-----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, ELZJLkhRfQknlo/SlEyjI4rRifRt+GyIRrPfsuOmx6+Y2fnP/+odDmgpV1BZsWtL a30T2Zwa3OgZ8jK4Qi+H8w== 0000950144-02-003311.txt : 20020415 0000950144-02-003311.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950144-02-003311 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020401 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: 1934 Act SEC FILE NUMBER: 000-14993 FILM NUMBER: 02597813 BUSINESS ADDRESS: STREET 1: 1301 FIRST AVE CITY: COLUMBUS STATE: GA ZIP: 31901 BUSINESS PHONE: 7065763400 MAIL ADDRESS: STREET 1: P O BOX 391 CITY: COLUMBUS STATE: GA ZIP: 31994 10-K 1 g74873e10-k.txt CARMIKE CINEMAS, INC. 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| Annualreport pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended DECEMBER 31, 2001 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 000-14993 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: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.03 PER SHARE 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 |_| Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes |X| No |_| As of March 15, 2002, approximately 9,000,000 shares of Common Stock, par value $.03 per share, were outstanding and the aggregate market value of the shares of the Common Stock held by non-affiliates of the registrant was approximately $21,688,967.40. DOCUMENTS INCORPORATED BY REFERENCE Specified portions of Carmike Cinemas, Inc.'s Proxy Statement relating to the 2002 Annual Meeting of Stockholders are incorporated by reference into Part III. TABLE OF CONTENTS
PAGE NUMBER ------ PART I ITEM 1. BUSINESS..................................................................................3 ITEM 2. PROPERTIES...............................................................................17 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..............................................................20 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........................................................................48 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..............................................48 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.....49 *PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .....................................49 ITEM 11. EXECUTIVE COMPENSATION...................................................................49 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...........................49 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........................................49 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..........................50
*Incorporated by reference from 2002 Proxy Statement. 2 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. PART I ITEM 1. BUSINESS. OVERVIEW Carmike Cinemas, Inc. ("Carmike" or the "Company") is a premiere motion picture exhibitor in the United States. As of December 31, 2001, the Company operated 323 theatres with an aggregate of 2,333 screens located in 35 states. Carmike's theatres are primarily located in small to mid-sized communities ranging in population size from approximately 8,000 to 500,000. As of December 31, 2001, management believes that Carmike was the sole exhibitor in approximately 70% of its free 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. RECENT DEVELOPMENTS Proceedings Under Chapter 11 of the Bankruptcy Code From August 8, 2000 to January 31, 2002, Carmike operated its business and managed its properties under the protection of the reorganization provisions of chapter 11 of title 11 of the U.S. Code (the "Bankruptcy Code"). On August 8, 2000 (the "Petition Date") Carmike and its subsidiaries Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. 3 (collectively, the "Debtors") filed voluntary petitions for relief under chapter 11 (the "Chapter 11 Cases") of the Bankruptcy Code. On January 4, 2002, the United States Bankruptcy Court for the District of Delaware entered an order confirming the Debtors' Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated as of November 14, 2001 (the "Plan"). The Plan became effective on January 31, 2002 (the "Effective Date") and, on the Effective Date, Carmike filed with the Secretary of State for the State of Delaware the Amended and Restated Certificate of Incorporation (the "Restated Certificate"), which cancelled all then existing Class A and Class B Common Stock and Preferred Stock and established authorized capital stock of twenty million (20,000,000) shares of reorganized Carmike Common Stock, par value $.03 per share, and one million (1,000,000) shares of reorganized Carmike Preferred Stock, par value $1.00 per share. The Company currently has only reorganized Carmike Common Stock outstanding and has approximately nine million (9,000,000) shares of such stock outstanding. Material features of the Plan are: - The Plan provides for the issuance or reservation for future issuance of ten million (10,000,000) shares of reorganized Carmike Common Stock in the aggregate. - The holders of Carmike's cancelled Class A and Class B Common Stock received in the aggregate 22.2% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. - The holders of Carmike's cancelled 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock (the "Series A Preferred Stock") received in the aggregate 41.2% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. - Certain holders of $45,685,000 in aggregate principal amount of the cancelled 9-3/8% Senior Subordinated Notes due 2009 issued by Carmike prior to the Chapter 11 Cases (the "Original Senior Subordinated Notes") received in the aggregate 26.6% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. - Carmike reserved one million (1,000,000) shares of the reorganized Carmike Common Stock for issuance under a new management incentive plan (the "2002 Stock Plan"). - The holders of Bank Claims (as defined below) in the Chapter 11 Cases received New Bank Debt (as defined below) and cash in the amount of approximately $35 million plus accrued and unpaid post-petition interest on the Bank Claims from January 15, 2002 to the Effective Date. "Bank Claims" consisted of claims of certain banks arising under: (i) the Amended and Restated Credit Agreement among the Company, the banks party thereto and Wachovia Bank, N.A., as agent, dated as of January 29, 1999, and amended as of March 31, 2000 and (ii) the Term Loan Credit Agreement among the Company, the banks party thereto, Wachovia Bank, NA., as administrative agent, Goldman Sachs Credit Partners, L.P., as syndication agent, and First Union National Bank, as documentation agent, dated as of February 25, 1999, as amended as of July 13, 1999, and further amended as of March 31, 2000, and certain related documents. "New Bank Debt" 4 consists of approximately $254 million and bears interest, at the greater of: (a) at the option of Carmike, (i) a specified base rate plus 3.5% or (ii) LIBOR plus 4.5%; and (b) 7.75% per annum. - Carmike issued $154,315,000 of its new 10-3/8% Senior Subordinated Notes due 2009 (the "New Senior Subordinated Notes") in exchange for $154,315,000 aggregate principal amount of the claims in the Chapter 11 Cases concerning the Original Senior Subordinated Notes. - Certain of Carmike's underperforming theatres were closed. Lease terminations and settlement agreements are being negotiated for the resolution of lease termination claims, and the restructuring or other disposition of lease obligations. - General unsecured creditors will receive, cash and notes in the aggregate of approximately $40,000,000 to $50,000,000 with an annual interest rate of 9.4% in resolution of their allowed claims under the Chapter 11 Cases. Also on the Effective Date, the Company closed on a Revolving Credit Agreement (the "Revolving Credit Agreement") totaling $50 million. The proceeds of advances made under the Revolving Credit Agreement will be used to provide working capital financing to the Company and its subsidiaries and for funds for other general corporate purposes of the Company. The Company, on the Effective Date, borrowed $20 million of the Revolving Credit Agreement in partial repayment of its obligations under the Plan owing to the holders of the Bank Claims. The terms of the $50 million Revolving Credit Agreement are set forth in a Credit Agreement, dated as of January 31, 2002, among the Company, Eastwynn Theatres, Inc., the various subsidiaries from time to time parties to the agreement as credit parties, General Electric Capital Corporation as agent and lender, the various banks or other financial institutions from time to time parties to the agreement as lenders, and GECC Capital Markets Group, Inc. as lead arranger. The Company's Amended and Restated Bylaws provide that the Board of Directors consists of ten (10) individuals. The Company has entered into a stockholders agreement, dated as of January 31, 2002 (the "Stockholders' Agreement"), with the following persons: Michael W. Patrick; GS Capital Partners III, L.P.; GS Capital Partners III Offshore, L.P.; Goldman Sachs & Co. Verwaltungs Gmbh; Bridge Street Fund 1998; Stone Street Fund 1998; The Jordan Trust; TJT(B); TJT(B) (Bermuda) Investment Company LTD.; David W. Zalaznick and Barbara Zalaznick, JT TEN; Leucadia Investors, Inc. and Leucadia National Corporation (collectively, the "Signing Stockholders"). Based on all shares of the Company's Common Stock outstanding as of the Effective Date, under the Plan, the Signing Stockholders own (a) approximately 83.2% of the approximately nine million (9,000,000) shares of Common Stock issued and outstanding on the Effective Date and (b) approximately 82.7% if the calculation is made on a fully diluted basis assuming that an additional one million (1,000,000) shares of the Common Stock have been issued under the 2002 Stock Plan. The stockholders that signed the Stockholders' Agreement have agreed to vote their shares of reorganized Carmike Common Stock in favor of certain matters, such as certain nominees to the Board of Directors and the 2002 Stock Plan, if they are presented to the stockholders of the Company for approval. The Signing Stockholders further agreed to certain transfer restrictions regarding their shares of reorganized Carmike Common Stock. The parties to the Stockholders' Agreement also signed a registration rights 5 agreement with the Company with provisions concerning demand registration for resale of their shares of reorganized Carmike Common Stock under applicable provisions of the Securities Act of 1933, as amended. In connection with Carmike's reorganization, the Company reached an agreement with MoviePlex Realty Leasing, L.L.C. ("MoviePlex") to restructure the Amended and Restated Master Lease dated January 29, 1999 between Movieplex Realty Leasing L.L.C. as landlord and Carmike as tenant (the "Original Master Lease") and entered into the Second Amended and Restated Master Lease, dated as of September 1, 2001 (the "New Master Lease"). Under the New Master Lease, Carmike has entered into a new 15-year lease for the six MoviePlex properties with an option to extend the term for an additional five years. The Original Master Lease was terminated and pre-Chapter 11 Cases defaults under the Original Master Lease were cured up to a maximum amount of $493,680. The initial first twelve months base rent for the six theatres is an aggregate of $5.4 million per annum ($450,000 per month), subject to periodic increases thereafter and certain additional rent obligations such as percentage rent. Over-the-Counter Bulletin Board Trading In January, 2001, the Company's Class A Common Stock was delisted from the New York Stock Exchange for failure to meet the continued listing requirements concerning average global market capitalization and average share price. The Class A Common Stock subsequently traded on the NASD's over-the-counter Bulletin Board under the ticker symbol "CKECQ" from January 17, 2001 to the Effective Date. On the Effective Date, the Class A Common Stock was cancelled and extinguished, and the reorganized Carmike Common Stock began trading under the symbol "CMKC" on the NASD's over-the-counter Bulletin Board. 6 THEATRE OPERATIONS Carmike's revenues are generated primarily from admissions and concession sales. Additional revenues, which are not material, are generated from video game arcade areas, family entertainment centers and on-screen advertising. The following table sets forth, certain information regarding the 323 theatres and 2,333 screens operated by Carmike as of December 31, 2001:
STATE THEATRES SCREENS STATE THEATRES SCREENS - ----- -------- ------- ----- -------- ------- Alabama................18 163 New Mexico..............1 2 Arkansas...............11 95 New York................1 8 Colorado................9 57 North Carolina.........41 311 Delaware................1 14 North Dakota............7 40 Florida................10 80 Ohio....................6 39 Georgia................27 218 Oklahoma...............11 56 Idaho...................4 17 Pennsylvania...........25 189 Illinois................2 6 South Carolina.........15 105 Iowa...................12 99 South Dakota............5 35 Kansas..................1 12 Tennessee..............30 230 Kentucky...............10 51 Texas..................13 95 Louisiana...............3 22 Utah....................6 47 Maryland................1 8 Virginia...............12 73 Michigan................1 5 Washington..............1 12 Minnesota..............10 80 West Virginia...........4 28 Missouri................1 8 Wisconsin...............2 18 Montana................14 78 Wyoming.................3 13 Nebraska................5 19 323 2,333
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 smaller markets where Carmike is the only exhibitor in the market. At December 31, 2001, Carmike operated 39 theatres with 154 screens as Discount Theatres. As of December 31, 2001, Carmike owned 77 of its theatres and leased 242 of its theatres. An additional four theatres were operated by Carmike under shared ownership. The total number of leases has decreased to 230, as of March 15, 2002, due to theatre lease rejections in the Chapter 11 Cases and lease maturities. Carmike's theatre operations are under the supervision of its Chief Operating Officer 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 Carmike's corporate headquarters. 7 Carmike has 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. THEATRE DEVELOPMENT Prior to the Chapter 11 Cases, Carmike's growth strategy primarily involved the development of new theatres and the addition of screens and other improvements to existing theatres, as well as selective acquisitions of theatres as available. During 2001, Carmike opened one theatre with 16 screens. Capital expenditures during 2001 aggregated approximately $9.2 million, net of lease financings. The Company's Chapter 11 filing and the excessive number of screens due to the industry's overbuilding of theatres in the last few years have been significant influences on the Company's current growth strategy. Carmike is committed to start construction of two theatres in 2002 if the legal issues concerning two leases are resolved by the Company and the landlords. If opportunities exist where new construction will be profitable to the Company, we will consider building additional theatres in future periods. Since the Petition Date, Carmike has closed approximately 26% of its theatres and is analyzing the remaining theatres and evaluating approaches to optimize its portfolio. 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. 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 8 percentage declining over the term of the run. Carmike's film rental fees typically begin at 60% of admission revenues and gradually decline to as low as 30% 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%) 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. Carmike currently does not bid for films in any of its film licensing zones. 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. The table below depicts the Industry's top 10 films for 2001 compared to Carmike's top 10 films for 2001:
Industry Carmike Cinemas -------- --------------- 1. Harry Potter Sorcerer's Stone 1. Rush Hour 2 2. Shrek 2. Harry Potter Sorcerer's Stone 3. Monsters, Inc. 3. Monsters, Inc. 4. Rush Hour 2 4. Shrek 5. Lord of the Rings: Fellowship of the Rings 5. Pearl Harbor 6. The Mummy Returns 6. Jurassic Park 3 7. Pearl Harbor 7. The Mummy Returns 8. Jurassic Park 3 8. Planet of the Apes 9. Planet of the Apes 9. Hannibal 10. Hannibal 10. The Fast and the Furious
Relationship with Distributors Carmike depends on, among other things, the quality, quantity, availability and acceptance by movie-going customers of the motion pictures produced by the motion picture 9 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. 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 ten major distributors accounted for approximately 97.3% of Carmike's admission revenues during the year ended December 31, 2001: Buena Vista, DreamWorks, Fox, MGM/UA, Miramax, New Line Cinema, Paramount, Sony, Universal and Warner Brothers. As of the Petition Date, film distributors held claims against Carmike aggregating approximately $37 million. After the Debtors commenced their Chapter 11 Cases, several distributors elected to cease supplying the Debtors with new film product until their claims against the Debtors for pre-petition film exhibition fees were paid in full. Carmike negotiated an agreement with each of its principal film distributors to repay their pre-petition claims for film exhibition fees in full in 17 weekly installments. Based on these Motion Picture Distributor Agreements, the film distributors began to supply the Debtors with new film product again. Carmike's payments under the Motion Picture Distributor Agreements began on September 18, 2000 and were concluded by December 26, 2000. Carmike believes its relationship with the studios has returned to normal. CONCESSIONS Concession sales are Carmike's second largest revenue source after box office admissions, constituting approximately 31.8% of total revenues for 2001. 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, frozen drinks, coffee, ice cream, pizza, hot dogs and pretzels, at certain theatre locations. Carmike actively seeks to promote concession 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 up-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 concession vendors on a national or regional basis to obtain high volume discounts or bulk rates. The Company receives a majority of its concessions supplies from the following two vendors: ShowTime Concession Supply Inc. and The Coca-Cola(R)Company. 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 and IQ-2000, which are installed in all of its theatres, allows Carmike to centralize most theatre-level 10 administrative functions at its corporate headquarters, creating significant operating leverage. IQ-Zero allows corporate management to monitor ticket and concession 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. IQ-2000 is our enhancement of the IQ-Zero system. IQ-2000 facilitates new services such as advanced ticket sales and Internet ticket sales. Its expanded capacity will allow for future growth and more detailed data tracking and trend analysis. IQ-2000 is the management information system in Carmike's theatres built since 1999. 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 Carmike theatres include electronic video games located in or adjacent to the lobby and on-screen advertising is provided on a number of Carmike's screens, each of which provides additional revenues to Carmike. Carmike operates two family entertainment centers under the name Hollywood Connection(R)which feature multiplex theatres and other forms of family entertainment. 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. 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 our theatres. Competitors have built or are planning to build theatres in certain areas in which Carmike operates, which have resulted and may continue to result in excess capacity in such areas which adversely affects attendance and pricing at Carmike's theatres in such areas. During the Chapter 11 Cases, the Debtors received approval from the Bankruptcy Court to reject theatre leases relating to 136 theatre locations of the Debtors. See Part II, Item 7 of this form 10-K Report under the caption "Chapter 11 Cases". In the past few years, the movie exhibition industry has faced significant challenges, largely due to the effects of too many screens and a relatively flat box office. The number of screens in the United States had increased dramatically, growing from approximately 31,640 screens in 1997 to approximately 37,396 screens in 2000. The industry did experience a modest reduction in the total number of screens in the U.S. in 2001 to 36,764, a decrease of approximately 1.7%. The total number of theatres in the U.S. however has not dramatically increased, in 1997 there were 7,480 compared to 7,421 in 2000. The total number of theatres in 11 the U.S. did decrease significantly in 2001 to 7,070, a decrease of approximately 4.7%. See Part I, Item 7 of this Form 10-K Report under the caption "The Industry". 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 us. In addition, demographic changes and competitive pressures can lead to a theatre location becoming impaired. 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 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. Also, the ADA may require certain modifications be made to existing theatres in order to make them accessible to patrons and employees who are disabled. For example, Carmike is aware of several 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 in Des Moines, Iowa and to distribute to all of its theatres a questionnaire designed to 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 continuing to assess 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 has a Director of ADA Compliance to monitor its ADA requirements. 12 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, 2001, approximately 55% of Carmike's employees were paid at the federal minimum wage and, accordingly, the minimum wage largely determines our 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 of 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)trademark. EMPLOYEES As of December 31, 2001, Carmike had approximately 9,059 employees, of which 47 are covered by collective bargaining agreements. In order to combat uncertainties that may have stemmed from the Chapter 11 Cases, to reward key employees for shouldering any additional burdens that had been imposed by the Chapter 11 Cases and to maintain employee morale, the Company implemented, with the approval of the Bankruptcy Court, the Carmike Cinemas, Inc. Employee Retention and Severance Plan. The Employee Retention and Severance Plan is one component of the Company's comprehensive program designed to provide incentives to management and other critical employees to remain in the Debtors' employment and to work toward a successful reorganization of the Debtors' business. The other components include the continuance of the Company's annual bonus plan in the ordinary course of business to the extent that bonus objectives can be met during the fiscal year. 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. 13 Ability to Service Debt After the Effective Date, our ability to service our indebtedness 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, to pay the interest on, to refinance our indebtedness, or to fund planned capital expenditures for theatre construction, expansion or renovation will depend on our future performance. Our future performance is, to a certain extent, subject to general industry economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based upon our current level of operations and the closing of certain underperforming theatres, we believe that cash flow from operations, available cash, borrowings under the Revolving Credit Agreement, and sales of surplus assets will be adequate to meet our future liquidity needs. 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. Seasonality Our revenues are dependent upon the timing of motion picture releases by distributors. 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 and year to year. 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. Dependence upon Motion Picture Production and Performance Our business will be adversely affected if there is a decline in the quality and number of motion pictures available for screening. Our business to a substantial degree depends on the availability of suitable motion pictures for screening in our theatres and the appeal of such motion pictures in our theatre markets. 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. A disruption in the production of motion pictures, lack of motion pictures or poor performance of motion pictures in theatres will likely 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 14 picture distributors that provide quality first-run movies to the motion picture exhibition industry, the following ten distributors accounted for approximately 97.3% of our admission revenues for the fiscal year ended December 31, 2001: Buena Vista, DreamWorks, Fox, MGM/UA, Miramax, New Line Cinema, Paramount, Sony, Universal and Warner Brothers. No single distributor dominates the market. A deterioration in our relationships with any of the major film distributors could adversely affect our access to commercially successful films and 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. Our theatre operations are also subject to federal, state and local laws governing matters such as construction, renovation and operation of our theatres, as well as wages, working conditions, citizenship, and health and sanitation requirements and licensing. We believe that our theatres are in material compliance with these requirements. At December 31, 2001, approximately 55% of our employees were paid at the federal minimum wage and, accordingly, the minimum wage largely determines our labor costs for those employees. The ADA and certain state statutes and local ordinances, among other things, require that places of public accommodation, including both existing and newly constructed theatres, be accessible to customers with disabilities. The ADA may require that certain modifications be made to existing theatres in order to make them accessible to patrons and employees who are disabled. The ADA requires that theatres be constructed to permit persons with disabilities full use of a theatre and its facilities. We are aware of several 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 Our business is subject to significant competitive pressures. 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. Further, we have closed certain theatres since the commencement of the Chapter 11 Cases and our competitors or smaller, entrepreneurial developers may purchase or lease the abandoned buildings and reopen them as theatres in competition with us. 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 15 customers, obtaining new theatre sites and acquiring theatre circuits. There have been a number of consolidations in the movie theatre industry, and the impact of these consolidations could have an adverse effect on 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 these delivery systems on the motion picture industry is difficult to determine precisely, there is a risk that they could adversely affect attendance at motion pictures shown in theatres. Movie theatres also face competition from a variety of other forms of entertainment competing for the public's leisure time and disposable income, including sporting events, concerts, live theatre and restaurants. Because our theatres depend upon discretionary consumer spending, they may be adversely affected by a downturn in the economy. Expansion Plans Although greatly reduced, we have continued to expand our operations through the development of new theatres and the expansion of existing theatres. 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 markets from unexpected sources. Newly constructed theatres may not perform up to management's expectations. We face significant competition for potential theatre locations and for opportunities to acquire existing theatres and theatre circuits. Because of this competition, Carmike may be unable to add to its theatre portfolio on terms we consider acceptable. Future Capital Requirements The availability of capital will continue to be extremely limited since the Company emerged from bankruptcy. New sources of financing are questionable and numerous uncertainties will continue to exist. Traditional sources of financing new theatres through landlords may be unavailable for a number of years. Like others in our industry, we are 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 the year 2002 we anticipate retrofitting approximately 10 screens to strengthen our position in certain markets. We will lose revenue from those screens while they are being renovated. 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 cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated revenue growth and operating improvements will be 16 realized or that future capital will be available to us to enable us to fund our capital expenditure needs. Accounting for 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. Whenever events or changes in circumstances indicate that the carrying amount of an asset or a group of assets may not be recoverable, we review for impairment of long-lived assets and goodwill related to those assets to be held and used in the business. We also periodically review and monitor our internal management reports and the competition in our markets for indicators of impairment of individual theatres. If we determine that assets are impaired, we are required to recognize a charge to earnings. In the fourth quarters of 2001, 2000 and 1999, the Company identified impairments of asset values for certain theatres and a joint venture investment in three movie theatre-entertainment complexes. As a result, we recognized a non-cash impairment charge of approximately $132.2 million, $21.2 million and $33.0 million, respectively, in the fourth quarters of 2001, 2000 and 1999. These impairment charges reduce the carrying value of approximately 287 theatres with 2,126 screens for 2001, approximately 18 theatres with 130 screens for 2000 and approximately 82 theatres with 432 screens for 1999. The impairment charges additionally reduce the carrying value of a joint venture which operated three movie theatre-entertainment complexes and equipment removed from theatres that were closed or rejected during the Chapter 11 Cases. The impairment charge recognized for 2001 was significantly larger than in prior years due to the write-off of leasehold improvements on rejected theatres, the impact of closing owned theatres, the diminished value of our entertainment centers and the write-down of surplus equipment removed from closed theatres. Additionally, in 2001 the Company included the equipment in the theatre valuation calculations based on the reduced capital building program in the future as well as the excess supply of equipment in inventory. 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 and Chief Executive Officer. Losing the services of one or more members of our senior management could adversely affect our business and results of operations. We have a new five-year employment agreement with Michael W. Patrick as Chief Executive Officer, the term of which extends for one year each December 31, provided that neither Carmike nor Mr. Patrick chooses not to so extend the agreement and we maintain key man life insurance covering him. Our success partially depends on our ability to attract and retain key personnel. ITEM 2. PROPERTIES. As of December 31, 2001, Carmike owned 77 of its theatres and leased 242 of its theatres. An additional four theatres were operated by Carmike under shared ownership. 17 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 10 years. During the pendency of the Chapter 11 Cases, the Company had the right to reject unexpired leases of real property, of which those rejected leases total 136. 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 office, 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. CHAPTER 11 CASES On August 8, 2000, the Company and its subsidiaries Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. filed voluntary petitions for protection under chapter 11 of the Bankruptcy Code. On November 14, 2001, the Company filed its Plan with the Bankruptcy Court. On January 3, 2002, the Bankruptcy Court approved the Company's Plan and an order was entered confirming the Plan on January 4, 2002. The Effective Date for the Company's emergence from the Chapter 11 Cases was January 31, 2002. Additional information relating to the Chapter 11 Cases is set forth in Part I, Item 1 of this Form 10-K Report under the caption "Proceedings Under Chapter 11 of the Bankruptcy Code" and in Notes 2 and 3 of the Notes to the Consolidated Financial Statements. Such information is incorporated herein by reference. OTHER 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, 2001. 18 EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth certain information as of March 15, 2002 regarding the executive officers of Carmike. For purposes of this section, references to Carmike include Carmike's predecessor, Martin Theatres, Inc.
NAME AGE TITLE - ---- --- ----- Michael W. Patrick...................51 President, Chief Executive Officer and Chairman of the Board of Directors Fred W. Van Noy......................45 Senior Vice President, Chief Operating Officer Martin A. Durant.....................53 Senior Vice President - Finance, Treasurer and Chief Financial Officer Anthony J. Rhead.....................60 Senior Vice President-- Film and Secretary P. Lamar Fields......................47 Senior Vice President-- Real Estate H. Madison Shirley...................50 Senior Vice President-- Concessions and Assistant Secretary Marilyn B. Grant.....................54 Vice President-- Advertising Philip A. Smitley....................43 Assistant Vice President and Controller
MICHAEL W. PATRICK has served as President of Carmike since October 1981, as a director of Carmike since April 1982, as Chief Executive Officer since March 1989 and Chairman of the Board of Directors since January 2002. 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. 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 the position of Senior Vice President -- Operations. In November 2000, he was elected to his present position as Senior Vice President - Chief Operating Officer. MARTIN A. DURANT joined Carmike in July 1999 as Senior Vice President - Finance, Treasurer and Chief Financial Officer. Prior to joining Carmike, Mr. Durant was Senior Vice President - Corporate Services for AFLAC Incorporated, a Columbus, Georgia based international holding company, for a period of ten years. Prior to his position with AFLAC he was President of a venture capital firm located in Florida. Mr. Durant began his career with KPMG Peat Marwick and is a licensed Certified Public Accountant. 19 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. He was elected Secretary in January 2002. Prior to joining Carmike, he worked as a film booker for Plitt Theatres, Inc. from 1973 to 1981. 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. 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. 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 pending the appointment of Martin A. Durant in July 1999. Prior to joining Carmike, Mr. Smitley was Divisional Controller-- Transportation of Burnham Service Corporation, a trucking company. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Since January 31, 2002, the Company's Common Stock has traded on the NASD's over-the-counter Bulletin Board (the "OTCBB") under the symbol "CMKC". Carmike's pre-reorganization Class A Common Stock traded on the OTCBB under the symbol "CKECQ" from January 17, 2001 until January 30, 2002. The Class A Common Stock previously traded on the New York Stock Exchange under the symbol "CKE" until trading in the Company's stock on the New York Stock Exchange was suspended prior to trading on January 12, 2001 because the Company had fallen below certain Exchange criteria for continued listing. 20 The following table sets forth the high and low sales prices of the Class A Common Stock as reported by the OTCBB for the periods indicated in 2001 (beginning January 17, 2001) and by the New York Stock Exchange for the periods indicated in 2000.
HIGH LOW --------- --------- 2001 First Quarter.............. $ 0.75 $ 0.20 Second Quarter............. 0.67 0.33 Third Quarter.............. 0.57 0.34 Fourth Quarter............. 3.41 0.37 2000 First Quarter.............. $ 7 15/16 $ 5 7/16 Second Quarter............. 6 1/16 3 7/16 Third Quarter.............. 4 1/16 1 1/16 Fourth Quarter............. 7/8 5/16
One share of pre-reorganization Class A or Class B Common Stock of Carmike is equal to 0.194925 of one share of reorganized Carmike Common Stock. On March 15, 2002, the last reported sale price of the reorganized Common Stock on the over-the-counter Bulletin Board was $15.90 per share. As of March 15, 2002, there were approximately 128 holders of record of Carmike's reorganized Common Stock. Letters of Transmittal are still outstanding, once they are received and processed by the Company's transfer agent the number of holders of record will increase. Prior to the reorganization on January 31, 2002, Carmike had 550,000 shares of Series A Preferred Stock, all of which were held by certain affiliates of Goldman, Sachs & Co. Each share of the Series A Preferred Stock was convertible into four shares of the pre-reorganization Class A Common Stock. Series A Preferred Stock dividends of $7.0 million were in arrears at December 31, 2001. In view of the Company's having ceased making scheduled dividend payments on the Preferred Stock after the Petition Date, the holders of the Series A Preferred Stock on March 31, 2001 designated two additional directors to the Company's Board of Directors. Upon the reorganization on January 31, 2002, the holders of the pre-reorganization Carmike Series A Preferred Stock received 41.2% of the ten million (10,000,000) shares of reorganized Carmike Common Stock on a fully diluted basis. During fiscal year 2001, the Company did not make any sales of its unregistered equity securities. Carmike never declared or paid any cash dividends on its Class A or Class B Common Stock. Additionally, Carmike could not declare dividends on any of its stock including the Series A Preferred Stock during the pendency of the Chapter 11 Cases without Bankruptcy Court approval. Carmike currently intends to retain future earnings for use in the expansion and operation of its business and, therefore, does not anticipate paying dividends on its reorganized Common Stock 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 Notes 10 and 12 of Notes to Consolidated Financial Statements regarding restrictions in Carmike's debt instruments on Carmike's ability to pay dividends. 21 ITEM 6. SELECTED FINANCIAL AND OPERATING DATA. The selected consolidated Statements of Operations 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, ------------------------------------------------------------- 1997 1998 1999 2000 2001 (1) (2) (2)(3) (2)(4) (4) --------- --------- --------- --------- --------- (IN MILLIONS EXCEPT PERCENTAGES, RATIOS AND OPERATING DATA) STATEMENT OF OPERATIONS: Revenues: Admissions ............................................ $ 319.2 $ 330.5 $ 336.0 $ 315.4 $ 311.8 Concessions and other ................................. 139.4 151.1 150.9 146.9 145.1 --------- --------- --------- --------- --------- Total revenues ................................... 458.6 481.6 486.9 462.3 456.9 Costs and expenses: Film exhibition costs ................................. 169.7 177.8 181.5 185.2 171.2 Concession costs ...................................... 18.3 19.9 19.0 21.0 20.2 Other theatre operating costs ......................... 175.1 187.9 191.1 194.8 182.0 General and administrative ............................ 6.4 7.1 7.3 6.9 8.8 Depreciation and amortization ......................... 33.4 37.5 41.2 43.2 42.2 Impairment of long-lived assets (5) .................. -- 38.3 33.0 21.2 132.2 Restructuring charge (5) .............................. -- 34.7 (2.7) -0- -0- --------- --------- --------- --------- --------- 402.9 503.2 470.4 472.3 556.6 --------- --------- --------- --------- --------- Operating income (loss) ................................... 55.7 (21.6) 16.5 (10.0) (99.7) Interest expense .......................................... 23.1 27.2 36.8 31.0 6.1 --------- --------- --------- --------- --------- Income (loss) before reorganization costs, income taxes and extraordinary item .......................... 32.6 (48.8) (20.3) (41.0) (105.8) Reorganization costs ..................................... -0- -0- -0- 7.0 19.6 --------- --------- --------- --------- --------- Income (loss) before income taxes and extraordinary item .................................................. 32.6 (48.8) (20.3) (48.0) (125.4) Income tax expense (benefit) .............................. 12.4 (18.2) (7.7) 25.6 -0- --------- --------- --------- --------- --------- Net income (loss) before extraordinary item $ 20.2 $ (30.6) $ (12.6) $ (73.6) $ (125.4) ========= ========= ========= ========= ========= Weighted average common Shares outstanding: Basic ..................................................... 11,277 11,356 11,375 11,344 11,344 ========= ========= ========= ========= ========= Diluted ................................................... 11,366 11,356 11,375 11,344 11,344 ========= ========= ========= ========= ========= Earnings (loss) per common share before extraordinary item: Basic ..................................................... $ 1.79 $ (2.73) $ (1.37) $ (6.62) $ (11.05) ========= ========= ========= ========= ========= Diluted ................................................... $ 1.78 $ (2.73) $ (1.37) $ (6.62) $ (11.05) ========= ========= ========= ========= =========
22
AS OF DECEMBER 31, ------------------------------------------------------------- 1997 1998 1999 2000 2001 (4) (4) --------- --------- --------- --------- --------- (in millions, except operating data) BALANCE SHEET DATA: Cash and cash equivalents ................................. $ 2.5 $ 3.8 $ (4.2) $ 52.5 $ 94.2 Property and equipment, net (5) ........................... 497.1 573.6 666.2 621.2 460.1 Total assets .............................................. 606.0 683.5 794.4 761.3 617.8 Total long-term obligations, including current maturities (6) ................................ 360.7 351.8 470.3 52.0 49.7 Total shareholders' equity ................................ 202.9 226.3 204.2 129.1 3.7 OPERATING DATA: Theatre locations (7) ..................................... 520 468 458 352 323 Screens (7) ............................................... 2,720 2,658 2,848 2,438 2,333 Average screens per location .............................. 5.2 5.7 6.2 6.9 7.2 Total attendance (in thousands) ........................... 75,336 77,763 74,518 67,804 64,621 Total average screens in operation ........................ 2,644 2,733 2,800 2,643 2,386 Average ticket price ...................................... $ 4.24 $ 4.25 $ 4.51 $ 4.65 $ 4.83 Average concession per patron ............................. $ 1.68 $ 1.79 $ 1.84 $ 1.98 $ 2.10
(1) On May 23, 1997, the Company acquired certain theatres (19 theatres, 104 screens) from First International Theatres for approximately $17 million. 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. (2) Preferred Stock dividends on the Series A Preferred Stock totaled $332,000, $3,025,000 and $1,513,000 for the years ended December 31, 1998, 1999 and 2000, respectively. See Notes 2 and 10 of Notes to Consolidated Financial Statements. (3) Excludes an extraordinary charge of $6,291,000 (net of income taxes) or $0.56 per diluted share. (4) See Notes 1, 2 and 3 with respect to the Company's bankruptcy and financial reporting in accordance with Statement of Position 90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy Code". See Note 3 of Notes to Consolidated Financial Statements with respect to reorganization costs incurred while in bankruptcy. See Note 11 for income taxes relative to valuation allowances for deferred income tax debits. (5) See Notes 2, 3 and 4 of Notes to Consolidated Financial Statements with respect to impairments of long-lived assets and restructuring charges. (6) Excludes long-term restructuring reserves and deferred income tax liabilities; includes current maturities of long-term indebtedness and capital lease obligations. 23 (7) Excludes 28 theatres with 116 screens at December 31, 1998, which were closed by Carmike during 1999 in accordance with its restructuring plan. Excludes 84 theatres and 394 screens at December 31, 2000, which were closed by Carmike upon approval of the Bankruptcy Court of the rejection of certain leases. Excludes 17 theatres and 81 screens at December 31, 2001, which were closed by Carmike upon approval of the Bankruptcy Court of the rejection of certain leases. 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. Except for the historical information contained herein, the following discussion contains forward-looking statements that involve a number of risks and uncertainties. Carmike cautions that any forward-looking statements made by the Company are not guarantees of future performance and 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. 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, competition with other forms of entertainment and other factors including, but not limited to, the following: - there can be no assurance that the cash and cash equivalents on hand at December 31, 2001, cash generated by the Company from operations and cash available under the Revolving Credit Agreement will be sufficient to fund the operations of the Company; - there can be no assurance as to the overall viability of the Company's long-term operational reorganization and financial restructuring plan; - there can be no assurance as to the Company's being able to obtain sufficient financing sources to meet future obligations; - the Company may have difficulty in attracting patrons or labor as a result of the Chapter 11 Cases; - the Company may continue to have difficulty in maintaining or creating new relationships with suppliers or vendors as a result of the Chapter 11 Cases; - an adverse determination in a legal proceeding, whether currently asserted or arising in the future, may have a material adverse effect on the Company's financial position; 24 - there can be no assurance regarding the availability of suitable motion pictures for exhibition in the Company's markets; - the Company faces significant competitive pressures; - economic and/or business conditions generally, and in the movie industry, in particular, may not be favorable such that the Company's revenues and results of operation are adversely affected; - acts of war, terrorism, catastrophe and other events beyond the control of the Company which may adversely affect business conditions or the Company's rights; - there can be no assurance as to the Company's ability to achieve satisfactory levels of profitability and cash flow from operations; - there may not be available sufficient capital to service the Company's debt obligations and to finance the Company's business plans on terms satisfactory to the Company; - there can be no assurance as to the success of the Company's marketing of certain assets and pursuit of financing alternatives; and the other factors set forth in "Item 1 Business--Factors that May Affect Future Performance," as well as other factors detailed from time to time in Carmike's filings with the Securities and Exchange Commission. In addition, the Chapter 11 Cases may disrupt the Company's operations and may result in a number of other operational difficulties, including the following: - the Company's ability to access capital markets will likely be limited; - the Company, notwithstanding its Employee Retention and Severance Plan, may be unable to retain top management and other key personnel; - relationships with film suppliers; and - suppliers to the Company may stop providing supplies or services to the Company or provide such supplies or services only on "cash on delivery," "cash on order" or other terms that could have an adverse impact on the Company's cash flow. By making these forward-looking statements, the Company 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 under the Federal securities laws. 25 THE INDUSTRY In the past few years, the movie exhibition industry has faced significant challenges, largely due to the effects of too many screens and a relatively flat box office. The number of screens in the United States had increased dramatically, growing from approximately 31,640 screens in 1997 to approximately 37,396 screens in 2000. The industry did experience a modest reduction in the total number of screens in the U.S. in 2001 to 36,764, a decrease of approximately 1.7%. The total number of theatres in the U.S. however has not dramatically increased, in 1997 there were 7,480 compared to 7,421 in 2000. The total number of theatres in the U.S. did decrease significantly in 2001 to 7,070, a decrease of approximately 4.7%. Megaplexes, theatres with anywhere from 14 to 30 screens in a single theatre, have became the industry standard in most major markets. The megaplex format provides numerous benefits for theatre operators, including allowing facilities (concession stands and restrooms) and operating costs (lease rentals, utilities and personnel) to be allocated over a larger base of screens and patrons. The megaplex theatres also contain increasingly costly improvements, such as stadium seating, state-of-the-art projection and sound systems and other expensive amenities. These megaplexes are not only competing with each other but have quickly rendered many older multiplexes obsolete, and exhibitors have not been able to dispose of or close their older facilities quickly enough. Box office revenues have increased due to increased ticket prices, but the increase in revenue has been diminished by the higher costs of operating so many screens in addition to movie studios getting a larger portion of box office receipts due to shorter film run times. The significant decay of older theatres and the underperformance of many new builds have put pressure on industry-wide operating results, operating margins, certain covenant requirements under bank facilities and the market price of Carmike's and other exhibitors' stock. Carmike has seen several of its competitors consolidate throughout 2001 and 2002. Regal Cinemas Inc., United Artists Theatre Co. and Edwards Theatres, Inc., all of which had been operating under bankruptcy protection, were taken over by Philip Anschutz. The new parent company for the three exhibitors is Regal Entertainment Group. AMC Entertainment Inc. has received approval from the U.S. Bankruptcy Court in Delaware to buy General Cinemas as part of General Cinemas' Chapter 11 reorganization plan. Loews Cineplex Entertainment Corp., as part of its confirmed Chapter 11 reorganization plan, will no longer be publicly held. Under the terms of the plan, Onex Corp. and Oaktree Capital Management LLC will privately hold 100% of the equity of the company. Smaller, independent operators, in some markets, have reopened theatres that have been abandoned due to Chapter 11 lease rejections. CHAPTER 11 CASES On August 8, 2000 (the "Petition Date") Carmike and its subsidiaries Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. (collectively, the "Debtors") filed voluntary petitions for relief under chapter 11 (the "Chapter 11 Cases") of title 11 of the U.S. Code. On January 4, 2002, the United States Bankruptcy Court for the District of Delaware entered an order confirming the Debtors' Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated as of November 14, 2001 (the "Plan"). The Plan became effective on January 31, 2002 (the "Effective Date"). 26 In the Chapter 11 Cases, substantially all unsecured and partially secured liabilities as of the Petition Date were subject to compromise or other treatment until a plan of reorganization was confirmed by the Bankruptcy Court. Generally, actions to enforce or otherwise effect repayment of all pre-chapter 11 liabilities as well as all pending litigation against the Debtors were stayed while the Debtors continued their business operations as debtors-in-possession. The Chapter 11 Cases resulted from a sequence of events and the unforeseen effect that these events would have in the aggregate on the Company. Surprisingly weak film performance during the summer of 2000 contributed to the Company's revenues for the summer of 2000 significantly underachieving the Company's internal projections. Like its competitors, the Company had ramped up its costs by expending significant funds in building megaplexes and in making improvements to existing theatres in order to attract and accommodate larger audiences. Consequently, the effect of poor summer returns was substantial on the Company in its efforts to comply with the financial covenants under its then $200 million Revolving Credit Facility and $75 million Term Loan Credit Agreement (the "Pre-Reorganization Bank Facilities"). On June 30, 2000, the Company was in technical default of certain financial covenants contained in the Pre-Reorganization Bank Facilities and was unable to negotiate amendments with the lenders to resolve these compliance issues, as the Company had been able to do in the past. On July 28, 2000, the agents under the Pre-Reorganization Bank Facilities issued a Payment Blockage Notice to Carmike and the indenture trustee for the 9-3/8% Senior Subordinated Notes due 2009 (the "Original Senior Subordinated Notes") prohibiting payment by Carmike of the semi-annual interest payment in the amount of $9,375,000 due to the holders of the Original Senior Subordinated Notes on August 1, 2000. Faced with significant operating shortfalls, unavailability of credit and problems dealing with the Company's lenders, among other things, the Company filed for bankruptcy in order to continue its business. The Company could not pay pre-petition debts without prior Bankruptcy Court approval during the Chapter 11 Cases. Immediately after the commencement of the Chapter 11 Cases, the Debtors sought and obtained several orders from the Bankruptcy Court which were intended to stabilize their business and enable the Debtors to continue operations as debtors-in-possession. The most significant of these orders: (i) permitted the Debtors to operate their consolidated cash management system during the Chapter 11 Cases in substantially the same manner as it was operated prior to the commencement of the Chapter 11 Cases; (ii) authorized payment of pre-petition wages, vacation pay and employee benefits and reimbursement of employee business expenses; (iii) authorized payment of pre-petition sales and use taxes owed by the Debtors; (iv) authorized the Debtors to pay up to $2,250,000 of pre-petition obligations to critical vendors, common carriers and workers' compensation insurance to aid the Debtors in maintaining operation of their theatres and approximately $37 million to film distributors as set forth below; and (v) authorized debt service payments for the loan related to Industrial Revenue Bonds issued by the Downtown Development Authority of Columbus, Georgia. As debtors-in-possession, the Debtors had the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject executory contracts and unexpired leases during the Chapter 11 Cases. In this context, "assumption" means that the Debtors agree to perform their obligations and cure all existing defaults under the contract or lease, and "rejection" means that the Debtors are relieved from their obligations to perform further under the contract or lease but are subject to a claim for damages for the breach thereof. Any damages resulting from rejection of executory contracts and unexpired leases were treated as general 27 unsecured claims in the Chapter 11 Cases. During the Chapter 11 Cases, the Debtors received approval from the Bankruptcy Court to reject theatre leases relating to 136 theatre locations of the Debtors. The 136 theatres approved for rejection generated approximately $2.0 million and $13.5 million in theatre-level cash flow losses for the years ended December 31, 2001 and 2000, respectively. Such losses are measured by subtracting revenues generated at such theatre locations from costs of operations (film exhibition costs, concession costs and other theatre operating costs) for such theatres. The Debtors cannot presently determine or reasonably estimate the ultimate liability that may result from rejecting leases or from the filing of claims for any rejected contracts, and no provisions have yet been made for these items. As of the Petition Date, the trade creditors of the Debtors holding the largest unpaid claims were the film distributors, with claims aggregating approximately $37 million. After the Debtors commenced their Chapter 11 Cases, several distributors elected to cease supplying the Debtors with new film product until their claims against the Debtors for pre-petition film exhibition fees were paid in full. The Company negotiated an agreement with each of its principal film distributors to repay their pre-petition claims for film exhibition fees in full as critical vendors in 17 weekly installments ending December 26, 2000, (collectively, the "Motion Picture Distributor Agreements"). The Bankruptcy Court approved each of the Motion Picture Distributor Agreements at a hearing held on September 14, 2000. Based on the Motion Picture Distributor Agreements, the film distributors have supplied the Debtors with new film product again. Each of the principal film distributors agreed to the terms of the Motion Picture Distributor Agreements, which include provisions relating to the payment of pre-petition claims as well as payments during the Chapter 11 Cases. Also, during the Chapter 11 Cases, Carmike reached an agreement to restructure its master lease facility with MoviePlex Realty Leasing, L.L.C. ("MoviePlex") and entered into the Second Amended and Restated Master Lease, dated as of September 1, 2001 (the "New Master Lease"). Under the New Master Lease, Carmike has entered into a new 15-year lease for the six MoviePlex properties with an option to extend the term for an additional five years. The Original MoviePlex Lease was terminated and prepetition defaults under the Original MoviePlex Lease were cured up to a maximum amount of $493,680. The initial first twelve months base rent for the six theatres is an aggregate of $5.4 million per annum ($450,000 per month), subject to periodic increases thereafter and certain additional rent obligations such as percentage rent. Percentage rent is an amount equal to 12% of all revenue made in, from or at the leased premises in excess of the Annual Breakpoint made by Carmike in the leased premises during any lease year, and "Annual Breakpoint" is the amount which is 50% of the quotient obtained by dividing the base rent by 10%. All past due rent, additional rent, and/or other sums due to MoviePlex under the terms of the New Master Lease bears interest from the date which is five days from the due date until paid by Carmike at the rate of 2% above the published prime rate of Wachovia Bank, N.A., or its successor, not to exceed the maximum rate of interest allowed by New York state law. Under the New Master Lease, Carmike pays all real estate taxes with respect to the leased premises. Carmike agrees, that upon the request of MoviePlex, it will subordinate its rights under the New Master Lease to the interest of any ground lessor of the land upon which one of the six properties is located to the lien of any mortgage or deed of trust now or thereafter in force against the land and building of which the leased premises are a part, except that Carmike's peaceable possession of the leased premises will not be disturbed and its obligations under the New Master Lease will 28 remain unchanged. Carmike agrees to indemnify MoviePlex against any claims, demands, actions against MoviePlex arising out of Carmike's failure to perform its obligations or observe any covenants under the repairs and maintenance article of the New Master Lease, except arising from MoviePlex's negligence or willful misconduct. Each of the Debtor subsidiaries has guaranteed Carmike's payment of rents, charges and additional sums coming due under the New Master Lease and performance of covenants and agreements contained in the New Master Lease. When the Plan became effective on January 31, 2002, Carmike filed with the Secretary of State for the State of Delaware the Amended and Restated Certificate of Incorporation (the "Restated Certificate"), which cancelled all then existing Class A and Class B Common Stock and Preferred Stock and established authorized capital stock of twenty million (20,000,000) shares of reorganized Carmike Common Stock, par value $.03 per share, and one million (1,000,000) shares of reorganized Carmike Preferred Stock, par value $1.00 per share. The Company currently has only reorganized Carmike Common Stock outstanding and has approximately nine million (9,000,000) shares of such stock outstanding. Material features of the Plan are: - - The Plan provides for the issuance or reservation for future issuance of ten million (10,000,000) shares of reorganized Carmike Common Stock in the aggregate. - - The holders of Carmike's cancelled Class A and Class B Common Stock received in the aggregate 22.2% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. - - The holders of Carmike's cancelled Series A Preferred Stock received in the aggregate 41.2% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. - - Certain holders of $45,685,000 in aggregate principal amount of the cancelled 9-3/8% Senior Subordinated Notes due 2009 issued by Carmike prior to the Chapter 11 Cases (the "Original Senior Subordinated Notes") received in the aggregate 26.6% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. - - Carmike reserved one million (1,000,000) shares of the reorganized Carmike Common Stock for issuance under a new management incentive plan (the "2002 Stock Plan") and 780,000 shares under the 2002 Stock Plan have been issued to Michael W. Patrick pursuant to his new employment agreement as Chief Executive Officer of the Company. - - The holders of Bank Claims (as defined below) in the Chapter 11 Cases received New Bank Debt (as defined below) and cash in the amount of approximately $35 million plus accrued and unpaid post-petition interest on the Bank Claims from January 15, 2002 to the Effective Date. "Bank Claims" consisted of claims of certain banks arising under: (i) the Amended and Restated Credit Agreement among the Company, the banks party thereto and Wachovia Bank, N.A., as agent, dated as of January 29, 1999, and amended as of March 31, 2000 and (ii) the Term Loan Credit Agreement among the Company, the banks party thereto, Wachovia Bank, NA., as administrative agent, Goldman Sachs Credit Partners, L.P., as syndication agent, and First Union National Bank, as 29 documentation agent, dated as of February 25, 1999, as amended as of July 13, 1999, and further amended as of March 31, 2000, and certain related documents. "New Bank Debt" consists of approximately $254 million and bears interest, at the greater of: (a) at the option of Carmike, (i) a specified base rate plus 3.5% or (ii) LIBOR plus 4.5%; and (b) 7.75% per annum. - - Carmike issued $154,315,000 of its new 10-3/8% Senior Subordinated Notes due 2009 (the "New Senior Subordinated Notes") in exchange for $154,315,000 aggregate principal amount of the claims in the Chapter 11 Cases concerning the Original Senior Subordinated Notes. - - 136 of Carmike's underperforming theatres were closed. Lease terminations and settlement agreements are being negotiated for the resolution of lease termination claims, and the restructuring or other disposition of lease obligations. - - General unsecured creditors will receive, cash and notes in the aggregate of approximately $40,000,000 to $50,000,000 with an annual interest rate of 9.4% in resolution of their allowed claims under the Chapter 11 Cases. On the Effective Date, the Company entered into a new Term Loan Credit Agreement (the "Post-Confirmation Credit Agreement"), which governs the terms of the New Bank Debt. The Company's subsidiaries have guaranteed the Company's obligations under the Post-Confirmation Credit Agreement. The lenders under the Post-Confirmation Credit Agreement have (i) a second priority, perfected lien on owned real property and, to the extent landlord approval was obtained or not required, leased real property of the Company and its subsidiaries; (ii) a second priority, perfected security interest in the capital stock of all Company subsidiaries; and (iii) a second priority, security interest in substantially all personal property owned by the Company and its subsidiaries. All of the security interests and liens that secure the New Bank Debt under the Post-Confirmation Credit Agreement are junior and subordinate to the liens and security interests of the collateral agent under the Revolving Credit Agreement described below. The final maturity date of the New Bank Debt loans under the Post-Confirmation Credit Agreement is January 31, 2007. The principal payment dates are June 30 and December 31 of each year, beginning June 30, 2002 and ending June 30, 2006. In addition, the Post-Confirmation Credit Agreement contains covenants that require the Company, among other things, to meet certain financial ratios and that prohibit the Company from taking certain actions and entering into certain transactions. There are also provisions in the Post-Confirmation Credit Agreement as to when the Company must prepay portions of the loans. See "Financial Covenant Compliance" below. Also on the Effective Date, the Company closed on a Revolving Credit Agreement (the "Revolving Credit Agreement") totaling $50 million. The proceeds of advances under the Revolving Credit Agreement will be used to provide working capital financing to the Company and its subsidiaries and for funds for other general corporate purposes of the Company. The Company, on the Effective Date, borrowed $20 million of the Revolving Credit Agreement in partial repayment of its obligations owing to the banks under the Post-Confirmation Credit Agreement. The terms of the Revolving Credit Agreement are set forth in a Credit Agreement, 30 dated as of January 31, 2002, among the Company, Eastwynn Theatres, Inc., General Electric Capital Corporation as agent and lender, GECC Capital Markets Group, Inc. as lead arranger, the various subsidiaries from time to time parties to the agreement as credit parties, and the various banks or other financial institutions from time to time parties to the agreement as lenders. The interest rate for borrowings under the Revolving Credit Agreement is set from time to time at the Company's option (subject to certain conditions set forth in the Credit Agreement) at either: (i) the Index Rate (as defined in the Revolving Credit Agreement) plus 1.75% per annum or (ii) the applicable LIBOR Rate (as defined in the Revolving Credit Agreement) plus 3.25% per annum, based on the aggregate Revolving Credit Advances (as defined in the Revolving Credit Agreement) outstanding from time to time. Borrowings under the Revolving Credit Agreement are secured by first priority security interests in substantially all tangible or intangible property of the Company (but does not include certain equipment or real estate constituting premises subject to the master leasing agreement with MoviePlex Realty Leasing, L.L.C.). The Company and its subsidiary Eastwynn Theatres, Inc. (each a "Borrower") have guaranteed the other's obligations under the Revolving Credit Agreement, and Company subsidiaries Wooden Nickel Pub, Inc. and Military Services, Inc. also have guaranteed the obligations under the Revolving Credit Agreement. Further, the Revolving Credit Agreement contains covenants that, among other things, prohibit the Company from taking certain actions and entering into certain transactions. There are also provisions in the Revolving Credit Agreement as to when the Company must prepay portions of the loans. See "Financial Covenant Compliance" below. In addition, on the Effective Date and pursuant to the Plan, the Company issued $154,315,000 10-3/8% Senior Subordinated Notes due 2009 (the "New Senior Subordinated Notes"), in exchange for $154,315,000 aggregate principal amount of the Original Senior Subordinated Note Claims in the Company's bankruptcy case relating to the Company's former 9-3/8% Senior Subordinated Notes due 2009 (the "Original Senior Subordinated Notes"); the remaining $45,685,000 in aggregate principal amount of the Original Notes were exchanged under the Plan for shares of reorganized Company Common Stock, as previously reported. The New Senior Subordinated Notes were issued pursuant to an Indenture, dated as of January 31, 2002, among the Company, the subsidiary guarantors named therein and Wilmington Trust Company, as Trustee (the "Indenture"). The Company subsidiary guarantees of the New Senior Subordinated Notes are junior and subordinated on the same basis as the New Senior Subordinated Notes are junior and subordinated to the Company's Senior Debt (as defined in the Indenture and includes the debt described above under the Post-Confirmation and Revolving Credit Agreements). Interest at 10-3/8% per annum from the issue date to maturity is payable on the New Senior Subordinated Notes each February 1 and August 1, with the first interest payment date being February 1, 2002. The New Senior Subordinated Notes are redeemable at the Company's option under certain conditions on or after February 1, 2004. Further, the Indenture contains covenants that, among other things, restricts the Company in connection with the incurrence of additional indebtedness not including the debt incurred under the Post-Confirmation and Revolving Credit Agreement as described above, asset sales, changes of control and transactions with affiliates. The Company's Amended and Restated Bylaws, which became effective on January 31, 2002, provide that the Board of Directors consists of ten (10) individuals. The Company has entered into a stockholders agreement, dated as of January 31, 2002 (the "Stockholders' 31 Agreement"), with the following persons: Michael W. Patrick; GS Capital Partners III, L.P.; GS Capital Partners III Offshore, L.P.; Goldman Sachs & Co. Verwaltungs Gmbh; Bridge Street Fund 1998; Stone Street Fund 1998; The Jordan Trust; TJT(B); TJT(B) (Bermuda) Investment Company LTD.; David W. Zalaznick and Barbara Zalaznick, JT TEN; Leucadia Investors, Inc. and Leucadia National Corporation (collectively, the "Signing Stockholders"). Based on all shares of the Company's Common Stock outstanding as of the Effective Date, under the Plan, the Signing Stockholders own (a) approximately 83.2% of the approximately nine million (9,000,000) shares of Common Stock issued and outstanding on the Effective Date and (b) approximately 82.7% if the calculation is made on a fully diluted basis assuming that an additional one million (1,000,000) shares of the Common Stock have been issued under the new management incentive plan. Pursuant to the Stockholders' Agreement, the Signing Stockholders agreed to vote their shares of capital stock of the Company, during the term of the agreement (as described below), in a manner necessary to elect the following individuals to the Company's Board of Directors: (a) the Chief Executive Officer ("CEO") of the Company; (b) Carl Patrick, Jr., subject to certain conditions; (c) three members designated by Jordan/Zalaznick Advisers, Inc., provided that at least one of such designees is an Independent Director (as defined below); (d) four members designated by GS Capital Partners III, L.P., provided that at least one of such designees is an Independent Director; and (e) an individual designated by the CEO and approved by a majority of the members of the Company's board of directors who, if elected, will qualify as an Independent Director. In the Stockholders' Agreement, an "Independent Director" means a person that (a) holds less than 5% of the capital stock of the Company and (b) is not an Affiliate (as defined therein) of a person who holds 5% or more of the capital stock of the Company and (c) is not an officer or employee of the Company. The term of the Stockholders' Agreement expires on the twenty-fifth month of the Effective Date unless earlier terminated by a written agreement executed by the Signing Stockholders (and/or their permitted transferees that have agreed to be bound by the terms of the Stockholders' Agreement) holding at least 66.67% of the shares of capital stock of the Company owned by all of the Signing Stockholders (and any permitted transferees) at such time. Also pursuant to the Stockholders' Agreement, the Signing Stockholders agreed to vote their shares of capital stock of the Company in a manner necessary to approve the Carmike Cinemas, Inc. 2002 Stock Plan at an annual or special meeting of the Company's stockholders held within twelve months of the Effective Date, and to support affirmative action with respect to and, if presented for vote before the Company's stockholders, to vote for the Employment Agreement between the Company and Michael W. Patrick as CEO. In addition, the Signing Stockholders agreed that for twenty-five months commencing on the Effective Date, they will not, directly or indirectly, sell, offer to sell, grant any option to purchase or otherwise transfer or dispose of any interest in the capital stock of the Company other than (a) pursuant to an Extraordinary Transaction (as defined therein) such as the sale of all or substantially all of the assets of the Company or a sale, merger, consolidation or other transaction as a result of which the holders of the voting stock of the Company immediately prior to such transaction would hold less than 50% of the outstanding voting rights of the successor entity; (b) to a parent company of the Signing Stockholder; (c) to a wholly owned subsidiary of the Signing Stockholder or a wholly owned subsidiary of the parent company of the Signing Stockholder; or (d) in the case of an individual Signing Stockholder, to a family member; 32 provided, that with respect to each of the foregoing (b), (c) and (d), the transferee agrees to become bound by the terms and conditions of the Stockholders' Agreement. Further pursuant to a registration rights agreement, dated as of January 31, 2002, among the Company and the Signing Stockholders (the "Registration Rights Agreement"), subject to certain exceptions, holders of restricted shares of Common Stock (the "Registrable Securities") who are signatories to the Registration Rights Agreement ("Holders") have the right to require the Company to register under the Securities Act of 1933, as amended, all or a part of the Registrable Securities held by such requesting Holders, provided that the number of shares sought to be included in such registration equals or exceeds, in the aggregate, 10% or more of the shares of Common Stock then issued and outstanding (calculated on a fully diluted basis). Holders are entitled to an unlimited number of such demand registrations provided that the 10% requirement described in the foregoing sentence can be satisfied. In addition, subject to certain exceptions, Holders have the right to demand (an unlimited number of times) inclusion of Registrable Securities that such Holders beneficially own in registrations by the Company of securities either for its own account or the account of a selling security holder. Carmike believes the motion picture exhibition industry has stabilized during the last eighteen months. All of the major exhibitors have experienced some form of financial restructuring, capitalization change or downsizing. The explosive growth of new theatre construction has slowed and numerous screens have been taken out of the marketplace. Carmike's business plan and operations strategy will center on slow focused growth through very selective theatre construction, the addition of screens in markets where we already have a theatre and the continuation of cost controls and inventory management that will ensure maximum cash flow from operations. Additionally, the Company will focus on the reduction of debt through required periodic amortization, sales of surplus real estate and operating cash. CRITICAL ACCOUNTING POLICIES Carmike's Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of operations discusses Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. On an on-going basis, management evaluates its estimates and judgements, including those related to impairment of long-lived assets including goodwill, leasing transactions, depreciation of property and equipment, income taxes and contingencies and litigation. Management bases its estimates and judgements on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Management believes the following critical accounting policies, among others, affect its more significant judgements and estimates used in the preparation of its consolidated financial statements. 33 Bankruptcy Matters In connection with the Chapter 11 Cases, the Company is required to report in accordance with Statement of Position 90-7 Financial Reporting by Entities in Reorganization under the Bankruptcy Code ("SOP 90-7"). SOP 90-7 requires, among other things, (i) that pre-petition liabilities that are subject to compromise be segregated in the Company's consolidated balance sheet as liabilities subject to compromise and (ii) the identification of all transactions and events that are directly associated with the reorganization of the company in the Consolidated Statement of Operations. As debtors-in-possession, the Debtors had the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject executory contracts and unexpired leases during the Chapter 11 Cases. Any damages resulting from rejection of executory contracts or unexpired leases were treated as general unsecured claims in the Chapter 11 Cases. During the Chapter 11 Cases, the Debtors received approval from the Bankruptcy Court to reject theatre lease relating to 136 theatre locations of the Debtors. The Debtors cannot presently determine or reasonably estimate the ultimate liability that may result from rejecting leases or from the filing for any rejected contracts, and no provisions have yet been made for these items. See Note 2 of Notes to Consolidated Financial Statements for additional information regarding proceedings under Chapter 11. Property and Equipment Property and equipment are carried at cost. Assets held for disposal are reported at the lower of the asset's carrying amount or its fair value less costs to sell. Amortization of assets recorded under capital leases is included with depreciation expense in the accompanying consolidated statements of operations. The Company uses accelerated methods of depreciation for income tax purposes. For financial reporting purposes, depreciation is computed on a straight-line basis as follows: Building and improvements 20-30 years Leasehold improvements 15-30 years Leasehold interests 15-30 years Equipment 5-15 years
Impairment of Long Lived Assets, including Goodwill The Company accounts for its long-lived assets in accordance with the Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS No. 121"). The Company reviews its long-lived assets including goodwill related to those assets for impairment 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 operating results that are not in line with management's expectations to be its primary indicator of potential impairment. An additional impairment indicator used by management is the existence of competition in a market, either from third parties or from the 34 Company's own expansion. For purposes of SFAS No. 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. Considerable judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. See "Assets Impairments" following for additional information regarding the effects on the 2001, 2000 and 1999 consolidated financial statement. Effective January 1, 2002, the Company will adopt Statement of Financial Accounting Standards No. 142 ("SFAS No. 142"), Goodwill and Other Intangible Assets. In general, SFAS No. 142 requires that during 2002 the Company assess the fair value of the net assets underlying our acquisition related goodwill on a business by business basis. Where that fair value is less than the related carrying value, Carmike will be required to reduce the amount of the goodwill. These reductions will be made retroactive to January 1, 2002. SFAS No. 142 also requires that Carmike discontinue the amortization of its acquisition related goodwill. As of December 31, 2001, the Company's financial statements included acquisition related goodwill of $23.4 million , net of previous amortization. Although the process of implementing SFAS No. 142 will take several more months, Carmike preliminarily believes that the adoption will not have a significant effect on the its results of operations or financial position except the reduction of amortization expenses of approximately $1.5 million in 2002. Leases The Company has various non-cancelable operating lease agreements. The theatre leases generally provide for the payment of fixed monthly rentals, property taxes, common area maintenance, insurance and repairs. Certain of these leases provide for escalating lease payments over the terms of the leases. Moreover, certain leases also include contingent rental fee based on a percentage of sales. 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 generally totaling 15-20 years. For financial statement purposes, the total amount of base rentals over the term of the leases is charged to expense on the straight-line method over the lease terms. Rental expense in excess of lease payments is recorded as a deferred rental liability. Income Taxes The Company uses the liability method of accounting for income taxes, which requires recognition of temporary differences between financial statement and income tax basis of assets and liabilities, measured by enacted tax rates. 35 The Company established a valuation allowance in accordance with the provisions of FASB Statement No. 109, Accounting for Income Taxes. The Company continually reviews the adequacy of the valuation allowance and recognizes that benefits of deferred tax assets only as reassessment indicates that it is more likely than not that the deferred tax assets will be realized. 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. As previously stated, Carmike accounts for its long-lived assets in accordance with SFAS No. 121. 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 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 2001, 2000 and 1999, the Company identified impairments of asset values for certain theatres and a joint venture investment in three movie theatre-entertainment complexes. As a result, the Company recognized a non-cash impairment charge of approximately $132.2 million, $21.2 million and $33.0 million, respectively, in the fourth quarters of 2001, 2000 and 1999. These impairment charges reduce the carrying value of approximately 287 theatres with 2,126 screens for 2001, approximately 18 theatres with 130 screens for 2000 and approximately 82 theatres with 432 screens for 1999. The impairment charges additionally reduce the carrying value of a joint venture which operated three movie theatre-entertainment complexes and equipment removed from theatres that were closed or rejected during the Chapter 11 Cases. The impairment charge recognized for 2001 was significantly larger than in prior years due to the write-off of leasehold improvements on rejected theatres, the impact of closing owned theatres, the diminished value of our entertainment centers and the write-down of surplus equipment removed from closed or rejected theatres. Additionally, in 2001 the Company included the equipment in the theatre valuation calculations based on the reduced capital building program in the future as well as the excess supply of equipment in inventory. During the course of the Chapter 11 proceedings the Company had the opportunity to reject leases on unprofitable leased theatres, to reassess the longer term value in keeping some of its owned theatres operating and to remove and store equipment taken from leased and owned theatres. During the fourth quarter of 2001 the Company had sufficient information to assess the impact of lease rejections, the closure of owned theatres, the future viability of our entertainment centers and the effect of surplus equipment. As a result of these reviews, in the fourth quarter of 2001, Carmike identified impairment of asset values for 287 theatres and 2,126 screens (the "2001 Impairment Charge"). The 2001 Impairment Charge was significant and included a provision for the total impairment of carrying value on 112 of the 136 leased theatres that were rejected during the Chapter 11 Cases, the impairment of our two entertainment centers, the impairment of equipment removed from leased and owned theatres and the inclusion of 36 equipment in the valuation analysis for the theatres remaining in the Company's portfolio. The Company has recognized impairment charges of $132.2 million (approximately $(11.65) per diluted share). These impairment charges reduced the carrying value of property and equipment by $148.6 million (cost of $214.2 million less accumulated depreciation and amortization of $86.5 million) and goodwill by approximately $20.9 million. Included in reorganization costs is $16.4 million for impairment charges on rejected theatres. Subsequent to the Petition Date, the Company identified certain owned theatres and other leased theatres which had not yet been rejected but had indicators of impairments. These theatres have been identified as impaired as a result of decreased cash flows due to new competition in their markets or management's plans relative to future operations. The Company has recognized impairment charges of approximately $21.2 million (approximately $1.87 per diluted share) for 18 theatres with 130 screens (the "2000 Impairment Charge"). These impairment charges (the 2000 Impairment Charge plus impairment charges related to reorganization - see Note 2--Proceedings Under Chapter 11) reduced the carrying value of property and equipment by $24.2 million (costs of $34.4 million less accumulated depreciation and amortization of $10.2 million) and goodwill by approximately $2.0 million. In the fourth quarter of 1999, Carmike identified impairments of asset values for 82 theatres with 432 screens (the "1999 Impairment Charge"). The 82 theatres included a further impairment of 29 theatres that were included in previous impairment charges. The 1999 Impairment Charge totaled approximately $28 million (approximately $17 million after income taxes or $1.50 per diluted share). This charge reduced the carrying value of property and equipment by approximately $22 million (costs of approximately $35 million less accumulated depreciation and amortization of approximately $13 million) and goodwill by approximately $6 million. During the fourth quarter of 1999, Carmike also identified an investment in a joint venture as permanently impaired based on the joint venture's estimate of future cash flows. The 50% owned joint venture is managed by Carmike under a management agreement and the Company prepares the joint venture's cash flow estimates. The joint venture operated three movie theatre/entertainment complexes, which have closed as of December 31, 2000. The impairment charge of approximately $5 million (approximately $3 million after income taxes or $.30 per diluted share) (together with the 1999 Impairment Charge, collectively, the "1999 Impairment Charges") represents our pro-rata portion of the joint-venture's impairment. The 2001 Impairment Charge was primarily attributed to the rejection of leases during the reorganization process, the decrease in value in our entertainment centers, surplus equipment, the decrease in the fair market values of owned property and inability to improve a marginal theatre's operating results to a level that would support the carrying value of the long-lived assets. The 2000 Impairment Charge and the 1999 Impairment Charges were primarily caused by reductions in estimated theatre cash flows due to (i) the impact of new or increased competition on certain older, auditorium-style theatres, (ii) negative evaluation of the operating results produced from theatres previously converted to Discount Theatres or (iii) inability to improve a marginal theatre/entertainment center's operating results to a level that would support the carrying value of the long-lived assets. 37 As a result of the reduced carrying amount of the impaired assets due to the 2001, 2000 and 1999 Impairment Charges, depreciation and amortization expense for 2001, 2000 and 1999 was reduced by approximately $9.8 million, $9.2 million and $6.7 million, respectively (2001 - approximately $9.8 million after income taxes or $.86 per diluted share; 2000 - approximately $9.2 million after income taxes or $.81 per diluted share; and 1999 - approximately $4.2 million after income taxes or $.37 per diluted share;). Depreciation and amortization for 2002 will be reduced by approximately $18 million as a result of the impairment charges. There can be no assurance that Carmike will not take additional charges in the future related to the impairment of assets. As a result of the Chapter 11 Cases, the Company has delayed its plans to expand existing theatres using equipment that is held by the Company. Also, the Company has significant amounts of equipment available for removal or already removed from the theatres closed due to lease rejections. The future fair value of this equipment (net book value of approximately $2.7 million at December 31, 2001) will be largely determined by the Company's ability to build new theatres or retrofit and expand existing theatres in the future. The future use of this equipment, and, therefore an estimate of its future value, has been considered in the impairment charge for 2001. Carmike has approximately $23.4 million of goodwill recorded at December 31, 2001. The goodwill values arose from acquisitions made by Carmike during the period from 1982 through 1997 and are amortized on a straight-line basis over a forty year life. Carmike evaluates goodwill for impairment in accordance with the requirements of SFAS No. 121. The unimpaired goodwill at December 31, 2001 was evaluated by Carmike based on estimated theatre and market level cash flows (see Note 4 of Notes to Consolidated Financial Statements) and Carmike believes that the assigned life of goodwill is appropriate. The 2001 Impairment Charge, the 2000 Impairment Charges and the 1999 Impairment Charge 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 "1998 Restructuring Plan"). In accordance with the 1998 Restructuring Plan, the theatres were closed during 1999. Those theatres with remaining lease terms at the Petition Date have been approved for rejection by the Bankruptcy Court. Carmike has recognized a charge of approximately $35 million (approximately $21 million after income taxes or $1.89 per diluted share) to establish reserves for 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. During June 1999, Carmike revised its estimates of the total costs to be incurred for its 1998 Restructuring Plan. The approximately $3 million decrease in estimated costs (approximately $2 million after income taxes or $.15 per diluted share) was the result of a lessor initiated early buyout of a lease included in the 1998 Restructuring Plan. The early lease 38 termination provides savings for the lease payments, utilities and other associated lease costs which were expected to be incurred over the remaining lease period at December 31, 1998. During 2000, the Company negotiated a settlement with a lessor that eliminated future payments under the terms of the lease. In addition, a stipulation was signed by the lessor in which the lessor released future claims in exchange for the theatre equipment and leasehold improvements. The reorganization reserve was reduced by a $755,000 credit to reorganization costs for this transaction. Disbursements charged against the reserves established for the 1998 Restructuring Plan were approximately $2.9 million and $3.7 million during 2000 and 1999, respectively. The theatres remaining under this restructuring charge were rejected during the Chapter 11 proceedings. The remaining restructuring reserve will be evaluated on the Effective Date of the Company's exit from the Chapter 11 Cases. 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, --------------------------------------------------------- 1997 1998 1999(1) 2000 2001 ------ ------ -------- ------ ------ Revenues: Admissions .............................................. 69.6% 68.6% 69.0% 68.2% 68.2% Concessions and other ................................... 30.4 31.4 31.0 31.8 31.8 ------ ------ ------ ------ ------ Total revenues ........................................ 100.0 100.0 100.0 100.0 100.0 Costs and expenses: Film exhibition costs (2) ............................... 37.0 36.9 37.3 40.1 37.5 Concession costs ........................................ 4.0 4.1 3.9 4.5 4.4 Other theatre operating costs ........................... 38.2 39.0 39.2 42.2 39.9 General and administrative .............................. 1.4 1.5 1.5 1.5 1.9 Depreciation and amortization ........................... 7.3 7.8 8.4 9.3 9.2 Impairment of long-lived assets ......................... -- 8.0 6.8 4.6 28.9 Restructuring charge .................................... -- 7.2 (.5) -- -- ------ ------ ------ ------ ------ 87.9 104.5 96.6 102.2 121.8 ------ ------ ------ ------ ------ Operating income (loss) ............................... 12.1 (4.5) 3.4 (2.2) (21.8) Interest expense ........................................... 5.0 5.6 7.6 6.7 1.3 ------ ------ ------ ------ ------ Income (loss) before reorganization costs, income taxes and extraordinary items .................... 7.1 (10.1) (4.2) (8.9) (23.1) Reorganization costs ....................................... -- -- -- 1.5 4.3 ------ ------ ------ ------ ------ Income (loss) before income taxes and extraordinary item ......................................... 7.1 (10.1) (4.2) (10.4) (27.4) Income tax expense (benefit) ............................... 2.7 (3.8) (1.6) 5.5 -- ------ ------ ------ ------ ------ Net income (loss) before extraordinary item ...................................... 4.4% (6.3)% (2.6)% (15.9)% (27.4% ====== ====== ====== ====== ====== Other information: Film exhibition costs as % of admissions revenue (2) .................................. 53.1% 53.8% 54.0% 58.7% 54.9% Concession costs as a % of concession revenue ...................................... 14.4% 14.3% 14.0% 15.6% 14.8%
