorganized Carmike By-laws and under applicable nonbankruptcy law. 1.54 New Subordinated Notes means the notes to be issued under the Amended Subordinated Notes Indenture on and after the Effective Date. 1.55 Other Priority Claim means any Claim, other than an Administrative Expense Claim or a Priority Tax Claim, entitled to priority in right of payment under section 507(a) of the Bankruptcy Code. 1.56 Other Secured Claim means any Secured Claim, other than a Secured Tax Claim or a Secured Claim held by Wachovia for the benefit of the Banks. 1.57 Plan means this chapter 11 plan of reorganization, including, without limitation, the Plan Supplement and all exhibits, supplements, appendices and schedules hereto, either in its present form or as the same may be altered, amended or modified from time to time. 1.58 Plan Supplement means the forms of documents specified in Section 12.15 of the Plan. 1.59 Post-Confirmation Credit Agreement means that certain credit agreement by and among Reorganized Carmike, the Agent, and the Banks pursuant to which the New Bank Debt will be issued under the Plan, which credit agreement will be filed with the Court no later than ten days prior to the earlier of (1) 6 the last day upon which holders of Claims may vote to accept or reject the Plan, and (2) the deadline for objecting to confirmation of the Plan. 1.60 Preferred Stock means the Series A Preferred Stock of Carmike issued and outstanding as of the Commencement Date. 1.61 Prime Rate means that interest rate, if any, so denominated and set by the Agent from time to time as its prime interest rate for borrowings and if no such rate is denominated and set by the Agent, the Prime Rate means the prime rate as published in the Wall Street Journal. 1.62 Priority Tax Claim means any Claim of a governmental unit of the kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. 1.63 Pro Rata Share means a proportionate share, so that the ratio of the consideration distributed (i) on account of an Allowed Claim in a Class to the amount of such Allowed Claim is the same as the ratio of the amount of the consideration distributed on account of all Allowed Claims and reserved for distribution on account of all Disputed Claims in such Class to the amount of all Allowed Claims and Disputed Claims in such Class, and (ii) on account of an Allowed Equity Interest in a Class to the amount of such Allowed Equity Interest is the same as the ratio of the amount of the consideration distributed on account of all Allowed Equity Interests in such Class to the amount of all Allowed Equity Interests in such Class. 1.64 Record Date means the day that is five Business Days from and after the Confirmation Date. 1.65 Registration Rights Agreement means the agreement governing the registration of the New Common Stock of certain holders thereof in substantially the form included in the Plan Supplement. 1.66 Reorganized Carmike means Carmike on and after the Effective Date. 1.67 Reorganized Carmike By-laws means the amended and restated By-laws of Reorganized Carmike, which shall be in substantially the form contained in the Plan Supplement. 1.68 Reorganized Carmike Certificate of Incorporation means the amended and restated Certificate of Incorporation of Reorganized Carmike, which shall be in substantially the form contained in the Plan Supplement. 1.69 Reorganized Carmike Employment Contract means the employment contract between Reorganized Carmike and Michael W. Patrick which shall be in substantially the form contained in the Plan Supplement. 1.70 Reorganized Carmike Management Shares means shares of New Common Stock representing 10% of the fully-diluted New Common Stock of Reorganized Carmike that will be issued or reserved for issuance to management as described in Section 8.5 of the Plan. 1.71 Reorganized Debtors means Reorganized Carmike and each of the Reorganized Subsidiaries. 1.72 Reorganized Subsidiaries means the Subsidiaries on and after the Effective Date. 7 1.73 Required Banks means each of the "Required Banks" and the "Required Lenders" as defined in the Bank Revolver Agreement and the Bank Term Loan Agreement, respectively. 1.74 Schedules means the schedules of assets and liabilities, the list of holders of Equity Interests and the statements of financial affairs filed by the Wooden Nickel Pub, Inc. and Military Services, Inc. on September 19, 2000 and Carmike and Eastwynn Theatres, Inc. on October 18, 2000 under section 521 of the Bankruptcy Code and Bankruptcy Rule 1007, and all amendments and modifications thereto through and including the Confirmation Date, including, without limitation, the amendments to the Schedules filed on April 16, 2001. 1.75 Secured Claim means any Claim, to the extent reflected in the Schedules or a proof of claim as a Secured Claim, which is secured by a Lien on Collateral to the extent of the value of such Collateral, as determined in accordance with section 506(a) of the Bankruptcy Code, or, in the event that such Claim is subject to a permissible setoff under section 553 of the Bankruptcy Code, to the extent of such permissible setoff. 1.76 Secured Tax Claim means any Secured Claim which, absent its secured status, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code. 1.77 Stockholders' Agreement means a stockholders' agreement to be entered into pursuant to Section 5.8 of the Plan between Reorganized Carmike and certain Electing Noteholders (David W. Zalaznick, Bermuda Investment Co., an affiliate of John W. Jordan, II, and Leucadia National Corporation), holders of Preferred Stock Equity Interests, and Michael W. Patrick, in their capacities as holders of New Common Stock on and after the Effective Date, which shall be in substantially the form contained in the Plan Supplement. 1.78 Subordinated Note Claims means all Claims for principal, interest and other charges and arising under the Subordinated Notes Indenture. 1.79 Subordinated Notes means all notes issued and outstanding under the Subordinated Notes Indenture as of the Commencement Date. 1.80 Subordinated Notes Indenture means the trust indenture, dated as of February 3, 1999, between Carmike, as issuer of the Subordinated Notes, and The Bank of New York, as trustee and all of the documents and instruments relating thereto, as amended, supplemented, modified or restated as of the Commencement Date. 1.81 Subsequent Distribution Date means each May 31 and November 30 commencing on May 31, 2002. 1.82 Subsidiary means any Debtor other than Carmike. 1.83 Subsidiary Equity Interest means any share of common stock or other instrument evidencing a present ownership interest in any of the Subsidiaries, whether or not transferable, and any option, warrant or right, contractual or otherwise, to acquire any such interest. 1.84 Tort Claim means any Claim relating to personal injury, property damage, products liability, discrimination, employment or any other similar litigation Claim asserted against any of the Debtors. 1.85 Wachovia means Wachovia Bank, N.A., as agent under the Bank Credit Agreements. 8 Interpretation; Application of Definitions and Rules of Construction. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include both the singular and the plural and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. Unless otherwise specified, all section, article, schedule or exhibit references in the Plan are to the respective Section in, Article of, Schedule to, or Exhibit to, the Plan. The words "herein," "hereof," "hereto," "hereunder" and other words of similar import refer to the Plan as a whole and not to any particular section, subsection or clause contained in the Plan. The rules of construction contained in section 102 of the Bankruptcy Code shall apply to the construction of the Plan. A term used herein that is not defined herein, but that is used in the Bankruptcy Code, shall have the meaning ascribed to that term in the Bankruptcy Code. The headings in the Plan are for convenience of reference only and shall not limit or otherwise affect the provisions of the Plan. ARTICLE II TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS -------------------------------------- 2.1 Administrative Expense Claims. Except to the extent that any entity entitled to payment of any Allowed Administrative Expense Claim agrees to a less favorable treatment, each holder of an Allowed Administrative Expense Claim shall receive, in full and complete settlement, satisfaction and discharge of its Allowed Administrative Expense Claim, Cash in an amount equal to such Allowed Administrative Expense Claim on the later of the Effective Date and the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or as soon thereafter as is practicable; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtors in Possession or liabilities arising under loans or advances to or other obligations incurred by the Debtors in Possession shall be paid in full and performed by the applicable Reorganized Debtor in the ordinary course of business in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing or other documents relating to such transactions. 2.2 Professional Compensation and Reimbursement Claims. All entities seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under sections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code shall (a) file their respective final applications for allowances of compensation for services rendered and reimbursement of expenses incurred through the Effective Date by no later than the date that is 60 days after the Effective Date or such other date as may be fixed by the Bankruptcy Court and (b) if granted such an award by the Bankruptcy Court, be paid in full in such amounts as are Allowed by the Bankruptcy Court (i) on the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or as soon thereafter as is practicable or (ii) upon such other terms as may be mutually agreed upon between such holder of an Administrative Expense Claim and the Reorganized Debtors. 2.3 Priority Tax Claims. Except to the extent that a holder of an Allowed Priority Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Priority Tax Claim shall receive, in full and complete settlement, satisfaction and discharge of its Allowed Priority Tax Claim, at the sole option of Reorganized Carmike, (a) Cash in an amount equal to such Allowed Priority Tax Claim on the later of the Effective Date and the date such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon thereafter as is practicable or (b) equal annual Cash payments in an aggregate amount equal to such Allowed Priority Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth anniversary of the date of assessment of such Allowed Priority Tax Claim, or upon such other terms determined by the Bankruptcy Court to 9 provide the holder of such Allowed Priority Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Priority Tax Claim. ARTICLE III CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS --------------------------------------------- Claims, other than Administrative Expense Claims and Priority Tax Claims, are classified for all purposes, including voting, confirmation and distribution pursuant to the Plan, as follows: Class Status - ----- ------ Class 1 - Other Priority Claims Unimpaired Class 2 - Secured Tax Claims Impaired Class 3 - Other Secured Claims Unimpaired Class 4 - Bank Claims Impaired Class 5 - General Unsecured Claims Impaired Class 6 - Convenience Claims Impaired Class 7 - Subordinated Note Claims Impaired Class 8 - Preferred Stock Interests Impaired Class 9 - Common Stock Interests Impaired Class 10 - Subsidiary Equity Interests Unimpaired ARTICLE IV TREATMENT OF CLAIMS AND EQUITY INTERESTS ---------------------------------------- 4.1 CLASS 1 -- OTHER PRIORITY CLAIMS. (a) Impairment and Voting. Class 1 is unimpaired by the Plan. Each holder of an Allowed Other Priority Claim is conclusively presumed to have accepted the Plan and is not entitled to vote to accept or reject the Plan. (b) Distributions. Except to the extent that a holder of an Allowed Other Priority Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Other Priority Claim as of the Record Date shall receive, in full and complete settlement, satisfaction and discharge of its Allowed Other Priority Claim, Cash in an amount equal to such Allowed Other Priority Claim on the Effective Date or as soon thereafter as is practicable. 10 4.2 CLASS 2 -- SECURED TAX CLAIMS. (a) Impairment and Voting. Class 2 is impaired by the Plan. Each holder of an Allowed Secured Tax Claim is entitled to vote to accept or reject the Plan. (b) Distributions. Except to the extent that a holder of an Allowed Secured Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Secured Tax Claim as of the Record Date shall receive, in full and complete settlement, satisfaction and discharge of its Allowed Secured Tax Claim, at the sole option of Reorganized Carmike, (i) Cash in an amount equal to such Allowed Secured Tax Claim, including any interest on such Allowed Secured Tax Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, if any, on the later of the Effective Date and the date such Allowed Secured Tax Claim becomes an Allowed Secured Tax Claim, or as soon thereafter as is practicable or (ii) equal annual Cash payments in an aggregate amount equal to such Allowed Secured Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth anniversary of the date of assessment of such Allowed Secured Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Secured Tax Claim. (c) Retention of Liens. Each holder of an Allowed Secured Tax Claim shall retain the Liens (or replacement Liens as may be contemplated under nonbankruptcy law) securing its Allowed Secured Tax Claim as of the Effective Date until full and final payment of such Allowed Secured Tax Claim is made as provided herein, and upon such full and final payment, such Liens shall be deemed null and void and shall be unenforceable for all purposes. 4.3 CLASS 3 -- OTHER SECURED CLAIMS. (a) Impairment and Voting. Class 3 is unimpaired by the Plan. Each holder of an Allowed Other Secured Claim is conclusively presumed to have accepted the Plan and is not entitled to vote to accept or reject the Plan. (b) Distributions/Reinstatement of Claims. Except to the extent that a holder of an Other Secured Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Other Secured Claim as of the Record Date shall, in full and complete settlement, satisfaction and discharge of its Other Secured Claim, at the sole option of the Reorganized Debtors, (i) be reinstated and rendered unimpaired in accordance with section 1124 of the Bankruptcy Code, (ii) receive Cash in an amount equal to such Other Secured Claim, including any interest on such Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, if any, on the Effective Date or as soon thereafter as is practicable or (iii) receive the Collateral securing its Other Secured Claim and any interest on such Other Secured Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, if any, on the Effective Date or as soon thereafter as is practicable. 