-----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, L16sH/AcAPgCJg5VzS/mQxbpwotlENhQbM352+YCOe4T1WyGCI1KkDvF3te+/E0o wyVTSsNoUPUXm8QXk/W7eg== 0000950144-99-003444.txt : 19990331 0000950144-99-003444.hdr.sgml : 19990331 ACCESSION NUMBER: 0000950144-99-003444 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 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: 10-K SEC ACT: SEC FILE NUMBER: 001-11604 FILM NUMBER: 99577108 BUSINESS ADDRESS: STREET 1: 1301 FIRST AVE CITY: COLUMBUS STATE: GA ZIP: 31901 BUSINESS PHONE: 4045763400 MAIL ADDRESS: STREET 1: P O BOX 391 CITY: COLUMBUS STATE: GA ZIP: 31994 10-K 1 CARMIKE CINEMAS 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) |X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended DECEMBER 31, 1998 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ___________ to _______ Commission File Number 1-11604 CARMIKE CINEMAS, INC. (Exact Name Of Registrant As Specified in Its Charter) DELAWARE 58-1469127 (State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 1301 FIRST AVENUE, COLUMBUS, GEORGIA 31901 (Address of Principal Executive Offices) (Zip Code)
(706) 576-3400 (Registrant's Telephone Number, including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered ---------------------------------------------- ------------------------------------------ CLASS A COMMON STOCK, PAR VALUE $.03 PER SHARE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K |_| As of March 1, 1999, 9,942,487 shares of Class A Common Stock, par value $.03 per share, were outstanding and the aggregate market value of the shares of the Class A Common Stock held by non-affiliates of the registrant was approximately $148,473,795. As of March 1, 1999, 1,420,700 shares of Class B Common Stock, par value $.03 per share, were outstanding, all of which shares are held by affiliates of the registrant. DOCUMENTS INCORPORATED BY REFERENCE Specified portions of Carmike Cinemas, Inc.'s Proxy Statement relating to the 1999 Annual Meeting of Stockholders are incorporated by reference into Part III. 2 TABLE OF CONTENTS
PAGE NUMBER Part I ------ Item 1. Business..................................................................................3 Item 2. Properties...............................................................................18 Item 3. Legal Proceedings........................................................................18 Item 4. Submission of Matters to a Vote of Security Holders......................................18 Executive Officers of the Registrant................................................................19 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................21 Item 6. Selected Financial and Operating Data....................................................22 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...............................................................................24 Item 7A. Quantitative and Qualitative Disclosures About Market Risk...............................33 Item 8. Financial Statements and Supplementary Data..............................................33 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...............................................................................34 *Part III Item 10. Directors and Executive Officers of the Registrant.......................................34 Item 11. Executive Compensation...................................................................34 Item 12 Security Ownership of Certain Beneficial Owners and Management...........................34 Item 13 Certain Relationships and Related Transactions...........................................34 Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..........................35 *Incorporated by reference from 1999 Proxy Statement.
2 3 CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS This Report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including, in particular, forward-looking statements under the headings "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." The words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate," "slate" and similar expressions are intended to identify such forward-looking statements; however, this Report also contains other forward-looking statements in addition to historical information. Carmike cautions that there are various important factors that could cause actual results to differ materially from those indicated in the forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are the factors set forth below in "Item 1. Business -- Factors That May Affect Future Performance." By making these forward-looking statements, Carmike does not undertake to update them in any manner except as may be required by its disclosure obligations in filings it makes with the Securities and Exchange Commission (the "Commission") under the Federal securities laws. In this Report, the words "Company," "Carmike," "we," "our," "ours," and "us" refer to Carmike Cinemas, Inc. and its subsidiaries. Information in this Report as to the number of theatres and screens operated by us and average screens per theatre as of December 31, 1998 is net of theatres scheduled to be closed pursuant to our restructuring plan. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Asset Impairments and Restructuring Charge." PART I ITEM 1. BUSINESS. OVERVIEW Carmike is the largest motion picture exhibitor in the United States in terms of number of theatres operated and is the third largest in terms of the number of screens operated. As of December 31, 1998, Carmike operated 468 theatres with an aggregate of 2,658 screens located in 36 states. Carmike's theatres are located in small to mid-sized communities ranging in population size from approximately 7,700 to 456,000. As of December 31, 1998, management believes that Carmike was the sole exhibitor in approximately 65.0% of its film licensing zones and was the leading exhibitor in approximately 83.0% of its film licensing zones. Carmike was organized as a Delaware corporation in April 1982 in connection with the leveraged buy-out of its predecessor, the Martin Theatres circuit, by present management of Carmike. The principal executive offices of Carmike are located at 1301 First Avenue, Columbus, Georgia 31901, and the telephone number is (706) 576-3400. 3 4 RECENT DEVELOPMENTS Subordinated Debt Placement On February 3, 1999, Carmike sold in a private placement (the "Subordinated Debt Placement") $200.0 million in principal amount of its 9 3/8% Senior Subordinated Notes due 2009 (the "Notes") to Goldman, Sachs & Co., First Union Capital Markets, a division of Wheat First Securities, Inc., and ING Baring Furman Selz LLC (collectively, the "Initial Purchasers"). Under the Indenture relating to the Notes, Carmike will pay interest on the Notes on February 1 and August 1 of each year. The first such payment will be made on August 1, 1999. Carmike has the option to redeem all or a portion of the Notes at any time on or after February 1, 2004. Before February 1, 2002, Carmike may redeem up to 35.0% of the aggregate principal amount of the Notes issued under the Indenture with the proceeds of certain offerings of Carmike's equity securities. If Carmike experiences specific kinds of changes in control, Carmike must offer to repurchase the Notes. The proceeds from the sale of the Notes were used to redeem three series of Carmike's senior notes held by certain institutional investors (the "Senior Notes"). In connection with the redemption of Senior Notes and the amendment to Carmike's revolving credit facility described below, Carmike expects to recognize an extraordinary charge of approximately $10.2 million ($6.1 million after income taxes) in the first quarter of 1999 to reflect the repayment premiums associated with the retirement of the Senior Notes and the related write-off of deferred financing costs. Refinancing Arrangements On January 29, 1999, Carmike amended and restated its revolving credit facility (as amended, the "Revolving Credit Facility"). In addition, on February 25, 1999, Carmike entered into a $75.0 million Term Loan B, the proceeds of which were applied to repay revolving credit borrowings. Following application of the proceeds of the Term Loan B, the maximum available borrowings under the Revolving Credit Facility was reduced from $275.0 million to $200.0 million. The Revolving Credit Facility also has an increased interest rate on borrowings and revised and additional financial covenants. In connection with the amendment and restatement of the Revolving Credit Facility, Carmike also amended and restated its Master Lease with Movieplex Realty Leasing, L.L.C. to provide for security interests and guarantees and to amend certain covenants contained therein. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." THEATRE OPERATIONS Carmike's revenues are generated primarily from admissions and concessions sales. Additional revenues, which are not material, are generated from electronic video games installed in the lobbies of some of its theatres and on-screen advertising. The following table sets forth as of December 31, 1998 (after giving effect to the restructuring plan hereinafter described) certain information regarding the 468 theatres and 2,658 screens operated by Carmike: 4 5
STATE THEATRES SCREENS STATE THEATRES SCREENS - ----- -------- ------- ----- -------- ------- Alabama................24 177 Nebraska................9 32 Arkansas...............12 93 New Mexico..............1 2 Colorado...............11 64 New York................1 8 Delaware................2 12 North Carolina.........65 373 Florida................16 89 North Dakota............9 45 Georgia................37 247 Ohio....................8 43 Idaho...................9 24 Oklahoma...............14 66 Illinois................3 13 Pennsylvania...........38 202 Indiana.................2 13 South Carolina.........26 147 Iowa...................20 130 South Dakota............8 50 Kansas..................2 12 Tennessee..............39 229 Kentucky...............11 53 Texas..................17 80 Louisiana...............3 22 Utah...................12 72 Maryland................2 12 Virginia...............15 88 Michigan................2 10 Washington..............1 1 Minnesota..............13 66 West Virginia...........5 30 Missouri................1 8 Wisconsin...............7 46 Montana................16 77 Wyoming.................7 22
In accordance with a restructuring plan adopted by Carmike's Board of Directors in December 1998, Carmike will close or dispose of 28 theatres with an aggregate of 116 screens during the next year. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Asset Impairments and Restructuring Charge." Theatres scheduled for disposition are not included in the above table. From time to time, Carmike converts marginally profitable theatres to "Discount Theatres" for the exhibition of films that have previously been shown on a first-run basis. Carmike also operates certain theatres for the exhibition of first-run films at a reduced admission price. These theatres are typically in a smaller market where Carmike is the only exhibitor in the market. At December 31, 1998, Carmike operated 64 theatres with 250 screens as Discount Theatres. As of December 31, 1998, Carmike owned 88 of its theatres, had 322 ground and improvement leases and had 49 ground leases, excluding theatres scheduled to be closed in 1999. An additional nine theatres were operated by Carmike under shared ownership. Carmike's theatre operations are under the supervision of its Senior Vice President -- Operations and four division managers. The division managers are responsible for implementing Company operating policies and supervising Carmike's eighteen operating districts. Each operating district has a district manager who is responsible for overseeing the day-to-day operations of Carmike's theatres. Corporate policy development, strategic planning, site selection and lease negotiation, theatre design and construction, concession purchasing, film licensing, advertising, and financial and accounting activities are centralized at the corporate headquarters of Carmike. 5 6 Carmike has implemented an incentive bonus program for theatre level management which provides for bonuses based on incremental improvements in theatre profitability, including concession sales. As part of this program, Carmike evaluates "mystery shopper" reports on the quality of service, cleanliness and film presentation at individual theatres. Carmike relies upon advertisements and movie schedules published in newspapers to inform its customers of film selections and show times. Newspaper advertisements are typically displayed in a single group for all Carmike's theatres located in the newspaper's circulation area. In addition, Carmike utilizes radio spots and promotions to further market its films. Major distributors frequently share the cost of newspaper and radio advertising. Carmike also exhibits in its theatres previews of coming attractions and films presently playing on Carmike's other screens in the same market area. In addition, Carmike sells gift certificates and offers a discount ticket plan to attract groups of patrons to its theatres. THEATRE DEVELOPMENT Carmike's growth strategy primarily involves the development of new theatres and the addition of screens and other improvements to existing theatres, and selective acquisitions of theatres as available. During 1998, Carmike opened 16 new theatres with 182 screens, added 16 auditoriums to its existing theatres and retrofit 114 auditoriums at certain of its theatres. At December 31, 1998, Carmike had 152 screens under construction, and intends to develop approximately 382 screens during 1999. Carmike's capital expenditures during 1998 aggregated approximately $146.7 million, net of lease financings, and Carmike estimates that capital expenditures in connection with its development plans will aggregate approximately $129.0 million, net of lease financings, during 1999. Carmike expects that theatre construction, expansion and renovation and capital expenditures will be approximately $75.0 million, net of lease financings, for 2000. Carmike has designed a prototype multiplex theatre which can be adapted and sized to a particular location, which management believes results in construction and operating cost savings. Carmike's typical new multiplex is designed for a market with a population of between 100,000 to 250,000, has 12 to 20 screens (with 16 screens being typical), and features digital stereo surround sound, oversized screens, plush seating with cup holders and a spacious lobby. Stadium seating will be included in or added to certain theatres located in Carmike's larger markets, where appropriate. Carmike currently has 303 screens with stadium seating and plans to provide stadium seating in another 465 auditoriums during 1999. Carmike estimates that the average cost of a new 16-screen multiplex will be approximately $9.0 million ($4.0 million if the land and improvements are leased rather than owned). FILM LICENSING Carmike obtains licenses to exhibit films by directly negotiating with or, in rare circumstances, submitting bids to film distributors. Carmike licenses films through its booking office located in Columbus, Georgia. Carmike's Senior Vice President -- Film, in consultation with Carmike's President, directs Carmike's motion picture bookings. 6 7 Prior to negotiating or bidding for a film license, Carmike's Senior Vice President -- Film and film booking personnel evaluate the prospects for upcoming films. The criteria considered for each film include cast, director, plot, performance of similar films, estimated film rental costs and expected MPAA rating. Successful licensing depends greatly upon the availability of commercially popular motion pictures, knowledge of the tastes of residents in markets served by each theatre and insight into the trends in those tastes. Carmike maintains a database that includes revenue information on films previously exhibited in its markets. This historical information is then utilized by Carmike to match new films with particular markets so as to maximize revenues. The major film distributors generally release during the summer and holiday seasons, primarily Thanksgiving and Christmas, those films which they anticipate to be the most successful. Consequently, Carmike has historically generated higher revenues during such periods. Film Rental Fees Film licenses typically specify rental fees based on the higher of a gross box office receipts formula or an adjusted gross box office receipts formula. Under a gross box office receipts formula, the distributor receives a specified percentage of box office receipts, with the percentage declining over the term of the run. Carmike's film rental fees typically begin at 60.0% of admission revenues and gradually decline to as low as 30.0% over a period of four to eight weeks. Under an adjusted gross box office receipts formula (commonly known as a "90/10" clause), the distributor receives a specified percentage (i.e., 90.0%) of the excess of box office receipts over a negotiated amount for house expenses. In addition, Carmike is occasionally required to pay non-refundable guarantees of film rentals, to make advance payments of film rentals, or both, in order to obtain a license for a film. Although not specifically contemplated by the provisions of film licenses, the terms of film licenses generally (with the exception of Universal, Fox, Sony and DreamWorks) are adjusted or re-negotiated subsequent to exhibition of the film in relation to its success. Film Licensing Zones Film licensing zones are geographic areas (generally encompassing a radius of three to five miles) established by film distributors where any given film is allocated to only one theatre within that area. In film licensing zones where Carmike has little or no competition, Carmike obtains film licenses by selecting a film from among those offered and negotiating directly with the distributor. In competitive film licensing zones, a distributor will either require the exhibitors in the zone to bid for a film or will allocate its films among the exhibitors in the zone. When films are licensed under the allocation process, a distributor will choose which exhibitor is offered a movie and then that exhibitor will negotiate film rental terms directly with the distributor for the film. Over the past several years, distributors have generally used the allocation rather than the bidding process to license their films. When films are licensed through a bidding process, exhibitors compete for licenses based upon economic terms. Carmike currently does not bid for films in any of its film licensing zones. 7 8 First-Run Films Carmike predominantly licenses "first-run" films. If a film has substantial remaining potential following its first-run, Carmike may license it for a subsequent run (a "sub-run"). Although average daily sub-run attendance is often less than average daily first-run attendance, sub-run film cost is generally less than first-run film cost. Additionally, sub-runs enable Carmike to exhibit a variety of films during periods in which there are few new releases. Relationship with Distributors Carmike depends on, among other things, the quality, quantity, availability and acceptance by movie going customers of the motion picture product produced by the motion picture production companies and licensed for exhibition to the motion picture exhibitors by distribution companies. Disruption in the production of motion pictures by the major studios and/or independent producers or poor performance of motion pictures could have an adverse effect on the business of Carmike. The motion picture production and distribution industry in the United States is led by a few major movie studios and their distribution operations, but no single distributor dominates the market. See "-- Regulatory Environment." Accordingly, Carmike's business is dependent upon the availability of marketable pictures and its relationships with distributors. While there are numerous distributors which provide quality first-run movies to the motion picture exhibition industry, the following nine major distributors accounted for approximately 92.0% of Carmike's admission revenues during the year ended December 31, 1998: Buena Vista, Warner Brothers, Fox, Paramount, Universal, DreamWorks, MGM/UA, Sony and New Line. Carmike licenses films from a number of distributors and believes that its relationships with distributors generally are satisfactory. CONCESSIONS Concessions sales are Carmike's second largest revenue source after box office admissions, constituting 29.0% of total revenues for 1998. Carmike's strategy emphasizes quick and efficient service built around a limited menu primarily focused on higher margin items such as popcorn, candy and soft drinks. In addition, Carmike has introduced a limited number of new products, such as bottled water, coffee and ice cream, at certain of its theatre locations. Carmike actively seeks to promote concessions sales through the design and appearance of its concession stands, the introduction of special promotions from time to time, and the training of its employees to cross sell products. In addition, Carmike's management incentive bonus program includes concession results as a component of determining the bonus awards. Carmike negotiates prices for its concessions supplies directly with concessions vendors on a national or regional basis to obtain high volume discounts or bulk rates. MANAGEMENT INFORMATION SYSTEMS Carmike has a significant commitment to its major operating systems, some of which have been developed internally. Carmike's proprietary computer system, IQ-Zero, which is installed in all of its theatres, allows Carmike to centralize most theatre-level administrative 8 9 functions at its corporate headquarters, creating significant operating leverage. IQ-Zero allows corporate management to monitor ticket and concessions sales and box+office and concession staffing on a daily basis. Carmike's integrated management information system, centered around IQ-Zero, also coordinates payroll, tracks theatre invoices and generates operating reports analyzing film performance and theatre profitability. Accordingly, there is active communication between the theatres and corporate headquarters, which allows senior management to react to vital profit and staffing information on a daily basis and perform the majority of the theatre-level administrative functions, thereby enabling the theatre manager to focus on the day-to-day operations of the theatre. ADDITIONAL REVENUE STREAMS Carmike actively engages in efforts to develop revenue streams in addition to admissions and concessions revenues. Certain of Carmike's theatres include electronic video games located adjacent to or in the lobby, and on-screen advertising is provided on a number of Carmike's screens, each of which provides additional revenues to Carmike. Since 1997, Carmike has opened five family entertainment centers under the name Hollywood Connection(R), including three which were developed pursuant to a joint venture with Wal-Mart, and which feature multiplex theatres and other forms of entertainment. Carmike is currently evaluating this concept and is also exploring alternate revenue sources such as advertising and marketing programs on beverage and popcorn containers. COMPETITION The motion picture exhibition industry is fragmented and highly competitive. In markets where it is not the sole exhibitor, Carmike competes against regional and independent operators as well as the larger theatre circuit operators. Carmike's operations are subject to varying degrees of competition with respect to film licensing, attracting customers, obtaining new theatre sites or acquiring theatre circuits. Carmike believes that the principal competitive factors with respect to film licensing include licensing terms, seating capacity, location and prestige of an exhibitor's theatres, quality of projection and sound at the theatres and the exhibitor's ability and willingness to promote the films. The competition for customers is dependent upon factors such as the availability of popular films, location of the theatres, customer comfort, quality of projection and sound and the ticket prices. Carmike believes that its admission prices are competitive with admission prices of competing theatres. In those areas where real estate is readily available, there are few barriers preventing competing companies from opening theatres near one of Carmike's existing theatres, which may have a material adverse effect on Carmike's theatres. In addition, competitors have built or are planning to build theatres in certain areas in which Carmike operates, which may result in excess capacity in such areas and may adversely affect attendance and pricing at Carmike's theatres in such areas. The opening of large multiplexes and theatres with stadium seating by Carmike and certain of its competitors has tended to, and is expected to continue to, draw audiences away from certain older theatres, including theatres operated by Carmike. In addition, demographic changes and competitive pressures can lead to a theatre location becoming impaired. 9 10 Certain trends in the theatre exhibition industry favor larger better capitalized companies, creating an environment for consolidation. Recently, a number of significant acquisitions and consolidations in the movie exhibition industry have been completed. For example, the combination of the Loews Theatres exhibition business of Sony Pictures Entertainment Inc. with Cineplex Odeon Corporation, which was completed in May 1998, has resulted in a combined company, Loews Cineplex Entertainment Corporation, with approximately 2,900 screens in 458 locations. In December 1997, the investment firm of Kohlberg Kravis Roberts & Co. ("KKR") consummated its acquisition of Act III Cinemas, Inc. ("Act III"). In early 1998, KKR and Hicks, Muse, Tate & Furst, Inc. ("Hicks Muse") announced a joint agreement to acquire Regal Cinemas, Inc. ("Regal Cinemas") and to subsequently combine Regal Cinemas with Act III and with United Artists Theatre Company ("United Artists"), which Hicks Muse had proposed to acquire. Hicks Muse subsequently withdrew its offer to acquire United Artists; however, the combination of Regal Cinemas with Act III has resulted in a combined company with approximately 3,300 screens in 392 locations. Carmike cannot predict what impact such consolidations may have on Carmike's future results of operations. In addition to competition with other motion picture exhibitors, Carmike's theatres face competition from a number of alternative motion picture exhibition delivery systems, such as cable television, satellite and pay-per-view services and home video systems. The expansion of such delivery systems (such as video on demand) could have a material adverse effect upon Carmike's business and results of operations. Carmike also competes for the public's leisure time and disposable income with all forms of entertainment, including sporting events, concerts, live theatre and restaurants. REGULATORY ENVIRONMENT 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. Certain consent decrees resulting from such cases bind certain major motion picture distributors and require the motion pictures of such distributors to be offered and licensed to exhibitors, including Carmike, on a theatre-by-theatre basis. Consequently, exhibitors such as Carmike cannot assure themselves of a supply of motion pictures by entering into long-term arrangements with major distributors but must compete for licenses on a film-by-film and theatre-by-theatre basis. The Americans with Disabilities Act (the "ADA"), which became effective in 1992, and certain state statutes and local ordinances, among other things, require that places of public accommodation, including theatres (both existing and newly constructed), be accessible to patrons with disabilities. The ADA requires that theatres be constructed to permit persons with disabilities full use of a theatre and its facilities and reasonable access to work stations and may require that certain modifications be made to existing theatres in order to make such theatres accessible to certain theatre patrons and employees who are disabled. For example, Carmike is aware of several recent lawsuits that have been filed against other exhibitors by disabled moviegoers alleging that certain stadium seating designs violate the ADA. On June 30, 1998, Carmike executed a Settlement Agreement with the U.S. Department of Justice under Title III of the ADA. Under the Settlement Agreement, Carmike agreed to complete the readily achievable removal of barriers to accessibility, or alternatives to barrier removal, at two theatres operated by Carmike in Des Moines, Iowa and to distribute to all of its theatres a questionnaire designed to 10 11 assist its management in the identification of existing and potential barriers and a threshold determination of what steps might be available for removal of such existing and potential barriers. Carmike is currently assessing the impact of such questionnaires on its theatres. Carmike constructs new theatres to be accessible to the disabled and believes it is otherwise in substantial compliance with applicable regulations relating to accommodating the needs of the disabled. Carmike's theatre operations are also subject to federal, state and local laws governing such matters as construction, renovation and operation of its theatres, as well as wages, working conditions, citizenship, and health and sanitation requirements and licensing. Carmike believes that its theatres are in material compliance with such requirements. At December 31, 1998, approximately 71.0% of Carmike's employees were paid at the federal minimum wage and, accordingly, the minimum wage largely determines Carmike's labor costs for those employees. Carmike owns, manages and/or operates theatres and other properties which may be subject to certain U.S. federal, state and local laws and regulations relating to environmental protection, including those governing past or present releases of hazardous substances. Certain of these laws and regulations may impose joint and several liability on certain statutory classes of persons for the costs of investigation or remediation of such contamination, regardless of fault or the legality of original disposal. These persons include the present or former owner or operator of a contaminated property, and companies that generated, disposed of or arranged for the disposal of hazardous substances found at the property. Additionally, in the course of maintaining and renovating its theatres and other properties, Carmike periodically encounters asbestos containing materials ("ACMs") that must be handled and disposed in accordance with federal, state and local laws, regulations and ordinances. Such laws may impose liability for release of ACMs and may entitle third parties to seek recovery from owners or operators of real properties for personal injury associated with ACMs. TRADEMARKS AND TRADENAMES Carmike owns or has rights to trademarks or trade names that it uses in conjunction with the operation of its theatres. Carmike owns the Carmike Cinemas(R) and Hollywood Connection(R) trademarks. EMPLOYEES As of December 31, 1998, Carmike had approximately 10,234 employees, of which 54 are covered by collective bargaining agreements. Carmike considers its relations with its employees to be good. FACTORS THAT MAY AFFECT FUTURE PERFORMANCE In addition to other factors and matters discussed elsewhere herein, factors that, in the view of Carmike, could cause actual results to differ materially from those discussed in forward-looking statements are set forth below. All forward-looking statements attributable to Carmike or persons acting on our behalf are expressly qualified in their entirety by the following cautionary statements. 11 12 Seasonality Our 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 our results of operations, which may vary significantly from quarter to quarter. Moreover, to the extent that certain "event" films are distributed more widely than in the past, our margins may be hurt as a result of the higher film licensing fees payable during the early period of a film's run. For the year ended December 31, 1998, the percentages of our admissions revenue by quarter were as follows: first quarter 24.4%; second quarter 23.0%; third quarter 27.9%; and fourth quarter 24.7%. Dependence upon Motion Picture Production and Performance Our business depends on the availability of suitable motion pictures for screening in our theatres and the appeal of such motion pictures in our theatre markets. We mainly license first-run motion pictures. Our results of operations will vary from period to period based upon the quantity and quality of the motion pictures we show in our theatres. For example, in the first quarter of 1998, we benefited from the unexpectedly long run and success of "Titanic," while in the second quarter of 1998 our results were adversely impacted by the disappointing performance of certain "event" films. A disruption in the production of motion pictures, lack of motion pictures or poor performance of motion pictures in theatres could adversely affect our business and results of operations. Dependence on Relationships with Motion Picture Distributors Our 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 nine distributors accounted for approximately 92.0% of our admission revenues for the fiscal year ended December 31, 1998 -- Buena Vista, DreamWorks, Fox, New Line Cinema, Paramount, Sony, United Artists, Universal and Warner Brothers. No single distributor dominates the market. A deterioration in our relationships with any of the major film distributors could adversely affect our access to commercially successful films and could adversely affect our business and results of operations. Government Regulation Like others in our industry, we are subject to certain federal, state and local laws and regulations which limit the manner in which we may conduct our 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, we cannot ensure a supply of motion pictures by entering into long term arrangements with major distributors. Instead, we must compete for film licenses on a film by film and theatre by theatre basis. 12 13 The ADA and certain state statutes and local ordinances, among other things, require that places of public accommodation, including theatres (both existing and newly constructed), be accessible to customers with disabilities. The ADA may require that certain modifications be made to existing theatres in order to make such theatres accessible to certain theatre 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 and reasonable access to work stations. We are aware of several recent lawsuits that have been filed against other exhibitors by disabled moviegoers alleging that certain stadium seating designs violated the ADA. We have established a program to review and evaluate our theatres and to make changes that may be required by law. Although we believe that the cost of complying with the ADA will not adversely affect our business and results of operations, we cannot predict the extent to which the ADA or any future laws or regulations regarding the needs of the disabled will impact our operations. Competition The opening of large multiplexes and theatres with stadium seating by us and certain of our competitors has tended to, and is expected to continue to, draw audiences away from certain older theatres, including theatres operated by us. In addition, demographic changes and competitive pressures can lead to the impairment of a theatre. In addition to competition from other motion picture exhibitors, we face competition from other forms of entertainment. We 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 recent consolidations in the movie theatre industry, and the impact of such consolidations could have an adverse effect on our business. Even where we are the only exhibitor in a film licensing zone, we may still experience competition for moviegoers from theatres in a neighboring zone. In addition, our 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 such delivery systems on the motion picture industry is difficult to determine precisely, there is a risk that they will 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. Expansion Plans We have in the past expanded our operations through theatre acquisitions and new theatre openings. We intend to continue pursuing an expansion strategy by: - developing new theatres; - expanding our existing theatres; and - selectively acquiring existing theatres and theatre circuits. Developing new theatres poses a number of risks. Construction of new theatres may result in cost overruns, delays or unanticipated expenses related to zoning or tax law considerations. Desirable sites for new theatres may be unavailable or expensive, and the market locations for new theatres may deteriorate over time. Additionally, the market potential of new theatre sites cannot be precisely determined, and our theatres may face competition in new 13 14 markets from unexpected sources. Newly constructed theatres may not perform up to management's expectations. Additionally, there is a risk that we may not be able to manage growth as effectively as we have in the past if we expand our existing operations. We face significant competition for potential theatre locations and for opportunities to acquire existing theatres and theatre circuits. Because of this competition, we may be unable to make acquisitions on terms we consider acceptable. Future Capital Requirements Our industry is undergoing a transition as newer theatres with stadium seating are attracting moviegoers away from older theatres. As of December 31, 1998, we have 152 screens under construction, and we expect to add an aggregate of 382 screens during 1999. We anticipate that all of the theatres scheduled to be added in 1999 will provide stadium seating. We anticipate that our construction, expansion and renovation program will require capital expenditures of approximately $129.0 million, net of lease financings, in 1999, and approximately $75.0 million, net of lease financings, in 2000. Like others in our industry, we have been required to recognize charges associated with the write-down and closing of underperforming theatres primarily as a result of the emergence of new competition in the marketplace. The opening of large multiplexes by our competitors and the opening of newer theatres with stadium seating in certain of our markets have led us to reassess a number of our theatre locations to determine whether to renovate or to dispose of underperforming locations. In accordance with our restructuring plan, we will close 28 theatres in 1999 having an aggregate of 116 screens. The opening of new multiplexes by our competitors will likely continue to draw audiences away from our older theatres unless we continue to make significant capital expenditures. We have budgeted for 1999 approximately $6.2 million to retrofit approximately 83 screens to strengthen our market position in certain markets. We will lose revenue from those theatres while they are being renovated. As of December 31, 1998, after giving effect to our construction, expansion and renovation program, approximately 25.4% of our auditoriums featured stadium seating. Further advances in theatre design may also require us to make substantial capital expenditures in the future, or to close older theatres that cannot be economically renovated, to compete with new developments in theatre design. We believe that we will be able to satisfy our currently anticipated capital needs for theatre construction, expansion and renovation and possible acquisitions for at least the next two years by cash flow from operations and available cash, together with borrowings under our Revolving Credit Facility, additional sales of debt or equity securities, and additional bank financings and other forms of long-term debt. We may also enter into sales and leasebacks of theatre properties to supplement our current sources of capital. However, we cannot assure you that our business will generate sufficient cash flow from operations, that we will satisfy the requirements for borrowing under the Revolving Credit Facility, that currently anticipated revenue growth and operating improvements will be realized or that future capital will be available to us to enable us to fund our capital expenditure needs. 14 15 Impairment of Assets The opening of large multiplexes and theatres with stadium seating by us and certain of our competitors has tended to, and is expected to continue to, draw audiences away from certain older theatres, including theatres operated by us. In addition, demographic changes and competitive pressures can lead to the impairment of a theatre. We review for impairment of long-lived assets and goodwill related to those assets to be held and used in the business whenever events or changes in circumstances indicate that the carrying amount of an asset or a group of assets may not be recoverable. We also periodically review and monitor our internal management reports and the competition in our markets for indicators of impairment of individual theatres. In the fourth quarter of 1998, we identified impairments of asset values for certain of our theatres. As a result, we recognized a non-cash impairment charge of approximately $38.3 million in the fourth quarter of 1998 to reduce the carrying value of approximately 145 theatres with approximately 610 screens. We also recorded an impairment charge, effective January 1, 1996, upon our adoption of FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. There can be no assurance that we will not take additional charges in the future related to the impairment of assets. Substantial Leverage We have now and will continue to have a significant amount of indebtedness. Our substantial indebtedness could have important consequences. For example, it could: - make it more difficult for us to satisfy our obligations with respect to our indebtedness; - increase our vulnerability to general adverse economic and industry conditions; - limit our ability to fund future working capital, capital expenditures for theatre construction, expansion, renovation or acquisition, and other general corporate requirements; - require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, and other general corporate purposes; - limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; - place us at a competitive disadvantage compared to our competitors that have less debt; and - limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. And, failing to comply with those covenants could result in an event of default which, if not cured or waived, could have a material adverse effect on us. Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks described above. The terms of the agreements governing our indebtedness do not fully prohibit us or our subsidiaries from 15 16 doing so. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could intensify. Ability to Service Debt To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. Our ability to make scheduled payments of principal of, or to pay the interest on, or to refinance our indebtedness, or to fund planned capital expenditures for theatre construction, expansion and renovation or theatre acquisition will depend on our future performance. Our future performance is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based upon our current level of operations and anticipated increases in revenues and cash flow as a result of our theatre construction, expansion and renovation program, and the scheduled closing of certain underperforming theatres, we believe that cash flow from operations and available cash, together with available borrowings under our Revolving Credit Facility and cash that could be generated from lease financing arrangements and/or sales of additional debt or equity securities, will be adequate to meet our future liquidity needs for at least the next two years. We cannot assure you, however, that our business will generate sufficient cash flow from operations, that currently anticipated revenue growth and operating improvements will be realized or that future capital will be available to us from the sale of debt or equity securities, additional bank financings, other long-term debt or lease financings in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, or raise additional capital through other means, on commercially reasonable terms or at all. Dependence upon Senior Management We believe that our success is due to our experienced management team. We depend in large part on the continued contribution of our senior management, including Michael W. Patrick, Carmike's President. Losing the services of one or more members of our senior management could adversely affect our business and results of operations. We have an employment agreement with Michael W. Patrick which is automatically renewed each year and we maintain key man life insurance covering him. Risks Associated with the Year 2000 The Year 2000 issue refers generally to the data structure problems that will prevent systems from properly recognizing dates after the year 1999. We have implemented a Year 2000 compliance program designed to ensure that our computer systems and applications will function properly beyond 1999. In light of our compliance efforts, we do not believe that the Year 2000 issue will adversely affect our business and results of operations. However, we cannot assure you that our systems will be Year 2000 compliant prior to December 31, 1999, or that the failure of any such system will not adversely affect our business and results of operations. To the extent the Year 2000 problem adversely affects the business and results of operations of third parties 16 17 with whom we have important relationships, such as vendors, suppliers and financial institutions, the Year 2000 problem could also adversely affect our business and results of operations. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Year 2000." 17 18 ITEM 2. PROPERTIES. As of December 31, 1998, Carmike owned 88 of its theatres, had 322 ground and improvement leases and had 49 ground leases, excluding theatres scheduled to be closed in 1999. An additional nine theatres were operated by Carmike under shared ownership. Carmike's leases are generally entered into on a long-term basis. The theatre leases generally provide for the payment of fixed monthly rentals, contingent rentals based on a percentage of revenue over a specified amount, and the payment of property taxes, common area maintenance, insurance and repairs. Carmike, at its option, can renew a substantial portion of its theatre leases, at the then fair rental rate for various periods with the maximum renewal period totaling 40 years. Carmike owns its headquarters building, which has approximately 48,500 square feet, in Columbus, Georgia. Pursuant to the terms of industrial revenue bonds which were issued in connection with the construction of the corporate offices, Carmike's interest in the building is encumbered by a Deed to Secure Debt and Security Agreement in favor of the Downtown Development Authority of Columbus, Georgia. ITEM 3. LEGAL PROCEEDINGS. From time to time, Carmike is involved in routine litigation and legal proceedings in the ordinary course of its business, such as personal injury claims, employment matters, contractual disputes and claims alleging ADA violations. Currently, Carmike does not have pending any litigation or proceedings that management believes will have a material adverse effect, either individually or in the aggregate, upon Carmike. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the last quarter of the year ended December 31, 1998. 18 19 EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth certain information as of March 15, 1999 regarding the executive officers of Carmike. For purposes of this section, references to Carmike include Carmike's predecessor, Martin Theatres, Inc.
NAME AGE TITLE - ---- --- ----- C.L. Patrick.........................80 Chairman of the Board of Directors Michael W. Patrick...................48 President, Chief Executive Officer and Director F. Lee Champion, III.................48 Senior Vice President, General Counsel, Secretary and Director Larry M. Adams.......................55 Senior Vice President -- Information Systems P. Lamar Fields......................44 Senior Vice President -- Real Estate Anthony J. Rhead.....................57 Senior Vice President -- Film H. Madison Shirley...................47 Senior Vice President-- Concessions and Assistant Secretary Fred W. Van Noy......................42 Senior Vice President -- Operations James R. Davis.......................60 Vice President -- Technical Marilyn B. Grant.....................51 Vice President -- Advertising Philip A. Smitley....................40 Assistant Vice President and Controller
C.L. PATRICK, who has served as Chairman of the Board of Directors of Carmike since April 1982, joined Carmike in 1945, became its General Manager in 1948 and served as President of Carmike from 1969 to 1970. He served as President of Fuqua Industries, Inc. from 1970 to 1978 and as Vice Chairman of the Board of Directors of Fuqua Industries, Inc. from 1978 to 1982. Mr. Patrick is a director emeritus of Columbus Bank & Trust Company. Messrs. Michael W. Patrick and Carl L. Patrick, Jr., a director of Carmike, are the sons of Mr. C.L. Patrick. MICHAEL W. PATRICK has served as President of Carmike since October 1981, as a director of Carmike since April 1982 and as Chief Executive Officer since March 29, 1989. He joined Carmike in 1970 and served in a number of operational and film booking and buying capacities prior to becoming President. Mr. Patrick serves as a director of Columbus Bank & Trust Company and the Will Rogers Institute, and he is a member of the Board of Trustees of Columbus State University Foundation, Inc. 19 20 F. LEE CHAMPION, III joined Carmike in January 1998 as Senior Vice President, General Counsel and Secretary. In December 1998, he was elected a director of Carmike. Prior to joining Carmike, Mr. Champion practiced law with the firm of Champion and Champion. LARRY M. ADAMS joined Carmike as Data Processing Manager in July 1973. In August, 1982, he became Vice President -- Informational Systems and in December 1997 he became Senior Vice President -- Information Systems. In March 1999, Mr. Adams assumed the duties of interim chief accounting officer. P. LAMAR FIELDS joined Carmike in January 1983 as Director of Real Estate. He served in this position until 1985 when he became Vice President -- Development. In December 1997 he was elected to his present position of Senior Vice President -- Real Estate. ANTHONY J. RHEAD joined Carmike in June 1981 as manager of the booking office in Charlotte, North Carolina. In July 1983, Mr. Rhead became Vice President -- Film of Carmike and in December 1997 was elected Senior Vice President -- Film. Prior to joining Carmike, he worked as a film booker for Plitt Theatres, Inc. from 1973 to 1981. H. MADISON SHIRLEY joined Carmike in 1976 as a theatre manager. He served as a District Manager from 1983 to 1987 and as Director of Concessions from 1987 until 1990. He became Vice President -- Concessions in 1990 and Senior Vice President -- Concessions and Assistant Secretary in December 1997. FRED W. VAN NOY joined Carmike in 1975. He served as a District Manager from 1984 to 1985 and as Western Division Manager from 1985 to 1988, when he became Vice President -- General Manager. In December 1997, he was elected to his present position as Senior Vice President -- Operations. JAMES R. DAVIS joined Carmike in 1990 as Technical Director. He served in this position until December 1995, when he was elected to his present position as Vice President -- Technical. MARILYN B. GRANT joined Carmike in 1975 as a bookkeeper. She served as Advertising Coordinator from 1984 to 1985 and became the Director of Advertising in 1985. In August 1990, she was elected to her present position as Vice President -- Advertising. PHILIP A. SMITLEY joined Carmike in April 1997 as Controller. In January 1998, he was elected to his present position of Assistant Vice President and Controller. In March 1999, he assumed the duties of interim chief financial officer. Prior to joining Carmike, Mr. Smitley was Divisional Controller -- Transportation of Burnham Service Corporation, a trucking company. 20 21 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Carmike's Class A Common Stock, par value $.03 per share (the "Class A Common Stock"), is traded on the New York Stock Exchange under the symbol "CKE." The following table sets forth the high and low sales prices of the Class A Common Stock as reported by the New York Stock Exchange for the periods indicated.
HIGH LOW ------------- ---------- 1997 First Quarter............................................. $ 29 $ 23 1/8 Second Quarter............................................ 35 1/8 28 1/2 Third Quarter............................................. 32 3/4 27 3/16 Fourth Quarter............................................ 33 3/8 28 3/16 1998 First Quarter............................................. $ 32 1/2 $ 27 1/8 Second Quarter............................................ 33 1/16 25 11/16 Third Quarter............................................. 27 11/16 17 5/8 Fourth Quarter............................................ 21 11/16 15 1/16
On March 1, 1999, the last reported sale price of the Class A Common Stock on the New York Stock Exchange was $15.875 per share. As of March 1, 1999, there were approximately 741 and three holders of record of Carmike's Class A Common Stock and Class B Common Stock, par value $.03 per share (the "Class B Common Stock"), respectively. Carmike has never declared or paid any cash dividends on its Class A Common Stock or Class B Common Stock. Carmike currently intends to retain future earnings for use in the expansion and operation of its business and, therefore, does not anticipate paying dividends in the foreseeable future. The payment of dividends, if any, in the future is within the discretion of Carmike's board of directors and will depend on Carmike's earnings, capital requirements, financial condition and other relevant factors. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and Note E of Notes to Consolidated Financial Statements regarding restrictions in Carmike's debt instruments on Carmike's ability to pay dividends. On November 22, 1998, GS Capital Partners III, L.P. and certain other affiliates of Goldman, Sachs & Co. purchased an aggregate of 550,000 shares of Carmike's 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock, par value $1.00 per share (the "Series A Preferred Stock"), for an aggregate purchase price of $55.0 million. This preferred stock placement was exempt from registration under Section 4(2) of the Securities Act as a transaction not involving a public offering. In addition, the purchasers of the Series A Preferred Stock are sophisticated and had access to information about Carmike. 21 22 ITEM 6. SELECTED FINANCIAL AND OPERATING DATA. The selected consolidated Statement of Income and Balance Sheet data set forth below were derived from the consolidated financial statements of Carmike. This information should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Carmike's Consolidated Financial Statements and related Notes thereto.
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------- 1994 1995 (1) 1996 (2) 1997 (2) 1998 (3) ---------- ---------- ---------- ---------- ----------- (IN MILLIONS EXCEPT PERCENTAGES, RATIOS AND OPERATING DATA) STATEMENT OF INCOME DATA: Revenues: Admissions ....................... $ 232.1 $ 253.7 $ 296.6 $ 319.2 $ 330.5 Concessions and other ............ 95.5 111.0 130.1 139.4 151.1 ---------- ---------- ---------- ---------- ---------- Total revenues .............. 327.6 364.7 426.7 458.6 481.6 Costs and expenses: Film exhibition costs ............ 123.6 135.6 157.0 169.7 177.8 Concession costs ................. 12.2 15.0 17.3 18.3 19.9 Other theatre operating costs .... 119.0 143.7 164.1 175.1 187.9 General and administrative ....... 5.1 5.5 6.0 6.4 7.1 Depreciation and amortization .... 22.5 27.2 28.4 33.4 37.5 Impairment of long-lived assets .. -- -- 45.4 -- 38.3 Restructuring charge ............. -- -- -- -- 34.7 ---------- ---------- ---------- ---------- ---------- 282.4 327.0 418.2 402.9 503.2 ---------- ---------- ---------- ---------- ---------- Operating income (loss) ..... 45.2 37.7 8.5 55.7 (21.6) Interest expense ..................... 17.0 16.0 20.3 23.1 27.2 ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes .... 28.2 21.7 (11.8) 32.6 (48.8) Income tax expense (benefit) ......... 11.2 8.7 (4.5) 12.4 (18.2) ---------- ---------- ---------- ---------- ---------- Net income (loss) .................... $ 17.0 $ 13.0 $ (7.3) $ 20.2 $ (30.6) ---------- ---------- ---------- ---------- ---------- Weighted average common shares outstanding: Basic ................................ 8,312 11,161 11,174 11,277 11,356 ---------- ---------- ---------- ---------- ---------- Diluted .............................. 8,477 11,260 11,174 11,366 11,356 ---------- ---------- ---------- ---------- ---------- Earnings (loss) per common share: Basic ................................ $ 2.04 $ 1.17 $ (0.65) $ 1.79 $ (2.73) ---------- ---------- ---------- ---------- ---------- Diluted .............................. $ 2.00 $ 1.16 $ (0.65) $ 1.78 $ (2.73) ---------- ---------- ---------- ---------- ----------
22 23
AS OF DECEMBER 31, --------------------------------------------------------------------------- 1994 1995 1996 1997 1998 --------------------------------------------------------------------------- (in millions, except operating data) BALANCE SHEET DATA: Cash and cash equivalents ............ $ 17.9 $ 11.3 $ 5.6 $ 16.5 $ 17.8 Property and equipment, net .......... 294.0 371.9 388.0 497.1 573.6 Total assets ......................... 377.6 478.0 489.4 620.0 697.5 Total long-term obligations, including current maturities (4) ........... 153.3 230.5 268.3 360.7 351.8 Total shareholders' equity ........... 172.0 185.1 178.0 202.9 226.3 OPERATING DATA: Theatre locations (5) ................ 445 519 519 520 468 Screens (5) .......................... 1,942 2,383 2,518 2,720 2,658 Average screens per location ......... 4.4 4.6 4.9 5.2 5.7 Total attendance (in thousands) ...... 59,660 64,496 74,213 75,336 77,763 Total average screens in operation ... 1,852 2,151 2,476 2,644 2,733 Average ticket price ................. $ 3.89 $ 3.93 $ 4.00 $ 4.24 $ 4.25 Average concession per patron ........ $ 1.46 $ 1.59 $ 1.62 $ 1.68 $ 1.79
- ------------------------ (1) During the year ended December 31, 1995, Carmike acquired, in various acquisitions, 83 theatres with 377 screens. (2) See Note D of Notes to Consolidated Financial Statements with respect to acquisitions. (3) Preferred stock dividends on the Series A Preferred Stock totaled $332,000. See Note H of Notes to Consolidated Financial Statements. (4) Excludes long-term reserves and deferred income tax liabilities; includes current maturities of long-term indebtedness and capital lease obligations. (5) Excludes 28 theatres with 116 screens at December 31, 1998, which will be closed by Carmike in accordance with its restructuring plan. 23 24 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion of Carmike's financial condition and operating results should be read in conjunction with "Item 6. Selected Financial and Operating Data" and Carmike's Consolidated Financial Statements and Notes thereto. Except for the historical information contained herein, the following discussion contains forward-looking statements that involve a number of risks and uncertainties. Factors which could cause Carmike's actual results in future periods to differ materially include, but are not limited to, the availability of suitable motion pictures for exhibition in Carmike's markets, the availability of opportunities for expansion, the effect of consolidations in the movie exhibition industry and competition with other forms of entertainment and the factors set forth in "Item 1. Business -- Factors That May Affect Future Performance," as well as other factors discussed or identified from time to time in Carmike's filings with the Commission. ASSET IMPAIRMENTS AND RESTRUCTURING CHARGE Asset Impairments The opening of large multiplexes and theatres with stadium seating by Carmike and certain of its competitors has tended to, and is expected to continue to, draw audiences away from certain older theatres, including theatres operated by Carmike. In addition, demographic changes and competitive pressures can lead to the impairment of a theatre. Carmike reviews for impairment of long-lived assets and goodwill related to those assets to be held and used in the business whenever events or changes in circumstances indicate that the carrying amount of an asset or a group of assets may not be recoverable. Carmike also periodically reviews and monitors its internal management reports and the competition in its markets for indicators of impairment of individual theatres. In the fourth quarter of 1998, Carmike identified impairments of asset values for 145 theatres with 610 screens. The 145 theatres included a further impairment for 46 theatres that were part of the 1996 impairment charge (see discussion below). There can be no assurance that Carmike will not take additional charges in the future related to the impairment of assets. The 1998 impairment charge of approximately $38.3 million (approximately $24.1 million after income taxes or $2.12 per diluted share) is a non-cash charge which reduced the carrying value of property and equipment by $29.4 million (costs of $49.0 million less accumulated depreciation and amortization of $19.6 million) and the excess of purchase price over net assets of businesses acquired by $8.9 million. The 1998 impairment was primarily caused by reductions in estimated theatre cash flows due to (i) the impact of new or increased competition on certain of Carmike's older, auditorium-style theatres, (ii) Carmike's negative evaluation of the operating results produced from theatres previously converted to discount houses or (iii) Carmike's inability to improve a marginal theatre's operating results. Carmike accounts for its long-lived assets in accordance with the Financial Accounting Standards Board Statement No. 121, Accounting for the Impairment of Long-Lived Assets and 24 25 for Long-Lived Assets to be Disposed Of. The initial non-cash charge upon Carmike's adoption of Statement No. 121 during 1996 was approximately $45.4 million (approximately $28.2 million after income taxes or $2.52 per diluted share) to reduce the carrying amount of certain of Carmike's theatres. The 1996 impairment resulted from management's evaluation of recoverability of asset values of individual theatres. Prior to 1996, Carmike's long-lived assets were evaluated on a market by market basis for impairment. The 1996 impairment included a reduction in the carrying value of property and equipment by $34.3 million (costs of $52.6 million less accumulated depreciation and amortization of $18.3 million) and in the excess of purchase price over net assets of businesses acquired by $11.1 million. As a result of the reduced carrying amount of the impaired assets due to the 1996 impairment charge, depreciation and amortization expense for 1998, 1997 and 1996 was reduced by approximately $3.5 million, $3.8 million and $4.2 million, respectively (1998 -- $2.2 million after income taxes or $.19 per diluted share; 1997 -- $2.4 million after income taxes or $.21 per diluted share; 1996 -- $2.6 million after income taxes or $.23 per diluted share). Depreciation and amortization for 1999 will be reduced by approximately $6.7 million as a result of the 1998 and 1996 impairment charges. The 1998 and 1996 impairment charges are reflected as operating expenses in Carmike's Consolidated Financial Statements. Restructuring Charge In December 1998, Carmike's Board of Directors approved a restructuring plan involving the closure or disposition of 28 theatres (116 screens) in certain markets that did not fit Carmike's operating and growth strategies (the "Restructuring Plan"). In accordance with the Restructuring Plan, the theatres are scheduled to be closed during 1999. Carmike has recognized a charge of approximately $34.7 million (approximately $21.5 million after income taxes or $1.89 per diluted share) to establish reserves for the future cash expenditures related to these theatres. The established reserves are primarily for future lease payments payable in accordance with the terms of the lease agreements and for certain lease related costs. There are no material employee termination costs as a result of the closure of these theatres. Disbursements of the restructuring reserves for 1999 are estimated to total approximately $4.6 million. Revenues during the years ended December 31, 1998, 1997 and 1996 for the theatres identified for closure under the Restructuring Plan were approximately $8.7 million, $14.6 million and $17.3 million, respectively. Operating income (losses) during the years ended December 31, 1998, 1997 and 1996 for the theatres included in the Restructuring Plan were approximately $(3.6) million, $(.5) million and $1.1 million, respectively. 25 26 RESULTS OF OPERATIONS The following table sets forth for the years indicated the percentage of total revenues represented by certain items reflected in Carmike's Consolidated Statements of Operations:
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------------------------ 1994 1995 1996 1997 1998 ------------------------------------------------------ Revenues: Admissions ............................... 70.9% 69.6% 69.5% 69.6% 68.6% Concessions and other .................... 29.1 30.4 30.5 30.4 31.4 ----- ----- ----- ----- ----- Total revenues ......................... 100.0 100.0 100.0 100.0 100.0 Costs and expenses: Film exhibition costs (1) ................ 37.7 37.2 36.8 37.0 36.9 Concession costs ......................... 3.7 4.1 4.0 4.0 4.1 Other theatre operating costs ............ 36.3 39.4 38.4 38.2 39.0 General and administrative ............... 1.6 1.5 1.4 1.4 1.5 Depreciation and amortization ............ 6.9 7.5 6.7 7.3 7.8 Impairment of long-lived assets .......... -- -- 10.7 -- 8.0 Restructuring charge ..................... -- -- -- -- 7.2 ----- ----- ----- ----- ----- 86.2 89.7 98.0 87.9 104.5 ----- ----- ----- ----- ----- Operating income (loss) ................ 13.8 10.3 2.0 12.1 (4.5) Interest expense ............................ 5.2 4.4 4.7 5.0 5.6 Income (loss) before income taxes ........... 8.6 5.9 (2.7) 7.1 (10.1) Income tax expense (benefit) ................ 3.4 2.4 (1.0) 2.7 (3.8) ----- ----- ----- ----- ----- Net income (loss) ........................... 5.2% 3.5% (1.7)% 4.4% (6.3)% ===== ===== ===== ===== ===== Other Information: Film exhibition costs as % of admissions revenue (1) ................. 53.2% 53.5% 52.9% 53.1% 53.8% Concession costs as a % of concessions ... 13.8% 14.4% 14.2% 14.4% 14.3%
- ------------------- (1) Film exhibition costs include advertising expenses net of co-op reimbursements. Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 Total revenues for the year ended December 31, 1998 increased 5.0% to $481.6 million from $458.6 million. This increase consists of an $11.3 million increase in admissions and an $11.7 million increase in concessions and other. These increases are due primarily to the additional revenues generated by the increase in the average number of screens in operation and an increase in the average concessions sale per patron, partially offset by the loss in revenues at theatres closed during the period for renovation. Attendance per average screen was 28,453 for 1998 compared to 28,493 for 1997. Revenue per average screen was $176,205 for 1998 compared to $173,449 for 1997. Average admission prices were relatively unchanged at $4.25 for 1998 compared to $4.24 the previous year with the average concessions sale per patron increasing 6.5% to $1.79 for 1998 from $1.68 for 1997. Cost of theatre operations (film exhibition costs, concession costs and other theatre operating costs) increased 6.2% to $385.6 million from $363.1 million due to films that did not play for an extended period of time, which provides greater percentage payments to the 26 27 distributors, more screens in operation and higher attendance numbers. As a percentage of revenue, cost of operations increased from 79.2% of total revenues in 1997 to 80.1% of total revenues in 1998. General and administrative costs increased 10.9% to $7.1 million from $6.4 million reflecting additional general and administrative costs incurred in connection with the additional screens added in 1997 and 1998. As a percentage of total revenues, general and administrative costs increased only slightly to 1.47% from 1.40% in 1997. Depreciation and amortization increased 12.3% to $37.5 million from $33.4 million as a result of the increased screens in operation from the Company's acquisitions and expansions in 1997 and 1998. These amounts have also been reduced due to the 1996 impairment charge from the Company's adopting Statement No. 121 (see Note B of Notes to Consolidated Financial Statements). Interest expense increased to $27.2 million from $23.1 million due to the increase in the average amount of outstanding debt. Year Ended December 31, 1997 Compared to Year Ended December 31, 1996 Total revenues for the year ended December 31, 1997 increased 7.5% to $458.6 million from $426.7 million. This increase consists of a $22.6 million increase in admissions and a $9.3 million increase in concessions and other. Overall attendance increased 1.5% due to the additional screens in operation acquired in 1997 and 1996 (see Note D of Notes to Consolidated Financial Statements). Attendance per average screen declined 5.0% during the year ended December 31, 1997 compared to the year ended December 31, 1996. Revenue per average screen was $173,449 for 1997 compared to $172,345 for 1996. Average admission prices increased 6.0% to $4.24 from $4.00 and the average concessions sales per patron increased 3.7% to $1.68 from $1.62. Also included in concessions and other were a higher level of gains on sales of assets and additional income from Carmike's new family entertainment center, The Hollywood Connection(R). Cost of theatre operations increased 7.3% to $363.1 million from $338.4 million due to the increased number of screens in operation and the increase in attendance. As a percentage of revenues, cost of theatre operations decreased from 79.3% to 79.2%. General and administrative costs increased 6.6% to $6.4 million from $6.0 million reflecting additional general and administrative costs incurred in connection with the additional screens added in 1996 and 1997. As a percentage of total revenues, general and administrative costs remained the same at 1.4%. Depreciation and amortization increased 17.7% to $33.4 million from $28.4 million as a result of the increased screens in operation. This amount has also been reduced due to the 1996 impairment charge from adopting Statement No. 121 (see Note B of Notes to Consolidated Financial Statements). Interest expense increased 14.1% to $23.1 million from $20.3 million for the year ended December 31, 1996. This increase reflects a higher average amount of debt outstanding for the year 27 28 ended December 31, 1997. The increase in Carmike's debt during 1997 resulted from capital expenditures incurred in connection with theatre acquisitions and expansions. Carmike's average cost of debt in 1997 declined to 7.0% from 7.9% in 1996. LIQUIDITY AND CAPITAL RESOURCES Carmike's revenues are collected in cash and credit cards, principally through admissions and theatre concessions. Because its revenues are received in cash and cash equivalents prior to the payment of related expenses, Carmike has an operating "float" which partially finances its operations. Carmike entered into a revolving credit facility on October 17, 1997, and amended and restated this facility on January 29, 1999. The Revolving Credit Facility matures November 10, 2002 and bears interest at LIBOR plus 2.25%. Carmike is obligated to pay a commitment fee of .5% on the unused portion of the facility. In addition, on February 25, 1999 Carmike entered into a $75.0 million Term Loan B, the proceeds of which were applied to repay revolving credit borrowings. The Term Loan B matures March 30, 2005 and bears interest at LIBOR plus 2.75%. Following application of the proceeds of the Term Loan B, the maximum available borrowings under the Revolving Credit Facility was reduced from $275.0 million to $200.0 million. At March 15, 1999, Carmike had $108.9 million available for borrowings under the Revolving Credit Facility. Carmike also obtains liquidity through its theatre leasing arrangements. The cost of constructing a new theatre is reduced substantially if Carmike leases the real estate and improvements rather than purchasing them. As of December 31, 1998, Carmike had 49 ground leases and 322 ground and improvement leases, excluding theatres scheduled to be closed in 1999. Minimum annual rent payments on these theatres totaled $53.1 million in 1998 and are expected to increase in 1999. Carmike is a party to a master lease facility (the "Master Lease") with Movieplex Realty Leasing, L.L.C., which provides up to $75.0 million for financing the development of multiplex theatres, of which approximately $52.8 million was available as of December 31, 1998. Theatres leased pursuant to the Master Lease have lease terms of 16 years. In connection with the amendment and restatement of the Revolving Credit Facility on January 29, 1999, Carmike also amended and restated its Master Lease to provide for security interests and guarantees and to amend certain covenants contained therein. The Revolving Credit Facility, the Term Loan B and the Master Lease contain certain restrictive provisions which, among other things, limit additional indebtedness of Carmike, limit the payment of dividends and other defined restricted payments, require that certain debt to capitalization ratios be maintained and require minimum levels of cash flows. Carmike's capital expenditures arise principally in connection with the development of new theatres, renovation and expansion of existing theatres and theatre acquisitions. During 1998, such capital expenditures totaled $146.7 million, net of lease financings. Carmike estimates that capital expenditures for 1999 will be approximately $129.0 million, net of any lease financings. Carmike expects to build 22 new theatres having an aggregate of 334 screens, add 48 stadium seating auditoriums to existing theatres, and retrofit approximately 83 existing auditoriums in 1999. Carmike estimates that the average cost of a new 16-screen multiplex will 28 29 be approximately $9.0 million ($4.0 million if the land and improvements are leased rather than owned). Carmike intends to enter into leasing arrangements whenever possible in order to minimize capital requirements. Carmike expects that capital expenditures for theatre construction, expansion and renovation will be approximately $75.0 million, net of lease financings for 2000. Carmike believes that its currently anticipated capital needs for theatre construction, expansion and renovation and possible acquisitions for at least the next two years will be satisfied by the cash and cash equivalents and short-term investments on hand, borrowings under the Revolving Credit Facility, additional sale of debt and/or equity securities, additional bank financings and other forms of long-term debt and internally generated cash flow. Additionally, Carmike may supplement its current sources of capital through sales and leasebacks of theatre properties where market conditions for such transactions are favorable. Cash from operating activities was $92.0 million for the year ended December 31, 1998, compared to $63.1 million for the year ended December 31, 1997. Net cash used in investing activities was $138.3 million for the year ended December 31, 1998 as compared to $135.6 million for the year ended December 31, 1997. This increase in cash used in investing activities was primarily due to increased capital expenditures for Carmike's theatres. For the years ended December 31, 1998 and 1997, cash provided by financing activities was $47.5 million and $83.5 million, respectively. This decrease in cash provided by financing activities was due to net repayments of indebtedness of approximately $9.0 million in 1998, net of proceeds of $54.0 million from the 1998 issuance of preferred stock as compared to net borrowings of approximately $80.0 million in 1997. Our ability to make scheduled payments of principal of, or to pay the interest on, or to refinance our indebtedness, or to fund planned capital expenditures for theatre construction, expansion, renovation or acquisition will depend on our future performance. Our future performance is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based upon our current level of operations and anticipated increases in revenues and cash flow as a result of our theatre construction, expansion and renovation program, and the scheduled closing of certain underperforming theatres, we believe that cash flow from operations and available cash, together with available borrowings under the Revolving Credit Facility, lease financing arrangements and/or sales of additional debt or equity securities, will be adequate to meet our future liquidity needs for at least the next two years. We cannot assure you, however, that our business will generate sufficient cash flow from operations, that currently anticipated revenue growth and operating improvements will be realized or that future capital will be available to us from the sale of debt or equity securities, additional bank financings, other long-term debt or lease financings in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness or raise additional capital through other means, on commercially reasonable terms or at all. See "Item 1. Business -- Factors That May Affect Future Performance - -- Future Capital Requirements," "-- Substantial Leverage" and "-- Ability to Service Debt." 29 30 SEASONALITY AND INFLATION The major film distributors generally release those films which they anticipate to be the most successful during the summer and holiday seasons. Consequently, Carmike has historically generated higher revenues during such periods. Carmike adjusts its prices periodically and will continue to do so as competitive conditions permit. In general, management believes that inflation has not had a significant impact on the operations of Carmike in any of the periods discussed above. YEAR 2000 The Year 2000 issue refers generally to the data structure problem that may prevent systems from properly recognizing dates after the year 1999. The Year 2000 issue affects information technology ("IT") systems, such as computer programs and various types of electronic equipment that process date information by using only two digits rather than four digits to define the applicable year, and thus may recognize a date using "00" as the year 1900 rather than the year 2000. The issue also affects some non-IT systems, such as devices which rely on a microcontroller to process date information. The Year 2000 issue could result in system failures or miscalculations, causing disruptions of a company's operations. Moreover, even if a company's systems are Year 2000 compliant, a problem may exist to the extent that the data that such systems process is not. Carmike's State of Readiness Carmike has implemented a Year 2000 compliance program designed to ensure that Carmike's computer systems and applications will function properly beyond 1999. Carmike's Year 2000 compliance program has three phases: (1) identification, (2) remediation (including modification, upgrading and replacement) and (3) testing. Carmike's Year 2000 compliance program is an ongoing process involving continual evaluation and may be subject to a change in response to new developments. Carmike has three material internal IT systems: (1) its accounting system, (2) its proprietary IQ-Zero point-of-sale system and (3) a film system through which Carmike manages the booking of the films shown in its theatres. Carmike has completed the identification, remediation and testing phases with respect to its accounting system. Although Carmike has completed the identification and remediation phases with respect to its IQ-Zero and film systems, the testing phase will not be completed until after the first quarter of 1999. Carmike has conducted a survey of its theatres and has not identified any non-IT systems the failure of which to be Year 2000 compliant would have a material adverse effect on Carmike's business, operating results or financial condition. Carmike has surveyed its material vendors and suppliers (including concession, technical and film suppliers) and the financial institutions with whom it has material relationships. Based on such survey, Carmike is not aware of any material third-party Year 2000 risks. 30 31 Costs to Address Carmike's Year 2000 Issues Carmike estimates that the cost of remediation of problems related to Year 2000 issues will be less than $50,000. This cost includes the cost of upgrading its film system. Carmike's Contingency Plan If Carmike's internal IT systems are not Year 2000 compliant on a timely basis, Carmike plans to operate such systems manually until any Year 2000 issues are remediated. Such remediation may result in loss of data and information and increased costs of operations. In addition, if the IQ-Zero system failed to operate properly due to Year 2000 problems, local management staff may not be able to focus their attention on their customers and theatre needs. Carmike expects to maintain close contact with the third parties with whom Carmike has material relationships, such as vendors, suppliers and financial institutions, to ensure that such third parties' Year 2000 issues do not affect Carmike's operations. The Risks of Carmike's Year 2000 Issues In light of its compliance efforts, Carmike does not believe that the Year 2000 issue will materially adversely affect operations or results of operations, and does not expect implementation to have a material impact on Carmike's financial statements. However, there can be no assurance that Carmike's systems will be Year 2000 compliant prior to December 31, 1999, or that the failure of any such system will not have a material adverse effect on Carmike's business, operating results and financial condition. To the extent the Year 2000 problem has a material adverse effect on the business, operations or financial condition of third parties with whom Carmike has material relationships, such as vendors, suppliers and financial institutions, the Year 2000 problem could also have a material adverse effect on Carmike's business, results of operations and financial condition. RISK MANAGEMENT AND MARKET SENSITIVE INSTRUMENTS Carmike is exposed to various market risks. These exposures primarily relate to changes in interest rates. Floating Interest Rate Risk: Based on Carmike's floating rate debt outstanding at December 31, 1998, a 100 basis point increase in market rates would increase interest expense and decrease income before income taxes by approximately $2.3 million. The amount was determined by calculating the effect of the hypothetical interest rate on Carmike's floating rate debt outstanding at December 31, 1998. Fixed Interest Rate Risk: The fair market value of long-term fixed interest rate debt is also subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of Carmike's total long-term fixed rate debt at December 31, 1998, after adjustment for the restructuring of Carmike's indebtedness in the first quarter of 1999, was approximately $200.0 million which equaled its value at the February 3, 1999 date of issuance. (See Note E of Notes to Consolidated Financial Statements.) A hypothetical 100 basis point decrease in the prevailing interest rates at the date of issuance in 1999 would result in an increase in fair value of total long- 31 32 term debt by approximately $12.8 million. Fair market values are based on estimates made by investment bankers. Interest Rate Swaps: Carmike enters into interest rate swap agreements to manage its exposure to interest rate changes. The swaps involve the exchange of fixed and variable interest rate payments without exchanging the notional principal amount. Payments or receipts on the agreements are recorded as adjustments to interest expense. At December 31, 1998, Carmike had outstanding interest rate swap agreements, maturing at various dates through 2003, with an aggregate notional principal amount of $70.0 million. Under these agreements, Carmike pays a fixed rate based on LIBOR and receives a floating interest rate. These swaps effectively change Carmike's payment of interest on $70.0 million of variable rate debt to fixed rate debt. The fair values of these interest rate swap agreements represent the estimated receipts or payments that would be made to terminate the agreements. At December 31, 1998, Carmike would have paid approximately $1.3 million to terminate the agreements. A 1.0% decrease in LIBOR would increase the amount paid by approximately $.7 million. The fair value is based on counterparty quotes, considering current interest rates. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. Carmike expects to adopt Statement No. 133 effective January 1, 2000. The Statement will require Carmike to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Carmike does not anticipate that the adoption of Statement No. 133 will have a significant effect on its results of operations or financial position. 32 33 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Management and Market Sensitive Instruments." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Consolidated Financial Statements for the years ended December 31, 1998, 1997 and 1996 Report of Ernst & Young LLP, Independent Auditors...............................................F-1 Consolidated Balance Sheets.....................................................................F-2 Consolidated Statements of Operations...........................................................F-4 Consolidated Statements of Cash Flows...........................................................F-5 Consolidated Statements of Shareholders' Equity.................................................F-6 Notes to Consolidated Financial Statements......................................................F-8
33 34 Report Of Independent Auditors Board of Directors and Shareholders Carmike Cinemas, Inc. We have audited the accompanying consolidated balance sheets of Carmike Cinemas, Inc. and subsidiaries as of December 31, 1998 and 1997, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Carmike Cinemas, Inc. and subsidiaries at December 31, 1998 and 1997 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Columbus, Georgia February 25, 1999 F-1 35 CONSOLIDATED BALANCE SHEETS CARMIKE CINEMAS, INC. AND SUBSIDIARIES (IN THOUSANDS)
DECEMBER 31 1998 1997 --------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 17,771 $ 16,545 Short-term investments 801 3,042 Accounts and notes receivable 522 758 Inventories 3,851 3,082 Prepaid expenses 5,886 5,448 Recoverable construction allowances under capital leases -0- 2,100 --------- --------- TOTAL CURRENT ASSETS 28,831 30,975 OTHER ASSETS Investments in and advances to partnerships 20,334 14,148 Deferred income taxes-- Note I 14,059 -0- Other 3,753 9,669 --------- --------- 38,146 23,817 PROPERTY AND EQUIPMENT -- Notes B, D, E and F Land 60,846 59,546 Buildings and improvements 261,887 184,769 Leasehold improvements 176,004 177,970 Leasehold interests 22,221 37,921 Equipment 212,976 185,955 --------- --------- 733,934 646,161 Accumulated depreciation and amortization (160,322) (149,105) --------- --------- 573,612 497,056 EXCESS OF PURCHASE PRICE OVER NET ASSETS OF BUSINESSES ACQUIRED -- Notes B and D 56,954 68,149 --------- --------- $ 697,543 $ 619,997 ========= =========
F-2 36
DECEMBER 31 1998 1997 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 45,533 $ 26,122 Accrued expenses-- Notes A and C 37,842 17,833 Current maturities of long-term indebtedness and capital lease obligations 1,290 19,077 -------- -------- TOTAL CURRENT LIABILITIES 84,665 63,032 LONG-TERM LIABILITIES Long-term debt, less current maturities-- Note E 232,013 222,242 Senior Notes-- Note E 79,870 79,870 Capital lease obligations, less current maturities -- Note F 38,587 39,550 Restructuring reserve, less current portion -- Note C 30,099 -0- Other 6,000 -0- Deferred income taxes -- Note I -0- 12,431 -------- -------- 386,569 354,093 Commitments and contingencies -- Notes C, E, F and J SHAREHOLDERS' EQUITY -- Notes D, E, G, and H 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock, $1.00 par value, authorized 1,000,000 shares, issued and outstanding 550,000 shares; involuntary liquidation value of $ 55,000,000 550 -0- Class A Common Stock, $.03 par value, one vote per share, authorized 22,500,000 shares, issued and outstanding 9,942,487 and 9,918,587 shares, respectively 298 298 Class B Common Stock, $.03 par value, ten votes per share, authorized 5,000,000 shares, issued and outstanding 1,420,700 shares 43 43 Paid-in capital 158,543 104,677 Retained earnings 66,875 97,854 -------- -------- 226,309 202,872 -------- -------- 697,543 619,997 ======== ========
See accompanying notes F-3 37 CONSOLIDATED STATEMENTS OF OPERATIONS CARMIKE CINEMAS, INC. AND SUBSIDIARIES (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, 1998 1997 1996 --------- --------- ----------- Revenues: Admissions $ 330,534 $ 319,235 $ 296,629 Concessions and other 151,034 139,363 130,097 --------- --------- ----------- 481,568 458,598 426,726 Costs and expenses: Film exhibition costs 177,754 169,672 156,968 Concession costs 19,911 18,334 17,252 Other theatre operating costs 187,870 175,103 164,149 General and administrative expenses 7,115 6,352 5,959 Depreciation and amortization expenses 37,502 33,443 28,408 Impairments of long-lived assets-- Note B 38,300 -0- 45,447 Restructuring charge-- Note C 34,699 -0- -0- --------- --------- ----------- 503,151 402,904 418,183 --------- --------- ----------- OPERATING INCOME (LOSS) (21,583) 55,694 8,543 Interest expense 27,230 23,142 20,289 --------- --------- ----------- INCOME (LOSS) BEFORE INCOME TAXES (48,813) 32,552 (11,746) Income tax expense (benefit)-- Note I (18,166) 12,366 (4,469) --------- --------- ----------- NET INCOME (LOSS) (30,647) 20,186 (7,277) Preferred stock dividends (332) -0- -0- --------- --------- ----------- NET INCOME (LOSS) AVAILABLE FOR COMMON STOCK $ (30,979) 20,186 (7,277) ========= ========= =========== Weighted average shares outstanding: Basic 11,356 11,277 11,174 Effect of dilutive securities - employee stock options -0- 89 -0- --------- --------- ----------- Diluted 11,356 11,366 11,174 ========= ========= =========== Earnings (loss) per common share: Basic $ (2.73) $ 1.79 $ (.65) ========= ========= =========== Diluted $ (2.73) $ 1.78 $ (.65) ========= ========= ===========
See accompanying notes. F-4 38 CONSOLIDATED STATEMENTS OF CASH FLOWS CARMIKE CINEMAS, INC. AND SUBSIDIARIES (IN THOUSANDS)
YEARS ENDED DECEMBER 31 1998 1997 1996 ----------- ----------- ----------- OPERATING ACTIVITIES Net income (loss) $ (30,647) $ 20,186 $ (7,277) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 37,502 33,443 28,408 Impairment charges 38,300 -0- 45,447 Restructuring charge 34,699 -0- -0- Deferred income taxes (26,490) 7,011 (14,811) Gain on sales of property and equipment (282) (2,202) (767) Other gains (898) -0- -0- Changes in operating assets and liabilities: Accounts and notes receivable and inventories (533) (565) 7,572 Prepaid expenses (438) (85) (231) Accounts payable 19,411 4,690 (2,941) Accrued expenses and other liabilities 21,409 593 (962) ----------- ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 92,033 63,071 54,438 INVESTING ACTIVITIES Purchases of property and equipment (146,713) (126,144) (70,926) Purchases of assets from other theatre operators -0- (11,647) (23,075) Proceeds from sales of property and equipment 6,007 8,729 1,808 Decrease (increase) in: Short-term investments 2,241 4,684 (224) Other 121 (11,216) (5,781) ----------- ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (138,344) (135,594) (98,198) FINANCING ACTIVITIES Debt: Additional borrowings 3,215,000 2,354,594 1,205,678 Repayments (3,223,979) (2,273,674) (1,167,929) Issuance of Preferred Stock, net 54,000 -0- -0- Issuance of Class A Common Stock 416 501 113 Recoverable construction allowances under capital leases 2,100 2,078 122 ----------- ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 47,537 83,499 37,984 ----------- ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,226 10,976 (5,776) Cash and cash equivalents at beginning of year 16,545 5,569 11,345 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 17,771 $ 16,545 $ 5,569 =========== =========== ===========
See accompanying notes. F-5 39 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY CARMIKE CINEMAS, INC. AND SUBSIDIARIES (IN THOUSANDS)
SERIES A SENIOR CUMULATIVE CONVERTIBLE EXCHANGEABLE CLASS A PREFERRED STOCK COMMON STOCK -------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ---------- --------- --------- BALANCES AT DECEMBER 31, 1995 -0- $ -0- 9,745 $ 292 Issuance of Class A Common Stock on exercise of stock options -0- -0- 14 -0- Net loss -0- -0- -0- -0- --------- ----- --------- --------- BALANCES AT DECEMBER 31, 1996 -0- -0- 9,759 292 Issuance of Class A Common Stock: Exercise of stock options -0- -0- 31 1 Purchase of business-- Note D -0- -0- 129 5 Net income -0- -0- -0- -0- --------- ----- --------- --------- BALANCES AT DECEMBER 31, 1997 -0- -0- 9,919 298 ISSUANCE OF CLASS A COMMON STOCK ON EXERCISE OF STOCK OPTIONS -0- -0- 23 -0- ISSUANCE OF PREFERRED STOCK 550 550 -0- -0- DIVIDENDS ON PREFERRED STOCK -0- -0- -0- -0- NET LOSS -0- -0- -0- -0- --------- ----- ========= ========= BALANCES AT DECEMBER 31, 1998 550 $ 550 9,942 $ 298 ========= ===== ========= =========
See accompanying notes. F-6 40
CLASS B COMMON STOCK PAID-IN RETAINED SHARES AMOUNT CAPITAL EARNINGS TOTAL - ------------------- ---------------- -------- -------- ---------- 1,421 $ 43 $ 99,814 $ 84,945 $ 185,094 -0- -0- 113 -0- 113 -0- -0- -0- (7,277) (7,277) - ------------------- ---------------- -------- -------- --------- 1,421 43 99,927 77,668 177,930 -0- -0- 500 -0- 501 -0- -0- 4,250 -0- 4,255 -0- -0- -0- 20,186 20,186 - ------------------- ---------------- -------- -------- --------- 1,421 43 104,677 97,854 202,872 -0- -0- 416 -0- 416 -0- -0- 53,450 -0- 54,000 -0- -0- -0- (332) (332) -0- -0- -0- (30,647) (30,647) - ------------------- ---------------- -------- -------- --------- 1,421 $ 43 $158,543 $ 66,875 $ 226,309 =================== ================ ======== ======== =========
F-7 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CARMIKE CINEMAS, INC. AND SUBSIDIARIES DECEMBER 31, 1998 NOTE A -- SIGNIFICANT ACCOUNTING POLICIES The primary business of the Company is the operation of motion picture theatres which generate revenues principally through admissions and concessions sales. Such revenues are primarily received in cash at the point of sale. Nine major distributors in the motion picture industry produced films which accounted for approximately 92.0%, 94.0% and 98.0% of the Company's admission revenues in 1998, 1997 and 1996, respectively. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. OPERATING AGREEMENTS: The Company jointly owns or leases certain theatres which it operates under the terms of operating agreements related to the other participants' undivided interest in such theatres. The Company consolidates the results of operations of these theatres in the accompanying Consolidated Statements of Operations. CASH EQUIVALENTS: Cash equivalents are highly liquid investments consisting primarily of money market accounts and investment grade, short-term debt instruments and have maturities at the date of purchase of less than three months. The Company limits the amount of its credit exposure to any one commercial issue of debt instruments. Cash equivalents are stated at cost which represents the deposit amount plus interest credited to the account. Deposits with banks are federally insured in limited amounts. SHORT-TERM INVESTMENTS: Short-term investments consist principally of U.S. Government securities with maturity dates less than one year from date of purchase and are stated at cost which approximates market. INVENTORIES: Inventories, principally concessions and theatre supplies, are stated at the lower of cost (first-in, first-out method) or market. INVESTMENT IN PARTNERSHIPS: The Company is a partner in three partnerships which operate motion picture theatres. The investments in these partnerships are accounted for by the equity method whereby the cost of the investment is adjusted to reflect the Company's equity in the earnings or losses of the partnership less withdrawals made by the Company. The Company's equity in the earnings (losses) of these partnerships was approximately $(616,000), $243,000 and $399,000 in 1998, 1997 and 1996, respectively. F-8 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT: Property and equipment are carried at cost. Depreciation is computed by the straight-line method for financial reporting purposes as follows: 20 to 30 years for buildings and building improvements; one to 30 years for leasehold interests and leasehold improvements; and five to 15 years for equipment. The Company uses accelerated methods of depreciation for income tax purposes. Amortization of assets recorded under capital leases is included with depreciation expense in the accompanying Consolidated Statements of Operations. ACCRUED EXPENSES: Accrued expenses include the following (in thousands):
DECEMBER 31 1998 1997 ------------------------------ Deferred revenues $ 10,609 $ 5,290 Deferred and other accrued rents 8,428 6,529 Restructuring reserves 4,600 -0- Property taxes 4,303 2,472 Other accruals 9,902 3,542 ------------------------------- $ 37,842 $ 17,833 ===============================
ADVERTISING: The Company expenses advertising costs when incurred. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. EXCESS OF PURCHASE PRICE OVER NET ASSETS OF BUSINESSES ACQUIRED: The excess of the purchase price over the net assets of businesses acquired is amortized on a straight-line basis over a 40 year period. Accumulated amortization was $5.5 million and $4.6 million at December 31, 1998 and 1997, respectively. In the event that facts and circumstances indicate that the excess of the purchase price over the net assets of businesses acquired may be impaired, an evaluation of continuing value would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with this asset would be compared to its carrying amount to determine if a write down to market value or discounted cash flow value is required (See Note B -- Impairments of Long-Lived Assets). F-9 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) BENEFIT PLANS: The Company has a non-qualified deferred compensation plan for certain of its executive officers. Under this plan, the Company contributes 10.0% of the employee's taxable compensation to a secular trust designated for the employee. The Company also has a discretionary benefit plan for certain non-executive employees. Contributions to the plans are at the discretion of the Company's executive management. Expenses related to these plans are not material to the Company's operations. STOCK BASED COMPENSATION: The Company has granted stock options to certain employees for a fixed number of shares with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for its stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related interpretations because the Company believes the alternative fair value accounting provided for under FASB Statement No. 123, Accounting for Stock Based Compensation, requires the use of valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized for the stock option grants. ACCOUNTING POLICIES NOT YET ADOPTED: In June 1998, the FASB issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company expects to adopt the new Statement effective January 1, 2000. The Statement will require the Company to recognize all derivatives on the balance sheet at fair value. The Company does not anticipate that the adoption of this Statement will have a significant effect on its results of operations or financial position. F-10 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECLASSIFICATIONS: Certain 1997 and 1996 amounts in the accompanying consolidated financial statements have been restated to conform to the current year's presentation. NOTE B -- IMPAIRMENTS OF LONG-LIVED ASSETS In accordance with FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("Statement 121"), the Company reviews for impairment of long-lived assets, and goodwill related to those assets, to be held and used in the business whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company periodically reviews and monitors its internal management reports and the competition in its markets for indicators of impairment of individual theatres. The Company considers a trend of unsatisfactory operating results that are not in line with management's expectations to be its primary indicator of potential impairment. An additional indicator of possible impairment used by management is the existence of significant competition in a market, either from third parties or from the Company's own expansion, where the Company currently operates theatres. For purposes of Statement 121, assets are evaluated for impairment at the theatre level, which management believes is the lowest level for which there are identifiable cash flows. The Company deems a theatre to be impaired if a forecast of undiscounted future operating cash flows directly related to the theatre, including estimated disposal value if any, is less than its carrying amount. If a theatre is determined to be impaired, the loss is measured as the amount by which the carrying amount of the theatre exceeds its fair value. Fair value is based on management's estimates which are based on using the best information available, including prices for similar theatres or the results of valuation techniques such as discounting estimated future cash flows as if the decision to continue to use the impaired theatres was a new investment decision. Considerable management judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. F-11 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE B -- IMPAIRMENTS OF LONG-LIVED ASSETS (CONTINUED) Statement 121 also requires, among other provisions, that long-lived assets held for disposal and certain identified intangibles be reported at the lower of the asset's carrying amount or its fair value less costs to sell. Recoverability of other long-lived assets, primarily investments in unconsolidated affiliates and goodwill not identified with impaired theatres covered by the above paragraph, will continue to be evaluated on a recurring basis. The primary indicator of recoverability is the current or forecasted profitability over the estimated remaining life of these assets. If recoverability is unlikely based on the evaluation, the carrying amount is written down to the fair value. In the future, additional adjustments could be required. In the fourth quarter of 1998, the Company identified asset impairments for certain of its theatres (the "1998 Impairment"). The 1998 Impairment charge of approximately $38.3 million (approximately $24.1 million after income taxes or $2.12 per diluted share) is a non-cash charge which reduced the carrying value of property and equipment by $29.4 million (costs of $49.0 million less accumulated depreciation and amortization of $19.6 million) and the excess of purchase price over net assets of businesses acquired by $8.9 million. The 1998 Impairment was primarily caused by reductions in estimated theatre cash flows due to (i) the impact of new or increased competition on certain of the Company's older, auditorium-style theatres, (ii) the Company's negative evaluation of the operating results produced from theatres previously converted to discount houses or (ii) the Company's inability to improve a marginal theatre's operating results. F-12 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE B -- IMPAIRMENTS OF LONG-LIVED ASSETS (CONTINUED) The initial non-cash charge upon the Company's adoption of Statement 121 during 1996 (the "1996 Impairment") was approximately $45.4 million (approximately $28.2 million after income taxes or $2.52 per diluted share) to reduce the carrying amount of certain of the Company's theatres. The 1996 Impairment resulted from management's evaluation of recoverability of asset values of individual theatres. Prior to 1996, the Company's long-lived assets were evaluated on a market by market basis for impairment. The 1996 Impairment included a reduction in the carrying value of property and equipment by $34.3 million (costs of $52.6 million less accumulated depreciation and amortization of $18.3 million) and the excess of purchase price over net assets of businesses acquired by $11.1 million. As a result of the reduced carrying amount of the impaired assets due to the 1996 Impairment charge, depreciation and amortization expense for 1998, 1997 and 1996 was reduced by approximately $3.5 million, $3.8 million and $4.2 million, respectively (1998 - $2.2 million after income taxes or $.19 per diluted share; 1997 - $2.4 million after income taxes or $.21 per diluted share; 1996 - $2.6 million after income taxes or $.23 per diluted share). NOTE C -- RESTRUCTURING CHARGE In December 1998, the Company's Board of Directors approved a restructuring plan involving the closure or disposition of a group of theatres in certain markets that did not fit the Company's operating and growth strategies (the "Restructuring Plan"). In accordance with the Restructuring Plan, such theatres are scheduled to be closed during 1999. The Company has recognized a charge of approximately $34.7 million (approximately $21.5 million after income taxes or $1.89 per diluted share) to establish reserves for the future cash expenditures related to these theatres. The established reserves are primarily for future lease payments payable in accordance with the terms of the lease agreements and for certain lease related costs. Disbursements are estimated to occur as follows (in thousands): 1999 $ 4,600 2000 3,804 2001 3,463 2002 3,016 2003 and thereafter 19,816 ----------- $ 34,699 ===========