39 (1) Excludes extraordinary items for loss on debt refinancing. (2) Film exhibition costs include advertising expenses net of co-op reimbursements. Year Ended December 31, 2001 Compared to Year Ended December 31, 2000 Total revenues for the year ended December 31, 2001 decreased to $457 million from $462 million. This decrease is primarily due to the reduction of screens in the circuit partially offset by the increase in attendance per screen. The decrease in screens is due to the rejection and closure of non-profitable leased theatres as part of the Company's filing for Chapter 11 protection. Attendance per average screen was 27,083 for 2001 compared to 25,654 for 2000. Revenue per average screen was $191,513 for 2001 compared to $174,914 for 2000. Average admission prices increased 3.9% to $4.83 for 2001 compared to $4.65 the previous year with the average concessions sale per patron increasing 6.1% to $2.10 for 2001 from $1.98 for 2000. Cost of theatre operations (film exhibition costs, concession costs and other theatre operating costs) decreased 7.0% to $373 million from $401 million due (i) to decreased film rent as a result of films that did play for an extended period of time, which provides lower percentage payments to the distributors, (ii) reduced lease costs due to theatres closed in 2001 and (iii) decreased operating costs due to closed theatres. As a percentage of revenue, cost of theatre operations decreased from 86.8% of total revenues in 2000 to 81.6% of total revenues in 2001. General and administrative costs were $8.8 million for 2001 and $6.9 million for 2000. As a percentage of total revenues, general and administrative costs were 1.9% in 2001 and 1.5% in 2000. Depreciation and amortization decreased 2.3% to $42 million from $43 million as a result of reduced screens in operation. The 2001 and 2000 Impairment Charges reduced the values of property and equipment and goodwill. These adjustments to cost reduced the amount of depreciation and amortization recognized during 2001 by approximately $9.8 million. Interest expense for the year ended December 31, 2001 decreased 80.7% to $6 million from $31 million for the year ended December 31, 2000. The Company ceased recording interest expense relating to substantially all of its debt facilities effective August 8, 2000 in accordance with the requirements of SOP 90-7. The Company recognized no income tax expense or benefit in 2001 as compared to tax expense of approximately $26 million in 2000 as a result of being in a loss carryforward position in 2001 for income tax purposes. Reorganization costs of $19.6 million have been incurred during 2001 and include $8.2 million of professional fees and $16.4 million of asset impairments directly related to actions taken under the Chapter 11 Cases including, among other things, lease rejections. These costs have been offset by $3.0 million of interest income and gains on asset sales subsequent to the Petition Date. 40 Year Ended December 31, 2000 Compared to Year Ended December 31, 1999 Total revenues for the year ended December 31, 2000 decreased to $462 million from $487 million. This decrease is due primarily to a decrease in attendance of 9% partially offset by an increase in total dollars spent per patron. The decrease in attendance was partially due to the uncertainty created in the Company's filing for Chapter 11 protection and less than anticipated acceptance of film product. When Carmike filed for Chapter 11 protection, numerous business interruptions were encountered, including: the loss of newspaper advertisements, utility cut-offs, loss of film, employee resignations and supplier cut-offs, that all had an effect on decreasing attendance. Attendance per average screen was 25,654 for 2000 compared to 26,614 for 1999. Revenue per average screen was $174,914 for 2000 compared to $173,902 for 1999. Average admission prices increased 3.1% to $4.65 for 2000 compared to $4.51 the previous year with the average concessions sale per patron increasing 7.6% to $1.98 for 2000 from $1.84 for 1999. Cost of theatre operations (film exhibition costs, concession costs and other theatre operating costs) increased 2.3% to $401 million from $392 million due (i) to increased film rent as a result of films that did not play for an extended period of time, which provides greater percentage payments to the distributors, (ii) increased lease costs due to theatres opened in 1999 and 2000, and (iii) increased startup costs for new theatres. Additionally, higher costs were incurred due to the Chapter 11 Cases as film companies adjusted the terms on their movies, newspapers changed the full contract rates for advertising and concession items were purchased in local markets at retail prices. As a percentage of revenue, cost of theatre operations increased from 80.4% of total revenues in 1999 to 86.8% of total revenues in 2000. General and administrative costs were $6.9 million for 2000 and $7.3 million for 1999. As a percentage of total revenues, general and administrative costs were 1.50% in both 2000 and 1999. Depreciation and amortization increased 4.9% to $43 million from $41 million as a result of the new screens in operation from our expansions in 2000 and 1999. The 1998 and 1999 Impairment Charges reduced the values of property and equipment and goodwill. These adjustments to cost reduced the amount of depreciation and amortization recognized during 2000 by approximately $9.2 million. Interest expense for the year ended December 31, 2000 decreased 16.2% to $31 million from $37 million for the year ended December 31, 1999. The Company ceased recording interest expense relating to substantially all of its debt facilities effective August 8, 2000 in accordance with the requirements of Statement of Position 90-7 "Financial Reporting by Entities In Reorganization under the Bankruptcy Code" ("SOP 90-7"). Income tax expense of $26 million was recorded in 2000 versus an income tax benefit of $7.8 million recognized in 1999. In periods prior to June 30, 2000, the Company has recognized deferred income tax assets based on its ability to implement certain tax planning strategies that would, if necessary, be implemented to accelerate taxable amounts to offset deductible temporary differences. These tax planning strategies primarily involved the Company's ability to sell property to generate taxable gains. As a result of (i) the Chapter 11 Cases and the Company's default on its Bank Facilities, (ii) changes in the Company's projections of future operating results, and (iii) the limited market for theatre sale/leaseback transactions, the 41 Company no longer had the ability to implement the tax planning strategies that would allow it to continue to recognize certain of its deferred income tax assets. As a result the Company recorded a valuation allowance of $41 million during 2000. Reorganization costs of $7 million were incurred since the Petition Date and include $4 million of professional fees and $5 million of asset impairments directly related to actions taken under the Chapter 11 Cases including, among other things, lease rejections. These costs were offset by $2 million of interest income and gain on asset sales subsequent to the Petition Date. During the period ended March 31, 1999 the Company recognized an extraordinary charge of $10.1 million ($6.3 million net of income tax benefit, or $0.55 per diluted share) for the prepayment premiums paid in connection with the redemption of senior notes and the elimination of certain deferred debt costs related to indebtedness which was retired in February 1999. 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. RISK MANAGEMENT AND MARKET SENSITIVE INSTRUMENTS Carmike is exposed to various market risks. Prior to the Petition Date, these exposures primarily related to changes in interest rates. Substantially all of the Company's interest was suspended during the bankruptcy. Since the Effective Date, the Company has begun to pay interest and is again subject to the market risk related to changes in 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 adopted Statement No. 133 effective January 1, 2001. The Statement requires 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. The adoption of Statement No. 133 did not have a significant effect on the Company's results of operations or financial position. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 Business Combinations ("SFAS No. 141"), which eliminates the pooling method of accounting for all business combinations initiated after June 30, 2001 and addresses the initial recognition and measurement of goodwill and other intangible assets 42 acquired in a business combination. The Company adopted SFAS No. 141 for business combinations initiated after June 30, 2001. During 2001 the Company did not transact any business combinations. Therefore, the adoption of SFAS No. 141 had no significant effects on the Company's results of operations or financial position. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. The Company will adopt the standard on January 1, 2002. The Company expects the adoption of SFAS No. 142 will result in the reduction of amortization expense of approximately $1.5 million in 2002. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a segment of a business. The Company will adopt the standard on January 1, 2002. The Company does not expect the adoption of the Statement will have a significant impact on the Company's financial position and results of operations. LIQUIDITY AND CAPITAL RESOURCES GENERAL The Company's revenues are collected in cash and credit cards, principally through admissions and theatre concessions. Because its revenues are received in cash prior to the payment of related expenses, the Company has an operating "float" which partially finances its operations. The Company had working capital of $54.7 million as of December 31, 2001, compared to working capital of $27.1 million at December 31, 2000. The improved working capital recorded as of December 31, 2001 reflects the improvement in cash flow from operations. At December 31, 2001, the Company had approximately $94.2 million in cash and cash equivalents on hand. Substantially all of which was used to repay pre-petition liabilities in connection with the Effective Date. As of March 22, 2002, the Company had approximately $25 million in cash and cash equivalents on hand. Carmike's capital expenditures arise principally in connection with the development of new theatres, renovation and expansion of existing theatres and theatre acquisitions. During 2001, such capital expenditures totaled $9.2 million. In connection with the Revolving Credit Agreement, the Company will be limited to capital expenditures, as defined, of $20 million in 2002 and $15 million in each of the next four years. Cash provided by operating activities was $49.4 million for the twelve-months ended December 31, 2001, compared to cash provided by operating activities of $25.4 million for the twelve-months ended December 31, 2000. The increase in cash flow from operating activities was primarily due to the decrease in net loss as a result of non-cash impairment charges. Net cash used in investing activities was $1.0 million for the year ended December 31, 2001 as 43 compared to $15.6 million in the prior year. This decrease in cash used in investing activities was primarily due to the decreased level of capital expenditures and receipt of proceeds from sales of long-term assets. For the year ended December 31, 2001 cash used in financing activities was $6.8 million compared to cash provided by financing activities of $47.0 million for the previous year. The decrease was primarily due to reduced borrowings under the Old Revolving Credit Facility. The Company's liquidity needs are funded by operating cash flow, sales of surplus assets, availability under the Revolving Credit Agreement and short term float. The exhibition industry is very seasonal with the studios normally releasing their premiere film product during the holiday season or summer months. This seasonal positioning of film product makes the Company's needs for cash vary significantly from period to period. Additionally, the ultimate performance of the film product, any time during the calendar year, will have the most dramatic impact on the Company's cash needs. The Company's ability to service its indebtedness will require a significant amount of cash. Our ability to generate this cash will depend largely on future operations. Based upon our current level of operations, we believe that cash flow from operations, available cash, sales of surplus assets and borrowings under the Revolving Credit Agreement will be adequate to meet our liquidity needs. The Company cannot make assurances, however, that its business will continue to generate significant cash flow to fund its liquidity needs. We are dependent to a large degree on the public's acceptance of the films released by the studios. We are also subject to a high degree of competition and low barriers of entry into our industry. In the future, we may need to refinance all or a portion of our indebtedness on or before maturity. The Company cannot make assurances that it will be able to refinance any of its indebtedness or raise additional capital through other means, on commercially reasonable terms or at all. Contractual Obligations
PAYMENTS DUE BY PERIOD One Year or Less 2-3 Years 4-5 Years After 5 Years Total ---------------------------------------------------------------------- Term Loan -New Bank Debt (1) $ 20,000 $ 55,000 $ 60,000 $ 96,130 $ 231,130 Revolving Credit Agreement (2) -0- -0- 50,000 -0- 50,000 New Senior Subordinated Notes (3) -0- -0- -0- 154,315 154,315 General unsecured creditors (4) 5,000 10,000 10,000 15,000 40,000 Industrial Revenue Bond 522 1,043 739 -0- 2,304 Capital Lease Obligations (5) 6,600 13,373 13,388 84,509 117,870 Operating Leases (5) 40,608 76,458 71,153 365,707 553,926 ---------------------------------------------------------------------- Total Contractual Cash Obligations $ 72,730 $ 155,874 $ 205,280 $ 715,661 $1,149,545 ======================================================================
(1) Term Loan has required semi-annual principal payments each June 30 and December 31 through June 30, 2006. The remaining principal balance outstanding matures on January 15, 2007. (2) The Revolving Credit Agreement has a maturity date of October 31, 2006. This presentation assumes the full $50 million commitment is outstanding and payable. (3) The maturity date for the New Senior Subordinated Notes is February 1, 2009. (4) General unsecured creditors in the Chapter 11 Cases are due semi-annual payments of $2.5 million plus interest with a maturity of January 31, 2007. 44 (5) Includes obligations for theatres the Company had not closed or rejected at December 31, 2001. Professional fees have averaged approximately $712,000 per month from the Petition Date through December 31, 2001. Carmike will continue to incur significant professional fees during the remainder of the Chapter 11 Cases. FINANCIAL COVENANT COMPLIANCE Both before and after the commencement of the Chapter 11 Cases, Carmike has taken steps to restructure its operations and to improve profitability. These steps include but are not limited to reduction of new movie theatre development, curtailment of renovation and expansion of existing theatres, increased management control over expenditures, aggressive marketing of surplus assets and evaluations of capital sources and debt restructurings. The Company has been incurring and will continue to incur significant professional fees and other restructuring costs. The Company anticipates that it may incur additional impairments of long-lived assets in connection with the Chapter 11 Cases and the ongoing restructuring of its business operations during fiscal year 2002. Carmike's credit and leasing facilities contain certain restrictive provisions which, among other things, limit additional indebtedness of the Company, limit capital expenses, limit the payment of dividends and other defined restricted payments, require that certain debt to capitalization ratios be maintained and require minimum levels of defined cash flows. To secure the New Master Lease, Carmike granted MoviePlex an express contract lien, in addition to MoviePlex's statutory lien as landlord, on and a security interest in all equipment, inventory, fixtures and other personal property which is located on the leased premises or used in connection therewith and upon all proceeds thereof. In the Event of Default (as defined below) by Carmike, MoviePlex has the immediate option to terminate the New Master Lease and all rights of Carmike thereunder and may then recover from Carmike: (a) the worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus (b) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rent loss which could have been reasonably avoided (as liquidated damages); plus (c) the worth at the time of award of the amount by which the unpaid rent for the balance of the New Master Lease term after the time of award exceeds the amount of such rent loss which could be reasonably avoided (as liquidated damages); plus (d) at MoviePlex's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time under applicable law. A "Default" under the New Master Lease includes Carmike's failure to pay rent or perform under certain conditions, Carmike's being adjudged bankrupt or the judicial seizure of its assets, or the occurrence of a Change of Control of Carmike. Under the New Master Lease, a "Change of Control" is any event, transaction or occurrence as a result of which (i) the stockholders of Carmike cease to own and control all of the economic and voting rights associated with ownership of at least 30% of the outstanding capital stock of all classes of Carmike on a fully diluted basis, or Carmike ceases to own and control all of the economic and voting rights associated with all of the outstanding capital stock of any of its Debtor subsidiaries 45 (except that a particular qualified buyer transaction is not a Change of Control under the New Master Lease). The New Master Lease has been collaterally assigned, like the Original Master Lease was, to Wachovia Bank, N.A., in its capacity as Agent under the Reimbursement Agreement dated as of November 20, 1997, as amended, among MoviePlex, certain lenders (the "MoviePlex Lenders") and Wachovia Bank, as Agent pursuant to a Mortgage and an Assignment of Rents as to each of six properties, to secure MoviePlex's obligations to such MoviePlex Lenders under the Reimbursement Agreement. At the end of the New Master Lease term, or if the lease is terminated by reason of default by Carmike, the furniture, fixtures and equipment located in the theatres will become the property of the MoviePlex Lenders. In addition, the MoviePlex Lenders have released their liens on the Debtors' other assets that secured the MoviePlex obligations. If a default or Event of Default (as defined below) under the Revolving Credit Agreement occurs and is continuing, then the Agent may (and at the request of the requisite lenders shall) suspend the Revolving Credit Agreement with respect to additional advances and/or the incurrence of additional letter of credit obligations and may increase the interest rate applicable to the loans and the letter of credit fees to the Default Rate (i.e., two percentage points above the otherwise applicable rate). If an Event of Default under the Revolving Credit Agreement occurs and is continuing, the Agent may (and at the request of the requisite lenders shall) terminate the revolving loan facility with respect to further advances or the incurrence of further letter of credit obligations and may declare all or any portion of the obligations due and payable and require that the letter of credit obligations be cash collateralized (except that no declaration of such is required if any Borrower or Debtor Subsidiary becomes subject to a bankruptcy proceeding). "Events of Default" under the Revolving Credit Agreement include, among other events and subject to any conditions set forth in the Revolving Credit Agreement: (a) a Borrower's failure to pay principal or interest on the loans or other obligations when due and payable or failure to reimburse Agent's expenses; (b) any credit party's or Borrower's failure to perform or observe certain covenants, such as the Borrowers' using the proceeds of the revolving loan and swing line advances solely for refinancing the bank debt under the Post-Confirmation Credit Agreement; (c) a credit party's breach or default with respect to the Indenture or the Post-Confirmation Credit Agreement; or (d) the occurrence of a Change of Control. A "Change of Control" under the Revolving Credit Agreement is similar to such an event under the New Master Lease. If an Event of Default under the Post-Confirmation Credit Agreement occurs and is continuing, then, if requested by the required lenders, the Administrative Agent shall terminate the commitments and declare the notes and all amounts payable under the Post-Confirmation Credit Agreement due (except that no declaration of such is required if Carmike or any of its subsidiaries becomes subject to a bankruptcy proceeding). "Events of Default" under the Post-Confirmation Credit Agreement include, among other events and subject to any conditions in the Post-Confirmation Credit Agreement: (a) Carmike's failure to pay principal or interest on the Loans or when due and payable or failure to pay certain expenses; (b) Carmike's failure to perform or observe certain covenants, such as compliance with certain funded debt to EBITDA and interest coverage ratios; or (c) the occurrence of a Change of Control. A "Change of Control" under the Post-Confirmation Credit Agreement is similar to such an event under the New Master Lease. 46 If an Event of Default under the Indenture occurs and is continuing, then the Trustee or the holders of at least 25% in principal amount of the then outstanding New Senior Subordinated Notes may declare all the New Senior Subordinated Notes to be due and payable immediately. "Events of Default" under the Indenture include, among other events and subject to any conditions in the Indenture: (a) the Company's failure to pay principal, interest or premium when due on the New Senior Subordinated Notes, (b) Carmike's or any of certain subsidiaries' failure to comply with the restrictions concerning certain payments, incurrence of certain indebtedness and issuance of preferred stock, offer to repurchase the New Senior Subordinated Notes upon a change of control, assets sales, limitations on dividend and other payment restrictions affecting subsidiaries, and merger, consolidation, sale of assets contained in the Indenture, or (c) Carmike's default under the Plan Trade Payable (as defined in the Indenture) or any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced certain Indebtedness (as defined in the Indenture) for money borrowed by Carmike or any of certain subsidiaries, which default (A) is caused by a failure to pay principal of, or interest or premium, if any, on such Plan Trade Payables or Indebtedness prior to the expiration of the grace period, if any on the date of such default (a "Payment Default") or (B) results in the acceleration of such Indebtedness prior to the express maturity thereof and, in each case, the principal amount of such Plan Trade Payables or Indebtedness, together with the principal amount of any other Plan Trade Payables or such Indebtedness which has so had a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more. RELATED PARTY TRANSACTIONS Carmike has an aircraft lease agreement dated July 1, 1983, with C.L.P. Equipment, a sole proprietorship of which C.L. Patrick is the owner, pursuant to which Carmike paid $190,522 in the year ended December 31, 2001. Carmike believes that this transaction is on terms no less favorable to Carmike than terms available from unaffiliated parties in arm's-length transactions. F. Lee Champion, III, Senior Vice President, General Counsel, Secretary and a director of Carmike until December 31, 2001, owns 20% of Military Services, Inc., a subsidiary of Carmike. Mr. Champion provides outside legal services for the Company and is compensated on terms no less favorable to Carmike than terms available from unaffiliated parties in arm's-length transactions. Carl E. Sanders, a director of Carmike until April 9, 2001, is Chairman of Troutman Sanders LLP, Atlanta, Georgia, which provided legal services to Carmike during 2001 and is providing legal services to Carmike during 2002. Elizabeth C. Fascitelli and Richard A. Friedman are managing directors of Goldman Sachs. Goldman Sachs and its subsidiaries have provided investment banking and related financial services to Carmike during 2001 and are expected to provide similar services to Carmike in 2002. Ms. Fascitelli and Mr. Friedman initially were elected as directors of Carmike pursuant to a Stock Purchase Agreement dated November 22, 1998 relating to the sale of the Series A Preferred Stock, pursuant to which certain affiliates of Goldman Sachs purchased an aggregate of 550,000 shares of the Series A Preferred Stock for an aggregate purchase price of $55.0 million. The holders of the Series A Preferred Stock received 41.2% of the ten million (10,000,000) shares of reorganized Carmike Common Stock on January 31, 2002 provided for in the Plan, and Ms. Fascitelli and Mr. Friedman have been designated by GS Capital Partners, III 47 pursuant to the Stockholders' Agreement to be a member of the Board of Directors of the Company. See Part II, Item 7 of this Form 10-K Report under the caption "Chapter 11 Cases". On February 3, 1999, Carmike sold $200 million in principal amount of Original Senior Subordinated Notes, of which $140 million in principal amount was purchased by Goldman Sachs. Certain claims regarding these notes were exchanged in the Chapter 11 Cases for the New Senior Subordinated Notes. In addition, on February 25, 1999, Carmike entered into a $75 million Term Loan B for which Goldman Sachs Credit Partners L.P., an affiliate of Goldman Sachs, was a lead arranger and syndication agent. As discussed in "Chapter 11 Cases" above, certain holders of $45,685,000 in aggregate principal amount of the Original Senior Subordinated Notes received in the aggregate 26.6% of the ten million (10,000,000) shares of reorganized Carmike Common Stock provided for in the Plan. Each holder that exchanged such notes for shares of reorganized Carmike Common Stock received 886,667 shares of reorganized Carmike Common Stock. These holders include: (a) TJT (B) (Bermuda) Investment Company Ltd., a Bermuda company wholly owned by TJT (B), of which Carmike director John W. Jordan, II is the sole trustee, (b) Carmike director David W. Zalaznick and his wife Barbara Zalaznick, as joint tenants, and (c) Leucadia National Corporation, of which Carmike director Ian M. Cumming is also a director and Chairman. 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." Interest paid on the Company's debt is largely subject to changes in interest rates in the market. The Revolving Credit Agreement and the New Bank Debt are based on a structure that is priced over an index or LIBOR rate option. A substantial number of the Company's theatre leases are off-balance sheet as required by Generally Accepted Accounting Principles for Operating Leases. The cash commitments required for these leases have been included in the contractual obligations schedule included in Part II, Item 7 of this Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Consolidated Financial Statements for the years ended December 31, 2001 and 2000 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
48 REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Carmike Cinemas, Inc. (Debtor-In-Possession) We have audited the accompanying consolidated balance sheets of Carmike Cinemas, Inc. and subsidiaries (a debtor-in-possession as of August 8, 2000) as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States. 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, 2001 and 2000 and the consolidated results of operations and cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. 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 Atlanta, Georgia March 27, 2002 F-1 CONSOLIDATED BALANCE SHEETS CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) (IN THOUSANDS, EXCEPT FOR SHARE DATA)
DECEMBER 31, 2001 2000 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 94,187 $ 52,522 Accounts and notes receivable 692 1,627 Inventories 3,072 4,029 Recoverable construction allowances 8,175 13,392 Prepaid expenses 5,140 7,109 --------- --------- Total current assets 111,266 78,679 Other assets: Investments in and advances to partnerships 7,095 8,747 Other (including restricted cash of $13,185 in 2001 and $3,500 in 2000) 15,984 6,702 --------- --------- 23,079 15,449 Property and equipment Land 58,707 67,041 Buildings and improvements 146,728 200,898 Leasehold improvements 218,352 277,322 Leasehold interest 5,841 15,429 Equipment 179,619 255,931 --------- --------- 609,247 816,621 Accumulated depreciation and amortization (149,154) (195,456) --------- --------- 460,093 621,165 Goodwill, net of accumulated amortization 23,354 45,991 --------- --------- Total assets $ 617,792 $ 761,284 ========= =========
F-2
DECEMBER 31, 2001 2000 --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 22,291 $ 19,098 Accrued expenses 32,028 29,903 Current maturities of long-term indebtedness and capital lease obligations 2,289 2,569 --------- --------- Total current liabilities 56,608 51,570 Long-term liabilities: Long-term debt, less $1,418 and $1,724 in current maturities and $444,806 and $455,239 classified as subject to compromise at December 31, 2001 and 2000 -0- -0- Capital lease obligations, less current maturities and $3,120 and $2,364 classified as subject to compromise at December 31, 2001 and 2000 47,423 49,430 Restructuring reserve, less $24,668 and $24,683 classified as subject to compromise at December 31, 2001 and 2000 -0- -0- Deferred income taxes 1,927 1,927 --------- --------- 49,350 51,357 Liabilities subject to compromise 508,100 529,236 Commitments and Contingencies Shareholders' equity: 5.5% Series A Senior Cumulative Exchangeable Preferred Stock, $1.00 par value, Authorized 1,000,000 shares, issued and outstanding 550,000 shares, respectively; involuntary liquidation value of $55,000 550 550 Class A Common Stock, $.03 par value, one vote per share, authorized 22,500,000 shares, issued and outstanding 10,018,287 shares, respectively 301 301 Class B Common Stock, $.03 par value, ten votes per share, authorized 5,000,000 shares, issued and outstanding 1,370,700 shares, respectively 41 41 Treasury Stock, at cost, 44,800 shares, respectively (441) (441) Paid-in capital 158,772 158,772 Retained earnings (deficit) (155,489) (30,102) --------- --------- 3,734 129,121 --------- --------- Total liabilities and shareholders' equity $ 617,792 $ 761,284 ========= =========
See accompanying notes F-3 CONSOLIDATED STATEMENTS OF OPERATIONS CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, 2001 2000 1999 ---------- ---------- ---------- Revenues: Admissions $ 311,818 $ 315,395 $ 335,980 Concessions and other 145,132 146,902 150,945 ---------- ---------- ---------- 456,950 462,297 486,925 Costs and expenses: Film exhibition costs 171,207 185,195 181,504 Concession costs 20,184 20,964 19,046 Other theatre operating costs 182,054 194,789 191,063 General and administrative expenses 8,846 6,889 7,316 Depreciation and amortization expenses 42,153 43,174 41,146 Impairment charge 132,207 21,250 32,993 Change in estimated restructuring costs -0- -0- (2,671) ---------- ---------- ---------- 556,651 472,261 470,397 ---------- ---------- ---------- Operating income (loss) (99,701) (9,964) 16,528 Interest expense (Contractual interest for both years ended December 31, 2001 and 2000 was $44,651) 6,138 31,009 36,853 ---------- ---------- ---------- Net (loss) before reorganization costs, Income taxes and extraordinary item (105,839) (40,973) (20,325) Reorganization costs 19,548 7,042 -0- ---------- ---------- ---------- Net (loss) before income taxes and extraordinary item (125,387) (48,015) (20,325) Income tax (benefit) -0- 25,548 (7,740) ---------- ---------- ---------- Net (loss) before extraordinary item (125,387) (73,563) (12,585) Extraordinary item (net of income taxes) -0- -0- (6,291) ---------- ---------- ---------- Net (loss) (125,387) (73,563) (18,876) Preferred stock dividends -0- (1,513) (3,025) ---------- ---------- ---------- Net (loss) available for common stock $ (125,387) $ (75,076) $ (21,901) ========== ========== ========== Weighted average shares outstanding: Basic and diluted 11,344 11,344 11,375 ========== ========== ========== (Loss) per common share before extraordinary item: Basic and diluted $ (11.05) $ (6.62) $ (1.37) ========== ========== ========== (Loss) per common share: Basic and diluted $ (11.05) $ (6.62) $ (1.93) ========== ========== ==========
See accompanying notes. F-4 CONSOLIDATED STATEMENTS OF CASH FLOWS CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) (IN THOUSANDS)
YEARS ENDED DECEMBER 31, 2001 2000 1999 ----------- ----------- ---------- OPERATING ACTIVITIES Net (loss) $ (125,387) $ (73,563) $ (18,876) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 42,153 43,174 41,146 Impairment charges 132,207 26,134 32,993 Restructuring charge -0- (755) (2,671) Deferred income taxes -0- 22,965 (6,979) Non-cash reorganization items 9,064 -0- -0- Recoverable income taxes -0- 5,775 (5,775) Gain on sales of property and equipment -0- (3,018) (2,765) Extraordinary charge -0- 3,021 10,146 Changes in operating assets and liabilities: Accounts and notes receivable and inventories 3,544 43 (276) Prepaid expenses and other assets (7,313) 3,148 (4,371) Accounts payable 3,193 (6,642) 11,144 Accrued expenses and other liabilities (8,040) 5,150 5,913 ----------- ----------- ---------- Net cash provided by operating activities 49,421 25,432 59,629 INVESTING ACTIVITIES Purchases of property and equipment (9,191) (44,948) (140,480) Proceeds from sales of property and equipment 8,197 4,473 5,069 Proceeds from sale/leaseback transaction -0- 23,589 -0- Decrease (increase) in other -0- 1,249 372 ----------- ----------- ---------- Net cash used in investing activities (994) (15,637) (135,039) FINANCING ACTIVITIES Debt: Additional borrowings, net of debt issuance costs -0- 341,211 2,422,818 Repayments (including prepayment penalties) (11,979) (294,599) (2,337,724) Issuance of Preferred Stock -0- -0- -0- Preferred stock dividends -0- (1,513) (3,025) Issuance of Class A Common Stock -0- -0- 230 Repurchase of Class A Common Stock -0- -0- (441) Recoverable construction allowances under capital leases 5,217 1,867 (15,259) ----------- ----------- ---------- Net cash provided by (used in) financing activities (6,762) 46,966 66,599 ----------- ----------- ---------- Increase (decrease) in cash and cash equivalents 41,665 56,761 (8,811) Cash and cash equivalents at beginning of year 52,522 (4,239) 4,572 ----------- ----------- ---------- Cash and cash equivalents at end of year $ 94,187 $ 52,522 $ (4,239) =========== =========== ==========
See accompanying notes F-5 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) (IN THOUSANDS)
SERIES A SENIOR CUMULATIVE CONVERTIBLE EXCHANGEABLE CLASS A PREFERRED STOCK COMMON STOCK -------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ----------------- ----------------- ------------ -------------- Balance at December 31, 1998 550 $ 550 9,942 $ 298 Issuance of Class A Common Stock on exercise of stock options - - 26 1 Purchase of Treasury Stock - - - - Dividends on Preferred Stock - - - - Net loss - - - - ----------------- ----------------- ------------ -------------- Balance at December 31, 1999 550 $ 550 9,968 $ 299 Issuance of Class A Common Stock by Conversion of Class B Common Stock - - 50 2 Dividends on Preferred Stock - - - - Net loss - - - - ----------------- ----------------- ------------ -------------- Balance at December 31, 2000 550 $ 550 10,018 $ 301 Issuance of Class A Common Stock on exercise of stock options - - - - Purchase of Treasury Stock - - - - Dividends on Preferred Stock - - - - Net (loss) - - - - ----------------- ----------------- ------------ -------------- Balance at December 31, 2001 550 $ 550 10,018 $ 301 ================= ================= ============ ============== See accompanying notes.
F-6
CLASS B COMMON STOCK TREASURY STOCK PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL - -------------- -------------- ------------- --------------- ------------------ ----------------- -------------- 1,421 $ 43 -0- $ -0- $ 158,543 $ 66,875 $ 226,309 - - - - 229 - 230 - - (45) (441) - - (441) - - - - - (3,025) (3,025) - - - - - (18,876) (18,876) - -------------- -------------- ------------- --------------- ------------------ ----------------- ------------------ 1,421 43 (45) (441) 158,772 44,974 204,197 (50) (2) - - - - - - - - - - (1,513) (1,513) - - - - - (73,563) (73,563) - -------------- -------------- ------------- --------------- ------------------ ----------------- ------------------ 1,371 $ 41 (45) $ (441) $ 158,772 $ (30,102) $ 129,121 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (125,387) (125,387) - -------------- -------------- ------------- --------------- ------------------ ----------------- ----------------- 1,371 $ 41 (45) $ (441) $ 158,772 $ (155,489) $ 3,734 ============== ============== ============= =============== ================== ================= ==================
F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) DECEMBER 31, 2001 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION On August 8, 2000 (the "Petition Date"), Carmike and its subsidiaries, Eastwynn Theatres, Inc. ("Eastwynn"), Wooden Nickel Pub, Inc. ("Wooden Nickel") and Military Services, Inc. (collectively "the Company") filed voluntary petitions for relief under Chapter 11 ("the "Chapter 11 Cases") of the United States Bankruptcy Code. In connection with the Chapter 11 Cases, the Company is required to report in accordance with Statement of Position 90-7 Financial Reporting by Entities in Reorganization under the Bankruptcy Code ("SOP 90-7"). SOP 90-7 requires, among other things, (i) that pre-petition liabilities that are subject to compromise be segregated in the Company's consolidated balance sheet as liabilities subject to compromise and (ii) the identification of all transactions and events that are directly associated with the reorganization of the Company in the Consolidated Statement of Operations. DESCRIPTION OF BUSINESS The primary business of the Company is the operation of motion picture theatres which generate revenues principally through admissions and concessions sales. The Company considers itself to be in a single segment. Substantially all revenues are received in cash and are recognized as income at the point of sale. Ten major distributors in the motion picture industry produced films which accounted for approximately 97.3%, 98.8% and 97.8% of the Company's admission revenues in 2001, 2000 and 1999, respectively. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. CASH AND CASH EQUIVALENTS Cash equivalents are highly liquid investments with original maturities of three months or less and consist primarily of money market accounts and deposits. Cash equivalents are stated at cost. Deposits with banks are federally insured in limited amounts. DEBT ISSUANCE COSTS Costs related to the issuance of debt are capitalized and amortized to interest expense over the term of the related debt prior to the Chapter 11 Cases. Subsequent to the Chapter 11 Cases, these costs are included in the Consolidated Balance Sheet in "Liabilities Subject to Compromise" along with the related debt and are not being amortized. F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVENTORIES Inventories, principally concessions and theatre supplies, are stated at the lower of cost (first-in, first-out method) or market. INVESTMENTS IN UNCONSOLIDATED AFFILIATES The Company is a partner in joint ventures that operate motion picture theatres. The investments in these ventures 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. PROPERTY AND EQUIPMENT Property and equipment are carried at cost or cost adjusted for recognized impairments. Assets held for disposal are reported at the lower of the asset's carrying amount or its fair value less costs to sell. Amortization of assets recorded under capital leases is included with depreciation expense in the accompanying consolidated statements of operations. The Company uses accelerated methods of depreciation for income tax purposes. For financial reporting purposes, depreciation is computed on a straight-line basis as follows: Building and improvements 20-30 years Leasehold improvements 15-30 years Leasehold interests 15-30 years Equipment 5-15 years GOODWILL Goodwill represents the excess of purchase price over the fair value of net tangible assets acquired and is amortized on a straight-line basis over 40 years. Accumulated amortization was $4.8 million and $7.8 million at December 31, 2001 and 2000, respectively, and amortization expense was $1.5 million for each of 2001, 2000 and 1999. IMPAIRMENT OF LONG LIVED ASSETS The Company accounts for its long-lived assets in accordance with the Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS No. 121"). The Company reviews its long-lived assets and goodwill related to those assets for impairment 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 operating results that are not in agreement with management's expectations to be its primary indicator of potential impairment. An additional impairment indicator used by management is the existence of competition in a market, either from third parties or from the Company's own expansion. For purposes of SFAS No. 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 F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. Considerable judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such estimates. Recoverability of investments in unconsolidated affiliates is evaluated on an ongoing 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. INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS No. 109"). Under SFAS 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. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. ADVERTISING The company expenses advertising costs when incurred. STOCK BASED COMPENSATION The Company accounts for its stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25'). 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. EARNINGS PER SHARE Basic earnings per share are presented in conformity with Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128") for all periods presented. In accordance with SFAS No. 128, basic net loss per common share has been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding plus common stock equivalents for each period. Options to purchase shares of common stock were not included in the computed diluted earnings per share in 2001, 2000 or 1999 because the option exercise price was greater than the average market price of the stock and the effect would be antidilutive. Shares potentially issuable in connection with the 5.5% Series A Senior Cumulative Convertible Exchangeable Preferred Stock (the "Preferred Stock") were not included in the diluted earnings per share calculation in 2001, 2000 and 1999 as their effect would be antidulutive. F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) LEASES The Company has various non-cancelable operating lease agreements. The theatre leases generally provide for the payment of fixed monthly rentals, property taxes, common area maintenance, insurance and repairs. Certain of these leases provide for escalating lease payments over the terms of the leases. Moreover, certain leases also include contingent rental fees based on a percentage of sales. 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 generally totaling 15-20 years. For financial statement purposes, the total amount of base rentals over the term of the leases is charged to expense on the straight-line method over the lease terms. Rental expense in excess of lease payments is recorded as a deferred rental liability. DERIVATIVES It is the Company's policy to recognize all derivative financial instruments, such as interest rate swap contracts in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either periodically recorded in income or in shareholders' equity as a component of comprehensive income depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedges risk(s). Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in comprehensive income net of applicable deferred taxes. Changes in fair values of derivatives, not qualifying as hedges, are reported in income. If an interest rate swap agreement is 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 to income coincident with the extinguishment. See Note 3 - Liabilities Subject to Compromise, for a discussion of the interest rate swaps terminated at the Petition Date. BENEFIT PLANS The Company has a non-qualified deferred compensation plan for certain of its executive officers. Under this plan, the Company contributes ten percent 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. RECLASSIFICATIONS Certain amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year's presentation. F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"). The Company adopted SFAS No. 133, as amended, effective January 1, 2001. SFAS No. 133 requires the Company to recognize all derivatives on the balance sheet at fair value. The adoption of SFAS No. 133 did not have a significant effect on the Company's results of operations or financial position. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 Business Combinations ("SFAS No. 141"), which eliminates the pooling method of accounting for all business combinations initiated after June 30, 2001 and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. The Company adopted SFAS No. 141 for business combinations initiated after June 30, 2001. During 2001 the Company did not transact any business combinations. Therefore, the adoption of SFAS No. 141 had no significant effects on the Company's results of operations or financial position. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. The Company expects the adoption of SFAS No. 142 will result in the reduction of amortization expense of approximately $1.5 million in 2002. In general, SFAS No. 142 requires the Company to assess the fair value of the net assets underlying our acquisition related goodwill on a theatre by theatre basis during 2002. Reductions, if any, will be made retroactive to January 1, 2002. In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations for a disposal of a segment of a business. The Company will adopt the standard on January 1, 2002. The Company does not expect that the adoption of the Statement will have a significant impact on the Company's financial position and results of operations. NOTE 2--PROCEEDINGS UNDER CHAPTER 11 On August 8, 2000 (the "Petition Date") Carmike and its subsidiaries Eastwynn Theatres, Inc., Wooden Nickel Pub, Inc. and Military Services, Inc. (collectively, the "Debtors") filed voluntary petitions for relief under chapter 11 (the "Chapter 11 Cases") of title 11 of the U.S. Code. On January 4, 2002, the United States Bankruptcy Court for the District of Delaware entered an order confirming the Debtors' Amended Joint Plan of Reorganization Under Chapter 11 of the F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 2--PROCEEDINGS UNDER CHAPTER 11 (CONTINUED) Bankruptcy Code, dated as of November 14, 2001 (the "Plan"). The Plan became effective on January 31, 2002 (the "Effective Date"). In the Chapter 11 Cases, substantially all unsecured and partially secured liabilities as of the Petition Date were subject to compromise or other treatment until a plan of reorganization was confirmed by the Bankruptcy Court. Generally, actions to enforce or otherwise effect repayment of all pre-chapter 11 liabilities as well as all pending litigation against the Debtors were stayed while the Debtors continued their business operations as debtors-in-possession. The Company could not pay pre-petition debts without prior Bankruptcy Court approval during the Chapter 11 Cases. Immediately after the commencement of the Chapter 11 Cases, the Debtors sought and obtained several orders from the Bankruptcy Court which were intended to stabilize their business and enable the Debtors to continue operations as debtors-in-possession. The most significant of these orders: (i) permitted the Debtors to operate their consolidated cash management system during the Chapter 11 Cases in substantially the same manner as it was operated prior to the commencement of the Chapter 11 Cases; (ii) authorized payment of pre-petition wages, vacation pay and employee benefits and reimbursement of employee business expenses; (iii) authorized payment of pre-petition sales and use taxes owed by the Debtors; (iv) authorized the Debtors to pay up to $2,250,000 of pre-petition obligations to critical vendors, common carriers and workers' compensation insurance to aid the Debtors in maintaining operation of their theatres and approximately $37 million to film distributors as set forth below; and (v) authorized debt service payments for the loan related to Industrial Revenue Bonds issued by the Downtown Development Authority of Columbus, Georgia. As debtors-in-possession, the Debtors had the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject executory contracts and unexpired leases during the Chapter 11 Cases. In this context, "assumption" means that the Debtors agree to perform their obligations and cure all existing defaults under the contract or lease, and "rejection" means that the Debtors are relieved from their obligations to perform further under the contract or lease but are subject to a claim for damages for the breach thereof. Any damages resulting from rejection of executory contracts and unexpired leases were treated as general unsecured claims in the Chapter 11 Cases. During the Chapter 11 Cases, the Debtors received approval from the Bankruptcy Court to reject theatre leases relating to 136 theatre locations of the Debtors. The Debtors cannot presently determine or reasonably estimate the ultimate liability that may result from rejecting leases or from the filing of claims for any rejected contracts, and no provisions have yet been made for these items. As a result of the Chapter 11 Cases, no principal or interest payments will be made on unsecured pre-petition debt. Payments may be required to be made on secured pre-petition debt subject to Bankruptcy Court approval. On October 27, 2000, the Debtors' received Bankruptcy Court approval to make debt service payments for the loan related to Industrial Revenue Bonds issued by the Downtown Development Authority of Columbus, Georgia. The Company has reached an agreement with its creditor constituencies that provides for the payment of cash collateral and adequate protection, as those terms are defined in the Bankruptcy Code. The Company made F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 2--PROCEEDINGS UNDER CHAPTER 11 (CONTINUED) payments to the secured lenders in the amount of $8,272,821 on March 5, 2001 and will make payments of $500,000 per month as adequate protection payments. All of these payments are treated as principal payments under the creditor agreement. Additionally, after the Petition Date, the Company cannot declare dividends for its Preferred Stock. Preferred Stock dividends of $7.0 million and $2.3 million are in arrears at December 31, 2001 and 2000. The terms of the Preferred Stock agreement provide, with respect to dividend arrearages, that the dividend accrued rate increases to 8.5%. In view of the Company's having ceased making scheduled dividend payments on the Preferred Stock after the Petition Date, the holders of the Preferred Stock have designated two additional directors to the Company's Board of Directors. Also, during the Chapter 11 Cases, the Company reached an agreement to restructure its master lease facility with MoviePlex Realty Leasing, L.L.C. ("MoviePlex") and entered into the Second Amended and Restated Master Lease, dated as of September 1, 2001 (the "New Master Lease"). Under the New Master Lease, Carmike has entered into a new 15-year lease for the six MoviePlex properties with an option to extend the term for an additional five years. The Original MoviePlex Lease was terminated and prepetition defaults of $493,680 under the Original MoviePlex Lease were paid. The initial first twelve months base rent for the six theatres is an aggregate of $5.4 million per annum ($450,000 per month), subject to periodic increases thereafter and certain additional rent obligations such as percentage rent. All past due rent, additional rent, and/or other sums due to MoviePlex under the terms of the New Master Lease bears interest from the date which is five days from the due date until paid by Carmike at the rate of 2% above the published prime rate of Wachovia Bank, N.A. Under the New Master Lease, Carmike pays all real estate taxes with respect to the leased premises. When the Plan became effective on January 31, 2002, Carmike filed with the Secretary of State for the State of Delaware the Amended and Restated Certificate of Incorporation (the "Restated Certificate"), which cancelled all then existing Class A and Class B Common Stock and Preferred Stock of the Company and established authorized capital stock of twenty million (20,000,000) shares of reorganized Carmike Common Stock, par value $.03 per share, and one million (1,000,000) shares of reorganized Carmike Preferred Stock, par value $1.00 per share. The Company currently has only reorganized Carmike Common Stock outstanding and has approximately nine million (9,000,000) shares of such stock outstanding. Material features of the Plan are: - - The Plan provides for the issuance or reservation for future issuance of ten million (10,000,000) shares of reorganized Carmike Common Stock in the aggregate. - - The holders of Carmike's cancelled Class and Class B Common Stock received in the aggregate 22.2% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. F-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 2--PROCEEDINGS UNDER CHAPTER 11 (CONTINUED) - - The holders of Carmike's cancelled Series A Preferred Stock received in the aggregate 41.2% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. - - Certain holders of $45,685,000 in aggregate principal amount of the cancelled 9-3/8% Senior Subordinated Notes due 2009 issued by Carmike prior to the Chapter 11 Cases (the "Original Senior Subordinated Notes") received in the aggregate 26.6% of the ten million (10,000,000) shares of reorganized Carmike Common Stock. - - Carmike reserved one million (1,000,000) shares of the reorganized Carmike Common Stock for issuance under a new management incentive plan (the "2002 Stock Plan") and 780,000 shares under the 2002 Stock Plan have been issued to Michael W. Patrick pursuant to his new employment agreement as Chief Executive Officer of the Company. - - The holders of Bank Claims in the Chapter 11 Cases received New Bank Debt and cash in the amount of approximately $35 million plus accrued and unpaid post-petition interest on the Bank Claims from January 15, 2002 to the Effective Date. "Bank Claims" consisted of claims of certain banks arising under: (i) the Amended and Restated Credit Agreement, dated as of January 29, 1999, and amended as of March 31, 2000 and (ii) the Term Loan Credit Agreement dated as of February 25, 1999, as amended as of July 13, 1999, and further amended as of March 31, 2000, and certain related documents. "New Bank Debt" consists of approximately $254 million and bears interest, at the greater of: (a) at the option of Carmike, (i) a specified base rate plus 3.5% or (ii) LIBOR plus 4.5%; and (b) 7.75% per annum. - - Carmike issued $154,315,000 of its new 10-3/8% Senior Subordinated Notes due 2009 (the "New Senior Subordinated Notes") in exchange for $154,315,000 aggregate principal amount of the claims in the Chapter 11 Cases concerning the Original Senior Subordinated Notes. - - 136 of Carmike's underperforming theatres were closed. Lease terminations and settlement agreements are being negotiated for the resolution of lease termination claims, and the restructuring or other disposition of lease obligations. - - General unsecured creditors will receive, cash and notes including certain amounts included in liabilities subject to compromise with an annual interest rate of 9.4% in resolution of their allowed claims under the Chapter 11 Cases. On the Effective Date, the Company entered into a new Term Loan Credit Agreement (the "Post-Confirmation Credit Agreement"), which governs the terms of the New Bank Debt. The Company's subsidiaries have guaranteed the Company's obligations under the Post-Confirmation Credit Agreement. The lenders under the Post-Confirmation Credit Agreement have (i) a second priority, perfected lien on owned real property and, to the extent landlord approval was obtained or not required, leased real property of the Company and its subsidiaries; (ii) a second priority, perfected security interest in the capital stock of all Company subsidiaries; and (iii) a second F-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 2--PROCEEDINGS UNDER CHAPTER 11 (CONTINUED) priority, security interest in substantially all personal property owned by the Company and its subsidiaries. All of the security interests and liens that secure the New Bank Debt under the Post-Confirmation Credit Agreement are junior and subordinate to the liens and security interests of the collateral agent under the Revolving Credit Agreement described below. The final maturity date of the New Bank Debt loans under the Post-Confirmation Credit Agreement is January 31, 2007. The principal payment dates are June 30 and December 31 of each year, beginning June 30, 2002 and ending June 30, 2006. In addition, the Post-Confirmation Credit Agreement contains covenants that require the Company, among other things, to meet certain financial ratios and that prohibit the Company from taking certain actions and entering into certain transactions. There are also provisions in the Post-Confirmation Credit Agreement as to when the Company must prepay portions of the loans. Also on the Effective Date, the Company closed on a Revolving Credit Agreement (the "Revolving Credit Agreement") totaling $50 million. The proceeds of advances under the Revolving Credit Agreement will be used to provide working capital financing to the Company and its subsidiaries and for funds for other general corporate purposes of the Company. The Company, on the Effective Date, borrowed $20 million of the Revolving Credit Agreement in partial repayment of its obligations owing to the banks under the Post-Confirmation Credit Agreement. The terms of the Revolving Credit Agreement are set forth in a Credit Agreement, dated as of January 31, 2002. The interest rate for borrowings under the Revolving Credit Agreement is set from time to time at the Company's option (subject to certain conditions set forth in the Credit Agreement) at either: (i) the Index Rate (as defined in the Revolving Credit Agreement) plus 1.75% per annum or (ii) the applicable LIBOR Rate (as defined in the Revolving Credit Agreement) plus 3.25% per annum, based on the aggregate Revolving Credit Advances (as defined in the Revolving Credit Agreement) outstanding from time to time. Borrowings under the Revolving Credit Agreement are secured by first priority security interests in substantially all tangible or intangible property of the Company (but does not include certain equipment or real estate constituting premises subject to the master leasing agreement with MoviePlex Realty Leasing, L.L.C.). The Revolving Credit Agreement contains covenants that, among other things, prohibit the Company from taking certain actions and entering into certain transactions. There are also provisions in the Revolving Credit Agreement as to when the Company must prepay portions of the loans. In addition, on the Effective Date and pursuant to the Plan, the Company issued $154,315,000 10-3/8% Senior Subordinated Notes due 2009 (the "New Senior Subordinated Notes"), in exchange for $154,315,000 aggregate principal amount of the Original Senior Subordinated Note Claims in the Company's bankruptcy case relating to the Company's former 9-3/8% Senior Subordinated Notes due 2009 (the "Original Senior Subordinated Notes"); the remaining $45,685,000 in aggregate principal amount of the Original Notes were exchanged under the Plan for shares of reorganized Company Common Stock, as previously reported. The New Senior Subordinated Notes were issued pursuant to an Indenture, dated as of January 31, 2002, among the Company, the subsidiary guarantors named therein and Wilmington Trust Company, as Trustee (the "Indenture"). The Company subsidiary guarantees of the New Senior Subordinated Notes are F-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 2--PROCEEDINGS UNDER CHAPTER 11 (CONTINUED) junior and subordinated on the same basis as the New Senior Subordinated Notes are junior and subordinated to the Company's Senior Debt (as defined in the Indenture and includes the debt described above under the Post-Confirmation and Revolving Credit Agreements). Interest at 10-3/8% per annum from the issue date to maturity is payable on the New Senior Subordinated Notes each February 1 and August 1, with the first interest payment date being February 1, 2002. The New Senior Subordinated Notes are redeemable at the Company's option under certain conditions on or after February 1, 2004. Further, the Indenture contains covenants that, among other things, restricts the Company in connection with the incurrence of additional indebtedness not including the debt incurred under the Post-Confirmation and Revolving Credit Agreement as described above, asset sales, changes of control and transactions with affiliates. The reorganization value of the assets of the Company immediately before the Effective Date was greater than the total of all post-petition liabilities and allowed claims and the Plan does not result in a change in ownership as defined by Statement of Position 90-7; accordingly, the Company will continue to recognize its historical basis of accounting. The following table illustrates the effects of the reorganization as if the Company had recorded the aforementioned adjustments as of December 31, 2001.
DECEMBER 31, 2001 ADJUSTMENTS PRO FORMA AS REPORTED (UNAUDITED) (UNAUDITED) ------------------------------------------------- Current assets $ 111,266 $ (83,225) $ 28,041 Other assets 15,984 15,984 Investment in affiliated entities 7,095 7,095 Property and equipment, net 460,093 460,093 Goodwill, net 23,354 23,354 ------------------------------------------------- Total assets 617,792 (83,225) 534,567 ================================================= Current liabilities 56,608 56,608 Capital lease obligations 47,423 47,423 Long-term debt -- 408,860 408,860 Deferred income taxes 1,927 1,927 Liabilities subject to compromise 508,100 (455,970) 52,130 ------------------------------------------------- Total liabilities 614,058 (47,110) 566,948 Preferred stock 550 (550) -- Class A Common Stock 301 (31) 270 Class B Common Stock 41 (41) -- Treasury Stock (441) 441 -- Paid-in capital 158,772 23,338 182,110 Retained earnings (deficit) (155,489) (59,272) (214,761) ------------------------------------------------- Stockholders' equity 3,734 (36,115) (32,381) ------------------------------------------------- Total of liabilities and shareholders' equity $ 617,792 $ (83,225) $ 534,567 ==================================================
F-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 3--REORGANIZATION AND RESTRUCTURING COSTS Reorganization costs are directly associated with the reorganization proceedings under the Company's Chapter 11 Cases. Under the Bankruptcy Code, the Company may elect to assume or reject real estate leases, employment contracts, personal property leases, service contracts and other executory pre-petition contracts, subject to Bankruptcy Court approval. The Company cannot presently determine or reasonably estimate the ultimate liability that may result from rejecting leases or from the filing of claims for any rejected contracts, and no provisions have yet been made for these items in the financial statements. Included in the reorganization cost are impairment charge assigned to the net book value of equipment that has been transferred to certain lessors to eliminate their deficiency claims in the Chapter 11 Cases. 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 were closed during 1999. The Company incurred a charge of approximately $34.7 million (approximately $21.5 million after income taxes or $1.89 per diluted share) in 1998 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. The remaining reserves, $24.7 million at December 31, 2001 and 2000, are classified as liabilities subject to compromise in the accompanying consolidated balance sheets. During June 1999, the Company revised its estimate of the total costs to be incurred for its restructuring plan approved in December 1998. The $2.7 million decrease in estimated costs (approximately $1.7 million after income taxes or $.15 diluted share) was the result of a lessor initiated early buyout of a lease included in the restructuring plan. The early lease termination provides savings for the lease payments, utilities and other associated lease costs expected to be incurred over the remaining lease period. During 2000, the Company negotiated a settlement with a lessor that eliminated future payments under the terms of the lease. In addition, a stipulation was signed by the lessor which released future claims in exchange for the theatre equipment and leasehold improvements. The restructuring reserve was reduced by a $0.9 million credit to reorganization costs for this transaction in December 2000. Payments charged against the reserve were approximately $0 million, $2.9 million and $3.7 million during 2001, 2000 and 1999, respectively. Those theatres with remaining lease terms at the Petition Date have been approved for rejection by the Bankruptcy Court. F-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 3--REORGANIZATION AND RESTRUCTURING COSTS (CONTINUED) Reorganization costs are as follows (in thousands):
DECEMBER 31, 2001 2000 -------------------------------- Professional fees $ 8,210 $ 3,936 Asset impairments 16,419 4,884 Gains on sales of assets (871) (1,108) Retention payments 902 - Interest income (2,240) (1,138) Other (2,872) 468 -------------------------------- Total reorganization costs $ 19,548 $ 7,042 ================================
Cash provided by (used in) reorganization costs are as follows (in thousands):
DECEMBER 31, 2001 2000 --------- --------- Professional fees $ (7,927) $ (885) Retention payments (619) - Proceeds from sale of assets 8,197 2,317 Payment of pre-petition liabilities (15,534) (39,497) Interest income 2,240 1,138 Other (886) (1,119) --------- -------- $ (14,529) $(38,046) ========= ========
NOTE 4--IMPAIRMENTS OF LONG-LIVED ASSETS Impairment charges for the years ended December 31 are as follows:
2001 2000 1999 -------------------------------------------- Impairment of fixed assets $ 93,615 $ 22,806 $21,572 Impairment of equipment 34,103 1,347 488 Impairment of goodwill 20,908 1,981 5,550 Impairment of joint ventures -- -- 5,383 -------------------------------------------- Total impairments $ 148,626 $ 26,134 $32,993 Amounts classified as reorganization (16,419) (4,884) - -------------------------------------------- Impairment charge $ 132,207 $ 21,250 $32,993 ============================================
In the fourth quarter of 2001, 2000 and 1999, the Company identified impairments of asset values for certain theatres, two entertainment centers and a joint venture investment in three movie theatre-entertainment complexes. As a result, the Company recognized a non-cash impairment charge of approximately $132.2 million, $21.2 million and $33.0 million, respectively, in the fourth quarters of 2001, 2000 and 1999. These impairment charges reduce the carrying value of approximately 287 theatres with 2,126 screens for 2001, approximately 18 theatres with 130 F-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 4--IMPAIRMENTS OF LONG-LIVED ASSETS (CONTINUED) screens for 2000 and approximately 82 theatres with 432 screens for 1999. The impairment charge recognized for 2001 was significantly larger than in prior years due to the write-off of leasehold improvements on rejected theatres, the impact of closing owned theatres, the diminished value of our entertainment centers and the write-down of surplus equipment removed from closed theatres. Additionally, in 2001 the Company included the equipment in the theatre valuation calculations based on the reduced capital building program in the future as well as the excess supply of equipment in inventory. This change in estimate related to including theatre equipment, accounted for approximately $34.1 of the 2001 Impairment Charge. During the course of the Chapter 11 proceedings the Company had the opportunity to reject leases on unprofitable leased theatres, to reassess the longer term value in keeping some of its owned theatres operating and to remove equipment taken from leased and owned theatres. During the fourth quarter of 2001 the Company had sufficient information to assess the impact of lease rejections, the closure of owned theatres, the future viability of our entertainment centers and the effect of surplus equipment. As a result of these reviews, in the fourth quarter of 2001, Carmike identified impairment of asset values for 287 theatres and 2,126 screens (the "2001 Impairment Charge"). The 2001 Impairment Charge was significant and included a provision for the total impairment of carrying value on 136 leased theatres that were rejected during the Chapter 11 Cases, the impairment of our two entertainment centers, the impairment of equipment removed from leased and owned theatres and the inclusion of equipment in the valuation analysis for the theatres remaining in the Company's portfolio. The Company has recognized an impairment charge of $132.2 million (approximately $11.65 per diluted share). These impairment charges reduced the carrying value of property and equipment by $148.6 million (cost of $214.2 million less accumulated depreciation and amortization of $86.5 million) and goodwill by approximately $20.9 million. Subsequent to the Petition Date, the Company, in 2000, identified certain owned theatres and other leased theatres which have not yet been rejected but had indicators of impairments. These theatres have been identified as impaired as a result of decreased cash flows due to new competition in their markets or management's plans relative to future operations. The Company has recognized impairment charges of approximately $21.2 million (approximately $1.87 per diluted share) for 18 theatres with 130 screens (the "2000 Impairment Charge"). The 2000 Impairment Charge reduced the carrying value of property and equipment by $24.2 million (costs of $34.4 million less accumulated depreciation and amortization of $10.2 million) and goodwill by approximately $2.0 million. In the fourth quarter of 1999, Carmike identified impairments of asset values for 82 theatres with 432 screens (the "1999 Impairment Charge"). The 82 theatres included a further impairment of 29 theatres that were included in previous impairment charges. The 1999 Impairment Charge totaled approximately $28 million (approximately $17 million after income taxes or $1.50 per diluted share). This charge reduced the carrying value of property and equipment by approximately $22 million (costs of approximately $35 million less accumulated depreciation and amortization of approximately $13 million) and goodwill by approximately $6 million. F-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 4--IMPAIRMENTS OF LONG-LIVED ASSETS (CONTINUED) During the fourth quarter of 1999, Carmike also identified an investment in a joint venture as permanently impaired based on the joint venture's estimate of future cash flows. The 50% owned joint venture is managed by Carmike under a management agreement and the Company prepares the joint venture's cash flow estimates. The joint venture operated three movie theatre/entertainment complexes, which have closed as of December 31, 2000. The impairment charge of approximately $5 million (approximately $3 million after income taxes or $.30 per diluted share) (together with the 1999 Impairment Charge, collectively, the "1999 Impairment Charges") represents our pro-rata portion of the joint-venture's impairment. The 2001 Impairment Charge was primarily attributed to the rejection of leases during the reorganization process, the decrease in value in our entertainment centers, surplus equipment and the decrease in the fair market values of owned property. The 2000 Impairment Charge and the 1999 Impairment Charges were primarily caused by reductions in estimated theatre cash flows due to (i) the impact of new or increased competition on certain older, auditorium-style theatres, (ii) negative evaluation of the operating results produced from theatres previously converted to Discount Theatres or (iii) inability to improve a marginal theatre/entertainment center's operating results to a level that would support the carrying value of the long-lived assets. As a result of the reduced carrying amount of the impaired assets due to the 2000, 1999 and 1998 Impairment Charges, depreciation and amortization expense for 2001, 2000 and 1999 was reduced by approximately $9.8 million, $9.2 million and $6.7 million, respectively (2001 - approximately $9.8 million after income taxes or $.86 per diluted share; 2000 - approximately $9.2 million after income taxes or $.81 per diluted share; and 1999 - approximately $4.2 million after income taxes or $.37 per diluted share). Depreciation and amortization for 2002 will be reduced by approximately $18 million as a result of the aggregate impairment charges. There can be no assurance that Carmike will not take additional charges in the future related to the impairment of assets. NOTE 5--LIABILITIES SUBJECT TO COMPROMISE The principal categories of obligations classified as Liabilities Subject to Compromise under the Chapter 11 Cases are identified below. The amounts in total may vary significantly from the stated amounts of proofs of claims that ultimately will be filed with the Bankruptcy Court, and may be subject to future adjustments depending on Bankruptcy Court action, further developments with respect to potential disputed claims, and determination as to the value of any collateral securing claims or other events. Additional claims may arise from the rejection of executory contracts and unexpired leases by the Debtors. Amounts outstanding under the Bank Facilities and the Subordinated Notes at the petition date are classified as Liabilities Subject to Compromise in the accompanying financial statements until a plan of reorganization is approved and implemented. After the Petition Date, the Company is prohibited from making contractual payments on its outstanding long-term debt obligations absent a Bankruptcy Court order or until conclusion of the Chapter 11 Cases and implementation of a plan of reorganization allowing for such payments. F-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 5--LIABILITIES SUBJECT TO COMPROMISE (CONTINUED) In March 2001, the Company reached an agreement with its creditor constituencies that provides for the payment of cash collateral and adequate protection, as those terms are defined in the Bankruptcy Code. On March 5, 2001 the Company paid secured lenders $8,272,821 and has made payments of $500,000 per month beginning in March as adequate protection payments. All of these payments allocated to the Revolving Credit and Term Loan B are treated as principal payments under the applicable credit agreement. Amounts allocated to the Master Lease are treated as post-petition rent and do not affect liabilities subject to compromise. As a result of the Chapter 11 Cases, the agents under the Bank Facilities terminated the Company's interest rate swap agreements. At December 31, 2000, approximately $897,000 was due to the Company at the date of the termination of these interest rate swap agreements, August 8, 2000. This amount was applied as cash collateral for the outstanding debt under the Bank Facilities. The principal categories of claims classified as liabilities subject to compromise at December 31, 2001 and 2000 are as follows (in thousands):
DECEMBER 31, 2001 2000 --------------------- -------------------- Accounts payable $ 14,970 $ 19,958 Accrued expenses 20,981 27,160 Restructuring reserves 24,668 24,683 Revolving credit agreement 184,392 192,000 Term loan B 68,448 71,273 Subordinated notes 191,966 191,966 Other 2,675 2,196 --------------------- -------------------- $ 508,100 $ 529,236 ===================== ====================
Activity for pre-petition liabilities approved by the bankruptcy court, including cash payments and other non-cash items, are as follows (in thousands):
DECEMBER 31, 2001 2000 ----------------------- Film distributors $ - $37,247 Revolving credit facility 7,608 -- Term Loan B 2,824 -- Subordinated Notes -- -- Property Taxes 2,969 -- Critical trade vendors 2,133 1,750 Workers' compensation -- 350 Common carriers -- 150 ------- ------- Cash paid 15,534 39,497 Other non-cash itemS 5,602 -- ------- ------- $21,136 $39,497 ======= =======
F-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 6--INVESTMENTS IN UNCONSOLIDATED AFFILIATES The Company is a partner in joint ventures that operate motion picture theatres. The Company's equity in the income or (loss) of these ventures, prior to impairment charges, was approximately $(699,000), $(980,000) and $(891,000) in 2001, 2000 and 1999, respectively. These amounts are included as "Concessions and other" in the accompanying consolidated statements of operations. NOTE 7--PROPERTY AND EQUIPMENT The Company obtained property and equipment under capital leases of approximately zero and $15 million in 2001 and 2000, respectively. The following amounts related to capital lease assets are included in property and equipment (in thousands):
DECEMBER 31, 2001 2000 --------------------- --------------------- Buildings and improvements $ 43,147 $ 50,989 Less accumulated amortization (8,685) (9,693) --------------------- --------------------- $ 34,462 $ 41,296 ===================== =====================
During 2000, Carmike sold three theatres, with a net book value of $22.8 million, for proceeds of $23.6 million. The theaters sold in 2000 were leased back from the purchaser under a 20-year operating lease agreement. Gains realized from the sale-leaseback transaction are recognized over the life of the leases. The leases contain renewal options and generally provide that Carmike will pay property taxes, common area maintenance, insurance and repairs. NOTE 8--CAPITALIZED INTEREST Prior to the Petition Date, the Company capitalized interest in connection with its construction on long-lived assets. Interest incurred and interest capitalized are as follows (in thousands):
INTEREST INTEREST INCURRED CAPITALIZED YEARS ENDED DECEMBER 31, 2001 $ 6,138 $ - 2000 29,254 1,500 1999 32,759 3,131
F-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 9--ACCRUED EXPENSES Accrued expenses include the following (in thousands):
DECEMBER 31, 2001 2000 -------------------- -------------------- Deferred revenues $ 12,062 $ 10,680 Deferred and other accrued rents 5,545 8,754 Property taxes 6,847 2,972 Other accruals 7,574 7,497 -------------------- -------------------- $ 32,028 $ 29,903 ==================== ====================
NOTE 10--DEBT Debt consists of the following (in thousands):
DECEMBER 31, 2001 2000 --------------------- --------------------- Revolving credit facility $ 184,392 $ 192,000 Term Loan B 68,448 71,273 Subordinated Notes 191,966 191,966 Industrial Revenue Bonds; payable in equal installments through May 2006, with interest rates ranging from 53/4% to 7% 1,417 1,724 --------------------- --------------------- 446,223 456,963 Less: Amounts classified as liabilities subject to (444,806) (455,239) compromise Current maturities (1,417) (1,724) --------------------- --------------------- $ -0- $ -0- ===================== =====================
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 Subordinated Notes mature on February 1, 2009 and bear interest at the rate of 9 3/8% which is payable semi-annually in arrears on February 1 and August 1 of each year. The Subordinated Notes are unconditionally guaranteed by Eastwynn and Wooden Nickel. The Subordinated Notes are general unsecured obligations of the Company and are subordinate to existing debt and substantially all future borrowings. The Subordinated Notes contain certain restrictive provisions that may limit dividends and other restricted payments. The Company used the net proceeds from the issuance of the Subordinated Notes, approximately $193.7 million, to redeem its then outstanding Senior Notes and to reduce the amounts outstanding under its Revolving Credit Agreement. The Company recognized an extraordinary charge in 2000 of approximately $10.2 million ($6.3 million after income taxes) for a prepayment premium of approximately $9.2 million paid in connection with the redemption of the Senior Notes and the write-off of deferred debt fees of approximately $.9 million. F-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 10--DEBT (CONTINUED) See Note 2--Proceedings Under Chapter 11 for further discussion of debt. NOTE 11--INCOME TAXES In periods prior to June 30, 2000, the Company had recognized deferred income tax assets based on its ability to generate future taxable income in amounts sufficient to allow the utilization of the deductible temporary differences that created those deferred tax assets. These tax planning strategies primarily involved the Company's ability to sell property to generate gains. As a result of (i) its Chapter 11 filing and the Company's default on its Bank Facilities, (ii) changes in the Company's projections of future operating results, and (iii) the limited market for theatre sale-leaseback transactions, the Company no longer has the ability to implement the tax planning strategies that would allow it to continue to recognize certain of its deferred income tax assets. Thus, the Company provided a valuation allowance of approximately $40.9 and $83.1 million during the years ended December 31, 2001 and 2000. In connection with the reorganization, it is anticipated that the Company may undergo an ownership change or changes within the meaning of Section 382 of the Internal Revenue Code. Consequently, the ability of the Company to use the net operating losses and credits may be severely limited and will be subject to an annual limitation based on the product of the fair value of the Company immediately after reorganization multiplied by the federal long-term tax exempt bond rate. For tax purposes, the discharge of the liabilities pursuant to the Chapter 11 Cases may result in income that is excluded from the Company's taxable income. However, certain of the Company's tax attributes, including net operating loss carryforwards and tax credits, may be reduced by the amount of cancellation of debt income. To the extent the amount excluded exceeds these tax attributes, the tax basis in the Company's property must be reduced by the amount of the excluded cancellation of debt income. It is estimated that after the reorganization, the Company will have approximately $148.4 million in net operating loss carryovers and $6.04 million of alternative minimum tax carryforwards. The provision for income tax expense (benefit) is summarized as follows (in thousands):
DECEMBER 31, 2001 2000 -------------------- -------------------- Current: Federal $- $ - State - 1,150 Deferred - 24,398 -------------------- -------------------- $- $25,548 ==================== ====================
F-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 11--INCOME TAXES (CONTINUED) Significant components of the Company's deferred tax liabilities (assets) and valuation reserves are as follows (in thousands):
DECEMBER 31, 2001 2000 ------------------ ----------------- Alternative minimum tax credit carryforwards $ (6,041) $ (4,700) Net operating loss carryforwards (54,633) (19,471) Financial statement bases of property and equipment over (under) tax bases (36,396) (5,609) Restructuring reserve (8,606) (8,935) Deferred rent (1,152) (2,470) Post-petition interest 23,877 - ------------------ ---------------- (82,951) (41,185) Valuation reserves 83,143 40,951 Other deferred tax credits 1,735 2,161 ------------------ ----------------- $ 1,927 $ 1,927 ================== =================
It is anticipated that the Company will not pay income taxes in 2001. The Company paid income taxes in 2000 and 1999 of approximately $1.2 million and $3.9 million, respectively. The Company has net operating loss carryovers of approximately $148.4 million, which will begin to expire in the year 2020. NOTE 12--SHAREHOLDERS' EQUITY The Company's authorized capital consists of 22.5 million shares of Class A Common Stock, $.03 par value, 5 million shares of Class B Common Stock, $.03 par value, and one million shares of the 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% of the cash dividends payable on each share of Class A Common Stock. Class B Common Stock is convertible at any time by the holder into an equal number of shares of Class A Common Stock. The Series A Preferred Stock pays quarterly cash dividends at an annual rate of 5.5% and is convertible 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 but does have involuntary liquidation rights for $55 million. Each share of the Series A Preferred Stock is convertible into four shares of the Class A Common Stock. During the course of the Chapter 11 Cases, the Company could not declare dividends for its Preferred Stock. Dividends of $7.0 million and $2.3 million on Preferred Stock are in arrears at December 31, 2001 and 2000. The terms of the Preferred Stock agreement provides that the F-26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 12--SHAREHOLDERS' EQUITY (CONTINUED) dividend rate increases to 8.5% for arrearages. As a result, the holders of the Preferred Stock have designated two additional directors to the Company's Board of Directors. The Company has shares of Class A Common Stock reserved for future issuance as follows (in thousands):
DECEMBER 31, 2001 2000 ------ ------ Stock option plan $ 813 $ 823 Conversion rights of Series A Preferred Stock 2,200 2,200 Conversion rights of Class B Common Stock 1,371 1,371 ------ ------ $4,384 $4,394 ====== ======
See Note 2--Proceedings Under Chapter 11 STOCK OPTION PLANS During 1998, the Board of Directors and Shareholders approved a new stock option plan (the "1998 Plan") that provided for 750,000 shares of Class A Common Stock. At December 31, 2001, 66,000 shares were available for grant under the 1998 Plan. The Company has also issued options under a plan (the "1986 Plan") that provided for 700,000 shares of Class A Common Stock. No shares are available for grant under the 1986 Plan. Under the Company's 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, 2001 have been at a price that approximated fair market value on the date of the grant. Pro forma information regarding net income and earnings per share is required by Statement of Financial Accounting Standards No. 123 (SFAS No. 123), and has been determined as if the Company had accounted for its employee stock options under the fair value method. The fair value for these options was estimated at the date of grant using a Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that 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. For SFAS No. 123 purposes, the fair value of each option grant and stock based award has been estimated as of the date of grant using the Black-Scholes option pricing model with the following F-27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 12--SHAREHOLDERS' EQUITY (CONTINUED) weighted-average assumptions:
2001* 2000 1999 --------------- --------------- -------------- Expected life (years) N/A 5.0 5.0 Risk-free interest rate N/A 6.65% 5.78% Dividend yield N/A 0.0% 0.0% Expected volatility N/A 1.302 0.314 * No options were granted in 2001
The estimated fair value of the options granted during 2000 and 1999, was $4.77 and $5.24 per share, and is amortized to expense over the options' vesting period. Had compensation cost been determined consistent with SFAS No. 123, utilizing the assumptions detailed above, the Company's pro forma net loss and pro forma basic loss per share would have increased to the following amounts:
2001 2000 1999 ----------------- ----------------- --------------- Net loss: As reported......... $ (125,387) $ (75,076) $ (21,907) Pro forma - for SFAS No. 123 (125,803) (75,931) (22,461) Basic net loss per share As reported......... $ (11.05) $ (6.62) $ (1.93) Pro forma - for SFAS No. 123 (11.09) (6.70) (1.98)
Changes in outstanding stock options were as follows (in thousands, except for exercise price per share):
EXERCISE PRICE PER SHARE $6.00 - $5.44 $14.00 $18.00 $27.125 TOTAL ------------ ------------ ------------- ------------ ----------- Stock options outstanding at December 31, 1998 -- 92 88 335 515 Issued -- 6 -- -- 6 Forfeitures -- -- (15) -- (15) Exercised -- (26) -- -- (26) ------------ ------------ ------------- ------------ ----------- Stock options outstanding at December 31, 1999 -- 72 73 335 480 Issued 403 -- -- -- 403 Forfeitures -- (66) -- -- (66) Exercised -- -- -- -- -- ------------ ------------ ------------- ------------ ----------- Stock options outstanding at December 31, 2000 403 6 73 335 817 Issued -- -- -- -- -- Forfeitures -- -- (10) (60) (70) Exercised -- -- -- -- -- ------------ ------------ ------------- ------------ ----------- STOCK OPTIONS OUTSTANDING AT DECEMBER 31, 2001 403 6 63 275 747 ============ ============ ============= ============ ===========
F-28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 12--SHAREHOLDERS' EQUITY (CONTINUED) At December 31, 2001 613,000 options were exercisable. NOTE 13--COMMITMENTS AND CONTIGENCIES LEASES Under the Bankruptcy Code, the Company may elect to assume or reject real estate leases, subject to Bankruptcy Court approval. As of January 2002, the Company has received approval from the Bankruptcy Court to reject leases relating to 136 theater locations over the course of the proceeding. The Company cannot presently determine or reasonably estimate the ultimate liability that may result from rejecting and no provisions have yet been made for these items in the financial statements. Future minimum payments under capital leases and operating leases with terms over one year and which had not been rejected by the Company in the Chapter 11 Cases as of December 31, 2001, are as follows (in thousands):
OPERATING LEASES CAPITAL LEASES ------------------- ------------------- 2002 $ 40,608 $ 6,600 2003 39,402 6,635 2004 37,056 6,738 2005 37,145 6,756 2006 34,008 6,632 Thereafter 365,707 84,509 ------- -------- Total minimum lease payments $ 553,926 $117,870 ============= Less amounts representing interest (69,576) --------- Present value of future minimum lease payments 48,294 Less current maturities (871) --------- $ 47,423 =========
Rent expense was approximately $51.7 million, $67.4 million and $59.6 million for 2001, 2000 and 1999, respectively. Included in rent expense is approximately $3.5 million, $3.1 million and $3.8 million of contingent rental payments. LITIGATION 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. F-29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 14--CONDENSED FINANCIAL DATA The Company and its wholly owned subsidiaries have fully, unconditionally, and jointly and severally guaranteed the Company's obligations under the Subordinated Notes. The Company has one subsidiary and several unconsolidated affiliates that 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. Combined separate financial data for the guarantor subsidiaries is as follows:
2001 2000 1999 ------------------ ------------------ ----------------- Year ended December 31, Revenues $ 364,973 $ 371,826 $ 386,255 Operating income (loss) (1) (67,832) (3,080) 6,554 Net loss before extraordinary item (108,328) (48,044) (14,905) At December 31, Assets: Current assets 26,342 36,069 11,682 Other assets 3,709 3,642 15,305 Property and equipment 355,238 480,786 517,851 Goodwill 12,001 30,903 33,553 ------------------ ------------------ ----------------- $ 397,290 $ 551,400 $ 578,391 Liabilities and equity: Current liabilities $ 21,590 $ 21,758 $ 15,426 Intercompany notes and advances 278,516 320,073 302,435 Long-term liabilities 41,149 42,799 69,684 Liabilities Subject to Compromise 21,549 23,968 - Equity 34,486 142,802 190,846 ------------------ ------------------ ----------------- $ 397,290 $ 551,400 $ 578,391 ================== ================== =================
(1) Net of parent company management and license fees of approximately $21.4 million, $21.8 million and $30.3 million for the years ended December 31, 2001, 2000 and 1999, respectively. NOTE 15--FAIR VALUE OF 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 recoverable construction allowances. The Company maintains cash and cash equivalents with various financial institutions. These financial institutions are located in the southeastern united States and Company policy is designed to limit exposure to any one institution. The Company performs periodic evaluations of the relative credit standings of those financial institutions that are considered in the Company's investment strategy. F-30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) NOTE 15--FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) 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. RECOVERABLE CONSTRUCTION ALLOWANCES: The carrying amount reported in the balance sheets or recoverable construction allowances approximates their fair value. 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 amount of the Company's long-term debt borrowings have not been adjusted to fair value since the Petition Date as a result of the Chapter 11 Cases. NOTE 16--QUARTERLY RESULTS (UNAUDITED) (In thousands, except for per share data)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTALS --------------- --------------- ---------------- --------------- ---------------- YEAR ENDED DECEMBER 31, 2001 Total revenues $ 99,704 $ 108,877 $ 130,439 $ 117,930 $ 456,950 Operating income (loss) 1,931 5,980 15,130 (122,742) (99,701) Net income (loss) (1,246) 2,275 11,096 (137,512) (125,387) Basic and diluted income (loss) per common share $ (0.11) $ 0.20 $ 0.97 $ (12.12) $ (11.05) YEAR ENDED DECEMBER 31, 2000 Total revenues $ 101,535 $ 112,757 $ 127,828 $ 120,177 $ 462,297 Operating income (loss) (1,090) 699 5,744 (15,317) (9,964) Net loss (7,364) (40,205) (2,069) (23,295) (73,563) Basis and diluted loss per common share $ (0.72) $ (3.61) $ (0.18) $ (2.11) $ (6.62)
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 2001 and 2000 includes a charge for the impairment of long-lived assets as discussed in Note 4. The fourth quarter of 2001 includes a decrease in the estimated property taxes payable of $2.0 million. The second quarter of 2000 includes a $2.7 million decrease in estimated charges to be incurred under the Restructuring Plan and a reduction of deferred income tax assets as discussed in Note 11. F-31 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 2002 Annual Meeting of Stockholders of Carmike (hereinafter, the "2002 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 2002 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 2002 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 2002 Proxy Statement. 49 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, 2001 and 2000 Consolidated statements of operations-- Years ended December 31, 2001, 2000 and 1999 Consolidated statements of cash flows -- Years ended December 31, 2001, 2000 and 1999 Consolidated statements of shareholders' equity -- Years ended December 31, 2001, 2000 and 1999 Notes to consolidated financial statements-- December 31, 2001 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.0-14993. 50
EXHIBIT NUMBER DESCRIPTION 2.1 Debtors' Joint Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated November 14, 2001 (filed as Exhibit 99 to Carmike's Current Report on Form 8-K filed November 19, 2001 and incorporated herein by reference). 2.2 Debtors' Amended Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code dated November 14, 2001 (filed as Exhibit T-3E1 to Carmike's Form T-3 filed on December 11, 2001 and incorporated herein by reference). 3.1 Amended and Restated Certificate of Incorporation of Carmike (filed as Exhibit 3.1 to Carmike's Amendment to Form 8-A filed January 31, 2002 and incorporated herein by reference). 3.2 Amended and Restated By-laws of Carmike (filed as Exhibit 3.2 to Carmike's Amendment to Form 8-A filed January 31, 2002 and incorporated herein by reference). 4.1 Indenture dated January 31, 2002 between Carmike, the subsidiary guarantors named therein and Wilmington Trust Company, as Trustee. 4.2 Stockholders' Agreement, dated as of January 31, 2002 by and among Carmike Cinemas, Inc. and certain stockholders (filed as Exhibit 99.2 to Amendment No. 1 to Schedule 13D of Goldman Sachs & Co., et. al., dated February 8, 2002 and incorporated herein by reference). 4.3 Registration Rights Agreement, dated as of January 31, 2002, by and among Carmike Cinemas, Inc. and certain stockholders (filed as Exhibit 99.3 to Amendment No. 1 to Schedule 13D of Goldman Sachs & Co., et. al., dated February 8, 2002 and incorporated herein by reference). 10.1 Term Loan Credit Agreement dated January 31, 2002 among Carmike Cinemas, Inc., BNY Asset Solutions LLC as Administrative Agent, and the various banks or other financial institutions from time to time parties to the agreement as Lenders. 10.2 $50,000,000 Credit Agreement dated as of January 31, 2002 among Carmike Cinemas, Inc., Eastwynn Theatres, Inc., General Electric Corporation as Agent and Lender, GECC Capital Markets Group, Inc. as Lead Arranger, the various subsidiaries from time to time parties to the agreement as credit parties, and the various banks or other financial institutions from time to time parties to the agreement as Lenders. 10.3 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).
