-----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, QQ6fKpORsJseQzr0u2yB8kvZLj7PfGMDRIWDMNJ2IS7rHghnUvllMonyS1b4rXcN 0leg12U5Qgf7l2S6zPgw3A== 0000950144-98-009326.txt : 19980812 0000950144-98-009326.hdr.sgml : 19980812 ACCESSION NUMBER: 0000950144-98-009326 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19980702 FILED AS OF DATE: 19980810 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REGAL CINEMAS INC CENTRAL INDEX KEY: 0000905035 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830] IRS NUMBER: 621412720 STATE OF INCORPORATION: TN FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21772 FILM NUMBER: 98681615 BUSINESS ADDRESS: STREET 1: 7132 COMMERCIAL PARK DR CITY: KNOXVILLE STATE: TN ZIP: 37918 BUSINESS PHONE: 4239221123 MAIL ADDRESS: STREET 1: 7132 COMMERCIAL PARK DR CITY: KNOXVILLE STATE: TN ZIP: 37918 10-Q 1 REGAL CINEMAS FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 1998 Commission file number 333-52943 --------- Regal Cinemas, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Tennessee 62-1412720 - ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 7132 Commercial Park Drive Knoxville, Tennessee 37918 -------------------------------------- --------------------- (Address of Principal Executive Offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (423) 922-1123 ---------------------- 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 ----- ----- 1 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. - -------------------------------------------------------------------------------- REGAL CINEMAS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (in thousands of dollars) ASSETS
JULY 2, JANUARY 1, 1998 1998 --------- --------- Current assets: Cash and equivalents .................... $ 27,480 $ 18,398 Accounts receivable ..................... 1,080 4,791 Inventories ............................. 2,194 2,159 Prepaids and other current assets ....... 8,255 6,377 Refundable income taxes ................. 7,744 2,424 --------- --------- Total current assets ................. 46,753 34,149 --------- --------- Property and equipment: Land .................................... 54,330 53,955 Buildings and leasehold improvements .... 415,345 366,323 Equipment ............................... 244,428 211,465 Construction in progress ................ 55,310 46,529 --------- --------- 769,413 678,272 Accumulated depreciation and amortization (131,232) (112,927) --------- --------- Total property and equipment, net .... 638,181 565,345 Goodwill, net ................................ 55,475 52,619 Other assets ................................. 44,005 8,537 --------- --------- Total assets ......................... $ 784,414 $ 660,650 ========= =========
See accompanying notes to condensed consolidated financial statements. 2 3 REGAL CINEMAS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) ------------------------------------------------- (in thousands of dollars, except share amounts) LIABILITIES AND SHAREHOLDERS' DEFICIT
JULY 2, JANUARY 1, 1998 1998 --------- -------- Current liabilities: Current maturities of long-term debt (Note 4) .......... $ 306 $ 306 Accounts payable ....................................... 38,582 38,982 Accrued expenses ....................................... 35,517 13,739 --------- -------- Total current liabilities ........................... 74,405 53,027 --------- -------- Long-term debt, less current maturities (Note 4) ............ 775,963 288,277 Other liabilities ........................................... 10,184 12,771 --------- -------- Total liabilities ................................... 860,552 354,075 --------- -------- Commitments (Note 4) Shareholders' equity (deficit) (Note 1): Preferred stock, no par; 100,000,000 shares authorized, none issued ............................. -- Common stock, no par; 500,000,000 shares authorized; 155,494,566 and 223,903,849 shares issued and outstanding at July 2, 1998 and January 1, 1998 ..................................... (118,941) 223,707 Retained earnings ........................................... 42,803 82,868 --------- -------- Total shareholders' equity (deficit) ................ $ (76,138) $306,575 --------- -------- Total liabilities and shareholders' equity .......... $ 784,414 $660,650 ========= ========
See accompanying notes to condensed consolidated financial statements. 3 4 REGAL CINEMAS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------- (in thousands of dollars)
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------ ------------------------ JULY 2, JULY 3, JULY 2, JULY 3, 1998 1997 1998 1997 --------- --------- --------- --------- Revenue: Admissions ...................... $ 95,571 $ 73,941 $ 190,918 $ 150,455 Concessions ..................... 41,940 32,379 82,041 62,996 Other operating revenue ......... 8,485 4,860 15,184 8,739 --------- --------- --------- --------- Total revenues ........... 145,996 111,180 288,143 222,190 --------- --------- --------- --------- Operating expenses: Film rental and advertising costs 55,141 41,122 103,987 81,298 Cost of concessions and other ... 6,626 5,252 12,995 10,217 Theatre operating expenses ...... 50,508 37,990 100,177 75,112 General and administrative expenses .................... 3,801 4,977 8,011 9,544 Depreciation and amortization ... 10,336 7,272 19,917 14,460 Recapitalization expenses (Note 1) .................... 62,047 -- 62,047 -- --------- --------- --------- --------- Total operating expenses . 188,459 96,613 307,134 190,631 --------- --------- --------- --------- Operating income (loss) ........... (42,463) 14,567 (18,991) 31,559 Other income (expense): Interest expense ............ (8,536) (3,197) (13,327) (6,077) Interest income ............. 318 56 467 173 Other ....................... 4 (141) (236) (331) --------- --------- --------- --------- Income (loss) before income taxes and extraordinary loss .......... (50,677) 11,285 (32,087) 25,324 Provision for (benefit from) income taxes (Note 5) ........... (11,162) 4,347 (3,912) 9,799 --------- --------- --------- --------- Income (loss) before extraordinary loss) ........................... (39,515) 6,938 (28,175) 15,525 Extraordinary loss -- loss on retirement of debt, net of income tax benefit of $7,602 (Note 4) .......... (11,890) -- (11,890) --------- --------- --------- --------- Net income (loss) ................. $ (51,405) $ 6,938 $ (40,065) $ 15,525 ========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements. 4 5 REGAL CINEMAS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (in thousands of dollars)
SIX MONTHS ENDED ------------------------- JULY 2, JULY 3, 1998 1997 ----------- -------- Cash flows from operating activities: Net income (loss)(1) ................................... $ (40,065) $ 15,525 Adjustments to reconcile net income to net cash provided by operating activities: Noncash loss on extinguishment of debt ......... 3,026 -- Depreciation and amortization .................. 19,917 14,460 Loss (gain) on sale of assets .................. (23) 331 Deferred income taxes .......................... (9,664) 133 Changes in operating assets and liabilities: Accounts receivable .......................... 3,711 1,139 Inventories .................................. (35) (534) Prepaids and other current assets ............ (7,198) (554) Accounts payable ............................. (400) 1,594 Accrued expenses and other liabilities ....... 28,855 4,693 ----------- -------- Net cash provided (used) by operating activities(1) ........................... (1,876) 36,787 Cash flows from investing activities: Capital expenditures, net ........................... (91,119) (77,387) Investment in goodwill and other assets ............. (8,030) (13,775) ----------- -------- Net cash used in investing activities ... (99,149) (91,162) Cash flows from financing activities: Long-term debt borrowings ........................... 790,000 50,868 Payments made on long-term debt ..................... (302,314) -- Deferred financing costs ............................ (34,931) -- Proceeds from issuance of common stock .............. 774,717 751 Purchase and retirement of common stock ............. (1,117,407) -- Stock compensation expense .......................... 42 60 ----------- -------- Net cash provided by financing activities 110,107 51,679 ----------- -------- Net increase (decrease) in cash and equivalents ........ 9,082 (2,696) Cash and equivalents at beginning of period ............ 18,398 17,116 ----------- -------- Cash and equivalents at end of period .................. $ 27,480 $ 14,420 =========== ========
- ---------- (1) Includes $46,451 of Recapitalization expenses, net of tax benefit. See accompanying notes to condensed consolidated financial statements. 5 6 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 1. RECAPITALIZATION On May 27, 1998, an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR") and an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") merged with and into Regal Cinemas, Inc. (the "Merger"), with the Company continuing as the surviving corporation of the Merger. The Merger and related transactions have been recorded as a recapitalization (the "Recapitalization"). In the Recapitalization, the Company's existing shareholders, received cash for their shares of common stock. In addition, in connection with the Recapitalization, the Company canceled options and repurchased warrants held by certain former directors, management and employees of the Company (the "Option/Warrant Redemption"). The aggregate amount paid to effect the Merger and the Option/Warrant Redemption was approximately $1.2 billion. The net proceeds of the $400 million senior subordinated notes, initial borrowings of $375.0 million under the senior credit facility and the proceeds of $776.9 million from the investment by KKR, Hicks Muse, DLJ Merchant Banking Partners II, L.P. and affiliated funds ("DLJ") and management in the Company was used: (i) to fund the cash payments required to effect the Merger and the Option/Warrant Redemption; (ii) to repay and retire the Company's existing senior credit facilities; (iii) to repurchase the existing Regal 8.5% senior subordinated notes; (iv) to pay related fees and expenses; and (v) for general corporate purposes. Upon consummation of the Merger, KKR owned $287.3 million of the Company's equity securities, Hicks Muse owned $437.3 million of the Company's equity securities and DLJ owned $50.0 million of the Company's equity securities. Each investor received securities consisting of a combination of Common Stock and the Company's Series A Convertible Preferred Stock, no par value ("Convertible Preferred Stock"), which was converted into Common Stock on June 3, 1998. To equalize KKR's and Hicks Muse's investments in the Company at $362.3 million each, Hicks Muse exchanged $75.0 million of Convertible Preferred Stock, with KKR for $75.0 million of common stock of Act III Cinemas, Inc. ("Act III"). Upon completion of the Recapitalization and the conversion of the Convertible Preferred Stock, KKR, Hicks Muse and DLJ own approximately 46.6%, 46.6% and 6.4%, respectively, of the Company's Common Stock. During 1998, nonrecurring costs of approximately $62.0 million, including approximately $39.8 million of compensation costs, were incurred in connection with the Recapitalization. Financing costs of approximately $34.2 million were incurred and classified as deferred financing costs which will be amortized over the lives of the new debt facilities (see Note 4). Of the total Merger Recapitalization costs above, $19.5 million was paid to KKR and Hicks Muse. 2. THE COMPANY AND BASIS OF PRESENTATION Regal Cinemas, Inc. ("Regal") and its wholly owned subsidiaries, collectively referred to as the "Company" operates multi-screen motion picture theatres principally throughout the eastern United States. The Company formally operates on a fiscal year ending on the Thursday closest to December 31. On July 31, 1997, Regal issued 2,837,594 shares of its common stock for all of the outstanding common stock of Cobb Theatres. The merger has been accounted for as a pooling of interests and, accordingly, these condensed consolidated financial statements have been restated for all periods to include the results of operations and financial positions of Cobb Theatres. 6 7 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- Separate results of the combining entities for the three and six-month periods ended July 3, 1997 are as follows:
Three Six Months Months Ended Ended July 3, 1997 July 3, 1997 ------------ ------------ Revenues: (in thousands) Regal ...................................... $ 79,083 $ 157,129 Cobb Theatres, L.L.C. and Tricob Partnership 32,097 65,061 --------- --------- $ 111,180 $ 222,190 ========= ========= Net (loss): Regal ...................................... $ 7,812 $ 16,348 Cobb Theatres, L.L.C. and Tricob Partnership (874) (823) --------- --------- $ 6,938 $ 15,525 ========= =========
3. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheet as of July 2, 1998, the condensed consolidated statements of operations for the three months and six months ended July 2, 1998 and July 3, 1997 and the condensed consolidated statements of cash flows for the six months ended July 2, 1998 and July 3, 1997 have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The January 1, 1998 information has been derived from the audited January 1, 1998 balance sheet of Regal Cinemas, Inc. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Report filed on Form 10-K dated March 31, 1998. The results of operations for the three and six-month periods ended July 2, 1998 are not necessarily indicative of the operating results for the full year. 7 8 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 4. LONG-TERM DEBT Long-term debt at July 2, 1998 and January 1, 1998, consists of the following:
JULY 2, JANUARY 1, 1998 1998 -------- -------- (IN THOUSANDS) $400,000 Regal senior subordinated notes due June 1, 2008, with interest payable semiannually at 9.5%. Notes are redeemable, in whole or in part, at the option of the Company at any time on or after June 1, 2003, at the redemption prices (expressed as percentages of the principal amount thereof) set forth below together with accrued and unpaid interest to the redemption date, if redeemed during the 12 month period beginning on June 1 of the years indicated: Year Redemption Price ---- ---------------- 2003 104.750% 2004 103.167% 2005 101.583% 2006 and thereafter 100.000% $400,000 -- Term Loans 375,000 -- Revolving credit facility -- -- $125,000 Regal senior subordinated notes, due October 1, 2007 with interest payable semiannually at 8.5% 125,000 $250,000 Regal senior reducing revolving credit facility -- 162,000 Other 1,269 1,583 -------- -------- 776,269 288,583 Less current maturities (306) (306) -------- -------- $775,963 $288,277 ======== ========
The Company's debt at July 2, 1998, is scheduled to mature as follows: (in thousands) 1998....................... $ 306 1999....................... 2,093 2000....................... 2,400 2001....................... 3,750 2002....................... 3,750 Thereafter................. $ 763,970 --------- Total...................... $ 776,269 ========= 8 9 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 4. LONG-TERM DEBT, CONTINUED Under the Company's previous $250,000 senior reducing revolving credit facility (the "revolving credit facility"), interest was payable quarterly at LIBOR plus .65%. The margin added to LIBOR was determined based upon certain financial ratios of the Company. The revolving credit facility was repaid in conjunction with the Recapitalization. NEW CREDIT FACILITIES -- In connection with the Merger and Recapitalization, the Company entered into credit facilities provided by a syndicate of financial institutions. Such credit facilities (the "Credit Facilities") include a $350,000 Revolving Credit Facility (including the availability of Revolving Loans, Swing Line Loans, and Letters of Credit) and three term loan facilities: Term A ($120,000), Term B ($120,000), and Term C ($135,000) (the "Term Loans"). The Company must pay an annual commitment fee ranging from 0.2% to 0.425%, depending on the Company's Total Leverage Ratio, as defined, of the unused portion of the Revolving Credit Facility. The Revolving Credit Facility expires in June 2005. No borrowings were outstanding under the Revolving Credit Facility at July 2, 1998. Borrowings under the Term A Loan or the Revolving Credit Facility can be made at the "Base Rate" plus a margin of 0% to 1%, or the "LIBO Rate," plus .625% to 2.25%, both depending on the Total Leverage Ratio. The Base Rate on revolving loans is the rate established by the Administrative Agent in New York as its base rate for dollars loaned in the United States. The LIBO Rate is based on the LIBOR rate for the corresponding length of loan. One percent of the outstanding balance on the Term A Loan is due annually though 2004 with the balance of the Term A Loan due in 2005. Borrowings under the Term B Loan can be made at the Base Rate plus a margin of 0.75% to 1.25% or the LIBO Rate plus 2.0% to 2.5%, both depending on the Total Leverage Ratio. One percent of the outstanding balance is due annually through 2005, with the balance of the loan due in 2006. Borrowings under the Term C Loan can be made at the Base Rate plus a margin of 1.0% to 1.5% or the LIBO Rate plus 2.25% to 2.75%, both depending on the Total Leverage Ratio. One percent of the outstanding balance is due annually through 2006, with the balance of the loan due in 2007. The Credit Facilities contain customary covenants and restrictions on the Company's ability to issue additional debt or engage in certain activities and include customary events of default. In addition, the Credit Facilities specify that the Company must meet or exceed defined interest coverage ratios and must not exceed defined leverage ratios. The Company was in compliance with such covenants at July 2, 1998. The Credit Facility is secured by a pledge of the stock of the Company's domestic subsidiaries. The Company's payment obligations under the Credit Facility is guaranteed by its direct and indirect U.S. subsidiaries. 9 10 REGAL CINEMAS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED --------------------------------------------------------------- 4. LONG-TERM DEBT, CONTINUED TENDER OFFER -- In connection with the Recapitalization, the Company commenced a tender offer for all of the Regal 8.5% senior subordinated notes ("Regal Notes") and a consent solicitation in order to effect certain changes in the Indenture. Upon completion of the tender offer, holders had tendered and given consents with respect to 100% of the outstanding principal amount of the Regal Notes. In addition, the Company and the trustee executed a supplement to the Indenture, effecting the proposed amendments which included, among other things, the elimination of all financial covenants for the Regal Notes. On May 27, 1998, the Company paid, for each $1,000 principal amount, $1,116.24 for Regal Notes tendered plus, in each case, accrued and unpaid interest of $13.22. Regal financed the purchase price of the Regal Notes with funds from the Recapitalization. EXTRAORDINARY LOSS -- An extraordinary loss of $11.9 million, net of income taxes of $7.6 million, was recognized for the write-off of deferred financing costs and prepayment penalties incurred in connection with redeeming the Regal Notes as well as for the write-off of deferred financing costs related to the Company's previous credit facility. 5. INCOME TAXES The effective income tax rate on income (loss) before extraordinary items for the six month periods ended July 2, 1998 and July 3, 1997 differs from the statutory federal income tax rate of 35% as follows:
SIX MONTHS ENDED ------------------ JULY 2, JULY 3, 1998 1997 ------- ------- Federal statutory tax rate.......................... 35.0% 35.0% Nondeductible recapitalization costs................ (26.8%) -- State taxes, net of federal effect.................. 4.0% 3.7% ------ ------- Effective rate............................. 12.2% 38.7% ====== =======
6. CAPITAL STOCK Earnings per share information is not presented as the Company's shares do not trade in a public market. After the Recapitalization, the Company effected a stock split resulting in a price per share of $5.00, which $5.00 per share price is equivalent to the $31.00 per share consideration paid in the Merger. The January 1, 1998 shares outstanding have been adjusted to reflect such equivalent shares. 7. RECLASSIFICATIONS Certain reclassifications have been made to the 1997 financial statements to conform with the 1998 presentation. These reclassifications had no impact on previously reported results of operations or shareholders' deficit. 10 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following analysis of the financial condition and results of operations of the Company, should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included herein. BACKGROUND OF REGAL Regal has achieved significant growth in theatres and screens since its formation in November of 1989. Since inception through July 2, 1998, Regal acquired 191 theatres with 1,510 screens, developed 70 new theatres with 879 screens and added 78 new screens to existing theatres. Theatres developed by the Company typically generate positive theatre level cash flow within the first three months following commencement of operation and reach a mature level of attendance within one to three years following commencement of operation. Theatre closings have had no significant effect on the operations of Regal. RESULTS OF OPERATIONS The Company's revenues are generated primarily from box office receipts and concession sales. Additional revenues are generated by electronic video games located adjacent to the lobbies of certain of the Company's theatres, and by on-screen advertisements and revenues from the Company's five entertainment centers which are adjacent to theatre complexes. Direct theatre costs consist of film rental costs, costs of concessions and theatre operating expenses. Film rental costs are related to the popularity of a film and the length of time since the film's release and generally decline as a percentage of admission revenues the longer a film has been released. Because certain concession items, such as fountain drinks and popcorn, are purchased in bulk and not pre-packed for individual servings, the Company is able to improve its margins by negotiating volume discounts. Theatre operating expenses consist primarily of theatre labor and occupancy costs. Future increases in minimum wage requirements or legislation requiring additional employer funding of health care, among other things, may increase theatre operating expenses as a percentage of total revenues. 11 12 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED The following table sets forth for the fiscal periods indicated the percentage of total revenues represented by certain items reflected in the Company's consolidated statements of income.
PERCENTAGE OF TOTAL REVENUES ---------------------------------------- THREE MONTHS ENDED SIX MONTHS ENDED ------------------- ------------------ JULY 2, JULY 3, JULY 2, JULY 3, 1998 1997 1998 1997 ------- ------- -------- -------- Revenue: Admissions................................... 65.5% 66.5% 66.2% 67.7% Concessions.................................. 28.7% 29.1% 28.5% 28.4% Other operating revenue...................... 5.8% 4.4% 5.3% 3.9% ------- ------ ------ ------- Total revenues........................ 100.0% 100.0% 100.0% 100.0% ------- ------ ------ ------- Operating expenses: Film rental and advertising costs............ 37.8% 37.0% 36.1% 36.5% Cost of concessions and other................ 4.5% 4.7% 4.5% 4.6% Theatre operating expenses................... 34.6% 34.2% 34.8% 33.9% General and administrative expenses................................. 2.6% 4.5% 2.8% 4.3% Depreciation and amortization................ 7.1% 6.5% 6.9% 6.5% Recapitalization expenses.................... 42.5% -- 21.5% -- ------- ------ ------ ------ Total operating expenses.............. 129.1% 86.9% 106.6% 85.8% ------- ------ ------ ------ Operating income (loss)........................ (29.1%) 13.1% (6.6%) 14.2% Other income (expense): Interest expense......................... (5.8%) (2.9%) (4.6%) (2.7%) Interest income.......................... 0.2% 0.1% 0.2% -- Other.................................... -- (0.1%) (0.1%) (0.1%) ------- ------ ------ ------ Income (loss) before income taxes and extraordinary loss....................... (34.7%) 10.2% (11.1%) 11.4% Provision for (benefit from) income taxes........................................ (7.6%) 4.0% (1.3%) 4.4% ------- ------ ------ ------ Income (loss) before extraordinary loss)........................................ 27.1% 6.2% (9.8%) 7.0% Extraordinary loss....................... (8.1%) -- (4.1%) -- ------- ------ ------ ------ Net income (loss).............................. (35.2%) 6.2% (13.9%) 7.0% ======= ====== ====== ======
12 13 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED THREE MONTHS ENDED JULY 2, 1998 AND JULY 3, 1997 TOTAL REVENUES -- Total revenues for the second quarter of fiscal 1998 increased by 31.3% to $146.0 million from $111.1 million in the comparable 1997 period. This increase was due to a 19.6% increase in attendance attributable primarily to the net addition of 407 screens in the last 12 months. Of the $34.9 million net increase in revenues for the period, a $6.1 million increase was attributed to theatres previously operated by the Company, $5.6 million increase was attributed to theatres acquired by the Company, and $23.0 million increase was attributed to new theatres constructed by the Company. Average ticket prices increased 8.0% during the period, reflecting an increase in ticket prices and a greater proportion of larger market theatres in the 1998 period than in the same period in 1997. Average concession sales per customer increased 8.3% for the period, reflecting both an increase in consumption and, to a lesser degree, an increase in concession prices. DIRECT THEATRE COSTS -- Direct theatre costs increased by 33.1% to $112.3 million in the second quarter 1998 from $84.4 million in the second quarter 1997. Direct theatre costs as a percentage of total revenues increased to 76.9% in the 1998 period from 75.9% in the 1997 period. The increase of direct theatre costs as a percentage of total revenues was primarily attributable to higher film rental and advertising costs as a percentage of total revenues. GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses decreased by 23.6% to $3.8 million in the second quarter 1998 from $5.0 million in the second quarter 1997. As a percentage of total revenues, general and administrative expenses decreased to 2.6% in the 1998 period from 4.5% in the 1997 period. DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased in the second quarter 1998 by 42.1% to $10.3 million from $7.3 million in the second quarter 1997. This increase was primarily the result of theatre property additions associated with the Company's expansion efforts. OPERATING INCOME (LOSS) -- Operating income (loss) for the second quarter 1998 decreased to $(42.5) million, or (29.1)% of total revenues, from $14.6 million, or 13.1% of total revenues, in the second quarter 1997. Before nonrecurring expenses associated with the Recapitalization, operating income for the second quarter 1998 was $19.6 million or 13.4% of total revenues. INTEREST EXPENSE -- Interest expense increased in the second quarter 1998 by 167.0% to $8.5 million from $3.2 million in the second quarter 1997. The increase was primarily due to higher average borrowings outstanding associated with the Recapitalization of the Company. INCOME TAXES -- The provision (benefit) for income taxes in the second quarter 1998 was $(11.2) million as compared to $4.3 million in the second quarter 1997. The effective tax rate was 13 14 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED (22.0)% in the 1998 period as compared to 38.5%% in the 1997 period as the 1998 period reflected certain Recapitalization expenses which were not deductible for tax purposes. NET INCOME (LOSS) -- The net income (loss) in the second quarter 1998 was ($51.4) million as compared to $6.9 million in the second quarter 1997. Net income before nonrecurring and extraordinary items was $6.9 million or 4.8% of total revenues in the second quarter of 1998 as compared to $6.9 million or 6.2% of total revenues in the 1997 period. SIX MONTHS ENDED JULY 2, 1998 AND JULY 3, 1997 TOTAL REVENUES -- Total revenues for the six months ended July 2, 1998 increased by 29.7% to $288.1 million from $222.2 million in the comparable 1997 period. This increase was due to a 18.8% increase in attendance attributable primarily to the net addition of 407 screens in the last 12 months. Of the $65.9 million net increase in revenues for the period, a $16.3 million decrease was attributed to theatres previously operated by the Company, $11.2 million increase was attributed to theatres acquired by the Company, and $38.4 million increase was attributed to new theatres constructed by the Company. Average ticket prices increased 6.9% during the period, reflecting an increase in ticket prices and a greater proportion of larger market theatres in the 1998 period than in the same period in 1997. Average concession sales per customer increased 9.7% for the period, reflecting both an increase in consumption and, to a lesser degree, an increase in concession prices. DIRECT THEATRE COSTS -- Direct theatre costs increased by 30.4% to $217.2 million for the six months ended July 2, 1998 from $166.6 million in the comparable 1997 period. Direct theatre costs as a percentage of total revenues increased to 75.4% in the 1998 period from 75.0% in the 1997 period. The increase of direct theatre costs as a percentage of total revenues was primarily attributable to higher theatre operating expenses as a percentage of total revenues. GENERAL AND ADMINISTRATIVE EXPENSES -- General and administrative expenses decreased by 16.1% to $8.0 million for the six months ended July 2, 1998 from $9.5 million in the comparable 1997 period. As a percentage of total revenues, general and administrative expenses decreased to 2.8% in the 1998 period from 4.3% in the 1997 period. DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased for the six months ended July 2, 1998 by 37.7% to $19.9 million from $14.5 million in the comparable 1997 period. This increase was primarily the result of theatre property additions associated with the Company's expansion efforts. OPERATING INCOME (LOSS) -- Operating income (loss) for the six months ended July 2, 1998 decreased to $(19.0) million, or (6.6)% of total revenues, from $31.6 million, or 14.2% of total revenues, in the comparable 1997 period. Before nonrecurring expenses associated with the 14 15 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED Recapitalization, operating income for the six month period ended July 2, 1998 was $43.1 million or 14.9% of total revenues. INTEREST EXPENSE -- Interest expense increased for the six months ended July 2, 1998 by 119.3% to $13.3 million from $6.1 million in the comparable 1997 period. The increase was primarily due to higher average borrowings outstanding associated with the Recapitalization of the Company. INCOME TAXES -- The provision (benefit) for income taxes for the six months ended July 2, 1998 was $(13.9) million as compared to $9.8 million in the 1997 period. The effective tax rate was (12.2)% in the 1998 period as compared to 38.7% in the 1997 period as the 1998 period reflected certain Recapitalization expenses which were not deductible for tax purposes. NET INCOME (LOSS) -- The net income (loss) for the six months ended July 2, 1998 increased was $(40.1) million as compared to $15.5 million in the 1997 period. Net income before nonrecurring and extraordinary items was $18.2 million or 6.3% of total revenues in the six months ended July 2, 1998 as compared to $15.5 million or 7.0% of total revenues in the 1997 period. RECENT TRANSACTIONS RECAPITALIZATION AND MERGER -- On May 27, 1998, an affiliate of Kohlberg Kravis Roberts & Co. L.P. ("KKR") and an affiliate of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation of the Merger. The Merger and related transactions have been recorded as a recapitalization (the "Recapitalization"). In the Recapitalization, the Company's existing shareholders, received cash for their shares of common stock. In addition, in connection with the Recapitalization, the Company canceled options and repurchased warrants held by certain former directors, management and employees of the Company (the "Option/Warrant Redemption"). The aggregate amount paid to effect the Merger and the Option/Warrant Redemption was approximately $1.2 billion. The net proceeds of the $400 million senior subordinated notes, initial borrowings of $375.0 million under the senior credit facility and the proceeds of $776.9 million from the investment by KKR, Hicks Muse, DLJ Merchant Banking Partners II, L.P. and affiliated funds ("DLJ") and management in the Company was used: (i) to fund the cash payments required to effect the Merger and the Option/Warrant Redemption; (ii) to repay and retire the Company's existing senior credit facilities; (iii) to repurchase the existing Regal 8.5% senior subordinated notes; (iv) to pay related fees and expenses; and (v) for general corporate purposes. Upon consummation of the Merger, KKR owned $287.3 million of the Company's equity securities, Hicks Muse owned $437.3 million of the Company's equity securities and DLJ owned $50.0 million of the Company's equity securities. Each investor received securities consisting of a 15 16 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED combination of Common Stock and the Company's Series A Convertible Preferred Stock, no par value ("Convertible Preferred Stock"), which was converted into Common Stock on June 3, 1998. To equalize KKR's and Hicks Muse's investments in the Company at $362.3 million each, Hicks Muse exchanged $75.0 million of Convertible Preferred Stock, with KKR for $75.0 million of common stock of Act III Cinemas, Inc. ("Act III"). Upon completion of the Recapitalization and the conversion of the Convertible Preferred Stock, KKR, Hicks Muse and DLJ own approximately 46.6%, 46.6% and 6.4%, respectively, of the Company's Common Stock. During 1998, nonrecurring costs of approximately $62.0 million, including approximately $39.8 million of compensation costs, were incurred in connection with the Recapitalization. Financing costs of approximately $34.2 million were incurred and classified as deferred financing costs which will be amortized over the lives of the new debt facilities (see Note 4). Of the total Merger Recapitalization costs above, $19.5 million was paid to KKR and Hicks Muse. TENDER OFFER -- In connection with the Recapitalization, the Company commenced a tender offer for all of the Regal 8.5% senior subordinated notes ("Regal Notes") and a consent solicitation in order to effect certain changes in the Indenture. Upon completion of the tender offer, holders had tendered and given consents with respect to 100% of the outstanding principal amount of the Regal Notes. In addition, the Company and the trustee executed a supplement to the Indenture, effecting the proposed amendments which included, among other things, the elimination of all financial covenants for the Regal Notes. On May 27, 1998, the Company paid, for each $1,000 principal amount, $1,116.24 for Regal Notes tendered plus, in each case, accrued and unpaid interest of $13.22. Regal financed the purchase price of the Regal Notes with funds from the Recapitalization. LIQUIDITY AND CAPITAL RESOURCES Substantially all of the Company's revenues are derived from cash box office receipts and concession sales, while film rental fees are ordinarily paid to distributors 15 to 45 days following receipt of admission revenues. The Company thus has an operating cash "float" which partially finances its operations, reducing the Company's needs for external sources of working capital. The Company's capital requirements have arisen principally in connection with acquisitions of existing theatres, new theatre openings and the addition of screens to existing theatres and have been financed with equity (including equity issued in connection with acquisitions and public offerings), borrowings under the Company's loan agreement and internally generated cash. NEW CREDIT FACILITIES -- In connection with the Merger and Recapitalization, the Company entered into credit facilities provided by a syndicate of financial institutions. Such credit facilities (the "Credit Facilities") include a $350,000 Revolving Credit Facility (including the availability of Revolving Loans, Swing Line Loans, and Letters of Credit) and three term loan facilities: Term A ($120,000), Term B ($120,000), and Term C ($135,000) (the "Term Loans"). The Company 16 17 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED must pay an annual commitment fee ranging from 0.2% to 0.425%, depending on the Company's Total Leverage Ratio, as defined, of the unused portion of the Revolving Credit Facility. The Revolving Credit Facility expires in June 2005. No borrowings were outstanding under the Revolving Credit Facility at July 2, 1998. Borrowings under the Term A Loan or the Revolving Credit Facility can be made at the "Base Rate" plus a margin of 0% to 1%, or the "LIBO Rate," plus .625% to 2.25%, both depending on the Total Leverage Ratio. The Base Rate on revolving loans is the rate established by the Administrative Agent in New York as its base rate for dollars loaned in the United States. The LIBO Rate is based on the LIBOR rate for the corresponding length of loan. One percent of the outstanding balance on the Term A Loan is due annually though 2004 with the balance of the Term A Loan due in 2005. Borrowings under the Term B Loan can be made at the Base Rate plus a margin of 0.75% to 1.25% or the LIBO Rate plus 2.0% to 2.5%, both depending on the Total Leverage Ratio. One percent of the outstanding balance is due annually through 2005, with the balance of the loan due in 2006. Borrowings under the Term C Loan can be made at the Base Rate plus a margin of 1.0% to 1.5% or the LIBO Rate plus 2.25% to 2.75%, both depending on the Total Leverage Ratio. One percent of the outstanding balance is due annually through 2006, with the balance of the loan due in 2007. The Credit Facilities contain customary covenants and restrictions on the Company's ability to issue additional debt or engage in certain activities and include customary events of default. In addition, the Credit Facilities specify that the Company must meet or exceed defined interest coverage ratios and must not exceed defined leverage ratios. The Company was in compliance with such covenants at July 2, 1998. The Credit Facility is secured by a pledge of the stock of the Company's domestic subsidiaries. The Company's payment obligations under the Credit Facility is guaranteed by its direct and indirect U.S. subsidiaries. During 1997, the Company effected three acquisitions (including one acquisition accounted for as a pooling of interests). The aggregate consideration paid was approximately $48.5 million in cash, the issuance of 2,837,594 shares of Common Stock and the assumption of approximately $110 million of liabilities. At January 2, 1997, the Company anticipated that it would spend $125 million to $150 million to develop and renovate theatres during 1997, of which the Company had approximately $58.1 million in contractual commitments for expenditures. The actual capital expenditures for fiscal 1997 were $178.1 million. 17 18 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED At July 2, 1998, the Company had 261 multi-screen theatres with an aggregate of 2,467 screens. At such date, the Company had 35 new theatres with 571 screens and 32 screens at 6 existing locations under construction. The Company intends to develop approximately 450 to 500 screens during the balance of 1998 and approximately 600 to 700 screens during 1999. The Company expects that the capital expenditures in connection with its development plan will aggregate approximately $180.0 million for the balance of 1998 and approximately $140.0 million during 1999. The Company believes that its capital needs for completion of theatre construction and development for at least the next 6 to 12 months will be satisfied by available credit under the new loan agreement, as amended, internally generated cash flow and available cash and equivalents. NEW ACCOUNTING PRONOUNCEMENTS During fiscal 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income, Statement of Financial Accounting Standards No. 131 ("SFAS 131"), Disclosures About Segment of an Enterprise and Related Information. SFAS 130 requires disclosure of comprehensive income and its components in a company's financial statements and is effective for fiscal years beginning after December 15, 1997. SFAS 131 requires new disclosures of segment information in a company's financial statements and is effective for fiscal years beginning after December 15, 1997. Adoption of these statements will not impact the Company's consolidated financial position, results of operations or cash flows. On June 15, 1998, the Financial Accounting Standards Board issued FAS No. 133, Accounting for Derivative and Financial Instruments and Hedging Activities. FAS 133 establishes a new model for accounting for derivatives and hedging activities based on these fundamental principles i) derivatives represent assets and liabilities that should be recognized at fair value on the balance sheet ii) derivative gains and losses do not represent liabilities or assets and, therefore, should not be reported on the balance sheet as deferred credits or deferred debits and iii) special hedge accounting should be provided only for transactions that meet certain specified criteria, which include a requirement that the change in the fair value of the derivative be highly effective in offsetting the change in the fair value or cash flows of the hedged item. This Statement is effective for fiscal years beginning after June 15, 1999 and is not expected to have a material effect on the Company's financial position or results of operations. RECENT DEVELOPMENTS Act III, the ninth largest motion picture exhibitor in the United States based on number of screens in operation, is controlled by KKR and Hicks Muse. As of July 2, 1998, Act III operated 131 theatres, with an aggregate of 843 screens in seven states. While KKR and Hicks Muse currently intend to merge Act III with and into Regal or an affiliate of Regal (the "Act III 18 19 MANAGEMENT'S DISCUSSION AND ANALYSIS, CONTINUED Merger") approximately 90 days after the closing of the Recapitalization, there is currently no definitive agreement to consummate the Act III Merger. YEAR 2000 The Company is dependent on computer systems and applications to conduct its business. Based on a current assessment of its computer systems and applications, Regal believes that it will not experience any material Year 2000 problems with its computer systems. The Company estimates that costs to remediate any Year 2000 issues will not be material and will be funded through operating cash flows. The Company is expensing all costs associated with remediation of Year 2000 issues as incurred. 19 20 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. - ----------------------------------------------------------------------------- (a) Exhibits: (4) Indenture dated as of May 27, 1998, between Regal Cinemas, Inc. and IBJ Schroder Bank & Trust Company. (10.1) Employment Agreement, dated as of May 27, 1998, between Regal Cinemas, Inc. and Michael L. Campbell. (10.2) Employment Agreement, dated as of May 27, 1998, between Regal Cinemas, Inc. and Lewis Frazer III. (10.3) Employment Agreement, dated as of May 27, 1998, between Regal Cinemas, Inc. and Gregory W. Dunn. (10.4) Credit Agreement, dated as of May 27, 1998, among Regal Cinemas, Inc., its subsidiaries and the lenders named therein. (27) Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K. None.