4.4 CLASS 4 -- BANK CLAIMS. (a) Impairment, Voting and Allowance. Class 4 is impaired by the Plan. Each holder of a Bank Claim is entitled to vote to accept or reject the Plan. The Bank Claims shall for the purposes of this Plan be Allowed Claims in the aggregate amount of $264,977,449 as of the Commencement Date. (b) Distributions. Each holder of a Bank Claim as of the Record Date shall receive on the Effective Date, in full and complete settlement, satisfaction and discharge of its Bank Claim, its Pro Rata Share of: (i) New Bank Debt and (ii) Cash in an amount equal to the sum of (w) $35,000,000 on 11 account of all accrued and unpaid post-petition interest on the Bank Claims through the Effective Date, provided, however, that in the event the Effective Date occurs after January 15, 2002, such $35,000,000 amount shall be increased by the interest accruing on the Allowed Bank Claims from January 15, 2002 through and including the Effective Date at a per annum rate equal to "LIBOR" plus 3.00%, as defined in and pursuant to the Bank Revolver Agreement, or "LIBOR" plus 3.50%, as defined in and pursuant to the Bank Term Loan Agreement, as applicable; (x) the Effective Date Net Cash; (y) the Exit Financing Net Cash; and (z) all reasonable professional fees and expenses incurred by the Banks' retained professionals, Jones, Day, Reavis & Pogue, FTI/Policano & Manzo, and Duane, Morris & Hecksher LLP, in connection with these Chapter 11 Cases (including reasonable prepetition fees and expenses of Jones, Day, Reavis & Pogue) and all agent fees required to be paid by the Debtors under the Bank Credit Agreements through such time as is necessary to fully complete the implementation of the New Bank Debt under the Plan. The payment of Effective Date Net Cash shall be made on the Effective Date based upon a reasonable estimate of Effective Date Net Cash by the Debtors as of such date. The Agent and the Reorganized Debtors shall attempt to reconcile the actual amount of Effective Date Net Cash by June 30, 2002, with any agreed increase or decrease to be reflected in the June 30, 2002 amortization payment to be made on account of the New Bank Debt. The New Bank Debt will bear interest, at the greater of: (a) at the option of Reorganized Carmike, (i) the Base Rate plus 3.5% or (ii) LIBOR plus 4.5%; and (b) 7.75% per annum. Interest will be payable monthly in arrears. The New Bank Debt will mature on the fifth anniversary of the Effective Date. Reorganized Carmike shall repay the principal amount of the New Bank Debt prior to maturity as follows: Date Amortization ---- ------------ June 30, 2002 $10,000,000 December 31, 2002 $10,000,000 June 30, 2003 $12,500,000 December 31, 2003 $12,500,000 June 30, 2004 $15,000,000 December 31, 2004 $15,000,000 June 30, 2005 $20,000,000 December 31, 2005 $20,000,000 June 30, 2006 $20,000,000 As more specifically described in the Post-Confirmation Credit Agreement, the New Bank Debt will be entitled to additional amortization payments on March 31 of each calendar year while the New Bank Debt is outstanding in the amount by which (a) the greater of (i) 50% of the Reorganized Debtors' EBITDA for the previous calendar year exceeds the projected EBITDA set forth in Exhibit E to the Disclosure Statement for such previous calendar year, and (ii) 50% of cash and cash equivalents of the Reorganized Debtors in excess of $15 million as of the end of the previous calendar year, exceeds (b) the amount then outstanding under the Exit Financing Facility (including, without limitation, undrawn letters of credit). In addition, the New Bank Debt will, subject to the terms of the Exit Financing Facility, be entitled to amortization payments equal to 50% of the net proceeds of asset sales permitted by the Post-Confirmation Credit Agreement (subject to customary reserves and reinvestment rights), in excess of such amount as is required to be paid on account of the Exit Financing Facility as a permanent reduction of the commitments thereunder. The New Bank Debt will be entitled to such other terms and conditions as set forth in the Post-Confirmation Credit Agreement. The New Bank Debt will be secured by a security interest, lien, and mortgage on all assets of the Reorganized Debtors (except, upon approval of any settlement of the Debtors' obligations relating to the Amended and Restated Master Lease between Carmike and MoviePlex Realty Leasing LLC, the property at 12 or related to the MoviePlex sites which secure the MoviePlex obligations so long as the MoviePlex obligations are secured by no other property). Such security interest, lien, and mortgage shall (1) be junior only to the security interests, liens and mortgages granted pursuant to the Exit Financing Facility and any security interests, liens and mortgages retained by holders of Secured Claims under the Plan, which liens had priority over the liens securing the Bank Claims as of the Commencement Date, and (2) attach to the Debtors' real estate leases only to the extent that the Debtors or Reorganized Debtors are able to obtain the required consents from landlords, which consents the Debtors and Reorganized Debtors shall use their reasonable best efforts to obtain without an obligation to make payments to landlords (other than reimbursement of reasonable legal costs and minimal administrative costs as may be agreed to in the Post-Confirmation Credit Agreement) to obtain such consents. In addition to the allowance of the Bank Claims in the amount set forth in Section 4.4(a), the Debtors will provide the release set forth in Section 9.6 of the Plan on account of Bank Claims. 4.5 CLASS 5 -- GENERAL UNSECURED CLAIMS (OTHER THAN CONVENIENCE CLAIMS) (a) Impairment and Voting. Class 5 is impaired by the Plan. Each holder of an Allowed General Unsecured Claim is entitled to vote to accept or reject the Plan. (b) Distributions. Except to the extent that a holder of a General Unsecured Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed General Unsecured Claim as of the Record Date, other than a Convenience Claim treated in accordance with Section 4.6(b)(i) of the Plan, shall receive, in full and complete settlement, satisfaction and discharge of such Allowed General Unsecured Claim, Cash in the aggregate amount of its Allowed General Unsecured Claim, together with interest from the Commencement Date to the Effective Date at a fixed annual rate equal to 9.4% (which amount for purposes of this Section 4.5(b) shall be added to the amount of its Allowed General Unsecured Claim, provided, however, that interest on lease rejection Claims shall commence accruing on the date following the effective date of such lease rejection) payable as follows: (i) on the Effective Date, or as soon thereafter as is practicable, a principal payment equal to its Pro Rata Share of $10 million, (ii) commencing on the first Subsequent Distribution Date after the Effective Date or as soon thereafter as is practicable, and on each Subsequent Distribution Date thereafter, such holder shall receive payments of interest on its Allowed General Unsecured Claim at a fixed annual rate equal to 9.4%, plus principal payments equal to its Pro Rata Share of $2,500,000 and (iii) on the fifth anniversary of the Effective Date, the outstanding principal balance of such Allowed General Unsecured Claim together with all accrued and unpaid interest thereon as of such date. In addition, in the event the Debtors refinance the New Bank Debt after the Effective Date, each holder of an Allowed General Unsecured Claim shall receive from the proceeds of such refinancing, as an additional amortization payment of principal, 20% of the then outstanding principal balance of its Allowed General Unsecured Claim, which payment shall be applied in satisfaction of the remaining payment obligations due to such holder under the Plan in the inverse order of maturity of such payments. 4.6 CLASS 6 - CONVENIENCE CLAIMS (a) Impairment and Voting. Class 6 is impaired by the Plan. Each holder of an Allowed Convenience Claim is entitled to vote to accept or reject the Plan. (b) Distributions. (i) If the holders of Class 6 Convenience Claims vote to accept the Plan by the requisite majorities set forth in section 1126(c) of the Bankruptcy Code, except to the extent that a holder of a Convenience Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Convenience Claim as of the Record Date shall receive on the Effective Date, or as soon thereafter as is 13 practicable, in full and complete settlement, satisfaction and discharge of such Allowed Convenience Claim, Cash in an amount equal to 80% of its Allowed Convenience Claim. (ii) If the holders of Class 6 Convenience Claims do not accept the Plan by the requisite majorities set forth in section 1126(c) of the Bankruptcy Code, then the holders of Allowed Convenience Claims shall be treated as holders of Allowed General Unsecured Claims and treated in accordance with Section 4.5(b) of the Plan, provided, however, that in such event any election by a holder of an Allowed Convenience Claim to reduce the amount of its Allowed Claim to $1,000 shall be null and void. 4.7 CLASS 7 -- SUBORDINATED NOTE CLAIMS (a) Impairment, Voting and Allowance. Class 7 is impaired by the Plan. Each holder of an Allowed Subordinated Note Claim is entitled to vote to accept or reject the Plan. Pursuant to the Plan, the Subordinated Note Claims shall be Allowed in the aggregate amount of $209,739,583, consisting of $200,000,000 in principal and $9,739,583 of accrued and unpaid interest as of the Commencement Date. (b) Distributions. Except to the extent that a holder of an Allowed Subordinated Note Claim agrees to different treatment or elects the treatment pursuant to Section 4.7(c), on the Effective Date, or as soon thereafter as is practicable, each holder of an Allowed Subordinated Note Claim as of the Record Date shall receive, in full and complete settlement, satisfaction and discharge of its Allowed Subordinated Note Claim (i) a New Subordinated Note in a principal amount equal to the principal amount of its Allowed Subordinated Note Claim, and (ii) its Pro Rata Share of Cash in the amount of the accrued and unpaid interest which is due and payable as of the Effective Date on the Subordinated Notes under the Subordinated Notes Indenture at the non-default rate. Assuming an Effective Date of January 15, 2002, the accrued and unpaid interest which is due and payable as of such date under the Subordinated Notes Indenture at the non-default rate will be $22,983,364 (assuming the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000). (c) Election to Receive New Common Stock. (i) Each holder of an Allowed Subordinated Note Claim may, at its option, elect on the Ballot to receive on account of such Claim shares of New Common Stock, in which event such holder shall forego any right to receive a distribution under Section 4.7(b) of the Plan and such consideration shall revest in Reorganized Carmike on the Effective Date; provided, however, that the aggregate principal amount of Allowed Subordinated Note Claims that may be exchanged for New Common Stock pursuant to this Section 4.7(c) shall not exceed $50,000,000 in the aggregate. Each Electing Noteholder shall receive its Pro Rata Share of New Common Stock representing, in the aggregate, the percentage of the New Common Stock as set forth at Section V.A.10 of the Disclosure Statement based upon the aggregate amount of Allowed Subordinated Note Claims held by all such Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000, each Electing Noteholder will receive its Pro Rata Share of New Common Stock representing 28.1% of the New Common Stock on a fully diluted basis. (ii) In the event that the Electing Noteholders hold greater than $50,000,000 in principal amount of Allowed Subordinated Note Claims, each such holder (A) shall be permitted to tender such portion of its Allowed Subordinated Note Claim equal to the product of $50,000,000 multiplied by the quotient of (x) the principal amount of such holder's Allowed Subordinated Note Claim divided by (y) the aggregate principal amount of Allowed Subordinated Note Claims held by all Electing Noteholders; provided, however, that the principal amount of each Electing Noteholder's Allowed Subordinated Note Claim that may be tendered for New Common Stock shall be reduced to the nearest $1,000 denomination, and (B) shall receive on account of the principal amount of its Allowed Subordinated Note Claims not tendered for New Common Stock pursuant to 14 this Section 4.7(c), the distribution of Cash and New Subordinated Notes provided under Section 4.7(b) of the Plan; provided further, however, that if the amount of Allowed Subordinated Note Claims to be tendered would be reduced to less than $50,000,000 as a result of the reduction to denominations of $1,000 in clause (A), then the Debtors may, in their sole discretion, eliminate such shortfall (such that the aggregate principal amount of tendered Allowed Subordinated Note Claims equals $50,000,000) by choosing one or more Electing Noteholders to tender the remainder of their Allowed Subordinated Note Claims for New Common Stock under this Section 4.7(c) of the Plan. (d) Distribution to Indenture Trustee. On the Effective Date, or as soon after is practicable, the Debtors shall pay the reasonable fees and expenses of the Indenture Trustee to the extent required by the Subordinated Notes Indenture. 4.8 CLASS 8 - PREFERRED STOCK EQUITY INTERESTS (a) Impairment and Voting. Class 8 is impaired by the Plan. Each holder of a Preferred Stock Equity Interest is entitled to vote to accept or reject the Plan. (b) Distributions. On the Effective Date, or as soon thereafter as is practicable, each holder of an Allowed Preferred Stock Equity Interest as of the Record Date shall receive in full and complete settlement, satisfaction and discharge of such Allowed Preferred Stock Equity Interest, its Pro Rata Share of New Common Stock representing the percentage of the New Common Stock described at Section V.A.10 of the Disclosure Statement based upon the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims is $50,000,000, each holder of an Allowed Preferred Stock Equity Interest will receive its Pro Rata Share of New Common Stock representing 39.9% of the New Common Stock on a fully diluted basis. On the Effective Date, all Preferred Stock Equity Interests shall be extinguished. 4.9 CLASS 9 - COMMON STOCK EQUITY INTERESTS (a) Impairment and Voting. Class 9 is impaired by the Plan. Each holder of an Allowed Common Stock Equity Interest is entitled to vote to accept or reject the Plan. (b) Distributions. On the Effective Date, or as soon thereafter as is practicable, each holder of an Allowed Common Stock Equity Interest as of the Record Date shall receive in full and complete satisfaction of such Allowed Common Stock Equity Interest, its Pro Rata Share of New Common Stock representing the percentage of the New Common Stock described at Section V.A.10 of the Disclosure Statement based upon the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders as of the Effective Date. Assuming that the aggregate principal amount of Allowed Subordinated Note Claims held by Electing Noteholders is $50,000,000, each holder of an Allowed Common Stock Equity Interest will receive its Pro Rata Share of New Common Stock representing 22.0% of the New Common Stock on a fully diluted basis. On the Effective Date, all Common Stock Equity Interests shall be extinguished. 4.10 CLASS 10 - SUBSIDIARY EQUITY INTERESTS (a) Impairment and Voting. Class 10 is unimpaired by the Plan. Each holder of an Allowed Subsidiary Equity Interest is conclusively presumed to have voted to accept the Plan. 15 (b) Reinstatement of Subsidiary Equity Interests. Each holder of a Subsidiary Equity Interest shall retain such Subsidiary Equity Interest. The Subsidiary Equity Interests will be reinstated pursuant to section 1124(1) of the Bankruptcy Code and the legal, equitable or contractual rights to which such Subsidiary Equity Interests entitles a holder of a Subsidiary Equity Interest shall not be altered. ARTICLE V PROVISIONS REGARDING VOTING AND DISTRIBUTIONS UNDER THE PLAN AND TREATMENT OF DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS ----------------------------------------------- 5.1 Voting of Claims. Each holder of an Allowed Claim in an impaired Class of Claims or of an Allowed Equity Interest that is entitled to vote on the Plan pursuant to Article IV of the Plan shall be entitled to vote separately to accept or reject the Plan as provided in such order as is entered by the Bankruptcy Court establishing procedures with respect to the solicitation and tabulation of votes to accept or reject the Plan, or any other order or orders of the Bankruptcy Court. 