51
EXHIBIT NUMBER DESCRIPTION 10.4* 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). 10.5* 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). 10.6* 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). 10.7* Employment Agreement dated December 30, 1999 between C. L. Patrick and Carmike. (filed as Exhibit 10.8 to Carmike's Form 10-K for the year ended December 31, 1999 (Commission File No. 1-11604 (the "1999 Form 10-K") and incorporated herein by reference). 10.8 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). 10.9 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). 10.10 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). 10.11 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). 10.12 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). 10.13 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). 10.14 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).
52
EXHIBIT NUMBER DESCRIPTION 10.15 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). 10.16 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). 10.17 Second Amended and Restated Master Lease dated September 1, 2001 between MoviePlex Realty Leasing, L.L.C. and Carmike. 10.18* Letter of employment dated July 6, 1999, between Carmike and Martin A. Durant (filed as Exhibit 10.21 to the 1999 Form 10-K and incorporated herein by reference). 10.19* Trust Agreement dated as of July 16, 1999, between Carmike, Michael W. Patrick, F. Lee Champion, III and Larry M. Adams (filed as Exhibit 10.23 to the 1999 Form 10-K and incorporated herein by reference). 10.20* Carmike Cinemas, Inc. Employee Retention and Severance Plan (filed as Exhibit 10.22 to the 2000 Form 10-K and incorporated herein by reference). 10.21* Carmike Cinemas, Inc. 2002 Stock Plan (filed as Exhibit 4.2 to Carmike's Form S-8 filed March 29, 2002 and incorporated herein by reference). 21 List of Subsidiaries (filed as Exhibit 21 to Carmike's Form 10-K for the year ended 2000 and incorporated herein by reference). 23 Consent of Ernst & Young LLP.
- ------------ * 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, 2001, Carmike filed a Current Report on Form 8-K dated October 3, 2001 reporting information under Items 5 and 7 and a Current Report on Form 8-K dated November 13, 2001 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). 53 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: April 1, 2002 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 in the capacities indicated and as of the date indicated above.
Signature Title /s/ Michael W. Patrick President, Chief Executive - -------------------------------------- Officer and Chairman of the Board of Directors Michael W. Patrick /s/ Martin A. Durant Senior Vice President-Finance, Treasurer - -------------------------------------- and Chief Financial Officer (Principal Financial Officer) Martin A. Durant /s/ Philip A. Smitley Assistant Vice President-Controller - -------------------------------------- (Principal Accounting Officer) Philip A. Smitley /s/ Denis F. Cronin Director - -------------------------------------- Denis F. Cronin /s/ Ian M. Cumming Director - -------------------------------------- Ian M. Cumming /s/ Elizabeth Cogan Fascitelli Director - -------------------------------------- Elizabeth Cogan Fascitelli /s/ Richard A. Friedman Director - -------------------------------------- Richard A. Friedman /s/ John W. Jordan, II Director - -------------------------------------- John W. Jordan, II /s/ C.L. Patrick Director - -------------------------------------- C. L. Patrick /s/ Carl L. Patrick, Jr. Director - -------------------------------------- Carl L. Patrick, Jr. /s/ Jane L. Vris Director - -------------------------------------- Jane L. Vris /s/ David W. Zalaznick Director - -------------------------------------- David W. Zalaznick
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS CARMIKE CINEMAS, INC. AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) DECEMBER 31, 2001 (IN THOUSANDS OF DOLLARS)
COL. A COL. B COL. C COL. D COL. E - ----------------------------------- --------------- ------------------------------------- ------------------ ------------------ ADDITIONS BALANCE AT CHARGED TO COSTS CHARGED TO OTHER BALANCE AT END BEGINNING OF AND EXPENSES ACCOUNTS - DESCRIBE DEDUCTIONS - OF PERIOD DESCRIPTION PERIOD DESCRIBE - ----------------------------------- --------------- ------------------ -------------------- ------------------ ------------------ Year Ended December 31, 1999: Reserve for restructuring charge $ 34,699 (1) $ (2,671) (2) $ - $ (3,685) (3) $ 28,343 Year Ended December 31, 2000: Reserve for restructuring charge $ 28,343 $ (775) (2) $ (24,683) (4) $ (2,885) (3) $ -0- Valuation reserve for deferred income tax assets $ - $ 40,951 (5) $ - $ - $ 40,951 Year Ended December 31, 2001: Valuation reserve for deferred income tax assets $ 40,951 $ 42,192 (6) $ - $ - $ 83,143
(1) Charge recorded in December 1998. See Note 3 of Notes to Consolidated Financial Statements. (2) Change in estimate of liabilities to be incurred. See Note 5 of Notes to Consolidated Financial Statements. (3) Net payments made during period, including $500,000 payment for early lease termination in 1999. See Note 5 of Notes to Consolidated Financial Statements. (4) Amounts outstanding at the Petition Date have been classified to Liabilities Subject to Compromise. All theatres covered by the restructuring charge have been approved by the Bankruptcy Court for lease rejection. (5) Valuation reserve recorded in the year ended December 31, 2000. See Note 11 of Notes to Consolidated Financial Statements. (6) Valuation reserve recorded in the year ended December 31, 2001. See Note 11 of Notes to Consolidated Financial Statements. EX-4.1 3 g74873ex4-1.txt INDENTURE EXHIBIT 4.1 ================================================================================ --------------------------- CARMIKE CINEMAS, INC. 10 3/8% Senior Subordinated Notes due 2009 --------------------------- --------------------------- INDENTURE Dated as of January 31, 2002 --------------------------- --------------------------- WILMINGTON TRUST COMPANY, Trustee --------------------------- ================================================================================ CROSS-REFERENCE TABLE* Provisions of Trust Indenture Act of 1939 and Indenture dated as January 31, 2002 among Carmike Cinemas, Inc., a Delaware corporation, the Guarantors party thereto and Wilmington Trust Company, as trustee:
Trust Indenture Act Section Indenture Section 310 (a)(1)................................... 7.10 (a)(2)................................... 7.10 (a)(3)................................... N.A. (a)(4)................................... N.A. (a)(5)................................... 7.10 (b)...................................... 7.10 (c)...................................... N.A. 311 (a)...................................... 7.11 (b)...................................... 7.11 (c)...................................... N.A. 312 (a)...................................... 2.05 (b)...................................... 12.03 (c)...................................... 12.03 313 (a)...................................... 7.06 (b)(1)................................... N.A. (b)(2)................................... 7.07 (c)...................................... 7.06,12.02 (d)...................................... 7.06 314 (a)...................................... 4.03,12.02 (b)...................................... N.A. (c)(1)................................... 12.04 (c)(2)................................... 12.04 (c)(3)................................... N.A. (d)...................................... N.A. (e)...................................... 12.05 (f)...................................... N.A. 315 (a)...................................... 7.01 (b)...................................... 7.05,12.02 (c)...................................... 7.01 (d)...................................... 7.01 (e)...................................... 6.11 316 (a) (last sentence)...................... 2.09 (a)(1)(A)................................ 6.05 (a)(1)(B)................................ 6.04 (a)(2)................................... N.A. (b)...................................... 6.07 (c)...................................... 2.12 317 (a)(1)................................... 6.08 (a)(2)................................... 6.09 (b)...................................... 2.04
i 318 (a)...................................... 12.01 (b)...................................... N.A. (c)...................................... 12.01
N.A. means not applicable. *This Cross Reference Table is not part of the Indenture. ii TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions.................................................................................2 Section 1.02 Other Definitions..........................................................................17 Section 1.03 Incorporation by Reference of Trust Indenture Act..........................................18 Section 1.04 Rules of Construction......................................................................18 ARTICLE 2 THE NOTES Section 2.01 Form and Dating............................................................................18 Section 2.02 Execution and Authentication...............................................................19 Section 2.03 Registrar and Paying Agent.................................................................19 Section 2.04 Paying Agent to Hold Money in Trust........................................................20 Section 2.05 Holder Lists...............................................................................20 Section 2.06 Transfer and Exchange......................................................................20 Section 2.07 Replacement Notes..........................................................................23 Section 2.08 Outstanding Notes..........................................................................23 Section 2.09 Treasury Notes.............................................................................24 Section 2.10 Temporary Notes............................................................................24 Section 2.11 Cancellation...............................................................................24 Section 2.12 Defaulted Interest.........................................................................24 Section 2.13 CUSIP Numbers..............................................................................25 ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee.........................................................................25 Section 3.02 Selection of Notes to Be Redeemed..........................................................25 Section 3.03 Notice of Redemption.......................................................................25 Section 3.04 Effect of Notice of Redemption.............................................................26 Section 3.05 Deposit of Redemption Price................................................................26 Section 3.06 Notes Redeemed in Part.....................................................................27 Section 3.07 Optional Redemption........................................................................27 Section 3.08 Mandatory Redemption.......................................................................27 ARTICLE 4 COVENANTS Section 4.01 Payment of Notes...........................................................................28 Section 4.02 Maintenance of Office or Agency............................................................28 Section 4.03 Reports....................................................................................28 Section 4.04 Compliance Certificate.....................................................................29 Section 4.05 Taxes......................................................................................30 Section 4.06 Stay, Extension and Usury Laws.............................................................30
i Section 4.07 Restricted Payments........................................................................30 Section 4.08 [Reserved.]................................................................................32 Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock.................................32 Section 4.10 Fall-Away Event............................................................................35 Section 4.11 Transactions with Affiliates...............................................................35 Section 4.12 Corporate Existence........................................................................36 Section 4.13 Payments for Consent.......................................................................37 Section 4.14 Additional Note Guarantees.................................................................37 Section 4.15 Offer to Repurchase Upon Change of Control.................................................37 Section 4.16 No Senior Subordinated Debt................................................................38 Section 4.17 Limitation on Asset Sales..................................................................38 Section 4.18 Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries..............39 ARTICLE 5 SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets...................................................39 Section 5.02 Successor Corporation Substituted..........................................................40 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default..........................................................................41 Section 6.02 Acceleration...............................................................................42 Section 6.03 Other Remedies.............................................................................43 Section 6.04 Waiver of Past Defaults....................................................................43 Section 6.05 Control by Majority........................................................................44 Section 6.06 Limitation on Suits........................................................................44 Section 6.07 Rights of Holders of Notes to Receive Payment..............................................44 Section 6.08 Collection Suit by Trustee.................................................................44 Section 6.09 Trustee May File Proofs of Claim...........................................................45 Section 6.10 Priorities.................................................................................45 Section 6.11 Undertaking for Costs......................................................................46 ARTICLE 7 TRUSTEE Section 7.01 Duties of Trustee..........................................................................46 Section 7.02 Rights of Trustee..........................................................................47 Section 7.03 Individual Rights of Trustee...............................................................48 Section 7.04 Trustee's Disclaimer.......................................................................48 Section 7.05 Notice of Defaults.........................................................................48 Section 7.06 Reports by Trustee to Holders of the Notes.................................................48 Section 7.07 Compensation and Indemnity.................................................................49 Section 7.08 Replacement of Trustee.....................................................................50 Section 7.09 Successor Trustee by Merger, etc...........................................................50 Section 7.10 Eligibility; Disqualification..............................................................51 Section 7.11 Preferential Collection of Claims Against Company..........................................51 Section 7.12 Trustee's Application for Instructions from the Company....................................51
ii ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance...................................51 Section 8.02 Legal Defeasance and Discharge.............................................................51 Section 8.03 Covenant Defeasance........................................................................52 Section 8.04 Conditions to Legal or Covenant Defeasance.................................................52 Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions......................................................53 Section 8.06 Repayment to Company.......................................................................54 Section 8.07 Reinstatement..............................................................................54 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes........................................................55 Section 9.02 With Consent of Holders of Notes...........................................................55 Section 9.03 Compliance with Trust Indenture Act........................................................57 Section 9.04 Revocation and Effect of Consents..........................................................57 Section 9.05 Notation on or Exchange of Notes...........................................................57 Section 9.06 Trustee to Sign Amendments, etc............................................................57 ARTICLE 10 SUBORDINATION Section 10.01 Agreement to Subordinate...................................................................57 Section 10.02 Liquidation; Dissolution; Bankruptcy.......................................................58 Section 10.03 Default on Designated Senior Debt..........................................................58 Section 10.04 Acceleration of Notes......................................................................59 Section 10.05 When Distribution Must Be Paid Over........................................................59 Section 10.06 Notice by Company..........................................................................59 Section 10.07 Subrogation................................................................................59 Section 10.08 Relative Rights............................................................................60 Section 10.09 Subordination May Not Be Impaired by Company...............................................60 Section 10.10 Distribution or Notice to Representative...................................................60 Section 10.11 Rights of Trustee and Paying Agent.........................................................60 Section 10.12 Authorization to Effect Subordination......................................................61 Section 10.13 Amendments.................................................................................61 Section 10.14 Trustee Not Fiduciary for Holders of Senior Indebtedness...................................61 ARTICLE 11 NOTE GUARANTEES Section 11.01 Guarantee..................................................................................61 Section 11.02 Subordination of Note Guarantee............................................................62 Section 11.03 Limitation on Guarantor Liability..........................................................62 Section 11.04 Execution and Delivery of Note Guarantee...................................................63
iii Section 11.05 Guarantors May Consolidate, etc., on Certain Terms.........................................63 Section 11.06 Releases Following Sale of Assets..........................................................64 ARTICLE 12 MISCELLANEOUS Section 12.01 Trust Indenture Act Controls...............................................................64 Section 12.02 Notices....................................................................................64 Section 12.03 Communication by Holders of Notes with Other Holders of Notes..............................66 Section 12.04 Certificate and Opinion as to Conditions Precedent.........................................66 Section 12.05 Statements Required in Certificate or Opinion..............................................66 Section 12.06 Rules by Trustee and Agents................................................................66 Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders...................66 Section 12.08 Governing Law..............................................................................67 Section 12.09 No Adverse Interpretation of Other Agreements..............................................67 Section 12.10 Successors.................................................................................67 Section 12.11 Severability...............................................................................67 Section 12.12 Counterpart Originals......................................................................67 Section 12.13 Table of Contents, Headings, etc...........................................................67 Section 12.14 Plan of Reorganization.....................................................................67
EXHIBITS Exhibit A FORM OF NOTE Exhibit B FORM OF NOTE GUARANTEE Exhibit C FORM OF SUPPLEMENTAL INDENTURE SCHEDULES Schedule I Schedule of Guarantors iv INDENTURE dated as of January 31, 2002 among Carmike Cinemas, Inc., a Delaware corporation (the "Company"), the Guarantors named on Schedule I hereto (the "Original Guarantors") and Wilmington Trust Company, a Delaware banking corporation, as trustee (the "Trustee"). R E C I T A L S WHEREAS, the Company and the Trustee previously entered into an Indenture (the "Original Indenture") pursuant to which $200,000,000 aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2009 (the "Original Notes") of the Company have been issued; and WHEREAS, the Company defaulted on an interest payment with respect to the Original Notes; and the Company and the Original Guarantors subsequently filed for reorganization under Chapter 11 of the United States Bankruptcy Code; and WHEREAS, pursuant to the Amended Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code for the Company and the Original Guarantors (as it may be altered, amended or modified from time to time, the "Plan of Reorganization"), which Plan of Reorganization was confirmed by Order of the United States Bankruptcy Court for the District of Delaware on January 3, 2002 (the "Confirmation Order"), (i) on the effective date of the Plan of Reorganization, $154,315,000 aggregate principal amount of Notes (as defined below) are to be issued under this Indenture in exchange for $154,315,000 aggregate principal amount of the Original Notes and (ii) shares of the common Capital Stock of the Company (the "Plan Exchanged Capital Stock") are to be issued in exchange for the remaining $45,685,000 aggregate principal amount of the Original Notes (the "Original Exchanged Notes"); and WHEREAS, pursuant to the Plan of Reorganization and the Confirmation Order, the Company and the Original Guarantors have duly authorized this Indenture and the execution and delivery hereof; and WHEREAS, this Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of and to govern indentures qualified under the Trust Indenture Act; and WHEREAS, pursuant to the Plan of Reorganization and the Confirmation Order, all acts and things necessary have been done to make the Notes, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid, binding and legal obligations of the Company, and to make this Indenture a valid agreement of the Company and the Original Guarantors in accordance with its terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: The Company, the Original Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 10 3/8% Senior Subordinated Notes due 2009 (the "Notes") issued hereunder: A-1 ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions. "Acquired Debt" means, with respect to any specified Person: (a) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (b) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control", as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms "controlling", "controlled by" and "under common control with" shall have correlative meanings. "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary that apply to such transfer or exchange. "Asset Acquisition" means: (a) any transaction pursuant to which any Person shall become a Subsidiary of the Company or shall be consolidated or merged with the Company or any Subsidiary of the Company; or (b) the acquisition by the Company or any Subsidiary of the Company of assets of any Person comprising a division, line of business or theatre site of such Person. "Asset Sale" by any Person means any transfer, conveyance, sale, lease or other disposition by such Person or any of its Restricted Subsidiaries (including any issuance or sale by a Restricted Subsidiary of Capital Stock of such Restricted Subsidiary, and including a consolidation or merger or other sale of any such Restricted Subsidiary with, into or to another Person in a transaction in which such Restricted Subsidiary ceases to be a Restricted Subsidiary, but excluding a disposition by a Restricted Subsidiary of such Person to such Person or a Wholly Owned Restricted Subsidiary of such Person that is a Guarantor or by such Person to a Wholly Owned Restricted Subsidiary of such Person that is a Guarantor) of (i) shares of Capital Stock A-2 (other than directors' qualifying shares) or other ownership interests of a Restricted Subsidiary of such Person, (ii) substantially all of the assets of such Person or any of its Restricted Subsidiaries representing a division or line of business or (iii) other assets or rights of such Person or any of its Restricted Subsidiaries outside of the ordinary course of business. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means: (a) in the case of a corporation, corporate stock; (b) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (c) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and (d) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Change of Control" means the occurrence of any of the following: (a) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than to the Principal, a Related Party of the Principal, PIA, any of PIA's officers or directors or any Affiliate of PIA or any of PIA's officers or directors (collectively, the "Permitted Holders"); or A-3 (b) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Permitted Holders or any direct or indirect Subsidiary of any Permitted Holder or any Permitted Group, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares. "Company" means Carmike Cinemas, Inc., and any and all successors thereto. "Consolidated EBITDA" means, for any period: (i) the aggregate of the TLCF of all Theatres operated by the Company and its Restricted Subsidiaries for such period less, (ii) the consolidated selling and general administrative expense (other than any compensation expense arising from grants to management of the Company and its Restricted Subsidiaries of Equity Interests in the Company) of the Company and its Restricted Subsidiaries for such period, all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP; provided that, Consolidated EBITDA shall not include: (x) the TLCF of any Theatre accrued at any time when such Theatre is not operated by the Company or any of its Restricted Subsidiaries, including, without limitation, the TLCF of any Theatre operated by any Person that accrued prior to the date such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; and (y) the TLCF of any Theatre that is operated by any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such TLCF is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary (other than any agreement or instrument evidencing Indebtedness or Preferred Stock that (I) is outstanding on the Issue Date or incurred or issued thereafter in compliance with Section 4.09 hereof and (II) has not been created and does not exist in violation of Section 4.18 hereof; provided that the terms of any such agreement restricting the declaration and payment of dividends or similar distributions apply only in the event of a default with respect to a financial covenant or a covenant relating to payment (beyond any applicable period of grace) contained in such agreement or instrument and provided such terms are determined by the Company to be customary in comparable financings and such restrictions are determined by the A-4 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 (i) neither the Company nor any other Restricted Subsidiary is obligated therefor and (ii) the TLCF of Theatres operated by such Restricted Subsidiary is excluded in the calculation of Consolidated EBITDA pursuant to clause (y) of the definition thereof (but only in the same proportion as the TLCF of Theatres operated by such Restricted Subsidiary is excluded from the calculation of Consolidated EBITDA pursuant to clause (y) of the definition thereof), in each case, on a consolidated basis and in accordance with GAAP. "Construction Indebtedness Amount" shall mean, as of any date, an amount equal to the lesser of: (a) $100.0 million; and A-5 (b) the total Indebtedness of any Person and its Restricted Subsidiaries outstanding on the last day of the most recently ended period of the Company for which internal financial statements are available incurred in connection with the construction or enhancement of Theatres or screens that, on such date, are not yet open for business. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. "Credit Exit Facilities" means the credit facilities with General Electric Capital Corporation and certain other banks and other institutional lenders initially established on the Issue Date to provide for revolving credit loans, swing line loans and letters of credit having an aggregate principal (or face) amount not to exceed $50 million at any one time outstanding, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Debt Rating" shall mean the rating assigned to the Notes by Moody's or S&P, as the case may be. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Designated Senior Debt" means: (a) any Indebtedness outstanding under Credit Exit Facilities; and (b) after payment in full of all Obligations under Credit Exit Facilities, any other Senior Debt permitted under this Indenture the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt". "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the A-6 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 or any Plan Trade Payables. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security or other Indebtedness that is convertible into, or exchangeable for, or otherwise constitutes the right to acquire, Capital Stock). "Equity Offering" means any underwritten offering of Qualified Capital Stock of the Company. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Existing Capital Lease Obligations" means the Capital Lease Obligations in respect of the Company's Theatres existing on the Issue Date, including the Company's Theatres under construction in Fort Wayne, Indiana, and Jacksonville, North Carolina on the Issue Date, each as in existence on the Issue Date, less any amounts repaid in connection with Asset Sales, scheduled or optional principal payments, cash flow sweeps or other repayments (no such repaid amounts permitted to be reborrowed hereunder pursuant to clause (b) of the second paragraph of Section 4.09). "Existing Indebtedness" means (i) the Plan Term Loan Bank Debt and (ii) the Existing Capital Lease Obligations. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. "Global Notes" means, individually and collectively, each permanent global Note substantially in the form of Exhibit A hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary and issued in accordance with Section 2.01 hereof. A-7 "Global Note Legend" means the legend set forth in Section 2.06(g), which is required to be placed on all Global Notes issued under this Indenture. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness. "Guarantors" means each of: (a) the Company's Domestic Restricted Subsidiaries; and (b) any other subsidiary that executes a Note Guarantee in accordance with the provisions of this Indenture; and their respective successors and assigns. The Company's Domestic Restricted Subsidiaries on the Issue Date consist of each of the Subsidiaries of the Company named on Schedule I hereto. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (a) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements; and (b) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (a) in respect of borrowed money; (b) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (c) in respect of banker's acceptances; (d) representing Capital Lease Obligations; (e) in respect of the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable; or A-8 (f) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP; provided, however, that, in the case of the Company or any Subsidiary thereof, the term "Indebtedness" shall not include the Plan Trade Payables. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be: (a) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (b) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness; For purposes of calculating the amount of any Indebtedness hereunder, (a) there shall be no double-counting of direct obligations, Guarantees and reimbursement obligations for letters of credit; (b) the principal amount of any Indebtedness of any Person arising by reason of such Person having granted or assumed a Lien on its property to secure Indebtedness of others shall be the lower of the fair market value of such property and the principal amount of such Indebtedness outstanding (or committed to be advanced) at the time of determination; (c) the principal amount of any Indebtedness of any Person arising by reason of such Person having Guaranteed Indebtedness of others where the amount of such Guarantee is limited to an amount less than the principal amount of the Indebtedness Guaranteed, shall be such amount as so limited; (d) the payment obligation for non-interest rate Hedging Obligations shall be equal to (i) zero, to the extent the notional amount of the Hedging Obligation is not greater than the reasonably anticipated requirements of the Company and its Subsidiaries for the asset that is the subject of the Hedging Obligation, as such needs are projected by management of the Company at the time the Hedging Obligation is entered into or (ii) the notional amount of such Hedging Obligation, to the extent such notional amount exceeds such reasonably anticipated requirements. "Indenture" means this Indenture, as amended or supplemented from time to time. "Independent Financial Advisor" means an accounting, appraisal, investment banking firm or consultant to Persons engaged in the motion picture exhibition and distribution business of nationally recognized standing that is, in the judgment of the Board of Directors, qualified to perform the task for which it has been engaged. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. A-9 "Investment Grade Status" exists as of a date and thereafter if at such date either (i) the Debt Rating of Moody's is at least Baa3 (or the equivalent) or higher; or (ii) the Debt Rating of S&P is at least BBB- (or the equivalent) or higher. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. "Issue Date" means January 31, 2002, the effective date of the Plan of Reorganization. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Leverage Ratio" means, as of any date, the ratio of: (a) Consolidated Indebtedness (excluding any Construction Indebtedness Amount and net of any cash and cash equivalents) of the Company on such date to (b) the aggregate amount of Consolidated EBITDA of the Company for the most recently ended four full fiscal quarter period of the Company for which internal financial statements are available (the "Reference Period"). In addition to the foregoing, for purposes of this definition, "Consolidated EBITDA" shall be calculated on a pro forma basis after giving effect to: (a) the incurrence of the Indebtedness or the issuance of the Disqualified Stock or other Preferred Stock (and the application of the proceeds therefrom) giving rise to the need to make such calculation and any incurrence or issuance (and the application of the proceeds therefrom) or repayment of other Indebtedness or Preferred Stock, other than the incurrence or repayment of Indebtedness for ordinary working capital purposes, at any time subsequent to the beginning of the Reference Period and on or prior to the date of determination, as if such incurrence (and the application of the proceeds thereof), or the repayment, as the case may be, occurred on the first day of the Reference Period; (b) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Subsidiaries (including any Person that becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring, assuming or otherwise becoming liable for or issuing Indebtedness or Preferred Stock) at any time on or subsequent to the first day of the Reference Period and on or prior to the date of determination, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness or Preferred Stock and also A-10 including any Consolidated EBITDA associated with such Asset Acquisition) had occurred on the first day of the Reference Period; and (c) any Theatre that was permanently closed for business at any time on or subsequent to the first day of the Reference Period and on or prior to the date of determination as if such Theatre was closed on the first day of the Reference Period. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset securing Indebtedness, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Net Cash Proceeds" from any Asset Sale by any Person means cash or readily marketable cash equivalents received (including by way of sale or discounting of a note, installment receivable or other receivable, but excluding any other consideration received in the form of assumption by the acquiree of Indebtedness or other obligations relating to such properties or assets) therefrom by such Person, net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred and all federal, state, provincial, foreign and local taxes required to be accrued as a liability as a consequence of such Asset Sale, (ii) all payments made by such Person or its Restricted Subsidiaries on any Indebtedness which is secured by such assets in accordance with the terms of any Lien upon or with respect to such assets or which must by the terms of such Lien, or in order to obtain a necessary consent to such Asset Sale or by applicable law, be repaid out of the proceeds from such Asset Sale, (iii) all distributions and other payments made to minority interest holders in Restricted Subsidiaries of such Person or joint ventures as a result of such Asset Sale and (iv) appropriate amounts to be provided by such Person or any Restricted Subsidiary thereof, as the case may be, as a reserve in accordance with GAAP against any liabilities associated with such assets and retained by such Person or any Restricted Subsidiary thereof, as the case may be, after such Asset Sale, including, without limitation, liabilities under any indemnification obligations and severance and other employee termination costs associated with such Asset Sale, in each case as determined by the Board of Directors, in its reasonable good faith judgment evidenced by a resolution of the Board of Directors filed with the Trustee; provided, however, that any reduction in such reserve following the consummation of such Asset Sale will be treated for all purposes of this Indenture and the Notes as a new Asset Sale at the time of such reduction with Net Cash Proceeds equal to the amount of such reduction. "Note Guarantee" means the Guarantee by each Guarantor of the Company's payment obligations under this Indenture and on the Notes, executed pursuant to the provisions of this Indenture. "Notes" has the meaning assigned to such term in the Recitals to this Indenture. A-11 "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means, with respect to any Person, a certificate signed on behalf of such Person by two Officers of such Person, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of such Person, that meets the requirements of Section 12.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Original Exchanged Notes" has the meaning assigned to such term in the Recitals to this Indenture. "Original Guarantors" means each of the Subsidiaries of the Company named on Schedule I hereto, which constitute all of the Company's Domestic Restricted Subsidiaries on the Issue Date. "Original Indenture" has the meaning assigned to such term in the Recitals to this Indenture. "Original Notes" means the 9 3/8% Senior Subordinated Notes due 2009 of the Company issued pursuant to the Original Indenture. "Participant" means, with respect to the Depositary, a Person who has an account with the Depositary. "Permitted Group" means any group of investors that is deemed to be a "person" (as that term is used in Section 13(d)(3) of the Exchange Act) by virtue of the Stockholders' Agreement, as the same may be amended, modified or supplemented from time to time, provided that no single Person (other than the Principal and the Principal's Related Parties) Beneficially Owns (together with its Affiliates) more of the Voting Stock of the Company that is Beneficially Owned by such group of investors than is then collectively Beneficially Owned by the Principal and the Principal's Related Parties in the aggregate. "Permitted Junior Securities" means: (a) Equity Interests in the Company or any Guarantor; or A-12 (b) debt securities that are subordinated to all Senior Debt and any debt securities issued in exchange for Senior Debt to substantially the same extent as, or to a greater extent than, the Notes and the Note Guarantees are subordinated to Senior Debt under this Indenture. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of all customary expenses and premiums incurred in connection therewith); (b) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (c) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (d) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "PIA" means Goldman, Sachs & Co. and its Affiliates. "Plan Exchanged Capital Stock" has the meaning assigned to such term in the Recitals to this Indenture. "Plan of Reorganization" has the meaning assigned to such term in the Recitals to this Indenture. "Plan Term Loan Bank Debt" means term loan bank Indebtedness of the Company owing to certain banks in an aggregate principal amount of $264,977,449.00 million on the Issue Date issued pursuant to Section 4.4(b) of the Plan of Reorganization in exchange for Allowed Class 4 Claims (as defined in the Plan of Reorganization), as in existence on the Issue Date, less any A-13 amounts repaid in connection with Asset Sales, scheduled or optional principal payments, cash flow sweeps or other repayments (no such repaid amounts permitted to be reborrowed hereunder pursuant to clause (b) of the second paragraph of Section 4.09). "Plan Trade Payables" means the unsecured trade payables provided for pursuant to Section 4.5(b) of the Plan of Reorganization in satisfaction of Allowed Class 5 Claims (as defined in the Plan of Reorganization) and bearing interest at the annual rate of 9.4%, each as in existence on the Issue Date, less any amounts repaid in connection with refinancing of the Plan Term Loan Bank Debt, with Asset Sales, scheduled or optional principal payments, cash flow sweeps or other repayments (no such repaid amounts permitted to be reborrowed hereunder pursuant to clause (b) or (d) of the second paragraph of Section 4.09). "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Principal" means Michael W. Patrick. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Stock. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the Issue Date, executed by the Company for the benefit of certain holders of the common Capital Stock of the Company pursuant to Section 5.9 of the Plan of Reorganization, as in effect on the Issue Date. "Related Party" means: (a) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of the Principal; or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of the Principal and/or such other Persons referred to in the immediately preceding clause (a). "Representative" means the indenture trustee or other trustee, agent or representative for any Senior Debt. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Department of the Trustee (or any successor group of the Trustee) with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means each Subsidiary of the Company. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor to the rating agency business thereof. A-14 "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Debt" means: (a) all Indebtedness of the Company or any Guarantor outstanding under the Credit Exit Facilities and the Plan Term Loan Bank Debt and all Hedging Obligations with respect thereto; (b) any other Indebtedness of the Company or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or any Note Guarantee; and (c) all Obligations with respect to the items listed in the preceding clauses (a) and (b). Notwithstanding anything to the contrary in the preceding, Senior Debt will not include: (a) any liability for federal, state, local or other taxes owed or owing by the Company; (b) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates; (c) the Plan Trade Payables or any trade payables; or (d) the portion of any Indebtedness that is incurred in violation of this Indenture. "Senior Guarantees" means the Guarantees by the Guarantors of Obligations under the Senior Debt. "Significant Restricted Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Significant Subsidiary" means any Subsidiary that would be a "Significant Subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the Issue Date. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Stockholders' Agreement" means the Stockholders' Agreement, dated as of the Issue Date, among the Company and holders of the common Capital Stock of the Company on the Issue Date, entered into pursuant to Section 5.8 of the Plan of Reorganization, as in effect on the Issue Date. A-15 "Subsidiary" means, with respect to any specified Person: (a) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (b) any partnership (i) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Surviving Person" means, with respect to any Person involved in or that makes any Disposition, the Person formed by or surviving such Disposition or the Person to which such Disposition is made. "Theatre" means any building and related improvements or complex of buildings and related improvements containing one or more movie screens and operated as a movie theatre by the Company or any Restricted Subsidiary. "Theatre Level Cash Flow" or "TLCF" means, with respect to any Theatre, for any period: (a) the revenues of the Company and its Subsidiaries generated for such period by such Theatre, less (b) the costs and expenses of operations (including, without limitation, film exhibition costs, concession costs, salaries and wages, facility leases, advertising, utilities and other theatre operating costs but excluding depreciation and amortization and general and administrative expenses) of the Company and its Subsidiaries allocable to such Theatre for such period, less (c) if the Company and its Subsidiaries do not own such Theatre and the lease in respect thereof is a Capital Lease Obligation, all interest and principal amounts on such Capital Lease Obligations for such period, all determined on a consolidated basis (i) with any volume discounts or similar pricing matters associated with film exhibition costs, advertising or other expenses incurred as a cost of operating such Theatre and one or more other Theatres being allocated equitably on a pro rata basis among all such Theatres and (ii) otherwise in conformity with GAAP. "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA; provided, however, that in the event such Act is further amended after such date, "TIA" means, to the extent required by any such amendment, such Act as so further amended. A-16 "Total Tangible Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, less total consolidated intangible assets of the Company and its Restricted Subsidiaries, in each case, as shown on the most recent balance sheet of the Company that is as of a date after the Issue Date. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness. "Wholly Owned Restricted Subsidiary" of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries of such Person. Section 1.02 Other Definitions.
Term Defined in 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
A-17 Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) provisions apply to successive events and transactions; and (f) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. A-18 The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with written instructions given by the Holder thereof as required by Section 2.06 hereof. Section 2.02 Execution and Authentication. Two Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by two Officers (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term A-19 "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. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.04 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. Section 2.05 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA ss. 312(a). Section 2.06 Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company, in its sole discretion, determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee. Upon the occurrence of either of the A-20 preceding events in clause (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. If any holder of a beneficial interest in a Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, (i) the transferor of such beneficial interest must deliver to the Registrar (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; and (ii) upon satisfaction of such conditions, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar in writing through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. A Holder of a Definitive Note may exchange such Note for a beneficial interest in a Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Global Note at any time. Upon receipt of a written request for such an exchange or transfer, the Trustee shall cancel the applicable Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Global Notes. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. A-21 (f) [Reserved.] (g) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF CARMIKE CINEMAS, INC." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a Global Note have been exchanged for Definitive Notes or a Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this A-22 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 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to the due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. Section 2.07 Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08 Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof. A-23 If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Section 2.10 Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose of such canceled Notes in its customary manner (subject to the record retention requirement of the Exchange Act). The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 A-24 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 45 days (unless a shorter period shall be acceptable to the Trustee) but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. Section 3.02 Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. Section 3.03 Notice of Redemption. At least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. A-25 The notice shall identify the Notes (including applicable CUSIP Numbers) to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04 Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption Price. On or prior to 10:00 a.m., New York City time, on the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related A-26 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 to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below:
Year Percentage 2004................................ 104.688% 2005................................ 103.125% 2006................................ 101.563% 2007 and thereafter................. 100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at any time prior to February 1, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes issued under this Indenture at a redemption price equal to 109.375% of the principal amount thereof plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the aggregate principal amount of Notes issued under this Indenture remain outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and that such redemption must occur within 60 days of the date of the closing of such Equity Offering. (c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. Section 3.08 Mandatory Redemption. The Company shall not be required to make mandatory redemption payments with respect to the Notes. A-27 ARTICLE 4 COVENANTS Section 4.01 Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Trustee's drop agent, Computershare Trust Company of New York, Wall Street Plaza, 88 Pine Street, 19th Floor, New York, New York 10005 as one such office or agency of the Company in accordance with Section 2.03 hereof. Section 4.03 Reports. (a) Whether or not required by the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes and to the Trustee, within the time periods specified in the SEC's rules and regulations (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information A-28 only, a report on the annual financial statements by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. The Company shall at all times comply with TIA ss. 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). (b) Whether or not required by the SEC, the Company shall file a copy of all of the information and reports referred to in clauses (a)(i) and (a)(ii) above with the SEC for public availability within the time periods specified in the SEC's rules and regulations (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (c) For so long as any Notes remain outstanding, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Section 4.04 Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. A-29 (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon, but in any event within five Business Days, of any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Taxes. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06 Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07 Restricted Payments. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (a) declare or pay any dividend or make any other payment or distribution on account of the Company's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company); (b) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; or (c) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or the Note Guarantees, except a payment of interest or principal at the Stated Maturity thereof (all such payments and other actions set forth in clauses (a) through (c) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and A-30 (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to the Leverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments declared or made after the Issue Date, shall not exceed, at the date of determination, the sum of: (i) an amount equal to 100% of the Company's Consolidated EBITDA since the Issue Date to the end of the Company's most recently ended full fiscal quarter for which internal financial statements are available, taken as a single accounting period, plus the interest component of all payments associated with Capital Lease Obligations included in Consolidated Interest Expense for such period to the extent deducted in computing Consolidated EBITDA for such period, less the product of 2.0 times the Company's Consolidated Interest Expense since the Issue Date to the end of the Company's most recently ended full fiscal quarter for which internal financial statements are available, taken as a single accounting period, plus (ii) an amount equal to 100% of the aggregate net proceeds, including the fair market value of property other than cash, received by the Company from the sale of Equity Interests since the Issue Date other than (A) sales of Disqualified Stock, (B) Equity Interests sold to any of the Company's Subsidiaries, and (C) any Equity Interests sold or otherwise issued pursuant to the Plan of Reorganization (including, without limitation, the Plan Exchanged Capital Stock issued in exchange for the Original Exchanged Notes), plus (iii) the greater of (i) $60.0 million and (ii) 10% of Total Tangible Assets of the Company and its consolidated Subsidiaries as determined in accordance with GAAP as of the date of the most recently prepared internal balance sheet of the Company that is as of a date after the Issue Date. So long as no Default has occurred and is continuing or would be caused thereby, the preceding provisions will not prohibit: (a) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (b) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Guarantor or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c)(ii) of the preceding paragraph; A-31 (c) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (d) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Subsidiary of the Company held by any employee, director or consultant of the Company (or any of its Subsidiaries) pursuant to any equity subscription agreement or stock option or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $2.5 million in any twelve-month period; (e) repurchases of Equity Interests deemed to occur upon exercise of Equity Interests if such Equity Interests represent a portion of the exercise price of such warrants, options or rights; provided that the portion of such exercise price represented by such Equity Interests so exercised shall be excluded from the aggregate net proceeds from the sale of Equity Interests upon exercise of such warrants, options or rights; and (f) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Company or any of its Restricted Subsidiaries or any class or series of Preferred Stock of Restricted Subsidiaries of the Company, in each case, issued in accordance with Section 4.09 hereof. The amount of all Restricted Payments, other than cash, shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant shall be determined by the Board of Directors in good faith whose resolution with respect thereto shall be delivered to the Trustee. Section 4.08 [Reserved.] Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly, or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock, and the Company's Restricted Subsidiaries may incur Indebtedness or issue shares of Preferred Stock, if the Company's Leverage Ratio at the time of incurrence of such Indebtedness or the issuance of such Disqualified Stock or Preferred Stock, after giving pro forma effect to such incurrence or issuance as set forth in the definition of "Leverage Ratio", would have been no greater than 7.0 to 1. The first paragraph of this Section 4.09 shall not prohibit the incurrence of any of the following items of Indebtedness, issuances of Preferred Stock, or acquisitions of Indebtedness, Disqualified Stock or Preferred Stock (collectively, "Permitted Debt"): A-32 (a) the incurrence by the Company and any of its Restricted Subsidiaries of additional Indebtedness and letters of credit pursuant to the Credit Exit Facilities (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) in an aggregate principal amount at any one time outstanding under this clause (a) not to exceed $50.0 million; (b) to the extent the Company or any Restricted Subsidiary is deemed to incur any Existing Indebtedness or Plan Trade Payables on the Issue Date, the incurrence by the Company and its Restricted Subsidiaries of such Existing Indebtedness or Plan Trade Payables on the Issue Date; (c) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes to be issued on the Issue Date (including the Note Guarantees); (d) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace, Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under the first paragraph of this Section 4.09 or clauses (b), (c) or (d) of this paragraph; (e) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that: (i) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and (ii) (A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (e); (f) the issuance by the Company or any of its Restricted Subsidiaries of Preferred Stock that is held solely by the Company and/or any of its Restricted Subsidiaries; provided, however, that: (i) if the Company or any Guarantor is the issuer of such Preferred Stock, such Preferred Stock (A) must not be mandatorily redeemable or redeemable at the option of the issuer thereof or the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; (B) if such Preferred Stock is exchangeable into Indebtedness, such Indebtedness shall not be Permitted Debt unless it meets the criteria of one or more of the categories of Permitted Debt described in clauses (a) through (j); and A-33 (ii) (A) any subsequent issuance or transfer of Equity Interests that results in any such Preferred Stock being held by a Person other than the Company or a Restricted Subsidiary thereof and (B) any sale or other transfer of any such Preferred Stock to a Person that is not either the Company or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an issuance of such Preferred Stock by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (f); (g) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any Indebtedness the incurrence of which was not prohibited by the terms of this Indenture or currency exchange risk other than solely for speculative purposes; (h) Indebtedness not constituting Indebtedness for borrowed money in respect of performance bonds, reimbursement obligations with respect to letters of credit, bankers' acceptances, completion guarantees and surety or appeal bonds provided by the Company or any of its Restricted Subsidiaries in the ordinary course of their business or Indebtedness not constituting Indebtedness for borrowed money with respect to reimbursement type obligations regarding workers' compensation claims; (i) Indebtedness not constituting Indebtedness for borrowed money arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in each case incurred in connection with the disposition of any business assets or Subsidiaries of the Company (other than guarantees of Indebtedness or other obligations incurred by any Person acquiring all or any portion of such business assets or Restricted Subsidiaries of the Company for the purpose of financing such acquisition) in a principal amount not to exceed the gross proceeds, including non-cash proceeds, actually received by the Company or any of its Restricted Subsidiaries in connection with such disposition; provided, however, that such Indebtedness is not reflected on the balance sheet of the Company or any Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (i)); and (j) Capital Lease Obligations incurred after the Issue Date in an aggregate principal amount at any one time outstanding under this clause (j) not to exceed (i) if such time is prior to January 1, 2004, $50 million, (ii) if such time is after December 31, 2003 and prior to January 1, 2006, $75 million or (iii) if such time is after December 31, 2005, $100 million. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (a) through (j) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion thereof, in any manner that complies with this Section 4.09. Indebtedness under Credit Exit Facilities outstanding on the Issue Date shall be deemed to have been incurred on such date in reliance on the exception provided by clause (a) of the definition of Permitted Debt. A-34 Section 4.10 Fall-Away Event. The Company's and its Restricted Subsidiaries' obligations to comply with the provisions of Sections 4.07, 4.09, 4.11, 4.16, 4.17 and 4.18 and Section 5.01 hereof will terminate if and when the Notes achieve Investment Grade Status (a "Fall-Away Event"); provided, however, that, if the Notes thereafter cease to be of Investment Grade Status, the Company's and its Restricted Subsidiaries' obligations to comply with such provisions shall automatically be reinstated as to events occurring after the date the Notes again are not of Investment Grade Status (with all amounts specified in clause (c) of Section 4.07 to be calculated at any time thereafter as if the Fall-Away Event had not occurred), subject to the terms, conditions and obligations set forth in this Indenture. Section 4.11 Transactions with Affiliates. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate in any single transaction or series of related transactions involving aggregate payments or consideration in excess of $5.0 million (each, an "Affiliate Transaction"), unless: (a) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (b) the Company delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this covenant and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors. The following items shall not be deemed to be Affiliate Transactions and, therefore, will not be subject to the provisions of the prior paragraph: (a) reasonable and customary directors' fees, indemnification and similar arrangements and payments thereunder; (b) any obligations of the Company under any employment agreement, non-competition or confidentiality agreement with any officer of the Company, as in effect on the Issue Date (provided that each amendment of any of the foregoing agreements shall be subject to the limitations of this Section 4.11); (c) Restricted Payments that are permitted by the provisions of Section 4.07 hereof; (d) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors; (e) loans or advances to employees in the ordinary course of business of the Company or any of its Restricted Subsidiaries consistent with the past practices; A-35 (f) payments by the Company or any of its Restricted Subsidiaries to PIA or its Affiliates made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking or similar services, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Board of Directors in good faith; (g) transactions in which the Company or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Company or such Restricted Subsidiary from a financial point of view or that it is on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction on an arms-length basis from a person that is not an Affiliate; (h) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, the Stockholders' Agreement or the Registration Rights Agreement to which it is a party as of the Issue Date and any similar agreements that it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (h) to the extent that the terms, taken as a whole, of any such amendment or new agreement are not otherwise disadvantageous to the Holders in any material respect; (i) transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors or the management thereof, or are on terms, taken as a whole, at least as favorable as might reasonably have been obtained at such time from a person that is not an Affiliate; (j) any agreement as in effect since the Issue Date or any amendment thereto (so long as any such amendment, taken as a whole, is not disadvantageous to the Holders in any material respect) or any transaction contemplated thereby; and (k) any purchase of Capital Stock (other than Disqualified Stock) of the Company by Affiliates thereof. Section 4.12 Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company A-36 and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.13 Payments for Consent. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.14 Additional Note Guarantees. If the Company or any of its Subsidiaries acquires or creates another Subsidiary after the Issue Date, then the Company shall cause that newly acquired or created Subsidiary, prior to, or contemporaneously with the acquisition or creation of such Subsidiary, to become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel to the Trustee, which Opinion of Counsel shall state that the execution of such supplemental indenture is authorized or permitted by this Indenture and that such Subsidiary has become a Guarantor hereunder. The form of such Supplemental Indenture is attached as Exhibit C hereto. Section 4.15 Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company shall make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase (the "Change of Control Payment"). Within 10 days following any Change of Control, the Company shall mail a notice to each Holder stating: (i) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (ii) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (iii) that any Note not tendered will continue to accrue interest; (iv) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (v) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (vi) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (vii) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and A-37 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 publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) Prior to complying with any of the provisions of this Section 4.15, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.15. (d) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Sections 3.01 through 3.06 hereof and all other provisions of this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Section 4.16 No Senior Subordinated Debt. The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Company and senior in any respect in right of payment to the Notes. No Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Debt of such Guarantor and senior in any respect in right of payment to such Guarantor's Note Guarantee. Section 4.17 Limitation on Asset Sales. The Company shall not, and shall not permit any Restricted Subsidiary to, make any Asset Sale in one or more related transactions unless: (i) the Company or the Restricted Subsidiary, as the case may be, receives consideration for such disposition at least equal to the fair market value for the assets sold or disposed of as determined by the Board of Directors in good faith; and (ii) all Net Cash Proceeds of such Asset Sale are applied in a manner permitted under the terms of the instruments or agreements governing the Senior Debt then outstanding. A-38 Section 4.18 Limitations on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrances or restriction on the ability of any Restricted Subsidiary of the Company (i) to pay dividends (in cash or otherwise) or make any other distributions in respect of its Capital Stock or pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary; (ii) to make any Investment in or to the Company or any other Restricted Subsidiary; or (iii) to transfer any of its property or assets to the Company or any other Restricted Subsidiary. Notwithstanding the foregoing, the Company may, and may permit any Restricted Subsidiary to, suffer to exist any such encumbrances or restriction (a) pursuant to any agreement or instrument governing the Credit Exit Facilities or the Plan Term Loan Bank Debt; (b) pursuant to an agreement relating to any Indebtedness incurred by a Person (other than a Restricted Subsidiary of the Company existing on the Issue Date or any Restricted Subsidiary carrying on any of the businesses of any such Restricted Subsidiary) prior to the date on which such Person became a Restricted Subsidiary of the Company and outstanding on such date and not incurred in anticipation of becoming a Restricted Subsidiary, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person so acquired; (c) pursuant to an agreement effecting a renewal, refunding or extension of Debt incurred pursuant to an agreement referred to in clause (a) or (b) above, provided, however, that the provisions contained in such renewal, refunding or extension agreement relating to such encumbrance or restriction are no more restrictive in any material respect than the provisions contained in the agreement the subject thereof, as determined in good faith by the Board of Directors; (d) in the case of clause (iii) above, contained in any security agreement (including a capital lease) securing Indebtedness of a Restricted Subsidiary otherwise permitted under this Indenture, but only to the extent such restrictions restrict the transfer of the property subject to such security agreement; (e) in the case of clause (iii) above, constituting a customary nonassignment provision entered into in the ordinary course of business consistent with past practices in a lease or other contract to the extent such provision restricts the transfer or subletting or licensing of any such lease or the assignment of rights under any such contract; (f) with respect to a Restricted Subsidiary of the Company imposed pursuant to an agreement which has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary, provided that consummation of such transaction would not result in an Event of Default or a Default, that such restriction terminates if such transaction is closed or abandoned and that the closing or abandonment of such transaction occurs within one year of the date such agreement was entered into; or (g) to the extent such encumbrance or restriction is the result of applicable corporate law or regulation relating to the payment of dividends or distributions. ARTICLE 5 SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets. The Company may not, directly or indirectly: (i) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person; unless: A-39 (a) either: (i) the Company is the surviving corporation; or (ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to agreements reasonably satisfactory to the Trustee; (c) immediately after such transaction no Default or Event of Default exists; (d) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made will either: (i) on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Debt) pursuant to the Leverage Ratio test set forth in the first paragraph of Section 4.09 hereof; or (ii) have a Leverage Ratio less than the Leverage Ratio of the Company immediately prior to such transaction; and (e) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that such merger, consolidation, or sale of assets complies with this provision and that all conditions precedent provided for herein relating to such transaction have been complied with. Notwithstanding the foregoing clauses (b) and (d), (i) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company or to another Restricted Subsidiary and (ii) the Company may merge with an Affiliate of the Company organized solely for the purposes of reorganizing the Company in another jurisdiction in the United States to realize tax or other benefits. In addition, the Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. This Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of its Wholly Owned Restricted Subsidiaries. Section 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such A-40 consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default. An "Event of Default" occurs if: (a) the Company defaults in the payment when due of interest on the Notes whether or not prohibited by Article 10 hereof and such default continues for a period of 30 days; (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including in connection with an offer to purchase) or otherwise whether or not prohibited by Article 10 hereof; (c) the Company or any of its Restricted Subsidiaries fails to comply with any of the provisions of Sections 4.07, 4.09, 4.15, 4.17, 4.18 or 5.01 hereof; (d) the Company or any of its Restricted Subsidiaries fails to observe or perform any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default (i) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period, if any, provided in such Indebtedness on the date of such default (a "Payment Default") or (ii) results in the acceleration of such Indebtedness prior to the express maturity thereof and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness which has so had a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 consecutive days, provided that the aggregate of all such undischarged judgments exceeds $10.0 million; A-41 (g) the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary in an involuntary case; (ii) appoints a custodian of the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary or for all or substantially all of the property of the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by this Indenture, any Note Guarantee of any Significant Restricted Subsidiary is held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Restricted Subsidiary, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under such Guarantor's Note Guarantee. Section 6.02 Acceleration. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof with respect to the Company, any Significant Restricted Subsidiary or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Restricted Subsidiary) occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the Notes shall become due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in A-42 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 (i) the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default (except nonpayment of principal, interest or premium that has become due solely because of the acceleration) have been cured or waived and (iii) the Company shall have paid to the Trustee all amounts due under Section 7.07 hereof. If an Event of Default occurs on or after February 1, 2004 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs prior to February 1, 2004 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to such date, then, upon acceleration of the Notes, an additional premium shall also become and be immediately due and payable in an amount, for each of the years beginning on February 1 of the years set forth below, as set forth below (expressed as a percentage of the principal amount of the Notes on the date of payment that would otherwise be due but for the provisions of this sentence):
Year Percentage 2001................................. 107.500% 2002................................. 106.563% 2003................................. 105.625%
Section 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults. Subject to Section 6.02, holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and, if any, or interest on, the Notes (including in A-43 connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 Control by Majority. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Notwithstanding any provision to the contrary in this Indenture, the Trustee shall not be obligated to take any action with respect to the provisions of the last paragraph of Section 6.02 unless directed to do so pursuant to this Section 6.05. Section 6.06 Limitation on Suits. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal A-44 of, premium, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amount due the Trustee under Section 7.07 hereof. Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct by a final, non-appealable judgment or order. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. A-45 Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE Section 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. A-46 (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, including, without limitation, the provisions of Section 6.05 hereof, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed (whether in its original or facsimile form) by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the advice of such counsel of its own selection or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. A-47 (h) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder. (i) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (j) The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty except to the extent expressly provided herein, and the Trustee shall not be answerable for other than negligence or willful misconduct. Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05 Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 Reports by Trustee to Holders of the Notes. Within 60 days after each May 15 beginning with the May 15 following the Issue Date, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). A-48 The Trustee also shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA ss. 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA ss. 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or delisted therefrom. Section 7.07 Compensation and Indemnity. The Company shall pay to the Trustee as agreed upon in writing from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall fully indemnify the Trustee against any and all losses, claims, damages, liabilities or expenses (including taxes other than taxes based on the income of the Trustee) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or willful misconduct. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The obligations of the Company under this Section 7.07 shall survive the resignation or removal of the Trustee and the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section 12.04, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the extent applicable. A-49 Section 7.08 Replacement of Trustee. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in principal amount of the then outstanding Notes may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee and its agents and counsel hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. A-50 Section 7.10 Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated therein. Section 7.12 Trustee's Application for Instructions from the Company. Any application by the Trustee for written instructions from the Company may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights A-51 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 interest on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03 Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.07, 4.09, 4.11, 4.13, 4.14, 4.15, 4.16, 4.17 and 4.18 hereof and clause (d) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance. The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium and interest on the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the A-52 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 as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article 8 concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is concerned, at any time in the period ending on the 91st day after the date of deposit; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Opinion of Counsel (which may be subject to customary exceptions) to the effect that on the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; (h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (i) the Company shall have delivered to the Trustee the written consent of the holders of each series of Senior Debt or their designated representative. Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as A-53 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 interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or interest on any Note and remaining unclaimed for two years after such principal, premium or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. A-54 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. Notwithstanding Section 9.02 hereof, the Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Note Guarantees or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes or to alter the provisions of Article 2 hereof (including the related definitions) in a manner that does not materially adversely affect any Holder; (c) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes by a successor to the Company pursuant to Article 5 or Article 11 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under this Indenture of any Holder of the Notes; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; or (f) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 12.04 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company, the Guarantors and the Trustee may amend or supplement this Indenture (including Section 4.15 hereof), the Note Guarantees and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. A-55 Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 12.04 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment, supplement, or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes except as provided above with respect to Section 4.15 hereof; (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or interest on the Notes; (g) waive a redemption payment with respect to any Note other than a payment required under Section 4.15 hereof; A-56 (h) make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions; or (i) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture. In addition, without the consent of at least 75% in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange offer for, or purchase of, such Notes), no waiver or amendment to this Indenture may make any change in the provisions of Article 10 hereof that adversely affects the rights of any Holder of Notes. Section 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental Indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 SUBORDINATION Section 10.01 Agreement to Subordinate. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes is subordinated in right of A-57 payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. Section 10.02 Liquidation; Dissolution; Bankruptcy. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshaling of the Company's assets and liabilities: (i) holders of Senior Debt shall be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt) before Holders of the Notes shall be entitled to receive any payment with respect to the Notes (except that Holders may receive (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof); and (ii) until all Obligations with respect to Senior Debt (as provided in clause (i) above) are paid in full, any distribution to which Holders would be entitled but for this Article 10 shall be made to holders of Senior Debt (except that Holders of Notes may receive (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof), as their interests may appear. Section 10.03 Default on Designated Senior Debt. (a) The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes and may not acquire from the Trustee or any Holder any Notes for cash or property (other than (A) Permitted Junior Securities and (B) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing beyond any applicable grace period in the agreement, indenture or other document governing such Designated Senior Debt; or (ii) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of the Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from a Person who may give it pursuant to Section 10.10 hereof. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until 360 days shall have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment A-58 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, if this Article 10 otherwise permits the payment, distribution or acquisition at the time of such payment or acquisition. Section 10.04 Acceleration of Notes. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. Section 10.05 When Distribution Must Be Paid Over. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder, as applicable, has been notified (as a result of the receipt of a Payment Blockage Notice or otherwise) that such payment is prohibited by this Article 10, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. Section 10.06 Notice by Company. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. Section 10.07 Subrogation. After all Senior Debt is paid in full and until the Notes are paid in full, Holders of Notes shall be subrogated (equally and ratably with all other A-59 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 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. Section 10.08 Relative Rights. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: (i) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (ii) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (iii) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. Section 10.09 Subordination May Not Be Impaired by Company. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Section 10.10 Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. Section 10.11 Rights of Trustee and Paying Agent. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would A-60 cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. Section 10.12 Authorization to Effect Subordination. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. Section 10.13 Amendments. The provisions of this Article 10 shall not be amended or modified without the written consent of the holders of all Senior Debt. In addition, without the consent of at least 75% in principal amount of the Notes then outstanding (including such consents obtained in connection with a tender offer or exchange offer for, or purchase of, such Notes), no waiver or amendment to this Indenture may make any change in the provisions of this Article 10 that adversely affects the rights of any Holder of Notes. Section 10.14 Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article and no implied covenants or obligations with respect to holders of Senior Indebtedness shall be read into this Indenture against the Trustee. ARTICLE 11 NOTE GUARANTEES Section 11.01 Guarantee. Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the A-61 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 defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. Section 11.02 Subordination of Note Guarantee. The Obligations of each Guarantor under its Note Guarantee pursuant to this Article 11 shall be junior and subordinated to the Senior Guarantee of such Guarantor on the same basis as the Notes are junior and subordinated to Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. Section 11.03 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent A-62 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 11, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Section 11.04 Execution and Delivery of Note Guarantee. To evidence its Note Guarantee set forth in Section 11.01 hereof, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form included in Exhibit B shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President or one of its Vice Presidents. Each Guarantor hereby agrees that its Note Guarantee set forth in Section 11.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any new Subsidiaries subsequent to the Issue Date, if required by Section 4.14 hereof, the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Note Guarantees in accordance with Section 4.14 hereof and this Article 11, to the extent applicable. Section 11.05 Guarantors May Consolidate, etc., on Certain Terms. Except as otherwise provided in Section 11.06 hereof, no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person (other than the Company or another Guarantor) whether or not affiliated with such Guarantor unless: (a) subject to Section 11.06 hereof, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, this Indenture and the Note Guarantee on the terms set forth herein or therein; and (b) immediately after giving effect to such transaction, no Default or Event of Default exists. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and A-63 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 Issue Date. Except as set forth in Article 4 and Article 5 hereof, and notwithstanding clauses (a) and (b) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 11.06 Releases Following Sale of Assets. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) a Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale, other disposition or designation was made by the Company in accordance with the provisions of this Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. ARTICLE 12 MISCELLANEOUS Section 12.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA ss.318(c), the imposed duties shall control. Section 12.02 Notices. Any notice or communication by the Company , any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the others' address: A-64 If to the Company and/or any Guarantor: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31902-2109 Telecopier No.: (706) 576-3419 Attention: President With a copy to: Troutman Sanders LLP Bank of America Plaza 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308 Telecopier No.: (404) 885-3900 Attention: Terry C. Bridges If to the Trustee: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890 Telecopier No.: (302) 636-4140 Attention: Corporate Trust Administration The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, postage prepaid, certified or registered mail, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA ss. 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. A-65 If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 12.03 Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA ss. 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). Section 12.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, such action is authorized or permitted by this Indenture and that all such conditions precedent and covenants have been satisfied. Section 12.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss. 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 12.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Note Guarantees or this Indenture or for any A-66 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. Section 12.09 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 12.10 Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 11.06 hereof. Section 12.11 Severability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 12.12 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 12.13 Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. Section 12.14 Plan of Reorganization. Pursuant to the Plan of Reorganization, the Original Indenture has been terminated and cancelled and, in connection therewith, (i) any and all obligations of the Company under the Original Indenture to the holders of Original Notes or the Trustee immediately prior to the execution and delivery of this Indenture on the Issue Date are discharged in full except for the $154,315,000 in aggregate principal amount evidenced by the 10 3/8% Senior Subordinated Notes due 2009 issued hereunder on the Issue Date and except for other distributions required under the Plan of Reorganization, and (ii) any existing Defaults or Events of Default immediately prior to the execution and delivery of this Indenture on the Issue Date (and any of the consequences thereof) are waived in their entirety. A-67 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, effective as of the date first written above. CARMIKE CINEMAS, INC. By: /s/ Martin A. Durant --------------------------------- Name: Martin A. Durant ------------------------------- Title: Senior Vice President ------------------------------ EASTWYNN THEATRES, INC. By: /s/ Martin A. Durant --------------------------------- Name: Martin A. Durant ------------------------------- Title: Senior Vice President ------------------------------ WOODEN NICKEL PUB, INC. By: /s/ Martin A. Durant --------------------------------- Name: Martin A. Durant ------------------------------- Title: Senior Vice President ------------------------------ MILITARY SERVICES, INC. By: /s/ Martin A. Durant --------------------------------- Name: Martin A. Durant ------------------------------ Title: Senior Vice President ------------------------------- WILMINGTON TRUST COMPANY, as Trustee By: /s/ Steven Cimalore ---------------------------------- Name: Steven Cimalore -------------------------------- Title: Senior Vice President ------------------------------- A-68 EXHIBIT A [Face of Note] CUSIP/CINS 143436AE3 10 3/8% Senior Subordinated Notes due 2009 No. $ ----- --------------- Carmike Cinemas, Inc. promises to pay to Cede & Co. or registered assigns, the principal sum of $___________ Dollars on February 1, 2009. Interest Payment Dates: February 1 and August 1 Dated: A-69 CARMIKE CINEMAS, INC. By: ------------------------------------ Name: Title: By: ------------------------------------ Name: Title: (SEAL) This is one of the Global Notes referred to in the within-mentioned Indenture: WILMINGTON TRUST COMPANY, as Trustee By: ---------------------------------------- (Authorized Signer) Dated: A-70 [Back of Note] 10 3/8% Senior Subordinated Notes due 2009 [Insert the Global Note Legend, if applicable pursuant to the provisions of the Indenture] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Carmike Cinemas, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note from August 1, 2001 (the "Interest Commencement Date") until the Issue Date at 9 3/8% per annum and from the Issue Date until maturity at 10 3/8% per annum. The Company will pay interest semi-annually in arrears on February 1 and August 1 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Interest Commencement Date; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated after a Record Date and before the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be February 1, 2002. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the January 15 or July 15 next preceding the Interest Payment Date (or, in the case of the first Interest Payment Date, at the close of business on the Issue Date) (the "Record Date"), even if such Notes are canceled after such Record Date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest and premium on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, Wilmington Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. A-71 4. INDENTURE. The Company issued the Notes under an Indenture dated as of January 31, 2002 ("Indenture") among the Company, the Guarantors named therein and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the indenture shall govern and be controlling. The Notes are obligations of the Company limited to $154,315,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. (a) Except as set forth in subparagraph (b) of this Paragraph 5, the Notes shall not be redeemable at the Company's option pursuant to this Paragraph 5 prior to February 1, 2004. On or after February 1, 2004, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest to the applicable redemption date, if redeemed during the twelve-month period beginning on February 1 of the years indicated below:
Year Percentage 2004............................... 104.688% 2005............................... 103.125% 2006............................... 101.563% 2007 and thereafter................ 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to February 1, 2002, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes of the redemption price equal to 109.375% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% in aggregate principal amount of Notes issued under the Indenture remain outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company and its Subsidiaries); and that such redemption must occur within 60 days of the date of the closing of such Equity Offering. 6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company shall be required to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase (the "Change of Control A-72 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 whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Note Guarantees or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture, the Note Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or Guarantor's obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on the Notes whether or not prohibited by the subordination provisions of the Indenture; (ii) default in payment when due of principal of, or premium, if any, on the Notes when the same becomes due and payable at maturity, upon redemption (including A-73 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, 4.17, 4.18 or 5.01 of the Indenture; (iv) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in principal amount of the Notes then outstanding voting as a single class to comply with certain other agreements in the Indenture or the Notes; (v) default under certain other agreements relating to Indebtedness of the Company which default (a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity; (vi) certain final judgments for the payment of money that remain undischarged for a period of 60 consecutive days; (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Restricted Subsidiaries or any group of Restricted Subsidiaries, that taken as a whole, would constitute a Significant Restricted Subsidiary; and (viii) except as permitted by the Indenture, any Note Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor that is a Significant Restricted Subsidiary or any Person acting on its behalf shall deny or disaffirm its obligations under such Guarantor's Note Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. 14. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator or stockholder, of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, the Indenture or the Note Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. A-74 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 Attention: President A-75 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-76 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-77 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-78 EXHIBIT B FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in and subject to the provisions in the Indenture dated as of January 31, 2002 (the "Indenture") among Carmike Cinemas, Inc., the Guarantors listed on Schedule I thereto and Wilmington Trust Company, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium, if any, interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. EASTWYNN THEATRES, INC. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- WOODEN NICKEL PUB, INC. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- MILITARY SERVICES, INC. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- B-1 EXHIBIT C FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Carmike Cinemas, Inc. (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and Wilmington Trust Company, as trustee under the indenture referred to below (the "Trustee"). WITNESSETH WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of January 31, 2002 providing for the issuance of an aggregate principal amount of up to $154,315,000 of 10 3/8% Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and C-1 (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article Six of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article Six of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) Pursuant to Section 11.03 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect C-2 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 Guarantor under this Note Guarantee will not constitute a fraudulent transfer or conveyance. 3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. 4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not sell or otherwise dispose of all or substantially all of its assets or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Sections 11.05 and 11.06 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Note Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles Four and Five and Section 11.06 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 5. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the Capital C-3 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 Guarantee. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale, other disposition or designation was made by the Company in accordance with the provisions of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. (b) Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article Eleven of the Indenture. 6. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. 7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. COUNTERPARTS The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. C-4 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: , ----------------- ---- [GUARANTEEING SUBSIDIARY] By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- CARMIKE CINEMAS, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- EASTWYNN THEATRES, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- WOODEN NICKEL PUB, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- MILITARY SERVICES, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- WILMINGTON TRUST COMPANY, as Trustee By: ------------------------------------- Authorized Signatory C-5 SCHEDULE I SCHEDULE OF GUARANTORS The following schedule lists each Guarantor under the Indenture as of the Issue Date: 1. Eastwynn Theatres, Inc. 2. Wooden Nickel Pub, Inc. 3. Military Services, Inc. Schedule I-1 EX-10.1 4 g74873ex10-1.txt TERM LOAN AGREEMENT EXHIBIT 10.1 TERM LOAN CREDIT AGREEMENT AMONG CARMIKE CINEMAS, INC., THE LENDERS LISTED HEREIN AND BNY ASSET SOLUTIONS LLC, AS ADMINISTRATIVE AGENT DATED AS OF JANUARY 31, 2002 TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS...................................................................................1 SECTION 1.01. DEFINITIONS.................................................................................1 SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS........................................................20 SECTION 1.03. USE OF DEFINED TERMS.......................................................................21 SECTION 1.04. TERMINOLOGY................................................................................21 SECTION 1.05. REFERENCES.................................................................................21 ARTICLE II THE CREDITS..................................................................................21 SECTION 2.01. COMMITMENTS TO MAKE LOANS; CONTINUATION AND CONVERSION ELECTIONS..................................................................................21 SECTION 2.02. NOTES......................................................................................22 SECTION 2.03. MATURITY OF LOANS..........................................................................22 SECTION 2.04. INTEREST RATES.............................................................................23 SECTION 2.05. FEES.......................................................................................24 SECTION 2.06. TERMINATION OF COMMITMENTS.................................................................24 SECTION 2.07. OPTIONAL PREPAYMENTS.......................................................................25 SECTION 2.08. MANDATORY PREPAYMENTS......................................................................25 SECTION 2.09. GENERAL PROVISIONS AS TO PAYMENTS..........................................................26 SECTION 2.10. COMPUTATION OF INTEREST AND FEES...........................................................28 ARTICLE III CONDITIONS TO EFFECTIVENESS..................................................................28 SECTION 3.01. CONDITIONS PRECEDENT TO EFFECTIVENESS......................................................28 ARTICLE IV REPRESENTATIONS AND WARRANTIES...............................................................31 SECTION 4.01. CORPORATE EXISTENCE AND POWER..............................................................31 SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION.................................31 SECTION 4.03. BINDING EFFECT.............................................................................31 SECTION 4.04. FINANCIAL INFORMATION......................................................................31 SECTION 4.05. LITIGATION.................................................................................32 SECTION 4.06. COMPLIANCE WITH ERISA......................................................................32 SECTION 4.07. TAXES......................................................................................32 SECTION 4.08. SUBSIDIARIES...............................................................................32 SECTION 4.09. NOT AN INVESTMENT COMPANY..................................................................33 SECTION 4.10. PUBLIC UTILITY HOLDING COMPANY ACT.........................................................33 SECTION 4.11. OWNERSHIP OF PROPERTY; LIENS...............................................................33 SECTION 4.12. NO DEFAULT.................................................................................33 SECTION 4.13. FULL DISCLOSURE............................................................................33 SECTION 4.14. ENVIRONMENTAL MATTERS......................................................................33 SECTION 4.15. COMPLIANCE WITH LAWS.......................................................................34 SECTION 4.16. CAPITAL STOCK..............................................................................34 SECTION 4.17. MARGIN STOCK...............................................................................34 SECTION 4.18. INSOLVENCY.................................................................................34
-i- TABLE OF CONTENTS (continued)
PAGE ARTICLE V COVENANTS....................................................................................34 SECTION 5.01. INFORMATION................................................................................35 SECTION 5.02. INSPECTION OF PROPERTY, BOOKS AND RECORDS..................................................36 SECTION 5.03. RATIO OF FUNDED DEBT TO EBITDA.............................................................36 SECTION 5.04. INTEREST COVERAGE RATIO....................................................................37 SECTION 5.05. RESTRICTED PAYMENTS........................................................................37 SECTION 5.06. RATIO OF EBITDAR TO FIXED CHARGES..........................................................37 SECTION 5.07. NEGATIVE PLEDGE............................................................................38 SECTION 5.08. MAINTENANCE OF EXISTENCE...................................................................39 SECTION 5.09. DISSOLUTION................................................................................40 SECTION 5.10. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS................................................40 SECTION 5.11. USE OF PROCEEDS............................................................................40 SECTION 5.12. COMPLIANCE WITH LAWS; PAYMENT OF TAXES.....................................................40 SECTION 5.13. INSURANCE..................................................................................41 SECTION 5.14. CHANGE IN FISCAL YEAR......................................................................41 SECTION 5.15. MAINTENANCE OF PROPERTY....................................................................41 SECTION 5.16. ENVIRONMENTAL NOTICES......................................................................41 SECTION 5.17. ENVIRONMENTAL MATTER.......................................................................41 SECTION 5.18. ENVIRONMENTAL RELEASE......................................................................41 SECTION 5.19. ADDITIONAL COVENANTS, ETC..................................................................41 SECTION 5.20. INVESTMENTS................................................................................43 SECTION 5.21. GUARANTY OF AND COLLATERAL GRANTED BY THE SUBSIDIARIES.....................................43 SECTION 5.22. SUBORDINATED DEBT..........................................................................44 SECTION 5.23. CAPITAL EXPENDITURES.......................................................................44 SECTION 5.24. ADDITIONAL MORTGAGES.......................................................................44 SECTION 5.25. DEBT RATING................................................................................45 ARTICLE VI DEFAULTS.....................................................................................45 SECTION 6.01. EVENTS OF DEFAULT..........................................................................45 SECTION 6.02. NOTICE OF DEFAULT..........................................................................47 ARTICLE VII THE AGENT....................................................................................47 SECTION 7.01. APPOINTMENT, POWERS AND IMMUNITIES.........................................................47 SECTION 7.02. RELIANCE BY ADMINISTRATIVE AGENT...........................................................48 SECTION 7.03. DEFAULTS...................................................................................48 SECTION 7.04. RIGHTS OF ADMINISTRATIVE AGENT AND ITS AFFILIATES AS A LENDER..............................49 SECTION 7.05. INDEMNIFICATION............................................................................49 SECTION 7.06. CONSEQUENTIAL DAMAGES......................................................................49 SECTION 7.07. PAYEE OF NOTE TREATED AS OWNER.............................................................50 SECTION 7.08. NON-RELIANCE ON ADMINISTRATIVE AGENT, TERM COLLATERAL AGENT AND OTHER LENDERS....................................................................50 SECTION 7.09. FAILURE TO ACT.............................................................................50 SECTION 7.10. RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT AND TERM COLLATERAL AGENT...........................................................................50
-ii- TABLE OF CONTENTS (continued)
PAGE ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION..............................................................51 SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR...................................51 SECTION 8.02. ILLEGALITY.................................................................................51 SECTION 8.03. INCREASED COST AND REDUCED RETURN..........................................................52 SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR EURO-DOLLAR LOANS..........................................53 SECTION 8.05. COMPENSATION...............................................................................54 SECTION 8.06. REPLACEMENT OF LENDER......................................................................54 ARTICLE IX MISCELLANEOUS................................................................................55 SECTION 9.01. NOTICES....................................................................................55 SECTION 9.02. NO WAIVERS.................................................................................55 SECTION 9.03. EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION...............................................56 SECTION 9.04. SETOFFS; SHARING OF SET-OFFS...............................................................56 SECTION 9.05. AMENDMENTS AND WAIVERS.....................................................................57 SECTION 9.06. MARGIN STOCK COLLATERAL....................................................................58 SECTION 9.07. SUCCESSORS AND ASSIGNS.....................................................................58 SECTION 9.08. CONFIDENTIALITY............................................................................61 SECTION 9.09. REPRESENTATION BY LENDERS..................................................................61 SECTION 9.10. OBLIGATIONS SEVERAL........................................................................61 SECTION 9.11. SURVIVAL OF CERTAIN OBLIGATIONS............................................................62 SECTION 9.12. NEW YORK LAW...............................................................................62 SECTION 9.13. SEVERABILITY...............................................................................62 SECTION 9.14. INTEREST...................................................................................62 SECTION 9.15. INTERPRETATION.............................................................................62 SECTION 9.16. CONSENT TO JURISDICTION....................................................................62 SECTION 9.17. EDGAR FILING...............................................................................63 SECTION 9.18. COUNTERPARTS...............................................................................63
EXHIBIT A TERM NOTE EXHIBIT B ASSIGNMENT AND ACCEPTANCE EXHIBIT C OPINION OF WEIL, GOTSHAL & MANGES LLP, COUNSEL FOR THE BORROWER EXHIBIT D CLOSING CERTIFICATE OF CARMIKE CINEMAS, INC. EXHIBIT E CARMIKE CINEMAS, INC. [GUARANTOR] OFFICER'S CERTIFICATE EXHIBIT F FORM OF COMPLIANCE CERTIFICATE EXHIBIT G NOTICE OF CONTINUATION OR CONVERSION EXHIBIT H FORM OF GUARANTY -iii- TABLE OF CONTENTS (continued) Schedule 1.01A Schedule of New Bank Debt, Commitment Amounts and Ratable Shares Schedule 1.01B Fee Properties and Leasehold Properties Schedule 4.08 Reorganized Subsidiaries Schedule 4.14(a) Environmental Liabilities Schedule 4.14(b) Environmental Releases Schedule 4.14(c) Environmental Authorizations Schedule 5.07 Existing Liens -iv- TERM LOAN CREDIT AGREEMENT TERM LOAN CREDIT AGREEMENT dated as of January 31, 2002, among CARMIKE CINEMAS, INC., a Delaware corporation, the LENDERS listed on the signature pages hereof, and BNY ASSET SOLUTIONS LLC, as Administrative Agent. The parties hereto agree as follows: This Term Loan Credit Agreement is the Post-Confirmation Credit Agreement as defined and referred to in the Reorganization Plan, and is executed and delivered by the parties hereto pursuant thereto and the Confirmation Order, and the Term Loans constitute the principal balance of the New Bank Debt as of the Effective Date. ARTICLE I DEFINITIONS Section 1.01. Definitions. The terms as defined in this Section 1.01 shall, for all purposes of this Agreement (except as herein otherwise expressly provided or unless the context otherwise requires), have the meanings set forth herein: "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.04(c). "Administrative Agent" means BNY Asset Solutions LLC, a limited liability company organized under the laws of the State of Delaware, in its capacity as administrative agent for the Lenders hereunder, and its successors and permitted assigns in such capacity; provided, however, that solely for purposes of Section 3.01(h), "Administrative Agent" means Wachovia Bank, N.A., as Administrative Agent under the Bank Credit Agreements. "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. "Agreement" means this Term Loan Credit Agreement, together with all amendments, supplements and other modifications hereto. "Amended Subordinated Notes Indenture" means the Trust Indenture dated as of the Effective Date, between the Borrower, as issuer of the New Subordinated Notes, and Wilmington Trust Company, as Trustee, and all of the documents and instruments relating thereto. "Applicable Margin" has the meaning set forth in Section 2.04(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. "Bank Credit Agreements" has the meaning set forth in the Reorganization Plan "Banks" has the meaning set forth in the Reorganization Plan, and refers to the Lenders, in their capacity as Banks thereunder. "Bank Claims" has the meaning set forth in the Reorganization Plan. "Bankruptcy Code" means title 11 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases. "Bankruptcy Court" means the United States District Court for the District of Delaware having jurisdiction over the Chapter 11 Cases. "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, and is to be made as a Base Rate Loan pursuant to the applicable Notice of Continuation or Conversion or Article VIII, as applicable. "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 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. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close, and, if the applicable Business Day relates to Euro-Dollar Loans, on which dealings in Dollar deposits are carried out in the London interbank market. "Capital Expenditures" means for any period the sum of all capital expenditures incurred during such period by the Borrower and its Subsidiaries, as determined in accordance 2 with GAAP, but excluding any Capital Expenditures consisting of tenant improvement expenses which are reimbursed or reimbursable to the Borrower or a Subsidiary by the landlord. "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. "Carmike Stockholders" means those stockholders identified on Disclosure Schedule 4.08 as holders of the Capital Stock of the Borrower. "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 Balances" means, as at any date of determination, the aggregate amount of Cash and Cash Equivalents of the Borrower and its Subsidiaries. "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 or 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. 3 "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. "Change of Control" means any event, transaction or occurrence as a result of which (a) the Carmike Stockholders cease to own and control all of the economic and voting rights associated with ownership of at least thirty percent (30%) of the outstanding capital Stock of all classes of Carmike on a fully diluted basis, or (b) the Borrower ceases to own and control all of the economic and voting rights associated with all of the outstanding capital Stock of any of its Subsidiaries. "Chapter 11 Cases" means the cases under Chapter 11 of the Bankruptcy Code commenced by the Borrower and the Subsidiaries, styled In re Carmike Cinemas, Inc. et al., Chapter 11 Case Nos. 00-3302 through 00-3305 (SLR) inclusive, Jointly Administered; before the Bankruptcy Court. "Closing Certificate" has the meaning set forth in Section 3.01(d). "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. "Collateral" means the property of the Borrower and the Subsidiaries in which the Term Collateral Agent, for the ratable benefit of the Lenders, is granted a security interest pursuant to the Security Agreement, the Pledge Agreement and the Mortgages, to secure the Secured Obligations. "Collateral Documents" means the Intercreditor Agreement, the Pledge Agreement, the Security Agreement, the Mortgages, and such financing statements as the Term Collateral Agent may require to perfect its security interest in the Collateral. "Commencement Date" has the meaning set forth in the Reorganization Plan. "Commitment" means, with respect to each Lender, (i) the amount of New Bank Debt set forth opposite the name of such Lender on Schedule 101(A) (which is its ratable share of the New Bank Debt), 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, and such term refers to (i) the obligation to make the initial Loans on the Effective Date pursuant to Section 2.01, and (ii) thereafter, only to make Refunding Loans. "Compliance Certificate" has the meaning set forth in Section 5.01(c). 4 "Confirmation Order" means the order of the Bankruptcy Court confirming the Reorganization Plan pursuant to Section 1129 of the Bankruptcy Code. "Consolidated Operating Income" means, for any period, 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. "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. "Convenience Claims" has the meaning set forth in the Reorganization Plan. "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. "Declining Lender" has the meaning set forth in Section 2.08(c). "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; provided, that Debt shall not include the promissory note of the Borrower in a principal amount not to exceed $3,622,974 and bearing interest at the rate of 10.083% per annum payable to Columbus Bank and Trust Company, and any extensions and renewals thereof, provided (1) the proceeds of such promissory note are used to pay the full purchase price of a certificate of deposit (the "IRB Certificate of Deposit"), (2) such promissory note (and any such extension or renewal thereof) is secured by the pledge of such IRB Certificate of Deposit issued 5 by Columbus Bank and Trust company in an amount and bearing interest at a rate sufficient to pay all obligations under such promissory note, (3) such promissory note is nonrecourse to the Borrower or to any Subsidiary except to such IRB Certificate of Deposit and (4) the obligation under such promissory note is not, in accordance with GAAP, to be classified on its balance sheet as debt. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived in writing, become an Event of Default. "Default Rate" means, with respect to any Loan, on any day, the sum of 2% plus the interest rate (including the Applicable Margin) which otherwise is applicable from time to time to such Loan hereunder. "Dividends" means for any period the sum of all dividends paid or declared during such period in respect of any Capital Stock and Redeemable Preferred Stock (other than dividends paid or payable in the form of additional Capital Stock). "Dollars" or "$" means dollars in lawful currency of the United States of America. "EBITDA" means, for any period, the Net Income of the Borrower and the Subsidiaries for such period: (i) plus, to the extent such amount was deducted in calculating such Net Income: (a) interest expense; (b) income and franchise taxes; (c) depreciation expense; (d) amortization expense; (e) all other non-cash items, extraordinary non-cash items, non-recurring and unusual non-cash items and the cumulative effects of changes in accounting principles under GAAP reducing such Net Income, all as determined on a consolidated basis for the Borrower and the Subsidiaries in conformity with GAAP; (f) upfront expenses resulting from, to the extent permitted by this Agreement, equity offerings, investments, mergers, recapitalizations, Patrick Cash Payments, asset dispositions, asset acquisitions, and similar transactions to the extent such expenses reduce Net Income; (g) restructuring charges reducing Net Income; (h) charges arising from the grant of stock or options to management; and (i) losses on asset dispositions, and (ii) less (a) all non-cash items, extraordinary non-cash items, non-recurring and unusual non-cash items and the cumulative effects of changes in accounting principles all as determined on a consolidated basis for the Borrower and the Subsidiaries in conformity with GAAP, increasing such Net Income; and (b) gains on asset dispositions. "EBITDA Notice" has the meaning set forth in Section 2.08(d). "EBITDAR" shall mean EBITDA plus Rental Obligations. "Effective Date " has the meaning specified in Section 3.01. "Effective Date Net Cash" means the amount, if any, by which (i) the Cash and Cash Equivalents of the Borrower and the Subsidiaries on the Effective Date exceed (ii) 6 $20,000,000, less the amount of Cash consisting of funds retained on account of Disputed Claims (as defined in the Reorganization Plan) and to fund the payments to be made under the Reorganization Plan on or about the Effective Date, including, without limitation, the following: (1) professional fees incurred through the Effective Date, cure payments, and retention payments under the Borrower's and the Subsidiaries' current severance and retention plan approved by the Bankruptcy Court; (2) fees and expenses relating to the Revolver Credit Facility; (3) post-petition interest on the Bank Claims and other amounts payable to the Banks under the Reorganization Plan (other than the Effective Date Net Cash and the Exit Financing Net Cash); (4) pre-petition interest on the Subordinated Note Claims at the non-default rate of interest; (5) post-petition interest due on the Subordinated Note Claims at the non-default rate of interest through the Effective Date but excluding the interest payment in the amount of $7,237,802.15 due on February 1, 2002 under the Subordinated Notes Indenture; (6) $10 million of payments to holders of GUC Claims; (7) payments to holders of Convenience Claims; and (8) payments to the United State Trustee pursuant to section 1930 of title 28 of the United States Code incurred through the Effective Date; provided, that notwithstanding anything to the contrary in the foregoing, any Patrick Cash Payments shall be disregarded in computing Cash and Cash Equivalents on the Effective Date and in determining Effective Date Net Cash. Effective Date Net Cash shall not include any amounts borrowed by or available to the Borrower or the Subsidiaries under the Revolving Credit Agreement; provided, however, that (x) Effective Date Net Cash will not be less than $0.00, and (y) there shall be excluded from the deductions in calculating Effective Date Net Cash amounts relating to accrued and unpaid general trade or similar claims that are Administrative Claims (as defined in the Reorganization Plan) incurred after the Commencement Date. "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 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. 7 "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 legislation. Any reference to any provision of ERISA shall also be deemed to be a reference to any successor provision or provisions thereof. "Exit Financing Net Cash" means the amount by which the commitment under the Revolver Credit Agreement on the Effective Date exceeds $30,000,000; provided, however, that if, after the Effective Date, the Revolver Credit Agreement is (i) amended, supplemented, or modified at any time to increase the commitments thereunder, or (ii) is completely or partially replaced with a facility having a higher commitment, in each case with the consent of the Lenders as is required by this Agreement, Exit Financing Net Cash also means and includes the additional amount by which such increased or higher commitment exceeds $30 million, less the amount of the Exit Financing Net Cash paid on the Effective Date, and such additional amount shall be payable to the Administrative Agent, for the ratable account of the Lenders, at the time of such increase in commitment or closing of such replacement facility; provided, however, that in no event shall Exit Financing Net Cash exceed $20,000,000. "Euro-Dollar Loan" means a Loan which bears or is to bear interest at a rate based upon the London Interbank Offered Rate made on the Effective Date or pursuant to the applicable Notice of Continuation or Conversion. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.04(c). "Event of Default" has the meaning set forth in Section 6.01 "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 8 overnight Federal funds transactions among members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to The Bank of New York on such day on such transactions as determined by the Administrative Agent. "Fee Properties" means all Properties consisting of real estate and improvements in which the Borrower or any Subsidiary owns fee simple title. The Fee Properties in existence on the Effective Date are described on Schedule 1.01(B). "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 by the Borrower 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, determined on a consolidated basis for such period, the sum of (i) the aggregate amount of interest expense on Funded Debt of the Borrower and the Subsidiaries during such period plus (ii) the aggregate amount of Rental Obligations for such period. "Funded Debt" means at any date the Debt of the Borrower and its Subsidiaries, determined on a consolidated basis as of such date, consisting of (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 the term "Funded Debt" shall include, in addition to all Debt which would otherwise be included pursuant to the foregoing definition, but without duplication, Debt evidenced by the Notes and the Amended Subordinated Notes, but shall not include Debt owing to the holders of GUC Claims; provided, however, that in order to avoid duplication, Debt consisting of industrial development revenue or similar bonds shall not be included as Funded Debt if they are enhanced by letters of credit as to which the related reimbursement obligations are included as Funded Debt. 9 "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 dated as of even date herewith in substantially the form of Exhibit H to be executed by each the Guarantors which are Subsidiaries on the Effective Date, and by each Person which becomes a Subsidiary after the Effective Date pursuant to Section 5.21(a), for the benefit of the Administrative Agent and the Lenders. "Guaranty Obligations" means the obligations of the Guarantors under the Guaranty. "GUC Claims" means the "Claims" under Class 5 described in the Reorganization Plan which are "Allowed Claims" (as those terms are defined in the Reorganization Plan) pursuant to the Reorganization Plan. "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., as amended, 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, as amended, or in any applicable state or local law or regulation and (e) "insecticides", "fungicides", or "rodenticides", as those terms are defined in the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, as amended, or in any applicable state or local law or regulation. "Interest Period" means, 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 or third month thereafter, as the Borrower may elect in the applicable Notice of Continuation or Conversion, provided that: 10 (a) any Interest Period (subject to clause (c) below) which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (b) any Interest Period which begins on the last 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 Business Day of the appropriate subsequent calendar month; and (c) no Interest Period may be selected which would end after the Maturity Date. "Intercreditor Agreement" means an intercreditor agreement acceptable to the Term Collateral Agent, the Lenders, the Revolver Collateral Agent, and the Revolver Lenders, setting forth, among other things, provisions pertaining to the relative priorities of the Term Collateral Agent and the Revolver Collateral Agent in the Collateral, for the giving of certain notices, and as to enforcement actions with respect to the Collateral, as it may hereafter be amended, supplemented or otherwise modified 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) leases and/or real property acquired by the Borrower or any of its Subsidiaries for the purpose of developing movie theatres and (ii) equipment or inventory in the ordinary course of business. "Lease" means the Master Lease dated as of the Effective Date between Movieplex Realty Leasing, L.L.C., as Landlord, and the Borrower, as Tenant, as it may hereafter be amended, supplemented or otherwise modified from time to time. "Lease Equipment and Fixtures" means the equipment located at any premises leased pursuant to the Lease in which a security interest is granted to the landlord under the Lease to secure the Borrower's obligations thereunder, including the fixtures at such locations. "Leasehold Mortgage Properties" means all Leasehold Properties which are subject to a Mortgage and as to which all Real Estate Collateral Documentation required by the Term Collateral Agent has been obtained pursuant to Section 3.01(k), 5.21(a) or 5.24. "Leasehold Properties" means all Properties consisting of real estate and improvements in which the Borrower or any Subsidiary has a leasehold interest, excluding real estate and improvements which are subject to and leased pursuant to the Lease and the equipment located on such real estate. The Leasehold Properties in existence on the Effective Date are described on Schedule 1.01(B). "Lender" means each bank or other financial institution listed on the signature pages hereof as having a Commitment, and its successors and assigns. 11 "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 in an Assignment and Acceptance) 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 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 Collateral Documents or the Loans, as such documents and instruments may be amended, supplemented or otherwise modified from time to time. "London Interbank Offered Rate" has the meaning set forth in Section 2.04(c). "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 (c) the ability of the Borrower to perform its obligations under the Loan Documents to which it is a party, or (d) the legality, validity or enforceability of any Loan Document. "Maturity Date" means January 31, 2007. "Monthly Payment Date" means the last day of each calendar month, or, if any such day is not a Business Day, the next succeeding Business Day. "Moody's" means Moody's Investor Service, Inc. 12 "Mortgages" means, individually or collectively, as the context shall require, any mortgage, deed to secure debt, deed of trust or similar instrument appropriate for the relevant jurisdiction, in form and substance reasonably satisfactory to the Administrative Agent and the Term Collateral Agent pursuant to which the Borrower or any Subsidiary, grants a second priority (junior and subordinate to the Lien of the Revolver Collateral Agent, and subject to the Permitted Encumbrances), perfected Lien on all Fee Properties and Leasehold Properties as provided in and pursuant to Section 3.01(k), 5.21(a) and 5.24, to the Term Collateral Agent, for the ratable benefit of the Lenders, to secure the Secured Obligations, as contemplated in Sections 3.01(k), 5.21(a) and 5.24, as it may hereafter be amended, supplemented or otherwise modified from time to time; provided; however, that as to each Leasehold Property, the Borrower and the Subsidiaries shall use reasonable commercial efforts, and exercise due diligence, to obtain any required consent from the landlord of such Leasehold Property, without an obligation to make payments to such landlord (other than reimbursement of reasonable legal costs and minimal administrative costs) to obtain such consent. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means, 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 the Borrower or any 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 Debt under the Revolver Credit Agreement which is required to be repaid in connection with the disposition thereof, but only to the extent the commitments under the Revolving Credit Agreement are reduced by such payment, plus (B) the principal amount of any other Debt (other than payments on the Secured Obligations required by Section 2.08) which is secured by such asset, which is required to be repaid in connection with the disposition thereof, plus (C) the reasonable fees, including broker's fees, and out-of-pocket expenses incurred by such Borrower or such Subsidiary, as the case may be, in connection with such disposition, plus (D) so long as no Event of Default is in existence, provision for taxes, including income taxes, attributable to the disposition of such asset, plus (E) so long as no Event of Default is in existence, with respect to proceeds from the sale of equipment to be replaced at any Property, a reserve in an amount reasonably anticipated to be for the replacement of such equipment; (ii) with respect to any construction allowance amounts agreed upon with the landlord of any Leased Property after the Commencement Date (including after entry of the Confirmation Order) but not paid to the Borrower or any Subsidiary as of the entry of the Confirmation Order, the amount thereof actually received but not actually used by the Borrower or Subsidiary for construction of tenant improvements at the relevant Leased Property; (iii) with respect to any cash proceeds received by the Borrower or a Subsidiary from the issuance of any Capital Stock (other than cash proceeds received by a 13 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 the principal amount of Debt under the Revolving Credit Agreement required to be paid from such proceeds, but only to the extent the commitments under the Revolving Credit Agreement are reduced by such payment, and all reasonable and customary costs and expenses incurred by such Borrower or Subsidiary directly in connection with the issuance of such Capital Stock; provided, however, that up to the first $10,000,000 of such remaining proceeds may be retained by the Borrower and used for any expenditure not in violation of the terms and provisions of this Agreement; (iv) with respect to any cash proceeds received in respect of the incurrence of Debt for money borrowed (other than under the Revolving Credit Facility and the New Subordinated Debt), all such cash proceeds, after deducting therefrom the principal amount of Debt under the Revolving Credit Agreement required to be paid from such proceeds, but only to the extent the commitments under the Revolving Credit Agreement are reduced by such payment; and (v) 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 Debt under the Revolving Credit Agreement which is required to be repaid in connection with the disposition thereof, but only to the extent the commitments under the Revolving Credit Agreement are reduced by such payment, plus (B) the principal amount of any other Debt (other than payments on the Secured Obligations required by Section 2.08) which is secured by such Property, which is required to be repaid in connection with the disposition thereof, plus (C) the reasonable fees and out-of-pocket expenses incurred by such Borrower or such Subsidiary in connection with the collection of such cash proceeds, and plus (D) the amount which the Borrower estimates it will expend to restore or replace such Property. "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. "New Bank Debt" means the sum of $264,977,449, less (a) all Adequate Protection Payments (as defined in the Reorganization Plan) and (b) all payments of Effective Date Net Cash and Exit Financing Net Cash made to the Lenders as of the Effective Date pursuant to the Reorganization Plan, the amount of the New Bank Debt after giving effect to such payments being set forth on Schedule 1.01(A), which Schedule 1.01(A) show for each Lender its Commitment and its ratable share of the New Bank Debt as of the Effective Date. 14 "New Subordinated Debt" means the Debt of the Borrower evidenced by New Subordinated Notes. "New Subordinated Debt Documents" means the New Subordinated Notes, the Amended Subordinated Notes Indenture and the Subsidiary Guarantees described in the Amended Subordinated Notes Indenture. "New Subordinated Notes" means the 10.375% Senior Subordinated Notes in the original principal amount of approximately $155,000,000 having a maturity not earlier than June 1, 2009 which are described and defined as "New Subordinated Notes" in the Reorganization Plan, which are issued on the Effective Date to holders of Subordinated Note Claims which are not "Electing Noteholders" (as defined in the Reorganization Plan) and which are subordinated in right of payment to the payment in full of the obligations of the Borrower under this Agreement and the Revolver Credit Agreement pursuant to the subordination provisions contained in the Amended Subordinated Notes Indenture. "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 Continuation or Conversion" has the meaning set forth in Section 2.01(a). "Off-Balance Sheet Lease" means any lease entered into by the Borrower or any Subsidiary 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 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. "Officer's Certificate" has the meaning set forth in Section 3.01(e). "Operating Lease" means a 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. "Participant" has the meaning set forth in Section 9.07(b). "Patrick Cash Payments" means any cash payments (other than normal payments on account of salary or other benefits in the ordinary course of business) made to Michael W. Patrick (or on his behalf to a trust or other Person controlled by him) on or about the Effective Date in connection with stock issued to him pursuant to the Reorganization Plan or pursuant to any employment agreement with the Borrower or otherwise on account of his employment as chief executive officer of the Borrower. 15 "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Encumbrance" means, with respect to any Fee Property or Leasehold Mortgage Property, the encumbrances permitted by the Term Collateral Agent in its reasonable judgment (but not including any Lien on the interests of the Borrower or any Subsidiary thereon consisting of a mortgage, deed to secure debt, deed of trust or security agreement, except in favor of the Revolver Collateral Agent) as specified in the Mortgage pertaining thereto. "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 reasonably satisfactory to the Administrative Agent and the Term Collateral Agent pursuant to which the Borrower or any Subsidiary pledges and grants a second priority (junior and subordinate to the Lien of the Revolver Collateral Agent) perfected security interest in the capital stock of all Subsidiaries to the Term Collateral Agent, for the ratable benefit of the Lenders, to secure the Secured Obligations, as it may hereafter be amended, supplemented or otherwise modified 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 The Bank of New York from time to time as an interest rate basis for borrowings. The Prime Rate is but one of several interest rate bases used by The Bank of New York. The Bank of New York lends at interest rates above and below the Prime Rate. "Principal Payment Date" means each June 30 and December 31, commencing June 30, 2002, or, if any such day is not a Business Day, the next succeeding Business Day, and the Maturity Date. "Projections" means the Borrower's forecasted consolidated (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all prepared on a Subsidiary by Subsidiary or division-by-division basis, if applicable, and otherwise consistent with the historical financial statements of the Borrower, together with appropriate supporting details and a statement of underlying assumptions. 16 "Properties" means all real property owned, leased under a ground lease or otherwise used or occupied by the Borrower or any Subsidiary, wherever located. "Real Estate Collateral Documentation" means the instruments, documents and agreements executed and/or delivered by the Borrower or any Subsidiary to the Term Collateral Agent (if applicable) pursuant to Section 5.24 in connection with each Mortgage in order to convey to the Term Collateral Agent (or a trustee for the benefit of the Term Collateral Agent, as applicable in the relevant jurisdiction) for the ratable benefit of the Lenders a second priority Lien (junior and subordinate to the Lien of the Revolver Collateral Agent and subject to Permitted Encumbrances) on the right, title and interest of the Borrower or any Subsidiary in or to the Fee Property or Leasehold Property described therein, as the case may be, and other rights ancillary thereto, all in form and substance reasonably satisfactory to the Term Collateral Agent, after consultation with the Borrower or such Subsidiary, as applicable. The Real Estate Collateral Documentation may include, without limitation, the following as to each Fee Property or Leasehold Mortgage Property: (i) an owner's/lessee's affidavit for each parcel or tract of such Fee Property or Leasehold Property; (ii) mortgagee title insurance binders and policies for each tract or parcel of such Fee Property or Leasehold Mortgage Property; (iii) such landlord consents with respect to the Leasehold Mortgage Properties as the Term Collateral Agent may reasonably require from any Third Parties with respect to any portion of such Leasehold Mortgage Property; (iv) for each Fee Property and Leasehold Mortgage Property, a copy of any existing survey of each parcel or tract of such Fee Property or Leasehold Property, and upon request of the Term Collateral Agent upon the occurrence and during the continuance of an Event of Default, the Term Collateral Agent shall be furnished a current "as-built" survey; (v) a certificate as to the insurance required by the related Mortgage; (vi) upon request of the Term Collateral Agent upon the occurrence and during the continuance of an Event of Default, the Term Collateral Agent shall be furnished a report of a licensed engineer detailing an environmental inspection of such Fee Property or Leasehold Property; (vii) an indemnification agreement regarding hazardous materials for such Fee Property or Leasehold Mortgage Property and (viii) any other instruments, documents and agreements which are furnished to the Revolver Collateral Agent. "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 17 sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof. "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. "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. "Reorganization Plan" means Debtors' Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated November 14, 2001, including the Plan Supplement referred to therein and all exhibits, supplements, appendices and schedules thereto relating to the Borrower and its Subsidiaries. "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, the chief executive officer, the President, the Treasurer, the Secretary or any Senior Vice President of the Borrower or any Subsidiary, as applicable. "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 such Person's Capital Stock) or (b) any option, warrant or other right to acquire shares of the Borrower's or any such Subsidiary's Capital Stock. "Revolver Agent" means General Electric Capital Corporation, as Agent for the Revolver Lenders under the Revolver Credit Agreement. 18 "Revolver Collateral Agent" means the Revolver Agent, in its capacity as collateral agent for the Revolver Lenders under the Revolver Collateral Documents. "Revolver Collateral Documents" means the "Collateral Documents", as defined in the Revolver Credit Agreement. "Revolver Lenders" means the "Lenders", as defined in the Revolver Credit Agreement. "Revolver Commitments" means the Commitments of the Revolver Lenders under the Revolver Credit Agreement. "Revolver Credit Agreement" means the Credit Agreement, dated as of January 31, 2002 among the Borrower, the lenders party thereto from time to time, and the Revolver Agent, as Agent, as amended, supplemented or otherwise modified from time to time. The revolving credit facility provided for in the Revolver Credit Agreement is the "Exit Financing Facility", as defined and described in the Reorganization Plan, as amended, supplemented or otherwise modified from time to time. "Revolving Loan" means, collectively, the loans in the aggregate amount of up to $50,000,000, made from time to time by the Revolver Lenders pursuant to the Revolver Credit Agreement. "Sale Notice" has the meaning set forth in Section 2.08(d). "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. "Secured Obligations" means: (i) the obligations of the Borrower under this Agreement, including principal, interest, fees, costs and expenses and indemnification amounts, (ii) the Guaranty Obligations, and (iii) the obligations of the Borrower and the Subsidiaries under the Collateral Documents. "Security Agreement" means a Security Agreement in form and substance satisfactory to the Administrative Agent and the Term Collateral Agent pursuant to which each of the Borrower and the Subsidiaries grants a second priority (junior and subordinate to the Lien of the Revolver Collateral Agent, and subject to the Permitted Encumbrances) in all personal property owned by it, including, without limitation, all equipment, fixtures, accounts, chattel paper, instruments, inventory and general intangibles, to the Term Collateral Agent, for the ratable benefit of the Lenders, to secure the Secured Obligations, as it may hereafter be amended or supplemented from time to time; provided, that the Lease Equipment and Fixtures shall be excluded. "Subordinated Note Claims" has the meaning set forth in the Reorganization Plan. "Subordinated Notes Indenture" means the trust indenture, dated as of February 3, 1999 between the Borrower, as issuer, and The Bank of New York, as trustee, as amended, restated supplemented or otherwise modified prior to the Commencement Date. 19 "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, the Subsidiaries on the Effective Date being the "Reorganized Subsidiaries", as defined in the Reorganization Plan. "Taxes" has the meaning set forth in Section 2.09(d). "Term Collateral Agent" means the Administrative Agent, in its capacity as collateral agent for the Lenders hereunder pursuant to the Collateral Documents. "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 and Subsidiaries' respective businesses and on a temporary basis. "Transferee" has the meaning set forth in Section 9.07(d). "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). "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 1.02. 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 and the other Loan Documents. 20 Section 1.03. 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 1.04. 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 1.05. 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 2.01. Commitments to Make Loans; Continuation and Conversion Elections.(a) 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 Loans by the Lenders shall be made on or about the Effective Date (when all conditions in Section 3.01 have been satisfied), in the aggregate principal amount of the Commitments, by converting the outstanding principal amount of each Lender's New Bank Debt as of the Effective Date to Loans borrowed hereunder, and thereafter, all Loans shall be made only as Refunding Loans. The initial Borrowing on the Effective Date shall be Euro-Dollar Loans. Thereafter, by delivering a notice (a "Notice of Continuation or Conversion"), which shall be substantially in the form of Exhibit G, to the Administrative Agent on or before 12:00 P.M., prevailing Eastern time, on a Business Day, the Borrower may from time to time irrevocably elect, by notice on the same Business Day, in the case of Base Rate Loans, and 3 Business Days, in the case of Euro-Dollar Loans, that all, or any portion in an aggregate principal amount of $5,000,000 or any larger integral multiple of $1,000,000 be, (i) in the case of Base Rate Loans, converted into Euro-Dollar Loans or, (ii) in the case of Euro-Dollar Loans, converted into Base Rate Loans or continued as Euro-Dollar Loans (in the absence of delivery of a Notice of Continuation or Conversion with respect to any Euro-Dollar Loan at least 3 Business Days before the last day of the then current Interest Period with respect thereto, such Euro-Dollar Loan shall, on such last day, automatically convert to a Base Rate Loan); provided, however, that (x) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders that have made such Loans, and (y) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, a Euro-Dollar Loan when any Event of Default has occurred and is continuing. (b) Each Borrowing under this Section 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. 21 (c) Upon receipt of a Notice of Continuation or Conversion, the Administrative Agent shall promptly notify each Lender of the contents thereof and such Notice of Continuation or Conversion shall not thereafter be revocable by the Borrower. Notwithstanding anything to the contrary contained in this Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred and be continuing a Default or an Event of Default, which Default or Event of Default shall not have been cured or waived in writing; provided, however, so long as a Default which is not an Event of Default is continuing, Euro-Dollar Borrowings having a 1 month Interest Period shall be available. Section 2.02. Notes. (a) 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. (b) Upon receipt of each Lender's Note pursuant to Section 3.01, the Administrative Agent shall deliver such Note to such Lender. Each Lender shall record, and prior to any transfer of its Note 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 Note; 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 such Note or the ability of any Lender to assign its Note. Each Lender is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. Section 2.03. 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 shall be repaid through a Refunding Loan, except to the extent of any installment payment required pursuant to the next succeeding sentence. Semi-annual installment principal payments on the Loans shall be made on each of the Principal Payment Dates set forth below in the aggregate principal amount set forth below for such Principal Payment Date, together with interest thereon and any amount payable pursuant to Section 8.05(a); provided, however, that to the extent the payment of estimated Effective Date Net Cash on the Effective Date pursuant to Section 3.01(h)(ii) is determined by mutual agreement of the Borrower and the Administrative Agent to be greater or less than actual Effective Date Net Cash, the payment on the Principal Payment Date on June 30, 2002 shall be increased or decreased by such excess or shortfall, as the case may be: 22
Principal Payment Date Installment Principal Amount ---------------------- ---------------------------- June 30, 2002 $10,000,000 December 31, 2002 $10,000,000 June 30, 2003 $12,500,000 December 31, 2003 $12,500,000 June 30, 2004 $15,000,000 December 31, 2004 $15,000,000 June 30, 2005 $20,000,000 December 31, 2005 $20,000,000 June 30, 2006 $20,000,000
Section 2.04. Interest Rates. (a) "Applicable Margin" means (x) as to Base Rate Loans, 3.5%, and (y) as to Euro-Dollar Loans, 4.5%. (b) 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 greater of (x) the Base Rate for such day plus the Applicable Margin and (y) 7.75%, calculated for purposes of this clause (y) for the actual number of days elapsed in a 365/366 day year. Such interest shall be payable on each Monthly Payment Date while such Base Rate Loan is outstanding and on the date such Base Rate Loan is converted to a Euro-Dollar Rate Loan. 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. (c) 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 greater of (x) the sum of the Applicable Margin plus the applicable Adjusted London Interbank Offered Rate for such Interest Period and (y) 7.75%, calculated for purposes of this clause (y) for the actual number of days elapsed in a 365/366 day year. Such interest shall be payable on each Monthly Payment Date while such Euro-Dollar Loan is outstanding and on the last day of the Interest Period for such Euro-Dollar Rate Loan. Any overdue principal of and, to the extent permitted by 23 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) 100% 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 11:00 A.M., prevailing Eastern time, 2 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 thereof) 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. (d) 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. (e) After the occurrence and during the continuance of an Event of Default, the principal amount of the Loans (and, to the extent permitted by applicable law, all accrued interest thereon) shall bear interest at the Default Rate. Section 2.05. Fees. 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 are provided in the fee letter between the Borrower and the Administrative Agent dated January 8, 2002, or as otherwise may be agreed upon in writing by the Borrower and the Administrative Agent. Section 2.06. 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. 24 Section 2.07. Optional Prepayments. (a) The Borrower may, upon at least 1 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 $500,000, by paying the principal amount to be prepaid together with accrued interest and unpaid 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. (b) 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 in amounts aggregating at least $1,000,000, or any larger multiple of $500,000 prior to the maturity thereof only upon (i) at least 3 Business Days' notice to the Administrative Agent, (ii) compliance with the provisions of Section 8.05, and (iii) payment of an administrative fee of $250 to the Administrative Agent (which fee shall be retained by the Administrative Agent). Each such optional prepayment shall be applied to prepay ratably the Euro-Dollar Loans of the several Lenders included in such Euro-Dollar Borrowing. (c) 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 2.08. Mandatory Prepayments. (a) The Borrower shall repay or prepay Loans in an amount equal to 50% of Net Cash Proceeds described in clauses (i) and (v) of the definition thereof, and 100% of all other Net Cash Proceeds, within 15 Business Days after the receipt of Net Cash Proceeds; provided, that amounts not included in Net Cash Proceeds pursuant to: (x) clause (i) of the definition thereof which have not been used or committed to be used within 180 days from the sale of the equipment to be replaced shall be paid on such 180th day; or (y) clause (v)(D) 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. (b) Within 90 days after the end of the first Fiscal Quarter of each Fiscal Year, commencing with the Fiscal Quarter ending March 31, 2003, the Borrower shall repay or prepay Loans in an amount equal to the greater of (i) 50% of EBIDTA in excess of projected EBITDA (as set forth in Exhibit E to the disclosure statement relating the Reorganization Plan) for the prior Fiscal Year and (ii) 50% of Cash Balances in excess of $15 million at the end of the first Fiscal Quarter of such Fiscal Year, provided that (1) in computing Cash Balances for purposes of the foregoing, there shall be no deduction for any prepayments outside the ordinary course of business of any obligations due and payable after the end of such first Fiscal Quarter of such Fiscal Year, and (2) the Borrower shall first deduct from any amounts required to be paid 25 pursuant to this Section 2.08(b) amounts sufficient to reduce the outstanding principal amount of any revolving credit facility to $20 million (the "Mandatory Prepayment Threshold"). Notwithstanding the foregoing, if for any reason there is a permanent reduction in the commitment amount of any revolving credit facility, the Mandatory Prepayment Threshold shall be adjusted downward on a dollar-for-dollar basis for purposes of determining the amount of any prepayment or repayment required to be made pursuant to this Section 2.08(b). (c) Prepayments pursuant to this Section 2.08 shall be made to the Administrative Agent, for the ratable account of the Lenders, based on the aggregate principal balance of the Loans as of the time of the payment; provided, that any Lender (a "Declining Lender") may, by notice to the Administrative Agent as provided below, decline to accept any particular prepayment pursuant to this Section 2.08, in which event the amount of any prepayment otherwise payable to such Declining Lender shall be paid to the other Lenders that are not Declining Lenders on a pro rata basis. (d) At least 10 Business Days prior to any sale giving rise to Net Cash Proceeds subject to clause (a) of this Section, the Borrower shall send a notice to the Administrative Agent (a "Sale Notice") which describes, with respect to such sale, (1) the property to be sold, (2) the anticipated sale date, (3) the anticipated gross sale proceeds and (4) the anticipated Net Sale Proceeds. Promptly upon receipt of any Sale Notice, the Administrative Agent shall send a copy thereof to each Lender. Within 5 Business Days after the completion of any sale, the Borrower shall notify the Administrative Agent of the actual gross sale proceeds and Net Cash Proceeds received in connection therewith. At least 20 Business Days prior to furnishing 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), the Borrower shall send a notice to the Administrative Agent (an "EBITDA Notice") setting forth the amount of EBITDA payable pursuant to Section 2.08(b) with respect to the Fiscal Year just ended. Promptly upon receipt of the EBITDA Notice, the Administrative Agent shall send a copy thereof to each Lender. Within 15 Business Days after receipt of a copy of a Sale Notice or any EBITDA Notice, each Lender desiring to waive a prepayment under Section 2.08(b) shall so notify the Administrative Agent in writing and such Lender shall be a Declining Lender (and any Lender which fails to give such notice within such period shall be deemed not to have waived such payment). (e) All prepayments made for the account of the Lenders pursuant to this Section 2.08 shall be accompanied by any amount required to be paid pursuant to Section 8.05(a), and shall be applied in installments of principal in the inverse order of maturity. Section 2.09. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and any fees payable hereunder without set-off or counterclaim, not later than 11:00 A.M. prevailing Eastern time, on the date when due, in Federal or other funds immediately available in Irving, Texas 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. 26 (b) Whenever any payment of principal of, or interest on, the Base Rate Loans or any fees shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding 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 Business Day, the date for payment thereof shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding 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 at the applicable rates set forth in this Agreement. (c) Except as provided in Section 2.08(c), 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: (i) first, to Euro-Dollar Loans for which the Interest Period expires on the date of such payment or prepayment; (ii) second, to Base Rate Loans; and (iii) third, to Euro-Dollar Loans for which the Interest Period expires after the date of such payment or prepayment (in direct order of maturity). (d) (i) All payments of principal, interest and fees and all other amounts due and payable by the Borrower pursuant to this Agreement with respect to any Loan or fee relating thereto shall be paid without deduction for, and free from, any tax, imposts, levies, duties, deductions, or withholdings of any nature now or at anytime hereafter imposed by any governmental authority or by any taxing authority thereof, excluding in the case of each Lender, taxes imposed on or measured by its net income or overall gross receipts, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender is organized or in which the applicable Lending Office of any such Lender is located or any political subdivision or taxing authority thereof, or by any other jurisdiction or any political subdivision or taxing authority thereof (other than a jurisdiction in which such Lender would not be subject to tax but for the execution and performance of this Agreement) (all such non-excluded taxes, imposts, levies, duties, deductions or withholdings of any nature being "Taxes"). In the event that the Borrower is required by applicable law to make any such withholding or deduction of Taxes with respect to any Loan or fee or other amount due and payable hereunder, the Borrower shall pay such deduction or withholding to the applicable taxing authority, shall promptly furnish to any Lender in respect of which such deduction or withholding is made all receipts and other documents evidencing such payment, subject to the Lender's compliance with subsection (d)(ii) to the extent it is able to do so, and shall pay to such Lender additional amounts as may be necessary in order that the amount received by such Lender after the required withholding or other payment shall equal the amount such Lender would have received had no such withholding or other payment been made. If the Borrower fails to provide such original or certified copy of a receipt evidencing payment of Taxes or certificate(s) or opinion of counsel of exemption therefrom, the Borrower hereby agrees, subject to the Lender's compliance with subsection (d)(ii) to the extent it is able to do so, to compensate such Lender for, and indemnify them with respect to, the tax consequences of the Borrower's failure to provide evidence of tax payments or tax exemption. 27 (ii) Each Lender which is not organized under the laws of the United States or any state thereof agrees to deliver to the Borrower, with a copy to the Administrative Agent, prior to the first payment date after becoming a Lender (or upon changing the jurisdiction of its applicable Lending Office), such certificates, documents, forms and other evidence required by the governmental authority in the jurisdiction imposing any applicable Taxes, and such other information reasonably requested by the Borrower or the Administrative Agent, establishing that the Lender is entitled to receive payments of principal and interest under this Agreement and the Notes without deduction and free from withholding of any Taxes imposed by such jurisdiction (and, from time to time, to provide the Borrower and the Administrative Agent with any required revisions or replacements to such certificates, documents, forms and other evidence); provided that if it is unable, for any reason, to establish such exemption, or to file such forms and, in any event, during such period of time as such request for exemption is pending, the Borrower shall nonetheless remain obligated under the terms of the immediately preceding paragraph. (iii) In the event any Lender receives a refund of any Taxes paid by the Borrower pursuant to this Section 2.09(d), it will pay to the Borrower the amount of such refund promptly upon receipt thereof; provided that if at any time thereafter it is required to return such refund, the Borrower shall promptly repay to such Lender the amount of such refund. (iv) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and the Lenders contained in this Section 2.09(d) shall be applicable with respect to any Participant, Assignee or other Transferee as of the time of such participation, assignment or other transfer, and any calculations required by such provisions (A) shall be made based upon the circumstances of such Participant, Assignee or other Transferee, and (B) constitute a continuing agreement and shall survive the termination of this Agreement and the payment in full or cancellation of the Notes. Section 2.10. Computation of Interest and Fees. Interest on Base Rate Loans 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. Any 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 EFFECTIVENESS Section 3.01. 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"): (a) receipt by the Administrative Agent from each of the parties hereto of a facsimile or an original of a duly executed signature page of this Agreement signed by such party; 28 (b) receipt by the Administrative Agent of either (i) a duly executed counterpart of each of the other 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; (c) receipt by the Administrative Agent of the opinions (together with any opinions of local counsel relied on therein) of Weil, Gotshal & Manges LLP, counsel for the Borrower and the Guarantors, and Troutman Sanders LLP, counsel of the Borrower and the Guarantors, each dated as of the Effective Date, substantially in the form of opinion attached hereto as Exhibits C (each giving a portion of such opinion) and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent or any Lender may reasonably request; (d) 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 or Event of 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; (e) receipt by the Administrative Agent of 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; (f) 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 Guarantors; (g) execution and delivery of the Intercreditor Agreement; (h) receipt by Wachovia Bank, N.A., as the Administrative Agent, for the ratable account of the Lenders, of all distributions payable to the "Banks" pursuant to Section 4.4(b)(ii) of the Reorganization Plan, including: (i) $35,000,000 on account of all accrued and unpaid post-petition interest on the Bank Claims through the Effective Date, provided, however, that in the event the Effective Date occurs after January 15, 2002, such $35,000,000 amount shall be increased by the interest accruing on the "Allowed Bank Claims" (as defined in the Reorganization Plan), from January 15, 2002 to and including the Effective Date at a per annum rate equal to "LIBOR" plus 3.00%, as defined in and pursuant to the Bank Revolver Agreement (as defined in the Reorganization Plan), plus 3.00%, as to Lenders parties thereto, or "LIBOR", 29 as defined in and pursuant to the Bank Term Loan Agreement (as defined in the Reorganization Plan), plus 3.50%, as to Lenders parties thereto; (ii) the Effective Date Net Cash, calculated based upon a reasonable estimate of Effective Date Net Cash by the Borrower as of such date; (iii) the Exit Financing Net Cash; and (iv) all reasonable professional fees and expenses incurred by the Banks' retained professionals, Jones, Day, Reavis & Pogue, FTI/Policano & Manzo, and Duane, Morris & Hecksher LLP, in connection with the Chapter 11 Cases and all agent fees required to be paid by the Borrower and the Guarantors under the Bank Credit Agreements through such time as is necessary to fully complete the implementation of the New Bank Debt under the Reorganization Plan; (i) the Confirmation Order shall have been entered and all conditions precedent to the effectiveness thereof set forth in Section 10.1 of the Reorganization Plan shall have been satisfied; (j) the Administrative Agent and the Lenders shall be satisfied with (1) the terms and provisions of the Revolver Credit Agreement and related collateral and security documents, and (2) any changes materially adverse to the Administrative Agent, the Collateral Agent or the Lenders in the New Subordinated Debt Documents and the Reorganization Plan's distributions to holders of the GUC Claims from those described in the Reorganization Plan as filed on November 14, 2001, and all such documents described in clauses (1) and (2) (other than with respect to the GUC Claims) shall have been executed and delivered, and conformed copies thereof shall have been delivered to the Administrative Agent, and all conditions precedent to the effectiveness of all such documents shall have been satisfied (other than any conditions pertaining to the execution and delivery of this Agreement and related documents), and the Administrative Agent shall be reasonably satisfied that, upon this Agreement's becoming effective, the Reorganization Plan will be substantially consummated; (k) the execution and delivery to the Term Collateral Agent of (1) the Pledge Agreement and the Security Agreement and (2) the Mortgages and the Real Estate Collateral Documents reasonably required by the Term Collateral Agent, together with local counsel opinions satisfactory to the Term Collateral Agent pertaining to the Mortgages; provided, however, that to the extent required consents have not been obtained from landlords of Leasehold Properties as of the Effective Date notwithstanding exercise of due diligence and reasonable commercial efforts, as contemplated in the definition of Mortgage, the Borrower shall continue to pursue such consents with due diligence after the Effective Date, but the failure to deliver Mortgages and Real Estate Collateral Documents on the Effective Date as to such Leasehold Properties shall not constitute a failure to satisfy the conditions precedent to the effectiveness of this Agreement pursuant to this Section 3.01(k); (l) the Administrative Agent and the Lenders shall have received Uniform Commercial Code searches reasonably satisfactory to the Administrative Agent and the Lenders for all locations presently occupied or used by the Borrower and its Subsidiaries; and (m) delivery (x) to the Revolver Collateral Agent of the Capital Stock of all Subsidiaries and blank stock powers satisfactory in form and substance to the Term Collateral Agent, and (y) to the Term Collateral Agent of an authenticated record from the Revolver Collateral Agent to the effect that it holds (or will hold, upon delivery to it) such Capital Stock 30 and blank stock powers for the benefit of the Term Collateral Agent and the Lenders, subject to its prior security interest for the benefit of the Revolver Lenders; and (n) the execution and delivery by the Term Collateral Agent of financing statements satisfactory in form and substance to the Term Collateral Agent. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: Section 4.01. Corporate Existence and Power. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, 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 4.02. 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, the filing with the Bankruptcy Court of this Agreement and the other Loan Documents required to be filed and the filing of the Mortgages and UCC-1 financing statements pursuant hereto), (iv) do not contravene, or constitute a default under, any provision of material applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any material 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, other than Liens permitted by this Agreement. Section 4.03. 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 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 2000 and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended, reported on by Ernst & Young, LLP, 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, 2001, copies of 31 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. (b) Since December 31, 2000, there has been no event, act, condition or occurrence having a Material Adverse Effect. Section 4.05. 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. Section 4.06. Compliance with ERISA. (a) 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. (b) 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 4.07. 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, 1997. Section 4.08. 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 are the "Reorganized Subsidiaries" (as defined in the Reorganization Plan), and which accurately sets forth each such Subsidiary's complete name and jurisdiction of 32 incorporation. As of the Effective Date, Schedule 4.08 lists all of the holders of 5% or more of the Capital Stock of the Borrower. Section 4.09. 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 4.10. 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 4.11. 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 4.12. 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 4.13. 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 4.14. Environmental Matters. (a) Except as otherwise provided in Schedule 4.14(a), (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. (b) Except as otherwise provided in Schedule 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. 33 (c) Except as otherwise provided in Schedule 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 4.15. 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 4.16. 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, other than Liens permitted by this Agreement. At least a majority of the issued shares of capital stock of each of the Borrower's Subsidiaries (other than Wholly-Owned Subsidiaries) is owned by the Borrower free and clear of any Lien or adverse claim, other than Liens permitted by this Agreement. Section 4.17. 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 4.18. 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 Section 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 otherwise consent in writing to waive such requirement or prohibition): 34 Section 5.01. Information. The Borrower will deliver to each of the Lenders, with a copy to the Administrative Agent: (a) 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 independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications not acceptable to the Required Lenders; (b) 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: (i) 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 and the figures contained in the Projections for such 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; and (ii) an annual operating plan for the Borrower, on a consolidated basis, approved by the Board of Directors of the Borrower, for the following Fiscal Year, which (1) includes a statement of all of the material assumptions on which such plan is based, (2) includes quarterly balance sheets, income statements and statements of cash flows for the following year and (3) integrates sales, gross profits, operating expenses, operating profit, cash flow projections and projections, all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections, representing management's good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and facilities; (c) 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, 5.04, 5.06, 5.07, 5.10, 5.20 and 5.23, 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; (d) 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; (e) within 5 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 35 Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) 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; (h) 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; (i) 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; (j) within 30 days after the end of each Fiscal Quarter, a report concerning theatre operations showing (a) gross attendance, (b) gross concession revenue and (c) gross ticket revenue for the Fiscal Quarter just ended; and (k) 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 5.02. 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 if no Event of Default has occurred and is continuing and at the Borrower's expense after the occurrence and during the continuance 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 5.03. Ratio of Funded Debt to EBITDA. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 2002, the ratio of Funded Debt 36 to EBITDA 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 --------------------- ---------------- March 31, 2002 through December 31, 2002 7.25 to 1.0 March 31, 2003 through December 31, 2003 7.00 to 1.0 March 31, 2004 through December 31, 2004 6.75 to 1.0 March 31, 2005 through December 31, 2005 6.25 to 1.0 Each Fiscal Quarter 5.75 to 1.0
Section 5.04. Interest Coverage Ratio. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 2002, the ratio of EBITDA to interest expense on Funded Debt of the Borrower and its Subsidiaries, calculated on a consolidated basis at the end of such Fiscal Quarter for the period of 4 consecutive Fiscal Quarters ending on such date, shall not be less than the applicable ratio provided in the following table:
Fiscal Quarter Ending Applicable Ratio --------------------- ---------------- March 31, 2002 through December 31, 2002 1.50 to 1.0 March 31, 2003 through December 31, 2003 1.55 to 1.0 March 31, 2004 through December 31, 2004 1.65 to 1.0 March 31, 2005 through December 31, 2005 1.75 to 1.0 Each Fiscal Quarter 1.85 to 1.0
Section 5.05. 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. Section 5.06. Ratio of EBITDAR to Fixed Charges. At the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending March 31, 2000, the ratio of EBITDAR to Fixed Charges, in each case for the period of 4 consecutive Fiscal Quarters ending on such date, 37 shall not be less than the applicable ratio provided in the following table:
Fiscal Quarter Ending Applicable Ratio --------------------- ---------------- March 31, 2002 through December 31, 2002 1.0 to 1.0 March 31, 2003 through December 31, 2003 1.0 to 1.0 March 31, 2004 through December 31, 2004 1.0 to 1.0 March 31, 2005 through December 31, 2005 1.0 to 1.0
Section 5.07. 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: (a) Liens in favor of the Revolver Collateral Agent and/or the Revolver Lenders securing the indebtedness under the Revolving Credit Facility, up to (but not in excess of) a principal amount of $50,000,000, plus interest, fees, expenses and indemnification amounts, Liens required to be granted to landlords with respect to Lease Properties in the Bankruptcy Case in connection with assumption of the related leases of such Lease Properties pursuant to Section 365 of the Bankruptcy Code and not subsequently waived by such landlords as part of any consent to a Mortgage on the Lease Property, and other Liens existing on the date of this Agreement securing Debt outstanding on the Effective Date and described on Schedule 5.07; (b) any Lien in favor of the Administrative Agent or the Collateral Agent pursuant to the Loan Documents; (c) 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; (d) Liens securing Debt owing by any Guarantor to the Borrower; (e) 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) through (d) of this Section, provided that (i) such Debt is not secured by any additional assets, and (ii) the principal amount of such Debt secured by any such Lien is not increased; (f) any Lien on Margin Stock; 38 (g) 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 5.12; (h) 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 5.12; (i) 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); (j) 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; (k) 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; (l) 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 the time any such Person becomes a Subsidiary, or at the time of such merger or of acquisition of such assets, 5% of Consolidated Operating Income as of the end of the most recent completed Fiscal Year; and (m) 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 outstanding at the time any such Lien is created not to exceed 5% of Consolidated Operating Income as of the end of the most recent completed Fiscal Year. Section 5.08. Maintenance of Existence. The Borrower shall, and shall cause each Subsidiary to, maintain its corporate existence and carry on its business in substantially the 39 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 5.09. 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 through corporate reorganization to the extent permitted by Section 5.11. Section 5.10. 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 entity 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 or to the Borrower, (ii) subject to the mandatory prepayment provisions of Section 2.08, the sale of equipment to be replaced at any Property, or (iii) subject to the mandatory prepayment provisions of Section 2.08, during any Fiscal Quarter, a transfer of other assets (including, but not limited to sale/leaseback transactions) 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 clauses (d) (i) and (ii) of this Section) had a book value of more than $5,000,000, provided in each of the foregoing such cases no Default shall have occurred or will occur as a consequence thereof. At the request of the Borrower, the Collateral Agent shall release any Collateral sold by the Borrower or any Subsidiary in conformity with the foregoing provisions, so long as any prepayments required by Section 2.08 have been made. Section 5.11. 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 5.12. 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 40 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 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 5.13. 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 of 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 5.14. Change in Fiscal Year. The Borrower will not change its Fiscal Year. Section 5.15. 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 5.16. 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 5.17. Environmental Matter. 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 5.18. 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, the Borrower or such Subsidiary shall comply with any and all notice, investigation, removal and remediation requirements applicable to the Borrower or such Subsidiary under Environmental Laws with respect to such Environmental Release. Section 5.19. 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 41 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 Administrative Agent and the Lenders. Thereupon, if the Administrative Agent shall request an amendment 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), then 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 rates, fees, expenses, yield protection, indemnities, collateral, loan 42 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 5.20. 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) deposits required by government agencies or public utilities, (b) Investments in existence on the Effective Date, (c) loans, advances or other Investments to or in Guarantors; (e) non-cash loans consisting of the deferred purchase price for acquisition of Capital Stock of the Borrower by employees pursuant to the 2001 Stock Plan dated on or about the Effective Date; and (e) other Investments which, in the aggregate since the Effective Date, do not exceed $1,000,000; provided, however, immediately after giving effect to the making of any Investment, no Event of Default shall have occurred and be continuing. Section 5.21. Guaranty of and Collateral Granted by the Subsidiaries. (a) The Borrower shall deliver to the Administrative Agent and each Lender notice that a Person has become a Subsidiary within 10 Business 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 Security Agreement, and, it will also execute and deliver (i) if it owns stock in any other Subsidiary, a Pledge Agreement, and (ii) if it owns any Fee Property or leases any Leasehold Property, a Mortgage on each such Property (subject, as to Leasehold Properties, to the proviso contained in the definition of Mortgage), and deliver the Real Estate Collateral Documents reasonably required by the Term Collateral Agent, together with local counsel opinions reasonably satisfactory to the Term Collateral Agent pertaining to the Mortgages, in each case pursuant to an instrument in form and substance reasonably satisfactory to the Administrative Agent executed and delivered to the Administrative Agent within 60 days after the day on which such Person became a Subsidiary. (b) Together with the instruments referred to in Section 5.21(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(e) (to the extent such items relate to the Guarantors) for such Subsidiary. 43 (c) Once any Person becomes a Subsidiary and therefore becomes a party to the Guaranty in accordance with Section 5.21(a), such Person thereafter shall remain a party to the Guaranty without regard to whether it thereafter ceases to be a Subsidiary. (d) 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 be continuing, and (iii) the Borrower shall have delivered to the Administrative Agent and the Lenders notice of such sale, then the Administrative Agent shall release promptly such Guarantor from the Guaranty and the other Loan Documents to which it is a party. Section 5.22. Subordinated Debt. The Borrower shall not (i) amend the terms of any of the New Subordinated Debt Documents in a manner adverse to the Administrative Agent, the Collateral Agent or the Lenders, or (ii) purchase or 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 New 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 New Subordinated Notes. Section 5.23. Capital Expenditures. At the end of each Fiscal Year, commencing with the Fiscal Quarter ending December 31, 2002, Capital Expenditures for such Fiscal Year shall not exceed the sum of: (i) the amount set forth below for the Fiscal Years set forth below; plus (ii) the lesser of (x) any unused amount from the prior Fiscal Year and (y) $5,000,000.
Fiscal Year Ending Capital Expenditure Limit --------------------- ------------------------- December 31, 2002 $20,000,000 December 31, 2003 $15,000,000 December 31, 2004 $10,000,000 December 31, 2005 $15,000,000 December 31, 2006 $15,000,000.
