NOTE 7—DEBT

Debt consisted of the following as of December 31, 2011 and 2010:


	December 31,
	2011			2010
Term loan	$	198,923	⁽¹⁾	$	235,491
Current maturities		(2,043	)		(2,399	)

	$	196,880		$	233,092

(1)	Term loan is reflected net of unamortized discount of $1,306.

In January 2010, the Company entered into a $265,000 senior secured term loan with an interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 3.5%, or the base rate (subject to a floor of 3.0%) plus a margin of 2.5%, as the Company may elect. The Credit Agreement (as amended) provides that if the Company's leverage ratio exceeds 4.50 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by 25 basis points (0.25%), and if the leverage ratio exceeds 5.00 to 1.00 for any period of four consecutive fiscal quarters, the interest rate on outstanding term loans would increase by an additional 25 basis points (0.25%).

The debt was issued with a discount of approximately $2,650, which is being amortized to interest expense using the effective interest method over the life of the debt. The proceeds were used to repay the Company's $170,000 seven year term loan that was due in May 2012 with a then outstanding balance of $139,634 and the $185,000 seven year delayed-draw term loan facility that was due in May 2012 with a then outstanding balance of $111,152. The Company recorded a loss on extinguishment of debt of $2,573 for the year ended December 31, 2010 for the write-off of unamortized debt issuance costs. The Company is currently required to make principal repayments of the senior secured term loan in the amount of $511 on the last day of each calendar quarter, with a balance of $192,567 due at final maturity on January 27, 2016. During the year ended December 31, 2011, the Company voluntarily repaid $35,000 of principal on its senior secured term loan. At December 31, 2011 and 2010, the average interest rate on the Company's debt was 5.50%.

In January 2010, the Company also entered into a new $30,000 revolving credit facility with an initial interest rate of LIBOR (subject to a floor of 2.0%) plus a margin of 4.0%, or base rate (subject to a 3.0% floor) plus a margin 3.0%, as the Company might elect. The applicable margins are subject to adjustment based on the Company's ratio of total debt to EBITDA as reflected in the Company's quarterly or annual financial statements, with the margins ranging from 3.50% to 4.00% on LIBOR based loans, and from 2.50% to 3.00% on base rate based loans. In addition, the Company is required to pay commitment fees on the unused portion of the new revolving credit facility. The commitment fee rate was initially 0.75% per annum, and is also subject to adjustment based on the Company's ratio of total debt to EBITDA, with the rates ranging from 0.50% to 0.75%. The final maturity date of the revolving credit facility is January 27, 2013. The new $30,000 revolving credit facility replaced the prior $50,000 revolving credit facility that was scheduled to mature in May 2010. There was no outstanding balance on the revolving credit facilities at December 31, 2011 and 2010.

The credit agreement for the term loan and revolving credit facilities requires that mandatory prepayments be made from (1) 100% of the net cash proceeds from certain asset sales or dispositions or issuances of certain debt obligations, (2) 100% of the net cash proceeds from sales-leaseback transactions, and (3) various percentages (ranging from 0% to 75% depending on our consolidated leverage ratio) of excess cash flow as defined in the credit agreement. In addition, the first amendment to the Credit Agreement imposes a prepayment fee of 1% of the amount prepaid in connection with certain refinancings and repricings occurring prior to March 3, 2012. The Company made voluntary debt prepayments during 2011 of $35,000, including $15,000 from after tax Screenvision funds (see Note 11—Screenvision Transaction). As a result, the Company has obtained a consent from its lenders which modifies the excess cash flow payment for the year ended December 31, 2011 to exclude the effect of the $30,000 Screenvision receivable. The Company is therefore not required to make an excess cash flow payment for 2011.

The senior secured term loan and revolving credit facilities are guaranteed by each of the Company's subsidiaries and secured by a perfected first priority security interest in substantially all of the Company's present and future assets.

The Company is required as part of the senior secured term loan facility to enter into interest rate protection to the extent necessary to provide that at least 50% of the term loan is subject to either a fixed interest rate or interest rate protection for a period of not less than three years.

Interest Rate Cap Agreement

On April 15, 2010, the Company entered into a three-year interest rate cap agreement. This agreement caps the interest rate on $125,000 of aggregate principal amount of the Company's outstanding term loan at 9.5%. As of December 31, 2011, the fair value of the interest rate cap was immaterial.