5.2 Nonconsensual Confirmation. If any impaired Class of Claims or Equity Interests entitled to vote shall not accept the Plan by the requisite statutory majority provided in section 1126(c) of the Bankruptcy Code, the Debtors reserve the right to amend the Plan in accordance with Section 12.8 hereof or undertake to have the Bankruptcy Court confirm the Plan under section 1129(b) of the Bankruptcy Code or both. 5.3 Nonenforcement of Subordination Provision The treatment provided in this Plan to the holders of Bank Claims shall be in full and complete settlement, satisfaction and discharge of such Claims. The Confirmation Order shall operate as a permanent injunction enjoining any holder of a Bank Claim (prior to the Effective Date) and the holders of New Bank Debt from enforcing the subordination provisions in the Subordinated Notes Indenture after the Effective Date with respect, and solely with respect, to defaults or other events arising on or before substantial consummation of the Plan on the Effective Date. The New Bank Debt shall be "Senior Debt" as defined in the Amended Subordinated Notes Indenture and, notwithstanding anything to the contrary in the Plan, the rights of holders of New Bank Debt shall not be altered in any manner in the Amended Subordinated Notes Indenture from that which existed under the Subordinated Notes Indenture with respect to any act, event, or circumstances occurring after substantial consummation of the Plan on the Effective Date. 5.4 Method of Distributions Under the Plan. (a) Disbursing Agent. All distributions under the Plan shall be made by the Disbursing Agent. A Disbursing Agent shall not be required to give any bond or surety or other security for the performance of its duties unless otherwise ordered by the Bankruptcy Court; in the event that a Disbursing Agent is so otherwise ordered, all costs and expenses of procuring any such bond or surety shall be borne by Reorganized Carmike. (b) Surrender of Certificates. The Disbursing Agent may require, as a condition to making any distribution under the Plan, that each holder of an Allowed Subordinated Note Claim and Allowed Equity Interest surrender the note or certificate evidencing such Claim or Equity Interest to Reorganized Carmike or its designee. In that event, any holder of an Allowed Subordinated Note Claim or Allowed Equity Interest that fails to (a) surrender such note or certificate or (b) execute and furnish a bond in form, substance, and amount reasonably satisfactory to the Disbursing Agent before the first anniversary of the Effective Date shall be deemed to have forfeited all rights and may not participate in any distribution under the Plan. 16 (c) Delivery of Distributions. Subject to Bankruptcy Rule 9010, all distributions under the Plan shall be made to the holder of each Allowed Claim or each Allowed Interest at the address of such holder as listed on the Schedules or, with respect to Equity Interests, with the registrar or transfer agent for Equity Interests, as of the Record Date, unless the Debtors or, on and after the Effective Date, Reorganized Carmike, have been notified in writing of a change of address, including, without limitation, by the filing of a timely proof of Claim by such holder that provides an address for such holder different from the address reflected on the Schedules. All distributions to any holder of a Bank Claim shall be made to the Agent. All distributions to any holder of an Allowed Subordinated Note Claim (excluding such Claims held by Electing Noteholders) will be made to the Indenture Trustee. Subject to Section 5.4(i) below, in the event that any distribution to any holder is returned as undeliverable, the Disbursing Agent shall use reasonable efforts to determine the current address of such holder, but no distribution to such holder shall be made unless and until the Disbursing Agent has determined the then current address of such holder, at which time such distribution shall be made to such holder without interest. (d) Distributions of Cash. Any payment of Cash made by the Reorganized Debtors pursuant to the Plan shall, at the Reorganized Debtors' option, be made by check drawn on a domestic bank or wire transfer, except that the payment of Cash to the holders of Allowed Subordinated Note Claims and Allowed Bank Claims shall be made by wire transfer of immediately available funds to the Indenture Trustee under the Amended Subordinated Notes Indenture and the Agent, respectively. (e) Timing of Distributions. Any payment or distribution required to be made under the Plan on a day other than a Business Day shall be made on the next succeeding Business Day. (f) Hart-Scott-Rodino Compliance. Any shares of New Common Stock to be distributed under the Plan to any entity required to file a Premerger Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall not be distributed until the notification and waiting periods applicable under such Act to such entity shall have expired or been terminated. (g) Minimum Distributions. No payment of Cash less than $25 shall be made by the Reorganized Debtors to any holder of a Claim unless a request therefor is made in writing to Reorganized Carmike. (h) Fractional Shares. No fractional shares of New Common Stock, or Cash in lieu thereof, shall be distributed under the Plan. When any distribution pursuant to the Plan on account of an Allowed Claim or Allowed Equity Interest would otherwise result in the issuance of a number of shares of New Common Stock that is not a whole number, the actual distribution of shares of New Common Stock shall be rounded as follows: (i) fractions of 1/2 or greater shall be rounded to the next higher whole number; and (ii) fractions of less than 1/2 shall be rounded to the next lower whole number. The total number of shares of New Common Stock to be distributed to holders of Allowed Claims shall be adjusted as necessary to account for the rounding provided in this Section 5.4(h). (i) Unclaimed Distributions. All distributions under the Plan that are unclaimed for a period of one year after distribution thereof shall be deemed unclaimed property under section 347(b) of the Bankruptcy Code and revested in Reorganized Carmike and any entitlement of any holder of any Claim or Equity Interest to such distributions shall be extinguished and forever barred. (j) Distributions to Holders as of the Record Date. As of the close of business on the Record Date, the claims register and equity register, as applicable, shall be closed, and there shall be no further changes in the record holder of any Claim. Carmike and Reorganized Carmike shall have no obligation to 17 recognize any transfer of any Claim occurring after the Record Date. Reorganized Carmike shall instead be authorized and entitled to recognize and deal for all purposes under the Plan with only those record holders stated on the claims register as of the close of business on the Record Date. 5.5 Disputed Claims. (a) Distributions as to Allowed Portion of Disputed Claims. The holder of a Disputed Claim that is or becomes, in part, an Allowed Claim, shall receive a distribution in respect of the Allowed portion of such Claim, in accordance with Article IV of the Plan (for Claims partially Allowed on or prior to the Effective Date) or Section 5.5(b) of the Plan (for Claims partially Allowed subsequent to the Effective Date). (b) Distributions Upon Allowance of Disputed Claims. The holder of a Disputed Claim that becomes an Allowed Claim subsequent to the Effective Date shall receive the distribution of Cash that would have been made to such holder under the Plan, if the Disputed Claim had been an Allowed Claim on or prior to the Effective Date, without any additional post-Effective Date interest thereon (except as otherwise expressly provided under the Plan), on the first Business Day of the next succeeding month that is at least ten Business Days after the date such Disputed Claim becomes an Allowed Claim. (c) Distributions to Holders of Allowed Claims Upon Disallowance of Disputed Claims Upon the disallowance of any Disputed Claim, each holder of an Allowed General Unsecured Claim shall be entitled to its Pro Rata Share of Cash equal to the distribution that would have been made in accordance with Section 4.5(b) (and 4.6(b) if applicable) of the Plan to the holder of such Disputed Claim had such Disputed Claim been an Allowed Claim on or prior to the Effective Date. Such distributions on account of disallowed Claims shall be made on the next Subsequent Distribution Date. In the event that the amount to be distributed pursuant to this Section 5.5(c) at any time exceeds $3 million, then such distribution shall be made on the first Business Day of the next succeeding month that is at least ten Business Days after the first date on which the amount of such distribution exceeds $3 million, provided, however, that any such additional distribution under this Section 5.5(c) which would otherwise be made on a date that is within 35 days prior to any Subsequent Distribution Date shall be made on the next Subsequent Distribution Date. All amounts of Cash withheld from distributions on the Effective Date or any Subsequent Distribution Date on account of Disputed General Unsecured Claims in Class 5 shall be maintained in a trust or escrow account to be established on the Effective Date. Upon allowance or disallowance of all or any portion of such Disputed Claims, Reorganized Carmike shall make distributions from the segregated account in accordance with the Plan, provided that the amount of Cash remaining in such account shall be equal or exceed the aggregate amount of distributions that would have been made under the Plan on account of the then remaining Disputed General Unsecured Claims in Class 5 had such Disputed Claims been Allowed Claims as of the Effective Date. (d) Tort Claims. All Tort Claims are Disputed Claims. Any Tort Claim as to which a proof of claim was timely filed in the Chapter 11 Cases shall be determined and liquidated in the administrative or judicial tribunal(s) in which it is pending on the Effective Date or, if no action was pending on the Effective Date, in any administrative or judicial tribunal of appropriate jurisdiction, or in accordance with any alternative dispute resolution or similar proceeding as same may be approved by order of a court of competent jurisdiction. Any Tort Claim determined and liquidated (i) pursuant to a judgment obtained in accordance with this Section 5.5(c) and applicable nonbankruptcy law that has become a Final Order or (ii) in any alternative dispute resolution or similar proceeding as same may be approved by order of a court of competent jurisdiction, shall be deemed an Allowed General Unsecured Claim in such liquidated amount and satisfied in accordance with the Plan. Nothing contained in this Section 5.5(c) shall impair the Debtors' right to seek estimation of any and all Tort Claims in a court or courts of competent jurisdiction or constitute or be deemed a waiver of any Cause of Action that the Debtors may hold against any entity, including, without limitation, in connection with or arising out of any Tort Claim. 18 5.6 Objections to and Resolution of Claims. Except as to applications for allowance of compensation and reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code, Reorganized Carmike shall, on and after the Effective Date, have the exclusive right to make and file objections to Claims. On and after the Effective Date, Reorganized Carmike shall have the authority to compromise, settle, otherwise resolve or withdraw any objections to Claims and compromise, settle or otherwise resolve Disputed Claims without approval of the Bankruptcy Court. Unless otherwise ordered by the Bankruptcy Court, the Debtors and, on and after the Effective Date, the Reorganized Debtors, shall file all objections to Claims that are the subject of proofs of claim or requests for payment filed with the Bankruptcy Court (other than applications for allowances of compensation and reimbursement of expenses) and serve such objections upon the holder of the Claim as to which the objection is made as soon as is practicable, but in no event later than 120 days after the Effective Date or such later date as may be approved by the Bankruptcy Court. 5.7 Cancellation of Existing Securities and Agreements. On the Effective Date, the promissory notes, share certificates, bonds and other instruments evidencing any Claim or Equity Interest, other than an Allowed Other Secured Claim or an Allowed Subsidiary Equity Interest that is reinstated and rendered unimpaired pursuant to Sections 4.3(b) and 4.10 of the Plan, respectively, shall be deemed cancelled without further act or action under any applicable agreement, law, regulation, order or rule and the obligations of the Debtors under the agreements, indentures and certificates of designations governing such Claims and Equity Interests, as the case may be, shall be discharged. 5.8 Stockholders' Agreement. Certain holders of Allowed Subordinated Note Claims (David W. Zalaznick, Bermuda Investment Co., an affiliate of John W. Jordan, II, and Leucadia National Corporation) who are Electing Noteholders, each holder of a Preferred Stock Equity Interest, and Michael W. Patrick, shall become party to the Stockholders' Agreement. 5.9 Registration Rights Agreement. On the Effective Date, Reorganized Carmike shall execute the Registration Rights Agreement for the benefit of those holders of New Common Stock as of the Effective Date who may be regarded as an underwriter within the meaning ascribed to such term in section 1145 of the Bankruptcy Code. ARTICLE VI EXECUTORY CONTRACTS AND UNEXPIRED LEASES ---------------------------------------- 6.1 Assumption or Rejection of Executory Contracts and Unexpired Leases. (a) Executory Contracts and Unexpired Leases. Pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, all executory contracts and unexpired leases that exist between the Debtors and any person (including, without limitation, the Coca-Cola Contract) shall be deemed assumed by the Debtors, as of the Effective Date, except for any executory contract or unexpired lease (i) that has been rejected pursuant to an order of the Bankruptcy Court entered prior to the Confirmation Date, (ii) as to which a motion for approval of the rejection of such executory contract or unexpired lease has been filed and served prior to the Confirmation Date or (iii) that is set forth in Schedule 6.1(a)(x) (executory contracts) or Schedule 6.1(a)(y) (unexpired leases), which Schedules shall be included in the Plan Supplement; provided, however, that the Debtors reserve the right, on or prior to the Confirmation Date, to amend Schedules 6.1(a)(x) or 6.1(a)(y) to delete any executory contract or unexpired lease therefrom or add any executory contract or unexpired lease thereto, in which event such executory contract(s) or unexpired lease(s) shall be deemed to be, respectively, assumed by the Debtors or rejected. The Debtors shall provide notice of any amendments to Schedules 6.1(a)(x) or 6.1(a)(y) to the parties to the executory contracts and unexpired leases affected thereby. The listing of a document on Schedules 6.1(a)(x) and 19 6.1(a)(y) shall not constitute an admission by the Debtors that such document is an executory contract or an unexpired lease or that the Debtors have any liability thereunder. (b) Schedules of Rejected Executory Contracts and Unexpired Leases; Inclusiveness. Each executory contract and unexpired lease listed or to be listed on Schedules 6.1(a)(x) or 6.1(a)(y) that relates to the use or occupancy of real property shall include (i) modifications, amendments, supplements, restatements, or other agreements made directly or indirectly by any agreement, instrument, or other document that in any manner affects such executory contract or unexpired lease, without regard to whether such agreement, instrument or other document is listed on Schedules 6.1(a)(x) or 6.1(a)(y) and (ii) executory contracts or unexpired leases appurtenant to the premises listed on Schedules 6.1(a)(x) or 6.1(a)(y), including, without limitation, all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, powers, uses, usufructs, reciprocal easement agreements, vault, tunnel or bridge agreements or franchises, and any other interests in real estate or rights in rem relating to such premises to the extent any of the foregoing are executory contracts or unexpired leases, unless any of the foregoing agreements previously has been assumed or assumed and assigned by the Debtors. (c) Insurance Policies. All of the Debtors' insurance policies and any agreements, documents or instruments relating thereto, are treated as executory contracts under the Plan. Nothing contained in this Section 6.1(c) shall constitute or be deemed a waiver of any Cause of Action that the Debtors may hold against any entity, including, without limitation, the insurer under any of the Debtors' policies of insurance. (d) Approval of Assumption or Rejection of Executory Contracts and Unexpired Leases. Entry of the Confirmation Order shall, subject to and upon the occurrence of the Effective Date, constitute (i) the approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the assumption of the executory contracts and unexpired leases assumed pursuant to Section 6.1(a) hereof, and (ii) the approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the rejection of the executory contracts and unexpired leases listed on Schedule 6.1(a)(x) and Schedule 6.1(a)(y) pursuant to Section 6.1(a) hereof. (e) Cure of Defaults. Except as may otherwise be agreed to by the parties, within 30 days after the Effective Date, the Reorganized Debtors shall cure any and all undisputed defaults under any executory contract or unexpired lease assumed by the Debtors pursuant to Section 6.1(a) hereof, in accordance with section 365(b)(1) of the Bankruptcy Code. All disputed defaults that are required to be cured shall be cured either within 30 days of the entry of a Final Order determining the amount, if any, of the Reorganized Debtors' liability with respect thereto, or as may otherwise be agreed to by the parties. (f) Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Plan. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to Section 6.1 of the Plan must be filed with the Bankruptcy Court and served upon the Debtors or, on and after the Effective Date, Reorganized Carmike, no later than 30 days after the later of (i) notice of entry of an order approving the rejection of such executory contract or unexpired lease, (ii) notice of entry of the Confirmation Order and (iii) notice of an amendment to Schedule 6.1(a)(x) or 6.1(a)(y). All such Claims not filed within such time will be forever barred from assertion against the Debtors, their estates, the Reorganized Debtors, and their property. 6.2 Continuation of Officer, Director and Employee Indemnification. The obligations of the Debtors to defend, indemnify, reimburse or limit the liability of their present and any former directors, officers or employees who were directors, officers or employees, respectively, on or after the Commencement Date, solely in their capacity as directors, officers or employees, against any claims or obligations pursuant to the Debtors' certificates of incorporation or by-laws, applicable state law or specific agreement, or any 20 combination of the foregoing, shall survive confirmation of the Plan, remain unaffected thereby, and not be discharged irrespective of whether indemnification, defense, reimbursement or limitation is owed in connection with an event occurring before, on or after the Commencement Date. 6.3 Compensation and Benefit Programs. Except as provided in Section 6.1(a) of the Plan, all savings plans, retirement plans or benefits, if any, health care plans, performance-based incentive plans, workers' compensation programs and life, disability, directors and officers liability and other insurance plans are treated as executory contracts under the Plan and shall, on the Effective Date, be deemed assumed by the Debtors, in accordance with sections 365(a) and 1123(b)(2) of the Bankruptcy Code. ARTICLE VII IMPLEMENTATION OF THE PLAN -------------------------- 7.1 Substantive Consolidation. Entry of the Confirmation Order shall constitute the approval, pursuant to section 105(a) of the Bankruptcy Code, effective as of the Effective Date, of the substantive consolidation of the Chapter 11 Cases for purposes of voting on, confirmation of and distribution under the Plan. On and after the Effective Date, (i) all assets and liabilities of the Subsidiaries shall be deemed merged or treated as though they were merged into and with the assets and liabilities of Carmike, (ii) no distributions shall be made under the Plan on account of intercompany claims among the Debtors, (iii) all guarantees of the Debtors of the obligations of any other Debtor shall be eliminated so that any claim against any Debtor and any guarantee thereof executed by any other Debtor and any joint or several liability of any of the Debtors shall be deemed to be one obligation of the consolidated Debtors and (iv) each and every Claim filed or to be filed in the Chapter 11 Case of any of the Debtors shall be deemed filed against the consolidated Debtors, and shall be deemed one Claim against and obligation of the consolidated Debtors. ARTICLE VIII PROVISIONS REGARDING CORPORATE GOVERNANCE AND MANAGEMENT OF REORGANIZED DEBTORS ------------------------------------------------ 8.1 General. On the Effective Date, the management, control and operation of the Reorganized Debtors shall become the general responsibility of the Boards of Directors of the Reorganized Debtors, respectively. 8.2 Directors and Officers of the Reorganized Debtors. (a) Reorganized Carmike. (i) Board of Directors. The initial Board of Directors of Reorganized Carmike shall consist of ten individuals, three of whom shall be independent directors. Of the directors of Reorganized Carmike not required to be independent directors, one shall be the Chief Executive Officer of Reorganized Carmike, one shall be Carl Patrick, Jr., two shall be appointed by Jordan/Zalaznick Advisers, Inc. and its affiliates, three shall be appointed by GS Capital Partners III, L.P. and its affiliates, and of the three independent directors, one shall be designated by Jordan/Zalaznick Advisers, Inc. and its affiliates, one shall be designated by GS Capital Partners III, L.P. and its affiliates, and one shall be identified by the Chief Executive Officer of Reorganized Carmike and agreed upon by the Board of Directors of Reorganized Carmike. The names of the members of the initial Board of Directors of Reorganized Carmike shall be disclosed at or prior to the Confirmation Hearing, 21 provided that the Debtors shall file a list of the names of such members with the Plan Supplement to the extent then known. Each of the members of such initial Board of Directors shall serve in accordance with the Reorganized Carmike Certificate of Incorporation or Reorganized Carmike By-laws, as the same may be amended from time to time. (ii) Officers. The officers of Carmike immediately prior to the Effective Date shall serve as the initial officers of Reorganized Carmike on and after the Effective Date. Such officers shall serve in accordance with any employment agreement with Reorganized Carmike and applicable nonbankruptcy law. (b) Reorganized Subsidiaries. (i) Boards of Directors. The members of the Boards of Directors of the Subsidiaries immediately prior to the Effective Date shall serve as the initial members of the Boards of Directors of the Reorganized Subsidiaries. Each of the members of such initial Boards of Directors shall serve in accordance with the Certificate of Incorporation or By-laws of such Reorganized Subsidiary, as the same may be amended from time to time. (ii) Officers. The initial officers of the Reorganized Subsidiaries immediately prior to the Effective Date shall serve as the initial officers of the Reorganized Subsidiaries. Such officers shall serve in accordance with any employment agreement with the Reorganized Subsidiaries and applicable nonbankruptcy law. 8.3 By-laws and Certificates of Incorporation. The Reorganized Carmike By-laws, the Reorganized Carmike Certificate of Incorporation, and the certificates of incorporation and by-laws of each of the Reorganized Subsidiaries shall contain provisions necessary (a) to prohibit the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code, subject to further amendment of such Certificates of Incorporation and By-laws as permitted by applicable law and (b) to effectuate the provisions of the Plan, in each case without any further action by the stockholders or directors of the Debtors, the Debtors in Possession or the Reorganized Debtors. 8.4 Issuance of New Securities and Debt Instruments. The issuance of the New Common Stock, New Subordinated Notes and New Bank Debt by Reorganized Carmike is hereby authorized without further act or action under applicable law, regulation, order or rule. All securities issued pursuant to this Plan shall be exempt from registration under the Securities Act of 1933, as amended, pursuant to section 1145 of the Bankruptcy Code to the extent permitted thereby. 8.5 Reorganized Carmike Management Shares. Reorganized Carmike shall, on the Effective Date, grant to Michael W. Patrick a fully vested and non-forfeitable right to receive shares of New Common Stock representing 5% of the outstanding shares of New Common Stock on a fully diluted basis upon such events designated by Mr. Patrick prior to the Effective Date, reserve 5% of the New Common Stock on a fully diluted basis with respect to the grant to Mr. Patrick, and reserve an additional 5% of the New Common Stock on a fully diluted basis for issuance (either through an outright grant or an option to purchase) to management of the Reorganized Debtors at the discretion of Reorganized Carmike's Board of Directors. 8.6 Reorganized Carmike Employment Contract. As of the Effective Date, Reorganized Carmike shall enter into the Reorganized Carmike Employment Contract. 22 ARTICLE IX EFFECT OF CONFIRMATION OF PLAN ------------------------------ 9.1 Term of Bankruptcy Injunction or Stays. Unless otherwise provided, all injunctions or stays provided for in the Chapter 11 Cases under section 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date. 9.2 Revesting of Assets. (a) On the Effective Date, except as otherwise provided for in the Plan, (i) the property of the estate of Carmike shall vest in Reorganized Carmike, and (ii) the assets of any Subsidiary shall vest in the corresponding Reorganized Subsidiary. (b) From and after the Effective Date, the Reorganized Debtors may operate their businesses, and may use, acquire and dispose of property free of any restrictions imposed under the Bankruptcy Code. (c) As of the Effective Date, all property of the Reorganized Debtors shall be free and clear of all liens, claims and interests of holders of Claims and Equity Interests, except as otherwise provided in the Plan. 9.3 Claims Preserved. As of the Effective Date, any and all avoidance claims accruing to the Debtors and Debtors in Possession under sections 502(d), 544, 545, 547, 548, 549, 550 and 551 of the Bankruptcy Code, shall be preserved and shall vest with the Reorganized Debtors. 9.4 Discharge of Debtors. The rights afforded herein and the treatment of all Claims and Equity Interests herein shall be in exchange for and in complete satisfaction, discharge and release of Claims and Equity Interests of any nature whatsoever, including any interest accrued on such Claims from and after the Commencement Date, against the Debtors and the Debtors in Possession, or any of their assets or properties. Except as otherwise provided herein, (a) on the Effective Date, all such Claims against and Equity Interests in the Debtors shall be satisfied, discharged and released in full and (b) all persons shall be precluded from asserting against the Reorganized Debtors, their successors, or their assets or properties any other or further Claims or Equity Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. 9.5 Limited Release of Debtors' Officers and Directors. In consideration of the efforts expended and to be expended by the individual members of the Debtors' officers and directors in conjunction with their operational and financial restructuring during the Chapter 11 Cases, on the Effective Date, the Debtors and the Reorganized Debtors automatically shall release and shall be deemed to release any and all claims that they have or may have against such officers and directors, in their capacities as such, arising or based upon any actions, conduct or omissions occurring prior to the Effective Date and in connection with the Chapter 11 Cases. The Confirmation Order shall constitute an order approving the compromise, settlement and release of any and all such claims pursuant to section 1123(b)(3)(A) of the Bankruptcy Code. 9.6 Release of Banks. As of the Effective Date, the Debtors, on behalf of themselves and all of their successors and assigns, and each of the Debtors' estates (collectively, including the Debtors and their estates, the "Releasing Parties") will be deemed to have forever released, waived and discharged Wachovia, each of the Banks, and each of the foregoing's respective officers, directors, principals, employees, agents, advisors, and attorneys, and all of the successors and assigns of the foregoing (collectively, including Wachovia 23 and each Bank, the "Released Parties") from all claims (as such term is defined in section 101(5) of the Bankruptcy Code), obligations, suits, judgments, damages, demands, debts, rights, causes of action, liabilities, rights of contribution and rights of indemnification, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising in law, equity or otherwise (collectively, "Claims"), that are based in whole or in part on any act, omission, transaction, or other occurrence taking place on, or prior to, the Effective Date in any way relating to the Chapter 11 Cases, the Plan, the Bank Credit Agreements, any document or agreement related thereto, the Bank Claims, or any Bank's loan relationship relating to the Bank Credit Agreements with the Debtors, which any Releasing Party has, had or may have against Released Party; provided, however, that such release will not apply to any obligations of the Banks or the Agent under the Post-Confirmation Credit Agreement. Such release will be effective notwithstanding that any Releasing Party or other person or entity may hereafter discover facts in addition to, or different from, those which that party now knows or believes to be true, and without regard to the subsequent discovery or existence of such different or additional facts, and the Releasing Parties are hereby expressly deemed to have waived any and all rights that they may have under any statute or common law principle which would limit the effect of the foregoing release, waiver, and discharge to those Claims actually known or suspected to exist on the Effective Date. 9.7 Injunction. Except as otherwise expressly provided in the Plan, the Confirmation Order or a separate order of the Bankruptcy Court, all entities who have held, hold or may hold Claims against or Equity Interests in the Debtors, are permanently enjoined, on and after the Effective Date, from (a) commencing or continuing in any manner any action or other proceeding of any kind against the Debtors with respect to any such Claim or Equity Interest, (b) the enforcement, attachment, collection or recovery by any manner or means of any judgment, award, decree or order against the Debtors on account of any such Claim or Equity Interest, (c) creating, perfecting or enforcing any encumbrance of any kind against the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest, (d) asserting any right of setoff, subrogation or recoupment of any kind against any obligation due from the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest and (e) commencing or continuing in any manner any action or other proceeding of any kind with respect to any claims and causes of action which are extinguished, dismissed or released pursuant to the Plan. Such injunction shall extend to successors of the Debtors, including, without limitation, the Reorganized Debtors, and their respective properties and interests in property. ARTICLE X EFFECTIVENESS OF THE PLAN 10.1 Conditions Precedent to Effectiveness. The Plan shall not become effective unless and until the following conditions shall have been satisfied or waived pursuant to Section 10.3 of the Plan: (a) the Confirmation Order, in form and substance acceptable to the Debtors shall have been signed by the judge presiding over the Chapter 11 Cases, and there shall not be a stay or injunction in effect with respect thereto; (b) all actions, documents and agreements necessary to implement the Plan shall have been effected or executed; (c) the holders of at least $45,685,000 in principal amount of Allowed Subordinated Note Claims elect to receive shares of New Common Stock on account of such Allowed Claims in accordance with Section 4.7(c) of the Plan; and 24 (d) the Debtors shall have received all authorizations, consents, regulatory approvals, rulings, letters, no action letters, opinions or documents that are determined by the Debtors to be necessary to implement the Plan. 10.2 Effect of Failure of Conditions. In the event that one or more of the conditions specified in Section 10.1 of the Plan have not occurred on or before 120 days after the Confirmation Date, (a) the Confirmation Order shall be vacated, (b) no distributions under the Plan shall be made, (c) the Debtors and all holders of Claims and Equity Interests shall be restored to the status quo ante as of the day immediately preceding the Confirmation Date as though the Confirmation Date never occurred and (d) the Debtors' obligations with respect to Claims and Equity Interests shall remain unchanged and nothing contained herein shall constitute or be deemed a waiver or release of any Claims or Equity Interests by or against the Debtors or any other person or to prejudice in any manner the rights of the Debtors or any person in any further proceedings involving the Debtors. 