Section 5.24. Additional Mortgages. In the event the Borrower or any Subsidiary acquires any Fee Property or leases any Leasehold Property after the Effective Date, (x) within 5 Business Days after the date of acquisition thereof or of execution and delivery of a lease pertaining thereto, The Borrower or such Subsidiary shall notify the Term Collateral Agent of such acquisition or lease, and furnish a copy of any such lease to the Term Collateral Agent, and (y) within 60 days after the date of acquisition thereof or of execution and delivery of a lease pertaining thereto, the Borrower or 44 such Subsidiary shall deliver to the Term Collateral Agent a Mortgage thereon (and shall include in the lease for any such Leasehold Property a consent to the granting of such Mortgage and a landlord's waiver as to the fixtures, equipment and other personal property at such Leasehold Property) and the Real Estate Collateral Documents reasonably required by the Term Collateral Agent, together with local counsel opinions reasonably satisfactory to the Term Collateral Agent pertaining to the Mortgages. Section 5.25. Debt Rating. Promptly, at any time after 12 months after the Effective Date, upon request of the Administrative Agent (acting at the direction of the Required Lenders), the Borrower will seek and obtain a debt rating of the Loans under this Agreement by Moody's and/or S&P, ARTICLE VI DEFAULTS Section 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) 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 Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within five Business Days after such fee or other amount becomes due; or (b) the Borrower shall fail to observe or perform any covenant contained in any of Sections 5.01(e), 5.02(ii), 5.03 to 5.06, inclusive, 5.08 (as to the Borrower), 5.09 (as to the Borrower), 5.11, 5.14, and 5.20 to 5.24, inclusive; provided, however, that no Event of Default shall occur under any of Sections 5.03, 5.04 or 5.06, unless the Borrower shall fail to observe or perform the covenant contained therein for 2 consecutive Fiscal Quarters; or (c) 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 30 days after the earlier of (i) the first day on which 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 (d) 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 (e) 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 New Subordinated Debt and Debt under the Revolver Credit Agreement) when due or within any applicable grace period; or 45 (f) any event or condition shall occur 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 (g) 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 (h) 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 (i) 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 (j) 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 46 (k) 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 (l) any Collateral Document or Guaranty shall cease to be in full force and effect or the Borrower or any Guarantor, as applicable, shall deny or disaffirm its obligations thereunder; or (m) 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; or (n) any Change of Control occurs; 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 6.02. 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. ARTICLE VII THE AGENT Section 7.01. 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 47 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. Section 7.02. 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 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 7.03. 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 48 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 7.04. Rights of Administrative Agent and Its Affiliates as a Lender. With respect to any Loan made by BNY Asset Solutions LLC or an Affiliate of BNY Asset Solutions LLC (including, without limitation, The Bank of New York), such Affiliate and BNY Asset Solutions LLC 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 BNY Asset Solutions LLC (or in BNY Asset Solutions LLC's case, acting as the Administrative Agent), and the term Lender or Lenders shall, unless the context otherwise indicates, include such Affiliate of BNY Asset Solutions LLC in its individual capacity. Such Affiliate and BNY Asset Solutions LLC 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 BNY Asset Solutions LLC 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 BNY Asset Solutions LLC) 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 7.05. Indemnification. Each Lender severally agrees to indemnify the Administrative Agent and the Term Collateral Agent, to the extent the Administrative Agent or the Term Collateral 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 or the Term Collateral 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 under the other Loan Documents) or 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 or the Term Collateral Agent. If any indemnity furnished to the Administrative Agent or the Term Collateral Agent for any purpose shall, in the opinion of the Administrative Agent or the Term Collateral Agent, be insufficient or become impaired, the Administrative Agent or the Term Collateral Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. Section 7.06. CONSEQUENTIAL DAMAGES. THE ADMINISTRATIVE AGENT AND THE TERM COLLATERAL 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. 49 Section 7.07. 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 7.08. Non-Reliance on Administrative Agent, Term Collateral Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on the Administrative Agent, the Term Collateral 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, the Term Collateral 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. Neither the Administrative Agent nor the Term Collateral 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 or the Term Collateral Agent hereunder or under the other Loan Documents, neither the Administrative Agent nor the Term Collateral Agent shall 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 or the Term Collateral Agent. Section 7.09. Failure to Act. Except for action expressly required of the Administrative Agent or the Term Collateral Agent hereunder or under the other Loan Documents, the Administrative Agent and the Term Collateral 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 or the Term Collateral Agent by reason of taking, continuing to take, or failing to take any such action. Section 7.10. Resignation or Removal of Administrative Agent and Term Collateral Agent. Subject to the appointment and acceptance of a successor Administrative Agent and Term Collateral Agent as provided below, the Administrative Agent and Term Collateral Agent may resign at any time by giving notice thereof to the Lenders and the Borrower and the Administrative Agent and the Term Collateral 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 and Term Collateral Agent. If no successor Administrative Agent and Term Collateral Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 50 days after the retiring Administrative Agent's notice of resignation or the Required Lenders' removal of the retiring Administrative Agent and Term Collateral Agent, then the retiring Administrative Agent and Term Collateral Agent may, on behalf of the Lenders, appoint a successor Administrative Agent and Term Collateral Agent. Any successor Administrative Agent and Term Collateral Agent shall be a bank or other entity which has a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent and Term Collateral Agent hereunder by a successor Administrative Agent and Term Collateral Agent, such successor Administrative Agent and Term Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and Term Collateral Agent, and the retiring Administrative Agent and Term Collateral Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's and Term Collateral Agent's resignation or removal hereunder as Administrative Agent and Term Collateral 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 and Term Collateral Agent hereunder. ARTICLE VIII CHANGE IN CIRCUMSTANCES; COMPENSATION Section 8.01. 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: (a) 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 (b) 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 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 8.02. 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 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 51 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 8.03. Increased Cost and Reduced Return. (a) If after the Effective Date, 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: (i) 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 (other than any changes in respect of (i) Taxes and (ii) taxes imposed on, or measured by, the net income or overall gross receipts or franchise taxes of such Lender by the jurisdiction in which such Lender has its principal office or in which the applicable Lending Office for such Euro-dollar Loan is located or any political subdivision or taxing authority thereof, or by any other jurisdiction or any political subdivision or taxing authority thereof (other than a jurisdiction in which such Lender would not be subject to tax but for the execution and performance of this Agreement)); or (ii) 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 (iii) shall impose on any Lender (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; 52 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 reasonably 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. (b) If any Lender shall have determined that after the Effective Date 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 reasonably 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. (c) Each Lender shall notify the Borrower of any event occurring after the Effective Date 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. (d) The provisions of this Section 8.03 shall be applicable with respect to any Participant, Assignee or other Transferee. Section 8.04. 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 Business Days' prior notice to such Lender through the 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: 53 (a) 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 (b) 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 8.05. 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: (a) any payment or prepayment (pursuant to Section 2.07, Section 2.08, 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; (b) 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 (c) 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 Continuation or Conversion delivered pursuant to Section 2.01(a); 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 or, if the applicable rate of interest is 7.75% pursuant to Section 2.04(b)(y) or 2.04(c)(y), the amount by which 7.75% exceeds the rate which would have been applicable but for the application of Section 2.04(b)(y) or 2.04(c)(y), less the Applicable Margin) 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 8.06. 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 Loans or requests compensation pursuant to Section 8.03, then, so long as the condition giving 54 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 other Loan Documents 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 9.01. 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, in an applicable Assignment and Acceptance 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 U.S. mail, 72 hours after such communication is deposited in the U.S. 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 9.02. 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. 55 Section 9.03. Expenses; Documentary Taxes; Indemnification. (a) The Borrower shall pay (i) all out-of-pocket expenses of the Administrative Agent and the Term Collateral Agent, including fees and disbursements of special counsel for the Administrative Agent and the Term Collateral 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 Event of Default or alleged Event of Default hereunder or thereunder and (ii) if a Default occurs and is continuing, all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Term Collateral Agent or any Lender, including reasonable 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. (b) The Borrower shall indemnify the Administrative Agent, the Term Collateral Agent and each Lender against any transfer taxes, documentary taxes, stamp taxes, recording fees, assessments or charges made by any Authority by reason of the execution and delivery of this Agreement or the other Loan Documents or the recording of any of the Collateral Documents. (c) The Borrower shall indemnify the Administrative Agent, the Term Collateral 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, the Term Collateral 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, the Term Collateral 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 9.04. Setoffs; Sharing of Set-Offs. (a) 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 the occurrence and during the continuance 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. 56 (b) 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 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 Debt of the Borrower other than its Debt 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. (c) Notwithstanding the foregoing, it is hereby expressly agreed that neither the Administrative Agent nor any Lender shall have any Lien on or security interest in, or right to set-off against, any amount held for the Borrower by the Administrative Agent's or such Lender's Affiliates in any corporate custody account or similar account maintained at any Lender in a trust capacity, 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 paragraph (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 9.05. Amendments and Waivers. (a) 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, 57 interest or fees due on any date fixed for the payment thereof; provided, that the Required Lenders can waive or rescind the application of the Default Rate under this Agreement, (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) 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 5.21(d)) or (x) release any Collateral (other than any release of Collateral pursuant to Section 5.10 or pursuant to the Intercreditor Agreement). (b) 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 9.06. 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 9.07. Successors and Assigns. (a) 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. (b) 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 58 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 interest is payable thereon from the rate at which the Participant is entitled to receive interest in 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). (c) 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; 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 if (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 (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 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, (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, (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 59 of a Lender or a Related Fund of any Lender, or $3,500 in any other case, and (E) recordation of such assignment on the Register, as defined and provided below, 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. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 9.07(c), to maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Loans. With respect to any Lenders, the transfer of any Commitment of such Lenders and the rights to the principal of, and interest on, any Loan shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitment and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitment and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitment and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Acceptance pursuant to this Section 9.07(c). Coincident with the delivery of such an Assignment and Acceptance to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Commitment and/or Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Commitment and/or Loan, and thereupon one or more new Notes in the aggregate principal amount so assigned shall be issued to the new Lender and, if applicable, a new Note shall be issued to the assigning or transferor Lender in the remaining aggregate principal amount of its Commitment and/or Loan not so assigned. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 9.07(c); but excluding any such losses, claims, damages and liabilities incurred by reason of the gross negligence or willful misconduct of the Administrative Agent. Each Lender agrees to indemnify the Borrower and the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Borrower or the Administrative Agent by reason of the inaccuracy of any information which is furnished by such Lender concerning such Lender or its Lending Office or the amount assigned pursuant to an Assignment and Acceptance Agreement. (d) Subject to the provisions of Section 9.08, the Borrower authorizes each Lender to disclose to any Participant, Assignee or other transferee of such Lender (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. 60 (e) 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. (f) 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 9.08. 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 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 9.09. 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 9.10. 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 61 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 9.11. 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 9.12. 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 9.13. 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 9.14. 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 9.15. 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 9.16. 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. 62 Section 9.17. EDGAR Filing. Promptly after the Effective Date, the Administrative Agent agrees to cause its counsel to deliver to the Borrower a 3 1/2 inch high density computer disk containing the final form of this Agreement, formatted on Word. After the execution and delivery of any amendment, modification or supplement to this Agreement, the Administrative Agent agrees to cause its counsel 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 Word or other software program mutually agreeable to the Borrower and counsel to the Administrative Agent. Section 9.18. Counterparts. This Agreement may be signed in any number of counterparts and delivered by facsimile, by hand, by overnight courier, or by US mail, each of which (including counterparts delivered by facsimile) shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 63 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. CARMIKE CINEMAS, INC. By: /s/ Martin A. Durant --------------------------------- Title: Senior Vice President Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901 Attention: Martin A. Durant Senior Vice President and Chief Financial Officer Telecopy number: (706) 576-3419 Telephone number: (706) 576-3400 BNY ASSET SOLUTIONS LLC, as Administrative Agent By: /s/ William Cunningham ------------------------------------------------- Title: Managing Director Address for Notices BNY AssetSolutions LLc 600 East Las Colinas Blvd. Suite 1300 Irving, Texas 75039 Attention: Risk Management Telecopy Number: 972-401-8554 Telephone Number: 972-401-8500 BANKERS TRUST COMPANY, as a Term Lender By: BTNY Services, Inc. As Attorney-in-Fact By: /s/ Annemaire Reilly-Papanogiou ------------------------------------------ Name: Annemarie Reilly-Papanogiou Title: Director Lending Office: Bankers Trust Company 90 Hudson Street, 5th Floor Jersey City, NJ 07302 Mail Stop JCY05-0511 Attention: Annemarie Reilly Phone: 201-593-2150 Fax: 201-593-2315/2316 With a copy to: Joseph Regan Bankers Trust Company 90 Hudson Street, 5th Floor Jersey City, NJ 07302 Mail Stop JCY05-0511 Phone: 201-593-2198 Fax: 201-593-2307/2308/2309 BEAR, STEARNS & CO. INC., as a Term Lender By: /s/ John E. McDermott -------------------------------------- John E. McDermott Senior Managing Director Lending Office: Bear, Stearns & Co. Inc. 383 Madison Avenue New York, New York 10179 Attention: Jennifer Herskowitz Phone: 212-272-6161 Fax: 212-272-8079 With a copy to: Laura L. Torrado, Esq. Bear, Stearns & Co. Inc. 383 Madison Avenue New York, New York 10179 Phone: 212-272-7811 Fax: 212-272-8629 With a copy to: Thomas Boyce Bear, Stearns & Co. Inc. 383 Madison Avenue New York, New York 10179 Phone: 212-272-6198 Fax: 212-272-8629 CASTLERIGG MASTER INVESTMENTS LTD., as a Term Lender By: Sandell Asset Management Corp. By: /s/ James Cacioppo ------------------------------------- James Cacioppo Principal Lending Office: Castlerigg Master Investments, Ltd. c/o Sandell Asset Management Corp. 1251 Avenue of the Americas New York, NY 10020 Attn: Tim O'Brien Phone: 212-899-4756 Fax: 212-899-4734 Email: tim@sandellmgmt.com CREDIT SUISSE FIRST BOSTON, as a Term Lender By: /s/ Leigh Dworkin ----------------------------------------- Name: Leigh Dworkin Title: Authorized Signatory Lending Office: Credit Suisse First Boston 11 Madison Avenue, 5th Floor New York, NY 10010 Credit Contact: Don Pollard/ Tom Hendrick/Barry Zamore Phone: 212-538-2403 Fax: 212-538-5286 With a copy to: Leigh Dworkin Credit Suisse First Boston 11 Madison Avenue, 5th Floor New York, NY 10010 Phone: 212-325-9905 Fax: 212-325-8229 With a copy to: John Hanlon Credit Suisse First Boston 11 Madison Avenue, 13th Floor New York, NY 10010 Phone: 212-538-6849 Fax: 212-325-8129 EVENT PARTNERS DEBT ACQUISITIONS, LLC, as a Term Lender By: /s/ Michael J. Gelbat --------------------------------------- Name: Michael J. Gelbat Title: Authorized Signatory Lending Office: Event Partners Debt Acquisitions, LLC c/o John A. Levin & Co., Inc. One Rockefeller Plaza, 25th Floor New York, NY 10020 Attn: Michael Gelblat Phone: 212-332-8475 Fax: 212-332-8473 FERNWOOD ASSOCIATES, L.P., as a Term Revolver Lender By: Fernwood Associates, L.P. By: /s/ David B. Forer ---------------------------------------- David B. Forer General Partner Lending Office: Fernwood Associates, L.P. c/o Intermarket Corporation 667 Madison Avenue, 20th Floor New York, New York 10021 Credit Contact: Laura M. Zaki Phone: 212-593-1550 Fax: 212-832-4997 GENERAL ELECTRIC CAPITAL CORPORATION, as a Term Lender By: /s/ W. Jerome McDermott ---------------------------------------- W. Jerome McDermott Vice President Lending Office: General Electric Capital Corporation 60 Long Ridge Road Stamford, CT 06927 Credit Contact: Bob Kelly Phone: 203-357-4649 Fax: 203-316-7978 Payment Contact: Kathy Savino Phone: 203-357-4892 Fax: 203-602-8344 HZ SPECIAL OPPORTUNITIES LLC, as a Term Lender By: Highbridge Capital Management, LLC By: /s/ Daniel Zwirn ----------------------------------------- Daniel Zwirn Portfolio Manager Lending Office: Special Opportunities Group Highbridge Capital Management, LLC 9 West 57th Street, 27th Floor New York, NY 10019 Attention: Ivan Q. Zinn/Bob Racusin Phone: 212-287-4672 Fax: 212-287-4263 ILLINOIS MUNICIPAL RETIREMENT FUND, as a Term Lender By: MacKay Shields LLC Its: Investment Advisor By: /s/ Robert A. Nisi ----------------------------------------- Robert A. Nisi General Counsel Lending Office: Donald E. Morgan III MacKay Shields LLC 9 West 57th Street, 33rd Floor New York, NY 10019 Phone: 212-230-3911 Fax: 212-754-9187 With a copy to: Berlack, Israels & Liberman LLP 120 West 45th Street New York, NY 10036 Attn: Claude A. Baum Phone: 212-704-0100 Fax: 212-704-0196 MAINSTAY VP SERIES FUND, INC., ON BEHALF OF ITS HIGH YIELD CORPORATE BOND PORTFOLIO, as a Term Lender By: MacKay Shields LLC Its: Investment Advisor By: /s/ Robert A. Nisi ----------------------------------------- Robert A. Nisi General Counsel Lending Office: Donald E. Morgan III MacKay Shields LLC 9 West 57th Street, 33rd Floor New York, NY 10019 Phone: 212-230-3911 Fax: 212-754-9187 With a copy to: Berlack, Israels & Liberman LLP 120 West 45th Street New York, NY 10036 Attn: Claude A. Baum Phone: 212-704-0100 Fax: 212-704-0196 MOORE GLOBAL INVESTMENTS, LTD., as a Term Lender By: Moore Capital Management, Inc. Its: Trading Manager By: s/ Anthony Gallagher ----------------------------------------- Anthony Gallagher Director of Operations Lending Office: Moore Global Investments, Ltd. c/o Esbin & Alter, LLP 497 South Main Street New City, New York 10956 Attention: Scott L. Esbin Phone: 845-634-7909 Fax: 845-634-4160 NATIONS MASTER INVESTMENT TRUST, as a Term Lender By: MacKay Shields LLC Its: Investment Advisor By: /s/ Robert A. Nisi ----------------------------------------- Robert A. Nisi General Counsel Lending Office: Donald E. Morgan III MacKay Shields LLC 9 West 57th Street, 33rd Floor New York, NY 10019 Phone: 212-230-3911 Fax: 212-754-9187 With a copy to: Berlack, Israels & Liberman LLP 120 West 45th Street New York, NY 10036 Attn: Claude A. Baum Phone: 212-704-0100 Fax: 212-704-0196 OZ MASTER FUND, LTD., as a Term Lender By: OZ Management, LLC, as Advisor By: /s/ Daniel S. Och ----------------------------------------- Daniel S. Och Senior Managing Member Lending Office: OZ Master Fund, Ltd. c/o Oz Management, LLC 9 West 57th Street, 39th Floor New York, New York 10019 Attention: Joel Frank/Michael Maroof Phone: 212-790-0000 Fax: 212-790-0170 OZF CREDIT OPPORTUNITIES MASTER FUND II, LTD., as a Term Lender By: OZF Management, L.P., as Investment Advisor By: /s/ Stephen C. Freidheim ----------------------------------------- Stephen C. Freidheim Senior Managing Member Lending Office: OZF Opportunities Master Fund, Ltd. c/o OZF Management, LLC 9 West 57th Street, 39th Floor New York, New York 10019 Attention: Vanessa Kelly Whalen/ Tom Stamatelos Phone: 212-790-0000 Fax: 212-790-0140 With a copy to: Susan Rubin OZF Management, LLC 9 West 57th Street, 39th Floor New York, NY 10019 Phone: 212-790-0165 Fax: 212-790-0065 OZF CREDIT OPPORTUNITIES MASTER FUND, LTD., as a Term Lender By: OZF Management, L.P., as Investment Advisor By: /s/ Stephen C. Freidheim ----------------------------------------- Stephen C. Freidheim Senior Managing Member Lending Office: OZF Opportunities Master Fund, Ltd. c/o OZF Management, LLC 9 West 57th Street, 39th Floor New York, New York 10019 Attention: Vanessa Kelly Whalen/ Tom Stamatelos Phone: 212-790-0000 Fax: 212-790-0140 PUTNAM DIVERSIFIED INCOME TRUST, as a Term Lender By: /s/ John R. Verani ---------------------------------------- John R. Verani Vice President Lending Office: Putnam Investments c/o Scott M. Kirwin Ropes & Gray 1 International Place Boston, MA 02110 Phone: 617-951-7077 Fax: 617-951-7050 PUTNAM HIGH YIELD ADVANTAGE FUND, as a Term Lender By: /s/ John R. Verani ---------------------------------------- John R. Verani Vice President Lending Office: Putnam Investments c/o Scott M. Kirwin Ropes & Gray 1 International Place Boston, MA 02110 Phone: 617-951-7077 Fax: 617-951-7050 PUTNAM HIGH YIELD TRUST, as a Term Lender By: /s/ John R. Verani ---------------------------------------- John R. Verani Vice President Lending Office: Putnam Investments c/o Scott M. Kirwin Ropes & Gray 1 International Place Boston, MA 02110 Phone: 617-951-7077 Fax: 617-951-7050 PUTNAM FUNDS TRUST - PUTNAM HIGH YIELD TRUST II, as a Term Lender By: /s/ John R. Verani ---------------------------------------- John R. Verani Vice President Lending Office: Putnam Investments c/o Scott M. Kirwin Ropes & Gray 1 International Place Boston, MA 02110 Phone: 617-951-7077 Fax: 617-951-7050 SALOMON BROTHERS HOLDING COMPANY INC., as a Term Lender By: /s/ Edward Sutherland ----------------------------------------- Edward Sutherland Managing Director Lending Office: Salomon Brothers Holding Company Inc. 33 West 34th Street, 8th Floor New York, New York 10001 Attention: Pierre Batrouni Phone: 212-615-9137 Fax: 212-615-9149 or 9151 THE MAINSTAY FUNDS, ON BEHALF OF ITS HIGH YIELD CORPORATE BOND FUND SERIES, as a Term Lender By: MacKay Shields LLC Its: Investment Advisor By: /s/ Robert A. Nisi ---------------------------------------- Robert A. Nisi General Counsel Lending Office: Donald E. Morgan III MacKay Shields LLC 9 West 57th Street, 33rd Floor New York, NY 10019 Phone: 212-230-3911 Fax: 212-754-9187 With a copy to: Berlack, Israels & Liberman LLP 120 West 45th Street New York, NY 10036 Attn: Claude A. Baum Phone: 212-704-0100 Fax: 212-704-0196 THE RAPTOR GLOBAL PORTFOLIO LTD., as a Term Lender By: Tudor Investment Corporation, Trading Advisor By: /s/ Richard Puma ---------------------------------------- Richard Puma Vice President Operations Lending Office: The Raptor Global Portfolio Ltd. c/o Tudor Investment Corporation 1275 King Street Greenwich, CT 06831 Credit Contact: Richard Puma Phone: 203-863-6729 Fax: 203-552-6202 THE TUDOR BVI GLOBAL PORTFOLIO LTD., as a Term Lender By: Tudor Investment Corporation, Trading Advisor By: /s/ Richard Puma ----------------------------------------- Richard Puma Vice President Operations Lending Office: The Tudor BVI Global Portfolio Ltd. c/o Tudor Investment Corporation 1275 King Street Greenwich, CT 06831 Credit Contact: Richard Puma Phone: 203-863-6729 Fax: 203-552-6202 TUDOR PROPRIETARY TRADING, L.L.C., as a Term Lender By: Tudor Investment Corporation, Trading Advisor By: /s/ Richard Puma ----------------------------------------- Richard Puma Vice President Operations Lending Office: Tudor Proprietary Trading, L.L.C. c/o Tudor Investment Corporation 1275 King Street Greenwich, CT 06831 Credit Contact: Richard Puma Phone: 203-863-6729 Fax: 203-552-6202 VAN KAMPEN PRIME RATE INCOME TRUST, as a Term Lender By: Van Kampen Investment Advisory Corp. By: /s/ Christina Jamieson ---------------------------------------- Christina Jamieson Vice President Lending Office: Van Kampen Prime Rate Income Trust c/o Van Kampen Investment Advisory Corp. 1 Parkview Plaza Oak Brook Terrace, IL 60181 Credit Contact: Mike Starshak Phone: 630-684-6303 Fax: 630-684-6740 EX-10.2 5 g74873ex10-2.txt CREDIT AGREEMENT EXHIBIT 10.2 ================================================================================ CREDIT AGREEMENT Dated as of January 31, 2002 among CARMIKE CINEMAS, INC., and EASTWYNN THEATRES, INC., as Borrowers, THE OTHER CREDIT PARTIES SIGNATORY HERETO, as Credit Parties, THE LENDERS SIGNATORY HERETO FROM TIME TO TIME, as Lenders, and GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender GECC CAPITAL MARKETS GROUP, INC. as Lead Arranger ================================================================================ Table of Contents
Page ---- 1. AMOUNT AND TERMS OF CREDIT..............................................................................1 1.1 Credit Facilities..............................................................................1 1.2 Letters of Credit..............................................................................4 1.3 Prepayments....................................................................................4 1.4 Use of Proceeds................................................................................7 1.5 Interest and Applicable Margins................................................................7 1.6 [Intentionally Omitted]........................................................................9 1.7 [Intentionally Omitted]........................................................................9 1.8 Cash Management Systems........................................................................9 1.9 Fees...........................................................................................9 1.10 Receipt of Payments............................................................................9 1.11 Application and Allocation of Payments.........................................................9 1.12 Loan Account and Accounting...................................................................10 1.13 Indemnity.....................................................................................11 1.14 Access........................................................................................12 1.15 Taxes.........................................................................................12 1.16 Capital Adequacy; Increased Costs; Illegality.................................................13 1.17 Single Loan...................................................................................14 2. CONDITIONS PRECEDENT...................................................................................15 2.1 Conditions to the Initial Loans...............................................................15 2.2 Further Conditions to Each Loan...............................................................16 3. REPRESENTATIONS AND WARRANTIES.........................................................................16 3.1 Corporate Existence; Compliance with Law......................................................17 3.2 Executive Offices, Collateral Locations, FEIN.................................................17 3.3 Corporate Power, Authorization, Enforceable Obligations.......................................17 3.4 Financial Statements and Projections..........................................................17 3.5 Material Adverse Effect.......................................................................18 3.6 Ownership of Property; Liens..................................................................19 3.7 Labor Matters.................................................................................19 3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.....................20
-i- Table of Contents (continued)
Page ---- 3.9 Government Regulation.........................................................................20 3.10 Margin Regulations............................................................................20 3.11 Taxes.........................................................................................20 3.12 ERISA.........................................................................................21 3.13 No Litigation.................................................................................22 3.14 Brokers.......................................................................................22 3.15 Intellectual Property.........................................................................22 3.16 Full Disclosure...............................................................................22 3.17 Environmental Matters.........................................................................23 3.18 Insurance.....................................................................................23 3.19 Deposit and Disbursement Accounts.............................................................23 3.20 Government Contracts..........................................................................24 3.21 [Intentionally Omitted].......................................................................24 3.22 Agreements and Other Documents................................................................24 3.23 Solvency......................................................................................24 3.24 [Intentionally Omitted].......................................................................24 3.25 [Intentionally Omitted].......................................................................24 3.26 Other Debt....................................................................................24 4. FINANCIAL STATEMENTS AND INFORMATION...................................................................25 4.1 Reports and Notices...........................................................................25 4.2 Communication with Accountants................................................................25 5. AFFIRMATIVE COVENANTS..................................................................................25 5.1 Maintenance of Existence and Conduct of Business..............................................25 5.2 Payment of Charges............................................................................26 5.3 Books and Records.............................................................................26 5.4 Insurance; Damage to or Destruction of Collateral.............................................26 5.5 Compliance with Laws..........................................................................28 5.6 Supplemental Disclosure.......................................................................28 5.7 Intellectual Property.........................................................................28 5.8 Environmental Matters.........................................................................28
-ii- Table of Contents (continued)
Page ---- 5.9 Landlords' Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases.........29 5.10 [Intentionally Omitted].......................................................................30 5.11 Further Assurances............................................................................30 6. NEGATIVE COVENANTS.....................................................................................30 6.1 Mergers, Subsidiaries, Etc....................................................................30 6.2 Investments; Loans and Advances...............................................................30 6.3 Indebtedness..................................................................................31 6.4 Employee Loans and Affiliate Transactions.....................................................31 6.5 Capital Structure and Business................................................................32 6.6 Guaranteed Indebtedness.......................................................................32 6.7 Liens.........................................................................................32 6.8 Sale of Stock and Assets......................................................................33 6.9 ERISA.........................................................................................33 6.10 Financial Covenants...........................................................................33 6.11 Hazardous Materials...........................................................................33 6.12 Sale-Leasebacks...............................................................................33 6.13 Cancellation of Indebtedness..................................................................34 6.14 Restricted Payments...........................................................................34 6.15 Change of Corporate Name or Location; Change of Fiscal Year...................................34 6.16 No Impairment of Intercompany Transfers.......................................................34 6.17 No Speculative Transactions...................................................................34 6.18 Leases; Real Estate Purchases.................................................................35 6.19 Changes Relating to Debt; Material Contracts..................................................35 7. TERM...................................................................................................35 7.1 Termination...................................................................................35 7.2 Survival of Obligations Upon Termination of Financing Arrangements............................35 8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.................................................................36 8.1 Events of Default.............................................................................36 8.2 Remedies......................................................................................38
-iii- Table of Contents (continued)
Page ---- 8.3 Waivers by Credit Parties.....................................................................38 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT....................................................39 9.1 Assignment and Participations.................................................................39 9.2 Appointment of Agent..........................................................................41 9.3 Agent's Reliance, Etc.........................................................................42 9.4 GE Capital and Affiliates.....................................................................42 9.5 Lender Credit Decision........................................................................43 9.6 Indemnification...............................................................................43 9.7 Successor Agent...............................................................................43 9.8 Setoff and Sharing of Payments................................................................44 9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert......................45 10. SUCCESSORS AND ASSIGNS.................................................................................47 10.1 Successors and Assigns........................................................................47 11. MISCELLANEOUS..........................................................................................47 11.1 Complete Agreement; Modification of Agreement.................................................47 11.2 Amendments and Waivers........................................................................47 11.3 Fees and Expenses.............................................................................49 11.4 No Waiver.....................................................................................50 11.5 Remedies......................................................................................51 11.6 Severability..................................................................................51 11.7 Conflict of Terms.............................................................................51 11.8 Confidentiality...............................................................................51 11.9 GOVERNING LAW.................................................................................51 11.10 Notices.......................................................................................52 11.11 Section Titles................................................................................53 11.12 Counterparts..................................................................................53 11.13 WAIVER OF JURY TRIAL..........................................................................53 11.14 Press Releases and Related Matters............................................................53 11.15 Reinstatement.................................................................................53
-iv- Table of Contents (continued)
Page ---- 11.16 Advice of Counsel.............................................................................54 11.17 No Strict Construction........................................................................54 12. CROSS-GUARANTY.........................................................................................54 12.1 Cross-Guaranty................................................................................54 12.2 Waivers by Borrowers..........................................................................54 12.3 Benefit of Guaranty...........................................................................55 12.4 Subordination of Subrogation, Etc.............................................................55 12.5 Election of Remedies..........................................................................55 12.6 Limitation....................................................................................56 12.7 Contribution with Respect to Guaranty Obligations.............................................56 12.8 Liability Cumulative..........................................................................57
-v- INDEX OF APPENDICES Annex A (Recitals) - Definitions Annex B (Section 1.2) - Letters of Credit Annex C (Section 1.8) - Cash Management System Annex D (Section 2.1(a)) - Closing Checklist Annex E (Section 4.1(a)) - Financial Statements and Projections -- Reporting Annex F (Section 4.1(b)) - Collateral Reports [Intentionally Omitted] Annex G (Section 6.10) - Financial Covenants Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information Annex I (Section 11.10) - Notice Addresses Annex J (from Annex A - Commitments definition) Commitments as of Closing Date Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance Exhibit 1.1(a)(ii) - Form of Revolving Note Exhibit 1.1(c)(ii) - Form of Swing Line Note Exhibit 1.1(c)(ii) - Form of Swing Line Note Exhibit 1.5(e) - Form of Notice of Conversion/Continuation Exhibit 9.1(a) - Form of Assignment Agreement Disclosure Schedule 1.3(b) - Permitted Real Estate Dispositions Disclosure Schedule 1.4 - Sources and Uses; Funds Flow Memorandum Disclosure Schedule 3.1 - Type of Entity; State of Organization Disclosure Schedule 3.2 - Executive Offices, Collateral Locations, FEIN Disclosure Schedule 3.4(A) - Financial Statements Disclosure Schedule 3.4(B) - Pro Forma Disclosure Schedule 3.4(C) - Projections Disclosure Schedule 3.5 - Material Adverse Effect since December 31, 2000 Disclosure Schedule 3.6 - Real Estate and Leases Disclosure Schedule 3.7 - Labor Matters Disclosure Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding Stock Disclosure Schedule 3.11 - Tax Matters Disclosure Schedule 3.12 - ERISA Plans Disclosure Schedule 3.13 - Litigation Disclosure Schedule 3.14 - Brokers Disclosure Schedule 3.15 - Intellectual Property Disclosure Schedule 3.17 - Hazardous Materials Disclosure Schedule 3.18 - Insurance Disclosure Schedule 3.19 - Deposit and Disbursement Accounts Disclosure Schedule 3.20 - Government Contracts Disclosure Schedule 3.22 - Material Agreements Disclosure Schedule 5.1 - Trade Names Disclosure Schedule 6.3 - Indebtedness Disclosure Schedule 6.4(a) - Transactions with Affiliates Disclosure Schedule 6.7 - Existing Liens
This CREDIT AGREEMENT (this "Agreement"), dated as of January 31, 2002 among CARMIKE CINEMAS, INC., a Delaware corporation ("Carmike") and EASTWYNN THEATRES, INC., an Alabama corporation ("Eastwynn") (Eastwynn and Carmike are sometimes collectively referred to herein as the "Borrowers" and individually as a "Borrower"); the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, "GE Capital"), for itself, as Lender, and as Agent for Lenders (in such capacity, the "Agent"), and the other Lenders signatory hereto from time to time. RECITALS WHEREAS, Borrowers have requested that Lenders extend revolving credit facilities to Borrowers of up to Fifty Million Dollars ($50,000,000) in the aggregate for the purpose of refinancing certain indebtedness of Borrowers and to provide (a) working capital financing for Borrowers, (b) funds for other general corporate purposes of Borrowers and (c) funds for other purposes permitted hereunder; and for these purposes, Lenders are willing to make certain loans and other extensions of credit to Borrowers of up to such amount upon the terms and conditions set forth herein; and WHEREAS, Borrowers have agreed to secure all of their obligations under the Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a security interest in and lien upon all of their existing and after-acquired personal and real property; and WHEREAS, capitalized terms used in this Agreement shall have the meanings ascribed to them in Annex A and, for purposes of this Agreement and the other Loan Documents, the rules of construction set forth in Annex A shall govern. All Annexes, Disclosure Schedules, Exhibits and other attachments (collectively, "Appendices") hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together with this Agreement, shall constitute but a single agreement. These Recitals shall be construed as part of the Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the parties hereto agree as follows: 1. AMOUNT AND TERMS OF CREDIT 1.1 Credit Facilities. (a) Revolving Credit Facility. (i) Subject to the terms and conditions hereof, each Revolving Lender agrees to make available to Borrowers from time to time until the Commitment Termination Date its Pro Rata Share of advances (each, a "Revolving Credit Advance"). The Pro Rata Share of the Revolving Loan of any Revolving Lender shall not at any time exceed its separate Revolving Loan Commitment. The obligations of each Revolving Lender hereunder shall be several and not joint. Until the Commitment Termination Date, Borrowers may borrow, repay and reborrow under this Section 1.1(a); provided that the aggregate amount of all Revolving Credit Advances to be made at any time shall not exceed the Revolving Loan Commitments at 7 such time. Each Revolving Credit Advance shall be made on notice by Borrower Representative to Agent. Any such notice must be given no later than (1) 11:00 a.m. (New York time) on the Business Day of the proposed Revolving Credit Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m. (New York time) on the date which is 3 Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice (a "Notice of Revolving Credit Advance") must be given in writing (by telecopy or overnight courier) substantially in the form of Exhibit 1.1(a)(i), and shall include the information required in such Exhibit and such other information as may be required by Agent. If any Borrower desires to have the Revolving Credit Advances bear interest by reference to a LIBOR Rate, Borrower Representative must comply with Section 1.5(e). (ii) Except as provided in Section 1.12, each Borrower shall execute and deliver to each Revolving Lender a note to evidence the Revolving Loan Commitment of that Revolving Lender. Each note shall be in the principal amount of the Revolving Loan Commitment of the applicable Revolving Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(a)(ii) (each a "Revolving Note" and, collectively, the "Revolving Notes"). Each Revolving Note shall represent the obligation of the applicable Borrower to pay the amount of the applicable Revolving Lender's Revolving Loan Commitment or, if less, such Revolving Lender's Pro Rata Share of the aggregate unpaid principal amount of all Revolving Credit Advances to such Borrower together with interest thereon as prescribed in Section 1.5. The entire unpaid balance of the aggregate Revolving Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date. (b) [Intentionally Omitted]. (c) Swing Line Facility. (i) Agent shall notify the Swing Line Lender upon Agent's receipt of any Notice of Revolving Credit Advance with respect to an Index Rate Loan. Subject to the terms and conditions hereof, the Swing Line Lender may, in its discretion, make available from time to time until the Commitment Termination Date advances (each, a "Swing Line Advance") in accordance with any such notice. The provisions of this Section 1.1(c) shall not relieve Revolving Lenders of their obligations to make Revolving Credit Advances under Section 1.1(a); provided that if the Swing Line Lender makes a Swing Line Advance pursuant to any such notice, such Swing Line Advance shall be in lieu of any Revolving Credit Advance that otherwise may be made by Revolving Credit Lenders pursuant to such notice. The aggregate amount of Swing Line Advances outstanding shall not exceed at any time the lesser of (A) the Swing Line Commitment and (B) the Maximum Amount, less the outstanding balance of the Revolving Loan at such time ("Swing Line Availability"). Until the Commitment Termination Date, Borrowers may from time to time borrow, repay and reborrow under this Section 1.1(c). Each Swing Line Advance shall be made pursuant to a Notice of Revolving Credit Advance delivered to Agent by Borrower Representative on behalf of the applicable Borrower in accordance with Section 1.1(a). Any such notice must be given no later than 11:00 a.m. (New York time) on the Business Day of the proposed Swing Line Advance. Unless the Swing Line Lender has received at least one Business Day's prior written notice from Requisite Lenders instructing it not to make a Swing Line Advance, the Swing Line Lender shall, notwithstanding 8 the failure of any condition precedent set forth in Sections 2.2, be entitled to fund that Swing Line Advance, and to have each Revolving Lender make Revolving Credit Advances in accordance with Section 1.1(c)(iii) or purchase participating interests in accordance with Section 1.1(c)(iv). Notwithstanding any other provision of this Agreement or the other Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan. Borrowers shall repay the aggregate outstanding principal amount of the Swing Line Loan one (1) Business Day after demand therefor by Agent. (ii) Each Borrower shall execute and deliver to the Swing Line Lender a promissory note to evidence the Swing Line Commitment. Each note shall be in the principal amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(c)(ii) (each a "Swing Line Note" and, collectively, the "Swing Line Notes"). Each Swing Line Note shall represent the obligation of each Borrower to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Swing Line Advances made to such Borrower together with interest thereon as prescribed in Section 1.5. The entire unpaid balance of the Swing Line Loan and all other noncontingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full. (iii) The Swing Line Lender, at any time and from time to time in its sole and absolute discretion may on behalf of any Borrower (and each Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Revolving Lender (including the Swing Line Lender) to make a Revolving Credit Advance to each Borrower (which shall be an Index Rate Loan) in an amount equal to that Revolving Lender's Pro Rata Share of the principal amount of the applicable Borrower's Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the date such notice is given. Unless any of the events described in Sections 8.1(h) or 8.1(i) has occurred (in which event the procedures of Section 1.1(c)(iv) shall apply) and regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Advance are then satisfied, each Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a Revolving Credit Advance on behalf of the Swing Line Lender prior to 3:00 p.m. (New York time) in immediately available funds on the Business Day next succeeding the date that notice is given. The proceeds of those Revolving Credit Advances shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Swing Line Loan of the applicable Borrower. (iv) If, prior to refunding a Swing Line Loan with a Revolving Credit Advance pursuant to Section 1.1(c)(iii), one of the events described in Sections 8.1(h) or 8.1(i) has occurred, then, subject to the provisions of Section 1.1(c)(v) below, each Revolving Lender shall, on the date such Revolving Credit Advance was to have been made for the benefit of the applicable Borrower, purchase from the Swing Line Lender an undivided participation interest in the Swing Line Loan to such Borrower in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon request of Agent, each Revolving Lender shall promptly transfer to the Swing Line Lender, in immediately available funds, the amount of its participation interest. (v) Each Revolving Lender's obligation to make Revolving Credit Advances in accordance with Section 1.1(c)(iii) and to purchase participation interests in accordance with Section 1.1(c)(iv) shall be absolute and unconditional and shall not be affected 9 by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right that such Revolving Lender may have against the Swing Line Lender, any Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of any Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement at any time or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If any Revolving Lender does not make available to Agent or the Swing Line Lender, as applicable, the amount required pursuant to Sections 1.1(c)(iii) or 1.1(c)(iv), as the case may be, the Swing Line Lender shall be entitled to recover such amount on demand from such Revolving Lender, together with interest thereon for each day from the date of non-payment until such amount is paid in full at the Federal Funds Rate for the first two Business Days and at the Index Rate thereafter. (d) Reliance on Notices; Appointment of Borrower Representative. Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Revolving Credit Advance, Notice of Conversion/Continuation or similar notice believed by Agent to be genuine. Agent may assume that each Person executing and delivering any notice in accordance herewith was duly authorized, unless the responsible individual acting thereon for Agent has actual knowledge to the contrary. Each Borrower hereby designates Carmike as its representative and agent on its behalf for the purposes of issuing Notices of Revolving Credit Advances and Notices of Conversion/Continuation, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, requesting Letters of Credit, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents. Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Borrower or Borrowers hereunder to Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower. 1.2 Letters of Credit. Subject to and in accordance with the terms and conditions contained herein and in Annex B, Borrower Representative, on behalf of the applicable Borrower, shall have the right to request, and Revolving Lenders agree to incur, or purchase participations in, Letter of Credit Obligations in respect of each Borrower. 1.3 Prepayments. (a) Voluntary Termination; Reduction. In addition, Borrowers may at any time on at least 10 days' prior written notice by Borrower Representative to Agent terminate in whole or part ratably the unused portions of the respective Commitments of the Lenders; provided that each partial reduction shall be in the aggregate amount of not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and provided that upon such termination, all Loans and other Obligations shall be immediately due and payable in full and all Letter of 10 Credit Obligations shall be cash collateralized or otherwise satisfied in accordance with Annex B. Any such voluntary reduction and any such termination of the Revolving Loan Commitment must be accompanied by the payment of any applicable LIBOR funding breakage costs in accordance with Section 1.13(b). Upon any such termination of the Revolving Loan Commitment, each Borrower's right to request Revolving Credit Advances, or request that Letter of Credit Obligations be incurred on its behalf, or request Swing Line Advances, shall simultaneously be terminated. (b) Mandatory Prepayments. If at any time the aggregate outstanding balances of the Revolving Loan and the Swing Line Loan exceed the Maximum Amount, Borrowers shall immediately repay the aggregate outstanding Revolving Credit Advances to the extent required to eliminate such excess. If any such excess remains after repayment in full of the aggregate outstanding Revolving Credit Advances, Borrowers shall provide cash collateral for the Letter of Credit Obligations in the manner set forth in Annex B to the extent required to eliminate such excess. (i) [Intentionally Omitted]. (ii) (A) Borrowers shall prepay the Loans in an amount equal to all proceeds of any asset disposition of any Credit Party (excluding proceeds of asset dispositions permitted by Section 6.8(a)) or any issuance of Stock, net of (1) commissions and other reasonable and customary transaction costs, fees (including brokers' fees) and expenses properly attributable to such transaction and payable by Credit Parties in connection therewith (in each case, paid to non-Affiliates), (2) transfer taxes, (3) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, (4) an appropriate reserve for income taxes in accordance with GAAP in connection therewith, and (5) with respect to proceeds received in connection with the issuance by any Credit Party of Stock, twenty million dollars ($20,000,000); provided, that, Borrowers shall not be required to make such prepayments to the extent (A) all such proceeds of any asset disposition are reinvested by one or more Credit Parties in a manner acceptable to Agent, in its sole discretion, within 180 days of receipt by any Credit Party of such proceeds (Borrowers acknowledge that no prepayment of obligations under the Post-Confirmation Credit Agreement shall be deemed a reinvestment of such proceeds), and (B) no Default or Event of Default exists from and including the date of such disposition through and including the date of such reinvestment; provided, further, that so long as no Default or Event of Default exists at the time of any asset disposition relating to Real Estate identified as surplus property on Disclosure Schedule 1.3(b), Borrowers shall not be required to apply the proceeds of such disposition, except for those proceeds which exceed, in the aggregate with respect to all such dispositions, the lesser of (I) $18,000,000 or (II) five percent (5%) of the net book value of all plant, property and equipment of the Credit Parties as shown on the audited financial information most recently delivered to Agent pursuant to Annex E (after giving effect to any write-downs subsequent to the reporting period for which such audited financial information was delivered), to any prepayment hereunder. Any prepayment required hereunder shall be applied in accordance with Section 1.3(c). (iii) Upon any sale of more than fifty percent (50%) of the issued and outstanding Stock of any Borrower or any sale of Stock of any Subsidiary of any other Credit Party to any Person other than a Credit Party, no later than the Business Day following the date 11 of receipt of the proceeds thereof, the Borrower or shall prepay the Loans in an amount equal to all such proceeds (other than proceeds received by a Subsidiary from the sale of Stock to any Borrower or to another Subsidiary), net of underwriting discounts and commissions and other reasonable customary transaction costs, fees and expenses paid to non-Affiliates in connection therewith. Any such prepayment shall be applied in accordance with Section 1.3(c). (iv) Until the Termination Date, Borrowers shall prepay the Obligations on the date that is 10 days after the earlier of (A) the date on which Borrowers' annual audited Financial Statements for the immediately preceding Fiscal Year are delivered pursuant to Annex E or (B) the date on which such annual audited Financial Statements were required to be delivered pursuant to Annex E, in an amount equal to the greater of: (1) fifty percent (50%) of the lesser of (x) Excess Cash Flow for the immediately preceding Fiscal Year and (y) the amount by which the Credit Parties' cash on hand on the date specified in clause (A) or (B) above exceeds $15,000,000; and (2) the amount payable on or about such date to the lenders under the Post-Confirmation Credit Agreement pursuant to Section 2.08(b)(ii) of the Post-Confirmation Credit Agreement. Any prepayments from Excess Cash Flow paid pursuant to this clause (iv) shall be accompanied by written notice signed by Borrower Representative's Chief Financial Officer and shall be applied in accordance with Section 1.3(c). (c) Application of Certain Mandatory Prepayments. Any prepayments made by any Borrower pursuant to Sections 1.3(b)(ii), (b)(iii), or (b)(iv) above shall be applied as follows: first, to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; second, to the interest then due and payable on Borrowers' Swing Line Loan; third, to the principal balance of the Swing Line Loan; fourth, to interest then due and payable on Revolving Credit Advances; fifth, to the principal balance of Revolving Credit Advances outstanding until the same has been paid in full; sixth, to any Letter of Credit Obligations to provide cash collateral therefor in the manner set forth in Annex B, until all such Letter of Credit Obligations have been fully cash collateralized in the manner set forth in Annex B. The Revolving Loan Commitment shall be permanently reduced by the amount of any such prepayments pursuant to Sections 1.3(b)(ii) or (b)(iii). (d) Application of Prepayments from Insurance and Condemnation Proceeds. Unless reinvested by one or more Credit Parties in the absence of an Event of Default, in a manner acceptable to Agent in its sole discretion, within 180 days of receipt by any Credit Party of insurance or condemnation proceeds (excluding proceeds relating to Real Estate identified on Disclosure Schedule 1.3(b) as a permitted disposition or the disposition of which is permitted by Section 6.8 (a)), prepayments from insurance or condemnation proceeds in accordance with Section 5.4(c) and the Mortgage(s), respectively, shall be applied, first, to the Swing Line Loans and, second, to the Revolving Credit Advances of the Borrower that incurred such casualties or losses. Neither the Revolving Loan Commitment nor the Swing Line Loan Commitment shall be permanently reduced by the amount of any such prepayments. 12 (e) No Implied Consent. Nothing in this Section 1.3 shall be construed to constitute Agent's or any Lender's consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents. 1.4 Use of Proceeds. Borrowers shall utilize the proceeds of the Revolving Loan and the Swing Line Advances solely for the Refinancing (provided that not more than $20,000,000 of such proceeds, in the aggregate, shall be used for the Refinancing and to pay any related transaction expenses), the making of Restricted Payments with respect to the Post-Confirmation Credit Agreement Documents (not otherwise prohibited hereunder or by the Intercreditor Agreement) and for the financing of Borrowers' ordinary working capital and general corporate needs. Disclosure Schedule (1.4) contains a description of Borrowers' sources and uses of funds as of the Closing Date, including Loans and Letter of Credit Obligations to be made or incurred on that date, and a funds flow memorandum detailing how funds from each source are to be transferred to particular uses. 1.5 Interest and Applicable Margins. (a) Borrowers shall pay interest to Agent, for the ratable benefit of Lenders in arrears on each applicable Interest Payment Date, the Index Rate plus the Applicable Revolver Index Margin per annum or, at the election of Borrower Representative, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, based on the aggregate Revolving Credit Advances outstanding from time to time. The Applicable Margins are as follows: Applicable Revolver Index Margin 1.75% Applicable Revolver LIBOR Margin 3.25% Applicable L/C Margin 3.25%
(b) If any payment on any Loan becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. (c) All computations of Fees calculated on a per annum basis and interest shall be made by Agent on the basis of a 360-day year, in each case for the actual number of days occurring in the period for which such interest and Fees are payable. The Index Rate is a floating rate determined for each day. Each determination by Agent of an interest rate and Fees hereunder shall be final, binding and conclusive on Borrowers, absent manifest error. (d) So long as an Event of Default has occurred and is continuing under Section 8.1(a), (h) or (i) or so long as any Event of Default has occurred and is continuing and at the election of Agent (or upon the written request of Requisite Lenders) confirmed by written notice from Agent to Borrower Representative, the interest rates applicable to the Loans and the Letter of Credit Fees shall be increased by two percentage points (2%) per annum above the rates of interest or the rate of such Fees otherwise applicable hereunder ("Default Rate"), and all 13 outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Interest and Letter of Credit Fees at the Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is cured or waived and shall be payable upon demand. (e) Subject to the conditions precedent set forth in Section 2.2, Borrower Representative shall have the option to (i) request that any Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding Loans (other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section 1.13(b) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the first day after the last day of the LIBOR Period of the Loan to be continued. Any Loan or group of Loans having the same proposed LIBOR Period to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $5,000,000 and integral multiples of $500,000 in excess of such amount. Any such election must be made by 11:00 a.m. (New York time) on the 3rd Business Day prior to (1) the date of any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower Representative wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower Representative in such election. If no election is received with respect to a LIBOR Loan by 11:00 a.m. (New York time) on the 3rd Business Day prior to the end of the LIBOR Period with respect thereto (or if an Event of Default has occurred and is continuing or if the additional conditions precedent set forth in Section 2.2 shall not have been satisfied), that LIBOR Loan shall be converted to an Index Rate Loan at the end of its LIBOR Period. Borrower Representative must make such election by notice to Agent in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a "Notice of Conversion/Continuation") in the form of Exhibit 1.5(e). (f) Notwithstanding anything to the contrary set forth in this Section 1.5, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest that would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in Sections 1.5(a) through (e), unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this paragraph shall again apply. In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount that such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated 14 pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. If, notwithstanding the provisions of this Section 1.5(f), a court of competent jurisdiction shall finally determine that a Lender has received interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent permitted by applicable law, promptly apply such excess in the order specified in Section 1.11 and thereafter shall refund any excess to Borrowers or as a court of competent jurisdiction may otherwise order. 1.6 [Intentionally Omitted]. 1.7 [Intentionally Omitted]. 1.8 Cash Management Systems. On or prior to the Closing Date, Borrowers will establish and will maintain until the Termination Date, the cash management systems described in Annex C (the "Cash Management Systems"). 1.9 Fees. (a) Borrowers shall pay to GE Capital, individually, the Fees specified in that certain commitment letter dated as of December 13, 2001 (and executed on December 14, 2001) among Borrowers and GE Capital (the "GE Capital Letter"), at the times specified for payment therein. (b) As additional compensation for the Revolving Lenders, Borrowers shall pay to Agent, for the ratable benefit of such Lenders, in arrears, on the first Business Day of each month prior to the Commitment Termination Date and on the Commitment Termination Date, a Fee for Borrowers' non-use of available funds in an amount equal to the Applicable Unused Line Fee per annum (calculated on the basis of a 360 day year for actual days elapsed) multiplied by the difference between (x) the Maximum Amount (as it may be reduced from time to time) and (y) the average for the period of the daily closing balances of the aggregate Revolving Loan outstanding during the period for which such Fee is due. (c) [Intentionally Omitted]. (d) Borrowers shall pay to Agent, for the ratable benefit of Revolving Lenders, the Letter of Credit Fee as provided in Annex B. 1.10 Receipt of Payments. Borrowers shall make each payment under this Agreement not later than 2:00 p.m. (New York time) on the day when due in immediately available funds in Dollars to the Collection Account. Payments received after 2:00 p.m. New York time on any Business Day or on a day that is not a Business Day shall be deemed to have been received on the following Business Day. 1.11 Application and Allocation of Payments. (a) So long as no Default or Event of Default has occurred and is continuing, (i) payments shall be applied first, to the Swing Line Loan and, second, to the Revolving Loan; (ii) payments matching specific scheduled payments then due shall be applied to those scheduled 15 payments; (iii) voluntary prepayments shall be applied as determined by Borrower Representative, subject to the provisions of Section 1.3(a); and (iv) mandatory prepayments shall be applied as set forth in Sections 1.3(c) and 1.3(d). All payments and prepayments applied to a particular Loan shall be applied ratably to the portion thereof held by each Lender as determined by its Pro Rata Share. As to any other payment, and as to all payments made when a Default or Event of Default has occurred and is continuing or following the Commitment Termination Date, each Borrower hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of such Borrower, and each Borrower hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all such payments against the Obligations of Borrowers as Agent may deem advisable notwithstanding any previous entry by Agent in the Loan Account or any other books and records. In the absence of a specific determination by Agent with respect thereto, payments shall be applied to amounts then due and payable in the following order: (1) to Fees and Agent's expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on the other Loans, ratably in proportion to the interest accrued as to each Loan; (5) to principal payments on the other Loans and to provide cash collateral for Letter of Credit Obligations in the manner described in Annex B, ratably to the aggregate, combined principal balance of the other Loans and outstanding Letter of Credit Obligations; and (6) to all other Obligations, including expenses of Lenders to the extent reimbursable under Section 11.3. (b) Agent is authorized to, and at its sole election may, charge to the Revolving Loan balance on behalf of each Borrower and cause to be paid all Fees, expenses, Charges, costs (including insurance premiums in accordance with Section 5.4(a)) and interest and principal, other than principal of the Revolving Loan, owing by Borrowers under this Agreement or any of the other Loan Documents if and to the extent Borrowers fail to pay promptly any such amounts as and when due. At Agent's option and to the extent permitted by law, any charges so made shall constitute part of the Revolving Loan hereunder. 1.12 Loan Account and Accounting. Agent shall maintain a loan account (the "Loan Account") on its books to record: all Advances, all payments made by Borrowers, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations. All entries in the Loan Account shall be made in accordance with Agent's customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on Agent's most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agent and Lenders by each Borrower; provided that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower's duty to pay the Obligations. Agent shall render to Borrower Representative a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account as to each Borrower for the immediately preceding month. Unless Borrower Representative notifies Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within 30 days after the date thereof, each and every such accounting shall (absent manifest error) be deemed final, binding and conclusive on Borrowers in all respects as to all matters reflected therein. Only those items expressly objected to in such notice shall be deemed to be disputed by Borrowers. Notwithstanding any provision herein contained to the contrary, any Lender may elect (which election may be revoked) to dispense with the issuance of Notes to that Lender and may rely on the Loan Account as evidence of the amount of Obligations from time to time owing to it. 16 1.13 Indemnity. (a) Each Credit Party that is a signatory hereto shall jointly and severally indemnify and hold harmless each of Agent, Lenders and their respective Affiliates, and each such Person's respective officers, directors, employees, attorneys, agents and representatives (each, an "Indemnified Person"), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) that may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively, "Indemnified Liabilities"); provided, that no such Credit Party shall be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results from that Indemnified Person's gross negligence or willful misconduct, as determined by a court of competent jurisdiction in a final non-appealable judgment or order. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. (b) To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or occurs as a result of acceleration, by operation of law or otherwise); (ii) any Borrower shall refuse to accept any borrowing of, or shall request a termination of, any borrowing of, conversion into or continuation of, LIBOR Loans after Borrower Representative has given notice requesting the same in accordance herewith; or (iii) any Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower Representative has given a notice thereof in accordance herewith, then Borrowers shall jointly and severally indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing. Such indemnification shall include any loss (excluding loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this subsection, each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a maturity comparable to the relevant LIBOR Period; provided, that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. This covenant shall 17 survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. As promptly as practicable under the circumstances, each Lender shall provide Borrower Representative with its written calculation of all amounts payable pursuant to this Section 1.13(b), and such calculation shall be binding on the parties hereto unless Borrower Representative shall object in writing within 10 Business Days of receipt thereof, specifying the basis for such objection in reasonable detail. 1.14 Access. Each Credit Party that is a party hereto shall, during normal business hours, from time to time upon five days' prior notice as frequently as Agent determines to be appropriate: (a) provide Agent and any of its officers, employees and agents access to its properties, facilities, advisors and employees (including officers) of each Credit Party and to the Collateral, (b) permit Agent, and any of its officers, employees and agents, to inspect, audit and make extracts from any Credit Party's books and records, and (c) permit Agent, and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of any Credit Party. If an Event of Default has occurred and is continuing or if access is necessary to preserve or protect the Collateral as determined by Agent, each such Credit Party shall provide such access to Agent at all times and without advance notice. Each Credit Party shall make available to Agent and its counsel, as quickly as is possible under the circumstances, originals or copies of all books and records that Agent may reasonably request. Each Credit Party shall deliver any document or instrument necessary for Agent, as it may from time to time reasonably request, to obtain records from any service bureau or other Person that maintains records for such Credit Party, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Credit Party. Agent will give Lenders at least 5 Business Days' prior written notice of regularly scheduled audits. Representatives of other Lenders may accompany Agent's representatives on regularly scheduled audits at no charge to Borrowers. 1.15 Taxes. (a) Any and all payments by each Borrower hereunder (including any payments made pursuant to Section 12) or under the Notes shall be made, in accordance with this Section 1.15, free and clear of and without deduction for any and all present or future Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder (including any sum payable pursuant to Section 12) or under the Notes, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1.15) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (ii) such Borrower shall make such deductions, and (iii) such Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within 30 days after the date of any payment of Taxes, Borrower Representative shall make available to Agent the original or a certified copy of a receipt evidencing payment thereof. Agent and Lenders shall not be obligated to return or refund any amounts received pursuant to this Section. (b) Each Credit Party that is a signatory hereto shall jointly and severally indemnify and, within 10 days of demand therefor, pay Agent and each Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under 18 this Section 1.15) paid by Agent or such Lender, as appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. (c) Each Lender organized under the laws of a jurisdiction outside the United States (a "Foreign Lender") as to which payments to be made under this Agreement or under the Notes are exempt from United States withholding tax under an applicable statute or tax treaty shall provide to Borrower Representative and Agent a properly completed and executed IRS Form W-8ECI or Form W-8BEN or other applicable form, certificate or document prescribed by the IRS or the United States certifying as to such Foreign Lender's entitlement to such exemption (a "Certificate of Exemption"). Any foreign Person that seeks to become a Lender under this Agreement shall provide a Certificate of Exemption to Borrower Representative and Agent prior to becoming a Lender hereunder. No foreign Person may become a Lender hereunder if such Person fails to deliver a Certificate of Exemption in advance of becoming a Lender. 1.16 Capital Adequacy; Increased Costs; Illegality. (a) If any Lender shall have determined that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law), in each case, adopted after the Closing Date, from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder below that which such Lender would have achieved but for such adoption, then Borrowers shall from time to time upon demand by such Lender (with a copy of such demand to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by such Lender to Borrower Representative and to Agent shall, absent manifest error, be final, conclusive and binding for all purposes. (b) If, due to either (i) the introduction of or any change in any law or regulation (or any change in the interpretation thereof) or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), in each case adopted after the Closing Date, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to Agent), pay to Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower Representative and to Agent by such Lender, shall be conclusive and binding on Borrowers for all purposes, absent manifest error. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrowers pursuant to this Section 1.16(b). 19 (c) Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan at another branch or office of that Lender without, in that Lender's opinion, adversely affecting it or its Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower Representative through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans shall be suspended, and each such Lender shall make an Index Rate Loan as part of any request for LIBOR Loans and (ii) if the LIBOR Loans are then outstanding, each Borrower shall immediately convert each such Loan into an Index Rate Loan. If at any time after a Lender gives notice under this Section 1.16(c), such Lender determines that it may lawfully make LIBOR Loans, such Lender shall promptly give notice of that determination to each Borrower and Agent and Agent shall promptly transmit the notice to each Lender. The Borrowers' right to request and such Lender's obligation, if any, to make LIBOR Loans shall thereupon be restored and (ii) each Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing by such Borrower to such Lender, together with interest accrued thereon, unless Borrower Representative on behalf of such Borrower, within 5 Business Days after the delivery of such notice and demand, converts all LIBOR Loans into Index Rate Loans. (d) Any demand by a Lender for reimbursement pursuant to Sections 1.15(a), 1.16(a) or 1.16(b) must be made within one hundred eighty (180) days of the event which created such right of reimbursement. Within 15 days after receipt by Borrower Representative of written notice and demand from any Lender (an "Affected Lender") for payment of additional amounts or increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b), Borrower Representative may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender. So long as no Default or Event of Default has occurred and is continuing, Borrower Representative, with the consent of Agent, may obtain, at Borrowers' expense, a replacement Lender ("Replacement Lender") for the Affected Lender, which Replacement Lender must be reasonably satisfactory to Agent. If Borrowers obtain a Replacement Lender within 90 days following notice of their intention to do so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender for an amount equal to the principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale; provided, that Borrowers shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment. Notwithstanding the foregoing, Borrowers shall not have the right to obtain a Replacement Lender if the Affected Lender rescinds its demand for increased costs or additional amounts within 15 days following its receipt of Borrowers' notice of intention to replace such Affected Lender. Furthermore, if Borrowers give a notice of intention to replace and do not so replace such Affected Lender within 90 days thereafter, Borrowers' rights under this Section 1.16(d) shall terminate and Borrowers shall promptly pay all increased costs or additional amounts demanded by such Affected Lender pursuant to Sections 1.15(a), 1.16(a) and 1.16(b). 1.17 Single Loan. All Loans to each Borrower and all of the other Obligations of each Borrower arising under this Agreement and the other Loan Documents shall constitute 20 one general obligation of that Borrower secured, until the Termination Date, by all of the Collateral. 2. CONDITIONS PRECEDENT 2.1 Conditions to the Initial Loans. No Lender shall be obligated to make any Loan or incur any Letter of Credit Obligations on the Closing Date, or to take, fulfill, or perform any other action hereunder, until the following conditions have been satisfied or provided for in a manner satisfactory to Agent, or waived in writing by Agent and Lenders: (a) Credit Agreement; Loan Documents. This Agreement or counterparts hereof shall have been duly executed by, and delivered to, Borrowers, each other Credit Party, Agent and Lenders; and Agent shall have received such documents, instruments, agreements and legal opinions as Agent shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including all those listed in the Closing Checklist attached hereto as Annex D, each in form and substance reasonably satisfactory to Agent. (b) Intercreditor Agreement. Agent shall have received a fully executed original of the Intercreditor Agreement satisfactory to Agent. (c) Approvals. Agent shall have received (i) satisfactory evidence that the Credit Parties have obtained all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents and the consummation of the Related Transactions or (ii) an officer's certificate in form and substance reasonably satisfactory to Agent affirming that no such consents or approvals are required. (d) [Intentionally Omitted]. (e) Payment of Fees. Borrowers shall have paid the Fees required to be paid on the Closing Date in the respective amounts specified in Section 1.9 (including the Fees specified in the GE Capital Letter), and shall have reimbursed Agent for all fees, costs and expenses of closing due and payable on the Closing Date. (f) Capital Structure: Other Indebtedness. The capital structure of each Credit Party and the terms and conditions of all Indebtedness of each Credit Party shall be consistent with the terms of the Plan of Reorganization. (g) Due Diligence. Agent shall have completed its business and legal due diligence with results reasonably satisfactory to Agent. (h) Consummation of Related Transactions. Agent shall have received fully executed copies of the Related Transactions Documents, each of which shall be in form and substance reasonably satisfactory to Agent and its counsel. The Related Transactions shall have been consummated in accordance with the terms of the Related Transactions Documents. 21 (i) Confirmation Order. The Confirmation Order has been entered by the Court. 2.2 Further Conditions to Each Loan. Except as otherwise expressly provided herein, no Lender shall be obligated to fund any Advance, convert or continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if, as of the date thereof: (a) any representation or warranty by any Credit Party contained herein or in any other Loan Document is untrue or incorrect as of such date, except to the extent that such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted or expressly contemplated by this Agreement and Agent or Requisite Lenders have determined not to make such Advance, convert or continue any Loan as LIBOR Loan or incur such Letter of Credit Obligation as a result of the fact that such warranty or representation is untrue or incorrect; (b) any event or circumstance having a Material Adverse Effect has occurred since the date hereof as determined by the Requisite Lenders and Agent or Requisite Lenders have determined not to make such Advance, convert or continue any Loan as a LIBOR Loan or incur such Letter of Credit Obligation as a result of the fact that such event or circumstance has occurred; (c) any Default or Event of Default has occurred and is continuing or would result after giving effect to any Advance (or the incurrence of any Letter of Credit Obligation), and Agent or Requisite Lenders shall have determined not to make any Advance, convert or continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation as a result of that Default or Event of Default; or (d) after giving effect to any Advance (or the incurrence of any Letter of Credit Obligations), the outstanding principal amount of the aggregate Revolving Loan would exceed the Maximum Amount, in each case, less the then outstanding principal amount of the Swing Line Loan. The request and acceptance by any Borrower of the proceeds of any Advance, the incurrence of any Letter of Credit Obligations or the conversion or continuation of any Loan into, or as, a LIBOR Loan shall be deemed to constitute, as of the date thereof, (i) a representation and warranty by Borrowers that the conditions in this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrowers of the cross-guaranty provisions set forth in Section 12 and of the granting and continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents. 3. REPRESENTATIONS AND WARRANTIES To induce Lenders to make the Loans and to incur Letter of Credit Obligations, the Credit Parties executing this Agreement, jointly and severally, make the following representations and warranties to Agent and each Lender with respect to all Credit Parties, each and all of which shall survive the execution and delivery of this Agreement. 22 3.1 Corporate Existence; Compliance with Law. Each Credit Party (a) is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation or organization set forth in Disclosure Schedule (3.1); (b) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not result in exposure to losses, damages or liabilities in excess of $50,000; (c) has the requisite power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now, heretofore and proposed to be conducted; (d) subject to specific representations regarding Environmental Laws, has all material licenses, permits, consents or approvals from or by, and has made all material filings with, and has given all material notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (e) is in compliance with its charter and bylaws or partnership or operating agreement, as applicable; and (f) subject to specific representations set forth herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance with all applicable requirements of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 3.2 Executive Offices, Collateral Locations, FEIN. As of the Closing Date, the current location of each Credit Party's chief executive office and the warehouses and premises at which any Collateral is located are set forth in Disclosure Schedule (3.2), and none of any Credit Party's chief executive offices or warehouses has changed within the 6 months preceding the Closing Date. In addition, Disclosure Schedule (3.2) lists the federal employer identification number and state organizational identification number of each Credit Party. 3.3 Corporate Power, Authorization, Enforceable Obligations. The execution, delivery and performance by each Credit Party of the Loan Documents to which it is a party and the creation of all Liens provided for therein: (a) are within such Person's power; (b) have been duly authorized by all necessary corporate, limited liability company or limited partnership action; (c) do not contravene any provision of such Person's charter, bylaws or partnership or operating agreement as applicable; (d) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 2.1(c), all of which will have been duly obtained, made or complied with prior to the Closing Date. Each of the Loan Documents shall be duly executed and delivered by each Credit Party that is a party thereto and each such Loan Document shall constitute a legal, valid and binding obligation of such Credit Party enforceable against it in accordance with its terms. 3.4 Financial Statements and Projections. Except for the Projections, all Financial Statements concerning Borrowers and their respective Subsidiaries that are referred to 23 below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of the Persons covered thereby as at the dates thereof and the results of their operations and cash flows for the periods then ended. (a) Financial Statements. The following Financial Statements attached hereto as Disclosure Schedule (3.4(a)) have been delivered on the date hereof: (i) The audited consolidated balance sheets at December 31, 1999 and 2000 and the related statements of income and cash flows of Borrowers and their Subsidiaries for the Fiscal Years then ended, certified by Ernst & Young, LLP. (ii) The unaudited balance sheet(s) at September 30, 2001 and the related statement(s) of income and cash flows of Borrowers and their Subsidiaries for the three (3) Fiscal Quarters then ended. (b) Pro Forma. The Pro Forma delivered on the date hereof and attached hereto as Disclosure Schedule (3.4(b)) was prepared by Borrowers giving pro forma effect to the Related Transactions, was based on the unaudited consolidated balance sheets of Borrowers and their Subsidiaries dated as of the dates in and Section 4.3(a)(ii) and was prepared in accordance with GAAP, with only such adjustments thereto as would be required in accordance with GAAP. (c) Projections. The Projections delivered on the date hereof and attached hereto as Disclosure Schedule (3.4(c)) have been prepared by Borrowers in light of the past operations of their businesses, but including future payments of known contingent liabilities and reflect projections for the five (5) year period beginning on January 1, 2001 on a year-by-year basis. The Projections are based upon estimates and assumptions stated therein, all of which Borrowers believe to be reasonable and fair in light of current conditions and current facts known to Borrowers and, as of the Closing Date (except to the extent that actual results for the year ending December 31, 2001 varied from those set forth in the Projections), reflect Borrowers' good faith and reasonable estimates of the future financial performance of Borrowers and of the other information projected therein for the period set forth therein. (d) [Intentionally Omitted]. 3.5 Material Adverse Effect. Except as set forth in Disclosure Schedule (3.5), between December 31, 2000 and the Closing Date: (a) no Credit Party has incurred any obligations, contingent or noncontingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments that are not reflected in the Pro Forma and that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (b) no contract, lease or other agreement or instrument has been entered into by any Credit Party or has become binding upon any Credit Party's assets and no law or regulation applicable to any Credit Party has been adopted that has had or could reasonably be expected to have a Material Adverse Effect, and (c) no Credit Party is in default and to the best of Borrowers' knowledge no third party is in default under any material contract, lease or other agreement or instrument, that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Between 24 December 31, 2000 and the Closing Date no event has occurred, that alone or together with other events, could reasonably be expected to have a Material Adverse Effect. 3.6 Ownership of Property; Liens. As of the Closing Date, the real estate ("Real Estate") listed in Disclosure Schedule (3.6) constitutes all of the real estate owned, leased, subleased, or used by any Credit Party. Each Credit Party owns good and marketable fee simple title to all of its owned Real Estate, and valid and marketable leasehold interests in all of its leased Real Estate, all as described on Disclosure Schedule (3.6), and copies of all such leases or a summary of terms thereof reasonably satisfactory to Agent have been delivered to Agent. Disclosure Schedule (3.6) further describes any Real Estate with respect to which any Credit Party is a lessor, sublessor or assignor as of the Closing Date. Each Credit Party also has good and marketable title to, or valid leasehold interests in, all of its personal property and assets. As of the Closing Date, none of the properties and assets of any Credit Party are subject to any Liens other than Permitted Encumbrances and except as set forth on Disclosure Schedule (3.6)) there are no facts, circumstances or conditions known to any Credit Party that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Encumbrances. Each Credit Party has received all deeds, assignments, waivers, consents, nondisturbance and attornment or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Credit Party's right, title and interest in and to all such Real Estate and other properties and assets. Disclosure Schedule (3.6) also describes any purchase options, rights of first refusal or other similar contractual rights pertaining to any Real Estate. As of the Closing Date, no portion of any Credit Party's fee-owned Real Estate has suffered any material damage by fire or other casualty loss that has not heretofore been repaired and restored in all material respects to its original condition or otherwise remedied. As of the Closing Date, all material permits required to have been issued or appropriate to enable the Real Estate to be lawfully occupied and used for all of the purposes for which it is currently occupied and used have been lawfully issued and are in full force and effect. 3.7 Labor Matters. As of the Closing Date (a) no strikes or other material labor disputes against any Credit Party are pending or, to any Credit Party's knowledge, threatened; (b) hours worked by and payment made to employees of each Credit Party comply with the Fair Labor Standards Act and each other federal, state, local or foreign law applicable to such matters; (c) all material payments due from any Credit Party for employee health and welfare insurance have been paid or accrued as a liability on the books of such Credit Party; (d) except as set forth in Disclosure Schedule (3.7), no Credit Party is a party to or bound by any collective bargaining agreement, management agreement, consulting agreement, employment agreement, bonus, restricted stock, stock option, or stock appreciation plan or agreement or any similar plan, agreement or arrangement (and true and complete copies of any agreements described on Disclosure Schedule (3.7) have been delivered to Agent); (e) there is no organizing activity involving any Credit Party pending or, to any Credit Party's knowledge, threatened by any labor union or group of employees; (f) there are no representation proceedings pending or, to any Credit Party's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of any Credit Party has made a pending demand for recognition; and (g) except as set forth in Disclosure Schedule (3.7), there are no material complaints or charges against any Credit Party pending or, to the knowledge of any Credit Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in 25 connection with, or otherwise relating to the employment or termination of employment by any Credit Party of any individual. 3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness. Except as set forth in Disclosure Schedule (3.8), as of the Closing Date, no Credit Party has any Subsidiaries, is engaged in any joint venture or partnership with any other Person, or is an Affiliate of any other Person. All of the issued and outstanding Stock of each Credit Party is owned by each of the Stockholders and in the amounts set forth in Disclosure Schedule (3.8) (except that with respect to the ownership of Carmike, only those Stockholders holding in excess of five percent (5%) of the issued and outstanding Stock of Carmike shall be set forth thereon). Except as set forth in Disclosure Schedule (3.8), there are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which any Credit Party may be required to issue, sell, repurchase or redeem any of its Stock or other equity securities or any Stock or other equity securities of its Subsidiaries. All outstanding Indebtedness and Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for the Obligations) is described in Section 6.3 (including Disclosure Schedule (6.3)). None of the Credit Parties other than Borrowers has any Indebtedness or Guaranteed Indebtedness (except the Obligations) except as set forth on Disclosure Schedule (6.3). 3.9 Government Regulation. No Credit Party is subject to regulation as an "investment company" under, and as such term is defined in, the Investment Company Act of 1940. No Credit Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The making of the Loans by Lenders to Borrowers, the incurrence of the Letter of Credit Obligations on behalf of Borrowers, the application of the proceeds thereof and repayment thereof and the consummation of the Related Transactions will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission. 3.10 Margin Regulations. No Credit Party is engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" as such terms are defined in Regulation U of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as "Margin Stock"). Except for Margin Stock having a value not in excess of $100,000 (which amount represents less than 25% of the value of the assets of the Credit Parties), no Credit Party owns any Margin Stock, and none of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any Margin Stock or for any other purpose that might cause any of the Loans or other extensions of credit under this Agreement to be considered a "purpose credit" within the meaning of Regulations T, U or X of the Federal Reserve Board. No Credit Party will take or permit to be taken any action that might cause any Loan Document to violate any regulation of the Federal Reserve Board. 