F-13 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE C -- RESTRUCTURING CHARGE (CONTINUED) Revenues during the years ended December 31, 1998, 1997 and 1996 for the theatres included in the Restructuring Plan were approximately $8.7 million, $14.6 million and $17.3 million, respectively. Operating income (losses) during the years ended December 31, 1998, 1997 and 1996 for the theatres included in the Restructuring Plan were approximately $(3.6) million, $(.5) million and $1.1 million, respectively. NOTE D -- ACQUISITIONS The Company's acquisitions are accounted for under the purchase method of accounting. Under the purchase method of accounting, the results of operations of the acquired businesses are included in the accompanying consolidated financial statements as of their respective acquisition dates. The assets and liabilities of acquired businesses are included based on an allocation of the purchase prices. In separate transactions, the Company has acquired certain assets and businesses as follows:
NUMBER OF APPROXIMATE ------------------------ SELLER PURCHASE PRICE THEATRES SCREENS EFFECTIVE DATE - ------ -------------- --------- ------- -------------- (IN THOUSANDS) 1997 First International Theatres $ 16,800 19 104 MAY 23, 1997 ============ ===== ==== 1996 Maxi Saver Cinemas $ 3,975 2 18 Jan. 5, 1996 Fox Theaters Corp. 19,100 12 61 Feb. 16, 1996 ------------ ----- -- $ 23,075 14 79 ============ ===== ===
The First International Theatres acquisition purchase price included 128,986 shares of the Company's Class A Common Stock with a fair market value of approximately $4.25 million at the date of acquisition. The excess of purchase price over net assets of businesses acquired has been recorded as an intangible asset. Amounts recorded were approximately $6.1 million and $17.0 million in 1997 and 1996, respectively. Pro-forma results have not been presented as they are not significantly different than reported amounts. F-14 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE E -- INDEBTEDNESS Long-term debt consists of the following (in thousands):
DECEMBER 31 1998 1997 --------- --------- Revolving credit facility $ 230,000 $ 220,000 Industrial Revenue Bonds; payable in equal installments through May 2006, with interest rates ranging from 3.90% to 5.98% 2,285 2,500 Convertible Note -0- 3,855 --------- --------- 232,285 226,355 Less current maturities (272) (4,113) --------- --------- $ 232,013 $ 222,242 ========= =========
RESTRUCTURING OF INDEBTEDNESS: In February 1999, the Company completed its offering of $200.0 million of 9 3/8% Senior Subordinated Notes due 2009 (the "Subordinated Notes"). The Company's wholly-owned subsidiaries have fully, unconditionally, jointly and severally guaranteed the Subordinated Notes. (See Note L -- Condensed Financial Data.) Additionally, on January 29, 1999 the Company amended and restated its 1997 Credit Agreement (as amended, the "Revolving Credit Facility"). The Revolving Credit Facility provides for revolving credit availability of $200.0 million, matures November 10, 2002 and bears interest at LIBOR plus 2.25%. The Company will pay a commitment fee of .5% on the unused portion of the facility. The Revolving Credit Facility allowed for the February 25, 1999 issuance of a separate $75.0 million Term Loan B Facility (the "Term Loan B"). The Term Loan B will mature March 30, 2005 and bears interest at LIBOR plus 2.75%. The Company used the net proceeds from the issuance of the Subordinated Notes, approximately $193.7 million, to redeem its then outstanding Senior Notes (see discussion below) and to reduce the amounts outstanding under the Revolving Credit Facility. The Company will recognize an extraordinary charge in the first quarter of 1999 of approximately $10.2 million ($6.1 million after income taxes) for a make whole premium of approximately $9.2 million paid in connection with the retirement of the Senior Notes and the write-off of deferred loan fees of approximately $1.0 million. F-15 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE E -- INDEBTEDNESS (CONTINUED) REVOLVING CREDIT FACILITY: On October 17, 1997, the Company entered into a credit agreement (the "1997 Credit Agreement") with a consortium of twelve banks to provide a revolving line of credit of up to $275.0 million for working capital, acquisitions and other general corporate purposes. The revolving line of credit under the 1997 Credit Agreement is available for a five year period. The Company has the option to borrow at rates based on either the base rate of Wachovia Bank, N.A. or LIBOR plus .875% and is required to pay annual fees of .30% on the full amount of the facility. The interest rate and facility fees are subject to adjustment based upon the Company's ratio of defined funded debt to defined cash flows. The 1997 Credit Agreement contains certain restrictive provisions which, among other things, limit additional indebtedness of the Company, limit dividend and other restricted payments, require that certain debt to capitalization ratios be maintained and require minimum levels of cash flows. INTEREST RATE SWAPS: The Company has entered into interest rate swap agreements to modify the interest characteristics of a portion of its outstanding debt. The agreements involve the exchange of amounts based on a variable interest rate for amounts based on a fixed interest rate over the life of the agreements without an exchange of the notional amounts upon which the payments are based. The Company specifically designates interest rate swaps as hedges of debt instruments and recognizes interest differentials as adjustments to interest expense in the period they occur. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment of interest expense related to the debt (the accrual accounting method). The related amount payable to, or receivable from, counter-parties is included in other liabilities or assets. The fair value of the swap agreements is not recognized in the financial statements. If, in the future, an interest rate swap agreement were terminated, any resulting gain or loss would be deferred and amortized to interest expense over the remaining life of the hedged debt instrument. In the event of early extinguishment of a designated debt obligation, any realized or unrealized gain or loss from the swap would be recognized in income coincident with the extinguishment. The interest rate swap agreements changed floating interest rate expense on amounts outstanding under the 1997 Credit Agreement. Under one interest rate swap agreement, the Company has fixed $50.0 million of its floating rate debt through February 7, 2003. The effective rate at December 31, 1998 was 6.58%, equal to a fixed rate of 5.705% plus the margin of .875% the Company presently pays over LIBOR. Under another interest rate swap agreement, the Company has fixed $20.0 million of its floating rate debt through February 7, 2001 at a fixed rate of 5.51% plus the margin the Company pays over LIBOR (.875% at December 31, 1998) for a total effective rate of 6.385%. F-16 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE E -- INDEBTEDNESS (CONTINUED) The Company is exposed to credit losses in the event of nonperformance by counter-parties on interest rate swap agreements. The Company does not believe there is a significant risk of nonperformance by any of the counter-parties to these instruments and the Company monitors the financial stability of such parties on a periodic basis. BANK LOAN: During August 1998, the Company entered into a $50.0 million loan agreement with a bank, which was subsequently amended to reduce availability to $25.0 million (the "Bank Loan"). The Bank Loan matured on January 31, 1999 and was terminated at that date. No amounts were outstanding under this facility at December 31, 1998. SENIOR NOTES: The Company has outstanding various unsecured notes payable to institutional investors (collectively the "Senior Notes") as follows (in thousands):
DECEMBER 31 1998 1997 ----------- ---------- 10.53% Senior Notes, due 2005 $ 47,727 $ 54,545 7.90% Senior Notes, due 2002 14,286 17,857 7.52% Senior Notes, due 2003 17,857 21,429 ----------- ---------- $ 79,870 $ 93,831 =========== ==========
As discussed in Restructuring of Indebtedness above, in February 1999 the Company redeemed all of its then outstanding Senior Notes. OTHER: On December 31, 1998, the Company had approximately $4.0 million of unrestricted retained earnings available for common stock dividends under its most restrictive debt agreement. F-17 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE E -- INDEBTEDNESS (CONTINUED) Interest paid and interest capitalized were as follows (in thousands):
INTEREST YEARS ENDED DECEMBER 31 INTEREST PAID CAPITALIZED ----------------------- ------------- ----------- 1998 $ 26,068 $ 4,537 1997 24,856 2,914 1996 21,055 1,115
All amounts outstanding at December 31, 1998 under the 1997 Credit Agreement and the Senior Notes have been classified as long-term in the accompanying Consolidated Balance Sheets based on the revised maturities resulting from the February 1999 transactions discussed above. Aggregate principal payments on the Industrial Revenue Bonds as of December 31, 1998 are as follows (in thousands): 1999 $ 272 2000 288 2001 305 2002 323 2003 and thereafter 1,097 ======== $ 2,285 ========
NOTE F -- LEASES Certain of the Company's theatres and equipment are leased under non-cancelable leases expiring in various years through 2023. The theatre leases generally provide, among other things, for the payment of fixed monthly rentals, contingent rentals based on a percentage of revenue over a specified amount, and the payment of property taxes, common area maintenance, insurance and repairs. The Company, at its option, can renew a substantial portion of its theatre leases, at the then fair rental rate, for various periods with the maximum renewal period totaling 40 years. Property and equipment includes the following amounts related to capital lease assets (in thousands):
DECEMBER 31 1998 1997 -------- -------- Buildings and improvements $ 43,443 $ 43,443 Equipment 2,877 2,877 -------- -------- 46,320 46,320 Less accumulated amortization (12,565) (10,963) -------- -------- $ 33,755 $ 35,357 ======== ========
F-18 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE F -- LEASES (CONTINUED) Future minimum payments, by year and in the aggregate, under capital leases and non-cancelable operating leases with terms over one year as of December 31, 1998 are as follows (in thousands):
OPERATING CAPITAL LEASES LEASES ---------- ----------- 1999 $ 48,178 $ 5,817 2000 45,917 5,668 2001 43,037 5,628 2002 40,271 5,689 2003 38,019 5,615 Thereafter 267,117 75,572 ---------- ----------- Total minimum lease payments $ 482,539 103,989 ========== Less amounts representing interest (64,384) ----------- Present value of future minimum lease payments 39,605 Less current maturities (1,018) ----------- $ 38,587 ===========
Rent expense was approximately $66.8 million, $57.6 million and $54.8 million for 1998, 1997 and 1996, respectively. The Company is a party to a master lease facility which provides up to $75.0 million for financing the development of new theatres. Approximately $52.8 million is available under this facility at December 31, 1998. The facility, as amended in February 1999, has, among other things, financial and operating covenants which are substantially the same as the Company's covenants under its 1999 Credit Agreement. Lease payments under this facility will start in November 1999 and extend for a period of 16 years. Lease payments under the facility are also secured by a pledge of the Company's stock in its subsidiaries. F-19 53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE G -- STOCK OPTION PLAN The Company has stock option plans for shares of its Class A Common Stock. Key employees were granted options at terms (purchase price, expiration date and vesting schedule) established at the date of grant by a committee of the Company's Board of Directors. Options granted through December 31, 1998, have been at a price which approximated fair market value on the date of the grant. During 1998, the Board of Directors and stockholders approved a new stock option plan (the "1998 Plan") covering 750,000 shares of Class A Common Stock and approved the grant of non-qualified stock options for 335,000 shares of Class A Common Stock at $27.125 per share, a price which approximated fair market value on the date of the grant. At December 31, 1998, 415,000 shares were available for grant under the 1998 Plan. The Company has also issued options under a plan (the "1986 Plan") which covered 700,000 shares of Class A Common Stock. There are no remaining shares available for grant under the 1986 Plan. Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1998: risk-free interest rates of 5.39%; dividend yields of 0%; volatility factors of the expected market price of the Company's common stock of .226; and a weighted-average expected life of the option of 5.0 years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. F-20 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE G -- STOCK OPTION PLAN (CONTINUED) For purposes of pro forma disclosures, the estimated fair value of the options granted during 1998, $8.53 per share, is amortized to expense over the options' vesting period. Pro forma stock based compensation costs resulted in a 1998 pro forma loss of $31.5 million (or pro forma diluted net loss per share of $2.78). Changes in outstanding stock options were as follows (in thousands, except for exercise price per share):
EXERCISE PRICE PER SHARE ---------------------------------------------------------------------- $6.00- 8.50 $ 9.00 $18.00 $27.125 Total ----- ------- ------ ------- ----- Stock options outstanding at December 31, 1995 94 21 143 -0- 258 Exercised (14) -0- -0- -0- (14) Forfeited (1) (1) (8) -0- (10) ---- ------- ---- ------- ---- Stock options outstanding at December 31, 1996 79 20 135 -0- 234 Exercised (6) -0- (25) -0- (31) --- ------- ---- ------- ---- Stock options outstanding at December 31, 1997 73 20 110 -0- 203 Issued -0- -0- -0- 335 335 Exercised (1) -0- (22) -0- (23) === ======= ==== ======= ==== Stock options outstanding at December 31, 1998 72 20 88 335 515 === ======= ==== ======= ====
At December 31, 1998, approximately 188,000 of the above options were exercisable. F-21 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE H -- SHAREHOLDERS' EQUITY The Company's authorized capital consists of 22.5 million shares of Class A Common Stock, $.03 par value, 5.0 million shares of Class B Common Stock, $.03 par value, and one million shares of Preferred Stock, $1.00 par value. Each share of Class A Common Stock entitles the holder to one vote per share, whereas a share of Class B Common Stock entitles the holder to ten votes per share. Each share of Class B Common Stock is entitled to cash dividends, when declared, in an amount equal to 85.0% of the cash dividends payable on each share of Class A Common Stock. Additionally, Class B Common Stock is convertible at any time by the holder into an equal number of shares of Class A Common Stock. On November 22, 1998, the Company sold an aggregate of 550,000 shares of its 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock, par value $1.00 per share (the "Series A Preferred Stock"), for an aggregate purchase price of $55.0 million, approximately $54.0 million net of expenses. The Series A Preferred Stock pays quarterly cash dividends at an annual rate of 5.5% and is convertible any time after November 30, 1999, at the option of the holder, into the Company's Class A Common Stock at $25.00 per share (subject to anti-dilution adjustments). The Series A Preferred Stock is not subject to mandatory redemption or sinking fund provisions. The Series A Preferred Stock is also exchangeable into subordinated debt of the Company in certain instances at the option of the Company. The Company has shares of Class A Common Stock reserved for future issuance as follows (in thousands):
DECEMBER 31 1998 1997 ----- ------ Stock option plan 930 203 Conversion rights of Series A Preferred Stock 2,200 -0- Conversion rights of Class B Common Stock 1,421 1,421 Convertible Note -0- 100 ----- ----- 4,551 1,724 ===== =====
F-22 56 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE I -- INCOME TAXES The Company accounts for income taxes in accordance with FASB Statement No. 109, Accounting for Income Taxes. Under Statement No. 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rate and laws that will be in effect when the differences are expected to reverse. The provision for income tax expense (benefit) is summarized as follows (in thousands):
YEARS ENDED DECEMBER 31 1998 1997 1996 ----------- --------- ----------- Current: Federal $ 6,926 $ 4,037 $ 8,492 State 1,398 1,318 1,850 Deferred (26,490) 7,011 (14,811) ----------- --------- ----------- $ (18,166) $ 12,366 $ (4,469) =========== ========= ===========
Significant components of the Company's deferred tax liabilities (assets) are as follows (in thousands):
DECEMBER 31 1998 1997 ----------- ----------- Financial statement bases of property and equipment over (under) tax bases $ (1,239) $ 12,091 Restructuring reserve (13,186) -0- Deferred rent (2,431) (2,025) Income taxes payable for prior years 2,359 1,943 Other 438 422 ----------- ---------- $ (14,059) $ 12,431 =========== ==========
F-23 57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE I -- INCOME TAXES (CONTINUED) A reconciliation of income tax expense (benefit) at the federal income tax rate and income tax expense (benefit) as reflected in the consolidated financial statements follows (in thousands):
YEARS ENDED DECEMBER 31 1998 1997 1996 ------------ ----------- ----------- Income tax expense (benefit) at statutory rates $ (17,084) $ 11,393 $ (4,111) State income taxes, net of federal tax benefit/provision (1,444) 1,375 (501) Amortization of excess of purchase price over net assets of business acquired 430 106 79 Other items, net (68) (508) 64 ------------ ------------ ---------- $ (18,166) $ 12,366 $ (4,469) ============ ============ ==========
Income taxes paid in 1998, 1997 and 1996 were approximately $3.7 million, $8.1 million and $9.2 million, respectively. NOTE J -- COMMITMENTS AND CONTINGENCIES The Company is subject to various claims and lawsuits arising in the ordinary course of business. In the opinion of management, the ultimate resolution of these matters will not have a material effect on the consolidated financial statements of the Company. The Company has commitments at December 31, 1998 totaling approximately $47.9 million to build new theatres or to expand existing theatres, including commitments of approximately $11.0 million for theatres to be constructed under the Company's master lease facility. The Company plans to fund the expenditures for such capital improvements through (i) the Revolving Credit Facility (see Note E), (ii) executing operating leases (see Note F) or (iii) cash flows from operations. F-24 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE K -- FINANCIAL INSTRUMENTS CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash investments and short-term investments. The Company maintains cash and cash equivalents and short-term investments and certain other financial instruments with various financial institutions. These financial institutions are located in the southeast and Company policy is designed to limit exposure to any one institution. The Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in the Company's investment strategy. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance sheets for cash and cash equivalents approximates their fair value. SHORT-TERM INVESTMENTS: The Company's short-term investments consist of U.S. Treasury Notes with maturities of less than one year. The carrying value approximates market at December 31, 1998 and 1997. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE: The carrying amounts reported in the balance sheets for accounts receivable and accounts payable approximated their fair value. LONG-TERM DEBT: The carrying amounts of the Company's long-term debt borrowings approximate their fair value. The fair values of the Company's long-term debt are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. INTEREST RATE SWAP AGREEMENTS: The unrealized loss for the interest rate swap agreements was approximately $1.3 million at December 31, 1998 based on evaluations made by the counter-parties to the interest rate swap agreements. The Company does not anticipate realization of this loss as the Company intends to hold the interest rate swap agreements to maturity. F-25 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE L - CONDENSED FINANCIAL DATA The Company and its wholly-owned subsidiaries have fully, unconditionally, jointly and severally guaranteed the Company's obligations under the Subordinated Notes (see Note E - Indebtedness). The Company has one subsidiary and several unconsolidated affiliates which are not guarantors of the Subordinated Notes. Separate financial statements and other disclosures of each of the guarantors are not presented because management has determined that they would not be material to investors. Consolidating separate financial data for the guarantor subsidiaries is as follows:
1998 1997 1996 ----------- ------------ -------------- Year Ended December 31, Revenues $ 388,005 $ 370,408 $ 345,659 Operating income (loss)(1) (35,328) 23,987 (3,769) Net income (loss) (32,783) 12,503 (3,930) At December 31, Assets Current assets $ 7,800 $ 16,790 $ 12,670 Other assets 10,697 1,288 1,153 Property and equipment 433,462 385,038 298,921 Goodwill 37,641 4,778 0 ------------ ------------ -------------- $ 489,600 $ 407,894 $ 312,744 ============ ============ ============== Liabilities and Equity Current liabilities $ 15,763 $ 14,775 $ 11,525 Intercompany notes and advances 213,830 112,426 40,228 Long-term liabilities 54,200 37,178 29,979 Equity 205,807 243,515 231,012 ------------ ------------ -------------- $ 489,600 $ 407,894 $ 312,744 ============ ============ ==============
(1) Net of parent company management and license fees of approximately $30.3 million, $29.3 million and $27.6 million for the years ended December 31, 1998, 1997 and 1996, respectively. F-26 60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES NOTE M -- QUARTERLY RESULTS (UNAUDITED) (In thousands, except for per share data)
YEAR ENDED DECEMBER 31, 1998 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTALS - ---------------------------- ----------- ----------- ----------- ----------- ------ TOTAL REVENUES $ 117,142 $ 110,698 $ 134,720 $ 119,008 $ 481,568 OPERATING INCOME (LOSS) 12,435 7,063 20,921 (62,002) (21,583) NET INCOME (LOSS) 3,794 362 8,760 (43,563) (30,647) BASIC INCOME (LOSS) PER COMMON SHARE .33 .03 .77 (3.86) (2.73) DILUTED INCOME (LOSS) PER COMMON SHARE .33 .03 .77 (3.86) (2.73) Year Ended December 31, 1997 Total revenues $ 108,457 $ 110,074 $ 128,736 $ 111,331 $ 458,598 Operating income 11,631 14,989 19,420 9,654 55,694 Net income 3,965 5,941 8,228 2,052 20,186 Basic income per common share .35 .53 .73 .18 1.79 Diluted income per common share .35 .53 .72 .18 1.78
Net income (loss) per common share calculations for each of the above quarters is based on the weighted average number of shares outstanding for each period and the sum of the quarters may not necessarily equal the net income (loss) per common share amount for the year. The fourth quarter of 1998 includes a charge for the impairment of long-lived assets and a restructuring charge. See Notes B and C. F-27 61 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding the directors of Carmike is incorporated by reference from the section entitled "Election of Directors" in the Proxy Statement relating to the 1999 Annual Meeting of Stockholders of Carmike (hereinafter, the "1999 Proxy Statement"). Information regarding the executive officers of Carmike is set forth in Part I of this Report on Form 10-K pursuant to General Instruction G(3) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. Information regarding executive compensation is incorporated by reference from the section entitled "Executive Compensation and Other Information" contained in the 1999 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is incorporated by reference from the sections entitled "Security Ownership of Certain Beneficial Holders" and "Security Ownership of Management" contained in the 1999 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information regarding certain relationships and related transactions is incorporated by reference from the section entitled "Certain Relationships and Related Transactions" contained in the 1999 Proxy Statement. 34 62 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(1) and (2) Financial Statements and Financial Statement Schedules The following consolidated financial statements of Carmike Cinemas, Inc. are included in "Item 8. Financial Statements And Supplementary Data." Financial Statements: Report of Independent Auditors Consolidated balance sheets -- December 31, 1998 and 1997 Consolidated statements of operations -- Years ended December 31, 1998, 1997 and 1996 Consolidated statements of cash flows -- Years ended December 31, 1998, 1997 and 1996 Consolidated statements of shareholders' equity -- Years ended December 31, 1998, 1997 and 1996 Notes to consolidated financial statements -- December 31, 1998 This report also includes the following Financial Statement Schedule: Schedule II -- Valuation and Qualifying Accounts All other financial statement schedules are omitted because they are not applicable or not required under the related instructions, or because the required information is shown either in the consolidated financial statements or in the notes thereto. (a)(3) Listing of Exhibits Periodic reports, proxy statements and other information filed by Carmike with the Commission pursuant to the informational requirements of the Exchange Act may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices of the Commission: Midwest Regional Office, Citicorp Center, Suite 1400, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661-2511; and Northeast Regional Office, Suite 1300, 13th Floor, 7 World Trade Center, New York, New York 10048. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission also maintains a Web site (http://www.sec.gov) that makes available reports, proxy statements and other information regarding Carmike. Carmike's SEC file number reference is Commission File No.1-11604. 35 63
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 3.1 Amended and Restated Certificate of Incorporation of Carmike. 3.2 Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock. 3.3 By-laws of Carmike (filed as Exhibit 3(b) to Carmike's Form 10-K for the fiscal year ended December 31, 1987 (Commission File No. 1-11604), and incorporated herein by reference). 4.1 Indenture dated February 3, 1999 between Carmike and The Bank of New York. 4.2 Exchange and Registration Rights Agreement dated February 3, 1999 between Carmike, Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and the Purchasers (as defined). 10.1 Stock Purchase Agreement dated November 22, 1998 between Carmike and GS Capital Partners III, L.P. and certain of its affiliates. 10.2 $275,000,000 Amended and Restated Credit Agreement dated January 29, 1999 between Carmike, the Banks (as defined therein) and Wachovia Bank, N.A. 10.3 $75,000,000 Term Loan Credit Agreement dated February 25, 1999 between Carmike, the Lenders listed therein, Wachovia Bank, N.A., Goldman Sachs Credit Partners L.P and First Union National Bank. 10.4 Stock Purchase Agreement dated as of June 27, 1997 by and between the shareholders of Morgan Creek Theatres, Inc.; shareholders of SB Holdings, Inc.; members of RDL Consulting Limited Liability Company; Morgan Creek Theatres, Inc.; SB Holdings, Inc.; RDL Consulting Limited Liability Company; First International Theatres; Carmike and Eastwynn Theatres, Inc. (filed as Exhibit 2 to Carmike's Form 10-Q for the fiscal quarter ended June 30, 1997 (Commission File No. 1-11604), and incorporated herein by reference). 10.5* Carmike 1998 Class A Stock Option Plan, together with form of Employee Nonqualified Stock Option Agreement (filed as Exhibit 10(p) to Carmike's Form 10-K for the year ended December 31, 1997 (Commission File No. 1-11604), and incorporated herein by reference). 10.6* Carmike Class A Stock Option Plan, as amended, together with form of Stock Option Agreement (filed as Exhibit 10(a) to Carmike's Form 10-K for the year ended December 31, 1990 (Commission File No. 1-11604), and incorporated herein by reference). 10.7* Carmike Deferred Compensation Agreement and Trust Agreement dated as of January 1, 1990 (filed as Exhibit 10(u) to Carmike's Form 10-K for the year ended December 31, 1990, and incorporated herein by reference). 10.8* Employment Agreement dated August 10, 1998 between C. L. Patrick and Carmike.
36 64 10.9* Employment Agreement dated August 10, 1998 between Michael W. Patrick and Carmike. 10.10 Aircraft Lease dated July 1, 1983, as amended June 30, 1986, by and between C.L.P. Equipment and Carmike (filed as Exhibit 10(h) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.11 Equipment Lease Agreement dated December 17, 1982 by and between Michael W. Patrick and Carmike (Kingsport, Tennessee) (filed as Exhibit 10(i) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.12 Equipment Lease Agreement dated January 29, 1983 by and between Michael W. Patrick and Carmike (Valdosta, Georgia) (filed as Exhibit 10(j) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.13 Equipment Lease Agreement dated November 23, 1983 by and between Michael W. Patrick and Carmike (Nashville (Belle Meade), Tennessee) (filed as Exhibit 10(k) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.14 Equipment Lease Agreement dated December 17, 1982 by and between Michael W. Patrick and Carmike (Opelika, Alabama) (filed as Exhibit 10(l) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.15 Equipment Lease Agreement dated July 1, 1986 by and between Michael W. Patrick and Carmike (Muskogee and Stillwater, Oklahoma) (filed as Exhibit 10(m) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.16 Equipment Lease Agreement dated December 17, 1982 by and between C. L. Patrick and Carmike (Eastridge, Tennessee) (filed as Exhibit 10(n) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.17 Summary of Extensions of Equipment Lease Agreements, which are Exhibits 10(f), 10(g), 10(h), 10(i), and 10(k) (filed as Exhibit 10(o) to Carmike's Form 10-K for the fiscal year ended December 31, 1987 (Commission File No. 1-11604), and incorporated herein by reference). 10.18 Summary of Extensions of the Equipment Lease Agreements, which are Exhibits 10(f), 10(g), 10(h), 10(i), and 10(k) as extended as shown in Exhibit 10(m) (filed as Exhibit 10(n) to Carmike's Form 10-K for the year ended December 31, 1991 (Commission File No. 1-11604), and incorporated herein by reference). 10.19 Summary of Extensions of Aircraft Lease Agreement and Equipment Lease Agreement which are Exhibits 10(e) and 10(k) (filed as Exhibit 10(o) to Carmike's Form 10-K for the year ended December 31, 1991 (Commission File No. 1-11604), and incorporated herein by reference). 21 List of Subsidiaries.
37 65 23 Consent of Ernst & Young LLP. 27 Financial Data Schedule (for Securities and Exchange Commission use only). - ------------ * Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. (b) Reports on Form 8-K During the fiscal quarter ended December 31, 1998, Carmike filed a Current Report on Form 8-K dated November 23, 1998 reporting information under Items 5 and 7. (c) Exhibits The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statements Schedules See Item 14(a) (1) and (2). 38 66 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CARMIKE CINEMAS, INC. Date March 25, 1999 By: /s/ Michael W. Patrick -------------------------------------- Michael W. Patrick President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ C. L. Patrick Chairman of the Board March 25, 1999 - -------------------------------------- C. L. Patrick /s/ Michael W. Patrick President, Chief Executive March 25, 1999 - -------------------------------------- Officer and Director Michael W. Patrick /s/ Larry M. Adams Senior Vice President-- March 25, 1999 - -------------------------------------- Information Systems Larry M. Adams (Chief Accounting Officer) /s/ Philip A. Smitley Assistant Vice President and March 25, 1999 - -------------------------------------- Controller (Chief Financial Officer) Philip A. Smitley /s/ F. Lee Champion, III Director March 25, 1999 - -------------------------------------- F. Lee Champion, III
67 /s/ Elizabeth Cogan Fascitelli Director March 25, 1999 - ------------------------------- Elizabeth Cogan Fascitelli /s/ Richard A. Friedman Director March 25, 1999 - -------------------------------------- Richard A. Friedman /s/ John W. Jordan Director March 25, 1999 - -------------------------------------- John W. Jordan, II /s/ Carl L. Patrick, Jr. Director March 25, 1999 - -------------------------------------- Carl L. Patrick, Jr. /s/ Carl E. Sanders Director March 25, 1999 - -------------------------------------- Carl E. Sanders /s/ David W. Zalaznick Director March 25, 1999 - -------------------------------------- David W. Zalaznick
68 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS CARMIKE CINEMAS, INC. AND SUBSIDIARIES DECEMBER 31, 1998 (IN THOUSANDS OF DOLLARS)
COL. A COL. B COL. C COL. D COL. E - ----------------------------------------------------------------------------------------------------------------------------------- ADDITIONS ---------------------------------------- BALANCE AT CHARGED TO COSTS CHARGED TO OTHER DEDUCTIONS- BALANCE AT END DESCRIPTION BEGINNING OF PERIOD AND EXPENSES ACCOUNTS - DESCRIBE DESCRIBE OF PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Year Ended December 31, 1998: Reserve for restructuring charge $ -0- $ 34,699 (1) $ -0- $ -0- $ 34,699
(1) Charge recorded in December 1998. See Note C of Notes to Consolidated Financial Statements. Note: Prior to December 1998, there were no accounts meeting the requirements for disclosure on this schedule. 69 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 3.1 Amended and Restated Certificate of Incorporation of Carmike. 3.2 Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock. 3.3 By-laws of Carmike (filed as Exhibit 3(b) to Carmike's Form 10-K for the fiscal year ended December 31, 1987 (Commission File No. 1-11604), and incorporated herein by reference). 4.1 Indenture dated February 3, 1999 between Carmike and The Bank of New York. 4.2 Exchange and Registration Rights Agreement dated February 3, 1999 between Carmike, Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and the Purchasers (as defined). 10.1 Stock Purchase Agreement dated November 22, 1998 between Carmike and GS Capital Partners III, L.P. and certain of its affiliates. 10.2 $275,000,000 Amended and Restated Credit Agreement dated January 29, 1999 between Carmike, the Banks (as defined therein) and Wachovia Bank, N.A. 10.3 $75,000,000 Term Loan Credit Agreement dated February 25, 1999 between Carmike, the Lenders listed therein, Wachovia Bank, N.A., Goldman Sachs Credit Partners L.P and First Union National Bank. 10.4 Stock Purchase Agreement dated as of June 27, 1997 by and between the shareholders of Morgan Creek Theatres, Inc.; shareholders of SB Holdings, Inc.; members of RDL Consulting Limited Liability Company; Morgan Creek Theatres, Inc.; SB Holdings, Inc.; RDL Consulting Limited Liability Company; First International Theatres; Carmike and Eastwynn Theatres, Inc. (filed as Exhibit 2 to Carmike's Form 10-Q for the fiscal quarter ended June 30, 1997 (Commission File No. 1-11604), and incorporated herein by reference). 10.5* Carmike 1998 Class A Stock Option Plan, together with form of Employee Nonqualified Stock Option Agreement (filed as Exhibit 10(p) to Carmike's Form 10-K for the year ended December 31, 1997 (Commission File No. 1-11604), and incorporated herein by reference). 10.6* Carmike Class A Stock Option Plan, as amended, together with form of Stock Option Agreement (filed as Exhibit 10(a) to Carmike's Form 10-K for the year ended December 31, 1990 (Commission File No. 1-11604), and incorporated herein by reference). 10.7* Carmike Deferred Compensation Agreement and Trust Agreement dated as of January 1, 1990 (filed as Exhibit 10(u) to Carmike's Form 10-K for the year ended December 31, 1990, and incorporated herein by reference).
70 10.8* Employment Agreement dated August 10, 1998 between C. L. Patrick and Carmike. 10.9* Employment Agreement dated August 10, 1998 between Michael W. Patrick and Carmike. 10.10 Aircraft Lease dated July 1, 1983, as amended June 30, 1986, by and between C.L.P. Equipment and Carmike (filed as Exhibit 10(h) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.11 Equipment Lease Agreement dated December 17, 1982 by and between Michael W. Patrick and Carmike (Kingsport, Tennessee) (filed as Exhibit 10(i) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.12 Equipment Lease Agreement dated January 29, 1983 by and between Michael W. Patrick and Carmike (Valdosta, Georgia) (filed as Exhibit 10(j) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.13 Equipment Lease Agreement dated November 23, 1983 by and between Michael W. Patrick and Carmike (Nashville (Belle Meade), Tennessee) (filed as Exhibit 10(k) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.14 Equipment Lease Agreement dated December 17, 1982 by and between Michael W. Patrick and Carmike (Opelika, Alabama) (filed as Exhibit 10(l) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.15 Equipment Lease Agreement dated July 1, 1986 by and between Michael W. Patrick and Carmike (Muskogee and Stillwater, Oklahoma) (filed as Exhibit 10(m) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.16 Equipment Lease Agreement dated December 17, 1982 by and between C. L. Patrick and Carmike (Eastridge, Tennessee) (filed as Exhibit 10(n) to Carmike's Registration Statement on Form S-1 (Registration No. 33-8007), and incorporated herein by reference). 10.17 Summary of Extensions of Equipment Lease Agreements, which are Exhibits 10(f), 10(g), 10(h), 10(i), and 10(k) (filed as Exhibit 10(o) to Carmike's Form 10-K for the fiscal year ended December 31, 1987 (Commission File No. 1-11604), and incorporated herein by reference). 10.18 Summary of Extensions of the Equipment Lease Agreements, which are Exhibits 10(f), 10(g), 10(h), 10(i), and 10(k) as extended as shown in Exhibit 10(m) (filed as Exhibit 10(n) to Carmike's Form 10-K for the year ended December 31, 1991 (Commission File No. 1-11604), and incorporated herein by reference). 10.19 Summary of Extensions of Aircraft Lease Agreement and Equipment Lease Agreement which are Exhibits 10(e) and 10(k) (filed as Exhibit 10(o) to Carmike's Form 10-K for the year ended December 31, 1991 (Commission File No. 1-11604), and incorporated herein by reference).
71 21 List of Subsidiaries. 23 Consent of Ernst & Young LLP. 27 Financial Data Schedule (for Securities and Exchange Commission use only).
- ------------ * Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. EX-3.1 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF CARMIKE CINEMAS, INC. (Restated for purposes of Regulation S-T, Rule 102(c).) Carmike Cinemas, Inc. (the "Corporation"), organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify that: 1. The name under which the Corporation was originally incorporated was "Martin Cinemas, Inc." and its original Certificate of Incorporation was filed with the Secretary of State of Delaware on April 2, 1982; 2. The Directors of the Corporation, by unanimous written consent pursuant to Section 141(f) of the General Corporation Law of the State of Delaware, adopted as of September 29, 1986 resolutions proposing and declaring advisable and in the best interest of the Corporation the following restatement of the Certificate of Incorporation of the Corporation, as previously amended and supplemented; 3. This restatement of the Certificate of Incorporation of the Corporation has been duly adopted in accordance with Sections 245 and 141 of the General Corporation Law of the State of Delaware; 4. This restatement of the Certificate of Incorporation of the Corporation only restates and integrates and does not further amend the provisions of the Corporation's Certificate of Incorporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation except as otherwise allowed by the General Corporation Law of the State of Delaware; and 5. The text of the Certificate of Incorporation of the Corporation, as previously amended and supplemented, is hereby restated by this Restated Certificate of Incorporation to read in full as follows: FIRST: The name of the Corporation (hereinafter called the "Corporation") is CARMIKE CINEMAS, INC. SECOND: The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, Wilmington, New Castle County, Delaware 19801; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company. 2 THIRD: The purpose of the Corporation is to engage in any lawful act or activity of which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The aggregate number of shares of capital stock of all classes which the Corporation shall have authority to issue is 28,500,000, consisting of (i) 27,500,000 shares of Common Stock, which in turn consists of (A) 22,500,000 shares of Class A Common Stock, par value $.03 per share (the "Class A Common Stock"), and (B) 5,000,000 shares of Class B Common Stock, par value $.03 per share (the "Class B Common Stock"), and (ii) 1,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred Stock"). The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of stock of the Corporation, are as follows: A. PREFERRED STOCK The Board of Directors is authorized, subject to the limitations prescribed by law and the provisions of this Article FOURTH, to provide for the issuance of the shares of the Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: (a) The number of shares constituting that series and the distinctive designation of that series; (b) Whether that series shall have dividend rights, whether dividends shall be cumulative, and, if so, from which date or dates, and the applicable rate and the relative rights of priority, if any, of payment of dividends on shares of that series; (c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (e) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; -2- 3 (f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; (g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payments of shares of that series; and (h) Any other relative rights, preferences and limitations of that series. Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment before any dividends shall be paid or declared and set apart for payment on the common shares with respect to the same dividend period. If upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the assets available for distribution to holders of shares of the Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto. B. CLASS A COMMON STOCK AND CLASS B COMMON STOCK I. Dividends and other Distributions. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Certificate of Incorporation, as amended from time to time, holders of Class A Common Stock and Class B Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor; provided that in the case of cash dividends, if at any time a cash dividend is paid on the Class A Common Stock, a cash dividend must also be paid on the Class B Common Stock in an amount per share of Class B Common Stock equal to 85% of the amount of the cash dividend paid on each share of the Class A Common Stock (rounded down, if necessary, to the nearest one-hundredth of a cent), or if at any time a cash dividend is paid on the Class B Common Stock, a cash dividend must also be paid on the Class A Common Stock in an amount equal to 117.647% of the amount of the cash dividend paid on each share of the Class B Common Stock (rounded up, if necessary, to the nearest one-hundredth of a cent), such that a cash dividend may not be paid on either the Class A Common Stock or the Class B Common Stock unless a cash dividend is also paid on the other as aforesaid; and provided, further, that in the case of dividends or other distributions payable in stock of the Corporation other than Preferred Stock, including distributions pursuant to stock splits or divisions of stock of the Corporation other than Preferred Stock, which occur after the initial issuance of shares of Class B Common Stock by the Corporation, only shares of Class A Common Stock shall be distributed with respect to Class A Common Stock and only shares of Class B Common Stock in an amount per share equal to the amount per share paid with respect to the Class A Common Stock shall be distributed with respect to Class B Common Stock, and -3- 4 that, in the case of any combination or reclassification of the Class A Common Stock, the shares of Class B Common Stock shall also be combined or reclassified so that the number of shares of Class B Common Stock outstanding immediately following such combination or reclassification shall bear the same relationship to the number of shares outstanding immediately prior to such combination or reclassification as the number of shares of Class A Common Stock outstanding immediately following such combination or reclassification bears to the number of shares of Class A Common Stock outstanding immediately prior to such combination or reclassification. II. Voting. (a) At every meeting of the stockholders every holder of Class A Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Class A Common Stock standing in his name on the transfer books of the Corporation and every holder of Class B Common Stock shall be entitled to ten (10) votes in person or by proxy for each share of Class B Common Stock standing in his name on the transfer books of the Corporation. (b) Following the initial issuance of shares of Class B Common Stock, the Corporation may not effect the issuance of any additional shares of Class B Common Stock (except in connection with stock splits and stock dividends) unless and until such issuance is authorized by the holders of a majority of the voting power of the shares of Class A Common Stock and of Class B Common Stock entitled to vote, each voting separately as a class. (c) Except as may be otherwise required by law or by this Article Fourth, the holders of Class A Common Stock and Class B Common Stock shall vote together as a single class, subject to any voting rights which may be granted to holders of Preferred Stock. (d) Every reference in this Certificate of Incorporation to a majority or other proportion of shares of stock shall refer to such majority or other proportion of the votes of such shares of stock. III. Transfer. (a) No person holding shares of Class B Common Stock of record (hereinafter called a "Class B Holder") may transfer, and the Corporation shall not register the transfer of, such shares of Class B Common Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except to a Permitted Transferee, and any attempted transfer of shares not permitted hereunder shall result in such shares being converted into Class A Common Stock as provided by subsection (d) of this Section III. A Permitted Transferee shall mean, with respect to each person from time to time shown as the record holder of shares of Class B Common Stock: (i) In the case of a Class B Holder who is a natural person, (A) The spouse of such Class B Holder, any lineal descendant of a parent of such Class B Holder, and any spouse of such lineal descendant (which lineal descendants, their spouses, the Class B Holder, and his or her spouse are -4- 5 herein collectively referred to as the "Class B Holder's Family Members"); (B) The trustee of a trust (including a voting trust) principally for the benefit of such Class B Holder and/or one or more of his or her Permitted Transferees described in each subclause of this clause (i) other than this subclause (B), provided that such trust may also grant a general or special power of appointment to one or more of such Class B Holder's Family Members and may permit trust assets to be used to pay taxes, legacies and other obligations of the trust or of the estates of one or more of such Class B Holder's Family Members payable by reason of the death of any of such Family Members; (C) A corporation if a majority of the beneficial ownership of outstanding capital stock of such corporation which is entitled to vote for the election of directors is owned by, or a partnership if a majority of the beneficial ownership of the partnership interests which are entitled to participate in the management of the partnership are held by, the Class B Holder or his or her Permitted Transferees determined under this clause (i), provided that if by reason of any change in the ownership of such stock or partnership interests, such corporation or partnership would no longer qualify as a Permitted Transferee, all shares of Class B Common Stock then held by such corporation or partnership shall, upon written notice given by the Corporation to such corporation or partnership, without further act on anyone's part, be converted into shares of Class A Common Stock effective upon the date of the giving of such notice, and stock certificates formerly representing such shares of Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of shares of Class A Common Stock; and (D) The estate of such Class B Holder. (ii) In the case of a Class B Holder holding the shares of Class B Common Stock in question as trustee pursuant to a trust (other than a trust described in clause (iii) below), "Permitted Transferee" means (A) any person transferring Class B Common Stock to such trust and (B) any Permitted Transferee of any such transferor determined pursuant to clause (i) above. (iii) In the case of a Class B Holder holding the shares of Class B Common Stock in question as trustee pursuant to a trust which was irrevocable on the record date for determining the persons to whom the Class B Common Stock is first issued by the Corporation (hereinafter in this Section III called the "Record Date"), "Permitted Transferee" means (A) any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment of otherwise and (B) any Permitted Transferee of any such person determined pursuant to clause (i) above. -5- 6 (iv) In the case of a Class B Holder which is a corporation or partnership acquiring record and beneficial ownership of the shares of Class B Common Stock in question upon its initial issuance by the Corporation, "Permitted Transferee" means (A) any partner of such partnership, or stockholder of such corporation, on the Record Date, (B) any person transferring such shares of Class B Common Stock to such corporation or partnership, and (C) any Permitted Transferee of any such person, partner, or stockholder referred to in subclauses (A) and (B) of this clause (iv), determined under clause (i) above. (v) In the case of a Class B Holder which is a corporation or partnership (other than a corporation or partnership described in clause (iv) above) holding record and beneficial ownership of the shares of Class B Common Stock in question, "Permitted Transferee" means (A) any person transferring such shares of Class B Common Stock to such corporation or partnership and (B) any Permitted Transferee of any such transferor determined under clause (i) above. (vi) In the case of a Class B Holder which is the estate of a deceased Class B Holder, or which is the estate of a bankrupt or insolvent Class B Holder, which holds record and beneficial ownership of the shares of Class B Common Stock in question, "Permitted Transferee" means a Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder as determined pursuant to clause (i), (ii), (iii), (iv) or (v) above, as the case may be. (b) For purposes of this Section III: (i) The relationship of any person that is derived by or through legal adoption shall be considered a natural one. (ii) Each joint owner of shares of Class B Common Stock shall be considered a "Class B Holder" of such shares. (iii) A minor for whom shares of Class B Common Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Holder of such shares. (iv) Unless otherwise specified, the term "person" means both natural persons and legal entities. (v) Without derogating from the election conferred upon the Corporation pursuant to subclause (C) of clause (i) above, each reference to a corporation shall include any successor corporation resulting from merger or consolidation, and each reference to a partnership shall include any successor partnership resulting from the death or withdrawal of a partner. -6- 7 (c) Any transfer of shares of Class B Common Stock not permitted hereunder shall result in the conversion of the transferee's shares of Class B Common Stock into shares of Class A Common Stock, effective the date on which certificates representing such shares are presented for transfer on the books of the Corporation or on such earlier date that the Corporation receives notice of such attempted transfer. The Corporation may, in connection with preparing a list of stockholders entitled to vote at any meeting of stockholders, or as a condition to the transfer or the registration of shares of Class B Common Stock on the Corporation's books, require the furnishing of such affidavits or other proof as it deems necessary to establish that any person is the beneficial owner of shares of Class B Common Stock or is a Permitted Transferee. (d) Shares of Class B Common Stock shall be registered in the names of the beneficial owners thereof and not in "street" or "nominee" name. For this purpose, a "beneficial owner" of any shares of Class B Common Stock shall mean a person who, or an entity which, possesses the power, either singly or jointly, to direct the voting or disposition of such shares. Certificates for shares of Class B Common Stock shall bear a legend referencing the restrictions on transfer imposed by this Section III. IV. Conversion Rights. (a) Subject to the terms and conditions of this Section IV, each share of Class B Common Stock shall be convertible at any time or from time to time, at the option of the respective holder thereof, at the office of any transfer agent for Class B Common Stock, and at such other place or places, if any, as the Board of Directors may designate, or if the Board of Directors shall fail so to designate, at the principal office of the Corporation (attention of the Secretary of the Corporation), into one (1) fully paid and nonassessable share of Class A Common Stock. Upon conversion, the Corporation shall make no payment or adjustment on account of dividends accrued or in arrears on Class B Common Stock surrendered for conversion or on account of any dividends on the Class A Common Stock issuable on such conversion. Before any holder of Class B Common Stock shall be entitled to convert the same into Class A Common Stock, he shall surrender the certificate or certificates for such Class B Common Stock at the office of said transfer agent (or other place as provided above), which certificate or certificates, if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank (such endorsements or instruments of transfer to be in form satisfactory to the Corporation), and shall give written notice to the Corporation at said office that he elects so to convert said Class B Common Stock in accordance with the terms of this Section IV, and shall state in writing therein the name or names in which he wishes the certificate or certificates for Class A Common Stock to be issued. Every such notice of election to convert shall constitute a contract between the holder of such Class B Common Stock and the Corporation, whereby the holder of such Class B Common Stock shall be deemed to subscribe for the amount of Class A Common Stock which he shall be entitled to receive upon such conversion, and, in satisfaction of such subscription, to deposit the Class B Common Stock to be converted and to release the Corporation from all liability thereunder, and thereby the Corporation shall be deemed to agree that the surrender of the certificate or certificates therefor and the extinguishment of liability thereon shall constitute full payment of such subscription for Class A Common Stock to be issued upon such conversion. -7- 8 The Corporation will as soon as practicable after such deposit of a certificate or certificates for Class B Common Stock, accompanied by the written notice and the statement above prescribed, issue and deliver at the office of said transfer agent (or other place as provided above) to the person for whose account such Class B Common Stock was so surrendered, or to his nominee(s) or transferee(s), a certificate or certificates for the number of full shares of Class A Common Stock to which he shall be entitled as aforesaid. Subject to the provisions of subsection (c) of this Section IV, such conversion shall be deemed to have been made as of the date of such surrender of the Class B Common Stock to be converted; and the person or persons entitled to receive the Class A Common Stock issuable upon conversion of such Class B Common Stock shall be treated for all purposes as the record holder or holders of such Class A Common Stock on such date. (b) The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Class B Common Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class B Common Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid. (c) The Corporation shall not be required to convert Class B Common Stock, and no surrender of Class B Common Stock shall be effective for that purpose, while the stock transfer books of the Corporation are closed for any purpose; but the surrender of Class B Common Stock for conversion during any period while such books are so closed shall become effective for conversion immediately upon the reopening of such books, as if the conversion had been made on the date such Class B Common Stock was surrendered. (d) The Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issue upon conversion of the outstanding shares of Class B Common Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all such outstanding shares, provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Common Stock by delivery of shares of Class A Common Stock which are held in the treasury of the Corporation. The Corporation covenants that if any shares of Class A Common Stock, required to be reserved for purposes of conversion hereunder, require registration with or approval of any governmental authority under any federal or state law before such shares of Class A Common Stock may be issued upon conversion, the Corporation will use its best efforts to cause such shares to be duly registered or approved, as the case may be. The Corporation will endeavor to list the shares of Class A Common Stock required to be delivered upon conversion prior to such delivery upon each national securities exchange, if any, upon which the outstanding Class A Common Stock is listed at the time of such delivery. The Corporation covenants that all shares of Class A Common Stock which shall be issued upon conversion of the shares of Class B Common Stock, will, upon issue, be fully paid and nonassessable and not entitled to any preemptive rights. -8- 9 V. Liquidation Rights. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of Preferred Stock shall be entitled to receive, out of the net assets of the Corporation, an amount for each share equal to the amount fixed in the Certificate of Incorporation, plus an amount equal to all dividends accrued and unpaid on such shares to the date fixed for distribution, and no more, before any of the assets of the Corporation shall be distributed or paid over to the holders of Class A Common Stock. After payment in full of said amounts to the holders of Preferred Stock, the remaining assets and funds of the Corporation shall be divided among and paid ratably to the holders of Class A Common Stock and Class B Common Stock. If, upon such dissolution, liquidation or winding up, the assets of the Corporation distributable as aforesaid among the holders of Preferred Stock shall be insufficient to permit full payment to them of said preferential amounts, then such assets shall be distributed among such holders ratably in proportion to the respective total amounts which they shall be entitled to receive as provided in this Section V. A merger or consolidation of the Corporation with or into any other corporation or a sale or conveyance of all or any part of the assets of the Corporation (which shall not in fact result in the liquidation of the Corporation and the distribution of assets to stockholders) shall not be deemed to be a voluntary or involuntary liquidation or dissolution or winding up of the Corporation within the meaning of this Section V. FIFTH: The Corporation is to have perpetual existence. SIXTH: For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided: 1. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. The phrase "whole Board" and the phrase "total number of directors" shall be deemed to have the same meaning, to wit, the total number of directors which the corporation would have if there were no vacancies. Election of directors need not be by written ballot. 2. After the original or other By-Laws of the Corporation have been adopted, amended, or repealed, as the case may be, in accordance with the provisions of Section 109 of the General Corporation Law of the State of Delaware, and, after the Corporation has received any payment for any of its stock, the power to adopt, amend, or repeal the By-Laws of the Corporation may be exercised by the Board of Directors of the Corporation; provided, however, that any provision for the classification of directors of the Corporation for staggered terms pursuant to the provisions of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be set forth in an initial By-Law or in a By-Law adopted by the stockholders entitled to vote of the Corporation unless provisions for such classification shall be set forth in this Certificate of Incorporation. -9- 10 SEVENTH: The Corporation shall, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. EIGHTH: From time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article EIGHTH. NINTH: No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction for which the director derived an improper personal benefit. This Article NINTH shall not eliminate or limit the liability of a director for any act or omission occurring prior to the time this Article NINTH became effective. -10- EX-3.2 3 CERTIFICATE OF DESIGNATIONS,PREFERENCES,& RELATIVE 1 EXHIBIT 3.2 CARMIKE CINEMAS, INC. CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF 5.5% SERIES A SENIOR CUMULATIVE CONVERTIBLE EXCHANGEABLE PREFERRED STOCK PURSUANT TO SECTION 151(g) OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE Carmike Cinemas, Inc. (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Corporation (the "Board of Directors"), in a duly convened meeting thereof on November 22, 1998, adopted the following resolution, which resolution remains in full force and effect as of the date hereof: WHEREAS, the Board of Directors is authorized, within the limitations and restrictions stated in the Restated Certificate of Incorporation of the Corporation, to fix by resolution or resolutions the designation of each series of Preferred Stock of the Corporation (the "Preferred Stock") and the powers, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof, including, without limiting the generality of the foregoing, such provisions as may be desired concerning voting, redemption, dividends, dissolution or distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolutions of the Board of Directors under the General Corporation Law of the State of Delaware; and WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of Preferred Stock and the number of shares constituting such series; NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such series of Preferred Stock on the terms and with the provisions herein set forth: 1. Number of Shares; Designation. A total of 550,000 shares of Preferred Stock of the Corporation are hereby designated as 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock (the "Series A Preferred Stock"). 2. Rank. The Series A Preferred Stock shall, with respect to payment of dividends, redemption payments and rights upon liquidation, dissolution or winding up of the 2 affairs of the Corporation, (x) rank senior and prior to the Class A Common Stock, par value $.03 per share, of the Corporation ("Class A Common Stock") and the Class B Common Stock, par value $.03 per share, of the Corporation ("Class B Common Stock", and together with the Class A Common Stock, "Common Stock") and to all Junior Dividend Stock (as defined in Section 3(a)) and all Junior Liquidation Stock (as defined in Section 5(b)) and any other class or series of capital stock of the Corporation that by its terms ranks junior to the Series A Preferred Stock as to payment of dividends, redemption payments and rights upon liquidation, dissolution or winding up of the affairs of the Corporation, (y) rank on a parity with all Parity Dividend Stock (as defined in Section 3(a)) and all Parity Liquidation Stock (as defined in Section 5(b)), and (z) rank junior to all Senior Dividend Stock (as defined in Section 3(d)), and all Senior Liquidation Stock (as defined in Section 5(b)). 3. Dividends. (a)(i) The holders of the issued and outstanding shares of the Series A Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors, out of funds legally available therefor, distributions in the form of cumulative cash dividends at the annual rate per share of 5.5% (the "Base Rate") of the sum of (x) the Liquidation Preference (defined in Section 5(a)) and (y) all unpaid dividends, if any, whether or not declared, from the date of issuance of the shares of Series A Preferred Stock (the "Closing Date") to the applicable dividend payment date. Dividends on shares of Series A Preferred Stock shall accumulate, whether or not declared, on a daily basis from the Closing Date and shall be payable initially on December 31, 1998 and then quarterly on each March 31, June 30, September 30, and December 31 thereafter (each, a "Dividend Payment Date"), except that if any Dividend Payment Date is not a business day then the Dividend Payment Date shall be on the first immediately succeeding business day (as used herein, the term "business day" shall mean any day except a Saturday, Sunday or day on which banking institutions are legally authorized to close in The City of New York). Dividends shall cease to accumulate in respect of Series A Preferred Stock on the Redemption Date or the Conversion Date for such shares, as the case may be, unless, in the case of a Redemption Date, the Corporation fails to pay the amounts necessary for such redemption or repurchase (including any unpaid dividends required to be paid at such time) or, in the case of a Conversion Date, the Corporation fails to deliver certificates representing Class A Common Stock issuable upon such conversion within three business days of the Conversion Date or to make any payment with respect to any unpaid dividends required to be paid at such time, as the case may be, in which cases dividends shall continue to accumulate from the Redemption Date or the Conversion Date, as the case may be, at a rate of 8.5% per annum (the "Default Dividend Rate") until such payment and/or delivery is made. If requested in writing by any holder not less than five days prior to any Dividend Payment Date, the Corporation shall pay the amount of any dividend so declared with respect to such Dividend Payment Date by means of wire transfer to an account specified by the holder in such notice. (ii) All dividend payments paid with respect to shares of Series A Preferred Stock shall be paid pro rata to the holders entitled thereto. (iii) If any dividend payable on any Dividend Payment Date, together with all unpaid dividends in respect of prior periods, is not declared and paid in full in cash on such Dividend Payment Date, as provided in Section 3(a)(i), then until such time as all accumulated and unpaid dividends have been declared and paid in full, shares of Series A Preferred Stock shall accumulate dividends at the -2- 3 Default Dividend Rate rather than the Base Rate (all such dividends, "Default Dividends"). All references herein to "unpaid dividends" shall be deemed to include any unpaid Default Dividends. (iv) Dividends to be paid on any Dividend Payment Date shall be paid to the holders of record of shares of the Series A Preferred Stock as they appear on the stock register of the Corporation at the close of business on such record dates (each, a "Dividend Payment Record Date"), which shall be not more than 40 days nor fewer than 10 days preceding each Dividend Payment Date thereof, as shall be fixed by the Board of Directors of the Corporation. Default Dividends shall be declared and paid at any time as of which funds legally available therefor are available to the Corporation, without reference to any regular Dividend Payment Date, to the holders of record on such date, not exceeding 20 days nor fewer than 10 days preceding the date on which dividends in arrears will be paid, as may be fixed by the Board of Directors of the Corporation. v) Holders of shares of the Series A Preferred Stock shall be entitled to receive dividends in preference to and in priority over dividends upon the Common Stock and any other series or class of the Corporation's capital stock that ranks junior as to dividends to the Series A Preferred Stock (such stock, including the Common Stock "Junior Dividend Stock") and shall be on a parity as to dividends with any series or class of the Corporation's capital stock that does not rank senior or junior as to dividends with the Series A Preferred Stock ("Parity Dividend Stock"). The holders of shares of the Series A Preferred Stock shall not be entitled to any dividends in excess of full cumulative dividends (including Default Dividends), as herein provided. (b) In the event (i) the aggregate amount of unpaid dividends at any time exceeds twice the amount that would otherwise be payable on a Dividend Payment Date assuming no arrearages from previous periods), or (ii) the Corporation shall otherwise materially violate or be in material breach of any material provision hereof or any material provision of Article 9 or Article 10 of the Stock Purchase Agreement (as defined in Section 8(a)) and such violation or breach shall remain uncured for a period of 30 days after the Corporation becomes aware of or receives notice of such violation or breach, then, in addition to any other rights that may otherwise be available to holders of Series A Preferred Stock pursuant to this Certificate of Designations or the Restated Certificate of Incorporation of the Corporation, and notwithstanding any other provision of the Restated Certificate of Incorporation to the contrary, the total number of directors of the Corporation shall be increased by two, and the holders of Series A Preferred Stock, voting together as a single class, shall by affirmative vote of holders of a plurality of the total number of shares of Series A Preferred Stock voting thereon, be entitled to elect, at a meeting of such stockholders or by written consent in lieu thereof, to the Board of Directors of the Corporation two additional directors (the "Dividend Default Directors") (which directors shall be in addition to, and not in lieu of, any Purchaser Designees (as defined in the Stock Purchase Agreement) and which directors shall each be required to satisfy any qualifications existing under applicable law and shall be entitled to all rights of voting and participation as are directors of the Corporation generally), and shall be entitled, by affirmative vote of holders of a majority of the total number of shares of Series A Preferred Stock then outstanding or by written -3- 4 consent in lieu thereof, at any time to remove any director so elected. Any other provision of this Certificate of Designations or the Restated Certificate of Incorporation or By-Laws of the Corporation notwithstanding, no Dividend Default Director may be removed except in the manner provided for in this paragraph. Vacancies among the Dividend Default Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled at any time, but only by the affirmative vote of holders of a plurality of the total number of shares of Series A Preferred Stock then outstanding, voting together as a single class, or by written consent in lieu thereof, and any director so chosen shall hold office for a term expiring on the date the term of office of the director such newly-elected director shall have replaced would have expired. At any time during which the holders of Series A Preferred Stock are entitled to elect Dividend Default Directors, in the event the Corporation declares and pays in cash all theretofore unpaid Default Dividends and cures any failure, violation or breach referred to in clause (ii) above, then the term of any Dividend Default Director then in office shall be deemed to have expired as of the time such payment is made or breach is cured, and the total number of directors of the Corporation shall be reduced by the number of Dividend Default Directors then in office whose term shall have expired and the holders of Series A Preferred Stock shall cease to have any rights hereunder to elect Dividend Default Directors, in each case, unless and until one or more of the conditions specified in clauses (i) and (ii) hereof shall recur. (c) So long as any shares of the Series A Preferred Stock are outstanding, the Corporation shall not declare, pay or set apart for payment any dividend on any of the Common Stock or other Junior Dividend Stock or make any payment on account of, or set apart for payment money for a sinking or other similar fund for, the purchase, redemption or other retirement of, any of the Common Stock or other Junior Dividend Stock or any warrants, rights, calls or options exercisable for or convertible into any of the Common Stock or other Junior Dividend Stock, or make any distribution in respect thereof, either directly or indirectly, and whether in cash, obligations or shares of the Corporation or other property (other than distributions or dividends in Common Stock or other Junior Dividend Stock to the holders of Common Stock or other Junior Dividend Stock), and shall not permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase or redeem any of the Common Stock or other Junior Dividend Stock or any warrants, rights, calls or options exercisable for or convertible into any of the Junior Dividend Stock unless, all unpaid dividends (including Default Dividends) on the Series A Preferred Stock shall have been paid. (d) If at any time the Corporation issues (in accordance with Section 8(c)(ii)) any class or series of capital stock ranking senior and prior to the Series A Preferred Stock with respect to the payment of dividends ("Senior Dividend Stock") and fails to pay or declare and set apart for payment accrued and unpaid dividends on such Senior Dividend Stock, in whole or in part, then (except to the extent allowed by the terms of the Senior Dividend Stock) no dividend paid in cash shall be paid or declared and set apart for payment on the Series A Preferred Stock unless and until all accrued and unpaid dividends with respect to the Senior Dividend Stock shall have been paid or declared and set apart for payment, without interest. Except as provided in Section 3(e) below, no dividends shall be paid or declared and set apart for payment on any Parity Dividend Stock for any period unless the Corporation has paid or declared and set apart for payment, or contemporaneously pays or declares and sets apart for payment, on the Series A Preferred Stock all unpaid dividends for all dividend payment periods terminating on or prior to the date of payment of such dividends. Except as provided in Section 3(e) below, no dividends -4- 5 paid in cash shall be paid or declared and set apart for payment on the Series A Preferred Stock for any period unless the Corporation has paid or declared and set apart for payment, or contemporaneously pays or declares and sets apart for such payment, on any Parity Dividend Stock all accrued and unpaid dividends for all dividend payment periods terminating on or prior to the date of payment of such dividends. (e) If at any time the Corporation has failed to pay any unpaid dividends on any shares of Series A Preferred Stock on any Dividend Payment Date or on any Parity Dividend Stock on a stated payment date, as the case may be, the Corporation shall not: (i) purchase any shares of the Series A Preferred Stock or Parity Dividend Stock (except for a consideration payable in Common Stock or other Junior Dividend Stock) or redeem fewer than all of the shares of the Series A Preferred Stock and Parity Dividend Stock then outstanding except for (x) the repurchase or redemption of shares of the Series A Preferred Stock made pro rata among the holders of the shares of the Series A Preferred Stock then outstanding and (y) the repurchase or redemption made pro rata with respect to all shares of the Series A Preferred Stock and Parity Dividend Stock then outstanding so that the amounts repurchased or redeemed shall in all cases bear to each other the same ratio that, at the time of the repurchase or redemption, the aggregate Liquidation Preference of all of the Series A Preferred Stock and of the other Parity Dividend Stock then outstanding, respectively, bear to each other; or (ii) permit any corporation or other entity directly or indirectly controlled by the Corporation to purchase any Common Stock, Junior Dividend Stock, shares of the Series A Preferred Stock or Parity Dividend Stock, except to the same extent that the Corporation could purchase such shares. Unless and until all unpaid dividends in respect of prior dividend payment periods on shares of the Series A Preferred Stock and any Parity Dividend Stock at the time outstanding have been paid in full, all dividends paid by the Corporation upon shares of the Series A Preferred Stock or Parity Dividend Stock shall be declared pro rata with respect to all shares of the Series A Preferred Stock and Parity Dividend Stock then outstanding, so that the amounts of any dividends declared on shares of the Series A Preferred Stock and on the Parity Dividend Stock shall in all cases bear to each other the same ratio that, at the time of the declaration, all unpaid dividends in respect of prior dividend payment periods on shares of the Series A Preferred Stock and the other Parity Dividend Stock, respectively, bear to each other. 4. Redemption. (a) (i) General. Except as provided in this Section 4, shares of the Series A Preferred Stock shall not be redeemable by the Corporation. (ii) Optional Redemption. From and after the date that is the third anniversary of the Closing Date, the Corporation, at its option, may within 45 days of any 150% Date (as defined below) redeem shares of Series A Preferred Stock, in whole or in part, in the sole discretion of the Board of Directors, to the extent it has funds legally available therefor, at the redemption price of 100% of the Liquidation Preference thereof, plus an amount equal to the unpaid dividends -5- 6 thereon, if any, whether or not declared, to the redemption date (each such date, a "Redemption Date"). A "150% Date" shall be any date as of which the Closing Price of the Class A Common Stock equals or exceeds 150% of the Conversion Price then in effect on at least 20 of the 30 trading days immediately preceding such date and as of such date. As used herein, the "Closing Price" of any security on any day means the last reported sale price regular way on such day or, in the case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way of the Common Stock, in each case on the New York Stock Exchange, Inc. (the "NYSE") or, if not listed or admitted to trading on such exchange, as listed or quoted on the American Stock Exchange ("AMEX") or The Nasdaq Stock Market, Inc.'s National Market ("Nasdaq"). No redemption shall be permitted pursuant to this subsection (ii) at any time during which the Class A Common Stock is not listed or admitted to trading on one of the NYSE, AMEX or Nasdaq. (iii) Payment of Redemption Price. The amount of the redemption price on any shares of Series A Preferred Stock redeemed, on any redemption provided for herein, whether allocable to the Liquidation Preference thereon or to any unpaid dividends to be paid on the shares of Series A Preferred Stock redeemed on such Redemption Date, shall be paid in cash. (b) Not less than 15 days nor more than 45 days (such date as fixed by the Board of Directors of the Corporation is referred to herein as the "Redemption Record Date") prior to the date fixed for any redemption of shares of the Series A Preferred Stock pursuant to this Section 4, a notice specifying the time and place of the redemption and the number of shares to be redeemed shall be given by first class mail, postage prepaid, to the holders of record on the Redemption Record Date of the shares of the Series A Preferred Stock to be redeemed at their respective addresses as the same shall appear on the books of the Corporation, calling upon each holder of record to surrender to the Corporation on the Redemption Date at the place designated in the notice such holder's certificate or certificates representing the number of shares specified in the notice of redemption. Neither failure to mail such notice, nor any defect therein or in the mailing thereof, to any particular holder shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the holder receives the notice. On or after the Redemption Date, each holder of shares of Series A Preferred Stock to be redeemed shall present and surrender such holder's certificate or certificates for such shares to the Corporation at the place designated in the redemption notice and thereupon the redemption price of the shares, and any unpaid dividends thereon to the Redemption Date, shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof, and each surrendered certificate shall be canceled. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (c) If a notice of redemption has been given pursuant to this Section 4 and if, on or before the Redemption Date, the funds necessary for such redemption (including all dividends on the shares of Series A Preferred Stock to be redeemed that will accumulate to the Redemption Date) shall have been set aside by the Corporation, separate and apart from its other -6- 7 funds, in trust for the pro rata benefit of the holders of the shares of Series A Preferred Stock so called for redemption, then, notwithstanding that any certificates for such shares of Series A Preferred Stock have not been surrendered for cancellation, on the Redemption Date dividends shall cease to accumulate on the shares of the Series A Preferred Stock to be redeemed and the holders of such shares shall cease to be stockholders with respect to those shares, shall have no interest in or claims against the Corporation by virtue thereof and shall have no voting or other rights with respect thereto, except the conversion rights provided in subsection (d) of this Section 4 and Section 6 below and the right to receive the monies payable upon such redemption, without interest thereon, upon surrender (and endorsement, if required by the Corporation) of their certificates, and the shares of Series A Preferred Stock evidenced thereby shall no longer be outstanding. Subject to applicable escheat laws, any monies so set aside by the Corporation and unclaimed at the end of four years from the Redemption Date shall revert to the general funds of the Corporation, after which reversion the holders of such shares so called for redemption shall look only to the general funds of the Corporation for the payment of the redemption price, without interest. Any interest accrued on funds so deposited shall belong to the Corporation and be paid thereto from time to time. (d) If a notice of redemption has been given pursuant to this Section 4 and any holder of shares of Series A Preferred Stock shall, prior to the close of business on the business day immediately preceding the Redemption Date, give written notice to the Corporation pursuant to Section 6 below of the conversion of any or all of the shares to be redeemed held by the holder, then such redemption shall not become effective as to such shares to be converted and such conversion shall become effective as provided in Section 6 below, whereupon any funds deposited by the Corporation for the redemption of such shares shall (subject to any right of the holder of such shares to receive the dividend payable thereon as provided in Section 6 below) immediately upon such conversion be returned to the Corporation or, if then held in trust by the Corporation, shall automatically and without further corporate action or notice be discharged from the trust. (e) In every case of redemption of fewer than all of the outstanding shares of the Series A Preferred Stock pursuant to this Section 4, the shares to be redeemed shall be selected pro rata, provided that only whole shares shall be selected for redemption. 5. Liquidation. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the holders of the Series A Preferred Stock shall be entitled to receive $100.00 per share (the "Liquidation Preference"), plus an amount equal to the unpaid dividends thereon, if any, whether or not declared, to the payment date. (b) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the holders of shares of Series A Preferred Stock (i) shall not be entitled to receive the Liquidation Preference of the shares held by them until payment in full or provision has been made for the payment of all claims of creditors of the Corporation and the liquidation preference of any class or series of capital stock ranking senior to the Series A Preferred Stock with respect to redemption rights and rights upon liquidation, dissolution or winding up of the affairs of the Corporation ("Senior Liquidation Stock" and together with the Senior Dividend Stock, the "Senior Stock"), plus accrued and unpaid dividends thereon, if any, -7- 8 whether or not declared, to the payment date, shall have been paid in full and (ii) shall be entitled to receive the Liquidation Preference of such shares held by them, plus unpaid dividends thereon, if any, whether or not declared, to the payment date, in preference to and in priority over any distributions upon the Common Stock and any other series or class of the Corporation's capital stock that ranks junior to the Series A Preferred Stock as to redemption rights and rights upon liquidation, dissolution or winding up of the affairs of the Corporation ("Junior Liquidation Stock" and together with the Junior Dividend Stock, the "Junior Stock"). Upon payment in full of the Liquidation Preference (plus unpaid dividends thereon, if any, whether or not declared, to the payment date) to which the holders of shares of the Series A Preferred Stock are entitled, the holders of shares of the Series A Preferred Stock shall not be entitled to any further participation in any distribution of assets by the Corporation. Subject to clause (i) above, if the assets of the Corporation are not sufficient to pay in full the Liquidation Preference (plus unpaid dividends thereon) payable to the holders of shares of the Series A Preferred Stock and the liquidation preference payable to the holders of any series or class of the Corporation's capital stock, outstanding on the date hereof or hereafter issued, that ranks on a parity with the Series A Preferred Stock as to redemption rights and rights upon liquidation, dissolution or winding up of the affairs of the Corporation ("Parity Liquidation Stock" and together with the Parity Dividend Stock, the "Parity Stock"), the holders of all such shares shall share ratably in proportion to the full respective preferential amounts payable on such shares in any distribution. (c) For the purposes of this Section 5, neither the sale of all or substantially all of the assets of the Corporation nor the consolidation or merger of the Corporation with or into any other entity shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, unless such sale, consolidation or merger shall be in connection with a plan of liquidation, dissolution or winding up of the Corporation. 6. Optional Conversion. (a) Holders of shares of Series A Preferred Stock may, at any time after the first anniversary of the Closing Date, convert shares of Series A Preferred Stock, unless previously redeemed, into a number of shares of Class A Common Stock calculated by dividing, for each share of Series A Preferred Stock to be converted, (1) the Liquidation Preference by (2) $25.00, subject to adjustment as described below in Section 6(f) (the "Conversion Price"). If more than one share of Series A Preferred Stock shall be surrendered for conversion at one time by the same record holder, the number of full shares of Class A Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. In the case of shares of Series A Preferred Stock called for redemption, conversion rights shall expire at the close of business on the business day immediately preceding the Redemption Date. The holders of shares of Series A Preferred Stock that convert such shares into shares of Class A Common Stock shall be entitled to receive any unpaid dividends accumulating through the Conversion Date. (b) Any holder of shares of Series A Preferred Stock electing to convert the shares or any portion thereof in accordance with Section 6(a) above shall give written notice (a "Conversion Notice") to the Corporation (which notice may be given by facsimile transmission) that such holder elects to convert the same and shall state therein the number of shares of Series A Preferred Stock to be converted and the name or names in which such holder wishes the certificate or certificates for shares of Class A Common Stock to be issued. Promptly thereafter, the holder shall surrender the certificate or certificates of shares of Series A Preferred Stock to be -8- 9 converted, duly endorsed, at the office of the Corporation or any transfer agent for such shares, or at such other place designated by the Corporation, provided that the Corporation shall at all times maintain an office or agency in The City of New York for such purposes. The Corporation shall, within three business days of receipt of such Conversion Notice, issue and deliver to or upon the order of such holder, against delivery of the certificates representing the shares of Series A Preferred Stock that have been converted, a certificate or certificates for the number of shares of Class A Common Stock to which such holder shall be entitled (in the number(s) and denomination(s) designated by such holder), and the Corporation shall deliver to such holder a certificate or certificates for the number of shares of Series A Preferred Stock that such holder has not elected to convert. The conversion right with respect to any shares of Series A Preferred Stock shall be deemed to have been exercised at the date upon which the Conversion Notice is received by the Corporation (the "Conversion Date"), and the person or persons entitled to receive the Class A Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Class A Common Stock upon that date; provided, however, that nothing in this sentence shall relieve the Corporation of its obligation to deliver to the person or persons entitled to receive the Class A Common Stock issuable upon conversion certificates therefor (and the payment required by Section 6(d), if applicable), or its obligation, if any, to pay any dividends accumulating after the Conversion Date pursuant to Section 3(a)(i) above. (c) No fractional shares of Class A Common Stock shall be issued upon conversion of shares of Series A Preferred Stock. Instead of any fractional share of Class A Common Stock otherwise issuable upon conversion of any shares of Series A Preferred Stock, the Corporation shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the Closing Price of the Class A Common Stock on the Conversion Date. In the absence of a Closing Price, the Board of Directors shall in good faith determine the current market price on such basis as it reasonably considers appropriate and such current market price shall be used to calculate the cash adjustment; provided that in no case shall such current market price be less than the Conversion Price then in effect. (d) If a holder converts shares of Series A Preferred Stock, the Corporation shall pay any documentary, stamp or similar issue or transfer tax due on the issue of Class A Common Stock upon the conversion or due upon the issuance of a new certificate or certificates for any shares of Series A Preferred Stock not converted. The holder, however, shall pay any such tax that is due because any such shares of the Class A Common Stock or of the Series A Preferred Stock are issued in a name other than the name of the holder. (e) The Corporation shall at all times keep reserved out of its authorized but unissued Class A Common Stock a sufficient number of shares of Class A Common Stock to permit the conversion of all of the then-outstanding shares of Series A Preferred Stock. For the purposes of this Section 6(e), the full number of shares of Class A Common Stock then issuable upon the conversion of all then-outstanding shares of Series A Preferred Stock shall be computed as if at the time of computation all outstanding shares of Series A Preferred Stock were held by a single holder. The Corporation shall from time to time, in accordance with the laws of the State of Delaware and its Certificate of Incorporation, increase the authorized amount of its Class A Common Stock if at any time the authorized amount of its Class A Common Stock remaining unissued shall not be sufficient to permit the conversion of all shares of Series A Preferred Stock at the time outstanding. All shares of Class A Common Stock issued upon conversion of the -9- 10 shares of Series A Preferred Stock shall be validly issued, fully paid, nonassessable and free and clear of any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), restriction or other security interest of any kind or nature whatsoever (collectively, "Liens"), other than any such Liens imposed by the holder to whom such shares are issued or such person's creditors. (f) The Conversion Price shall be subject to adjustment as follows: (i) In case the Corporation shall (A) pay a dividend on any class of its capital stock in shares of any class of Common Stock, (B) subdivide the outstanding shares of any class of Common Stock into a greater number of shares or (C) combine the outstanding shares of any class of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted by multiplying the Conversion Price at which the shares of Series A Preferred Stock were theretofore convertible by a fraction of which the denominator shall be the number of shares of Common Stock outstanding immediately following such action and of which the numerator shall be the number of shares of Common Stock outstanding immediately prior thereto. Such adjustment shall be made whenever any event listed above shall occur and shall become effective retroactively immediately after the record date in the case of a dividend and immediately after the effective date in the case of a subdivision or combination. (ii) In case the Corporation shall issue rights or warrants to any Person (including holders of its Common Stock) entitling such Person or Persons to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined below) per share of Class A Common Stock on the date of issuance, or in case the Corporation shall issue to any Person (including holders of its Common Stock) other securities convertible into or exchangeable for Common Stock for a consideration per share of Common Stock deliverable upon conversion or exchange thereof less than the Current Market Price per share of Class A Common Stock on the date of issuance, then the Conversion Price in effect immediately prior thereto shall be adjusted as provided below so that the Conversion Price therefor shall be equal to the price determined by multiplying (A) the Conversion Price at which shares of Series A Preferred Stock were theretofore convertible by (B) a fraction of which (x) the denominator shall be the sum of (1) the number of shares of Common Stock outstanding on the date of issuance of the convertible or exchangeable securities, rights or warrants and (2) the number of additional shares of Common Stock offered for subscription or purchase, or issuable upon such conversion or exchange, and (y) the numerator shall be the sum of (1) the number of shares of Common Stock outstanding on the date of issuance of such convertible or exchangeable securities, rights or warrants and (2) the number of additional shares of Class A Common Stock which the aggregate offering price of the number of shares of Common Stock so offered would purchase at the Current Market Price per share of Class A Common Stock. Such adjustment shall be made whenever such convertible or exchangeable securities, rights or warrants are issued, and shall become effective immediately -10- 11 after the date of issuance of such securities. In the event the price per share of Common Stock deliverable upon exercise of any outstanding right or warrant to purchase or subscribe for Common Stock, or upon conversion or exchange of any securities convertible into or exchangeable for shares of Common Stock, is adjusted or amended to an amount less than the Current Market Price per share of Class A Common Stock as of the date of such adjustment or amendment, then the Conversion Price in effect immediately prior thereto shall be adjusted as provided in the immediately preceding sentence as if such right, warrant or convertible or exchangeable security were newly issued by the Corporation on the date of such adjustment or amendment. The foregoing notwithstanding, upon the expiration of any right or warrant to purchase Common Stock, the issuance of which resulted in an adjustment in the Conversion Price pursuant to this Section 6(f)(ii), if any such right or warrant shall expire and shall not have been exercised, the Conversion Price shall be recomputed immediately upon such expiration and effective immediately upon such expiration shall be increased to the price it would have been (but reflecting any other adjustments to the Conversion Price made pursuant to the provisions of this Section 6(f) after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants. No further adjustment shall be made upon exercise of any right, warrant, convertible security or exchangeable security if any adjustment shall have been made upon issuance of such security. As used herein, the "Current Market Price" for a given date shall mean the average of the Closing Price of the Common Stock as reported in The Wall Street Journal or other reputable financial news source, for the 20 consecutive trading days immediately preceding such date; provided, however, that with respect to options issued pursuant to duly adopted stock option or other plans of the Corporation pursuant to which options to purchase capital stock of the Corporation may be issued to employees and directors of the Corporation or of affiliates under the Corporation's control ("Corporation Option Plans"), each reference to "Current Market Price" in this subsection (ii) shall be deemed to be a reference to the current market price or fair market value of the Class A Common Stock or similar concept as such term or concept is used in the applicable Corporation Option Plan for determining the fair market value of such stock at the time of grant. (iii) In case the Corporation shall pay a dividend or make a distribution to all holders of any class of its Common Stock (including any dividend or distribution paid in connection with a consolidation or merger in which the Corporation is the continuing corporation) of any shares of capital stock of the Corporation or its subsidiaries (other than in shares of Common Stock) or evidences of its indebtedness or assets or cash (excluding dividends or distributions in connection with the liquidation, dissolution or winding up of the Corporation) or rights or warrants to subscribe for or purchase any of its securities or those of its subsidiaries or securities convertible or exchangeable for Common Stock (excluding those securities referred to in Section 6(f)(ii) above), then in each such case the Conversion Price in effect immediately prior thereto shall be -11- 12 adjusted as provided below so that the Conversion Price thereafter shall be equal to the price determined by multiplying (A) the Conversion Price in effect on the record date mentioned below by (B) a fraction, the numerator of which shall be the Current Market Price per share of Class A Common Stock on the record date mentioned below less the then fair market value (as determined in good faith by the Board of Directors of the Corporation, which determination shall be conclusive) as of such record date of the cash, assets, evidences of indebtedness or securities so paid with respect to one share of Common Stock, and the denominator of which shall be the Current Market Price per share of Class A Common Stock on such record date; provided, however, that in the event the then fair market value (as so determined) so paid with respect to one share of Common Stock is equal to or greater than the Current Market Price per share of Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of shares of the Series A Preferred Stock shall have the right to receive the amount and kind of assets, evidences of indebtedness, or securities such holder would have received had such holder converted each such share of Series A Preferred Stock immediately prior to the record date for such dividend. Such adjustment shall be made whenever any such payment is made, and shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive the payment. (iv) In case the Corporation shall purchase, redeem or otherwise acquire any shares of Common Stock at a price per share greater than the Current Market Price per share of such Common Stock on the date of such event, or in case the Corporation shall purchase, redeem or otherwise acquire other securities convertible into or exchangeable for Common Stock for a consideration per share of Common Stock into which such security is convertible or exchangeable greater than the Current Market Price of a share of Class A Common Stock on the date of such event, then the Conversion Price in effect immediately prior thereto shall be adjusted as provided below so that the Conversion Price therefor shall be equal to the price determined by multiplying (A) the Conversion Price at which shares of Series A Preferred Stock were theretofore convertible by (B) a fraction of which (x) the denominator shall be the Current Market Price per share of Class A Common Stock on the date of such event, and (y) the numerator shall be the Current Market Price per share of Class A Common Stock on the date of such event less the difference between (1) the consideration paid by the Corporation per share of Common Stock (or, in the case of securities convertible into or exchangeable for Common Stock, the consideration per share of Common Stock into which such security is convertible or exchangeable) purchased, redeemed or acquired in such event and (2) the Current Market Price per share of Class A Common Stock on the date of such event. Such adjustment shall be made whenever such Common Stock is issued or sold, and shall become effective immediately after the issuance or sale of such securities; provided, however, that no adjustment shall be made pursuant to this subsection (iv) if holders of a majority of the Series A Preferred Stock consent in advance to the event that -12- 13 would otherwise give rise to such adjustment occurring without such Conversion Price adjustment. (v) In case the Corporation shall issue or sell any shares of Common Stock at a price per share below the Current Market Price per share of Common Stock on the date the Corporation commits or agrees to such sale or issuance, then the Conversion Price in effect immediately prior thereto shall be adjusted as provided below so that the Conversion Price therefor shall be equal to the price determined by multiplying (A) the Conversion Price at which shares of Series A Preferred Stock were theretofore convertible by (B) a fraction of which (x) the denominator shall be the sum of (1) the number of shares of Common Stock outstanding on the date of issuance or sale of such shares of Common Stock and (2) the number of additional shares of Common Stock offered for sale or subject to issuance, and (y) the numerator shall be the sum of (1) the number of shares of Common Stock outstanding on the date of issuance or sale of such shares of Common Stock and (2) the number of additional shares of Class A Common Stock which the aggregate offering price of the number of shares of Common Stock so offered or issued would purchase at the Current Market Price per share of Class A Common Stock. Such adjustment shall be made whenever such Common Stock is issued or sold, and shall become effective immediately after the issuance or sale of such securities; provided, however, that the provisions of this subparagraph shall not apply to (1) shares of Class A Common Stock issued upon conversion of shares of Series A Preferred Stock, (2) shares of Class A Common Stock issued upon conversion of shares of Class B Common Stock, (3) shares of Class A Common Stock issued upon conversion of options issued or granted pursuant to Corporation Option Plans, or (4) shares of Common Stock issued in a bona fide public offering to or through a nationally recognized investment banking firm in which affiliates (as defined in the rules of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended) of the Corporation (other than the Purchasers (as defined in the Stock Purchase Agreement (as defined below)) and Persons controlling the Purchasers) purchase less than 10% of the shares sold in such offering. (vi) No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided, however, that any adjustments that by reason of this Section 6(f)(vi) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 6(f) shall be made to the nearest cent. (vii) In the event that at any time the holder of any share of Series A Preferred Stock thereafter surrendered for conversion shall become entitled to receive any shares of the Corporation other than shares of the Common Stock, thereafter the number of such other shares so receivable upon conversion of any share of Series A Preferred Stock shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Section 6(f), and the other provisions -13- 14 of this Section 6 with respect to the Common Stock shall apply on like terms to any such other shares. (viii) Whenever the Conversion Price is adjusted, as herein provided, the Corporation shall promptly file with the transfer agent for the Series A Preferred Stock, if any, a certificate of an officer of the Corporation setting forth the Conversion Price after the adjustment and setting forth a brief statement of the facts requiring such adjustment and a computation thereof (each, a "Conversion Certificate") and promptly thereafter the Corporation shall cause a notice of the adjusted Conversion Price to be mailed to each registered holder of shares of Series A Preferred Stock; provided that if there is no transfer agent for the Series A Preferred Stock, then the Corporation shall promptly send a copy of the Conversion Certificate to each holder of record by first class mail, postage pre-paid. (ix) In case of any reclassification of the Class A Common Stock, any consolidation of the Corporation with, or merger of the Corporation into, any other entity, any merger of another entity into the Corporation (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Corporation), any sale or transfer of all or substantially all of the assets of the Corporation or any compulsory share exchange pursuant to which share exchange the Class A Common Stock is converted into other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the holder of each share of Series A Preferred Stock outstanding immediately prior thereto shall have the right thereafter, during the period such share of Series A Preferred Stock shall be convertible, to convert such share into the kind and amount of securities, cash and other property receivable upon the reclassification, consolidation, merger, sale, transfer or share exchange by a holder of the number of shares of Class A Common Stock of the Corporation into which a share of Series A Preferred Stock would have been convertible immediately prior to the reclassification, consolidation, merger, sale, transfer or share exchange. The Corporation, the person formed by the consolidation or resulting from the merger or which acquires such assets or which acquires the Corporation's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such rights and such rights shall be clearly provided for in the definitive transaction documents relating to such transaction. The certificate or articles of incorporation or other constituent document shall provide for adjustments, which, for events subsequent to the effective date of the certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6. The provisions of this Section 6(f)(ix) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. (x) In the event any Merger Event (as defined below) is proposed or the Corporation enters into any agreement providing for a Merger Event, and the -14- 15 fair market value of the cash, securities and other property to be received by holders of shares of Class A Common Stock for each share of Class A Common Stock held, or into which shares of Class A Common Stock are to be converted in such event (the "Merger Event Consideration"), is less than the Conversion Price then in effect, then each holder of shares of Series A Preferred Stock may elect to cause all of such holders shares of Series A Preferred Stock to be converted into shares of Class A Common Stock effective immediately prior to the Merger Event on the basis of an adjusted Conversion Price equal to 99% of the aggregate fair market value of the Merger Event Consideration. The Corporation shall not engage in any Merger Event or permit any Merger Event to occur unless not less than 30 days prior to the proposed date of such Merger Event the Corporation shall have sent, by first class mail, postage prepaid, a notice to each holder of Series A Preferred Stock at such holder's address as it appears on the stock books of the Corporation, which notice shall:(i) describe the contemplated Merger Event and indicate the date on which the Merger Event is expected to be consummated; (ii) state the Merger Event Consideration; (iii) inform such holders of their right to effect a conversion pursuant to and in accordance with this subsection in connection with the proposed Merger Event; and (iv) state that holders electing not to convert pursuant to this subsection shall have the rights set forth in subsection (ix) above. The term "Merger Event" shall mean (1) any consolidation of the Corporation with, or merger of the Corporation into, any other entity, (2) any merger of another entity into the Corporation (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of any class of Common Stock of the Corporation), (3) any sale or transfer of all or substantially all of the assets of the Corporation or (4) any compulsory share exchange pursuant to which share exchange the Class A Common Stock is to be converted into other securities, cash or other property, except, in each of cases (1)-(4), for any such event in which the consideration to be received by holders of Class A Common Stock consists solely of shares of common stock of the acquiring or surviving corporation of such event, which common stock is listed or admitted to trading or quoted on the NYSE, AMEX or Nasdaq. For purposes of this subsection (x), the fair market value of any securities for which a Current Market Price is ascertainable shall be the Current Market Price for such security as of the relevant date, and the fair market value of all other securities and all other assets or property shall be determined in good faith by the Board of Directors of the Corporation. (g) The Corporation from time to time may reduce the Conversion Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period. Whenever the Conversion Price is so reduced, the Corporation shall mail to holders of record of the Series A Preferred Stock a notice of the reduction at least 15 days before the date the reduced Conversion Price takes effect, stating the reduced Conversion Price and the period it will be in effect. A voluntary reduction of the Conversion Price does not change or adjust the Conversion Price otherwise in effect for purposes of paragraph 6(f) above. -15- 16 7. Status of Shares. All shares of the Series A Preferred Stock that are at any time redeemed pursuant to Section 4, converted pursuant to Section 6 or exchanged pursuant to Section 10 and all shares of the Series A Preferred Stock that are otherwise reacquired by the Corporation and subsequently canceled by the Board of Directors of the Corporation shall have the status of authorized but unissued shares of Preferred Stock, without designation as to series, subject to reissuance by the Board of Directors of the Corporation as shares of any one or more other series. 