20 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REGAL CINEMAS, INC. Date: August 10, 1998 By: /s/ Michael L. Campbell ------------------------------------- Michael L. Campbell, Chairman, President and Chief Executive Officer By: /s/ Lewis Frazer III ------------------------------------- Lewis Frazer III, Executive Vice President and Chief Financial Officer 21 22 EXHIBIT INDEX
ITEM DESCRIPTION - ------------------- ------------------------------------------------------------- (4) Indenture dated as of May 27, 1998, between Regal Cinemas, Inc. and IBJ Schroder Bank & Trust Company. (10.1) Employment Agreement, dated as of May 27, 1998, between Regal Cinemas, Inc. and Michael L. Campbell. (10.2) Employment Agreement, dated as of May 27, 1998, between Regal Cinemas, Inc. and Lewis Frazer III. (10.3) Employment Agreement, dated as of May 27, 1998, between Regal Cinemas, Inc. and Gregory W. Dunn. (10.4) Credit Agreement, dated as of May 27, 1998, among Regal Cinemas, Inc., its subsidiaries and the lenders named therein. (27) Financial Data Schedule (for SEC use only).
EX-4 2 INDENTURE DATED MAY 27, 1998 1 Exhibit 4 EXECUTION COPY ================================================================================ REGAL CINEMAS, INC., Issuer and IBJ SCHRODER BANK & TRUST COMPANY, Trustee ---------- Indenture Dated as of May 27, 1998 ---------- 9 1/2% Senior Subordinated Notes due 2008 ================================================================================ 2 CROSS-REFERENCE TABLE
TIA Sections Indenture Sections - ------------ ------------------ ss. 310(a)(1)....................................... 7.10 (a)(2)....................................... 7.10 (b).......................................... 7.03; 7.08 ss. 311(a).......................................... 7.03 (b).......................................... 7.03 ss. 312(a).......................................... 2.04 (b).......................................... 10.02 (c).......................................... 10.02 ss. 313(a).......................................... 7.06 (b)(2)....................................... 7.07 (c).......................................... 7.05; 7.06; 11.02 (d).......................................... 7.06 ss. 314(a).......................................... 7.05; 11.02 (a)(4)....................................... 4.12; 11.02 (c)(1)....................................... 11.03 (c)(2)....................................... 11.03 (e).......................................... 4.12; 11.04 ss. 315(a).......................................... 7.02 (b).......................................... 7.05; 11.02 (c).......................................... 7.02 (d).......................................... 7.02 (e).......................................... 6.11 ss. 316(a)(1)(A).................................... 6.05 (a)(1)(B).................................... 6.04 (b).......................................... 6.07 (c).......................................... 9.03 ss. 317(a)(1)....................................... 6.08 (a)(2)....................................... 6.09 (b).......................................... 2.05 ss. 318(a).......................................... 11.01 (c).......................................... 11.01
Note: The Cross-Reference Table shall not for any purpose be deemed to be a part of the Indenture. 3 TABLE OF CONTENTS
Page ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions.......................................................1 SECTION 1.02. Incorporation by Reference of Trust Indenture Act................17 SECTION 1.03. Rules of Construction............................................18 ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating..................................................19 SECTION 2.02. Restrictive Legends..............................................20 SECTION 2.03. Execution, Authentication and Denominations......................22 SECTION 2.04. Registrar and Paying Agent.......................................23 SECTION 2.05. Paying Agent to Hold Money in Trust..............................24 SECTION 2.06. Transfer and Exchange............................................24 SECTION 2.07. Book-Entry Provisions for Global Notes...........................25 SECTION 2.08. Special Transfer Provisions......................................27 SECTION 2.09. Replacement Notes................................................30 SECTION 2.10. Outstanding Notes................................................30 SECTION 2.11. Temporary Notes..................................................31 SECTION 2.12. Cancellation.....................................................31 SECTION 2.13. CUSIP Numbers....................................................31 SECTION 2.14. Defaulted Interest...............................................32 SECTION 2.15. Issuance of Additional Notes.....................................32 ARTICLE THREE REDEMPTION SECTION 3.01. Right of Redemption..............................................32 SECTION 3.02. Notices to Trustee...............................................33 SECTION 3.03. Selection of Notes to Be Redeemed................................33 SECTION 3.04. Notice of Redemption.............................................33 SECTION 3.05. Effect of Notice of Redemption...................................35 SECTION 3.06. Deposit of Redemption Price......................................35 SECTION 3.07. Payment of Notes Called for Redemption...........................35 SECTION 3.08. Notes Redeemed in Part...........................................35
- ------------- Note: The Table of Contents shall not for any purposes be deemed to be a part of the Indenture. 4 ii ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes.................................................36 SECTION 4.02. Maintenance of Office or Agency..................................36 SECTION 4.03. Fall-away Event..................................................37 SECTION 4.04. Limitation on Restricted Payments................................37 SECTION 4.05. Limitation on the Incurrence of Additional Indebtedness and Issuance of Capital Stock...................................39 SECTION 4.06. Limitations on Transactions with Affiliates......................40 SECTION 4.07. Repurchase of Notes upon a Change of Control.....................41 SECTION 4.08. Existence........................................................42 SECTION 4.09. Payment of Taxes and Other Claims................................42 SECTION 4.10. Maintenance of Properties and Insurance..........................43 SECTION 4.11. Notice of Defaults...............................................43 SECTION 4.12. Compliance Certificates..........................................43 SECTION 4.13. Commission Reports and Reports to Holders........................44 SECTION 4.14. Waiver of Stay, Extension or Usury Laws..........................44 SECTION 4.15. Limitation on Layering...........................................45 ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. When Company May Merge, Etc......................................45 SECTION 5.02. Successor Substituted............................................46 ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default................................................46 SECTION 6.02. Acceleration.....................................................47 SECTION 6.03. Other Remedies...................................................48 SECTION 6.04. Waiver of Past Defaults..........................................48 SECTION 6.05. Control by Majority..............................................49 SECTION 6.06. Limitation on Suits..............................................49 SECTION 6.07. Rights of Holders to Receive Payment.............................50 SECTION 6.08. Collection Suit by Trustee.......................................50 SECTION 6.09. Trustee May File Proofs of Claim.................................50 SECTION 6.10. Priorities.......................................................51 SECTION 6.11. Undertaking for Costs............................................51 SECTION 6.12. Restoration of Rights and Remedies...............................51 SECTION 6.13. Rights and Remedies Cumulative...................................51
5 iii SECTION 6.14. Delay or Omission Not Waiver.....................................52 ARTICLE SEVEN TRUSTEE SECTION 7.01. General..........................................................52 SECTION 7.02. Certain Rights of Trustee........................................52 SECTION 7.03. Individual Rights of Trustee.....................................54 SECTION 7.04. Trustee's Disclaimer.............................................54 SECTION 7.05. Notice of Default................................................54 SECTION 7.06. Reports by Trustee to Holders....................................54 SECTION 7.07. Compensation and Indemnity.......................................54 SECTION 7.08. Replacement of Trustee...........................................55 SECTION 7.09. Successor Trustee by Merger, Etc.................................56 SECTION 7.10. Eligibility......................................................56 SECTION 7.11. Money Held in Trust..............................................57 ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. Termination of Company's Obligations.............................57 SECTION 8.02. Defeasance and Discharge of Indenture............................58 SECTION 8.03. Defeasance of Certain Obligations................................60 SECTION 8.04. Application of Trust Money.......................................62 SECTION 8.05. Repayment to Company.............................................62 SECTION 8.06. Reinstatement....................................................62 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders.......................................63 SECTION 9.02. With Consent of Holders..........................................63 SECTION 9.03. Revocation and Effect of Consent.................................64 SECTION 9.04. Notation on or Exchange of Notes.................................65 SECTION 9.05. Trustee to Sign Amendments, Etc..................................65 SECTION 9.06. Conformity with Trust Indenture Act..............................65 ARTICLE TEN SUBORDINATION OF NOTES SECTION 10.01. Notes Subordinated to Senior Indebtedness.......................66 SECTION 10.02. No Payment on Notes in Certain Circumstances....................66
6 iv SECTION 10.03. Payment over of Proceeds upon Dissolution, Etc..................68 SECTION 10.04. Subrogation.....................................................70 SECTION 10.05. Obligations of Company Unconditional............................70 SECTION 10.06. Notice to Trustee...............................................71 SECTION 10.07. Reliance on Judicial Order or Certificate of Liquidating Agent..72 SECTION 10.08. Trustee's Relation to Senior Indebtedness.......................72 SECTION 10.09. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Indebtedness...........72 SECTION 10.10. Holders Authorize Trustee to Effectuate Subordination of Notes..73 SECTION 10.11. Not to Prevent Events of Default................................73 SECTION 10.12. Trustee's Compensation Not Prejudiced...........................73 SECTION 10.13. No Waiver of Subordination Provisions...........................73 SECTION 10.14. Payments May Be Paid Prior to Dissolution.......................73 SECTION 10.15. Consent of Holders of Senior Indebtedness Under the Senior Credit Facilities...............................74 SECTION 10.16. Trust Moneys Not Subordinated...................................74 SECTION 10.17. Notice to Representative of Designated Senior Indebtedness......74 ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. Trust Indenture Act of 1939.....................................75 SECTION 11.02. Notices.........................................................75 SECTION 11.03. Certificate and Opinion as to Conditions Precedent..............76 SECTION 11.04. Statements Required in Certificate or Opinion...................76 SECTION 11.05. Rules by Trustee, Paying Agent or Registrar.....................77 SECTION 11.06. Payment Date Other Than a Business Day..........................77 SECTION 11.07. Governing Law...................................................77 SECTION 11.08. No Adverse Interpretation of Other Agreements...................77 SECTION 11.09. No Recourse Against Others......................................77 SECTION 11.10. Successors......................................................78 SECTION 11.11. Duplicate Originals.............................................78 SECTION 11.12. Separability....................................................78 SECTION 11.13. Table of Contents, Headings, Etc................................78 EXHIBIT A Form of Note.......................................................A-1 EXHIBIT B Form of Certificate................................................B-1 EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Non-QIB Accredited Investors...............C-1 EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S...............................D-1
7 INDENTURE, dated as of May 27, 1998, between REGAL CINEMAS, INC., a Tennessee corporation (the "Company"), and IBJ SCHRODER BANK & TRUST COMPANY, a New York banking corporation, trustee (the "Trustee"). RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance initially of up to $400,000,000 aggregate principal amount of the Company's 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") issuable as provided in this Indenture. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done, and the Company has done all things necessary to make the Notes, when executed by the Company and authenticated and delivered by the Trustee hereunder and duly issued by the Company, valid obligations of the Company as hereinafter provided. This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act of 1939, as amended, that are required to be a part of and to govern indentures qualified under the Trust Indenture Act of 1939, as amended. AND THIS INDENTURE FURTHER WITNESSETH For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders, as follows. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. "Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Restricted Subsidiaries or assumed in connection with the acquisition of assets from such Person and not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition, merger or consolidation. "Acquired Preferred Stock" means the Preferred Stock of any Person at such time as such Person becomes a Restricted Subsidiary of the Company or at the time it merges or consolidates with the Company or any of its Restricted Subsidiaries and not issued by such Person in connection with, or in anticipation or contemplation of, such acquisition, merger or consolidation. 8 2 "Act III" means Act III Cinemas, Inc., a Delaware corporation. "Act III Merger" means the merger of Act III with and into the Company. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Affiliate Transaction" has the meaning specified in Section 4.06. "Agent" means any Registrar, Co-Registrar, Paying Agent, Transfer Agent or authenticating agent. "Agent Members" has the meaning provided in Section 2.07(a). "Asset Acquisition" means (i) any transaction pursuant to which any Person shall become a Restricted Subsidiary of the Company or shall be consolidated or merged with the Company or any Restricted Subsidiary of the Company or (ii) the acquisition by the Company or any Restricted Subsidiary of the Company of assets of any Person comprising a division, line of business or theatre site of such Person. "Board of Directors" means the Board of Directors of the Company or any committee of such Board of Directors duly authorized to act under this Indenture. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York, New York. "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of capital stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Capitalized Lease Obligation" means, as to any Person, the obligation of such Person to pay rent or other amounts under a lease to which such Person is a party that is required to be classified and accounted for as a capital lease obligation under GAAP, and for purposes of this 9 3 definition, the amount of such obligation at any date shall be the capitalized amount of such obligation at such date, determined in accordance with GAAP. "Change of Control" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group") (whether or not otherwise in compliance with the provisions of this Indenture), other than to Hicks Muse, KKR or any of their respective officers or directors or any Affiliates of any of the foregoing (the "Permitted Holders"); or (ii) the acquisition by any Person or Group (other than the Permitted Holders or any direct or indirect subsidiary of any Permitted Holder) of the power, directly or indirectly, to vote or direct the voting of securities having more than 50% of the ordinary voting power for the election of directors of the Company. "Change of Control Offer" has the meaning provided in Section 4.07(a). "Change of Control Payment Date" has the meaning provided in Section 4.07(c). "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the TIA, then the body performing such duties at such time. "Commodity Agreement" means any commodity futures contract, commodity option or other similar agreement or arrangement. "Company" means the party named as such in the first paragraph of this Indenture until a successor replaces it pursuant to Article Five of this Indenture and thereafter means the successor. "Company Order" means a written request or order signed in the name of the Company (i) by its Chairman of the Board, its Chief Executive Officer, its President, a Vice President or its Chief Financial Officer and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that such written request or order may be signed by any two officers or directors listed in clause (i) above in lieu of being signed by one of such officers or directors listed in such clause (i) and one of the officers listed in clause (ii) above. "Consolidated EBITDA" means, for any period, the net income of the Company and its Restricted Subsidiaries for such period plus, to the extent such amount was deducted in calculating such net income (i) Consolidated Interest Expense, (ii) income taxes, (iii) depreciation expense, (iv) amortization expense, (v) all other non-cash items, extraordinary items, nonrecurring and 10 4 unusual items and cumulative effects of changes in accounting principles reducing such net income, less all non-cash items, extraordinary items, nonrecurring and unusual items and cumulative effects of changes in accounting principles increasing such net income, all as determined on a consolidated basis for the Company and its Restricted Subsidiaries in conformity with GAAP; (vi) upfront expenses resulting from equity offerings, investments, mergers, recapitalizations, option buyouts, Dispositions, Asset Acquisitions and similar transactions to the extent such expenses reduce net income; (vii) restructuring charges reducing net income; and (viii) gains or losses on Dispositions; provided that Consolidated EBITDA shall not include (x) the net income (or net loss) of any Person that is not a Restricted Subsidiary, except (I) with respect to net income, to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Restricted Subsidiaries by such Person during such period and (II) with respect to net losses, to the extent of the amount of investments made by the Company or any Restricted Subsidiary in such Person during such period; (y) solely for the purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (iii) of Section 4.04(a) (and in such case, except to the extent includable pursuant to clause (x) above), the net income (or net loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Company or any of its Restricted Subsidiaries; and (z) the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary (other than any agreement or instrument evidencing Indebtedness or Preferred Stock outstanding on the Issue Date or incurred or issued thereafter in compliance with Section 4.05; provided that the terms of any such agreement restricting the declaration and payment of dividends or similar distributions apply only in the event of a default with respect to a financial covenant or a covenant relating to payment (beyond any applicable period of grace) contained in such agreement or instrument and provided such terms are determined by the Company to be customary in comparable financings and such restrictions are determined by the Company not to materially affect the Company's ability to make principal or interest payments on the Notes when due). "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of (i) the interest expense of such Person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (a) any amortization of debt discount, (b) the net cost under Interest Swap Agreements (including any amortization of discounts), (c) the interest portion of any deferred payment obligation, (d) all commissions, discounts and other fees and charges owed with respect to letters of credit, bankers' acceptance financing or similar facilities, and (e) all accrued interest and (ii) the interest component of Capitalized Lease Obligations paid or accrued by such Person and its Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP; excluding, however, any amount of such interest of any Restricted Subsidiary if the net income of 11 5 such Restricted Subsidiary is excluded in the calculation of Consolidated EBITDA pursuant to clause (z) of the definition thereof (but only in the same proportion as the net income of such Restricted Subsidiary is excluded from the calculation of Consolidated EBITDA pursuant to clause (z) of the definition thereof), all as determined on a consolidated basis (without taking into account Unrestricted Subsidiaries) in conformity with GAAP. "Construction Indebtedness Amount" shall mean an amount equal to the lesser of (i) $100 million and (ii) the total Indebtedness of any Person and its Restricted Subsidiaries outstanding on the last day of any Reference Period incurred in connection with the construction or enhancement of motion picture theatres or screens that, on such day, are not open for business. "Contemplated Acquisition" means the business combination, by the Act III Merger or otherwise, of Act III and the Company. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date of this Indenture, located at One State Street, New York, New York 10004; Attention: Corporate Administration and, in the event the Notes are listed on the Luxembourg Stock Exchange, at Greffier et Chef du Tribunal d'Arrondissement de et a Luxembourg, Chief Registrar of the District Court in Luxembourg. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement. "Debt Rating" shall mean the rating assigned to the Notes by Moody's or S&P, as the case may be. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Depositary" means The Depository Trust Company, its nominees, and their respective successors. "Designated Preferred Stock" means preferred stock of the Company (other than Disqualified Capital Stock) that is issued for cash (other than to a Restricted Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an Officers' Certificate executed by the principal executive officer and the principal financial officer of the Company, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (iii) of Section 4.04(a). "Designated Senior Indebtedness" means (i) all obligations under the Senior Credit Facilities and (ii) any other Senior Indebtedness of the Company which, at the date of 12 6 determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of this Indenture. "Disposition" means, with respect to any Person, any merger, consolidation or other business combination involving such Person (whether or not such Person is the Surviving Person) or the sale, assignment, or transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets or Capital Stock. "Disqualified Capital 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), or upon the happening of any event, matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control if such Capital Stock requires that the Change of Control Offer with respect to the Notes be completed prior to any similar offer being made with respect to such Capital Stock), in whole or in part, on or prior to the final maturity date of the Notes; provided that only the portion of Capital Stock which so matures or is mandatorily redeemable or is so redeemable at the sole option of the holder thereof prior to the final maturity date of the Notes shall be deemed Disqualified Capital Stock. "Equity Offering" means a private sale or public offering of Capital Stock or preferred stock (other than Disqualified Capital Stock) of the Company. "Event of Default" has the meaning provided in Section 6.01. "Exchange Act" means the Securities Exchange Act of 1934. "Exchange Notes" means any securities of the Company containing terms identical to the Notes (except that such Exchange Notes shall be registered under the Securities Act) that are issued and exchanged for the Notes pursuant to the Registration Rights Agreement and this Indenture. "Existing Regal Notes" means the Company's 8 1/2% Senior Subordinated Notes due October 1, 2007. "GAAP" means generally accepted accounting principles in the United States of America, including those 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 the Commission or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and 13 7 computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP as in effect on the date hereof. "Global Notes" has the meaning provided in Section 2.01. "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. "Hicks Muse" means Hicks, Muse, Tate & Furst Incorporated. "Holder" or "Noteholder" means the registered holder of any Note. "Indebtedness" means with respect to any Person, without duplication, any liability of such Person (i) for borrowed money, (ii) evidenced by bonds, debentures, notes or other similar instruments, (iii) constituting Capitalized Lease Obligations, (iv) incurred or assumed as the deferred purchase price of property or services, or pursuant to conditional sale obligations and title retention agreements (but excluding trade accounts payable arising in the ordinary course of business), (v) for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) for Indebtedness of others guaranteed by such Person, (vii) for Interest Swap Agreements, Commodity Agreements and Currency Agreements and (viii) for Indebtedness of any other Person of the type referred to in clauses (i) through (vii) which is secured by any Lien on any property or asset of such first referred to Person, the amount of such Indebtedness being deemed to be the lesser of the value of such property or asset or the amount of the Indebtedness so secured. The amount of Indebtedness of any Person at any date shall be (i) the outstanding principal amount of all unconditional obligations described above, as such amount would be calculated in accordance with GAAP, (ii) the accreted value thereof, in the case of any Indebtedness issued with original issue discount and (iii) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. "Indenture" means this Indenture as originally executed or as it may be amended or supplemented from time to time by one or more indentures supplemental to this Indenture entered into pursuant to the applicable provisions of this Indenture. "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 Company's Board of Directors, qualified to perform the task for which it has been engaged. "Institutional Accredited Investor" means an institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. 14 8 "Interest Payment Date" means each semiannual interest payment date on June 1 and December 1 of each year, commencing December 1, 1998. "Interest Swap Agreements" means any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement. "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. "Issue Date" means the date of original issuance of the Notes. "KKR" means Kohlberg Kravis Roberts & Co. L.P. "Leverage Ratio" means the ratio of (i) the aggregate outstanding amount of Indebtedness (excluding any Construction Indebtedness Amount and net of any cash and cash equivalents) of the Company and its Restricted Subsidiaries on a consolidated basis in accordance with GAAP plus the aggregate liquidation preference of all Disqualified Capital Stock of such Person and all Preferred Stock of Restricted Subsidiaries of such Person (other than any such Disqualified Capital Stock or Preferred Stock held by such Person or any of its Restricted Subsidiaries) on such date to (ii) the aggregate amount of Consolidated EBITDA for the most recent four full fiscal quarters (the "Four Quarter Period") for which financial statements of the Company have been filed with the Commission or delivered to the Trustee pursuant to Section 4.13. The Four Quarter Period shall be hereinafter referred to as the "Reference Period." For purposes of this definition, the aggregate outstanding principal amount of Indebtedness or aggregate liquidation preference of Preferred Stock of the Person and its Restricted Subsidiaries for which such calculation is made shall be determined on a pro forma basis as if the Indebtedness or Preferred Stock giving rise to the need to perform such calculation had been incurred and the proceeds therefrom had been applied, and all other transactions in respect of which such Indebtedness or Preferred Stock is being incurred has occurred, on the last day of 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 (i) the Transactions, (ii) the incurrence of the Indebtedness or Preferred Stock of such Person and its Restricted Subsidiaries (and the application of the proceeds therefrom) giving rise to the need to make such calculation and any incurrence (and the application of the proceeds therefrom) or repayment of other Indebtedness or Preferred Stock, other than the incurrence or repayment of Indebtedness pursuant to working capital facilities, 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, (iii) any Dispositions, Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise 15 9 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 Indebtedness or Preferred Stock) or Theatre Completions at any time on or subsequent to the first day of the Reference Period and on or prior to the date of determination, as if such Disposition, Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness or Preferred Stock and also including any Consolidated EBITDA associated with such Asset Acquisition) or Theatre Completion occurred on the first day of the Reference Period, (iv) the effects of incremental contributions to Consolidated EBITDA the Company reasonably believes in good faith could have been achieved during the Reference Period as a result of such Asset Acquisition or Theatre Completion (regardless of whether such incremental contributions could then be reflected in pro forma financial statements under GAAP, Regulation S-X promulgated by the Commission or any other regulation or policy of the Commission); provided, however, that such incremental contributions were identified and quantified in good faith in an Officers' Certificate delivered to the Trustee at the time of any calculation of the Leverage Ratio and (v) any motion picture theatre that was permanently closed for business at any time on or subsequent to the first day of the Reference Period and on or prior to the date of determination as if such theatre was closed on the first day of the Reference Period. In calculating "Consolidated Interest Expense" for purposes of the calculation of "Consolidated EBITDA," (i) interest on Indebtedness determined on a fluctuating basis as of the date of determination (including Indebtedness actually incurred on the date of the transaction giving rise to the need to calculate the Leverage Ratio) and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness as in effect on the date of determination and (ii) notwithstanding (i) above, interest determined on a fluctuating basis, to the extent such interest is covered by Interest Swap Agreements that will remain in effect for at least 12 months, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. For purposes of calculating the Consolidated EBITDA associated with any Theatre Completion, the amount thereof for the Reference Period shall be the amount of Consolidated EBITDA expected by the Company in good faith to be derived by the Company from such Theatre Completion during the first 12-month period following the date on which the relevant theatre or screen opens for business. "Lien" means, with respect to any asset, any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof. "Non-U.S. Person" means a person who is not a "U.S. person" (as defined in Regulation S). 16 10 "Note Obligations" means all Obligations relating to the Notes, including, without limitation, all principal, premium, if any, interest (including, without limitation, any additional amounts payable with respect to the Notes as a result of the failure to comply with the terms of the Registration Rights Agreement). "Notes" means any of the securities, as defined in the first paragraph of the recitals hereof, that are authenticated and delivered under this Indenture. For all purposes of this Indenture, the term "Notes" shall include the Notes initially issued on the Issue Date, any Exchange Notes to be issued and exchanged for any Notes pursuant to the Registration Rights Agreement and this Indenture and any other Notes issued after the Closing Date under this Indenture. For purposes of this Indenture, all Notes shall vote together as one series of Notes under this Indenture. "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing, or otherwise relating to, any Indebtedness. "Officer" means, with respect to the Company, (i) the Chairman of the Board, the Chief Executive Officer, the President, any Vice President or the Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary. "Officers' Certificate" means a certificate signed by one Officer listed in clause (i) of the definition thereof and one Officer listed in clause (ii) of the definition thereof or two officers listed in clause (i) of the definition thereof. Each Officers' Certificate shall include the statements provided for in TIA Section 314(e) to the extent applicable. "Offshore Global Note" has the meaning provided in Section 2.01. "Offshore Physical Notes" has the meaning provided in Section 2.01. "Opinion of Counsel" means a written opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 11.04 hereof. The counsel may be an employee of or counsel to the Company. Each such Opinion of Counsel shall include the statements provided for in TIA Section 314(e). "Paying Agent" has the meaning provided in Section 2.04, except that, for the purposes of Article Eight, the Paying Agent shall not be the Company or a Subsidiary of the Company or an Affiliate of any of them. The term "Paying Agent" includes any additional Paying Agent. "Payment Blockage Period" has the meaning provided in Section 10.02. "Permitted Indebtedness" means, without duplication, (i) Indebtedness outstanding on the Issue Date (including the Existing Regal Notes); (ii) Indebtedness of the Company and any of its 17 11 Restricted Subsidiaries incurred under the Senior Credit Facilities (including letter of credit obligations), provided that the aggregate principal amount at any time outstanding does not exceed $725.0 million, which amount shall be increased to $1.22 billion upon the consummation of the Contemplated Acquisition; (iii) Indebtedness evidenced by or arising under the Notes and this Indenture in respect of the Notes; (iv) Interest Swap Agreements, Commodity Agreements and Currency Agreements; provided, however, that such agreements are entered into for bona fide hedging purposes and not for speculative purposes; (v) additional Indebtedness of the Company or any of its Restricted Subsidiaries not otherwise permitted under Section 4.05 of this Indenture, in an aggregate principal amount, which when aggregated with the aggregate principal amount of all other Indebtedness then outstanding and incurred pursuant to this clause (v), does not at any one time outstanding exceed the sum of (x) $100.0 million and (y) 100% of the net cash proceeds received by the Company from the issue or sale after the Issue Date of Capital Stock (other than Disqualified Capital Stock) of the Company or net cash proceeds contributed to the capital of the Company (other than in respect of Disqualified Capital Stock) as determined in accordance with clauses (iii)(b) and (iii)(c) of Section 4.04(a) to the extent such net cash proceeds have not been applied pursuant to such clause to make Restricted Payments or to effect other transactions pursuant to Section 4.04(b) (it being understood that any Indebtedness incurred under this clause (v) shall cease to be deemed incurred or outstanding for purposes of this clause (v) from and after the first date on which the Company could have incurred such Indebtedness under Section 4.05 without reliance upon this clause (v), and such Indebtedness shall thereupon be deemed to have been so incurred); (vi) Refinancing Indebtedness (other than in respect of Indebtedness incurred pursuant to clauses (ii), (v) and (xiii) of this definition); (vii) Indebtedness owed by the Company to any Restricted Subsidiary of the Company (so long as it shall remain a Restricted Subsidiary of the Company) or by any Restricted Subsidiary (so long as it remains a Restricted Subsidiary of the Company) of the Company to the Company or any Restricted Subsidiary of the Company; (viii) guarantees by the Company or Restricted Subsidiaries of any Indebtedness permitted to be incurred pursuant to this Indenture; (ix) Indebtedness in respect of performance bonds, reimbursement obligations with respect to letters of credit, bankers' acceptances, completion guarantees and surety or appeal bonds provided by the Company or any of its Restricted Subsidiaries in the ordinary course of their business or Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims; (x) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in each case incurred in connection with the disposition of any business assets or Subsidiaries of the Company (other than guarantees of Indebtedness or other obligations incurred by any Person acquiring all or any portion of such business assets or Restricted Subsidiaries of the Company for the purpose of financing such acquisition) in a principal amount not to exceed the gross proceeds, including non-cash proceeds, actually received by the Company or any of its Restricted Subsidiaries in connection with such disposition; provided, however, that such 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 18 12 deemed to be reflected on such balance sheet for purposes of this clause); (xi) Indebtedness (including but not limited to Capitalized Lease Obligations, mortgage financings or purchase money obligations) incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property or assets (whether through direct purchase of assets or the Capital Stock of any Person owning such assets) or incurred to refinance any such purchase price or cost of construction or improvement; (xii) Indebtedness or Disqualified Capital Stock of Persons that are acquired by the Company or any of its Restricted Subsidiaries or merged into a Restricted Subsidiary in accordance with the terms of this Indenture; provided, however, that such Indebtedness or Disqualified Capital Stock is not incurred in contemplation of such acquisition or merger; and provided further that after giving effect to such acquisition or merger, either (i) the Company would be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under Section 4.05(a) or (ii) the Leverage Ratio is less than immediately prior to such acquisition or merger; and (xiii) Indebtedness incurred in connection with any Real Estate Financing Transaction; provided, however, that the amount of Indebtedness outstanding under clause (ii) above and this clause (xiii) shall not exceed $725.0 million (which amount shall be increased to $1.22 billion upon consummation of the Contemplated Acquisition) at any time outstanding. "Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Physical Notes" has the meaning provided in Section 2.01. "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" of a debt security, including the Notes, means the principal amount due on the stated maturity as shown on such debt security. "Private Placement Legend" means the legend initially set forth on the Notes in the form set forth in Section 2.02. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Real Estate Financing Transaction" means a financing or series of financings consisting principally of one or more mortgage financings, real estate sale or leaseback transactions or an asset-backed program based on real estate owned by the Company or any of its Subsidiaries (funded by the issuance of commercial paper, medium term notes or other forms of borrowing and 19 13 including credit enhancement facilities), and which may consist of or include such other forms of financing consistent with the foregoing as the Board of Directors shall approve in good faith, in each case as such financing or financings may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any amendment extending the maturity of, refinancing, replacing or otherwise restructuring all or any portion of the Indebtedness under such financing or financings or any successor or replacement agreement and whether including the same or any other lender or group of lenders, and whether including or replacing as borrowers or guarantors one or more Subsidiaries of the Company. "Redemption Date" means, when used with respect to any Note to be redeemed, the date fixed for such redemption by or in accordance with this Indenture. "Redemption Price" means, when used with respect to any Note to be redeemed, the price at which such Note is to be redeemed in accordance with this Indenture. "Refinancing Indebtedness" means any refinancing by the Company or its Restricted Subsidiaries of Indebtedness of the Company or any of its Restricted Subsidiaries incurred in accordance with Section 4.05 that does not (i) result in an increase in the aggregate principal amount of Indebtedness (such principal amount to include, for purposes of this definition, any premiums, fees, penalties or accrued interest paid with the proceeds of the Refinancing Indebtedness) of such Person or (ii) create Indebtedness with (A) a Weighted Average Life to Maturity that is less than the Weighted Average Life to Maturity of the Indebtedness being refinanced or (B) a final maturity earlier than the final maturity of the Indebtedness being refinanced. "Refunding Capital Stock" has the meaning provided in Section 4.04(b). "Registrar" has the meaning provided in Section 2.04. "Registration Rights Agreement" means the Registration Rights Agreement, dated May 27, 1998, between the Company and Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co. and certain permitted assigns specified therein. "Registration Statement" means the Registration Statement as defined and described in the Registration Rights Agreement. "Regular Record Date" for the interest payable on any Interest Payment Date means the May 15 or November 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Regulation S" means Regulation S under the Securities Act. 20 14 "Responsible Officer", when used with respect to the Trustee, means the chairman or any vice chairman of the board of directors, the chairman or any vice chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller or any assistant controller or any other officer of the Trustee in its corporate trust department customarily performing functions similar to those performed by any of the above-designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Senior Indebtedness; provided, however, that if, and for so long as, any issue of Senior Indebtedness lacks such a representative, then the Representative for such issue of Senior Indebtedness shall at all times constitute the holders of a majority in outstanding principal amount of such issue of Senior Indebtedness. "Restricted Payment" means (i) the declaration or payment of any dividend or the making of any other distribution (other than dividends or distributions payable in Qualified Capital Stock or in options, rights or warrants to acquire Qualified Capital Stock or dividends or distributions by a Restricted Subsidiary so long as in the case of any dividend or distribution payable on or in respect of any class or series of Capital Stock issued by a Subsidiary other than a Wholly Owned Subsidiary, the Company or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Capital Stock) on shares of the Company's Capital Stock, or (ii) the purchase, redemption, retirement or other acquisition for value of any Capital Stock of the Company, or any warrants, rights or options to acquire shares of Capital Stock of the Company, other than through the exchange of such Capital Stock or any warrants, rights or options to acquire shares of any class of such Capital Stock for Qualified Capital Stock or warrants, rights or options to acquire Qualified Capital Stock. "Restricted Subsidiary" means a Subsidiary of the Company other than an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company existing as of the Issue Date. The Board of Directors may designate any Unrestricted Subsidiary or any person that is to become a Subsidiary as a Restricted Subsidiary if, immediately after giving effect to such action (and treating any Acquired Indebtedness as having been incurred at the time of such action), the Company could have incurred at least $1.00 of additional indebtedness under the first paragraph of Section 4.05 of this Indenture. "Rule 144A" means Rule 144A under the Securities Act. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc. or any successor to the rating agency business thereof. 21 15 "Secured Indebtedness" means any Indebtedness of the Company or a Restricted Subsidiary secured by a Lien. "Securities Act" means the Securities Act of 1933, as amended. "Security Register" has the meaning provided in Section 2.04. "Senior Credit Facilities" means the credit facilities under that certain Credit Agreement dated as of the date hereof, among the Company and The Bank of Nova Scotia, as administrative agent and collateral agent, BancAmerica Robertson Stephens, as syndication agent, The Chase Manhattan Bank, as documentation agent, and the other financial institutions from time to time party thereto, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending or shortening the maturity of, refinancing, replacing or otherwise restructuring (including by way of adding Subsidiaries of the Company as additional borrowers or guarantors thereunder or increasing the amount of Indebtedness thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders (or other institutions). "Senior Indebtedness" means, whether outstanding on the Issue Date or thereafter issued, all Indebtedness of the Company, including interest (including interest accruing on or after the filing of, or which would have accrued but for the filing of, any petition in bankruptcy or for reorganization relating to the Company or any Restricted Subsidiary whether or not a claim for post-filing interest is allowed in such proceeding) and premium, if any, thereon, and other monetary amounts (including fees, expenses, reimbursement obligations under letters of credit and indemnities) owing in respect thereof unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that the obligations in respect of such Indebtedness ranks pari passu with the Notes; provided, however, that Senior Indebtedness will not include (1) any obligation of the Company to any Restricted Subsidiary, (2) any liability for federal, state, foreign, local or other taxes owed or owing by the Company, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness, Guarantee or obligation of the Company that is expressly subordinate or junior in right of payment to any other Indebtedness, Guarantee or obligation of the Company, including any Note Obligations and the Existing Regal Notes or (5) obligations in respect of any Capital Stock. "Senior Subordinated Indebtedness" means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. 22 16 "Significant Restricted 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. "Subsidiary", with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, through one or more intermediaries, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, through one or more intermediaries, owned by such Person. Notwithstanding anything in this Indenture to the contrary, all references to the Company and its consolidated Subsidiaries or to financial information prepared on a consolidated basis in accordance with GAAP shall be deemed to include the Company and its Subsidiaries as to which financial statements are prepared on a combined basis in accordance with GAAP and to financial information prepared on such a combined basis. Notwithstanding anything in this Indenture to the contrary, an Unrestricted Subsidiary shall not be deemed to be a Restricted Subsidiary for purposes of this Indenture. "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 Completion" means any motion picture theatre or screen or enhancement which was first opened for business during any applicable period. "TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb), as in effect on the date this Indenture was executed, except as provided in Section 9.06. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as shown on the most recent balance sheet of the Company. "Transaction Date" means, with respect to the incurrence of any Indebtedness by the Company or any of its Restricted Subsidiaries, the date such Indebtedness is to be incurred and, with respect to any Restricted Payment, the date such Restricted Payment is to be made. "Trustee" means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the provisions of Article Seven of this Indenture and thereafter means such successor. "United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended and as codified in Title 11 of the United States Code, as amended from time to time hereafter, or any successor federal bankruptcy law. 23 17 "Unrestricted Subsidiary" means a Subsidiary of the Company created after the Issue Date and so designated by a resolution adopted by the Board of Directors; provided, however, that (a) neither the Company nor any of its other Restricted Subsidiaries (1) provides any credit support for any Indebtedness or other Obligations of such Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness) or (2) is directly or indirectly liable for any Indebtedness or other Obligations of such Subsidiary and (b) at the time of designation of such Subsidiary, such Subsidiary has no property or assets (other than de minimis assets resulting from the initial capitalization of such Subsidiary). The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could incur $1.00 of additional Indebtedness under the first paragraph of Section 4.05 of this Indenture and (y) no Default or Event of Default shall have occurred or be continuing. Any designation pursuant to this definition by the Board of Directors shall be evidenced to the Trustee by the filing with the Trustee of a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. "U.S. Global Notes" has the meaning provided in Section 2.01. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable or redeemable at the issuer's option. "U.S. Physical Notes" has the meaning provided in Section 2.01. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Subsidiary" means, with respect to any Subsidiary of any Person, the ownership of all of the outstanding Capital Stock of such Subsidiary (other than any director's qualifying shares or shares owned by foreign nationals to the extent mandated by applicable law) by such Person or one or more Wholly Owned Subsidiaries of such Person. SECTION 1.02. 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: 24 18 "indenture securities" means the Notes; "indenture security holder" means a Holder or a Noteholder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by a rule of the Commission and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "or" is not exclusive; (iv) words in the singular include the plural, and words in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (vii) all ratios and computations based on GAAP contained in this Indenture shall be computed in accordance with the definition of GAAP set forth in Section 1.01; and (viii) all references to Sections or Articles refer to Sections or Articles of this Indenture unless otherwise indicated. 25 19 ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating. The Notes and the Trustee's certificate of authentication shall be substantially in the form annexed hereto as Exhibit A with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange agreements to which the Company is subject. Each Note shall be dated the date of its authentication. The terms and provisions contained in the form of the Notes annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a part of this Indenture. To the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (the "U.S. Global Notes"), registered in the name of the nominee of the Depositary, deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the U.S. Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, in accordance with the instructions given by the Holder thereof, as hereinafter provided. Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued initially in the form of one or more temporary global Notes in registered form substantially in the form set forth in Exhibit A (the "Temporary Offshore Global Notes"), registered in the name of the nominee of the Depositary, deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Offshore Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary or its nominee, as hereinafter provided. At any time after the 40th day following the later of commencement of the offering of the Notes and the Issue Date, upon receipt by the Trustee and the Company of a certificate substantially in the form of Exhibit B hereto, one or more permanent global Notes in registered form substantially in the form set forth in Exhibit A (the "Permanent Offshore Global Notes"; and together with the Temporary Offshore Global Notes, the "Offshore Global Notes") duly executed by the Company and authenticated by the Trustee as hereinafter provided shall be deposited with the Trustee, as custodian for the Depositary or its nominee, and the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the Temporary Offshore Global Notes in an amount equal to the principal amount of the beneficial interest in the Temporary Offshore Global Notes transferred. 26 20 Notes offered and sold to Institutional Accredited Investors shall be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A (the "U.S. Physical Notes"). Notes issued pursuant to Section 2.07 in exchange for interests in the Offshore Global Notes shall be in the form of permanent certificated Notes in registered form substantially in the form set forth in Exhibit A (the "Offshore Physical Notes"). The Offshore Physical Notes and U.S. Physical Notes are sometimes collectively herein referred to as the "Physical Notes." The U.S. Global Notes and the Offshore Global Notes are sometimes referred to herein as the "Global Notes." The definitive Notes shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Notes may be listed, all as determined by the Officers executing such Notes, as evidenced by their execution of such Notes. SECTION 2.02. Restrictive Legends. Unless and until a Note is exchanged for an Exchange Note or otherwise sold in connection with an effective Registration Statement pursuant to the Registration Rights Agreement, (i) the U.S. Global Notes and U.S. Physical Notes shall bear the legend set forth below on the face thereof and (ii) the Offshore Physical Notes and Offshore Global Notes shall bear the legend set forth below on the face thereof until at least the 41st day after the Closing Date and receipt by the Company and the Trustee of a certificate substantially in the form of Exhibit B hereto, and the Temporary Offshore Global Notes shall bear the legend set forth below on the face thereof. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO 27 21 A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS. Each Global Note, whether or not an Exchange Note, shall also bear the following legend on the face thereof: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY AS IS REQUESTED BY AN 28 22 AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION S 2.01, 2.06, 2.07 AND 2.08 OF THE INDENTURE. SECTION 2.03. Execution, Authentication and Denominations. Subject to Article Four and applicable law, the aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited. The Notes shall be executed by two Officers of the Company. The signature of these Officers on the Notes may be by facsimile or manual signature in the name and on behalf of the Company. If an Officer whose signature is on a Note no longer holds that office at the time the Trustee or authenticating agent authenticates the Note, the Note shall be valid nevertheless. A Note shall not be valid until the Trustee or authenticating agent manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. At any time and from time to time after the execution of this Indenture, the Trustee or an authenticating agent shall upon receipt of a Company Order authenticate for original issue Notes in the aggregate principal amount specified in such Company Order; provided that the Trustee shall be entitled to receive an Officers' Certificate and an Opinion of Counsel of the Company in connection with such authentication of Notes. Such Company Order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated and, in case of an issuance of Notes pursuant to Section 2.15, shall certify that such issuance is in compliance with Article Four. The Trustee may appoint an authenticating agent 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 authenticating agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. 29 23 The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 in principal amount and any integral multiple thereof. SECTION 2.04. Registrar and Paying Agent. The Company shall maintain one or more offices or agencies where Notes may be presented for registration of transfer or for exchange (each a "Transfer Agent" and such Transfer Agent in the Borough of Manhattan, The City of New York, the "Registrar"), one or more offices or agencies where Notes may be presented for payment (each a "Paying Agent") and an office or agency where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served, one of which in each case shall be in the Borough of Manhattan, The City of New York and, so long as the Notes are listed on the Luxembourg Stock Exchange, one of which shall be in Luxembourg. The Company shall cause the Registrar to keep a register of the Notes and of their transfer and exchange (the "Security Register"). The Security Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall give prompt written notice to the Trustee of the name and address of any such Agent and any change in the address of such Agent. If the Company fails to maintain a Registrar, Paying Agent and/or agent for service of notices and demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for service of notices and demands. The Company may remove any Agent upon written notice to such Agent and the Trustee; provided that no such removal shall become effective until (i) the acceptance of an appointment by a successor Agent to such Agent as evidenced by an appropriate agency agreement entered into by the Company and such successor Agent and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as such Agent until the appointment of a successor Agent in accordance with clause (i) of this proviso. The Company, any Subsidiary of the Company, or any Affiliate of any of them may act as Paying Agent, Registrar or Transfer Agent, and/or agent for service of notice and demands. The Company initially appoints the Trustee as Registrar, Paying Agent, authenticating agent and agent for service of notice and demands. 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 Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee as of each Regular Record Date and at such other times as the Trustee may reasonably request the names and addresses of Holders as they appear in the Security Register, including the aggregate principal amount of Notes held by each Holder. 30 24 SECTION 2.05. Paying Agent to Hold Money in Trust. Not later than 11:00 a.m. (New York City time) each due date of the principal, premium, if any, and interest on any Notes, the Company shall deposit with one or more Paying Agents money in immediately available funds sufficient to pay such principal, premium, if any, and interest so becoming due. The Company shall require each Paying Agent other than the Trustee to agree in writing that such Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Notes (whether such money has been paid to it by the Company or any other obligor on the Notes), and such Paying Agent shall promptly notify the Trustee of any default by the Company (or any other obligor on the Notes) in making any such payment. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require such Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent shall have no further liability for the money so paid over to the Trustee. If the Company or any Subsidiary of the Company or any Affiliate of any of them acts as a Paying Agent, it will, on or before each due date of any principal of, premium, if any, or interest on the Notes, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient, with monies held by all other Paying Agents, to pay such principal, premium, if any, or interest so becoming due until such sum of money shall be paid to such Holders or otherwise disposed of as provided in this Indenture, and will promptly notify the Trustee of its action or failure to act. SECTION 2.06. Transfer and Exchange. The Notes are issuable only in registered form. A Holder may transfer a Note only by written application to the Registrar or another Transfer Agent stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Holder only upon, final acceptance and registration of the transfer by the Registrar in the Security Register. Prior to the registration of any transfer by a Holder as provided herein, the Company, the Trustee, and any agent of the Company shall treat the person in whose name the Note is registered as the owner thereof for all purposes whether or not the Note shall be overdue, and neither the Company, the Trustee, nor any such agent shall be affected by notice to the contrary. Furthermore, any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent) and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. When Notes are presented to the Registrar or another Transfer Agent with a request to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations (including an exchange of Notes for Exchange Notes), the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met (including that such Notes are duly endorsed or accompanied by a written instrument of transfer duly executed by the Holder thereof or by an attorney who is authorized in writing to act on behalf of the Holder); provided that no exchanges of Notes for Exchange Notes shall occur until a Registration 31 25 Statement shall have been declared effective by the Commission and that any Notes that are exchanged for Exchange Notes shall be cancelled by the Trustee. To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar's request. No service charge shall be made for any registration of transfer or exchange or redemption of the Notes, 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 other similar governmental charge payable upon exchanges pursuant to Section 2.11, 3.08 or 9.04). Neither the Registrar nor any other Transfer Agent shall be required (i) to issue, register the transfer of or exchange any Note during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Notes selected for redemption under Section 3.03 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. SECTION 2.07. Book-Entry Provisions for Global Notes. (a) The U.S. Global Notes and Offshore Global Notes initially shall (i) be registered in the name of the Depositary for such Global Notes or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear legends as set forth in Section 2.02. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note. (b) Transfers of a Global Note shall be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in Global Notes may be transferred in accordance with the rules and procedures of the Depositary and the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in the U.S. Global Notes or the Offshore Global Notes, as the case may be, if (i) the Company notifies the Trustee in writing that the Depositary it no longer willing or able to act as Depositary or the Depositary ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed by the Company within 90 days of such notice, (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Notes in definitive form under this Indenture, (iii) an Event of Default has occurred 32 26 and is continuing and the Registrar has received a request from the Depositary or (iv) in accordance with the rules and procedures of the Depositary and the provisions of Section 2.08. (c) Any beneficial interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in another Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in such other Global Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest. (d) In connection with any transfer of a portion of the beneficial interests in a Global Note to beneficial owners pursuant to paragraph (b) of this Section 2.07, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in such Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Notes or Offshore Physical Notes, as the case may be, of like tenor and amount. (e) In connection with the transfer of the U.S. Global Notes or the Offshore Global Notes, in whole, to beneficial owners pursuant to paragraph (b) of this Section 2.07, the U.S. Global Notes or Offshore Global Notes, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the U.S. Global Notes or Offshore Global Notes, as the case may be, an equal aggregate principal amount of U.S. Physical Notes or Offshore Physical Notes, as the case may be, of authorized denominations. (f) Any U.S. Physical Note delivered in exchange for an interest in the U.S. Global Notes pursuant to paragraph (b), (d) or (e) of this Section 2.07 shall, except as otherwise provided by paragraph (e) of Section 2.08, bear the legend regarding transfer restrictions applicable to the U.S. Physical Note set forth in Section 2.02. (g) Any Offshore Physical Note delivered in exchange for an interest in the Offshore Global Notes pursuant to paragraph (b), (d) or (e) of this Section 2.07 shall, except as otherwise provided by paragraph (e) of Section 2.08, bear the legend regarding transfer restrictions applicable to the Offshore Physical Note set forth in Section 2.02. (h) The registered holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. 33 27 SECTION 2.08. Special Transfer Provisions. Unless and until a Note is exchanged for an Exchange Note or otherwise sold in connection with an effective Registration Statement pursuant to the Registration Rights Agreement, the following provisions shall apply: (a) Transfers to Non-QIB Institutional Accredited Investors. The following provisions shall apply with respect to the registration of any proposed transfer of a Note to any Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons): (i) The Registrar shall register the transfer of any Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the time period referred to in Rule 144(k) under the Securities Act or (y) the proposed transferee has delivered to the Registrar (A) a certificate substantially in the form of Exhibit C hereto and (B) if the aggregate principal amount of the Notes being transferred is less than $100,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Notes, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Notes in an amount equal to the principal amount of the beneficial interest in the U.S. Global Notes to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more U.S. Physical Notes of like tenor and amount. (b) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Note to a QIB (excluding Non-U.S. Persons): (i) If the Note to be transferred consists of (x) either Offshore Physical Notes prior to the removal of the Private Placement Legend or U.S. Physical Notes, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A 34 28 or (y) an interest in the U.S. Global Notes, the transfer of such interest may be effected only through the book entry system maintained by the Depositary. (ii) If the proposed transferee is an Agent Member, and the Note to be transferred consists of U.S. Physical Notes, upon receipt by the Registrar of the documents referred to in paragraph (i) above and instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of U.S. Global Notes in an amount equal to the principal amount of the U.S. Physical Notes to be transferred, and the Trustee shall cancel the U.S. Physical Notes so transferred. (c) Transfers of Interests in the Temporary Offshore Global Notes. The following provisions shall apply with respect to registration of any proposed transfer of an interest in a Temporary Offshore Global Notes: (i) The Registrar shall register the transfer of any Note (x) if the proposed transferee is a Non-U.S. Person and the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto or (y) if the proposed transferee is a QIB and the proposed transferor has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) If the proposed transferee is an Agent Member, upon receipt by the Registrar of the documents referred to in clause (i)(y) above and instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the U.S. Global Notes in an amount equal to the principal amount of the Temporary Offshore Global Notes to be transferred, and the Trustee shall decrease the amount of the Temporary Offshore Global Notes. (d) Transfers of Interests in the Permanent Offshore Global Notes or Unlegended Offshore Physical Notes. The following provisions shall apply with respect to any transfer of 35 29 interests in Permanent Offshore Global Notes or unlegended Offshore Physical Notes. The Registrar shall register the transfer of any such Note without requiring any additional certification. (e) Transfers to Non-U.S. Persons at Any Time. The following provisions shall apply with respect to any transfer of a Note to a Non-U.S. Person: (i) Prior to the 41st day following the later of commencement of the offering of the Notes and the Issue Date, the Registrar shall register any proposed transfer of a Note to a Non-U.S. Person upon receipt of a certificate substantially in the form of Exhibit D hereto from the proposed transferor. (ii) On and after the 41st day following the later of commencement of the offering of the Notes and the Issue Date, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Note to be transferred is a U.S. Physical Note or an interest in U.S. Global Notes, upon receipt of a certificate substantially in the form of Exhibit D hereto from the proposed transferor. (iii) (a) If the proposed transferor is an Agent Member holding a beneficial interest in the U.S. Global Notes, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (ii) and (y) instructions in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and a decrease in the principal amount of the U.S. Global Notes in an amount equal to the principal amount of the beneficial interest in the U.S. Global Notes to be transferred, and (b) if the proposed transferee is an Agent Member, upon receipt by the Registrar of instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Offshore Global Notes in an amount equal to the principal amount of the U.S. Physical Notes or the U.S. Global Notes, as the case may be, to be transferred, and the Trustee shall cancel the Physical Note, if any, so transferred or decrease the amount of the U.S. Global Notes. (f) Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless either (i) the circumstances contemplated by the fourth paragraph of Section 2.01 or (a)(i)(x) or (e)(ii) of this Section 2.08 exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. 36 30 (g) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall not register a transfer of any Note unless such transfer complies with the restrictions on transfer of such Note set forth in this Indenture. The Registrar shall be entitled to receive and rely on written instructions from the Company verifying that such transfer complies with such restrictions on transfer. In connection with any transfer of Notes, each Holder agrees by its acceptance of the Notes to furnish the Registrar or the Company such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act; provided that the Registrar shall not be required to determine (but may rely on a determination made by the Company with respect to) the sufficiency of any such certifications, legal opinions or other information. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.07 or this Section 2.08. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. SECTION 2.09. Replacement Notes. If a mutilated Note is surrendered to the Trustee or if the Holder claims that the Note has been lost, destroyed or wrongfully taken, then, in the absence of notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall issue and the Trustee shall authenticate a replacement Note of like tenor and principal amount and bearing a number not contemporaneously outstanding; provided that the requirements of this Section 2.09 are met. If required by the Company, an indemnity bond must be furnished that is sufficient in the judgment of the Company to protect the Company, the Trustee or any Agent from any loss that any of them may suffer if a Note is replaced. The Company may charge such Holder for its expenses and the expenses of the Trustee in replacing a Note. In case any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof. Every replacement Note is an additional obligation of the Company and shall be entitled to the benefits of this Indenture. SECTION 2.10. Outstanding Notes. Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.10 as not outstanding. If a Note is replaced pursuant to Section 2.09, it ceases to be outstanding unless and until the Trustee and the Company receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser. 37 31 If the Paying Agent (other than the Company or an Affiliate of the Company) holds on the maturity date money sufficient to pay Notes payable on that date, then on and after that date such Notes cease to be outstanding and interest on them shall cease to accrue. A Note does not cease to be outstanding because the Company or one of its Subsidiaries holds such Note, provided, however, that in determining whether the Holders of the requisite principal amount of the outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any other obligor upon the Notes or any Subsidiaries of the Company or of such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which the Trustee has actual knowledge to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company or any other obligor upon the Notes or any Subsidiaries of the Company or of such other obligor. SECTION 2.11. Temporary Notes. Until definitive Notes are ready for delivery, the Company may prepare and execute and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of definitive Notes but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officers executing the temporary Notes, as evidenced by their execution of such temporary Notes. If temporary Notes are issued, the Company will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes shall be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes shall be entitled to the same benefits under this Indenture as definitive Notes. SECTION 2.12. Cancellation. The Company at any time may deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Notes previously authenticated hereunder which the Company has not issued and sold. Each Transfer Agent and Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee shall cancel all Notes surrendered for transfer, exchange, payment or cancellation and shall destroy them in accordance with its normal procedure. SECTION 2.13. CUSIP Numbers. The Company in issuing the Notes may use "CUSIP", "CINS" or "ISIN" numbers (if then generally in use), and the Company and the Trustee shall use 38 32 CUSIP, CINS or ISIN numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders; provided that any such notice shall 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 redemption or exchange and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any change in "CUSIP", "CINS" or "ISIN" numbers for the Notes. SECTION 2.14. Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay, or shall deposit with the Paying Agent money in immediately available funds sufficient to pay, the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date. A special record date, as used in this Section 2.14 with respect to the payment of any defaulted interest, shall mean the 15th day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, the Company shall mail to each Holder and to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.15. Issuance of Additional Notes. The Company may, subject to Article Four of this Indenture and applicable law, issue additional Notes under this Indenture. The Notes issued on the Closing Date and any additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture. ARTICLE THREE REDEMPTION SECTION 3.01. Right of Redemption. (a) The Notes are redeemable, at the Company's option, in whole or in part, at any time or from time to time, on or after June 1, 2003 and prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's last address (and so long as the Notes are listed on the Luxembourg Stock Exchange, publication of notice in Luxembourg), as it appears in the Security Register, at the following Redemption Prices (expressed in percentages of principal amount thereof on the applicable Redemption Date), plus accrued and unpaid interest to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date), if redeemed during the 12-month period commencing June 1 of the years set forth below:
Redemption Year Price ---- ---------- 2003..................................104.750% 2004..................................103.167