10.3 Waiver of Conditions. The Debtors may waive, by a writing signed by an authorized representative of the Debtors and subsequently filed with the Bankruptcy Court, one or more of the conditions precedent to effectiveness of the Plan set forth in Section 10.1 of the Plan with the prior written consent of the Required Banks and the Committee. ARTICLE XI RETENTION OF JURISDICTION ------------------------- The Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of, and related to, the Chapter 11 Cases and the Plan pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy Code and for, among other things, the following purposes: (a) To hear and determine pending applications for the assumption or rejection of executory contracts or unexpired leases, if any are pending, and the allowance of cure amounts and Claims resulting therefrom; (b) To hear and determine any and all adversary proceedings, applications and contested matters; (c) To hear and determine any objection to Claims; (d) To enter and implement such orders as may be appropriate in the event the Confirmation Order is for any reason stayed, revoked, modified or vacated; (e) To issue such orders in aid of execution and consummation of the Plan, to the extent authorized by section 1142 of the Bankruptcy Code; (f) To consider any amendments to or modifications of the Plan, to cure any defect or omission, or reconcile any inconsistency in any order of the Bankruptcy Court, including, without limitation, the Confirmation Order; (g) To hear and determine all applications for compensation and reimbursement of expenses of professionals under sections 330, 331 and 503(b) of the Bankruptcy Code; (h) To hear and determine disputes arising in connection with the interpretation, implementation or enforcement of the Plan, including, without limitation, any and all disputes arising in connection with the interpretation, 25 implementation or enforcement of the discharge and injunction provisions contained in Sections 9.4 and 9.7 of the Plan; (i) To recover all assets of the Debtors and property of the Debtors' estates, wherever located; (j) To hear and determine matters concerning state, local and federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code; (k) To hear any other matter not inconsistent with the Bankruptcy Code; and (l) To enter a final decree closing the Chapter 11 Cases. ARTICLE XII MISCELLANEOUS PROVISIONS ------------------------ 12.1 Effectuating Documents and Further Transactions. Each of the Debtors and the Reorganized Debtors is authorized to execute, deliver, file or record such contracts, instruments, releases, indentures and other agreements or documents and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan and any securities issued pursuant to the Plan. 12.2 Corporate Action. On the Effective Date, all matters provided for under the Plan that would otherwise require approval of the stockholders or directors of one or more of the Debtors or Reorganized Debtors, including, without limitation, the authorization to issue or cause to be issued New Bank Debt, New Subordinated Notes and New Common Stock (including the Reorganized Carmike Management Shares), the effectiveness of the Reorganized Carmike Certificate of Incorporation, the Reorganized Carmike By-laws, the certificates of incorporation of the Reorganized Subsidiaries, the by-laws of the Reorganized Subsidiaries, the Stockholders' Agreement, the Registration Rights Agreement, the Amended Subordinated Notes Indenture, and the election or appointment, as the case may be, of directors and officers of the Reorganized Debtors pursuant to the Plan and the authorization and approval of the Reorganized Carmike Employment Contract, shall be deemed to have occurred and shall be in effect from and after the Effective Date pursuant to the applicable general corporation law of the states in which the Debtors and the Reorganized Debtors are incorporated, without any requirement of further action by the stockholders or directors of the Debtors, or Reorganized Debtors. On the Effective Date, or as soon thereafter as is practicable, the Reorganized Debtors shall, if required, file their amended certificates of incorporation with the Secretary of State of the state in which each such entity is incorporated, in accordance with the applicable general corporation law of each such state. 12.3 Exemption from Transfer Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer or exchange of notes or equity securities under the Plan, the creation of any mortgage, deed of trust or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan, including, without limitation, any merger agreements or agreements of consolidation, deeds, bills of sale or assignments executed in connection with any of the transactions contemplated under the Plan, shall not be subject to any stamp, real estate transfer, mortgage recording or other similar tax. All sale transactions consummated by the Debtors and approved by the Bankruptcy Court on and after the Commencement Date through and including the Effective Date, including, without limitation, the sale by the Debtors of owned property pursuant to section 363(b) of the Bankruptcy Code and the assumption, assignment and sale by the Debtors of unexpired leases of non-residential real property pursuant to section 365(a) of the Bankruptcy Code, shall be deemed to have been made under, in furtherance of, 26 or in connection with the Plan and, thus, shall not be subject to any stamp, real estate transfer, mortgage recording or other similar tax. 12.4 Exculpation. None of the Debtors, the Reorganized Debtors, the Committee or any of their respective members, officers, directors, employees, advisors, professionals or agents shall have or incur any liability to any holder of a Claim or Equity Interest for any act or omission in connection with, related to, or arising out of, the Chapter 11 Cases, the pursuit of confirmation of the Plan, the consummation of the Plan or the administration of the Plan or the property to be distributed under the Plan, except for willful misconduct and gross negligence, and, in all respects, the Debtors, the Reorganized Debtors, the Committee and each of their respective members, officers, directors, employees, advisors, professionals and agents shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Plan. 12.5 Termination of Committee. The appointment of the Committee shall terminate on the Effective Date. 12.6 Post-Effective Date Fees and Expenses. From and after the Effective Date, the Reorganized Debtors shall, in the ordinary course of business and without the necessity for any approval by the Bankruptcy Court, pay the reasonable fees and expenses of professional persons thereafter incurred by the Reorganized Debtors, including, without limitation, those fees and expenses incurred in connection with the implementation and consummation of the Plan. 12.7 Payment of Statutory Fees. All fees payable pursuant to section 1930 of title 28 of the United States Code, as determined by the Bankruptcy Court at the Confirmation Hearing, shall be paid on the Effective Date and shall not be affected by the substantive consolidation of the Debtors' estates. 12.8 Amendment or Modification of the Plan. Alterations, amendments or modifications of or to the Plan may be proposed in writing by the Debtors at any time prior to the Confirmation Date, provided that the Plan, as altered, amended or modified, satisfies the conditions of sections 1122 and 1123 of the Bankruptcy Code, and the Debtors shall have complied with section 1125 of the Bankruptcy Code. The Plan may be altered, amended or modified at any time after the Confirmation Date and before substantial consummation, provided that the Plan, as altered, amended or modified, satisfies the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan, as altered, amended or modified, under section 1129 of the Bankruptcy Code. A holder of a Claim or Equity Interest that has accepted the Plan shall be deemed to have accepted the Plan, as altered, amended or modified, if the proposed alteration, amendment or modification does not materially and adversely change the treatment of the Claim or Equity Interest of such holder. 12.9 Severability. In the event that the Bankruptcy Court determines, prior to the Confirmation Date, that any provision in the Plan is invalid, void or unenforceable, such provision shall be invalid, void or unenforceable with respect to the holder or holders of such Claims or Equity Interests as to which the provision is determined to be invalid, void or unenforceable. The invalidity, voidness or unenforceability of any such provision shall in no way limit or affect the enforceability and operative effect of any other provision of the Plan. 12.10 Revocation or Withdrawal of the Plan. The Debtors reserve the right to revoke or withdraw the Plan prior to the Confirmation Date. If the Debtors revoke or withdraw the Plan prior to the Confirmation Date, then the Plan shall be deemed null and void. In such event, nothing contained herein shall constitute or be deemed a waiver or release of any claims by or against the Debtors or any other person or to prejudice in any manner the rights of the Debtors or any person in any further proceedings involving the Debtors. 27 12.11 Binding Effect. The Plan shall be binding upon and inure to the benefit of the Debtors, the holders of Claims and Equity Interests, and their respective successors and assigns, including, without limitation, the Reorganized Debtors. 12.12 Notices. All notices, requests and demands to or upon the Debtors or, on and after the Effective Date, the Reorganized Debtors, to be effective shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows: If to the Debtors: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901-2109 Attn: F. Lee Champion, Esq. Telephone: (706) 576-3891 Facsimile: (706) 324-0470 with a copy to: Weil, Gotshal & Manges LLP Richards, Layton & Finger P.A. 767 Fifth Avenue One Rodney Square New York, New York 10153 P.O. Box 551 Attn: Harvey R. Miller, Esq. Wilmington, Delaware 19899 George A. Davis, Esq. Attn: Mark D. Collins, Esq. Telephone: (212) 310-8000 Telephone: (302) 658-6541 Facsimile: (212) 310-8007 Facsimile: (302) 658-6548 If to the Committee: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 590 Madison Avenue New York, New York 10022 Attn: Fred Hodara, Esq. Telephone: (212) 872-1000 Facsimile: (212) 872-1002 If to the Banks: Jones, Day, Reavis & Pogue Wachovia Bank, N.A. North Point 191 Peachtree Street, N.E. 901 Lakeside Avenue Atlanta, Georgia Cleveland, OH 44114 Attn: Reginald Dawson Attn: David G. Heiman, Esq. Telephone: (404) 332-4075 Telephone: (216) 586-3939 Facsimile: (404) 332-6920 Facsimile: (216) 579-0212 28 Jones, Day, Reavis & Pogue 77 W. Wacker Drive Chicago, Illinois 60601 Attn: Brad B. Erens, Esq. Telephone: (312) 782-3939 Facsimile: (312) 782-8585 12.13 Governing Law. Except to the extent the Bankruptcy Code, Bankruptcy Rules or other federal law is applicable, or to the extent an exhibit to the Plan provides otherwise, the rights and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of law of such jurisdiction. 12.14 Withholding and Reporting Requirements. In connection with the consummation of the Plan, the Debtors or the Reorganized Debtors, as the case may be, shall comply with all withholding and reporting requirements imposed by any federal, state, local or foreign taxing authority and all distributions hereunder shall be subject to any such withholding and reporting requirements. 12.15 Plan Supplement. The Reorganized Carmike Certificate of Incorporation, the Reorganized Carmike By-laws, Schedules 6.1(a)(x) and 6.1(a)(y) referred to in Section 6.1 of the Plan, the Stockholders' Agreement, the Registration Rights Agreement, the Reorganized Carmike Employment Contract, the Post-Confirmation Credit Agreement, the Amended Subordinated Notes Indenture and the loan documents for the Exit Financing Facility shall be contained in the Plan Supplement and filed with the Clerk of the Bankruptcy Court at least 10 days prior to the last day upon which holders of Claims and Equity Interests may vote to accept or reject the Plan. Upon its filing with the Bankruptcy Court, the Plan Supplement may be inspected in the office of the Clerk of the Bankruptcy Court during normal court hours. Holders of Claims or Equity Interests may obtain a copy of the Plan Supplement upon written request to Carmike in accordance with Section 12.12 of the Plan. 12.16 Allocation of Plan Distributions Between Principal and Interest. To the extent that any Allowed Claim entitled to a distribution under the Plan is comprised of indebtedness and accrued but unpaid interest thereon, such distribution shall, for federal income tax purposes, be allocated to the interest amount of the Claim first and then to the principal amount of the Claim. 12.17 Headings. Headings are used in the Plan for convenience and reference only, and shall not constitute a part of the Plan for any other purpose. 12.18 Exhibits/Schedules. All exhibits and schedules to the Plan, including the Plan Supplement, are incorporated into and are a part of the Plan as if set forth in full herein. Dated: Wilmington, Delaware November 14, 2001 CARMIKE CINEMAS, INC., a Delaware corporation (for itself and on behalf of each of the Subsidiaries) By: /s/ Michael W. Patrick ---------------------------------------------- Name: Michael W. Patrick Title: President and Chief Executive Officer EX-99 6 a12-10ext3g.txt EXHIBIT T3G Exhibit T3G Registration No. ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) WILMINGTON TRUST COMPANY (Exact name of trustee as specified in its charter) Delaware 51-0055023 (State of incorporation) (I.R.S. employer identification no.) Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 (Address of principal executive offices) Cynthia L. Corliss Vice President and Trust Counsel Wilmington Trust Company Rodney Square North Wilmington, Delaware 19890 (302) 651-8516 (Name, address and telephone number of agent for service) CARMIKE CINEMAS, INC. (Exact name of obligor as specified in its charter) Delaware 58-1469127 (State of incorporation) (I.R.S. employer identification no.) 1301 First Avenue Columbus, Georgia 31901-2109 (Address of principal executive offices) (Zip Code) 10 3/8% Senior Subordinated Notes due 2009 (Title of the indenture securities) ================================================================================ ITEM 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Deposit Insurance Co. State Bank Commissioner Five Penn Center Dover, Delaware Suite #2901 Philadelphia, PA (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the trustee, describe each affiliation: Based upon an examination of the books and records of the trustee and upon information furnished by the obligor, the obligor is not an affiliate of the trustee. ITEM 16. LIST OF EXHIBITS. List below all exhibits filed as part of this Statement of Eligibility and Qualification. A. Copy of the Charter of Wilmington Trust Company, which includes the certificate of authority of Wilmington Trust Company to commence business and the authorization of Wilmington Trust Company to exercise corporate trust powers. B. Copy of By-Laws of Wilmington Trust Company. C. Consent of Wilmington Trust Company required by Section 321(b) of Trust Indenture Act. D. Copy of most recent Report of Condition of Wilmington Trust Company. Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wilmington Trust Company, a corporation organized and existing under the laws of Delaware, has duly caused this Statement of Eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Wilmington and State of Delaware on the ___ day of December, 2001. WILMINGTON TRUST COMPANY [SEAL] Attest: By: --------------------------- ---------------------------------- Assistant Secretary Name: Title: Vice President 2 EXHIBIT A AMENDED CHARTER Wilmington Trust Company Wilmington, Delaware As existing on May 9, 1987 Amended Charter or Act of Incorporation of Wilmington Trust Company Wilmington Trust Company, originally incorporated by an Act of the General Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which company was changed to "Wilmington Trust Company" by an amendment filed in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act of Incorporation of which company has been from time to time amended and changed by merger agreements pursuant to the corporation law for state banks and trust companies of the State of Delaware, does hereby alter and amend its Charter or Act of Incorporation so that the same as so altered and amended shall in its entirety read as follows: First: - The name of this corporation is Wilmington Trust Company. Second: - The location of its principal office in the State of Delaware is at Rodney Square North, in the City of Wilmington, County of New Castle; the name of its resident agent is Wilmington Trust Company whose address is Rodney Square North, in said City. In addition to such principal office, the said corporation maintains and operates branch offices in the City of Newark, New Castle County, Delaware, the Town of Newport, New Castle County, Delaware, at Claymont, New Castle County, Delaware, at Greenville, New Castle County Delaware, and at Milford Cross Roads, New Castle County, Delaware, and shall be empowered to open, maintain and operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market Street, and 3605 Market Street, all in the City of Wilmington, New Castle County, Delaware, and such other branch offices or places of business as may be authorized from time to time by the agency or agencies of the government of the State of Delaware empowered to confer such authority. Third: - (a) The nature of the business and the objects and purposes proposed to be transacted, promoted or carried on by this Corporation are to do any or all of the things herein mentioned as fully and to the same extent as natural persons might or could do and in any part of the world, viz.: (1) To sue and be sued, complain and defend in any Court of law or equity and to make and use a common seal, and alter the seal at pleasure, to hold, purchase, convey, mortgage or otherwise deal in real and personal estate and property, and to appoint such officers and agents as the business of the Corporation shall require, to make by-laws not inconsistent with the Constitution or laws of the United States or of this State, to discount bills, notes or other evidences of debt, to receive deposits of money, or securities for money, to buy gold and silver bullion and foreign coins, to buy and sell bills of exchange, and generally to use, exercise and enjoy all the powers, rights, privileges and franchises incident to a corporation which are proper or necessary for the transaction of the business of the Corporation hereby created. (2) To insure titles to real and personal property, or any estate or interests therein, and to guarantee the holder of such property, real or personal, against any claim or claims, adverse to his interest therein, and to prepare and give certificates of title for any lands or premises in the State of Delaware, or elsewhere. (3) To act as factor, agent, broker or attorney in the receipt, collection, custody, investment and management of funds, and the purchase, sale, management and disposal of property of all descriptions, and to prepare and execute all papers which may be necessary or proper in such business. (4) To prepare and draw agreements, contracts, deeds, leases, conveyances, mortgages, bonds and legal papers of every description, and to carry on the business of conveyancing in all its branches. (5) To receive upon deposit for safekeeping money, jewelry, plate, deeds, bonds and any and all other personal property of every sort and kind, from executors, administrators, guardians, public officers, courts, receivers, assignees, trustees, and from all fiduciaries, and from all other persons and individuals, and from all corporations whether state, municipal, corporate or private, and to rent boxes, safes, vaults and other receptacles for such property. (6) To act as agent or otherwise for the purpose of registering, issuing, certificating, countersigning, transferring or underwriting the stock, bonds or other obligations of any corporation, association, state or municipality, and may receive and manage any sinking fund therefor on such terms as may be agreed upon between the two parties, and in like manner may act as Treasurer of any corporation or municipality. (7) To act as Trustee under any deed of trust, mortgage, bond or other instrument issued by any state, municipality, body politic, corporation, association or person, either alone or in conjunction with any other person or persons, corporation or corporations. (8) To guarantee the validity, performance or effect of any contract or agreement, and the fidelity of persons holding places of responsibility or trust; to become surety for any 2 person, or persons, for the faithful performance of any trust, office, duty, contract or agreement, either by itself or in conjunction with any other person, or persons, corporation, or corporations, or in like manner become surety upon any bond, recognizance, obligation, judgment, suit, order, or decree to be entered in any court of record within the State of Delaware or elsewhere, or which may now or hereafter be required by any law, judge, officer or court in the State of Delaware or elsewhere. (9) To act by any and every method of appointment as trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity in the receiving, holding, managing, and disposing of any and all estates and property, real, personal or mixed, and to be appointed as such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian or bailee by any persons, corporations, court, officer, or authority, in the State of Delaware or elsewhere; and whenever this Corporation is so appointed by any person, corporation, court, officer or authority such trustee, trustee in bankruptcy, receiver, assignee, assignee in bankruptcy, executor, administrator, guardian, bailee, or in any other trust capacity, it shall not be required to give bond with surety, but its capital stock shall be taken and held as security for the performance of the duties devolving upon it by such appointment. (10) And for its care, management and trouble, and the exercise of any of its powers hereby given, or for the performance of any of the duties which it may undertake or be called upon to perform, or for the assumption of any responsibility the said Corporation may be entitled to receive a proper compensation. (11) To purchase, receive, hold and own bonds, mortgages, debentures, shares of capital stock, and other securities, obligations, contracts and evidences of indebtedness, of any private, public or municipal corporation within and without the State of Delaware, or of the Government of the United States, or of any state, territory, colony, or possession thereof, or of any foreign government or country; to receive, collect, receipt for, and dispose of interest, dividends and income upon and from any of the bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property held and owned by it, and to exercise in respect of all such bonds, mortgages, debentures, notes, shares of capital stock, securities, obligations, contracts, evidences of indebtedness and other property, any and all the rights, powers and privileges of individual owners thereof, including the right to vote thereon; to invest and deal in and with any of the moneys of the Corporation upon such securities and in such manner as 3 it may think fit and proper, and from time to time to vary or realize such investments; to issue bonds and secure the same by pledges or deeds of trust or mortgages of or upon the whole or any part of the property held or owned by the Corporation, and to sell and pledge such bonds, as and when the Board of Directors shall determine, and in the promotion of its said corporate business of investment and to the extent authorized by law, to lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey real and personal property of any name and nature and any estate or interest therein. (b) In furtherance of, and not in limitation, of the powers conferred by the laws of the State of Delaware, it is hereby expressly provided that the said Corporation shall also have the following powers: (1) To do any or all of the things herein set forth, to the same extent as natural persons might or could do, and in any part of the world. (2) To acquire the good will, rights, property and franchises and to undertake the whole or any part of the assets and liabilities of any person, firm, association or corporation, and to pay for the same in cash, stock of this Corporation, bonds or otherwise; to hold or in any manner to dispose of the whole or any part of the property so purchased; to conduct in any lawful manner the whole or any part of any business so acquired, and to exercise all the powers necessary or convenient in and about the conduct and management of such business. (3) To take, hold, own, deal in, mortgage or otherwise lien, and to lease, sell, exchange, transfer, or in any manner whatever dispose of property, real, personal or mixed, wherever situated. (4) To enter into, make, perform and carry out contracts of every kind with any person, firm, association or corporation, and, without limit as to amount, to draw, make, accept, endorse, discount, execute and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures, and other negotiable or transferable instruments. (5) To have one or more offices, to carry on all or any of its operations and businesses, without restriction to the same extent as natural persons might or could do, to purchase or otherwise acquire, to hold, own, to mortgage, sell, convey or otherwise dispose of, real and personal property, of every class and description, in any State, District, Territory or Colony of the United States, and in any foreign country or place. (6) It is the intention that the objects, purposes and 4 powers specified and clauses contained in this paragraph shall (except where otherwise expressed in said paragraph) be nowise limited or restricted by reference to or inference from the terms of any other clause of this or any other paragraph in this charter, but that the objects, purposes and powers specified in each of the clauses of this paragraph shall be regarded as independent objects, purposes and powers. Fourth: - (a) The total number of shares of all classes of stock which the Corporation shall have authority to issue is forty-one million (41,000,000) shares, consisting of: (1) One million (1,000,000) shares of Preferred stock, par value $10.00 per share (hereinafter referred to as "Preferred Stock"); and (2) Forty million (40,000,000) shares of Common Stock, par value $1.00 per share (hereinafter referred to as "Common Stock"). (b) Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the Board of Directors each of said series to be distinctly designated. All shares of any one series of Preferred Stock shall be alike in every particular, except that there may be different dates from which dividends, if any, thereon shall be cumulative, if made cumulative. The voting powers and the preferences and relative, participating, optional and other special rights of each such series, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding; and, subject to the provisions of subparagraph 1 of Paragraph (c) of this Article Fourth, the Board of Directors of the Corporation is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of a particular series of Preferred Stock, the voting powers and the designations, preferences and relative, optional and other special rights, and the qualifications, limitations and restrictions of such series, including, but without limiting the generality of the foregoing, the following: (1) The distinctive designation of, and the number of shares of Preferred Stock which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by like action of the Board of Directors; (2) The rate and times at which, and the terms and conditions on which, dividends, if any, on Preferred Stock of such series shall be paid, the extent of the preference or relation, if any, of such dividends to the dividends payable on any other class or classes, or series of the same or other class of stock and whether such dividends shall be cumulative or non-cumulative; 5 (3) The right, if any, of the holders of Preferred Stock of such series to convert the same into or exchange the same for, shares of any other class or classes or of any series of the same or any other class or classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (4) Whether or not Preferred Stock of such series shall be subject to redemption, and the redemption price or prices and the time or times at which, and the terms and conditions on which, Preferred Stock of such series may be redeemed. (5) The rights, if any, of the holders of Preferred Stock of such series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up, of the Corporation. (6) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Preferred Stock of such series; and (7) The voting powers, if any, of the holders of such series of Preferred Stock which may, without limiting the generality of the foregoing include the right, voting as a series or by itself or together with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such circumstances and on such conditions as the Board of Directors may determine. (c) (1) After the requirements with respect to preferential dividends on the Preferred Stock (fixed in accordance with the provisions of section (b) of this Article Fourth), if any, shall have been met and after the Corporation shall have complied with all the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts (fixed in accordance with the provisions of section (b) of this Article Fourth), and subject further to any conditions which may be fixed in accordance with the provisions of section (b) of this Article Fourth, then and not otherwise the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors. (2) After distribution in full of the preferential amount, if any, (fixed in accordance with the provisions of section (b) of this Article Fourth), to be distributed to the holders of Preferred Stock in the event of voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding-up, of the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available for distribution to 6 stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. (3) Except as may otherwise be required by law or by the provisions of such resolution or resolutions as may be adopted by the Board of Directors pursuant to section (b) of this Article Fourth, each holder of Common Stock shall have one vote in respect of each share of Common Stock held on all matters voted upon by the stockholders. (d) No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. (e) The relative powers, preferences and rights of each series of Preferred Stock in relation to the relative powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to authority granted in section (b) of this Article Fourth and the consent, by class or series vote or otherwise, of the holders of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in the resolution or resolutions as to any series of Preferred Stock adopted pursuant to section (b) of this Article Fourth that the consent of the holders of a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of any or all other series of Preferred Stock. (f) Subject to the provisions of section (e), shares of any series of Preferred Stock may be issued from time to time as the Board of 7 Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (g) Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. (h) The authorized amount of shares of Common Stock and of Preferred Stock may, without a class or series vote, be increased or decreased from time to time by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote thereon. Fifth: - (a) The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. The number of directors constituting the entire Board shall be not less than five nor more than twenty-five as fixed from time to time by vote of a majority of the whole Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the whole Board shall be twenty-four until otherwise fixed by a majority of the whole Board. (b) The Board of Directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1982, directors of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next annual election of directors. At such election, the stockholders shall elect a successor to such director to hold office until the next election of the class for which such director shall have been chosen and until his successor shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. (c) Notwithstanding any other provisions of this Charter or Act of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Charter or Act of Incorporation or the By-Laws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time without cause, but only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in 8 the election of directors (considered for this purpose as one class) cast at a meeting of the stockholders called for that purpose. (d) Nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Such nominations shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than 14 days nor more than 50 days prior to any meeting of the stockholders called for the election of directors; provided, however, that if less than 21 days' notice of the meeting is given to stockholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to stockholders. Notice of nominations which are proposed by the Board of Directors shall be given by the Chairman on behalf of the Board. (e) Each notice under subsection (d) shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of such nominee and (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee. (f) The Chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (g) No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. Sixth: - The Directors shall choose such officers, agents and servants as may be provided in the By-Laws as they may from time to time find necessary or proper. Seventh: - The Corporation hereby created is hereby given the same powers, rights and privileges as may be conferred upon corporations organized under the Act entitled "An Act Providing a General Corporation Law", approved March 10, 1899, as from time to time amended. Eighth: - This Act shall be deemed and taken to be a private Act. Ninth: - This Corporation is to have perpetual existence. 