8. Voting Rights. (a) Until expiration or termination of the waiting periods under the HSR Act applicable to the purchase of voting securities of the Corporation by the Purchasers (as defined in the Stock Purchase Agreement (as defined below)) or the receipt of any necessary clearance from any appropriate agency or department of the federal government of the United States charged with enforcing the HSR Act with respect thereto (the "HSR Clearance Date"), holders of shares of the Series A Preferred Stock shall have no voting rights. Until the HSR Clearance Date, there shall be imprinted on all certificates representing shares of Series A Preferred Stock a legend to the following effect: THE SECURITIES REPRESENTED BY THIS CERTIFICATE CARRY NO RIGHT TO VOTE WITH RESPECT TO ANY MATTER UNLESS AND UNTIL THE INITIAL PURCHASERS OF THESE SECURITIES FROM CARMIKE CINEMAS, INC. SHALL HAVE RECEIVED ANY NECESSARY CLEARANCE UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), TO HOLD VOTING SECURITIES IN CARMIKE CINEMAS, INC., AND ANY APPLICABLE WAITING PERIODS UNDER THE HSR ACT WITH RESPECT THERETO HAVE EXPIRED OR TERMINATED. Promptly following the HSR Clearance Date, holders of certificates bearing the foregoing legend may exchange such certificates for new certificates, without legend, representing the same number of shares of Series A Preferred Stock as were represented by the certificate so exchanged, and the Corporation shall promptly issue and deliver such new certificates upon receipt of the old, which shall thereupon be canceled. The term "Stock Purchase Agreement" means that certain Stock Purchase Agreement, dated as of November 22, 1998 by and among the Corporation and GS Capital Partners III, L.P. and certain of its affiliates. The term "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations of the Federal Trade Commission thereunder. (b) From and after the HSR Clearance Date and for so long as any shares of the Series A Preferred Stock are outstanding, each share of Series A Preferred Stock shall entitle the holder thereof to notice of and to vote, in person or by proxy, at any special or annual meeting of stockholders, on all matters entitled to be voted on by holders of Common Stock and any other series or class of Voting Stock (as defined in Section 8(e)) voting together as a single class with all other shares entitled to vote thereon. With respect to any such vote, each share of Series A Preferred Stock shall entitle the holder thereof to cast that number of votes per share as is equal to the number of votes that such holder would be entitled to cast had such holder converted its shares of Series A Preferred Stock into shares of Class A Common Stock as of the record date for determining the stockholders of the Corporation eligible to vote on any such -16- 17 matters (regardless of whether such shares of Series A Preferred Stock are actually then convertible). (c) From and after the HSR Clearance Date and for so long as any shares of the Series A Preferred Stock are outstanding, in addition to any vote or consent of stockholders required by law or by the Corporation's Restated Certificate of Incorporation, the affirmative vote or consent of the holders of at least a majority of the shares of Series A Preferred Stock at any time issued and outstanding, acting as a single class, given in person or by proxy at any meeting called for such purpose, shall be necessary for effecting or validating: (i) any reclassification of the Series A Preferred Stock or any amendment, alteration or repeal (including as a result of a merger or consolidation involving the Corporation or otherwise by operation of law) of any of the provisions of the Restated Certificate of Incorporation of the Corporation, or any merger or consolidation involving the Corporation, in either case which adversely affects the voting powers, dividend or liquidation preference or other rights or preferences of the holders of the shares of Series A Preferred Stock; provided that any amendment to the Certificate of Incorporation affecting the relative voting, dividend, and other rights and preferences between the Class A Common Stock and the Class B Common Stock that adversely affects holders of or shares of Class A Common Stock shall be deemed to adversely affect the rights and preferences of holders of shares of Series A Preferred Stock; and provided, further, that any amendment of the provisions of the Corporation's Restated Certificate of Incorporation so as to authorize or create, or to increase the authorized amount of, any class of Junior Stock (other than Class B Common Stock) shall not be deemed to affect adversely the voting powers, rights or preferences of the holders of shares of Series A Preferred Stock; (ii) the authorization or creation of, or the increase in the authorized amount of, or the issuance of any shares of any class or series of Senior Stock, Parity Stock or Class B Common Stock or any security convertible into shares of any class or series of Senior Stock, Parity Stock or Class B Common Stock; (iii) the merger or consolidation of the Corporation with or into any other entity, unless the resulting corporation will thereafter have no class or series of shares and no other securities either authorized or outstanding ranking prior to, or on a parity with, shares of Series A Preferred Stock in the payment of dividends or the distribution of its assets on liquidation, dissolution or winding up; (iv) the application of any funds, property or assets of the Corporation or any of its subsidiaries to the purchase, redemption, sinking fund or other retirement of any shares of any class of Common Stock or other Junior Stock or Parity Stock, if the aggregate value of all of the funds, property or assets so applied, paid or distributed from the Closing Date through and including the date of the application, payment, repurchase, would exceed $50,000,000.00; and (v) the declaration, payment or making of any dividend or distribution (in cash, property or obligations) in respect of any shares of any class of Common Stock or -17- 18 other Junior Stock or Parity Stock, other than a dividend or dividends payable solely in Common Stock or Junior Stock, if the aggregate value of all of the funds, property or assets so applied, paid or distributed from the Closing Date through and including the date of dividend or distribution would exceed the greater of (1) $10,000,000.00 and (2) $10,000,000.00 plus 50% of the Corporation's aggregate net income from the Closing Date through the calendar quarter ending prior to the declaration of such dividend or distribution (net of aggregate losses for such period and less the aggregate value of all dividends declared and all other funds, property or assets distributed in respect of any shares of class of Common Stock or other Junior Stock or Parity Stock from the Closing Date through and including the date such dividend or distribution is paid or distributed). For purposes of this subsection (v), "net income" shall be determined in accordance with generally accepted accounting principles and otherwise in a manner comparable to the manner in which net income is calculated or determined for purposes of the financial statements included in the periodic reports filed by the Corporation with the Securities and Exchange Commission prior to the Closing date. (d) In connection with any right to vote pursuant to Section 8(c), each holder of shares of Series A Preferred Stock shall have one vote for each share held. The above notwithstanding, and subject to Section 8(b), no consent of holders of Series A Preferred shall be required for the creation of any indebtedness of any kind of the Corporation. (e) The term "Voting Stock" means any class or classes of capital stock, or securities convertible into or exchangeable for any class of capital stock, of the Corporation pursuant to which the holders thereof have the general power under ordinary circumstances to vote with respect to the election of at least a majority of the Board of Directors of the Corporation, irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency. 9. Sinking Fund Redemption. The shares of the Series A Preferred Stock are not subject to sinking fund requirements. 10. Exchange. (a) Shares of Series A Preferred Stock shall be exchangeable for Convertible Debt (as defined below), in whole but not in part, out of surplus of the Corporation legally available for such exchange, at any time and from time to time at the option of the Corporation; provided that the holders of Series A Preferred Stock at that time are reasonably satisfied that the receipt of the Convertible Debt in such exchange shall not be treated as a dividend or ordinary income to such holders. All unpaid dividends on the shares of Series A Preferred Stock, including Default Dividends and dividends accumulated from the last preceding Dividend Payment Date through the date fixed for such exchange, shall be declared and paid prior to or on the same date as the date of any exchange pursuant to this Section 10. The Corporation shall cause the Convertible Debt to be issued on and dated the date which coincides with the date of exchange of the Series A Preferred Stock. (b) Any notice of any exchange of the Series A Preferred Stock given by the Corporation shall be mailed to each holder of shares of Series A Preferred Stock to be exchanged at such holder's address as it appears on the books of the Corporation. Such notice shall set forth the procedures for exchanging certificates representing Series A Preferred Stock for Convertible -18- 19 Debt with a principal amount equal to 100% of the aggregate Liquidation Preference of the shares of Series A Preferred Stock being exchanged. The Corporation shall as promptly as practicable thereafter mail to each such holder a notice setting forth the procedures for exchanging certificates representing Series A Preferred Stock for Convertible Debt. Upon such exchange, the rights of the holders of Series A Preferred Stock to be exchanged as stockholders of the Corporation shall cease, and the person or persons entitled to receive the Convertible Debt issuable upon such exchange shall be treated for all purposes as the registered holder or holders of such Convertible Debt. (c) The shares of Series A Preferred Stock which have been exchanged shall no longer be deemed to be outstanding and shall be retired and all rights with respect to such shares, including, without limitation, the rights, if any, to receive dividends (and interest thereon) and to receive notices and to vote or consent (except for the right of the holders to receive unpaid dividends, if any, and Convertible Debt and Common Stock, as provided herein, in exchange therefor) shall forthwith cease. (d) Upon any exchange of shares of Series A Preferred Stock into Convertible Debt, as provided herein, in accordance with this Section 10, the Corporation will pay any documentary, stamp or similar issue or transfer taxes which may be due with respect to the transfer and exchange of such exchanged shares, if any; provided, however, that if the Convertible Debt into which the shares of Series A Preferred Stock is exchangeable pursuant to this Section 10 is to be issued in the name of any person other than the holder of the shares of Series A Preferred Stock to be so exchanged, the amount of any transfer taxes (whether imposed on the Corporation, the holder or such other person) payable on account of the transfer to such person will be payable by the holder. (e) Unless otherwise agreed by the Corporation and each holder of shares of Series A Preferred Stock, any shares exchanged at the Corporation's election shall be called for exchange on a pro rata basis from all holders of Series A Preferred Stock. Any exchange for which shares are called for exchange on a pro rata basis (whether or not some of such shares so called are subsequently converted pursuant to Section 6) shall comply with this Section 10. Any fractional share of Series A Preferred Stock which would otherwise be issuable as a result of any exchange of less than all shares held shall be included in the shares exchanged. (f) The Convertible Debt shall have a maturity date of the tenth anniversary of the Closing Date; a principal amount equal to the Liquidation Preference multiplied by the number of shares of Series A Preferred Stock exchanged for such Convertible Debt (and a proportionate principal amount for any fractional share exchanged); shall provide for payment of interest at the rate of 5.5% per annum (and default interest at the rate of 8.5% per annum), payable quarterly in cash; shall provide for holders thereof to have the right to put the Convertible Debt to the Corporation at 101% of principal (plus accrued interest) on the occurrence of certain "change of control" events; and shall be convertible and redeemable on terms substantially the same as those of the Series A Preferred Stock; in each case, on the terms and conditions set forth in the Convertible Debt Indenture and shall otherwise be on the terms set forth in the Convertible Debt Indenture. -19- 20 (g) Definitions. "Convertible Debt" means the 5.5% Convertible Debentures of the Corporation issued pursuant to the Convertible Debt Indenture, as amended, modified, supplemented, restructured, replaced, extended or refinanced from time to time in accordance with the terms hereof and thereof. "Convertible Debt Indenture" means the indenture pursuant to which the Convertible Debt is to be issued, having terms in accordance with this Section 10 and otherwise in form and substance acceptable to holders of a majority of Series A Preferred Stock immediately prior to the effectiveness of such indenture. -20- 21 IN WITNESS WHEREOF, Carmike Cinemas, Inc. has caused this Certificate to be duly executed on its behalf by its undersigned duly authorized officer this 24th day of November 1998. CARMIKE CINEMAS, INC. By: /s/ F. Lee Champion, III ---------------------------------- Name: F. Lee Champion, III Title: Senior Vice President EX-4.1 4 INDENTURE DATED FEBRUARY 3,1999 1 EXHIBIT 4.1 EXECUTION COPY - -------------------------------------------------------------------------------- ------------------------- CARMIKE CINEMAS, INC. SERIES A AND SERIES B 9 3/8% SENIOR SUBORDINATED NOTES DUE 2009 ------------------------- ======================== INDENTURE Dated as of February 3, 1999 ======================== ------------------------- THE BANK OF NEW YORK Trustee ------------------------- 2 CROSS-REFERENCE TABLE*
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. 3 TABLE OF CONTENTS
Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions.........................................................................................1 Section 1.02. Other Definitions..................................................................................16 Section 1.03. Incorporation by Reference of Trust Indenture Act..................................................16 Section 1.04. Rules of Construction..............................................................................17 ARTICLE 2 THE NOTES Section 2.01. Form and Dating....................................................................................17 Section 2.02. Execution and Authentication.......................................................................18 Section 2.03. Registrar and Paying Agent.........................................................................18 Section 2.04. Paying Agent to Hold Money in Trust................................................................19 Section 2.05. Holder Lists.......................................................................................19 Section 2.06. Transfer and Exchange..............................................................................19 Section 2.07. Replacement Notes..................................................................................29 Section 2.08. Outstanding Notes..................................................................................29 Section 2.09. Treasury Notes.....................................................................................30 Section 2.10. Temporary Notes....................................................................................30 Section 2.11. Cancellation.......................................................................................30 Section 2.12. Defaulted Interest.................................................................................30 Section 2.13. CUSIP Numbers......................................................................................31 ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01. Notices to Trustee.................................................................................31 Section 3.02. Selection of Notes to Be Redeemed..................................................................31 Section 3.03. Notice of Redemption...............................................................................32 Section 3.04. Effect of Notice of Redemption.....................................................................32 Section 3.05. Deposit of Redemption Price........................................................................32 Section 3.06. Notes Redeemed in Part.............................................................................33 Section 3.07. Optional Redemption................................................................................33 Section 3.08. Mandatory Redemption...............................................................................33 ARTICLE 4 COVENANTS Section 4.01. Payment of Notes...................................................................................34 Section 4.02. Maintenance of Office or Agency....................................................................34 Section 4.03. Reports............................................................................................34 Section 4.04. Compliance Certificate.............................................................................35 Section 4.05. Taxes..............................................................................................36 Section 4.06. Stay, Extension and Usury Laws.....................................................................36 Section 4.07. Restricted Payments................................................................................36 Section 4.08. Designation of Restricted and Unrestricted Subsidiaries............................................38 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.........................................39 Section 4.10. Fall-Away Event....................................................................................41 Section 4.11. Transactions with Affiliates.......................................................................42 Section 4.12. Corporate Existence................................................................................43 Section 4.13. Payments for Consent...............................................................................43 Section 4.14. Additional Note Guarantees.........................................................................43 Section 4.15. Offer to Repurchase Upon Change of Control.........................................................44 Section 4.16. No Senior Subordinated Debt........................................................................45
i 4 ARTICLE 5 SUCCESSORS Section 5.01. Merger, Consolidation, or Sale of Assets...........................................................45 Section 5.02. Successor Corporation Substituted..................................................................46 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01. Events of Default..................................................................................46 Section 6.02. Acceleration.......................................................................................48 Section 6.03. Other Remedies.....................................................................................49 Section 6.04. Waiver of Past Defaults............................................................................49 Section 6.05. Control by Majority................................................................................49 Section 6.06. Limitation on Suits................................................................................49 Section 6.07. Rights of Holders of Notes to Receive Payment......................................................50 Section 6.08. Collection Suit by Trustee.........................................................................50 Section 6.09. Trustee May File Proofs of Claim...................................................................50 Section 6.10. Priorities.........................................................................................50 Section 6.11. Undertaking for Costs..............................................................................51 ARTICLE 7 TRUSTEE Section 7.01. Duties of Trustee..................................................................................51 Section 7.02. Rights of Trustee..................................................................................52 Section 7.03. Individual Rights of Trustee.......................................................................53 Section 7.04. Trustee's Disclaimer...............................................................................53 Section 7.05. Notice of Defaults.................................................................................53 Section 7.06. Reports by Trustee to Holders of the Notes.........................................................53 Section 7.07. Compensation and Indemnity.........................................................................54 Section 7.08. Replacement of Trustee.............................................................................55 Section 7.09. Successor Trustee by Merger, etc...................................................................55 Section 7.10. Eligibility; Disqualification......................................................................56 Section 7.11. Preferential Collection of Claims Against Company..................................................56 Section 7.12. Trustee's Application for Instructions from the Company............................................56 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...........................................56 Section 8.02. Legal Defeasance and Discharge.....................................................................56 Section 8.03. Covenant Defeasance................................................................................57 Section 8.04. Conditions to Legal or Covenant Defeasance.........................................................57 Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.......................................................................58 Section 8.06. Repayment to Company...............................................................................59 Section 8.07. Reinstatement......................................................................................59 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01. Without Consent of Holders of Notes................................................................59 Section 9.02. With Consent of Holders of Notes...................................................................60 Section 9.03. Compliance with Trust Indenture Act................................................................62 Section 9.04. Revocation and Effect of Consents..................................................................62 Section 9.05. Notation on or Exchange of Notes...................................................................62 Section 9.06. Trustee to Sign Amendments, etc....................................................................62 ARTICLE 10 SUBORDINATION Section 10.01. Agreement to Subordinate..........................................................................62
ii 5 Section 10.02. Liquidation; Dissolution; Bankruptcy..............................................................63 Section 10.03. Default on Designated Senior Debt.................................................................63 Section 10.04. Acceleration of Notes.............................................................................64 Section 10.05. When Distribution Must Be Paid Over...............................................................64 Section 10.06. Notice by Company.................................................................................64 Section 10.07. Subrogation.......................................................................................64 Section 10.08. Relative Rights...................................................................................64 Section 10.09. Subordination May Not Be Impaired by Company......................................................65 Section 10.10. Distribution or Notice to Representative..........................................................65 Section 10.11. Rights of Trustee and Paying Agent................................................................65 Section 10.12. Authorization to Effect Subordination.............................................................65 Section 10.14. Amendments........................................................................................66 Section 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness..........................................66 ARTICLE 11 NOTE GUARANTEES Section 11.01. Guarantee.........................................................................................66 Section 11.02. Subordination of Note Guarantee...................................................................67 Section 11.03. Limitation on Guarantor Liability.................................................................67 Section 11.04. Execution and Delivery of Note Guarantee..........................................................67 Section 11.05. Guarantors May Consolidate, etc., on Certain Terms................................................68 Section 11.06. Releases Following Sale of Assets.................................................................69 ARTICLE 12 MISCELLANEOUS Section 12.01. Trust Indenture Act Controls......................................................................69 Section 12.02. Notices...........................................................................................69 Section 12.03. Communication by Holders of Notes with Other Holders of Notes.....................................70 Section 12.04. Certificate and Opinion as to Conditions Precedent................................................70 Section 12.05. Statements Required in Certificate or Opinion.....................................................71 Section 12.06. Rules by Trustee and Agents.......................................................................71 Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders..........................71 Section 12.08. Governing Law.....................................................................................71 Section 12.09. No Adverse Interpretation of Other Agreements.....................................................72 Section 12.10. Successors........................................................................................72 Section 12.11. Severability......................................................................................72 Section 12.12. Counterpart Originals.............................................................................72 Section 12.13. Table of Contents, Headings, etc..................................................................72 Section 7.12. Statement by Officers as to Default.................................................................2
iii 6 EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITE INVESTOR Exhibit E FORM OF NOTE GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE SCHEDULES Schedule I Schedule of Guarantors iv 7 INDENTURE dated as of February 3, 1999 between Carmike Cinemas, Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation as trustee (the "Trustee"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 9 3/8% Series A Senior Subordinated Notes due 2009 (the "Series A Notes") and the 9 3/8% Series B Senior Subordinated Notes due 2009 (the "Series B Notes" and, together with the Series A Notes, the "Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. "144A Global Note" means a global note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "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. "Additional Notes" means up to $150.0 million aggregate principal amount of Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes. "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, Euroclear and Cedel that apply to such transfer or exchange. 8 "Asset Acquisition" means: (a) any transaction pursuant to which any Person shall become a Restricted Subsidiary of the Company or shall be consolidated or merged with the Company or any Restricted Subsidiary of the Company; or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of assets of any Person comprising a division, line of business or theatre site of such Person. "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. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "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. "Cedel" means Cedel Bank, SA. "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 2 9 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 (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, the net income of the Company and its Restricted Subsidiaries for such period plus, to the extent such amount was deducted in calculating such net income: (a) Consolidated Interest Expense; (b) income taxes; (c) depreciation expense; (d) amortization expense; (e) all other non-cash items, extraordinary items, nonrecurring 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 cumulative effects of changes in accounting principles increasing such net income, all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP; (f) upfront expenses resulting from equity offerings, investments, mergers, recapitalizations, option buyouts, Dispositions, Asset Acquisitions and similar transactions to the extent such expenses reduce net income; (g) restructuring charges reducing net income; and (h) gains or losses on Dispositions; provided that, Consolidated EBITDA shall not include: (x) the net income (or net loss) of any Person that is not a Restricted Subsidiary, except (I) with respect to net income, to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries by such Person during such period and (II) with respect to net losses, to the extent of the amount of investments made by the Company or any Restricted Subsidiary in such Person during such period; (y) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (c) of Section 4.07 hereof (and in such case, except to the extent includable pursuant to clause (x) above), the net income (or net loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or 3 10 substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; and (z) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income 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 outstanding on the date of this Indenture or incurred or issued thereafter in compliance with Section 4.09 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 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 the net income of such Restricted Subsidiary is excluded in the calculation of Consolidated EBITDA pursuant to clause (z) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is 4 11 excluded from the calculation of Consolidated EBITDA pursuant to clause (z) 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 (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 motion picture 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 Facilities" means one or more debt facilities or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, 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 Facilities; and (b) after payment in full of all Obligations under Credit 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". "Disposition" means, with respect to any Person, any merger, consolidation or other business combination involving such Person (whether or not such Person is the Surviving Person) or the sale, 5 12 assignment, or transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets or Capital Stock. "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 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. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means any underwritten offering of Qualified Capital Stock of the Company. "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Exchange Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means up to $41.9 million in aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under any Credit Facility) in existence on the date of this Indenture, until such amounts are repaid. "Existing Preferred Stock" means the convertible preferred stock of the Company issued to GS Capital Partners III, L.P. and its affiliates pursuant to a Stock Purchase Agreement, dated November 22, 1998. 6 13 "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 date of this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), 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 current Domestic Restricted Subsidiaries; and (b) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of this Indenture; and their respective successors and assigns. "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. "IAI Global Note" means the global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold to Institutional Accredited Investors. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent, in respect of: (a) borrowed money; 7 14 (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (c) banker's acceptances; (d) representing Capital Lease Obligations; (e) 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 (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. 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. 8 15 "Initial Notes" means the first $200.0 million aggregate principal amount of Notes issued under this Indenture on the date hereof. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs. "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. "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. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "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 issuance of the Existing Preferred Stock and the offering of the Notes; (b) 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; (c) any Dispositions, 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) 9 16 incurring, assuming or otherwise becoming liable for or issuing Indebtedness or Preferred Stock) or Theatre Completions 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 Disposition, Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness or Preferred Stock and also including any Consolidated EBITDA associated with such Asset Acquisition) or Theatre Completion had occurred on the first day of the Reference Period; (d) the effects of incremental contributions to Consolidated EBITDA that the Company reasonably believes in good faith could have been achieved during the Reference Period as a result of such Asset Acquisition or Theatre Completion (regardless whether such incremental contributions could then be reflected in pro forma financial statements under GAAP, Regulation S-X promulgated by the Commission or any other regulation or policy of the Commission); provided, however, that such incremental contributions were identified and quantified in good faith in an Officers' Certificate delivered to the Trustee at the time of any calculation of the Leverage Ratio; and (e) any motion picture 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. "Market Making Shelf Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Non-Recourse Debt" means Indebtedness: (a) as to which neither the Company nor any of its Restricted Subsidiaries (i) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (ii) is directly or indirectly liable as a guarantor or otherwise, or (iii) constitutes the lender; (b) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (c) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a Person who is not a U.S. Person. 10 17 "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 it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Offering" means the offering of the Notes by the Company. "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 a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, 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. "Participant" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to DTC, shall include Euroclear and Cedel). "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 Stock Purchase 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 Investments" means any one or more Investments in any one or more Unrestricted Subsidiaries of the Company made since the date of this Indenture having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this definition not to exceed $10.0 million at any time outstanding. "Permitted Junior Securities" means: (a) Equity Interests in the Company or any Guarantor; or (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 Subsidiary Guarantees are subordinated to Senior Debt under this Indenture. 11 18 "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. "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. "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Stock. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Exchange and Registration Rights Agreement, dated as of February 3, 1999, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements between the Company and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from 12 19 time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Global Note bearing the Private Placement Legend and deposited with or on behalf of the Depositary and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "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 Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers 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 Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investments" means any Investment in an Unrestricted Subsidiary other than a Permitted Investment. "Restricted Period" means the 40-day distribution compliance period as defined in Regulation S. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. 13 20 "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor to the rating agency business thereof. "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 Credit Facilities 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 Subsidiary 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) 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. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "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 date of this Indenture. "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 date of this Indenture. "Special Interest" means, as liquidated damages, all special interest then accruing pursuant to Section 2(d) of the Registration Rights Agreement. "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. 14 21 "Stock Purchase Agreement" means that certain Stock Purchase Agreement, dated as of November 22, 1998 by and between the Company and GS Capital Partners III, L.P. and certain related parties, as in effect on the date of this Indenture. "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. "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. "Theatre Completion" means any motion picture theatre or screen or enhancement which was first opened for business during any applicable period. "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. "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. "Unrestricted Global Note" means a 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, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Subsidiary" means Military Services, Inc. and each Subsidiary of the Company created after the date of this Indenture and so designated by a resolution adopted by the Board of Directors; provided, however, that, in each case: (a) such Subsidiary had no Indebtedness other than Non-Recourse Debt; and (b) at the time of designation of such Subsidiary, such Subsidiary has no property or assets (other than de minimis assets resulting from the initial capitalization of such Subsidiary). "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. 15 22 "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 "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; 16 23 "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. 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 17 24 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. (c) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Cedel Bank. 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 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. 18 25 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 and Special Interest, if any 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 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. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth 19 26 herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (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 credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (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. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transferee will take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, 20 27 including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement or the Market Making Shelf Registration Statement, in each case, in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. 21 28 (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, 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 in a Restricted Global Note pursuant to this Section 2.06(c)(i) 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 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. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. 22 29 (ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement or the Market Making Shelf Registration Statement, in each case, in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted 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, upon satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, 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)(iii) 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 23 30 Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable; (F) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note. (ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an 24 31 Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement or the Market Making Shelf Registration Statement, in each case, in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a written request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. 25 32 (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. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement or the Market Making Shelf Registration Statement, in each case, in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or 26 33 (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT 27 34 PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) 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 particular Global Note have been exchanged for Definitive Notes or a particular 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 a beneficial interest in another Global Note or for 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; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased 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 increase. (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). 28 35 (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 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 Business 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 29 36 by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof. 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 bona fide 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 30 37 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 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 30 days 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. 31 38 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. 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. One Business Day prior to 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. 32 39 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 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 (including Special 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 (including Special 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. 33 40 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 all Special Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. 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 and Special Interest, if any, (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 Corporate Trust Office of the Trustee 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 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. If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries and if any of its Unrestricted 34 41 Subsidiaries would constitute a Significant Subsidiary or any group of Unrestricted Subsidiaries taken as a whole, would constitute a Significant Subsidiary, then the quarterly and annual financial information required by this Section shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in "Management's Discussion and Analysis of Financial Condition and Results of Operations", of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. 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) Following the consummation of the Exchange Offer, 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 understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. 35 42 (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; (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 Subsidiary Guarantees, except a payment of interest or principal at the Stated Maturity thereof; or (d) make any Restricted Investment (all such payments and other actions set forth in clauses (a) through (d) 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 36 43 (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 date of this Indenture 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 date of this Indenture 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, less the product of 2.0 times the Company's Consolidated Interest Expense since the date of this Indenture 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 date of this Indenture (other than (A) sales of Disqualified Stock, and (B) Equity Interests sold to any of the Company's Subsidiaries), plus (iii) without duplication of any amount included in clause (c)(ii) above, 100% of the aggregate net proceeds, including the fair market value of property other than cash, received by the Company as a capital contribution since the date of this Indenture, plus (iv) 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, plus (v) to the extent that any Unrestricted Subsidiary is redesignated as a Restricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so redesignated. 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; 37 44 (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; (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; and (g) the declaration and payment of dividends to holders of the Existing Preferred Stock. 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. To the extent the issuance of Capital Stock and the receipt of capital contributions are applied to permit the issuance of Indebtedness pursuant to clause (l) of the definition of Permitted Debt, the issuance of such Capital Stock and the receipt of such capital contributions shall not be applied to Restricted Payments under this covenant. Section 4.08. Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary so designated shall be deemed to be a Restricted Investment made as of the time of such designation and shall either reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 hereof or reduce the amount available for future Permitted Investments, as the Company shall determine. That designation shall only be permitted if such Restricted Investment would be permitted at that time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (i) the Company could incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to the Leverage Ratio set forth in the first paragraph of Section 4.09 hereof and (ii) no Default or Event of Default shall have occurred or be continuing. 38 45 Any designation pursuant to this Section 4.08 by the Board of Directors shall be evidenced to the Trustee by the filing with the Trustee of a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. 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"): (a) the incurrence by the Company and any of its Restricted Subsidiaries of additional Indebtedness and letters of credit pursuant to Credit 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 $275.0 million; (b) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (c) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes to be issued on the date of this Indenture and the Exchange Notes to be issued pursuant to the Registration Rights Agreement (including, in each case, the Subsidiary 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), (d), (l) or (m) 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 Subsidiary 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 39 46 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 (m); and (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 that is permitted by the terms of this Indenture to be outstanding or currency exchange risk other than solely for speculative purposes; (h) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; (i) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; (j) Indebtedness 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 with respect to reimbursement type obligations regarding workers' compensation claims; (k) Indebtedness 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 40 47 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 (k)); (l) Indebtedness, Disqualified Stock or Preferred Stock of Persons that are acquired by the Company or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms of this Indenture; provided, however, that such Indebtedness, Disqualified Stock or Preferred Stock is not incurred in contemplation of such acquisition or merger; and provided further that after giving effect to such acquisition or merger, either (i) the Company would be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to the Leverage Ratio set forth in the first paragraph of this Section 4.09 or (ii) the Company's Leverage Ratio immediately after giving effect to such acquisition or merger would be lower than the Company's Leverage Ratio immediately prior to such acquisition or merger; and (m) additional Indebtedness of the Company or any of its Restricted Subsidiaries in an aggregate principal amount which, when aggregated with the aggregate principal amount of all other Indebtedness then outstanding and incurred pursuant to this clause (m), does not at any one time outstanding exceed the sum of (x) $100.0 million and (y) 100% of the net cash proceeds received by the Company from the sale of its Equity Interests (other than Disqualified Stock) after the date of this Indenture to the extent such net cash proceeds have not been applied to make Restricted Payments or to effect other transactions pursuant to Section 4.07 hereof. 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 (m) 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 Facilities outstanding on the date on which Notes are first issued and authenticated under this Indenture 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. Notwithstanding the foregoing, the Company shall not incur or suffer to exist, or permit any of its Restricted Subsidiaries or its Unrestricted Subsidiaries to incur or suffer to exist, any Obligations with respect to an Unrestricted Subsidiary that would violate the provisions set forth in the definition of Unrestricted Subsidiary. Specifically, without limiting the generality of the foregoing, if an Unrestricted Subsidiary incurs Indebtedness that is not Non-Recourse Debt or any Indebtedness of an Unrestricted Subsidiary ceases to be Non-Recourse Debt, such Unrestricted Subsidiary shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date. Notwithstanding any other provision of this Section 4.09, the Company shall not issue any Indebtedness in exchange for the Existing Preferred Stock unless the Weighted Average Life to Maturity of such Indebtedness is at least one year longer than the remaining Weighted Average Life to Maturity of the Notes. 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 and 5.01 hereof will terminate if and when the Notes achieve Investment Grade Status (a "Fall-Away Event"); provided, however, that the Company's and its Restricted 41 48 Subsidiaries' obligations to comply with such provisions shall be reinstated as to events occurring after the date of reinstatement if the Notes cease to be of Investment Grade Status, 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, noncompetition or confidentiality agreement with any officer of the Company, as in effect on the date of this Indenture (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; (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 42 49 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, any Stock Purchase Agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the date of this Indenture 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 date of this Indenture 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 date of this Indenture 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 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. 43 50 Section 4.14. Additional Note Guarantees. If the Company or any of its Subsidiaries acquires or creates another Domestic Subsidiary after the date of this Indenture, then that newly acquired or created Domestic Subsidiary must become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel to the Trustee within 10 Business Days of the date on which it was acquired or created; provided, however, this covenant shall not apply to any Subsidiary that has been properly designated as an Unrestricted Subsidiary in accordance with Section 4.08 hereof for so long as it continues to constitute an Unrestricted Subsidiary. The form of such Supplemental Indenture is attached as Exhibit F 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 (including Special 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 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 44 51 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 Subsidiary Guarantee. 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: (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, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee; (c) immediately after such transaction no Default or Event of Default exists; and 45 52 (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. 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 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 (including Special Interest) on the Notes whether or not prohibited by Article Ten hereof and such default continues for a period of 30 days; 46 53 (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 Ten hereof; (c) the Company or any of its Restricted Subsidiaries fails to comply with any of the provisions of Section 4.07, 4.09, 4.15 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 the Holders of at least 25% in aggregate principal amount of the Notes (including Additional Notes, if any) 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 date of this Indenture, 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 provided in such Indebtedness on the date of such default (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness 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; (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; 47 54 (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 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 the rescission would not conflict with any judgment or decree and 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. 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 ---- ---------- 1999.......................................... 109.375% 2000.......................................... 108.438% 2001.......................................... 107.500% 2002.......................................... 106.563% 2003.......................................... 105.625%
48 55 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. 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 principal of, premium and, if any, or interest (including Special 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. 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 49 56 (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 (including Special 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 trust against the Company for the whole amount of principal of, premium, if any, and interest (including Special 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. 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 Six, it shall pay out the money in the following order: 50 57 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 (including Special Interest), ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Special Interest, if any 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. 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). 51 58 (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. (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, 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. 52 59 (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. (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. 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 date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes 53 60 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). 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 satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section 7.07, 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. 54 61 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. 55 62 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 Eight. 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 56 63 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 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 Special Interest, if any, and interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article Two 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 Eight. Subject to compliance with this Article Eight, 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, 4.08, 4.09, 4.11, 4.13, 4.14, 4.15 and 4.16 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 Special Interest, if any, 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 date of this Indenture, there has been a change in the applicable 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 57 64 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 Eight 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 Notes of all sums due and to become due thereon in respect of principal, premium and Special Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. 58 65 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 Eight 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 and Special Interest, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium and Special Interest, if any, 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 and Special Interest, if any, 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. 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: 59 66 (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 Two 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 Five or Article Eleven 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; (f) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; or (g) 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 7.02 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 (including Additional Notes, if any) 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 (including Additional Notes, if any) 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. 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 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or 60 67 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 (including Additional Notes, if any) 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 (including Additional Notes, if any) 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; (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 Ten hereof that adversely affects the rights of any Holder of Notes. 61 68 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 Nine 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 this Article Ten, 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. 62 69 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 Ten 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 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, 63 70 if this Article Ten 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 Ten, 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 Ten, 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 Ten, 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 Ten, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article Ten. 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 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 Ten 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 Ten defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: 64 71 (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 Ten 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 Ten, 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 Ten. Section 10.11. Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article Ten 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 would cause the payment of any Obligations with respect to the Notes to violate this Article Ten. Only the Company or a Representative may give the notice. Nothing in this Article Ten 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 65 72 subordination as provided in this Article Ten, 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 10.14. Amendments. The provisions of this Article Ten 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 Ten that adversely affects the rights of any Holder of Notes. Section 10.15. 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 Eleven, 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 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 66 73 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 Six 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 Six 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 Eleven 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 Ten 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 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 Eleven, 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 E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and 67 74 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 date of this Indenture, 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 Eleven, 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 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 date of the execution hereof. Except as set forth in Articles Four and Five 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. 68 75 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. In addition, if the Company properly designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary, then such Guarantor shall 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 Eleven. 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: 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 69 76 With a copy to: Troutman Sanders LLP NationsBank Plaza 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308-2216 Telecopier No.: (404) 962-6725 Attention: Patricia A. Wilson If to the Trustee: The Bank of New York 101 Barclay Street, Floor 21 West New York, NY 10286 Telecopier No.: (212) 815-5915 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. 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: 70 77 (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, 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 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. 71 78 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. [Signatures on following page] 72 79 SIGNATURES Dated as of February 3, 1999 CARMIKE CINEMAS, INC. By:/s/ F. Lee Champion, III --------------------------------- Name: F. Lee Champion, III Title: Senior Vice President, General Counsel & Secretary EASTWYNN THEATRES, INC. By:/s/ F. Lee Champion, III --------------------------------- Name: F. Lee Champion, III Title: Senior Vice President, General Counsel & Secretary WOODEN NICKEL PUB, INC. By:/s/ F. Lee Champion, III --------------------------------- Name: F. Lee Champion, III Title: Secretary Indenture Signature Page 80 Dated as of February 3, 1999 THE BANK OF NEW YORK, AS TRUSTEE By:/s/ Marie E. Trimboli --------------------------------- Name: Marie E. Trimboli Title: Assistant Treasurer Indenture Signature Page 81 [Face of Note] CUSIP/CINS 143436AC7 9 3/8% [Series A] [Series B] 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: February 3, 1999 Indenture Signature Page 82 Dated as of February 3, 1999 Carmike Cinemas, Inc. By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: (SEAL) This is one of the Global Notes referred to in the within-mentioned Indenture: THE BANK OF NEW YORK, as Trustee By: -------------------------------------------- (Authorized Signatory) 83 [Back of Note] 9 3/8% [Series A] [Series B] Senior Subordinated Notes due 2009 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] [Insert the Private Placement 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 9 3/8% per annum from February 3, 1999 until maturity and shall pay the Special Interest payable pursuant to Section 2(d) of the Registration Rights Agreement referred to below. The Company will pay interest and Special 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 August 1, 1999. 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 and Special 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) and Special Interest, if any, 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 (including Special 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 including Special 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, premium and Special Interest 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, The Bank of New York, 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. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of February 3, 1999 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated A-2 84 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 $350.0 million in aggregate principal amount of which $200.0 million are Initial Notes and up to $150.0 million may be issued as Additional Notes. 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 (including Special 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 (including Special 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 and Special Interest thereon, if any, 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 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 A-3 85 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 and Additional Notes, if any, 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 and Additional Notes, if any, 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, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, 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 (including Special 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 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 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 (including Additional Notes, if any) 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 A-4 86 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. 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. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Exchange and Registration Rights Agreement dated as of February 3, 1999, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 18. 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. A-5 87 The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 Attention: President A-6 88 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-7 89 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-8 90 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-9 91 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 The Bank of New York 101 Barclay Street, Floor 21 West New York, NY 10286 Re: 9 3/8% Senior Subordinated Notes due 2009 Reference is hereby made to the Indenture, dated as of February 3, 1999 (the "Indenture"), between Carmike Cinemas, Inc., as issuer (the "Company"), and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the B-1 92 Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or B-2 93 Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ------------------------------------------- [Insert Name of Transferor] By: ------------------------------------------- Name: Title: Dated: -------------------------- B-3 94 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP__________), or (ii) [ ] Regulation S Global Note (CUSIP__________), or (iii)[ ] IAI Global Note (CUSIP___________); or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP_________), or (ii) [ ] Regulation S Global Note (CUSIP__________), or (iii)[ ] IAI Global Note (CUSIP_________); or (iv) [ ] Unrestricted Global Note (CUSIP__________); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 95 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 The Bank of New York 101 Barclay Street, Floor 21 West New York, NY 10286 Re: 9 3/8% Senior Subordinated Notes due 2009 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of February __, 1999 (the "Indenture"), between Carmike Cinemas, Inc., as issuer (the "Company"), and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. C-1 96 (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b)[ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note,[ ] IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-2 97 EXHIBIT C This certificate and the statements contained herein are made for your benefit and the benefit of the Company. -------------------------------------------- [Insert Name of Transferor] By: ----------------------------------------- Name: Title: Dated: ------------------------ C-3 98 EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 The Bank of New York 101 Barclay Street, Floor 21 West New York, NY 10286 Re: 9 3/8% Senior Subordinated Notes due 2009 Reference is hereby made to the Indenture, dated as of February __, 1999 (the "Indenture"), between Carmike Cinemas, Inc., as issuer (the "Company"), and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with our proposed purchase of $____________ aggregate principal amount of: (a) [ ] a beneficial interest in a Global Note, or (b) [ ] a Definitive Note, we confirm that: 1. We understand that any subsequent transfer of the Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein. 3. We understand that, on any proposed resale of the Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies D-1 99 EXHIBIT D with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. ------------------------------------------- [Insert Name of Accredited Investor] By: ---------------------------------------- Name: Title: Dated: ---------------------- D-2 100 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 the Indenture and subject to the provisions in the Indenture dated as of February 3, 1999 (the "Indenture") among Carmike Cinemas, Inc., the Guarantors listed on Schedule I thereto and The Bank of New York, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, interest and Special Interest, if any, 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. 101 EASTWYNN THEATRES, INC. By: ------------------------------------ Name: Title: WOODEN NICKEL PUB, INC. By: ------------------------------------ Name: Title: 102 EXHIBIT F 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 The Bank of New York, 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 February 3, 1999 providing for the issuance of an aggregate principal amount of up to $350.0 million of 9 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 and Special Interest, if any, 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 and Special Interest, if any, 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 (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 F-1 103 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 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 F-2 104 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, the Note Guarantee and the Registration Rights Agreement 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 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 F-3 105 Guarantee. In addition, if the Company properly designates any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary, then such Guarantor shall 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. F-4 106 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: THE BANK OF NEW YORK as Trustee By: -------------------------------- Authorized Signatory F-5 107 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. Schedule I Page 1 EX-4.2 5 EXCHANGE & REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.2 EXECUTION COPY CARMIKE CINEMAS, INC. 9 3/8% SENIOR SUBORDINATED NOTES DUE 2009 UNCONDITIONALLY GUARANTEED AS TO THE PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY EASTWYNN THEATRES, INC. WOODEN NICKEL PUB, INC. --------- EXCHANGE AND REGISTRATION RIGHTS AGREEMENT FEBRUARY 3, 1999 Goldman, Sachs & Co., As representatives of the several Purchasers named in Schedule I to the Purchase Agreement c/o Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Ladies and Gentlemen: Carmike Cinemas, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to the Purchasers (as defined herein) upon the terms set forth in the Purchase Agreement (as defined herein) its 9 3/8% Senior Subordinated Notes due 2009, which are unconditionally guaranteed as to the payment of principal, premium, if any, and interest by the Guarantors named on Schedule I hereto. As an inducement to the Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Purchasers thereunder, the Company and the Guarantors agree with the Purchasers for the benefit of holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows: 1. Certain Definitions. For purposes of this Exchange and Registration Rights Agreement, the following terms shall have the following respective meanings: "Base Interest" shall mean the interest that would otherwise accrue on the Securities under the terms thereof and the Indenture, without giving effect to the provisions of this Exchange and Registration Rights Agreement. 1 2 The term "broker-dealer" shall mean any broker or dealer registered with the Commission under the Exchange Act. "Closing Date" shall mean the date on which the Securities are initially issued. "Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. "Conduct Rules" shall have the meaning assigned thereto in Section 3(d)(xix) hereof. "Effective Time," in the case of (i) an Exchange Registration, shall mean the time and date as of which the Commission declares the Exchange Registration Statement effective or as of which the Exchange Registration Statement otherwise becomes effective; (ii) a Shelf Registration, shall mean the time and date as of which the Commission declares the Shelf Registration Statement effective or as of which the Shelf Registration Statement otherwise becomes effective; and (iii) a Market Making Shelf Registration, shall mean the time and date as of which the Commission declares the Market Making Shelf Registration Statement effective or as of which the Market Making Shelf Registration Statement otherwise becomes effective. "Electing Holder" shall mean any holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(ii) or 3(d)(iii) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, or any successor thereto, as the same shall be amended from time to time. "Exchange Offer" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Registration" shall have the meaning assigned thereto in Section 3(c) hereof. "Exchange Registration Statement" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Securities" shall have the meaning assigned thereto in Section 2(a) hereof. "Guarantors" shall have the meaning assigned thereto in the Indenture. The term "holder" shall mean each of the Purchasers and other persons who acquire Registrable Securities from time to time (including any successors or assigns), in each case for so long as such person owns any Registrable Securities. 2 3 "Indenture" shall mean the Indenture, dated as of February 3, 1999, between the Company, the Guarantors and The Bank of New York, as Trustee, as the same shall be amended from time to time. "Market Making Shelf Registration" shall have the meaning assigned thereto in Section 2(c) hereof. "Market Making Shelf Registration Statement" shall have the meaning assigned thereto in Section 2(c) hereof. "NASD" shall have the meaning assigned thereto in Section 3(d) (xix) hereof. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto. The term "person" shall mean a corporation, association, partnership, organization, business, individual, government or political subdivision thereof or governmental agency. "Purchase Agreement" shall mean the Purchase Agreement, dated as of January 27, 1999 between the Purchasers, the Guarantors and the Company relating to the Securities. "Purchasers" shall mean the Purchasers named in Schedule I to the Purchase Agreement. "Registrable Securities" shall mean the Securities; provided, however, that a Security shall cease to be a Registrable Security when (i) in the circumstances contemplated by Section 2(a) hereof, the Security has been exchanged for an Exchange Security in an Exchange Offer as contemplated in Section 2(a) hereof; provided that any Exchange Security that, pursuant to the last two sentences of Section 2(a), is included in a prospectus for use in connection with resales by broker-dealers shall be deemed to be a Registrable Security with respect to Sections 5, 6 and 9 until resale of such Registrable Security has been effected within the 180-day period referred to in Section 2(a); (ii) in the circumstances contemplated by Section 2(b) hereof, a Shelf Registration Statement registering such Security under the Securities Act has been declared or becomes effective and such Security has been sold or otherwise transferred by the holder thereof pursuant to and in a manner contemplated by such effective Shelf Registration Statement; (iii) such Security is sold pursuant to Rule 144 under circumstances in which any legend borne by such Security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Indenture; (iv) such Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or (v) such Security shall cease to be outstanding. "Registration Default" shall have the meaning assigned thereto in Section 2(d) hereof. 3 4 "Registration Default Period" shall have the meaning assigned thereto in Section 2(d) hereof. "Registration Expenses" shall have the meaning assigned thereto in Section 4 hereof. "Resale Period" shall have the meaning assigned thereto in Section 2(a) hereof. "Restricted Holder" shall mean (i) a holder that is an affiliate of the Company within the meaning of Rule 405, (ii) a holder who acquires Exchange Securities outside the ordinary course of such holder's business, (iii) a holder who has arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing Exchange Securities and (iv) a holder that is a broker-dealer, but only with respect to Exchange Securities received by such broker-dealer pursuant to an Exchange Offer in exchange for Registrable Securities acquired by the broker-dealer directly from the Company. "Rule 144", "Rule 405" and "Rule 415" shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time. "Securities" shall mean, collectively, the 9 3/8 % Senior Subordinated Notes due 2009 of the Company to be issued and sold to the Purchasers, and securities issued in exchange therefor or in lieu thereof pursuant to the Indenture. Each Security is entitled to the benefit of the subsidiary guarantee provided for in the Indenture (the "Guarantee") and, unless the context otherwise requires, any reference herein to a "Security," an "Exchange Security" or a "Registrable Security" shall include a reference to the related Guarantee. The term "Secondary Offer Registration Statement" shall mean (i) the Shelf Registration Statement required to be filed by the Company pursuant to Section 2(b) hereof and/or (ii) the Market Making Shelf Registration Statement required to be filed by the Company pursuant to Section 2(c) hereof, in each case, as applicable. As used herein, references to a Secondary Offer Registration Statement in the singular shall, if applicable, be deemed to be in the plural. "Securities Act" shall mean the Securities Act of 1933, or any successor thereto, as the same shall be amended from time to time. "Shelf Registration" shall have the meaning assigned thereto in Section 2(b) hereof. "Shelf Registration Statement" shall have the meaning assigned thereto in Section 2(b) hereof. "Special Interest" shall have the meaning assigned thereto in Section 2(d) hereof. 4 5 "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended, or any successor thereto, and the rules, regulations and forms promulgated thereunder, all as the same shall be amended from time to time. Unless the context otherwise requires, any reference herein to a "Section" or "clause" refers to a Section or clause, as the case may be, of this Exchange and Registration Rights Agreement, and the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Exchange and Registration Rights Agreement as a whole and not to any particular Section or other subdivision. 2. Registration Under the Securities Act. (a) Except as set forth in Section 2(b) below, the Company agrees to file under the Securities Act, as soon as practicable, but no later than 90 days after the Closing Date, a registration statement relating to an offer to exchange (such registration statement, the "Exchange Registration Statement", and such offer, the "Exchange Offer") any and all of the Securities for a like aggregate principal amount of debt securities issued by the Company and guaranteed by the Guarantors, which debt securities and guarantee are substantially identical to the Securities and the related Guarantee, respectively (and are entitled to the benefits of a trust indenture which is substantially identical to the Indenture or is the Indenture and which has been qualified under the Trust Indenture Act), except that they have been registered pursuant to an effective registration statement under the Securities Act and do not contain provisions for the additional interest contemplated in Section 2(d) below (such new debt securities hereinafter called "Exchange Securities"). The Company agrees to use its reasonable best efforts to cause the Exchange Registration Statement to become effective under the Securities Act as soon as practicable thereafter, but no later than 180 days after the Closing Date. The Exchange Offer will be registered under the Securities Act on the appropriate form and will comply with all applicable tender offer rules and regulations under the Exchange Act. The Company further agrees to use its reasonable best efforts to commence and complete the Exchange Offer promptly, but no later than 45 business days after such Exchange Registration Statement has become effective, hold the Exchange Offer open for at least 30 days and issue Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn on or prior to the expiration of the Exchange Offer. The Exchange Offer will be deemed to have been "completed" only if the debt securities and related guarantee received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are, upon receipt, transferable by each such holder without restriction under Section 5 of the Securities Act and the Exchange Act (except for the requirement to deliver a prospectus included in the Exchange Act Registration Statement applicable to resales by any broker-dealer of Exchange Securities received by such broker-dealer pursuant to an Exchange Offer in exchange for Registrable Securities other than those acquired by the broker-dealer directly from the Company) and without material restrictions under the blue sky or securities laws of a substantial majority of the States of the United States of America. The Exchange Offer shall be deemed to have been completed upon the earlier to occur of (i) the Company having exchanged the Exchange Securities for all outstanding Registrable Securities pursuant to the Exchange Offer and 5 6 (ii) the Company having exchanged, pursuant to the Exchange Offer, Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn before the expiration of the Exchange Offer, which shall be on a date that is at least 30 days following the commencement of the Exchange Offer. The Company agrees (x) to include in the Exchange Registration Statement a prospectus for use in any resales by any holder of Exchange Securities that is a broker-dealer and (y) to keep such Exchange Registration Statement effective for a period (the "Resale Period") beginning when Exchange Securities are first issued in the Exchange Offer and ending upon the earlier of the expiration of the 180th day after the Exchange Offer has been completed or such time as such broker-dealers no longer own any Registrable Securities. With respect to such Exchange Registration Statement, such holders shall have the benefit of the rights of indemnification and contribution set forth in Sections 6(a), (c), (d) and (e) hereof. (b) If (i) on or prior to the time the Exchange Offer is completed existing Commission interpretations are changed such that the debt securities or the related guarantee received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are not or would not be, upon receipt, transferable by each such holder without restriction under the Securities Act, (ii) the Exchange Offer has not been completed within 210 days following the Closing Date or (iii) the Exchange Offer is not available to any holder of the Securities, the Company shall, in lieu of (or, in the case of clause (iii), in addition to) conducting the Exchange Offer contemplated by Section 2(a), file under the Securities Act as soon as practicable, but no later than the later of 45 days after the time such obligation to file arises or 90 days after the Closing Date, a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (such filing, the "Shelf Registration" and such registration statement, the "Shelf Registration Statement"). The Company agrees to use its reasonable best efforts (x) to cause the Shelf Registration Statement to become or be declared effective no later than 120 days after such Shelf Registration Statement is filed and to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the second anniversary of the Effective Time or such time as there are no longer any Registrable Securities outstanding, provided, however, that no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or to use the prospectus forming a part thereof for resales of Registrable Securities unless such holder is an Electing Holder, and (y) after the Effective Time of the Shelf Registration Statement, promptly upon the request of any holder of Registrable Securities that is not then an Electing Holder, to take any action reasonably necessary to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities, including, without limitation, any action necessary to identify such holder as a selling securityholder in the Shelf Registration Statement, provided, however, that nothing in this clause (y) shall relieve any such holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(iii) hereof. The Company further agrees to supplement or make amendments to the Shelf Registration Statement, as and when required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or rules and regulations 6 7 thereunder for shelf registration, and the Company agrees to furnish to each Electing Holder copies of any such supplement or amendment prior to its being used or promptly following its filing with the Commission. Notwithstanding the foregoing, the Company may postpone, for a period not to exceeds 30 days, supplementing or amending the Shelf Registration Statement if (i) the Company is in possession of material non-public information related to a proposed financing, recapitalization, acquisition, business combination or other material transaction and the Board of Directors of the Company determines (in good faith in a written resolution) that disclosure of such information would have a material adverse effect on the business or operations of the Company and its subsidiaries and disclosure of such information is not otherwise required by law and (ii)the Company delivers notice (which shall include a copy of the resolution of the Board of Directors with respect to such determination) to the Electing Holders and any placement agent or underwriting as contemplated by Section 3(d)(viii) (F) to the effect that Electing Holders may not make offers or sales under the Shelf Registration Statement; provided, however, that the Company may deliver only two such notices within any twelve-month period. Promptly upon the earlier of (x) public disclosure of such material non-public information, (y) the date on which such non-public information is no longer material and (z) 30 days after the date notice is given by the Company pursuant to clause (ii) above, the Company shall supplement or amend the Shelf Registration Statement as required by the immediately preceding sentence and give notice to the Electing Holders that offers and sales under the Shelf Registration Statement may be resumed. (c) The Company shall file under the Securities Act, on the date that the Exchange Registration Statement (or in lieu thereof, the Shelf Registration Statement) is filed with the Commission, a "shelf" registration statement (which may be the Exchange Registration Statement or the Shelf Registration Statement if permitted by the rules and regulations of the Commission) pursuant to Rule 415 under the Securities Act or any similar rule that may be adopted by the Commission providing for the registration of, and the sale on a continuous or delayed basis in secondary transactions by Goldman, Sachs & Co. of, Securities (in the event of a Shelf Registration) or Exchange Securities (in the event of an Exchange Offer) (such filing, the "Market Making Shelf Registration", and such registration statement, the "Market Making Shelf Registration Statement"). The Company agrees to use its reasonable best efforts to cause the Market Making Shelf Registration Statement to become or be declared effective on or prior to (i) the date the Exchange Offer is completed pursuant to Section 2(a) above or (ii) the date the Shelf Registration becomes or is declared effective pursuant to Section 2(b) above, and to keep such Market Making Shelf Registration Statement continuously effective for so long as Goldman, Sachs & Co. may be required to deliver a prospectus in connection with transactions in the Securities or the Exchange Securities, as the case may be. In the event that Goldman, Sachs & Co. holds Securities at the time an Exchange Offer is to be conducted under Section 2(a) above, the Company agrees that the Market Making Shelf Registration shall provide for the resale by Goldman, Sachs & Co. of such Securities and shall be kept continuously effective for so long as Goldman, Sachs & Co. may be required to deliver a prospectus in connection with the sale of such Securities. The 7 8 Company further agrees to supplement or make amendments to the Market Making Shelf Registration Statement, as and when required by the rules, regulations or instructions applicable to the registration form used by the Company for such Market Making Shelf Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, and the Company agrees to furnish to Goldman, Sachs & Co. copies of any such supplement or amendment prior to its being used or promptly following its filing with the Commission. Notwithstanding the foregoing, the Company may suspend the offering and sale under the Market Making Shelf Registration Statement for a period or periods the Board of Directors of the Company reasonably determines to be necessary, but in any event not to exceed 120 days in each year during which the Market Making Shelf Registration Statement is required to be effective and usable hereunder (measured from the Effective Time of the Market Making Shelf Registration Statement to successive anniversaries thereof) if (A)(i) the Company is in possession of material nonpublic information relating to a proposed financing, recapitalization, acquisition, disposition, business combination or other material transaction and (ii)(x) such transaction is required to be disclosed in the Market Making Shelf Registration Statement, the related prospectus or any amendment or supplement thereto, or the failure by the Company to disclose such transaction in the Market Making Shelf Registration Statement or related prospectus, or any amendment or supplement thereto, as then amended or supplemented, would cause the Market Making Shelf Registration Statement, prospectus or amendment or supplement thereto, to contain an untrue statement of material fact or omit to state a material fact necessary in order to make the statement therein, in the light of the circumstances under which they were made, not misleading, (y) information regarding the existence of such transaction has not then been publicly disclosed by or on behalf of the Company and (z) the Board of Directors of the Company determines in good faith that disclosure of such transaction would not be in the best interest of the Company or would have a material adverse effect on the consummation of such transaction, and (B) the Company notifies Goldman, Sachs & Co. within five days after such Board of Directors makes the relevant determination set forth in clause (A). (d) In the event that (i) the Company has not filed the Exchange Registration Statement, the Shelf Registration Statement or the Market Making Shelf Registration Statement on or before the date on which such registration statement is required to be filed pursuant to Section 2(a), 2(b) or 2(c) hereof, respectively, or (ii) such Exchange Registration Statement, Shelf Registration Statement or Market Making Shelf Registration Statement has not become effective or been declared effective by the Commission on or before the date on which such registration statement is required to become or be declared effective pursuant to Section 2(a), 2(b) or 2(c) hereof, respectively, or (iii) the Exchange Offer has not been completed within 45 business days after the initial effective date of the Exchange Registration Statement relating to the Exchange Offer (if the Exchange Offer is then required to be made) or (iv) any Exchange Registration Statement, Shelf Registration Statement or Market Making Shelf Registration Statement required by Section 2(a), 2(b) or 2(c) hereof is filed and declared effective but shall thereafter either be withdrawn by the Company or shall become subject 8 9 to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such registration statement (except as specifically permitted herein) without being succeeded immediately by an additional registration statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default" and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then, as liquidated damages for such Registration Default, subject to the provisions of Section 9(b), special interest ("Special Interest"), in addition to the Base Interest, shall accrue at a per annum rate of 0.25% for the first 90 days of the Registration Default Period, at a per annum rate of 0.50% for the second 90 days of the Registration Default Period, at a per annum rate of 0.75% for the third 90 days of the Registration Default Period and at a per annum rate of 1.0% thereafter for the remaining portion of the Registration Default Period; provided that the aggregate Special Interest rate shall in no event exceed 1.0% per annum. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Registration Statement, the Shelf Registration Statement and/or the Market Making Shelf Registration Statement, in the case of (i) above, (2) upon the effectiveness of the Exchange Registration Statement, the Shelf Registration Statement and/or the Market Making Shelf Registration Statement, in the case of (ii) above, (3) upon completion of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment or an additional registration statement that causes the Exchange Registration Statement, the Shelf Registration Statement and/or the Market Making Shelf Registration Statement to again be declared effective or made usable in the case of (iv) above, the Special Interest payable as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease accruing and the interest rate shall return to the Base Interest. (e) The Company shall take, and shall cause the Guarantors to take, all actions necessary or advisable to be taken by it to ensure that the transactions contemplated herein are effected as so contemplated, including all actions necessary or desirable to register the Guarantee under the registration statement contemplated in Section 2(a), 2(b) or 2(c) hereof, as applicable. (f) Any reference herein to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time and any reference herein to any post-effective amendment to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time. 3. Registration Procedures. If the Company files a registration statement pursuant to Section 2(a), Section 2(b) or Section 2(c), the following provisions shall apply: (a) At or before the Effective Time of the Exchange Offer, the Shelf Registration or the Marketing Making Shelf Registration, whichever may be first, the Company shall qualify the Indenture under the Trust Indenture Act. 9 10 (b) In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (c) In connection with the Company's obligations with respect to the registration of Exchange Securities as contemplated by Section 2(a) (the "Exchange Registration"), if applicable, the Company shall, as soon as practicable (or as otherwise specified): (i) prepare and file with the Commission, as soon as practicable but no later than 90 days after the Closing Date, an Exchange Registration Statement on any form which may be utilized by the Company and which shall permit the Exchange Offer and resales of Exchange Securities by broker-dealers during the Resale Period to be effected as contemplated by Section 2(a), and use its reasonable best efforts to cause such Exchange Registration Statement to become effective as soon as practicable thereafter, but no later than 180 days after the Closing Date; (ii) as soon as practicable prepare and file with the Commission such amendments and supplements to such Exchange Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Exchange Registration Statement for the periods and purposes contemplated in Section 2(a) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Exchange Registration Statement, and promptly provide each broker-dealer holding Exchange Securities with such number of copies of the prospectus included therein (as then amended or supplemented), in conformity in all material respects with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, as such broker-dealer reasonably may request prior to the expiration of the Resale Period, for use in connection with resales of Exchange Securities; (iii) promptly notify each broker-dealer that has requested or received copies of the prospectus included in such Exchange Registration Statement, and confirm such advice in writing, (A) when such Exchange Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Exchange Registration Statement or any post-effective amendment, when the same has become effective, (B) of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Exchange Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Exchange Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 5 cease to be true and correct in all 10 11 material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) at any time during the Resale Period when a prospectus is required to be delivered under the Securities Act, that such Exchange Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (iv) in the event that the Company would be required to provide notice pursuant to Section 3(c)(iii)(F) above to any broker-dealers holding Exchange Securities, without unreasonable delay prepare and furnish to each such holder a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of such Exchange Securities during the Resale Period, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (v) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such Exchange Registration Statement or any post-effective amendment thereto at the earliest practicable date; (vi) use its reasonable best efforts to (A) register or qualify the Exchange Securities under the securities laws or blue sky laws of such jurisdictions as are contemplated by Section 2(a), no later than the commencement of the Exchange Offer, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions until the expiration of the Resale Period and (C) take any and all other actions as may be reasonably necessary or advisable to enable each broker-dealer holding Exchange Securities to consummate the disposition thereof in such jurisdictions during the Resale Period; provided, however, that neither the Company nor the Guarantors shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(c)(vi), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; 11 12 (vii) use its reasonable best efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Exchange Registration, the Exchange Offer and the offering and sale of Exchange Securities by broker-dealers during the Resale Period; (viii) provide a CUSIP number for all Exchange Securities, not later than the Effective Time of the Exchange Registration Statement; and (ix) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but no later than eighteen months after the effective date of such Exchange Registration Statement, an earnings statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (d) In connection with the Company's obligations with respect to the Shelf Registration and the Market Making Shelf Registration, as applicable, the Company shall use its reasonable best efforts to cause the applicable Secondary Offer Registration Statement to permit the disposition of Registrable Securities by the holders thereof, in the case of the Shelf Registration, and of Securities or Exchange Securities by Goldman, Sachs & Co., in the case of a Market Making Shelf Registration (subject to the second paragraph of Section 2(c) hereof), in accordance with the intended method or methods of disposition thereof provided for in the applicable Secondary Offer Registration Statement. In connection therewith, the Company shall, as soon as practicable (or as otherwise specified): (i) (A) prepare and file with the Commission, as soon as practicable, but in any case within the time periods specified in Section 2(b) or Section 2(c) hereof, as applicable, a Secondary Offer Registration Statement on any form which may be utilized by the Company, which shall (x) register all of the Registrable Securities, in the case of a Shelf Registration, and the Securities and Exchange Securities, in the case of a Market Making Shelf Registration, for resale by the holders thereof in accordance with such method or methods of disposition as may be specified in writing by the holders of the Registrable Securities as, from time to time, may be Electing Holders, in the case of a Shelf Registration, or Goldman, Sachs & Co., in the case of a Market Making Shelf Registration and (y) be, in the case of a Market Making Shelf Registration, in the form approved by Goldman, Sachs & Co., and (B) use its reasonable best efforts to cause such Secondary Offer Registration Statement to become effective as soon as practicable after such filing, but in any case within the time periods specified in Section 2(b) or Section 2(c) hereof, as applicable; (ii) not less than 30 calendar days prior to the Effective Time of the Shelf Registration Statement, mail the Notice and Questionnaire to the holders of Registrable Securities; no holder shall be entitled to be named as a selling 12 13 securityholder in the Shelf Registration Statement as of the Effective Time, and no holder shall be entitled to use the prospectus forming a part thereof for resales of Registrable Securities at any time, unless such holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; provided, however, holders of Registrable Securities shall have at least 28 calendar days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Company; (iii) after the Effective Time of the Shelf Registration Statement, upon the request of any holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder; provided that the Company shall not be required to take any action to name such holder as a selling securityholder in the Shelf Registration Statement or to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities until such holder has returned a completed and signed Notice and Questionnaire to the Company; (iv) as soon as reasonably practicable (A) prepare and file with the Commission such amendments and supplements to the Secondary Offer Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Secondary Offer Registration Statement for the period specified in Section 2(b) or Section 2(c) hereof, as applicable, and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Secondary Offer Registration Statement and, in the case of an amendment to or supplement of the Market Making Shelf Registration Statement, each in a form approved by Goldman, Sachs & Co., and (B) furnish to the Electing Holders, in the case of a Shelf Registration, and Goldman, Sachs & Co., in the case of a Market Making Shelf Registration, copies of any such supplement or amendment simultaneously with or prior to its being used or filed with the Commission; (v) comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities, Securities or Exchange Securities, as applicable, covered by such Secondary Offer Registration Statement in accordance with the intended methods of disposition provided for therein by the Electing Holders, in the case of a Shelf Registration, or Goldman, Sachs & Co., in the case of a Market Making Shelf Registration; (vi) provide (A) with respect to a Shelf Registration, the Electing Holders; (B) with respect to a Market Making Shelf Registration, Goldman, Sachs & Co. and its counsel; and (C) in either case, the underwriters (which term, for purposes of this Exchange and Registration Rights Agreement, shall include a person deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act), if any, thereof, the sales or placement agent, if any, therefor, and one counsel (and any local counsel) for such underwriters or agent, the 13 14 opportunity to participate in the preparation of such Secondary Offer Registration Statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto; (vii) for a reasonable period prior to the filing of such Secondary Offer Registration Statement, and throughout the period specified in Section 2(b) or Section 2(c) hereof, as applicable, make available at reasonable times at the Company's principal place of business or such other reasonable place for inspection by the persons referred to in Section 3(d)(vi) who shall certify to the Company that they have a current intention to sell the Registrable Securities pursuant to the Shelf Registration, or the Securities or Exchange Securities pursuant to the Market Making Shelf Registration, as applicable, such financial and other information and books and records of the Company, and cause the officers, employees, counsel and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably necessary, in the judgment of the respective counsel referred to in such Section 3(d)(vi), to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that each such party shall be required to maintain in confidence and not to disclose to any other person any information or records reasonably designated by the Company as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such Secondary Offer Registration Statement or otherwise), or (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such person shall have given the Company prompt prior written notice of such requirement), or (C) such information is required to be set forth in such Secondary Offer Registration Statement or the prospectus included therein or in an amendment to such Secondary Offer Registration Statement or an amendment or supplement to such prospectus in order that such Secondary Offer Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the Commission and does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (viii) promptly notify each of the Electing Holders or Goldman, Sachs & Co., as applicable, any sales or placement agent therefor and any underwriter thereof (which notification may be made through any managing underwriter that is a representative of such underwriter for such purpose) and confirm such advice in writing, (A) when such Secondary Offer Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Secondary Offer Registration Statement or any post-effective amendment, when the same has become effective, (B) of any comments by the Commission and by the blue sky or 14 15 securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Secondary Offer Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Secondary Offer Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 3(d)(xvii) or Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities or the Securities or Exchange Securities, as applicable, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) if at any time when a prospectus is required to be delivered under the Securities Act, that such Secondary Offer Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (ix) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of such Secondary Offer Registration Statement or any post-effective amendment thereto at the earliest practicable date; (x) if requested by any managing underwriter or underwriters, any placement or sales agent, any Electing Holder or Goldman, Sachs & Co., promptly incorporate in a prospectus supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission and as such managing underwriter or underwriters, such agent, such Electing Holder or Goldman, Sachs & Co. specifies should be included therein relating to the terms of the sale of such Registrable Securities or the Securities or Exchange Securities, as applicable, including information with respect to the principal amount thereof being sold by such Electing Holder, Goldman, Sachs & Co. or such agent or to any underwriters, the name and description of such Electing Holder, a description of Goldman, Sachs & Co., such agent or such underwriter, the offering price of such Registrable Securities, Securities or Exchange Securities, as applicable, and any discount, commission or other compensation payable in respect thereof and the purchase price being paid therefor by such underwriters and with respect to any other terms of the offering of the Registrable Securities, Securities or Exchange Securities, as applicable, to be sold by such Electing Holder, Goldman, Sachs & Co. or such agent or to such underwriters, as applicable; and make all required filings of such prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; 15 16 (xi) furnish to Goldman, Sachs & Co., each Electing Holder, each placement or sales agent, if any, therefor, each underwriter, if any, thereof and the respective counsel referred to in Section 3(d)(vi) an executed copy (or, in the case of an Electing Holder, a conformed copy) of such Secondary Offer Registration Statement, each such amendment and supplement thereto (in each case, including all exhibits thereto (in the case of an Electing Holder of Registrable Securities, upon request) and documents incorporated by reference therein) and such number of copies of such Secondary Offer Registration Statement (excluding exhibits thereto and documents incorporated by reference therein unless specifically so requested by Goldman, Sachs & Co., such Electing Holder, agent or underwriter, as the case may be) and of the prospectus included in such Secondary Offer Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, and such other documents, as Goldman, Sachs & Co., such Electing Holder, agent, if any, and underwriter, if any, may reasonably request in order to facilitate the offering and disposition of the Registrable Securities owned by such Electing Holder, the Securities or Exchange Securities owned by Goldman, Sachs & Co., and the Registrable Securities, Securities or Exchange Securities offered or sold by such agent or underwritten by such underwriter, as applicable, and to permit Goldman, Sachs & Co., such Electing Holder, agent and underwriter to satisfy the prospectus delivery requirements of the Securities Act; and the Company hereby consents to the use of such prospectus (including such preliminary and summary prospectus) and any amendment or supplement thereto by Goldman, Sachs & Co. (subject to the second paragraph of Section 2(c) hereof), each such Electing Holder and any such agent and underwriter, in each case in the form most recently provided to such person by the Company, in connection with the offering and sale of the Registrable Securities, Securities or Exchange Securities covered by the prospectus (including such preliminary and summary prospectus) or any supplement or amendment thereto; (xii) use its reasonable best efforts to (A) register or qualify the Registrable Securities, Securities or Exchange Securities, as applicable, to be included in such Secondary Offer Registration Statement under such securities laws or blue sky laws of such jurisdictions as any Electing Holder, Goldman, Sachs & Co. and each placement or sales agent, if any, therefor and each underwriter, if any, thereof shall reasonably request, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the period the Shelf Registration is required to remain effective under Section 2(b) above or the period the Market Making Shelf Registration is required to remain effective under Section 2(c) above, as applicable, and for so long as may be necessary to enable Goldman, Sachs & Co., any such Electing Holder, agent or underwriter to complete its distribution of Registrable Securities, Securities or Exchange Securities, as applicable, pursuant to such Secondary Offer Registration Statement 16 17 and (C) take any and all other actions as may be reasonably necessary or advisable to enable each such Electing Holder and Goldman, Sachs & Co., as applicable, such agent, if any, and underwriter, if any, to consummate the disposition in such jurisdictions of such Registrable Securities, Securities or Exchange Securities; provided, however, that neither the Company nor the Guarantors shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(d)(xii), (2) consent to general service of process or taxation in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; (xiii) use its reasonable best efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required of the Company or, with respect to the Registrable Securities, Securities or Exchange Securities, as applicable, to effect the Shelf Registration or the Market Marking Shelf Registration, or the offering or sale in connection therewith or to enable the selling holder or holders or Goldman, Sachs & Co. to offer, or to consummate the disposition of, their Registrable Securities, Securities or Exchange Securities, as applicable; (xiv) cooperate with the Electing Holders or Goldman, Sachs & Co. and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities, Securities or Exchange Securities to be sold, which certificates, if so required by any securities exchange upon which any Registrable Securities, Securities or Exchange Securities are listed, shall be printed, penned, lithographed or engraved, or otherwise produced by any combination of such methods, on steel engraved borders, and which certificates shall not bear any restrictive legends; and, in the case of an underwritten offering, enable such Registrable Securities, Securities or Exchange Securities, as applicable to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of the Registrable Securities, Securities or Exchange Securities, as applicable; (xv) provide a CUSIP number for all Registrable Securities, Securities or Exchange Securities, as applicable, not later than the applicable Effective Time; (xvi) enter into one or more underwriting agreements, engagement letters, agency agreements, "best efforts" underwriting agreements or similar agreements, as appropriate, including customary provisions relating to indemnification and contribution, and take such other actions in connection therewith as, (A) in the case of a Shelf Registration, any Electing Holders aggregating at least 20% in aggregate principal amount of the Registrable Securities at the time outstanding or, (B) in the case of a Market Making Shelf Registration, Goldman, Sachs & Co., shall request in order to expedite or facilitate the disposition of such Registrable Securities, Securities or Exchange 17 18 Securities, as applicable; provided that the Company shall not be required to entered into any such agreement more than twice with respect to all of the Registrable Securities and may delay entering into any such agreement until the consummation of any underwritten public offering in which the Company shall be engaged provided that such delay is reasonable; (xvii) whether or not an agreement of the type referred to in Section 3(d)(xvi) hereof is entered into and whether or not any portion of the offering contemplated by the Secondary Offer Registration is an underwritten offering or is made through a placement or sales agent or any other entity, (A) make such representations and warranties to the Electing Holders, Goldman, Sachs & Co. and the placement or sales agent, if any, therefor and the underwriters, if any, thereof in form, substance and scope as are customarily made in connection with an offering of debt securities and substantially in the form set forth in the Purchase Agreement pursuant to any appropriate agreement or to a registration statement filed on the form applicable to the Shelf Registration or the Market Making Shelf Registration, as applicable; (B) obtain an opinion of counsel to the Company in customary form and covering such matters, of the type customarily covered by such an opinion, as the managing underwriters, if any, and in the case of a Shelf Registration, as any Electing Holders of at least 20% in aggregate principal amount of the Registrable Securities at the time outstanding or, in the case of a Market Making Shelf Registration, as Goldman, Sachs & Co. may reasonably request, addressed to such Electing Holder or Electing Holders, Goldman, Sachs & Co. and the placement or sales agent, if any, therefor and the underwriters, if any, thereof and dated the effective date of such Secondary Offer Registration Statement (and if such Secondary Offer Registration Statement contemplates an underwritten offering of a part or all of the Registrable Securities, Securities or Exchange Securities, as applicable, dated the date of the closing under the underwriting agreement relating thereto) and the date of filing of an amendment or supplement to such Secondary Offer Registration Statement or any other document that is incorporated in such Secondary Offer Registration Statement by reference and includes financial data with respect to a fiscal quarter or year, as the case may be, (it being agreed that the matters to be covered by such opinion shall include the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(d)(xvi) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Registrable Securities, Securities or Exchange Securities, as applicable; the absence of material legal or governmental proceedings involving the Company or any of its subsidiaries; the absence of a breach by the Company or any of its subsidiaries of, or a default under, material agreements binding upon the Company or any subsidiary of the Company; the absence of governmental approvals required to be obtained in connection with the Shelf Registration or Market Making Shelf Registration, as applicable, the offering and sale of the Registrable Securities, Securities or Exchange Securities, 18 19 as applicable, this Exchange and Registration Rights Agreement or any agreement of the type referred to in Section 3(d)(xvi) hereof, except such approvals as may be required under state securities or blue sky laws; the material compliance as to form of such Secondary Offer Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, respectively; and, as of the date of the opinion and of the Secondary Offer Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Secondary Offer Registration Statement and the prospectus included therein, as then amended or supplemented, and from the documents incorporated by reference therein (in each case, other than the financial statements and other financial information contained therein) of an untrue statement of a material fact or the omission to state therein a material fact necessary to make the statements therein not misleading (in the case of such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act); (C) obtain a "cold comfort" letter or letters from the independent certified public accountants of the Company addressed to the selling Electing Holders, Goldman, Sachs & Co. the placement or sales agent, if any, therefor or the underwriters, if any, thereof, dated (i) the effective date of such Secondary Offer Registration Statement and (ii) the effective date of any prospectus supplement to the prospectus included in such Secondary Offer Registration Statement or amendment or supplement to such Secondary Offer Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus (and, if such Secondary Offer Registration Statement contemplates an underwritten offering pursuant to any prospectus supplement to the prospectus included in such Secondary Offer Registration Statement or post-effective amendment to such Secondary Offer Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus, dated the date of the closing under the underwriting agreement relating thereto), such letter or letters to be in customary form and covering such matters of the type customarily covered by letters of such type; (D) deliver such documents and certificates, including officers' certificates, as may be reasonably requested, in the case of a Shelf Registration, by any Electing Holders of at least 20% in aggregate principal amount of the Registrable Securities at the time outstanding or, in the case of a Market Making Shelf Registration, by Goldman, Sachs & Co., and, in either case, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, dated the effective date of such Secondary Offer Registration Statement (and if such Secondary Offer Registration Statement contemplates an underwritten offering of a part or all of the Registrable Securities, Securities or Exchange Securities, as applicable, dated the date of the closing under the underwriting agreement relating thereto) and the date of filing of an amendment or supplement to such Secondary Offer Registration Statement or any other document that is incorporated in such Secondary Offer Registration Statement by reference and includes financial data 19 20 with respect to a fiscal quarter or year, as the case may be, to evidence the accuracy of the representations and warranties made pursuant to clause (A) above or those contained in Section 5(a) hereof and the compliance with or satisfaction of any agreements or conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantors; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Section 6 hereof; (xvii) notify in writing each holder of Registrable Securities affected thereby and Goldman, Sachs & Co. of any proposal by the Company to amend or waive any provision of this Exchange and Registration Rights Agreement pursuant to Section 9(h) hereof and of any amendment or waiver effected pursuant thereto, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be; (xix) in the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities, Securities or Exchange Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Conduct Rules") of the National Association of Securities Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time) thereof, whether as a holder of such Registrable Securities, Securities or Exchange Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such broker-dealer in complying with the requirements of such Conduct Rules, including by (A) if such Conduct Rules shall so require, engaging a "qualified independent underwriter" (as defined in such Conduct Rules) to participate in the preparation of the Secondary Offer Registration Statement relating to such Registrable Securities, Securities or Exchange Securities, as applicable, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Secondary Offer Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Registrable Securities, Securities or Exchange Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof, and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Conduct Rules; (xx) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but in any event not later than eighteen months after the effective date of such Secondary Offer Registration Statement, an earnings statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder); and 20 21 (xxi) for so long as Goldman, Sachs & Co. may be required to deliver a prospectus in connection with the offer and sale of Securities or Exchange Securities in secondary transactions, to furnish to Goldman, Sachs & Co. copies of all reports or other communications (financial or other) furnished to stockholders of the Company, and deliver to Goldman, Sachs & Co. (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange or interdealer automated quotation system on which the Securities or Exchange Securities or any other securities of the Company are listed or quoted and the documents specified in Section 4.03 of the Indenture, as in effect on the Closing; and (ii) such additional information concerning the business and financial condition of the Company and its subsidiaries as Goldman, Sachs & Co. may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company are consolidated in reports furnished to its stockholders generally or to the Commission). (e) In the event that the Company would be required to provide notice pursuant to Section 3(d)(viii)(F) above to the Electing Holders, Goldman, Sachs & Co., the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, the Company shall without unreasonable delay prepare and furnish to each such person a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, Securities or Exchange Securities, as applicable, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. Each Electing Holder and Goldman, Sachs & Co. agrees, that upon receipt of any notice from the Company pursuant to Section 3(d)(viii)(F) hereof, such Electing Holder and Goldman, Sachs & Co. shall forthwith discontinue the disposition of Registrable Securities, Securities or Exchange Securities, as applicable, pursuant to the Secondary Offer Registration Statement applicable to such Registrable Securities, Securities or Exchange Securities, as applicable, until such Electing Holder or Goldman, Sachs & Co., as applicable, shall have received copies of such amended or supplemented prospectus, and if so directed by the Company, such Electing Holder or Goldman, Sachs & Co. shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Electing Holder's or Goldman, Sachs & Co.'s possession of the prospectus covering such Registrable Securities, Securities or Exchange Securities, as applicable, at the time of receipt of such notice. (f) In addition to the information required to be provided in a Notice and Questionnaire by each Electing Holder as to which any Shelf Registration pursuant to Section 2(b) is being effected or to be provided by Goldman, Sachs & Co. in connection with the Market Making Shelf Registration pursuant to Section 2(c), the Company may require an Electing Holder or Goldman, Sachs & Co., as applicable, to furnish to the Company in writing such additional information regarding such Electing Holder or 21 22 Goldman, Sachs & Co. and such Electing Holder's or Goldman, Sachs & Co.'s intended method of distribution of the applicable Registrable Securities, Securities or Exchange Securities as the Company may from time to time reasonably request in writing, but only to the extent that such information is required or necessary in order to comply with the Securities Act. Each such Electing Holder and Goldman, Sachs & Co. agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Electing Holder or Goldman, Sachs & Co., as the case may be, to the Company or of the occurrence of any event in either case as a result of which any prospectus relating to such Shelf Registration or Market Making Shelf Registration, as applicable, contains or would contain an untrue statement of a material fact regarding such Electing Holder or Goldman, Sachs & Co. or such Electing Holder's or Goldman, Sachs & Co.'s intended method of disposition of the applicable Registrable Securities, Securities or Exchange Securities or omits to state any material fact regarding such Electing Holder or Goldman, Sachs & Co. or such Electing Holder's or Goldman, Sachs & Co.'s intended method of disposition of the applicable Registrable Securities, Securities or Exchange Securities required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and promptly to furnish to the Company in writing any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Electing Holder or Goldman, Sachs & Co. or the disposition of the applicable Registrable Securities, Securities or Exchange Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. 4. Registration Expenses. The Company agrees to bear and to pay or cause to be paid promptly all expenses incident to the Company's performance of or compliance with this Exchange and Registration Rights Agreement, including (a) all Commission and any NASD registration, filing and review reasonable fees and expenses including fees and disbursements of counsel for the placement or sales agent or underwriters in connection with such registration, filing and review, (b) all fees and expenses in connection with the qualification of the Registrable Securities, Securities or Exchange Securities, as applicable, for offering and sale under the state securities and blue sky laws referred to in Section 3(d)(vi) and 3(d)(xii) hereof and determination of their eligibility for investment under the laws of such jurisdictions as any managing underwriters or the Electing Holders or Goldman, Sachs & Co. may designate, including reasonable fees and disbursements of counsel for the Electing Holders or Goldman, Sachs & Co. or underwriters in connection with such qualification and determination, (c) all expenses relating to the preparation, printing, production, distribution and reproduction of each registration statement required to be filed hereunder, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Securities or Exchange Securities for delivery and the expenses of printing or producing any underwriting agreements, agreements among underwriters, selling agreements and blue sky or legal investment memoranda and all other documents in connection with the offering, sale or delivery of Securities or Exchange Securities to be disposed of (including certificates representing the Securities or 22 23 Exchange Securities), (d) messenger, telephone and delivery expenses relating to the offering, sale or delivery of Securities or Exchange Securities and the preparation of documents referred in clause (c) above, (e) reasonable fees and expenses of the Trustee under the Indenture, (f) internal expenses (including all salaries and expenses of the Company's officers and employees performing legal or accounting duties), (g) fees, disbursements and expenses of counsel and independent certified public accountants of the Company (including the expenses of any opinions or "cold comfort" letters required by or incident to such performance and compliance), (h) fees, disbursements and expenses of any "qualified independent underwriter" engaged pursuant to Section 3(d)(xix) hereof, (i) reasonable fees, disbursements and expenses of one counsel for the Electing Holders retained in connection with a Shelf Registration, as selected by the Electing Holders of at least a majority in aggregate principal amount of the Registrable Securities held by such Electing Holders, and one counsel for Goldman, Sachs & Co. retained in connection with a Market Making Shelf Registration, as selected by Goldman, Sachs & Co., (j) any fees charged by securities rating services for rating the Securities or Exchange Securities and (k) fees, expenses and disbursements of any other persons, including special experts, retained by the Company in connection with such registration (collectively, the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any holder of Registrable Securities, Goldman, Sachs & Co. or any placement or sales agent therefor or underwriter thereof, the Company shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor. Notwithstanding the foregoing, the holders of the Registrable Securities being registered, or Goldman, Sachs & Co., as applicable, shall pay all agency fees and commissions and underwriting discounts and commissions attributable to the sale of the applicable Registrable Securities, Securities or Exchange Securities and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel and experts specifically referred to above. 5. Representations and Warranties. The Company and the Guarantors represent and warrant to, and agree with, each Purchaser and each of the holders from time to time of Registrable Securities that: (a) Each registration statement covering Registrable Securities, Securities or Exchange Securities and each prospectus (including any preliminary or summary prospectus) contained therein or furnished pursuant to Section 3(c) or Section 3(d) hereof and any further amendments or supplements to any such registration statement or prospectus, when it becomes effective or is filed with the Commission, as the case may be, and, in the case of an underwritten offering of Registrable Securities, Securities or Exchange Securities, at the time of the closing under the underwriting agreement relating thereto, will conform in all material respects to the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at all times subsequent to the applicable Effective Time when a prospectus would be required to be delivered under the Securities Act, other than (A) from (i) such time as a notice has been given to holders of Registrable Securities or Goldman, Sachs & Co., as 23 24 applicable, pursuant to Section 3(c)(iii)(F) or Section (d)(viii)(F) hereof until (ii) such time as the Company furnishes an amended or supplemented prospectus pursuant to Section 3(c)(iv) or Section 3(e) hereof or (B) during any suspension of offering and sale pursuant to the second paragraph of Section 2 (b) or 2(c) hereof, each such registration statement, and each prospectus (including any summary prospectus) contained therein or furnished pursuant to Section 3(c) or Section 3(d) hereof, as then amended or supplemented, will conform in all material respects to the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a holder of Registrable Securities or Goldman, Sachs & Co., as applicable, expressly for use therein. (b) Any documents incorporated by reference in any prospectus referred to in Section 5(a) hereof, when they become or became effective or are or were filed with the Commission, as the case may be, will conform or conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and none of such documents will contain or contained an untrue statement of a material fact or will omit or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a holder of Registrable Securities or Goldman, Sachs & Co., as applicable, expressly for use therein. (c) The compliance by the Company with all of the provisions of this Exchange and Registration Rights Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any subsidiary of the Company is a party or by which the Company or any subsidiary of the Company is bound or to which any of the property or assets of the Company or any subsidiary of the Company is subject other than any such conflict, breach or violation as would not, singly or in the aggregate, have a material adverse effect or result in any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, nor will such action result in any violation of the provisions of the certificate of incorporation, as amended, or the by-laws of the Company or the Guarantors or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any subsidiary of the Company or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Company and the Guarantors of the transactions contemplated by this Exchange and Registration Rights Agreement, except in connection with the registration under the 24 25 Securities Act of the Registrable Securities, Securities or Exchange Securities, qualification of the Indenture under the Trust Indenture Act, filings of reports by the Company under the Exchange Act and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or blue sky laws in connection with the offering and distribution of the Registrable Securities, Securities or Exchange Securities. (d) This Exchange and Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Guarantors. 6. Indemnification. (a) Indemnification by the Company and the Guarantors. The Company and the Guarantors, jointly and severally, will indemnify and hold harmless each of the holders of Registrable Securities included in an Exchange Registration Statement, each of the Electing Holders of Registrable Securities included in a Shelf Registration Statement and Goldman, Sachs & Co. as holder of Securities or Exchange Securities included in a Market Making Shelf Registration Statement and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Securities, Securities or Exchange Securities against any losses, claims, damages or liabilities, joint or several, to which Goldman, Sachs & Co., or such holder, Electing Holder, agent or underwriter may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Exchange Registration Statement or Secondary Offer Registration Statement, as the case may be, under which such Registrable Securities, Securities or Exchange Securities, were registered under the Securities Act, or any preliminary, final or summary prospectus contained therein or furnished by the Company to Goldman, Sachs & Co., any such holder, Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse Goldman, Sachs & Co., such holder, such Electing Holder, such agent and such underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that neither the Company nor any Guarantor shall be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary, final or summary prospectus, or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by such person expressly for use therein. (b) Indemnification by the Holders and any Agents and Underwriters in Connection with any Shelf Registration. The Company may require, as a condition to including any Registrable Securities in any Shelf Registration filed pursuant to Section 2(b) hereof and to entering into any underwriting agreement with respect thereto, that the 25 26 Company shall have received an undertaking reasonably satisfactory to it from the Electing Holder of such Registrable Securities and from each underwriter named in any such underwriting agreement, severally and not jointly, to (i) indemnify and hold harmless the Company, the Guarantors, and all other holders of Registrable Securities, against any losses, claims, damages or liabilities to which the Company, the Guarantors or such other holders of Registrable Securities may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary, final or summary prospectus contained therein or furnished by the Company to any such Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Electing Holder or underwriter expressly for use therein, and (ii) reimburse the Company and the Guarantors for any legal or other expenses reasonably incurred by the Company and the Guarantors in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that no such Electing Holder shall be required to undertake liability to any person under this Section 6(b) for any amounts in excess of the dollar amount of the proceeds to be received by such Electing Holder from the sale of such Electing Holder's Registrable Securities pursuant to such registration. (c) Indemnification by Goldman, Sachs & Co. and any Agents and Underwriters in Connection with the Market Making Shelf Registration. The Company may require, as a condition to including any Securities or Exchange Securities in the Market Making Shelf Registration Statement filed pursuant to Section 2(c) hereof and to entering into any underwriting agreement with respect thereto, that the Company shall have received an undertaking reasonably satisfactory to it from each underwriter named in any such underwriting agreement, severally and not jointly, to, and Goldman, Sachs & Co., shall, and hereby agrees to, (i) indemnify and hold harmless the Company and the Guarantors, against any losses, claims, damages or liabilities to which the Company or the Guarantors may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Market Making Shelf Registration Statement, or any preliminary, final or summary prospectus contained therein or furnished by the Company to Goldman, Sachs & Co. or to any such agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by Goldman, Sachs & Co. or such underwriter expressly for use therein, and (ii) reimburse the Company and the Guarantors for any legal or other expenses reasonably incurred by the Company and the 26 27 Guarantors in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that, in the case of Securities held by Goldman, Sachs & Co. at the time of the Exchange Offer, Goldman, Sachs & Co. shall not be required to undertake liability to any person under this Section 6(c) for any amounts in excess of the dollar amount of the proceeds to be received by Goldman, Sachs & Co. from the sale of such Securities by Goldman, Sachs & Co. pursuant to the Market Making Shelf Registration. (d) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above of written notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party pursuant to the indemnification provisions of or contemplated by this Section 6, notify such indemnifying party in writing of the commencement of such action; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under the indemnification provisions of or contemplated by Section 6(a), 6(b) or 6(c) hereof. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. The indemnifying party shall not be required to indemnify the indemnified party for any amount paid or payable by the indemnified party in the settlement of any proceeding effected without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (e) Contribution. If for any reason the indemnification provisions contemplated by Section 6(a), 6(b) or 6(c) hereof are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified 27 28 party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 6(e) were determined by pro rata allocation (even if the holders or any agents or underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6(e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(e), neither any holder nor, in the case of a Market Making Shelf Registration relating to the sale by Goldman, Sachs & Co. of Securities held by it a the time of the Exchange Offer, Goldman, Sachs & Co. shall be required to contribute any amount in excess of the amount by which the dollar amount of the proceeds received by such holder from the sale of any Registrable Securities or Goldman, Sachs & Co. from the sale of any such Securities (after deducting any fees, discounts and commissions applicable thereto) exceeds the amount of any damages which such holder or Goldman, Sachs & Co., as applicable, have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities, Securities or Exchange Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The holders', Goldman, Sachs & Co.'s and any underwriters' obligations in this Section 6(e) to contribute shall be several and not joint. (f) The obligations of the Company and the Guarantors under this Section 6 shall be in addition to any liability which the Company or the Guarantors may otherwise have and shall extend, upon the same terms and conditions, to each officer, director and partner of Goldman, Sachs & Co., each holder, agent and underwriter and each person, if any, who controls Goldman, Sachs & Co., any holder, agent or underwriter within the meaning of the Securities Act; and the obligations of Goldman, Sachs & Co., the holders and any agents or underwriters contemplated by this Section 6 shall be in addition to any liability which Goldman, Sachs & Co., the respective holder, agent or underwriter may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company or the Guarantors (including any person who, with his consent, is named in any registration statement as about to become a director of the Company or 28 29 the Guarantors) and to each person, if any, who controls the Company or the Guarantors within the meaning of the Securities Act. 7. Underwritten Offerings. (a) Selection of Underwriters. If any of the Registrable Securities covered by the Shelf Registration are to be sold pursuant to an underwritten offering, the managing underwriter or underwriters thereof shall be designated by Electing Holders holding at least a majority in aggregate principal amount of the Registrable Securities to be included in such offering, provided that such designated managing underwriter or underwriters is or are reasonably acceptable to the Company. (b) Participation by Holders. Each holder of Registrable Securities hereby agrees with each other such holder that no such holder may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. Rule 144. The Company covenants to the holders of Registrable Securities and Goldman, Sachs & Co., that to the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities or Goldman, Sachs & Co., may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities or Goldman, Sachs & Co., to sell Securities or Exchange Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the written request of any holder of Registrable Securities or Goldman, Sachs & Co. in connection with that holder's or Goldman, Sachs & Co.'s sale pursuant to Rule 144, the Company shall deliver to such holder or Goldman, Sachs & Co. a written statement as to whether it has complied with such requirements. 9. Miscellaneous. (a) No Inconsistent Agreements. The Company represents, warrants, covenants and agrees that it has not granted, and shall not grant, registration rights with respect to Registrable Securities, Securities or Exchange Securities or any other securities which would be inconsistent with the terms contained in this Exchange and Registration Rights Agreement. 29 30 (b) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations hereunder and that the Purchasers and the holders from time to time of the Registrable Securities may be irreparably harmed by any such failure, and accordingly agree that the Purchasers and such holders, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of the Company under this Exchange and Registration Rights Agreement in accordance with the terms and conditions of this Exchange and Registration Rights Agreement, in any court of the United States or any State thereof having jurisdiction. (c) Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, if delivered personally or by courier, or three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested) as follows: If to the Company, to it at, 1301 First Avenue, P.O. Box 391, Columbus, Georgia 31902-2109, telecopier (706) 324-0470, if to Goldman, Sachs & Co., to it at, 85 Broad Street, New York, New York 10004, telecopier (212) 902-3000, Attention: David J. Greenwald; and if to a holder, to the address of such holder set forth in the security register or other records of the Company, or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (d) Parties in Interest. All the terms and provisions of this Exchange and Registration Rights Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and the holders from time to time of the Registrable Securities and the respective successors and assigns of the parties hereto and such holders. In the event that any transferee of any holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Securities shall be held subject to all of the terms of this Exchange and Registration Rights Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by all of the applicable terms and provisions of this Exchange and Registration Rights Agreement. If the Company shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Securities subject to all of the applicable terms hereof. (e) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Exchange and Registration Rights Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of Goldman, Sachs & Co. or any holder of Registrable Securities, any director, officer or partner of Goldman, Sachs & Co. or such holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Securities pursuant to the Purchase Agreement and the 30 31 transfer and registration of Securities by such holder or Goldman, Sachs & Co. and the consummation of an Exchange Offer. Anything herein to the contrary notwithstanding, the indemnity agreement of the Company and the Guarantors in Section 6(a) hereof, the representations and warranties in Section 5(a) and Section 5(b) hereof and any representation or warranty as to the accuracy of the Secondary Offer Registration Statement (or any preliminary, final or summary prospectus contained therein) contained in any certificate furnished by the Company pursuant to Section 3(d)(xvii) hereof, insofar as they may constitute a basis for indemnification for liabilities (other than payment by the Company and the Guarantors of expenses incurred or paid in the successful defense of any action, suit or proceeding) arising under the Securities Act, shall not extend to the extent of any interest therein of a controlling person or partner of Goldman, Sachs & Co. who is a director, officer or controlling person of the Company when the Exchange Registration Statement or the Secondary Offer Registration Statement has become effective, except in each case to the extent that an interest of such character shall have been determined by a court of appropriate jurisdiction as not against public policy as expressed in the Securities Act. Unless in the opinion of counsel for the Company the matter has been settled by controlling precedent, the Company will, if a claim for such indemnification is asserted, submit to a court of appropriate jurisdiction the question whether such interest is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (f) GOVERNING LAW. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (g) Headings. The descriptive headings of the several Sections and paragraphs of this Exchange and Registration Rights Agreement are inserted for convenience only, do not constitute a part of this Exchange and Registration Rights Agreement and shall not affect in any way the meaning or interpretation of this Exchange and Registration Rights Agreement. (h) Entire Agreement; Amendments. This Exchange and Registration Rights Agreement and the other writings referred to herein (including the Indenture and the form of Securities) or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Exchange and Registration Rights Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Exchange and Registration Rights Agreement may be amended and the observance of any term of this Exchange and Registration Rights Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Company and the holders of at least a majority in aggregate principal amount of the Registrable Securities at the time outstanding and Goldman, Sachs & Co.; provided, however, that any such amendment or waiver affecting solely provisions of this Exchange and Registration Rights Agreement relating to the Market Making Registration may be 31 32 effected by a written instrument duly executed solely by the Company and Goldman, Sachs & Co. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 9(h), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities or is delivered to such holder. (i) Inspection. For so long as this Exchange and Registration Rights Agreement shall be in effect, this Exchange and Registration Rights Agreement and a complete list of the names and addresses of all the holders of Registrable Securities and the address of Goldman, Sachs & Co. shall be made available upon reasonable notice in writing for inspection and copying on any business day by Goldman, Sachs & Co. or any holder of Registrable Securities for proper purposes only (which shall include any purpose related to the rights of the holders of Registrable Securities under the Securities, the Indenture and this Exchange and Registration Rights Agreement) at the offices of the Company at the address thereof set forth in Section 9(c) above or at the office of the Trustee under the Indenture. (j) Counterparts. This Exchange and Registration Rights Agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 32 33 If the foregoing is in accordance with your understanding, please sign and return to us one for the Company and the Guarantors, one for each of the Purchasers, and one for each counsel of such parties, counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Purchasers, this letter and such acceptance hereof shall constitute a binding agreement between each of the Purchasers, the Guarantors and the Company. It is understood that your acceptance of this letter on behalf of each of the Purchasers is pursuant to the authority set forth in a form of Agreement among Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, Carmike Cinemas, Inc. By: /s/ F. Lee Champion, III ----------------------------------------- Name: F. Lee Champion, III Title: Senior Vice President/Secretary Eastwynn Theatres, Inc. By: /s/ F. Lee Champion, III ----------------------------------------- Name: F. Lee Champion, III Title: Senior Vice President/Secretary Wooden Nickel Pub, Inc. By: /s/ F. Lee Champion, III ----------------------------------------- Name: F. Lee Champion, III Title: Secretary Accepted as of the date hereof: Goldman, Sachs & Co. First Union Capital Markets, a division of Wheat First Securities ING Baring Furman Selz LLC By: /s/ Goldman, Sachs & Co. ----------------------------------- (Goldman, Sachs & Co.) Exchange and Registration Rights Agreement Signature Page 34 SCHEDULE I GUARANTORS 1. Eastwynn Theatres, Inc. 2. Wooden Nickel Pub, Inc. Schedule I-1 35 EXHIBIT A CARMIKE CINEMAS, INC. INSTRUCTION TO DTC PARTICIPANTS (DATE OF MAILING) URGENT - IMMEDIATE ATTENTION REQUESTED DEADLINE FOR RESPONSE: [INSERT DATE] * The Depository Trust Company ("DTC") has identified you as a DTC Participant through which beneficial interests in the Carmike Cinemas, Inc. (the "Company") 9 3/8 % Senior Subordinated Notes due 2009 (the "Securities") are held. The Company is in the process of registering the Securities under the Securities Act of 1933, as amended for resale by the beneficial owners thereof. In order to have their Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Securityholder Questionnaire. It is important that beneficial owners of the Securities receive a copy of the enclosed materials as soon as possible as their rights to have the Securities included in the registration statement depend upon their returning the Notice and Questionnaire by _______________ [Insert Deadline For Response]. Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact Carmike Cinemas, Inc., 1301 First Avenue, P.O. Box 391, Columbus, Georgia 31902-2109, telephone (706) 576-3400. - -------- * Not less than 28 calendar days from date of mailing. A-1 36 CARMIKE CINEMAS, INC. NOTICE OF REGISTRATION STATEMENT AND SELLING SECURITYHOLDER QUESTIONNAIRE (DATE) Reference is hereby made to the Exchange and Registration Rights Agreement (the "Exchange and Registration Rights Agreement") between Carmike Cinemas, Inc. (the "Company") and the Purchasers named therein. Pursuant to the Exchange and Registration Rights Agreement, the Company has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form __ (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Company's 9 3/8 % Senior Subordinated Notes due 2009 (the "Securities"). A copy of the Exchange and Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Exchange and Registration Rights Agreement. Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE _________________ [Insert Deadline for Response]. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Shelf Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities. Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. The term "Registrable Securities" is defined in the Exchange and Registration Rights Agreement. A-2 37 ELECTION The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Exchange and Registration Rights Agreement, including, without limitation, Section 6 of the Exchange and Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto. Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement, the Selling Securityholder will be required to deliver to the Company and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and as Exhibit B to the Exchange and Registration Rights Agreement. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: A-3 38 QUESTIONNAIRE (1) (a) Full Legal Name of Selling Securityholder: (b) Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable Securities Listed in Item (3) below: (c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in Item (3) below are Held: (2) Address for Notices to Selling Securityholder: --------------------------------- --------------------------------- --------------------------------- Telephone: --------------------------------- Fax: --------------------------------- Contact Person: --------------------------------- (3) Beneficial Ownership of Securities: Except as set forth below in this Item (3), the undersigned does not beneficially own any Securities. (a) Principal amount of Registrable Securities beneficially owned: ------------------------ CUSIP No(s). of such Registrable Securities: ------------------------------------------ (b) Principal amount of Securities other than Registrable Securities beneficially owned: -------------------------------------------------------- CUSIP No(s). of such other Securities: ------------------------------------------------ (c) Principal amount of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement: ---------------------------------------------------------------------------- CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement: -----------------------------------------
(4) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any other securities of the Company, other than the Securities listed above in Item (3). A-4 39 State any exceptions here: (5) Relationships with the Company: Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: (6) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M. In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer A-5 40 of its rights and obligations under this Notice and Questionnaire and the Exchange and Registration Rights Agreement. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Shelf Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Shelf Registration Statement and related Prospectus. In accordance with the Selling Securityholder's obligation under Section 3(d) of the Exchange and Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect. All notices hereunder and pursuant to the Exchange and Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: (i) To the Company: Carmike Cinemas, Inc. 1301 First Avenue P.O. Box 391 Columbus, Georgia 31902-2109 Attention: President (ii) With a copy to: Troutman Sanders LLP NationsBank Plaza 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308-2216 Attention: Patricia Wilson Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder (with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above. This Exchange and Registration Rights Agreement shall be governed in all respects by the laws of the State of New York. IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated: _____________________ A-6 41 ----------------------------------------------------------------------- Selling Securityholder (Print/type full legal name of beneficial owner of Registrable Securities) By: -------------------------------------------------------------------- Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE ___________ [Insert Deadline for Response] TO THE COMPANY'S COUNSEL AT: Troutman Sanders LLP NationsBank Plaza 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308-2216 Attention: Patricia Wilson A-7 42 EXHIBIT B NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT The Bank of New York Carmike Cinemas, Inc. c/o The Bank of New York 101 Barclay Street, 21 West New York, New York 10286 Attention: Trust Officer Re: Carmike Cinemas, Inc. (the "Company") 9 3/8 % Senior Subordinated Notes due 2009 Dear Sirs: Please be advised that __________________ has transferred $_______________ aggregate principal amount of the above-referenced Notes pursuant to an effective Registration Statement on Form (File No. 333- ) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus dated __________ or in supplements thereto, and that the aggregate principal amount of the Notes transferred are the Notes listed in such Prospectus opposite such owner's name. Dated: Very truly yours, ----------------------------------- (Name) By: ----------------------------------- (Authorized Signature) B-1 EX-10.1 6 STOCK PURCHASE AGREEMENT DATED 11/22/98 1 EXHIBIT 10.1 ================================================================================ STOCK PURCHASE AGREEMENT by and among CARMIKE CINEMAS, INC. and GS CAPITAL PARTNERS III, L.P., and certain of its affiliates Dated: November 22, 1998 ================================================================================ 2 TABLE OF CONTENTS
Page ARTICLE 1 DEFINITIONS..................................................................................1 1.1 Definitions..................................................................................1 ARTICLE 2 PURCHASE AND SALE OF SECURITIES..............................................................6 2.1 Purchase and Sale of Securities..............................................................6 2.2 Certificates of Designation..................................................................6 2.3 Closing......................................................................................6 2.4 Use of Proceeds..............................................................................6 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................6 3.1 Corporate Existence and Power................................................................7 3.2 Subsidiaries.................................................................................7 3.3 Corporate Authorization; No Contravention....................................................7 3.4 Governmental Authorization; Third Party Consents.............................................7 3.5 Binding Effect...............................................................................8 3.6 Capitalization of the Company................................................................8 3.7 SEC Filings; Financial Statements............................................................9 3.8 Absence of Certain Developments..............................................................9 3.9 No Undisclosed Liabilities...................................................................9 3.10 Compliance with Laws.........................................................................9 3.11 Litigation..................................................................................10 3.12 Material Contracts..........................................................................10 3.13 Private Offering............................................................................10 3.14 Board Approval; DGCL 203; Stockholder Approval..............................................10 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................................11 4.1 Existence and Power.........................................................................11 4.2 Authorization; No Contravention.............................................................11 4.3 Governmental Authorization; Third Party Consents............................................11 4.4 Binding Effect..............................................................................11 4.5 Purchase for Own Account, Etc...............................................................11 4.6 Sufficient Funds............................................................................12 ARTICLE 5 COVENANTS OF THE COMPANY....................................................................12 5.1 Conduct of Business.........................................................................12 5.2 Indemnification of Brokerage................................................................13 5.3 Rule 144....................................................................................13 5.4 HSR Approval................................................................................13 5.5 No Rights Plan..............................................................................13 ARTICLE 6 COVENANTS OF THE PURCHASER..................................................................14 6.1 Indemnification of Brokerage................................................................14
-i- 3 ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS TO CLOSE..........................14 7.1 Representations and Covenants...............................................................14 7.2 Filing of Certificates of Designations......................................................14 7.3 Opinion of Counsel to the Company...........................................................14 7.4 No Actions..................................................................................15 7.5 NYSE Listing................................................................................15 ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY TO CLOSE.............................15 8.1 Representations and Covenants...............................................................15 8.2 No Actions..................................................................................15 ARTICLE 9 REGISTRATION RIGHTS; PREEMPTIVE RIGHTS......................................................15 9.1 Requested Registration......................................................................15 9.2 Company Registration........................................................................17 9.3 Transferability.............................................................................17 9.4 Expenses of Registration....................................................................18 9.5 Registration Procedures.....................................................................18 9.6 Indemnification.............................................................................20 9.7 Holdback Agreement..........................................................................23 9.8 Other Registration Rights...................................................................24 9.9 Preemptive Rights...........................................................................24 ARTICLE 10 DIRECTOR DESIGNATION RIGHT..................................................................25 10.1 Directors...................................................................................25 ARTICLE 11 TERMINATION OF AGREEMENT....................................................................26 11.1 Termination.................................................................................26 11.2 Survival After Termination..................................................................27 ARTICLE 12 MISCELLANEOUS...............................................................................27 12.1 Survival....................................................................................27 12.2 Expenses....................................................................................27 12.3 Notices.....................................................................................28 12.4 Successors and Assigns......................................................................29 12.5 Amendment and Waiver........................................................................29 12.6 Counterparts................................................................................29 12.7 Headings....................................................................................29 12.8 GOVERNING LAW...............................................................................29 12.9 Severability................................................................................30 12.10 Entire Agreement............................................................................30 12.11 Further Assurances..........................................................................30 12.12 Public Announcements........................................................................30 12.13 Specific Performance........................................................................30
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Page ---- EXHIBIT A Form of Certificate of Designations of 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock EXHIBIT B Form of Opinion of Counsel to the Company
-iii- 5 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated as of November 22, 1998 (this "Agreement"), by and among CARMIKE CINEMAS, INC., a Delaware corporation (the "Company"), and GS CAPITAL PARTNERS III, L.P., a Delaware limited partnership ("GSCPIII") and certain affiliates of GSCPIII set forth on the signature page of this Agreement (the "GSCP Affiliates", and together with GSCPIII, and including their respective successors and permitted assigns, the "Purchasers"). WHEREAS, the Company proposes to issue and sell to the Purchasers, and the Purchasers propose to buy, for an aggregate purchase price of Fifty-Five Million Dollars ($55,000,000.00), 550,000 shares of 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock, par value $1.00 per share, of the Company; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms shall have the meanings set forth below: "Actions" means actions, causes of action, suits, claims, complaints, demands, litigations or legal, administrative or arbitral proceedings. "Affiliate" means a Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with the Person specified. "Agreement" means this Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof. "Allocation Notice" has the meaning assigned to such term in Section 2.3(b). "Board of Directors" means the board of directors of the Company or any duly authorized committee thereof. "Broker" has the meaning assigned to such term in Section 5.2. "Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close. 6 "Bylaws" means the bylaws of the Company, as the same may have been amended and in effect as of the Closing Date. "Certificate of Designations" means the Certificate of Designations, in the form attached hereto as Exhibit A, relating to the Series A Preferred Stock. "Certificate of Incorporation" means the Restated Certificate of Incorporation of the Company, as the same may have been amended and in effect as of the Closing Date. "Claims" means losses, claims, damages or liabilities, joint or several, Actions or proceedings (whether commenced or threatened). "Class A Common Stock" means the Class A Common Stock, par value $.03 per share, of the Company, or any other capital stock of the Company into which such stock is reclassified or reconstituted. "Class B Common Stock" means the Class B Common Stock, par value $.03 per share, of the Company, or any other capital stock of the Company into which such stock is reclassified or reconstituted. "Closing" has the meaning assigned to such term in Section 2.3. "Closing Date" has the meaning assigned to such term in Section 2.3. "Commission" means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act. "Common Stock" means the Class A Common Stock and Class B Common Stock. "Company Options" has the meaning assigned to such term in Section 3.6. "Contemplated Transactions" means the transactions contemplated by this Agreement, including without limitation the purchase and sale of the Series A Preferred Stock and the conversion of shares of Series A Preferred Stock into shares of Class A Common Stock from time to time in accordance with the Certificate of Designations. "Contractual Obligation" means, as to any Person, any agreement, undertaking, contract, indenture, mortgage, deed of trust, credit agreement, note, evidence of indebtedness or other instrument, written or otherwise, to which such Person is a party or by which it or any of its property is bound. "Control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Decrees" has the meaning assigned to such term in Section 3.10(a). -2- 7 "Demand Notice" has the meaning assigned to such term in Section 9.1(a). "DGCL" means the Delaware General Corporation Law. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. "Exercising Holder" has the meaning assigned to such term in Section 9.2(b). "Existing Plans" has the meaning assigned to such term in Section 3.6. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Governmental Authority" means the government of any nation, state, city, locality or other political subdivision of any thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government or any international regulatory body having or asserting jurisdiction over a Person, its business or its properties. "GSCPIII" has the meaning assigned to such term in the preamble. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations of the Federal Trade Commission thereunder. "HSR Clearance Date" has the meaning assigned to such term in Section 10.1(b). "HSR Requirements" has the meaning assigned to such term in Section 3.4. "Holder" means a holder of shares of Series A Preferred Stock or Registrable Securities. "Initial Designees" means two individuals designated by GSCPIII in writing on or prior to the HSR Clearance Date to serve as directors on the Board of Directors. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), restriction or other security interest of any kind or nature whatsoever. "Material Adverse Effect" has the meaning assigned to such term in Section 3.8. "NASD" means the National Association of Securities Dealers, Inc. "Nasdaq" means The Nasdaq Stock Market Inc.'s National Market. "NYSE" means the New York Stock Exchange, Inc. -3- 8 "Person" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind. "Preferred Stock" has the meaning assigned to such term in Section 3.6. "Proposed Securities" has the meaning assigned to such term in Section 9.9(a). "Prospectus" shall mean the prospectus included in any Registration Statement (including without limitation a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to such prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such prospectus. "Purchased Shares" has the meaning assigned to such term in Section 2.1. "Purchaser Designees" has the meaning assigned to such term in Section 10.1(a). "Registrable Securities" shall mean the shares of Common Stock (1) into which shares of Series A Preferred Stock issued hereunder may be converted and any capital stock of the Company issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, such shares of Common Stock or (2) acquired in connection with the exercise of preemptive rights pursuant to Section 9.9, in each case until, in the case of any such share, (i) it is effectively registered under the Securities Act and disposed of in accordance with the Registration Statement covering it, or (ii) it is distributed to the public by the holder thereof pursuant to Rule 144. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance with Article 9 of this Agreement, including without limitation, (i) all Commission and stock exchange or the NASD registration and filing fees, (ii) all fees and expenses of complying with securities or "blue sky" laws (including reasonable fees and disbursements of counsel for the underwriters in connection with "blue sky" qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, (iv) the fees and disbursements of counsel for the Company and of the Company's independent public accountants, including the expenses of any special audits and/or "cold comfort" letters required by or incident to such performance and compliance, (v) the reasonable fees and disbursements of one counsel retained by the Exercising Holders (if GSCPIII is one of the Exercising Holders, such counsel to be selected by GSCPIII) as a group in connection with each such registration, (vi) any fees and disbursements of underwriters customarily paid by issuers or sellers of securities and the reasonable fees and expenses of any special experts retained in connection with the requested registration, including any fee payable to a qualified independent underwriter within the meaning of the rules of the NASD, but excluding underwriting discounts and commissions and transfer taxes, if any, (vii) internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or -4- 9 accounting duties) and (viii) securities acts liability insurance (if the Company elects to obtain such insurance). "Registration Statement" shall mean any registration statement of the Company under the Securities Act that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the related Prospectus, all amendments and supplements to such registration statement (including post-effective amendments), all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Requirement of Law" means, as to any Person, the Certificate of Incorporation and Bylaws or other organizational or governing documents of such Person, and any law, treaty, rule, regulation, ordinance, qualification, license or franchise or determination (including, without limitation, those related to taxes and to environmental matters) of an arbitrator or a court or other Governmental Authority or of the NYSE or NASD or any national securities exchange on which the Common Stock is listed or admitted to trading, in each case applicable or binding upon such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated hereby. "Rule 144" shall mean Rule 144 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "SEC Reports" means all proxy statements, registration statements, reports and other documents filed or required to be filed by the Company or any of its Subsidiaries with the Commission pursuant to the Securities Act or the Exchange Act since December 31, 1996. "Section 9.1 Exercising Holder" has the meaning assigned to such term in Section 9.1(b). "Section 9.2 Exercising Holder" has the meaning assigned to such term in Section 9.2(b). "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder. "Series A Preferred Stock" means the Company's 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock, par value $1.00 per share, established by the filing of the Certificate of Designations thereof, in the form attached hereto as Exhibit A, in the Office of the Secretary of State of Delaware. "Subsidiary" means in respect of any Person any other Person which, at the time as of which any determination is made, such Person or one or more of its Subsidiaries has, directly or indirectly, voting control. "Transfer" means any sale, assignment, hypothecation, transfer or other disposition. "Transferor" and "Transferee" shall have correlative meanings. -5- 10 "Violation" has the meaning assigned to such term in Section 9.6(a). ARTICLE 2 PURCHASE AND SALE OF SECURITIES 2.1 Purchase and Sale of Securities. Subject to the terms set forth herein and in reliance upon the representations set forth below, the Company agrees to sell to the Purchasers, and the Purchasers agree collectively to purchase from the Company, on the Closing Date, an aggregate of 550,000 shares of Series A Preferred Stock for the aggregate purchase price of $55,000,000.00 (all of the shares of Series A Preferred Stock being purchased pursuant hereto being referred to herein as the "Purchased Shares"). 2.2 Certificates of Designation. The Series A Preferred Stock shall have the powers, rights and preferences set forth in the form of Certificate of Designations attached hereto as Exhibit A. 2.3 Closing. (a) The purchase and issuance of the Purchased Shares shall take place at a closing (the "Closing") to be held at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, at 10:00 A.M., local time, on the Closing Date. The "Closing Date" shall be (i) the later of (1) November 30, 1998 or (2) the first Business Day after the conditions to closing set forth in Articles 7 and 8 (other than those to be satisfied at the Closing, which shall be satisfied or waived at the Closing) have been satisfied or waived by the party entitled to waive such condition, or (ii) such other date and time as the parties may agree. (b) Not less than two Business Days prior to the Closing, the Purchasers shall advise the Company in writing (the "Allocation Notice") of the names in which to register the shares of Series A Preferred Stock to be purchased at the Closing (which shall be the names of one or more of the Purchasers or their nominees) and the number of shares to be purchased by each Purchaser (which numbers, when added together, shall equal 550,000). At the Closing, the Company shall deliver to the Purchasers certificates representing the Purchased Shares (each of which shall be fully paid, non-assessable and free and clear of any Liens), duly registered in the name of each Purchaser or its nominee (as set forth in the Allocation Notice), and the Purchasers shall deliver to the Company the aggregate purchase price therefor by wire transfer of immediately available funds to an account designated in writing by the Company to the Purchasers at least two Business Days before the Closing. 2.4 Use of Proceeds. Funds received by the Company in respect of the aggregate purchase price referred to in Section 2.1 shall be used by the Company solely to reduce borrowings under indebtedness outstanding on the date hereof. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to the Purchasers as follows: -6- 11 3.1 Corporate Existence and Power. The Company (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware; (b) has all requisite corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is engaged; and (c) has the corporate power and authority to execute, deliver and perform its obligations under this Agreement. The Company is duly qualified to do business as a foreign corporation in, and is in good standing under the laws of, each jurisdiction in which the conduct of its business or the nature of the property owned requires such qualification, except where the failure to be so qualified and in good standing would not have a Material Adverse Effect. 3.2 Subsidiaries. Except as set forth on Schedule 3.2, the Company has no Subsidiaries and no material interest or investments in any corporation, partnership, limited liability company, trust or other entity or organization. Each Subsidiary listed on Schedule 3.2 has been duly organized, is validly existing and in good standing under the laws of the jurisdiction of its organization, has the corporate power and authority to own its properties and to conduct its business and is duly registered, qualified and authorized to transact business and is in good standing in each jurisdiction in which the conduct of its business or the nature of its properties requires such registration, qualification or authorization, except where the failure to be so registered, qualified or authorized would not have a Material Adverse Effect. Except as disclosed on Schedule 3.2, all of the issued and outstanding capital stock (or equivalent interests) of each Subsidiary set forth on Schedule 3.2 has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company free and clear of any Liens and there are no rights, options or warrants outstanding or other agreements to acquire shares of capital stock (or equivalent interests) of such Subsidiary. 3.3 Corporate Authorization; No Contravention. The execution, delivery and performance by the Company of this Agreement and the Contemplated Transactions, (a) have been duly authorized by all necessary corporate action of the Company; (b) do not contravene the terms of the Certificate of Incorporation or Bylaws of the Company or the organizational documents of its Subsidiaries; and (c) except as would not have a Material Adverse Effect, do not violate or result in any breach or contravention of, a default under, or an acceleration of any obligation under or the creation (with or without notice, lapse of time or both) of any Lien under, any Contractual Obligation of the Company or its Subsidiaries or any Requirement of Law applicable to the Company or its Subsidiaries. No event has occurred and no condition exists which (upon notice or the passage of time or both) would constitute, or give rise to: (i) any breach, violation, default, change of control or right to cause the Company to repurchase or redeem under, (ii) any Lien on the assets of the Company or any of its Subsidiaries under, (iii) any termination right of any party under or (iv) any change or acceleration in the rights or obligations of any party under, any indenture, mortgage, deed of trust, credit or other agreement, contract, lease, license, note or other evidence of indebtedness or other material agreement of the Company or its Subsidiaries or the Certificate of Incorporation or Bylaws or the organizational documents of the Company's Subsidiaries, except for any such breach, violation, default acceleration, creation or change that does not, individually or in the aggregate, have a Material Adverse Effect. 3.4 Governmental Authorization; Third Party Consents. Except as would not have a Material Adverse Effect or materially affect the Purchasers' ability to own the Purchased -7- 12 Shares and exercise the rights incident thereto, no approval, consent, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law, Contractual Obligation or otherwise, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the sale, issuance and delivery of the Purchased Shares) by the Company, or enforcement against the Company, of this Agreement or the Contemplated Transactions; provided, however, that expiration or termination of the waiting periods under the HSR Act applicable to the purchase of voting securities of the Company by the Purchasers or the receipt of any necessary clearance from any appropriate Governmental Authority charged with enforcement of the HSR Act with respect thereto (collectively, the "HSR Requirements") is required in order for the Purchasers to have the directors designation rights set forth in Article 10 hereof and for the Purchased Shares to have voting rights. 3.5 Binding Effect. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. 3.6 Capitalization of the Company. The authorized capital stock of the Company consists of (i) 27,500,000 shares of Common Stock, of which 22,500,000 shares are designated as Class A Common Stock and 5,000,000 shares are designated as Class B Common Stock, and (ii) 1,000,000 shares of preferred stock, par value $1.00, of the Company (the "Preferred Stock"). As of November 22, 1998, (a) no shares of Preferred Stock were issued or outstanding, (b) 9,942,487 shares of Class A Common Stock were issued and outstanding, (c) 1,420,700 shares of Class B Common Stock were issued and outstanding, and (d) 1,935,000 shares of Class A Common Stock were reserved for or subject to issuance upon the exercise of outstanding Company Options or upon conversion of outstanding shares of Class B Common Stock. Schedule 3.6 sets forth a true and correct list of all outstanding options or warrants to purchase shares of any class or series of capital stock of the Company (collectively, the "Company Options") and a true and correct list of each of the Company's stock option, incentive or other plans pursuant to which options or warrants to purchase capital stock of the Company may be issued (collectively, the "Existing Plans"). Except (1) as set forth in the second sentence of this Section 3.6, (2) shares of Common Stock issued (i) pursuant to the exercise of outstanding Company Options or (ii) on the conversion of outstanding shares of Class B Common Stock and (3) options granted under Existing Plans after the date hereof, on the Closing Date there will be no shares of Common Stock or any other equity security of the Company issuable upon conversion or exchange of any security of the Company nor will there be any rights, options or warrants outstanding or other agreements to acquire shares of capital stock of the Company nor will the Company be contractually obligated to issue any shares of capital stock or to purchase, redeem or otherwise acquire any of its outstanding shares of capital stock. The Company has not created any "phantom stock," stock appreciation rights or other similar rights the value of which is related to or based upon the price or value of the Common Stock. None of the Company's outstanding debt or debt instruments provide voting rights with respect to the Company to the holders thereof. No stockholder of the Company or other Person is entitled to any preemptive or similar rights to subscribe for shares of capital stock of the Company. All of the issued and outstanding shares of Common Stock are, and the Purchased Shares (when issued hereunder) -8- 13 after payment of the purchase price therefor to the Company, will be, duly authorized, validly issued, fully paid, nonassessable, and free and clear of all Liens (other than any such Liens imposed by the Purchasers or any of their creditors). Except as set forth on Schedule 3.6 hereto, the Company has not granted to any Person the right to demand or request that the Company effect a registration under the Securities Act of any securities held by such Person or to include any securities of such Person in any such registration by the Company. 3.7 SEC Filings; Financial Statements. The Company has timely filed all SEC Reports. Each SEC Report complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, as applicable, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements in the SEC Reports, in light of the circumstances under which they were made, not misleading. Each of the Company's financial statements (including, in each case, any related notes) contained in the SEC Reports complied as to form in all material respects with applicable published rules and regulations of the Commission with respect thereto, was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to such financial statements) and fairly presented the financial position of the Company and its Subsidiaries as at the respective dates and the results of operations and cash flows for the periods indicated, except that unaudited financial statements were subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount or effect. 3.8 Absence of Certain Developments. Since December 31, 1997, except as described in the SEC Reports filed with the Commission prior to the date hereof, (a) the Company has operated in the ordinary course and (b) there has been no material adverse change, or any developments that, individually or in the aggregate, would reasonably be expected to cause material adverse change, in or affecting the business, results of operations, management or condition, financial or otherwise, of the Company and its Subsidiaries, taken as a whole (a "Material Adverse Effect"). 3.9 No Undisclosed Liabilities. Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, except (a) liabilities or obligations disclosed or reserved against in the SEC Reports filed prior to the date of this Agreement or (b) liabilities or obligations which could not have, individually or in the aggregate, have not had, and could not reasonably be expected to have, a Material Adverse Effect. 3.10 Compliance with Laws. Except as would not have a Material Adverse Effect, the Company and each of its Subsidiaries: (a) in the conduct of its business, is not, and since December 31, 1996, has not been, in violation of any Requirement of Law, or any judgments, orders, rulings, injunctions or decrees of Governmental Authority (collectively, "Decrees"), applicable thereto or to the employees conducting such business; (b) has all permits, licenses, authorizations, orders and approvals of, and have made all filings, applications and registrations with, all Governmental Authorities that are required in order to permit it to conduct its businesses as presently conducted; all such permits, -9- 14 licenses, authorizations, orders and approvals are in full force and effect and, to the best of the Company's knowledge, no suspension or cancellation of any of them is threatened; and (c) has received, since December 31, 1996, no notification or communication from any Governmental Authority (i) asserting that it is not in compliance with any of the Requirements of Law or Decrees which such Governmental Authority enforces or (ii) threatening to revoke any permit, license, authorization, order or approval. 3.11 Litigation. There is no legal action, suit, arbitration or other legal, administrative or other governmental investigation, inquiry or proceeding pending or, to the best knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or relating to this Agreement or the Contemplated Transactions which, if determined adversely to the Company, could reasonably be expected to have a Material Adverse Effect or could reasonably be expected to materially delay or prohibit the Closing. The Company is not subject to any Decree that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 3.12 Material Contracts. All of the Company's Contractual Obligations that are required to be described in the SEC Reports or to be filed as exhibits thereto are described in the SEC Reports or filed as exhibits thereto, as so required. Neither the Company nor any of its Subsidiaries nor any other party is in breach of or in default under any of the Company's Contractual Obligations except for such breaches and defaults which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 3.13 Private Offering. No form of general solicitation or general advertising was used by the Company or its representatives in connection with the offer or sale of the Purchased Shares. No registration of the Purchased Shares pursuant to the provisions of the Securities Act or any state securities or "blue sky" laws will be required by the offer, sale, or issuance of the Purchased Shares pursuant to this Agreement, assuming the accuracy of the Purchaser's representation contained in Section 4.5. 3.14 Board Approval; DGCL 203; Stockholder Approval. (a) The Board of Directors, at a meeting duly called and held, has determined the Contemplated Transactions to be advisable and in the best interests of the Company and its stockholders and has approved the Contemplated Transactions. (b) The Company has taken all action necessary to cause the restriction contained in Section 203 of the DGCL to be inapplicable to the Contemplated Transactions and to approve the Purchasers becoming "interested stockholders" within the meaning of Section 203 of the DGCL, whether by way of the Contemplated Transactions, conversion of the Series A Preferred Stock or any future transaction. (c) No approval of this Agreement or of the Contemplated Transactions by the holders of any shares of capital stock of the Company is required in connection with the execution or delivery of this Agreement or the consummation of the Contemplated Transactions, whether pursuant to the DGCL, the Certificate of Incorporation or Bylaws of the Company, the rules and regulations of the NYSE, or otherwise. -10- 15 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser hereby represents and warrants to the Company as follows as to itself: 4.1 Existence and Power. Such Purchaser (a) is duly organized and validly existing as a limited partnership under the laws of the jurisdiction of its formation (except that Goldman Sachs & Co. Verwaltungs GMBH is a civil law partnership under German law) and (b) has the requisite power and authority to execute, deliver and perform its obligations under this Agreement. 4.2 Authorization; No Contravention. The execution, delivery and performance by such Purchaser of this Agreement and the Contemplated Transactions(a) have been duly authorized by all necessary partnership action, (b) do not contravene the terms of such Purchaser's organizational documents, or any amendment thereof, and (c) do not violate, conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contractual Obligation of such Purchaser or any Requirement of Law applicable to such Purchaser, except for such violations, conflicts, breaches or Liens which will not result in a material adverse effect on such Purchaser's ability to consummate the Contemplated Transactions. 4.3 Governmental Authorization; Third Party Consents. Except as would not have a Material Adverse Effect or materially affect the Purchasers' ability to own the Purchased Shares and exercise the rights incident thereto, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance by such Purchaser, or enforcement against such Purchaser, of this Agreement or the consummation of the Contemplated Transactions; provided, however, that satisfaction of the HSR Requirements is required in order for the Purchasers to have the director designation rights set forth in Article 10 hereof and for the Purchased Shares to have voting rights. 4.4 Binding Effect. This Agreement has been duly executed and delivered by such Purchaser and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms. 4.5 Purchase for Own Account, Etc. (a) Purchase for Own Account. The Purchased Shares are being acquired by such Purchaser for its own account and with no current intention of distributing or reselling such Purchased Shares or any part thereof in any transaction that would be in violation of the securities laws of the United States of America or any state, without prejudice, however, to the rights of such Purchaser at all times to sell or otherwise dispose of all or any part of such Purchased Shares under an effective Registration Statement under the Securities Act or under an exemption from said registration available under the Securities Act. Such Purchaser understands and agrees that if such Purchaser should in the future decide to dispose of any Purchased Shares, it may do so only in compliance with the Securities -11- 16 Act and applicable state securities laws, as then in effect. Such Purchaser agrees to the imprinting, so long as required by law, of a legend on all certificates representing such Purchased Shares to the following effect: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. The legend set forth above may be removed if and when the securities represented by such certificate are disposed of pursuant to an effective registration statement under the Securities Act or upon the Company's receipt of an opinion of counsel, in form and substance and from counsel reasonably satisfactory to the Company and its counsel, confirming that any sale or transfer of such securities will not require registration of such securities under the Securities Act or under any blue sky or similar laws. In such event, the holder of any such certificate may exchange such certificate for a new certificate, without legend, representing the same number of shares of Series A Preferred Stock as were represented by the certificate so exchanged, and the Company shall promptly issue and deliver such new certificate upon receipt of the old, which shall thereupon be cancelled. (b) Purchaser Status. Such Purchaser is an "Accredited Investor" (as defined in Rule 501(a)) under the Securities Act. (c) Restricted Shares. Such Purchaser understands (i) that the Purchased Shares have not been, and the shares of Class A Common Stock issuable upon conversion of the Purchased Shares (the "Conversion Shares") will not be, registered under the Securities Act or any state securities laws, by reason of their issuance by the Company in a transaction exempt from the registration requirements thereof and (ii) the Purchased Shares and the Conversion Shares may not be sold unless such disposition is registered under the Securities Act and applicable state securities laws or is exempt from registration thereunder. 4.6 Sufficient Funds. Each Purchaser will have available funds sufficient to purchase such Purchaser's allocation of the Purchased Shares in accordance with the terms of this Agreement and to perform its obligations hereunder. ARTICLE 5 COVENANTS OF THE COMPANY 5.1 Conduct of Business. From the date hereof through the Closing Date, the Company and its Subsidiaries shall conduct their businesses in the ordinary course, consistent with past practice and generally in a manner such that the representations and warranties -12- 17 contained in Article 3 shall continue to be true and correct in all material respects on and as of the Closing Date (except for representations and warranties made as of a specific date) as if made on and as of the Closing Date. The Company shall give the Purchasers prompt notice of any event, condition or circumstance occurring from the date hereof through the Closing Date that would constitute a violation or breach of (i) any representation or warranty, whether made as of the date hereof or as of the Closing Date, or (ii) any covenant of the Company contained in this Agreement; provided, however, that no such notification shall relieve or cure any such breach or violation of any such representation, warranty or covenant or otherwise affect the accuracy of any such representation or warranty for the purposes of Section 7.1. 5.2 Indemnification of Brokerage. The Company represents and warrants to the Purchasers that no broker, finder, agent or similar intermediary (a "Broker") has acted on behalf of the Company or its Subsidiaries in connection with this Agreement or the Contemplated Transactions, and that there are no brokerage commissions, finder's fees or similar fees or commissions payable in connection therewith based on any agreement, arrangement or understanding with the Company or any of the Subsidiaries or any action taken by the Company or any of its Subsidiaries. 5.3 Rule 144. The Company shall file all reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as the Purchasers may reasonably request, all to the extent required to enable the Purchasers to sell the Common Stock into which the Purchased Shares may be converted pursuant to and in accordance with Rule 144. Such action shall include, but not be limited to, making available adequate current public information meeting the requirements of paragraph (c) of Rule 144. 5.4 HSR Approval. Promptly upon execution and delivery (and in any event within five (5) Business Days of the date of this Agreement), the Purchasers and the Company will prepare and file, or cause to be prepared and filed, with the appropriate Governmental Authorities, the requisite notification with respect to the Contemplated Transactions pursuant to the HSR Act. Thereafter, the Purchasers and the Company shall promptly supply all information requested by Governmental Authorities in connection with the HSR Act notification and cooperate with each other in responding to any such request, and the Company shall use all reasonable efforts to cause the applicable HSR Act waiting periods to be terminated early or to expire without further inquiry or extension of time by any Governmental Authority and otherwise to cause the HSR Requirements to be satisfied, including by supplying all information requested by Governmental Authorities in connection therewith, and to cooperate with the Purchasers in connection with the satisfaction of the HSR Requirements and the HSR Act generally. 