Debt Covenants

The senior secured term loan and revolving credit facilities contain covenants which, among other things, restrict the Company's ability, and that of its restricted subsidiaries, to:

•

pay dividends or make any other restricted payments to parties other than us;

•

incur additional indebtedness and financing obligations;

•

create liens on our assets;

•

make certain investments;

•

sell or otherwise dispose of our assets other than in the ordinary course of business;

•

consolidate, merge or otherwise transfer all or any substantial part of our assets;

•

enter into transactions with our affiliates; and

•

engage in businesses other than those in which we are currently engaged or those reasonably related thereto.

The Credit Agreement for the term loan and revolving credit facilities imposes an annual limit of $25.0 million on capital expenditures, plus a carryforward of $5.0 million of any unused capital expenditures from the prior year. In addition to the dollar limitation, the Company may not make any capital expenditure if any default or event of default under the credit agreement has occurred and is continuing, or if a breach of the financial covenants contained in the credit agreement would result on a pro forma basis after giving effect to the capital expenditure.

The Credit Agreement also contains financial covenants that require the Company to maintain a ratio of funded debt to adjusted EBITDA ("leverage ratio") below a specified maximum ratio, a ratio of adjusted EBITDA to interest expense ("interest coverage ratio") above a specified minimum ratio and a ratio of total adjusted debt (adjusted for certain leases and financing obligations) to adjusted EBITDA plus rental expense ("EBITDAR ratio") below a specified maximum ratio. The financial covenants contain normal and customary periodic changes in the required ratios over the life of the senior secured term loan and revolving credit facilities.

Leverage Ratio- The maximum leverage ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 5.50 to 1.00 for any four quarter period ending March 31, 2011 through June 30, 2012; (b) 5.00 to 1.00 for any four quarter period ending September 30, 2012 through December 31, 2012; (c) 4.50 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 4.25 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 4.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

Interest Coverage Ratio- The minimum interest coverage ratio as of the last day of any four consecutive fiscal quarters may not be less than: (a) 1.50 to 1.00 for any four quarter period ending March 31, 2011 through December 31, 2011; (b) 1.60 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 1.75 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 1.85 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 2.00 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

EBITDAR Ratio- The maximum EBITDAR ratio as of the last day of any four consecutive fiscal quarters may not exceed: (a) 8.00 to 1.00 for any four quarter period ending December 31, 2010 through December 31, 2011; (b) 7.50 to 1.00 for any four quarter period ending March 31, 2012 through December 31, 2012; (c) 7.00 to 1.00 for any four quarter period ending March 31, 2013 through December 31, 2013; (d) 6.75 to 1.00 for any four quarter period ending March 31, 2014 through December 31, 2014; and (e) 6.50 to 1.00 for any four quarter period ending March 31, 2015 or thereafter.

As of December 31, 2011, the Company was in compliance with all of the financial covenants in the amended Credit Agreement for the term loan and revolving credit facilities. As of December 31, 2011, the Company's leverage, interest coverage, and EBITDAR ratios were 3.02, 2.61, and 5.66, respectively.

The Company's financial results depend to a substantial degree on the availability of suitable motion pictures for screening in its theatres and the appeal of such motion pictures to patrons in its specific theatre markets. Based on the current projections and the Company's current financial covenant ratios, the Company believes it will remain in compliance with its financial covenants for the foreseeable future. However, it is possible that the Company may not comply with some or all of its financial covenants in the future.

In such events, the Company could seek waivers or additional amendments to the Credit Agreement if a violation did occur. However, the Company can provide no assurance that it will successfully obtain such waivers or amendments from its lenders. If the Company is unable to comply with some or all of the financial or non-financial covenants and if it fails to obtain future waivers or amendments to the Credit Agreement, the lenders may terminate the revolving credit facility with respect to additional advances and may declare all or any portion of the obligations under the revolving credit facility and the term loan facility due and payable.

Debt Maturities

At December 31, 2011 the Company's future maturities of long-term debt obligations are as follows:


	2012		2013		2014		2015		2016		Thereafter	Total
Senior secured term loan	$	2,043	$	2,043	$	2,043	$	1,533	$	192,567	—	$	200,229

The fair value of the senior secured term loan is estimated based on quoted market prices at the date of measurement as follows:


	Year ended December 31,
	2011		2010
Carrying amount, net	$	198,923	$	235,491
Fair value	$	198,247	$	239,244