39 33 2005....................................... 101.583 2006 and thereafter........................ 100.000 (b) In addition, at any time and from time to time prior to June 1, 2001, the Company may, at its option, redeem up to 35% of the aggregate principal amount of the Notes originally issued with the proceeds of one or more Equity Offerings, at a Redemption Price (expressed as a percentage of principal amount) of 109.50%, plus accrued and unpaid interest to the Redemption Date (subject to the rights of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date); provided that (i) at least 65% of Notes initially issued remains outstanding after each such redemption and (ii) any such redemption shall occur on or prior to the date that is 90 days after receipt by the Company of the proceeds of an Equity Offering. The Company shall effect such redemption on a pro rata basis. SECTION 3.02. Notices to Trustee. If the Company elects to redeem Notes pursuant to Section 3.01, it shall notify the Trustee in writing of the Redemption Date and the principal amount of Notes to be redeemed and the clause of this Indenture pursuant to which redemption shall occur. The Company shall give each notice provided for in this Section 3.02 in an Officers' Certificate at least 45 days before the Redemption Date (unless a shorter period shall be satisfactory to the Trustee). SECTION 3.03. Selection of Notes to Be Redeemed. If less than all of the Notes are to be redeemed at any time, the Trustee shall select the Notes to be redeemed in compliance with the requirements, as certified to it by the Company, of the principal national securities exchange, if any, on which the Notes are listed or, in the absence of such requirements or if the Notes are not listed on a national securities exchange, on a pro rata basis, by lot or by such other method as the Trustee in its sole discretion shall deem fair and appropriate; provided that no Note of $1,000 in principal amount or less shall be redeemed in part. The Trustee shall make the selection from the Notes outstanding and not previously called for redemption. The Trustee may select for redemption portions (equal to $1,000 in principal amount or any integral multiple thereof) of Notes that have denominations larger than $1,000 in principal amount. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company and the Registrar promptly in writing of the Notes or portions of Notes to be called for redemption. SECTION 3.04. Notice of Redemption. With respect to any redemption of Notes pursuant to Section 3.01, at least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail to each Holder whose Notes are to be redeemed at its registered address and shall publish such notice in Luxembourg at Greffier et 40 34 Chef du Tribunal d'Arrondissement de et a Luxembourg, Chief Registrar of the District Court in Luxembourg. The notice shall identify the Notes to be redeemed and shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the name and address of each Paying Agent; (iv) that Notes called for redemption must be surrendered to a Paying Agent in order to collect the Redemption Price; (v) that, unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders is to receive payment of the Redemption Price plus accrued interest to the Redemption Date upon surrender of the Notes to a Paying Agent; (vi) that, if any Note is being redeemed in part, the portion of the principal amount (equal to $1,000 in principal amount or any integral multiple thereof) of such Note to be redeemed and that, on and after the Redemption Date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be reissued; and (vii) that, if any Note contains a CUSIP, CINS or ISIN number as provided in Section 2.13, no representation is being made as to the correctness of the CUSIP, CINS or ISIN number either as printed on the Notes or as contained in the notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes. At the Company's request (which request may be revoked by the Company at any time prior to the time at which the Trustee shall have given such notice to the Holders), made in writing to the Trustee at least 45 days (or such shorter period as shall be satisfactory to the Trustee) before a Redemption Date, the Trustee shall give the notice of redemption in the name and at the expense of the Company. If, however, the Company gives such notice to the Holders, the Company shall concurrently deliver to the Trustee an Officers' Certificate stating that such notice has been given. 41 35 SECTION 3.05. Effect of Notice of Redemption. Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price. Upon surrender of any Notes to a Paying Agent, such Notes shall be paid at the Redemption Price, plus accrued interest, if any, to the Redemption Date. Notice of redemption shall be deemed to be given when mailed, whether or not the Holder receives the notice. In any event, failure to give such notice, or any defect therein, shall not affect the validity of the proceedings for the redemption of Notes held by Holders to whom such notice was properly given. SECTION 3.06. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with its Paying Agents not later than 11:00 a.m. (New York City time) (or, if the Company is acting as its own Paying Agent, shall segregate and hold in trust as provided in Section 2.05) money sufficient to pay the Redemption Price of and accrued interest on all Notes to be redeemed on that date other than Notes or portions thereof called for redemption on that date that have been delivered by the Company to the Trustee for cancellation. SECTION 3.07. Payment of Notes Called for Redemption. If notice of redemption has been given in the manner provided above, the Notes or portion of Notes specified in such notice to be redeemed shall become due and payable on the Redemption Date at the Redemption Price stated therein, together with accrued interest to such Redemption Date, and on and after such date (unless the Company shall default in the payment of such Notes at the Redemption Price and accrued interest to the Redemption Date, in which case the principal, until paid, shall bear interest from the Redemption Date at the rate prescribed in the Notes), such Notes shall cease to accrue interest. Upon surrender of any Note for redemption in accordance with a notice of redemption, such Note shall be paid and redeemed by the Company at the Redemption Price, together with accrued interest, if any, to the Redemption Date; provided that installments of interest whose stated maturity is on or prior to the Redemption Date shall be payable to the Holders registered as such at the close of business on the relevant Regular Record Date. SECTION 3.08. Notes Redeemed in Part. Upon surrender of any Note that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver by mail to the Holder without service charge, a new Note equal in principal amount to the unredeemed portion of such surrendered Note. 42 36 ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes. The Company shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date due if the Trustee or the Paying Agents (other than the Company, a Subsidiary of the Company, or any Affiliate of any of them) holds on that date money designated for and sufficient to pay the installment, except that, at the option of the Company, payment of interest may be made by check mailed to the address of each Holder as such address is specified in the Security Register. If the Company or any Subsidiary of the Company or any Affiliate of any of them acts as Paying Agent, an installment of principal, premium, if any, or interest shall be considered paid on the due date if the entity acting as Paying Agent complies with the last sentence of Section 2.05. As provided in Section 6.09, upon any bankruptcy or reorganization procedure relative to the Company, the Trustee shall serve as the Paying Agent, if any, for the Notes. The Company shall pay interest on overdue principal and premium, if any, and interest on overdue installments of interest, to the extent lawful, at the rate per annum specified in the Notes. SECTION 4.02. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, The City of New York and, in the event the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg, an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of any 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 address of the Trustee set forth in Section 11.02. 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 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 and, in the event the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg, 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. 43 37 The Company hereby initially designates the Corporate Trust Office of the Trustee as such office of the Company in the Borough of Manhattan, The City of New York in accordance with Section 2.04. SECTION 4.03. Fall-away Event. The Company's and its Restricted Subsidiaries' obligations to comply with the provisions of this Indenture under Sections 4.04, 4.05, 4.06 and 5.01 will terminate if and when the Notes are Investment Grade Status (a "Fall-away Event"); provided, however, that the Company's and its Restricted Subsidiaries' obligations to comply with such provisions shall be reinstated as to events occurring after such reinstatement if the Notes cease to have Investment Grade Status, subject to the terms, conditions and obligations set forth in this Indenture, provided, further, that no such Default or Event of Default shall be deemed to have arisen as a result of such reinstatement or as a result of any action taken or omitted from being taken during the period that the foregoing covenants were not in effect. SECTION 4.04. Limitation on Restricted Payments. (a) The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment if at the time of such Restricted Payment and immediately after giving effect thereto: (i) a Default or Event of Default shall have occurred and be continuing; or (ii) the Company is not able to incur $1.00 of additional Indebtedness under the first paragraph of Section 4.05 of this Indenture; or (iii) the aggregate amount of Restricted Payments made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined by the Board of Directors in good faith) exceeds the sum of (a) (x) 100% of Consolidated EBITDA of the Company accrued subsequent to the Issue Date to the most recent date for which financial information is available to the Company (taken as one accounting period), less (y) 1.75 times Consolidated Interest Expense for the same period, plus (b) 100% of the aggregate net proceeds, including the fair market value of property other than cash as determined by the Board of Directors in good faith, received subsequent to the Issue Date by the Company from any Person (other than a Restricted Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date of Qualified Capital Stock of the Company (excluding (i) any net proceeds from issuances and sales financed directly or indirectly using funds borrowed from the Company or any Restricted Subsidiary of the Company, until and to the extent such borrowing is repaid, but including the proceeds from the issuance and sale of any securities convertible into or exchangeable for Qualified Capital Stock to the extent such securities are so converted or exchanged and including any additional proceeds received by the Company upon such conversion or exchange, (ii) any net proceeds received from issuances and sales that are used to consummate a transaction described in clause (2) of paragraph (b) below 44 38 and (iii) any net cash proceeds received from the issuance and sale of Designated Preferred Stock), plus (c) without duplication of any amount included in clause (iii)(b) above, 100% of the aggregate net proceeds, including the fair market value of property other than cash (valued as provided in clause (iii)(b) above), received by the Company as a capital contribution subsequent to the Issue Date, plus (d) the greater of (i) $100 million and (ii) 15% of the Total 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. (b) Notwithstanding the foregoing, these provisions will not prohibit: (1) the payment of any dividend or the making of any distribution within 60 days after the date of its declaration if such dividend or distribution would have been permitted on the date of declaration; (2) (A) the purchase, redemption or other acquisition or retirement of any Capital Stock of the Company or any warrants, options or other rights to acquire shares of any class of such Capital Stock ("Retired Capital Stock") either (x) solely in exchange for shares of Qualified Capital Stock or other warrants, options or rights to acquire Qualified Capital Stock or (y) through the application of the net proceeds of a substantially concurrent sale for cash (other than to a Restricted Subsidiary of the Company) of shares of Qualified Capital Stock or warrants, options or other rights to acquire Qualified Capital Stock or (z) in the case of Disqualified Capital Stock, solely in exchange for, or through the application of the net proceeds of a substantially concurrent sale for cash (other than to a Restricted Subsidiary of the Company) of, Disqualified Capital Stock (in each case, "Refunding Capital Stock") and (B) the declaration and payment of dividends on Refunding Capital Stock in an aggregate amount per year no greater than the aggregate amount of dividends per annum that could have been paid on such Retired Capital Stock pursuant to this covenant (other than this clause (b)(2)(B)) immediately prior to such retirement; provided, however, that at the time of the declaration of any such dividends, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (3) payments made pursuant to any merger, consolidation or sale of assets effected in accordance with Article Five; provided, however, that no such payment may be made pursuant to this clause (3) unless, after giving pro forma effect to such transaction (and the incurrence of any Indebtedness in connection therewith and the use of the proceeds thereof), the Company would be able to incur $1.00 of additional Indebtedness under the first paragraph of Section 4.05 of this Indenture; (4)(A) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Capital Stock) issued after the Issue Date or (B) the declaration and payment of dividends on Refunding Capital Stock in excess of the dividends declarable and payable thereon pursuant to clause (2)(B) above; provided, however, in either case, after giving effect to such issuance or declaration on a pro forma basis, the Company and its Restricted Subsidiaries would be able to incur $1.00 of Indebtedness under the first paragraph of Section 4.05 of this Indenture; (5) repurchases of warrants, options or rights to acquire Capital Stock deemed to occur upon exercise of warrants, options or rights to acquire Capital Stock if such warrants, options or rights represent a portion of the exercise price of such warrants, options or rights; (6) the declaration and 45 39 payment of dividends to holders of any class or series of Disqualified Capital Stock or the declaration and payment of dividends to holders of Preferred Stock of Restricted Subsidiaries, in each case, issued in accordance with Section 4.05 of this Indenture; (7) commencing on the six month anniversary of the Issue Date, a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests of the Company in existence on the Issue Date and which are not held by KKR, Hicks Muse or any of their respective affiliates on the Issue Date (including any Capital Stock issued in respect of such Capital Stock as a result of a stock split, recapitalization, merger, combination, consolidation or otherwise, but excluding any Equity Interests issued pursuant to any management equity plan or stock option plan or similar agreement); provided that notwithstanding the foregoing, the Company and its Restricted Subsidiaries shall be permitted to make Restricted Payments under this clause (7) only if after giving effect thereto, the Company would be permitted to incur at least $1.00 of additional Indebtedness under the first paragraph of Section 4.05 of this Indenture; and (8) dividends on the Company's Capital Stock (other than Disqualified Capital Stock) after the first underwritten Equity Offering in an annual amount not to exceed 6.0% of the gross proceeds (before deducting underwriting discounts and commissions and other fees and expenses of the offering) received from shares of Capital Stock (other than Disqualified Capital Stock) sold for the account of the issuer thereof (and not for the account of any stockholder) in such initial underwritten Equity Offering; provided, however, that in the case of clauses other than clauses (1) and (2)(A), no Event of Default shall have occurred or be continuing at the time of such payment or as a result thereof. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date, amounts expended pursuant to clauses (1), 2(B), (3), (4) and (8) shall be included in such calculation. To the extent the issuance of Capital Stock and the receipt of capital contributions are applied to permit the issuance of Indebtedness pursuant to clause (v) of the definition of Permitted Indebtedness, the issuance of such Capital Stock and the receipt of such capital contributions shall not be applied to permit payments under this Section 4.04. SECTION 4.05. Limitation on the Incurrence of Additional Indebtedness and Issuance of Capital Stock. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (other than Permitted Indebtedness) and the Company will not issue any Disqualified Capital Stock and its Restricted Subsidiaries will not issue any Preferred Stock (except Preferred Stock issued to the Company or a Restricted Subsidiary of the Company so long as it is so held); provided, however, that the Company and its Restricted Subsidiaries may incur Indebtedness or issue shares of such Capital Stock if, in either case, the Company's Leverage Ratio at the time of incurrence of such Indebtedness or the issuance of such Capital Stock, as the case may be, after giving pro forma effect to such incurrence or issuance as of such date and to the use of proceeds therefrom is less than 7:1. 46 40 (b) The Company will not incur or suffer to exist, or permit any of its Restricted Subsidiaries to incur or suffer to exist, any Obligations with respect to an Unrestricted Subsidiary that would violate the provisions set forth in the definition of Unrestricted Subsidiary set forth in Section 1.01. (c) For purposes of determining compliance with this Section 4.05, in the event that an item of Permitted Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness or is entitled to be incurred pursuant to the first paragraph of this Section 4.05, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this Section 4.05 and such item of Indebtedness will be treated as having been incurred pursuant to only one of the clauses of the definition of Permitted Indebtedness or pursuant to the first paragraph hereof except as otherwise set forth in clause (v) of the definition of Permitted Indebtedness. Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes of this Section 4.05. SECTION 4.06. Limitations on Transactions with Affiliates. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions involving aggregate payments or consideration in excess of $5.0 million (including, without limitation, the purchase, sale, lease, contribution or exchange of any property or the rendering of any service) with or for the benefit of any of its or any of its Restricted Subsidiary's Affiliates (other than transactions between the Company and a Restricted Subsidiary of the Company or among Restricted Subsidiaries of the Company) (an "Affiliate Transaction"), other than Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction on an arm's-length basis from a person that is not an Affiliate; provided, however, that for a transaction or series of related transactions involving value of $10.0 million or more, such determination will be made in good faith by a majority of members of the Board of Directors and by a majority of the disinterested members of the Board of Directors, if any. The foregoing restrictions will not apply to (1) reasonable and customary directors' fees, indemnification and similar arrangements and payments thereunder; (2) any obligations of the Company under any employment agreement, noncompetition 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 covenant); (3) any Restricted Payment permitted to be made pursuant to Section 4.04 of this Indenture; (4) 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; (5) loans or advances to employees in the ordinary course of business of the Company or any of its Restricted Subsidiaries consistent with past practices; (6) payments made in connection with the Transactions, including, without limitation, fees payable to and expenses of Hicks Muse and KKR; (7) payments by the Company or any of its Restricted Subsidiaries to KKR or Hicks Muse or their respective Affiliates 47 41 made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures, which payments are approved by a majority of the Board of Directors in good faith; (8) 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 is on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction on an arm's-length basis from a person that is not an Affiliate; (9) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which 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 (9) 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; (10) 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 an unaffiliated party; (11) any agreement as in effect as of 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 (12) any purchases of Capital Stock (other than Disqualified Capital Stock) of the Company by Affiliates thereof. SECTION 4.07. Repurchase of Notes upon a Change of Control. (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Company purchase all or a portion of such Holder's Notes in cash pursuant to the offer described in paragraph (c) of this Section 4.07 (the "Change of Control Offer"), at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. (b) Prior to the mailing of the notice referred to below, but in any event within 30 days following the date on which the Company becomes aware that a Change of Control has occurred, if the purchase of the Notes would violate or constitute a default under any other Indebtedness of the Company, then the Company shall, to the extent needed to permit such purchase of Notes, either (i) repay all such Indebtedness and terminate all commitments outstanding thereunder or (ii) obtain the requisite consents, if any, under such Indebtedness to permit the purchase of the Notes as provided below. The Company will first comply with the covenant in the preceding sentence 48 42 before it will be required to make the Change of Control Offer or purchase the Notes pursuant to the provisions of paragraphs (c) and (d) below. (c) Within 30 days following the date on which the Company becomes aware that a Change of Control has occurred, the Company shall send, by first-class mail, postage prepaid, a notice to each Holder (and publish notice in Luxembourg at Greffier et Chef du Tribunal d'Arrondissement de et a Luxembourg, Chief Registrar of the District Court in Luxembourg), which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 60 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). Holders electing to have any Notes purchased pursuant to a Change of Control Offer must surrender such Notes to the Transfer Agent and/or Paying Agent for the Notes at the addresses specified in the notice prior to the close of business on the business day prior to the Change of Control Payment Date. The Company will not be required to make a Change of Control Offer pursuant to this covenant if a third party makes a Change of Control Offer in compliance with this Section 4.07 and repurchases all Notes validly tendered and not withdrawn under such Change of Control Offer. (d) The Company will comply with the requirements of Rule 14e-1 under the Exchange Act, to the extent applicable in connection with the purchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Company will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue hereof. SECTION 4.08. Existence. Subject to Articles Four and Five of this Indenture, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and the existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of the Company and each Restricted Subsidiary and the rights (whether pursuant to charter, partnership certificate, agreement, statute or otherwise), licenses and franchises of the Company and each Restricted Subsidiary; provided that the Company shall not be required to preserve any such right, license or franchise, or the existence of any Restricted Subsidiary, if the maintenance or preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole. SECTION 4.09. Payment of Taxes and Other Claims. The Company will pay or discharge and shall cause each of its Subsidiaries to pay or discharge, or cause to be paid or discharged, before the same shall become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon (a) the Company or any such Subsidiary, (b) the income or profits of any such Subsidiary which is a corporation or (c) the property of the Company or any such Subsidiary and (ii) all material lawful claims for labor, materials and 49 43 supplies that, if unpaid, might by law become a lien upon the property of the Company or any such Subsidiary; provided that the Company shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which, if necessary, adequate reserves have been established. SECTION 4.10. Maintenance of Properties and Insurance. The Company will cause all properties used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided that nothing in this Section 4.10 shall prevent the Company or any Restricted Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Company, desirable in the conduct of the business of the Company or such Restricted Subsidiary. The Company will provide or cause to be provided, for itself and its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, products liability insurance and public liability insurance, with reputable insurers or with the government of the United States of America, or an agency or instrumentality thereof, in such amounts, with such deductibles and by such methods as shall be customary for corporations similarly situated in the industry in which the Company or any such Restricted Subsidiary, as the case may be, is then conducting business. SECTION 4.11. Notice of Defaults. In the event that any Officer becomes aware of any Default or Event of Default, the Company shall promptly deliver to the Trustee an Officers' Certificate specifying such Default or Event of Default. SECTION 4.12. Compliance Certificates. (a) The Company shall deliver to the Trustee, within 45 days after the end of each fiscal quarter (120 days after the end of the last fiscal quarter of each year), an Officers' Certificate stating whether or not the signers know of any Default or Event of Default that occurred during such fiscal quarter. In the case of the Officers' Certificate delivered within 120 days after the end of the Company's fiscal year, such certificate shall contain a certification from the principal executive officer, principal financial officer or principal accounting officer of the Company that a review has been conducted of the activities of the Company and its Restricted Subsidiaries and the Company's and its Restricted Subsidiaries' performance under this Indenture and that the Company has complied with all conditions and covenants under this Indenture. For purposes of this Section 4.12, such compliance shall be 50 44 determined without regard to any period of grace or requirement of notice provided under this Indenture. If any of the Officers signing such certificate has knowledge of such a Default or Event of Default, the certificate shall describe any such Default or Event of Default and its status. The first certificate to be delivered pursuant to this Section 4.12(a) shall be for the first fiscal quarter beginning after the execution of this Indenture. (b) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, beginning with the fiscal year in which this Indenture was executed, a certificate signed by the Company's independent certified public accountants stating (i) that their audit examination has included a review of the terms of this Indenture and the Notes as they relate to accounting matters, (ii) that they have read the most recent Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this Section 4.12 and (iii) whether, in connection with their audit examination, anything came to their attention that caused them to believe that the Company was not in compliance with any of the terms, covenants, provisions or conditions of Article Four and Section 5.01 of this Indenture as they pertain to accounting matters and, if any Default or Event of Default has come to their attention, specifying the nature and period of existence thereof; provided that such independent certified public accountants shall not be liable in respect of such statement by reason of any failure to obtain knowledge of any such Default or Event of Default that would not be disclosed in the course of an audit examination conducted in accordance with generally accepted auditing standards in effect at the date of such examination. SECTION 4.13. Commission Reports and Reports to Holders. Whether or not the Company is then required to file reports with the Commission, the Company shall file with the Commission, to the extent such submissions are accepted for filing, all such reports and other information as it would be required to file with the Commission by Sections 13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company shall supply the Trustee and each Holder or shall supply to the Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information within 15 days after the date it would have been required to file such reports or other information with the Commission had it been subject to such Sections. All such reports sent to Holders shall be made available in Luxembourg at Greffier et Chef du Tribunal d'Arrondissement de et a Luxembourg, Chief Registrar of the District Court in Luxembourg. The Company also shall comply with the other provisions of TIA Section 314(a). SECTION 4.14. Waiver of Stay, Extension or Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of, premium, if any, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly 51 45 waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.15. Limitation on Layering. The Company will not incur any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is contractually subordinated in right of payment to all Senior Subordinated Indebtedness (including the Notes). ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. When Company May Merge, Etc. The Company shall not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the Company's assets determined on a consolidated basis for the Company to another Person or adopt a plan of liquidation unless (i) either (1) the Company is the Surviving Person or (2) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance, transfer or lease the properties and assets of the Company substantially as an entirety or, in the case of a plan of liquidation, the Person to which assets of the Company have been transferred, shall be a corporation, partnership, limited liability company or trust organized and existing under the laws of the United States or any State thereof or the District of Columbia; (ii) such Surviving Person shall assume all of the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after giving effect to such transaction and the use of the proceeds therefrom (on a pro forma basis, including giving effect to any Indebtedness incurred or anticipated to be incurred in connection with such transaction and the use of the proceeds therefrom), (1) no Default or Event of Default shall have occurred and be continuing and (2) either (x) such Surviving Person shall be able to incur $1.00 of additional Indebtedness under the first paragraph of Section 4.05 of this Indenture or (y) the Leverage Ratio for such Surviving Person would be less than the Leverage Ratio of the Company immediately prior to such transaction; and (iv) the Company has delivered to the Trustee prior to the consummation of the proposed transaction an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer complies with this Indenture and that all conditions precedent in this Indenture relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of related transactions) of all or substantially all of the properties and assets of one or more Restricted Subsidiaries, the Capital Stock of which constitutes all or substantially all of the properties or assets of the Company, will be deemed to be the transfer of all or substantially all of the properties and assets of the Company. Notwithstanding the foregoing 52 46 clauses (ii) and (iii), (1) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (2) the Company may merge with an Affiliate thereof organized solely for the purpose of reorganizing the Company in another jurisdiction in the U.S. to realize tax or other benefits. SECTION 5.02. Successor Substituted. Upon any consolidation or merger, or any sale, conveyance, transfer, lease or other disposition of all or substantially all of the property and assets of the Company in accordance with Section 5.01 of this Indenture, the successor Person formed by such consolidation or into which the Company is merged or to which such sale, conveyance, transfer, lease or other disposition is made shall succeed to, and be substituted for, 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, and the Company shall be discharged from its Obligations under the Notes; provided that the Company shall not be released from its obligation to pay the principal of, premium, if any, or interest on the Notes in the case of a lease of all or substantially all of its property and assets. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. Any of the following events shall constitute an "Event of Default" hereunder: (i) the failure to pay interest on the Notes when the same becomes due and payable and the Default continues for a period of 30 days (whether or not such payment is prohibited by the provisions of Article Ten); (ii) the failure to pay principal of or premium, if any, on any Notes when such principal or premium, if any, becomes due and payable, at maturity, upon redemption or otherwise (whether or not such payment is prohibited by the provisions of Article Ten); (iii) a default in the observance or performance of any other covenant or agreement contained in the Notes or this Indenture, which default continues for a period of 60 days after the Company receives written notice thereof specifying the default from the Trustee or holders of at least 30% in aggregate principal amount of outstanding Notes; (iv) the failure to pay at the final stated maturity (after giving effect to any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness, if the aggregate principal amount of such Indebtedness, together with the aggregate principal amount of any other such Indebtedness in default for failure 53 47 to pay principal at the final stated maturity (giving effect to any extensions thereof) or which has been accelerated, aggregates $20 million or more at any time; (v) one or more judgments in an aggregate amount in excess of $20 million (which are not covered by insurance as to which the insurer has not disclaimed coverage) being rendered against the Company or any of its Significant Restricted Subsidiaries and such judgment or judgments remain undischarged or unstayed for a period of 60 days after such judgment or judgments become final and nonappealable; (vi) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any of its Significant Restricted Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law for relief of debtors now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any of its Significant Restricted Subsidiaries or for all or substantially all of the property and assets of the Company or any of its Significant Restricted Subsidiaries or (C) the winding up or liquidation of the affairs of the Company or any of its Significant Restricted Subsidiaries and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (vii) the Company or any of its Significant Restricted Subsidiaries (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law for relief of debtors now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any of its Significant Restricted Subsidiaries or for all or substantially all of the property and assets of the Company or any of its Significant Restricted Subsidiaries or (C) effects any general assignment for the benefit of creditors. SECTION 6.02. Acceleration. Upon the occurrence of an Event of Default (other than an Event of Default specified in clause (vi) or (vii) of Section 6.01 that occurs with respect to the Company), the Trustee may, and the Trustee upon the request of the Holders of 30% in principal amount of the outstanding Notes shall, or the Holders of at least 30% in principal amount of outstanding Note may, declare the principal of all the Notes, together with all accrued and unpaid interest and premium, if any, due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"). Upon such a declaration of acceleration, such principal, premium, if any, and accrued interest (i) shall be immediately due and payable or (ii) if there are any amounts outstanding under the Senior Credit Facilities, will become due and payable upon the first to occur of an acceleration under the Senior Credit Facilities or five Business Days after receipt by the Company and the agent under the Senior Credit Facilities of such Acceleration Notice (unless all Events of Default specified in such Acceleration Notice have been cured or waived). If an Event 54 48 of Default specified in clauses (vi) through (vii) of Section 6.01 occurs with respect to the Company, the principal of, premium, if any, and accrued interest on the Notes then outstanding shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. At any time after such declaration or occurrence of acceleration, but before a judgment or decree for the payment of the money due has been obtained by the Trustee, the Holders of at least a majority in principal amount of the outstanding Notes by written notice to the Company and to the Trustee, may rescind and annul a declaration or occurrence of acceleration and its consequences if (a) the Company has paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and (ii) to the extent that payment of such interest is lawful, interest upon overdue installments of interest and overdue payments of principal which has become due otherwise than by such declaration of acceleration, at the rate prescribed therefor by such Notes, (b) all existing Defaults and Events of Default, other than the non-payment of the principal of, premium, if any, and accrued interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived, (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (d) in the event of the cure or waiver of a Default or Event of Default of the type described in clauses (vi) or (vii) of Section 6.01, the Trustee has received an Officers' Certificate and Opinion of Counsel that such Default or Event of Default has been cured or waived. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may, and at the direction of the Holders of at least a majority in principal amount of the outstanding Notes shall, pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, premium, if any, or 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. SECTION 6.04. Waiver of Past Defaults. Subject to Sections 6.02, 6.07 and 9.02, the Holders of at least a majority in principal amount of the outstanding Notes, by notice to the Trustee, may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of, premium, if any, or interest on any Note as specified in clause (i) or (ii) of Section 6.01 or in respect of a covenant or provision of this Indenture which cannot be modified or amended without the consent of the Holder of each outstanding Note affected. 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 Event of Default or impair any right consequent thereto. In the event of any Event of Default specified in clauses (iv), (vi) or (vii) of Section 6.01, 55 49 such Event of Default and all consequences thereof (including without limitation any acceleration or resulting payment default) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or Holders of the Notes, if within 60 days after such Event of Default arose (x) the Indebtedness that is the basis for such Event of Default has been discharged or (y) the Holders of such Indebtedness have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default, or (z) if the Default that is the basis for such Event of Default has been cured. SECTION 6.05. Control by Majority. The Holders of at least a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction; and provided further that the Trustee may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes. SECTION 6.06. Limitation on Suits. A Holder may not institute any proceeding, judicial or otherwise, with respect to this Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (i) the Holder has previously given the Trustee written notice of a continuing Event of Default; (ii) the Holders of at least 25% in aggregate principal amount of outstanding Notes shall have made a written request to the Trustee to pursue such remedy; (iii) such Holder or Holders offer the Trustee indemnity reasonably satisfactory to the Trustee against any costs, liability or expense; (iv) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and (v) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. For purposes of Section 6.05 of this Indenture and this Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any determination of whether the Holders of the required aggregate principal amount of outstanding Notes have concurred in any request or 56 50 direction of the Trustee to pursue any remedy available to the Trustee or the Holders with respect to this Indenture or the Notes or otherwise under the law. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over such other Holder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of the principal of, premium, if any, or interest on, such Note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the Notes, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal, premium or interest specified in clause (i) or (ii) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor of the Notes for the whole amount of principal, premium, if any, and accrued interest remaining unpaid, together with interest on overdue principal, premium, if any, and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the rate specified in the Notes, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may 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 any other amounts due the Trustee under Section 7.07) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor of the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims and to distribute the same, and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official 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. Nothing herein contained shall be deemed to empower 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 thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. 57 51 SECTION 6.10. Priorities. If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order: First: to the Trustee for all amounts due under Section 7.07; Second: to the holders of Senior Indebtedness, and as to the extent required by Article Ten; Third: to Holders for amounts then due and unpaid for principal of, premium, if any, and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, premium, if any, and interest, respectively; and Fourth: to the Company or any other obligors of the Notes, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys' fees, 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 pursuant to Section 6.07, or a suit by Holders of more than 10% in principal amount of the outstanding Notes. SECTION 6.12. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then, and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Company, Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 6.13. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or wrongfully taken Notes in Section 2.09, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy 58 52 shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 6.14. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article Six or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. ARTICLE SEVEN TRUSTEE SECTION 7.01. General. The duties and responsibilities of the Trustee shall be as provided by the TIA and as set forth herein. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not herein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article Seven. SECTION 7.02. Certain Rights of Trustee. Subject to TIA Sections 315(a) through (d): (i) the Trustee may rely, and shall be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed in good faith by it to be genuine and to have been signed or presented by the proper person; (ii) before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 11.04. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion; 59 53 (iii) the Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent appointed with due care by it hereunder; (iv) 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 reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction; (v) 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 its rights or powers, provided that the Trustee's conduct does not constitute negligence or bad faith; (vi) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (vii) 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; (viii) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (ix) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; and (x) the Trustee shall not be deemed to have notice of any 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 its Corporate Trust Office, and such notice references the Notes and this Indenture. 60 54 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 its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to TIA Sections 310(b) and 311. SECTION 7.04. Trustee's Disclaimer. The Trustee (i) makes no representation as to the validity or adequacy of this Indenture or the Notes, (ii) shall not be accountable for the Company's use or application of the proceeds from the Notes and (iii) shall not be responsible for any statement in the Notes other than its certificate of authentication. SECTION 7.05. Notice of Default. If any Default or any Event of Default occurs and is continuing and if such Default or Event of Default is known to the Trustee, the Trustee shall mail to each Holder in the manner and to the extent provided in TIA Section 313(c) notice of the Default or Event of Default within 45 days after it occurs, unless such Default or Event of Default has been cured; provided, however, that, except in the case of a Default in the payment of the principal of, premium, if any, or interest on any Note, the Trustee shall be protected in withholding such notice if and so long as the Board of Directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders. SECTION 7.06. Reports by Trustee to Holders. Within 60 days after each May 15, beginning with May 15, 1999, the Trustee shall mail to each Holder as provided in TIA Section 313(c) a brief report dated as of such May 15, if required by TIA Section 313(a). A copy of each report at the time of its mailing to the Holders of Securities shall be mailed to the Company and filed with the Commission and each stock exchange on which the Securities are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Securities are listed on any stock exchange or of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee such compensation as shall be agreed upon in writing from time to time for its services hereunder. The compensation of the Trustee shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by the Trustee in the administration of its duties hereunder without negligence, willful misconduct or bad faith on its part. Such disubrsements, expenses and advances shall include the reasonable compensation and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability or expense incurred by it without negligence, wilful misconduct or bad faith on its part in connection with the acceptance or administration of this Indenture and its duties under this 61 55 Indenture and the Notes, including the costs and expenses of defending itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the exercise or performance of any of its powers or duties under this Indenture and the Notes. 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 obligations of the Company under this Section 7.07 shall not be subordinated to the payment of Senior Indebtedness pursuant to Article Ten. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, premium, if any, and interest on particular Notes. If the Trustee incurs expenses or renders services after the occurrence of an Event of Default specified in clauses (vi) through (vii) of Section 6.01, the expenses and the compensation for the services will be intended to constitute expenses of administration under Title 11 of the United States Bankruptcy Code or any applicable federal or state law for the relief of debtors. The provisions of this Section 7.07 shall survive the termination of this Indenture. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. 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 at any time by so notifying the Company in writing at least 30 days prior to the date of the proposed resignation. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the consent of the Company. The Company may remove the Trustee if: (i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) 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 outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the 62 56 Company. If the successor Trustee does not deliver its written acceptance required by the next succeeding paragraph of this Section 7.08 within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in principal amount of the outstanding Notes may, at the expense of the Company, petition any court of competent jurisdiction for 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. Immediately after the delivery of such written acceptance, subject to the lien provided in Section 7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, (ii) the resignation or removal of the retiring Trustee shall become effective and (iii) the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder and to the administrative agent under the Senior Credit Facilities. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. If the Trustee is no longer eligible under Section 7.10 or shall fail to comply with TIA Section 310(b), any Holder who satisfies the requirements of TIA Section 310(b) may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.08, the Trustee shall resign immediately in the manner and with the effect provided in this Section. The Company shall give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligation under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee with the same effect as if the successor Trustee had been named as the Trustee herein, provided such corporation shall be otherwise qualified and eligible under this Article. SECTION 7.10. Eligibility. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital and surplus of at least $25 million as set forth in its most recent published annual report of condition that is subject to the requirements of applicable Federal or state supervising or examining authority. If 63 57 at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in this Article. SECTION 7.11. Money Held in Trust. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article Eight of this Indenture. ARTICLE EIGHT DISCHARGE OF INDENTURE SECTION 8.01. Termination of Company's Obligations. Except as otherwise provided in this Section 8.01, the Company may terminate its obligations under the Notes and this Indenture if: (i) all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes that have been replaced or Notes that are paid pursuant to Section 4.01 or Notes for whose payment money or securities have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or (ii) (A) the Notes mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption, (B) the Company irrevocably deposits in trust with the Trustee during such one-year period, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds solely for the benefit of the Holders for that purpose, money, U.S. Government Obligations or a combination thereof sufficient (in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee), without consideration of any reinvestment of any interest thereon, to pay principal, premium, if any, and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder, (C) no Default or Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit, (D) such deposit will not result in a breach or violation of, or constitute a Default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound and (E) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with. 64 58 With respect to the foregoing clause (i), the Company's obligations under Section 7.07 shall survive. With respect to the foregoing clause (ii), the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the Notes are no longer outstanding. Thereafter, only the Company's obligations in Sections 7.07, 8.04 and 8.05 and Article Ten (with respect to payments in respect of Note Obligations other than with the assets held in trust as described in clause (ii) above) shall survive. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Notes and this Indenture except for those surviving obligations specified above. SECTION 8.02. Defeasance and Discharge of Indenture. The Company will be deemed to have paid and will be discharged from any and all obligations in respect of the Notes on the date of the deposit referred to in clause (A) of this Section 8.02, and the provisions of this Indenture will no longer be in effect with respect to the Notes, and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same if: (A) with reference to this Section 8.02, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10) and conveyed all right, title and interest to the Trustee for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to (1) money in an amount, (2) U.S. Government Obligations that, through the payment of interest, premium, if any, and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (A), money in an amount or (3) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and interest on the outstanding Notes on the stated maturity of such principal or interest or any applicable Redemption Date selected by the Company; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Notes; (B) the Company has delivered to the Trustee (1) either (x) an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of the Company's exercise of its option under this Section 8.02 and will be subject to federal income tax on the same amount and in the same manner 65 59 and at the same times as would have been the case if such option had not been exercised, which Opinion of Counsel shall be based upon (and accompanied by a copy of) a ruling of the Internal Revenue Service directed to the Company to the same effect unless there has been a change in applicable federal income tax law after the Closing Date such that a ruling is no longer required or (y) a ruling directed to the Company received from the Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (2) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the Investment Company Act of 1940 and that after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Company under either such statute, provided, that in delivering any such Opinion of Counsel, such counsel shall be entitled to rely upon the statements of experts as to the solvency of the Company, and either (I) the trust funds will no longer remain the property of the Company (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (II) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, (a) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute and (b) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding; (C) immediately after giving effect to such deposit, on a pro forma basis, no Default or Event of Default shall have occurred and be continuing on the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound and is permitted by Article Ten; (D) if the Notes are then listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge; and (E) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02 have been complied with. 66 60 Notwithstanding the foregoing, the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 7.07, 8.04, 8.05, 8.06 and the rights, powers, trusts, duties and immunities of the Trustee hereunder and Article Ten (with respect to payments in respect of Note Obligations other than with the assets held in trust as described in this Section 8.02) shall survive until the Notes are no longer outstanding. Thereafter, only the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. If and when a ruling from the Internal Revenue Service or an Opinion of Counsel referred to in clause (B)(1) of this Section 8.02 is able to be provided specifically without regard to, and not in reliance upon, the continuance of the Company's obligations under Section 4.01, then the Company's obligations under such Section 4.01 shall cease upon delivery to the Trustee of such ruling or Opinion of Counsel and compliance with the other conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.02. After any such irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Notes and this Indenture except for those surviving obligations in the immediately preceding paragraph. SECTION 8.03. Defeasance of Certain Obligations. The Company may omit to comply with any term, provision or condition set forth in clause (iii) of Section 5.01, the proviso in Section 4.03 and Sections 4.04 through 4.07, 4.13 and 4.15 and clauses (iii) through (vii) of Section 6.01 shall be deemed not to be Events of Default and Article Ten shall not apply to the money and/or U.S. Government Obligations held by the trust referred to in clause (i) below, in each case with respect to the outstanding Notes if: (i) with reference to this Section 8.03, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10) and conveyed all right, title and interest to the Trustee for the benefit of the Holders, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee as trust funds in trust, specifically pledged to the Trustee for the benefit of the Holders as security for payment of the principal of, premium, if any, and interest, if any, on the Notes, and dedicated solely to, the benefit of the Holders, in and to (A) money in an amount, (B) U.S. Government Obligations that, through the payment of interest, premium, if any, and principal in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment referred to in this clause (i), money in an amount or (C) a combination thereof in an amount sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, without consideration of the reinvestment of such interest and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, the principal of, premium, if any, and interest on the outstanding Notes on the stated maturity of such principal or interest or on any applicable 67 61 Redemption Date selected by the Company; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal, premium, if any, and interest with respect to the Notes; (ii) the Company has delivered to the Trustee an Opinion of Counsel to the effect that (A) the creation of the defeasance trust does not violate the Investment Company Act of 1940, (B) after the passage of 123 days following the deposit (except, with respect to any trust funds for the account of any Holder who may be deemed to be an "insider" for purposes of the United States Bankruptcy Code, after one year following the deposit), the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law in a case commenced by or against the Company under either such statute, provided, that in delivering any such Opinion of Counsel, such counsel shall be entitled to rely upon the statements of experts as to the solvency of the Company, and either (1) the trust funds will no longer remain the property of the Company (and therefore will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally) or (2) if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, (x) assuming such trust funds remained in the possession of the Trustee prior to such court ruling to the extent not paid to the Holders, the Trustee will hold, for the benefit of the Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise (except for the effect of Section 552(b) of the United States Bankruptcy Code on interest on the trust funds accruing after the commencement of a case under such statute) and (y) the Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used in such case or proceeding, (C) the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred and (D) the Trustee, for the benefit of the Holders, has a valid first-priority security interest in the trust funds; (iii) immediately after giving effect to such deposit on a pro forma basis, no Default or Event of Default shall have occurred and be continuing on the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound and is permitted by Article Ten; 68 62 (iv) if the Notes are then listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge; and (v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance contemplated by this Section 8.03 have been complied with. SECTION 8.04. Application of Trust Money. Subject to Section 8.06, the Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be, and shall apply the deposited money and the money from U.S. Government Obligations in accordance with the Notes and this Indenture to the payment of principal of, premium, if any, and interest on the Notes; but such money need not be segregated from other funds except to the extent required by law. SECTION 8.05. Repayment to Company. Subject to Sections 7.07, 8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the Company upon request set forth in an Officers' Certificate any excess money held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years; provided that the Trustee or Paying Agent before being required to make any payment may cause to be published at the expense of the Company once in a newspaper of general circulation in The City of New York and, in the event the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg, or mail to each Holder entitled to such money at such Holder's address (as set forth in the Security Register) notice that such money remains unclaimed and that after a date specified therein (which shall be at least 30 days from the date of such publication or mailing) any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the Company has made any payment of principal of, premium, if any, or interest 69 63 on any Notes because of 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 or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. The Company, when authorized by a resolution of its Board of Directors (as evidenced by a Board Resolution delivered to the Trustee), and the Trustee may amend or supplement this Indenture or the Notes without notice to or the consent of any Holder: (1) to cure any ambiguity, defect or inconsistency in this Indenture; (2) to comply with Article Five; (3) to comply with any requirements of the Commission in connection with the qualification of this Indenture under the TIA; (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee; (5) to provide for uncertificated Notes in addition to or in place of certificated Notes; (6) to add one or more subsidiary guarantees on the terms required by this Indenture; or (7) to make any change that, in the good faith opinion of the Board of Directors as evidenced by a Board Resolution, does not materially and adversely affect the rights of any Holder. SECTION 9.02. With Consent of Holders. Subject to Sections 6.04 and 6.07 and without prior notice to the Holders, the Company, when authorized by its Board of Directors (as evidenced by a Board Resolution delivered to the Trustee), and the Trustee may amend this Indenture and the Notes with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding, and the Holders of a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee may waive future compliance by the Company with any provision of this Indenture or the Notes. 70 64 Notwithstanding the provisions of this Section 9.02, without the consent of each Holder affected, an amendment or waiver, including a waiver pursuant to Section 6.04, may not: (i) reduce the amount of Notes whose holders must consent to an amendment; (ii) reduce the rate of or change the time for payment of interest, including defaulted interest, on any Notes; (iii) reduce the principal of or change the fixed maturity of any Notes, or change the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (iv) make any Notes payable in money other than that stated in the Notes and the Indenture; (v) make any change in provisions of the Indenture protecting the right each Holder of a Note to receive payment of, premium on and interest on such Note on or after the due date thereof or to bring suit to enforce such payment or permitting Holders of a majority in principal amount of Notes to waive a Default or Event of Default; or (vi) after the Company's obligation to purchase Notes arises under Section 4.07, amend, modify or change the obligation of the Company to make or consummate a Change of Control Offer or modify any of the provisions or definitions with respect to any such offer. It shall not be necessary for the consent of the Holders 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 affected thereby a notice briefly describing the amendment, supplement or waiver. The Company will mail supplemental indentures to Holders upon request. 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 supplemental indenture or waiver. SECTION 9.03. Revocation and Effect of Consent. Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the Note of the consenting Holder, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note or portion of its Note. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date 71 65 the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver shall become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Notes. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then, notwithstanding the last two sentences of the immediately preceding paragraph, those persons who were Holders at such record date (or their duly designated proxies) and only those persons shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it is of the type described in the second paragraph of Section 9.02. In case of an amendment or waiver of the type described in the second paragraph of Section 9.02, the amendment or waiver shall bind each Holder who has consented to it and every subsequent Holder of a Note that evidences the same indebtedness as the Note of the consenting Holder. SECTION 9.04. Notation on or Exchange of Notes. If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver such Note to the Trustee. At the Company's expense, the Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder and the Trustee may place an appropriate notation on any Note thereafter authenticated. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. 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 9.05. Trustee to Sign Amendments, Etc. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture and that it will be valid and binding upon the Company. Subject to the preceding sentence, the Trustee shall sign such amendment, supplement or waiver if the same does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver that affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 9.06. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the TIA as then in effect. 72 66 ARTICLE TEN SUBORDINATION OF NOTES SECTION 10.01. Notes Subordinated to Senior Indebtedness. The Company and the Trustee each covenants and agrees, and each Holder, by its acceptance of a Note, likewise covenants and agrees that all Notes shall be issued subject to the provisions of this Article Ten; and each Person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that Note Obligations shall, to the extent and in the manner set forth in this Article Ten, be subordinated in right of payment to the prior payment in full, in cash, of all existing and future Senior Indebtedness, including, without limitation, the Company's obligations under the Senior Credit Facilities (including any interest accruing on or subsequent to, or which would have accrued but for the occurrence of, an event specified in Sections 6.01(vi) and 6.01(vii) of this Indenture, whether or not such interest is an allowed claim enforceable against the debtor under the United States Bankruptcy Code). SECTION 10.02. No Payment on Notes in Certain Circumstances. (a) No direct or indirect payment by or on behalf of the Company of Note Obligations (other than with the money, securities or proceeds held under any defeasance trust established in accordance with this Indenture), whether pursuant to the terms of the Notes or upon acceleration or otherwise, shall be made if (i) any Senior Indebtedness is not paid when due or (ii) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and/or any such acceleration has been rescinded or such Senior Indebtedness has been paid; provided, however, that the Company may pay any Note Obligation without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) above has occurred and is continuing. (b) During the continuance of any other event of default with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, upon receipt by the Trustee with a copy to the Company of written notice from the trustee or other representative for the holders of such Designated Senior Indebtedness (or the holders of at least a majority in principal amount of such Designated Senior Indebtedness then outstanding specifying an election to effect a Payment Blockage Period (as defined below) (a "Blockage Notice")), no payment of Note Obligations (other than with the money, securities or proceeds held under any defeasance trust established in accordance with this Indenture) may be made by or on behalf of the Company and except that holders of any Note Obligation may receive (i) Qualified Capital Stock issued by the Company to pay interest on the Notes or issued in exchange for the Notes, (ii) securities substantially identical 73 67 to the Notes issued by the Company in payment of interest accrued thereon or (iii) securities issued by the Company which are subordinated to Senior Indebtedness at least to the same extent as the Notes and having a Weighted Average Life to Maturity at least equal to the remaining Weighted Average Life to Maturity of the Notes) may be made for a period (a "Payment Blockage Period") commencing on the date of receipt of such notice and ending 179 days thereafter (or earlier if such Payment Blockage Period shall be terminated (i) by written notice to the Trustee with a copy to the Company from such trustee of, or other Representatives who gave such notice, (ii) because the default giving rise to such Blockage Notice has been cured or waived or is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full). Notwithstanding the provisions described in the immediately preceding sentence, but subject to the provisions of paragraphs (a) and (c) of this Section 10.02, the Company may resume payments on the Notes after the end of such Payment Blockage Period. Not more than one Payment Blockage Period may be commenced with respect to the Notes during any period of 360 consecutive days, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness (other than the agent under the Senior Credit Facilities), the agent under the Senior Credit Facilities may give another Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Payment Blockage Periods is in effect exceed 179 days in the aggregate during any 360-consecutive-day period. No nonpayment default that existed or was continuing on the date of delivery of any Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 consecutive days. The failure of the Company to pay principal when due or to pay interest on the Notes for more than 30 days after the scheduled payment therefor as a result of the occurrence of a Payment Blockage Period shall nevertheless constitute an Event of Default under this Indenture. For the purposes of this Article Ten (but without limiting the effect of any other provision of this Article Ten), paying any Note Obligation shall include any payment or distribution of any kind or character by the Company or its Subsidiaries, by set-off or otherwise, including, without limitation, any repurchase, redemption or acquisition of the Notes and any direct or indirect payment payable by reason of any other Indebtedness or Obligation being subordinated to the Notes. In addition, as long as the Notes are listed on the Luxembourg Stock Exchange, in the event of the issuance of a Blockage Notice, the Company shall notify the Luxembourg Stock Exchange and the Holders, in each case in accordance with Section 11.02. (c) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by Section 10.02(a) or 10.02(b) of this Indenture, the Trustee shall promptly notify the representatives of such Senior Indebtedness of such prohibited payment and such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that, upon 74 68 notice from the Trustee to the representatives of such Senior Indebtedness that such prohibited payment has been made, such representatives within 30 days of receipt of such notice from the Trustee notifies the Trustee of the amounts then due and owing on the Senior Indebtedness, if any, and only the amounts specified in such notice to the Trustee shall be paid to the representatives of such Senior Indebtedness and any excess above such amounts due and owing on Senior Indebtedness shall be paid to the Company. SECTION 10.03. Payment over of Proceeds upon Dissolution, Etc. (a) Upon any payment or distribution of assets or securities of the Company of any kind or character, whether in cash, property or securities (other than with the money, securities or proceeds held under any defeasance trust established in accordance with this Indenture), in connection with any dissolution or winding-up or total or partial liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other similar proceedings, any assignment for the benefit of creditors or any marshalling of assets for the benefit of creditors, all amounts due or to become due upon all Senior Indebtedness (including any interest accruing on or subsequent to, or which would have accrued but for the occurrence of, an event specified in paragraphs (vi) and (vii) of Section 6.01, whether or not such interest is an allowed claim enforceable against the debtor under the United States Bankruptcy Code) shall first be paid in full, in cash, before the Holders or the Trustee on their behalf shall be entitled to receive any payment by (or on behalf of) the Company on account of Note Obligations, or any payment to acquire any of the Notes for cash, property or securities, or any distribution with respect to the Notes of any cash, property or securities. Before any payment may be made by, or on behalf of, the Company on any Note Obligations (other than with the money, securities or proceeds held under any defeasance trust established in accordance with this Indenture) in connection with any such dissolution, winding-up, liquidation, reorganization, assignment, marshalling or proceeding, any payment or distribution of assets or securities for the Company of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee on their behalf would be entitled, but for the provisions of this Article Ten, shall be made by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person making such payment or distribution, or by the Holders or the Trustee if received by them or it, directly to the representatives of such Senior Indebtedness (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders) or their representatives or to any trustee or trustees under any other indenture pursuant to which any such Senior Indebtedness may have been issued, as their respective interests appear, to the extent necessary to pay all such Senior Indebtedness in full, in cash or cash equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the representatives of such Senior Indebtedness (except that Holders of the Notes may receive (i) Qualified Capital Stock issued by the Company to pay interest on the Notes or issued in exchange for the Notes, (ii) securities substantially identical to the Notes issued by the Company in payment of interest accrued thereon or (iii) securities issued by the Company which are subordinated to Senior Indebtedness at least to the same extent as the 75 69 Notes and having a Weighted Average Life to Maturity at least equal to the remaining Weighted Average Life to Maturity of the Notes). (b) To the extent any payment of Senior Indebtedness (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee or other similar Person, the Senior Indebtedness or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. To the extent the obligation to repay any Senior Indebtedness is declared to be fraudulent, invalid, or otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then the obligation so declared fraudulent, invalid or otherwise set aside (and all other amounts that would come due with respect thereto had such obligation not been so affected) shall be deemed to be reinstated and outstanding as Senior Indebtedness for all purposes hereof as if such declaration, invalidity or setting aside had not occurred. (c) In the event that, notwithstanding the foregoing provision prohibiting such payment or distribution, any payment or distribution of assets or securities of the Company of any kind or character, whether in cash, property or securities, shall be received by the Trustee or any Holder at a time when such payment or distribution is prohibited by Section 10.03(a) of this Indenture and before all obligations in respect of Senior Indebtedness are paid in full, in cash, such payment or distribution shall be received and held in trust for the benefit of, and shall be paid over or delivered to, the representatives of such Senior Indebtedness (pro rata to such holders on the basis of such respective amount of Senior Indebtedness held by such holders) or their representatives, or to the trustee or trustees under any indenture pursuant to which any such Senior Indebtedness may have been issued, as their respective interests appear, for application to the payment of Senior Indebtedness remaining unpaid until all such Senior Indebtedness has been paid in full, in cash, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Indebtedness. (d) For purposes of this Section 10.03, the words "cash, property or securities" shall not be deemed to include, so long as the effect of this clause is not to cause the Notes to be treated in any case or proceeding or similar event described in this Section 10.03 as part of the same class of claims as the Senior Indebtedness or any class of claims pari passu with, or senior to, the Senior Indebtedness for any payment or distribution, securities of the Company or any other corporation provided for by a plan of reorganization or readjustment that are subordinated, at least to the extent that the Notes are subordinated, to the payment of all Senior Indebtedness then outstanding; provided that (1) if a new corporation results from such reorganization or readjustment, such corporation assumes the Senior Indebtedness and (2) the rights of the holders 76 70 of the Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company with or into, another corporation or the liquidation or dissolution of the Company following the sale, conveyance, transfer, lease or other disposition of all or substantially all of its property and assets to another corporation upon the terms and conditions provided in Article Five of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 10.03 if such other corporation shall, as a part of such consolidation, merger, sale, conveyance, transfer, lease or other disposition, comply (to the extent required) with the conditions stated in Article Five of this Indenture. SECTION 10.04. Subrogation. (a) Upon the payment in full of all Senior Indebtedness in cash, the Holders shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company made on such Senior Indebtedness until the principal of, premium, if any, and interest on the Notes shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the representatives of the holders of the Senior Indebtedness of any cash, property or securities to which the Holders or the Trustee on their behalf would be entitled except for the provisions of this Article Ten, and no payment pursuant to the provisions of this Article Ten to the holders of Senior Indebtedness by Holders or the Trustee on their behalf shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the Holders, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. It is understood that the provisions of this Article Ten are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of the Senior Indebtedness, on the other hand. (b) If any payment or distribution to which the Holders would otherwise have been entitled but for the provisions of this Article Ten shall have been applied, pursuant to the provisions of this Article Ten, to the payment of all amounts payable under Senior Indebtedness, then, and in such case, the Holders shall be entitled to receive from the holders of such Senior Indebtedness any payments or distributions received by such holders of Senior Indebtedness in excess of the amount required to make payment in full, in cash, of such Senior Indebtedness of such holders. SECTION 10.05. Obligations of Company Unconditional. (a) Nothing contained in this Article Ten or elsewhere in this Indenture or in the Notes is intended to or shall impair, as among the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of, premium, if any, and interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Holders or the Trustee on their behalf from exercising all remedies otherwise permitted by applicable law upon 77 71 default under this Indenture, subject to the rights, if any, under this Article Ten of the holders of the Senior Indebtedness. (b) Without limiting the generality of the foregoing, nothing contained in this Article Ten will restrict the right of the Trustee or the Holders to take any action to declare the Notes to be due and payable prior to their stated maturity pursuant to Section 6.01 of this Indenture or to pursue any rights or remedies hereunder; provided, however, that all Senior Indebtedness then due and payable or thereafter declared to be due and payable shall first be paid in full, in cash, before the Holders or the Trustee on behalf of the Holders are entitled to receive any direct or indirect payment from the Company of Note Obligations. SECTION 10.06. Notice to Trustee. (a) The Company shall give prompt written notice to the Trustee of any fact known to the Company that would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Ten. The Trustee shall not be charged with the knowledge of the existence of any default or event of default with respect to any Senior Indebtedness or of any other facts that would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing at its Corporate Trust Office to that effect signed by an Officer of the Company, or by a holder of Senior Indebtedness or trustee or agent thereof; and prior to the receipt of any such written notice, the Trustee shall, subject to Article Seven, be entitled to assume that no such facts exist; provided that, if the Trustee shall not have received the notice provided for in this Section 10.06 at least three Business Days prior to the date upon which, by the terms of this Indenture, any monies shall become payable for any purpose (including, without limitation, the payment of the principal of, premium, if any, or interest on any Note), then, notwithstanding anything herein to the contrary, the Trustee shall have full power and authority to receive any monies from the Company and to apply the same to the purpose for which they were received, and shall not be affected by any notice to the contrary that may be received by it on or after such prior date except for an acceleration of the Notes prior to such application. Nothing contained in this Section 10.06 shall limit the right of the holders of Senior Indebtedness to recover payments as contemplated by this Article Ten. The foregoing shall not apply if the Paying Agent is the Company. The Trustee shall be entitled to rely in good faith on the delivery to it of a written notice by a Person representing himself or itself to be a holder of any Senior Indebtedness (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder. (b) In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 78 72 Ten and, if such evidence is not furnished to the Trustee, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.07. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets or securities referred to in this Article Ten, the Trustee and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings are pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other similar Person making such payment or distribution, delivered to the Trustee or to the Holders for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten, provided that such court, trustee, receiver, custodian, assignee, agent or other Person has been apprised of, or the order, decree or certificate makes reference to, the provisions of this Article. SECTION 10.08. Trustee's Relation to Senior Indebtedness. (a) The Trustee and any Paying Agent shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Indebtedness that may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Indebtedness and nothing in this Indenture shall deprive the Trustee or any Paying Agent of any of its rights as such holder. (b) With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Indebtedness 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 Indebtedness (except as provided in Sections 10.02(c) and 10.03(c) of this Indenture) and shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Notes 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 Ten or otherwise. SECTION 10.09. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Indebtedness. No right of any present or future holders of any Senior Indebtedness to enforce subordination as provided in this Article Ten will at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with. The provisions of this Article Ten are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Indebtedness. 79 73 SECTION 10.10. Holders Authorize Trustee to Effectuate Subordination of Notes. Each Holder by his acceptance of any Notes authorizes and expressly directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article Ten, and appoints the Trustee his attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the property and assets of the Company, the filing of a claim for the unpaid balance of its Notes in the form required in those proceedings. If the Trustee does not file a proper claim or proof in indebtedness in the form required in such proceeding at least 30 days before the expiration of the time to file such claim or claims, each holder of Senior Indebtedness is hereby authorized to file an appropriate claim for and on behalf of the Holders. SECTION 10.11. Not to Prevent Events of Default. The failure to make a payment on account of principal of, premium, if any, or interest on the Notes by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default. SECTION 10.12. Trustee's Compensation Not Prejudiced. Nothing in this Article Ten will apply to amounts due to the Trustee pursuant to other sections of this Indenture, including without limitation Section 7.07. SECTION 10.13. No Waiver of Subordination Provisions. Without in any way limiting the generality of Section 10.09, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend or shorten the time of payment of, or renew or alter, Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 10.14. Payments May Be Paid Prior to Dissolution. Nothing contained in this Article Ten or elsewhere in this Indenture shall prevent (i) the Company except under the conditions described in Section 10.02 or 10.03, from making payments of principal of, premium, if any, and interest on the Notes, or from depositing with the Trustee any money for such payments, or (ii) the application by the Trustee of any money deposited with it for the purpose of making such payments of principal of, premium, if any, and interest on the Notes to the holders entitled thereto unless, at least three Business Days prior to the date upon which such payment 80 74 becomes due and payable, the Trustee shall have received the written notice provided for in Section 10.02(b) of this Indenture (or there shall have been an acceleration of the Notes prior to such application) or in Section 10.06 of this Indenture. The Company shall give prompt written notice to the Trustee of any dissolution, winding up, liquidation or reorganization of, or similar proceeding (including any assignment for the benefit of creditors or any marshalling of assets) with respect to, the Company. SECTION 10.15. Consent of Holders of Senior Indebtedness Under the Senior Credit Facilities. The provisions of this Article Ten (including the definitions contained in this Article and references to this Article contained in this Indenture) shall not be amended in a manner that would adversely affect the rights of the holders of Senior Indebtedness under the Senior Credit Facilities, and no such amendment shall become effective unless the holders of Senior Indebtedness under the Senior Credit Facilities shall have consented (in accordance with the provisions of the Senior Credit Facilities) to such amendment. The Trustee shall be entitled to receive and rely on an Officers' Certificate stating that such consent has been given. SECTION 10.16. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article Eight by the Trustee for the payment of principal of, premium, if any, and interest on the Notes shall not be subordinated to the prior payment of any Senior Indebtedness (provided that, at the time deposited, such deposit did not violate any then outstanding Senior Indebtedness), and none of the Holders shall be obligated to pay over any such amount to any holder of Senior Indebtedness. SECTION 10.17. Notice to Representative of Designated Senior Indebtedness. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the Representative (if any) of any issue of Designated Senior Indebtedness which is then outstanding; provided, however, that the Company and the Trustee shall be obligated to notify such a Representative (other than with respect to the Senior Credit Facilities) only if such Representative has delivered or caused to be delivered an address for the service of such a notice to the Company and the Trustee (and the Company and the Trustee shall be obligated only to deliver the notice to the address so specified). If a notice is required pursuant to the immediately preceding sentence, the Company may not pay the Notes (except payment (i) in Qualified Capital Stock issued by the Company to pay interest on the Notes or issued in exchange for the Notes, (ii) in securities substantially identical to the Notes issued by the Company in payment of interest accrued thereon or (iii) in securities issued by the Company which are subordinated to the Senior Indebtedness at least to the same extent as the Notes and have a Weighted Average Life to Maturity at least equal to the remaining Weighted Average Life to Maturity of the Notes), until five Business Days after the respective Representative of the Designated Senior Indebtedness receives notice (at the address specified in the preceding sentence) of such acceleration and, 81 75 thereafter, may pay the Notes only if the subordination provisions of the Indenture otherwise permit payment at that time. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. Trust Indenture Act of 1939. Prior to the effectiveness of the Registration Statement, this Indenture shall incorporate and be governed by the provisions of the TIA that are required or deemed to be part of and to govern indentures qualified under the TIA. After the effectiveness of the Registration Statement, this Indenture shall be subject to the provisions of the TIA that are required or deemed to be a part of this Indenture and shall, to the extent applicable, be governed by such provisions. SECTION 11.02. Notices. Any notice or communication shall be sufficiently given if in writing and delivered in person, mailed by first-class mail or sent by telecopier transmission addressed as follows: if to the Company: Regal Cinemas, Inc. 7132 Commercial Park Drive Knoxville, Tennessee 37918 Telecopier No.: 423-922-6085 Attention: Chief Financial Officer if to the Trustee: IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Telecopier No.: 212-858-2952 Attention: Corporate Administration The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Holder shall be mailed to it at its address as it appears on the Security Register by first-class mail and shall be sufficiently given to him if so mailed within the time prescribed. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Copies of any such communication or notice to a Holder shall also be mailed to the Trustee and each Agent at the same time. 82 76 Failure to mail a notice or communication to a Holder as provided herein or any defect in any such notice or communication shall not affect its sufficiency with respect to other Holders. Except for a notice to the Trustee, which is deemed given only when received, and except as otherwise provided in this Indenture, if a notice or communication is mailed in the manner provided in this Section 11.02, it is duly given, whether or not the addressee receives it. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Holders may communicate pursuant to TIA Section 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 Section 312(c). SECTION 11.03. 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: (i) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (ii) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.04. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each person signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in such certificate or opinion is based; 83 77 (iii) a statement that, in the opinion of each such person, he 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 complied with; and (iv) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with; provided, however, that, with respect to matters of fact, an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. SECTION 11.05. Rules by Trustee, Paying Agent or Registrar. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 11.06. Payment Date Other Than a Business Day. If an Interest Payment Date, Redemption Date, Payment Date, stated maturity or date of maturity of any Note shall not be a Business Day, then payment of principal of, premium, if any, or interest on such Note, as the case may be, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Payment Date or Redemption Date, or at the stated maturity or date of maturity of such Note; provided that no interest shall accrue for the period from and after such Interest Payment Date, Payment Date, Redemption Date, stated maturity or date of maturity, as the case may be. SECTION 11.07. Governing Law. This Indenture and the Notes shall be governed by the laws of the State of New York 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. The Trustee, the Company and the Holders agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Indenture or the Notes. SECTION 11.08. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any Subsidiary of the Company. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.09. No Recourse Against Others. No recourse for the payment of the principal of, premium, if any, or interest on any of the Notes, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company contained in this Indenture or in any of the Notes, or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator or against any past, present or future partner, stockholder, other equityholder, officer, director, employee or controlling person, as such, of the Company or of any successor Person, either directly or through the Company or any successor Person, whether by virtue of any constitution, statute or rule of 84 78 law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes. SECTION 11.10. 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. SECTION 11.11. Duplicate 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 11.12. Separability. 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 11.13. 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 hereof and shall in no way modify or restrict any of the terms and provisions hereof. 85 SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. REGAL CINEMAS, INC. By: ------------------------------------- Name: Lewis Frazer III Title: Chief Financial Officer IBJ SCHRODER BANK & TRUST COMPANY By: ------------------------------------ Name: Stephen J. Giurlando Title: Assistant Vice President 86 EXHIBIT A [APPLICABLE LEGENDS] [FACE OF NOTE] REGAL CINEMAS, INC. 9 1/2% Senior Subordinated Note due 2008 [CUSIP] [CINS] [ISIN] [__________] No. ____ $_________ REGAL CINEMAS, INC., a Tennessee corporation (the "Company", which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to _____________, or its registered assigns, the principal sum of ______________________ ($____________) on [________,____]. Interest Payment Dates: June 1 and December 1, commencing December 1, 1998 Regular Record Dates: May 15 and November 15. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers. Date: May 27, 1998 REGAL CINEMAS, INC. By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: 87 A-2 (Trustee's Certificate of Authentication) This is one of the 9 1/2% Senior Subordinated Notes due 2008 described in the within-mentioned Indenture. IBJ SCHRODER BANK & TRUST COMPANY, as Trustee By: ----------------------------------- Authorized Signatory 88 A-3 [REVERSE SIDE OF NOTE] REGAL CINEMAS, INC. 9 1/2% Senior Subordinated Note due 2008 1. Principal and Interest. The Company will pay the principal of this Note on June 1, 2008. The Company promises to pay interest on the principal amount of this Note on each Interest Payment Date, as set forth below, at the rate per annum shown above. Interest will be payable semiannually (to the holders of record of the Notes at the close of business on the May 15 or November 15 immediately preceding the Interest Payment Date) on each Interest Payment Date, commencing December 1, 1998. If an exchange offer (the "Exchange Offer") registered under the Securities Act is not consummated and a shelf registration statement (the "Shelf Registration Statement") under the Securities Act with respect to resales of the Notes is not declared effective by the Commission, on or before January 7, 1999 in accordance with the terms of the Registration Rights Agreement dated May 27, 1998 between the Company and Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman, Sachs & Co., the annual interest rate borne by the Notes shall be increased by 0.5% from the rate shown above accruing from the date that is 225 days after the Issue Date, payable in cash semiannually, in arrears, on each Interest Payment Date, commencing June 1, 1999 until the Exchange Offer is consummated or the Shelf Registration Statement is declared effective. The Holder of this Note is entitled to the benefits of such Registration Rights Agreement. 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 May 27, 1998, provided that, if there is no existing default in the payment of interest and this Note is authenticated between a Regular Record Date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such Interest Payment Date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 89 A-4 2. Method of Payment. The Company will pay interest on the principal amount of the Notes as provided above on each June 1 and December 1, commencing December 1, 1998 to the persons who are Holders (as reflected in the Security Register at the close of business on the May 15 or November 15 immediately preceding the Interest Payment Date), in each case, even if the Note is cancelled on registration of transfer or registration of exchange after such record date; provided that, with respect to the payment of principal, the Company will make payment to the Holder that surrenders this Note to a Paying Agent on or after June 1, 2008. The Company will pay principal, premium, if any, and as provided above, interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. However, the Company may pay principal, premium, if any, and interest by its check payable in such money. It may mail an interest check to a Holder's registered address (as reflected in the Security Register). If a payment date is a date other than a Business Day at a place of payment, payment may be made at that place on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. Paying Agent and Registrar. Initially, the Trustee will act as authenticating agent, a Paying Agent and the Registrar. The Company may change any authenticating agent, Paying Agent or Transfer Agent without notice. The Company, any Subsidiary or any Affiliate of any of them may act as a Paying Agent or a Transfer Agent. 4. Indenture; Limitations. The Company issued the Notes under an Indenture dated as of May 27, 1998 (the "Indenture"), between the Company and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). Capitalized terms herein are used as defined in the Indenture unless otherwise indicated. 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. The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture shall control. The Notes are general unsecured obligations of the Company. The Company may, subject to Article Four of the Indenture and applicable law, issue additional Notes under the Indenture. 90 A-5 5. Optional Redemption. The Notes are redeemable, at the Company's option, in whole or in part, at any time or from time to time, on or after June 1, 2003 and prior to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by first class mail to each Holder's last address, as it appears in the Security Register, at the following Redemption Prices (expressed in percentages of principal amount thereof on the applicable Redemption Date), plus accrued and unpaid interest to the Redemption Date (subject to the right of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date), if redeemed during the 12-month period commencing June 1 of the years set forth below:
Redemption Year Price ---- ---------- 2003....................................... 104.750% 2004....................................... 103.167 2005....................................... 101.583 2006 and thereafter........................ 100.000
At any time and from time to time prior to June 1, 2001, the Company may redeem up to 35% of the principal amount of the Notes with the proceeds of one or more Equity Offerings, at a Redemption Price (expressed as a percentage of principal amount) of 109.50%, plus accrued and unpaid interest to the Redemption Date (subject to the rights of Holders of record on the relevant Regular Record Date that is prior to the Redemption Date to receive interest due on an Interest Payment Date); provided that (i) at least 65% of Notes initially issued remains outstanding after each such redemption and (ii) any such redemption shall occur on or prior to the date that is 90 days after receipt by the Company of the proceeds of an Equity Offering. The Company shall effect such redemption on a pro rata basis. Notes in original denominations larger than $1,000 may be redeemed in part. On and after the Redemption Date, interest ceases to accrue on Notes or portions of Notes called for redemption, unless the Company defaults in the payment of the Redemption Price. 6. Repurchase upon Change of Control. (a) Upon the occurrence of a Change of Control, each Holder shall have the right to require that the Company purchase all or a portion of such Holder's Notes in cash pursuant to the offer described in Section 4.07(c) of the Indenture, at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. 91 A-6 (b) Prior to the mailing of the notice referred to below, but in any event within 30 days following the date on which the Company becomes aware that a Change of Control has occurred, if the purchase of the Notes would violate or constitute a default under any other Indebtedness of the Company, then the Company shall, to the extent needed to permit such purchase of Notes, either (i) repay all such Indebtedness and terminate all commitments outstanding thereunder or (ii) obtain the requisite consents, if any, under such Indebtedness to permit the purchase of the Notes as provided below. The Company will first comply with the covenant in the preceding sentence before it will be required to make the Change of Control Offer or purchase the Notes pursuant to the provisions of Section 4.07(c) and Section 4.07(d) of the Indenture. A notice of such Change of Control will be mailed within 30 days after any Change of Control occurs to each Holder at its last address as it appears in the Security Register. Notes in original denominations larger than $1,000 may be sold to the Company in part. On and after the Payment Date, interest ceases to accrue on Notes or portions of Notes surrendered for purchase by the Company, unless the Company defaults in the payment of the purchase price. 7. Denominations; Transfer; Exchange. The Notes are in registered form without coupons in denominations of $1,000 of principal amount and multiples of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer or exchange of any Notes selected for redemption. Also, it need not register the transfer or exchange of any Notes for a period of 15 days before the day of mailing of a notice of redemption of Notes selected for redemption. 8. Persons Deemed Owners. A Holder shall be treated as the owner of a Note for all purposes. 9. Unclaimed Money. If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment, unless an abandoned property law designates another Person, and all liability of the Trustee and such Paying Agent with respect to such money shall cease. 92 A-7 10. Discharge Prior to Redemption or Maturity. Under certain circumstances, if the Company deposits with the Trustee money, U.S. Government Obligations or a combination thereof sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes to redemption or maturity of the Notes, the Company may, under certain circumstances, be discharged from the Indenture and the Notes, except in certain circumstances for certain provisions thereof, or from certain covenants set forth in the Indenture. 11. Amendment; Supplement; Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding, and any existing default or compliance with any provision may be waived with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding. Without notice to or the consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency and make any change that does not materially and adversely affect the rights of any Holder. 12. Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Restricted Subsidiaries, among other things, to incur additional Indebtedness, make Restricted Payments, issue Preferred Stock of Restricted Subsidiaries, Guarantee Indebtedness of the Company, engage in transactions with Affiliates, or merge, consolidate or transfer substantially all of its assets. Within 45 days after the end of each fiscal quarter (90 days after the end of the last fiscal quarter of each year), the Company shall deliver to the Trustee an Officers' Certificate stating whether or not the signers thereof know of any Default or Event of Default under such restrictive covenants. 13. Successor Persons. When a successor person or other entity assumes all the obligations of its predecessor under the Notes and the Indenture, the predecessor person will be released from those obligations. 14. Defaults and Remedies. Any of the following events constitutes an "Event of Default" under the Indenture: 93 A-8 (i) the failure to pay interest on the Notes when the same becomes due and payable and the Default continues for a period of 30 days (whether or not such payment is prohibited by the provisions of Article Ten); (ii) the failure to pay principal of or premium, if any, on any Notes when such principal or premium, if any, becomes due and payable, at maturity, upon redemption or otherwise (whether or not such payment is prohibited by the provisions of Article Ten); (iii) a default in the observance or performance of any other covenant or agreement contained in the Notes or this Indenture, which default continues for a period of 60 days after the Company receives written notice thereof specifying the default from the Trustee or holders of at least 30% in aggregate principal amount of outstanding Notes; (iv) the failure to pay at the final stated maturity (after giving effect to any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary of the Company, or the acceleration of the final stated maturity of any such Indebtedness, if the aggregate principal amount of such Indebtedness, together with the aggregate principal amount of any other such Indebtedness in default for failure to pay principal at the final stated maturity (giving effect to any extensions thereof) or which has been accelerated, aggregates $20 million or more at any time; (v) one or more judgments in an aggregate amount in excess of $20 million (which are not covered by insurance as to which the insurer has not disclaimed coverage) being rendered against the Company or any of its Significant Restricted Subsidiaries and such judgment or judgments remain undischarged or unstayed for a period of 60 days after such judgment or judgments become final and nonappealable; (vi) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Company or any of its Significant Restricted Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law for relief of debtors now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any of its Significant Restricted Subsidiaries or for all or substantially all of the property and assets of the Company or any of its Significant Restricted Subsidiaries or (C) the winding up or liquidation of the affairs of the Company or any of its Significant Restricted Subsidiaries and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (vii) the Company or any of its Significant Restricted Subsidiaries (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law for relief of debtors now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession 94 A-9 by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any of its Significant Restricted Subsidiaries or for all or substantially all of the property and assets of the Company or any of its Significant Restricted Subsidiaries or (C) effects any general assignment for the benefit of creditors. If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee may, and at the direction of the Holders of at least 30% in aggregate principal amount of the Notes then outstanding shall, declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Company occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of at least a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of any trust or power. 15. Subordination. The payment of the Notes will, to the extent set forth in the Indenture, be subordinated in right of payment to the prior payment in full, in cash, of all Senior Indebtedness. 16. Trustee Dealings with the Company. The Trustee under the Indenture, 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. 17. No Recourse Against Others. No incorporator or any past, present or future partner, stockholder, other equityholder, officer, director, employee or controlling person, as such, of the Company or of any successor Person shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 18. Authentication. This Note shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the other side of this Note. 95 A-10 19. 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). The Company will furnish a copy of the Indenture to any Holder upon written request and without charge. Requests may be made to Regal Cinemas, Inc., 7132 Commercial Park Drive, Knoxville, Tennessee 37918; Attention: Chief Financial Officer. 96 A-11 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. - ---------------------------------- - -------------------------------------------------------------------------------- Please print or typewrite name and address including zip code of assignee - -------------------------------------------------------------------------------- the within Note and all rights thereunder, hereby irrevocably constituting and appointing ________________________________ attorney to transfer said Note on the books of the Company with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL NOTES OTHER THAN EXCHANGE NOTES, UNLEGENDED OFFSHORE GLOBAL NOTES AND UNLEGENDED OFFSHORE PHYSICAL NOTES] In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date the Shelf Registration Statement is declared effective or (ii) the end of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that without utilizing any general solicitation or general advertising that: [Check One] [ ] (a) this Note is being transferred in compliance with the exemption from registration under the Securities Act of 1933 provided by Rule 144A thereunder. or [ ] (b) this Note is being transferred other than in accordance with (a) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture. 97 A-12 If none of the foregoing boxes is checked, the Trustee or other Registrar shall not be obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.08 of the Indenture shall have been satisfied. Date: -------------------- ---------------------------------------- NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: ----------------------------- Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933 and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ---------------------- ----------------------------------------------- NOTICE: To be executed by an executive officer 98 A-13 OPTION OF HOLDER TO ELECT PURCHASE If you wish to have this Note purchased by the Company pursuant to Section 4.07 of the Indenture, check the Box: [ ] If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.07 of the Indenture, state the amount: $___________________. Date: ------------------ Your Signature: ----------------------------------------------------------------- (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: -------------------------------- Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee. 99 EXHIBIT B Form of Certificate ___________, _____ IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Attention: Corporate Administration Regal Cinemas, Inc. 7132 Commercial Park Drive Knoxville, Tennessee 37918 Attention: Chief Financial Officer Re: Regal Cinemas, Inc. (the "Company") 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") Dear Sirs: This letter relates to U.S. $____ principal amount of Notes represented by a Note (the "Legended Note") which bears a legend outlining restrictions upon transfer of such Legended Note. Pursuant to Section 2.02 of the Indenture dated as of May 27, 1998 (the "Indenture") relating to the Notes, we hereby certify that we are (or we will hold such securities on behalf of) a person outside the United States to whom the Notes could be transferred in accordance with Rule 904 of Regulation S promulgated under the U.S. Securities Act of 1933. Accordingly, you are hereby requested to exchange the legended certificate for an unlegended certificate representing an identical principal amount of Notes, all in the manner provided for in the Indenture. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Holder] By: --------------------------------- Authorized Signature 100 EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ___________, _____ IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Attention: Corporate Administration Re: Regal Cinemas, Inc. (the "Company") 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") Dear Sirs: In connection with our proposed purchase of $__________ aggregate principal amount of the Notes, we confirm that: 1. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture dated as of May 27, 1998 (the "Indenture") relating to the Notes and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with such restrictions and conditions and the Securities Act of 1933, amended (the "Securities Act"). 2. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Notes within the time period referred to in Rule 144(k) of the Securities Act, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and, if such transfer is in respect of an aggregate principal amount of less than $100,000, an opinion of counsel acceptable to the Company that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to 101 C-2 provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 3. We understand that, on any proposed resale of any Notes, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 4. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment. 5. We are acquiring the Notes purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: --------------------------------- Authorized Signature 102 EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers Pursuant to Regulation S ___________, ______ IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Attention: Corporate Administration Re: Regal Cinemas, Inc.(the "Company") 9 1/2% Senior Subordinated Notes due 2008 (the "Notes") Dear Sirs: In connection with our proposed sale of U.S.$_______ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933 and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States; (3) no directed selling efforts have been made by us in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the U.S. Securities Act of 1933. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: ---------------------------------- Authorized Signature EX-10.1 3 EMPLOYMENT AGREEMENT BETWEEN REGAL AND CAMPBELL 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT AGREEMENT, made as of May 27, 1998, by and between Regal Cinemas, Inc., a Tennessee corporation (the "Company"), and Michael L. Campbell ("Executive"). RECITALS In order to induce Executive to serve as the Chief Executive Officer and Chairman of the Board of Directors of the Company, the Company desires to provide Executive with compensation and other benefits on the terms and conditions set forth in this Agreement. Executive is willing to accept such employment and perform services for the Company, on the terms and conditions hereinafter set forth. It is therefore hereby agreed by and between the parties as follows: 1. Employment. 1.1 Subject to the terms and conditions of this Agreement, the Company (or the company existing after the integration, if any, of the Company and Act III Cinemas, Inc. ("Act III")) agrees to employ Executive during the term hereof as its Chief Executive Officer and Chairman of the Board of Directors. In his capacity as the Chief Executive Officer of the Company, Executive shall report to the Board of Directors of the Company (the "Board") and shall have the powers, responsibilities and authorities of chief executive officers of corporations of the size, type and nature of the Company, as it exists from time to time, as are assigned by the Board consistent with the position of Chief Executive Officer. - 1 - 2 1.2 Subject to the terms and conditions of this Agreement, Executive hereby agrees to be employed as the Chief Executive Officer and Chairman of the Board of the Company (or the company existing after the integration, if any, of the Company and Act III) and agrees to devote such working time and efforts (except for permitted vacation periods and reasonable periods of illness and other incapacity), to the best of his ability, experience and talent, to the performance of services, duties and responsibilities in connection therewith so that such performance shall be his primary business activity. Executive shall perform such duties and exercise such powers with respect to the activities of the Company, commensurate with his positions, as the Chief Executive Officer and Chairman of the Board of the Company as the Board shall from time to time delegate to him on such terms and conditions and subject to such restrictions as such Board may reasonably from time to time impose. Executive will be responsible for the selection of the members of the Company's management team, subject to the good faith approval of the Board. 1.3 Nothing in this Agreement shall preclude Executive from serving on boards of directors of other companies and participating in charitable or community activities that do not substantially interfere with his duties and responsibilities hereunder or conflict with the interest of the Company. 1.4 Headquarters of the Company will be in Knoxville, TN, or any other reasonable location acceptable to the Executive. 2. Term of Employment. Executive's term of employment under this Agreement shall commence as of the date hereof, and, subject to the terms hereof, shall terminate (the "Termination Date") on the earlier of (i) May 27, 2001, or (ii) termination of - 2 - 3 Executive's employment pursuant to this Agreement; provided, however, that any termination of employment by Executive (other than for death or Permanent Disability) may only be made upon 90 days prior written notice to the Company. The Executive shall resign from the Board upon any termination of employment. 