5.5 No Rights Plan. From the date hereof through the first date on which shares of Series A Preferred Stock are convertible into Class A Common Stock pursuant to the Certificate of Designations, and thereafter for so long as the Purchasers collectively beneficially own Common Stock representing at least 5% of the total voting power of the Company (assuming conversion of all shares of Series A Preferred Stock into Class A Common Stock, regardless of whether such shares are actually then convertible), the Company shall not adopt or enter into any "poison pill" rights plan or any similar plan or agreement or declare or pay any dividend of any rights to purchase capital stock of the Company in connection with such a plan -13- 18 or agreement unless such plan or agreement would permit the Purchasers, their Affiliates and their managed accounts to beneficially own, in the aggregate, all of the shares of capital stock of the Company then owned or held by them at such time plus an additional number of shares of capital stock representing an additional 5% of the total voting power of the Company without causing or triggering any adverse consequences to the Purchasers or otherwise giving rise to any rights in any other person (including any of the Company's stockholders) as a result thereof. ARTICLE 6 COVENANTS OF THE PURCHASER 6.1 Indemnification of Brokerage. The Purchasers covenant that no Broker has acted on behalf of any Purchaser in connection with this Agreement or the Contemplated Transactions, and that there are no brokerage commissions, finders' fees or similar fees or commissions payable in connection therewith based on any agreement, arrangement or understanding with any Purchaser, or any action taken by any Purchaser. Each Purchaser agrees to indemnify and hold harmless the Company from any Action or demand for commission or other compensation by any Broker claiming to have been employed by or on behalf of such Purchaser, and to bear the cost of legal expenses incurred in defending against any such claim. ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO CLOSE The obligations of the Purchasers to enter into and complete the Closing are subject to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by the Purchasers: 7.1 Representations and Covenants. The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects (other than those which are qualified as to materiality, Material Adverse Effect or other similar term, which shall be true and correct in all respects) on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date; the Company shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by the Company on or prior to the Closing Date; and the Company shall have delivered to the Purchasers a certificate, dated the date of the Closing and signed by an executive officer of the Company, to the foregoing effect. 7.2 Filing of Certificate of Designations. The Certificate of Designations of the Series A Preferred Stock in the form attached hereto as Exhibit A shall have been filed with the Office of the Secretary of State of the State of Delaware in accordance with Section 242 of the DGCL. 7.3 Opinion of Counsel to the Company. The Purchasers shall have received the legal opinion of Troutman Sanders LLP, counsel to the Company, dated the Closing Date, addressed to the Purchaser, in a form reasonably acceptable to the Purchasers and such counsel. -14- 19 7.4 No Actions. (a) No Action shall be pending by or before any Governmental Authority (including investigations instituted by the United States Department of Justice or the Federal Trade Commission in connection with antitrust regulations) to restrain or prohibit this Agreement or the consummation of the Contemplated Transactions. (b) No law, order, decree, rule or injunction shall have been enacted, entered, promulgated or enforced by any Governmental Authority that prohibits or makes illegal the consummation of any of the Contemplated Transactions. 7.5 NYSE Listing. The shares of Class A Common Stock issuable upon conversion of the Purchased Shares shall have been approved for listing on the NYSE, subject only to official notice of issuance. ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO CLOSE The obligation of the Company to enter into and complete the Closing is subject to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by the Company: 8.1 Representations and Covenants. The representations and warranties of the Purchasers contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date; the Purchasers shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by them on or prior to the Closing Date; and the Purchasers shall have delivered to the Company a certificate, dated the date of the Closing and signed by a general partner of each Purchaser, to the foregoing effect. 8.2 No Actions. (a) No Action shall be pending by or before any Governmental Authority (including investigations instituted by the United States Department of Justice or the Federal Trade Commission in connection with antitrust regulations) to restrain or prohibit this Agreement or the consummation of the Contemplated Transactions. (b) No law, order, decree, rule or injunction shall have been enacted, entered, promulgated or enforced by any Governmental Authority that prohibits or makes illegal the consummation of any of the Contemplated Transactions. ARTICLE 9 REGISTRATION RIGHTS; PREEMPTIVE RIGHTS 9.1 Requested Registration. (a) If the Company shall receive from Holders of Registrable Securities or Purchased Shares representing, in the aggregate, at least a majority of the Registrable Securities (which calculation shall include all Registrable Securities then outstanding and all Registrable Securities into which all shares of Series A Preferred Stock then outstanding may be converted), a written request (which shall specify whether the distribution -15- 20 will be made by means of an underwriting) that the Company effect a registration (a "Demand Notice") with respect to all or a part of the Registrable Securities, which Demand Notice shall request registration of a number of shares of Class A Common Stock reasonably expected to have an aggregate selling price of $20,000,000.00 or more, the Company will, as soon as practicable, use its reasonable best efforts to effect such registration under the Securities Act (which shall be a "shelf" registration statement pursuant to Rule 415 under the Securities Act (or a successor provision), if so requested by the Holders of a majority of the Registrable Securities specified in the Demand Notice and if the Company is eligible therefor at such time) as may be so requested and as would permit or facilitate the sale and distribution of the Registrable Securities as are specified in such request; provided, however, that the Company shall not be required to effect any registration requested pursuant to this Section 9.1(a) if at the time the Demand Notice is received (i) the shares are eligible for sale and capable of being sold at such time pursuant to Rule 144 promulgated under the Securities Act and (ii) the number of shares of Class A Common Stock sought to be included in such registration does not exceed 1% of the number of shares of such class outstanding. After the Company has effected two (2) such registrations pursuant to this Section 9.1(a), the related Registration Statements have been declared effective and the distribution contemplated thereunder completed, the Company shall have no further obligation under this Section 9.1(a). (b) Section 9.1(a) notwithstanding, if the Company shall furnish to Holders who have elected to exercise their rights under Section 9.1(a) (each, a "Section 9.1 Exercising Holder") a certificate signed by the President or the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, disclosure of certain information that would otherwise be required to be disclosed in a Registration Statement to be filed pursuant to Section 9.1(a) would be seriously detrimental to the Company, and it is therefore desirable and in the best interests of the Company to defer the filing of such registration statement, then the Company shall have the right to defer such filing for a period of time after receipt of such request; provided, however, that the Company may not defer such filing more than once in any 12-month period and the aggregate period of time during any such 12-month which the Company may defer such filing shall not exceed 90 days. (c) If the Company or any stockholder, other than a Section 9.1 Exercising Holder, wishes to offer any of its securities in connection with any registration initiated pursuant to this Section 9.1, no such securities may be offered by the Company or such other stockholder without the consent of the Holders of a majority of the Registrable Securities specified in the Demand Notice related to such offering. (d) In connection with any underwritten offering pursuant to this Section 9.1, Section 9.1 Exercising Holders shall have the right to select the underwriter or underwriters, which shall be a nationally recognized investment banking firm or firms reasonably acceptable to the Company; provided that for so long as the Purchasers together hold at least a majority of the Registrable Securities, GSCPIII shall have the right, in its sole discretion, to select an underwriter or underwriters on behalf of the Exercising Holders. If Goldman, Sachs & Co. is selected as an underwriter, Goldman, Sachs & Co. shall appoint a qualified independent underwriter, if necessary. -16- 21 9.2 Company Registration. (a) If the Company shall determine to register any shares of Common Stock for the account of the Company, a security holder or holders or otherwise (other than a registration relating solely to employee benefit plans, or a registration relating solely to a merger, exchange offer or a transaction of the type specified in Rule 145(a) under the Securities Act), the Company will promptly deliver to each of the Holders a written notice of such proposed transaction at least 20 Business Days prior to the filing of a registration statement and include in such registration, and in any underwriting involved therein, all the Registrable Securities specified in written requests made by Holders within ten Business Days after receipt of the written notice from the Company described above. Each Holder shall be entitled to have its shares included in an unlimited number of registrations pursuant to this Section 9.2. (b) If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 9.2(a). In such event, the right of each Holder to registration pursuant to Section 9.2(a) shall be conditioned upon such Holder's participation in such underwriting and the inclusion of the Registrable Securities in the underwriting to the extent provided herein. If the Holders shall have elected to exercise their rights under Section 9.2(a) (each, a "Section 9.2 Exercising Holder," and, together with the Section 9.1 Exercising Holders, the "Exercising Holders"), they shall enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for underwriting by the Company. Notwithstanding any other provision of this Section 9.2, if the representative determines and so advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the Company shall so advise the Section 9.2 Exercising Holders and any other Person (other than the Company) registering shares under such registration. In such an event, the number of Registrable Securities that may be included in the registration and underwriting by the Section 9.2 Exercising Holders and each other Person (other than the Company) registering shares under such registration, shall be reduced, on a pro rata basis (based on the number of shares of Common Stock requested to be included by each such Section 9.2 Exercising Holder (counting shares of Series A Preferred Stock on an as-converted-to-common basis) and each other Person (other than the Company) registering shares under such registration), by such minimum number of shares as is necessary to comply with such limitation. If a Section 9.2 Exercising Holder disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company and the underwriter. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. 9.3 Transferability. Each Transferee of Registrable Securities wishing to participate as an Exercising Holder in any registration pursuant to Section 9.1 or 9.2 shall, prior thereto, execute and deliver to the Company a letter agreement (and shall cause each other Person to whom it assigns its registration rights under this Article 9 to execute and deliver to the Company a similar letter agreement) in form and substance satisfactory to the Company, pursuant to which such Transferee (or such other Person or Persons to whom it assigns its registration rights under this Article 9) agrees to comply with the requirements of this Article 9 (including this sentence) to the same extent and subject to the same terms and conditions as a Purchaser. -17- 22 9.4 Expenses of Registration . The Company shall pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Article 9; provided, however, that each Exercising Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to a Registration Statement effected pursuant to this Article 9. 9.5 Registration Procedures . In the case of each registration effected by the Company pursuant to Article 9, the Company will: (a) prepare and file with the Commission, as promptly as practicable, the requisite Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become and remain effective; (b) (i) prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective (but, in the case of a Registration Statement that is not a "shelf" registration, only for the period of time reasonably necessary to permit the Exercising Holders to dispose of all the Registrable Securities included in such offering) and (ii) comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such Registration Statement during such period; (c) furnish to the Exercising Holders prior to the filing of the requisite Registration Statement copies of drafts of such Registration Statement as is proposed to be filed (and give such Exercising Holders and their counsel a reasonable opportunity to comment on such documents), and thereafter such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the Prospectus included in such Registration Statement (including each preliminary prospectus) and such other documents in such quantities as the Exercising Holders may reasonably request from time to time in order to facilitate its distribution; (d) notify the Exercising Holders promptly of any request by the Commission for the amending or supplementing of such Registration Statement or Prospectus or for additional information and promptly deliver to the Exercising Holders and their counsel copies of any comments received from the Commission; (e) notify the Exercising Holders, promptly after the Company shall receive notice thereof, of the time when the Registration Statement becomes effective or when any amendment or supplement or any Prospectus forming a part of the Registration Statement has been filed; (f) advise the Exercising Holders promptly after the Company shall receive notice or obtain knowledge of the issuance of any stop order by the Commission suspending the effectiveness of any such Registration Statement or amendment thereto or of the initiation or threatening of any proceeding for that purpose, and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal promptly if such stop order should be issued; -18- 23 (g) use all reasonable efforts to register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions as the Exercising Holders (or the managing underwriter, in the case of underwritten offerings) reasonably request; provided that the Company shall not be required to qualify to do business or become subject to service of process or taxation in any jurisdiction in which it is not already so qualified or subject; (h) use all reasonable efforts, including filing any necessary listing applications with any securities exchange or Nasdaq, to cause the Registrable Securities included in the Registration Statement to be listed on any securities exchange or authorized for quotation on any national quotation system on which any of the Common Stock is then listed; (i) notify the Exercising Holders, at any time when a Prospectus relating to the proposed sale is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement or amendment contains an untrue statement of a material fact or omits to state any material fact required to be stated therein in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company will prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (j) enter into customary agreements (including without limitation, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities included in the Registration Statement; (k) in the case of a Registration Statement filed pursuant to Section 9.1 involving a shelf Registration Statement, prepare and file with the Commission such amendments and supplements to such shelf Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such shelf Registration Statement effective until the earlier of (i) the sale of all Registrable Securities covered thereby or (ii) the second anniversary of the initial date of the effectiveness of such shelf Registration Statement, and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such Registration Statement; (l) make available, upon reasonable prior notice and during normal business hours in New York City, for inspection by Exercising Holders, any underwriter participating in any disposition pursuant to the Registration Statement and any attorney, accountant or other agent retained by the Exercising Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and cause the Company's officers, directors and employees, upon reasonable prior notice and during normal business hours in New York City, to supply all relevant information reasonably requested by the Exercising Holders or any such underwriter, attorney, accountant or agent in connection with the Registration Statement; -19- 24 (m) request the Company's independent public accountants to provide to the underwriters, if any, and the Exercising Holders, if permissible, a comfort letter in customary form and covering such matters of the type customarily covered by comfort letters to underwriters in connection with public offerings; (n) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter in an underwritten offering; and (o) use all reasonable efforts to facilitate the distribution and sale of any Registrable Securities to be offered pursuant to this Agreement, including without limitation by making road show presentations, holding meetings with potential investors and taking such other actions as shall be requested by the Exercising Holders of Registrable Securities covered by a Registration Statement or the lead managing underwriter of an underwritten offering. 9.6 Indemnification. (a) In the event of any registration of any Registrable Securities pursuant to this Article 9, the Company will, and hereby does, indemnify and hold harmless, to the fullest extent permitted by law, each Exercising Holder, its directors, officers, members, managers, managing directors, fiduciaries, employees and stockholders or general and limited partners (and the directors, officers, members, managers, managing directors, fiduciaries, employees and stockholders or general and limited partners thereof), each other Person who participates as an underwriter or a qualified independent underwriter, if any, in the offering or sale of such securities, each director, officer, members, managers, fiduciary, managing director, employee and stockholder or general and limited partner of such underwriter or qualified independent underwriter, and each other Person (including any such Person's directors, officers, members, managers, managing directors, fiduciaries, employees and stockholders or general and limited partners), if any, who controls such seller or any such underwriter or qualified independent underwriter, within the meaning of the Securities Act, against any and all Claims in respect thereof and expenses (including reasonable fees and expenses of counsel and any amounts paid in any settlement effected with the Company's consent, which consent shall not be unreasonably withheld or delayed) to which each such indemnified party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Claims or expenses arise out of or are based upon any of the following actual or alleged statements, omissions or violations (each, a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which such securities were registered pursuant to this Agreement under the Securities Act or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus or any amendment or supplement thereto, together with the documents incorporated by reference therein, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, or (iii) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration, and the Company will reimburse any such indemnified party for any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or -20- 25 defending any such Claim as such expenses are incurred; provided, that the Company shall not be liable to any such indemnified party in any such case to the extent such Claim or expense arises out of or is based upon any Violation which occurs in reliance upon and in conformity with written information furnished to the Company or its representatives by or on behalf of such indemnified party expressly stating that such information is for use therein. (b) Each Exercising Holder will, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, severally and not jointly, indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 9.6), to the extent permitted by law, the Company, its directors, officers, fiduciaries, employees and stockholders (and the directors, officers, fiduciaries, employees and stockholders or general and limited partners thereof) and each Person (including any such Person's directors, officers, fiduciaries, employees and stockholders or general and limited partners), if any, controlling the Company within the meaning of the Securities Act and all other prospective sellers in such registration and their directors, officers, fiduciaries, employees and stockholders or general and limited partners and respective controlling Persons (including any such Person's directors, officers, fiduciaries, employees and stockholders or general and limited partners) against any and all Claims and expenses (including reasonable fees and expenses of counsel and any amounts paid in any settlement effected with the consent of the indemnifying party, which consent shall not be unreasonably withheld or delayed) to which each such indemnified party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Claims or expenses arise out of or are based upon any Violation which occurs in reliance upon and in conformity with written information furnished to the Company or its representatives by or on behalf of such Exercising Holder or underwriter or qualified independent underwriter, if any, expressly stating that such information is for use in connection with any Registration Statement, preliminary, final or summary prospectus or amendment or supplement or document incorporated by reference into any of the foregoing; provided, however, that the aggregate amount which any such Exercising Holder shall be required to pay pursuant to this Section 9.6(b) and Sections 9.6(c) and (e) shall be limited to the amount of the net proceeds received by such Exercising Holder upon the sale of the Registrable Securities pursuant to the Registration Statement giving rise to such claim. (c) Indemnification similar to that specified in the preceding paragraphs (a) and (b) of this Section 9.6 (with appropriate modifications) shall be given by the Company and each Exercising Holder (if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected), severally and not jointly, with respect to any required registration or other qualification of securities under any state securities and "blue sky" laws. (d) Any Person entitled to indemnification under this Agreement shall notify promptly the indemnifying party in writing of the commencement of any Action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 9.6, but the failure of any indemnified party to provide such notice shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 9.6, except to the extent the indemnifying party is actually materially prejudiced thereby, and shall not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than under this Section 9.6. In case any action or proceeding is brought against an -21- 26 indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, unless in the reasonable opinion of outside counsel to the indemnified party a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, to assume the defense thereof jointly with any other indemnifying party similarly notified, to the extent that it chooses, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party that it so chooses, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that (i) if the indemnifying party fails to take reasonable steps necessary to defend diligently the action or proceeding within twenty (20) days after receiving notice from such indemnified party that the indemnified party believes it has failed to do so; or (ii) if such indemnified party who is a defendant in any action or proceeding which is also brought against the indemnifying party reasonably shall have concluded that there may be one or more legal defenses available to such indemnified party which are not available to the indemnifying party; or (iii) if representation of both parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct, then, in any such case, the indemnified party shall have the right to assume or continue its own defense as set forth above (but with no more than one firm of counsel for all indemnified parties in each jurisdiction, except to the extent any indemnified party or parties reasonably shall have concluded that there may be legal defenses available to such party or parties which are not available to the other indemnified parties or to the extent representation of all indemnified parties by the same counsel is otherwise inappropriate under applicable standards of professional conduct) and the indemnifying party shall be liable for any expenses therefor. No indemnifying party shall, without the written consent of the indemnified party, which consent shall not be unreasonably withheld, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the indemnified party from all liability arising out of such action or claim, (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party and (C) does not include any injunctive or other non-monetary relief. (e) If for any reason the foregoing indemnity is unavailable or is insufficient to hold harmless an indemnified party under Section 9.6(a), (b) or (c), then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any Claim in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other from the relevant offering of securities. If, however, the allocation provided in the immediately preceding sentence is not permitted by applicable law, or if the indemnified party failed to give the notice required by Section 9.6(d) above and the indemnifying party is prejudiced thereby, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative fault of but also the relative benefits received by the indemnifying party, on the one hand, and the indemnified party, on the other hand, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the Violation relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, -22- 27 knowledge, access to information and opportunity to correct or prevent such Violation. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 9.6(e) were to be determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the preceding sentences of this Section 9.6(e). The amount paid or payable in respect of any Claim shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such Claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding anything in this Section 9.6(e) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 9.6(e) to contribute any amount in excess of (x) in the case of an indemnifying party that is a Holder of Registrable Securities, the net proceeds received by such indemnifying party from the sale of Registrable Securities in the offering to which the losses, claims, damages or liabilities of the indemnified parties relate, or (y) in the case of an indemnifying party that is an underwriter or a qualified independent underwriter, the amount of the commission received by it in connection with the offering to which the losses, claims, damages or liabilities of the indemnified parties relate, less, in any such case referred to in (x) and (y), the amount of all indemnification and contribution payments made pursuant to Sections 9.6(b) and (c) and this Section 9.6(e), as the case may be, in connection with such offering. (f) The indemnity agreements contained herein shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract and shall remain operative and in full force and effect regardless of any investigation made or omitted by or on behalf of any indemnified party and shall survive the Transfer of the Registrable Securities by any such party. (g) The indemnification and contribution required by this Section 9.6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (h) In connection with underwritten offerings, the Company will use reasonable best efforts to negotiate terms of indemnification that are reasonably favorable to the various sellers pursuant thereto, as appropriate under the circumstances, and that are no less favorable to such sellers than the terms contained in this Section 9.6. 9.7 Holdback Agreement. (a) If requested in writing by the Company or the underwriter, if any, of any offering affording Holders of Registrable Securities registration rights pursuant to Section 9.2 each Holder agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144, of any Registrable Securities or any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company (in each case, other than as part of such underwritten public offering) within fourteen (14) days before or 90 days after the effective date of a Registration Statement affording Holders registration rights pursuant to Section 9.2, or for such shorter period as the sole or lead managing underwriter shall request, in any such case, unless consented to by such underwriter. -23- 28 (b) If requested in writing by the underwriter of any offering in connection with any registration pursuant to Section 9.1, the Company agrees not to effect any public sale or distribution (other than public sales or distributions solely by and for the account of the Company of securities issued (x) pursuant to any employee or director benefit or similar plan or any dividend reinvestment plan or (y) in any acquisition by the Company) of any Registrable Securities or any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company (in each case, other than as part of such underwritten public offering), within fourteen (14) days before or 90 days after the effective date of a registration statement filed in connection with a registration pursuant to Section 9.1, or for such shorter period as the sole or lead managing underwriter shall request, in any such case, unless consented to by such underwriter. 9.8 Other Registration Rights. The Company shall not grant any right of registration under the Securities Act relating to any of its securities to any Person other than the Purchasers if such rights would or could reasonably be expected to frustrate, impede or limit the Purchasers' rights pursuant to Section 9.2. 9.9 Preemptive Rights. (a) From the Closing Date through the date on which shares of Series A Preferred Stock first become convertible into shares of Class A Common Stock pursuant to the Certificate of Designations, and thereafter for so long as the Purchasers collectively beneficially own (assuming conversion of all shares of Series A Preferred Stock into Class A Common Stock, regardless of whether such shares are actually then convertible) not less than 5% of the total number of shares of Common Stock outstanding from time to time, in the event the Company proposes to issue Common Stock of any kind (including any warrants, options or securities or units comprising securities convertible into or exchangeable for Common Stock or rights to acquire the same) of the Company, other than (1) pursuant to a bona fide public offering to or through a nationally recognized investment banking firm in which, to the Company's knowledge, no single Person or its Affiliates (excluding members of the underwriting syndicate, if an underwritten offering) purchases 10% or more of the shares sold in such offering, (2) pursuant to an employee or non-management director stock option plan, stock bonus plan, stock purchase plan or other management equity program or plan, (3) pursuant to any merger, share exchange or acquisition pursuant to which shares of Series A Common Stock are exchanged for, or issued upon cancellation or conversion of, equity securities of an entity engaged primarily in, or to acquire assets primarily for use in, the motion picture exhibition business, or (4) securities issuable upon exercise of previously issued warrants, options or other rights to acquire Common Stock or upon conversion of previously issued securities convertible into Common Stock, then the Company shall: (i) deliver to the Purchasers written notice setting forth in reasonable detail (1) the terms and provisions of the securities proposed to be issued (the "Proposed Securities"); (2) the price and other terms of the proposed sale of such securities; (3) the amount of such securities proposed to be issued; and (4) such other information as the Purchaser may reasonably request in order to evaluate the proposed issuance; and (ii) offer to issue to the Purchasers in the aggregate a portion of the Proposed Securities equal to a percentage determined by dividing (x) the number of shares of Common Stock beneficially owned by the Purchasers (assuming conversion of -24- 29 all shares of Series A Preferred Stock into Class A Common Stock, regardless of whether such shares are actually then convertible), by (y) the total number of shares of Common Stock then outstanding. The Purchasers must exercise the purchase rights hereunder within ten (10) Business Days after receipt of such notice from the Company. (b) Upon the expiration of the offering period described above, or if the Purchasers shall default in paying for or purchasing the Proposed Securities on the terms offered by the Company, the Company shall thereafter be free to sell such Proposed Securities that the Purchaser has not elected to purchase during the ninety (90) days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to the Purchasers. Any Proposed Securities offered or sold by the Company after such 90 day period must be reoffered to the Purchasers pursuant to this Section 9.9. (c) The election by the Purchasers not to exercise preemptive rights under this Section 9.9 in any one instance shall not affect its right (other than in respect of a reduction in its percentage holdings) as to any subsequent proposed issuance. Any sale of such securities by the Company without first giving the Purchasers the rights described in this Section 9.9 shall be void and of no force and effect, and the Company shall not register such sale or issuance on the books and records of the Company. ARTICLE 10 DIRECTOR DESIGNATION RIGHT 10.1 Directors. (a) From the HSR Clearance Date and for so long as the Purchasers and their Affiliates collectively beneficially own a number of shares of Common Stock (assuming conversion at such time of the Purchased Shares (regardless of convertibility)) that is not less than 50% of the number of shares of Common Stock beneficially owned (assuming conversion at such time of the Purchased Shares regardless of convertibility) by them immediately after the Closing (as such number may be adjusted for stock splits, reverse stock splits, dividends paid in Common Stock, reclassifications of the Common Stock, and other similar events), GSCPIII shall have the right to designate, at all times and from time to time, two directors of the Company; and (ii) for so long as the Purchasers and their Affiliates beneficially own a number of shares of Common Stock (assuming conversion at such time of the Purchased Shares (regardless of convertibility)) that is not less than 10% of the number of shares of Common Stock beneficially owned (assuming conversion at such time of the Purchased Shares (regardless of convertibility)) by them immediately after the Closing (as such number may be adjusted for stock splits, reverse stock splits, dividends paid in Common Stock, reclassifications of the Common Stock, and other similar events), GSCPIII shall have the right to designate, at all times and from time to time, one director of the Company. Individuals designated pursuant to this paragraph shall be considered "Purchaser Designees" for purposes of this Agreement. The Initial Designees elected pursuant to paragraph (b) below shall be the initial Purchaser Designees. -25- 30 (b) Promptly upon expiration, termination or satisfaction of the HSR Requirements (the "HSR Clearance Date"), each of the Company and the Board of Directors shall take such action as may be necessary (including seeking any necessary vote or approval of any stockholder of the Company, taking any action necessary to expand the size of the Board of Directors, or causing any existing director to resign in order to make room for the Initial Designees) to cause the Initial Designees to be elected to the Board of Directors, effective as of the HSR Clearance Date. (c) If requested by GSCPIII, the Company will use reasonable efforts (in accordance with the Certificate of Incorporation and Bylaws of the Company and the DGCL) to cause the removal any Purchaser Designee (in accordance with the Certificate of Incorporation and Bylaws of the Company and the DGCL). Any vacancy among the Purchaser Designees caused by removal or by the death, retirement or resignation of any Purchaser Designee shall be filled by a Person designated by GSCPIII, and the Company agrees to take any such action as is necessary, in accordance with the Certificate of Incorporation and Bylaws of the Company and the DGCL, to cause such designee to be appointed or elected to the Board of Directors. In the event that the term of any director who at such time is a Purchaser Designee is to expire, then in connection with any meeting of the Company's stockholders at which a successor to such director is to be elected, the Company shall nominate a Purchaser Designee designated by GSCPIII and shall recommend that stockholders vote in favor of such individual's election to the Board of Directors in any proxy statement, information statement or other communication to stockholders issued or disseminated by the Company. In the event of any vacancy among the Purchaser Designees, the Board of Directors shall not take any action not approved by the remaining Purchaser Designee (or by the Purchasers if there be no remaining Purchaser Designee), during the period from the time GSCPIII informs the Company of a designee to fill any such vacancy to the time such designee is duly appointed or elected to the Board of Directors. (d) GSCPIII and the Company agree that one Purchaser Designee shall have the right, but not the obligation, to sit on each committee of the Board of Directors. ARTICLE 11 TERMINATION OF AGREEMENT 11.1 Termination. (a) This Agreement may be terminated prior to the Closing as follows: (i) by either the Purchasers or the Company if the Closing shall not have occurred before December 31, 1998; provided, however, that the right to terminate this Agreement under this Section 11.1(a) shall not be available to any party whose failure to perform any covenant or obligation under this Agreement or willful breach of a representation or warranty has been the cause of or resulted in the failure of the Closing to occur on or before such date. -26- 31 (ii) at the election of the Purchasers, if prior to the Closing Date there shall have been a breach of any of the Company's representations, warranties, covenants or agreements, which breach would result in the failure to satisfy any of the conditions set forth in Section 7.1, and such breach shall be incapable of being cured or, if capable of being cured, shall not have been cured within 15 days after written notice thereof shall have been received by the Company; (iii) at the election of the Company, if prior to the Closing Date there shall have been a breach of any of the Purchasers' representations, warranties, covenants or agreements, which breach would result in the failure to satisfy any of the conditions set forth in Section 8.1, and such breach shall be incapable of being cured or, if capable of being cured, shall not have been cured within 15 days after written notice thereof shall have been received by the Purchasers; (iv) at the election of the Company or the Purchasers, if any legal proceeding is commenced and pending by any Governmental Authority seeking to prevent the consummation of the Closing or any other Contemplated Transaction and the Company or the Purchasers, as the case may be, reasonably and in good faith deem it impracticable or inadvisable to proceed in view of such legal proceeding; or (v) at any time on or prior to the Closing Date, by mutual written consent of the Company and the Purchasers. (b) If this Agreement so terminates, it shall become null and void and have no further force or effect, except as provided in Section 11.2. 11.2 Survival After Termination. If this Agreement terminates pursuant to Section 11.1 and the Contemplated Transactions are not consummated, this Agreement shall become null and void and have no further force or effect, except that any such termination shall be without prejudice to the rights of any party on account of the nonsatisfaction of the conditions set forth in Articles 7 and 8 resulting from the intentional or willful breach or violation of the representations, warranties, covenants or agreements of another party under this Agreement. Notwithstanding anything in this Agreement to the contrary, the provisions of Sections 5.2 and 6.1, this Section 11.2 and Sections 12.2, 12.8 and 12.10 shall survive any termination of this Agreement. ARTICLE 12 MISCELLANEOUS 12.1 Survival. None of the representations and warranties set forth in either of Article 3 or Article 4 shall survive the Closing. All other agreements, obligations and covenants of any party set forth in this Agreement shall survive the Closing indefinitely unless earlier terminated in accordance with their terms. 12.2 Expenses. (a) The Company shall pay its own expenses incurred in connection with the negotiation, execution, delivery, performance and consummation of this Agreement. -27- 32 (b) Unless this Agreement is terminated pursuant to Section 11.1(a)(iii), the Company shall reimburse each of the Purchasers for the out-of-pocket expenses of the Purchasers or any of their Affiliates (whether or not incurred prior to the date hereof), including, without limitation, the fees, disbursements and other reasonable expenses of attorneys, accountants and any other advisors thereto, arising out of or relating to the negotiation, execution, delivery, performance and consummation of this Agreement. Such reimbursement shall be made not later than the third Business Day following the later of (1) the Closing Date and (2) the date on which the Purchasers provide a written statement of their expenses to the Company; provided, however, that if this Agreement is terminated prior to the Closing Date other than pursuant to Section 11.1(a)(iii), such reimbursement shall be made not later than the third Business Day following the date on which the Purchasers provide a written statement of their expenses to the Company. In addition, the Company shall reimburse each of the Purchasers for the out-of-pocket expenses of the Purchasers or any of their Affiliates (whether or not incurred prior to the date hereof), including, without limitation, the fees, disbursements and other reasonable expenses of attorneys, accountants and any other advisors thereto, arising out of or relating to the negotiation, execution, delivery, performance and consummation of any amendment to this Agreement or the Convertible Debt Indenture (as defined in the Certificate of Designations attached hereto as Exhibit A). 12.3 Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be delivered personally, telecopied or sent by certified, registered or express mail, postage prepaid. Any such notice shall be deemed given if delivered personally or telecopied, on the date of such delivery, or if sent by reputable overnight courier, on the first Business Day following the date of such mailing, as follows: (a) if to the Company: c/o CARMIKE CINEMAS, Inc. 1301 First Avenue Columbus, Georgia 31901 Attention: Forrest Lee Champion, III Telecopy: (706) 324-0470 with a copy to: Troutman Sanders LLP 600 Peach Tree Street, Suite 5200 Atlanta, Georgia 30308 Attention: Patricia A. Wilson Telecopy: (404) 885-3900 (b) if to the Purchasers: GS Capital Partners III, L.P. 85 Broad Street New York, New York Attention: Ben Adler -28- 33 Telecopy: (212) 357-5505 with a copy to: Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Attention: Mitchell S. Presser Telecopy: (212) 403-2000 Any party may by notice given in accordance with this Section 12.3 designate another address or person for receipt of notices hereunder. 12.4 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto. Other than the parties hereto and their successors and permitted assigns and, with respect to Article 9, any Exercising Holders, no Person is intended to be a beneficiary of this Agreement. No party hereto may assign its rights under this Agreement without the prior written consent of the other party hereto; provided, however, that prior to the Closing, any Purchaser may assign all or any portion of its rights hereunder (along with the corresponding obligations) to any Affiliate of the Purchasers or by any Purchaser to its security holders or partners. Any assignee of any Purchaser pursuant to the proviso of the foregoing sentence shall be deemed to be a "Purchaser" for all purposes of this Agreement. 12.5 Amendment and Waiver . (a) No failure or delay on the part of the Company or the Purchasers in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or the Purchasers at law, in equity or otherwise. (b) Any amendment, supplement or modification of or to any provision of this Agreement and any waiver of any provision of this Agreement shall be effective only if it is made or given in writing and signed by the Company and each Purchaser. 12.6 Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, all of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 12.7 Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 12.8 GOVERNING LAW; EXCLUSIVE JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER STATE. The parties hereby irrevocably -29- 34 submit to the jurisdiction of the federal courts of the United States of America located in the Borough of Manhattan, City of New York, State of New York (or, if such federal courts shall not have jurisdiction over such matters, to the jurisdiction of the state courts of the State of New York located in the Borough of Manhattan, City of New York, State of New York) solely in respect of the interpretation and enforcement of the provisions of this Agreement and in respect of the Contemplated Transactions and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and the parties irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a federal or state court. 12.9 Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. 12.10 Entire Agreement. This Agreement, together with the schedules and exhibits hereto, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement, together with the schedules and exhibits hereto, supersedes all prior agreements and understandings between the parties with respect to such subject matter. 12.11 Further Assurances. Each of the parties shall execute such documents and take, or cause to be taken, all appropriate action, and shall do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Contemplated Transactions and obtain any consents, exemptions, authorizations, or other actions by, or give any notices to, or make any filings with, any Governmental Authority or any other Person. 12.12 Public Announcements. Except to the extent required by law or the regulations of any national securities exchange or the NASD, none of the parties hereto will issue or make any reports, statements or releases to the public with respect to this Agreement or the Contemplated Transactions (other than communications among any of the Purchasers and any of the partners of any partner of any Purchaser) without consulting the other parties, and, during the period from the date hereof until thirty (30) days after the Closing Date, without the approval of the other parties (such approval not to be unreasonably withheld). 12.13 Specific Performance. The parties acknowledge that money damages are not an adequate remedy for violations of this Agreement and that any party may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunctive or such other relief as such court may deem just and proper in order to enforce this Agreement or -30- 35 prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief or any requirement for a bond. -31- 36 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized as of the date first above written. CARMIKE CINEMAS, INC. By: /s/ John O. Barwick, III ----------------------------------------------------- Name: John O. Barwick, III Title: S.V.P. PURCHASERS: GS CAPITAL PARTNERS III, L.P. By: GS Advisors III, L.P., its general partner By: GS Advisors III, L.L.C., its general partner By: /s/ Elizabeth C. Fascitelli ----------------------------------------- Name: Elizabeth C. Fascitelli Title: Managing Director Attorney-in-Fact GS CAPITAL PARTNERS III OFFSHORE, L.P. By: GS Advisors III (Cayman), L.P., its general partner By: GS Advisors III, L.L.C., its general partner By: /c/ Elizabeth C. Fascitelli ------------------------------------------ Name: Elizabeth C. Fascitelli Title: Managing Director Attorney-in-Fact GOLDMAN SACHS & CO. VERWALTUNGS GMBH By: /s/ Elizabeth C. Fascitelli ----------------------------------------------------- Name: Elizabeth C. Fascitelli Title: Managing Director Attorney-in-Fact and By: /s/ Robert Gheewalla ------------------------------------------------------ Name: Robert Gheewalla Title: Vice President Attorney-in-Fact [FIRST SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT] 37 THE GOLDMAN SACHS GROUP, L.P. By: The Goldman Sachs Corporation, General Partner By: /s/ Elizabeth C. Fascitelli ------------------------------------------------ Name: Elizabeth C. Fascitelli Title: Managing Director Attorney-in-Fact [SECOND SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT] EX-10.2 7 $275,000,000 AMENDED & RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.2 $275,000,000 AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JANUARY 29, 1999 AMONG CARMIKE CINEMAS, INC. THE BANKS LISTED HEREIN AND WACHOVIA BANK, N.A., AS AGENT 2 TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS...........................................................................................1 Section I.1. Definitions................................................................................1 Section I.2. Accounting Terms and Determinations.......................................................20 Section I.3. Use of Defined Terms......................................................................20 Section I.4. Terminology...............................................................................20 Section I.5. References................................................................................20 ARTICLE II THE CREDITS ........................................................................................20 Section II.1. Commitments to Make Loans................................................................20 Section II.2. Method of Borrowing Loans................................................................21 Section II.3. Notes....................................................................................22 Section II.4. Maturity of Loans........................................................................23 Section II.5. Interest Rates...........................................................................23 Section II.6. Fees.....................................................................................25 Section II.7. Optional Termination or Reduction of Commitments.........................................27 Section II.8. Termination and Reduction of Commitments.................................................27 Section II.9. Optional Prepayments.....................................................................27 Section II.10. Mandatory Prepayments....................................................................27 Section II.11. General Provisions as to Payments........................................................28 Section II.12. Computation of Interest and Fees.........................................................29 ARTICLE III CONDITIONS TO BORROWINGS ............................................................................29 Section III.1. Conditions Precedent to Effectiveness....................................................29 Section III.2. Conditions to All Borrowings.............................................................30 ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................................31 Section IV.1. Corporate Existence and Power............................................................31 Section IV.2. Corporate and Governmental Authorization; No Contravention...............................32 Section IV.3. Binding Effect...........................................................................32 Section IV.4. Financial Information....................................................................32 Section IV.5. Litigation...............................................................................32 Section IV.6. Compliance with ERISA....................................................................32 Section IV.7. Taxes....................................................................................33 Section IV.8. Subsidiaries.............................................................................33 Section IV.9. Not an Investment Company................................................................33 Section IV.10. Public Utility Holding Company Act.......................................................33 Section IV.11. Ownership of Property; Liens.............................................................33 Section IV.12. No Default...............................................................................33 Section IV.13. Full Disclosure..........................................................................33 Section IV.14. Environmental Matters...................................................................34 Section IV.15. Compliance with Laws.....................................................................34 Section IV.16. Capital Stock............................................................................34 Section IV.17. Margin Stock.............................................................................35 Section IV.18. Insolvency...............................................................................35 ARTICLE V COVENANTS .............................................................................................35 Section V.1. Information..............................................................................35 Section V.2. Inspection of Property, Books and Records................................................36 Section V.3. Ratio of Consolidated Senior Funded Debt to Consolidated Cash Flow.......................37 Section V.4. Ratio of Consolidated Funded Debt to Consolidated Cash Flow..............................37 Section V.5. Restricted Payments......................................................................37 Section V.6. Fixed Charge Coverage....................................................................37 Section V.7. Adjusted Fixed Charge Coverage...........................................................37 Section V.8. Negative Pledge..........................................................................39 Section V.9. Maintenance of Existence.................................................................39 Section V.10. Dissolution..............................................................................39 Section V.11. Consolidations, Mergers and Sales of Assets..............................................39 Section V.12. Use of Proceeds..........................................................................40
3 Section V.13. Compliance with Laws; Payment of Taxes...................................................40 Section V.14. Insurance................................................................................40 Section V.15. Change in Fiscal Year....................................................................40 Section V.16. Maintenance of Property..................................................................40 Section V.17. Environmental Notices....................................................................40 Section V.18. Environmental Matters....................................................................41 Section V.19. Environmental Release....................................................................41 Section V.20. Additional Covenants, Etc................................................................41 Section V.21. Investments..............................................................................42 Section V.22. Guaranty of Subsidiaries.................................................................42 Section V.23. Limitation on Consolidated Funded Debt...................................................43 Section V.24. Delivery of Collateral Documents.........................................................43 Section V.25. Subordinated Debt........................................................................44 ARTICLE VI DEFAULTS .............................................................................................44 Section VI.1. Events of Default........................................................................44 Section VI.2. Notice of Default........................................................................46 ARTICLE VII THE AGENT............................................................................................47 Section VII.1. Appointment, Powers and Immunities.......................................................47 Section VII.2. Reliance by Agent........................................................................47 Section VII.3. Defaults.................................................................................47 Section VII.4. Rights of Agent and Its Affiliates as a Bank.............................................48 Section VII.5. Indemnification..........................................................................48 Section VII.6. CONSEQUENTIAL DAMAGES....................................................................48 Section VII.7. Payee of Note Treated as Owner...........................................................48 Section VII.8. Non-Reliance on Agent and Other Banks....................................................49 Section VII.9. Failure to Act...........................................................................49 Section VII.10.Resignation or Removal of Agent..........................................................49 ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION ..............................................................50 Section VIII.1.Basis for Determining Interest Rate Inadequate or Unfair.................................50 Section VIII.2.Illegality...............................................................................50 Section VIII.3.Increased Cost and Reduced Return........................................................50 Section VIII.4.Base Rate Loans Substituted for Euro-Dollar Loans........................................52 Section VIII.5.Compensation.............................................................................52 Section VIII.6.Replacement of Bank......................................................................53 ARTICLE IX MISCELLANEOUS.........................................................................................53 Section IX.1. Notices..................................................................................53 Section IX.2. No Waivers...............................................................................54 Section IX.3. Expenses; Documentary Taxes; Indemnification.............................................54 Section IX.4. Setoffs; Sharing of Set-Offs.............................................................55 Section IX.5. Amendments and Waivers...................................................................56 Section IX.6. Margin Stock Collateral..................................................................56 Section IX.7. Successors and Assigns...................................................................56 Section IX.8. Confidentiality..........................................................................58 Section IX.9. Representation by Banks..................................................................59 Section IX.10. Obligations Several......................................................................59 Section IX.11. Survival of Certain Obligations..........................................................59 Section IX.12 Georgia Law..............................................................................59 Section IX.13. Severability.............................................................................59 Section IX.14. Interest.................................................................................59 Section IX.15. Interpretation...........................................................................60 Section IX.16. Consent to Jurisdiction..................................................................60 Section IX.17 EDGAR Filing.............................................................................60 Section IX.18 Counterparts.............................................................................60
4 AMENDED AND RESTATED CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 29, 1999, among CARMIKE CINEMAS, INC., a Delaware corporation, the BANKS listed on the signature pages hereof and WACHOVIA BANK, N.A., as Agent. The parties hereto agree as follows: This Amended and Restated Credit Agreement is an amendment and restatement of the $275,000,000 Credit Agreement by and among the Borrower, Wachovia Bank, N.A., First Union National Bank, SunTrust Bank, Atlanta, The Long-Term Credit Bank of Japan, Ltd., The Bank of New York, First American National Bank, The Industrial Bank of Japan, Limited, Atlanta Agency, The Sanwa Bank Limited, The Bank of Tokyo-Mitsubishi, Ltd., Columbus Bank and Trust Company, and Hibernia National Bank, and Wachovia Bank, N.A., as the Agent, dated as of October 17, 1997, as amended prior to the date hereof by First Amendment to Credit Agreement dated as of September 29, 1998 (as so amended, the "Original Agreement"), which is superseded hereby. ARTICLE I DEFINITIONS Section I.1. Definitions. The terms as defined in this Section 1.01 shall, for all purposes of this Agreement and any amendment hereto (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: "Adjusted Cash Flow" means, for any period, Consolidated Operating Income for such period, plus, to the extent deducted in determining the amount thereof, (i) Rental Obligations (less any principal portion of any Off-Balance Sheet Lease), (ii) depreciation and amortization, and (iii) any aggregate net income during such period arising from the sale, exchange or other distribution of capital assets, provided that the total amount so included pursuant to this clause (iii) shall not exceed 5% of Consolidated Operating Income for such period, provided further, however, that, in calculating Adjusted Cash Flow for any such period, any acquisition or disposition of assets that shall have occurred during such period will be deemed to have occurred at the beginning of such period; and (iv) with respect to any Off-Balance Sheet Property which was acquired or ground-leased by any entity acting in the capacity of landlord (or in any functionally similar capacity to a landlord) under any Off-Balance Sheet Lease within the 12-month period ending on the date of determination of Consolidated Cash Flow, Adjusted Cash Flow shall include Theatre-Level EBITDA for such Off-Balance Sheet Property and shall be determined with respect to such Off-Balance Sheet Property on the basis of actual Theatre-Level EBITDA within such period and projected Theatre-Level EBITDA for the remainder of such period (with such projections being based on the average Theatre-Level EBITDA of comparable theater properties of the Borrower which were operated during the entire 12-month period). "Adjusted Fixed Charges" means, for any period, without duplication, the sum for such period of (i) Fixed Charges, plus (ii) all dividends paid by the Borrower, plus (iii) the aggregate amount paid, or required to be paid, in cash by the Borrower and its Subsidiaries in 5 respect of income taxes (including deferred taxes), plus (iv) all scheduled payments of principal made by the Borrower or any Subsidiary with respect to Consolidated Funded Debt (excluding principal payments on the Senior Notes and payments on the Loans hereunder). "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.05(c). "Affiliate" of any Person means (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, 20% or more of the common stock or equivalent equity interests. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means Wachovia Bank, N.A., a national banking association organized under the laws of the United States of America, in its capacity as agent for the Banks hereunder, and its successors and permitted assigns in such capacity. "Agent's Letter Agreements" means either or both, as the context shall require, of those certain letter agreements dated September 5, 1997 and January 12, 1999, between the Borrower and the Agent relating to the structure of the Loans, and certain fees payable by the Borrower to the Agent, together with all amendments and modifications thereto. "Agreement" means this Amended and Restated Credit Agreement, together with all amendments and supplements hereto. "Applicable Commitment Fee Rate" has the meaning set forth in Section 2.06(a). "Applicable Margin" has the meaning set forth in Section 2.05(a). "Assignee" has the meaning set forth in Section 9.07(c). "Assignment and Acceptance" means an Assignment and Acceptance executed in accordance with Section 9.07(c) in the form attached hereto as Exhibit B. "Authority" has the meaning set forth in Section 8.02. "Bank" means each bank listed on the signature pages hereof as having a Commitment, and its successors and assigns. "Base Rate" means for any Base Rate Loan for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate, and (ii) one-half of one percent above the Federal Funds Rate for such day. For purposes of determining the Base Rate for any day, changes in the Prime Rate and the Federal Funds Rate shall be effective on the date of each such change. "Base Rate Loan" means a Loan which bears or is to bear interest at a rate based 2 6 upon the Base Rate. "Board of Directors" means the Board of Directors of the Borrower or a duly authorized committee of directors lawfully exercising the relevant powers of such Board. "Borrower" means Carmike Cinemas, Inc., a Delaware corporation, and its successors and permitted assigns. "Borrowing" means a borrowing hereunder consisting of Loans made to the Borrower at the same time by the Banks pursuant to Article II. A Borrowing is a "Base Rate Borrowing" if such Loans are Base Rate Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans. "Capital Lease" as applied to any Person, means any lease of any property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person, other than, in the case of the Borrower or a Subsidiary, any such lease under which the Borrower or a Wholly-owned Subsidiary is the lessor. "Capital Lease Obligation" with respect to any Capital Lease, means the amount of the obligation of the lessee thereunder which would, in accordance with GAAP, appear on a balance sheet of such lessee (or the notes thereto) in respect of such Capital Lease. "Capital Stock" means any capital stock (other than capital stock which is either (i) mandatorily redeemable or (ii) redeemable at the option of the holder thereof) of the Borrower or any Subsidiary (to the extent issued to a Person other than the Borrower), whether common or preferred. "Cash" means money, currency or a credit balance in a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "Cash Equivalents" means, as at any date of determination: (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of acquisition thereof, the highest rating obtainable from either S&P or Moody's; (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Bank or by any commercial bank organized under the laws of the United States or any state thereof or the District of Columbia that (1) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (2) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; (v) shares of any money market mutual fund that (1) has at least 95% of its assets invested continuously in the types of investments referred to in 3 7 clauses (i), (ii) and (iii) above, (2) has net assets of not less than $500,000,000 and (3) has the highest rating obtainable from either S&P or Moody's. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. ss.9601 et seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation and Liability Information System established pursuant to CERCLA. "Change of Law" shall have the meaning set forth in Section 8.02. "Closing Certificate" has the meaning set forth in Section 3.01(e). "Code" means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code. Any reference to any provision of the Code shall also be deemed to be a reference to any successor provision or provisions thereof. "Coke Advance" means an advance in the amount of $10,000,000 made by The Coca Cola Company on certain advertising, promotional and incentive fees anticipated to be earned by the Borrower pursuant to the Amended and Restated Agreement between them dated December 20, 1998. "Collateral" means the property of the Borrower and EastWynn, respectively, in which the Collateral Agent, for the ratable benefit of the Secured Parties, is granted a security interest pursuant to the Security Agreement and the Pledge Agreement, to secure the Secured Obligations, for the ratable benefit of the Secured Parties. "Collateral Agent" means Wachovia Bank, N.A., in its capacity as collateral agent under the Collateral Documents. "Collateral Documents" means the Intercreditor Agreement, the Pledge Agreement, the Security Agreement and such financing statements as the Collateral Agent may require to perfect its security interest in the Collateral. "Collateralization Date" means the date which is the earlier of (x) the closing of the Term Loan, or (y) February 26, 1999 (or such later date as the Agent, acting at the direction of the Required Banks, may agree upon in writing). "Commitment" means, with respect to each Bank, (i) the amount set forth opposite the name of such Bank on the signature pages hereof, or (ii) as to any Bank which enters into an Assignment and Acceptance (whether as transferor Bank or as Assignee thereunder), the amount of such Bank's Commitment after giving effect to such Assignment and Acceptance, in each case as such amount may be reduced from time to time pursuant to Sections 2.07. "Commitment Fee Determination Date" has the meaning set forth in Section 2.06(a). 4 8 "Commitment Fee Payment Date" means the last day of each March, June, September and December. "Compliance Certificate" has the meaning set forth in Section 5.01(c). "Consolidated Cash Flow" means, for any period, the sum of Consolidated Operating Income of the Borrower, and its Subsidiaries, plus to the extent deducted in determining such Consolidated Operating Income (i) depreciation and amortization, and (ii) any aggregate net income during such period arising from the sale, exchange or other distribution of capital assets, provided, however, that the total amount so included pursuant to this clause (ii) shall not exceed 5% of Consolidated Operating Income for such period, provided further, however, that, in calculating Consolidated Cash Flow for any such period, any acquisition or disposition of assets that shall have occurred during such period will be deemed to have occurred at the beginning of such period; provided further, however, that (x) for purposes of determining the ratio of Consolidated Funded Debt to Consolidated Cash Flow and the ratio of Consolidated Senior Funded Debt to Consolidated Cash Flow, all Off-Balance Sheet Lease Payments made during the relevant period which has been deducted in computing Consolidated Net Income shall be added back in computing Consolidated Cash Flow and (y) with respect to any Off-Balance Sheet Property which was acquired or ground-leased by any entity acting in the capacity of landlord (or in any functionally similar capacity to a landlord) under any Off-Balance Sheet Lease within the 12-month period ending on the date of determination of Consolidated Cash Flow, Consolidated Cash Flow shall include Theatre-Level EBITDA for such Off-Balance Sheet Property and shall be determined with respect to such Off-Balance Sheet Property on the basis of actual Theatre-Level EBITDA within such period and projected Theatre-Level EBITDA for the remainder of such period (with such projections being based on the average Theatre-Level EBITDA of comparable theater properties of the Borrower which were operated during the entire 12-month period). "Consolidated Current Assets" means, as at any date of determination, the total assets of the Borrower and its Consolidated Subsidiaries on a consolidated basis which may properly be classified as current assets in conformity with GAAP, excluding Cash and Cash Equivalents. "Consolidated Current Liabilities" means, at any date of determination, the total liabilities of the Borrower and its Consolidated Subsidiaries on a consolidated basis which may properly be classified as current liabilities in conformity with GAAP (but excluding current maturities of long-term debt of the Borrower and its Consolidated Subsidiaries determined in accordance with GAAP). "Consolidated Funded Debt" means at any date the Funded Debt of the Borrower and its Subsidiaries, determined on a consolidated basis as of such date. "Consolidated Net Income" means for any period, the net income (or deficit) of the Borrower and its Subsidiaries for such period in question (taken as a cumulative whole) after deducting, without duplication, all operating expenses, provisions for all taxes and reserves (including reserves for deferred income taxes) and all other proper deductions, all determined in accordance with GAAP on a consolidated basis, after eliminating material inter-company items in accordance with GAAP and after deducting portions of income properly attributable to outside 5 9 minority interests, if any, in Subsidiaries; provided however, that there shall be excluded (a) any income or deficit of any other Person accrued prior to the date it becomes a Subsidiary or merges into or consolidates with the Borrower or another Subsidiary, (b) the net income in excess of an amount equal to 5% of Consolidated Net Income for such period before giving effect to this clause (b) (or deficit) of any Person (other than a Subsidiary) in which the Borrower or any Subsidiary has any ownership interest, except to the extent that any such income has been actually received by the Borrower or such Subsidiary in the form of cash dividends or similar distributions, and provided that the resulting income is generated by lines of businesses substantially similar to those of the Borrower and its Subsidiaries taken as a whole during the fiscal year ended December 31, 1998, (c) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period, (d) any deferred credit or amortization thereof from the acquisition of any properties or assets of any Person, (e) any aggregate net income (but not any aggregate net loss) during such period arising from the sale, exchange or other distribution of capital assets (such term to include all fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities) to the extent the aggregate gains from such transactions exceed losses from such transactions, (f) any impact on the income statement resulting from any write-up of any assets after the Effective Date, (g) any items properly classified as extraordinary in accordance with GAAP, (h) proceeds of life insurance policies to the extent such proceeds exceed premiums paid to maintain such life insurance policies, (i) any portion of the net income of a Subsidiary which is unavailable for the payment of dividends to the Borrower or a Subsidiary, (j) any gain arising from the acquisition of any debt securities for a cost less than principal and accrued interest, (k) in the case of a successor to the Borrower by permitted consolidation or merger or transfer of assets pursuant to Section 5.12, any earnings, of such successor or transferee prior to the consolidation, merger or transfer of assets, (1) any earnings on any Investments of the Borrower or any Subsidiary except to the extent that such earnings are received by the Borrower or such Subsidiary as cash, provided that earnings which would otherwise be excluded from Consolidated Net Income pursuant to the preceding provisions of this clause (1) shall be included in Consolidated Net Income but only to the extent that such earnings are attributable to the net income of any Person (other than a Subsidiary) in which the Borrower or any Subsidiary has any ownership interest and such net income is not otherwise excluded from Consolidated Net Income by virtue of clause (b) of this definition and (m) the Restructuring and Impairment Charges for 1998. "Consolidated Net Worth" means as of any date of determination (a) the sum of (i) the net book value (after deducting related depreciation, obsolescence, amortization, valuation and other proper reserves other than any such reserve maintained in accordance with GAAP in connection with the use of the last-in-first-out method of inventory valuation) at which the assets of the Borrower and its Subsidiaries would be shown on a consolidated balance sheet at such date prepared in accordance with GAAP, but excluding any amount on account of write-ups of assets after the date of the most recent audited financial statements delivered pursuant to Section 5.01, and (ii) the net book value of all Off-Balance Sheet Property minus (b) the amount at which the consolidated liabilities of the Borrower and its Subsidiaries (other than capital stock and surplus) would be shown on such balance sheet, and including as liabilities all reserves for contingencies and other potential liabilities and all minority interests in Subsidiaries. "Consolidated Operating Income" means, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining the amount thereof, (i) the 6 10 aggregate amount paid, or required to be paid, in cash by the Borrower and its Subsidiaries in respect of income taxes (including deferred taxes) during such period plus (ii) Interest Expense. "Consolidated Senior Funded Debt" means at any date the sum of: (i) Consolidated Funded Debt, minus (ii) the Subordinated Debt. "Consolidated Total Capitalization" means, at any time, the sum of: (i) Consolidated Net Worth, and (ii) Consolidated Funded Debt. "Consolidated Working Capital" means, as at any date of determination, the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Consolidated Working Capital Adjustment" means, for any period on a consolidated basis, the amount (which may be a negative number) by which Consolidated Working Capital as of the beginning of such period exceeds (or is less than) Consolidated Working Capital as of the end of such period. "Contribution Agreement" means the Contribution Agreement of even date herewith in substantially the form of Exhibit I to be executed by the Borrower and by the Guarantors which are Subsidiaries on the Effective Date and by each of the Guarantors which becomes a Subsidiary after the Effective Date pursuant to Section 5.22(a). "Control" means legal and beneficial ownership of that percentage of Voting Stock which enables the owner thereof to elect a majority of the corporate directors (or persons performing similar functions) of the Borrower. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. "Current Debt" means as at any date of determination all Debt for borrowed money maturing or payable on demand or within one year from the date of the creation thereof including any Debt that is by its terms or by the terms of any instrument or agreement relating thereto directly or indirectly renewable or extendible, at the option of the debtor, to a date beyond such year, including any outstanding amounts of any revolving credit facility, but excluding any fixed or contingent payments maturing or required to be made not more than one year after such date in respect of the principal and premium, if any, on any Funded Debt. Any Debt that is extended or renewed shall be deemed to have been created at the date of such extension or renewal. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under Capital Leases, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations (absolute or contingent) of such Person 7 11 to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such Person. In determining the Debt and assets of any Person, no effect shall be given to deposits, trust arrangements or similar arrangements which, in accordance with GAAP, extinguish Debt for which such Person remains legally liable, except Debt shall not include the promissory note of the Borrower in a principal amount not to exceed $3,622,974 and bearing interest at the rate of 10.083% per annum payable to Columbus Bank and Trust Company, and any extensions and renewals thereof, provided the proceeds of such promissory note are used to pay the full purchase price of a certificate of deposit (the "IRB Certificate of Deposit"), such promissory note (and any such extension or renewal thereof) is secured by the pledge of such IRB Certificate of Deposit issued by Columbus Bank and Trust Company in an amount and bearing interest at a rate sufficient to pay all obligations under such promissory note, such promissory note is nonrecourse to the Borrower or to any Subsidiary except to such IRB Certificate of Deposit and the obligation under such promissory note is not, in accordance with GAAP, to be classified on its balance sheet as debt. "Debt Rating" means the rating of the Subordinated Debt by Moody's and S&P. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived in writing, become an Event of Default. "Default Rate" means, with respect to any Loan, on any day, the sum of 2% plus the then highest interest rate (including the Applicable Margin) which may be applicable to any Loans hereunder (irrespective of whether any such type of Loans are actually outstanding hereunder). "Dividends" means for any period the sum of all dividends paid or declared during such period in respect of any Capital Stock and Redeemable Preferred Stock (other than dividends paid or payable in the form of additional Capital Stock). "Dollars" or "$" means dollars in lawful currency of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Georgia are authorized or required by law to close. "EastWynn" means EastWynn Theaters, Inc., an Alabama corporation, and its successors. "EastWynn Guaranty Obligations" means the obligations of EastWynn under (i) the Guaranty, (ii) the "Guaranty", as defined in the Lease, and (iii) from and after the closing of the Term Loan, the "Guaranty", as defined in the Term Loan Credit Agreement. "Effective Date " has the meaning specified in Section 3.01. "Environmental Authority" means any federal, state or local government that exercises any form of jurisdiction or authority under any Environmental Law. 8 12 "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Borrower or any Subsidiary required by any Environmental Law. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Laws, whether or not entered upon consent, or written agreements with an Environmental Authority arising from or in any way associated with a noncompliance with, or liability or claim arising under, any Environmental Law. "Environmental Laws" means any and all federal, state and local statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, licenses or other governmental restrictions relating to the environment or to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment, including, without limitation, ambient air, surface water, groundwater or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof. "Environmental Liability" shall mean any liability whatsoever, whenever and by whomever asserted (whether absolute or contingent, matured or unmatured) including, without limitation, any cost (including costs of investigation), damage (including without limitation, damages for personal injury or death, consequential damages and natural resource damages), penalty, fine or order, expense, fee (including reasonable attorneys' fees and consulting fees), or disbursement resulting from or related to a violation of any Environmental Law or any remedial or response obligation arising under any Environmental Law, or otherwise arising contractually with any party or entity or by operation of any law relating to any Hazardous Material for which the Borrower is responsible. "Environmental Notices" means notice from any Environmental Authority of an alleged noncompliance with or liability under any Environmental Law, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any violation of any Environmental Law or any investigations concerning any violation of any Environmental Law. "Environmental Proceedings" means any judicial or administrative proceedings arising from any Environmental Law. "Environmental Releases" means releases as defined in CERCLA or under any applicable state or local environmental law or regulation. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Euro-Dollar Business Day" means any Domestic Business Day on which 9 13 dealings in Dollar deposits are carried out in the London interbank market. "Euro-Dollar Loan" means a Loan which bears or is to bear interest at a rate based upon the London Interbank Offered Rate. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.05(c). "Event of Default" has the meaning set forth in Section 6.01. "Excess Cash Flow" means, without duplication, for any Fiscal Year, the sum for such Fiscal Year of: (a) Adjusted Cash Flow (excluding, however, any amount described in clause (iv) of the definition thereof), minus (b) capital expenditures, minus (c) Rental Obligations, minus (d) Interest Expense, minus (e) all principal paid by the Borrower or any Subsidiary with respect to Consolidated Funded Debt, minus (f) any positive Working Capital Adjustment, plus (g) any negative Working Capital Adjustment and minus (h) all income taxes actually paid in cash. "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 Domestic Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic 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 Wachovia on such day on such transactions as determined by the Agent. "Financing" shall mean (i) any transaction or series of transactions for the incurrence by the Borrower of any Debt or for the establishment of a commitment to make advances which would constitute Debt of the Borrower, which Debt is not by its terms subordinate and junior to other Debt of the Borrower, (ii) an obligation incurred in a transaction or series of transactions in which assets of the Borrower are sold and leased back, or (iii) a sale of accounts or other receivables or any interest therein, other than a sale or transfer of accounts or receivables attendant to a sale permitted hereunder of an operating division; provided that Capital Leases and Capital Lease Obligations shall be excluded from this definition. "Fiscal Quarter" means any fiscal quarter of the Borrower. "Fiscal Year" means any fiscal year of the Borrower. "Fixed Charges" for any period, means without duplication, the sum of (i) the aggregate amount of Interest Expense during such period plus (ii) the aggregate amount of Rental Obligations (less any principal portion of any Off-Balance Sheet Lease) for such period. "Funded Debt" of any Person means (i) all Debt of such Person which in accordance with GAAP would be classified on a balance sheet of such Person as of such date as long-term debt, and including in any event all Debt of such Person, whether secured or unsecured, having a final maturity (or which, pursuant to its terms, is renewable or extendible at 10 14 the option of such Person for a period ending) more than one year after the date of the creation thereof (including any portion thereof which is on such date included in current liabilities of such Person) plus (ii) all Current Debt of such Person; it being understood and agreed that, with respect to the Borrower, the term "Funded Debt" shall include, in addition to all Debt which would otherwise be included pursuant to the foregoing definition, but without duplication, (x) all Unescrowed Off-Balance Sheet Lease Indebtedness, (y) the Off-Balance Sheet Lease Equity Amounts and (z) the Subordinated Debt, but with respect to the Borrower, the term "Funded Debt" shall not include the Coke Advance. "GAAP" means generally accepted accounting principles applied on a basis consistent with those which, in accordance with Section 1.02, are to be used in making the calculations for purposes of determining compliance with the terms of this Agreement. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantors" means each Person which is a Subsidiary as of the Effective Date and any Person which becomes a Subsidiary after the Effective Date. "Guaranty" means the Guaranty Agreement of even date herewith in substantially the form of Exhibit H to be executed by the Guarantors which are Subsidiaries on the Effective Date and by each Person which becomes a Subsidiary after the Effective Date pursuant to Section 5.22(a), for the benefit of the Agent and the Banks. "Hazardous Materials" includes, without limitation, (a) solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. ss.6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) any "hazardous substance", "pollutant" or "contaminant", as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, including crude oil or any fraction thereof, (d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable state or local law or regulation and (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Interest Expense" for any period, means the aggregate amount (determined in accordance with GAAP on a consolidated basis after eliminating all intercompany items) of all interest accrued (whether or not actually paid) by the Borrower and its Subsidiaries during such 11 15 period in respect of Debt of the Borrower and its Subsidiaries (including Capital Lease Obligations), provided that the term "Interest Expense" shall (i) include, without limitation, net amounts paid or accrued during such period in connection with interest rate protection products (including, without limitation, interest rate swaps, caps, floors and collars), amortized (if appropriate under GAAP) appropriately over the term of the applicable Debt, any amortized discount in respect of Debt issued at a discount and any fees or commissions payable in connection with any letters of credit, the portion of any Capital Lease Obligation allocable to interest in accordance with GAAP, the amount of interest costs incurred by any Person during any period that is capitalized in accordance with GAAP and is not included as an interest cost in calculating Consolidated Net Income for such period, and (ii) shall exclude all costs associated with the prepayment of fixed-rate debt. "Interest Rate Protection Agreement" means an interest rate hedging or protection agreement entered into by and between the Borrower and a Bank or a Term Lender, or an Affiliate of either, together with all exhibits, schedules, extensions, renewals, amendments, substitutions and replacements thereto and thereof. "Intercreditor Agreement" means an intercreditor agreement acceptable to the Collateral Agent and the Secured Parties, setting forth, among other things, the appointment of the Collateral Agent and its rights, duties and obligations, indemnification provisions for the Collateral Agent, provisions for the administration and sharing of the Collateral, for the giving of certain notices, as to voting rights and as to enforcement actions with respect to the Collateral, as it may hereafter be amended or supplemented from time to time. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the first, second, third or sixth month thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (1) any Interest Period (subject to clause (c) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (2) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of the appropriate subsequent calendar month; and (3) no Interest Period may be selected which begins before the Revolver Termination Date and would otherwise end after the Revolver Termination Date. (2) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending on the first day after the date of such Borrowing which is the last day of a Fiscal Quarter; provided that: (1) any Interest Period (subject to clause (b) below) which would otherwise 12 16 end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (2) no Interest Period may end after the Revolver Termination Date. "Investment" means any investment in any Person, whether by means of purchase or acquisition of assets, Debt or securities of such Person, capital contribution to such Person, loan or advance to such Person, making of a time deposit with such Person, Guarantee or assumption of any Debt of such Person or otherwise; excluding, however, the acquisition of (i) "Leased Property", as defined in the Lease, (ii) leases and/or real property acquired by the Borrower or any of its Subsidiaries for the purpose of developing movie theatres and (iii) equipment or inventory in the ordinary course of business. "LC Agent" means the "Agent", as that term is defined in the Reimbursement Agreement. "LC Lenders" means the "Lenders", as that term is defined in the Reimbursement Agreement. "Lease" means the Amended and Restated Master Lease dated as of even date herewith between Movieplex Realty Leasing, L.L.C., as Landlord, and the Borrower, as Tenant, as it may hereafter be amended or supplemented from time to time. "Lending Office" means, as to each Bank, its office located at its address set forth on the signature pages hereof (or identified on the signature pages hereof as its Lending Office) or such other office as such Bank may hereafter designate as its Lending Office by notice to the Borrower and the Agent. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement which has the practical effect of constituting a security interest or encumbrance, servitude or encumbrance of any kind in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. "Loan" means a Base Rate Loan or a Euro-Dollar Loan and Loans means Base Rate Loans or Euro-Dollar Loans, or any or all of them, as the context shall require. "Loan Documents" means this Agreement, the Notes, the Guaranty, the Contribution Agreement, the Collateral Documents, any other document evidencing, relating to or securing the Loans, and any other document or instrument delivered from time to time in connection with this Agreement, the Notes, the Guaranty, the Contribution Agreement, the Collateral Documents or the Loans, as such documents and instruments may be amended or supplemented from time to time. 13 17 "London Interbank Offered Rate" has the meaning set forth in Section 2.05(c). "Maintenance Capital Expenditures" means expenditures of the Borrower and its Subsidiaries which are (i) capitalized on the books of the Borrower and its Subsidiaries in accordance with GAAP and (ii) incurred for the purpose of maintaining existing Properties (but not for major renovations of or new improvements to existing Properties or acquisition of new Properties). "Margin Stock" means "margin stock" as defined in Regulation T, U or X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Material Adverse Effect" means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the financial condition, operations, business, properties or prospects of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or the Banks under the Loan Documents, or the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, as applicable, or (c) the legality, validity or enforceability of any Loan Document. "Moody's" means Moody's Investor Service, Inc. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means, in each case as set forth in a statement in reasonable detail delivered by the respective Borrower to the Agent: (i) with respect to the disposition of assets (including in connection with sale/leaseback transactions, but excluding sales of inventory in the ordinary course of business) by any Borrower or Subsidiary, the excess, if any, of (1) the cash proceeds received in connection with such disposition over (2) the sum of (A) the principal amount of any Debt (other than payments on the Secured Obligations required by Section 2.10(b)) which is secured by such asset and which is required to be repaid in connection with the disposition thereof, plus (B) the reasonable out-of-pocket expenses incurred by such Borrower or such Subsidiary, as the case may be, in connection with such disposition, plus (C) so long as no Event of Default is in existence, provision for taxes, including income taxes, attributable to the disposition of such asset, less (D) cash proceeds in an amount equal to an aggregate of $3,000,000 from all such dispositions of assets in the Fiscal Year in which the relevant disposition of assets occurs; (ii) with respect to any cash proceeds received by any Borrower or a Subsidiary from the issuance of any Capital Stock (other than cash proceeds received by a Subsidiary from the sale of Capital Stock to the Borrower or to another Subsidiary or received in connection with any sale under the Borrower's stock option plans for the benefit of officers, employees and directors or used to pay the repurchase price of stock held by any 14 18 of them pursuant to any such plans), all such cash proceeds, after deducting therefrom all reasonable and customary costs and expenses incurred by such Borrower or Subsidiary directly in connection with the issuance of such Capital Stock; (iii) with respect to any cash proceeds received in respect of the incurrence of the Term Debt and the Subordinated Debt (other than the $200,000,000 in Subordinated Debt described in Section 5.25(b)), all such cash proceeds; and (iv) with respect to any proceeds or awards from any casualty to or condemnation of any of the Properties, the excess, if any, of (1) the cash proceeds received in connection with such casualty or condemnation award over (2) the sum of (A) the principal amount of any Debt (other than payments on the Secured Obligations required by Section 2.10(b)) which is secured by such Property and which is required to be repaid in connection with the disposition thereof, plus (B) the reasonable out-of-pocket expenses incurred by such Borrower or such Subsidiary, as the case may be, in connection with the collection of such proceeds, less (C) the amount which the Borrower estimates it will expend to restore or replace such Property; less (D) cash proceeds in an amount equal to an aggregate of $1,000,000 from all such casualties and condemnation awards in the Fiscal Year in which the relevant casualty or condemnation award occurs. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto and "Note" means any one of such Notes. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Off-Balance Sheet Lease Equity Amounts" means the aggregate amount of all capital contributions made from time to time to any entity acting in the capacity of landlord (or in any functionally similar capacity to a landlord) under any Off-Balance Sheet Lease by equity holders in such entity. "Off-Balance Sheet Lease Indebtedness" means the aggregate principal amount of (and capitalized interest on) all indebtedness incurred or issued in connection with any Off-Balance Sheet Lease which is secured, supported or serviced, directly or indirectly, by any payments made by the Borrower or any Subsidiary. "Off-Balance Sheet Lease Payments" means, for any period, the aggregate amount of any rental payments or other similar payments made during such period in connection with any Off-Balance Sheet Lease. "Off-Balance Sheet Lease" means the Lease and any other lease which is treated as a lease for accounting purposes and as a financing instrument for property law and bankruptcy purposes, and in respect of which transaction any Off-Balance Sheet Lease Indebtedness is issued or incurred. "Off-Balance Sheet Property" means any property subject to an Off-Balance Sheet Lease. 15 19 "Officer's Certificate" has the meaning set forth in Section 3.01(f). "Operating Lease" means a lease (including an Off-Balance Sheet Lease) of real or personal property other than, in the case of the Borrower or a Subsidiary, (a) any such lease under which the Borrower or a Wholly-Owned Subsidiary is the lessor and (b) any Capital Lease. "Original Agreement" has the meaning set forth in the preamble. "Participant" has the meaning set forth in Section 9.07(b). "Patrick Family" means any or all of C. L. Patrick, Sr., Michael W. Patrick, Carl L. Patrick, Jr., Francis Patrick and Michael W. Patrick, II, or trusts to which one or more of the foregoing are the sole beneficiaries. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership (including without limitation, a joint venture), an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding 5 plan years made contributions. "Pledge Agreement" means a Pledge Agreement in form and substance satisfactory to the Agent and the Collateral Agent pursuant to which the Borrower pledges and grants a first priority perfected security interest in the capital stock of all Subsidiaries to the Collateral Agent, for the ratable benefit of the Secured Parties, to secure the Secured Obligations, as it may hereafter be amended or supplemented from time to time. "Preferred Stock" means, as applied to any corporation, shares of such corporation which are entitled to preference or priority over any other shares of such corporation in respect of either the payment of dividends or the distribution of assets upon liquidation. "Prime Rate" refers to that interest rate so denominated and set by Wachovia from time to time as an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases used by Wachovia. Wachovia lends at interest rates above and below the Prime Rate. "Properties" means all real property owned, leased under a ground lease or otherwise used or occupied by the Borrower or any Subsidiary, wherever located. "Rate Determination Date" has the meaning set forth in Section 2.05(a). 16 20 "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Revolver Termination Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "Reimbursement Agreement" means that certain Reimbursement Agreement dated as of November 20, 1997, among Movieplex Realty Leasing, L.L.C., the LC Agent and the LC Lenders, as amended by First Amendment to Reimbursement Agreement dated as of even date herewith, and as it may hereafter be amended or supplemented from time to time. "Rental Obligations" means for any period, the total amount (whether or not designated as rentals or additional or supplemental rentals) payable by the Borrower or any Subsidiary under any Operating Lease during such period (in each case exclusive of amounts so payable on account of maintenance, repairs, insurance, taxes, assessments and other similar charges); if and to the extent that the amount of any Rental Obligation during any future period is not definitely determinable under the Operating Lease in question, the amount of such Rental Obligation shall be estimated in such reasonable manner as the Board of Directors in good faith may determine. "Required Banks" means at any time Banks having at least 66 2/3% of the aggregate amount of the Commitments or, if the Commitments are no longer in effect, Banks holding at least 66 2/3% of the aggregate outstanding principal amount of the Notes. "Responsible Officer" means the chief financial officer or the chief executive officer of the Borrower. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Borrower's Capital Stock or the Capital Stock of any Subsidiary which is not a Wholly-Owned Subsidiary (except (x) dividends payable solely in shares of such Capital Stock, (y) dividends payable on Capital Stock of such Subsidiaries which are payable pro rata to all of the owners of such Capital Stock, and (z) dividends payable to the Borrower or a Guarantor) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Borrower's or any such Subsidiary's Capital Stock (except shares acquired upon the conversion thereof into other shares of its Capital Stock) or (b) any option, warrant or other right to acquire shares of the Borrower's or any such Subsidiary's Capital Stock. "Restructuring and Impairment Charges for 1998" means the following charges to be taken by the Borrower for the fourth Fiscal Quarter of its 1998 fiscal year: (i) a restructuring charge in the amount of approximately $33,000,000 and (ii) impairment of asset value charge in the amount of approximately $37,000,000 to $41,000,000. "Revolver Termination Date" means November 10, 2002. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. "Secured Obligations" means: (i) the obligations of the Borrower under (x) this Agreement, (y) the Lease and the Lessee Undertaking and (z) from and after the closing of the Term Loan, the Term Loan Credit Agreement; (ii) the EastWynn Guaranty Obligations; and (iii) 17 21 the actual (as distinguished from notional) liability of the Borrower to any Bank or Term Lender ,or Affiliate or either, under any Interest Rate Protection Agreement with any such Bank, Term Lender or Affiliate. "Secured Parties" means (i) the Agent and the Banks, and, with respect to any Interest Rate Protection with an Affiliate of a Bank, such Affiliate, (ii) the LC Agent (as assignee of the Landlord, for the ratable benefit of the LC Lenders) and the LC Lenders and (iii) from and after the closing of the Term Loan, the Term Administrative Agent and the Term Lenders, and with respect to any Interest Rate Protection with an Affiliate of a Term Lender, such Affiliate. "Security Agreement" means a Security Agreement in form and substance satisfactory to the Agent and the Collateral Agent pursuant to which each of the Borrower and EastWynn grants a first priority, perfected security interest in all personal property owned by it, including, without limitation, all equipment, fixtures, accounts, chattel paper, instruments, inventory and general intangibles, to the Collateral Agent, for the ratable benefit of the Secured Parties, to secure the Secured Obligations, as it may hereafter be amended or supplemented from time to time. "Senior Notes" means, collectively, the 10.53% Senior Notes due 2005 in the outstanding principal amount of approximately $47,700,000, the 7.90% Senior Notes due 2002 in the outstanding principal amount of approximately $14,300,000 and the 7.52% Senior Notes due 2003 in the outstanding principal amount of approximately $17,900,000. "Subordinated Debt" means up to $350,000,000 in Debt of the Borrower evidenced by Subordinated Notes. "Subordinated Debt Documents" means the Subordinated Notes, the Subordinated Debt Indenture and the Subsidiary Guarantees described in the Subordinated Debt Offering Circular. "Subordinated Debt Indenture" means the Indenture described in the Subordinated Debt Offering Circular among the Borrower, the Guarantors parties thereto described in the Subordinated Debt Offering Circular and The Bank of New York, as Trustee. "Subordinated Debt Offering Circular" means the Offering Circular dated January 27, 1999 pertaining to the issuance of $200,000,000 of Subordinated Notes and contemplating the subsequent issuance of up to an additional $150,000,000 of Subordinated Notes, pursuant to the Subordinated Debt Indenture. "Subordinated Notes" means the 9.375% Senior Subordinated Notes having a maturity not earlier than June 1, 2009 which are described in the Subordinated Debt Offering Circular (including any "Exchange Notes" issued under the Subordinated Debt Indenture) and which are subordinated in right of payment to the payment of the obligations of the Borrower under the Credit Agreement and the Term Credit Agreement pursuant to the subordination provisions described in the Subordinated Debt Offering Circular. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or 18 22 other persons performing similar functions are at the time directly or indirectly owned by the Borrower. "Term Administrative Agent" means the "Administrative Agent", as defined in the Term Loan Credit Agreement. "Term Agents" means Wachovia Bank, N.A., as Administrative Agent, Goldman, Sachs Credit Partners L.P., as Syndication Agent and First Union National Bank, as Documentation Agent, under the Term Loan Credit Agreement. "Term Lenders" means the "Lenders", as defined in the Term Loan Credit Agreement. "Term Loan" means, collectively, the term loans in the aggregate amount of $75,000,000 having a maturity not later than June 1, 2005, to be made by the Term Lenders pursuant to the Term Loan Credit Agreement in accordance with the terms of the letter agreement dated January 12, 1999, among the Term Agents and the Borrower. "Term Loan Credit Agreement" means the Term Loan Credit Agreement to be executed by the Borrower, the Term Agents and the Term Lenders on or about February 16, 1999, pertaining to the Term Loans, as it may hereafter be amended or supplemented from time to time. "Theater-Level EBITDA" means with respect to any Off-Balance Sheet Property, operating income derived therefrom, without provision for any interest, taxes related to income, depreciation, amortization and corporate general and administrative expenses. "Third Parties" means all lessees, sublessees, licensees and other users of the Properties, excluding those users of the Properties in the ordinary course of the Borrower's business and on a temporary basis. "Transferee" has the meaning set forth in Section 9.07(d). "Unescrowed Off-Balance Sheet Lease Indebtedness" means the aggregate amount of all Off-Balance Sheet Lease Indebtedness minus the aggregate amount of any Off-Balance Sheet Lease Indebtedness being held in an escrow fund pending expenditure with respect to the property or asset being financed in connection with the Off-Balance Sheet Lease with respect to which such Off-Balance Sheet Lease Indebtedness was issued or incurred. "Unused Commitments" means at any date an amount equal to the aggregate amount of the Commitments less the aggregate outstanding principal amount of the Loans. "Voting Stock" means capital stock of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or persons performing similar functions). "Wachovia" means Wachovia Bank, N.A., a national banking association and its successors. 19 23 "Wholly-Owned Subsidiary" means any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. Section I.2. Accounting Terms and Determinations. Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks, unless with respect to any such change concurred in by the Borrower's independent public accountants or required by GAAP, in determining compliance with any of the provisions of this Agreement or any of the other Loan Documents: (i) the Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Required Banks shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 5.01 hereof, shall mean the financial statements referred to in Section 4.04); provided that, if either the Borrower or the Required Banks shall so object, then the Borrower and the Banks shall negotiate in good faith to modify the relevant covenants set forth in Article V in order to appropriately reflect such changes in GAAP and, in the event such covenants are so modified, upon execution of an amendment to this Agreement effectuating such modification, the related changes in GAAP will be effective for calculation and reporting purposes under this Agreement. Section I.3. Use of Defined Terms. All terms defined in this Agreement shall have the same meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall otherwise require. Section I.4. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. Section I.5. References. Unless otherwise indicated, references in this Agreement to "Articles", "Exhibits", "Schedules", and "Sections" are references to articles, exhibits, schedules and sections hereof. ARTICLE II THE CREDITS Section II.1. Commitments to Make Loans. Each Bank severally agrees, on the terms and conditions set forth herein, to make Loans to the Borrower from time to time during the period from the Effective Date and before the Revolver Termination Date; provided that, 20 24 immediately after each such Loan is made, the aggregate outstanding principal amount of Loans by such Bank shall not exceed the amount of its Commitment, provided further that the aggregate principal amount of all Loans at any one time outstanding shall not exceed the aggregate amount of the Commitments of all of the Banks at such time. Each Euro-Dollar Borrowing under this Section shall be in an aggregate principal amount of $3,000,000 or any larger multiple of $500,000 (except that any such Euro-Dollar Borrowing may be in the amount of the Unused Commitments) and shall be made from the several Banks ratably in proportion to their respective Commitments. Each Base Rate Borrowing under this Section shall be in an aggregate principal amount of $1,000,000 or any larger multiple of $500,000 (except that any such Base Rate Borrowing may be in the amount of the Unused Commitments) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, repay or prepay Loans and reborrow under this Section at any time before the Revolver Termination Date. Section II.2. Method of Borrowing Loans. (1) The Borrower shall give the Agent notice in the form attached hereto as Exhibit G (a "Notice of Borrowing") prior to 11:00 A.M. (Atlanta, Georgia time) on the Domestic Business Day of each Base Rate Borrowing and at least 3 Euro-Dollar Business Days before each Euro-Dollar Borrowing, specifying: (1) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (2) the aggregate amount of such Borrowing, (3) whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, and (4) in the case of a Euro-Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. (2) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (3) Not later than 11:00 A.M. (Atlanta, Georgia time) on the date of each Euro-Dollar Borrowing, and not later than 2:00 P.M. (Atlanta, Georgia time) on the date of each Base Rate Borrowing, each Bank shall (except as provided in subSection (d) of this Section) make available its ratable share of such Borrowing, in Federal or other funds immediately available in Atlanta, Georgia, to the Agent at its address referred to in or specified pursuant to Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower at the Agent's aforesaid address. Unless the Agent receives notice from a Bank, at the Agent's address referred to in Section 9.01, no later than 4:00 P.M. (local time at such address) on the Domestic Business Day before the date of a Euro-Dollar Borrowing, and no later than 21 25 1:00 P.M. (local time at such address) on the Domestic Business Day of a Base Rate Borrowing, stating that such Bank will not make a Loan in connection with such Borrowing, the Agent shall be entitled to assume that such Bank will make a Loan in connection with such Borrowing and, in reliance on such assumption, the Agent may (but shall not be obligated to) make available such Bank's ratable share of such Borrowing to the Borrower for the account of such Bank. If the Agent makes such Bank's ratable share available to the Borrower and such Bank does not in fact make its ratable share of such Borrowing available on such date, the Agent shall be entitled to recover such Bank's ratable share from such Bank or the Borrower (and for such purpose shall be entitled to charge such amount to any account of the Borrower maintained with the Agent), together with interest thereon for each day during the period from the date of such Borrowing until such sum shall be paid in full at a rate per annum equal to the rate at which the Agent determines that it obtained (or could have obtained) overnight Federal funds to cover such amount for each such day during such period, provided that any such payment by the Borrower of such Bank's ratable share and interest thereon shall be without prejudice to any rights that the Borrower may have against such Bank. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. (4) If any Bank makes a new Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Agent as provided in subSection (c) of this Section, or remitted by the Borrower to the Agent as provided in Section 2.11, as the case may be. (5) Notwithstanding anything to the contrary contained in this Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred a Default or an Event of Default, which Default or Event of Default shall not have been cured or waived in writing. (6) In the event that a Notice of Borrowing fails to specify whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, such Loans shall be made as Base Rate Loans. If the Borrower is otherwise entitled under this Agreement to repay any Loans maturing at the end of an Interest Period applicable thereto with the proceeds of a new Borrowing, and the Borrower fails to repay such Loans using its own moneys and fails to give a Notice of Borrowing in connection with such new Borrowing, a new Borrowing shall be deemed to be made on the date such Loans mature in an amount equal to the principal amount of the Loans so maturing, and the Loans comprising such new Borrowing shall be Base Rate Loans. (7) Notwithstanding anything to the contrary contained herein, (i) there shall not be more than 7 different Interest Periods outstanding at the same time (for which purpose Interest Periods described in different numbered clauses of the definition of the term "Interest Period" shall be deemed to be different Interest Periods even if they are coterminous) and (ii) the proceeds of any Base Rate Borrowing shall be applied first to repay the unpaid principal amount of all Base Rate Loans (if any) outstanding immediately before such Base Rate Borrowing. Section II.3. Notes. (1) The Loans of each Bank shall be evidenced by a single Note payable to the 22 26 order of such Bank for the account of its Lending Office in an amount equal to the original principal amount of such Bank's Commitment. (2) Upon receipt of each Bank's Notes pursuant to Section 3.01, the Agent shall deliver such Notes to such Bank. Each Bank shall record, and prior to any transfer of its Notes shall endorse on the schedule forming a part thereof appropriate notations to evidence, the date, amount and maturity of, and effective interest rate for, each Loan made by it, the date and amount of each payment of principal made by the Borrower with respect thereto and whether such Loan is a Base Rate Loan or Euro-Dollar Loan, and such schedule shall constitute rebuttable presumptive evidence of the principal amount owing and unpaid on such Bank's Notes; provided that the failure of any Bank to make, or any error in making, any such recordation or endorsement shall not affect the obligation of the Borrower hereunder or under the Notes or the ability of any Bank to assign its Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. Section II.4. Maturity of Loans. Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. Section II.5. Interest Rates. (1) "Applicable Margin" shall be determined quarterly based upon the ratio of Consolidated Funded Debt to Consolidated Cash Flow (calculated as of the last day of each Fiscal Quarter for the period of 4 consecutive Fiscal Quarters then ended), as follows:
- ----------------------------------------------------------------------------------------------------------- Ratio of Consolidated Funded Debt to Consolidated Cash Base Rate Loans Euro-Dollar Flow Loans - ----------------------------------------------------------------------------------------------------------- Greater than or equal to 5.5 1.75% 2.75% - ----------------------------------------------------------------------------------------------------------- Greater than or equal to 5.0 but less than 5.5 1.5% 2.5% - ----------------------------------------------------------------------------------------------------------- Greater than or equal to 4.5 but less than 5.0 1.25% 2.25% - ----------------------------------------------------------------------------------------------------------- Greater than or equal to 4.0 but less than 4.5 1.0% 2.0% - ----------------------------------------------------------------------------------------------------------- Less than 4.0 0.75% 1.75% - -----------------------------------------------------------------------------------------------------------
The Applicable Margin shall be determined effective as of each date (herein, the "Rate Determination Date") which is 50 days after the last day of the final Fiscal Quarter in the period for which the foregoing ratio is being determined, and the Applicable Margin so determined shall remain effective from such Rate Determination Date until the date which is 50 days after the last day of the Fiscal Quarter in which such Rate Determination Date falls (which latter date shall be a new Rate Determination Date); provided that (i) for the period from and including the Effective Date to but excluding the Rate Determination Date next following the Effective Date, the Applicable Margin shall be (A) 1.25% for Base Rate Loans and (B) 2.25% for Euro-Dollar Loans, (ii) in the case of Applicable Margins determined for the fourth and final Fiscal Quarter of a Fiscal Year, the Rate Determination Date shall be the date which is 95 days after the last day of 23 27 such final Fiscal Quarter and such Applicable Margins shall be determined based upon the annual audited financial statements for the Fiscal Year ended on the last day of such final Fiscal Quarter, and (iii) if on any Rate Determination Date the Borrower shall have failed to deliver to the Banks the financial statements required to be delivered pursuant to Section 5.01 with respect to the Fiscal Quarter most recently ended prior to such Rate Determination Date (or, in the case of annual audited financial statements, with respect to the Fiscal Year which includes such final Fiscal Quarter), then for the period beginning on such Rate Determination Date and ending on the earlier of (x) the next Rate Determination Date (on which the Applicable Margin shall again be determined pursuant to this paragraph) and (y) the date on which the Borrower shall deliver to the Banks the financial statements to be delivered pursuant to Section 5.01(b) with respect to such Fiscal Quarter (in the case of a failure to deliver quarterly unaudited financial statements) or the date on which the Borrower shall deliver to the Banks the annual audited financial statements to be delivered pursuant to Section 5.01(a) with respect to the Fiscal Year which includes such final Fiscal Quarter (in the case of a failure to deliver annual audited financial statements), the Applicable Margin shall be determined as if the ratio of Consolidated Funded Debt to Consolidated Cash Flow was more than 5.50 at all times during such period. Any change in the Applicable Margin on any Rate Determination Date shall result in a corresponding change, effective on and as of such Rate Determination Date, in the interest rate applicable to each Loan outstanding on such Rate Determination Date, provided that (i) for Euro-Dollar Loans, changes in the Applicable Margin shall only be effective for Interest Periods commencing on or after the Rate Determination Date, and (ii) no Applicable Margin shall be decreased pursuant to this Section 2.05 if an Event of Default is in existence on the Rate Determination Date. (2) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day plus the Applicable Margin. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (3) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin plus the applicable Adjusted London Interbank Offered Rate for such Interest Period; provided that if any Euro-Dollar Loan shall, as a result of clause (1)(c) of the definition of Interest Period, have an Interest Period of less than one month, such Euro-Dollar Loan shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 3 months, at intervals of 3 months after the first day thereof. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan means 24 28 for the Interest Period of such Euro-Dollar Loan the rate per annum determined on the basis of the rate for deposits in Dollars of amounts equal or comparable to the principal amount of such Euro-Dollar Loan offered for a term comparable to such Interest Period, which rate appears on Page "3750" of the Telerate Service (or such other page as may replace page 3750 of that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for deposits in Dollars), determined as of 1:00 P.M. (Atlanta, Georgia time), 2 Euro-Dollar Business Days prior to the first day of such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (4) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the Banks by telecopy of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (5) After the occurrence and during the continuance of a Default, the principal amount of the Loans (and, to the extent permitted by applicable law, all accrued interest thereon) may, at the election of the Required Banks, bear interest at the Default Rate. Section II.6. Fees. (1) The Borrower shall pay to the Agent for the ratable account of each Bank a commitment fee equal to the product of: (i) the aggregate of the daily average unused amounts of such Bank's Commitment, times (ii) a per annum percentage equal to the Applicable Commitment Fee Rate. Such commitment fee shall accrue from and including the Effective Date to and including the Revolver Termination Date. Commitment fees shall be payable quarterly in arrears on the first Commitment Fee Payment Date following each Commitment Fee Determination Date and on the Revolver Termination Date; provided that should the Commitments be terminated at any time prior to the Revolver Termination Date for any reason, the entire accrued and unpaid commitment fee shall be paid on the date of such termination. The "Applicable Commitment Fee Rate" shall be determined quarterly based upon the ratio of Consolidated Funded Debt to Consolidated Cash Flow (calculated as of the last day of each Fiscal Quarter for the period of 4 Fiscal Quarters then ended) as follows: 25 29
- ---------------------------------------------------------------------------------------------- Ratio of Consolidated Funded Debt Applicable Commitment to Consolidated Cash Flow Fee Rate - ---------------------------------------------------------------------------------------------- Greater than or equal to 5.5 0.5% - ---------------------------------------------------------------------------------------------- Greater than or equal to 5.0 but less than 5.5 0.5% - ---------------------------------------------------------------------------------------------- Greater than or equal to 4.5 but less than 5.0 0.5% - ---------------------------------------------------------------------------------------------- Greater than or equal to 4.0 but less than 4.5 0.375% - ---------------------------------------------------------------------------------------------- Less than 4.0 0.375% - ----------------------------------------------------------------------------------------------
The Applicable Commitment Fee Rate shall be determined effective as of each date (herein, the "Commitment Fee Determination Date") which is 50 days after the last day of the final Fiscal Quarter in the period for which the foregoing ratio is being determined, and the Applicable Commitment Fee Rate so determined shall remain effective from such Commitment Fee Determination Date until the date which is 50 days after the last day of the Fiscal Quarter in which such Commitment Fee Determination Date falls (which latter date shall be a new Commitment Fee Determination Date); provided that (i) for the period from and including the Effective Date to but excluding the Commitment Fee Determination Date next following the Effective Date, the Applicable Commitment Fee Rate shall be 0.5%; (ii) in the case of any Applicable Commitment Fee Rate determined for the fourth and final Fiscal Quarter of a Fiscal Year, the Commitment Fee Determination Date shall be the date which is 95 days after the last day of such final Fiscal Quarter and such Applicable Commitment Fee Rate shall be determined based upon the annual audited financial statements for the Fiscal Year ended on the last day of such final Fiscal Quarter, and (iii) if on any Commitment Fee Determination Date the Borrower shall have failed to deliver to the Banks the financial statements required to be delivered pursuant to Section 5.01 with respect to the Fiscal Quarter most recently ended prior to such Commitment Fee Determination Date (or, in the case of annual audited financial statements, with respect to the Fiscal Year which includes such final Fiscal Quarter), then for the period beginning on such Commitment Fee Determination Date and ending on the earlier of (x) the next Commitment Fee Determination Date (on which the Applicable Commitment Fee Rate shall again be determined pursuant to this paragraph) and (y) the date on which the Borrower shall deliver to the Banks the financial statements to be delivered pursuant to Section 5.01(b) with respect to such Fiscal Quarter (in the case of a failure to deliver quarterly unaudited financial statements) or the date on which the Borrower shall deliver to the Banks the annual audited financial statements to be delivered pursuant to Section 5.01(a) with respect to the Fiscal Year which includes such final Fiscal Quarter (in the case of a failure to deliver annual audited financial statements), the Applicable Commitment Fee Rate shall be determined as if the ratio of Consolidated Funded Debt to Consolidated Cash Flow was more than 5.5 at all times during such period, provided that the Applicable Commitment Fee Rate shall not be decreased pursuant to this Section 2.06 if an Event of Default is in existence on the Commitment Fee Determination Date. (2) On the Effective Date, the Borrower shall pay to the Agent, for the ratable account of each Bank a fee in an amount equal to 0.20% of such Bank's Commitment. (3) The Borrower shall pay to the Agent, for the account and sole benefit of the Agent, such fees and other amounts at such times as set forth in the Agent's Letter Agreement. 26 30 Section II.7. Optional Termination or Reduction of Commitments. The Borrower may, upon at least 3 Domestic Business Days' notice to the Agent, terminate at any time, or proportionately reduce from time to time by an aggregate amount of at least $5,000,000 or any larger multiple of $1,000,000, the Commitments. If the Commitments are terminated in their entirety, all accrued fees (as provided under Section 2.06) shall be payable on the effective date of such termination. Section II.8. Termination and Reduction of Commitments. (1) The Commitments shall terminate on the Revolver Termination Date and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. (2) The Commitments of each of the Banks shall be reduced ratably by the amount of the mandatory payments required to be made by the Borrower to the Banks pursuant Section 2.10(b); provided, that such payments pursuant to Section 2.10(b) shall not, except as set forth in 2.10(b), cause the aggregate Commitments to be reduced below $150,000,000. Section II.9. Optional Prepayments. (1) The Borrower may, upon at least 1 Domestic Business Day's notice to the Agent, prepay any Base Rate Borrowing in whole at any time, or from time to time in part in amounts aggregating at least $500,000, or any larger multiple of $500,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Base Rate Loans of the several Banks included in such Base Rate Borrowing. (2) Except as provided in Sections 2.01 and 8.02, the Borrower may prepay all or any portion of the principal amount of any Euro-Dollar Loan prior to the maturity thereof only upon (i) at least 3 Euro-Dollar Business Days' notice to the Agent, (ii) compliance with the provisions of Section 8.05, and (iii) payment of an administrative fee of $250 to the Agent (which fee shall be retained by the Agent). (3) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such prepayment and such notice shall not thereafter be revocable by the Borrower. Section II.10. Mandatory Prepayments. (a) On each date on which the Commitments are reduced or terminated pursuant to Section 2.07 or terminated pursuant to Section 2.08, the Borrower shall repay or prepay (a) in the case of a reduction of the Commitments pursuant to Section 2.07 such principal amount of the outstanding Loans, if any (together with interest accrued thereon and any amounts due under Section 8.05(a)), as may be necessary so that after such payment the aggregate unpaid principal amount of the Loans does not exceed the aggregate amount of the Commitments as then reduced, or (b) in the case of a termination of the Commitments pursuant to Section 2.07 or 2.08, the entire principal amount of the outstanding Loans (together with interest accrued thereon and any amounts due under Section 8.05(a)). 27 31 (b) The Borrower shall repay or prepay (i) Loans in an amount equal to 100% of the proceeds of the Term Loan, (ii) Loans and the Term Loan in an amount equal to 50% of other Net Cash Proceeds and (iii) Loans and the Term Loan in amount equal to 50% of any Excess Cash Flow. Prepayments pursuant to the foregoing clause (i) shall be made on the date of receipt of the proceeds of the Term Loan. Payments pursuant to the foregoing clause (ii) shall be made within 15 Business Days after the receipt of Net Cash Proceeds (except that prepayments from proceeds of Subordinated Debt shall be made on the date of receipt of such proceeds); provided, that amounts not included in Net Cash Proceeds pursuant to clause (iv)(C) of the definition thereof which have not been used or committed to be used within 180 days from the casualty or condemnation of such Property to restore or replace the relevant Property shall be paid on such 180th day. Payments pursuant to the foregoing clause (iii) shall be made on the date the Borrower furnishes its annual financial statements to the Banks pursuant to Section 5.01(a) (or on the date such statements are required to be so furnished pursuant to such section, if they have not been furnished by such date). Prepayments pursuant to the foregoing clause (i) shall be made to the Agent, for the ratable account of the Banks. Prepayments pursuant to the foregoing clauses (ii) and (iii) shall be made to the Agent and, after the Term Loan has been made, the Term Agent, for the ratable account of the Banks and the Term Lenders, based on the aggregate amount of the Commitments and the aggregate principal balance of the Term Loan as of the time of the payment; provided, that from and after the date that the Commitments have been reduced to $150,000,000 by payments made pursuant to the foregoing clauses (ii) and (iii) in accordance with Section 2.08, such repayments or prepayments shall be made solely to the Term Lenders, until the Term Loan is paid in full, except that after the Commitments have so been reduced to $150,000,000, with respect to any sale of Collateral, if the Term Loan has been paid in full (or prepayments pursuant hereto have been waived by the Term Lenders), any Net Cash Proceeds from such sale which are not used to purchase replacement Collateral having equal or greater value shall be used to prepay the Loans, and the Commitments shall be reduced by the amount of such prepayments. Section II.11. General Provisions as to Payments. (1) The Borrower shall make each payment of principal of, and interest on, the Loans and of commitment fees hereunder, not later than 11:00 A.M. (Atlanta, Georgia time) on the date when due, in Federal or other funds immediately available in Atlanta, Georgia, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. (2) Whenever any payment of principal of, or interest on, the Base Rate Loans or the fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (3) Each payment or prepayment of Loans shall be applied by the Agent to 28 32 repay or prepay ratably the Loans of the several Banks in the following order of priority: (1) first, to Euro-Dollar Loans maturing on the date of such payment or prepayment; (2) second, to Base Rate Loans maturing on or after the date of such payment or prepayment (in the direct order of maturity); and (3) third, to Euro-Dollar Loans maturing after the date of such payment or prepayment (in direct order of maturity). Section II.12. Computation of Interest and Fees. Interest on Base Rate Loans based on the Base Rate shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Interest on Euro-Dollar Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Commitment fees and any other fees payable hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). ARTICLE III CONDITIONS TO BORROWINGS Section III.1. Conditions Precedent to Effectiveness. This Agreement shall become effective on and as of the first date on which the following conditions precedent have been satisfied (the "Effective Date"): (1) receipt by the Agent from each of the parties hereto of either (i) a duly executed counterpart of this Agreement signed by such party or (ii) a facsimile transmission stating that such party has duly executed a counterpart of this Agreement and sent such counterpart to the Agent; (2) [INTENTIONALLY OMITTED]; (3) receipt by the Agent of an opinion (together with any opinions of local counsel relied on therein) of Troutman Sanders, counsel for the Borrower and the Guarantors, dated as of the Effective Date, substantially in the form and substance delivered by such counsel in connection with the Original Agreement and covering such additional matters relating to the transactions contemplated hereby as the Agent or any Bank may reasonably request; (4) receipt by the Agent of an opinion of Jones, Day, Reavis & Pogue, special counsel for the Agent, dated as of the Effective Date, substantially in the form of Exhibit C hereto and covering such additional matters relating to the transactions contemplated hereby as the Agent may reasonably request; (5) receipt by the Agent of a certificate (the "Closing Certificate"), dated the Effective Date, substantially in the form of Exhibit D hereto, signed by a principal financial 29 33 officer of the Borrower, to the effect that (i) no Default has occurred and is continuing on the Effective Date and (ii) the representations and warranties of the Borrower contained in Article IV are true on and as of the Effective Date; (6) receipt by the Agent of all documents which the Agent or any Bank may reasonably request relating to the existence of the Borrower and each Guarantor, the corporate authority for and the validity of this Agreement, the Guaranty and any other matters relevant hereto, all in form and substance satisfactory to the Agent, including without limitation a certificate of incumbency of the Borrower and each Guarantor (the "Officer's Certificate"), signed by the Secretary or an Assistant Secretary of the Borrower or each Guarantor, substantially in the form of Exhibit E hereto, certifying as to the names, true signatures and incumbency of the officer or officers of the Borrower or each Guarantor authorized to execute and deliver the Loan Documents to which the Borrower or each Guarantor is a party, and certified copies of the following items: (i) the Certificate or Articles of Incorporation of the Borrower and each Guarantor, (ii) the Bylaws of the Borrower and each Guarantor, (iii) a certificate of the Secretary of State of the State of Delaware as to the good standing of the Borrower as a Delaware corporation and similar certificates for each Guarantor from its jurisdiction of incorporation, and (iv) the action taken by the Board of Directors of the Borrower and each Guarantor authorizing the Borrower's and Guarantors' execution, delivery and performance of this Agreement and the other Loan Documents to which the Borrower and each Guarantor is a party; (7) receipt by the Agent from each of the Guarantors as of the Effective Date of a duly executed counterpart of the Guaranty signed by such Guarantor and from the Borrower and each of the Guarantors as of the Effective Date of a duly executed counterpart of the Contribution Agreement signed by the Borrower and such Guarantors; (8) receipt by the Agent of the amendment fee pursuant to Section 2.06(b) and other fees payable on the Effective Date in accordance with the Agent's Letter Agreement; (9) receipt by the Agent of evidence satisfactory to it of execution and delivery of the Lease and the First Amendment to the Reimbursement Agreement as contemplated in an engagement letter dated January 12, 1999, between Carmike Cinemas, Inc., Movieplex Realty Leasing, L.L.C. and Wachovia Bank, N.A.; (10) the Subordinated Debt shall have received a Debt Rating of B- or higher by S&P and B3 or higher by Moody's; and (11) Payment to the Agent, for the ratable account of the Banks, of the "Facility Fee", as defined in the Original Agreement, pursuant to Section 2.06(a) of the Original Agreement, for the period ending on the Effective Date. Section III.2. Conditions to All Borrowings. The obligation of each Bank to make a Loan on the occasion of each Borrowing is subject to the satisfaction of the following conditions: (1) receipt by the Agent of Notice of Borrowing as required by Section 2.02; 30 34 (2) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; (3) the fact that the representations and warranties of the Borrower contained in Article IV of this Agreement shall be true on and as of the date of such Borrowing; and (4) the fact that, immediately after such Borrowing (i) the aggregate outstanding principal amount of the Loans of each Bank will not exceed the amount of its Commitment and (ii) the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments of all of the Banks as of such date. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the truth and accuracy of the facts specified in clauses (b), (c) and (d) of this Section; provided that (i) such Borrowing shall not be deemed to be such a representation and warranty as to the truth and accuracy of the fact specified in clause (c) of this Section, if the aggregate outstanding principal amount of the Loans immediately after such Borrowing will not exceed the aggregate outstanding principal amount thereof immediately before such Borrowing, (ii) if the aggregate outstanding principal amount of the Loans immediately after such Borrowing will not exceed the aggregate outstanding principal amount thereof immediately before such Borrowing, then (A) such Borrowing shall be deemed to be a representation and warranty as to the truth and accuracy of the fact specified in clause (b) of this Section determined as if the term "Default" appearing in such clause (b) were instead the term "Event of Default" and (B) the representation contained in the last sentence of Section 4.12 shall when remade pursuant to this Section in connection with such Borrowing be deemed to exclude the words "Default or", (iii) any representation and warranty contained in Article IV which by its terms is made as to matters as of a specified date shall when remade pursuant to this Section in connection with such Borrowing be deemed to be made as to matters as of such specified date and not any later date, and (iv) the representation contained in Section 4.04(b) shall when remade pursuant to this Section in connection with such Borrowing be deemed to refer not to December 31, 1997, but rather to the last day of the Fiscal Quarter most recently ended prior to the date of such Borrowing as to which the Borrower shall have delivered financial statements to the Bank pursuant to Section 5.01. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: Section IV.1. Corporate Existence and Power. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, unless the failure to be so qualified or to have such corporate powers or governmental licenses, authorizations, consents or approvals would not have a Material Adverse Effect. 31 35 Section IV.2. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement, the Notes and the other Loan Documents (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of this Agreement with the Securities and Exchange Commission), (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. Section IV.3. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms, and the Notes and the other Loan Documents, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally. Section IV.4. Financial Information. (1) The consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1997 and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended, reported on by Ernst & Young, copies of which have been delivered to each of the Banks, and the unaudited consolidated financial statements of the Borrower and its Subsidiaries for the interim period ended September 30, 1998, copies of which have been delivered to each of the Banks, fairly present, in conformity with GAAP, the consolidated financial position of the Borrower and its Subsidiaries as of such dates and their consolidated results of operations and cash flows for such periods stated. (2) Since December 31, 1997. there has been no event, act, condition or occurrence having a Material Adverse Effect (and the Agent and the Banks acknowledge that the Restructuring and Impairment Charges for 1998 do not have such an effect). Section IV.5. Litigation. On the Effective Date, there is no action, suit or proceeding pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which could have a Material Adverse Effect or which in any manner draws into question the validity or enforceability of, or could impair the ability of the Borrower to perform its obligations under, this Agreement, the Notes or any of the other Loan Documents. Section IV.6. Compliance with ERISA. (1) The Borrower and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC or a Plan under Title IV of ERISA. 32 36 (2) On the Effective Date, neither the Borrower nor any member of the Controlled Group is or ever has been obligated to contribute to any Multiemployer Plan. Section IV.7. Taxes. There have been filed on behalf of the Borrower and its Subsidiaries all Federal, state and local income, material excise, material property and other material tax returns which are required to be filed by them and all taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the Borrower or any Subsidiary have been paid prior to the same becoming delinquent, other than (i) those presently payable without penalty or interest and (ii) those being contested in good faith by appropriate proceedings with respect to which adequate reserves have been established in accordance with GAAP. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. As of the Effective Date, United States income tax returns of the Borrower and its Subsidiaries (other than Westwynn Theatres, Inc.) have been examined and closed through the Fiscal Year ended December 31, 1993. Section IV.8. Subsidiaries. Each of the Borrower's Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, unless the failure to be so qualified or to have such corporate powers or governmental licenses, authorizations, consents or approvals would not have a Material Adverse Effect. As of the Effective Date, the Borrower has no Subsidiaries except those Subsidiaries listed on Schedule 4.08, which accurately sets forth each such Subsidiary's complete name and jurisdiction of incorporation. Section IV.9. Not an Investment Company. Neither the Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. Section IV.10. Public Utility Holding Company Act. Neither the Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. Section IV.11. Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has title to its properties sufficient for the conduct of its business, and none of such property is subject to any Lien except as permitted in Section 5.07. Section IV.12. No Default. Neither the Borrower nor any of its Subsidiaries is in Default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound which could have or cause a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. Section IV.13. Full Disclosure. All information heretofore furnished by the Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is as of the Effective Date, and all such information hereafter 33 37 furnished by the Borrower to the Agent or any Bank will be, true, accurate and complete in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. As of the Effective Date, the Borrower has disclosed to the Banks in writing any and all facts which could have or cause a Material Adverse Effect. Section IV.14. Environmental Matters. (1) Except as otherwise provided in Exhibit 4.14A, (1) neither the Borrower nor any Subsidiary is subject to Environmental Liabilities which could cause a Material Adverse Effect, (2) to the best of the Borrower's knowledge, neither the Borrower nor any Subsidiary has been designated a potentially responsible party under CERCLA or under any state statute similar to CERCLA, and (3) to the best of the Borrower's knowledge, none of the Properties has been identified on any current National Priorities List or CERCLIS List. (2) Except as otherwise provided in Exhibit 4.14(B), to the best of the Borrower's knowledge, (1) the Borrower, and each of its Subsidiaries, have used, managed, stored and otherwise handled Hazardous Materials at the Properties in compliance with applicable Environmental Laws, excluding any violation of Environmental Laws which did not cause a Material Adverse Effect, and (2) neither the Borrower nor any Subsidiary has caused an Environmental Release of Hazardous Materials into the subsurface soil or groundwater underlying the Properties which could reasonably be expected to cause a Material Adverse Effect. (3) Except as otherwise provided in Exhibit 4.14(C), to the best of the Borrower's knowledge, the Borrower and each of its Subsidiaries maintain all Environmental Authorizations necessary for the conduct of their respective businesses and are in compliance with all Environmental Laws applicable to the operation of the Properties and their respective businesses, excluding any omission of Environmental Authorizations or violation of Environmental Laws which could not reasonably be expected to cause a Material Adverse Effect. Section IV.15. Compliance with Laws. The Borrower and each Subsidiary is in compliance with all applicable laws, including, without limitation, all Environmental Laws, except where any failure to comply with any such laws would not, alone or in the aggregate, have a Material Adverse Effect. Section IV.16. Capital Stock. All Capital Stock, debentures, bonds, notes and all other securities of the Borrower and its Subsidiaries presently issued and outstanding are validly and properly issued in accordance with all applicable laws, including, but not limited to, the "Blue Sky" laws of all applicable states and the federal securities laws; provided that this representation shall not extend to any violation of applicable laws in connection with any such issuance occurring by reason of the action or inaction of any Person other than the Borrower, any Subsidiary or any Person retained or employed by the Borrower or any Subsidiary. The issued shares of Capital Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free and clear of any Lien or adverse claim. At least a majority of the issued shares of capital stock of each of the Borrower's other Subsidiaries (other than Wholly Owned Subsidiaries) is owned by the Borrower free and clear of any Lien or adverse claim. 34 38 Section IV.17. Margin Stock. Not more than 25% of the aggregate fair market value of the assets of the Company and its Subsidiaries which are subject to the provisions of Section 5.08 consists of Margin Stock. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock. No part of the proceeds of any Loan will be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation X. Section IV.18. Insolvency. After giving effect to the execution and delivery of the Loan Documents and the making of the Loans under this Agreement, the Borrower will not be "insolvent," within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of Title 11 of the United States Code or Section 2 of the Uniform Fraudulent Transfer Act, or any other applicable state law pertaining to fraudulent transfers, as each may be amended from time to time, or be unable to pay its debts generally as such debts become due, or have an unreasonably small capital to engage in any business or transaction, whether current or contemplated. ARTICLE V COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid (unless the Required Banks consent in writing): Section V.1. Information. The Borrower will deliver to each of the Banks: (1) as soon as available and in any event within 90 days after the end of each Fiscal Year, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, shareholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified by Ernst & Young or other independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications not acceptable to the Required Banks; (2) as soon as available and in any event within 45 days after the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a condensed consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and the related condensed statement of income and condensed statement of cash flows for such Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by the chief financial officer or the chief executive officer of the Borrower; (3) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate, substantially in the form of Exhibit F or in such other form as shall be mutually satisfactory to the Borrower and the Agent (a "Compliance Certificate"), of the chief financial officer or the chief executive officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.03 through 5.08, inclusive, 5.11 and 5.21, on 35 39 the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (4) simultaneously with the delivery of each set of annual financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements to the effect that nothing has come to their attention to cause them to believe that any Default existed on the date of such financial statements; (5) within 5 Domestic Business Days after the Borrower becomes aware of the occurrence of any Default, a certificate of the chief financial officer or the chief executive officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (6) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (7) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Borrower shall have filed with the Securities and Exchange Commission; (8) if and when the Borrower or any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; (9) promptly after the Borrower knows of the commencement thereof, notice of any litigation, dispute or proceeding involving a claim against the Borrower and/or any Subsidiary for $1,000,000 or more in excess of amounts covered in full by applicable insurance; (10) promptly after the Borrower knows of the existence thereof, any and all facts which could have or cause a Material Adverse Effect; and (11) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. Section V.2. Inspection of Property, Books and Records. The Borrower will (i) keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities; and (ii) permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank's expense prior to the occurrence of an Event of 36 40 Default and at the Borrower's expense after the occurrence of an Event of Default to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants. The Borrower agrees to cooperate and assist in such visits and inspections, in each case at such reasonable times and as often as may reasonably be desired. Section V.3. Ratio of Consolidated Senior Funded Debt to Consolidated Cash Flow. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 1999, the ratio of Consolidated Senior Funded Debt to Consolidated Cash Flow for the period of 4 consecutive Fiscal Quarters ending on such date shall not be greater than the applicable ratio provided in the following table:
Fiscal Quarter Ending Applicable Ratio --------------------- ---------------- On or before June 30, 2000 4.00 to 1.0 September 30, 2000, and thereafter 3.75 to 1.0
Section V.4. Ratio of Consolidated Funded Debt to Consolidated Cash Flow. At the end of each Fiscal Quarter ending as provided in the following table, the ratio of Consolidated Funded Debt at the end of such Fiscal Quarter to Consolidated Cash Flow for the period of 4 consecutive Fiscal Quarters ending on such date shall not be greater than the applicable ratio provided in the following table:
Fiscal Quarter Ending Applicable Ratio --------------------- ---------------- On or before June 30, 2000 6.00 to 1.0 September 30, 2000, and thereafter 5.75 to 1.0
Section V.5. Restricted Payments. The Borrower will not declare or make any, or permit any Subsidiary which is not a Wholly-Owned Subsidiary to make any, Restricted Payment after the Effective Date, if the aggregate amount of such Restricted Payments made in any consecutive 4 Fiscal Quarter period would exceed $4,000,000; provided that after giving effect to the payment of any such Restricted Payments, no Default shall be in existence or be created thereby. Section V.6. Fixed Charge Coverage. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending December 31, 1998, the ratio of (a) Adjusted Cash Flow to (b) Fixed Charges, in each case for the current Fiscal Quarter and the immediately preceding 3 Fiscal Quarters, shall not be less than 1.40 to 1.00. Section V.7. Adjusted Fixed Charge Coverage. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 1999, the ratio of (a) Adjusted Cash Flow minus Maintenance Capital Expenditures to (b) Adjusted Fixed Charges, in each case for the current Fiscal Quarter and the immediately preceding 3 Fiscal Quarters, shall not be less than 1.25 to 1.00. 37 41 Section V.8. Negative Pledge. Neither the Borrower nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (1) Liens existing on the date of this Agreement securing Debt outstanding on the Effective Date in an aggregate principal amount not exceeding $43,000,000; (2) any Lien in favor of the Collateral Agent pursuant to the Collateral Documents; (3) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset, provided that such Lien attaches to such asset concurrently with or within 18 months after the acquisition or completion of construction thereof; (4) Liens securing Debt owing by any Guarantor to the Borrower; (5) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses (a) or (c) of this Section, provided that (i) such Debt is not secured by any additional assets, and (ii) the amount of such Debt secured by any such Lien is not increased; (6) any Lien on Margin Stock; (7) Liens for taxes, assessments or governmental charges or levies either not yet due or the payment of which is not at the time required by Section 5.13; (8) Liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar Persons incurred in the ordinary course of business for sums either not yet due or the payment of which is not at the time required by Section 5.13; (9) Liens (other than any Lien created or imposed under ERISA and Liens on the Collateral) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive in any case of obligations incurred in connection with the borrowing of money or the obtaining of advances of credit); (10) any attachment or judgment Lien arising in connection with court proceedings, provided that (i) the execution or other enforcement of such Lien is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings diligently conducted, and (ii) such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor and neither the Borrower's nor any such Subsidiary's title to or right to use any of its property is impaired in any material respect by reason of such contest; 38 42 (11) easements, licenses, rights-of-way and other rights and privileges in the nature of easements and similar Liens incidental to the ownership of property and not incurred in connection with the borrowing of money or the obtaining of advances of credit, and which do not, individually or in the aggregate, interfere with the ordinary conduct of the business of the Borrower or any Subsidiary or materially detract from the value of the properties subject to any such Liens; (12) Liens on fixed assets (1) of any Person at the time such Person becomes a Subsidiary and not created in contemplation of such event, (2) of any Person existing at the time such Person is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event and (3) existing prior to the acquisition of such fixed assets by the Borrower or a Subsidiary and not created in contemplation of such acquisition, provided that the aggregate principal amount outstanding of Debt secured by Liens permitted under this paragraph (l) may not exceed at any time 5% of Consolidated Total Capitalization; and (13) Liens on assets other than the Collateral not otherwise permitted by the foregoing clauses of this Section securing Debt (other than indebtedness represented by the Notes) in an aggregate principal amount at any time outstanding not to exceed 5% of Consolidated Total Capitalization. Section V.9. Maintenance of Existence. The Borrower shall, and shall cause each Subsidiary to, maintain its corporate existence and carry on its business in substantially the same manner and in substantially the same fields as such business is now carried on and maintained; provided that (i) the Borrower and its Subsidiaries may engage in any transaction permitted by Section 5.10 and (ii) dissolution of any Subsidiary shall not be prohibited by this Section if all of the assets of such Subsidiary are transferred to the Borrower or any other Subsidiary following such dissolution. Section V.10. Dissolution. The Borrower shall not suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any shares of its own stock, except (i) through corporate reorganization to the extent permitted by Section 5.11, and (ii) through Restricted Payments permitted by Section 5.05. Section V.11. Consolidations, Mergers and Sales of Assets. The Borrower will not, nor will it permit any Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise transfer all or any substantial part of its assets to, any other Person, or discontinue or eliminate any business line or segment, provided that (a) the Borrower may merge with another Person if (i) such Person was organized under the laws of the United States of America or one of its states, (ii) the Borrower is the corporation surviving such merger and (iii) immediately after giving effect to such merger, no Default shall have occurred and be continuing, (b) Subsidiaries of the Borrower may merge or consolidate with one another or with the Borrower, (c) any Subsidiary of the Borrower may be merged or consolidated with or into another Person to consummate an acquisition of such other Person permitted by Section 5.21, provided that the surviving Person shall be a Subsidiary of the Borrower, (d) the foregoing limitation on the sale, lease or other transfer of assets and on the discontinuation or elimination of a business line or segment shall not prohibit (i) the sale, lease or other transfer of assets by a Subsidiary to any other Subsidiary (other than of Collateral by Eastwynn) or to the Borrower, or (ii) subject to the mandatory prepayment provisions of Section 2.10(b), during any Fiscal Quarter, a transfer of 39 43 assets in an arm's length transaction for fair market value or the discontinuance or elimination of a business line or segment (in a single transaction or in a series of related transactions) unless the aggregate assets to be so transferred or utilized in a business line or segment to be so discontinued, when combined with all other assets transferred, and all other assets utilized in all other business lines or segments discontinued, during such Fiscal Quarter and the immediately preceding three Fiscal Quarters (excluding, however, transfers of assets permitted by clause (i) of this Section) contributed more than 10% of Consolidated Operating Income during the 4 consecutive Fiscal Quarters immediately preceding such Fiscal Quarter, and (e) subject to the mandatory prepayment provisions of Section 2.10(b) and to presentation to the Agent and the Banks of a certificate showing pro forma compliance with the financial covenants contained in this Agreement after giving effect thereto, the Borrower may enter into sale/leaseback transactions after the Effective Date in an amount not to exceed in the aggregate $150,000,000, provided in each of the foregoing such cases no Default shall be in existence or be created thereby. At the request of the Borrower, the Collateral Agent shall release any Collateral sold by the Borrower or Eastwynn in conformity with the foregoing provisions, so long as any prepayments required by Section 2.10(b) have been made. Section V.12. Use of Proceeds. No portion of the proceeds of the Loans will be used by the Borrower or any Subsidiary for any purpose in violation of any applicable law or regulation. Section V.13. Compliance with Laws; Payment of Taxes. The Borrower will, and will cause each of its Subsidiaries and, in the case of ERISA, each member of the Controlled Group to, comply in all material respects with applicable laws (including but not limited to ERISA), regulations and similar requirements of governmental authorities (including but not limited to PBGC), except where the necessity of such compliance is being contested in good faith through appropriate proceedings diligently pursued. The Borrower will, and will cause each of its Subsidiaries to, pay promptly when due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a lien against the property of the Borrower or any Subsidiary, except (i) liabilities being contested in good faith by appropriate proceedings diligently pursued and against which, if requested by the Agent, the Borrower shall have set up reserves in accordance with GAAP and (ii) liabilities the nonpayment of which could have a Material Adverse Effect. Section V.14. Insurance. The Borrower will maintain, and will cause each of its Subsidiaries to maintain (either in the name of the Borrower or in such Subsidiary's own name), with financially sound and reputable insurance companies, insurance on all its Property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. Section V.15. Change in Fiscal Year. The Borrower will not change its Fiscal Year. Section V.16. Maintenance of Property. The Borrower shall, and shall cause each Subsidiary to, maintain all of its material properties and assets in good condition, repair and working order, ordinary wear and tear excepted. Section V.17. Environmental Notices. When a Responsible Officer or any officer 40 44 of the Borrower or any Subsidiary responsible for compliance with Environmental Laws with respect to any Property becomes aware of (i) an Environmental Liability associated with the Properties which could cause a Material Adverse Effect, (ii) an Environmental Release at any of the Properties which could cause a Material Adverse Effect, (iii) the designation of the Borrower or such Subsidiary as a potentially responsible party under CERCLA or any state statute similar to CERCLA, or (iv) identification of such Property on any National Priorities List or CERCLIS List, the Borrower shall promptly furnish to the Banks and the Agent written notice thereof. Section V.18. Environmental Matters. The Borrower and its Subsidiaries will not, and will not knowingly permit any Third Party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose, manage, or otherwise handle at the Properties any Hazardous Materials in such a manner which gives rise to an Environmental Liability which could cause a Material Adverse Effect. Section V.19. Environmental Release. Upon the occurrence of an Environmental Release of Hazardous Materials at any of the Properties of which Borrower or a Subsidiary becomes aware, Borrower or the Subsidiary shall comply with any and all notice, investigation, removal and remediation requirements applicable to the Borrower or Subsidiary under Environmental Laws with respect to such Environmental Release. Section V.20. Additional Covenants, Etc. In the event that at any time this Agreement is in effect or any Note remains unpaid the Borrower shall enter into any agreement, guarantee, indenture or other instrument governing, relating to, providing for commitments to advance or guaranteeing any Financing which exceeds $3,000,000 in aggregate amount (a "New Financing Agreement") or to amend any terms and conditions applicable to any Financing which exceeds $3,000,000 in aggregate amount (a "Financing Agreement Amendment"), which New Financing Agreement includes or which Financing Agreement Amendment adds or modifies Covenants, warranties, representations, defaults or events of default (or any other type of restriction which would have the practical effect of any of the foregoing, including, without limitation, any "put" or mandatory prepayment of all or substantially all of such debt) not substantially as, or in addition to those, provided in this Agreement or any other Loan Document, or more favorable to the lender or other counterparty thereunder than those provided in this Agreement or any other Loan Document (individually an "Additional Term" and collectively, the "Additional Terms"), the Borrower shall promptly so notify the Agent and the Banks. Thereupon, if the Agent shall request by written notice to the Borrower (after a determination has been made by the Required Banks that any such New Financing Agreement or Financing Agreement Amendment contains any provisions which either individually or in the aggregate are more favorable than one of the provisions set forth herein), the Borrower, the Agent and the Banks shall enter into an amendment to this Agreement providing for substantially the same such Additional Terms as those provided for in such New Financing Agreement or Financing Agreement Amendment, as the case may be, to the extent required and as may be selected by the Agent, such amendment to remain in effect, unless otherwise specified in writing by the Agent, for the entire duration of the stated term to maturity of such Financing (to and including the date to which the same may be extended at the Borrower's option), notwithstanding that such Financing might be earlier terminated by prepayment, refinancing, acceleration or otherwise; provided that if any such New Financing Agreement or the agreement, guarantee, indenture or other instrument amended by a Financing Agreement Amendment shall be modified, supplemented, amended or restated so as to modify, amend or eliminate therefrom any such 41 45 Additional Term so made a part of this Agreement, then so long as there exists no Default or Event of Default, the Agent and the Banks shall, at the Borrower's request made within 90 days following the date on which such New Financing Agreement or the agreement, guarantee, indenture or other instrument amended by a Financing Agreement Amendment is so modified, supplemented, amended or restated, amend this Agreement to similarly modify, amend or eliminate such Additional Term so made a part of this Agreement, provided that in no event will the Banks and the Agent be required to (i) eliminate any Covenant, representation, warranty, default or event of default which was set forth in this Agreement on the Effective Date or added to this Agreement pursuant to an amendment to this Agreement entered into other than pursuant to this Section, or (ii) modify or amend any Covenant, representation, warranty, default or event of default which was set forth in this Agreement on the Effective Date or added to this Agreement pursuant to any amendment to this Agreement entered into other than pursuant to this Section in a manner such that such Covenant, representation, warranty, default or event of default is less favorable to the Banks or the Agent than such Covenant, representation, warranty, default or event of default was on the Effective Date or the date the same was added to this Agreement pursuant to such an amendment, as the case may be. As used in this Section, the term "Covenants" shall mean covenants of a type similar to those set forth in Article V hereof or which customarily are described as affirmative, negative or financial covenants, but in no event shall such term encompass (w) agreements of the Borrower in respect of interest rate, fees, expenses, yield protection, indemnities, collateral, loan maturities, prepayment premiums, prepayment prohibitions or "call" protection or conditions precedent, (x) provisions whereby the Borrower waives rights, (y) provisions of a type comparable to those contained in Article IX or customarily included in the miscellaneous Section of a credit agreement or similar instrument, or (z) definitions to the extent such definitions relate to any of the provisions described in the foregoing clauses (w), (x) and (y). Section V.21. Investments. Neither the Borrower nor any of its Subsidiaries shall make Investments in any Person except: (a) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Agent, (iii) commercial paper rated A1 or the equivalent thereof by S&P or P1 or the equivalent thereof by Moody's and in either case maturing within 6 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by S&P and Aa or the equivalent thereof by Moody's, (v) loans or advances to employees not exceeding $1,000,000 in the aggregate principal amount outstanding at any time, in each case made in the ordinary course of business and consistent with practices existing on December 31, 1998, (vi) deposits required by government agencies or public utilities, and (vii) loans, advances or other Investments to or in Guarantors; and (b) other Investments which, in the aggregate, do not exceed 20% of Consolidated Net Worth; provided, however, immediately after giving effect to the making of any Investment, no Default shall have occurred and be continuing. Section V.22. Guaranty of Subsidiaries. (1) The Borrower shall deliver to the Agent and each Bank notice that a Person has become a Subsidiary within 10 days after the day on which such Person became a Subsidiary. The Borrower shall cause any Person which becomes a Subsidiary after the Effective 42 46 Date to become a party to, and agree to be bound by the terms of, the Guaranty and the Contribution Agreement pursuant to an instrument in form and substance satisfactory to the Agent executed and delivered to the Agent within 30 days after the day on which such Person became a Subsidiary. (2) Together with the instrument referred to in Section 5.22(a), the Borrower shall deliver to the Agent an opinion of counsel to such Subsidiary substantially in the form of the opinion delivered pursuant to Section 3.01(c) (to the extent such opinion includes opinions applicable to the Guarantors), modified appropriately to refer to such Subsidiary, and the items specified in Section 3.01(f) (to the extent such items relate to the Guarantors) for such Subsidiary. (3) Once any Person becomes a Subsidiary and therefore becomes a party to the Guaranty Agreement in accordance with Section 5.22(a), such Person thereafter shall remain a party to the Guaranty Agreement without regard to whether it thereafter ceases to be a Subsidiary. (4) If (i) the Borrower and/or any Subsidiary sells all of the equity interests owned by the Borrower and its Subsidiaries in any Guarantor, (ii) immediately before and after giving effect to such sale no Default or Event of Default shall have occurred, and (iii) the Borrower shall have delivered to the Agent and the Banks notice of such sale, then the Agent shall release such Guarantor from the Guaranty. Section V.23. Limitation on Consolidated Funded Debt. Neither the Borrower nor any Subsidiary will incur, create, assume or suffer to exist any Consolidated Funded Debt, other than (i) Consolidated Funded Debt set forth or reflected on the consolidated balance sheet of the Borrower and its Subsidiaries for the Fiscal Quarter ending September 30, 1998 delivered to the Banks pursuant to Section 4.04(a), (ii) any extension, renewal or refinancing of Consolidated Funded Debt described in clause (i) of this Section made on terms no less favorable to the Borrower or such Subsidiary than the terms of the Consolidated Funded Debt being so extended, renewed or refinanced immediately prior to such extension, renewal or refinancing, (iii) the Term Loan, (iv) Subordinated Debt, (v) Debt securing Liens permitted by Section 5.08 and (vi) additional Consolidated Funded Debt not exceeding at any time an aggregate amount outstanding of $5,000,000. Section V.24. Delivery of Collateral Documents. The Borrower will execute and deliver, and will cause EastWynn to execute and deliver, to the Collateral Agent the Collateral Documents, together with a favorable opinion of counsel to the Borrower and Eastwynn (as to corporate authority, power, no violation of other material agreements, validity, binding effect and enforceability) with respect to the Collateral Documents, on or before the Collateralization Date; provided, that if the Term Loan has not been made by the Term Lenders on or before the Collateralization Date, the Borrower and all Secured Parties other than the Term Agent and the Term Lenders shall execute and deliver the Intercreditor Agreement on the Collateralization Date, and the Intercreditor Agreement shall be executed by the Term Agent and the Term Lenders (and the other Secured Parties, if any amendments thereto have been requested by the Term Agent and agreed to by the other Secured Parties) on the date the Term Loan is made. 43 47 Section V.25. Subordinated Debt. (a) The Borrower will issue Subordinated Notes on the terms (including the subordination provisions) described in the Subordinated Debt Offering Circular, on or before February 5, 1999, in an aggregate amount not less than $200,000,000, and use proceeds thereof to pay in full the Senior Notes. (b) The Borrower shall not (i) amend the terms of any of the Subordinated Debt Documents, or (ii) make any voluntary or mandatory redemptions or prepayments (whether upon a change of control or otherwise) with respect to, or any legal or covenant defeasance of, the Subordinated Debt, without the consent of the Agent and the Required Lenders or (iii) make any payments whatsoever in violation of the subordination provisions pertaining to the Subordinated Notes. ARTICLE VI DEFAULTS Section VI.1. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (1) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay any interest on any Loan within five Domestic Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within five Domestic Business Days after such fee or other amount becomes due; or (2) the Borrower shall fail to observe or perform any covenant contained in Sections 5.01(e), 5.01(j), 5.02(ii), 5.03 to 5.07, inclusive, 5.09 (as to the Borrower) and 5.10 (as to the Borrower) and 5.12, or Section 5.15, 5.21(b), or 5.23 to 5.25, inclusive; (3) the Borrower shall fail to observe or perform any covenant or agreement contained or incorporated by reference in this Agreement (other than those covered by clause (a) or (b) above) for thirty days after the earlier of (i) the first day on which the a Responsible Officer has knowledge of such failure or (ii) written notice thereof has been given to the Borrower by the Agent at the request of any Bank; or (4) any representation, warranty, certification or statement made or deemed made by the Borrower in Article IV of this Agreement or in any other Loan Document, certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect or misleading in any material respect when made (or deemed made); or (5) the Borrower or any Subsidiary shall fail to make any payment in respect of Debt or any Off-Balance Sheet Lease Indebtedness in an aggregate amount in excess of $3,000,000 outstanding (other than the Notes, but including, without limitation, the Subordinated Debt and the Term Loan) when due or within any applicable grace period; or (6) any event or condition shall occur (other than (i) any voluntary notice of purchase, payment or prepayment delivered by the Borrower as Tenant under the Lease which 44 48 results in any amount which is the subject of such notice becoming due prior to its scheduled due date, and (ii) any damage, destruction, other casualty or condemnation which under Article 19 of the Lease results in any amount payable under the Lease becoming due prior to its scheduled due date) which results in the termination of any commitment regarding Debt or acceleration of the maturity of Debt or Off-Balance Sheet Lease Indebtedness in an aggregate amount in excess of $3,000,000 outstanding of the Borrower or any Subsidiary or the mandatory prepayment or purchase of such Debt or Off-Balance Sheet Lease Indebtedness by the Borrower (or its designee) or such Subsidiary (or its designee) prior to the scheduled maturity thereof, or enables (with any requirement for the giving of notice or lapse of time or both, having been satisfied) the holders of such commitment or Debt or Off-Balance Sheet Lease Indebtedness or any Person acting on such holders' behalf to terminate such commitment or accelerate the maturity thereof or require the mandatory prepayment or purchase thereof prior to the scheduled maturity thereof (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or any Subsidiary); or (7) the Borrower or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally, or shall admit in writing its inability, to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (8) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect; or (9) the Borrower or any member of the Controlled Group shall fail to pay when due any material amount which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated or the Borrower or any other member of the Controlled Group shall enter into, contribute or be obligated to contribute to, terminate or incur any withdrawal liability with respect to, a Multiemployer Plan; or 45 49 (10) one or more judgments or orders for the payment of money in an aggregate amount in excess of $500,000 shall be rendered against the Borrower or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (11) a federal tax lien shall be filed against the Borrower under Section 6323 of the Code or a lien of the PBGC shall be filed against the Borrower or any Subsidiary under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of 25 days after the date of filing; or (12) the Patrick Family shall at any time fail to Control the Borrower; or (13) the occurrence of any event, act or condition which the Required Banks determine either does or has a reasonable probability of causing a Material Adverse Effect and the failure of the Borrower to cure or prevent such Material Adverse Effect within 45 days after receipt of notice of such determination from the Required Banks; or (14) any Collateral Document or Guaranty shall cease to be in full force and effect or the Borrower or EastWynn or any Guarantor, as applicable, shall deny or disaffirm its obligations thereunder; or (15) any of the subordination provisions of the Subordinated Notes shall cease to be in full force and effect or any of the holders of Subordinated Debt or the Borrower shall deny or disaffirm its obligations thereunder; then, and in every such event, the Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by the Required Banks, by notice to the Borrower declare the Notes (together with accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents to be, and the Notes (together will all accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that if any Event of Default specified in clause (g) or (h) above occurs with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Notwithstanding the foregoing, the Agent shall have available to it all other remedies at law or equity, and shall exercise any one or all of them at the request of the Required Banks. Section VI.2. Notice of Default. The Agent shall give notice to the Borrower of any Default under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. 46 50 ARTICLE VII THE AGENT Section VII.1. Appointment, Powers and Immunities. Each Bank hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Agent: (a) shall have no duties or responsibilities except as expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee for any Bank; (b) shall not be responsible to the Banks for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any Bank under, this Agreement or any other Loan Document, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by the Borrower to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Required Banks, and then only on terms and conditions satisfactory to the Agent, and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The provisions of this Article VII are solely for the benefit of the Agent and the Banks, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and under the other Loan Documents, the Agent shall act solely as agent of the Banks and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower. The duties of the Agent shall be ministerial and administrative in nature, and the Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Bank. Section VII.2. Reliance by Agent. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telefax, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants or other experts selected by the Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions signed by the Required Banks or all the Banks where unanimity is required under this Agreement, and such instructions of the Required Banks or all the Banks where unanimity is required under this Agreement in any action taken or failure to act pursuant thereto shall be binding on all of the Banks. Section VII.3. Defaults. The Agent shall not be deemed to have knowledge of the occurrence of a Default or an Event of Default (other than the non-payment of principal of or interest on the Loans) unless the Agent has received notice from a Bank or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or an Event of Default, the Agent shall give prompt notice thereof to the Banks. The Agent shall give each Bank prompt notice of each non-payment of principal of or interest on the Loans, whether or not 47 51 it has received any notice of the occurrence of such non-payment. The Agent shall (subject to Section 9.05) take such action with respect to such Default or Event of Default as shall be directed by the Required Banks, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. Section VII.4. Rights of Agent and Its Affiliates as a Bank. With respect to any Loan made by Wachovia or an Affiliate of Wachovia, such Affiliate and Wachovia in their capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not an Affiliate of Wachovia (or in Wachovia's case, acting as the Agent), and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include such Affiliate of Wachovia or Wachovia in its individual capacity. Such Affiliate and Wachovia may (without having to account therefor to any Bank) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of its Affiliates) as if they were not an Affiliate of the Agent or the Agent, respectively; and such Affiliate and Wachovia may accept fees and other consideration from the Borrower (in addition to any agency fees and arrangement fees heretofore agreed to between the Borrower and Wachovia) for services in connection with this Agreement or any other Loan Document or otherwise without having to account for the same to the Banks. Section VII.5. Indemnification. Each Bank severally agrees to indemnify the Agent, to the extent the Agent shall not have been reimbursed by the Borrower, ratably in accordance with its Commitment, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or any such other documents; provided, however, that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. Section VII.6. CONSEQUENTIAL DAMAGES. THE AGENT SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. Section VII.7. Payee of Note Treated as Owner. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Agent and the 48 52 provisions of Section 9.07(c) have been satisfied. Any requests, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor or replacement thereof. Section VII.8. Non-Reliance on Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Agent shall not be required to keep itself (or any Bank) informed as to the performance or observance by the Borrower of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Agent hereunder or under the other Loan Documents, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other Person (or any of their Affiliates) which may come into the possession of the Agent. Section VII.9. Failure to Act. Except for action expressly required of the Agent hereunder or under the other Loan Documents, the Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Banks of their indemnification obligations under Section 7.05 against any and all liability and expense which may be incurred by the Agent by reason of taking, continuing to take, or failing to take any such action. Section VII.10. Resignation or Removal of Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Banks and the Borrower and the Agent may be removed at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Agent's notice of resignation or the Required Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent. Any successor Agent shall be a bank which has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder. 49 53 ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION Section VIII.1. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period in respect of any Euro-Dollar Loan: (1) the Agent determines that deposits in Dollars (in the applicable amounts) are not being offered in the relevant market for such Interest Period, or (2) the Required Banks advise the Agent that the London Interbank Offered Rate as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding the Euro-Dollar Loans for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make the Euro-Dollar Loans specified in such notice shall be suspended. Unless the Borrower notifies the Agent at least 2 Domestic Business Days before the date of any Borrowing of Euro-Dollar Loans for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. Section VIII.2. Illegality. If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any existing or future law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof (any such authority, bank or agency being referred to as an "Authority" and any such event being referred to as a "Change of Law"), or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority shall make it unlawful or impossible for any Bank (or its Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall, on the later of (i) the date such notice is received by the Borrower and (ii) the date such Change of Law becomes applicable, prepay in full the then outstanding principal amount of each Euro-Dollar Loan of such Bank, together with accrued interest thereon and any amount due such Bank pursuant to Section 8.05(a). Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. Section VIII.3. Increased Cost and Reduced Return. (1) If after the date hereof, a Change of Law or compliance by any Bank (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority: 50 54 (1) shall subject any Bank (or its Lending Office) to any tax, duty or other charge with respect to its Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans, or shall change the basis of taxation of payments to any Bank (or its Lending Office) of the principal of or interest on its Euro-Dollar Loans or any other amounts due under this Agreement in respect of its Euro-Dollar Loans or its obligation to make Euro-Dollar Loans (except for changes in the rate of tax on the overall net income of such Bank or its Lending Office imposed by the jurisdiction in which such Bank's principal executive office or Lending Office is located); or (2) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Lending Office); or (3) shall impose on any Bank (or its Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans; and the result of any of the foregoing is to increase the cost to such Bank (or its Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Lending Office) under this Agreement or under its Notes with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (2) If any Bank shall have determined that after the date hereof the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any existing or future law, rule or regulation, or any change in the interpretation or administration thereof, or compliance by any Bank (or its Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, has or would have the effect of reducing the rate of return on such Bank's capital as a consequence of its obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank, the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. (3) Each Bank shall notify the Borrower of any event occurring after the date of this Agreement entitling such Bank to compensation under this Section as promptly as practicable, but in any event within 45 days, after the officer of such Bank responsible for the business relationship of the Bank with the Borrower obtains actual knowledge thereof; provided 51 55 that (i) if any Bank fails to give such notice within 45 days after such officer obtains actual knowledge of such an event, such Bank shall with respect to compensation payable pursuant to this Section in respect of any costs resulting from such event, only be entitled to payment under this Section for costs incurred from and after the date 45 days prior to the date that such Bank does give such notice and (ii) each Bank will designate a different Lending Office for the Loans of such Bank affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Bank, be disadvantageous to such Bank or contrary to its general lending policies. Each Bank will furnish to the Borrower a certificate setting forth the basis and amount of each request by such Bank for compensation under this Section, accompanied by a statement of an officer of such Bank certifying that such request for compensation is being made pursuant to a policy adopted by such Bank to seek such compensation generally from customers similar to the Borrower. (4) The provisions of this Section 8.03 shall be applicable with respect to any Participant, Assignee or other Transferee. Section VIII.4. Base Rate Loans Substituted for Euro-Dollar Loans. If (i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03, and the Borrower shall, by at least 5 Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (1) all Loans which would otherwise be made by such Bank as Euro-Dollar Loans shall be made instead as Base Rate Loans (in which case interest and principal on such Loans shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (2) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. In the event that the Borrower shall elect that the provisions of this Section shall apply to any Bank, the Borrower shall remain liable for, and shall pay to such Bank as provided herein, all amounts due such Bank under Section 8.03 in respect of the period preceding the date of conversion of such Bank's Loans resulting from the Borrower's election. Section VIII.5. Compensation. Upon the request of any Bank, delivered to the Borrower and the Agent, the Borrower shall pay to such Bank such amount or amounts as shall compensate such Bank for any loss, cost or expense incurred by such Bank as a result of: (1) any payment or prepayment (pursuant to Section 2.08, Section 2.09, Section 8.02 or otherwise) of a Euro-Dollar Loan on a date other than the last day of an Interest Period for such Euro-Dollar Loan, as the case may be; (2) any failure by the Borrower to prepay a Euro-Dollar Loan on the date for such prepayment specified in the relevant notice of prepayment hereunder; or 52 56 (3) any failure by the Borrower to borrow a Euro-Dollar Loan on the date for the Euro-Dollar Borrowing of which such Euro-Dollar Loan is a part specified in the applicable Notice of Borrowing delivered pursuant to Section 2.02; such compensation to include, without limitation, an amount equal to the excess, if any, of (x) the amount of interest which would have accrued on the amount so paid or prepaid or not prepaid or borrowed for the period from the date of such payment, prepayment or failure to prepay or borrow to the last day of the then current Interest Period for such Euro-Dollar Loan (or, in the case of a failure to prepay or borrow, the Interest Period for such Euro-Dollar Loan which would have commenced on the date of such failure to prepay or borrow) at the applicable rate of interest for such Euro-Dollar Loan provided for herein (excluding, however, for purposes of this Section only the Applicable Margin in determining such rate of interest) over (y) the amount of interest (as reasonably determined by such Bank) such Bank would have paid on deposits in Dollars of comparable amounts having terms comparable to such period placed with it by leading banks in the London interbank market. Section VIII.6. Replacement of Bank. In the event that any Bank gives any notice under Section 8.02 resulting in the suspension of its obligation to make Euro-Dollar Loans or requests compensation pursuant to Section 8.03, then, so long as the condition giving rise to such suspension or compensation exists, the Borrower may designate another bank or financial institution (such bank or financial institution being herein called a "Replacement Bank") acceptable to the Agent (which acceptance will not be unreasonably withheld) and which is not an Affiliate of the Borrower, to assume such Bank's Commitment hereunder and to purchase the Loans of such Bank and such Bank's rights under this Agreement and the Notes held by such Bank, all without recourse to or representation or warranty by, or expense to, such Bank, for a purchase price equal to the outstanding principal amount of the Loans payable to such Bank plus any accrued but unpaid interest on such Loans and accrued but unpaid fees owing to such Bank plus any amounts payable to such Bank under Section 8.05 or otherwise owing to such Bank under the Loan Documents, and upon such assumption, purchase and substitution, and subject to the execution and delivery to the Agent by the Replacement Bank of documentation satisfactory to the Agent (pursuant to which such Replacement Bank shall assume the obligations of such original Bank under this Agreement), the Replacement Bank shall succeed to the rights and obligations of such Bank hereunder. In the event that the Borrower exercises its rights under the preceding sentence, the Bank against which such rights were exercised shall no longer be a party hereto or have any rights or obligations hereunder; provided that the obligations of the Borrower to such Bank under Article VIII and Section 9.03 with respect to events occurring or obligations arising before or as a result of such replacement shall survive such exercise. ARTICLE IX MISCELLANEOUS Section IX.1. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission or similar writing) and shall be given to such party at its address or telecopy number set forth on the signature pages hereof or such other address or telecopy number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective 53 57 (i) if given by telecopier, when such telecopy is transmitted to the telecopy number specified in this Section and the telecopy machine used by the sender provides a written confirmation that such telecopy has been so transmitted or receipt of such telecopy transmission is otherwise confirmed, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, and (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under Article II or Article VIII shall not be effective until received. Section IX.2. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note or other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section IX.3. Expenses; Documentary Taxes; Indemnification. (1) The Borrower shall pay (i) all out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Agent, in connection with the preparation of this Agreement and the other Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default or alleged Default hereunder or thereunder and (ii) if a Default occurs, all out-of-pocket expenses incurred by the Agent or any Bank, including fees and disbursements of counsel, in connection with such Default and collection and other enforcement proceedings resulting therefrom, including out-of-pocket expenses incurred in enforcing this Agreement and the other Loan Documents. (2) The Borrower shall indemnify the Agent and each Bank against any transfer taxes, documentary taxes, assessments or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents. (3) The Borrower shall indemnify the Agent, the Banks and each Affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any extension of credit by any Bank hereunder or breach by the Borrower of this Agreement or any other Loan Document or from investigation, litigation (including, without limitation, any actions taken by the Agent or any of the Banks to enforce this Agreement or any of the other Loan Documents) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing, and the Borrower shall reimburse the Agent and each Bank, and each Affiliate thereof and their respective directors, officers, employees and agents, upon demand for any expenses (including, without limitation, legal fees) incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified. 54 58 Section IX.4. Setoffs; Sharing of Set-Offs. (1) The Borrower hereby grants to each Bank, as security for the full and punctual payment and performance of the obligations of the Borrower under this Agreement, a continuing lien on and security interest in all deposits and other sums credited by or due from such Bank to the Borrower or subject to withdrawal by the Borrower; and regardless of the adequacy of any collateral or other means of obtaining repayment of such obligations, each Bank may at any time upon or after the occurrence of any Event of Default, and without notice to the Borrower, set off the whole or any portion or portions of any or all such deposits and other sums against such obligations, whether or not any other Person or Persons could also withdraw money therefrom. (2) Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest owing with respect to the Notes held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of all principal and interest owing with respect to the Notes held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks owing to such other Banks, and/or such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks owing to such other Banks shall be shared by the Banks pro rata; provided that (i) nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes, and (ii) if all or any portion of such payment received by the purchasing Bank is thereafter recovered from such purchasing Bank, such purchase from each other Bank shall be rescinded and such other Bank shall repay to the purchasing Bank the purchase price of such participation to the extent of such recovery together with an amount equal to such other Bank's ratable share (according to the proportion of (x) the amount of such other Bank's required repayment to (y) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. (3) Notwithstanding the foregoing, it is hereby expressly agreed that neither the Agent nor any Bank shall have any lien or security interest in, or right to set-off against, any amount held for the Borrower (i) by the Agent's or such Bank's Affiliates, including, but not limited to, Trustco Capital Management, Inc. and Synovus Securities, Inc., or (ii) in any corporate custody account or similar account maintained at any Bank in a trust capacity, in either case as security for or for application to the Loans or other obligations owing to the Agent, or such Bank under this Agreement or the Loan Documents; provided, however, that nothing contained in this subSection (c) shall in any way be construed as limiting the ability of any such Affiliate of the Agent or any Bank to set-off against the Borrower's accounts for any amount owing to such Affiliate or such Bank arising other than under this Agreement and the Loan Documents. 55 59 Section IX.5. Amendments and Waivers. (1) Any provision of this Agreement, the Notes or any other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) change the Commitment of any Bank or subject any Bank to any additional obligation (provided that an Assignment and Acceptance executed in connection with an assignment effected pursuant to, and in compliance with, Section 9.07(c) shall not be deemed to be a violation of this clause (i)), (ii) change the principal of or rate of interest on any Loan or any fees hereunder, (iii) change the date fixed for any payment of principal of or interest on any Loan or any fees hereunder, (iv) change the amount of principal, interest or fees due on any date fixed for the payment thereof, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the percentage of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement, (vi) change the manner of application of any payments made under this Agreement or the Notes, (vii) change this Section 9.05(a), (viii) change the definition of "Required Banks", (ix) release any Guarantor from its obligations under the Guaranty (other than any release of a Guarantor pursuant to Section 5.22(d)) or (x) release any Collateral (other than any release of Collateral pursuant to Section 5.11 or pursuant to the Intercreditor Agreement). (2) The Borrower will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement from or with any Bank, except on terms fully disclosed to the Agent (which terms the Agent shall be authorized to disclose to the Banks). Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to the Agent (for delivery to each Bank) forthwith following the date on which the same shall have been executed and delivered by the requisite percentage of Banks. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any Bank (in its capacity as such) as consideration for or as an inducement to the entering into by such Bank of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to all such Banks. Section IX.6. Margin Stock Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not, directly or indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. Section IX.7. Successors and Assigns. (1) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that, except as provided in paragraph (g) of this Section, the Borrower may not assign or otherwise transfer any of its rights under this Agreement. (2) Any Bank may at any time sell to one or more Persons (each a "Participant") participating interests in any Loan owing to such Bank, any Note held by such Bank, any Commitment hereunder or any other interest of such Bank hereunder. In the event of any such sale by a Bank of a participating interest to a Participant, such Bank's obligations under 56 60 this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. In no event shall a Bank that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder except that such Bank may agree that it will not (except as provided below), without the consent of the Participant, agree to (i) the change of any date fixed for the payment of principal of or interest on the related Loan or Loans, (ii) the change of the amount of any principal, interest or fees due on any date fixed for the payment thereof with respect to the related Loan or Loans, (iii) the change of the principal of the related Loan or Loans, or (iv) any change in the rate at which either interest is payable thereon or (if the Participant is entitled to any part thereof) commitment fee is payable hereunder from the rate at which the Participant is entitled to receive interest or commitment fee (as the case may be) in respect of such participation. Each Bank selling a participating interest in any Loan, Note, Commitment or other interest under this Agreement shall, within 10 Domestic Business Days of such sale, provide the Borrower and the Agent with written notification stating that such sale has occurred and identifying the Participant and the interest purchased by such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Article VIII with respect to its participation in Loans outstanding from time to time, subject to the provisions of Section 9.07(e). (3) Any Bank may at any time assign to one or more banks or financial institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume all such rights and obligations, pursuant to an Assignment and Acceptance in the form attached hereto as Exhibit B, executed by such Assignee, such transferor Bank and the Agent (and, in the case of (x) an Assignee that is not then a Bank or an Affiliate of a Bank; and (y) an assignment not made during the existence of an Event of Default, by the Borrower); provided that (i) no interest may be sold by a Bank pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably equivalent portions of the transferor Bank's Commitment (provided that the Borrower and the Agent may waive the requirement contained in this clause (i)), (ii) no interest may be sold by a Bank pursuant to this paragraph (c) to any Assignee that is not then a Bank or an Affiliate of a Bank without the consent of the Borrower, which consent shall not be unreasonably withheld (provided that (1) the Borrower's consent shall not be necessary with respect to any assignment made during the existence of an Event of Default, and (2) it shall not constitute the unreasonable withholding of consent if the Borrower shall decline to consent because (x) the Borrower makes a reasonable determination that it is materially more likely that the proposed Assignee will be entitled to compensation, or to a greater amount of compensation, than the transferor Bank, or (y) the proposed Assignee is a competitor, or an Affiliate of a competitor, of the Borrower or any Subsidiary), and (iii) the minimum amount of any Commitment, and the minimum aggregate principal amount of Loans, that may be so assigned by any transferor Bank shall be $5,000,000 (provided that (1) a Bank may assign all of its Commitment and its Loans even if the amount of its Commitment and the aggregate principal amount of its Loans 57 61 is less than $5,000,000, and (2) the Agent and the Borrower may waive the requirement contained in this clause (iii) without the consent of any Bank). Upon (A) execution of the Assignment and Acceptance by such transferor Bank, such Assignee, the Agent and (if applicable) the Borrower, (B) delivery of an executed copy of the Assignment and Acceptance to the Borrower and the Agent, (C) payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, and (D) payment by such transferor Bank to the Agent of a processing and recordation fee of $500, if the Assignee is a Bank or an Affiliate thereof, or $3,500 in any other case, such Assignee shall for all purposes be a Bank party to this Agreement and shall have all the rights and obligations of a Bank under this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by the Borrower, the Banks or the Agent shall be required. Upon the consummation of any transfer to an Assignee pursuant to this paragraph (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to each of such Assignee and such transferor Bank. (4) Subject to the provisions of Section 9.08, the Borrower authorizes each Bank to disclose to any Participant, Assignee or other transferee (each a "Transferee") and any prospective Transferee any and all financial and other information in such Bank's possession concerning the Borrower which has been delivered to such Bank by the Borrower pursuant to this Agreement or which has been delivered to such Bank by the Borrower in connection with such Bank's credit evaluation prior to entering into this Agreement. (5) No Transferee shall be entitled to receive any greater payment under Section 8.03 than the transferor Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Bank to designate a different Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (6) Anything in this Section 9.07 to the contrary notwithstanding, any Bank may assign and pledge all or any portion of the Loans and/or obligations owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans and/or obligations made by the Borrower to the assigning and/or pledging Bank in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Loans and/or obligations to the extent of such payment. No such assignment shall release the assigning and/or pledging Bank from its obligations hereunder. Section IX.8. Confidentiality. Each Bank agrees to exercise its best efforts to keep any information delivered or made available by the Borrower to it which such Bank knows to be or which is clearly indicated to be confidential information, confidential from anyone other than persons employed or retained by such Bank who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided, however, that nothing herein shall prevent any Bank from disclosing such information (i) to any other Bank, (ii) upon 58 62 the order of any court or administrative agency, (iii) to any regulatory agency or authority having jurisdiction over such Bank, upon the request or demand of such regulatory agency or authority, (iv) which has been publicly disclosed (unless such Bank knows such disclosure was made by a Person in violation of a confidentiality agreement with or confidentiality obligation to the Borrower or any Subsidiary), (v) to the extent reasonably required in connection with any litigation to which the Agent, any Bank or their respective Affiliates may be a party, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel and independent auditors and (viii) to any actual or proposed Participant, Assignee or other Transferee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section 9.08. Section IX.9. Representation by Banks. Each Bank hereby represents that it is a commercial lender or financial institution which makes loans in the ordinary course of its business and that it will make its Loans hereunder for its own account in the ordinary course of such business; provided, however, that, subject to Section 9.07, the disposition of the Note or Notes held by that Bank shall at all times be within its exclusive control. Section IX.10. Obligations Several. The obligations of each Bank hereunder are several, and no Bank shall be responsible for the obligations or commitment of any other Bank hereunder. Nothing contained in this Agreement and no action taken by the Banks pursuant hereto shall be deemed to constitute the Banks to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Bank shall be a separate and independent debt, and each Bank shall, subject to Article VI, be entitled to protect and enforce its rights arising out of this Agreement or any other Loan Document and it shall not be necessary for any other Bank to be joined as an additional party in any proceeding for such purpose. Section IX.11. Survival of Certain Obligations. Sections 8.03(a), 8.03(b), 8.05 and 9.03 of this Agreement and the obligations of the Borrower thereunder shall, without duplication, survive and continue to be enforceable notwithstanding the termination of this Agreement and the Commitments and the payment in full of the principal of and interest on all Loans. Section IX.12. Georgia Law. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of Georgia. Section IX.13. Severability. In case any one or more of the provisions contained in this Agreement, the Notes or any of the other Loan Documents should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and shall be enforced to the greatest extent permitted by law. Section IX.14. Interest. In no event shall the amount of interest due or payable hereunder or under the Notes exceed the maximum rate of interest allowed by applicable law, and in the event any such payment is inadvertently made to any Bank by the Borrower or inadvertently received by any Bank, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify such Bank in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Banks 59 63 not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. Section IX.15. Interpretation. No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision. Section IX.16. Consent to Jurisdiction. The Borrower (a) submits to personal jurisdiction in the State of Georgia, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Agreement, the Notes and the other Loan Documents, (b) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of Georgia for the purpose of litigation to enforce this Agreement, the Notes or the other Loan Documents, and (c) agrees that service of process may be made upon it in the manner prescribed in Section 9.01 for the giving of notice to the Borrower. Nothing herein contained, however, shall prevent the Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. Section IX.17. EDGAR Filing. Promptly after the Effective Date, the Agent agrees to deliver to the Borrower a 3 1/2 inch high density computer disk containing the final form of this Agreement, formatted on WordPerfect 6.1. After the execution and delivery of any amendment, modification or supplement to this Agreement, the Agent agrees to deliver to the Borrower, upon request of the Borrower, a 3 1/2 inch high density computer disk or other electronic or computer record mutually agreeable to the Borrower and the Agent containing the final form of such amendment, modification or supplement, formatted on WordPerfect 6.1 or other software program mutually agreeable to the Borrower and the Agent. Section IX.18. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under seal, by their respective authorized officers as of the day and year first above written. CARMIKE CINEMAS, INC. By: /s/ John O. Barwick, III ------------------------- (SEAL) Title: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 Attention: John O. Barwick, III Senior Vice President and Chief Financial Officer Telecopy number: (706) 576-3419 Telephone number: (706) 576-3400 60 64 COMMITMENTS $77,500,000 WACHOVIA BANK, N.A., as Agent and as a Bank By: /s/ Reginald T. Dawson -------------------------------------- (SEAL) Title: Lending Office Wachovia Bank, N.A. Syndication Services 191 Peachtree Street, N.E. Mail Code: GA-0423 Atlanta, Georgia 30303-1757 Attention: Valerie Monroe (27th floor) Telecopy Number: (404) 332-4005 Telephone Number: (404) 332-1439 with a copy to: Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attention: Reginald Dawson Telecopy number: (404) 332-6920 Telephone number: (404) 332-4075 61 65 $55,000,000 FIRST UNION NATIONAL BANK By: /s/ David B. Kraybill -------------------------------------- (SEAL) Title: Lending Office First Union National Bank - Florida 214 Hogan Street, 9th Floor Jacksonville, Florida 32202 Attention: Kathy Love Telecopy number: (904) 361-1010 Telephone number: (904) 361-1729 with a copy to: First Union National Bank 999 Peachtree Street 12th Floor Atlanta, Georgia 30309 Attention: Donald Q. Dalton Telecopy number: (404) 225-4255 Telephone number: (404) 225-4004 62 66 $42,500,000 SUNTRUST BANK, ATLANTA By: /s/ J. Christopher Deisley -------------------------------------- (SEAL) Title: By: /s/ Ashleigh R. Baucom -------------------------------------- (SEAL) Title: Lending Office SunTrust Bank, Atlanta 25 Park Place 23rd Floor Atlanta, Georgia 30303 Attention : J. Christopher Deisley Telecopy number: (404) 588-8833 Telephone number: (404) 588-8684 63 67 $20,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD. By: /s/ A. Haruyama -------------------------------------- (SEAL) Title: Lending Office The Long-Term Credit Bank of Japan, Ltd. 165 Broadway, 49th Floor New York, New York 10006 Attention: Kathleen Dorsch-Santiago Telecopy number: (212) 608-2371 Telephone number: (212) 335-4578 with a copy to: The Long-Term Credit Bank of Japan, Ltd. 245 Peachtree Center Avenue Suite 2801, Marquis One Tower Atlanta, Georgia 30303 Attention: Rebecca Silbert Telecopy number: (404) 658-9751 Telephone number: (404) 659-7210 64 68 $12,500,000 THE BANK OF NEW YORK By: /s/ Cynthia L. Rogers -------------------------------------- (SEAL) Title: Lending Office The Bank of New York 1 Wall Street, 16th Floor New York, New York 10286 Attention: Cynthia L. Rogers Telecopy number: (212) 635-8595 Telephone number: (212) 635-8608 65 69 $12,500,000 FIRST AMERICAN NATIONAL BANK By: /s/ H. Hope Stewart -------------------------------------- (SEAL) Title: Lending Office First American National Bank First American Center Fourth & Union Street, 3rd Floor Nashville, Tennessee 37238-0310 Attention: Hope Stewart Telecopy number: (615) 748-6072 Telephone number: (615) 748-6099 66 70 $12,500,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY By: /s/ Kazuo Iida -------------------------------------- (SEAL) Title: Lending Office The Industrial Bank of Japan, Limited, Atlanta Agency 191 Peachtree Street, N.E., Suite 3600 Atlanta, Georgia 30303-1757 Attention: William D. LaDuca Telecopy number: (404) 524-8509 Telephone number: (404) 420-3329 67 71 $12,500,000 THE SANWA BANK LIMITED By: /s/ P. Bartlett Wu -------------------------------------- (SEAL) Title: Lending Office The Sanwa Bank Limited Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attention: Renko Hara Telecopy number: (212) 754-2368 Telephone number: (212) 339-6390 with a copy to: The Sanwa Bank Limited Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attention: P. Bartlett Wu Telecopy number: (212) 754-1304 Telephone number: (212) 339-6251 68 72 $10,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD. By: /s/ Gary England -------------------------------------- (SEAL) Title: Lending Office The Bank of Tokyo-Mitsubishi, Ltd. 133 Peachtree Street, Suite 4970 Atlanta, Georgia 30303 Attention: Gary England Telecopy number: (404) 577-1155 Telephone number: (404) 577-2960 69 73 $10,000,000 COLUMBUS BANK AND TRUST COMPANY By: /s/ Philip A. Badcock, Jr. -------------------------------------- (SEAL) Title: Lending Office Columbus Bank and Trust Company 1148 Broadway Columbus, Georgia 31901 Attention: Philip A. Badcock, Jr. Telecopy number: (706) 649-6988 Telephone number: (706) 649-6989 70 74 $10,000,000 HIBERNIA NATIONAL BANK By: /s/ Kristie Peychaud -------------------------------------- (SEAL) Title: Lending Office Hibernia National Bank 313 Carondelet Street New Orleans, LA 70131 Attention: Kristie Peychaud Telecopy number: (504) 533-5344 Telephone number: (504) 533-2546 - ---------------------- TOTAL COMMITMENTS: $275,000,000 71 EX-10.3 8 $75,000,000 TERM LOAN CREDIT AGREEMENT 1 EXHIBIT 10.3 $75,000,000 TERM LOAN CREDIT AGREEMENT dated as of February 25, 1999 among CARMIKE CINEMAS, INC., The Lenders Listed Herein WACHOVIA BANK, N.A., as Administrative Agent, GOLDMAN SACHS CREDIT PARTNERS L.P, as Syndication Agent, and FIRST UNION NATIONAL BANK, as Documentation Agent 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS...................................................................................1 Section I.1. Definitions...............................................................................1 Section I.2. Accounting Terms and Determinations......................................................20 Section I.3. Use of Defined Terms.....................................................................20 Section I.4. Terminology..............................................................................20 Section I.5. References...............................................................................20 ARTICLE II THE CREDITS..................................................................................20 Section II.1. Commitments to Make Loans................................................................20 Section II.2. Method of Borrowing Loans................................................................21 Section II.3. Notes....................................................................................22 Section II.4. Maturity of Loans........................................................................23 Section II.5. Interest Rates...........................................................................23 Section II.6. Fees.....................................................................................25 Section II.7. Prepayment Premium.......................................................................26 Section II.8. Termination of Commitments...............................................................26 Section II.9. Optional Prepayments.....................................................................26 Section II.10. Mandatory Prepayments....................................................................26 Section II.11. General Provisions as to Payments........................................................27 Section II.12. Computation of Interest and Fees.........................................................29 ARTICLE III CONDITIONS TO BORROWINGS.....................................................................29 Section III.1. Conditions Precedent to Effectiveness....................................................29 ARTICLE IV REPRESENTATIONS AND WARRANTIES...............................................................31 Section IV.1. Corporate Existence and Power............................................................31 Section IV.2. Corporate and Governmental Authorization; No Contravention...............................31 Section IV.3. Binding Effect...........................................................................31 Section IV.4. Financial Information....................................................................31 Section IV.5. Litigation...............................................................................32 Section IV.6. Compliance with ERISA....................................................................32 Section IV.7. Taxes....................................................................................32 Section IV.8. Subsidiaries.............................................................................32 Section IV.9. Not an Investment Company................................................................32 Section IV.10. Public Utility Holding Company Act.......................................................33 Section IV.11. Ownership of Property; Liens.............................................................33 Section IV.12. No Default...............................................................................33 Section IV.13. Full Disclosure..........................................................................33 Section IV.14. Environmental Matters...................................................................33 Section IV.15. Compliance with Laws.....................................................................34 Section IV.16. Capital Stock............................................................................34 Section IV.17. Margin Stock.............................................................................34 Section IV.18. Insolvency...............................................................................34 ARTICLE V COVENANTS....................................................................................34 Section V.1. Information..............................................................................34 Section V.2. Inspection of Property, Books and Records................................................36 Section V.3 Ratio of Consolidated Senior Funded Debt to Consolidated Cash Flow.......................36 Section V.4. Ratio of Consolidated Funded Debt to Consolidated Cash Flow..............................36 Section V.5. Restricted Payments......................................................................37 Section V.6. Fixed Charge Coverage....................................................................37 Section V.7. Adjusted Fixed Charge Coverage...........................................................37 Section V.8. Negative Pledge..........................................................................37 Section V.9. Maintenance of Existence.................................................................38 Section V.10. Dissolution..............................................................................39 Section V.11. Consolidations, Mergers and Sales of Assets..............................................39 Section V.12. Use of Proceeds..........................................................................39 Section V.13. Compliance with Laws; Payment of Taxes...................................................39
3 Section V.14. Insurance................................................................................40 Section V.15. Change in Fiscal Year....................................................................40 Section V.16. Maintenance of Property..................................................................40 Section V.17. Environmental Notices....................................................................40 Section V.18. Environmental Matters....................................................................40 Section V.19. Environmental Release....................................................................40 Section V.20. Additional Covenants, Etc................................................................40 Section V.21. Investments..............................................................................42 Section V.22. Guaranty of Subsidiaries.................................................................42 Section V.23. Limitation on Consolidated Funded Debt...................................................42 Section V.24. Subordinated Debt........................................................................43 ARTICLE VI DEFAULTS....................................................................................43 Section VI.1. Events of Default........................................................................43 Section VI.2. Notice of Default........................................................................45 ARTICLE VII THE AGENT ..................................................................................46 Section VII.1. Appointment, Powers and Immunities.......................................................46 Section VII.2. Reliance by Administrative Agent.........................................................46 Section VII.3. Defaults.................................................................................47 Section VII.4. Rights of Administrative Agent and Its Affiliates as a Lender............................47 Section VII.5. Indemnification..........................................................................47 Section VII.6. CONSEQUENTIAL DAMAGES....................................................................48 Section VII.7. Payee of Note Treated as Owner...........................................................48 Section VII.8. Non-Reliance on Administrative Agent and Other Lenders...................................48 Section VII.9 Failure to Act...........................................................................48 Section VII.10. Resignation or Removal of Administrative Agent..........................................49 ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION.......................................................49 Section VIII.1. Basis for Determining Interest Rate Inadequate or Unfair................................49 Section VIII.2. Illegality..............................................................................49 Section VIII.3. Increased Cost and Reduced Return.......................................................50 Section VIII.4. Base Rate Loans Substituted for Euro-Dollar Loans.......................................51 Section VIII.5. Compensation............................................................................52 Section VIII.6. Replacement of Lender...................................................................52 ARTICLE IX MISCELLANEOUS...............................................................................53 Section IX.1. Notices..................................................................................53 Section IX.2. No Waivers...............................................................................53 Section IX.3. Expenses; Documentary Taxes; Indemnification.............................................53 Section IX.4. Setoffs; Sharing of Set-Offs.............................................................54 Section IX.5. Amendments and Waivers...................................................................55 Section IX.6. Margin Stock Collateral..................................................................56 Section IX.7. Successors and Assigns...................................................................56 Section IX.8. Confidentiality..........................................................................58 Section IX.9. Representation by Lenders................................................................59 Section IX.10. Obligations Several......................................................................59 Section IX.11. Survival of Certain Obligations..........................................................59 Section IX.12. New York Law.............................................................................59 Section IX.13. Severability.............................................................................59 Section IX.14. Interest.................................................................................59 Section IX.15. Interpretation...........................................................................59 Section IX.16. Consent to Jurisdiction..................................................................60 Section IX.17. EDGAR Filing.............................................................................60 Section IX.18. Counterparts.............................................................................60
4 TERM LOAN CREDIT AGREEMENT TERM LOAN CREDIT AGREEMENT dated as of February 25, 1999, among CARMIKE CINEMAS, INC., a Delaware corporation, the LENDERS listed on the signature pages hereof, WACHOVIA BANK, N.A., as Administrative Agent, GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication Agent and FIRST UNION NATIONAL BANK, as Documentation Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS Section I. 1. Definitions. The terms as defined in this Section 1.01 shall, for all purposes of this Agreement and any amendment hereto (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: "Adjusted Cash Flow" means, for any period, Consolidated Operating Income for such period, plus, to the extent deducted in determining the amount thereof, (i) Rental Obligations (less any principal portion of any Off-Balance Sheet Lease), (ii) depreciation and amortization, and (iii) any aggregate net income during such period arising from the sale, exchange or other distribution of capital assets, provided that the total amount so included pursuant to this clause (iii) shall not exceed 5% of Consolidated Operating Income for such period, provided further, however, that, in calculating Adjusted Cash Flow for any such period, any acquisition or disposition of assets that shall have occurred during such period will be deemed to have occurred at the beginning of such period; and (iv) with respect to any Off-Balance Sheet Property which was acquired or ground-leased by any entity acting in the capacity of landlord (or in any functionally similar capacity to a landlord) under any Off-Balance Sheet Lease within the 12-month period ending on the date of determination of Consolidated Cash Flow, Adjusted Cash Flow shall include Theatre-Level EBITDA for such Off-Balance Sheet Property and shall be determined with respect to such Off-Balance Sheet Property on the basis of actual Theatre-Level EBITDA within such period and projected Theatre-Level EBITDA for the remainder of such period (with such projections being based on the average Theatre-Level EBITDA of comparable theater properties of the Borrower which were operated during the entire 12-month period). "Adjusted Fixed Charges" means, for any period, without duplication, the sum for such period of (i) Fixed Charges, plus (ii) all dividends paid by the Borrower, plus (iii) the aggregate amount paid, or required to be paid, in cash by the Borrower and its Subsidiaries in respect of income taxes (including deferred taxes), plus (iv) all scheduled payments of principal made by the Borrower or any Subsidiary with respect to Consolidated Funded Debt (excluding principal payments on the Senior Notes and payments on the Loans hereunder). "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.05(c). "Administrative Agent" means Wachovia Bank, N.A., a national banking 5 association organized under the laws of the United States of America, in its capacity as administrative agent for the Lenders hereunder, and its successors and permitted assigns in such capacity. "Administrative Agent's Letter Agreement" means the letter agreement dated January 12, 1999, between the Borrower and the Administrative Agent relating to the structure of the Loans, and certain fees payable by the Borrower to the Administrative Agent, together with all amendments and modifications thereto. "Affiliate" of any Person means (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, 20% or more of the common stock or equivalent equity interests. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agents" means the Administrative Agent, the Documentation Agent, and the Syndication Agent. "Agreement" means this Term Loan Credit Agreement, together with all amendments and supplements hereto. "Anniversary Date" means the date one year after the Effective Date. "Applicable Margin" has the meaning set forth in Section 2.05(a). "Assignee" has the meaning set forth in Section 9.07(c). "Assignment and Acceptance" means an Assignment and Acceptance executed in accordance with Section 9.07(c) substantially in the form attached hereto as Exhibit B. "Authority" has the meaning set forth in Section 8.02. "Base Rate" means for any Base Rate Loan for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate, and (ii) one-half of one percent above the Federal Funds Rate for such day. For purposes of determining the Base Rate for any day, changes in the Prime Rate and the Federal Funds Rate shall be effective on the date of each such change. "Base Rate Loan" means a Loan which bears or is to bear interest at a rate based upon the Base Rate. "Board of Directors" means the Board of Directors of the Borrower or a duly authorized committee of directors lawfully exercising the relevant powers of such Board. "Borrower" means Carmike Cinemas, Inc., a Delaware corporation, and its successors and permitted assigns. 2 6 "Borrowing" means a borrowing hereunder consisting of Loans made to the Borrower at the same time by the Lenders pursuant to Article II. A Borrowing is a "Base Rate Borrowing" if such Loans are Base Rate Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans. "Capital Lease" as applied to any Person, means any lease of any property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person, other than, in the case of the Borrower or a Subsidiary, any such lease under which the Borrower or a Wholly-owned Subsidiary is the lessor. "Capital Lease Obligation" with respect to any Capital Lease, means the amount of the obligation of the lessee thereunder which would, in accordance with GAAP, appear on a balance sheet of such lessee (or the notes thereto) in respect of such Capital Lease. "Capital Stock" means any capital stock (other than capital stock which is either (i) mandatorily redeemable or (ii) redeemable at the option of the holder thereof) of the Borrower or any Subsidiary (to the extent issued to a Person other than the Borrower), whether common or preferred. "Cash" means money, currency or a credit balance in a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "Cash Equivalents" means, as at any date of determination: (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of acquisition thereof, the highest rating obtainable from either S&P or Moody's; (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States or any state thereof or the District of Columbia that (1) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (2) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; (v) shares of any money market mutual fund that (1) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (i), (ii) and (iii) above, (2) has net assets of not less than $500,000,000 and (3) has the highest rating obtainable from either S&P or Moody's. "CERCLA" means the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. ss.9601 et seq. and its implementing regulations and amendments. "CERCLIS" means the Comprehensive Environmental Response Compensation 3 7 and Liability Information System established pursuant to CERCLA. "Change of Law" shall have the meaning set forth in Section 8.02. "Closing Certificate" has the meaning set forth in Section 3.01(e). "Code" means the Internal Revenue Code of 1986, as amended, or any successor Federal tax code. Any reference to any provision of the Code shall also be deemed to be a reference to any successor provision or provisions thereof. "Coke Advance" means an advance in the amount of $10,000,000 made by The Coca Cola Company on certain advertising, promotional and incentive fees anticipated to be earned by the Borrower pursuant to the Amended and Restated Agreement between them dated December 20, 1998. "Collateral" means the property of the Borrower and EastWynn, respectively, in which the Collateral Agent, for the ratable benefit of the Secured Parties, is granted a security interest pursuant to the Security Agreement and the Pledge Agreement, to secure the Secured Obligations, for the ratable benefit of the Secured Parties. "Collateral Agent" means Wachovia Bank, N.A., in its capacity as collateral agent under the Collateral Documents. "Collateral Documents" means the Intercreditor Agreement, the Pledge Agreement, the Security Agreement and such financing statements as the Collateral Agent may require to perfect its security interest in the Collateral. "Commitment" means, with respect to each Lender, (i) the amount set forth opposite the name of such Lender on the signature pages hereof, or (ii) as to any Lender which enters into an Assignment and Acceptance (whether as transferor Lender or as Assignee thereunder), the amount of such Lender's Commitment after giving effect to such Assignment and Acceptance. "Compliance Certificate" has the meaning set forth in Section 5.01(c). "Consolidated Cash Flow" means, for any period, the sum of Consolidated Operating Income of the Borrower, and its Subsidiaries, plus to the extent deducted in determining such Consolidated Operating Income (i) depreciation and amortization, and (ii) any aggregate net income during such period arising from the sale, exchange or other distribution of capital assets, provided, however, that the total amount so included pursuant to this clause (ii) shall not exceed 5% of Consolidated Operating Income for such period, provided further, however, that, in calculating Consolidated Cash Flow for any such period, any acquisition or disposition of assets that shall have occurred during such period will be deemed to have occurred at the beginning of such period; provided further, however, that (x) for purposes of determining the ratio of Consolidated Funded Debt to Consolidated Cash Flow and the ratio of Consolidated Senior Funded Debt to Consolidated Cash Flow, all Off-Balance Sheet Lease Payments made during the relevant period which has been deducted in computing Consolidated Net Income shall be added back in computing Consolidated Cash Flow and (y) with respect to any Off-Balance 4 8 Sheet Property which was acquired or ground-leased by any entity acting in the capacity of landlord (or in any functionally similar capacity to a landlord) under any Off-Balance Sheet Lease within the 12-month period ending on the date of determination of Consolidated Cash Flow, Consolidated Cash Flow shall include Theatre-Level EBITDA for such Off-Balance Sheet Property and shall be determined with respect to such Off-Balance Sheet Property on the basis of actual Theatre-Level EBITDA within such period and projected Theatre-Level EBITDA for the remainder of such period (with such projections being based on the average Theatre-Level EBITDA of comparable theater properties of the Borrower which were operated during the entire 12-month period). "Consolidated Current Assets" means, as at any date of determination, the total assets of the Borrower and its Consolidated Subsidiaries on a consolidated basis which may properly be classified as current assets in conformity with GAAP, excluding Cash and Cash Equivalents. "Consolidated Current Liabilities" means, at any date of determination, the total liabilities of the Borrower and its Consolidated Subsidiaries on a consolidated basis which may properly be classified as current liabilities in conformity with GAAP (but excluding current maturities of long-term debt of the Borrower and its Consolidated Subsidiaries determined in accordance with GAAP). "Consolidated Funded Debt" means at any date the Funded Debt of the Borrower and its Subsidiaries, determined on a consolidated basis as of such date. "Consolidated Net Income" means for any period, the net income (or deficit) of the Borrower and its Subsidiaries for such period in question (taken as a cumulative whole) after deducting, without duplication, all operating expenses, provisions for all taxes and reserves (including reserves for deferred income taxes) and all other proper deductions, all determined in accordance with GAAP on a consolidated basis, after eliminating material inter-company items in accordance with GAAP and after deducting portions of income properly attributable to outside minority interests, if any, in Subsidiaries; provided however, that there shall be excluded (a) any income or deficit of any other Person accrued prior to the date it becomes a Subsidiary or merges into or consolidates with the Borrower or another Subsidiary, (b) the net income in excess of an amount equal to 5% of Consolidated Net Income for such period before giving effect to this clause (b) (or deficit) of any Person (other than a Subsidiary) in which the Borrower or any Subsidiary has any ownership interest, except to the extent that any such income has been actually received by the Borrower or such Subsidiary in the form of cash dividends or similar distributions, and provided that the resulting income is generated by lines of businesses substantially similar to those of the Borrower and its Subsidiaries taken as a whole during the fiscal year ended December 31, 1998, (c) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period, (d) any deferred credit or amortization thereof from the acquisition of any properties or assets of any Person, (e) any aggregate net income (but not any aggregate net loss) during such period arising from the sale, exchange or other distribution of capital assets (such term to include all fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities) to the extent the aggregate gains from such transactions exceed losses from such transactions, (f) any impact on the income statement resulting from any write-up of any assets after the Effective Date, (g) any items properly 5 9 classified as extraordinary in accordance with GAAP, (h) proceeds of life insurance policies to the extent such proceeds exceed premiums paid to maintain such life insurance policies, (i) any portion of the net income of a Subsidiary which is unavailable for the payment of dividends to the Borrower or a Subsidiary, (j) any gain arising from the acquisition of any debt securities for a cost less than principal and accrued interest, (k) in the case of a successor to the Borrower by permitted consolidation or merger or transfer of assets pursuant to Section 5.12, any earnings, of such successor or transferee prior to the consolidation, merger or transfer of assets, (1) any earnings on any Investments of the Borrower or any Subsidiary except to the extent that such earnings are received by the Borrower or such Subsidiary as cash, provided that earnings which would otherwise be excluded from Consolidated Net Income pursuant to the preceding provisions of this clause (1) shall be included in Consolidated Net Income but only to the extent that such earnings are attributable to the net income of any Person (other than a Subsidiary) in which the Borrower or any Subsidiary has any ownership interest and such net income is not otherwise excluded from Consolidated Net Income by virtue of clause (b) of this definition and (m) the Restructuring and Impairment Charges for 1998. "Consolidated Net Worth" means as of any date of determination (a) the sum of (i) the net book value (after deducting related depreciation, obsolescence, amortization, valuation and other proper reserves other than any such reserve maintained in accordance with GAAP in connection with the use of the last-in-first-out method of inventory valuation) at which the assets of the Borrower and its Subsidiaries would be shown on a consolidated balance sheet at such date prepared in accordance with GAAP, but excluding any amount on account of write-ups of assets after the date of the most recent audited financial statements delivered pursuant to Section 5.01, and (ii) the net book value of all Off-Balance Sheet Property minus (b) the amount at which the consolidated liabilities of the Borrower and its Subsidiaries (other than capital stock and surplus) would be shown on such balance sheet, and including as liabilities all reserves for contingencies and other potential liabilities and all minority interests in Subsidiaries. "Consolidated Operating Income" means, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining the amount thereof, (i) the aggregate amount paid, or required to be paid, in cash by the Borrower and its Subsidiaries in respect of income taxes (including deferred taxes) during such period plus (ii) Interest Expense. "Consolidated Senior Funded Debt" means at any date the sum of: (i) Consolidated Funded Debt, minus (ii) the Subordinated Debt. "Consolidated Total Capitalization" means, at any time, the sum of: (i) Consolidated Net Worth, and (ii) Consolidated Funded Debt. "Consolidated Working Capital" means, as at any date of determination, the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Consolidated Working Capital Adjustment" means, for any period on a consolidated basis, the amount (which may be a negative number) by which Consolidated Working Capital as of the beginning of such period exceeds (or is less than) Consolidated Working Capital as of the end of such period. "Contribution Agreement" means the Contribution Agreement of even date herewith in substantially the form of Exhibit I to be executed by the Borrower and by the 6 10 Guarantors which are Subsidiaries on the Effective Date and by each of the Guarantors which becomes a Subsidiary after the Effective Date pursuant to Section 5.22(a). "Control" means legal and beneficial ownership of that percentage of Voting Stock which enables the owner thereof to elect a majority of the corporate directors (or persons performing similar functions) of the Borrower. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. "Current Debt" means as at any date of determination all Debt for borrowed money maturing or payable on demand or within one year from the date of the creation thereof including any Debt that is by its terms or by the terms of any instrument or agreement relating thereto directly or indirectly renewable or extendible, at the option of the debtor, to a date beyond such year, including any outstanding amounts of any revolving credit facility, but excluding any fixed or contingent payments maturing or required to be made not more than one year after such date in respect of the principal and premium, if any, on any Funded Debt. Any Debt that is extended or renewed shall be deemed to have been created at the date of such extension or renewal. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under Capital Leases, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker's acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations (absolute or contingent) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such Person. In determining the Debt and assets of any Person, no effect shall be given to deposits, trust arrangements or similar arrangements which, in accordance with GAAP, extinguish Debt for which such Person remains legally liable, except Debt shall not include the promissory note of the Borrower in a principal amount not to exceed $3,622,974 and bearing interest at the rate of 10.083% per annum payable to Columbus Bank and Trust Company, and any extensions and renewals thereof, provided the proceeds of such promissory note are used to pay the full purchase price of a certificate of deposit (the "IRB Certificate of Deposit"), such promissory note (and any such extension or renewal thereof) is secured by the pledge of such IRB Certificate of Deposit issued by Columbus Bank and Trust Company in an amount and bearing interest at a rate sufficient to pay all obligations under such promissory note, such promissory note is nonrecourse to the Borrower or to any Subsidiary except to such IRB Certificate of Deposit and the obligation under such promissory note is not, in accordance with GAAP, to be classified on its balance sheet as debt. "Debt Rating" means the rating of the Subordinated Debt by Moody's and S&P. 7 11 "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived in writing, become an Event of Default. "Default Rate" means, with respect to any Loan, on any day, the sum of 2% plus the then highest interest rate (including the Applicable Margin) which may be applicable to any Loans hereunder (irrespective of whether any such type of Loans are actually outstanding hereunder). "Dividends" means for any period the sum of all dividends paid or declared during such period in respect of any Capital Stock and Redeemable Preferred Stock (other than dividends paid or payable in the form of additional Capital Stock). "Documentation Agent" means First Union National Bank, , a national banking association organized under the laws of the United States of America, in its capacity as documentation agent for the Lenders hereunder, and its successors and permitted assigns in such capacity. "Dollars" or "$" means dollars in lawful currency of the United States of America. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Georgia are authorized or required by law to close. "EastWynn" means EastWynn Theaters, Inc., an Alabama corporation, and its successors. "EastWynn Guaranty Obligations" means the obligations of EastWynn under (i) the Guaranty, (ii) the "Guaranty", as defined in the Lease, and (iii) the "Guaranty", as defined in the Revolver Credit Agreement. "Effective Date" has the meaning specified in Section 3.01. "Environmental Authority" means any federal, state or local government that exercises any form of jurisdiction or authority under any Environmental Law. "Environmental Authorizations" means all licenses, permits, orders, approvals, notices, registrations or other legal prerequisites for conducting the business of the Borrower or any Subsidiary required by any Environmental Law. "Environmental Judgments and Orders" means all judgments, decrees or orders arising from or in any way associated with any Environmental Laws, whether or not entered upon consent, or written agreements with an Environmental Authority arising from or in any way associated with a noncompliance with, or liability or claim arising under, any Environmental Law. "Environmental Laws" means any and all federal, state and local statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, licenses or other governmental restrictions relating to the environment or to emissions, discharges or releases of 8 12 pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes into the environment, including, without limitation, ambient air, surface water, groundwater or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof. "Environmental Liability" shall mean any liability whatsoever, whenever and by whomever asserted (whether absolute or contingent, matured or unmatured) including, without limitation, any cost (including costs of investigation), damage (including without limitation, damages for personal injury or death, consequential damages and natural resource damages), penalty, fine or order, expense, fee (including reasonable attorneys' fees and consulting fees), or disbursement resulting from or related to a violation of any Environmental Law or any remedial or response obligation arising under any Environmental Law, or otherwise arising contractually with any party or entity or by operation of any law relating to any Hazardous Material for which the Borrower is responsible. "Environmental Notices" means notice from any Environmental Authority of an alleged noncompliance with or liability under any Environmental Law, including without limitation any complaints, citations, demands or requests from any Environmental Authority or from any other person or entity for correction of any violation of any Environmental Law or any investigations concerning any violation of any Environmental Law. "Environmental Proceedings" means any judicial or administrative proceedings arising from any Environmental Law. "Environmental Releases" means releases as defined in CERCLA or under any applicable state or local environmental law or regulation. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Euro-Dollar Business Day" means any Domestic Business Day on which dealings in Dollar deposits are carried out in the London interbank market. "Euro-Dollar Loan" means a Loan which bears or is to bear interest at a rate based upon the London Interbank Offered Rate. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.05(c). "Event of Default" has the meaning set forth in Section 6.01. "Excess Cash Flow" means, without duplication, for any Fiscal Year, the sum for such Fiscal Year of: (a) Adjusted Cash Flow (excluding, however, any amount described in clause (iv) of the definition thereof), minus (b) capital expenditures, minus (c) Rental Obligations, minus (d) Interest Expense, minus (e) all principal paid by the Borrower or any Subsidiary with respect to Consolidated Funded Debt, minus (f) any positive Working Capital 9 13 Adjustment, plus (g) any negative Working Capital Adjustment and minus (h) all income taxes actually paid in cash. "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 Domestic Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic 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 Wachovia on such day on such transactions as determined by the Administrative Agent. "Financing" shall mean (i) any transaction or series of transactions for the incurrence by the Borrower of any Debt or for the establishment of a commitment to make advances which would constitute Debt of the Borrower, which Debt is not by its terms subordinate and junior to other Debt of the Borrower, (ii) an obligation incurred in a transaction or series of transactions in which assets of the Borrower are sold and leased back, or (iii) a sale of accounts or other receivables or any interest therein, other than a sale or transfer of accounts or receivables attendant to a sale permitted hereunder of an operating division; provided that Capital Leases and Capital Lease Obligations shall be excluded from this definition. "Fiscal Quarter" means any fiscal quarter of the Borrower. "Fiscal Year" means any fiscal year of the Borrower. "Fixed Charges" for any period, means without duplication, the sum of (i) the aggregate amount of Interest Expense during such period plus (ii) the aggregate amount of Rental Obligations (less any principal portion of any Off-Balance Sheet Lease) for such period. "Funded Debt" of any Person means (i) all Debt of such Person which in accordance with GAAP would be classified on a balance sheet of such Person as of such date as long-term debt, and including in any event all Debt of such Person, whether secured or unsecured, having a final maturity (or which, pursuant to its terms, is renewable or extendible at the option of such Person for a period ending) more than one year after the date of the creation thereof (including any portion thereof which is on such date included in current liabilities of such Person) plus (ii) all Current Debt of such Person; it being understood and agreed that, with respect to the Borrower, the term "Funded Debt" shall include, in addition to all Debt which would otherwise be included pursuant to the foregoing definition, but without duplication, (x) all Unescrowed Off-Balance Sheet Lease Indebtedness, (y) the Off-Balance Sheet Lease Equity Amounts and (z) the Subordinated Debt, but with respect to the Borrower, the term "Funded Debt" shall not include the Coke Advance. "GAAP" means generally accepted accounting principles applied on a basis consistent with those which, in accordance with Section 1.02, are to be used in making the calculations for purposes of determining compliance with the terms of this Agreement. 10 14 "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Guarantors" means each Person which is a Subsidiary as of the Effective Date and any Person which becomes a Subsidiary after the Effective Date. "Guaranty" means the Guaranty Agreement of even date herewith in substantially the form of Exhibit H to be executed by the Guarantors which are Subsidiaries on the Effective Date and by each Person which becomes a Subsidiary after the Effective Date pursuant to Section 5.22(a), for the benefit of the Administrative Agent and the Lenders. "Hazardous Materials" includes, without limitation, (a) solid or hazardous waste, as defined in the Resource Conservation and Recovery Act of 1980, 42 U.S.C. ss.6901 et seq. and its implementing regulations and amendments, or in any applicable state or local law or regulation, (b) any "hazardous substance", "pollutant" or "contaminant", as defined in CERCLA, or in any applicable state or local law or regulation, (c) gasoline, or any other petroleum product or by-product, including crude oil or any fraction thereof, (d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or in any applicable state or local law or regulation and (e) insecticides, fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable state or local law or regulation, as each such Act, statute or regulation may be amended from time to time. "Installment Payment Date" means each March 31, June 30, September 30 and December 31. "Interest Expense" for any period, means the aggregate amount (determined in accordance with GAAP on a consolidated basis after eliminating all intercompany items) of all interest accrued (whether or not actually paid) by the Borrower and its Subsidiaries during such period in respect of Debt of the Borrower and its Subsidiaries (including Capital Lease Obligations), provided that the term "Interest Expense" shall (i) include, without limitation, net amounts paid or accrued during such period in connection with interest rate protection products (including, without limitation, interest rate swaps, caps, floors and collars), amortized (if appropriate under GAAP) appropriately over the term of the applicable Debt, any amortized discount in respect of Debt issued at a discount and any fees or commissions payable in connection with any letters of credit, the portion of any Capital Lease Obligation allocable to interest in accordance with GAAP, the amount of interest costs incurred by any Person during any period that is capitalized in accordance with GAAP and is not included as an interest cost in calculating Consolidated Net Income for such period, and (ii) shall exclude all costs associated 11 15 with the prepayment of fixed-rate debt. "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the first, second, third or sixth month thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (1) any Interest Period (subject to clause (c) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (2) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of the appropriate subsequent calendar month; and (3) no Interest Period may be selected which would end after the Maturity Date. (2) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending on the first day after the date of such Borrowing which is the last day of a Fiscal Quarter; provided that: (1) any Interest Period (subject to clause (b) below) which would otherwise end on a day which is not a Domestic Business Day shall be extended to the next succeeding Domestic Business Day; and (2) no Interest Period may end after the Maturity Date. "Interest Rate Protection Agreement" means an interest rate hedging or protection agreement entered into by and between the Borrower and a Lender or a Revolver Bank, or an Affiliate of either, together with all exhibits, schedules, extensions, renewals, amendments, substitutions and replacements thereto and thereof. "Intercreditor Agreement" means an intercreditor agreement acceptable to the Collateral Agent and the Secured Parties, setting forth, among other things, the appointment of the Collateral Agent and its rights, duties and obligations, indemnification provisions for the Collateral Agent, provisions for the administration and sharing of the Collateral, for the giving of certain notices, as to voting rights and as to enforcement actions with respect to the Collateral, as it may hereafter be amended or supplemented from time to time. "Investment" means any investment in any Person, whether by means of purchase or acquisition of assets, Debt or securities of such Person, capital contribution to such Person, loan or advance to such Person, making of a time deposit with such Person, Guarantee or assumption of any Debt of such Person or otherwise; excluding, however, the acquisition of (i) "Leased Property", as defined in the Lease, (ii) leases and/or real property acquired by the Borrower or any of its Subsidiaries for the purpose of developing movie theatres and (iii) 12 16 equipment or inventory in the ordinary course of business. "LC Agent" means the "Agent", as that term is defined in the Reimbursement Agreement. "LC Lenders" means the "Lenders", as that term is defined in the Reimbursement Agreement. "Lease" means the Amended and Restated Master Lease dated January 29, 1999 between Movieplex Realty Leasing, L.L.C., as Landlord, and the Borrower, as Tenant, as it may hereafter be amended or supplemented from time to time. "Lender" means each bank or financial institution listed on the signature pages hereof as having a Commitment, and its successors and assigns. "Lending Office" means, as to each Lender, its office located at its address set forth on the signature pages hereof (or identified on the signature pages hereof as its Lending Office) or such other office as such Lender may hereafter designate as its Lending Office by notice to the Borrower and the Administrative Agent. "Lien" means, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement which has the practical effect of constituting a security interest or encumbrance, servitude or encumbrance of any kind in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. "Loan" means a Base Rate Loan or a Euro-Dollar Loan and Loans means Base Rate Loans or Euro-Dollar Loans, or any or all of them, as the context shall require. "Loan Documents" means this Agreement, the Notes, the Guaranty, the Contribution Agreement, the Collateral Documents, any other document evidencing, relating to or securing the Loans, and any other document or instrument delivered from time to time in connection with this Agreement, the Notes, the Guaranty, the Contribution Agreement, the Collateral Documents or the Loans, as such documents and instruments may be amended or supplemented from time to time. "London Interbank Offered Rate" has the meaning set forth in Section 2.05(c). "Maintenance Capital Expenditures" means expenditures of the Borrower and its Subsidiaries which are (i) capitalized on the books of the Borrower and its Subsidiaries in accordance with GAAP and (ii) incurred for the purpose of maintaining existing Properties (but not for major renovations of or new improvements to existing Properties or acquisition of new Properties). 13 17 "Margin Stock" means "margin stock" as defined in Regulation T, U or X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. "Material Adverse Effect" means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the financial condition, operations, business, properties or prospects of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or the Lenders under the Loan Documents, or the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, as applicable, or (c) the legality, validity or enforceability of any Loan Document. "Maturity Date" means March 30, 2005. "Moody's" means Moody's Investor Service, Inc. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means, in each case as set forth in a statement in reasonable detail delivered by the respective Borrower to the Administrative Agent: (i) with respect to the disposition of assets (including in connection with sale/leaseback transactions, but excluding sales of inventory in the ordinary course of business) by any Borrower or Subsidiary, the excess, if any, of (1) the cash proceeds received in connection with such disposition over (2) the sum of (A) the principal amount of any Debt (other than payments on the Secured Obligations required by Section 2.10) which is secured by such asset and which is required to be repaid in connection with the disposition thereof, plus (B) the reasonable out-of-pocket expenses incurred by such Borrower or such Subsidiary, as the case may be, in connection with such disposition, plus (C) so long as no Event of Default is in existence, provision for taxes, including income taxes, attributable to the disposition of such asset, less (D) cash proceeds in an amount equal to an aggregate of $3,000,000 from all such dispositions of assets in the Fiscal Year in which the relevant disposition of assets occurs; (ii) with respect to any cash proceeds received by any Borrower or a Subsidiary from the issuance of any Capital Stock (other than cash proceeds received by a Subsidiary from the sale of Capital Stock to the Borrower or to another Subsidiary or received in connection with any sale under the Borrower's stock option plans for the benefit of officers, employees and directors or used to pay the repurchase price of stock held by any of them pursuant to any such plans), all such cash proceeds, after deducting therefrom all reasonable and customary costs and expenses incurred by such Borrower or Subsidiary directly in connection with the issuance of such Capital Stock; (iii) with respect to any cash proceeds received in respect of the incurrence of the 14 18 Subordinated Debt (other than the $200,000,000 in Subordinated Debt described in Section 5.25(b)), all such cash proceeds; and (iv) with respect to any proceeds or awards from any casualty to or condemnation of any of the Properties, the excess, if any, of (1) the cash proceeds received in connection with such casualty or condemnation award over (2) the sum of (A) the principal amount of any Debt (other than payments on the Secured Obligations required by Section 2.10) which is secured by such Property and which is required to be repaid in connection with the disposition thereof, plus (B) the reasonable out-of-pocket expenses incurred by such Borrower or such Subsidiary, as the case may be, in connection with the collection of such proceeds, less (C) the amount which the Borrower estimates it will expend to restore or replace such Property; less (D) cash proceeds in an amount equal to an aggregate of $1,000,000 from all such casualties and condemnation awards in the Fiscal Year in which the relevant casualty or condemnation award occurs. "Notes" means the term promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, together with all amendments, consolidations, modifications, renewals and supplements thereto and "Note" means any one of such Notes. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Off-Balance Sheet Lease Equity Amounts" means the aggregate amount of all capital contributions made from time to time to any entity acting in the capacity of landlord (or in any functionally similar capacity to a landlord) under any Off-Balance Sheet Lease by equity holders in such entity. "Off-Balance Sheet Lease Indebtedness" means the aggregate principal amount of (and capitalized interest on) all indebtedness incurred or issued in connection with any Off-Balance Sheet Lease which is secured, supported or serviced, directly or indirectly, by any payments made by the Borrower or any Subsidiary. "Off-Balance Sheet Lease Payments" means, for any period, the aggregate amount of any rental payments or other similar payments made during such period in connection with any Off-Balance Sheet Lease. "Off-Balance Sheet Lease" means the Lease and any other lease which is treated as a lease for accounting purposes and as a financing instrument for property law and bankruptcy purposes, and in respect of which transaction any Off-Balance Sheet Lease Indebtedness is issued or incurred. "Off-Balance Sheet Property" means any property subject to an Off-Balance Sheet Lease. "Officer's Certificate" has the meaning set forth in Section 3.01(f). "Operating Lease" means a lease (including an Off-Balance Sheet Lease) of real or personal property other than, in the case of the Borrower or a Subsidiary, (a) any such lease 15 19 under which the Borrower or a Wholly-Owned Subsidiary is the lessor and (b) any Capital Lease. "Original Agreement" has the meaning set forth in the preamble. "Participant" has the meaning set forth in Section 9.07(b). "Patrick Family" means any or all of C. L. Patrick, Sr., Michael W. Patrick, Carl L. Patrick, Jr., Francis Patrick and Michael W. Patrick, II, or trusts to which one or more of the foregoing are the sole beneficiaries. "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership (including without limitation, a joint venture), an unincorporated association, a trust or any other entity or organization, including, but not limited to, a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (i) maintained by a member of the Controlled Group for employees of any member of the Controlled Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding 5 plan years made contributions. "Pledge Agreement" means a Pledge Agreement in form and substance satisfactory to the Administrative Agent and the Collateral Agent pursuant to which the Borrower pledges and grants a first priority perfected security interest in the capital stock of all Subsidiaries to the Collateral Agent, for the ratable benefit of the Secured Parties, to secure the Secured Obligations, as it may hereafter be amended or supplemented from time to time. "Preferred Stock" means, as applied to any corporation, shares of such corporation which are entitled to preference or priority over any other shares of such corporation in respect of either the payment of dividends or the distribution of assets upon liquidation. "Prime Rate" refers to that interest rate so denominated and set by Wachovia from time to time as an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases used by Wachovia. Wachovia lends at interest rates above and below the Prime Rate. "Properties" means all real property owned, leased under a ground lease or otherwise used or occupied by the Borrower or any Subsidiary, wherever located. "Rate Determination Date" has the meaning set forth in Section 2.05(a). "Redeemable Preferred Stock" of any Person means any preferred stock issued by such Person which is at any time prior to the Maturity Date either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. 16 20 "Refunding Loan" means a new Loan made on the day on which an outstanding Loan is maturing or a Base Rate Borrowing is being converted to a Euro-Dollar Borrowing, to the extent that the proceeds thereof are used entirely for the purpose of paying such maturing Loan or Loan being converted. "Reimbursement Agreement" means that certain Reimbursement Agreement dated as of November 20, 1997, among Movieplex Realty Leasing, L.L.C., the LC Agent and the LC Lenders, as amended by First Amendment to Reimbursement Agreement dated as of January 29, 1999, and as it may hereafter be amended or supplemented from time to time. "Related Fund" means, with respect to any Lender that is a fund that invests in bank loans, any other fund that invests in bank loans and is advised or managed by the same investment advisor as such Lender. "Rental Obligations" means for any period, the total amount (whether or not designated as rentals or additional or supplemental rentals) payable by the Borrower or any Subsidiary under any Operating Lease during such period (in each case exclusive of amounts so payable on account of maintenance, repairs, insurance, taxes, assessments and other similar charges); if and to the extent that the amount of any Rental Obligation during any future period is not definitely determinable under the Operating Lease in question, the amount of such Rental Obligation shall be estimated in such reasonable manner as the Board of Directors in good faith may determine. "Required Lenders" means at any time Lenders having at least 51% of the aggregate amount of the Commitments or, if the Commitments are no longer in effect, Lenders holding at least 51% of the aggregate outstanding principal amount of the Loans. "Responsible Officer" means the chief financial officer or the chief executive officer of the Borrower. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Borrower's Capital Stock or the Capital Stock of any Subsidiary which is not a Wholly-Owned Subsidiary (except (x) dividends payable solely in shares of such Capital Stock, (y) dividends payable on Capital Stock of such Subsidiaries which are payable pro rata to all of the owners of such Capital Stock, and (z) dividends payable to the Borrower or a Guarantor) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Borrower's or any such Subsidiary's Capital Stock (except shares acquired upon the conversion thereof into other shares of its Capital Stock) or (b) any option, warrant or other right to acquire shares of the Borrower's or any such Subsidiary's Capital Stock. "Restructuring and Impairment Charges for 1998" means the following charges to be taken by the Borrower for the fourth Fiscal Quarter of its 1998 fiscal year: (i) a restructuring charge in the amount of approximately $33,000,000 and (ii) impairment of asset value charge in the amount of approximately $37,000,000 to $41,000,000. "Revolver Agent" means Wachovia Bank, N.A., as Agent, under the Revolver Credit Agreement. 17 21 "Revolver Banks" means the "Banks", as defined in the Revolver Credit Agreement. "Revolver Commitments" means the Commitments of the Revolver Banks under the Revolver Credit Agreement. "Revolver Credit Agreement" means the Amended and Restated Credit Agreement among Carmike Cinemas, Inc., the banks listed therein, and Wachovia Bank, N.A. as Agent dated as of January 29, 1999. "Revolving Loan" means, collectively, the loans in the aggregate amount of up to $275,000,000, made from time to time by the Revolver Banks pursuant to the Revolver Credit Agreement. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. "Secured Obligations" means: (i) the obligations of the Borrower under (x) this Agreement, (y) the Lease and the Lessee Undertaking and (z) the Revolver Credit Agreement; (ii) the EastWynn Guaranty Obligations; and (iii) the actual (as distinguished from notional) liability of the Borrower to any Lender or Revolver Bank, or Affiliate or either, under any Interest Rate Protection Agreement with any such Lender, Revolver Bank or Affiliate. "Secured Parties" means (i) the Administrative Agent and the Lenders, and, with respect to any Interest Rate Protection with an Affiliate of a Lender, such Affiliate, (ii) the LC Agent (as assignee of the Landlord, for the ratable benefit of the LC Lenders) and the LC Lenders and (iii) the Revolver Administrative Agent and the Revolver Banks, and with respect to any Interest Rate Protection with an Affiliate of a Revolver Bank, such Affiliate. "Security Agreement" means a Security Agreement in form and substance satisfactory to the Administrative Agent and the Collateral Agent pursuant to which each of the Borrower and EastWynn grants a first priority, perfected security interest in all personal property owned by it, including, without limitation, all equipment, fixtures, accounts, chattel paper, instruments, inventory and general intangibles, to the Collateral Agent, for the ratable benefit of the Secured Parties, to secure the Secured Obligations, as it may hereafter be amended or supplemented from time to time. "Senior Notes" means, collectively, the 10.53% Senior Notes due 2005 in the outstanding principal amount of approximately $47,700,000, the 7.90% Senior Notes due 2002 in the outstanding principal amount of approximately $14,300,000 and the 7.52% Senior Notes due 2003 in the outstanding principal amount of approximately $17,900,000. "Subordinated Debt" means up to $350,000,000 in Debt of the Borrower evidenced by Subordinated Notes. "Subordinated Debt Documents" means the Subordinated Notes, the Subordinated Debt Indenture and the Subsidiary Guarantees described in the Subordinated Debt Offering Circular. 18 22 "Subordinated Debt Indenture" means the Indenture described in the Subordinated Debt Offering Circular among the Borrower, the Guarantors parties thereto described in the Subordinated Debt Offering Circular and The Bank of New York, as Trustee. "Subordinated Debt Offering Circular" means the Offering Circular dated January 27, 1999 pertaining to the issuance of $200,000,000 of Subordinated Notes and contemplating the subsequent issuance of up to an additional $150,000,000 of Subordinated Notes, pursuant to the Subordinated Debt Indenture. "Subordinated Notes" means the 9.375% Senior Subordinated Notes having a maturity not earlier than June 1, 2009 which are described in the Subordinated Debt Offering Circular (including any "Exchange Notes" issued under the Subordinated Debt Indenture) and which are subordinated in right of payment to the payment of the obligations of the Borrower under this Agreement and the Revolver Credit Agreement pursuant to the subordination provisions described in the Subordinated Debt Offering Circular. "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Borrower. "Syndication Agent" means Goldman Sachs Credit Partners L.P., a NEW YORK limited partnership, in its capacity as syndication agent for the Lenders hereunder, and its successors and permitted assigns in such capacity. "Theater-Level EBITDA" means with respect to any Off-Balance Sheet Property, operating income derived therefrom, without provision for any interest, taxes related to income, depreciation, amortization and corporate general and administrative expenses. "Third Parties" means all lessees, sublessees, licensees and other users of the Properties, excluding those users of the Properties in the ordinary course of the Borrower's business and on a temporary basis. "Transferee" has the meaning set forth in Section 9.07(d). "Unescrowed Off-Balance Sheet Lease Indebtedness" means the aggregate amount of all Off-Balance Sheet Lease Indebtedness minus the aggregate amount of any Off-Balance Sheet Lease Indebtedness being held in an escrow fund pending expenditure with respect to the property or asset being financed in connection with the Off-Balance Sheet Lease with respect to which such Off-Balance Sheet Lease Indebtedness was issued or incurred. "Voting Stock" means capital stock of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect the corporate directors (or persons performing similar functions). "Wachovia" means Wachovia Bank, N.A., a national banking association and its successors. 19 23 "Wholly-Owned Subsidiary" means any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. Section I.2. Accounting Terms and Determinations. Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders, unless with respect to any such change concurred in by the Borrower's independent public accountants or required by GAAP, in determining compliance with any of the provisions of this Agreement or any of the other Loan Documents: (i) the Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Required Lenders shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 5.01 hereof, shall mean the financial statements referred to in Section 4.04); provided that, if either the Borrower or the Required Lenders shall so object, then the Borrower and the Lenders shall negotiate in good faith to modify the relevant covenants set forth in Article V in order to appropriately reflect such changes in GAAP and, in the event such covenants are so modified, upon execution of an amendment to this Agreement effectuating such modification, the related changes in GAAP will be effective for calculation and reporting purposes under this Agreement. Section I.3. Use of Defined Terms. All terms defined in this Agreement shall have the same meanings when used in any of the other Loan Documents, unless otherwise defined therein or unless the context shall otherwise require. Section I.4. Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. Section I.5. References. Unless otherwise indicated, references in this Agreement to "Articles", "Exhibits", "Schedules", and "Sections" are references to articles, exhibits, schedules and sections hereof. ARTICLE II THE CREDITS Section II.1. Commitments to Make Loans. Each Lender severally agrees, on the terms and conditions set forth herein, to make Loans to the Borrower on or about the Effective Date in the amount of its Commitment; provided that all advances of the Loans by the Lenders 20 24 shall be made in a single funding on or about the Effective Date (when all conditions have been satisfied), in an aggregate amount not to exceed the aggregate Commitments, and thereafter, all Loans shall be made only as Refunding Loans. Each Euro-Dollar Borrowing under this Section shall be in an aggregate principal amount of $5,000,000 or any larger multiple of $1,000,000 (except that any such Euro-Dollar Borrowing may be in the amount of the Unused Commitments) and shall be made from the several Lenders ratably in proportion to their respective Commitments. Each Base Rate Borrowing under this Section shall be in an aggregate principal amount of $1,000,000 or any larger multiple of $100,000 (except that any such Base Rate Borrowing may be in the amount of the Unused Commitments) and shall be made from the several Lenders ratably in proportion to their respective Commitments. Once repaid, Borrowings may not be reborrowed pursuant hereto except as Refunding Loans. Section II.2. Method of Borrowing Loans. (1) The Borrower shall give the Administrative Agent notice in the form attached hereto as Exhibit G (a "Notice of Borrowing") prior to 11:00 A.M. (Atlanta, Georgia time) on the Domestic Business Day of each Base Rate Borrowing and at least 3 Euro-Dollar Business Days before each Euro-Dollar Borrowing, specifying: (1) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (2) the aggregate amount of such Borrowing, (3) whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, and (4) in the case of a Euro-Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. (2) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (3) Not later than 11:00 A.M. (Atlanta, Georgia time) on the date of each Euro-Dollar Borrowing, and not later than 2:00 P.M. (Atlanta, Georgia time) on the date of each Base Rate Borrowing, each Lender shall (except as provided in subSection (d) of this Section) make available its ratable share of such Borrowing, in Federal or other funds immediately available in Atlanta, Georgia, to the Administrative Agent at its address referred to in or specified pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article III has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent's aforesaid address. Unless the Administrative Agent receives notice from a Lender, at the Administrative Agent's address referred to in Section 9.01, no later than 4:00 P.M. (local time at such address) on the Domestic Business Day before the date of a Euro-Dollar Borrowing, and no later than 1:00 P.M. (local time at such address) on the Domestic Business Day of a Base Rate Borrowing, 21 25 stating that such Lender will not make a Loan in connection with such Borrowing, the Administrative Agent shall be entitled to assume that such Lender will make a Loan in connection with such Borrowing and, in reliance on such assumption, the Administrative Agent may (but shall not be obligated to) make available such Lender's ratable share of such Borrowing to the Borrower for the account of such Lender. If the Administrative Agent makes such Lender's ratable share available to the Borrower and such Lender does not in fact make its ratable share of such Borrowing available on such date, the Administrative Agent shall be entitled to recover such Lender's ratable share from such Lender or the Borrower (and for such purpose shall be entitled to charge such amount to any account of the Borrower maintained with the Administrative Agent), together with interest thereon for each day during the period from the date of such Borrowing until such sum shall be paid in full at a rate per annum equal to the rate at which the Administrative Agent determines that it obtained (or could have obtained) overnight Federal funds to cover such amount for each such day during such period, provided that any such payment by the Borrower of such Lender's ratable share and interest thereon shall be without prejudice to any rights that the Borrower may have against such Lender. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Loan included in such Borrowing for purposes of this Agreement. (4) All Loans other than the initial advance of the Loan shall be made as Refunding Loans. (5) Notwithstanding anything to the contrary contained in this Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred a Default or an Event of Default, which Default or Event of Default shall not have been cured or waived in writing. (6) In the event that a Notice of Borrowing fails to specify whether the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar Loans, such Loans shall be made as Base Rate Loans. If the Borrower is otherwise entitled under this Agreement to repay any Loans maturing at the end of an Interest Period applicable thereto with the proceeds of a new Borrowing, and the Borrower fails to repay such Loans using its own moneys and fails to give a Notice of Borrowing in connection with such new Borrowing, a new Borrowing shall be deemed to be made on the date such Loans mature in an amount equal to the principal amount of the Loans so maturing, and the Loans comprising such new Borrowing shall be Base Rate Loans. (7) Notwithstanding anything to the contrary contained herein, (i) there shall not be more than 7 different Interest Periods outstanding at the same time (for which purpose Interest Periods described in different numbered clauses of the definition of the term "Interest Period" shall be deemed to be different Interest Periods even if they are coterminous) and (ii) the proceeds of any Base Rate Borrowing shall be applied first to repay the unpaid principal amount of all Base Rate Loans (if any) outstanding immediately before such Base Rate Borrowing. Section II.3. Notes. (1) The Loans of each Lender shall be evidenced by a single Note payable to the order of such Lender for the account of its Lending Office in an amount equal to the original principal amount of such Lender's Commitment. (2) Upon receipt of each Lender's Notes pursuant to Section 3.01, the Administrative 22 26 Agent shall deliver such Notes to such Lender. Each Lender shall record, and prior to any transfer of its Notes shall endorse on the schedule forming a part thereof appropriate notations to evidence, the date, amount and maturity of, and effective interest rate for, each Loan made by it, the date and amount of each payment of principal made by the Borrower with respect thereto and whether such Loan is a Base Rate Loan or Euro-Dollar Loan, and such schedule shall constitute rebuttable presumptive evidence of the principal amount owing and unpaid on such Lender's Notes; provided that the failure of any Lender to make, or any error in making, any such recordation or endorsement shall not affect the obligation of the Borrower hereunder or under the Notes or the ability of any Lender to assign its Notes. Each Lender is hereby irrevocably authorized by the Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. Section II.4. Maturity of Loans. Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing, but may be repaid through a Refunding Loan, except to the extent of any installment payment required pursuant to the next succeeding sentence. Quarterly installment payments on the Loans shall be made on each of the Installment Payment Dates set forth below in the aggregate principal amount set forth below for such Installment Payment Date, together with interest thereon and any amount payable pursuant to Section 8.05(a):
Installment Payment Date Installment Principal Amount ------------------------ ---------------------------- June 30, 1999 through December 31, 2002 $ 187,500 March 31, 2003 and June 30, 2003 $ 2,500,000 September 30, 2003 through March 31, 2004 $ 5,000,000 June 30, 2004 and September 30, 2004 $10,000,000 December 31, 2004 $15,000,000 March 31, 2005 $17,188,500
Section II.5. Interest Rates. (1) "Applicable Margin" shall be determined quarterly based upon the ratio of Consolidated Funded Debt to Consolidated Cash Flow (calculated as of the last day of each Fiscal Quarter for the period of 4 consecutive Fiscal Quarters then ended), as follows:
- ------------------------------------------------------------------------------------------- Ratio of Consolidated Funded Debt to Base Rate Loans Euro-Dollar Consolidated Cash Flow --------------- Loans - ------------------------------------ ----------- - ------------------------------------------------------------------------------------------- Greater than or equal to 5.0 2.00% 3.00% - -------------------------------------------------------------------------------------------
23 27
- ------------------------------------------------------------------------------------------- Ratio of Consolidated Funded Debt to Base Rate Loans Euro-Dollar Consolidated Cash Flow --------------- Loans - ------------------------------------ ----------- - ------------------------------------------------------------------------------------------- Greater than or equal to 4.0 but less than 5.0 1.75% 2.75% - ------------------------------------------------------------------------------------------- Less than 4.0 1.50% 2.50% - -------------------------------------------------------------------------------------------
The Applicable Margin shall be determined effective as of each date (herein, the "Rate Determination Date") which is 50 days after the last day of the final Fiscal Quarter in the period for which the foregoing ratio is being determined, and the Applicable Margin so determined shall remain effective from such Rate Determination Date until the date which is 50 days after the last day of the Fiscal Quarter in which such Rate Determination Date falls (which latter date shall be a new Rate Determination Date); provided that (i) for the period from and including the Effective Date to but excluding the Rate Determination Date next following the Effective Date, the Applicable Margin shall be (A) 1.75% for Base Rate Loans and (B) 2.75% for Euro-Dollar Loans, (ii) in the case of Applicable Margins determined for the fourth and final Fiscal Quarter of a Fiscal Year, the Rate Determination Date shall be the date which is 95 days after the last day of such final Fiscal Quarter and such Applicable Margins shall be determined based upon the annual audited financial statements for the Fiscal Year ended on the last day of such final Fiscal Quarter, and (iii) if on any Rate Determination Date the Borrower shall have failed to deliver to the Lenders the financial statements required to be delivered pursuant to Section 5.01 with respect to the Fiscal Quarter most recently ended prior to such Rate Determination Date (or, in the case of annual audited financial statements, with respect to the Fiscal Year which includes such final Fiscal Quarter), then for the period beginning on such Rate Determination Date and ending on the earlier of (x) the next Rate Determination Date (on which the Applicable Margin shall again be determined pursuant to this paragraph) and (y) the date on which the Borrower shall deliver to the Lenders the financial statements to be delivered pursuant to Section 5.01(b) with respect to such Fiscal Quarter (in the case of a failure to deliver quarterly unaudited financial statements) or the date on which the Borrower shall deliver to the Lenders the annual audited financial statements to be delivered pursuant to Section 5.01(a) with respect to the Fiscal Year which includes such final Fiscal Quarter (in the case of a failure to deliver annual audited financial statements), the Applicable Margin shall be determined as if the ratio of Consolidated Funded Debt to Consolidated Cash Flow was more than 5.0 at all times during such period. Any change in the Applicable Margin on any Rate Determination Date shall result in a corresponding change, effective on and as of such Rate Determination Date, in the interest rate applicable to each Loan outstanding on such Rate Determination Date, provided that (i) for Euro-Dollar Loans, changes in the Applicable Margin shall only be effective for Interest Periods commencing on or after the Rate Determination Date, and (ii) no Applicable Margin shall be decreased pursuant to this Section 2.05 if an Event of Default is in existence on the Rate Determination Date. (2) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day plus the Applicable Margin. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. (3) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount 24 28 thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin plus the applicable Adjusted London Interbank Offered Rate for such Interest Period; provided that if any Euro-Dollar Loan shall, as a result of clause (1)(c) of the definition of Interest Period, have an Interest Period of less than one month, such Euro-Dollar Loan shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 3 months, at intervals of 3 months after the first day thereof. Any overdue principal of and, to the extent permitted by applicable law, overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Default Rate. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan the rate per annum determined on the basis of the rate for deposits in Dollars of amounts equal or comparable to the principal amount of such Euro-Dollar Loan offered for a term comparable to such Interest Period, which rate appears on Page "3750" of the Telerate Service (or such other page as may replace page 3750 of that service or such other service or services as may be nominated by the British Bankers' Association for the purpose of displaying London interbank offered rates for deposits in Dollars), determined as of 1:00 P.M. (Atlanta, Georgia time), 2 Euro-Dollar Business Days prior to the first day of such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (4) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Lenders by telecopy of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (5) After the occurrence and during the continuance of a Default, the principal amount of the Loans (and, to the extent permitted by applicable law, all accrued interest thereon) may, at the election of the Required Lenders, bear interest at the Default Rate. Section II.6. Fees. (1) On the Effective Date, the Borrower shall pay to the Administrative Agent, for 25 29 the ratable account of each Lender a fee in an amount equal to 0.25% of such Lender's Commitment. (2) The Borrower shall pay to the Administrative Agent, for the account and sole benefit of the Administrative Agent, such fees and other amounts at such times as set forth in the Administrative Agent's Letter Agreement. Section II.7. Prepayment Premium. In the event of any voluntary or mandatory prepayment of principal prior to the Anniversary Date, the Borrower shall pay, in addition to any other amounts due hereunder, to the Administrative Agent for the ratable benefit of the Lenders a prepayment fee equal to 1% of the principal prepaid. Section II.8. Termination of Commitments. The Commitments shall terminate on the Maturity Date and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. Section II.9. Optional Prepayments. (1) The Borrower may, upon at least 1 Domestic Business Day's notice to the Administrative Agent, prepay any Base Rate Borrowing in whole at any time, or from time to time in part in amounts aggregating at least $1,000,000, or any larger multiple of $100,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Base Rate Loans of the several Lenders included in such Base Rate Borrowing. (2) Except as provided in Sections 2.01 and 8.02, the Borrower may prepay all or any portion of the principal amount of any Euro-Dollar Loan prior to the maturity thereof only upon (i) at least 3 Euro-Dollar Business Days' notice to the Administrative Agent, (ii) compliance with the provisions of Sections 2.07 and 8.05, and (iii) payment of an administrative fee of $250 to the Administrative Agent (which fee shall be retained by the Administrative Agent). (3) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Lender of the contents thereof and of such Lender's ratable share of such prepayment and such notice shall not thereafter be revocable by the Borrower. Section II.10. Mandatory Prepayments. The Borrower shall repay or prepay (i) Revolving Loans in an amount equal to 100% of the proceeds of the first Borrowing hereunder, (ii) Loans and the Revolving Loan in an amount equal to 50% of other Net Cash Proceeds and (iii) Loans and the Revolving Loan in amount equal to 50% of any Excess Cash Flow. Prepayments pursuant to the foregoing clause (i) shall be made on the date of receipt of the proceeds of the Borrowing Loan. Payments pursuant to the foregoing clause (ii) shall be made within 15 Business Days after the receipt of Net Cash Proceeds (except that prepayments from proceeds of Subordinated Debt shall be made on the date of receipt of such proceeds); provided, that amounts not included in Net Cash Proceeds pursuant to clause (iv)(C) of the definition thereof which have not been used or committed to be used within 180 days from the casualty or condemnation of such Property to 26 30 restore or replace the relevant Property shall be paid on such 180th day. Payments pursuant to the foregoing clause (iii) shall be made on the date the Borrower furnishes its annual financial statements to the Lenders pursuant to Section 5.01(a) (or on the date such statements are required to be so furnished pursuant to such section, if they have not been furnished by such date). Prepayments pursuant to the foregoing clause (i) shall be made to the Revolver Agent, for the ratable account of the Revolver Banks. Prepayments pursuant to the foregoing clauses (ii) and (iii) shall be made to the Administrative Agent and to the Revolver Agent, for the ratable account of the Revolver Banks and the Lenders, based on the aggregate amount of the Revolver Commitments and the aggregate principal balance of the Loans as of the time of the payment; provided, that: (1) any Lender (a "Declining Lender") may, by notice to the Administrative Agent, decline to accept any particular prepayment pursuant to this Section 2.10, in which event the amount of any prepayment otherwise payable to such Declining Lender shall be paid to the Revolver Agent for the ratable account of the Revolver Banks, subject to the provisions of subclause (2) below; and (2) from and after the date that the Revolver Commitments have been reduced to $150,000,000 by payments made pursuant to the foregoing clauses (ii) and (iii) in accordance with Section 2.08 of the Revolver Credit Agreement, such repayments or prepayments shall be made solely to the Lenders, other than any Lenders which are Declining Lenders with respect thereto (and the amount of any prepayment otherwise payable to a Declining Lenders shall be not be subject to prepayment pursuant to this Section 2.08, except as provided in subclause (2) below), until the Loans are paid in full, and (3) notwithstanding the reduction of the Revolver Commitments to $150,000,000 by prepayments pursuant to the foregoing clauses (ii) and (iii) in accordance with Section 2.08 of the Revolving Credit Agreement, but only with respect to any sale of Collateral, to the extent of any Net Cash Proceeds from such sale which are not used to purchase replacement Collateral having equal or greater value and are not paid to the Declining Lenders pursuant to subclause (2) above shall be used to prepay the Revolving Loans, and the Revolver Commitments shall be reduced by the amount of such prepayments in accordance with the terms of the Revolver Credit Agreement. All prepayments made for the account of the Lenders pursuant to this Section 2.10 shall be accompanied by any amount required to be paid pursuant to Sections 207 and 8.05(a), and shall be applied in installments of principal in the inverse order of maturity. Section II.11. General Provisions as to Payments. (1) The Borrower shall make each payment of principal of, and interest on, the Loans and of commitment fees hereunder without set-off or counterclaim, not later than 11:00 A.M. (Atlanta, Georgia time) on the date when due, in Federal or other funds immediately available in 27 31 Atlanta, Georgia, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Lender its ratable share of each such payment received by the Administrative Agent for the account of the Lenders. (2) Whenever any payment of principal of, or interest on, the Base Rate Loans or the fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (3) Each payment or prepayment of Loans shall be applied by the Administrative Agent to repay or prepay ratably the Loans of the several Lenders in the following order of priority: (1) first, to Euro-Dollar Loans maturing on the date of such payment or prepayment; (2) second, to Base Rate Loans maturing on or after the date of such payment or prepayment (in the direct order of maturity); and (3) third, to Euro-Dollar Loans maturing after the date of such payment or prepayment (in direct order of maturity). (d) Each Lender shall, prior to the due date of any payments under the Notes, execute and deliver to the Borrower and the Administrative Agent, one or more (as the Borrower or the Administrative Agent may reasonably request) (i) either (x) if such Lender is organized under the laws of a jurisdiction other than the United States or a State thereof, then (x) if such Lender is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (A) United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, and (B) United States Internal Revenue Service Form W-8, or successor applicable form, as the case may be or, if such Lender is not a "bank" within the meaning of section 881(c)(3)(A) of the Code and is claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Lender delivers a Form W-8, a certificate representing that such Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign corporation related to any Borrower (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Lender claiming complete exemption from, or a reduced rate of, U.S. Federal withholding tax on payments of interest by the Borrower under this Agreement and the other Loan Documents; or (y) if such Lender is organized under the laws of the United States or a State thereof, then United States Internal Revenue Service Form W-9, or successor applicable form, as the case may be, and (ii) copies of replacements of any such forms on or before the date that any such forms expire or 28 32 after the occurrence of any event requiring a change in the most recent form previously delivered by it hereunder. Each Person that shall become a Lender shall, upon the effectiveness of the related transfer, be required to provide all of the forms required pursuant to this Section 2.11(d). Section II.12. Computation of Interest and Fees. Interest on Base Rate Loans based on the Base Rate shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). Interest on Euro-Dollar Loans shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed, calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Commitment fees and any other fees payable hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). ARTICLE III CONDITIONS TO BORROWINGS Section III.1. Conditions Precedent to Effectiveness. This Agreement shall become effective on and as of the first date on which the following conditions precedent have been satisfied (the "Effective Date"): (1) receipt by the Administrative Agent from each of the parties hereto of either (i) a duly executed counterpart of this Agreement signed by such party or (ii) a facsimile transmission stating that such party has duly executed a counterpart of this Agreement and sent such counterpart to the Administrative Agent; (2) receipt by the Administrative Agent of either (i) a duly executed counterpart of each of the Loan Documents signed by each of the parties thereto or (ii) a facsimile transmission stating that such party has duly executed a counterpart of such Loan Document and sent such counterpart to the Administrative Agent; (3) receipt by the Administrative Agent of an opinion (together with any opinions of local counsel relied on therein) of Troutman Sanders, counsel for the Borrower and the Guarantors, dated as of the Effective Date, substantially in the form and substance delivered by such counsel in connection with the Original Agreement and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or any Lender may reasonably request; (4) receipt by the Administrative Agent of an opinion of Jones, Day, Reavis & Pogue, special counsel for the Administrative Agent, dated as of the Effective Date, substantially in the form of Exhibit C hereto and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent may reasonably request; (5) receipt by the Administrative Agent of a certificate (the "Closing Certificate"), dated the Effective Date, substantially in the form of Exhibit D hereto, signed by a principal financial officer of the Borrower, to the effect that (i) no Default has occurred and is continuing on the Effective Date and (ii) the representations and warranties of the Borrower contained in Article IV are true on and as of the Effective Date; 29 33 (6) receipt by the Administrative Agent of all documents which the Administrative Agent or any Lender may reasonably request relating to the existence of the Borrower and each Guarantor, the corporate authority for and the validity of this Agreement, the Guaranty and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent, including without limitation a certificate of incumbency of the Borrower and each Guarantor (the "Officer's Certificate"), signed by the Secretary or an Assistant Secretary of the Borrower or each Guarantor, substantially in the form of Exhibit E hereto, certifying as to the names, true signatures and incumbency of the officer or officers of the Borrower or each Guarantor authorized to execute and deliver the Loan Documents to which the Borrower or each Guarantor is a party, and certified copies of the following items: (i) the Certificate or Articles of Incorporation of the Borrower and each Guarantor, (ii) the Bylaws of the Borrower and each Guarantor, (iii) a certificate of the Secretary of State of the State of Delaware as to the good standing of the Borrower as a Delaware corporation and similar certificates for each Guarantor from its jurisdiction of incorporation, and (iv) the action taken by the Board of Directors of the Borrower and each Guarantor authorizing the Borrower's and Guarantors' execution, delivery and performance of this Agreement and the other Loan Documents to which the Borrower and each Guarantor is a party; (7) receipt by the Administrative Agent from each of the Guarantors as of the Effective Date of a duly executed counterpart of the Guaranty signed by such Guarantor and from the Borrower and each of the Guarantors as of the Effective Date of a duly executed counterpart of the Contribution Agreement signed by the Borrower and such Guarantors; (8) receipt by the Administrative Agent of the commitment fee pursuant to Section 2.06(a) and other fees payable on the Effective Date in accordance with the Administrative Agent's Letter Agreement; (9) receipt by the Administrative Agent of evidence satisfactory to it of execution and delivery of (A) the Lease and the First Amendment to the Reimbursement Agreement as contemplated in an engagement letter dated January 12, 1999, between Carmike Cinemas, Inc., Movieplex Realty Leasing, L.L.C. and Wachovia Bank, N.A, and (B) the Revolver Credit Agreement as contemplated in an engagement letter dated January 12, 1999, between Carmike Cinemas, Inc., and Wachovia Bank, N.A.; (10) the Borrower shall have issued the Subordinated Debt on terms satisfactory to the Agents and received net cash proceeds of at least $200,000,000 from such issuance; (11) the Subordinated Debt shall have received a Debt Rating of B- or higher by S&P and B3 or higher by Moody's; (12) the Administrative Agent and the Lenders shall have received Uniform Commercial Code searches satisfactory to the Administrative Agent and the Lenders for all locations presently occupied or used by the Borrower and its Subsidiaries; (13) delivery to the Collateral Agent of the capital stock of all Subsidiaries and blank stock powers satisfactory in form and substance to the Collateral Agent; (14) the execution and delivery of financing statements satisfactory in form and 30 34 substance to the Collateral Agent; and (15) evidence satisfactory to the Administrative Agent of payment in full and cancellation of the Senior Notes. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: Section IV.1. Corporate Existence and Power. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, unless the failure to be so qualified or to have such corporate powers or governmental licenses, authorizations, consents or approvals would not have a Material Adverse Effect. Section IV.2. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement, the Notes and the other Loan Documents (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of this Agreement with the Securities and Exchange Commission), (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. Section IV.3. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms, and the Notes and the other Loan Documents, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally. Section IV.4. Financial Information. (1) The consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1997 and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended, reported on by Ernst & Young, copies of which have been delivered to each of the Lenders, and the unaudited consolidated financial statements of the Borrower and its Subsidiaries for the interim period ended September 30, 1998, copies of which have been delivered to each of the Lenders, fairly present, in conformity with GAAP, the consolidated financial position of the Borrower and its Subsidiaries as of such dates and their consolidated results of operations and cash flows for such periods stated. 31 35 (2) Since December 31, 1997. there has been no event, act, condition or occurrence having a Material Adverse Effect (and the Administrative Agent and the Lenders acknowledge that the Restructuring and Impairment Charges for 1998 do not have such an effect). Section IV.5. Litigation. On the Effective Date, there is no action, suit or proceeding pending, or to the knowledge of the Borrower threatened, against or affecting the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which could have a Material Adverse Effect or which in any manner draws into question the validity or enforceability of, or could impair the ability of the Borrower to perform its obligations under, this Agreement, the Notes or any of the other Loan Documents. Section IV.6. Compliance with ERISA. (1) The Borrower and each member of the Controlled Group have fulfilled their obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the presently applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC or a Plan under Title IV of ERISA. (2) On the Effective Date, neither the Borrower nor any member of the Controlled Group is or ever has been obligated to contribute to any Multiemployer Plan. Section Taxes. There have been filed on behalf of the Borrower and its Subsidiaries all Federal, state and local income, material excise, material property and other material tax returns which are required to be filed by them and all taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the Borrower or any Subsidiary have been paid prior to the same becoming delinquent, other than (i) those presently payable without penalty or interest and (ii) those being contested in good faith by appropriate proceedings with respect to which adequate reserves have been established in accordance with GAAP. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. As of the Effective Date, United States income tax returns of the Borrower and its Subsidiaries (other than Westwynn Theatres, Inc.) have been examined and closed through the Fiscal Year ended December 31, 1993. Section IV.8. Subsidiaries. Each of the Borrower's Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, unless the failure to be so qualified or to have such corporate powers or governmental licenses, authorizations, consents or approvals would not have a Material Adverse Effect. As of the Effective Date, the Borrower has no Subsidiaries except those Subsidiaries listed on Schedule 4.08, which accurately sets forth each such Subsidiary's complete name and jurisdiction of incorporation. Section IV.9. Not an Investment Company. Neither the Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 32 36 Section IV.10. Public Utility Holding Company Act. Neither the Borrower nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. Section IV.11. Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has title to its properties sufficient for the conduct of its business, and none of such property is subject to any Lien except as permitted in Section 5.07. Section IV.12. No Default. Neither the Borrower nor any of its Subsidiaries is in Default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound which could have or cause a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. Section IV.13. Full Disclosure. All information heretofore furnished by the Borrower to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is as of the Effective Date, and all such information hereafter furnished by the Borrower to the Administrative Agent or any Lender will be, true, accurate and complete in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. As of the Effective Date, the Borrower has disclosed to the Lenders in writing any and all facts which could have or cause a Material Adverse Effect. Section IV.14. Environmental Matters. (1) Except as otherwise provided in Exhibit 4.14A, (1) neither the Borrower nor any Subsidiary is subject to Environmental Liabilities which could cause a Material Adverse Effect, (2) to the best of the Borrower's knowledge, neither the Borrower nor any Subsidiary has been designated a potentially responsible party under CERCLA or under any state statute similar to CERCLA, and (3) to the best of the Borrower's knowledge, none of the Properties has been identified on any current National Priorities List or CERCLIS List. (2) Except as otherwise provided in Exhibit 4.14(B), to the best of the Borrower's knowledge, (1) the Borrower, and each of its Subsidiaries, have used, managed, stored and otherwise handled Hazardous Materials at the Properties in compliance with applicable Environmental Laws, excluding any violation of Environmental Laws which did not cause a Material Adverse Effect, and (2) neither the Borrower nor any Subsidiary has caused an Environmental Release of Hazardous Materials into the subsurface soil or groundwater underlying the Properties which could reasonably be expected to cause a Material Adverse Effect. (3) Except as otherwise provided in Exhibit 4.14(C), to the best of the Borrower's knowledge, the Borrower and each of its Subsidiaries maintain all Environmental Authorizations necessary for the conduct of their respective businesses and are in compliance with all Environmental Laws applicable to the operation of the Properties and their respective businesses, 33 37 excluding any omission of Environmental Authorizations or violation of Environmental Laws which could not reasonably be expected to cause a Material Adverse Effect. Section IV.15. Compliance with Laws. The Borrower and each Subsidiary is in compliance with all applicable laws, including, without limitation, all Environmental Laws, except where any failure to comply with any such laws would not, alone or in the aggregate, have a Material Adverse Effect. Section IV.16. Capital Stock. All Capital Stock, debentures, bonds, notes and all other securities of the Borrower and its Subsidiaries presently issued and outstanding are validly and properly issued in accordance with all applicable laws, including, but not limited to, the "Blue Sky" laws of all applicable states and the federal securities laws; provided that this representation shall not extend to any violation of applicable laws in connection with any such issuance occurring by reason of the action or inaction of any Person other than the Borrower, any Subsidiary or any Person retained or employed by the Borrower or any Subsidiary. The issued shares of Capital Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free and clear of any Lien or adverse claim. At least a majority of the issued shares of capital stock of each of the Borrower's other Subsidiaries (other than Wholly Owned Subsidiaries) is owned by the Borrower free and clear of any Lien or adverse claim. Section IV.17. Margin Stock. Not more than 25% of the aggregate fair market value of the assets of the Company and its Subsidiaries which are subject to the provisions of Section 5.08 consists of Margin Stock. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock. No part of the proceeds of any Loan will be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation X. Section IV.18. Insolvency. After giving effect to the execution and delivery of the Loan Documents and the making of the Loans under this Agreement, the Borrower will not be "insolvent," within the meaning of such term as used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of Title 11 of the United States Code or Section 2 of the Uniform Fraudulent Transfer Act, or any other applicable state law pertaining to fraudulent transfers, as each may be amended from time to time, or be unable to pay its debts generally as such debts become due, or have an unreasonably small capital to engage in any business or transaction, whether current or contemplated. ARTICLE V COVENANTS The Borrower agrees that, so long as any Lender has any Commitment hereunder or any amount payable under any Note remains unpaid (unless the Required Lenders consent in writing): Section V.1. Information. The Borrower will deliver to each of the Lenders: (1) as soon as available and in any event within 90 days after the end of each Fiscal Year, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such 34 38 Fiscal Year and the related consolidated statements of income, shareholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified by Ernst & Young or other independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications not acceptable to the Required Lenders; (2) as soon as available and in any event within 45 days after the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a condensed consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Quarter and the related condensed statement of income and condensed statement of cash flows for such Fiscal Quarter and for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by the chief financial officer or the chief executive officer of the Borrower; (3) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate, substantially in the form of Exhibit F or in such other form as shall be mutually satisfactory to the Borrower and the Administrative Agent (a "Compliance Certificate"), of the chief financial officer or the chief executive officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.03 through 5.08, inclusive, 5.11 and 5.21, on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (4) simultaneously with the delivery of each set of annual financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements to the effect that nothing has come to their attention to cause them to believe that any Default existed on the date of such financial statements; (5) within 5 Domestic Business Days after the Borrower becomes aware of the occurrence of any Default, a certificate of the chief financial officer or the chief executive officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (6) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (7) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Borrower shall have filed with the Securities and Exchange Commission; (8) if and when the Borrower or any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is 35 39 required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; (9) promptly after the Borrower knows of the commencement thereof, notice of any litigation, dispute or proceeding involving a claim against the Borrower and/or any Subsidiary for $1,000,000 or more in excess of amounts covered in full by applicable insurance; (10) promptly after the Borrower knows of the existence thereof, any and all facts which could have or cause a Material Adverse Effect; and (11) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Lender, may reasonably request. Section V.2. Inspection of Property, Books and Records. The Borrower will (i) keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities; and (ii) permit, and will cause each Subsidiary to permit, representatives of any Lender at such Lender's expense prior to the occurrence of an Event of Default and at the Borrower's expense after the occurrence of an Event of Default to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants. The Borrower agrees to cooperate and assist in such visits and inspections, in each case at such reasonable times and as often as may reasonably be desired. Section V.3. Ratio of Consolidated Senior Funded Debt to Consolidated Cash Flow. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 1999, the ratio of Consolidated Senior Funded Debt to Consolidated Cash Flow for the period of 4 consecutive Fiscal Quarters ending on such date shall not be greater than the applicable ratio provided in the following table:
Fiscal Quarter Ending Applicable Ratio --------------------- ---------------- On or before June 30, 2000 4.00 to 1.0 September 30, 2000, and thereafter 3.75 to 1.0
Section V.4. Ratio of Consolidated Funded Debt to Consolidated Cash Flow. At the end of each Fiscal Quarter ending as provided in the following table, the ratio of Consolidated Funded Debt at the end of such Fiscal Quarter to Consolidated Cash Flow for the period of 4 consecutive Fiscal Quarters ending on such date shall not be greater than the applicable ratio provided in the following table:
Fiscal Quarter Ending Applicable Ratio --------------------- ---------------- On or before June 30, 2000 6.00 to 1.0 September 30, 2000, and thereafter 5.75 to 1.0
36 40 Section V.5. Restricted Payments. The Borrower will not declare or make any, or permit any Subsidiary which is not a Wholly-Owned Subsidiary to make any, Restricted Payment after the Effective Date, if the aggregate amount of such Restricted Payments made in any consecutive 4 Fiscal Quarter period would exceed $4,000,000; provided that after giving effect to the payment of any such Restricted Payments, no Default shall be in existence or be created thereby. Section V.6. Fixed Charge Coverage. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending December 31, 1998, the ratio of (a) Adjusted Cash Flow to (b) Fixed Charges, in each case for the current Fiscal Quarter and the immediately preceding 3 Fiscal Quarters, shall not be less than 1.40 to 1.00. Section V.7. Adjusted Fixed Charge Coverage. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 1999, the ratio of (a) Adjusted Cash Flow minus Maintenance Capital Expenditures to (b) Adjusted Fixed Charges, in each case for the current Fiscal Quarter and the immediately preceding 3 Fiscal Quarters, shall not be less than 1.25 to 1.00. Section V.8. Negative Pledge. Neither the Borrower nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (1) Liens existing on the date of this Agreement securing Debt outstanding on the Effective Date in an aggregate principal amount not exceeding $43,000,000; (2) any Lien in favor of the Collateral Agent pursuant to the Collateral Documents; (3) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset, provided that such Lien attaches to such asset concurrently with or within 18 months after the acquisition or completion of construction thereof; (4) Liens securing Debt owing by any Guarantor to the Borrower; (5) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses (a) or (c) of this Section, provided that (i) such Debt is not secured by any additional assets, and (ii) the amount of such Debt secured by any such Lien is not increased; (6) any Lien on Margin Stock; (7) Liens for taxes, assessments or governmental charges or levies either not yet due or the payment of which is not at the time required by Section 5.13; 37 41 (8) Liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar Persons incurred in the ordinary course of business for sums either not yet due or the payment of which is not at the time required by Section 5.13; (9) Liens (other than any Lien created or imposed under ERISA and Liens on the Collateral) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive in any case of obligations incurred in connection with the borrowing of money or the obtaining of advances of credit); (10) any attachment or judgment Lien arising in connection with court proceedings, provided that (i) the execution or other enforcement of such Lien is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings diligently conducted, and (ii) such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor and neither the Borrower's nor any such Subsidiary's title to or right to use any of its property is impaired in any material respect by reason of such contest; (11) easements, licenses, rights-of-way and other rights and privileges in the nature of easements and similar Liens incidental to the ownership of property and not incurred in connection with the borrowing of money or the obtaining of advances of credit, and which do not, individually or in the aggregate, interfere with the ordinary conduct of the business of the Borrower or any Subsidiary or materially detract from the value of the properties subject to any such Liens; (12) Liens on fixed assets (1) of any Person at the time such Person becomes a Subsidiary and not created in contemplation of such event, (2) of any Person existing at the time such Person is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event and (3) existing prior to the acquisition of such fixed assets by the Borrower or a Subsidiary and not created in contemplation of such acquisition, provided that the aggregate principal amount outstanding of Debt secured by Liens permitted under this paragraph (l) may not exceed at any time 5% of Consolidated Total Capitalization; and (13) Liens on assets other than the Collateral not otherwise permitted by the foregoing clauses of this Section securing Debt (other than indebtedness represented by the Notes) in an aggregate principal amount at any time outstanding not to exceed 5% of Consolidated Total Capitalization. Section V.9. Maintenance of Existence. The Borrower shall, and shall cause each Subsidiary to, maintain its corporate existence and carry on its business in substantially the same manner and in substantially the same fields as such business is now carried on and maintained; provided that (i) the Borrower and its Subsidiaries may engage in any transaction permitted by Section 5.10 and (ii) dissolution of any Subsidiary shall not be prohibited by this Section if all of the assets of such Subsidiary are transferred to the Borrower or any other Subsidiary following such dissolution. 38 42 Section V.10. Dissolution. The Borrower shall not suffer or permit dissolution or liquidation either in whole or in part or redeem or retire any shares of its own stock, except (i) through corporate reorganization to the extent permitted by Section 5.11, and (ii) through Restricted Payments permitted by Section 5.05. Section V.11. Consolidations, Mergers and Sales of Assets. The Borrower will not, nor will it permit any Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise transfer all or any substantial part of its assets to, any other Person, or discontinue or eliminate any business line or segment, provided that (a) the Borrower may merge with another Person if (i) such Person was organized under the laws of the United States of America or one of its states, (ii) the Borrower is the corporation surviving such merger and (iii) immediately after giving effect to such merger, no Default shall have occurred and be continuing, (b) Subsidiaries of the Borrower may merge or consolidate with one another or with the Borrower, (c) any Subsidiary of the Borrower may be merged or consolidated with or into another Person to consummate an acquisition of such other Person permitted by Section 5.21, provided that the surviving Person shall be a Subsidiary of the Borrower, (d) the foregoing limitation on the sale, lease or other transfer of assets and on the discontinuation or elimination of a business line or segment shall not prohibit (i) the sale, lease or other transfer of assets by a Subsidiary to any other Subsidiary (other than of Collateral by Eastwynn) or to the Borrower, or (ii) subject to the mandatory prepayment provisions of Section 2.10, during any Fiscal Quarter, a transfer of assets in an arm's length transaction for fair market value or the discontinuance or elimination of a business line or segment (in a single transaction or in a series of related transactions) unless the aggregate assets to be so transferred or utilized in a business line or segment to be so discontinued, when combined with all other assets transferred, and all other assets utilized in all other business lines or segments discontinued, during such Fiscal Quarter and the immediately preceding three Fiscal Quarters (excluding, however, transfers of assets permitted by clause (i) of this Section) contributed more than 10% of Consolidated Operating Income during the 4 consecutive Fiscal Quarters immediately preceding such Fiscal Quarter, and (e) subject to the mandatory prepayment provisions of Section 2.10 and to presentation to the Administrative Agent and the Lenders of a certificate showing pro forma compliance with the financial covenants contained in this Agreement after giving effect thereto, the Borrower may enter into sale/leaseback transactions after the Effective Date in an amount not to exceed in the aggregate $150,000,000, provided in each of the foregoing such cases no Default shall be in existence or be created thereby. At the request of the Borrower, the Collateral Agent shall release any Collateral sold by the Borrower or Eastwynn in conformity with the foregoing provisions, so long as any prepayments required by Section 2.10 have been made. Section V.12. Use of Proceeds. No portion of the proceeds of the Loans will be used by the Borrower or any Subsidiary for any purpose in violation of any applicable law or regulation. Section V.13. Compliance with Laws; Payment of Taxes. The Borrower will, and will cause each of its Subsidiaries and, in the case of ERISA, each member of the Controlled Group to, comply in all material respects with applicable laws (including but not limited to ERISA), regulations and similar requirements of governmental authorities (including but not limited to PBGC), except where the necessity of such compliance is being contested in good faith through appropriate proceedings diligently pursued. The Borrower will, and will cause 39 43 each of its Subsidiaries to, pay promptly when due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a lien against the property of the Borrower or any Subsidiary, except (i) liabilities being contested in good faith by appropriate proceedings diligently pursued and against which, if requested by the Administrative Agent, the Borrower shall have set up reserves in accordance with GAAP and (ii) liabilities the nonpayment of which could have a Material Adverse Effect. Section V.14. Insurance. The Borrower will maintain, and will cause each of its Subsidiaries to maintain (either in the name of the Borrower or in such Subsidiary's own name), with financially sound and reputable insurance companies, insurance on all its Property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. Section V.15. Change in Fiscal Year. The Borrower will not change its Fiscal Year. Section V.16. Maintenance of Property. The Borrower shall, and shall cause each Subsidiary to, maintain all of its material properties and assets in good condition, repair and working order, ordinary wear and tear excepted. Section V.17. Environmental Notices. When a Responsible Officer or any officer of the Borrower or any Subsidiary responsible for compliance with Environmental Laws with respect to any Property becomes aware of (i) an Environmental Liability associated with the Properties which could cause a Material Adverse Effect, (ii) an Environmental Release at any of the Properties which could cause a Material Adverse Effect, (iii) the designation of the Borrower or such Subsidiary as a potentially responsible party under CERCLA or any state statute similar to CERCLA, or (iv) identification of such Property on any National Priorities List or CERCLIS List, the Borrower shall promptly furnish to the Lenders and the Administrative Agent written notice thereof. Section V.18. Environmental Matters. The Borrower and its Subsidiaries will not, and will not knowingly permit any Third Party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose, manage, or otherwise handle at the Properties any Hazardous Materials in such a manner which gives rise to an Environmental Liability which could cause a Material Adverse Effect. Section V.19. Environmental Release. Upon the occurrence of an Environmental Release of Hazardous Materials at any of the Properties of which Borrower or a Subsidiary becomes aware, Borrower or the Subsidiary shall comply with any and all notice, investigation, removal and remediation requirements applicable to the Borrower or Subsidiary under Environmental Laws with respect to such Environmental Release. Section V.20. Additional Covenants, Etc. In the event that at any time this Agreement is in effect or any Note remains unpaid the Borrower shall enter into any agreement, guarantee, indenture or other instrument governing, relating to, providing for commitments to advance or guaranteeing any Financing which exceeds $3,000,000 in aggregate amount (a "New Financing Agreement") or to amend any terms and conditions applicable to any Financing which exceeds $3,000,000 in aggregate amount (a "Financing Agreement Amendment"), which New 40 44 Financing Agreement includes or which Financing Agreement Amendment adds or modifies Covenants, warranties, representations, defaults or events of default (or any other type of restriction which would have the practical effect of any of the foregoing, including, without limitation, any "put" or mandatory prepayment of all or substantially all of such debt) not substantially as, or in addition to those, provided in this Agreement or any other Loan Document, or more favorable to the lender or other counterparty thereunder than those provided in this Agreement or any other Loan Document (individually an "Additional Term" and collectively, the "Additional Terms"), the Borrower shall promptly so notify the Administrative Agent and the Lenders. Thereupon, if the Administrative Agent shall request by written notice to the Borrower (after a determination has been made by the Required Lenders that any such New Financing Agreement or Financing Agreement Amendment contains any provisions which either individually or in the aggregate are more favorable than one of the provisions set forth herein), the Borrower, the Administrative Agent and the Lenders shall enter into an amendment to this Agreement providing for substantially the same such Additional Terms as those provided for in such New Financing Agreement or Financing Agreement Amendment, as the case may be, to the extent required and as may be selected by the Administrative Agent, such amendment to remain in effect, unless otherwise specified in writing by the Administrative Agent, for the entire duration of the stated term to maturity of such Financing (to and including the date to which the same may be extended at the Borrower's option), notwithstanding that such Financing might be earlier terminated by prepayment, refinancing, acceleration or otherwise; provided that if any such New Financing Agreement or the agreement, guarantee, indenture or other instrument amended by a Financing Agreement Amendment shall be modified, supplemented, amended or restated so as to modify, amend or eliminate therefrom any such Additional Term so made a part of this Agreement, then so long as there exists no Default or Event of Default, the Administrative Agent and the Lenders shall, at the Borrower's request made within 90 days following the date on which such New Financing Agreement or the agreement, guarantee, indenture or other instrument amended by a Financing Agreement Amendment is so modified, supplemented, amended or restated, amend this Agreement to similarly modify, amend or eliminate such Additional Term so made a part of this Agreement, provided that in no event will the Lenders and the Administrative Agent be required to (i) eliminate any Covenant, representation, warranty, default or event of default which was set forth in this Agreement on the Effective Date or added to this Agreement pursuant to an amendment to this Agreement entered into other than pursuant to this Section, or (ii) modify or amend any Covenant, representation, warranty, default or event of default which was set forth in this Agreement on the Effective Date or added to this Agreement pursuant to any amendment to this Agreement entered into other than pursuant to this Section in a manner such that such Covenant, representation, warranty, default or event of default is less favorable to the Lenders or the Administrative Agent than such Covenant, representation, warranty, default or event of default was on the Effective Date or the date the same was added to this Agreement pursuant to such an amendment, as the case may be. As used in this Section, the term "Covenants" shall mean covenants of a type similar to those set forth in Article V hereof or which customarily are described as affirmative, negative or financial covenants, but in no event shall such term encompass (w) agreements of the Borrower in respect of interest rate, fees, expenses, yield protection, indemnities, collateral, loan maturities, prepayment premiums, prepayment prohibitions or "call" protection or conditions precedent, (x) provisions whereby the Borrower waives rights, (y) provisions of a type comparable to those contained in Article IX or customarily included in the miscellaneous Section of a credit agreement or similar instrument, or (z) definitions to the extent such definitions relate to any of 41 45 the provisions described in the foregoing clauses (w), (x) and (y). Section V.21. Investments. Neither the Borrower nor any of its Subsidiaries shall make Investments in any Person except: (a) Investments in (i) direct obligations of the United States Government maturing within one year, (ii) certificates of deposit issued by a commercial bank whose credit is satisfactory to the Administrative Agent, (iii) commercial paper rated A1 or the equivalent thereof by S&P or P1 or the equivalent thereof by Moody's and in either case maturing within 6 months after the date of acquisition, (iv) tender bonds the payment of the principal of and interest on which is fully supported by a letter of credit issued by a United States bank whose long-term certificates of deposit are rated at least AA or the equivalent thereof by S&P and Aa or the equivalent thereof by Moody's, (v) loans or advances to employees not exceeding $1,000,000 in the aggregate principal amount outstanding at any time, in each case made in the ordinary course of business and consistent with practices existing on December 31, 1998, (vi) deposits required by government agencies or public utilities, and (vii) loans, advances or other Investments to or in Guarantors; and (b) other Investments which, in the aggregate, do not exceed 20% of Consolidated Net Worth; provided, however, immediately after giving effect to the making of any Investment, no Default shall have occurred and be continuing. Section V.22. Guaranty of Subsidiaries. (1) The Borrower shall deliver to the Administrative Agent and each Lender notice that a Person has become a Subsidiary within 10 days after the day on which such Person became a Subsidiary. The Borrower shall cause any Person which becomes a Subsidiary after the Effective Date to become a party to, and agree to be bound by the terms of, the Guaranty and the Contribution Agreement pursuant to an instrument in form and substance satisfactory to the Administrative Agent executed and delivered to the Administrative Agent within 30 days after the day on which such Person became a Subsidiary. (2) Together with the instrument referred to in Section 5.22(a), the Borrower shall deliver to the Administrative Agent an opinion of counsel to such Subsidiary substantially in the form of the opinion delivered pursuant to Section 3.01(c) (to the extent such opinion includes opinions applicable to the Guarantors), modified appropriately to refer to such Subsidiary, and the items specified in Section 3.01(f) (to the extent such items relate to the Guarantors) for such Subsidiary. (3) Once any Person becomes a Subsidiary and therefore becomes a party to the Guaranty Agreement in accordance with Section 5.22(a), such Person thereafter shall remain a party to the Guaranty Agreement without regard to whether it thereafter ceases to be a Subsidiary. (4) If (i) the Borrower and/or any Subsidiary sells all of the equity interests owned by the Borrower and its Subsidiaries in any Guarantor, (ii) immediately before and after giving effect to such sale no Default or Event of Default shall have occurred, and (iii) the Borrower shall have delivered to the Administrative Agent and the Lenders notice of such sale, then the Administrative Agent shall release such Guarantor from the Guaranty. Section V.23. Limitation on Consolidated Funded Debt. Neither the Borrower nor any Subsidiary will incur, create, assume or suffer to exist any Consolidated Funded Debt, 42 46 other than (i) Consolidated Funded Debt set forth or reflected on the consolidated balance sheet of the Borrower and its Subsidiaries for the Fiscal Quarter ending September 30, 1998 delivered to the Lenders pursuant to Section 4.04(a), (ii) any extension, renewal or refinancing of Consolidated Funded Debt described in clause (i) of this Section made on terms no less favorable to the Borrower or such Subsidiary than the terms of the Consolidated Funded Debt being so extended, renewed or refinanced immediately prior to such extension, renewal or refinancing, (iii) the Term Loan, (iv) Subordinated Debt, (v) Debt securing Liens permitted by Section 5.08 and (vi) additional Consolidated Funded Debt not exceeding at any time an aggregate amount outstanding of $5,000,000. Section V.24. Subordinated Debt. The Borrower shall not (i) amend the terms of any of the Subordinated Debt Documents, or (ii) make any voluntary or mandatory redemptions or prepayments (whether upon a change of control or otherwise) with respect to, or any legal or covenant defeasance of, the Subordinated Debt, without the consent of the Administrative Agent and the Required Lenders or (iii) make any payments whatsoever in violation of the subordination provisions pertaining to the Subordinated Notes. ARTICLE VI DEFAULTS Section VI.1. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (1) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay any interest on any Loan within five Domestic Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within five Domestic Business Days after such fee or other amount becomes due; or (2) the Borrower shall fail to observe or perform any covenant contained in Sections 5.01(e), 5.01(j), 5.02(ii), 5.03 to 5.07, inclusive, 5.09 (as to the Borrower) and 5.10 (as to the Borrower) and 5.12, or Section 5.15, 5.21(b), or 5.23 to 5.24, inclusive; (3) the Borrower shall fail to observe or perform any covenant or agreement contained or incorporated by reference in this Agreement (other than those covered by clause (a) or (b) above) for thirty days after the earlier of (i) the first day on which the a Responsible Officer has knowledge of such failure or (ii) written notice thereof has been given to the Borrower by the Administrative Agent at the request of any Lender; or (4) any representation, warranty, certification or statement made or deemed made by the Borrower in Article IV of this Agreement or in any other Loan Document, certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect or misleading in any material respect when made (or deemed made); or (5) the Borrower or any Subsidiary shall fail to make any payment in respect of Debt or any Off-Balance Sheet Lease Indebtedness in an aggregate amount in excess of $3,000,000 43 47 outstanding (other than the Notes, but including, without limitation, the Subordinated Debt and the Term Loan) when due or within any applicable grace period; or (6) any event or condition shall occur (other than (i) any voluntary notice of purchase, payment or prepayment delivered by the Borrower as Tenant under the Lease which results in any amount which is the subject of such notice becoming due prior to its scheduled due date, and (ii) any damage, destruction, other casualty or condemnation which under Article 19 of the Lease results in any amount payable under the Lease becoming due prior to its scheduled due date) which results in the termination of any commitment regarding Debt or acceleration of the maturity of Debt or Off-Balance Sheet Lease Indebtedness in an aggregate amount in excess of $3,000,000 outstanding of the Borrower or any Subsidiary or the mandatory prepayment or purchase of such Debt or Off-Balance Sheet Lease Indebtedness by the Borrower (or its designee) or such Subsidiary (or its designee) prior to the scheduled maturity thereof, or enables (with any requirement for the giving of notice or lapse of time or both, having been satisfied) the holders of such commitment or Debt or Off-Balance Sheet Lease Indebtedness or any Person acting on such holders' behalf to terminate such commitment or accelerate the maturity thereof or require the mandatory prepayment or purchase thereof prior to the scheduled maturity thereof (including, without limitation, any required mandatory prepayment or "put" of such Debt to the Borrower or any Subsidiary); or (7) the Borrower or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally, or shall admit in writing its inability, to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (8) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect; or (9) the Borrower or any member of the Controlled Group shall fail to pay when due any material amount which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member of the Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any such Plan or Plans or a proceeding shall be instituted by a fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a 44 48 decree adjudicating that any such Plan or Plans must be terminated or the Borrower or any other member of the Controlled Group shall enter into, contribute or be obligated to contribute to, terminate or incur any withdrawal liability with respect to, a Multiemployer Plan; or (10) one or more judgments or orders for the payment of money in an aggregate amount in excess of $500,000 shall be rendered against the Borrower or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or (11) a federal tax lien shall be filed against the Borrower under Section 6323 of the Code or a lien of the PBGC shall be filed against the Borrower or any Subsidiary under Section 4068 of ERISA and in either case such lien shall remain undischarged for a period of 25 days after the date of filing; or (12) the Patrick Family shall at any time fail to Control the Borrower; or (13) the occurrence of any event, act or condition which the Required Lenders determine either does or has a reasonable probability of causing a Material Adverse Effect and the failure of the Borrower to cure or prevent such Material Adverse Effect within 45 days after receipt of notice of such determination from the Required Lenders, or (14) any Collateral Document or Guaranty shall cease to be in full force and effect or the Borrower or EastWynn or any Guarantor, as applicable, shall deny or disaffirm its obligations thereunder; or (15) any of the subordination provisions of the Subordinated Notes shall cease to be in full force and effect or any of the holders of Subordinated Debt or the Borrower shall deny or disaffirm its obligations thereunder; then, and in every such event, the Administrative Agent shall (i) if requested by the Required Lenders, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by the Required Lenders, by notice to the Borrower declare the Notes (together with accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents to be, and the Notes (together will all accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that if any Event of Default specified in clause (g) or (h) above occurs with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Lenders, the Commitments shall thereupon automatically terminate and the Notes (together with accrued interest thereon) and all other amounts payable hereunder and under the other Loan Documents shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Notwithstanding the foregoing, the Administrative Agent shall have available to it all other remedies at law or equity, and shall exercise any one or all of them at the request of the Required Lenders. Section VI.2. Notice of Default. The Administrative Agent shall give notice to the Borrower of any Default under Section 6.01(c) promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof. 45 49 ARTICLE VII THE AGENT Section VII.1. Appointment, Powers and Immunities. (a) Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Administrative Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Administrative Agent: (i) shall have no duties or responsibilities except as expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee for any Lender; (ii) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any Lender under, this Agreement or any other Loan Document, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by the Borrower to perform any of its obligations hereunder or thereunder; (iii) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Required Lenders, and then only on terms and conditions satisfactory to the Administrative Agent, and (iv) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The provisions of this Article VII are solely for the benefit of the Administrative Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and under the other Loan Documents, the Administrative Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower. The duties of the Administrative Agent shall be ministerial and administrative in nature, and the Administrative Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Lender. (b) Each Lender hereby designates Goldman Sachs Credit Partners, L.P., Syndication Agent, and First Union National Bank, N.A., as Documentation Agent. The Syndication Agent and the Documentation Agent, in such capacities, shall have no duties or obligations whatsoever under this Agreement or any other Loan Document or any other document or any matter related hereto and thereto, but shall nevertheless be entitled to all the indemnities and other protection afforded to the Administrative Agent under this Article VII. Section VII.2. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telefax, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants or other experts selected by the 46 50 Administrative Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions signed by the Required Lenders or all the Lenders where unanimity is required under this Agreement, and such instructions of the Required Lenders or all the Lenders where unanimity is required under this Agreement in any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. Section VII.3. Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default or an Event of Default (other than the non-payment of principal of or interest on the Loans) unless the Administrative Agent has received notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Administrative Agent receives such a notice of the occurrence of a Default or an Event of Default, the Administrative Agent shall give prompt notice thereof to the Lenders. The Administrative Agent shall give each Lender prompt notice of each non-payment of principal of or interest on the Loans, whether or not it has received any notice of the occurrence of such non-payment. The Administrative Agent shall (subject to Section 9.05) take such action with respect to such Default or Event of Default as shall be directed by the Required Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. Section VII.4. Rights of Administrative Agent and Its Affiliates as a Lender. With respect to any Loan made by Wachovia or an Affiliate of Wachovia, such Affiliate and Wachovia in their capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not an Affiliate of Wachovia (or in Wachovia's case, acting as the Administrative Agent), and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include such Affiliate of Wachovia or Wachovia in its individual capacity. Such Affiliate and Wachovia may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of its Affiliates) as if they were not an Affiliate of the Administrative Agent or the Administrative Agent, respectively; and such Affiliate and Wachovia may accept fees and other consideration from the Borrower (in addition to any agency fees and arrangement fees heretofore agreed to between the Borrower and Wachovia) for services in connection with this Agreement or any other Loan Document or otherwise without having to account for the same to the Lenders. Section VII.5. Indemnification. Each Lender severally agrees to indemnify the Administrative Agent, to the extent the Administrative Agent shall not have been reimbursed by the Borrower, ratably in accordance with its Commitment, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or 47 51 the enforcement of any of the terms hereof or thereof or any such other documents; provided, however, that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Administrative Agent. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent, be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. Section VII.6. CONSEQUENTIAL DAMAGES. THE ADMINISTRATIVE AGENT SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY LENDER, THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. Section VII.7. Payee of Note Treated as Owner. The Administrative Agent may deem and treat each Person in whose name a Loan is registered as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Administrative Agent and the provisions of Section 9.07(c) have been satisfied. Any requests, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor or replacement thereof. Section VII.8. Non-Reliance on Administrative Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Administrative Agent shall not be required to keep itself (or any Lender) informed as to the performance or observance by the Borrower of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the properties or books of the Borrower or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower or any other Person (or any of their Affiliates) which may come into the possession of the Administrative Agent. Section VII.9. Failure to Act. Except for action expressly required of the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Lenders of their indemnification obligations under Section 7.05 against any and all liability and expense which may be incurred by the Administrative Agent by reason of taking, continuing to take, or failing to take any such action. 48 52 Section VII.10. Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower and the Administrative Agent may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent's notice of resignation or the Required Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent. Any successor Administrative Agent shall be a bank which has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder. ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION Section VIII.1. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period in respect of any Euro-Dollar Loan: (1) the Administrative Agent determines that deposits in Dollars (in the applicable amounts) are not being offered in the relevant market for such Interest Period, or (2) the Required Lenders advise the Administrative Agent that the London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Lenders of funding the Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Lenders to make the Euro-Dollar Loans specified in such notice shall be suspended. Unless the Borrower notifies the Administrative Agent at least 2 Domestic Business Days before the date of any Borrowing of Euro-Dollar Loans for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. Section VIII.2. Illegality. If, after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any existing or future law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof (any such 49 53 authority, bank or agency being referred to as an "Authority" and any such event being referred to as a "Change of Law"), or compliance by any Lender (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority shall make it unlawful or impossible for any Lender (or its Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Lender shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower, whereupon until such Lender notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Euro-Dollar Loans shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such Lender shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall, on the later of (i) the date such notice is received by the Borrower and (ii) the date such Change of Law becomes applicable, prepay in full the then outstanding principal amount of each Euro-Dollar Loan of such Lender, together with accrued interest thereon and any amount due such Lender pursuant to Section 8.05(a). Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Lender (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Lenders), and such Lender shall make such a Base Rate Loan. Section VIII.3. Increased Cost and Reduced Return. (1) If after the date hereof, a Change of Law or compliance by any Lender (or its Lending Office) with any request or directive (whether or not having the force of law) of any Authority: (1) shall subject any Lender (or its Lending Office) to any tax, duty or other charge with respect to its Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans, or shall change the basis of taxation of payments to any Lender (or its Lending Office) of the principal of or interest on its Euro-Dollar Loans or any other amounts due under this Agreement in respect of its Euro-Dollar Loans or its obligation to make Euro-Dollar Loans (except for changes in the rate of tax on the overall net income of such Lender or its Lending Office imposed by the jurisdiction in which such Lender's principal executive office or Lending Office is located); or (2) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Lending Office); or (3) shall impose on any Lender (or its Lending Office) or on 50 54 the United States market for certificates of deposit or the London interbank market any other condition affecting its Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans; and the result of any of the foregoing is to increase the cost to such Lender (or its Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Lending Office) under this Agreement or under its Notes with respect thereto, by an amount deemed by such Lender to be material, then, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. (2) If any Lender shall have determined that after the date hereof the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any existing or future law, rule or regulation, or any change in the interpretation or administration thereof, or compliance by any Lender (or its Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, has or would have the effect of reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (3) Each Lender shall notify the Borrower of any event occurring after the date of this Agreement entitling such Lender to compensation under this Section as promptly as practicable, but in any event within 45 days, after the officer of such Lender responsible for the business relationship of the Lender with the Borrower obtains actual knowledge thereof; provided that (i) if any Lender fails to give such notice within 45 days after such officer obtains actual knowledge of such an event, such Lender shall with respect to compensation payable pursuant to this Section in respect of any costs resulting from such event, only be entitled to payment under this Section for costs incurred from and after the date 45 days prior to the date that such Lender does give such notice and (ii) each Lender will designate a different Lending Office for the Loans of such Lender affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be disadvantageous to such Lender or contrary to its general lending policies. Each Lender will furnish to the Borrower a certificate setting forth the basis and amount of each request by such Lender for compensation under this Section, accompanied by a statement of an officer of such Lender certifying that such request for compensation is being made pursuant to a policy adopted by such Lender to seek such compensation generally from customers similar to the Borrower. (4) The provisions of this Section 8.03 shall be applicable with respect to any Participant, Assignee or other Transferee. Section VIII.4. Base Rate Loans Substituted for Euro-Dollar Loans. If (i) the obligation of any Lender to make or maintain Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03, and the Borrower shall, by at least 5 Euro-Dollar Business Days' prior notice to such Lender through the 51 55 Administrative Agent, have elected that the provisions of this Section shall apply to such Lender, then, unless and until such Lender notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (1) all Loans which would otherwise be made by such Lender as Euro-Dollar Loans shall be made instead as Base Rate Loans (in which case interest and principal on such Loans shall be payable contemporaneously with the related Euro-Dollar Loans of the other Lenders), and (2) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. In the event that the Borrower shall elect that the provisions of this Section shall apply to any Lender, the Borrower shall remain liable for, and shall pay to such Lender as provided herein, all amounts due such Lender under Section 8.03 in respect of the period preceding the date of conversion of such Lender's Loans resulting from the Borrower's election. Section VIII.5. Compensation. Upon the request of any Lender, delivered to the Borrower and the Administrative Agent, the Borrower shall pay to such Lender such amount or amounts as shall compensate such Lender for any loss, cost or expense incurred by such Lender as a result of: (1) any payment or prepayment (pursuant to Section 2.08, Section 2.09, Section 8.02 or otherwise) of a Euro-Dollar Loan on a date other than the last day of an Interest Period for such Euro-Dollar Loan, as the case may be; (2) any failure by the Borrower to prepay a Euro-Dollar Loan on the date for such prepayment specified in the relevant notice of prepayment hereunder; or (3) any failure by the Borrower to borrow a Euro-Dollar Loan on the date for the Euro-Dollar Borrowing of which such Euro-Dollar Loan is a part specified in the applicable Notice of Borrowing delivered pursuant to Section 2.02; such compensation to include, without limitation, an amount equal to the excess, if any, of (x) the amount of interest which would have accrued on the amount so paid or prepaid or not prepaid or borrowed for the period from the date of such payment, prepayment or failure to prepay or borrow to the last day of the then current Interest Period for such Euro-Dollar Loan (or, in the case of a failure to prepay or borrow, the Interest Period for such Euro-Dollar Loan which would have commenced on the date of such failure to prepay or borrow) at the applicable rate of interest for such Euro-Dollar Loan provided for herein (excluding, however, for purposes of this Section only the Applicable Margin in determining such rate of interest) over (y) the amount of interest (as reasonably determined by such Lender) such Lender would have paid on deposits in Dollars of comparable amounts having terms comparable to such period placed with it by leading banks in the London interbank market. Section VIII.6. Replacement of Lender. In the event that any Lender gives any notice under Section 8.02 resulting in the suspension of its obligation to make Euro-Dollar 52 56 Loans or requests compensation pursuant to Section 8.03, then, so long as the condition giving rise to such suspension or compensation exists, the Borrower may designate another bank or financial institution (such bank or financial institution being herein called a "Replacement Lender") acceptable to the Administrative Agent (which acceptance will not be unreasonably withheld) and which is not an Affiliate of the Borrower, to assume such Lender's Commitment hereunder and to purchase the Loans of such Lender and such Lender's rights under this Agreement and the Notes held by such Lender, all without recourse to or representation or warranty by, or expense to, such Lender, for a purchase price equal to the outstanding principal amount of the Loans payable to such Lender plus any accrued but unpaid interest on such Loans and accrued but unpaid fees owing to such Lender plus any amounts payable to such Lender under Section 8.05 or otherwise owing to such Lender under the Loan Documents, and upon such assumption, purchase and substitution, and subject to the execution and delivery to the Administrative Agent by the Replacement Lender of documentation satisfactory to the Administrative Agent (pursuant to which such Replacement Lender shall assume the obligations of such original Lender under this Agreement), the Replacement Lender shall succeed to the rights and obligations of such Lender hereunder. In the event that the Borrower exercises its rights under the preceding sentence, the Lender against which such rights were exercised shall no longer be a party hereto or have any rights or obligations hereunder; provided that the obligations of the Borrower to such Lender under Article VIII and Section 9.03 with respect to events occurring or obligations arising before or as a result of such replacement shall survive such exercise. ARTICLE IX MISCELLANEOUS Section IX.1. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission or similar writing) and shall be given to such party at its address or telecopy number set forth on the signature pages hereof or such other address or telecopy number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopy number specified in this Section and the telecopy machine used by the sender provides a written confirmation that such telecopy has been so transmitted or receipt of such telecopy transmission is otherwise confirmed, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, and (iii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article II or Article VIII shall not be effective until received. Section IX.2. No Waivers. No failure or delay by the Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any Note or other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section IX.3. Expenses; Documentary Taxes; Indemnification. 53 57 (1) The Borrower shall pay (i) all out-of-pocket expenses of the Administrative Agent, including fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation of this Agreement and the other Loan Documents, any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default or alleged Default hereunder or thereunder and (ii) if a Default occurs, all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including fees and disbursements of counsel, in connection with such Default and collection and other enforcement proceedings resulting therefrom, including out-of-pocket expenses incurred in enforcing this Agreement and the other Loan Documents. (2) The Borrower shall indemnify the Administrative Agent and each Lender against any transfer taxes, documentary taxes, assessments or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents. (3) The Borrower shall indemnify the Administrative Agent, the Lenders and each Affiliate thereof and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by the Borrower of the proceeds of any extension of credit by any Lender hereunder or breach by the Borrower of this Agreement or any other Loan Document or from investigation, litigation (including, without limitation, any actions taken by the Administrative Agent or any of the Lenders to enforce this Agreement or any of the other Loan Documents) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing, and the Borrower shall reimburse the Administrative Agent and each Lender, and each Affiliate thereof and their respective directors, officers, employees and agents, upon demand for any expenses (including, without limitation, legal fees) incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified. Section IX.4. Setoffs; Sharing of Set-Offs. (1) The Borrower hereby grants to each Lender, as security for the full and punctual payment and performance of the obligations of the Borrower under this Agreement, a continuing lien on and security interest in all deposits and other sums credited by or due from such Lender to the Borrower or subject to withdrawal by the Borrower; and regardless of the adequacy of any collateral or other means of obtaining repayment of such obligations, each Lender may at any time upon or after the occurrence of any Event of Default, and without notice to the Borrower, set off the whole or any portion or portions of any or all such deposits and other sums against such obligations, whether or not any other Person or Persons could also withdraw money therefrom. (2) Each Lender agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest owing with respect to the Notes held by it which is greater than the proportion received by any other Lender in respect of the aggregate amount of all principal and interest owing with respect to the Notes held by such other Lender, the Lender receiving such proportionately greater payment shall purchase such participations in the Notes held by the other 54 58 Lenders owing to such other Lenders, and/or such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Lenders owing to such other Lenders shall be shared by the Lenders pro rata; provided that (i) nothing in this Section shall impair the right of any Lender to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under the Notes, and (ii) if all or any portion of such payment received by the purchasing Lender is thereafter recovered from such purchasing Lender, such purchase from each other Lender shall be rescinded and such other Lender shall repay to the purchasing Lender the purchase price of such participation to the extent of such recovery together with an amount equal to such other Lender's ratable share (according to the proportion of (x) the amount of such other Lender's required repayment to (y) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. (3) Notwithstanding the foregoing, it is hereby expressly agreed that neither the Administrative Agent nor any Lender shall have any lien or security interest in, or right to set-off against, any amount held for the Borrower (i) by the Administrative Agent's or such Lender's Affiliates, including, but not limited to, Trustco Capital Management, Inc. and Synovus Securities, Inc., or (ii) in any corporate custody account or similar account maintained at any Lender in a trust capacity, in either case as security for or for application to the Loans or other obligations owing to the Administrative Agent, or such Lender under this Agreement or the Loan Documents; provided, however, that nothing contained in this subSection (c) shall in any way be construed as limiting the ability of any such Affiliate of the Administrative Agent or any Lender to set-off against the Borrower's accounts for any amount owing to such Affiliate or such Lender arising other than under this Agreement and the Loan Documents. Section IX.5. Amendments and Waivers. (1) Any provision of this Agreement, the Notes or any other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase the Commitment of any Lender or subject any Lender to any additional obligation (provided that an Assignment and Acceptance executed in connection with an assignment effected pursuant to, and in compliance with, Section 9.07(c) shall not be deemed to be a violation of this clause (i)), (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) extend the date fixed for any payment of principal of or interest on any Loan or any fees hereunder, (iv) reduce the amount of principal, interest or fees due on any date fixed for the payment thereof, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the percentage of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement, (vi) change the manner of application of any payments made under this Agreement or the Notes, (vii) change this Section 9.05(a), (viii) 55 59 change the definition of "Required Lenders", (ix) release any Guarantor from its obligations under the Guaranty (other than any release of a Guarantor pursuant to Section 5.22(d)) or (x) release any Collateral (other than any release of Collateral pursuant to Section 5.11 or pursuant to the Intercreditor Agreement). (2) The Borrower will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement from or with any Lender, except on terms fully disclosed to the Administrative Agent (which terms the Administrative Agent shall be authorized to disclose to the Lenders). Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to the Administrative Agent (for delivery to each Lender) forthwith following the date on which the same shall have been executed and delivered by the requisite percentage of Lenders. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any Lender (in its capacity as such) as consideration for or as an inducement to the entering into by such Lender of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to all such Lenders. Section IX.6. Margin Stock Collateral. Each of the Lenders represents to the Administrative Agent and each of the other Lenders that it in good faith is not, directly or indirectly (by negative pledge or otherwise), relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. Section IX.7. Successors and Assigns. (1) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that, except as provided in paragraph (g) of this Section, the Borrower may not assign or otherwise transfer any of its rights under this Agreement. (2) Any Lender may at any time sell to one or more Persons (each a "Participant") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment hereunder or any other interest of such Lender hereunder. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. In no event shall a Lender that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder except that such Lender may agree that it will not (except as provided below), without the consent of the Participant, agree to (i) the extension of any date fixed for the payment of principal of or interest on the related Loan or Loans, (ii) the decrease of the amount of any principal, interest or fees due on any date fixed for the payment thereof with respect to the related Loan or Loans, (iii) the reduction of the principal of the related Loan or Loans, or (iv) any decrease in the rate at which either interest is payable thereon or (if the Participant is entitled to any part thereof) commitment fee is payable hereunder from the rate at which the Participant is entitled to receive interest or commitment fee (as the case may be) in 56 60 respect of such participation. The Borrower agrees that each Participant shall be entitled to the benefits of Article VIII with respect to its participation in Loans outstanding from time to time, subject to the provisions of Section 9.07(e). (3) Any Lender may at any time assign to one or more banks or financial institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume all such rights and obligations, pursuant to an Assignment and Acceptance substantially in the form attached hereto as Exhibit B, executed by such Assignee, such transferor Lender and the Administrative Agent (and, in the case of (x) an Assignee that is not then a Lender, an Affiliate of a Lender or a Related Fund of any Lender; and (y) an assignment not made during the existence of an Event of Default, by the Borrower); provided that (i) no interest may be sold by a Lender pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably equivalent portions of the transferor Lender's Commitment (provided that the Borrower and the Administrative Agent may waive the requirement contained in this clause (i)), (ii) no interest may be sold by a Lender pursuant to this paragraph (c) to any Assignee that is not then a Lender, an Affiliate of a Lender or a Related Fund of any Lender without the consent of the Borrower, which consent shall not be unreasonably withheld (provided that (1) the Borrower's consent shall not be necessary with respect to any assignment made during the existence of an Event of Default, (2) it shall not constitute the unreasonable withholding of consent if the Borrower shall decline to consent because (x) the Borrower makes a reasonable determination that it is materially more likely that the proposed Assignee will be entitled to compensation, or to a greater amount of compensation, than the transferor Lender, or (y) the proposed Assignee is a competitor, or an Affiliate of a competitor, of the Borrower or any Subsidiary), and (3) Wachovia may at any time and from time to time, without consent of the Borrower, assign to one or more Assignees up to $68,750,000 of its Loans and Commitment, and (iii) the minimum amount of any Commitment, and the minimum aggregate principal amount of Loans, that may be so assigned by any transferor Lender shall be $5,000,000 (provided that (1) a Lender may assign all of its Commitment and its Loans even if the amount of its Commitment and the aggregate principal amount of its Loans is less than $5,000,000, (2) the Administrative Agent and the Borrower may waive the requirement contained in this clause (iii) without the consent of any Lender, and (3) if the proposed assignment is to be made to a then existing Lender, an Affiliate of a Lender or a Related Fund of any Lender, the minimum amount of any Commitment, and the minimum aggregate principal amount of Loans, so assigned shall be only $1,000,000). Upon (A) execution of the Assignment and Acceptance by such transferor Lender, such Assignee, the Administrative Agent and (if applicable) the Borrower, (B) delivery of an executed copy of the Assignment and Acceptance to the Borrower and the Administrative Agent, (C) payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, and (D) payment by such transferor Lender to the Administrative Agent of a processing and recordation fee of $500, if the Assignee is an Agent or a Lender, an Affiliate of a Lender or a Related Fund of any 57 61 Lender, or $3,500 in any other case, such Assignee shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by the Borrower, the Lenders or the Administrative Agent shall be required. Upon the consummation of any transfer to an Assignee pursuant to this paragraph (c), the transferor Lender, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to each of such Assignee and such transferor Lender. (4) Subject to the provisions of Section 9.08, the Borrower authorizes each Lender to disclose to any Participant, Assignee or other transferee (each a "Transferee") and any prospective Transferee any and all financial and other information in such Lender's possession concerning the Borrower which has been delivered to such Lender by the Borrower pursuant to this Agreement or which has been delivered to such Lender by the Borrower in connection with such Lender's credit evaluation prior to entering into this Agreement. (5) No Transferee shall be entitled to receive any greater payment under Section 8.03 than the transferor Lender would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02 or 8.03 requiring such Lender to designate a different Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (6) Anything in this Section 9.07 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of the Loans and/or obligations owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Loans and/or obligations made by the Borrower to the assigning and/or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Loans and/or obligations to the extent of such payment. No such assignment shall release the assigning and/or pledging Lender from its obligations hereunder. Section IX.8. Confidentiality. Each Lender agrees to exercise its best efforts to keep any information delivered or made available by the Borrower to it which such Lender knows to be or which is clearly indicated to be confidential information, confidential from anyone other than persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided, however, that nothing herein shall prevent any Lender from disclosing such information (i) to any other Lender, (ii) upon the order of any court or administrative agency, (iii) to any regulatory agency or authority having jurisdiction over such Lender, upon the request or demand of such regulatory agency or authority, (iv) which has been publicly disclosed (unless such Lender knows such disclosure was made by a Person in violation of a confidentiality agreement with or confidentiality obligation to the Borrower or any Subsidiary), (v) to the extent reasonably required in connection with any litigation to which the Administrative Agent, any Lender or their respective Affiliates may be a party, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Lender's legal counsel and independent 58 62 auditors and (viii) to any actual or proposed Participant, Assignee or other Transferee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section 9.08. Section IX.9. Representation by Lenders. Each Lender hereby represents that it is a commercial lender or financial institution which makes or invests in loans in the ordinary course of its business and that it will make its Loans hereunder for its own account in the ordinary course of such business; provided, however, that, subject to Section 9.07, the disposition of the Note or Notes held by that Lender shall at all times be within its exclusive control. Section IX.10. Obligations Several. The obligations of each Lender hereunder are several, and no Lender shall be responsible for the obligations or commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by the Lenders pursuant hereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall, subject to Article VI, be entitled to protect and enforce its rights arising out of this Agreement or any other Loan Document and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. Section IX.11. Survival of Certain Obligations. Sections 8.03(a), 8.03(b), 8.05 and 9.03 of this Agreement and the obligations of the Borrower thereunder shall, without duplication, survive and continue to be enforceable notwithstanding the termination of this Agreement and the Commitments and the payment in full of the principal of and interest on all Loans. Section IX.12. New York Law. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of New York. Section IX.13. Severability. In case any one or more of the provisions contained in this Agreement, the Notes or any of the other Loan Documents should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and shall be enforced to the greatest extent permitted by law. Section IX.14. Interest. In no event shall the amount of interest due or payable hereunder or under the Notes exceed the maximum rate of interest allowed by applicable law, and in the event any such payment is inadvertently made to any Lender by the Borrower or inadvertently received by any Lender, then such excess sum shall be credited as a payment of principal, unless the Borrower shall notify such Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Lenders not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. Section IX.15. Interpretation. No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being 59 63 deemed to have structured or dictated such provision. Section IX.16. Consent to Jurisdiction. The Borrower (a) submits to personal jurisdiction in the State of New York, the courts thereof and the United States District Courts sitting therein, for the enforcement of this Agreement, the Notes and the other Loan Documents, (b) waives any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of New York for the purpose of litigation to enforce this Agreement, the Notes or the other Loan Documents, and (c) agrees that service of process may be made upon it in the manner prescribed in Section 9.01 for the giving of notice to the Borrower. Nothing herein contained, however, shall prevent the Administrative Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. Section IX.17. EDGAR Filing. Promptly after the Effective Date, the Administrative Agent agrees to deliver to the Borrower a 3 1/2 inch high density computer disk containing the final form of this Agreement, formatted on WordPerfect 6.1. After the execution and delivery of any amendment, modification or supplement to this Agreement, the Administrative Agent agrees to deliver to the Borrower, upon request of the Borrower, a 3 1/2 inch high density computer disk or other electronic or computer record mutually agreeable to the Borrower and the Administrative Agent containing the final form of such amendment, modification or supplement, formatted on WordPerfect 6.1 or other software program mutually agreeable to the Borrower and the Administrative Agent. Section IX.18. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 60 64 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under seal, by their respective authorized officers as of the day and year first above written. CARMIKE CINEMAS, INC. By:/s/ John O. Barwick, III (SEAL) -------------------------------- Title: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 Attention: John O. Barwick, III Senior Vice President and Chief Financial Officer Telecopy number: (706) 576-3419 Telephone number: (706) 576-3400 61 65 COMMITMENTS $36,875,000 WACHOVIA BANK, N.A., as Administrative Agent and as a Lender By:/s/ Reginald T. Dawson (SEAL) ------------------------------ Title: Lending Office -------------- Wachovia Bank, N.A. Syndication Services 191 Peachtree Street, N.E. Mail Code: GA-0423 Atlanta, Georgia 30303-1757 Attention: Valerie Monroe (27th floor) Telecopy Number: (404) 332-4005 Telephone Number: (404) 332-1439 with a copy to: -------------- Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attention: Reginald Dawson Telecopy number: (404) 332-6920 Telephone number: (404) 332-4075 62 66 $15,625,000 GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication Agent and as a Lender By:/s/ E.C. Forst (SEAL) ----------------------------- Title: Lending Office -------------- Goldman Sachs Credit Partners L.P. 85 Broad Street, 15th Floor New York, New York 10004 Attention: Steve King Telecopier No: 212-357-0932 Telephone No: 212-902-8123 63 67 $4,000,000 FIRST UNION NATIONAL BANK, as Documentation Agent and as a Lender By:/s/ David B. Kraybill (SEAL) ------------------------------ Title: Lending Office -------------- First Union National Bank 301 South College, DC-5 Charlotte, North Carolina 28288-0735 Attention: David Kraybill Telecopy number: (704) 374-4092 Telephone number: (704) 383-7615 with a copy to: -------------- First Union National Bank 999 Peachtree Street 12th Floor Atlanta, Georgia 30309 Attention: Donald Q. Dalton Telecopy number: (404) 225-4255 Telephone number: (404) 225-4004 64 68 $3,125,000 KZH ING-2 LLC, as a Term Lender By:/s/ V. Conway -------------------------------- Title: Lending Office -------------- KZH ING-2 LLC c/o The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, New York 10001 Attention: Virginia Conway Telecopy number: (212) 946-7776 Telephone Number: (212) 946-7575 65 69 $3,125,000 ARCHIMEDES FUNDING II, LTD., as a Term Lender By: ING Capital Advisors, Inc., as Collateral Manager By:/s/ Jane M. Nelson -------------------------- Title: Lending Office -------------- ARCHIMEDES FUNDING II, LTD c/o ING Capital Advisors, Inc. as Collateral Manager 233 W. Wacker Drive Attention: Jane Nelson Suite 5200 Chicago Illinois 60606 66 70 $2,250,000 FLOATING RATE PORTFOLIO, as a Term Lender By: Invesco Senior Secured Management, Inc., as attorney in fact By:/s/ Kathleen A. Lenarcic -------------------------------------- Title: Lending Office -------------- FLOATING RATE PORTFOLIO c/o INVESCO Senior Secured Management, Inc. 1166 Avenue of the Americas New York, NY 10335 Attention: Kathleen Lenarcic Telecopy number: (212) 278-9847 Telephone number: (212) 278-9794 67 71 [INTENTIONALLY LEFT BLANK] 68 72 $5,000,000 OSPREY INVESTMENTS PORTFOLIO, as a Term Lender By: Citibank, N.A., as Manager By:/s/ Hans L. Christensen ------------------------------ Title: Lending Office: -------------- OSPREY INVESTMENTS PORTFOLIO c/o Citibank Global Asset Management 599 Lexington Avenue 26th Floor/Zone 10 New York, NY 10043 Attention: Daniel Slotkin Telecopy number: (212) 793-1871 Telephone number: (212) 559-9191 69 73 $5,000,000 FRANKLIN FLOATING RATE TRUST, as a Term Lender By:/s/ Chauncey Lufkin ------------------------------- Title: Lending Office: -------------- FRANKLIN FLOATING RATE TRUST 777 Mariners Island Blvd. San Mateo, CA 94404 Attention: Mr. Richard Hsu Telecopy number: (650) 312-3346 Telephone number: (650) 312-3732 - ----------------- TOTAL COMMITMENTS: $75,000,000 70 EX-10.8 9 EMPLOYMENT AGREEMENT BETWEEN C.L.PATRICK & CARMIKE 1 EXHIBIT 10.8 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated this the 10th day of August, 1998, among CARMIKE CINEMAS, INC., a Delaware corporation (the "Company"), and CARL L. PATRICK, 2701 Lynda Lane, Columbus, GA 31906 (the "Executive"), sometimes hereinafter referred to collectively as the "Parties". W I T N E S S E T H : NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1. EMPLOYMENT: As a senior executive officer (a) the Company agrees to employ the Executive, and the Executive agrees to work for the Company for a period (hereinafter called the "Employment Period") commencing on the date of this Agreement and ending at the expiration of five (5) years from said date, provided, however, that on December 31 of each year hereof, the term hereof shall be extended for one (1) year providing that neither the Company nor the Executive shall have given written notice to the other during the thirty (30) days prior to such anniversary date of its or his wish not to so extend this Agreement. (b) The Executive shall during the Employment Period have the duties as are customarily performed by Chief Executive Officers of Company. 2. COMPENSATION: (a) Company will continue to pay Executive during the Employment Period a basic minimum gross compensation of $290,492.40 per year. Salary shall be payable semi-monthly in arrears, and shall be subject to such payroll and withholding deductions as are required by law. (b) The Executive will during the term of the Employment Period be entitled to participate in the Welfare Benefit Plans. (c) The Executive will during the term of the Employment Period be entitled to participate in the Executive Bonus Plan and the Incentive Stock Option Plan. (d) The base salary stated in 2 (a) above shall be increased to reflect increases in the cost of living on the following basis: The salary shall be increased in the same proportion as the Urban Wage and Clerical Employees for All U.S. Cities Index shall increase as reported by the U. S. Department of Labor. The base period shall be the data published for the month of December 1996. In January of each year (during the term hereof, beginning in 1998) the ratio of the amount reported for the proceeding December and for the base period shall be computed. For the fiscal year beginning with January 1998, the base salary to be paid that year shall be an amount in the same proportion to the base salary as the preceding December index bears to the index for December 1996. 3. INSURANCE-DEATH BENEFIT. (a) If the Executive dies during the term of the Employment Period, the Company shall pay to the surviving spouse of the Executive, or to such other person as the Executive may designate in writing the sum of 1 2 one (1) year's salary, which payment shall be made monthly for twelve (12) months following the date of his death. (b) The Executive understands that the Company has purchased Key Man insurance on the life of the Executive, of which Company shall be the designated beneficiary. Accordingly, Executive herewith agrees to submit to such physical examination as may be required by any insurance company to bind the amount of insurance the Company wishes to purchase on Executive's life. 4. TRAVEL AND ENTERTAINMENT EXPENSE ALLOWANCES. (a) In addition to the compensation to be paid to the Executive, the Company shall, during the Employment Period, reimburse the Executive for all reasonable and necessary expenses actually incurred by him in performance of his duties. In addition, the Company during the Employment Period shall reimburse the Executive consistent with past practice of the Company with respect to paying or reimbursing the Executive for certain items. (b) Company shall during the Employment Period provide Executive with a car and driver for use by Executive in the performance of his duties. 5. EMPLOYMENT PERIOD. (a) The "Employment Period" shall commence on the date set forth above; provided, however, that should the Executive's employment by the Company be earlier terminated as hereinafter set forth in this section, the Employment Period shall end on the date of such earlier termination. (b) The Employment Period shall be terminated; (i) upon the death of the Executive; (ii) in the event that because of any physical or mental disability, the Executive is unable to perform, does not perform for a continuous period of six (6) months his duties as an Executive Officer, by written notice therefor; (iii) by the Company for cause, by delivery to the Executive of a written notice specifying such termination and the reasons therefor. During the period after notice is given and before termination of employment becomes effective, the Executive shall continue to be a regular employee of the Company, and shall be entitled to receive his salary and prerequisite to the extent of his participation prior to the giving of such notice. (c) For the purpose of this Section 5, "cause" shall mean willful malfeasance. 6. CHANGE IN CONTROL. (a) In General: In the event there is a Change in Control (as defined in this paragraph) of Company, this Agreement shall, in order to help to eliminate the uncertainties and concerns which may arise at such time, be automatically extended for a period of three (3) years, beginning on the first day of the month during which such Change in Control shall occur, upon all the same terms and provisions contained herein. (b) Definition: A "Change in Control" shall be deemed to have occurred upon the happening of any one of the following circumstances: (1) A change in stock ownership which would be required to be reported as a "Change in Control" pursuant to the Securities Act of 1934, as Amended, or any similar Federal or State reporting requirement; 2 3 (2) Any person, group (as used in Section 13 (d) (3) of the Securities Act of 1934) or organization becomes the beneficial owner, directly or indirectly, of 20% or more of the combined voting power of Company's outstanding stock; (3) The individuals constituting the existing Board of Directors cease, at any time during the term of this Agreement or any extensions hereof, to constitute at least a majority of the Board; (4) The stockholders of Company have approved a merger or sale of all or substantially all of the assets of Company; (5) Company combines with another Company and is the surviving company, but, immediately after the combination, the shareholders of Company immediately prior to the combination hold, directly or indirectly, less than 50% of the voting control of the combined company. (c) No Requirement to Seek Employment and No Offset: Company agrees that if Executive's employment is terminated by Company during the term of this Agreement, following a Change in Control, Executive is not required to seek other employment or attempt in any way to reduce the amounts payable to Executive by Company pursuant to the applicable terms of this Agreement or extensions hereof; it being understood and agreed that the amount of any payment or benefit to Executive provided for hereunder shall not be reduced by any compensation earned by Executive as a result of his employment by another employer, by any retirement benefits or by Company's attempt to offset any amount claimed to be owed by Executive to Company or otherwise. (d) Executive's Termination for "Good Reason": If following a Change in Control, Executive terminates his employment hereunder for "Good Reason", as hereinafter defined, Executive shall be entitled to all of the compensation and benefits provided for under this Agreement, or any extension hereof, as if Company had terminated Executive "without cause". Termination by Executive for "Good Reason" shall mean the occurrence of any one or more of the following events: (1) Any breach by Company of the terms and conditions of this Agreement, or any extensions hereof, effecting Executive's salary and bonus compensation, employee benefits, stock options or the loss of any of Executive's titles or positions with Company; (2) A significant diminution of Executive's duties and responsibilities; (3) The assignment to Executive of any duties inconsistent with his duties and responsibilities existing at the time of a Change in Control; 3 4 (4) Any purported termination of Executive's employment by Company other than as permitted by this Agreement; (5) The relocation of Company's principal office or Executive's own office to any place outside an area which is within 25 miles of the current principal office of Company in Columbus, Georgia; (6) The failure of any successor to Company to expressly assume and agree to discharge Company's obligations to Executive under this Agreement, or any extensions hereof, in form and substance satisfactory to Executive. 7. COVENANT NOT TO COMPETE; TRADE SECRETS. (a) Executive agrees that he will during the period set forth herein, and for a period of two (2) years thereafter, not accept employment with, or participate, directly or indirectly, as owner, stockholder, director, officer, manager, consultant or agent, or otherwise use his special, unique or extraordinary skills or knowledge with respect to the Company's business in or with any business, firm, corporation, partnership, association, venture or other entity or person which is engaged in the business of ownership and management of motion picture theatres, except this shall not be construed to prohibit Executive from owning an insubstantial fraction of the securities of a corporation which is publicly traded on a securities exchange or over the counter. (b) Trade Secrets: Executive further agrees that he will not, at any time during the period described in (a) above, or thereafter, disclose to any party other than the Company any trade secrets or other Confidential Information, learned or obtained by him while he is a stockholder, officer or director of the Company. As used herein, the term "Confidential Information" means information disclosed to the Executive or known by him as a consequence of or through his employment by the Company and not generally known in the industry to which the Company is engaged, and which in any way relates to the Company's products, processes, services, inventions (whether patentable or not), formulas, techniques or know how, including, but not limited to, information relating to research, development, manufacturing, purchasing, accounting, engineering, marketing, merchandising and selling. In the event of a breach or threatened breach by the Executive of the provisions of this Section 6, the parties agree that the Company's remedies at law would be inadequate, and the Company shall be entitled to an injunction to enforce such provisions. 8. ASSIGNMENT. The rights and obligations of the Executive and the Company under this Employment Agreement shall inure to the benefit of the parties, and shall be binding upon the Company and upon the successors and assigns of the Company. The Executive may not assign his rights or obligations hereunder. 9. NOTICES. All notices and requests hereunder shall be in writing and shall be delivered in person, or by certified mail, return receipt requested, postage prepaid, to the Company with a copy to Michael W. Patrick, P. O. Box 391, Columbus, GA 31902-0391, and if to the Executive, addressed to him at 2701 Lynda Lane, Columbus, GA 31906. 4 5 Such notices and requests shall be deemed delivered on the date on which personally delivered, or if delivered by certified mail, return receipt requested, the date sent. Either party may change his or its address for receipt of notices and requests hereunder by notice duly given to the other party in accordance with the provisions of this Section. 10. GOVERNING LAW. The laws of the State of Georgia shall govern all questions relative to the interpretation and construction of this Employment Agreement, and to the performance hereof. 11. SEVERABILITY. In case any one or more of the provisions or part(s) of a provision contained in this Employment Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part(s) of a provision of this Employment Agreement, but this Employment Agreement shall be reformed and construed as if such invalid, illegal or unenforceable provision or part(s) of a provision had never been contained herein, and such provision or part(s) reformed so that it would be valid, legal and enforceable to the maximum extent permitted. 12. WAIVER. No waiver by either party of any default hereunder, or by the other shall in any way prejudice the waiving party with respect to any subsequent default hereunder (whether or not similar) by the other party. 13. HEADINGS OF NO EFFECT. The headings and captions hereof have been inserted solely for convenience of reference, and shall in no way define, limit or describe any of the provisions of this Employment Agreement. 14. ENTIRE AGREEMENT. This instrument contains the entire Agreement of the parties, it may not be changed orally, but only by an instrument in writing, signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 15. ARBITRATION. The exclusive procedure for resolution of any dispute under this Agreement shall be by arbitration in Atlanta, GA before one arbitrator, in accordance with the rules then existing of the American Arbitration Association. The award of the arbitrator shall be final and binding upon the parties, and judgment upon the award may be entered in any court having jurisdiction thereof. The cost of arbitration, if any, shall be divided equally between the parties. Each party shall otherwise bear its or his own expense. 16. This Employment Agreement supersedes any previous employment agreement, and same are null and void, and of no legal effect whatsoever. 5 6 IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first above written. COMPANY: CARMIKE CINEMAS, INC. BY:/s/ John O. Barwick, III -------------------------------------- Authorized Signature EXECUTIVE: /s/ Carl L. Patrick ----------------------------------------- CARL L. PATRICK 6 EX-10.9 10 EMPLOYMENT AGREEMENT BETWEEN W. PATRICK & CARMIKE 1 EXHIBIT 10.9 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT dated this the 10th day of August, 1998, among CARMIKE CINEMAS, INC., a Delaware corporation (the "Company"), and MICHAEL W. PATRICK, 7233 Standing Boy Road, Columbus, GA 31904 (the "Executive"), sometimes hereinafter referred to collectively as the "Parties". W I T N E S S E T H : NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows: 1. EMPLOYMENT: As a senior executive officer (a) the Company agrees to employ the Executive, and the Executive agrees to work for the Company for a period (hereinafter called the "Employment Period") commencing on the date of this Agreement and ending at the expiration of five (5) years from said date, provided, however, that on December 31 of each year hereof, the term hereof shall be extended for one (1) year providing that neither the Company nor the Executive shall have given written notice to the other during the thirty (30) days prior to such anniversary date of its or his wish not to so extend this Agreement. (b) The Executive shall during the Employment Period have the duties as are prescribed by the Board of Directors to whom he shall report. 2. COMPENSATION: (a) Company will continue to pay Executive during the Employment Period a basic minimum gross compensation of $557,650.81 per year. Salary shall be payable semi-monthly in arrears, and shall be subject to such payroll and withholding deductions as are required by law. (b) The Executive will during the term of the Employment Period be entitled to participate in the Welfare Benefit Plans. (c) The Executive will during the term of the Employment Period be entitled to participate in the Executive Bonus Plan and the Incentive Stock Option Plan. (d) The base salary stated in 2 (a) above shall be increased to reflect increases in the cost of living on the following basis: The salary shall be increased in the same proportion as the Urban Wage and Clerical Employees for All U.S. Cities Index shall increase as reported by the U. S. Department of Labor. The base period shall be the data published for the month of December 1996. In January of each year (during the term hereof, beginning in 1998) the ratio of the amount reported for the proceeding December and for the base period shall be computed. For the fiscal year beginning with January 1998, the base salary to be paid that year shall be an amount in the same proportion to the base salary as the preceding December index bears to the index for December 1996. 3. INSURANCE-DEATH BENEFIT. (a) If the Executive dies during the term of the Employment Period, the Company shall pay to the surviving spouse of the Executive, or to such other person as the Executive may designate in writing the sum of 1 2 one (1) year's salary, which payment shall be made monthly for twelve (12) months following the date of his death. (b) The Executive understands that the Company has purchased Key Man insurance on the life of the Executive, of which Company shall be the designated beneficiary. Accordingly, Executive herewith agrees to submit to such physical examination as may be required by any insurance company to bind the amount of insurance the Company wishes to purchase on Executive's life. 4. TRAVEL AND ENTERTAINMENT EXPENSE ALLOWANCES. (a) In addition to the compensation to be paid to the Executive, the Company shall, during the Employment Period, reimburse the Executive for all reasonable and necessary expenses actually incurred by him in performance of his duties. In addition, the Company during the Employment Period shall reimburse the Executive consistent with past practice of the Company with respect to paying or reimbursing the Executive for certain items. (b) Company shall during the Employment Period provide Executive with a car and driver for use by Executive in the performance of his duties. 5. EMPLOYMENT PERIOD. (a) The "Employment Period" shall commence on the date set forth above; provided, however, that should the Executive's employment by the Company be earlier terminated as hereinafter set forth in this section, the Employment Period shall end on the date of such earlier termination. (b) The Employment Period shall be terminated; (i) upon the death of the Executive; (ii) in the event that because of any physical or mental disability, the Executive is unable to perform, does not perform for a continuous period of six (6) months his duties as an Executive Officer, by written notice therefor; (iii) by the Company for cause, by delivery to the Executive of a written notice specifying such termination and the reasons therefor. During the period after notice is given and before termination of employment becomes effective, the Executive shall continue to be a regular employee of the Company, and shall be entitled to receive his salary and prerequisite to the extent of his participation prior to the giving of such notice. (c) For the purpose of this Section 5, "cause" shall mean willful malfeasance. 6. CHANGE IN CONTROL. (a) In General: In the event there is a Change in Control (as defined in this paragraph) of Company, this Agreement shall, in order to help to eliminate the uncertainties and concerns which may arise at such time, be automatically extended for a period of five (5) years, beginning on the first day of the month during which such Change in Control shall occur, upon all the same terms and provisions contained herein. (b) Definition: A "Change in Control" shall be deemed to have occurred upon the happening of any one of the following circumstances: (1) A change in stock ownership which would be required to be reported as a "Change in Control" pursuant to the Securities Act of 1934, as Amended, or any similar Federal or State reporting requirement; 2 3 (2) Any person, group (as used in Section 13 (d) (3) of the Securities Act of 1934) or organization becomes the beneficial owner, directly or indirectly, of 20% or more of the combined voting power of Company's outstanding stock; (3) The individuals constituting the existing Board of Directors cease, at any time during the term of this Agreement or any extensions hereof, to constitute at least a majority of the Board; (4) The stockholders of Company have approved a merger or sale of all or substantially all of the assets of Company; (5) Company combines with another Company and is the surviving company, but, immediately after the combination, the shareholders of Company immediately prior to the combination hold, directly or indirectly, less than 50% of the voting control of the combined company. (c) No Requirement to Seek Employment and No Offset: Company agrees that if Executive's employment is terminated by Company during the term of this Agreement, following a Change in Control, Executive is not required to seek other employment or attempt in any way to reduce the amounts payable to Executive by Company pursuant to the applicable terms of this Agreement or extensions hereof; it being understood and agreed that the amount of any payment or benefit to Executive provided for hereunder shall not be reduced by any compensation earned by Executive as a result of his employment by another employer, by any retirement benefits or by Company's attempt to offset any amount claimed to be owed by Executive to Company or otherwise. (d) Executive's Termination for "Good Reason": If following a change in Control, Executive terminates his employment hereunder for "Good Reason", as hereinafter defined, Executive shall be entitled to all of the compensation and benefits provided for under this Agreement, or any extension hereof, as if Company had terminated Executive "without cause". Termination by Executive for "Good Reason" shall mean the occurrence of any one or more of the following events: (1) Any breach by Company of the terms and conditions of this Agreement, or any extensions hereof, effecting Executive's salary and bonus compensation, employee benefits, stock options or the loss of any of Executive's titles or positions with Company; (2) A significant diminution of Executive's duties and responsibilities; (3) The assignment to Executive of any duties inconsistent with his duties and responsibilities existing at the time of a Change in Control; 3 4 (4) Any purported termination of Executive's employment by Company other than as permitted by this Agreement; (5) The relocation of Company's principal office or Executive's own office to any place outside an area which is within 25 miles of the current principal office of Company in Columbus, Georgia; (6) The failure of any successor to Company to expressly assume and agree to discharge Company's obligations to Executive under this Agreement, or any extensions hereof, in form and substance satisfactory to Executive. 7. COVENANT NOT TO COMPETE; TRADE SECRETS. (a) Executive agrees that he will during the period set forth herein, and for a period of two (2) years thereafter, not accept employment with, or participate, directly or indirectly, as owner, stockholder, director, officer, manager, consultant or agent, or otherwise use his special, unique or extraordinary skills or knowledge with respect to the Company's business in or with any business, firm, corporation, partnership, association, venture or other entity or person which is engaged in the business of ownership and management of motion picture theatres, except this shall not be construed to prohibit Executive from owning an insubstantial fraction of the securities of a corporation which is publicly traded on a securities exchange or over the counter. (b) Trade Secrets: Executive further agrees that he will not, at any time during the period described in (a) above, or thereafter, disclose to any party other than the Company any trade secrets or other Confidential Information, learned or obtained by him while he is a stockholder, officer or director of the Company. As used herein, the term "Confidential Information" means information disclosed to the Executive or known by him as a consequence of or through his employment by the Company and not generally known in the industry to which the Company is engaged, and which in any way relates to the Company's products, processes, services, inventions (whether patentable or not), formulas, techniques or know how, including, but not limited to, information relating to research, development, manufacturing, purchasing, accounting, engineering, marketing, merchandising and selling. In the event of a breach or threatened breach by the Executive of the provisions of this Section 6, the parties agree that the Company's remedies at law would be inadequate, and the Company shall be entitled to an injunction to enforce such provisions. 8. ASSIGNMENT. The rights and obligations of the Executive and the Company under this Employment Agreement shall inure to the benefit of the parties, and shall be binding upon the Company and upon the successors and assigns of the Company. The Executive may not assign his rights or obligations hereunder. 9. NOTICES. All notices and requests hereunder shall be in writing and shall be delivered in person, or by certified mail, return receipt requested, postage prepaid, to the Company with a copy to Mr. Carl L. Patrick, P. O. Box 391, Columbus, GA 31902-0391, and if to the Executive, addressed to him at P. O. Box 391, 1301 First Avenue, Columbus, GA 31901-2109. 4 5 Such notices and requests shall be deemed delivered on the date on which personally delivered, or if delivered by certified mail, return receipt requested, the date sent. Either party may change his or its address for receipt of notices and requests hereunder by notice duly given to the other party in accordance with the provisions of this Section. 10. GOVERNING LAW. The laws of the State of Georgia shall govern all questions relative to the interpretation and construction of this Employment Agreement, and to the performance hereof. 11. SEVERABILITY. In case any one or more of the provisions or part(s) of a provision contained in this Employment Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part(s) of a provision of this Employment Agreement, but this Employment Agreement shall be reformed and construed as if such invalid, illegal or unenforceable provision or part(s) of a provision had never been contained herein, and such provision or part(s) reformed so that it would be valid, legal and enforceable to the maximum extent permitted. 12. WAIVER. No waiver by either party of any default hereunder, or by the other shall in any way prejudice the waiving party with respect to any subsequent default hereunder (whether or not similar) by the other party. 13. HEADINGS OF NO EFFECT. The headings and captions hereof have been inserted solely for convenience of reference, and shall in no way define, limit or describe any of the provisions of this Employment Agreement. 14. ENTIRE AGREEMENT. This instrument contains the entire Agreement of the parties, it may not be changed orally, but only by an instrument in writing, signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 15. ARBITRATION. The exclusive procedure for resolution of any dispute under this Agreement shall be by arbitration in Atlanta, GA before one arbitrator, in accordance with the rules then existing of the American Arbitration Association. The award of the arbitrator shall be final and binding upon the parties, and judgment upon the award may be entered in any court having jurisdiction thereof. The cost of arbitration, if any, shall be divided equally between the parties. Each party shall otherwise bear its or his own expense. 16. This Employment Agreement supersedes any previous employment agreement, and same are null and void, and of no legal effect whatsoever. 5 6 IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first above written. COMPANY: CARMIKE CINEMAS, INC. BY:/s/ John O. Barwick, III -------------------------------------- Authorized Signature EXECUTIVE: /s/ Michael W. Patrick ----------------------------------------- MICHAEL W. PATRICK 6 EX-21 11 LIST OF SUBSIDIARIES 1 EXHIBIT 21 CARMIKE CINEMAS, INC. LIST OF SUBSIDIARIES
SUBSIDIARY STATE OF INCORPORATION % OWNED - --------------------------- ------------------------ ------- Eastwynn Theatres, Inc. Alabama 100% Wooden Nickel Pub, Inc. Delaware 100% Military Services, Inc. Delaware 80%
EX-23 12 CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements Forms S-8 (No. 33-13723 and 33-48011) pertaining to the stock option plan of Carmike Cinemas, Inc. and Form S-8 (No. 333-53329) pertaining to Carmike Cinemas, Inc.'s 1998 Class A Stock Option Plan of our report dated February 25, 1999, with respect to the consolidated financial statements and schedule of Carmike Cinemas, Inc. and subsidiaries included in the Annual Report (Form 10-K), for the year ended December 31, 1998. /s/ Ernst & Young LLP Columbus, Georgia March 22, 1999 EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K OF CARMIKE CINEMAS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 17,771 801 522 0 3,851 28,831 733,934 160,322 697,543 84,665 0 0 550 341 225,418 697,543 151,034 481,568 19,911 458,534 37,502 0 27,230 (48,813) (18,166) (30,647) 0 0 0 (30,647) (2.73) (2.73) Total costs includes impairment of long-lived assets charge of 38.3 million and restructuring charge of 34.7 million.
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