9 Tenth: - The Board of Directors, by resolution passed by a majority of the whole Board, may designate any of their number to constitute an Executive Committee, which Committee, to the extent provided in said resolution, or in the By-Laws of the Company, shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Eleventh: - The private property of the stockholders shall not be liable for the payment of corporate debts to any extent whatever. Twelfth: - The Corporation may transact business in any part of the world. Thirteenth: - The Board of Directors of the Corporation is expressly authorized to make, alter or repeal the By-Laws of the Corporation by a vote of the majority of the entire Board. The stockholders may make, alter or repeal any By-Law whether or not adopted by them, provided however, that any such additional By-Laws, alterations or repeal may be adopted only by the affirmative vote of the holders of two-thirds or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class). Fourteenth: - Meetings of the Directors may be held outside of the State of Delaware at such places as may be from time to time designated by the Board, and the Directors may keep the books of the Company outside of the State of Delaware at such places as may be from time to time designated by them. Fifteenth: - (a) (1) In addition to any affirmative vote required by law, and except as otherwise expressly provided in sections (b) and (c) of this Article Fifteenth: (A) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with or into (i) any Interested Stockholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Stockholder), which, after such merger or consolidation, would be an Affiliate (as hereinafter defined) of an Interested Stockholder, or (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of related transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate fair market value of $1,000,000 or more, or 10 (C) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $1,000,000 or more, or (D) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation, or (E) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any similar transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder, or any Affiliate of any Interested Stockholder, shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for the purpose of this Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that some lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. (2) The term "business combination" as used in this Article Fifteenth shall mean any transaction which is referred to in any one or more of clauses (A) through (E) of paragraph 1 of the section (a). (b) The provisions of section (a) of this Article Fifteenth shall not be applicable to any particular business combination and such business combination shall require only such affirmative vote as is required by law and any other provisions of the Charter or Act of Incorporation or By-Laws if such business combination has been approved by a majority of the whole Board. (c) For the purposes of this Article Fifteenth: (1) A "person" shall mean any individual, firm, corporation or other entity. (2) "Interested Stockholder" shall mean, in respect of any business combination, any person (other than the Corporation or any Subsidiary) who or which as of the record date for the determination of stockholders entitled to notice of and to vote on such business 11 combination, or immediately prior to the consummation of any such transaction: (A) is the beneficial owner, directly or indirectly, of more than 10% of the Voting Shares, or (B) is an Affiliate of the Corporation and at any time within two years prior thereto was the beneficial owner, directly or indirectly, of not less than 10% of the then outstanding voting Shares, or (C) is an assignee of or has otherwise succeeded in any share of capital stock of the Corporation which were at any time within two years prior thereto beneficially owned by any Interested Stockholder, and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (3) A person shall be the "beneficial owner" of any Voting Shares: (A) which such person or any of its Affiliates and Associates (as hereafter defined) beneficially own, directly or indirectly, or (B) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding, or (C) which are beneficially owned, directly or indirectly, by any other person with which such first mentioned person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of capital stock of the Corporation. (4) The outstanding Voting Shares shall include shares deemed owned through application of paragraph (3) above but shall not include any other Voting Shares which may be issuable pursuant to any agreement, or upon exercise of conversion rights, warrants or options or otherwise. (5) "Affiliate" and "Associate" shall have the respective meanings given those terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981. 12 (6) "Subsidiary" shall mean any corporation of which a majority of any class of equity security (as defined in Rule 3a11-1 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1981) is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Investment Stockholder set forth in paragraph (2) of this section (c), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (d) majority of the directors shall have the power and duty to determine for the purposes of this Article Fifteenth on the basis of information known to them, (1) the number of Voting Shares beneficially owned by any person (2) whether a person is an Affiliate or Associate of another, (3) whether a person has an agreement, arrangement or understanding with another as to the matters referred to in paragraph (3) of section (c), or (4) whether the assets subject to any business combination or the consideration received for the issuance or transfer of securities by the Corporation, or any Subsidiary has an aggregate fair market value of $1,000,000 or more. (e) Nothing contained in this Article Fifteenth shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. Sixteenth: Notwithstanding any other provision of this Charter or Act of Incorporation or the By-Laws of the Corporation (and in addition to any other vote that may be required by law, this Charter or Act of Incorporation by the By-Laws), the affirmative vote of the holders of at least two-thirds of the outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (considered for this purpose as one class) shall be required to amend, alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this Charter or Act of Incorporation. Seventeenth: (a) a Director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Laws as the same exists or may hereafter be amended. (b) Any repeal or modification of the foregoing paragraph shall not adversely affect any right or protection of a Director of the Corporation existing hereunder with respect to any act or omission occurring prior to the time of such repeal or modification." 13 EXHIBIT B BY-LAWS WILMINGTON TRUST COMPANY WILMINGTON, DELAWARE As existing on February 20, 2000 BY-LAWS OF WILMINGTON TRUST COMPANY ARTICLE I Stockholders' Meetings Section 1. The Annual Meeting of Stockholders shall be held on the third Thursday in April each year at the principal office at the Company or at such other date, time, or place as may be designated by resolution by the Board of Directors. Section 2. Special meetings of all stockholders may be called at any time by the Board of Directors, the Chairman of the Board or the President. Section 3. Notice of all meetings of the stockholders shall be given by mailing to each stockholder at least ten (10) days before said meeting, at his last known address, a written or printed notice fixing the time and place of such meeting. Section 4. A majority in the amount of the capital stock of the Company issued and outstanding on the record date, as herein determined, shall constitute a quorum at all meetings of stockholders for the transaction of any business, but the holders of a small number of shares may adjourn, from time to time, without further notice, until a quorum is secured. At each annual or special meeting of stockholders, each stockholder shall be entitled to one vote, either in person or by proxy, for each share of stock registered in the stockholder's name on the books of the Company on the record date for any such meeting as determined herein. ARTICLE II Directors Section 1. The authorized number of directors that shall constitute the Board of Directors shall be fixed from time to time by or pursuant to a resolution passed by a majority of the Board within the parameters set by the Charter of the Bank. No more than two directors may also be employees of the Company or any affiliate thereof. Section 2. Except as provided in these Bylaws or as otherwise required by law, there shall be no qualifications for election or service as directors of the Company. In addition to any other provisions of these Bylaws, to be qualified for nomination for Election or appointment to the Board of Directors each person must have not attained the age of sixty nine years at the time of such election or appointment, provided however, the Nominating and Corporate Governance Committee may waive such qualification as to a particular candidate otherwise qualified to serve as a director upon a good faith determination by such committee that such a waiver is in the best interests of the Company and its stockholders. The Chairman of the Board of Directors shall not be qualified to continue to serve as a director upon the termination of his or her service in that office for any reason. Section 3. The class of Directors so elected shall hold office for three years or until their successors are elected and qualified. Section 4. The affairs and business of the Company shall be managed and conducted by the Board of Directors. Section 5. The Board of Directors shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Board of Directors or the President. Section 6. Special meetings of the Board of Directors may be called at any time by the Chairman of the Board of Directors or by the President, and shall be called upon the written request of a majority of the directors. Section 7. A majority of the directors elected and qualified shall be necessary to constitute a quorum for the transaction of business at any meeting of the Board of Directors. Section 8. Written notice shall be sent by mail to each director of any special meeting of the Board of Directors, and of any change in the time or place of any regular meeting, stating the time and place of such meeting, which shall be mailed not less than two days before the time of holding such meeting. Section 9. In the event of the death, resignation, removal, inability to act, or disqualification of any director, the Board of Directors, although less than a quorum, shall have the right to elect the successor who shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred, and until such director's successor shall have been duly elected and qualified. Section 10. The Board of Directors at its first meeting after its election by the stockholders shall appoint an Executive Committee, a Trust Committee, an Audit Committee and a Compensation Committee, and shall elect from its own members a Chairman of the Board of Directors and a President who may be the same person. The Board of Directors shall also elect at such meeting a Secretary and a Treasurer, who may be the same person, may appoint at any time such other committees and elect or appoint such other officers as it may deem advisable. The Board of Directors may also elect at such meeting one or more Associate Directors. Section 11. The Board of Directors may at any time remove, with or 2 without cause, any member of any Committee appointed by it or any associate director or officer elected by it and may appoint or elect his successor. Section 12. The Board of Directors may designate an officer to be in charge of such of the departments or divisions of the Company as it may deem advisable. ARTICLE III Committees Section 1. Executive Committee (A) The Executive Committee shall be composed of not more than nine members who shall be selected by the Board of Directors from its own members and who shall hold office during the pleasure of the Board. (B) The Executive Committee shall have all the powers of the Board of Directors when it is not in session to transact all business for and in behalf of the Company that may be brought before it. (C) The Executive Committee shall meet at the principal office of the Company or elsewhere in its discretion at such times to be determined by a majority of its members, or at the call of the Chairman of the Executive Committee or at the call of the Chairman of the Board of Directors. The majority of its members shall be necessary to constitute a quorum for the transaction of business. Special meetings of the Executive Committee may be held at any time when a quorum is present. (D) Minutes of each meeting of the Executive Committee shall be kept and submitted to the Board of Directors at its next meeting. (E) The Executive Committee shall advise and superintend all investments that may be made of the funds of the Company, and shall direct the disposal of the same, in accordance with such rules and regulations as the Board of Directors from time to time make. (F) In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Company by its directors and officers as contemplated by these By-Laws any two available members of the Executive Committee as constituted immediately prior to such disaster shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Company in accordance with the provisions of Article III of these By-Laws; and if less than three members of the Trust Committee is constituted immediately prior to such disaster shall be available for the transaction of its business, such Executive Committee shall also be empowered to exercise all of the powers reserved to the Trust 3 Committee under Article III Section 2 hereof. In the event of the unavailability, at such time, of a minimum of two members of such Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Company in accordance with the foregoing provisions of this Section. This By-Law shall be subject to implementation by Resolutions of the Board of Directors presently existing or hereafter passed from time to time for that purpose, and any provisions of these By-Laws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementary Resolutions shall be suspended during such a disaster period until it shall be determined by any interim Executive Committee acting under this section that it shall be to the advantage of the Company to resume the conduct and management of its affairs and business under all of the other provisions of these By-Laws. Section 2. Audit Committee (A) The Audit Committee shall be composed of five members who shall be selected by the Board of Directors from its own members, none of whom shall be an officer of the Company, and shall hold office at the pleasure of the Board. (B) The Audit Committee shall have general supervision over the Audit Division in all matters however subject to the approval of the Board of Directors; it shall consider all matters brought to its attention by the officer in charge of the Audit Division, review all reports of examination of the Company made by any governmental agency or such independent auditor employed for that purpose, and make such recommendations to the Board of Directors with respect thereto or with respect to any other matters pertaining to auditing the Company as it shall deem desirable. (C) The Audit Committee shall meet whenever and wherever the majority of its members shall deem it to be proper for the transaction of its business, and a majority of its Committee shall constitute a quorum. Section 3. Compensation Committee (A) The Compensation Committee shall be composed of not