3. Compensation. 3.1 Salary. The Company shall pay Executive a base salary ("Base Salary") at the rate of $500,000 per annum for the period commencing on the beginning of Executive's term of employment hereunder and ending on the Termination Date. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company. Any increase in Base Salary shall be in the discretion of the Board and, as so increased, shall constitute "Base Salary" hereunder. 3.2 Annual Bonus. In addition to his Base Salary, Executive shall, commencing with the 1998 fiscal year and continuing each fiscal year thereafter, be paid an annual cash bonus (the "Bonus") during the term of his employment hereunder. Executive's target bonus shall be 140% of Base Salary. For 1998, 70% of such bonus will depend on the achievement of the Company EBITDA target of $156 million (excluding (i) synergies, if any, from the combined operations and (ii) extraordinary charges related to the acquisition of the Company and the integration, if any, of the Company and Act III) and 30% will depend on achievement of Board established integration/synergy goals. After 1998, the Board, after consultation with management, will establish EBITDA targets based on the performance of the Company, taking into account the combined operations, if any, and synergies, if any. With respect to the EBITDA component, upon attainment of 90% of the EBITDA target the - 3 - 4 Executive will earn 50% of the EBITDA component, which will increase from 50% to 100% in a linear progression for achievement between 90% and 100% of the EBITDA target. Similarly, the EBITDA portion of the bonus will increase (up to a cap of 150% on the EBITDA portion of the bonus) in a linear progression from 100% to 150% for achievement of EBITDA over 100% of the EBITDA target. EBITDA achievement will be measured using the budgeted capital expenditures previously disclosed in the Goldman Sachs presentation to the Board dated December 29, 1997. 4. Employee Benefits. 4.1 Employee Benefit Programs, Plans and Practices. The Company shall provide Executive during the term of his employment hereunder with coverage under all employee pension and welfare benefit programs, plans and practices (to the extent permitted under any employee benefit plan) in accordance with the terms thereof, which the Company generally makes available to its senior executives. 4.2 Vacation. While employed hereunder, Executive shall be entitled to no less than 20 business days paid vacation in each calendar year, which shall be taken at such times as are consistent with Executive's responsibilities hereunder. 5. Expenses. Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement. The Company will reimburse Executive for such expenses upon presentation by Executive from time to time of appropriately itemized and approved (consistent with the Company's policy) accounts of such expenditures. - 4 - 5 6. Termination of Employment. 6.1 Termination Without Cause. The Company may terminate Executive's employment at any time for any reason and nothing herein shall be construed as a representation or covenant to continue Executive's employment. If Executive's employment is terminated by the Company other than for Permanent Disability, death or Cause (as such terms are defined in Sections 6.2 and 6.4 hereof) or the Executive resigns for Good Reason (as defined below) during the term hereunder, Executive shall receive such payments, if any, under applicable plans or programs, including but not limited to those referred to in Section 4.1 hereof, to which he is entitled pursuant to the terms of such plans or programs, and any unpaid payments of Base Salary previously earned, bonus awarded, accrued vacation and expense incurred for which Executive is entitled to reimbursement hereunder. If Executive is terminated or resigns under this Section 6.1, Executive shall also be entitled to receive (i) an amount (the "Termination Amount") in lieu of any other cash compensation beyond that provided in the immediately preceding sentence, which Termination Amount shall be equal to the greater of (x) two times Executive's annual Base Salary and (y) Base Salary payable over the then remaining balance of the employment term, in either case, payable in installments as normal payroll over the 24 months following such termination of employment (or, if longer, the remaining balance of the employment term); and (ii) continued coverage for the same period that the Termination Amount is payable under any employee medical, disability and life insurance plans in accordance with the respective terms thereof (other than the requirement of continued employment); provided, however, that payments and benefits due hereunder shall be reduced by any amounts owed by the Executive to the Company. Good Reason shall be - 5 - 6 defined as: (i) a reduction in Executive's Base Salary or an amendment to the annual cash bonus plan which would materially impair the ability of the Executive to receive a bonus (other than the establishment of the EBITDA or other performance targets to be set in good faith by the Board), (ii) a substantial reduction in Executive's duties and responsibilities, (iii) a transfer of the Executive's primary workplace by more than fifty (50) miles from the current workplace or (iv) Executive is not Chief Executive Officer of the combined operations following an integration, if any, of the Company and Act III. 6.2 Permanent Disability. If the Executive is unable to engage in the activities required by the Executive's job by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months ("Permanent Disability"), the Company or Executive may terminate Executive's employment on written notice thereof, and Executive shall receive or commence receiving, as soon as practicable: (i) the actual bonus, if any, he would have received in respect of the fiscal year in which his termination occurs, prorated by a fraction, the numerator of which is the number of days of the fiscal year until termination and the denominator of which is 365, payable at the same time as bonuses are paid to other executives; and (ii) accrued but unpaid Base Salary and such payments under applicable plans or programs, including but not limited to those referred to in Sections 4.1, 4.2 and 5 hereof, to which he is entitled pursuant to the terms of such plans or programs. 6.3 Death. In the event of Executive's death during the term of his employment hereunder, Executive's estate or designated beneficiaries shall receive or commence receiving, as soon as practicable: - 6 - 7 (i) the actual bonus, if any, he would have received in respect of the fiscal year in which his death occurs, prorated by a fraction, the numerator of which is the number of days of the fiscal year until his death and the denominator of which is 365, payable at the same time as bonuses are paid to other executives; and (ii) accrued but unpaid Base Salary and such payments under applicable plans or programs, including but not limited to those referred to in Sections 4.1, 4.2 and 5 hereof, to which Executive's estate or designated beneficiaries are entitled pursuant to the terms of such plans or programs. 6.4 Termination for Cause; Resignation by Executive. (a) The Company shall have the right to terminate the employment of Executive for Cause. In the event that Executive's employment is terminated by the Company for Cause or by Executive for any reason (other than by Executive for Good Reason or as a result of the Executive's Permanent Disability or death) during the term hereunder, Executive shall not be entitled to the payment of any compensation otherwise included under this Agreement. After the termination of Executive's employment under this Section 6.4., the obligations of the Company under this Agreement to make any further payments, or provide any benefits specified herein, to Executive shall thereupon cease and terminate. (b) As used herein, the term "Cause" shall be limited to (i) the willful refusal to perform in any material respect his duties or responsibilities for the Company, or willful disregard in any material respect of any financial or other budgetary limitations established in good faith by the Board; (ii) the engaging by the Executive in conduct that causes material and demonstrable injury, monetarily or otherwise, to the Company, including, but not limited to, misappropriation or conversion of assets of the Company (other than nonmaterial assets); (iii) conviction of or entry of a plea of nolo contendere to a felony; or (iv) - 7 - 8 a material breach of this Agreement by engaging in action in violation of the restrictive covenants in this Agreement. No act or failure to act by the Executive shall be deemed "willful" if done, or omitted to be done, by him in good faith and with the reasonable belief that his action or omission was in the best interest of the Company. 7. Equity Arrangements. (a) Promptly upon commencement of his employment hereunder, the Executive shall make a minimum investment of 60% of the aggregate value of his equity ownership immediately prior to the Effective Time (as defined in the Agreement and Plan of Merger dated as of January 19, 1998 among the Company, Screen Acquisition Corp. and Monarch Acquisition Corp.) (which shall be calculated without regard to any interest held by his former spouse, which interest shall be cashed out in full at the time of closing) on a rollover or other basis in the equity ("Purchased Equity") of the Company. As a result, Executive will cash out approximately $6.3 million in value (to be comprised of directly owned shares) and roll over the balance of his directly owned shares with a value of approximately $2.28 million and the unrealized gain on his options with a value of approximately $7.18 million, for an aggregate rollover value of approximately $9.46 million. The Company and the Executive shall endeavor to structure such investment in the most tax efficient manner possible under the relevant circumstances. In respect of such investment, the Company will grant the Executive options to purchase shares of the Company's Common Stock ("New Options") equal to 1.1 times the dollar value of his Purchased Equity. In addition, the Company will grant the Executive Performance Options (as defined in the Non-Qualified Stock Option Agreement between the Executive and the Company) for 250,000 shares of the Company's Common Stock, on a pre-split basis. All New Option terms will be - 8 - 9 consistent with the 1998 Stock Purchase and Option Plan for Key Employees of Regal Cinemas, Inc. It is the intention of the parties that, in the event that a combination of the Company and Act III is consummated, the value of each of the companies shall be the purchase price therefor, absent any subsequent adverse change. (b) Other provisions for Purchased Equity and Options shall be governed by a management shareholder agreement which will provide for repurchase rights, piggyback registration rights, tag-along rights and drag-along rights as heretofore agreed by the parties. 8. Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, New York 10019 Attn: Clifton Robbins with copies to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attn: Alvin H. Brown, Esq. and Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart, Jr. and - 9 - 10 Weil Gotshal & Manges LLP 100 Crescent Court Suite 1300 Dallas, Texas 75201 Attn: Jeremy W. Dickens, Esq. To Executive: Mr. Michael L. Campbell 7610 Saddlebrook Drive Knoxville, Tennessee 37938 with a copy to: Bass, Berry & Sims PLC 2700 First American Center Nashville, Tennessee 37238 Attn: Mitch Walker Any such notice or communication shall be delivered by hand or by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the third business day after the actual date of mailing shall constitute the time at which notice was given. 9. Separability; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. Each party shall bear the costs of any legal fees and other fees and expenses which may be incurred in respect of enforcing its respective rights under this Agreement. 10. Assignment. This contract shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, - 10 - 11 but neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Company, if such successor expressly agrees to assume the obligations of the Company hereunder. 11. Amendment. This Agreement may only be amended by written agreement of the parties hereto. 12. Nondisclosure of Confidential Information; Non-competition. (a) Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) as required by law. For purposes of this Section 12(a), "Confidential Information" shall mean non-public information concerning the financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing, acquisition and divestiture plans and other non-public, proprietary and confidential information of the Company, its subsidiaries, its theater affiliates, Kohlberg Kravis Roberts & Co. ("KKR"), Hicks, Muse, Tate & Furst Incorporated ("HM") or any affiliate of KKR or HM principally engaged in the theater business in existence as of the date of Executive's termination of employment (the "Restricted Group") or suppliers (including, without - 11 - 12 limitation, any motion picture distributor or exhibitor) or vendors, that, in any case, is not otherwise available to the public (other than by Executive's breach of the terms hereof). (b) During the period of his employment hereunder and for one year thereafter Executive agrees that, without the prior written consent of the Company, (A) he will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any business in Competition (as defined in Section 12(c)) with the business of the Restricted Group (excluding KKR and HM in any non-theater business) and (B) he shall not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or hire for the benefit of anyone, other than the Restricted Group, any person who is, or was at any time during the 6 months immediately preceding the time of the solicitation or hiring by the Executive employed by the Restricted Group (other than Executive's secretary or other administrative employee who worked directly for him). (c) For purposes of this Section 12, a business shall be deemed to be in "Competition" with the Restricted Group if it is principally engaged in the theater business within the same geographic area in which the Restricted Group conducts such business. Nothing in this Section 12 shall be construed so as to preclude Executive from investing in any publicly or privately held company, provided Executive's beneficial ownership of any class of such company's securities does not exceed 1% of the outstanding securities of such class. (d) Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall - 12 - 13 have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 12 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive and cease making any payments otherwise required by this Agreement; provided, however, that in the event a court of competent jurisdiction, which recognizes the validity of the provisions of this Section 12, finds the Executive not to be in violation of the provisions of this Section 12, then the Company shall pay to Executive, in a lump sum, within ten days of such determination, all amounts that would have been payable to Executive hereunder through the date of such determination and continue making any other payments due with respect to periods of time subsequent to such determination in accordance with the provisions of this Agreement. 13. Beneficiaries; References. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative, and the Company shall pay amounts payable under this Agreement, unless otherwise provided herein, in accordance with the terms of this Agreement, - 13 - 14 to Executive's personal or legal representatives, executors, administrators, heirs, distributees, devisees, legatees or estate, as the case may be. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine. 14. Survival. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. Specifically, but not exclusively, notwithstanding the expiration of the term of this Agreement, the provisions of Section 12 hereunder shall remain in effect as long as is necessary to give effect thereto. The provisions of this Section 14 are in addition to the survivorship provisions of any other section of this Agreement. 15. Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the state of New York, without reference to rules relating to conflicts of law. 16. Effect on Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior or other agreement or understanding between the Company or any affiliate of the Company and Executive. 17. Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law. - 14 - 15 18. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. REGAL CINEMAS, INC. By --------------------------------- Name: Title: ------------------------------------- Michael Campbell - 15 - EX-10.2 4 EMPLOYMENT AGREEMENT BETWEEN REGAL AND FRAZIER 1 EXHIBIT 10.2 EMPLOYMENT AGREEMENT AGREEMENT, made as of May 27, 1998, by and between Regal Cinemas, Inc., a Tennessee corporation (the "Company"), and Lewis Frazer III ("Executive"). RECITALS In order to induce Executive to serve as the Chief Financial Officer of the Company, the Company desires to provide Executive with compensation and other benefits on the terms and conditions set forth in this Agreement. Executive is willing to accept such employment and perform services for the Company, on the terms and conditions hereinafter set forth. It is therefore hereby agreed by and between the parties as follows: 1. Employment. 1.1 Subject to the terms and conditions of this Agreement, the Company (or the company existing after the integration, if any, of the Company and Act III Cinemas, Inc. ("Act III")) agrees to employ Executive during the term hereof as its Chief Financial Officer. In his capacity as the Chief Financial Officer of the Company, Executive shall report to the Chief Executive Officer and the Board of Directors of the Company (the "Board") and shall have the powers, responsibilities and authorities of chief financial officers of corporations of the size, type and nature of the Company, as it exists from time to time, as are assigned by the Board consistent with the position of Chief Financial Officer. 1.2 Subject to the terms and conditions of this Agreement, Executive hereby agrees to be employed as the Chief Financial Officer of the Company (or the company existing - 1 - 2 after the integration, if any, of the Company and Act III) and agrees to devote such working time and efforts (except for permitted vacation periods and reasonable periods of illness and other incapacity), to the best of his ability, experience and talent, to the performance of services, duties and responsibilities in connection therewith so that such performance shall be his primary business activity. Executive shall perform such duties and exercise such powers with respect to the activities of the Company, commensurate with his positions, as the Chief Financial Officer of the Company as the Chief Executive Officer and the Board shall from time to time delegate to him on such terms and conditions and subject to such restrictions as such Chief Executive Officer and Board may reasonably from time to time impose. 1.3 Nothing in this Agreement shall preclude Executive from serving on boards of directors of other companies and participating in charitable or community activities that do not substantially interfere with his duties and responsibilities hereunder or conflict with the interest of the Company. 2. Term of Employment. Executive's term of employment under this Agreement shall commence as of the date hereof, and, subject to the terms hereof, shall terminate (the "Termination Date") on the earlier of (i) May 27, 2001, or (ii) termination of Executive's employment pursuant to this Agreement; provided, however, that any termination of employment by Executive (other than for death or Permanent Disability) may only be made upon 90 days prior written notice to the Company. - 2 - 3 3. Compensation. 3.1 Salary. The Company shall pay Executive a base salary ("Base Salary") at the rate of $275,000 per annum for the period commencing on the beginning of Executive's term of employment hereunder and ending on the Termination Date. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company. Any increase in Base Salary shall be in the discretion of the Board and, as so increased, shall constitute "Base Salary" hereunder. 3.2 Annual Bonus. In addition to his Base Salary, Executive shall, commencing with the 1998 fiscal year and continuing each fiscal year thereafter, be paid an annual cash bonus (the "Bonus") during the term of his employment hereunder. Executive's target bonus shall be 100% of Base Salary. For 1998, 70% of such bonus will depend on the achievement of the Company EBITDA target of $156 million (excluding (i) synergies, if any, from the combined operations and (ii) extraordinary charges related to the acquisition of the Company and the integration, if any, of the Company and Act III) and 30% will depend on achievement of Board established integration/synergy goals. After 1998, the Board, after consultation with management, will establish EBITDA targets based on the performance of the Company, taking into account the combined operations, if any, and synergies, if any. With respect to the EBITDA component, upon attainment of 90% of the EBITDA target the Executive will earn 50% of the EBITDA component, which will increase from 50% to 100% in a linear progression for achievement between 90% and 100% of the EBITDA target. Similarly, the EBITDA portion of the bonus will increase (up to a cap of 150% on the EBITDA portion of the bonus) in a linear progression from 100% to 150% for achievement of EBITDA over 100% of - 3 - 4 the EBITDA target. EBITDA achievement will be measured using the budgeted capital expenditures previously disclosed in the Goldman Sachs presentation to the Board dated December 29, 1997. 4. Employee Benefits. 4.1 Employee Benefit Programs, Plans and Practices. The Company shall provide Executive during the term of his employment hereunder with coverage under all employee pension and welfare benefit programs, plans and practices (to the extent permitted under any employee benefit plan) in accordance with the terms thereof, which the Company generally makes available to its senior executives. 4.2 Vacation. While employed hereunder, Executive shall be entitled to no less than 20 business days paid vacation in each calendar year, which shall be taken at such times as are consistent with Executive's responsibilities hereunder. 5. Expenses. Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement. The Company will reimburse Executive for such expenses upon presentation by Executive from time to time of appropriately itemized and approved (consistent with the Company's policy) accounts of such expenditures. 6. Termination of Employment. 6.1 Termination Without Cause. The Company may terminate Executive's employment at any time for any reason and nothing herein shall be construed as a representation or covenant to continue Executive's employment. If Executive's employment is terminated by the Company other than for Permanent Disability, death or Cause (as such terms are defined in Sections 6.2 and 6.4 hereof) or the Executive resigns for Good Reason (as defined below) during - 4 - 5 the term hereunder, Executive shall receive such payments, if any, under applicable plans or programs, including but not limited to those referred to in Section 4.1 hereof, to which he is entitled pursuant to the terms of such plans or programs, and any unpaid payments of Base Salary previously earned, bonus awarded, accrued vacation and expense incurred for which Executive is entitled to reimbursement hereunder. If Executive is terminated or resigns under this Section 6.1, Executive shall also be entitled to receive (i) an amount (the "Termination Amount") in lieu of any other cash compensation beyond that provided in the immediately preceding sentence, which Termination Amount shall be equal to the greater of (x) two times Executive's annual Base Salary and (y) Base Salary payable over the then remaining balance of the employment term, in either case, payable in installments as normal payroll over the 24 months following such termination of employment (or, if longer, the remaining balance of the employment term); and (ii) continued coverage for the same period that the Termination Amount is payable under any employee medical, disability and life insurance plans in accordance with the respective terms thereof (other than the requirement of continued employment); provided, however, that payments and benefits due hereunder shall be reduced by any amounts owed by the Executive to the Company. Good Reason shall be defined as: (i) a reduction in Executive's Base Salary or an amendment to the annual cash bonus plan which would materially impair the ability of the Executive to receive a bonus (other than the establishment of the EBITDA or other performance targets to be set in good faith by the Board), (ii) a substantial reduction in Executive's duties and responsibilities, (iii) a transfer of the Executive's primary workplace by more than fifty (50) miles from the current workplace or (iv) Executive is not Chief Financial Officer of the combined operations following an integration, if any, of the Company and Act III. - 5 - 6 6.2 Permanent Disability. If the Executive is unable to engage in the activities required by the Executive's job by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months ("Permanent Disability"), the Company or Executive may terminate Executive's employment on written notice thereof, and Executive shall receive or commence receiving, as soon as practicable: (i) the actual bonus, if any, he would have received in respect of the fiscal year in which his termination occurs, prorated by a fraction, the numerator of which is the number of days of the fiscal year until termination and the denominator of which is 365, payable at the same time as bonuses are paid to other executives; and (ii) accrued but unpaid Base Salary and such payments under applicable plans or programs, including but not limited to those referred to in Sections 4.1, 4.2 and 5 hereof, to which he is entitled pursuant to the terms of such plans or programs. 6.3 Death. In the event of Executive's death during the term of his employment hereunder, Executive's estate or designated beneficiaries shall receive or commence receiving, as soon as practicable: (i) the actual bonus, if any, he would have received in respect of the fiscal year in which his death occurs, prorated by a fraction, the numerator of which is the number of days of the fiscal year until his death and the denominator of which is 365, payable at the same time as bonuses are paid to other executives; and (ii) accrued but unpaid Base Salary and such payments under applicable plans or programs, including but not limited to those referred to in Sections 4.1, 4.2 and 5 hereof, to which Executive's estate or designated beneficiaries are entitled pursuant to the terms of such plans or programs. 6.4 Termination for Cause; Resignation by Executive. (a) The Company shall have the right to terminate the employment of Executive for Cause. In the event that Executive's - 6 - 7 employment is terminated by the Company for Cause or by Executive for any reason (other than by Executive for Good Reason or as a result of the Executive's Permanent Disability or death) during the term hereunder, Executive shall not be entitled to the payment of any compensation otherwise included under this Agreement. After the termination of Executive's employment under this Section 6.4., the obligations of the Company under this Agreement to make any further payments, or provide any benefits specified herein, to Executive shall thereupon cease and terminate. (b) As used herein, the term "Cause" shall be limited to (i) the willful refusal to perform in any material respect his duties or responsibilities for the Company, or willful disregard in any material respect of any financial or other budgetary limitations established in good faith by the Board; (ii) the engaging by the Executive in conduct that causes material and demonstrable injury, monetarily or otherwise, to the Company, including, but not limited to, misappropriation or conversion of assets of the Company (other than nonmaterial assets); (iii) conviction of or entry of a plea of nolo contendere to a felony; or (iv) a material breach of this Agreement by engaging in action in violation of the restrictive covenants in this Agreement. No act or failure to act by the Executive shall be deemed "willful" if done, or omitted to be done, by him in good faith and with the reasonable belief that his action or omission was in the best interest of the Company. 7. Equity Arrangements. (a) Promptly upon commencement of his employment hereunder, the Executive shall make a minimum investment of $2,138,574, which is equal to 50% of the unrealized gain on options owned immediately prior to the Effective Time (as defined in the Agreement and Plan of Merger dated as of January 19, 1998 among the - 7 - 8 Company, Screen Acquisition Corp. and Monarch Acquisition Corp.), on a rollover or other basis in the equity ("Purchased Equity") of the Company. The Executive will be permitted to cash out 50% of the unrealized gain on options currently owned and 100% of his directly owned shares, subject to confirmation that such direct share holdings are de minimis. The Company and the Executive shall endeavor to structure such investment in the most tax efficient manner possible under the relevant circumstances. In respect of such investment, the Company will grant the Executive options to purchase shares of the Company's Common Stock ("New Options") equal to 1.1 times the dollar value of his Purchased Equity. All New Option terms will be consistent with the 1998 Stock Purchase and Option Plan for Key Employees of Regal Cinemas, Inc. It is the intention of the parties that, in the event that a combination of the Company and Act III is consummated, the value of each of the companies shall be the purchase price therefor, absent any subsequent adverse change. (b) Other provisions for Purchased Equity and Options shall be governed by a management shareholder agreement which will provide for repurchase rights, piggyback registration rights, tag-along rights and drag-along rights as heretofore agreed by the parties. 8. Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, New York 10019 Attn: Clifton Robbins - 8 - 9 with copies to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attn: Alvin H. Brown, Esq. and Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart, Jr. and Weil Gotshal & Manges LLP 100 Crescent Court Suite 1300 Dallas, Texas 75201 Attn: Jeremy W. Dickens, Esq. To Executive: Mr. Lewis Frazer III 12129 Brookstone Drive Knoxville, Tennessee 37922 with a copy to: Bass, Berry & Sims PLC 2700 First American Center Nashville, Tennessee 37238 Attn: Mitch Walker Any such notice or communication shall be delivered by hand or by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the third business day after the actual date of mailing shall constitute the time at which notice was given. - 9 - 10 9. Separability; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. Each party shall bear the costs of any legal fees and other fees and expenses which may be incurred in respect of enforcing its respective rights under this Agreement. 10. Assignment. This contract shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Company, if such successor expressly agrees to assume the obligations of the Company hereunder. 11. Amendment. This Agreement may only be amended by written agreement of the parties hereto. 12. Nondisclosure of Confidential Information; Non-competition. (a) Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the - 10 - 11 Company, or (ii) as required by law. For purposes of this Section 12(a), "Confidential Information" shall mean non-public information concerning the financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing, acquisition and divestiture plans and other non-public, proprietary and confidential information of the Company, its subsidiaries, its theater affiliates, Kohlberg Kravis Roberts & Co. ("KKR"), Hicks, Muse, Tate & Furst Incorporated ("HM") or any affiliate of KKR or HM principally engaged in the theater business in existence as of the date of Executive's termination of employment (the "Restricted Group") or suppliers (including, without limitation, any motion picture distributor or exhibitor) or vendors, that, in any case, is not otherwise available to the public (other than by Executive's breach of the terms hereof). (b) During the period of his employment hereunder and for one year thereafter Executive agrees that, without the prior written consent of the Company, (A) he will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any business in Competition (as defined in Section 12(c)) with the business of the Restricted Group (excluding KKR and HM in any non-theater business) and (B) he shall not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or hire for the benefit of anyone, other than the Restricted Group, any person who is, or was at any time during the 6 months immediately preceding the time of the solicitation or hiring by the - 11 - 12 Executive employed by the Restricted Group (other than Executive's secretary or other administrative employee who worked directly for him). (c) For purposes of this Section 12, a business shall be deemed to be in "Competition" with the Restricted Group if it is principally engaged in the theater business within the same geographic area in which the Restricted Group conducts such business. Nothing in this Section 12 shall be construed so as to preclude Executive from investing in any publicly or privately held company, provided Executive's beneficial ownership of any class of such company's securities does not exceed 1% of the outstanding securities of such class. (d) Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 12 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive and cease making any payments otherwise required by this Agreement; provided, however, that in the event a court of competent jurisdiction, which recognizes the validity of the provisions of this Section 12, finds the Executive not to be in - 12 - 13 violation of the provisions of this Section 12, then the Company shall pay to Executive, in a lump sum, within ten days of such determination, all amounts that would have been payable to Executive hereunder through the date of such determination and continue making any other payments due with respect to periods of time subsequent to such determination in accordance with the provisions of this Agreement. 13. Beneficiaries; References. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative, and the Company shall pay amounts payable under this Agreement, unless otherwise provided herein, in accordance with the terms of this Agreement, to Executive's personal or legal representatives, executors, administrators, heirs, distributees, devisees, legatees or estate, as the case may be. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine. 14. Survival. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. Specifically, but not exclusively, notwithstanding the expiration of the term of this Agreement, the provisions of Section 12 hereunder shall remain - 13 - 14 in effect as long as is necessary to give effect thereto. The provisions of this Section 14 are in addition to the survivorship provisions of any other section of this Agreement. 15. Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the state of New York, without reference to rules relating to conflicts of law. 16. Effect on Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior or other agreement or understanding between the Company or any affiliate of the Company and Executive. 17. Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law. - 14 - 15 18. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. REGAL CINEMAS, INC. By --------------------------------- Name: Title: ------------------------------------- Lewis Frazer III - 15 - EX-10.3 5 EMPLOYMENT AGREEMENT BETWEEN REGAL AND DUNN 1 EXHIBIT 10.3 EMPLOYMENT AGREEMENT AGREEMENT, made as of May 27, 1998, by and between Regal Cinemas, Inc., a Tennessee corporation (the "Company"), and Gregory W. Dunn ("Executive"). RECITALS In order to induce Executive to serve as the Chief Operating Officer of the Company, the Company desires to provide Executive with compensation and other benefits on the terms and conditions set forth in this Agreement. Executive is willing to accept such employment and perform services for the Company, on the terms and conditions hereinafter set forth. It is therefore hereby agreed by and between the parties as follows: 1. Employment. 1.1 Subject to the terms and conditions of this Agreement, the Company (or the company existing after the integration, if any, of the Company and Act III Cinemas, Inc. ("Act III")) agrees to employ Executive during the term hereof as its Chief Operating Officer. In his capacity as the Chief Operating Officer of the Company, Executive shall report to the Chief Executive Officer and the Board of Directors of the Company (the "Board") and shall have the powers, responsibilities and authorities of chief operating officers of corporations of the size, type and nature of the Company, as it exists from time to time, as are assigned by the Board consistent with the position of Chief Operating Officer. 1.2 Subject to the terms and conditions of this Agreement, Executive hereby agrees to be employed as the Chief Operating Officer of the Company (or the company existing - 1 - 2 after the integration, if any, of the Company and Act III) and agrees to devote such working time and efforts (except for permitted vacation periods and reasonable periods of illness and other incapacity), to the best of his ability, experience and talent, to the performance of services, duties and responsibilities in connection therewith so that such performance shall be his primary business activity. Executive shall perform such duties and exercise such powers with respect to the activities of the Company, commensurate with his positions, as the Chief Operating Officer of the Company as the Chief Executive Officer and the Board shall from time to time delegate to him on such terms and conditions and subject to such restrictions as such Chief Executive Officer and Board may reasonably from time to time impose. 1.3 Nothing in this Agreement shall preclude Executive from serving on boards of directors of other companies and participating in charitable or community activities that do not substantially interfere with his duties and responsibilities hereunder or conflict with the interest of the Company. 2. Term of Employment. Executive's term of employment under this Agreement shall commence as of the date hereof, and, subject to the terms hereof, shall terminate (the "Termination Date") on the earlier of (i) May 27, 2001, or (ii) termination of Executive's employment pursuant to this Agreement; provided, however, that any termination of employment by Executive (other than for death or Permanent Disability) may only be made upon 90 days prior written notice to the Company. - 2 - 3 3. Compensation. 3.1 Salary. The Company shall pay Executive a base salary ("Base Salary") at the rate of $325,000 per annum for the period commencing on the beginning of Executive's term of employment hereunder and ending on the Termination Date. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company. Any increase in Base Salary shall be in the discretion of the Board and, as so increased, shall constitute "Base Salary" hereunder. 