3.11 Taxes. Except for pre-petition claims provided for in the Plan of Reorganization, all tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by any Credit Party have been filed with the appropriate 26 Governmental Authority and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding Charges or other amounts being contested in accordance with Section 5.2(b). Proper and accurate amounts have been withheld by each Credit Party from its respective employees for all periods in full and complete compliance with all applicable federal, state, local and foreign laws and such withholdings have been timely paid to the respective Governmental Authorities. Disclosure Schedule (3.11) sets forth as of the Closing Date those taxable years for which any Credit Party's tax returns are currently being audited by the IRS or any other applicable Governmental Authority, and any assessments or threatened assessments in connection with such audit, or otherwise currently outstanding. Except as described in Disclosure Schedule (3.11), no Credit Party has executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. None of the Credit Parties and their respective predecessors are liable for any Charges: (a) under any agreement (including any tax sharing agreements) or (b) to each Credit Party's knowledge, as a transferee. As of the Closing Date, no Credit Party has agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which would have a Material Adverse Effect. 3.12 ERISA. (a) Disclosure Schedule (3.12) lists (i) all ERISA Affiliates and (ii) all Plans and separately identifies all Pension Plans, including Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare Plans. Copies of all such listed Plans, together with a copy of the latest IRS/DOL 5500-series form for each such Plan, have been delivered or made available to Agent. Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred that would cause the loss of such qualification or tax-exempt status. Each Plan is in compliance in all material respects with the applicable provisions of ERISA and the IRC, including the timely filing of all reports required under the IRC or ERISA, including the statement required by 29 CFR Section 2520.104-23. Neither any Credit Party nor ERISA Affiliate has failed to make any contribution or pay any amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan. Neither any Credit Party nor ERISA Affiliate has engaged in a "prohibited transaction," as defined in Section 406 of ERISA and Section 4975 of the IRC, in connection with any Plan, that would subject any Credit Party to a material tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC. (b) Except as set forth in Disclosure Schedule (3.12): (i) no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of any Credit Party, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to incur any liability as a result of a complete or partial withdrawal from a Multiemployer Plan; (v) within the last five years no Title IV Plan 27 of any Credit Party or ERISA Affiliate has been terminated, whether or not in a "standard termination" as that term is used in Section 4041(b)(1) of ERISA, nor has any Title IV Plan of any Credit Party or any ERISA Affiliate (determined at any time within the last five years) with Unfunded Pension Liabilities been transferred outside of the "controlled group" (within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate (determined at such time); (vi) except in the case of any ESOP, Stock of all Credit Parties and their ERISA Affiliates makes up, in the aggregate, no more than 10% of fair market value of the assets of any Plan measured on the basis of fair market value as of the latest valuation date of any Plan; and (vii) no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by the Standard & Poor's Corporation or an equivalent rating by another nationally recognized rating agency. 3.13 No Litigation. No action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of any Credit Party, threatened against any Credit Party, before any Governmental Authority or before any arbitrator or panel of arbitrators (collectively, "Litigation"), (a) that challenges any Credit Party's right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) that has a reasonable risk of being determined adversely to any Credit Party and that, if so determined, could be reasonably be expected to have a Material Adverse Effect. Except as set forth on Disclosure Schedule (3.13), as of the Closing Date there is no Litigation pending or, to any Credit Party's knowledge, threatened, that seeks damages in excess of $250,000 or injunctive relief against, or alleges criminal misconduct of, any Credit Party. 3.14 Brokers. Except as set forth in Disclosure Schedule (3.14), no broker or finder brought about the obtaining, making or closing of the Loans or the Related Transactions, and no Credit Party or Affiliate thereof has any obligation to any Person in respect of any finder's or brokerage fees in connection therewith. 3.15 Intellectual Property. As of the Closing Date, each Credit Party owns or has rights to use all Intellectual Property necessary to continue to conduct its business as now or heretofore conducted by it or proposed to be conducted by it, and each Patent, Trademark, Copyright and License is listed, together with application or registration numbers, as applicable, in Disclosure Schedule (3.15). Each Credit Party conducts its business and affairs without infringement of or interference with any Intellectual Property of any other Person in any material respect. Except as set forth in Disclosure Schedule (3.15), no Credit Party is aware of any infringement claim by any other Person with respect to any Intellectual Property owned by it. 3.16 Full Disclosure. No information contained in this Agreement, any of the other Loan Documents, Financial Statements or Collateral Reports or other written reports from time to time delivered hereunder or any written statement furnished by or on behalf of any Credit Party to Agent or any Lender pursuant to the terms of this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances. 28 3.17 Environmental Matters. (a) Except as set forth in Disclosure Schedule (3.17), as of the Closing Date: (i) the Real Estate is free of contamination from any Hazardous Material except for such contamination that would not adversely impact the value or marketability of such Real Estate and that would not result in Environmental Liabilities that could reasonably be expected to exceed $250,000; (ii) no Credit Party has caused or suffered to occur any Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate in violation of Environmental Laws; (iii) the Credit Parties are and have been in compliance with all Environmental Laws, except for such noncompliance that would not result in Environmental Liabilities which could reasonably be expected to exceed $250,000; (iv) the Credit Parties have obtained, and are in compliance with, all Environmental Permits required by Environmental Laws for the operations of their respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Environmental Permits would not result in Environmental Liabilities that could reasonably be expected to exceed $250,000, and all such Environmental Permits are valid, uncontested and in good standing; (v) no Credit Party is involved in operations or knows of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of such Credit Party which could reasonably be expected to exceed $250,000, and no Credit Party has permitted any current or former tenant or occupant of the Real Estate to engage in any such operations; (vi) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous Material that seeks damages, penalties, fines, costs or expenses in excess of $250,000 or injunctive relief against, or that alleges criminal misconduct by, any Credit Party; (vii) no notice has been received by any Credit Party identifying it as a "potentially responsible party" or requesting information under CERCLA or analogous state statutes, and to the knowledge of the Credit Parties, there are no facts, circumstances or conditions that may result in any Credit Party being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (viii) the Credit Parties have provided to Agent copies of all existing environmental reports, reviews and audits and all written information pertaining to actual or potential Environmental Liabilities, in each case relating to any Credit Party. (b) Each Credit Party hereby acknowledges and agrees that Agent (i) is not now, and has not ever been, in control of any of the Real Estate or any Credit Party's affairs, and (ii) does not have the capacity through the provisions of the Loan Documents or otherwise to influence any Credit Party's conduct with respect to the ownership, operation or management of any of its Real Estate or compliance with Environmental Laws or Environmental Permits. 3.18 Insurance. Disclosure Schedule (3.18) lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by each Credit Party. 3.19 Deposit and Disbursement Accounts. Disclosure Schedule (3.19) lists all banks and other financial institutions at which any Credit Party maintains deposit or other accounts as of the Closing Date, including any Disbursement Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor. 29 3.20 Government Contracts. Except as set forth in Disclosure Schedule (3.20), as of the Closing Date, no Credit Party is a party to any contract or agreement with any Governmental Authority and no Credit Party's Accounts are subject to the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any similar state or local law. 3.21 [Intentionally Omitted] 3.22 Agreements and Other Documents. As of the Closing Date, each Credit Party has provided to Agent or its counsel, on behalf of Lenders, accurate and complete copies (or summaries) of all of the following agreements or documents to which it is subject and each of which is listed in Disclosure Schedule (3.22): supply agreements and purchase agreements (excluding Capital Lease obligations) not terminable by such Credit Party within 60 days following written notice issued by such Credit Party and involving transactions in excess of $500,000 per annum; leases of Equipment having a remaining term of one year or longer and requiring aggregate rental and other payments in excess of $100,000 per annum; licenses and permits held by the Credit Parties, the absence of which could be reasonably likely to have a Material Adverse Effect; instruments and documents evidencing any Indebtedness or Guaranteed Indebtedness of such Credit Party and any Lien granted by such Credit Party with respect thereto; and instruments and agreements evidencing the issuance of any equity securities, warrants, rights or options to purchase equity securities of such Credit Party. 3.23 Solvency. As of the Closing Date, both before and after giving effect to (a) the Loans and Letter of Credit Obligations to be made or incurred on the Closing Date or such other date as Loans and Letter of Credit Obligations requested hereunder are made or incurred, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of Borrower Representative; (c) the Refinancing and the consummation of the other Related Transactions; and (d) the payment and accrual of all transaction costs in connection with the foregoing, each Credit Party is and will be Solvent. 3.24 [Intentionally Omitted]. 3.25 [Intentionally Omitted]. 3.26 Other Debt. As of the Closing Date, Borrowers have delivered to Agent a complete and correct copy of the Subordinated Debt Documents and the Post-Confirmation Credit Agreement Documents (including all schedules, exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith). Each Credit Party has the corporate power and authority to incur the Indebtedness evidenced by the Subordinated Debt Documents and the Post-Confirmation Credit Agreement Documents. The subordination provisions of the Subordinated Debt Documents are enforceable against the holders of the Subordinated Debt Documents by Agent and Lenders. All Obligations, including the Letter of Credit Obligations, constitute senior Indebtedness entitled to the benefits of the subordination provisions contained in the Subordinated Debt Documents. Borrowers acknowledge that Agent and each Lender are entering into this Agreement and are extending the Commitments in reliance upon the subordination provisions of the Subordinated Debt Documents, the payment blockage provisions of the Intercreditor Agreement and this Section 3.26. 30 4. FINANCIAL STATEMENTS AND INFORMATION 4.1 Reports and Notices. (a) Each Credit Party executing this Agreement hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent or to Agent and Lenders, as required, the Financial Statements, notices, Projections and other information at the times, to the Persons and in the manner set forth in Annex E. (b) Each Credit Party executing this Agreement hereby agrees that, from and after the Closing Date and until the Termination Date, it shall deliver to Agent or to Agent and Lenders, as required, the various Collateral Reports at the times, to the Persons and in the manner set forth in Annex F. 4.2 Communication with Accountants. Each Credit Party executing this Agreement authorizes Agent to communicate directly with its independent certified public accountants, and authorizes and, at Agent's request, shall instruct those accountants and advisors to disclose and make available to Agent any and all Financial Statements and other supporting financial documents, schedules and information relating to any Credit Party (including copies of any issued management letters) with respect to the business, financial condition and other affairs of any Credit Party. 5. AFFIRMATIVE COVENANTS Each Credit Party executing this Credit Agreement jointly and severally agrees as to all Credit Parties that from and after the date hereof and until the Termination Date: 5.1 Maintenance of Existence and Conduct of Business. Each Credit Party shall: do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and use its reasonable efforts, in the ordinary course and consistent with past practice to preserve its rights and franchises and continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; at all times maintain, preserve and protect all of its assets and properties used or useful in the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices; and transact business only in such corporate and trade names as are set forth in Disclosure Schedule (5.1). 31 5.2 Payment of Charges. (a) Except as provided in the Plan of Reorganization and subject to Section 5.2(b), each Credit Party shall pay and discharge or cause to be paid and discharged promptly all Charges payable by it, including (i) Charges imposed upon it, its income and profits, or any of its property (real, personal or mixed) and all Charges with respect to tax, social security and unemployment withholding with respect to its employees, (ii) lawful claims for labor, materials, supplies and services or otherwise, and (iii) all storage or rental charges payable to warehousemen or bailees, in each case, before any thereof shall become past due. (b) Each Credit Party may in good faith contest, by appropriate proceedings, the validity or amount of any Charges, Taxes or claims described in Section 5.2(a); provided, that (i) adequate reserves with respect to such contest are maintained on the books of such Credit Party, in accordance with GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other than payments to warehousemen and/or bailees) that is superior to any of the Liens securing the Obligations and such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as a result of such contest; (iv) such Credit Party shall promptly pay or discharge such contested Charges, Taxes or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Agent evidence reasonably acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to such Credit Party or the conditions set forth in this Section 5.2(b) are no longer met; and (v) Agent has not advised Borrowers in writing that Agent reasonably believes that nonpayment or nondischarge thereof could have or result in a Material Adverse Effect. 5.3 Books and Records. Each Credit Party shall keep adequate books and records with respect to its business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements attached as Disclosure Schedule (3.4(a)). 5.4 Insurance; Damage to or Destruction of Collateral. (a) The Credit Parties shall, at their sole cost and expense, maintain the policies of insurance described on Disclosure Schedule (3.18) as in effect on the date hereof or otherwise in form and amounts customary for its industry and with insurers reasonably acceptable to Agent. Such policies of insurance (or the loss payable and additional insured endorsements delivered to Agent) shall contain provisions pursuant to which the insurer agrees to provide 30 days prior written notice to Agent in the event of any non-renewal, cancellation or amendment of any such insurance policy. If any Credit Party at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above, or to pay all premiums relating thereto, Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto that Agent deems advisable. Agent shall have no obligation to obtain insurance for any Credit Party or pay any premiums therefor. By doing so, Agent shall not be deemed to have waived any Default or Event of Default arising from any Credit Party's failure to maintain such insurance or pay any premiums therefor. All sums so disbursed, including reasonable attorneys' fees, court costs and 32 other charges related thereto, shall be payable on demand by Borrowers to Agent and shall be additional Obligations hereunder secured by the Collateral. (b) Agent reserves the right at any time upon any change in any Credit Party's risk profile (including any change in the product mix maintained by any Credit Party or any laws affecting the potential liability of such Credit Party) to require additional forms and limits of insurance to, in Agent's opinion, adequately protect both Agent's and Lender's interests in all or any portion of the Collateral and to ensure that each Credit Party is protected by insurance in amounts and with coverage customary for its industry. If reasonably requested by Agent, each Credit Party shall deliver to Agent from time to time a report of a reputable insurance broker, reasonably satisfactory to Agent, with respect to its insurance policies. (c) Each Credit Party shall deliver to Agent, in form and substance reasonably satisfactory to Agent, endorsements to (i) all "All Risk" and business interruption insurance naming Agent, on behalf of itself and Lenders, as loss payee, and (ii) all general liability and other liability policies naming Agent, on behalf of itself and Lenders, as additional insured. Each Credit Party irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent), so long as any Event of Default has occurred and is continuing or the anticipated insurance proceeds exceed $500,000, as such Credit Party's true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under such "All Risk" policies of insurance, endorsing the name of such Credit Party on any check or other item of payment for the proceeds of such "All Risk" policies of insurance and for making all determinations and decisions with respect to such "All Risk" policies of insurance. Agent shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower Representative shall promptly notify Agent of any loss, damage, or destruction to the Collateral in the amount of $500,000 or more, whether or not covered by insurance. After deducting from such proceeds the expenses, if any, incurred by Agent in the collection or handling thereof, Agent may, at its option, apply such proceeds to the reduction of the Obligations in accordance with Section 1.3(d); provided that in the case of insurance proceeds pertaining to any Credit Party that is not a Borrower, such insurance proceeds shall be applied ratably to all of the Loans owing by Borrowers, or permit or require the applicable Credit Party to use such money, or any part thereof, to replace, repair, restore or rebuild the Collateral in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction. Notwithstanding the foregoing, if the casualty giving rise to such insurance proceeds could not reasonably be expected to have a Material Adverse Effect and such insurance proceeds do not exceed $1,000,000 in the aggregate, Agent shall permit the applicable Credit Party to replace, restore, repair or rebuild the property; provided that if such Credit Party shall not have completed or entered into binding agreements to complete such replacement, restoration, repair or rebuilding within 180 days of such casualty, Agent may apply such insurance proceeds to the Obligations in accordance with Section 1.3(d); provided, further, that in the case of insurance proceeds pertaining to any Credit Party that is not a Borrower, such insurance proceeds shall be applied ratably to all of the Loans owing by Borrowers. All insurance proceeds that are to be made available to any Borrower to replace, repair, restore or rebuild the Collateral shall be applied by Agent to reduce the outstanding principal balance of the Revolving Loan of such Borrower (which application shall not result in a permanent reduction of the Revolving Loan Commitment). All insurance proceeds made available to any Credit Party that is not a Borrower to replace, repair, restore or rebuild Collateral 33 shall be deposited in a cash collateral account. Thereafter, such funds shall be made available to Borrowers or such Credit Party to provide funds to replace, repair, restore or rebuild the Collateral as follows: (i) Borrower Representative shall request a Revolving Credit Advance or a release from the cash collateral account be made to Borrowers or such Credit Party in the amount requested to be released; and (ii) so long as the conditions set forth in Section 2.2 have been met, Revolving Lenders shall make such Revolving Credit Advance or Agent shall release funds from the cash collateral account. To the extent not used to replace, repair, restore or rebuild the Collateral, such insurance proceeds shall be applied in accordance with Section 1.3(d); provided that in the case of insurance proceeds pertaining to any Credit Party that is not a Borrower, such insurance proceeds shall be applied ratably to all of the Loans owing by Borrowers. 5.5 Compliance with Laws. Each Credit Party shall comply with all federal, state, local and foreign laws and regulations applicable to it, including those relating to ERISA and labor matters and Environmental Laws and Environmental Permits, except to the extent that the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 5.6 Supplemental Disclosure. From time to time as may be reasonably requested by Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of a Default or an Event of Default), the Credit Parties shall supplement each Disclosure Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or that is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Disclosure Schedule or representation shall amend, supplement or otherwise modify any Disclosure Schedule or representation, or be or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Agent and Requisite Lenders in writing, and (b) no supplement shall be required or permitted as to representations and warranties that relate solely to the Closing Date. 5.7 Intellectual Property. Each Credit Party will conduct its business and affairs without infringement of or interference with any Intellectual Property of any other Person in any material respect. 5.8 Environmental Matters. Each Credit Party shall and shall cause each Person within its control to: (a) conduct its operations and keep and maintain its Real Estate in compliance with all Environmental Laws and Environmental Permits other than noncompliance that could not reasonably be expected to have a Material Adverse Effect; (b) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real Estate or to otherwise comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of its Real Estate; (c) notify Agent promptly after such Credit Party becomes aware of any violation of Environmental Laws or Environmental Permits or any 34 Release on, at, in, under, above, to, from or about any Real Estate that is reasonably likely to result in Environmental Liabilities in excess of $100,000; and (d) promptly forward to Agent a copy of any order, notice, request for information or any communication or report received by such Credit Party in connection with any such violation or Release or any other matter relating to any Environmental Laws or Environmental Permits that could reasonably be expected to result in Environmental Liabilities in excess of $100,000, in each case whether or not the Environmental Protection Agency or any Governmental Authority has taken or threatened any action in connection with any such violation, Release or other matter. If Agent at any time has a reasonable basis to believe that there may be a violation of any Environmental Laws or Environmental Permits by any Credit Party or any Environmental Liability arising thereunder, or a Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, that, in each case, could reasonably be expected to have a Material Adverse Effect, then each Credit Party shall, upon Agent's written request (i) cause the performance of such environmental audits including subsurface sampling of soil and groundwater, and preparation of such environmental reports, at Borrowers' expense, as Agent may from time to time reasonably request, which shall be conducted by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent, and (ii) permit Agent or its representatives to have access to all Real Estate for the purpose of conducting such environmental audits and testing as Agent deems appropriate, including subsurface sampling of soil and groundwater. Borrowers shall reimburse Agent for the costs of such audits and tests and the same will constitute a part of the Obligations secured hereunder. 5.9 Landlords' Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases. For a period of six (6) months from and after the Closing Date, each Credit Party shall reasonable best efforts to obtain, for each leasehold location existing on the Closing Date, a landlord's agreement, mortgagee agreement or bailee letter, as applicable, from the lessor of each leased property, mortgagee of owned property or bailee with respect to any warehouse, processor or converter facility or other location where Collateral is stored or located, which agreement or letter shall contain a waiver or subordination of all Liens or claims that the landlord, mortgagee or bailee may assert against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and substance to Agent; provided that no Credit Party shall be required to pay any consent fees in connection therewith. From and after the Closing Date, no real estate shall be leased by any Credit Party unless and until a reasonably satisfactory landlord agreement shall first have been obtained with respect to such location. Each Credit Party shall timely and fully pay and perform its obligations in all material respects under all leases and other agreements with respect to each leased location or public warehouse where any Collateral is or may be located; provided that no such obligations need be paid which is being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on the appropriate books, but only so long as such obligation does not become a Lien or charge other than a Permitted Encumbrance, and no foreclosure, distraint, sale, or similar proceedings shall have been commenced and remain unstayed for a period thirty (30) days after such commencement. To the extent otherwise permitted hereunder, if any Credit Party proposes to acquire a fee ownership interest in Real Estate after the Closing Date, it shall, concurrently with such acquisition, provide to Agent a mortgage or deed of trust granting Agent a first priority Lien on such Real Estate, together with environmental audits, mortgage title insurance commitment, real estate survey, local counsel opinion(s), and, if required by Agent, supplemental casualty insurance and flood insurance, and such other documents, instruments or 35 agreements reasonably requested by Agent, in each case, in form and substance reasonably satisfactory to Agent. 5.10 [Intentionally Omitted]. 5.11 Further Assurances. Each Credit Party executing this Agreement agrees that it shall and shall cause each other Credit Party to, at such Credit Party's expense and upon written request of Agent, duly execute and deliver, or cause to be duly executed and delivered, to Agent such further instruments and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion of Agent to carry out more effectively the provisions and purposes of this Agreement or any other Loan Document. 6. NEGATIVE COVENANTS Each Credit Party executing this Agreement jointly and severally agrees as to all Credit Parties that from and after the date hereof until the Termination Date: 6.1 Mergers, Subsidiaries, Etc. No Credit Party shall directly or indirectly, by operation of law or otherwise, (a) form or acquire any Subsidiary, or (b) merge with, consolidate with, acquire all or substantially all of the assets or Stock of, or otherwise combine with or acquire, any Person, except that any Credit Party may merge with or dissolve into a Borrower, provided that Borrower Representative shall be the survivor of any such merger to which it is a party. 6.2 Investments; Loans and Advances. Except as otherwise expressly permitted by this Section 6, no Credit Party shall make or permit to exist any investment in, or make, accrue or permit to exist loans or advances of money to, any Person, through the direct or indirect lending of money, holding of securities or otherwise, except that: (a) Borrowers may hold investments comprised of notes payable, or stock or other securities issued by Account Debtors to any Borrower pursuant to negotiated agreements with respect to settlement of such Account Debtor's Accounts in the ordinary course of business, so long as the aggregate amount of such Accounts so settled by Borrowers does not exceed $100,000 and such Accounts are pledged in favor of Agent; (b) each Credit Party may maintain its existing investments in its Subsidiaries as of the Closing Date, provided that, with respect to investments in Wooden Nickel and MSI, Borrowers may make investments in Wooden Nickel and MSI sufficient to meet the working capital requirements of Wooden Nickel and MSI (but not, without the prior written consent of Agent, sufficient to enable either Wooden Nickel or MSI to expand operations beyond those operations existing as of the Closing Date), and (c) so long as Agent has not delivered an Activation Notice, Borrowers may make investments, subject to Control Letters in favor of Agent for the benefit of Lenders or otherwise subject to a perfected security interest in favor of Agent for the benefit of Lenders, in (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency thereof maturing within one year from the date of acquisition thereof, (ii) commercial paper maturing no more than one year from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., (iii) certificates of deposit maturing no more than one year from the date of creation thereof issued by commercial banks incorporated under the laws of the United States of America, each having combined capital, surplus and 36 undivided profits of not less than $300,000,000 and having a senior unsecured rating of "A" or better by a nationally recognized rating agency (an "A Rated Bank"), (iv) time deposits maturing no more than 30 days from the date of creation thereof with A Rated Banks and (v) mutual funds that invest solely in one or more of the investments described in clauses (i) through (iv) above. 6.3 Indebtedness. (a) No Credit Party shall create, incur, assume or permit to exist any Indebtedness, except (without duplication) (i) Indebtedness secured by purchase money security interests and Capital Leases permitted in Section 6.7(c), (ii) the Loans and the other Obligations, (iii) unfunded pension fund and other employee benefit plan obligations and liabilities to the extent they are permitted to remain unfunded under applicable law, (iv) existing Indebtedness described in Disclosure Schedule (6.3) and refinancings thereof or amendments or modifications thereto that do not have the effect of increasing the principal amount thereof or changing the amortization thereof (other than to extend the same) and that are otherwise on terms and conditions no less favorable to any Credit Party, Agent or any Lender, as determined by Agent, than the terms of the Indebtedness being refinanced, amended or modified, (v) Subordinated Debt; (vi) Trade Creditor Debt; (vii) Post-Confirmation Credit Agreement Debt, and (viii) Indebtedness consisting of intercompany loans and advances made by any Credit Party to any other Credit Party; provided, that: (A) at the request of Agent, each Credit Party shall have executed and delivered to each other Credit Party a demand note (collectively, the "Intercompany Notes") to evidence any such intercompany Indebtedness owing at any time by such Credit Party to such other Credit Parties which Intercompany Notes shall be in form and substance reasonably satisfactory to Agent and shall be pledged and delivered to Agent pursuant to the applicable Pledge Agreement or Security Agreement as additional collateral security for the Obligations; (B) each Credit Party shall record all intercompany transactions on its books and records in a manner reasonably satisfactory to Agent; (C) the obligations of each Credit Party under any such Intercompany Notes shall be subordinated to the Obligations of such Credit Party hereunder in a manner reasonably satisfactory to Agent; (D) at the time any such intercompany loan or advance is made by any Credit Party to any other Credit Party and after giving effect thereto, each such Credit Party shall be Solvent; and (E) no Default or Event of Default would occur and be continuing after giving effect to any such proposed intercompany loan. (b) No Credit Party shall, directly or indirectly, voluntarily purchase, redeem, defease or prepay any principal of, premium, if any, interest or other amount payable in respect of any Indebtedness, other than (i) the Obligations; (ii) Indebtedness secured by a Permitted Encumbrance if the asset securing such Indebtedness has been sold or otherwise disposed of in accordance with Sections 6.8(b) or (c); (iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancing thereof in accordance with Section 6.3(a)(iv); and (iv) otherwise permitted in Section 6.14. 6.4 Employee Loans and Affiliate Transactions. (a) Except as otherwise expressly permitted in this Section 6 with respect to Affiliates, no Credit Party shall enter into or be a party to any transaction with any other Credit Party or any Affiliate thereof except in the ordinary course of and pursuant to the reasonable requirements of such Credit Party's business and upon fair and reasonable terms that are no less 37 favorable to such Credit Party than would be obtained in a comparable arm's length transaction with a Person not an Affiliate of such Credit Party. In addition, except for (i) transactions among the Credit Parties and (ii) compensation of officers and directors, if any such transaction or series of related transactions involves payments in excess of $250,000 in the aggregate, the terms of these transactions must be disclosed in advance to Agent and Lenders. All such transactions existing as of the date hereof are described in Disclosure Schedule (6.4(a)). (b) No Credit Party shall enter into any lending or borrowing transaction with any employees of any Credit Party, except (i) loans to its respective employees in the ordinary course of business consistent with past practices for travel and entertainment expenses, relocation costs and similar purposes up to a maximum of $50,000 to any employee and up to a maximum of $100,000 in the aggregate at any one time outstanding or (ii) Indebtedness of employees to any Credit Party in connection with such Credit Party's employee stock ownership plan as disclosed to Agent on or before the Closing Date. (c) No Borrower shall amend the terms of any employment agreement with Michael Patrick in any manner less favorable to such Borrower. 6.5 Capital Structure and Business. No Credit Party shall (a) make any changes in any of its business objectives, purposes or operations that could in any way adversely affect the repayment of the Loans or any of the other Obligations or could reasonably be expected to have or result in a Material Adverse Effect, (b) make any change in its capital structure as described in Disclosure Schedule (3.8), or (c) amend its charter or bylaws in a manner that would adversely affect Agent or Lenders or such Credit Party's duty or ability to repay the Obligations. No Credit Party shall engage in any business other than the businesses currently engaged in by it. 6.6 Guaranteed Indebtedness. No Credit Party shall create, incur, assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement of instruments or items of payment for deposit to the general account of any Credit Party, (b) Subordinated Debt, and (c) for Guaranteed Indebtedness incurred for the benefit of any other Credit Party if the primary obligation is expressly permitted by this Agreement. 6.7 Liens. No Credit Party shall create, incur, assume or permit to exist any Lien on or with respect to its Accounts or any of its other properties or assets (whether now owned or hereafter acquired) except for (a) Permitted Encumbrances; (b) Liens in existence on the date hereof and summarized on Disclosure Schedule (6.7) securing the Indebtedness described on Disclosure Schedule (6.3) and permitted refinancings, extensions and renewals thereof, including extensions or renewals of any such Liens; provided that the principal amount of the Indebtedness so secured is not increased and the Lien does not attach to any other property; (c) Liens created after the date hereof by conditional sale or other title retention agreements (including Capital Leases) or in connection with purchase money Indebtedness with respect to Equipment and Fixtures acquired by any Credit Party in the ordinary course of business, involving the incurrence of an aggregate amount of purchase money Indebtedness and Capital Lease Obligations of not more than $500,000 outstanding at any one time for all such Liens (provided that such Liens attach only to the assets subject to such purchase money debt and such Indebtedness is incurred within 20 days following such purchase and does not exceed 38 100% of the purchase price of the subject assets); (d) Liens described in the Plan of Reorganization provided that such Liens are subordinated to the Liens in favor of Agent; and (e) other Liens securing Indebtedness not exceeding $500,000 in the aggregate at any time outstanding, so long as such Liens do not attach to any Accounts or Inventory. In addition, no Credit Party shall become a party to any agreement, note, indenture or instrument, or take any other action, that would prohibit the creation of a Lien on any of its properties or other assets in favor of Agent, on behalf of itself and Lenders, as additional collateral for the Obligations, except operating leases, Capital Leases or Licenses which prohibit Liens upon the assets that are subject thereto. 6.8 Sale of Stock and Assets. No Credit Party shall sell, transfer, convey, assign or otherwise dispose of any of its properties or other assets, including the Stock of any of its Subsidiaries (whether in a public or a private offering or otherwise) or any of its Accounts, other than (a) the sale of Inventory in the ordinary course of business, (b) the sale, transfer, conveyance or other disposition of the real property identified on Disclosure Schedule 1.3(b), and (c) the sale, transfer, conveyance or other disposition by a Credit Party of Equipment or Fixtures that are obsolete or no longer used or useful in such Credit Party's business and having a sales price not exceeding $500,000 in any single transaction or $2,000,000 in the aggregate in any Fiscal Year. With respect to any disposition of assets or other properties permitted pursuant to clause (b) or clause (c) above, subject to Section 1.3(b), Agent agrees on reasonable prior written notice to release its Lien on such assets or other properties in order to permit the applicable Credit Party to effect such disposition and shall deliver to Borrowers, at Borrowers' expense, appropriate UCC-3 termination statements and other releases as reasonably requested by Borrowers. 6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA Affiliate to, cause or permit to occur an event that could result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event could reasonably be expected to have a Material Adverse Effect. 6.10 Financial Covenants. Borrowers shall not breach or fail to comply with any of the Financial Covenants. 6.11 Hazardous Materials. No Credit Party shall cause or permit a Release of any Hazardous Material on, at, in, under, above, to, from or about any of the Real Estate where such Release would (a) violate in any respect, or form the basis for any Environmental Liabilities under, any Environmental Laws or Environmental Permits or (b) otherwise adversely impact the value or marketability of any of the Real Estate or any of the Collateral, other than such violations or Environmental Liabilities that could not reasonably be expected to have a Material Adverse Effect. 6.12 Sale-Leasebacks. No Credit Party shall engage in any sale-leaseback, synthetic lease or similar transaction involving any of its assets. 39 6.13 Cancellation of Indebtedness. No Credit Party shall cancel any claim or debt owing to it, except for reasonable consideration negotiated on an arm's length basis and in the ordinary course of its business consistent with past practices. 6.14 Restricted Payments. No Credit Party shall make any Restricted Payment, except (a) intercompany loans and advances among Credit Parties to the extent permitted by Section 6.3, (b) dividends and distributions by Subsidiaries of any Borrower paid to such Borrower, (c) employee loans permitted under Section 6.4(b), (d) payments of principal and interest of Intercompany Notes issued in accordance with Section 6.3; (e) payments with respect to the Trade Creditor Debt, (f) any Restricted Payment made in connection with Subordinated Debt not prohibited under the terms of the Subordinated Debt Documents and (g) any Restricted Payment made in connection with Post-Confirmation Credit Agreement Debt not prohibited under the terms of the Intercreditor Agreement. 6.15 Change of Corporate Name or Location; Change of Fiscal Year. No Credit Party shall (a) change its name as it appears in official filings in the state of its incorporation or other organization (b) change its chief executive office, principal place of business, corporate offices or warehouses or locations at which Collateral is held or stored, or the location of its records concerning the Collateral, (c) change the type of entity that it is, (d) change its organization identification number, if any, issued by its state of incorporation or other organization, or (e) change its state of incorporation or organization, in each case without at least 30 days prior written notice to Agent and after Agent's written acknowledgment that any reasonable action requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken, and provided that any such new location shall be in the continental United States. Without limiting the foregoing, no Credit Party shall change its name, identity or corporate structure in any manner that might make any financing or continuation statement filed in connection herewith seriously misleading within the meaning of Section 9-503 of the Code or any other then applicable provision of the Code except upon prior written notice to Agent and Lenders and after Agent's written acknowledgment that any reasonable action requested by Agent in connection therewith, including to continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in any Collateral, has been completed or taken. No Credit Party shall change its Fiscal Year. 6.16 No Impairment of Intercompany Transfers. No Credit Party shall directly or indirectly enter into or become bound by any agreement, instrument, indenture or other obligation (other than this Agreement and the other Loan Documents) that could directly or indirectly restrict, prohibit or require the consent of any Person with respect to the payment of dividends or distributions or the making or repayment of intercompany loans by a Subsidiary of any Borrower to any Borrower or between Borrowers. 6.17 No Speculative Transactions. No Credit Party shall engage in any transaction involving commodity options, futures contracts or similar transactions, except solely to hedge against fluctuations in the prices of commodities owned or purchased by it and the values of foreign currencies receivable or payable by it and interest swaps, caps or collars. 40 6.18 Leases; Real Estate Purchases. No Credit Party shall enter into any operating lease for Real Estate or modify, amend or supplement any existing leases that would result in an increase in excess of ten percent (10%) of the aggregate liabilities of Credit Parties under all existing leases (except for scheduled escalations contained and reflected in the Projections approved by Agent), except for (a) renewals or extensions of operating leases in effect as of the Closing Date or (b) leases with respect to the number of proposed theater locations set forth in the Disclosure Statement. Except as previously disclosed to Agent in writing prior to the Closing Date, no Credit Party shall purchase a fee simple ownership interest in Real Estate. No Credit Party shall enter into any operating lease for equipment if the aggregate of such new operating lease payments in any year subsequent to the Closing Date, for Borrowers and their respective Subsidiaries on a consolidated basis, would exceed $500,000. 6.19 Changes Relating to Debt; Material Contracts. (a) No Credit Party shall change or amend the terms of any Subordinated Debt, Subordinated Debt Document (or any indenture or agreement in connection therewith) if the effect of such amendment is to: (i) increase the interest rate on such Subordinated Debt; (ii) change the dates upon which payments of principal or interest are due on such Subordinated Debt other than to extend such dates; (iii) change any default or event of default other than to delete or make less restrictive any default provision therein, or add any covenant with respect to such Subordinated Debt; (iv) change the redemption or prepayment provisions of such Subordinated Debt other than to extend the dates therefor or to reduce the premiums payable in connection therewith; (v) grant any security or collateral to secure payment of such Subordinated Debt; or (vi) change or amend any other term if such change or amendment would materially increase the obligations of the Credit Party thereunder or confer additional material rights on the holder of such Subordinated Debt in a manner adverse to any Credit Party, Agent or any Lender. (b) No Credit Party shall change or amend the terms of any Post-Confirmation Credit Agreement Document in any manner prohibited under the terms of the Intercreditor Agreement. (c) No Credit Party shall change or amend the terms of any of the following material contracts: (i) the Concession Agreement or (ii) the Coke Agreement. 7. TERM 7.1 Termination. The financing arrangements contemplated hereby shall be in effect until the Commitment Termination Date, and the Loans and all other Obligations shall be automatically due and payable in full on such date. 7.2 Survival of Obligations Upon Termination of Financing Arrangements. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under this Agreement shall in any way affect or impair the obligations, duties and liabilities of the Credit Parties or the rights of Agent and Lenders relating to any unpaid portion of the Loans or any other Obligations, due or not due, liquidated, contingent or unliquidated, or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which 41 is required after the Commitment Termination Date. Except as otherwise expressly provided herein or in any other Loan Document, all undertakings, agreements, covenants, warranties and representations of or binding upon the Credit Parties, and all rights of Agent and each Lender, all as contained in the Loan Documents, shall not terminate or expire, but rather shall survive any such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, that the provisions of Section 11, the payment obligations under Sections 1.15 and 1.16, and the indemnities contained in the Loan Documents shall survive the Termination Date. 8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES 8.1 Events of Default. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an "Event of Default" hereunder: (a) Any Borrower (i) fails to make any payment of principal of the Loans or any of the other Obligations when due and payable, (i) fails to make any payment of interest on, or Fees owing in respect of, the Loans or any of the other Obligations within three (3) Business Days of when due and payable, or (ii) fails to pay or reimburse Agent or Lenders for any expense reimbursable hereunder or under any other Loan Document within 10 days following Agent's demand for such reimbursement or payment of expenses. (b) Any Credit Party fails or neglects to perform, keep or observe any of the provisions of Sections 1.4, 1.8, 5.4(a) or 6, or any of the provisions set forth in Annexes C or G, respectively. (c) Any Borrower fails or neglects to perform, keep or observe any of the provisions of Section 4 or any provisions set forth in Annex E, and the same shall remain unremedied for 5 Business Days or more. (d) Except as set forth in Section 8.1(m) below with respect to Mortgages, any Credit Party fails or neglects to perform, keep or observe any other provision of this Agreement or of any of the other Loan Documents (other than any provision embodied in or covered by any other clause of this Section 8.1) and the same shall remain unremedied for 20 days or more. (e) Except as set forth in Section 8.1(n) and Section 8.1(o) below with respect to the Subordinated Debt Documents or the Post-Confirmation Credit Documents, a default or breach occurs under any other agreement, document or instrument to which any Credit Party is a party that is not cured within any applicable grace period therefor, and such default or breach (i) involves the failure to make any payment when due in respect of any Indebtedness or Guaranteed Indebtedness (other than the Obligations) of any Credit Party in excess of $3,000,000 in the aggregate (including (x) undrawn committed or available amounts and (y) amounts owing to all creditors under any combined or syndicated credit arrangements), or (ii) causes, or permits any holder of such Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or Guaranteed Indebtedness or a portion thereof in excess of $3,000,000 in the aggregate to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, or cash collateral in respect thereof to be demanded, in each case (except with respect to the 42 Subordinated Debt Documents or the Post-Confirmation Credit Documents), regardless of whether such default is waived, or such right is exercised, by such holder or trustee. (f) Any representation or warranty herein or in any Loan Document or in any written statement, report, financial statement or certificate made or delivered to Agent or any Lender by any Credit Party is untrue or incorrect in any material respect as of the date when made or deemed made. (g) Assets of any Credit Party with a fair market value of $250,000 or more are attached, seized, levied upon or subjected to a writ or distress warrant, or come within the possession of any receiver, trustee, custodian or assignee for the benefit of creditors of any Credit Party and such condition continues for 30 days or more. (h) A case or proceeding is commenced against any Credit Party seeking a decree or order in respect of such Credit Party (i) under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Credit Party or for any substantial part of any such Credit Party's assets, or (iii) ordering the winding-up or liquidation of the affairs of such Credit Party, and such case or proceeding shall remain undismissed or unstayed for 60 days or more or a decree or order granting the relief sought in such case or proceeding shall be entered by a court of competent jurisdiction. (i) Any Credit Party (i) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, (ii) consents to or fails to contest in a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Credit Party or for any substantial part of any such Credit Party's assets, (iii) makes an assignment for the benefit of creditors, (iv) takes any action in furtherance of any of the foregoing; or (v) admits in writing its inability to, or is generally unable to, pay its debts as such debts become due. (j) A final judgment or judgments for the payment of money in excess of $500,000 in the aggregate at any time are outstanding against one or more of the Credit Parties and the same are not, within 30 days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay. (k) Any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Credit Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms), or any Lien created under any Loan Document ceases to be a valid and perfected first priority Lien (except as otherwise permitted herein or therein) in any of the Collateral purported to be covered thereby. 43 (l) Any Change of Control occurs. (m) Any default occurs and is continuing under any Mortgage after giving effect to any notice or cure periods set forth therein. (n) Any default or breach by any Borrower occurs and is continuing under any Subordinated Debt Document or the Concession Agreement, the Coke Agreement or any Subordinated Debt Document shall be terminated for any reason. (o) Any Event of Default by any Credit Party occurs and is continuing under any Post-Confirmation Credit Agreement Document or any Post-Confirmation Credit Agreement Document shall be terminated for any reason. 8.2 Remedies. (a) If any Default or Event of Default has occurred and is continuing, Agent may (and at the written request of the Requisite Lenders shall), without notice, suspend the Revolving Loan facility with respect to additional Advances and/or the incurrence of additional Letter of Credit Obligations, whereupon any additional Advances and additional Letter of Credit Obligations shall be made or incurred in Agent's sole discretion (or in the sole discretion of the Requisite Lenders, if such suspension occurred at their direction) so long as such Default or Event of Default is continuing. If any Event of Default has occurred and is continuing, Agent may (and at the written request of Requisite Lenders shall), without notice except as otherwise expressly provided herein, increase the rate of interest applicable to the Loans and the Letter of Credit Fees to the Default Rate. (b) If any Event of Default has occurred and is continuing, Agent may (and at the written request of the Requisite Lenders shall), without notice: (i) terminate the Revolving Loan facility with respect to further Advances or the incurrence of further Letter of Credit Obligations; (ii) declare all or any portion of the Obligations, including all or any portion of any Loan to be forthwith due and payable, and require that the Letter of Credit Obligations be cash collateralized as provided in Annex B, all without presentment, demand, protest or further notice of any kind, all of which are expressly waived by Borrowers and each other Credit Party; or (iii) exercise any rights and remedies provided to Agent under the Loan Documents or at law or equity, including all remedies provided under the Code; provided, that upon the occurrence of an Event of Default specified in Sections 8.1(h) or (i), the Revolving Loan facility shall be immediately terminated and all of the Obligations, including the aggregate Revolving Loan, shall become immediately due and payable without declaration, notice or demand by any Person. 8.3 Waivers by Credit Parties. Except as otherwise provided for in this Agreement or by applicable law, each Credit Party waives (including for purposes of Section 12): (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Agent on which any Credit Party may in any way be liable, and hereby ratifies and confirms whatever Agent may do in this regard, (b) all rights to notice and a hearing prior to Agent's taking possession or control 44 of, or to Agent's replevy, attachment or levy upon, the Collateral or any bond or security that might be required by any court prior to allowing Agent to exercise any of its remedies, and (c) the benefit of all valuation, appraisal, marshaling and exemption laws. 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT 9.1 Assignment and Participations. (a) Subject to the terms of this Section 9.1, any Lender may make an assignment to a Qualified Assignee of, or sell participations in, at any time or times, the Loan Documents, Loans, Letter of Credit Obligations and any Commitment or any portion thereof or interest therein, including any Lender's rights, title, interests, remedies, powers or duties thereunder. Any assignment by a Lender shall: (i) require the consent of Agent (which consent shall not be unreasonably withheld or delayed with respect to a Qualified Assignee) and so long as no Default or Event of Default then exists, the consent of Borrowers (which consent shall not be unreasonably withheld, delayed or conditioned) and the execution of an assignment agreement (an "Assignment Agreement") substantially in the form attached hereto as Exhibit 9.1(a) and otherwise in form and substance reasonably satisfactory to, and acknowledged by, Agent; (ii) be conditioned on such assignee Lender representing to the assigning Lender and Agent that it is purchasing the applicable Loans to be assigned to it for its own account, for investment purposes and not with a view to the distribution thereof; (iii) after giving effect to any such partial assignment, the assignee Lender shall have Commitments in an amount at least equal to $5,000,000 and the assigning Lender shall have retained Commitments in an amount at least equal to $5,000,000; (iv) include a payment to Agent of an assignment fee of $3,500. In the case of an assignment by a Lender under this Section 9.1, the assignee shall have, to the extent of such assignment, the same rights, benefits and obligations as all other Lenders hereunder. The assigning Lender shall be relieved of its obligations hereunder with respect to its Commitments or assigned portion thereof from and after the date of such assignment. Each Borrower hereby acknowledges and agrees that any assignment shall give rise to a direct obligation of Borrowers to the assignee and that the assignee shall be considered to be a "Lender". In all instances, each Lender's liability to make Loans hereunder shall be several and not joint and shall be limited to such Lender's Pro Rata Share of the applicable Commitment. In the event Agent or any Lender assigns or otherwise transfers all or any part of the Obligations, Agent or any such Lender shall so notify Borrowers and Borrowers shall, upon the request of Agent or such Lender, execute new Notes in exchange for the Notes, if any, being assigned. Notwithstanding the foregoing provisions of this Section 9.1(a), any Lender may at any time pledge the Obligations held by it and such Lender's rights under this Agreement and the other Loan Documents to a Federal Reserve Bank, and any Lender that is an investment fund may assign the Obligations held by it and such Lender's rights under this Agreement and the other Loan Documents to another investment fund managed by the same investment advisor; provided, that no such pledge to a Federal Reserve Bank shall release such Lender from such Lender's obligations hereunder or under any other Loan Document. (b) Any participation by a Lender of all or any part of its Commitments shall be made with the understanding that all amounts payable by Borrowers hereunder shall be determined as if that Lender had not sold such participation, and that the holder of any such participation shall not be entitled to require such Lender to take or omit to take any action 45 hereunder except actions directly affecting (i) any reduction in the principal amount of, or interest rate or Fees payable with respect to, any Loan in which such holder participates, (ii) any extension of the scheduled amortization of the principal amount of any Loan in which such holder participates or the final maturity date thereof, and (iii) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents). Solely for purposes of Sections 1.13, 1.15, 1.16 and 9.8, each Borrower acknowledges and agrees that a participation shall give rise to a direct obligation of Borrowers to the participant and the participant shall be considered to be a "Lender;" provided, however, that all amounts payable by the Borrowers to any Participant under Section 1.15 and 1.16 hereof shall be determined as if such Lender from whom such Participant purchased such participation had not sold such participation. Except as set forth in the preceding sentence no Borrower or Credit Party shall have any obligation or duty to any participant. Neither Agent nor any Lender (other than the Lender selling a participation) shall have any duty to any participant and may continue to deal solely with the Lender selling a participation as if no such sale had occurred. (c) Except as expressly provided in this Section 9.1, no Lender shall, as between Borrowers and that Lender, or Agent and that Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of participation in, all or any part of the Loans, the Notes or other Obligations owed to such Lender. (d) Each Credit Party executing this Agreement shall assist, at any time and from time to time, any Lender permitted to sell assignments or participations under this Section 9.1 as reasonably required to enable the assigning or selling Lender to effect any such assignment or participation, including the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and, in the case of a Lender who was a Lender on the Closing Date, if requested by Agent, the preparation of informational materials for, and the participation of management in meetings with, potential assignees or participants. Each Credit Party executing this Agreement shall certify the correctness, completeness and accuracy of all descriptions of the Credit Parties and their respective affairs contained in any selling materials provided by them and all other information provided by them and included in such materials, except that any Projections delivered by Borrowers shall only be certified by Borrowers as having been prepared by Borrowers in compliance with the representations contained in Section 3.4(c). (e) Any Lender may furnish any information concerning Credit Parties in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants); provided that such Lender shall obtain from assignees or participants confidentiality covenants substantially equivalent to those contained in Section 11.8. (f) So long as no Event of Default has occurred and is continuing, no Lender shall assign or sell participations in any portion of its Loans or Commitments to a potential Lender or participant, if, as of the date of the proposed assignment or sale, the assignee Lender or participant would be subject to capital adequacy or similar requirements under Section 1.16(a), increased costs under Section 1.16(b), an inability to fund LIBOR Loans under Section 1.16(c), or withholding taxes in accordance with Section 1.15(a). 46 (g) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender"), may grant to a special purpose funding vehicle (an "SPC"), identified as such in writing by the Granting Lender to Agent and Borrowers, the option to provide to Borrowers all or any part of any Loans that such Granting Lender would otherwise be obligated to make to Borrowers pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan; (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof, (iii) an SPC shall not be entitled to require such Lender to take or omit to take any action hereunder except actions directly affecting (A) any reduction in the principal amount of, or interest rate or Fees payable with respect to, any Loan in which such SPC participates, (B) any extension of the scheduled amortization of the principal amount of any Loan in which such SPC participates or the final maturity date thereof, and (C) any release of all or substantially all of the Collateral (other than in accordance with the terms of this Agreement, the Collateral Documents or the other Loan Documents). The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if such Loan were made by such Granting Lender. No SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). Any SPC may (i) with notice to, but without the prior written consent of, Borrowers and Agent and assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by Borrowers and Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This Section 9.1(g) may not be amended without the prior written consent of each Granting Lender, all or any of whose Loans are being funded by an SPC at the time of such amendment. For the avoidance of doubt, the Granting Lender shall for all purposes, including without limitation, the approval of any amendment or waiver of any provision of any Loan Document or the obligation to pay any amount otherwise payable by the Granting Lender under the Loan Documents, continue to be the Lender of record hereunder. 9.2 Appointment of Agent. GE Capital is hereby appointed to act on behalf of all Lenders as Agent under this Agreement and the other Loan Documents. The provisions of this Section 9.2 are solely for the benefit of Agent and Lenders and no Credit Party nor any other Person shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement and the other Loan Documents, Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Credit Party or any other Person. Agent shall have no duties or responsibilities except for those expressly set forth in this Agreement and the other Loan Documents. The duties of Agent shall be mechanical and administrative in nature and Agent shall not have, or be deemed to have, by reason of this Agreement, any other Loan Document or otherwise a fiduciary relationship in respect of any Lender. Except as expressly set forth in this Agreement and the other Loan Documents, Agent shall not have any duty to disclose, and shall not be liable for failure to disclose, any information relating to any Credit Party or any of their respective Subsidiaries or any Account Debtor that is communicated to or obtained by GE Capital or any of its Affiliates in any capacity. Neither Agent nor any of its Affiliates nor any of their respective officers, directors, employees, agents or 47 representatives shall be liable to any Lender for any action taken or omitted to be taken by it hereunder or under any other Loan Document, or in connection herewith or therewith, except for damages caused by its or their own gross negligence or willful misconduct. If Agent shall request instructions from Requisite Lenders or all affected Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Loan Document, then Agent shall be entitled to refrain from such act or taking such action unless and until Agent shall have received instructions from Requisite Lenders or all affected Lenders, as the case may be, and Agent shall not incur liability to any Person by reason of so refraining. Agent shall be fully justified in failing or refusing to take any action hereunder or under any other Loan Document (a) if such action would, in the opinion of Agent, be contrary to law or the terms of this Agreement or any other Loan Document, (b) if such action would, in the opinion of Agent, expose Agent to Environmental Liabilities or (c) if Agent shall not first be indemnified to its satisfaction against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting hereunder or under any other Loan Document in accordance with the instructions of Requisite Lenders or all affected Lenders, as applicable. 9.3 Agent's Reliance, Etc. Neither Agent nor any of its Affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents, except for damages caused by its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, Agent: (a) may treat the payee of any Note as the holder thereof until Agent receives written notice of the assignment or transfer thereof signed by such payee and in form reasonably satisfactory to Agent; (b) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of any Credit Party or to inspect the Collateral (including the books and records) of any Credit Party; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (f) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telecopy, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. 9.4 GE Capital and Affiliates. With respect to its Commitments hereunder, GE Capital shall have the same rights and powers under this Agreement and the other Loan Documents as any other Lender and may exercise the same as though it were not Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include GE Capital in its individual capacity. GE Capital and its Affiliates may lend money to, invest in, and generally engage in any kind of business with, any Credit Party, any of their Affiliates and any Person who 48 may do business with or own securities of any Credit Party or any such Affiliate, all as if GE Capital were not Agent and without any duty to account therefor to Lenders. GE Capital and its Affiliates may accept fees and other consideration from any Credit Party for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 9.5 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender and based on the Financial Statements referred to in Section 3.4(a) and such other documents and information as it has deemed appropriate, made its own credit and financial analysis of the Credit Parties and its own decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Each Lender acknowledges the potential conflict of interest of each other Lender as a result of Lenders holding disproportionate interests in the Loans, and expressly consents to, and waives any claim based upon, such conflict of interest. 9.6 Indemnification. Lenders agree to indemnify Agent (to the extent not reimbursed by Credit Parties and without limiting the obligations of Borrowers hereunder), ratably according to their respective Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by Agent in connection therewith; provided, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent's gross negligence or willful misconduct. Without limiting the foregoing, each Lender agrees to reimburse Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement and each other Loan Document, to the extent that Agent is not reimbursed for such expenses by Credit Parties. 9.7 Successor Agent. Agent may resign at any time by giving not less than 30 days' prior written notice thereof to Lenders and Borrower Representative. Upon any such resignation, the Requisite Lenders shall have the right to appoint a successor Agent and provided no Default or Event of Default then exists with Borrower's consent, which consent shall not be unreasonably withheld, delayed or conditioned. If no successor Agent shall have been so appointed by the Requisite Lenders and shall have accepted such appointment within 30 days after the resigning Agent's giving notice of resignation, then the resigning Agent may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender, if a Lender is willing to accept such appointment, or otherwise shall be a commercial bank or financial institution or a subsidiary of a commercial bank or financial institution if such commercial bank or financial institution is organized under the laws of the United States of America or of any State thereof and has a combined capital and surplus of at least $300,000,000. If no successor Agent has been appointed pursuant to the foregoing, within 30 days after the date such notice of resignation was 49 given by the resigning Agent, such resignation shall become effective and the Requisite Lenders shall thereafter perform all the duties of Agent hereunder until such time, if any, as the Requisite Lenders appoint a successor Agent as provided above. Any successor Agent appointed by Requisite Lenders hereunder shall be subject to the approval of Borrower Representative, such approval not to be unreasonably withheld or delayed; provided that such approval shall not be required if a Default or an Event of Default has occurred and is continuing. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the earlier of the acceptance of any appointment as Agent hereunder by a successor Agent or the effective date of the resigning Agent's resignation, the resigning Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents, except that any indemnity rights or other rights in favor of such resigning Agent shall continue. After any resigning Agent's resignation hereunder, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was acting as Agent under this Agreement and the other Loan Documents. 9.8 Setoff and Sharing of Payments. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default and subject to Section 9.9(f), each Lender is hereby authorized at any time or from time to time, without notice to any Credit Party or to any other Person, any such notice being hereby expressly waived, to offset and to appropriate and to apply any and all balances held by it at any of its offices for the account of any Borrower or Guarantor (regardless of whether such balances are then due to such Borrower or Guarantor) and any other properties or assets at any time held or owing by that Lender or that holder to or for the credit or for the account of any Borrower or Guarantor against and on account of any of the Obligations that are not paid when due. Any Lender exercising a right of setoff or otherwise receiving any payment on account of the Obligations in excess of its Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders shall sell) such participations in each such other Lender's or holder's Pro Rata Share of the Obligations as would be necessary to cause such Lender to share the amount so offset or otherwise received with each other Lender or holder in accordance with their respective Pro Rata Shares (other than offset rights exercised by any Lender with respect to Sections 1.13, 1.15 or 1.16). Each Credit Party that is a Borrower or Guarantor agrees, to the fullest extent permitted by law, that (a) any Lender may exercise its right to offset with respect to amounts in excess of its Pro Rata Share of the Obligations and may sell participations in such amounts so offset to other Lenders and holders and (b) any Lender so purchasing a participation in the Loans made or other Obligations held by other Lenders or holders may exercise all rights of offset, bankers' lien, counterclaim or similar rights with respect to such participation as fully as if such Lender or holder were a direct holder of the Loans and the other Obligations in the amount of such participation. Notwithstanding the foregoing, if all or any portion of the offset amount or payment otherwise received is thereafter recovered from the Lender that has exercised the right of offset, the purchase of participations by that Lender shall be rescinded and the purchase price restored without interest. 50 9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert. (a) Advances; Payments. (i) Revolving Lenders shall refund or participate in the Swing Line Loan in accordance with clauses (iii) and (iv) of Section 1.1(c). If the Swing Line Lender declines to make a Swing Line Loan or if Swing Line Availability is zero, Agent shall notify Revolving Lenders, promptly after receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00 p.m. (New York time) on the date such Notice of Revolving Advance is received, by telecopy, telephone or other similar form of transmission. Each Revolving Lender shall make the amount of such Lender's Pro Rata Share of such Revolving Credit Advance available to Agent in same day funds by wire transfer to Agent's account as set forth in Annex H not later than 3:00 p.m. (New York time) on the requested funding date, in the case of an Index Rate Loan, and not later than 11:00 a.m. (New York time) on the requested funding date, in the case of a LIBOR Loan. After receipt of such wire transfers (or, in the Agent's sole discretion, before receipt of such wire transfers), subject to the terms hereof, Agent shall make the requested Revolving Credit Advance to the Borrower designated by Borrower Representative in the Notice of Revolving Credit Advance. All payments by each Revolving Lender shall be made without setoff, counterclaim or deduction of any kind. (ii) On the 2nd Business Day of each calendar week or more frequently at Agent's election (each, a "Settlement Date"), Agent shall advise each Lender by telephone, or telecopy of the amount of such Lender's Pro Rata Share of principal, interest and Fees paid for the benefit of Lenders with respect to each applicable Loan. Provided that each Lender has funded all payments or Advances required to be made by it and has purchased all participations required to be purchased by it under this Agreement and the other Loan Documents as of such Settlement Date, Agent shall pay to each Lender such Lender's Pro Rata Share of principal, interest and Fees paid by Borrowers since the previous Settlement Date for the benefit of such Lender on the Loans held by it. To the extent that any Lender (a "Non-Funding Lender") has failed to fund all such payments and Advances or failed to fund the purchase of all such participations, Agent shall be entitled to set off the funding short-fall against that Non-Funding Lender's Pro Rata Share of all payments received from Borrowers. Such payments shall be made by wire transfer to such Lender's account (as specified by such Lender in Annex H or the applicable Assignment Agreement) not later than 1:00 p.m. (Chicago time) 2:00 p.m. (New York time) on the next Business Day following each Settlement Date. (b) Availability of Lender's Pro Rata Share. Agent may assume that each Revolving Lender will make its Pro Rata Share of each Revolving Credit Advance available to Agent on each funding date. If such Pro Rata Share is not, in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled to recover such amount on demand from such Revolving Lender without setoff, counterclaim or deduction of any kind. If any Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly notify Borrower Representative and Borrowers shall immediately repay such amount to Agent. Nothing in this Section 9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Revolving Lender or to relieve any Revolving Lender from its obligation to fulfill its Commitments 51 hereunder or to prejudice any rights that Borrowers may have against any Revolving Lender as a result of any default by such Revolving Lender hereunder. To the extent that Agent advances funds to any Borrower on behalf of any Revolving Lender and is not reimbursed therefor on the same Business Day as such Advance is made, Agent shall be entitled to retain for its account all interest accrued on such Advance until reimbursed by the applicable Revolving Lender. (c) Return of Payments. (i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from Borrowers and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind. (ii) If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Borrower or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Borrower or such other Person, without setoff, counterclaim or deduction of any kind. (d) Non-Funding Lenders. The failure of any Non-Funding Lender to make any Revolving Credit Advance or any payment required by it hereunder or to purchase any participation in any Swing Line Loan to be made or purchased by it on the date specified therefor shall not relieve any other Lender (each such other Revolving Lender, an "Other Lender") of its obligations to make such Advance or purchase such participation on such date, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make an Advance, purchase a participation or make any other payment required hereunder. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a "Lender" or a "Revolving Lender" (or be included in the calculation of "Requisite Lenders" hereunder) for any voting or consent rights under or with respect to any Loan Document. At Borrower Representative's request, Agent or a Person reasonably acceptable to Agent shall have the right with Agent's consent and in Agent's sole discretion (but shall have no obligation) to purchase from any Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at Agent's request, sell and assign to Agent or such Person, all of the Commitments of that Non-Funding Lender for an amount equal to the principal balance of all Loans held by such Non-Funding Lender and all accrued interest and fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement. (e) Dissemination of Information. Agent shall use reasonable efforts to provide Lenders with any notice of Default or Event of Default received by Agent from, or delivered by Agent to, any Credit Party, with notice of any Event of Default of which Agent has actually become aware and with notice of any action taken by Agent following any Event of Default; provided, that Agent shall not be liable to any Lender for any failure to do so, except to 52 the extent that such failure is attributable to Agent's gross negligence or willful misconduct. Lenders acknowledge that Borrowers are required to provide Financial Statements and Collateral Reports to Lenders in accordance with Annexes E and F hereto and agree that Agent shall have no duty to provide the same to Lenders. (f) Actions in Concert. Anything in this Agreement to the contrary notwithstanding, each Lender hereby agrees with each other Lender that no Lender shall take any action to protect or enforce its rights arising out of this Agreement or the Notes (including exercising any rights of setoff) without first obtaining the prior written consent of Agent and Requisite Lenders, it being the intent of Lenders that any such action to protect or enforce rights under this Agreement and the Notes shall be taken in concert and at the direction or with the consent of Agent or Requisite Lenders. 10. SUCCESSORS AND ASSIGNS 10.1 Successors and Assigns. This Agreement and the other Loan Documents shall be binding on and shall inure to the benefit of each Credit Party, Agent, Lenders and their respective successors and assigns (including, in the case of any Credit Party, a debtor-in-possession on behalf of such Credit Party), except as otherwise provided herein or therein. No Credit Party may assign, transfer, hypothecate or otherwise convey its rights, benefits, obligations or duties hereunder or under any of the other Loan Documents without the prior express written consent of Agent and Lenders. Any such purported assignment, transfer, hypothecation or other conveyance by any Credit Party without the prior express written consent of Agent and Lenders shall be void. The terms and provisions of this Agreement are for the purpose of defining the relative rights and obligations of each Credit Party, Agent and Lenders with respect to the transactions contemplated hereby and no Person shall be a third party beneficiary of any of the terms and provisions of this Agreement or any of the other Loan Documents. 11. MISCELLANEOUS 11.1 Complete Agreement; Modification of Agreement. The Loan Documents constitute the complete agreement between the parties with respect to the subject matter thereof and may not be modified, altered or amended except as set forth in Section 11.2. Any letter of interest, commitment letter, or fee letter (other than the GE Capital Letter) or confidentiality agreement, if any, between any Credit Party and Agent or any Lender or any of their respective Affiliates, predating this Agreement and relating to a financing of substantially similar form, purpose or effect shall be superseded by this Agreement. 11.2 Amendments and Waivers. (a) Except for actions expressly permitted to be taken by Agent, no amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, or any consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed by Agent and Borrowers, and by Requisite Lenders or all affected Lenders, as applicable. Except as set forth in clauses (b) and 53 (c) below, all such amendments, modifications, terminations or waivers requiring the consent of any Lenders shall require the written consent of Requisite Lenders. (b) No amendment, modification, termination or waiver of or consent with respect to any provision of this Agreement that waives compliance with the conditions precedent set forth in Section 2.2 to the making of any Loan or the incurrence of any Letter of Credit Obligations shall be effective unless the same shall be in writing and signed by Agent, Requisite Lenders and Borrowers. Notwithstanding anything contained in this Agreement to the contrary, no waiver or consent with respect to any Default or any Event of Default shall be effective for purposes of the conditions precedent to the making of Loans or the incurrence of Letter of Credit Obligations set forth in Section 2.2 unless the same shall be in writing and signed by Agent, Requisite Lenders and Borrowers. (c) No amendment, modification, termination or waiver shall, unless in writing and signed by Agent and each Lender directly affected thereby: (i) increase the principal amount of any Lender's Commitment (which action shall be deemed to directly affect all Lenders; (ii) reduce the principal of, rate of interest on or Fees payable with respect to any Loan or Letter of Credit Obligations of any affected Lender; (iii) extend any scheduled payment date (other than payment dates of mandatory prepayments under Section 1.3(b)(ii)-(iv)) or final maturity date of the principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any payment of interest or Fees as to any affected Lender; (v) release any Guaranty or, except as otherwise permitted herein or in the other Loan Documents, release, or permit any Credit Party to sell or otherwise dispose of, any Collateral with a value exceeding $5,000,000 in the aggregate (which action shall be deemed to directly affect all Lenders); (vi) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans that shall be required for Lenders or any of them to take any action hereunder; and (vii) amend or waive this Section 11.2 or the definition of the term "Requisite Lenders" insofar as such definition affect the substance of this Section 11.2. Furthermore, no amendment, modification, termination or waiver affecting the rights or duties of Agent or L/C Issuer under this Agreement or any other Loan Document shall be effective unless in writing and signed by Agent or L/C Issuer, as the case may be, in addition to Lenders required hereinabove to take such action. Each amendment, modification, termination or waiver shall be effective only in the specific instance and for the specific purpose for which it was given. No amendment, modification, termination or waiver shall be required for Agent to take additional Collateral pursuant to any Loan Document. No amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the holder of that Note. No notice to or demand on any Credit Party in any case shall entitle such Credit Party or any other Credit Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 11.2 shall be binding upon each holder of the Notes at the time outstanding and each future holder of the Notes. (d) If, in connection with any proposed amendment, modification, waiver or termination (a "Proposed Change"): (i) requiring the consent of all affected Lenders, the consent of Requisite Lenders is obtained, but the consent of other Lenders whose consent is required is not 54 obtained (any such Lender whose consent is not obtained as described in this clause (i) and in clauses (ii), (iii) and (iv) below being referred to as a "Non-Consenting Lender"), (ii) requiring the consent of Requisite Lenders, the consent of Lenders holding 51% or more of the aggregate Commitments is obtained, but the consent of Requisite Lenders is not obtained, then, so long as Agent is not a Non-Consenting Lender, at Borrower Representative's request, Agent or a Person reasonably acceptable to Agent shall have the right with Agent's consent and in Agent's sole discretion (but shall have no obligation) to purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall, upon Agent's request, sell and assign to Agent or such Person, all of the Commitments of such Non-Consenting Lenders for an amount equal to the principal balance of all Loans held by the Non-Consenting Lenders and all accrued interest and Fees with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement. (e) Upon payment in full in cash and performance of all of the Obligations (other than indemnification Obligations), termination of the Commitments and a release of all claims against Agent and Lenders, and so long as no suits, actions, proceedings or claims are pending or threatened against any Indemnified Person asserting any damages, losses or liabilities that are Indemnified Liabilities, Agent shall deliver to Borrowers termination statements, mortgage releases and other documents necessary or appropriate to evidence the termination of the Liens securing payment of the Obligations. 11.3 Fees and Expenses. Borrowers shall reimburse (i) Agent for all reasonable fees, costs and expenses (including the reasonable fees and expenses of all of its counsel, advisors, consultants and auditors) and (ii) Agent (and, with respect to clauses (c) and (d) below, all Lenders) for all fees, costs and expenses, including the reasonable fees, costs and expenses of counsel or other advisors (including environmental and management consultants and appraisers), incurred in connection with the negotiation and preparation of the Loan Documents and incurred in connection with: (a) the forwarding to Borrowers or any other Person on behalf of Borrowers by Agent of the proceeds of any Loan (including a wire transfer fee of $25 per wire transfer); (b) any amendment, modification or waiver of, consent with respect to, or termination of, any of the Loan Documents or Related Transactions Documents or advice in connection with the syndication and administration of the Loans made pursuant hereto or its rights hereunder or thereunder; (c) any litigation, contest, dispute, suit, proceeding or action (whether instituted by Agent, any Lender, any Borrower or any other Person and whether as a party, witness or otherwise) in any way relating to the Collateral, any of the Loan Documents or any other agreement to be executed or delivered in connection herewith or therewith, including any litigation, contest, dispute, suit, case, proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against any or all of the Borrowers or any other Person that may be obligated to Agent by virtue of the Loan Documents; including any such litigation, 55 contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the Loans during the pendency of one or more Events of Default; provided that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall be limited to one counsel for all such Lenders; provided, further, that no Person shall be entitled to reimbursement under this clause (c) in respect of any litigation, contest, dispute, suit, proceeding or action to the extent any of the foregoing results from such Person's gross negligence or willful misconduct; (d) any attempt to enforce any remedies of Agent against any or all of the Credit Parties or any other Person that may be obligated to Agent or any Lender by virtue of any of the Loan Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the Loans during the pendency of one or more Events of Default; provided, that in the case of reimbursement of counsel for Lenders other than Agent, such reimbursement shall be limited to one counsel for all such Lenders; (e) any workout or restructuring of the Loans during the pendency of one or more Events of Default; and (f) efforts to (i) monitor the Loans or any of the other Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their respective affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any of the Collateral; including, as to each of clauses (a) through (f) above, all reasonable attorneys' and other professional and service providers' fees arising from such services and other advice, assistance or other representation, including those in connection with any appellate proceedings, and all expenses, costs, charges and other fees incurred by such counsel and others in connection with or relating to any of the events or actions described in this Section 11.3, all of which shall be payable, on demand, by Borrowers to Agent. Without limiting the generality of the foregoing, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services. 11.4 No Waiver. Agent's or any Lender's failure, at any time or times, to require strict performance by the Credit Parties of any provision of this Agreement or any other Loan Document shall not waive, affect or diminish any right of Agent or such Lender thereafter to demand strict compliance and performance herewith or therewith. Any suspension or waiver of an Event of Default shall not suspend, waive or affect any other Event of Default whether the same is prior or subsequent thereto and whether the same or of a different type. Subject to the provisions of Section 11.2, none of the undertakings, agreements, warranties, covenants and representations of any Credit Party contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by any Credit Party shall be deemed to have been suspended or waived by Agent or any Lender, unless such waiver or suspension is by an 56 instrument in writing signed by an officer of or other authorized employee of Agent and the applicable required Lenders, and directed to Borrowers specifying such suspension or waiver. 11.5 Remedies. Agent's and Lenders' rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Agent or any Lender may have under any other agreement, including the other Loan Documents, by operation of law or otherwise. Recourse to the Collateral shall not be required. 11.6 Severability. Wherever possible, each provision of this Agreement and the other Loan Documents shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement or any other Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement or such other Loan Document. 11.7 Conflict of Terms. Except as otherwise provided in this Agreement or any of the other Loan Documents by specific reference to the applicable provisions of this Agreement, if any provision contained in this Agreement conflicts with any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control. 11.8 Confidentiality. Agent and each Lender agree to use commercially reasonable efforts (equivalent to the efforts Agent or such Lender applies to maintaining the confidentiality of its own confidential information) to maintain as confidential all confidential information provided to them by the Credit Parties and designated as confidential following receipt thereof, except that Agent and any Lender may disclose such information (a) to Persons employed or engaged by Agent or such Lender; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 11.8 (and any such bona fide assignee or participant or potential assignee or participant may disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any Governmental Authority or reasonably believed by Agent or such Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as, on the advice of Agent's or such Lender's counsel, is required by law; (e) in connection with the exercise of any right or remedy under the Loan Documents or in connection with any Litigation to which Agent or such Lender is a party; or (f) that ceases to be confidential through no fault of Agent or any Lender. 11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CITY OF ATLANTA, COUNTY OF FULTON SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND 57 LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF FULTON COUNTY; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR 3 DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID. 11.10 Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other parties, or whenever any of the parties desires to give or serve upon any other parties any communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be deemed to have been validly served, given or delivered: (a) upon the earlier of actual receipt and 3 Business Days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by telecopy or other similar facsimile transmission (with such telecopy or facsimile promptly confirmed by delivery of a copy by personal delivery or United States Mail as otherwise provided in this Section 11.10); (c) 1 Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated in Annex I or to such other address (or facsimile number) as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to any Person (other than Borrower Representative or Agent) designated in Annex I to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 58 11.11 Section Titles. The Section titles and Table of Contents contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 11.12 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which shall collectively and separately constitute one agreement. Delivery of a manually executed counterpart hereto by facsimile transmission shall be deemed delivery of an originally executed counterpart hereto. 11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. 11.14 Press Releases and Related Matters. Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of GE Capital or its affiliates or referring to this Agreement, the other Loan Documents or the Related Transactions Documents without at least 2 Business Days' prior notice to GE Capital and without the prior written consent of GE Capital unless (and only to the extent that) such Credit Party or Affiliate is required to do so under law and then, in any event, such Credit Party or Affiliate will consult with GE Capital before issuing such press release or other public disclosure. Each Credit Party consents to the publication by Agent or any Lender of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement. Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements. 11.15 Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Borrower for liquidation or reorganization, should any Borrower become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Borrower's assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be 59 reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. 11.16 Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed this Agreement and, specifically, the provisions of Sections 11.9 and 11.13, with its counsel. 11.17 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. 12. CROSS-GUARANTY 12.1 Cross-Guaranty. Each Borrower hereby agrees that such Borrower is jointly and severally liable for, and hereby absolutely and unconditionally guarantees to Agent and Lenders and their respective successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of, all Obligations owed or hereafter owing to Agent and Lenders by each other Borrower. Each Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, that its obligations under this Section 12 shall not be discharged until payment and performance, in full, of the Obligations has occurred, and that its obligations under this Section 12 shall be absolute and unconditional, irrespective of, and unaffected by, (a) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Loan Document or any other agreement, document or instrument to which any Borrower is or may become a party; (b) the absence of any action to enforce this Agreement (including this Section 12) or any other Loan Document or the waiver or consent by Agent and Lenders with respect to any of the provisions thereof; (c) the existence, value or condition of, or failure to perfect its Lien against, any security for the Obligations or any action, or the absence of any action, by Agent and Lenders in respect thereof (including the release of any such security); (d) the insolvency of any Credit Party; or (e) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor. Each Borrower shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder. 12.2 Waivers by Borrowers. Each Borrower expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel Agent or Lenders to marshall assets or to proceed in respect of the 60 Obligations guaranteed hereunder against any other Credit Party, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Borrower. It is agreed among each Borrower, Agent and Lenders that the foregoing waivers are of the essence of the transaction contemplated by this Agreement and the other Loan Documents and that, but for the provisions of this Section 12 and such waivers, Agent and Lenders would decline to enter into this Agreement. 12.3 Benefit of Guaranty. Each Borrower agrees that the provisions of this Section 12 are for the benefit of Agent and Lenders and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Borrower and Agent or Lenders, the obligations of such other Borrower under the Loan Documents. 12.4 Subordination of Subrogation, Etc. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, and except as set forth in Section 12.7, each Borrower hereby expressly and irrevocably subordinates to payment of the Obligations any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor until the Obligations are indefeasibly paid in full in cash. Each Borrower acknowledges and agrees that this subordination is intended to benefit Agent and Lenders and shall not limit or otherwise affect such Borrower's liability hereunder or the enforceability of this Section 12, and that Agent, Lenders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 12.4. 12.5 Election of Remedies. If Agent or any Lender may, under applicable law, proceed to realize its benefits under any of the Loan Documents giving Agent or such Lender a Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Agent or any Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section 12. If, in the exercise of any of its rights and remedies, Agent or any Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Borrower or any other Person, whether because of any applicable laws pertaining to "election of remedies" or the like, each Borrower hereby consents to such action by Agent or such Lender and waives any claim based upon such action, even if such action by Agent or such Lender shall result in a full or partial loss of any rights of subrogation that each Borrower might otherwise have had but for such action by Agent or such Lender. Any election of remedies that results in the denial or impairment of the right of Agent or any Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower's obligation to pay the full amount of the Obligations. In the event Agent or any Lender shall bid at any foreclosure or trustee's sale or at any private sale permitted by law or the Loan Documents, Agent or such Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Agent or such Lender but shall be credited against the Obligations. The amount of the successful bid at any such sale, whether Agent, Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section 12, notwithstanding that any present or future law or court decision or ruling may have the effect of 61 reducing the amount of any deficiency claim to which Agent or any Lender might otherwise be entitled but for such bidding at any such sale. 12.6 Limitation. Notwithstanding any provision herein contained to the contrary, each Borrower's liability under this Section 12 (which liability is in any event in addition to amounts for which such Borrower is primarily liable under Section 1) shall be limited to an amount not to exceed as of any date of determination the greater of: (a) the net amount of all Loans advanced to any other Borrower under this Agreement and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower; and (b) the amount that could be claimed by Agent and Lenders from such Borrower under this Section 12 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, such Borrower's right of contribution and indemnification from each other Borrower under Section 12.7. 