more than five (5) members who shall be selected by the Board of Directors from its own members who are not officers of the Company and who shall hold office during the pleasure of the Board. (B) The Compensation Committee shall in general advise upon all matters of policy concerning the Company brought to its attention by the management and from time to time review the management of the Company, major organizational matters, including salaries and employee benefits and specifically shall administer the Executive Incentive Compensation Plan. 4 (C) Meetings of the Compensation Committee may be called at any time by the Chairman of the Compensation Committee, the Chairman of the Board of Directors, or the President of the Company. Section 4. Associate Directors (A) Any person who has served as a director may be elected by the Board of Directors as an associate director, to serve during the pleasure of the Board. (B) An associate director shall be entitled to attend all directors meetings and participate in the discussion of all matters brought to the Board, with the exception that he would have no right to vote. An associate director will be eligible for appointment to Committees of the Company, with the exception of the Executive Committee, Audit Committee and Compensation Committee, which must be comprised solely of active directors. Section 5. Absence or Disqualification of Any Member of a Committee (A) In the absence or disqualification of any member of any Committee created under Article III of the By-Laws of this Company, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. ARTICLE IV Officers Section 1. The Chairman of the Board of Directors shall preside at all meetings of the Board and shall have such further authority and powers and shall perform such duties as the Board of Directors may from time to time confer and direct. He shall also exercise such powers and perform such duties as may from time to time be agreed upon between himself and the President of the Company. Section 2. The Vice Chairman of the Board. The Vice Chairman of the Board of Directors shall preside at all meetings of the Board of Directors at which the Chairman of the Board shall not be present and shall have such further authority and powers and shall perform such duties as the Board of Directors or the Chairman of the Board may from time to time confer and direct. Section 3. The President shall have the powers and duties pertaining to the office of the President conferred or imposed upon him by statute or 5 assigned to him by the Board of Directors. In the absence of the Chairman of the Board the President shall have the powers and duties of the Chairman of the Board. Section 4. The Chairman of the Board of Directors or the President as designated by the Board of Directors, shall carry into effect all legal directions of the Executive Committee and of the Board of Directors, and shall at all times exercise general supervision over the interest, affairs and operations of the Company and perform all duties incident to his office. Section 5. There may be one or more Vice Presidents, however denominated by the Board of Directors, who may at any time perform all the duties of the Chairman of the Board of Directors and/or the President and such other powers and duties as may from time to time be assigned to them by the Board of Directors, the Executive Committee, the Chairman of the Board or the President and by the officer in charge of the department or division to which they are assigned. Section 6. The Secretary shall attend to the giving of notice of meetings of the stockholders and the Board of Directors, as well as the Committees thereof, to the keeping of accurate minutes of all such meetings and to recording the same in the minute books of the Company. In addition to the other notice requirements of these By-Laws and as may be practicable under the circumstances, all such notices shall be in writing and mailed well in advance of the scheduled date of any other meeting. He shall have custody of the corporate seal and shall affix the same to any documents requiring such corporate seal and to attest the same. Section 7. The Treasurer shall have general supervision over all assets and liabilities of the Company. He shall be custodian of and responsible for all monies, funds and valuables of the Company and for the keeping of proper records of the evidence of property or indebtedness and of all the transactions of the Company. He shall have general supervision of the expenditures of the Company and shall report to the Board of Directors at each regular meeting of the condition of the Company, and perform such other duties as may be assigned to him from time to time by the Board of Directors of the Executive Committee. Section 8. There may be a Controller who shall exercise general supervision over the internal operations of the Company, including accounting, and shall render to the Board of Directors at appropriate times a report relating to the general condition and internal operations of the Company. There may be one or more subordinate accounting or controller officers however denominated, who may perform the duties of the Controller and such duties as may be prescribed by the Controller. Section 9. The officer designated by the Board of Directors to be in charge of the Audit Division of the Company with such title as the Board of 6 Directors shall prescribe, shall report to and be directly responsible only to the Board of Directors. There shall be an Auditor and there may be one or more Audit Officers, however denominated, who may perform all the duties of the Auditor and such duties as may be prescribed by the officer in charge of the Audit Division. Section 10. There may be one or more officers, subordinate in rank to all Vice Presidents with such functional titles as shall be determined from time to time by the Board of Directors, who shall ex officio hold the office Assistant Secretary of this Company and who may perform such duties as may be prescribed by the officer in charge of the department or division to whom they are assigned. Section 11. The powers and duties of all other officers of the Company shall be those usually pertaining to their respective offices, subject to the direction of the Board of Directors, the Executive Committee, Chairman of the Board of Directors or the President and the officer in charge of the department or division to which they are assigned. ARTICLE V Stock and Stock Certificates Section 1. Shares of stock shall be transferrable on the books of the Company and a transfer book shall be kept in which all transfers of stock shall be recorded. Section 2. Certificates of stock shall bear the signature of the President or any Vice President, however denominated by the Board of Directors and countersigned by the Secretary or Treasurer or an Assistant Secretary, and the seal of the corporation shall be engraved thereon. Each certificate shall recite that the stock represented thereby is transferrable only upon the books of the Company by the holder thereof or his attorney, upon surrender of the certificate properly endorsed. Any certificate of stock surrendered to the Company shall be cancelled at the time of transfer, and before a new certificate or certificates shall be issued in lieu thereof. Duplicate certificates of stock shall be issued only upon giving such security as may be satisfactory to the Board of Directors or the Executive Committee. Section 3. The Board of Directors of the Company is authorized to fix in advance a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of stockholders and any adjournment thereof, or entitled to receive payment of any dividend, or to any allotment or rights, or to exercise any rights in respect of any change, conversion or exchange of capital stock, or in connection with obtaining the consent of stockholders for any purpose, which record date shall not be more than 60 nor less than 10 days proceeding the date of any meeting of stockholders or the date for the payment of any dividend, or the date for the allotment of rights, or the 7 date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent. ARTICLE VI Seal Section 1. The corporate seal of the Company shall be in the following form: Between two concentric circles the words "Wilmington Trust Company" within the inner circle the words "Wilmington, Delaware." ARTICLE VII Fiscal Year Section 1. The fiscal year of the Company shall be the calendar year. ARTICLE VIII Execution of Instruments of the Company Section 1. The Chairman of the Board, the President or any Vice President, however denominated by the Board of Directors, shall have full power and authority to enter into, make, sign, execute, acknowledge and/or deliver and the Secretary or any Assistant Secretary shall have full power and authority to attest and affix the corporate seal of the Company to any and all deeds, conveyances, assignments, releases, contracts, agreements, bonds, notes, mortgages and all other instruments incident to the business of this Company or in acting as executor, administrator, guardian, trustee, agent or in any other fiduciary or representative capacity by any and every method of appointment or by whatever person, corporation, court officer or authority in the State of Delaware, or elsewhere, without any specific authority, ratification, approval or confirmation by the Board of Directors or the Executive Committee, and any and all such instruments shall have the same force and validity as though expressly authorized by the Board of Directors and/or the Executive Committee. ARTICLE IX Compensation of Directors and Members of Committees Section 1. Directors and associate directors of the Company, other than salaried officers of the Company, shall be paid such reasonable honoraria 8 or fees for attending meetings of the Board of Directors as the Board of Directors may from time to time determine. Directors and associate directors who serve as members of committees, other than salaried employees of the Company, shall be paid such reasonable honoraria or fees for services as members of committees as the Board of Directors shall from time to time determine and directors and associate directors may be employed by the Company for such special services as the Board of Directors may from time to time determine and shall be paid for such special services so performed reasonable compensation as may be determined by the Board of Directors. ARTICLE X Indemnification Section 1. (A) The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The Corporation shall indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the Corporation. (B) The Corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a Director or officer in his capacity as a Director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the Director or officer to repay all amounts advanced if it should be ultimately determined that the Director or officer is not entitled to be indemnified under this Article or otherwise. (C) If a claim for indemnification or payment of expenses, under this Article X is not paid in full within ninety days after a written claim therefor has been received by the Corporation the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification of payment of expenses under applicable law. (D) The rights conferred on any person by this Article X 9 shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Charter or Act of Incorporation, these By-Laws, agreement, vote of stockholders or disinterested Directors or otherwise. (E) Any repeal or modification of the foregoing provisions of this Article X shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. ARTICLE XI Amendments to the By-Laws Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, and any new By-Law or By-Laws adopted at any regular or special meeting of the Board of Directors by a vote of the majority of all the members of the Board of Directors then in office. 10 EXHIBIT C Section 321(b) Consent Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended, Wilmington Trust Company hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon requests therefor. WILMINGTON TRUST COMPANY Dated: December 10, 2001 By: ----------------------------------------- Name: Title: Vice President EXHIBIT D NOTICE This form is intended to assist state nonmember banks and savings banks with state publication requirements. It has not been approved by any state banking authorities. Refer to your appropriate state banking authorities for your state publication requirements. R E P O R T O F C O N D I T I O N Consolidating domestic subsidiaries of the WILMINGTON TRUST COMPANY of WILMINGTON - ---------------------------------------------------------- ------------------ Name of Bank City in the State of DELAWARE , at the close of business on September 30, 2001. ------------
ASSETS Thousands of dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coins................................................274,398 Interest-bearing balances.............................................................................. 0 Held-to-maturity securities................................................................................. 15,956 Available-for-sale securities.............................................................................1,177,116 Federal funds sold and securities purchased under agreements to resell......................................453,981 Loans and lease financing receivables: Loans and leases, net of unearned income. . . . . . . 4,879,670 LESS: Allowance for loan and lease losses. . . . . . 73,439 LESS: Allocated transfer risk reserve. . . . . . . . 0 Loans and leases, net of unearned income, allowance, and reserve.................................4,806,231 Assets held in trading accounts...................................................................................0 Premises and fixed assets (including capitalized leases)....................................................133,431 Other real estate owned...................................................................................... 668 Investments in unconsolidated subsidiaries and associated companies...........................................1,605 Customers' liability to this bank on acceptances outstanding......................................................0 Intangible assets: a. Goodwill.......................................................................................... 217 b. Other intangible assets......................................................................... 4,230 Other assets............................................................................................... 161,671 Total assets..............................................................................................7,029,504 CONTINUED ON NEXT PAGE LIABILITIES Deposits: In domestic offices.......................................................................................5,443,431 Noninterest-bearing . . . . . . . . 1,067,087 Interest-bearing. . . . . . . . . . 4,376,344 Federal funds purchased and Securities sold under agreements to repurchase................................. 549,060 Trading liabilities (from Schedule RC-D)..........................................................................0 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases:..............390,810 Bank's liability on acceptances executed and outstanding..........................................................0 Subordinated notes and debentures.................................................................................0 Other liabilities (from Schedule RC-G)..................................................................... 108,356 Total liabilities.........................................................................................6,491,657 EQUITY CAPITAL Perpetual preferred stock and related surplus.....................................................................0 Common Stock....................................................................................................500 Surplus (exclude all surplus related to preferred stock).....................................................62,118 a. Retained earnings.......................................................................................459,554 b. Accumulated other comprehensive income.................................................................. 15,675 Total equity capital........................................................................................537,847 Total liabilities, limited-life preferred stock, and equity capital.......................................7,029,504
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