12.7 Contribution with Respect to Guaranty Obligations. (a) To the extent that any Borrower shall make a payment under this Section 12 of all or any of the Obligations (other than Loans made to that Borrower for which it is primarily liable) (a "Guarantor Payment") that, taking into account all other Guarantor Payments then previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payment in the same proportion that such Borrower's "Allocable Amount" (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Borrowers as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Obligations and termination of the Commitments, such Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment. (b) As of any date of determination, the "Allocable Amount" of any Borrower shall be equal to the maximum amount of the claim that could then be recovered from such Borrower under this Section 12 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. (c) This Section 12.7 is intended only to define the relative rights of Borrowers and nothing set forth in this Section 12.7 is intended to or shall impair the obligations of Borrowers, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including Section 12.1. Nothing contained in this Section 12.7 shall limit the liability of any Borrower to pay the Loans made 62 directly or indirectly to that Borrower and accrued interest, Fees and expenses with respect thereto for which such Borrower shall be primarily liable. (d) The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Borrower to which such contribution and indemnification is owing. (e) The rights of the indemnifying Borrowers against other Credit Parties under this Section 12.7 shall be exercisable upon the full and indefeasible payment of the Obligations and the termination of the Commitments. 12.8 Liability Cumulative. The liability of Borrowers under this Section 12 is in addition to and shall be cumulative with all liabilities of each Borrower to Agent and Lenders under this Agreement and the other Loan Documents to which such Borrower is a party or in respect of any Obligations or obligation of the other Borrower, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary. [Remainder of Page Intentionally Left Blank] 63 IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above. BORROWERS CARMIKE CINEMAS, INC., a Delaware corporation By: /s/ Martin A. Durant ------------------------------------- Name: Martin A. Durant ----------------------------------- Title: Senior Vice President ---------------------------------- EASTWYNN THEATRES, INC., an Alabama corporation By: /s/ Martin A. Durant ------------------------------------- Name: Martin A. Durant ----------------------------------- Title: Senior Vice President ---------------------------------- AGENT/LENDERS GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender /s/ Richard W. Varolla ---------------------------------------- By: Richard W. Varolla ------------------------------------- Duly Authorized Signatory 64 The following Persons are signatories to this Agreement in their capacity as Credit Parties and not as Borrowers. WOODEN NICKEL PUB, INC., a Delaware corporation By: /s/ Martin A. Durant ------------------------------------- Name: Martin A. Durant ----------------------------------- Title: Senior Vice President ---------------------------------- MILITARY SERVICES, INC., a Delaware corporation By: /s/ Martin A. Durant ------------------------------------- Name: Martin A. Durant ----------------------------------- Title: Senior Vice President ---------------------------------- 65 ANNEX A (RECITALS) TO CREDIT AGREEMENT DEFINITIONS Capitalized terms used in the Loan Documents shall have (unless otherwise provided elsewhere in the Loan Documents) the following respective meanings, and all references to Sections, Exhibits, Schedules or Annexes in the following definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to the Agreement: "Account Debtor" means any Person who may become obligated to any Credit Party under, with respect to, or on account of, an Account, Chattel Paper or General Intangibles (including a payment intangible). "Accounting Changes" has the meaning ascribed thereto in Annex G. "Accounts" means all "accounts," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including (a) all accounts receivable, other receivables, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, or Instruments), (including any such obligations that may be characterized as an account or contract right under the Code), (b) all of each Credit Party's rights in, to and under all purchase orders or receipts for goods or services, (c) all of each Credit Party's rights to any goods represented by any of the foregoing (including unpaid sellers' rights of rescission, replevin, reclamation and stoppage in transit and rights to returned, reclaimed or repossessed goods), (d) all rights to payment due to any Credit Party for property sold, leased, licensed, assigned or otherwise disposed of, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit card or charge card, or for services rendered or to be rendered by such Credit Party or in connection with any other transaction (whether or not yet earned by performance on the part of such Credit Party), (e) all health care insurance receivables and (f) all collateral security of any kind, given by any Account Debtor or any other Person with respect to any of the foregoing. "Activation Event" and "Activation Notice" have the meanings ascribed thereto in Annex C. "Advance" means any Revolving Credit Advance. "Affiliate" means, with respect to any Person, (a) each Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 5% or more of the Stock having ordinary voting power in the election of directors of such Person, (b) each Person that controls, is controlled by or is under common control with such Person, (c) each of such Person's officers, directors, joint venturers and partners and (d) in the case of Borrowers, the immediate family members, spouses and lineal descendants of individuals who are Affiliates of any Borrower. For the purposes of this definition, "control" of a Person shall mean the A-1 possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise; provided, however, that the term "Affiliate" shall specifically exclude Agent and each Lender. "Agent" means GE Capital in its capacity as Agent for Lenders or its successor appointed pursuant to Section 9.7. "Agreement" means the Credit Agreement by and among Borrowers, the other Credit Parties party thereto, GE Capital, as Agent and Lender and the other Lenders from time to time party thereto, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Appendices" has the meaning ascribed to it in the recitals to the Agreement. "Applicable L/C Margin" means the per annum fee, from time to time in effect, payable with respect to outstanding Letter of Credit Obligations as determined by reference to Section 1.5(a). "Applicable Margins" means collectively the Applicable L/C Margin, Applicable Unused Line Fee, the Applicable Revolver Index Margin, and the Applicable Revolver LIBOR Margin. "Applicable Revolver Index Margin" means the per annum interest rate margin from time to time in effect and payable in addition to the Index Rate applicable to the Revolving Loan, as determined by reference to Section 1.5(a). "Applicable Revolver LIBOR Margin" means the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate applicable to the Revolving Loan, as determined by reference to Section 1.5(a). "Applicable Unused Line Fee" means the per annum fee, from time to time in effect, payable in respect of Borrowers' non-use of committed funds pursuant to Section 1.9(b), which fee is three quarters of one percent (0.75%). "Assignment Agreement" has the meaning ascribed to it in Section 9.1(a). "Bankruptcy Code" means the provisions of Title 11 of the United States Code, 11 U.S.C. ss.ss.101 et seq. "Blocked Accounts" has the meaning ascribed to it in Annex C. "Borrower Representative" means Carmike in its capacity as Borrower Representative pursuant to the provisions of Section 1.1(d). "Borrowers" and "Borrower" have the respective meanings ascribed thereto in the preamble to the Agreement. A-2 "Business Day" means any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York and in reference to LIBOR Loans shall mean any such day that is also a LIBOR Business Day. "Capital Expenditures" means, with respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Indebtedness but excluding Capital Lease Obligations and (b) tenant improvement expenses which are reimbursed or reimbursable to a Credit Party by the landlord) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto that have a useful life of more than one year and that are required to be capitalized under GAAP. "Capital Lease" means, with respect to any Person, any lease of any property (whether real, personal or mixed) by such Person as lessee that, in accordance with GAAP, would be required to be classified and accounted for as a capital lease on a balance sheet of such Person. "Capital Lease Obligation" means, with respect to any Capital Lease of any Person, the amount of the obligation of the lessee thereunder that, in accordance with GAAP, would appear on a balance sheet of such lessee in respect of such Capital Lease. "Carmike" means Carmike Cinemas, Inc., a Delaware corporation. "Carmike Pledge Agreement" means the Pledge Agreement of even date herewith executed by Carmike in favor of Agent, on behalf of itself and Lenders, pledging all Stock of its Subsidiaries and all Intercompany Notes owing to or held by it. "Carmike Stockholders" means those stockholders identified on Disclosure Schedule 3.8 as holders of Stock of Carmike. "Cash Collateral Account" has the meaning ascribed to it Annex B. "Cash Equivalents" has the meaning ascribed to it in Annex B. "Cash Management Systems" has the meaning ascribed to it in Section 1.8. "Change of Control" means any event, transaction or occurrence as a result of which (a) the Carmike Stockholders cease to own and control all of the economic and voting rights associated with ownership of at least thirty percent (30%) of the outstanding capital Stock of all classes of Carmike on a fully diluted basis, or (b) Carmike ceases to own and control all of the economic and voting rights associated with all of the outstanding capital Stock of any of its Subsidiaries. "Charges" means all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable), levies, assessments, charges, liens, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income or gross receipts of any Credit Party, (d) any A-3 Credit Party's ownership or use of any properties or other assets, or (e) any other aspect of any Credit Party's business. "Chattel Paper" means any "chattel paper," as such term is defined in the Code, including electronic chattel paper, now owned or hereafter acquired by any Credit Party. "Closing Date" means January 31, 2002. "Closing Checklist" means the schedule, including all appendices, exhibits or schedules thereto, listing certain documents and information to be delivered in connection with the Agreement, the other Loan Documents and the transactions contemplated thereunder, substantially in the form attached hereto as Annex D. "Code" means the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York; provided, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent's or any Lender's Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of New York, the term "Code" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. "Coke Agreement" means that certain Amended and Restated Agreement by and between the Coca-Cola Company and Carmike dated December 9, 1998 and effective December 10, 1998. "Collateral" means the property covered by the Security Agreement, the Mortgages and the other Collateral Documents and any other property, real or personal, tangible or intangible, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure the Obligations. "Collateral" shall not include Equipment located on, or Real Estate constituting, the six premises subject to the master leasing agreement with Movieplex. "Collateral Documents" means the Security Agreement, the Pledge Agreements, the Guaranties, the Mortgages, the Trademark Security Agreement, and all similar agreements entered into guaranteeing payment of, or granting a Lien upon property as security for payment of, the Obligations. "Collection Account" means that certain account of Agent, account number 502-328-54 in the name of Agent at Bankers Trust Company in New York, New York ABA No. 021 001 033, or such other account as may be specified in writing by Agent as the "Collection Account." A-4 "Commitment Termination Date" means the earliest of (a) October 31, 2006, (b) the date of termination of Lenders' obligations to make Advances and to incur Letter of Credit Obligations or permit existing Loans to remain outstanding pursuant to Section 8.2(b), and (c) the date of indefeasible prepayment in full by Borrowers of the Loans and the cancellation and return (or stand-by guarantee) of all Letters of Credit or the cash collateralization of all Letter of Credit Obligations pursuant to Annex B, and the permanent reduction of all Commitments to zero dollars ($0). "Commitments" means (a) as to any Lender, the aggregate of such Lender's Revolving Loan Commitment (including without duplication the Swing Line Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) as set forth on Annex J to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate of all Lenders' Revolving Loan Commitments (including without duplication the Swing Line Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) which aggregate commitment shall be Fifty Million Dollars ($50,000,000) on the Closing Date, as to each of clauses (a) and (b), as such Commitments may be reduced, amortized or adjusted from time to time in accordance with the Agreement. "Compliance Certificate" has the meaning ascribed to it in Annex E. "Concession Agreement" means that certain Concession Supply Agreement by and between Showtime Concessions Supply Company and Carmike dated May 1, 2000. "Confirmation Order" means the order of the Court entered pursuant to Section 1129 of the Bankruptcy Code, reasonably satisfactory in form and substance to Agent (specifically including, but not limited to, findings of fact with respect to extending credit hereunder in good faith for purposes, among other things, and providing for the effective date of Borrowers' Plan of Reorganization), together with all extensions, modifications and amendment thereto, which, among other matters but not by way of limitation authorizes Borrowers to obtain credit and incur indebtedness. "Contracts" means all "contracts," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, in any event, including all contracts, undertakings, or agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which any Credit Party may now or hereafter have any right, title or interest, including any agreement relating to the terms of payment or the terms of performance of any Account. "Control Letter" means a letter agreement between Agent and (i) the issuer of uncertificated securities with respect to uncertificated securities in the name of any Credit Party, (ii) a securities intermediary with respect to securities, whether certificated or uncertificated, securities entitlements and other financial assets held in a securities account in the name of any Credit Party, or (iii) a futures commission merchant or clearing house, as applicable, with respect to commodity accounts and commodity contracts held by any Credit Party, whereby, among other things, the issuer, securities intermediary or futures commission merchant disclaims any security interest in the applicable financial assets, acknowledges the Lien of Agent, on behalf of A-5 itself and Lenders, on such financial assets, and agrees to follow the instructions or entitlement orders of Agent without further consent by the affected Credit Party. "Copyright License" means any and all rights now owned or hereafter acquired by any Credit Party under any written agreement granting any right to use any Copyright or Copyright registration. "Copyrights" means all of the following now owned or hereafter adopted or acquired by any Credit Party: (a) all copyrights and General Intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including all registrations, recordings and applications in the United States Copyright Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof, and (b) all reissues, extensions or renewals thereof. "Court" means the United States Bankruptcy Court for the District of Delaware. "Credit Parties" means each Borrower and each of Carmike's Subsidiaries. "Default" means any event that, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default. "Default Rate" has the meaning ascribed to it in Section 1.5(d). "Deposit Accounts" means all "deposit accounts" as such term is defined in the Code, now or hereafter held in the name of any Credit Party. "Disbursement Accounts" has the meaning ascribed to it in Annex C. "Disclosure Schedules" means the Schedules prepared by Borrowers and denominated as Disclosure Schedules (1.4) through (6.7) in the Index to the Agreement. "Disclosure Statement" means Credit Parties' Amended Disclosure Statement pursuant to Section 1125 of the Bankruptcy Code filed with the United States Bankruptcy Court for the District of Delaware, dated November 14, 2001. "Documents" means all "documents," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located. "Dollars" or "$" means lawful currency of the United States of America. "Eastwynn" means Eastwynn Theatres, Inc., an Alabama corporation. "EBITDA" means, for any period, the net income of Borrowers and the Credit Parties for such period plus, to the extent such amount was deducted in calculating such net income: (a) interest expense; (b) income or franchise taxes; (c) depreciation expense; (d) amortization expense; (e) all other non-cash items, extraordinary non-cash items, non-recurring A-6 and unusual non-cash items and the cumulative effects of changes in accounting principles reducing such net income, less all non-cash items, extraordinary non-cash items, nonrecurring and unusual non-cash items and the cumulative effects of changes in accounting principles increasing such net income, all as determined on a consolidated basis for Borrowers and the Credit Parties in conformity with generally accepted accounting principles; (f) up front expenses resulting from equity offerings, investments, mergers, recapitalizations, option buyouts, asset dispositions, asset acquisitions, and similar transactions to the extent such expenses reduce net income; (g) restructuring charges incurred in the Chapter 11 case reducing net income; (h) non-cash charges arising from the grant of stock or options to management; and (i) gains or losses on asset dispositions. "Environmental Laws" means all applicable federal, state, local and foreign laws, statutes, ordinances, codes, rules, standards and regulations, now or hereafter in effect, and any applicable judicial or administrative interpretation thereof, including any applicable judicial or administrative order, consent decree, order or judgment, imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation). Environmental Laws include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. ss.ss. 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. ss.ss. 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss.ss. 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. ss.ss. 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. ss.ss. 2601 et seq.); the Clean Air Act (42 U.S.C. ss.ss. 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. ss.ss. 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. ss.ss. 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. ss.ss. 300(f) et seq.), and any and all regulations promulgated thereunder, and all analogous state, local and foreign counterparts or equivalents and any transfer of ownership notification or approval statutes. "Environmental Liabilities" means, with respect to any Person, all liabilities, obligations, responsibilities, response, remedial and removal costs, investigation and feasibility study costs, capital costs, operation and maintenance costs, losses, damages, punitive damages, property damages, natural resource damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants), fines, penalties, sanctions and interest incurred as a result of or related to any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law, including any arising under or related to any Environmental Laws, Environmental Permits, or in connection with any Release or threatened Release or presence of a Hazardous Material whether on, at, in, under, from or about or in the vicinity of any real or personal property. "Environmental Permits" means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws. A-7 "Equipment" means all "equipment," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located and, in any event, including all such Credit Party's machinery and equipment, including processing equipment, conveyors, machine tools, data processing and computer equipment, including embedded software and peripheral equipment and all engineering, processing and manufacturing equipment, office machinery, furniture, materials handling equipment, tools, attachments, accessories, automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other equipment of every kind and nature, trade fixtures and fixtures not forming a part of real property, together with all additions and accessions thereto, replacements therefor, all parts therefor, all substitutes for any of the foregoing, fuel therefor, and all manuals, drawings, instructions, warranties and rights with respect thereto, and all products and proceeds thereof and condemnation awards and insurance proceeds with respect thereto. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any regulations promulgated thereunder. "ERISA Affiliate" means, with respect to any Credit Party, any trade or business (whether or not incorporated) that, together with such Credit Party, are treated as a single employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC. "ERISA Event" means, with respect to any Credit Party or any ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any Credit Party or any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party or ERISA Affiliate to make when due required contributions to a Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i) the loss of a Qualified Plan's qualification or tax exempt status; or (j) the termination of a Plan described in Section 4064 of ERISA. "ESOP" means a Plan that is intended to satisfy the requirements of Section 4975(e)(7) of the IRC. "Event of Default" has the meaning ascribed to it in Section 8.1. "Excess Cash Flow" means, EBITDA in excess of projected EBITDA (as set forth in Exhibit E to the Disclosure Statement) for the prior Fiscal Year. A-8 "Fair Labor Standards Act" means the Fair Labor Standards Act, 29 U.S.C. ss.201 et seq. "Federal Funds Rate" means, for any day, a floating rate equal to the weighted average of the rates on overnight Federal funds transactions among members of the Federal Reserve System, as determined by Agent in its sole discretion, which determination shall be final, binding and conclusive (absent manifest error). "Federal Reserve Board" means the Board of Governors of the Federal Reserve System. "Fees" means any and all fees payable to Agent or any Lender pursuant to the Agreement or any of the other Loan Documents. "Financial Covenants" means the financial covenants set forth in Annex G. "Financial Statements" means the consolidated income statements, statements of cash flows and balance sheets of Borrowers delivered in accordance with Section 3.4 and Annex E. "Fiscal Month" means any of the monthly accounting periods of Borrowers. "Fiscal Quarter" means any of the quarterly accounting periods of Borrowers, ending on March 31, June 30, September 30, and December 31 of each year. "Fiscal Year" means any of the annual accounting periods of Borrowers ending on December 31 of each year. "Fixtures" means all "fixtures" as such term is defined in the Code, now owned or hereafter acquired by any Credit Party. "Funded Debt" means, with respect to any Person, without duplication, all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness that by its terms matures more than one year from, or is directly or indirectly renewable or extendible at such Person's option under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations, current maturities of long-term debt, revolving credit and short-term debt extendible beyond one year at the option of the debtor, and also including, in the case of Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of other Persons. Solely for purposes of calculating the ratio of Maximum Funded Debt to EBITDA required by Section (b) of Annex G, "Funded Debt" shall not include Trade Creditor Debt. "GAAP" means generally accepted accounting principles in the United States of America consistently applied, as such term is further defined in Annex G to the Agreement. A-9 "GE Capital" means General Electric Capital Corporation, a Delaware corporation. "General Intangibles" means all "general intangibles," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including all right, title and interest that such Credit Party may now or hereafter have in or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor and reissues, extensions or renewals thereof, rights in Intellectual Property, interests in partnerships, joint ventures and other business associations, licenses, permits, copyrights, trade secrets, proprietary or confidential information, inventions (whether or not patented or patentable), technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processes, models, drawings, materials and records, goodwill (including the goodwill associated with any Trademark or Trademark License), all rights and claims in or under insurance policies (including insurance for fire, damage, loss and casualty, whether covering personal property, real estate, tangible rights or intangible rights, all liability, life, key man and business interruption insurance, and all unearned premiums), uncertificated securities, choses in action, deposit, checking and other bank accounts, certificates of deposit, rights to receive tax refunds and other payments, rights to receive dividends, distributions, cash, Instruments, certificated securities, mutual fund shares and other property in respect of or in exchange for pledged Stock and Investment Property, rights of indemnification, all books and records, correspondence, credit files, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of such Credit Party or any computer bureau or service company from time to time acting for such Credit Party. "Goods" means all "goods" as defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, including embedded software to the extent included in "goods" as defined in the Code, manufactured homes, standing timber that is cut and removed for sale and unborn young of animals. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranteed Indebtedness" means as to any Person, any obligation of such Person guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease, dividend, or other obligation ("primary obligation") of any other Person (the "primary obligor") in any manner, including any obligation or arrangement of such Person to (a) purchase or repurchase any such primary obligation, (b) advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition of the primary obligor, (c) purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, (d) protect the beneficiary of such arrangement from loss (other than product warranties given in the ordinary course of business) or (e) indemnify the owner of such primary obligation against loss in respect thereof. The amount of any Guaranteed A-10 Indebtedness at any time shall be deemed to be an amount equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation in respect of which such Guaranteed Indebtedness is incurred and (y) the maximum amount for which such Person may be liable pursuant to the terms of the instrument embodying such Guaranteed Indebtedness, or, if not stated or determinable, the maximum reasonably anticipated liability (assuming full performance) in respect thereof. "Guaranties" means, collectively, each Subsidiary Guaranty and any other guaranty executed by any Guarantor in favor of Agent and Lenders in respect of the Obligations. "Guarantors" means each Subsidiary of each Borrower, and each other Person, if any, that executes a guaranty or other similar agreement in favor of Agent, for itself and the ratable benefit of Lenders, in connection with the transactions contemplated by the Agreement and the other Loan Documents. "Hazardous Material" means any substance, material or waste that is regulated by, or forms the basis of liability now or hereafter under, any Environmental Laws, including any material or substance that is (a) defined as a "solid waste," "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," "contaminant," "hazardous constituent," "special waste," "toxic substance" or other similar term or phrase under any Environmental Laws, or (b) petroleum or any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or any radioactive substance. "Hazardous Materials Indemnity Agreement" means that certain Hazardous Materials Indemnity Agreement, dated as of the Closing Date, by Credit Parties in favor of Agent. "Indebtedness" means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property, but excluding obligations to trade creditors incurred in the ordinary course of business that are unsecured and not overdue by more than 6 months unless being contested in good faith, (b) all reimbursement and other obligations with respect to letters of credit, bankers' acceptances and surety bonds, whether or not matured, (c) all obligations evidenced by notes, bonds, debentures or similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations and the present value (discounted at the Index Rate as in effect on the inception date of such lease) of future rental payments under all synthetic leases, (f) all obligations of such Person under commodity purchase or option agreements or other commodity price hedging arrangements, in each case whether contingent or matured, (g) all obligations of such Person under any foreign exchange contract, currency swap agreement, interest rate swap, cap or collar agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates, in each case whether contingent or matured, (h) all Indebtedness referred to above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property or other assets (including A-11 accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (i) the Obligations. "Indemnified Liabilities" has the meaning ascribed to it in Section 1.13. "Indemnified Person" has the meaning ascribed to in Section 1.13. "Index Rate" means, for any day, a floating rate equal to the higher of (i) the rate publicly quoted from time to time by The Wall Street Journal as the "base rate on corporate loans posted by at least 75% of the nation's 30 largest banks" (or, if The Wall Street Journal ceases quoting a base rate of the type described, the highest per annum rate of interest published by the Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate plus 50 basis points per annum. Each change in any interest rate provided for in the Agreement based upon the Index Rate shall take effect at the time of such change in the Index Rate. "Index Rate Loan" means a Loan or portion thereof bearing interest by reference to the Index Rate. "Instruments" means all "instruments," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, and, in any event, including all promissory notes and other evidences of indebtedness, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. "Intellectual Property" means any and all Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with such Trademarks. "Intercompany Notes" has the meaning ascribed to it in Section 6.3. "Intercreditor Agreement" means that certain Intercreditor Agreement dated as of the Closing Date by and among Agent and Second Lien Creditor Agent and agreed to and acknowledged by Credit Parties, in form and substance satisfactory to Agent. "Interest Coverage Ratio" means, with respect to any Person for any period, the ratio of EBITDA to Interest Expense. "Interest Expense" means, with respect to any Person for any fiscal period, interest expense (whether cash or non-cash) of such Person determined in accordance with GAAP for the relevant period ended on such date, including, interest expense with respect to any Funded Debt of such Person and interest expense for the relevant period that has been capitalized on the balance sheet of such Person. "Interest Payment Date" means (a) as to any Index Rate Loan, the first Business Day of each month to occur while such Loan is outstanding, and (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period provided that, in addition to the foregoing, each of (x) the date upon which all of the Commitments have been terminated and the Loans have been paid A-12 in full and (y) the Commitment Termination Date shall be deemed to be an "Interest Payment Date" with respect to any interest that has then accrued under the Agreement. "Inventory" means all "inventory," as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, wherever located, and in any event including inventory, merchandise, goods and other personal property that are held by or on behalf of any Credit Party for sale or lease or are furnished or are to be furnished under a contract of service, or that constitute raw materials, work in process, finished goods, returned goods, or materials or supplies of any kind, nature or description used or consumed or to be used or consumed in such Credit Party's business or in the processing, production, packaging, promotion, delivery or shipping of the same, including all supplies and embedded software. "Investment Property" means all "investment property" as such term is defined in the Code now owned or hereafter acquired by any Credit Party, wherever located, including (i) all securities, whether certificated or uncertificated, including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of any Credit Party, including the rights of any Credit Party to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities intermediary with respect to that account; (iii) all securities accounts of any Credit Party; (iv) all commodity contracts of any Credit Party; and (v) all commodity accounts held by any Credit Party. "IRC" means the Internal Revenue Code of 1986 and all regulations promulgated thereunder. "IRS" means the Internal Revenue Service. "L/C Issuer" has the meaning ascribed to it in Annex B. "L/C Sublimit" has the meaning ascribed to it in Annex B. "Lenders" means GE Capital, the other Lenders named on the signature pages of the Agreement, and, if any such Lender shall decide to assign all or any portion of the Obligations, such term shall include any assignee of such Lender. "Letter of Credit Fee" has the meaning ascribed to it in Annex B. "Letter of Credit Obligations" means all outstanding obligations incurred by Agent and Lenders at the request of Borrower Representative, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance of Letters of Credit by Agent or another L/C Issuer or the purchase of a participation as set forth in Annex B with respect to any Letter of Credit. The amount of such Letter of Credit Obligations shall equal the maximum amount that may be payable at such time or at any time thereafter by Agent or Lenders thereupon or pursuant thereto. A-13 "Letters of Credit" means documentary or standby letters of credit issued for the account of any Borrower by any L/C Issuer, and bankers' acceptances issued by any Borrower, for which Agent and Lenders have incurred Letter of Credit Obligations. "Letter-of-Credit Rights" means "letter-of-credit rights" as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, including rights to payment or performance under a letter of credit, whether or not such Credit Party, as beneficiary, has demanded or is entitled to demand payment or performance. "LIBOR Business Day" means a Business Day on which banks in the City of London are generally open for interbank or foreign exchange transactions. "LIBOR Loan" means a Loan or any portion thereof bearing interest by reference to the LIBOR Rate. "LIBOR Period" means, with respect to any LIBOR Loan, each period commencing on a LIBOR Business Day selected by Borrower Representative pursuant to the Agreement and ending one, two or three months thereafter, as selected by Borrower Representative's irrevocable notice to Agent as set forth in Section 1.5(e); provided, that the foregoing provision relating to LIBOR Periods is subject to the following: (a) if any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such LIBOR Period into another calendar month in which event such LIBOR Period shall end on the immediately preceding LIBOR Business Day; (b) any LIBOR Period that would otherwise extend beyond the Commitment Termination Date shall end 2 LIBOR Business Days prior to such date; (c) any LIBOR Period that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Period) shall end on the last LIBOR Business Day of a calendar month; (d) Borrower Representative shall select LIBOR Periods so as not to require a payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and (e) Borrower Representative shall select LIBOR Periods so that there shall be no more than 5 separate LIBOR Loans in existence at any one time. "LIBOR Rate" means for each LIBOR Period, a rate of interest determined by Agent equal to: (a) the offered rate for deposits in United States Dollars for the applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time), on the second A-14 full LIBOR Business Day next preceding the first day of such LIBOR Period (unless such date is not a Business Day, in which event the next succeeding Business Day will be used); divided by (b) a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on the day that is 2 LIBOR Business Days prior to the beginning of such LIBOR Period (including basic, supplemental, marginal and emergency reserves under any regulations of the Federal Reserve Board or other Governmental Authority having jurisdiction with respect thereto, as now and from time to time in effect) for Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board that are required to be maintained by a member bank of the Federal Reserve System. If such interest rates shall cease to be available from Telerate News Service, the LIBOR Rate shall be determined from such financial reporting service or other information as shall be mutually acceptable to Agent and Borrower Representative. "License" means any Copyright License, Patent License, Trademark License or other license of rights or interests now held or hereafter acquired by any Credit Party. "Lien" means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction). "Litigation" has the meaning ascribed to it in Section 3.13. "Loan Account" has the meaning ascribed to it in Section 1.12. "Loan Documents" means the Agreement, the Notes, the Collateral Documents, the Hazardous Materials Indemnity Agreement, the Master Standby Agreement, the Intercreditor Agreement, and all other agreements, instruments, documents and certificates identified in the Closing Checklist executed and delivered to, or in favor of, Agent or any Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices, and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Credit Party, or any employee of any Credit Party, and delivered to Agent or any Lender in connection with the Agreement or the transactions contemplated thereby. Any reference in the Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to the Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative. "Loans" means the Revolving Loan. "Margin Stock" has the meaning ascribed to in Section 3.10. A-15 "Master Standby Agreement" means the Master Agreement for Standby Letters of Credit among Borrowers, as Applicant(s), and GE Capital, as issuer to be entered into prior to the issuance of any Letters of Credit. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of the Borrowers and Credit Parties taken as a whole, (b) any Borrower's ability to pay any of the Loans or any of the other Obligations in accordance with the terms of the Agreement, (c) the Collateral or Agent's Liens, on behalf of itself and Lenders, on the Collateral or the priority of such Liens, or (d) Agent's or any Lender's rights and remedies under the Agreement and the other Loan Documents. Without limiting the generality of the foregoing, any event or occurrence adverse to one or more Credit Parties which results or could reasonably be expected to result in costs and/or liabilities or loss of revenues, individually or in the aggregate, to any Credit Party in any 30-day period in excess of the $600,000 shall constitute a Material Adverse Effect; provided, however, that the following shall not constitute a Material Adverse Effect: (i) non-cash accounting charges required by GAAP following the effectiveness of the Plan of Reorganization; and (ii) events or occurrences occurring prior to the effective date of the Plan of Reorganization, and claims arising in connection therewith, to the extent that such claims are resolved by the Plan of Reorganization. "Maximum Amount" means, as of any date of determination, an amount equal to the Revolving Loan Commitment of all Lenders as of that date. "Mortgaged Properties" has the meaning assigned to it in Annex D. "Movieplex" means Movieplex Realty Leasing, L.L.C. "Mortgages" means each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments of leases or other real estate security documents delivered by any Credit Party to Agent on behalf of itself and Lenders with respect to the Mortgaged Properties, all in form and substance reasonably satisfactory to Agent. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is making, is obligated to make or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "MSI" means Military Services, Inc., a Delaware corporation. "Net Worth" means, with respect to any Person as of any date of determination, the book value of the assets of such Person, minus the sum of (a) reserves applicable thereto, and (b) all of such Person's liabilities on a consolidated basis (including accrued and deferred income taxes), all as determined in accordance with GAAP. "Non-Funding Lender" has the meaning ascribed to it in Section 9.9(a)(ii). "Notes" means, collectively, the Revolving Notes and the Swing Line Note. A-16 "Notice of Conversion/Continuation" has the meaning ascribed to it in Section 1.5(e). "Notice of Revolving Credit Advance" has the meaning ascribed to it in Section 1.1(a). "Obligations" means all loans, advances, debts, liabilities and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or such amounts are liquidated or determinable) owing by any Credit Party to Agent or any Lender, and all covenants and duties regarding such amounts, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, arising under the Agreement or any of the other Loan Documents. This term includes all principal, interest (including all interest that accrues after the commencement of any case or proceeding by or against any Credit Party in bankruptcy, whether or not allowed in such case or proceeding), Fees, Charges, expenses, attorneys' fees and any other sum chargeable to any Credit Party under the Agreement or any of the other Loan Documents. "Patent License" means rights under any written agreement now owned or hereafter acquired by any Credit Party granting any right with respect to any invention on which a Patent is in existence. "Patents" means all of the following in which any Credit Party now holds or hereafter acquires any interest: (a) all letters patent of the United States or of any other country, all registrations and recordings thereof, and all applications for letters patent of the United States or of any other country, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State, or any other country, and (b) all reissues, continuations, continuations-in-part or extensions thereof. "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plan" means a Plan described in Section 3(2) of ERISA. "Permitted Encumbrances" means the following encumbrances: (a) Liens for taxes or assessments or other governmental Charges not yet due and payable or which are being contested in accordance with Section 5.2(b); (b) pledges or deposits of money securing statutory obligations under workmen's compensation, unemployment insurance, social security or public liability laws or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of money securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which any Credit Party is a party as lessee made in the ordinary course of business; (d) inchoate and unperfected workers', mechanics' or similar liens arising in the ordinary course of business, so long as such Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers', warehousemen's, suppliers' or other similar possessory liens arising in the ordinary course of business, so long as such Liens attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings to which any Credit Party is a party; (g) any attachment or judgment lien not constituting an Event of Default under Section 8.1(j); (h) A-17 zoning restrictions, easements, licenses, or other restrictions on the use of any Real Estate or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such Real Estate; (i) presently existing or hereafter created Liens in favor of Agent, on behalf of Lenders; (j) Liens subordinated in favor of Agent pursuant to the Intercreditor Agreement, (k) Liens in favor of Movieplex with respect to the six properties and Equipment located thereon identified as subject to a master leasing agreement with Movieplex on Disclosure Schedule (3.6)), and (l) Liens expressly permitted under clauses (b) and (c) of Section 6.7 of the Agreement and (m) Liens in favor of Anthony Properties Management, Inc. or any of its Affiliates so long as such Liens attach only to Equipment and Fixtures located at or on those locations leased by one or more Credit Parties from Anthony Properties Management, Inc. or any of its Affiliates and a valid leasehold mortgage for such location has been filed in favor of Agent with respect thereto. "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, other entity or government (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof). "Plan" means, at any time, an "employee benefit plan", as defined in Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to or has maintained, contributed to or had an obligation to contribute to at any time within the past 7 years on behalf of participants who are or were employed by any Credit Party or ERISA Affiliate. "Plan of Reorganization" means that certain Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (as hereinafter defined), including, without limitation, all supplements, exhibits, appendices and schedules thereto, as described in the Confirmation Order. "Pledge Agreements" means, collectively, the Carmike Pledge Agreement and the and any pledge agreements entered into after the Closing Date by any Credit Party (as required by the Agreement or any other Loan Document). "Post-Confirmation Credit Agreement" means that certain Post-Confirmation Credit Agreement (as defined in the Plan of Reorganization) evidencing a term loan facility extended to the Credit Parties by certain lenders party thereto, together with all other loan documents delivered in connection therewith, which agreement, among other things, supersedes and replaces those certain (a) Amended and Restated Credit Agreement among Carmike, the banks party thereto and the Second Lien Creditor Agent, dated as of January 29, 1999 as amended March 31, 2000 and (b) Term Loan Credit Agreement, among Carmike, the banks party thereto, Second Lien Creditor Agent, Goldman Sachs Credit Partners, L.P., as syndication agent and First Union National Bank, as documentation agent , dated as of February 25, 1999, as amended July 13, 1999 and further amended March 31, 2000. A-18 "Post-Confirmation Credit Agreement Debt" means the Indebtedness of Credit Parties evidenced by the Post-Confirmation Credit Agreement Documents. "Post-Confirmation Credit Agreement Documents" means the Post-Confirmation Credit Agreement and all "Loan Documents" as defined therein. "Proceeds" means "proceeds," as such term is defined in the Code, including (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to any Credit Party from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to any Credit Party from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of governmental authority), (c) any claim of any Credit Party against third parties (i) for past, present or future infringement of any Patent or Patent License, or (ii) for past, present or future infringement or dilution of any Copyright, Copyright License, Trademark or Trademark License, or for injury to the goodwill associated with any Trademark or Trademark License, (d) any recoveries by any Credit Party against third parties with respect to any litigation or dispute concerning any of the Collateral including claims arising out of the loss or nonconformity of, interference with the use of, defects in, or infringement of rights in, or damage to, Collateral, (e) all amounts collected on, or distributed on account of, other Collateral, including dividends, interest, distributions and Instruments with respect to Investment Property and pledged Stock, and (f) any and all other amounts, rights to payment or other property acquired upon the sale, lease, license, exchange or other disposition of Collateral and all rights arising out of Collateral. "Pro Forma" means the unaudited consolidated balance sheet, income statement, and cash flows of Borrowers and their Subsidiaries after giving pro forma effect to the Related Transactions. "Projections" means Borrowers' forecasted consolidated: (a) balance sheets; (b) profit and loss statements; (c) cash flow statements; and (d) capitalization statements, all prepared on a Subsidiary by Subsidiary or division-by-division basis, if applicable, and otherwise consistent with the historical Financial Statements of the Borrowers, together with appropriate supporting details and a statement of underlying assumptions. "Pro Rata Share" means with respect to all matters relating to any Lender, (a) with respect to all Loans prior to the Commitment Termination Date, the percentage obtained by dividing (i) the aggregate Commitments of that Lender by (ii) the aggregate Commitments of all Lenders, and (b) with respect to all Loans on and after the Commitment Termination Date, the percentage obtained by dividing (i) the aggregate outstanding principal balance of the Loans held by that Lender, by (ii) the outstanding principal balance of the Loans held by all Lenders. "Qualified Plan" means a Pension Plan that is intended to be tax-qualified under Section 401(a) of the IRC. "Qualified Assignee" means (a) any Lender, any Affiliate of any Lender and, with respect to any Lender that is an investment fund that invests in commercial loans, any other A-19 investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and (b) any commercial bank, savings and loan association or savings bank or any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933) which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which has a rating of BBB or higher from S&P and a rating of Baa2 or higher from Moody's at the date that it becomes a Lender and which, through its applicable lending office, is capable of lending to Borrowers without the imposition of any withholding or similar taxes; provided that no Person determined by Agent to be acting in the capacity of a vulture fund or distressed debt purchaser shall be a Qualified Assignee, and no Person or Affiliate of such Person (other than a Person that is already a Lender) holding Subordinated Debt or Stock issued by any Credit Party, shall be a Qualified Assignee. "Real Estate" has the meaning ascribed to it in Section 3.6. "Refinancing" means the partial repayment by Borrowers of the obligations owing to the Second Lien Creditor Agent and other banks under the Post-Confirmation Credit Agreement on the Closing Date. "Related Transactions" means the initial borrowing under the Revolving Loan on the Closing Date, the Refinancing, the issuance of the Subordinated Debt Documents and the Post-Confirmation Credit Agreement Documents, the payment of all fees, costs and expenses associated with all of the foregoing and the execution and delivery of all of the Related Transactions Documents. "Related Transactions Documents" means the Loan Documents, the Subordinated Debt Documents, the Post-Confirmation Credit Agreement Documents and Intercreditor Agreement, and all other agreements or instruments executed in connection with the Related Transactions. "Release" means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material in the indoor or outdoor environment, including the movement of Hazardous Material through or in the air, soil, surface water, ground water or property. "Requisite Lenders" means Lenders having (a) more than 66 2/3% of the Commitments of all Lenders, or (b) if the Commitments have been terminated, more than 66 2/3% of the aggregate outstanding amount of all Loans. "Restricted Payment" means, with respect to any Credit Party (a) the declaration or payment of any dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets in respect of Stock; (b) any payment on account of the purchase, redemption, defeasance, sinking fund or other retirement of such Credit Party's Stock or any other payment or distribution made in respect thereof, either directly or indirectly; A-20 (c) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to, any Subordinated Debt or Post-Confirmation Credit Agreement Debt; (d) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire Stock of such Credit Party now or hereafter outstanding; (e) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of such Credit Party's Stock or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission; (f) any payment, loan, contribution, or other transfer of funds or other property to any Stockholder of such Credit Party other than payment of compensation in the ordinary course of business to Stockholders who are employees of such Person; and (g) any payment of management fees (or other fees of a similar nature) by such Credit Party to any Stockholder of such Credit Party or its Affiliates. "Retiree Welfare Plan" means, at any time, a Welfare Plan that provides for continuing coverage or benefits for any participant or any beneficiary of a participant after such participant's termination of employment, other than continuation coverage provided pursuant to Section 4980B of the IRC and at the sole expense of the participant or the beneficiary of the participant. "Revolving Credit Advance" has the meaning ascribed to it in Section 1.1(a)(i). "Revolving Lenders" means, as of any date of determination, Lenders having a Revolving Loan Commitment. "Revolving Loan" means, at any time, the sum of (i) the aggregate amount of Revolving Credit Advances outstanding to Borrower plus (ii) the aggregate Letter of Credit Obligations incurred on behalf of Borrower. Unless the context otherwise requires, references to the outstanding principal balance of the Revolving Loan shall include the outstanding balance of Letter of Credit Obligations. "Revolving Loan Commitment" means (a) as to any Lender, the aggregate commitment of such Lender to make Revolving Credit Advances or incur Letter of Credit Obligations as set forth on Annex J to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make Revolving Credit Advances or incur Letter of Credit Obligations, which aggregate commitment shall be Fifty Million Dollars ($50,000,000) on the Closing Date, as such amount may be adjusted, if at all, from time to time in accordance with the Agreement. "Revolving Note" has the meaning ascribed to it in Section 1.1(a)(ii). "Second Lien Creditor Agent" means Bank of New York Asset Solutions LLC, a Delaware limited liability company, as administrative agent under the Post-Confirmation Credit Agreement Documents, and any successor or permitted assigns thereto. A-21 "Security Agreement" means the Security Agreement of even date herewith entered into by and among Agent, on behalf of itself and Lenders, and each Credit Party that is a signatory thereto. "Software" means all "software" as such term is defined in the Code, now owned or hereafter acquired by any Credit Party, other than software embedded in any category of Goods, including all computer programs and all supporting information provided in connection with a transaction related to any program. "Solvent" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can be reasonably be expected to become an actual or matured liability. "Stock" means all shares, options, warrants, general or limited partnership interests, membership interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). "Stockholder" means, with respect to any Person, each holder of Stock of such Person. "Subordinated Debt" means the Indebtedness of any Credit Party evidenced by the Subordinated Debt Documents and any other Indebtedness of any Credit Party subordinated to the Obligations in a manner and form satisfactory to Agent and Lenders in their sole discretion, as to right and time of payment and as to any other rights and remedies thereunder. "Subordinated Debt Documents" means, collectively, the Subordinated Notes and that certain Indenture, dated as of the Closing Date, delivered by one or more Credit Parties in favor of Wilmington Trust Company, as Trustee. "Subordinated Notes" means those certain unsecured 10 3/8% Senior Subordinated Notes due 2009 issued by Carmike as described in the Plan of Reorganization. "Subsidiary" means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding Stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, Stock A-22 of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of 50% or more of such Stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of a Borrower. "Subsidiary Guaranty" means the Subsidiary Guaranty of even date herewith executed by each Subsidiary of Carmike in favor of Agent, on behalf of itself and Lenders. "Supporting Obligations" means all "supporting obligations" as such term is defined in the Code, including letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments, or Investment Property. "Swing Line Advance" has the meaning ascribed to it in Section 1.1(c)(i). "Swing Line Availability" has the meaning ascribed to it in Section 1.1(c)(i). "Swing Line Commitment" means, as to the Swing Line Lender, the commitment of the Swing Line Lender to make Swing Line Advances as set forth on Annex J to the Agreement, which commitment constitutes a subfacility of the Revolving Loan Commitment of the Swing Line Lender. "Swing Line Lender" means GE Capital. "Swing Line Loan" means, as the context may require, at any time, the aggregate amount of Swing Line Advances outstanding to any Borrower or to all Borrowers. "Swing Line Note" has the meaning ascribed to it in Section 1.1(c)(ii). "Taxes" means taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Agent or a Lender by the jurisdictions under the laws of which Agent and Lenders are organized or conduct business or any political subdivision thereof. "Title IV Plan" means a Pension Plan (other than a Multiemployer Plan), that is covered by Title IV of ERISA, and that any Credit Party or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "Termination Date" means the date on which (a) the Revolving Loans have been indefeasibly repaid in full, (b) all other Obligations under the Agreement and the other Loan Documents have been completely discharged (c) all Letter of Credit Obligations have been cash A-23 collateralized, canceled or backed by standby letters of credit in accordance with Annex B, and (d) none of Borrowers shall have any further right to borrow any monies under the Agreement. "Trade Creditor Debt" means the "Claims" under Class 5 described in the Plan of Reorganization which are "Allowed Claims" (as those terms are defined in the Plan of Reorganization) pursuant to the Plan of Reorganization. "Trademark Security Agreements" means the Trademark Security Agreements made in favor of Agent, on behalf of Lenders, by each applicable Credit Party. "Trademark License" means rights under any written agreement now owned or hereafter acquired by any Credit Party granting any right to use any Trademark. "Trademarks" means all of the following now owned or hereafter existing or adopted or acquired by any Credit Party: (a) all trademarks, trade names, corporate names, business names, trade styles, service marks, logos, other source or business identifiers, prints and labels on which any of the foregoing have appeared or appear, designs and general intangibles of like nature (whether registered or unregistered), all registrations and recordings thereof, and all applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state or territory thereof, or any other country or any political subdivision thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill associated with or symbolized by any of the foregoing. "Unfunded Pension Liability" means, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits in accordance with Title IV of ERISA, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan, and (b) for a period of 5 years following a transaction which might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by any Credit Party or any ERISA Affiliate as a result of such transaction. "Welfare Plan" means a Plan described in Section 3(i) of ERISA. "Wooden Nickel" means Wooden Nickel Pub, Inc., a Delaware corporation. Rules of construction with respect to accounting terms used in the Agreement or the other Loan Documents shall be as set forth in Annex G. All other undefined terms contained in any of the Loan Documents shall, unless the context indicates otherwise, have the meanings provided for by the Code to the extent the same are used or defined therein; in the event that any term is defined differently in different Articles or Divisions of the Code, the definition contained in Article or Division 9 shall control. Unless otherwise specified, references in the Agreement or any of the Appendices to a Section, subsection or clause refer to such Section, subsection or clause as contained in the Agreement. The words "herein," "hereof" and "hereunder" and other words of similar import refer to the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the same may from time to time be amended, restated, modified or supplemented, A-24 and not to any particular section, subsection or clause contained in the Agreement or any such Annex, Exhibit or Schedule. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter genders. The words "including", "includes" and "include" shall be deemed to be followed by the words "without limitation"; the word "or" is not exclusive; references to Persons include their respective successors and assigns (to the extent and only to the extent permitted by the Loan Documents) or, in the case of governmental Persons, Persons succeeding to the relevant functions of such Persons; and all references to statutes and related regulations shall include any amendments of the same and any successor statutes and regulations. Whenever any provision in any Loan Document refers to the knowledge (or an analogous phrase) of any Credit Party, such words are intended to signify that such Credit Party has actual knowledge or awareness of a particular fact or circumstance or that such Credit Party, if it had exercised reasonable diligence, would have known or been aware of such fact or circumstance. A-25 ANNEX B (SECTION 1.2) TO CREDIT AGREEMENT LETTERS OF CREDIT (a) Issuance. Subject to the terms and conditions of the Agreement, Agent and Revolving Lenders agree to incur, from time to time prior to the Commitment Termination Date, upon the request of Borrower Representative on behalf of the applicable Borrower and for such Borrower's account, Letter of Credit Obligations by causing Letters of Credit to be issued by GE Capital or a Subsidiary thereof or a bank or other legally authorized Person selected by or acceptable to Agent in its sole discretion (each, an "L/C Issuer") for such Borrower's account and guaranteed by Agent; provided, that if the L/C Issuer is a Revolving Lender, then such Letters of Credit shall not be guaranteed by Agent but rather each Revolving Lender shall, subject to the terms and conditions hereinafter set forth, purchase (or be deemed to have purchased) risk participations in all such Letters of Credit issued with the written consent of Agent, as more fully described in paragraph (b)(ii) below. The aggregate amount of all such Letter of Credit Obligations shall not at any time exceed the lesser of (i) Five Million Dollars ($5,000,000) (the "L/C Sublimit") and (ii) the Maximum Amount less the aggregate outstanding principal balance of the Revolving Credit Advances. No such Letter of Credit shall have an expiry date that is more than one year following the date of issuance thereof, unless otherwise determined by the Agent, in its sole discretion, and neither Agent nor Revolving Lenders shall be under any obligation to incur Letter of Credit Obligations in respect of, or purchase risk participations in, any Letter of Credit having an expiry date that is later than the Commitment Termination Date. (b) (i) Advances Automatic; Participations. In the event that Agent or any Revolving Lender shall make any payment on or pursuant to any Letter of Credit Obligation, such payment shall then be deemed automatically to constitute a Revolving Credit Advance to the applicable Borrower under Section 1.1(a) of the Agreement regardless of whether a Default or Event of Default has occurred and is continuing and notwithstanding any Borrower's failure to satisfy the conditions precedent set forth in Section 2, and each Revolving Lender shall be obligated to pay its Pro Rata Share thereof in accordance with the Agreement. The failure of any Revolving Lender to make available to Agent for Agent's own account its Pro Rata Share of any such Revolving Credit Advance or payment by Agent under or in respect of a Letter of Credit shall not relieve any other Revolving Lender of its obligation hereunder to make available to Agent its Pro Rata Share thereof, but no Revolving Lender shall be responsible for the failure of any other Revolving Lender to make available such other Revolving Lender's Pro Rata Share of any such payment. (ii) If it shall be illegal or unlawful for any Borrower to incur Revolving Credit Advances as contemplated by paragraph (b)(i) above because of an Event of Default described in Sections 8.1(h) or (i) or otherwise or if it shall be illegal or unlawful for any Revolving Lender to be deemed to have assumed a ratable share of the reimbursement obligations owed to an L/C Issuer, or if the L/C Issuer is a Revolving Lender, then (A) immediately and without further action whatsoever, each Revolving Lender shall be deemed to B-1 have irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an undivided interest and participation equal to such Revolving Lender's Pro Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit Obligations in respect of all Letters of Credit then outstanding and (B) thereafter, immediately upon issuance of any Letter of Credit, each Revolving Lender shall be deemed to have irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an undivided interest and participation in such Revolving Lender's Pro Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit Obligations with respect to such Letter of Credit on the date of such issuance. Each Revolving Lender shall fund its participation in all payments or disbursements made under the Letters of Credit in the same manner as provided in the Agreement with respect to Revolving Credit Advances. (c) Cash Collateral. (i) If Borrowers are required to provide cash collateral for any Letter of Credit Obligations pursuant to the Agreement prior to the Commitment Termination Date, each Borrower will pay to Agent for the ratable benefit of itself and Revolving Lenders cash or cash equivalents acceptable to Agent ("Cash Equivalents") in an amount equal to 105% of the maximum amount then available to be drawn under each applicable Letter of Credit outstanding for the benefit of such Borrower. Such funds or Cash Equivalents shall be held by Agent in a cash collateral account (the "Cash Collateral Account") maintained at a bank or financial institution acceptable to Agent. The Cash Collateral Account shall be in the name of the applicable Borrower and shall be pledged to, and subject to the control of, Agent, for the benefit of Agent and Lenders, in a manner satisfactory to Agent. Each Borrower hereby pledges and grants to Agent, on behalf of itself and Lenders, a security interest in all such funds and Cash Equivalents held in the Cash Collateral Account from time to time and all proceeds thereof, as security for the payment of all amounts due in respect of the Letter of Credit Obligations and other Obligations, whether or not then due. The Agreement, including this Annex B, shall constitute a security agreement under applicable law. (ii) If any Letter of Credit Obligations, whether or not then due and payable, shall for any reason be outstanding on the Commitment Termination Date, Borrowers shall either (A) provide cash collateral therefor in the manner described above, or (B) cause all such Letters of Credit and guaranties thereof, if any, to be canceled and returned, or (C) deliver a stand-by letter (or letters) of credit in guaranty of such Letter of Credit Obligations, which stand-by letter (or letters) of credit shall be of like tenor and duration (plus 30 additional days) as, and in an amount equal to 105% of, the aggregate maximum amount then available to be drawn under, the Letters of Credit to which such outstanding Letter of Credit Obligations relate and shall be issued by a Person, and shall be subject to such terms and conditions, as are be satisfactory to Agent in its sole discretion. (iii) From time to time after funds are deposited in the Cash Collateral Account by any Borrower, whether before or after the Commitment Termination Date, Agent may apply such funds or Cash Equivalents then held in the Cash Collateral Account to the payment of any amounts, and in such order as Agent may elect, as shall be or shall become due and payable by such Borrower to Agent and Lenders with respect to such Letter of Credit B-2 Obligations of such Borrower and, upon the satisfaction in full of all Letter of Credit Obligations of such Borrower, to any other Obligations of any Borrower then due and payable. (iv) No Borrower nor any Person claiming on behalf of or through any Borrower shall have any right to withdraw any of the funds or Cash Equivalents held in the Cash Collateral Account, except that upon the termination of all Letter of Credit Obligations and the payment of all amounts payable by Borrowers to Agent and Lenders in respect thereof, any funds remaining in the Cash Collateral Account shall be applied to other Obligations then due and owing and upon payment in full of such Obligations, any remaining amount shall be paid to Borrowers or as otherwise required by law. Any interest earned on deposits in the Cash Collateral Account not applied to the Obligations upon termination of all Letter of Credit Obligations shall be for the account of Borrowers. (d) Fees and Expenses. Borrowers agree to pay to Agent for the benefit of Revolving Lenders, as compensation to such Lenders for Letter of Credit Obligations incurred hereunder, (i) all costs and expenses incurred by Agent or any Lender on account of such Letter of Credit Obligations, and (ii) for each month during which any Letter of Credit Obligation shall remain outstanding, a fee (the "Letter of Credit Fee") in an amount equal to the Applicable L/C Margin from time to time in effect multiplied by the maximum amount available from time to time to be drawn under the applicable Letter of Credit. Such fee shall be paid to Agent for the benefit of the Revolving Lenders in arrears, on the first Business Day of each month and on the Commitment Termination Date. In addition, Borrowers shall pay to any L/C Issuer, on demand, such customary fees (including all per annum fees), charges and expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance, amendment, transfer and payment of such Letter of Credit or otherwise payable pursuant to the application and related documentation under which such Letter of Credit is issued. (e) Request for Incurrence of Letter of Credit Obligations. Borrower Representative shall give Agent at least 2 Business Days' prior written notice requesting the incurrence of any Letter of Credit Obligation. The notice shall be accompanied by the form of the Letter of Credit (which shall be acceptable to the L/C Issuer) and a completed Application for Standby Letter of Credit. Notwithstanding anything contained herein to the contrary, Letter of Credit applications by Borrower Representative and approvals by Agent and the L/C Issuer may be made and transmitted pursuant to electronic codes and security measures mutually agreed upon and established by and among Borrower Representative, Agent and the L/C Issuer. (f) Obligation Absolute. The obligation of Borrowers to reimburse Agent and Revolving Lenders for payments made with respect to any Letter of Credit Obligation shall be absolute, unconditional and irrevocable, without necessity of presentment, demand, protest or other formalities, and the obligations of each Revolving Lender to make payments to Agent with respect to Letters of Credit shall be unconditional and irrevocable. Such obligations of Borrowers and Revolving Lenders shall be paid strictly in accordance with the terms hereof under all circumstances including the following: (i) any lack of validity or enforceability of any Letter of Credit or the Agreement or the other Loan Documents or any other agreement; B-3 (ii) the existence of any claim, setoff, defense or other right that any Borrower or any of their respective Affiliates or any Lender may at any time have against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such transferee may be acting), Agent, any Lender, or any other Person, whether in connection with the Agreement, the Letter of Credit, the transactions contemplated herein or therein or any unrelated transaction (including any underlying transaction between any Borrower or any of their respective Affiliates and the beneficiary for which the Letter of Credit was procured); (iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by Agent (except as otherwise expressly provided in paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or guaranty thereof against presentation of a demand, draft or certificate or other document that does not comply with the terms of such Letter of Credit or such guaranty; (v) any other circumstance or event whatsoever, that is similar to any of the foregoing; or (vi) the fact that a Default or an Event of Default has occurred and is continuing. (g) Indemnification; Nature of Lenders' Duties. (i) In addition to amounts payable as elsewhere provided in the Agreement, Borrowers hereby agree to pay and to protect, indemnify, and save harmless Agent and each Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees and allocated costs of internal counsel) that Agent or any Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or guaranty thereof, or (B) the failure of Agent or any Lender seeking indemnification or of any L/C Issuer to honor a demand for payment under any Letter of Credit or guaranty thereof as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority, in each case other than to the extent solely as a result of the gross negligence or willful misconduct of Agent or such Lender (as finally determined by a court of competent jurisdiction). (ii) As between Agent and any Lender and Borrowers, Borrowers assume all risks of the acts and omissions of, or misuse of any Letter of Credit by, beneficiaries of any Letter of Credit. In furtherance and not in limitation of the foregoing, to the fullest extent permitted by law, neither Agent nor any Lender shall be responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document issued by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact B-4 prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) failure of the beneficiary of any Letter of Credit to comply fully with conditions required in order to demand payment under such Letter of Credit; provided, that in the case of any payment by Agent under any Letter of Credit or guaranty thereof, Agent shall be liable to the extent such payment was made solely as a result of its gross negligence or willful misconduct (as finally determined by a court of competent jurisdiction) in determining that the demand for payment under such Letter of Credit or guaranty thereof complies on its face with any applicable requirements for a demand for payment under such Letter of Credit or guaranty thereof; (D) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they may be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a payment under any Letter of Credit or guaranty thereof or of the proceeds thereof; (G) the credit of the proceeds of any drawing under any Letter of Credit or guaranty thereof; and (H) any consequences arising from causes beyond the control of Agent or any Lender. None of the above shall affect, impair, or prevent the vesting of any of Agent's or any Lender's rights or powers hereunder or under the Agreement. (iii) Nothing contained herein shall be deemed to limit or to expand any waivers, covenants or indemnities made by Borrowers in favor of any L/C Issuer in any letter of credit application, reimbursement agreement or similar document, instrument or agreement between or among Borrowers and such L/C Issuer including a Master Standby Agreement entered into with Agent. B-5 ANNEX C (SECTION 1.8) TO CREDIT AGREEMENT CASH MANAGEMENT SYSTEM Each Borrower shall, and shall cause its Subsidiaries to, establish and maintain the Cash Management Systems described below: (a) On or before the Closing Date and until the Termination Date, each Borrower shall (i) establish deposit accounts ("Deposit Accounts") at one or more of the banks set forth in Disclosure Schedule (3.19), and (ii) deposit and cause its Subsidiaries to deposit or cause to be deposited promptly, and in any event no later than the first Business Day after the date of receipt thereof, all cash, checks, drafts or other similar items of payment relating to or constituting payments made in respect of any and all Collateral into one or more Deposit Accounts in such Borrower's name or any such Subsidiary's name and at a bank identified in Disclosure Schedule (3.19) (each, a "Relationship Bank"). On or before the Closing Date, the Borrowers shall have established a concentration account in the name of Carmike (each a "Blocked Account" and collectively, the "Blocked Accounts") at the bank or banks that shall be designated as the Blocked Account bank for the Borrowers in Disclosure Schedule (3.19) (each a "Blocked Account Bank" and collectively, the "Blocked Account Banks"), which bank(s) shall be reasonably satisfactory to Agent. Borrowers shall cause all cash, checks, drafts or other similar items of payment relating to or constituting payments made in respect of any and all Collateral in the Deposit Accounts to be forwarded by the Relationship Bank, not less frequently than every third Business Day and in any event, not less frequently than twice weekly, to a Blocked Account. (b) Each Borrower may maintain, in its name, an account (each a "Disbursement Account" and collectively, the "Disbursement Accounts") at a bank reasonably acceptable to Agent into which Agent shall, from time to time, deposit proceeds of Revolving Credit Advances made to such Borrower pursuant to Section 1.1 for use by such Borrower solely in accordance with the provisions of Section 1.4. (c) On or before the Closing Date (or such later date as Agent shall consent to in writing), each Blocked Account Bank, and each bank where a Disbursement Account is maintained, shall have entered into tri-party blocked account agreements with Agent, for the benefit of itself and Lenders, and the applicable Borrower and Subsidiaries thereof, as applicable, in form and substance reasonably acceptable to Agent, which shall become operative on or prior to the Closing Date. Each such blocked account agreement shall provide, among other things, that (i) all items of payment deposited in such account and proceeds thereof deposited in the applicable Blocked Account are held by such bank as agent or bailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the bank executing such agreement has no rights of setoff or recoupment or any other claim against such account, as the case may be, other than for payment of its service fees and other charges directly related to the administration of such account and for C-1 returned checks or other items of payment, and (iii) from and after the Closing Date (A) with respect to banks at which a Blocked Account is maintained, such bank agrees, from and after the receipt of a notice (an "Activation Notice") from Agent (which Activation Notice may be given by Agent at any time at which (1) a Default or an Event of Default has occurred and is continuing, (2) Agent reasonably believes based upon information available to it that a Default or an Event of Default is likely to occur; (3) Agent reasonably believes that an event or circumstance that is likely to have a Material Adverse Effect has occurred, or (4) Agent reasonably has grounds to question the integrity of any Borrower's Cash Management Systems or any Borrower's compliance with the provisions of this Annex C or any other provisions of the Loan Documents to the extent related to such Cash Management Systems (any of the foregoing being referred to herein as an "Activation Event")), to forward daily all amounts in each Blocked Account into the Collection Account. From and after the date Agent has delivered an Activation Notice to any bank with respect to any Blocked Account(s), no Borrower shall, or shall cause or permit any Subsidiary thereof to, accumulate or maintain cash in Disbursement Accounts or payroll accounts as of any date of determination in excess of checks outstanding against such accounts as of that date and amounts necessary to meet minimum balance requirements. (d) So long as no Default or Event of Default has occurred and is continuing, Borrowers may amend Disclosure Schedule (3.19) to add or replace a Relationship Bank or Blocked Account or to replace any Disbursement Account; provided, that (i) Agent shall have consented in writing in advance to the opening of such account with the relevant bank and (ii) prior to the time of the opening of such account, the applicable Borrower or its Subsidiaries, as applicable, and such bank shall have executed and delivered to Agent a tri-party blocked account agreement, in form and substance reasonably satisfactory to Agent. Borrowers shall close any of their accounts (and establish replacement accounts in accordance with the foregoing sentence) promptly and in any event within 30 days following notice from Agent that the creditworthiness of any bank holding an account is no longer acceptable in Agent's reasonable judgment, or as promptly as practicable and in any event within 60 days following notice from Agent that the operating performance, funds transfer or availability procedures or performance with respect to accounts of the bank holding such accounts or Agent's liability under any tri-party blocked account agreement with such bank is no longer acceptable in Agent's reasonable judgment. (e) The Blocked Accounts and the Disbursement Accounts shall be cash collateral accounts, with all cash, checks and other similar items of payment in such accounts securing payment of the Loans and all other Obligations, and in which each Borrower and each Subsidiary thereof shall have granted a Lien to Agent, on behalf of itself and Lenders, pursuant to the Security Agreement. (f) All amounts deposited in the Collection Account shall be deemed received by Agent in accordance with Section 1.10 and shall be applied (and allocated) by Agent in accordance with Section 1.11. In no event shall any amount be so applied unless and until such amount shall have been credited in immediately available funds to the Collection Account. (g) Each Borrower shall and shall cause its Affiliates, officers, employees, agents, directors or other Persons acting for or in concert with such Borrower (each a "Related Person") to (i) hold in trust for Agent, for the benefit of itself and Lenders, all checks, cash and C-2 other items of payment received by such Borrower or any such Related Person, and (ii) within 1 Business Day after receipt by such Borrower or any such Related Person of any checks, cash or other items of payment, deposit the same into a Blocked Account of such Borrower. Each Borrower and each Related Person thereof acknowledges and agrees that all cash, checks or other items of payment constituting proceeds of Collateral are part of the Collateral. All proceeds of the sale or other disposition of any Collateral, shall be deposited directly into the applicable Blocked Accounts. C-3 ANNEX D (SECTION 2.1(A)) TO CREDIT AGREEMENT CLOSING CHECKLIST In addition to, and not in limitation of, the conditions described in Section 2.1 of the Agreement, pursuant to Section 2.1(a), the following items must be received by Agent in form and substance satisfactory to Agent on or prior to the Closing Date (each capitalized term used but not otherwise defined herein shall have the meaning ascribed thereto in Annex A to the Agreement): A. Appendices. All Appendices to the Agreement, in form and substance satisfactory to Agent. B. Revolving Notes and Swing Line Notes. Duly executed originals of the Revolving Notes and Swing Line Notes for each applicable Lender, dated the Closing Date. C. Security Agreement. Duly executed originals of the Security Agreement, dated the Closing Date, and all instruments, documents and agreements executed pursuant thereto, including duly executed powers of attorney from each Credit Party in favor of Agent. D. Insurance. Satisfactory evidence that the insurance policies required by Section 5.4 are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements, as requested by Agent, in favor of Agent, on behalf of Lenders. E. Security Interests and Code Filings. (a) Evidence satisfactory to Agent that Agent (for the benefit of itself and Lenders) has a valid and perfected first priority security interest in the Collateral, including (i) such documents duly executed by each Credit Party (including financing statements under the Code and other applicable documents under the laws of any jurisdiction with respect to the perfection of Liens) as Agent may request in order to perfect its security interests in the Collateral and (ii) copies of Code search reports listing all effective financing statements that name any Credit Party as debtor, together with copies of such financing statements, none of which shall cover the Collateral, except for those relating to the Post-Confirmation Credit Agreement and subject to the Intercreditor Agreement. (b) Evidence satisfactory to Agent, including copies, of all UCC-1 and other financing statements filed in favor of any Credit Party with respect to each location, if any, at which Inventory may be consigned. (c) Control Letters from (i) all issuers of uncertificated securities and financial assets held by each Borrower, (ii) all securities intermediaries with respect to all securities accounts and securities entitlements of each Borrower, and (iii) all futures commission agents and clearing houses with respect to all commodities contracts and commodities accounts held by any Borrower. D-1 F. Intellectual Property Security Agreements. Duly executed originals of the Trademark Security Agreement, dated the Closing Date and signed by each Credit Party which owns Trademarks in form and substance reasonably satisfactory to Agent, together with all instruments, documents and agreements executed pursuant thereto. G. Subsidiary Guaranties. Guaranties executed by and each direct and indirect Subsidiary of Carmike that is not a Borrower in favor of Agent, for the benefit of Lenders. H. Initial Notice of Revolving Credit Advance. Duly executed originals of a Notice of Revolving Credit Advance, dated the Closing Date, with respect to the initial Revolving Credit Advance to be requested by Borrower Representative on the Closing Date. I. Letter of Direction. Duly executed originals of a letter of direction from Borrower Representative addressed to Agent, on behalf of itself and Lenders, with respect to the disbursement on the Closing Date of the proceeds of the initial Revolving Credit Advance. J. Cash Management System; Blocked Account Agreements. Evidence satisfactory to Agent that, as of the Closing Date, Cash Management Systems complying with Annex C to the Agreement have been established and are currently being maintained in the manner set forth in such Annex C, together with copies of duly executed tri-party blocked account and lock box agreements, reasonably satisfactory to Agent, with the banks as required by Annex C. K. Charter and Good Standing. For each Credit Party, such Person's (a) charter and all amendments thereto, (b) good standing certificates (including verification of tax status) in its state of incorporation and (c) good standing certificates (including verification of tax status) and certificates of qualification to conduct business in each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, each dated a recent date prior to the Closing Date and certified by the applicable Secretary of State or other authorized Governmental Authority. L. Bylaws and Resolutions. For each Credit Party, (a) such Person's bylaws, together with all amendments thereto and (b) resolutions of such Person's Board of Directors, approving and authorizing the execution, delivery and performance of the Loan Documents to which such Person is a party and the transactions to be consummated in connection therewith, each certified as of the Closing Date by such Person's corporate secretary or an assistant secretary as being in full force and effect without any modification or amendment. M. Incumbency Certificates. For each Credit Party, signature and incumbency certificates of the officers of each such Person executing any of the Loan Documents, certified as of the Closing Date by such Person's corporate secretary or an assistant secretary as being true, accurate, correct and complete. N. Opinions of Counsel. Duly executed originals of opinions of Troutman Sanders and Weil, Gotshal & Manges, counsel for the Credit Parties, together with any local counsel opinions reasonably requested by Agent, each in form and substance reasonably D-2 satisfactory to Agent and its counsel, dated the Closing Date, and each accompanied by a letter addressed to such counsel from the Credit Parties, authorizing and directing such counsel to address its opinion to Agent, on behalf of Lenders, and to include in such opinion an express statement to the effect that Agent and Lenders are authorized to rely on such opinion. O. Pledge Agreements. Duly executed originals of each of the Pledge Agreements accompanied by (as applicable) (a) share certificates representing all of the outstanding Stock being pledged pursuant to such Pledge Agreement and stock powers for such share certificates executed in blank and (b) the original Intercompany Notes and other instruments evidencing Indebtedness being pledged pursuant to such Pledge Agreement, duly endorsed in blank. P. Accountants' Letters. A letter from the Credit Parties to their independent auditors authorizing the independent certified public accountants of the Credit Parties to communicate with Agent and Lenders in accordance with Section 4.2. Q. Appointment of Agent for Service. An appointment on behalf of all Credit Parties by Carmike of CT Corporation as agent for service of process. R. [Intentionally Omitted] S. [Intentionally Omitted] T. Officer's Certificate. Agent shall have received duly executed originals of a certificate of the [Chief Executive Officer and Chief Financial Officer] of each Borrower, dated the Closing Date, stating that, since December 31, 2000 (a) no event or condition has occurred or is existing which could reasonably be expected to have a Material Adverse Effect; (b) there has been no material adverse change in the industry in which any Borrower operates; (c) no Litigation has been commenced which, if successful, would have a Material Adverse Effect or could challenge any of the transactions contemplated by the Agreement and the other Loan Documents; (d) there have been no Restricted Payments made by any Credit Party; and (e) there has been no material increase in liabilities, liquidated or contingent, and no material decrease in assets of any Borrower or any of its Subsidiaries. U. [Intentionally Omitted] V. Mortgages. Except with respect to the leasehold Real Estate (with respect to which Borrowers agree to use best efforts to obtain Mortgages and deliver the following) and the six properties subject to a master leasing agreement with Movieplex (for which no Mortgage will be required), Mortgages covering all of the Real Estate (the "Mortgaged Properties") together with: (a) title insurance policies, as-built surveys, zoning letters and certificates of occupancy, in each case reasonably satisfactory in form and substance to Agent, in its sole discretion; (b) evidence that counterparts of the Mortgages have been recorded in all places to the extent necessary or desirable, in the judgment of Agent, to create a valid and enforceable first priority lien (subject to Permitted Encumbrances) on each Mortgaged Property in favor of Agent for the benefit of itself and Lenders (or in favor of such other trustee as may be required or D-3 desired under local law); and (c) an opinion of counsel in each state in which any Mortgaged Property is located in form and substance and from counsel reasonably satisfactory to Agent. W. Intercreditor Agreement. Agent and Lenders shall have received the Intercreditor Agreement, in form and substance reasonably satisfactory to Agent, in its sole discretion. X. Environmental Reports. Agent shall have received Phase I Environmental Site Assessment Reports, consistent with American Society for Testing and Materials (ASTM) Standard E 1527-94 and applicable state requirements, on all of the Real Estate, dated no more than 6 months prior to the Closing Date, prepared by environmental engineers reasonably satisfactory to Agent, all in form and substance reasonably satisfactory to Agent, in its sole discretion; and Agent shall have further received such environmental review and audit reports, including Phase II reports, with respect to the Real Estate of any Credit Party as Agent shall have requested, and Agent shall be satisfied, in its sole discretion, with the contents of all such environmental reports. Agent shall have received letters executed by the environmental firms preparing such environmental reports, in form and substance reasonably satisfactory to Agent, authorizing Agent and Lenders to rely on such reports. Y. Audited Financials; Financial Condition. Agent shall have received the Financial Statements, Projections and other materials set forth in Section 3.4, certified by Borrower Representative's Chief Financial Officer, in each case in form and substance reasonably satisfactory to Agent, and Agent shall be satisfied, in its sole discretion, with all of the foregoing. Agent shall have further received a certificate of the Chief Executive Officer and/or the Chief Financial Officer of each Borrower, based on such Pro Forma and Projections, to the effect that (a) such Borrower will be Solvent upon the consummation of the transactions contemplated herein; (b) the Pro Forma fairly presents the financial condition of such Borrower as of the date thereof after giving effect to the transactions contemplated by the Loan Documents; (c) the Projections are based upon estimates and assumptions stated therein, all of which such Borrower believes to be reasonable and fair in light of current conditions and current facts known to such Borrower and, as of the Closing Date, reflect such Borrower's good faith and reasonable estimates of its future financial performance and of the other information projected therein for the period set forth therein (except to the extent that actual results for the year ending December 31, 2001 varied from those set forth in the Projections). AA. Confirmation Order. Agent shall have received evidence of the entry of the Confirmation Order. BB. Other Documents. Such other certificates, documents and agreements respecting any Credit Party as Agent may, in its reasonable discretion, request. D-4 ANNEX E (SECTION 4.1(A)) TO CREDIT AGREEMENT FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING Borrowers shall deliver or cause to be delivered to Agent or to Agent and Lenders, as indicated, the following: (a) Monthly Financials. To Agent and Lenders, within 30 days after the end of each Fiscal Month, financial information regarding Borrowers and their Subsidiaries, certified by the Chief Financial Officer of Carmike, including monthly balance sheet, cash flow statement reflecting month-end and year-to-date totals, income statement comparing actual results for such month to the results for the same month during the prior year and comparing actual results for the year-to-date to the results for the same period during the prior year and detailed calculation of the financial covenants set forth in Annex G to the Credit Agreement for the applicable month (utilizing the applicable data for the twelve-month period most recently ending); provided, that, with respect to the Fiscal Months ending January 31 and February 28 (or 29) each year, the financial information required to be delivered to Agent within 30 days after the end of such Fiscal Months shall be limited to preliminary income statements and all other financial information (including without limitation, balance sheets, cash flows and adjusted income statements) required to be delivered to Agent with respect to such Fiscal Months shall be delivered to Agent not later than April 19 each year. Such financial information shall be accompanied by the certification of the Chief Financial Officer of Borrower Representative that such financial information presented is true, correct and complete in all material respects and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. (b) Quarterly Financials. To Agent and Lenders, within 45 days after the end of each Fiscal Quarter, consolidated financial information regarding Borrowers and their Subsidiaries, certified by the Chief Financial Officer of Borrower Representative, including (i) unaudited balance sheets as of the close of such Fiscal Quarter and the related statements of income and cash flow for that portion of the Fiscal Year ending as of the close of such Fiscal Quarter and (ii) unaudited statements of income and cash flows for such Fiscal Quarter, in each case setting forth in comparative form the figures for the corresponding period in the prior year and the figures contained in the Projections for such Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end adjustments). Such financial information shall be accompanied by (A) a statement in reasonable detail (each, a "Compliance Certificate" showing the calculations used in determining compliance with each of the Financial Covenants that is tested on a quarterly basis and (B) the certification of the Chief Financial Officer of Borrower Representative that (i) such financial information presents fairly in accordance with GAAP (subject to normal year-end adjustments) the financial position, results of operations and statements of cash flows of Borrowers and their Subsidiaries, on both a consolidated basis, as at the end of such Fiscal Quarter and for that portion of the Fiscal Year then ended, (ii) any other information presented is true, correct and complete in all material respects and that there was no F-1 Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. In addition, Borrowers shall deliver to Agent and Lenders, within 45 days after the end of each Fiscal Quarter, a management discussion and analysis that includes a comparison to budget for that Fiscal Quarter and a comparison of performance for that Fiscal Quarter to the corresponding period in the prior year. (c) Operating Plan. To Agent and Lenders, as soon as available, but not later than 45 days after the end of each Fiscal Year, an annual operating plan for Borrowers, on a consolidated basis, approved by the Board of Directors of Borrowers, for the following Fiscal Year, which (i) includes a statement of all of the material assumptions on which such plan is based, (ii) includes quarterly balance sheets, income statements and statements of cash flows for the following year and (iii) integrates sales, gross profits, operating expenses, operating profit, cash flow projections and projections, all prepared on the same basis and in similar detail as that on which operating results are reported (and in the case of cash flow projections, representing management's good faith estimates of future financial performance based on historical performance), and including plans for personnel, Capital Expenditures and facilities. (d) Annual Audited Financials. To Agent and Lenders, within 90 days after the end of each Fiscal Year, audited Financial Statements for Borrowers and their Subsidiaries on a consolidated basis, consisting of balance sheets and statements of income and retained earnings and cash flows, setting forth in comparative form in each case the figures for the previous Fiscal Year, which Financial Statements shall be prepared in accordance with GAAP and certified without qualification, by an independent certified public accounting firm of national standing or otherwise acceptable to Agent. Such Financial Statements shall be accompanied by (i) a statement prepared in reasonable detail showing the calculations used in determining compliance with each of the Financial Covenants, (ii) a report from such accounting firm to the effect that, in connection with their audit examination, nothing has come to their attention to cause them to believe that a Default or Event of Default has occurred (or specifying those Defaults and Events of Default that they became aware of), it being understood that such audit examination extended only to accounting matters and that no special investigation was made with respect to the existence of Defaults or Events of Default, (iii) a letter addressed to Agent, on behalf of itself and Lenders, in form and substance reasonably satisfactory to Agent and subject to standard qualifications required by nationally recognized accounting firms, signed by such accounting firm acknowledging that Agent and Lenders are entitled to rely upon such accounting firm's certification of such audited Financial Statements, (iv) the annual letters to such accountants in connection with their audit examination detailing contingent liabilities and material litigation matters, and (v) the certification of the Chief Executive Officer or Chief Financial Officer of Borrowers that all such Financial Statements present fairly in accordance with GAAP the financial position, results of operations and statements of cash flows of Borrowers and their Subsidiaries on a consolidated basis, as at the end of such Fiscal Year and for the period then ended, and that there was no Default or Event of Default in existence as of such time or, if a Default or Event of Default has occurred and is continuing, describing the nature thereof and all efforts undertaken to cure such Default or Event of Default. F-2 (e) Management Letters. To Agent and Lenders, within 5 Business Days after receipt thereof by any Credit Party, copies of all management letters, exception reports or similar letters or reports in final form received by such Credit Party from its independent certified public accountants. (f) Default Notices. To Agent and Lenders, as soon as practicable, and in any event within 5 Business Days after an executive officer of any Borrower has actual knowledge of the existence of any Default, Event of Default or other event that has had a Material Adverse Effect, telephonic or telecopied notice specifying the nature of such Default or Event of Default or other event, including the anticipated effect thereof, which notice, if given telephonically, shall be promptly confirmed in writing on the next Business Day. (g) SEC Filings and Press Releases. To Agent and Lenders, promptly upon their becoming available, copies of: (i) all Financial Statements, reports, notices and proxy statements made publicly available by any Credit Party to its security holders; (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by any Credit Party with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority; and (iii) all press releases and other statements made available by any Credit Party to the public concerning material changes or developments in the business of any such Person. (h) Other Debt and Equity Notices. To Agent, as soon as practicable, copies of all material written notices given or received by any Credit Party with respect to any Subordinated Debt, Post-Confirmation Credit Agreement Debt or all stockholders of Carmike and, within 2 Business Days after any Credit Party obtains knowledge of any matured or unmatured event of default with respect to any Subordinated Debt or Post-Confirmation Credit Agreement Debt, notice of such event of default. (i) Supplemental Schedules. To Agent, supplemental disclosures, if any, required by Section 5.6. (j) Litigation. To Agent in writing, promptly upon learning thereof, notice of any Litigation commenced or threatened against any Credit Party that (i) seeks damages in excess of $500,000, (ii) seeks injunctive relief, (iii) is asserted or instituted against any Plan, its fiduciaries or its assets or against any Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges criminal misconduct by any Credit Party, (v) alleges the violation of any law regarding, or seeks remedies in connection with, any Environmental Liabilities or (vi) involves any product recall. (k) Insurance Notices. To Agent, disclosure of losses or casualties required by Section 5.4. (l) Lease Default Notices. To Agent, within 2 Business Days after receipt thereof, copies of (i) any and all payment default notices received under or with respect to any leased location or public warehouse where Collateral is located, and (ii) such other documents or notices as Agent may request. F-3 (m) Good Standing Certificates. Not less frequently than once during each calendar quarter, each Credit Party shall, unless Agent shall otherwise consent, provide to Agent a certificate of good standing from its state of incorporation or organization. (n) Other Documents. To Agent and Lenders, such other financial and other information respecting any Credit Party's business or financial condition as Agent or any Lender shall from time to time reasonably request. F-4 ANNEX G (SECTION 6.10) TO CREDIT AGREEMENT FINANCIAL COVENANTS Borrowers shall not breach or fail to comply with any of the following financial covenants, each of which shall be calculated in accordance with GAAP consistently applied: (a) Maximum Capital Expenditures. Borrowers and their Subsidiaries on a consolidated basis shall not make Capital Expenditures during the following periods that exceed in the aggregate the amounts set forth opposite each of such periods:
Period Maximum Capital Expenditures per Period ------ --------------------------------------- January 1, 2002 through December 31, 2002 $20,000,000 January 1, 2003 through December 31, 2003 $15,000,000 January 1, 2004 through December 31, 2004 $15,000,000 January 1, 2005 through December 31, 2005 $15,000,000 January 1, 2006 through December 31, 2006 $15,000,000
provided, however, that the amount of permitted Capital Expenditures referenced above will be increased in any period by the positive amount equal to the lesser of (i) $5,000,000, and (ii) the actual amount, if any, of any Capital Expenditures committed to during such prior period (the "Carry Over Amount"), and for purposes of measuring compliance herewith, the Carry Over Amount shall be deemed to be the last amount spent on Capital Expenditures in that succeeding year. (b) Maximum Funded Debt to EBITDA. Borrowers and their Subsidiaries shall have on a consolidated basis at the end of each Fiscal Quarter set forth below, a ratio of Indebtedness to EBITDA for the 12-month period then ended of not more than the following: 7.25:1.00 for the Fiscal Quarters ending March 31, 2002 through December 31, 2002; 7.00:1.00 for the Fiscal Quarters ending March 31, 2003 through December 31, 2003; 6.75:1.00 for the Fiscal Quarters ending March 31, 2004 through December 31, 2004; 6.25:1.00 for the Fiscal Quarters ending March 31, 2005 through December 31, 2005; and 5.75:1.00 for each Fiscal Quarter ending thereafter. (c) Maximum Revolving Credit Advances to EBITDA Ratio. Borrowers and their Subsidiaries on a consolidated basis shall have, at the end of each Fiscal Quarter, a ratio of the outstanding amount of Revolving Credit Advances to EBITDA of not more than 1.00:1.00: F-1 (d) Minimum Interest Coverage Ratio. Borrowers and their Subsidiaries on a consolidated basis shall have at the end of each Fiscal Quarter set forth below, an Interest Coverage Ratio for the 12-month period then ended of not less than the following: 1.50:1.00 for the Fiscal Quarters ending March 31, 2002 through December 31, 2002; 1.55:1.00 for the Fiscal Quarters ending March 31, 2003 through December 31, 2003; 1.65:1.00 for the Fiscal Quarters ending March 31, 2004 through December 31, 2004; 1.75:1.00 for the Fiscal Quarters ending March 31, 2005 through December 31, 2005; and 1.85:1.00 for each Fiscal Quarter ending thereafter. Unless otherwise specifically provided herein, any accounting term used in the Agreement shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP consistently applied. That certain items or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. If any "Accounting Changes" (as defined below) occur and such changes result in a change in the calculation of the financial covenants, standards or terms used in the Agreement or any other Loan Document, then Borrowers, Agent and Lenders agree to enter into negotiations in order to amend such provisions of the Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating Borrowers' and their Subsidiaries' financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made; provided, however, that the agreement of Requisite Lenders to any required amendments of such provisions shall be sufficient to bind all Lenders. "Accounting Changes" means (i) changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions), (ii) changes in accounting principles concurred in by any Borrower's certified public accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and EITF 88-16, and the application of the accounting principles set forth in FASB 109, including the establishment of reserves pursuant thereto and any subsequent reversal (in whole or in part) of such reserves; and (iv) the reversal of any reserves established as a result of purchase accounting adjustments. All such purchase accounting adjustments resulting from expenditures made subsequent to the Closing Date (including capitalization of costs and expenses or payment of pre-Closing Date liabilities) shall be treated as expenses in the period the expenditures are made and deducted as part of the calculation of EBITDA in such period regardless of when such expenditures were deducted from net income. If Agent, Borrowers and Requisite Lenders agree upon the required amendments, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained in the Agreement or in any other Loan Document shall, only to the extent of such Accounting Change, refer to GAAP, consistently applied after giving effect to the implementation of such Accounting Change. If Agent, Borrowers and Requisite Lenders cannot agree upon the required amendments within 30 days following the date of implementation of any Accounting Change, then all Financial Statements delivered and all calculations of financial covenants and other standards and terms in accordance with the Agreement and the other Loan Documents shall be prepared, delivered and made without regard to the underlying Accounting Change. For purposes F-2 of Section 8.1, a breach of a Financial Covenant contained in this Annex G shall be deemed to have occurred as of the last day of any specified measurement period, and on the last day of any specified measurement period, Agent may in its reasonable discretion determine a breach of a Financial Covenant has occurred as of such date, regardless of when the Financial Statements reflecting such breach are delivered to Agent. F-3 EX-10.17 6 g74873ex10-17.txt SECOND AMENDED AND RESTATED MASTER LEASE AGREEMENT EXHIBIT 10.17 SECOND AMENDED AND RESTATED MASTER LEASE THIS SECOND AMENDED AND RESTATED MASTER LEASE (this "Lease") made and entered as of this 1st day of September, 2001, by and between MOVIEPLEX REALTY LEASING, L.L.C., a New Jersey limited liability company, (hereinafter called "Landlord"), and CARMIKE CINEMAS, INC., a Delaware corporation, (hereinafter called "Tenant"). WITNESSETH: ARTICLE 1. Leased Premises and Term (a) Landlord and Tenant are party to the Original Lease (as hereinafter defined) pursuant to which Landlord leased to Tenant the premises consisting of six (6) properties more completely described on Exhibit "A" attached hereto and incorporated herein by reference (hereinafter called the "Leased Premises"); (b) On August 8, 2000, Tenant and its Subsidiaries commenced cases under Chapter 11 of the federal Bankruptcy Code of 1978, as amended, in the United States Bankruptcy Court of the District of Delaware; (c) In connection with the reorganization of Tenant, the parties hereto wish to amend and restate the Original Lease with, and replace it by, this Lease; (d) Landlord, for and in consideration of the foregoing and the covenants and agreements hereinafter set forth to be kept and performed by both parties hereto, does hereby demise and lease to Tenant and Tenant does hereby lease from Landlord (for the Term hereinafter stipulated) the Leased Premises; and (e) The term of this Lease (the "Term") shall commence upon the date hereof (the "Commencement Date") and shall end on August 31, 2016 (the "Termination Date"). ARTICLE 2. Definitions The following terms shall have the meaning set forth herein, unless such meanings are expressly modified, limited or extended elsewhere in this Lease: (a) "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Georgia are authorized by law to close. (b) "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 Tenant or any subsidiary (to the extent issued to a Person other than Tenant), whether common or preferred. (c) "Change of Control" means any event, transaction or occurrence as a result of which (i) the Tenant Stockholders cease to own and control all of the economic and voting rights associated with ownership of at least thirty percent (30%) of the outstanding Capital Stock of all classes of Tenant on a fully diluted basis, or (ii) Tenant ceases to own and control all of the economic and voting rights associated with all of the outstanding Capital Stock of any of its Subsidiaries, except that a Qualified Buyer transaction shall not be a Change of Control. (d) "Continuing Director" means, as of any date of determination, any member of the Board of Directors of the Tenant who (i) was a member of such Board of Directors on the Commencement Date or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. (e) "CPI" means the United States Department of Labor, Bureau of Labor Statistics, Consumer Price Index for all Urban Consumers (U.S. city average; base 1982-84 = 100), published by the Bureau of Labor Statistics of the United States Department of Labor. If at any time during the Term, the "CPI" shall be discontinued or published less frequently than monthly, Landlord and Tenant shall mutually and reasonably agree to substitute an official index published by the Bureau of Labor Statistics, or a successor governmental agency, which index is most nearly equivalent to the "CPI" or to a substitute procedure which reasonably reflects and monitors consumer prices. (f) "EastWynn" means EastWynn Theaters, Inc., an Alabama corporation and a wholly owned Subsidiary of Tenant. (g) "Enterprise Value" means market value of debt plus market value of equity. (h) "Environmental Requirements" means all present and future statutes, regulations, rules, ordinances, permits, approvals and similar items of all Governmental Authorities relating to the protection of the environment including, without limitation, those statutes regulating the use, transport, storage, disposal, discharge, release or threatened release of Hazardous Substances applicable to the Leased Premises and the Off-Site Improvements (until legal title to any portion of the Off-Site Improvements shall have been transferred to a Governmental Authority) and/or the use thereof. (i) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (j) "ERISA Affiliate" means (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as Tenant; (ii) a partnership or other trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code) with Tenant; and (iii) solely for purposes of liability under Section 12(c)(11) of the Code, the lien created under Section 412(n) of the Code, or for tax imposed for failure to meet minimum funding standards under Section 4971 of the Code, a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as Tenant, any corporation described in clause (i) above or any partnership or trade or business described in clause (ii) above. (k) "GAAP" means generally accepted accounting principles applied on a basis consistent with those which are to be used in making the calculations for purposes of determining compliance with this Lease. 2 (l) "Governmental Authority" means any and all courts, boards, agencies, commissions, offices or authorities of any nature whatsoever for any government unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. (m) "Hazardous Substances" means any hazardous or toxic substance, waste, pollutant or contaminated material, including without limitation, those substances within the scope of any federal, state or local environmental laws, regulations and ordinances, including the Resource Conservation and Recovery Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Superfund Amendment and Reauthorization Act of 1986, as amended, the Federal Water Pollution Control Act, as amended, the Clean Air Act, as amended, and the Safe Drinking Water Act, as amended. (n) "Impositions" means all real estate taxes with respect to the Leased Premises, payments in lieu of real estate taxes, any taxes levied against any other personal property owned by Tenant and located at or upon the Leased Premises, and excises, levies, license and permit fees and other charges imposed by any federal, state, county or city authority having jurisdiction over the Leased Premises, which during the Term may be levied, charged, confirmed, assessed or imposed upon or become due and payable out of or in respect of, or become a lien upon, the Leased Premises or any part thereof (together with any interest and penalties thereon), including, without limitation, any taxes or assessments hereafter assessed in lieu of any of the foregoing; provided, however, that "Impositions" shall not include (i) federal, state, or local income taxes; or (ii) franchise, gift, transfer, excise, capital stock, estate, succession, or inheritance taxes. (o) "Individual Property" means each of the six (6) individual properties included in the Leased Premises. (p) "Lease Year" means twelve consecutive calendar months. The first Lease Year shall begin on the Commencement Date and shall end on the date preceding the first anniversary of the Commencement Date. Subsequent Lease Years shall begin and end on the same dates as the first Lease Year but in succeeding calendar years. (q) "Legal Requirements" means, as to Tenant in the conduct of its business wherever situated, and as to the Leased Premises and the construction, ownership, use, occupancy, possession, environmental condition, operation, maintenance, alteration, repair or reconstruction thereof, (i) any and all present and future judicial decisions, statutes, rulings, rules, regulations, permits, certificates or ordinances of any Governmental Authority and applicable to Tenant or the Leased Premises or by which Tenant or the Leased Premises is bound, (ii) any and all terms, provisions, agreements or restrictions created or imposed pursuant to any lease, contract, instrument of restrictive covenants or other document applicable to and enforceable against the Leased Premises or the operator of the Leased Premises, or applicable to Tenant or by which Tenant is bound, and (iii) all Environmental Requirements. (r) "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 Tenant and its Subsidiaries taken as a whole, or 3 (b) the rights and remedies of Landlord under this Lease or the ability of Tenant to perform its obligations under this Lease to which it is a party, as applicable. (s) "Off-Site Improvements" means (i) with respect to each Individual Property, those improvements required to be constructed or installed pursuant to the applicable approvals on land other than such Individual Property, and (ii) with respect to the Leased Premises, all Off-Site Improvements constructed or to be constructed, collectively, on all of the Individual Properties. (t) "Original Lease" means that certain Amended and Restated Master Lease between MoviePlex Realty Leasing, L.L.C., as Landlord and Carmike Cinemas, Inc., as Tenant dated as of January 29, 1999, as amended by that certain First Amendment to Amended and Restated Master Lease dated as of November 19, 1999, that certain Second Amendment to Amended and Restated Master Lease dated as of March 31, 2000, and that certain Movieplex Interim Settlement Agreement effective as of April 1, 2001. (u) "Pending Bankruptcy" means Chapter 11 bankruptcy proceedings of Tenant and each of its Subsidiaries filed in the United States Bankruptcy Court for the District of Delaware, Case Nos. 00-3302 (SLR) - 00-3305 (SLR) (Jointly Administered). (v) "Person" means any individual, corporation, company, limited liability company, voluntary association, partnership, limited liability partnership, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof). (w) "Plan" means any "employee pension benefit plan" (as such term is defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by Tenant or any ERISA Affiliate. (x) "Qualified Buyer" means an entity with an Enterprise Value equal to or greater than Tenant's Enterprise Value at time immediately prior to giving affect to such Change of Control or assignment, however such Qualified Buyer shall in no event have an Enterprise Value which is less than $585,000,000. (y) "Rent" means Minimum Annual Rent, Percentage Rent, additional rent, payments for Impositions, insurance and all other payments required under this Lease. (z) "Stock" means all shares, options, warrants, general or limited partnership interests, membership interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). (aa) "Stockholder" means, with respect to any Person, each holder of Stock of such Person. (bb) "Subsidiary" means, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the 4 terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. (cc) The following additional terms are defined in the places in this Lease noted below:
TERM ARTICLE ----- ------- "Minimum Annual Rent" ................................................. 4 "Adjustment Date" ..................................................... 4 "Percentage Rent"...................................................... 4 "Annual Breakpoint".................................................... 4 "Revenue".............................................................. 5 "Option Term".......................................................... 9 "Guaranty"............................................................. 17 "Sublease Profits"..................................................... 21 "Default".............................................................. 23 "Communications"....................................................... 30
ARTICLE 3. Permitted Use Tenant covenants and agrees to use and occupy the Leased Premises during the Term as and for a theatre in a proper and lawful manner for the presentation of motion pictures, receipt and broadcasting of television, satellite broadcast and other media, vaudeville, so-called legitimate dramatic, operatic and other theatrical performances, exhibits, meetings, lectures, fashion shows and concerts, the sale of food and drink items customarily sold in concerts, and for such other activities as are usual and customary from time to time for theatres; provided however, that the Leased Premises shall not be used for the display of so-called "x-rated" or "adult entertainment" movies. Tenant may use the Leased Premises or an Individual Property either itself or by concession arrangements or contract for the sale of food, drinks, other edibles, and such other items as are customarily incidental to the operation of a motion picture theatre. ARTICLE 4. Rent Tenant agrees to pay as rent for the use and occupancy of the Leased Premises, at the times and in the manner hereinafter provided, the following sums of money: (a) MINIMUM ANNUAL RENT: Tenant, in consideration of said demise, does hereby covenant and agree with Landlord to pay to Landlord without deduction or set-off of any kind, the following stated sums per annum as rent for said Leased Premises, said Minimum Annual Rent to be payable in twelve (12) equal monthly installments, in advance, upon the first day of each and every month during the Term: 5 Initial Minimum Annual Rent shall be $5,400,000.00 per annum ($450,000.00 per month) during the first twelve (12) months of the Term. The Minimum Annual Rent shall be adjusted on the date which is one (1) month prior to the anniversary of the Commencement Date (each of such dates being herein referred to as an "Adjustment Date") as follows: The Minimum Annual Rent shall be increased (but in no event decreased) to an amount equal to the Minimum Annual Rent applicable for the previous Lease Year multiplied by the lesser of (i) one (1) plus the CPI; or (ii) one (1) plus two and one-half percent (2.5%) during Lease Year 2 through Lease Year 10. For calculation of the CPI, such increase shall be equal to the percentage increase in the CPI between (a) the CPI for the month of June immediately preceding the applicable Adjustment Date and (b) the CPI for the month of June one year prior to the October immediately preceding the applicable Adjustment Date. The Minimum Annual Rent for Lease Year 11 shall be $7,200,000.00 per annum ($600,000.00 per month). For the remaining Lease Years, the Minimum Annual Rent shall be increased on each Adjustment Date to an amount equal to the Minimum Annual Rent applicable for the previous Lease Year multiplied by the lesser of (i) one (1) plus the CPI; or (ii) one (1) plus two and one-half percent (2.5%) during each of the remaining Lease Years. All past due rent, additional rent, and/or other sums due to Landlord under the terms of this Lease shall bear interest from the date which is five (5) days from the due date until paid by Tenant at the rate of two percent (2%) above the published prime rate of Wachovia Bank, N.A., or its successor, not to exceed the maximum rate of interest allowed by law in the state of New York, and such interest shall be deemed to be additional rent. All payments for Rent (those hereinafter stipulated as well as said Minimum Annual Rent) shall be paid via authorized debit of a special account for rent established at Wachovia or by wire transfer as follows: Account Name: MoviePlex Rent Account Wachovia Bank, N.A. ABA# 061000010 Account Number 12-576-458 Reference: MoviePlex Rent Attn: David Morley or to such other payee or address as Landlord may designate, in writing, to Tenant. (b) PERCENTAGE RENT: In addition to the Minimum Annual Rent, Tenant agrees to pay to Landlord as "Percentage Rent" hereunder, the following sums of money: commencing upon the Commencement Date, and ending on the Termination Date, Tenant agrees to pay to Landlord Percentage Rent in an amount equal to twelve percent (12.0%) of all Revenue (as hereinafter defined) made in, from or at the Leased Premises in excess of the Annual Breakpoint made by Tenant in the Leased Premises during any Lease Year contained within said period of time. The "Annual Breakpoint" as used herein shall be the amount which is fifty percent (50%) of the quotient obtained by dividing the Minimum Annual Rent by ten percent (10%); and Said Percentage Rent for each such Lease Year shall be paid to Landlord within sixty (60) days after the Adjustment Date of each Lease Year. As soon as practical after the end of each Lease Year (or after the expiration or termination of the Term, if earlier), the Percentage Rent paid or payable shall be adjusted between Landlord and Tenant based upon the certified Revenue. 6 ARTICLE 5. Definition of Revenue The term "Revenue" as used in this Lease shall mean and include box office admissions, ticket sales, the entire amount of the actual sale price of all goods and merchandise sold (including gift and merchandise certificates), leased, rented or licensed and the charge for all services and all other receipts in, upon or from any part of the Leased Premises, whether (wholly or partially) for cash or credit, and shall include gross sales from vending machines including but not limited to mechanical and electronic machines (except telephone and postage stamp or revenue to which a third party provider of vending machines is entitled); mail or telephone orders received or filled at the Leased Premises; equipment leased; all deposits not refunded to purchasers; orders taken, although such orders may be filled elsewhere (including but not limited to orders which are accepted on a technology-based system, whether existing as of the date hereof or developed during the term of the lease, if such orders are accepted or filled at the Leased Premises; food and non-food concession sales; arcade and gaming revenue, advertising revenue (including on-screen advertising), parking revenue, special promotion revenue, all monies or other things of value which Tenant is entitled to receive from its operations; but deducting or excluding, as the case may be, the amount of all sales, use, excise, retailer's occupation or similar taxes imposed in a specific amount, or percentage upon, or determined by, the amount of retail sales made upon the Leased Premises. Notwithstanding anything to the contrary in the foregoing, Revenue shall only include Revenue to the extent Tenant is entitled to receive such Revenue. ARTICLE 6. Records and Audits (a) Tenant agrees to use a reasonable method to accurately record all Revenue and shall not materially change Tenant's current practices, which include weekly sales reports, deposit slips and sales and use tax returns. Documentation of specific sales exclusions must also be maintained. Said records shall be preserved (properly totaled) by Tenant either (a) at the Leased Premises or (b) at the home or regional offices of Tenant and made available to Landlord at the Leased Premises or such offices upon reasonable notice from Landlord for a period of at least three (3) years after the Lease Year to which such records relate (however, if any audit shall be commenced by Landlord or if there shall arise a dispute concerning Tenant's Revenue, Tenant's records shall be preserved and retained by Tenant until a final resolution of such dispute). The receipt by Landlord of any statement of Revenue or Percentage Rent for any period shall not constitute an admission of the correctness thereof. Tenant agrees to deliver to Landlord a statement of each month's sales on or before the thirtieth (30th) day of the following month and, by October 30th of each year of the Term, an annual statement certified by a financial officer of the Tenant of the Revenue made during the preceding year. If the Term expires or is terminated on a date other than August 31, then a like certified statement for the partial Lease Year in which expiration or termination occurs shall be delivered within sixty (60) days after expiration or termination. Landlord shall be entitled at Landlord's expense, to have an audit of the Revenue made during the period covered by such annual statement and account either by Landlord, an agent of the Landlord or a certified public accountant designated by Landlord, and to recalculate the rent payable for such period. Landlord shall provide such audit results to Tenant within a year of the Lease Year to which such audit relates. (b) Tenant may object to Landlord's audit by providing notice to Landlord within ten (10) days after receipt of Landlord's audit. If Tenant objects to such Landlord's audit, Landlord and Tenant shall agree on an independent firm of certified public accountants of recognized national 7 standing (who shall not be the accounting firm used by either Tenant or Landlord) at Tenant's expense to conduct a third audit of the Revenue made during the period covered by the Annual Statement in question, the result of which shall be final and conclusive on the parties (the "Final Audit"). If Landlord and Tenant fail to agree on an independent firm within thirty (30) days of Tenant's objection to Landlord's audit, then such firm shall be chosen by the American Association of Arbitrators at Landlord's and Tenant's shared cost. (c) If it shall be determined as a result of such audit that there has been a deficiency in the payment of percentage or additional rent, then such deficiency shall become immediately due and payable with interest at the rate of two percent (2%) above the published prime rate of Wachovia Bank, N.A., or its successor, not to exceed the maximum rate of interest allowed by law in the state of New York, and such interest shall be deemed to be additional rent, from the date when said payments should have been made. In the event Tenant shall be delinquent in furnishing to Landlord any monthly sales statement or statements required hereunder, then Landlord shall have the right, ten (10) days after delivery of written notice to Tenant, to conduct such audits as provided by this ARTICLE 6, and any and all charges occasioned by reason thereof shall be the sole obligation of Tenant, and such obligation shall be deemed an item of additional rent. ARTICLE 7. Taxes (a) Tenant covenants to pay all Impositions directly to the Person entitled to such payment, before any fine, penalty, interest or cost may be added thereto for the non-payment thereof. Tenant shall furnish to Landlord, promptly upon request therefor, official receipts or other satisfactory proof evidencing payment of such Impositions. Upon Tenant's failure to pay such Impositions, Landlord shall have the right, at Landlord's option, to require Tenant to promptly deposit with Landlord, funds for the payment of current Impositions required to be paid by Tenant hereunder. If Landlord receives a refund of any portion of any Imposition relating to a certain period, then Landlord shall, upon receipt of any such refund, reimburse Tenant an amount equal to such refund (such refund to be calculated after deducting all of Landlord's reasonable third party expenses paid in connection with obtaining any such refund and any other amounts due to Landlord from Tenant). (b) An official tax bill or copy thereof shall be submitted by Landlord to Tenant upon receipt of same by Landlord. Landlord agrees to cooperate, at Tenant's expense, with any efforts by or on behalf of Tenant relating to the negotiation, contest or appeal of any tax or assessment. (c) Tenant acknowledges its continuing obligations to Landlord for the payment of Impositions pursuant to the Original Lease; and Tenant warrants and represents that, except for Impositions the payment of which has been stayed by the Pending Bankruptcy for so long as they are so stayed, all such Impositions are paid or are not delinquent as of the Commencement Date. ARTICLE 8. Subordination and Attornment (a) Upon written request of Landlord, or any mortgagee or beneficiary of Landlord, Tenant will in writing, subordinate its rights hereunder to the interest of any ground lessor of the land upon which an Individual Property is situated and to the lien of any mortgage or deed of trust, now or hereafter in force against the land and building of which the Leased Premises are a part, 8 and upon any building hereafter placed upon the land of which the Leased Premises are a part and to all advances made or hereafter to be made upon the security thereof; providing, however, that the ground lessor, or the mortgagee or beneficiary named in said mortgage or trust deed shall agree that Tenant's peaceable possession of the Leased Premises will not be disturbed on account thereof and Tenant's obligations under this Lease remain unchanged. Any mortgagee or beneficiary of Landlord may at its option subordinate its mortgage or trust deed to this Lease. (b) In the event any proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under any mortgage, deed of trust or deed to secure debt, made by Landlord covering an Individual Property, Tenant shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under this Lease, provided that such purchaser shall assume Landlord's obligations under the Lease. ARTICLE 9. Option to Extend Term of Lease (a) So long as no Default (as defined in Article 23) has occurred and is continuing under this Lease, Tenant shall have the right and option to extend the Term upon the same terms, covenants and conditions as herein contained (except for the Minimum Annual Rent which shall be adjusted as hereinafter provided) for one (1) additional term of five (5) years (the "Option Term") by giving written notice to Landlord of the exercise of such option at least six (6) months prior to the end of the Term. (b) Minimum Annual Rent during the Option Term shall be $8,000,000.00 per annum ($666,667.00 per month) during the first Lease Year of the Option Term and the Minimum Annual Rent shall be increased on each Adjustment Date to an amount equal to the Minimum Annual Rent applicable for the previous year multiplied by the lesser of (i) one (1) plus the CPI; or (ii) one (1) plus two and one-half percent (2.5%) during each of the remaining Lease Years. ARTICLE 10. Condition of Premises Tenant's possession of the Leased Premises shall be conclusive evidence of Tenant's acceptance of the Leased Premises in good order and satisfactory condition. Tenant warrants that Tenant is familiar with and is currently occupying the Leased Premises demised by this Lease and Tenant hereby accepts the Leased Premises (including the mechanical, electrical, plumbing, fire protection and HVAC systems) in its present condition as suitable for the purpose for which it is leased. Tenant agrees that no representations respecting the condition of the Leased Premises and no promises to decorate, alter, repair or improve the Leased Premises either before or after the execution hereof, have been made by Landlord or its agents to Tenant. ARTICLE 11. Repairs and Maintenance (a) Tenant shall maintain the Leased Premises in good condition, normal wear and tear excepted, in a manner comparable to other theater facilities of comparable size and age in the same or comparable markets. Tenant shall be liable for all repairs, replacements and maintenance, ordinary and extraordinary, and shall keep the Leased Premises in good order and repair (normal wear and tear excepted), clean, sanitary and safe. Such repairs, replacements and maintenance shall include but not be limited to its heating and cooling equipment; other equipment; fixtures; improvements; floor covering; the exterior and interior portions of all doors, 9 door locks, security gates, and windows; plumbing and sewage facilities; walls; ceilings; and all plate glass. Tenant further agrees to paint the Leased Premises when necessary in order to maintain at all times a clean and sightly appearance. If Tenant refuses or neglects to make repairs and/or maintain the Leased Premises, or any part thereof, in a manner reasonably satisfactory to Landlord, Landlord shall have the right, upon giving Tenant reasonable written notice, with opportunity to cure, of its election to do so, to make repairs or perform such maintenance on behalf of and for the account of Tenant. In such event, Landlord's reasonable out of pocket expenses shall be paid for by Tenant as additional rent promptly upon receipt of a bill therefor. Nothing herein shall imply any duty on Landlord to do any work under this Lease or which, under any provisions of this Lease, Tenant may be required to perform; and, the performing thereof by Landlord shall not constitute a waiver of Tenant's default in failing to perform the same. Tenant shall indemnify Landlord against, and hold it harmless from, any claims, demands, actions against Landlord or losses or damages incurred by Landlord, arising out of or in any way connected with Tenant's failure to perform its obligations or observe any covenants under this ARTICLE 11, except arising from Landlord's negligence or willful misconduct. (b) Landlord shall not under any circumstances be required to build any improvements on an Individual Property, or to make any repairs, replacements, alterations or renewals of any nature or description to any Individual Property, whether interior or exterior, ordinary or extraordinary, structural or non-structural, foreseen or unforeseen, or to make any expenditure whatsoever in connection with this Lease or to inspect or maintain the Leased Premises or any part thereof in any way. Tenant hereby waives the right to require Landlord to make repairs, replacements, renewals or restorations pursuant to any Legal Requirements including, without limitation, any Environmental Requirements, except if due to Landlord's negligence or willful misconduct. ARTICLE 12. Alterations Except for alterations required for the provision of satellite broadcast to the theater, Tenant shall not make any structural alterations in any portion of the Leased Premises nor any major interior alterations without, in each instance, first obtaining the written consent of Landlord. Landlord shall not unreasonably withhold, condition or delay consent. Tenant shall use reasonable efforts to minimize and limit business interruptions caused by such alterations. All alterations, additions, improvements, provided for herein, shall become, upon completion, the property of Landlord, subject to the terms of this Lease, including without limitation, ARTICLE 13, without any payment by Landlord to Tenant. Landlord's consent shall not be required with respect to non-structural changes. ARTICLE 13. Fixtures and Personal Property; Grant of Security Interest (a) Any trade fixtures, signs and other personal property of Tenant not permanently affixed to the Leased Premises shall remain the property of Tenant except as provided in ARTICLES 23 and 24, and Landlord agrees that Tenant shall have the right, provided Tenant be not in Default under the terms of this Lease, at any time, and from time to time, to remove any and all of its trade fixtures, signs and other personal property which it may have stored or installed in the Leased Premises, including but not limited to counters, shelving, showcases, mirrors and other movable personal property. Nothing contained in this ARTICLE 13 shall be deemed or construed to permit or allow Tenant to remove such personal property, as to render the Leased 10 Premises unsuitable for use as a movie theater or other use permitted by this Lease without the replacement thereof with similar personal property of comparable or better quality. Tenant at its expense shall immediately repair any damage occasioned to the Leased Premises by reason of the removal of any such trade fixtures, signs, and other personal property, and upon expiration or earlier termination of this Lease, Tenant shall leave the Leased Premises in a neat and clean condition, free of debris. All trade fixtures, signs, and other personal property installed in or attached to the Leased Premises by Tenant must be in good condition when so installed or attached. Tenant shall pay before delinquency all taxes, assessments, license fees and public charges levied, assessed or imposed upon its business operation in the Leased Premises as well as upon its trade fixtures, leasehold improvements, merchandise and other personal property in, on or upon the Leased Premises. No taxes, assessments, fees or charges referred to in this paragraph shall be considered as taxes under the provisions of ARTICLE 7 hereof. (b) To secure the full, complete, and prompt payment when due of all rent and all other sums due or to become due hereunder and to secure the full, complete, and prompt payment and performance of all other of Tenant's obligations hereunder and under any other document delivered in connection herewith, Tenant hereby grants to Landlord an express contract lien on and security interest in all equipment, inventory, fixtures, consumer goods, goods, general intangibles and any and all other personal property of any kind or character of Tenant which is now located in or on, or may hereafter be placed in or on, the Leased Premises or used in connection therewith, whether such personal property now exists and is owned by Tenant or is hereafter acquired by Tenant, and also upon all proceeds thereof (including, without limitation, the proceeds of any insurance which may accrue to Tenant by reason of damage to or destruction of any such property and any repairs and replacements, substitutions, modifications, accessions, or additions of or to such property). This lien and security interest are given in addition to, and not in lieu of, Landlord's statutory lien and shall be cumulative thereto. To the extent permitted by law, this lien and security interest may be foreclosed with or without court proceedings, by public or private sale, with or without notice, and Landlord shall have the right to become purchaser at any such sale upon being the highest bidder. From time to time upon Landlord's request, Tenant shall execute Uniform Commercial Code financing statements relating to the aforesaid security interest. Tenant represents, warrants and covenants that Tenant owns all of the equipment, inventory, fixtures, consumer goods, goods and any other personal property of any kind or character which is now located on or in, or may hereafter be placed on or in, the Leased Premises or used in connection therewith and that such ownership interest is free and clear of all liens, security interests, or other encumbrances except liens, security interests, or other encumbrances existing in favor of Landlord. To the extent Landlord is provided with substitute collateral, Landlord shall release its lien on the collateral replaced by such substitute collateral, but only upon attachment and perfection of a first-priority security interest in favor of Landlord on such substitute collateral. Tenant's obligation to observe and perform any of the provisions of this ARTICLE 13 shall survive the expiration of the Term or the earlier termination of this Lease. ARTICLE 14. Liens Tenant agrees to pay for any work contracted for by Tenant or done for Tenant's account (or material furnished therefor) in, on or about the Leased Premises prior to any lien attaching to the 11 Leased Premises and shall promptly cause any such lien, or any claim therefor to be released or bonded in accordance with applicable law. If Landlord receives notice of any liens affecting the Leased Premises, Landlord will use reasonable efforts to notify Tenant regarding such liens. If Tenant shall fail to cause such lien forthwith to be so discharged or bonded after being notified of the filing thereof, then, in addition to any other right or remedy of Landlord, Landlord may discharge the same by paying the amount claimed to be due, and the amount so paid by Landlord together with interest thereon at the rate set forth in ARTICLE 4(a) and all reasonable third party costs and expenses, including reasonable attorneys' fees incurred by Landlord in procuring the discharge of such lien, shall be due and payable by Tenant to Landlord as additional rent on the first day of the next following month, or may, at Landlord's election, be subtracted from any sums owing to Tenant. Tenant's obligation to observe and perform any of the provisions of this ARTICLE 14 shall survive the expiration of the Term or the earlier termination of this Lease. ARTICLE 15. Laws and Ordinances (a) Tenant agrees to use Tenant's reasonable, best efforts to comply with all laws, ordinances, orders and regulations affecting the use and occupancy of the Leased Premises and the cleanliness, safety, or operation thereof. (b) Tenant agrees not to: (i) make use of or allow the Leased Premises to be used or occupied for any purposes (other than the Permitted Use) or in any manner, that might invalidate or increase the rate of (unless such increase is paid by Tenant) or make inoperative any policy of insurance of any kind whatsoever at any time carried on the Leased Premises; or (ii) keep or use or permit to be kept or used on the Leased Premises any flammable fluids, hazardous materials or explosives or engage in hazardous activities, except in accordance with Environmental Requirements. (c) In connection with the installation of any electrical, fire protection system or equipment, Tenant shall, at Tenant's own expense, make from time to time whatever changes are necessary to comply with the requirements of Governmental Authorities. (d) Tenant shall have no claim against Landlord, and Landlord shall have no liability for, any damages, demands, expenses, fees, fines, penalties, suits, proceedings, claims, actions and causes of action of any and every kind and nature arising or growing out of or in any way connected with Tenant's use or occupancy of the Leased Premises, should such use or occupancy be prohibited or substantially impaired by any law, ordinance or regulation of federal, state, county or municipal governments or by any act of legal or governmental or other public authority. ARTICLE 16. Utilities (a) Tenant agrees to pay as and when the same become due and payable, all water rents, rates and charges, all sewer rents and all similar charges and all charges for electricity, gas, heat, steam, hot water and other utilities supplied to the Leased Premises and, anything else supplied by any agency or public authority, or by Landlord to Tenant for the use or occupancy of the Leased Premises. 12 (b) Other than due to Landlord's gross negligence or willful misconduct, Landlord shall not be liable to Tenant in damages or otherwise if any utility services are interrupted or terminated because of necessary repairs, installations or improvements, or any cause, nor shall any such interruption or termination relieve Tenant of the performance of any of its obligations hereunder. ARTICLE 17. Representations, Covenants and Warranties of Tenant Tenant represents, covenants and warrants as follows: (a) Tenant 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 (i) states where the Leased Premises are located and (ii) every jurisdiction where, by the nature of its business, such qualification is necessary and where the failure to be so qualified would reasonably be expected to have a Material Adverse Effect, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted the failure of which to obtain would reasonably be expected to have a Material Adverse Effect. (b) The execution, delivery and performance by Tenant of this Lease (i) are within Tenant's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) other than approvals and filings required in connection with the Pending Bankruptcy, require no action by or in respect of, or filing with, any governmental body, agency or official, (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 Tenant or of any agreement, judgment, injunction, order, decree or other instrument binding upon Tenant or any of its Subsidiaries, and (v) do not result in the creation or imposition of any lien on any asset of Tenant or any of its Subsidiaries. (c) This Lease constitutes a valid and binding agreement of Tenant enforceable in accordance with its terms, provided that the enforceability hereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally. Each existing Subsidiary has executed and delivered the guaranty in the form attached hereto as Exhibit "B" (the "Guaranty") and the Guaranty constitutes a valid and binding agreement of the guarantors enforceable in accordance with its respective terms, provided that the enforceability 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. (d) The consolidated balance sheet of Tenant and its Subsidiaries as of December 31, 2000 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 the Agent, and the unaudited consolidated financial statements of Tenant and its Subsidiaries for the interim period ended September 30, 2001, fairly present, in conformity with GAAP, the consolidated financial position of Tenant and its Subsidiaries as of such dates and their consolidated results of operations and cash flows for such periods stated. (e) Except for the Pending Bankruptcy, there is no action, suit or proceeding pending, or to the knowledge of Tenant threatened, against or affecting Tenant or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which could have a Material 13 Adverse Effect or which in any manner draws into question the validity or enforceability of, or could impair the ability of Tenant to perform its obligations under this Lease. (f) Tenant and each of its ERISA Affiliates 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. Neither Tenant nor any of its ERISA Affiliates is or ever has been obligated to contribute to any Multi-employer Plan. (g) Except for the payment of amounts which have been stayed pursuant to the Pending Bankruptcy, there have been filed on behalf of Tenant 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 Tenant 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 Tenant and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of Tenant, adequate. United States income tax returns of Tenant and its Subsidiaries have been audited and closed through the Fiscal Year ended December 31, 1997. (h) Each of Tenant'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. Tenant has no Subsidiaries as of the date hereof except those Subsidiaries executing the Guaranty. (i) Tenant has paid all Impositions related to the Leased Premises except for (i) Impositions which are not yet delinquent and (ii) Impositions the payment of which has been stayed pursuant to the Pending Bankruptcy for as long as such stay is pending. Tenant has caused any and all liens related to the Leased Premises to be discharged and the Leased Premises is unencumbered, except for the Permitted Encumbrances in Exhibit "C" attached to this Lease. (j) Except for agreements, instruments or undertakings subject to the Pending Bankruptcy, neither Tenant 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. (k) The Debtors' Amended Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code filed by Tenant in the Pending Bankruptcy on November 14, 2001 did not, as of the date of filing, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not 14 misleading and, as of the date hereof, no event or condition exists which would render any such statement of material fact to be untrue or misleading. (l) Except as otherwise provided in Exhibit "D" attached to this Lease, (1) neither Tenant nor any of its Subsidiaries is currently subject to environmental liabilities which could cause a Material Adverse Effect, (2) to the best of Tenant's knowledge, neither Tenant 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 Tenant's knowledge, none of the Individual Properties has been identified on any current National Priorities List or CERCLIS List. (m) Except as otherwise provided in Exhibit "E" to the best of Tenant's knowledge, (1) Tenant, and each of its Subsidiaries, have used, managed, stored and otherwise handled Hazardous Substances at the Individual Properties in compliance with applicable Environmental Requirements, excluding any violation of Environmental Requirements which did not cause a Material Adverse Effect, and (2) neither Tenant nor any of its Subsidiaries has caused an environmental release of Hazardous Substances into the subsurface soil or groundwater underlying the Individual Properties which could reasonably be expected to cause a Material Adverse Effect. (n) Except as otherwise provided in Exhibit "F" to the best of Tenant's knowledge, Tenant and each of its Subsidiaries maintain all environmental authorizations necessary for the conduct of their respective businesses and are in compliance with all Environmental Requirements applicable to the operation of the Individual Properties and their respective businesses, excluding any omission of environmental authorizations or violation of Environmental Requirements which would not reasonably be expected to cause a Material Adverse Effect. (o) Tenant and each of its Subsidiaries is in compliance with all Legal Requirements, including, without limitation, all Environmental Requirements, except where any failure to comply with any such laws would not, alone or in the aggregate, have a Material Adverse Effect. Tenant shall also maintain in full force and effect all of its governmental and other authorizations, approvals, consents, permits, licenses, certifications and qualifications necessary for the operation and leasing of the Leased Premises. Tenant has not received, has no knowledge of any violation, nor is there any notice or, to Tenant's knowledge, other record of any violation, of any zoning, subdivision, environmental, building, fire, safety, health or other statute, ordinance, regulation, restrictive covenant or other restriction applicable to the Leased Premises which would reasonably be expected to have a Material Adverse Effect. (p) Tenant shall deliver to Landlord notice that a Person has become a wholly-owned Subsidiary within ten (10) Business Days after the day on which such Person became a wholly-owned Subsidiary. Tenant shall cause any Person which is or becomes a wholly-owned Subsidiary to become a party to, and agree to be bound by the terms of the Guaranty within such ten (10) Business Day period. Tenant covenants that each and every representation and warranty contained in this Lease, except for those contained in Section 17(c) and the last sentence of Section 17(h), is and shall be true and correct on each day during the Term as if made on such day. Tenant acknowledges that if any of the representations and warranties shall be incorrect or misleading at any such time and 15 such representation and warranty is not made correct within thirty (30) days after written notice by Landlord, Tenant shall be in Default pursuant to ARTICLE 23(a)(iii). ARTICLE 17A. Representations and Warranties of Landlord Landlord represents and warrants as follows: (a) Landlord is a limited liability company duly organized, validly existing and in good standing under the laws of the state of New Jersey, qualified to do business and be in good standing as a foreign limited liability company in each state where an Individual Property is located. Landlord has the full power and authority to enter into this Lease, and to engage in the transaction contemplated hereby, and the joinder, consent or approval of no other Person is required for the execution, delivery and performance hereof to properly consummate the transactions herein contemplated or, if required, such joinder, consent or approval has been obtained and evidence thereof has been delivered to Tenant. (b) Landlord shall maintain in full force and effect all of its governmental and other authorizations, approvals, consents, permits, licenses, certifications and qualifications necessary for the conduct of its business as it is presently being conducted or contemplated to be conducted hereunder to the extent the failure to so maintain the foregoing would constitute a Material Adverse Effect. (c) Neither the execution and delivery of this Lease nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby conflicts with or results in a breach of the terms, conditions or provisions of any restriction, any agreement or any instrument to which Landlord is now a party or by which Landlord or its property are bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien whatsoever upon any of the property or assets of Landlord, or upon the Leased Premises. (d) Upon the execution and delivery hereof, and assuming the valid execution and delivery hereof by Tenant, this Lease shall be a valid and binding obligation of Landlord enforceable against Landlord in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws relating to the enforcement of creditors' rights generally from time to time in effect and to the scope of equitable remedies which may be available. ARTICLE 18. Damage to Premises Landlord shall have no obligation to repair and restore the Leased Premises or any Individual Property in the event of a casualty. In the event an Individual Property is hereafter damaged, destroyed or rendered untenantable by fire or other casualty, then Tenant is obligated to rebuild such Individual Property in a manner reasonably acceptable to Landlord provided that all insurance proceeds payable to Landlord in respect of such casualty are made available to Tenant for such rebuilding. Tenant shall also repair and replace its merchandise, signs, goods, trade fixtures, furnishings, equipment, furniture and other installations of personalty of Tenant in a manner and to at least a condition equal to that prior to its damage or destruction, and if Tenant has closed, Tenant shall use diligent efforts to promptly reopen for business. The proceeds of all 16 insurance carried by Tenant on its property and improvements shall be held in trust by Tenant for the purpose of said repair and replacement. Except as herein expressly provided to the contrary, this Lease shall not terminate nor shall there be any abatement of rent or other charges or items of additional rent as the result of a fire or other casualty. ARTICLE 19. Insurance (a) Tenant agrees to carry Workers' Compensation Insurance, Employer's Liability Insurance and Comprehensive General Liability Insurance on each of the Individual Properties. Tenant agrees to name Landlord and, if Landlord elects, any other party designated by Landlord as Additional Insured(s) on Tenant's Comprehensive General Liability Insurance, which insurance shall be with companies licensed to do business in the state where each of the Individual Properties are located for limits of not less than $2,000,000 Combined Single Limit for Personal Injury including Bodily Injury and Death or Property Damage Liability and containing a Contractual Liability endorsement for each Individual Property. Such policy shall contain a provision that Landlord and Tenant will be given a minimum of thirty (30) days written notice by registered mail by the insurance company prior to cancellation, termination or change in such insurance. Tenant further agrees to carry "All Risk" Insurance (as understood in the insurance industry) including sprinkler leakage coverage for the full replacement value covering all Tenant's goods and merchandise, trade fixtures, furniture, signs, decorations, furnishings, wall covering, floor covering, draperies, equipment, and all other items and personal property of Tenant located on or within the Leased Premises. Replacement value is understood to mean the cost to replace without deduction for depreciation. All such insurance may be subject to deductibles in such amounts as are reasonably approved by Landlord and may be provided by a blanket policy reasonably approved by Landlord. Landlord hereby approves the $25,000 per occurrence, building and personal property deductible and the $5,000 sign damage deductible. Tenant shall make available to Landlord copies of the insurance policies or certificates evidencing that such insurance is in full force and effect and stating the terms thereof. Tenant further agrees to obtain certificates of insurance evidencing Comprehensive General Liability Insurance, including Completed Operations, and Workers' Compensation Insurance and Employer's Liability Insurance from any Contractor or Subcontractor engaged for repairs or maintenance on each of the Individual Properties, except to the extent such work has a value of not greater than $100,000 for such Individual Property. Such Liability Insurance must be for minimum limits of $500,000 Combined Single Limit for Bodily Injury including Death and Property Damage Liability for each Individual Property. (b) Tenant, on behalf of its insurance companies insuring each of the Individual Properties, its contents, Tenant's other property, waives any right of subrogation which such insurer or insurers may have against Landlord. Tenant shall use reasonable efforts to secure an appropriate clause in, or an endorsement to and made a part of such insurance policies, pursuant to which the respective insurance companies waive subrogation or permit the insured, prior to the loss, to agree with a third party to waive any claim it might have against said party. Neither Landlord nor Tenant shall be liable to the other party or to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage to any building, structure or other tangible property or liability for personal injury, or losses under worker's compensation laws and benefits, even though such loss or damage might have been occasioned by the negligence of such 17 party, its agents or employees. If there is any increased insurance cost as a result of the foregoing provision, each party shall bear its own expense. (c) All Tenant policies provided for herein shall be issued by insurance companies with a Best's Insurance Rating of A-VI or better. ARTICLE 20. Indemnification (a) Excluding gross negligence or willful misconduct on the part of indemnitee, Tenant shall and will indemnify and save harmless Landlord, its agents, officers and employees, from and against any and all liability, claims, demands, expenses, fees, fines, penalties, suits, proceedings, actions, and causes of action of any and every kind and nature arising or growing out of or in any way connected with Tenant's use, occupancy, management or control of the Leased Premises and/or Tenant's operations or activities in the Leased Premises whether or not occurring or resulting in damage or injury within the Leased Premises. This obligation to indemnify shall include reasonable legal and investigation costs and all other reasonable costs, expense and liabilities from the first notice that any claim or demand is to be made or may be made. Tenant's obligation to observe and perform any of the provisions of this ARTICLE 20 shall survive the expiration of the Term or the earlier termination of this Lease. (b) Excluding gross negligence or willful misconduct on the part of indemnitee, Landlord shall and will indemnify and save harmless Tenant, its agents, officers and employees, from and against any and all liability, claims, demands, expenses, fees, fines, penalties, suits, proceedings, actions, and causes of action of any and every kind and nature arising or growing out of or in any way connected with Landlord's gross negligence or willful misconduct, whether or not occurring or resulting in damage or injury within the Leased Premises. This obligation to indemnify shall include reasonable legal and investigation costs and all other reasonable costs, expense and liabilities from the first notice that any claim or demand is to be made or may be made. Landlord's obligation to observe and perform any of the provisions of this ARTICLE 20 shall survive the expiration of the Term or the earlier termination of this Lease. ARTICLE 21. Assignment, Subletting and Ownership (a) Tenant acknowledges that Tenant's agreement to operate in the Leased Premises for the Permitted Use for the Term, was a primary inducement and precondition to Landlord's agreement to lease the Leased Premises to Tenant. Accordingly, Tenant shall not transfer, assign, change ownership or hypothecate this Lease or Tenant's interest in and to the Leased Premises or any of the Individual Properties in whole or in part, or otherwise permit occupancy of all or any part thereof by anyone with, through, or under it, without first procuring the written consent of Landlord which may be granted or withheld in the sole and absolute discretion of Landlord. Any such attempt at transfer, assignment, change of ownership or hypothecation without Landlord's written consent shall be void and confer no rights upon any third person. The prohibitions of this ARTICLE 21 shall be construed to refer to any acts or events referred to when they occur by operation of law, legal process, receivership, bankruptcy or otherwise. Notwithstanding anything to the contrary in this ARTICLE 21, Tenant shall have the right to assign this Lease without Landlord's consent, but with notice to Landlord, to (i) any Qualified 18 Buyer, or (ii) any Subsidiary of Tenant, provided that such assignee assumes in full the obligations of Tenant under this Lease. In any such assignment of the Lease, Tenant shall be relieved of all obligations under this Lease provided the assignee has Enterprise Value as described required in the definition of Qualified Buyer. Tenant shall submit the request for an assignment (to the extent Landlord's consent is required) in writing with sufficient information and time for Landlord to make an informed decision as to the qualifications of the proposed assignee or sublessee. (b) Tenant may sublease any portion of the Lease Premises without the consent of Landlord provided that (i) Tenant remains obligated as provided in this Lease and (ii) to the extent Tenant receives any rent from any such subtenants in excess of Tenant's rent obligations in this Lease allocated to such Individual Property pursuant to the percentages provided in Section 26 of this Lease, fifty percent (50%) of such excess, after deducting Tenant's third party costs associated with such subleasing (including without limitation, brokerage), shall be paid immediately by Tenant to Landlord ("Sublease Profits"). Any failure of Tenant to pay the Sublease Profits to Landlord shall be a Default. (c) The consent by Landlord to any transfer, assignment, change of ownership or hypothecation shall not constitute a waiver of the necessity for such consent to any subsequent attempted transfer, assignment, subletting, change of ownership or hypothecation. Receipt by Landlord of rent due hereunder from any party other than Tenant shall not be deemed to be a consent to any such assignment, nor relieve Tenant of its obligation to pay rent or other charges for the full term of this Lease. Tenant shall have no claim and hereby waives the right to any claim against Landlord for damages by reason of any refusal, withholding or delaying by Landlord of any consent, and in such event Tenant's only remedies therefor shall be an action for specific performance or injunction to enforce any such requirement of consent. (d) Each transfer, assignment, subletting and hypothecation to which there has been consent shall be by instrument in writing in form reasonably satisfactory to Landlord, and shall be executed by the transferor, assignor, sublessor, hypothecator or mortgagor, and the transferee, assignee, sublessee, or mortgagee shall agree in writing for the benefit of Landlord to assume, be bound by, and perform the terms, covenants and conditions of this Lease to be done, kept and performed by Tenant and to retain all accounting records which Tenant is obligated to retain hereunder. One executed copy of such written instrument shall be delivered to Landlord. Each transfer, assignment or subletting between Tenant and the transferee, assignee or sublessee, shall specifically obligate such third party to observe and perform all of the obligations of this Lease and indicate that Landlord has the right to audit such other parties in accordance with the terms of this Lease. Failure to first obtain in writing Landlord's consent, to the extent required, or failure to comply with the provisions of this ARTICLE 21 shall operate to prevent any such transfer, assignment, subletting or hypothecation from becoming effective. If Landlord consents to any such transfer, Landlord agrees to provide evidence reasonably satisfactory to Tenant of Landlord's consent. ARTICLE 22. Access to Premises Tenant agrees that Landlord, its agents, employees or servants, or any person authorized by Landlord, may, upon reasonable notice to Tenant, enter any one or all of the Individual 19 Properties during normal business hours for the purpose of: (a) inspecting the condition of same; (b) exhibiting the same to prospective purchasers of the land or the buildings in which the Leased Premises or any of the Individual Properties are contained; and (c) placing notices, during the last six (6) months of the Term, in and upon said premises at such places as may be determined by Landlord. Tenant agrees that neither Tenant nor any person within Tenant's control shall interfere with such access. Except as otherwise provided in this Lease and in cases of emergency, Landlord shall not unreasonably disturb Tenant's conduct of business. ARTICLE 23. Defaults by Tenant (a) The occurrence of any of the following shall constitute a default and breach of this Lease by Tenant (a "Default"): (i) Tenant shall fail to pay when due any installment of rent, or any other payment required to be made by Tenant hereunder in whole or in part, and such failure shall continue for five (5) Business Days after written notice thereof by Landlord to Tenant; and/or (ii) A failure by Tenant to observe and perform any other provisions of this Lease to be observed or performed by Tenant, and such failure is not cured as soon as reasonably practicable and in any event within thirty (30) days after written notice thereof by Landlord to Tenant or, if such cure cannot reasonably be accomplished within thirty (30) days, no Default shall occur if Tenant commences such cure within such thirty (30) day period and diligently continues attempts to effectuate such cure to completion; and/or (iii) The making by Tenant of any general assignment for the benefit of creditors; the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or of a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within ninety (90) days); the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at any one of the Individual Properties or of Tenant's interest in this Lease; where possession is not restored to Tenant within thirty (30) days; or the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at any one of the Individual Properties or of Tenant's interest in this lease, where such seizure is not discharged within thirty (30) days; and/or (iv) a Change of Control. (b) In the event of any Default by Tenant, then in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice of such intention to terminate. In the event that Landlord shall elect to so terminate this Lease, then Landlord may recover from Tenant: (i) The worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus 20 (ii) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rent loss which could have been reasonably avoided (as liquidated damages); plus (iii) The worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rent loss which could be reasonably avoided (as liquidated damages); plus (iv) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time under applicable law. (c) The term "rent" as used herein shall be deemed to be and to mean the Minimum Annual Rent and all other sums required to be paid by Tenant pursuant to the terms of this Lease. All such sums, other than the Minimum Annual Rent, shall be computed on the basis of the average monthly amount thereof accruing during the immediately preceding twenty-four (24) month period prior to default, except that if it becomes necessary to compute such rent before such twenty-four (24) month period has occurred, then such rent shall be computed on the basis of the average monthly amount accruing during such shorter period. As used in paragraphs (i) and (ii) above, the "worth at the time of award" is computed by allowing interest at the rate of two percent (2%) above the published prime rate of Wachovia Bank, N.A., or its successor, not to exceed the maximum rate of interest allowed by law in the state of New York, and such interest shall be deemed to be additional rent. As used in paragraph (iii) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of ten percent (10%). (d) In the event of any Default by Tenant, Landlord shall also have the right to reenter the Leased Premises and remove all persons and property from the Leased Premises. Such property may be removed and stored in a public warehouse or elsewhere at the cost of Tenant. Landlord shall have no liability to Tenant for any loss or damage whatsoever resulting from such entry by Landlord, and Tenant hereby agrees to pay as additional rent upon demand any expenses or fees incurred or paid by Landlord as a result thereof. Tenant hereby waives notice of such reentry (or institution of legal proceedings). (e) In the event that Landlord shall elect to reenter as provided in paragraph (d) above or shall take possession of the Leased Premises pursuant to legal proceedings or pursuant to any notice provided by law, and if Landlord does not elect to terminate this Lease as provided in paragraph (b) above, then Landlord may from time to time, without terminating this Lease, either recover all Rent as it becomes due or relet the Leased Premises or any part thereof for such term or terms and at such rent or rent and upon such other terms and conditions and for such period of time as Landlord in its sole discretion may deem advisable, with the right to make alterations and repairs to the Leased Premises. (f) In the event that Landlord shall elect to relet, then rent received by Landlord from such reletting shall be applied first, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any cost of such reletting; third, to the payment of the cost of any alterations and repairs to the Leased Premises; fourth, to the payment of rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. Should that portion of such rent received from such reletting during any month, which is applied to the 21 payment of rent, be less than the rent payable during that month by Tenant hereunder, then Tenant shall pay such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. Notwithstanding anything in this paragraph (f) to the contrary, (i) to the extent that Landlord shall receive rent from reletting during any month in excess of the rent payable during that month by Tenant hereunder (after deducting Landlord's expenses of reletting, including without limitation, brokerage commissions and fees) ("Excess Rent"), such Excess Rent shall be applied as a credit against any amounts ("Deficiency Amounts") that Tenant shall have paid, or shall become obligated to pay, to Landlord pursuant to this paragraph (f), and (ii) on an annual basis, commencing one year after the termination of this Lease, Landlord shall reimburse Tenant for any Deficiency Amounts actually paid by Tenant to the extent that any Excess Rent is attributable to such Deficiency Amounts, and shall provide to Tenant an accounting therefor. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses incurred by Landlord in such reletting or in making such alterations and repairs not covered by the rent received from such reletting of the Leased Premises. (g) No reentry or taking possession of the Leased Premises by Landlord pursuant to paragraphs (d) or (e) of this ARTICLE 23 shall be construed as an election to terminate this Lease nor shall it cause a forfeiture of rent or other charges remaining to be paid during the balance of the term hereof, unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any reletting without termination by Landlord because of any default by Tenant, Landlord may at any time after such reletting, elect to terminate this Lease for any such default. (h) Tenant expressly waives any right or defense which it may have to claim a merger, and neither the commencement of any action or proceeding nor the settlement thereof, or entering of judgment therein shall bar Landlord from bringing subsequent actions or proceedings from time to time. (i) The parties hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Leased Premises or any claim of injury or damage. (j) Tenant shall not remove any personal property, equipment or furnishings from any of the Individual Properties during the existence of a Default. ARTICLE 24. Surrender of Premises (a) Upon (i) expiration of the Term, (ii) any Default under this Lease, or (iii) rejection of this Lease, the Leased Premises, including, without limitation, all building apparatus, equipment and personal property, including without limitation, the equipment described on Exhibit G attached hereto and named herein by reference and all additional personal property and equipment then upon the Leased Premises; and all alterations, improvements and other additions thereto that may have been made in, upon or about the Leased Premises shall be deemed automatically surrendered to Landlord. Tenant acknowledges and agrees that upon such events such equipment and personal property shall be the property of Landlord and Tenant shall thereafter have no rights in and to any such property and equipment. 22 (b) If Tenant shall abandon or vacate any Individual Property for any reason during the Term and Landlord exercises its remedies pursuant to ARTICLE 26, Tenant shall no longer have any rights in the personal property and equipment located at the Individual Property and such property shall become the property of Landlord as set forth in subsection (a) above. Tenant agrees to execute any documents which Landlord may request in connection with the transfer of Tenant's interests in such property including bills of sale at Landlord's request. (c) The Leased Premises and all said property shall be surrendered to Landlord by Tenant without any damage, injury, or disturbance thereto, or payment therefore, condemnation and ordinary wear and tear excepted. Tenant at its expense shall immediately repair any damage to the Leased Premises caused by Tenant vacating the same and shall leave the Leased Premises in a neat and clean condition, free of debris. (d) Tenant's obligation to observe and perform any of the provisions of this ARTICLE 24 shall survive the expiration of the Term or earlier termination of this Lease. ARTICLE 25. Tenant's Conduct of Business Tenant agrees to conduct its business at all times in a first-class manner consistent with reputable business standards and practices, and that it will keep the Leased Premises in a neat, safe, clean and orderly condition. ARTICLE 26. Tenant's Vacation or Abandonment of an Individual Property If the Tenant abandons or vacates an Individual Property for three (3) consecutive months, the Landlord may, at its option, terminate the Master Lease as its affects only the vacated or abandoned Individual Property by providing written notice to Tenant. For purposes of this ARTICLE 26, the terms "vacation" and "abandonment" shall apply although Tenant may have left all or any part of its trade fixtures, furniture, furnishings, signs, stock or other personal property within the Leased Premises. Until such time as Landlord determines whether to terminate the Lease as to the abandoned or vacated Individual Property, Tenant shall be responsible for all maintenance and other obligations under this Lease including the maintenance of the Individual Property abandoned and shall continue to pay all rents due under this Lease until Tenant receives notification from Landlord of Landlord's intention to terminate the Lease as it affects such Individual Property. Landlord and Tenant agree that for purposes of calculating the reduction in rent caused by the termination of the Lease as it affects such Individual Property, the following percentages shall be used for each Individual Property: (i) Delmont Property: 2% (ii) Edinburg Property: 12% (iii) El Paso Property: 21% (iv) Franklin Property: 33% (v) Kennewick Property: 17% (vi) Mobile Property: 15% 23 For example, if Tenant abandons the Delmont Property, and the Landlord terminates this Lease as it affects the Delmont Property, the Minimum Annual Rent shall be reduced by 2% beginning on the date on which Landlord receives rent from the replacement tenant. ARTICLE 27. Eminent Domain (a) In the event any Individual Property shall be appropriated or taken in its entirety under the power of eminent domain by any public or quasi-public authority, this Lease shall terminate and expire with respect to such Individual Property as of the date of such taking, and both Landlord and Tenant shall thereupon be released from any liability thereafter accruing hereunder with respect thereto. In the event more than thirty-five percent (35%) of the square footage of floor area or of the parking area of any Individual Property is taken under the power of eminent domain by any public or quasipublic authority, or if by reason of any appropriation or taking, regardless of the amount so taken, the remainder of such Individual Property is not usable for the purposes for which such Individual Property was leased, then Tenant shall have the right to terminate this Lease with respect to such Individual Property as of the date Tenant is required to vacate a portion of such Individual Property so taken upon giving notice to Landlord in writing of such election within sixty (60) days after the date of such taking. In the event of a termination pursuant to this ARTICLE 27, (i) both Landlord and Tenant shall thereupon be released from any liability thereafter accruing hereunder with respect to such Individual Property and (ii) the Minimum Annual Rent payable thereafter shall be reduced by the percentage amount provided in ARTICLE 26 above for the Individual Property affected. (b) Whether or not this Lease is terminated, Landlord shall be entitled to the entire award or compensation in such proceedings, except that Tenant may pursue reasonable relocation expenses. (c) If Tenant elects not to terminate this Lease, Tenant shall remain in that portion of the Leased Premises which shall not have been appropriated or taken as herein provided, and Tenant agrees, provided that all condemnation award proceeds are made available to it for such purpose, to, as soon as reasonably possible, restore the remaining portion of the Leased Premises to a complete unit of like quality and character as existed prior to such appropriation or taking; and thereafter the Minimum Annual Rent provided for in ARTICLE 4 hereof shall be adjusted on an equitable basis, taking into account the relative value of the portion taken as compared to the portion remaining and the relative impact thereon of the respective interests of Landlord and Tenant. ARTICLE 28. Attorneys' Fees In the event that at any time either Landlord or Tenant shall institute any action or proceeding against the other relating to the provisions of this Lease, on any Default hereunder, then, and in that event, the unsuccessful party in such action or proceeding agrees to reimburse the successful party for the reasonable expense of attorneys' fees and disbursements incurred therein by the successful party. Any obligation for attorneys' fees or disbursements incurred under this ARTICLE 28 shall be due and payable as additional rent under the provisions of this Lease. This ARTICLE 28 shall survive the expiration and/or termination of this Lease. 24 ARTICLE 29. Sale of Premises by Landlord Landlord may transfer any or all of its interest in this Lease or in the Leased Premises or any Individual Property, at any time without the consent of Tenant, provided that Tenant's obligations under this Lease shall remain the same (e.g., Tenant shall still only be required to send one rent check to the Landlord and it will be the Landlord's obligation to divide the rent). In the event of any sale or exchange of all or part of the Leased Premises by Landlord and/or assignment by Landlord of this Lease or a portion of its interest in this Lease, Landlord shall be and is hereby entirely freed and relieved of all liability under any and all of its covenants and obligations contained in or derived from this Lease arising out of any act, occurrence or omission relating to the Leased Premises or this Lease occurring after the consummation of such sale or exchange and assignment with respect to such transferred or assigned interest, provided that transferee assumes all of Landlord's obligations under the Lease. Tenant acknowledges that the Original Lease was collaterally assigned to Wachovia Bank, N.A., in its capacity as Agent under the Reimbursement Agreement dated as of November 20, 1997, as amended, among Landlord, the Lenders party thereto from time to time and Wachovia Bank, as Agent (the "Reimbursement Agreement") pursuant to a Mortgage and an Assignment of Rents (as defined in the Reimbursement Agreement) as to each of the properties comprising the Leased Premises, to secure Landlord's obligations to such Lenders under the Reimbursement Agreement, and agrees that such collateral assignments pursuant to such Mortgages and Assignments of Rent include this Lease, as an amendment and restatement of the Original Lease, and that this Lease shall constitute the "Lease" for all purposes under the Reimbursement Agreement. In Section 6.01 of the Reimbursement Agreement, the Agent agreed that, so long as all obligations of the Lessee are being paid as and when they come due pursuant to the Lease and no Event of Default has occurred under the Lease, the Lessee shall have no obligation under the Lease to pay Rent on an accelerated basis, and the Agent shall not terminate the Lease or disturb the rights of Lessee thereunder. Landlord represents and warrants to Tenant that such agreement of the Agent contained in the Reimbursement Agreement continues to apply to this Lease. ARTICLE 30. Notices All notices, offers, approvals, elections, consents, acceptances, waivers, reports, requests and other communications required or permitted to be given hereunder (all of the foregoing hereinafter collectively referred to as "Communications") shall be in writing and shall be deemed to have been duly given if delivered personally with receipt acknowledged or sent by facsimile (which shall be confirmed by a writing sent by registered or certified mail or equivalent on the same date that such facsimile is sent), or by recognized overnight courier for next Business Day delivery, addressed or sent to the parties at the following addresses and facsimile numbers or to such other additional address or facsimile number as any party shall hereafter specify by Communication to the other parties: 25 If to Landlord: Movieplex Realty Leasing, L.L.C. c/o Greenville Agricultural Credit Corporation 101 Greystone Blvd., Room 104 Columbia, South Carolina 29210 ATTN: Ms. Patricia Cato Facsimile: 803-988-4870 with a copy to: Wachovia Bank, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303-1757 ATTN: Syndications Group Facsimile: (404) 332-1394 with a copy to: Wachovia Bank, N.A. 191 Peachtree Street, N.E. 30th Floor Atlanta, Georgia 30303-1757 ATTN: Mr. Reginald Dawson Facsimile: (404) 332-6920 with a copy to: Jones, Day, Reavis & Pogue 3500 SunTrust Plaza 303 Peachtree Street, N.E. Atlanta, Georgia 30308-3242 ATTN: Christopher L. Carson, Esq. Facsimile: (404) 581-8868 If to Tenant: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901-2109 ATTN: Mr. Martin Durant Facsimile: (706) 576-5433 with a copy to: Carmike Cinemas, Inc. 1301 First Avenue Columbus, Georgia 31901-2109 ATTN: Mr. Lamar Fields Facsimile: (706) 576-3880 with a copy to: Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 ATTN: J. Philip Rosen, Esq. (RLY) Facsimile: (212) 310-8007 26 ARTICLE 31. Remedies All rights and remedies of Landlord herein created or otherwise extending at law are cumulative, and the exercise of one or more rights or remedies shall not be taken to exclude or waive the right to the exercise of any other. All such rights and remedies may be exercised and enforced concurrently and whenever and as often as deemed desirable. ARTICLE 32. Successors and Assigns All covenants, promises, conditions, representations and agreements herein contained shall be binding upon, apply and inure to the parties hereto and their respective heirs, executors, administrators, successors and assigns; it being understood and agreed, however, that the provisions of ARTICLE 21 hereof are in no way impaired by this ARTICLE 32. ARTICLE 33. Representations It is understood and agreed by Tenant that Landlord and Landlord's employees and agents have made no representations or promises with respect to the Leased Premises or the making or entry into this Lease, except as in this Lease expressly set forth, and that no claim or liability, or cause for termination, shall be asserted by Tenant against Landlord for, and Landlord shall not be liable by reason of, the breach of any representations or promises not expressly stated in this Lease. It is understood and agreed by Landlord that Tenant and Tenant's employees and agents have made no representations or promises with respect to the Leased Premises or the making or entry into this Lease, except as in this Lease expressly set forth, and that no claim or liability, or cause for termination, shall be asserted by Landlord against Tenant for, and Tenant shall not be liable by reason of, the breach of any representations or promises not expressly stated in this Lease. ARTICLE 34. Waiver The failure of Landlord to insist upon strict performance by Tenant of any of the covenants, conditions, provisions, rules and regulations, and agreements in this Lease, or to exercise any option, shall not be deemed a waiver of any of Landlord's rights or remedies and shall not be deemed a waiver of any subsequent breach or default by Tenant. The failure of Tenant to insist upon strict performance by Landlord of any of the covenants, conditions, provisions, rules and regulations, and agreements in this Lease, or to exercise any option, shall not be deemed a waiver of any of Tenant's rights or remedies and shall not be deemed a waiver of any subsequent breach or default by Landlord. No surrender of the Leased Premises shall be effected by Landlord's acceptance of rent or by any other means whatsoever unless the same be evidenced by Landlord's written acceptance of such as a surrender. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly rent shall be deemed to be other than on account of the earliest rent then unpaid, nor shall any endorsement or statement or any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this Lease. 27 ARTICLE 35. Holding Over If Tenant remains in possession of any part of the Leased Premises after the expiration of the term of this Lease without a new lease reduced to writing and duly executed and delivered (even if Tenant shall have paid, and Landlord shall have accepted, rent in respect to such holding over), Tenant shall be deemed to be occupying the entire Leased Premises only as a Tenant from month to month, subject to all covenants, conditions and agreements of this Lease, except as contemplated to the contrary in this ARTICLE 35. Such monthly rent shall be computed on the basis of one-eighth (1/8th) of the total rent payable by Tenant to Landlord during the last twelve (12) month period of the Term. ARTICLE 36. Interpretation The parties hereto agree that it is their intention hereby to create only the relationship of Landlord and Tenant, and that no provision hereof, or act of either party hereunder, shall ever be construed as creating the relationship of principal and agent, or a partnership, or a joint venture or enterprise between the parties hereto. ARTICLE 37. Administrative Fee Tenant shall pay an administrative fee to Wachovia Bank, N.A. (or any successor as Agent under the Reimbursement Agreement referred to in Article 29 hereof of which Tenant is notified in writing) in the amount of $30,000.00 each Lease Year on the Commencement Date and on each anniversary of such Commencement Date. ARTICLE 38. Covenant of Title Landlord covenants that it has full right, power and authority to make this Lease, and that Tenant or any permitted assignee or sublessee of Tenant, upon the payment of the rent and performance of the covenants upon Tenant's part to be performed hereunder, shall and may peaceably and quietly have, hold and enjoy the Leased Premises and improvements thereon during the Term of this Lease. ARTICLE 39. Waiver of Redemption Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Leased Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease or otherwise. The rights given to Landlord herein are in addition to any rights that may be given to Landlord by any statute or otherwise. ARTICLE 40. Fees Tenant warrants and represents that it has not had negotiations with or dealt with any realtor, broker or agent in connection with the negotiation and execution of this Lease, and Tenant agrees to pay and to hold Landlord harmless from any cost, expense or liability (including cost of suit and reasonable attorney's fees) for any compensation, commissions or charges claimed by any realtor, broker or agent with respect to this Lease and the negotiation thereof. Landlord warrants 28 and represents that it has not had negotiations with or dealt with any realtor, broker or agent in connection with the negotiation and execution of this Lease, and Landlord agrees to pay and to hold Tenant harmless from any cost, expense or liability (including cost of suit and reasonable attorney's fees) for any compensation, commissions or charges claimed by any realtor, broker or agent with respect to this Lease and the negotiation thereof. ARTICLE 41. Tenant's Property Landlord, its agents and employees shall not be liable and Tenant waives all claims for any damage to persons or property or to Tenant's business sustained by Tenant or any person claiming through Tenant located on the Leased Premises, nor for the loss of or damage to any property of Tenant or of others by theft or otherwise, whether caused by other tenants or persons in the Leased Premises, occupants of adjacent property, or the public, or caused by operations in construction of any private, public or quasi-public work, without being limited by any other provisions of this Lease, other than ARTICLE 21. All property kept or stored by Tenant on the Leased Premises shall be so kept or stored at the risk of Tenant only and Tenant shall hold Landlord harmless from any claims arising out of damage to the same or damage to Tenant's business, including subrogation claims by Tenant's insurance carrier, except to the extent arising under ARTICLE 21. ARTICLE 42. Lease Status At any time and from time to time, each party hereto shall, upon request of the other party, without charge, execute, acknowledge and deliver to the other party within thirty (30) days after request an instrument stating the commencement and termination dates of this Lease, the date on which rent commences, and if the same be true, that this Lease is a true and exact copy of the lease between the parties hereto, that there are no amendments hereof (or stating what amendments there may be), that the same is then in full force and effect and that, to the best of such party's knowledge, there are then no offsets, defenses or counterclaims with respect to the payment of rent reserved hereunder or in the performance of the other terms, covenants and conditions hereof on the part of such party to be performed, and that as of such date no default has been declared hereunder by either party hereto and that such party at the time has no knowledge of any facts or circumstances which it might reasonably believe would give rise to a default by either party. Each party shall remain liable to the other party for any damages sustained by such other party because of such failure by such party. Notwithstanding the foregoing, the failure of a party to execute, acknowledge and deliver the aforementioned instrument shall constitute an acknowledgment by such party that this Lease is unmodified and in full force and effect and shall constitute, as to any person or entity entitled to rely upon such statements, a waiver of any default by such party which may exist prior to the date of such notice. ARTICLE 43. Recording Landlord and Tenant agree to record a memorandum or so-called "short form" of this Lease in the appropriate real estate records for the Individual Properties. 29 ARTICLE 44. Construction of Lease Tenant declares that Tenant has read and understands all parts of this Lease, including all printed parts hereof. It is agreed that in the construction and interpretation of the terms of this Lease, that the rule of construction that a document is to be construed most strictly against the party who prepared the same shall not be applied, it being agreed that both parties hereto have participated in the preparation of the final form of this Lease. ARTICLE 45. Captions Captions throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction or meaning of the provisions of this Lease. The use of the terms "hereof", "hereunder" and "herein" shall refer to this Lease as a whole, inclusive of the exhibits, except when noted otherwise. The use of the masculine or neuter genders herein shall include the masculine, feminine and neuter genders. The singular form shall include the plural when the context so requires. As used herein the terms "Landlord" and "Tenant" shall mean and include "Landlord" and "Tenant" and "its/their agents and employees," unless the context otherwise requires. ARTICLE 46. Severability If any provision of this Lease or any term, paragraph, sentence, clause, phrase or word appearing herein be judicially or administratively held invalid or unenforceable for any reason, such holding shall not be deemed to affect, alter, modify or impair in any manner any other provision, term, paragraph, sentence, clause, phrase or word appearing herein. Landlord and Tenant acknowledge that certain charges, fees and other payments are deemed "additional rent" herein for the purpose of enforcing Landlord's remedies, and shall not be construed as "rent" in the event of imposition of rent controls. ARTICLE 47. Amendment and Restatement Landlord and Tenant each acknowledge and agree that this Lease is an amendment and restatement of the Original Lease and that this Lease supersedes the Original Lease in all respects. ARTICLE 48. Liability of Landlord Tenant acknowledges and agrees that all liability of Landlord under this Lease or arising out of the relationship of the parties created thereby shall be limited to its interest in the Leased Premises. No personal judgment shall lie against Landlord upon extinguishment of its rights in the Leased Premises and any judgment so rendered shall not give rise to any right of execution or levy against Landlord's assets (other than the Leased Premises). The provisions hereof shall inure to Landlord's successors and assigns. The foregoing provisions are not designed to relieve Landlord from the performance of any of Landlord's obligations under this Lease, but only to limit the personal liability of Landlord in case of recovery of a judgment against Landlord, nor shall the foregoing be deemed to limit Tenant's rights to obtain injunctive relief or specific 30 performance or to avail itself of any other right or remedy which may be awarded Tenant by law or under this Lease. ARTICLE 49. Entire Agreement This Lease and the exhibits attached hereto constitute the sole and exclusive agreement between the parties with respect to the Leased Premises. No amendment, modification of or supplements of this Lease shall be effective unless in writing and executed by Landlord and Tenant. ARTICLE 50. No Third-Party Rights This Lease shall not confer, or be construed as conferring (directly, indirectly, contingently or otherwise), any rights or benefits on any Person that is not a named party to this Lease, including any so-called third-party beneficiary rights. ARTICLE 51. Financial Statements (a) As soon as available and in any event within ninety (90) days following the close of each fiscal year of Tenant during the Term, Tenant shall furnish to Landlord a condensed, consolidated balance sheet of Tenant and its Subsidiaries as of the end of such fiscal year and the related condensed statement of income and condensed statement of cash flows for the year then ended, together with an opinion of an independent certified public accountant satisfactory to Landlord or, at the election of Landlord, a certificate of the chief financial officer, owner or partner of Tenant to the effect that the financial statements have been prepared in conformity with generally accepted accounting principles consistently applied and fairly present the financial condition and results of operations of Tenant as of and for the period covered. (b) As soon as available and in any event within forty-five (45) days after the end of each of the first three (3) fiscal quarters of each fiscal year, Tenant shall furnish to Landlord a condensed, consolidated balance sheet of Tenant 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 as to fairness of presentation, GAAP and consistency by the chief financial officer of Tenant. ARTICLE 52. Integrated Lease Tenant acknowledges that this Lease constitutes one integrated true lease of the Leased Premises and not separate leases of each Individual Property. ARTICLE 53. Multiple Counterparts The Lease may be executed in several counterparts, each of which shall be deemed an original, and all such counterparts shall together constitute one and the same instrument. 31 IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Lease on the day and year first above mentioned. WITNESS: LANDLORD: MOVIEPLEX REALTY LEASING, L.L.C. By: MoviePlex Realty Leasing Trust, its sole member By: Greenville Agricultural Credit Corporation, its Manager By: - ----------------------------- ------------------------------ Patricia Cato Vice President TENANT: ATTEST: CARMIKE CINEMAS, INC. By: - ----------------------------- -------------------------------------- Name: Title: 32 EX-23 7 g74873ex23.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements Form S-8 (No. 333-53329) pertaining to Carmike Cinemas, Inc.'s 1998 Class A Stock Option Plan, Form S-8 (No. 333-85194) pertaining to Carmike Cinemas, Inc. 2002 Stock Plan, and Form S-4 (No. 333-77333) pertaining to the registration of $200 million of its 9 3/8% Series B Senior Subordinated Notes due 2009 of our report dated March 27, 2002 with respect 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, 2001. /s/ Ernst & Young LLP Atlanta, Georgia March 29, 2002 -----END PRIVACY-ENHANCED MESSAGE-----