3.2 Annual Bonus. In addition to his Base Salary, Executive shall, commencing with the 1998 fiscal year and continuing each fiscal year thereafter, be paid an annual cash bonus (the "Bonus") during the term of his employment hereunder. Executive's target bonus shall be 100% of Base Salary. For 1998, 70% of such bonus will depend on the achievement of the Company EBITDA target of $156 million (excluding (i) synergies, if any, from the combined operations and (ii) extraordinary charges related to the acquisition of the Company and the integration, if any, of the Company and Act III) and 30% will depend on achievement of Board established integration/synergy goals. After 1998, the Board, after consultation with management, will establish EBITDA targets based on the performance of the Company, taking into account the combined operations, if any, and synergies, if any. With respect to the EBITDA component, upon attainment of 90% of the EBITDA target the Executive will earn 50% of the EBITDA component, which will increase from 50% to 100% in a linear progression for achievement between 90% and 100% of the EBITDA target. Similarly, the EBITDA portion of the bonus will increase (up to a cap of 150% on the EBITDA portion of the bonus) in a linear progression from 100% to 150% for achievement of EBITDA over 100% of - 3 - 4 the EBITDA target. EBITDA achievement will be measured using the budgeted capital expenditures previously disclosed in the Goldman Sachs presentation to the Board dated December 29, 1997. 4. Employee Benefits. 4.1 Employee Benefit Programs, Plans and Practices. The Company shall provide Executive during the term of his employment hereunder with coverage under all employee pension and welfare benefit programs, plans and practices (to the extent permitted under any employee benefit plan) in accordance with the terms thereof, which the Company generally makes available to its senior executives. 4.2 Vacation. While employed hereunder, Executive shall be entitled to no less than 20 business days paid vacation in each calendar year, which shall be taken at such times as are consistent with Executive's responsibilities hereunder. 5. Expenses. Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement. The Company will reimburse Executive for such expenses upon presentation by Executive from time to time of appropriately itemized and approved (consistent with the Company's policy) accounts of such expenditures. 6. Termination of Employment. 6.1 Termination Without Cause. The Company may terminate Executive's employment at any time for any reason and nothing herein shall be construed as a representation or covenant to continue Executive's employment. If Executive's employment is terminated by the Company other than for Permanent Disability, death or Cause (as such terms are defined in Sections 6.2 and 6.4 hereof) or the Executive resigns for Good Reason (as defined below) during - 4 - 5 the term hereunder, Executive shall receive such payments, if any, under applicable plans or programs, including but not limited to those referred to in Section 4.1 hereof, to which he is entitled pursuant to the terms of such plans or programs, and any unpaid payments of Base Salary previously earned, bonus awarded, accrued vacation and expense incurred for which Executive is entitled to reimbursement hereunder. If Executive is terminated or resigns under this Section 6.1, Executive shall also be entitled to receive (i) an amount (the "Termination Amount") in lieu of any other cash compensation beyond that provided in the immediately preceding sentence, which Termination Amount shall be equal to the greater of (x) two times Executive's annual Base Salary and (y) Base Salary payable over the then remaining balance of the employment term, in either case, payable in installments as normal payroll over the 24 months following such termination of employment (or, if longer, the remaining balance of the employment term); and (ii) continued coverage for the same period that the Termination Amount is payable under any employee medical, disability and life insurance plans in accordance with the respective terms thereof (other than the requirement of continued employment); provided, however, that payments and benefits due hereunder shall be reduced by any amounts owed by the Executive to the Company. Good Reason shall be defined as: (i) a reduction in Executive's Base Salary or an amendment to the annual cash bonus plan which would materially impair the ability of the Executive to receive a bonus (other than the establishment of the EBITDA or other performance targets to be set in good faith by the Board), (ii) a substantial reduction in Executive's duties and responsibilities, (iii) a transfer of the Executive's primary workplace by more than fifty (50) miles from the current workplace or (iv) Executive is not Chief Operating Officer of the combined operations following an integration, if any, of the Company and Act III. - 5 - 6 6.2 Permanent Disability. If the Executive is unable to engage in the activities required by the Executive's job by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months ("Permanent Disability"), the Company or Executive may terminate Executive's employment on written notice thereof, and Executive shall receive or commence receiving, as soon as practicable: (i) the actual bonus, if any, he would have received in respect of the fiscal year in which his termination occurs, prorated by a fraction, the numerator of which is the number of days of the fiscal year until termination and the denominator of which is 365, payable at the same time as bonuses are paid to other executives; and (ii) accrued but unpaid Base Salary and such payments under applicable plans or programs, including but not limited to those referred to in Sections 4.1, 4.2 and 5 hereof, to which he is entitled pursuant to the terms of such plans or programs. 6.3 Death. In the event of Executive's death during the term of his employment hereunder, Executive's estate or designated beneficiaries shall receive or commence receiving, as soon as practicable: (i) the actual bonus, if any, he would have received in respect of the fiscal year in which his death occurs, prorated by a fraction, the numerator of which is the number of days of the fiscal year until his death and the denominator of which is 365, payable at the same time as bonuses are paid to other executives; and (ii) accrued but unpaid Base Salary and such payments under applicable plans or programs, including but not limited to those referred to in Sections 4.1, 4.2 and 5 hereof, to which Executive's estate or designated beneficiaries are entitled pursuant to the terms of such plans or programs. 6.4 Termination for Cause; Resignation by Executive. (a) The Company shall have the right to terminate the employment of Executive for Cause. In the event that Executive's - 6 - 7 employment is terminated by the Company for Cause or by Executive for any reason (other than by Executive for Good Reason or as a result of the Executive's Permanent Disability or death) during the term hereunder, Executive shall not be entitled to the payment of any compensation otherwise included under this Agreement. After the termination of Executive's employment under this Section 6.4., the obligations of the Company under this Agreement to make any further payments, or provide any benefits specified herein, to Executive shall thereupon cease and terminate. (b) As used herein, the term "Cause" shall be limited to (i) the willful refusal to perform in any material respect his duties or responsibilities for the Company, or willful disregard in any material respect of any financial or other budgetary limitations established in good faith by the Board; (ii) the engaging by the Executive in conduct that causes material and demonstrable injury, monetarily or otherwise, to the Company, including, but not limited to, misappropriation or conversion of assets of the Company (other than nonmaterial assets); (iii) conviction of or entry of a plea of nolo contendere to a felony; or (iv) a material breach of this Agreement by engaging in action in violation of the restrictive covenants in this Agreement. No act or failure to act by the Executive shall be deemed "willful" if done, or omitted to be done, by him in good faith and with the reasonable belief that his action or omission was in the best interest of the Company. 7. Equity Arrangements. (a) Promptly upon commencement of his employment hereunder, the Executive shall make a minimum investment of $1,878,422, which is equal to 50% of the unrealized gain on options owned immediately prior to the Effective Time (as defined in the Agreement and Plan of Merger, dated as of January 19, 1998 among the - 7 - 8 Company, Screen Acquisition Corp. and Monarch Acquisition Corp.), on a rollover or other basis in the equity ("Purchased Equity") of the Company. The Executive will be permitted to cash out 50% of the unrealized gain on options currently owned and 100% of his directly owned shares, subject to confirmation that such direct share holdings are approximately 6,700 shares. The Company and the Executive shall endeavor to structure such investment in the most tax efficient manner possible under the relevant circumstances. In respect of such investment, the Company will grant the Executive options to purchase shares of the Company's Common Stock ("New Options") equal to 1.1 times the dollar value of his Purchased Equity. All New Option terms will be consistent with the 1998 Stock Purchase and Option Plan for Key Employees of Regal Cinemas, Inc. It is the intention of the parties that, in the event that a combination of the Company and Act III is consummated, the value of each of the companies shall be the purchase price therefor, absent any subsequent adverse change. (b) Other provisions for Purchased Equity and Options shall be governed by a management shareholder agreement which will provide for repurchase rights, piggyback registration rights, tag-along rights and drag-along rights as heretofore agreed by the parties. 8. Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street New York, New York 10019 Attn: Clifton Robbins - 8 - 9 with copies to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 Attn: Alvin H. Brown, Esq. and Hicks, Muse, Tate & Furst Incorporated 200 Crescent Court Suite 1600 Dallas, Texas 75201 Attn: Lawrence D. Stuart, Jr. and Weil Gotshal & Manges LLP 100 Crescent Court Suite 1300 Dallas, Texas 75201 Attn: Jeremy W. Dickens, Esq. To Executive: Mr. Gregory W. Dunn 7809 Eden Lane Knoxville, Tennessee 37938 with a copy to: Bass, Berry & Sims PLC 2700 First American Center Nashville, Tennessee 37238 Attn: Mitch Walker Any such notice or communication shall be delivered by hand or by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the third business day after the actual date of mailing shall constitute the time at which notice was given. - 9 - 10 9. Separability; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. Each party shall bear the costs of any legal fees and other fees and expenses which may be incurred in respect of enforcing its respective rights under this Agreement. 10. Assignment. This contract shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Company, if such successor expressly agrees to assume the obligations of the Company hereunder. 11. Amendment. This Agreement may only be amended by written agreement of the parties hereto. 12. Nondisclosure of Confidential Information; Non-competition. (a) Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) as required by law. For purposes of this Section 12(a), "Confidential Information" shall mean non-public information concerning the financial data, strategic business - 10 - 11 plans, product development (or other proprietary product data), customer lists, marketing, acquisition and divestiture plans and other non-public, proprietary and confidential information of the Company, its subsidiaries, its theater affiliates, Kohlberg Kravis Roberts & Co. ("KKR") and Hicks, Muse, Tate & Furst Incorporated ("HM") or any affiliate of KKR or HM principally engaged in the theater business in existence as of the date of Executive's termination of employment (the "Restricted Group") or suppliers (including, without limitation, any motion picture distributor or exhibitor) or vendors, that, in any case, is not otherwise available to the public (other than by Executive's breach of the terms hereof). (b) During the period of his employment hereunder and for one year thereafter Executive agrees that, without the prior written consent of the Company, (A) he will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any business in Competition (as defined in Section 12(c)) with the business of the Restricted Group (excluding KKR and HM in any non-theater business) and (B) he shall not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or hire for the benefit of anyone, other than the Restricted Group, any person who is, or was at any time during the 6 months immediately preceding the time of the solicitation or hiring by the Executive employed by the Restricted Group (other than Executive's secretary or other administrative employee who worked directly for him). (c) For purposes of this Section 12, a business shall be deemed to be in "Competition" with the Restricted Group if it is principally engaged in the theater business within the same geographic area in which the Restricted Group conducts such business. Nothing - 11 - 12 in this Section 12 shall be construed so as to preclude Executive from investing in any publicly or privately held company, provided Executive's beneficial ownership of any class of such company's securities does not exceed 1% of the outstanding securities of such class. (d) Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 12 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive and cease making any payments otherwise required by this Agreement; provided, however, that in the event a court of competent jurisdiction, which recognizes the validity of the provisions of this Section 12, finds the Executive not to be in violation of the provisions of this Section 12, then the Company shall pay to Executive, in a lump sum, within ten days of such determination, all amounts that would have been payable to Executive hereunder through the date of such determination and continue making any other payments due with respect to periods of time subsequent to such determination in accordance with the provisions of this Agreement. 13. Beneficiaries; References. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive - 12 - 13 any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative, and the Company shall pay amounts payable under this Agreement, unless otherwise provided herein, in accordance with the terms of this Agreement, to Executive's personal or legal representatives, executors, administrators, heirs, distributees, devisees, legatees or estate, as the case may be. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine. 14. Survival. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. Specifically, but not exclusively, notwithstanding the expiration of the term of this Agreement, the provisions of Section 12 hereunder shall remain in effect as long as is necessary to give effect thereto. The provisions of this Section 14 are in addition to the survivorship provisions of any other section of this Agreement. 15. Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the state of New York, without reference to rules relating to conflicts of law. 16. Effect on Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior or other agreement or understanding between the Company or any affiliate of the Company and Executive. - 13 - 14 17. Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law. - 14 - 15 18. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. REGAL CINEMAS, INC. By --------------------------------- Name: Title: ------------------------------------- Gregory W. Dunn - 15 - EX-10.4 6 CREDIT AGREEMENT DATED MAY 27, 1998 1 EXHIBIT 10.4 [EXECUTION COPY] U.S.$725,000,000 CREDIT AGREEMENT, dated as of May 27, 1998, among REGAL CINEMAS, INC., as the Borrower, VARIOUS FINANCIAL INSTITUTIONS, as the Lenders, THE BANK OF NOVA SCOTIA, as the Administrative Agent, BANCAMERICA ROBERTSON STEPHENS as the Syndication Agent, and THE CHASE MANHATTAN BANK, as the Documentation Agent. 2 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of May 27, 1998, among REGAL CINEMAS, INC., a Tennessee corporation (the "Borrower"), the several financial institutions from time to time party to this Agreement (collectively, the "Lenders", and, individually, a "Lender"), THE BANK OF NOVA SCOTIA ("Scotiabank"), as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), as Swing Line Lender and as an Issuer, BANCAMERICA ROBERTSON STEPHENS, as syndication agent (in such capacity, the "Syndication Agent") for the Lenders, and The Chase Manhattan Bank, as documentation agent (in such capacity, the "Documentation Agent"), W I T N E S S E T H: WHEREAS, the Borrower and its Subsidiaries (such and other capitalized terms being used herein with the meanings provided in Section 1.1) are engaged in the development, acquisition and operation of motion picture theatres; and WHEREAS, the Borrower is a party to an Agreement and Plan of Merger, dated as of January 19, 1998 and amended as of May 8, 1998 (the "Merger Agreement"), with Screen Acquisition Corp., a Delaware corporation ("KKR Merger Subsidiary") owned by Affiliates of KKR, and Monarch Acquisition Corp., a Delaware corporation ("HMTF Merger Subsidiary" and, together with KKR Merger Subsidiary, the "Merger Subsidiaries") owned by Affiliates of HMTF, pursuant to which, (a) prior to the Merger, (x) Affiliates of KKR and Affiliates of HMTF will make cash contributions (the "Sponsor Fund Contributions") to the equity capital of KKR Merger Subsidiary and HMTF Merger Subsidiary in the amounts of approximately $287,300,000 and approximately $437,300,000, respectively and (y) DLJ Merchant Banking Partners II, Inc. (the "Additional Investor") will make a contribution (the "Additional Equity") to the Equity Capital of the KKR Merger Subsidiary; (b) each Merger Subsidiary will merge (the "Merger", and the date of the consummation of the Merger being the "Merger Date") with and into the Borrower (the Borrower also being sometimes referred to (x) prior to the Merger, as "Old Regal" and (y) as the Tennessee corporation surviving the Merger, "Surviving Regal"); (c) all of the shares of common stock, no par value per share, of Old Regal (the "Old Regal Shares") issued and outstanding on the Merger Date (which, as at March 31, 1998 was 36,119,028 shares of common stock) (including certain Old Regal Shares held by Key Management but excluding, however, any Old Regal Shares held by a Merger Subsidiary) will be converted (the"Conversion") into the right to receive cash in the amount of $31.00 per share (the "Merger Consideration"); (d) options held by various directors, officers and employees of Old Regal will either (x) be converted into cash at a price per share equal to the Merger Consideration minus the related exercise price per share (the "Option Redemption") or (y) be rolled-over (the "Management RollOver") into continuing equity options to acquire Surviving Regal Common Shares with an equivalent aggregate spread, with new options to acquire Surviving Regal Common Shares at an exercise price of $31.00 per share being issued in connection therewith; 1 3 (e) the Sponsors and their Affiliates will receive Surviving Regal Preferred Shares and Surviving Regal Common Shares representing in the aggregate approximately 93.2% of all of the issued and outstanding Voting Stock of Surviving Regal on the Closing Date which, after giving effect to the HMTF/KKR Swap, will be held equally by each Sponsor and its respective Affiliates; and (f) Surviving Regal will repay or defease, as the case may be, all Indebtedness of Old Regal and its Subsidiaries identified on Item 7.2.1(b) ("Indebtedness to be Paid") of the Disclosure Schedule (the "Refinancing"); and WHEREAS, pursuant to a tender offer and consent solicitation, dated April 23, 1998 and amended as of May 6, 1998 (as so amended, and collectively with the related consent and letter of transmittal and other information and exhibits furnished therewith, the "Offer to Purchase"), the Borrower has offered to purchase for a maximum price of approximately $139,600,000 (including a premium of approximately $14,600,000) all of its 8 1/2% Senior Subordinated Notes due October 1, 2007 (the "Old Regal 8 1/2% Subordinated Notes") outstanding in the aggregate principal amount of $125,000,000 and is soliciting consents to amend the indenture, dated as of September 24, 1997 (the "Old Regal 8 1/2% Subordinated Note Indenture"), between Old Regal, as issuer, and IBJ Schroder Bank & Trust Company, as trustee, including to eliminate substantially all of the restrictive covenants contained therein; and WHEREAS, immediately following the consummation of the Merger, Surviving Regal will issue to the initial purchasers at 9 1/2% of par at least $400,000,000 in aggregate principal amount of 9 1/2% senior subordinated promissory notes (the "9 1/2% Subordinated Notes") due June 1, 2008, pursuant to the 9 1/2% Subordinated Note Indenture; and WHEREAS, to fund (together with the proceeds of the Sponsor Fund Contributions, the Additional Equity and the 9 1/2% Subordinated Notes) the Conversion, the Option Redemption, the Offer to Purchase, the Refinancing and Transaction Costs and to provide financing for the working capital and other ongoing general corporate purposes of Surviving Regal and Restricted Subsidiaries, the Borrower has requested that the Lenders and Issuer (as applicable) make available to Surviving Regal on the Closing Date and thereafter: (a) a Term A Loan Commitment pursuant to which Term A Loans in an aggregate original principal amount of up to $120,000,000 may be borrowed in a single Borrowing on the Closing Date; (b) a Term B Loan Commitment pursuant to which Term B Loans in an aggregate original principal amount of up to $120,000,000 may be borrowed in a single Borrowing on the Closing Date; (c) a Term C Loan Commitment pursuant to which Term C Loans in an aggregate original principal amount of up to $135,000,000 may be borrowed in a single Borrowing on the Closing Date; (d) a Revolving Loan Commitment (to include availability for Revolving Loans, Swing Line Loans and Letters of Credit) pursuant to which Borrowings of Revolving Loans and Swing Line Loans in a maximum aggregate outstanding principal amount (together with all Letter of Credit Outstandings) not to exceed $350,000,000 (subject, however, to Section 2.2.2) will be made 2 4 to the Borrower from time to time on and subsequent to the Closing Date but prior to the Revolving Loan Commitment Termination Date; (e) a Letter of Credit Commitment pursuant to which the Issuer will issue Letters of Credit (participated in by Revolving Loan Lenders) for the account of the Borrower and Restricted Subsidiaries from time to time on and subsequent to the Closing Date but prior to the Revolving Loan Commitment Termination Date in a maximum aggregate Stated Amount at any one time outstanding not to exceed the then existing Letter of Credit Commitment Amount; provided, however, that the aggregate outstanding principal amount of Revolving Loans, Swing Line Loans and Letter of Credit Outstandings at any time shall not exceed the then existing Revolving Loan Commitment Amount; and (f) a Swing Line Loan Commitment pursuant to which Borrowings of Swing Line Loans in an aggregate outstanding principal amount not to exceed the then existing Swing Line Loan Commitment Amount will be made by the Swing Line Lender (and participated in by the Revolving Loan Lenders) on and subsequent to the Closing Date but prior to the Revolving Loan Commitment Termination Date; provided, however, that the aggregate outstanding principal amount of such Swing Line Loans, Revolving Loans and Letter of Credit Outstandings at any time shall not exceed the then existing Revolving Loan Commitment Amount; with all the proceeds of the Credit Extensions to be used for the purposes specified in Section 7.1.9; WHEREAS, the Lenders and the Issuer are willing, on the terms and subject to the conditions hereinafter set forth (including Article V), to extend such Commitments and make such Loans to the Borrower and issue (or participate in) Letters of Credit for the account of the Borrower and Restricted Subsidiaries; and WHEREAS, the Borrower wishes to provide for the ability of one or more Lenders, in their respective sole and absolute individual discretion, to extend, (a) in connection with a contemplated but uncommitted Act III Acquisition, Revolving Credit Commitment Amount Increases or Additional Commitments comprising the Act III Additional Financing; and (b) in connection with Other Permitted Acquisitions, Revolving Credit Commitment Amount Increases or Additional Commitments, all in an aggregate principal amount, together with certain Indebtedness incurred or assumed in connection with Other Permitted Acquisitions, not to exceed $350,000,000 of which the amount in excess of $200,000,000 shall constitute Permitted Additional Structured Indebtedness; NOW, THEREFORE, the parties hereto agree as follows: 3 5 ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not italicized) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Acquired Person" means a Person acquired, or a Subsidiary created for the purpose of acquiring all or substantially all of the assets of a Person (or the business or any division of a Person) acquired, pursuant to a Permitted Acquisition. "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person; (b) the acquisition of in excess of 50% of the Capital Stock of any Person, or otherwise causing any Person to become a Subsidiary; (c) a merger or consolidation or any other combination with another Person (other than with a Person that is a Restricted Subsidiary) that results in the surviving entity being the Borrower (or its successor by merger) or a Restricted Subsidiary; or (d) an Unrestricted Subsidiary becoming a Restricted Subsidiary. "Act III" means Act III Cinemas, Inc., a Delaware corporation. "Act III Acquisition" means the merger of Act III with, or the purchase of Act III by, the Borrower, for which, on the Effective Date, there exists no contractual arrangement (written, verbal or otherwise) or obligation to enter into or complete such merger or purchase. "Act III Additional Financing" is defined in clause (a) of Section 2.8. "Act III Credit Agreement" means, on any date, the Credit Agreement, dated as of December 3, 1997, among Act III, various financial institutions, Scotiabank, as administrative agent, and BancAmerica Robertson Stephens, as syndication agent, as in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified and in effect on such date. "Additional Commitment" is defined in Section 2.8. "Additional Equity" is defined in clause (a) of the second recital. "Additional Financing Amendment" means an Instrument (x) which may from time to time be entered into by the Borrower, Lenders extending Revolving Credit Commitment Amount Increases or Additional Commitments pursuant to Section 2.8 and the Agents solely for the purpose of amending this Agreement as then in effect to effect such extensions hereunder and (y) which, subject, however, to its 4 6 compliance with the requirements of Section 2.8 applicable thereto and to its not violating the requirements of clauses (a), (b), (c), (d) (subject to the proviso therein) and (e) of Section 10.1 with respect to other Loans and Commitments of other Lenders, shall be binding upon all other Lenders parties hereto without any requirement for their consenting, or being a party, thereto. "Additional Investor" is defined in clause (a) of the second recital. "Additional Loan" is defined in Section 2.8. "Additional Note" means (x) a promissory note, if any, executed and delivered by the Borrower pursuant to clause (b) of Section 2.7 and payable to any Lender in a form established in accordance with Section 2.8 (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender for all Additional Loans made pursuant to any Additional Commitment and (y) all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Adjusted EBITDA" means, relative to the Borrower and Restricted Subsidiaries, for any applicable period, the difference of (a) the sum (without duplication) of (i) Consolidated Net Income of the Borrower and Restricted Subsidiaries for such period, plus (ii) the amounts deducted by the Borrower and Restricted Subsidiaries in determining Consolidated Net Income of the Borrower and Restricted Subsidiaries for such period representing (s) non-cash minority interest expense, (t) non-cash charges (including non-cash Rental Expense), amortization (including amortization of deferred financing fees), depreciation, non-cash restructuring charges or reserves, other non-cash reserves and non-recurring charges, (u) all federal, state and local taxes (whether paid in cash or deferred) computed on the basis of income, (v) Interest Expense and non-cash interest expense of the Borrower and Restricted Subsidiaries, (w) expenses or charges incurred in connection with the issuance of debt or equity securities and up-front fees paid with respect to credit facilities provided by banks and other financial institutions, (x) Transaction Costs, (y) expenses or charges incurred in connection with Real Estate Financings consummated during such period and (z) fees and expenses paid in connection with Permitted Acquisitions consummated, and Investments made, during such period, minus 5 7 (b) the amounts included by the Borrower and Restricted Subsidiaries in determining Consolidated Net Income of the Borrower and Restricted Subsidiaries for such period representing (x) non-cash gains and (y) non-recurring gains; provided, however, that (without duplication) "Adjusted EBITDA" (c) for any applicable period shall be determined on the basis that all Permitted Acquisitions which were consummated during such period were consummated on the first day of such period; (d) attributable to a particular motion picture theatre complex (x) which was newly opened for business, (y) for which additional screens were opened for business following an expansion of the number of screens at such complex or (z) for which previously existing screens were reopened for business following the installation of "stadium riser" seating for such screen during any applicable period shall be determined by the Borrower on a pro forma basis as if such motion picture theatre complex or such screen, as the case may be, was opened on the first day of such period; provided, however, that each such determination shall be made on each date on which a Compliance Certificate for such applicable period is delivered based on reasonable assumptions at such time certified to the Administrative Agent and made on a basis consistent with operating cash flows of similar motion picture theatres (if any); (e) attributable to a particular motion picture theatre which was permanently closed for business during any applicable period shall be determined on the basis that such motion picture theatre closed on the last day of the previous period; (f) for any applicable period shall be increased or decreased, as the case may be, to reflect the projected good faith identifiable and supportable net cost savings or additional net costs, as the case may be, resulting from any Permitted Acquisition consummated during such period (or either of the two Fiscal Quarters preceding such period) realizable during such period by combining the operations of an Acquired Person with the operations of the Borrower and Restricted Subsidiaries (as determined by the Borrower based on reasonable assumptions and computations set forth in sufficient detail and which are acceptable, in substance, to the Administrative Agent, and which determination shall be made on each date on which a Compliance Certificate for such applicable period is delivered); provided, however, that so long as such net savings or additional net costs will be realizable at any time during such period, it may be assumed, for the purpose of this clause, that such net cost savings or additional net costs will be realizable during the entire period; and (g) for any applicable period shall be determined on the basis that any redesignation of a Subsidiary as an Unrestricted Subsidiary or, as the case may be, a Restricted Subsidiary which occurred during such period occurred on the first day of such period. "Administrative Agent" is defined in the preamble and, in addition, shall include each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4. "Affiliate" means, relative to any Person, any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding, however, any trustee under, or any committee with responsibility for administering, any Plan). With respect to 6 8 (a) (i) any Lender or an Issuer, a Person shall be deemed to be "controlled by" another Person if such other Person possesses, directly or indirectly, 51% or more of the Voting Stock of such "controlled" Person or (ii) any Lender that is a fund that invests in commercial loans, such Lender shall be deemed to be "controlled by" any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor; and (b) all Persons other than any Lender or an Issuer, a Person shall be deemed to be "controlled by" another Person if such other Person possesses, directly or indirectly, power (x) to vote 10% or more of the Voting Stock of such "controlled" Person; or (y) to direct or cause the direction of the management and policies of such "controlled" Person whether through ownership of Voting Stock, by contract or otherwise. "Agent" means, as the context may require, the Administrative Agent, the Syndication Agent or the Documentation Agent. "this Agreement" means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated or otherwise modified and in effect on such date. "Alternate Base Rate" means, on any date and relative to all Base Rate Loans, a fluctuating rate of interest per annum (rounded upward, if necessary, to the next highest 1/16 of 1%) equal to the higher of (a) the Base Rate in effect on such day; and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate. The Administrative Agent will give notice promptly to the Borrower and the Lenders of changes in the Alternate Base Rate. "Applicable Commitment Fee" means, (a) relative to the fee payable to the Lenders pursuant to Section 3.3.1, the applicable rate per annum set forth below under the column entitled "Applicable Commitment Fee":
Total Applicable Leverage Ratio Commitment Fee ------------------------ ------------------------ >=5.5:1 0.425% <5.5:1 and >= 4.5:1 0.375% <4.5:1 and >= 4.0:1 0.350% <4.0:1 and >= 3.5:1 0.300% <3.5:1 and >= 3.0:1 0.250% < 3.0:1 0.200%; and
7 9 (b) relative to Additional Commitments which are revolving credit commitments, a rate per annum agreed to by the Borrower and the Lenders providing such Additional Commitments in accordance with Section 2.8. The Total Leverage Ratio used to compute the Applicable Commitment Fee pursuant to clause (a) shall be the Total Leverage Ratio set forth in the Current Compliance Certificate; provided, however, that for any period prior to June 30, 1998 for which the Borrower shall not have delivered a Compliance Certificate, the Applicable Commitment Fee shall be 0.375%. "Applicable Law" means, relative to any Person, (x) all provisions of laws, statutes, ordinances, rules, regulations, requirements, restrictions, permits, certificates or orders of any Governmental Authority applicable to such Person or any of its assets or property and (y) all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which such Person is a party or by which any of its assets or properties is bound or subject. "Applicable Margin" means (a) relative to the unpaid principal amount of each Term A Loan and Revolving Loan, the applicable rate per annum set forth below under the column entitled "Applicable Margin - Base Rate Term A Loans and Revolving Loans" or, as the case may be, "Applicable Margin - LIBO Rate Term A Loans and Revolving Loans":
Applicable Margin ------------------------------------------------------------ Base Rate LIBO Rate Total Term A Loans and Term A Loans and Leverage Ratio Revolving Loans Revolving Loans ------------------------ ---------------------------- ----------------------------- >= 5.5:1 1.000% 2.250% <5.5:1 and >= 5.0:1 0.750% 2.000% <5.0:1 and >= 4.5:1 0.375% 1.625% <4.5:1 and >= 4.0:1 0.125% 1.375% <4.0:1 and >= 3.5:1 0.000% 1.125% <3.5:1 and >= 3.0:1 0.000% 0.875% < 3.0:1 0.000% 0.625%;
(b) relative to the unpaid principal amount of each Term B Loan, the applicable rate per annum set forth below under the column entitled "Applicable Margin - Base Rate Term B Loans" or, as the case may be, "Applicable Margin - LIBO Rate Term B Loans":
Applicable Margin ------------------------------------------------------------ Total Base Rate LIBO Rate Leverage Ratio Term B Loans Term B Loans --------------------------- -------------------------- -------------------------- >= 5.5:1 1.250% 2.500% < 5.5:1 and >= 4.5:1 1.000% 2.250% < 4.5:1 0.750% 2.000%;
8 10 (c) relative to the unpaid principal amount of each Term C Loan, the applicable rate per annum set forth below under the column entitled "Applicable Margin - Base Rate Term C Loans" or, as the case may be, "Applicable Margin - LIBO Rate Term C Loans":
Applicable Margin --------------------------------------------------------------- Total Base Rate LIBO Rate Leverage Ratio Term C Loans Term C Loans ---------------------------- ---------------------------- ------------------------------- >= 5.5:1 1.500% 2.750% < 5.5:1 and >= 4.5:1 1.250% 2.500% < 4.5:1 1.000% 2.250%; and
(d) relative to Additional Loans, a rate per annum agreed to by the Borrower and the Lenders making such Additional Loans in accordance with Section 2.8. The Total Leverage Ratio used to compute the "Applicable Margin" for all types of Loans as set forth in clauses (a) through (c) shall be the Total Leverage Ratio set forth in the Current Compliance Certificate; provided, however, that for any period prior to June 30, 1998 for which the Borrower shall not have delivered a Compliance Certificate, the Applicable Margin for each type and class of Loan shall be determined by reference to the second to highest Total Leverage Ratio for each applicable type and class of Loan. "Approval" means, relative to any Obligor, each approval, license, permit, consent, exemption, filing, notice or registration by or with any Governmental Authority necessary to authorize or permit (x) the execution, delivery or performance of (1) this Agreement, any Note, any Security Document or any other Loan Document or for the validity or enforceability hereof or thereof or (2) the Merger Agreement or (y) its conduct of its business. "Authorized Officer" means, relative to the Borrower and any other Obligor, those of its officers who are Responsible Officers or whose signatures and incumbency shall have been certified to the Agents and the Lenders pursuant to Section 5.1.1 and such other officers of the Borrower as the Borrower designates in writing as such to the Administrative Agent. "Available Cumulative Consolidated Net Income" means, on any date, 50% of the sum of (x) Consolidated Net Income determined for the period (treated as one accounting period) consisting of all Fiscal Quarters elapsed since the Closing Date plus (y) with respect to any Permitted Acquisition, any goodwill and other intangibles resulting therefrom, for which financial statements and the Compliance Certificates related thereto have been delivered to the Administrative Agent pursuant to Section 7.1.1. "Available Investment Amount" means, on any date (a "Reference Date"), an amount equal to the difference of (a) the sum, computed for the period commencing on the Closing Date (and after giving effect to the Transaction) and continuing through the Reference Date, of 9 11 (i) the aggregate amount of Net Cash Proceeds from Dispositions which are refused by Lenders holding Term Loans and retained by the Borrower in accordance with clause (b)(iii) of Section 3.1.2 during such period, plus (ii) the Available Restricted Payment Amount (if positive) determined on the Reference Date (and without giving effect to clause (b)(iii) of such definition), minus (b) the aggregate amount of all Investments (as such aggregate amount is determined in accordance with the definition of "Investment") made by the Borrower and Restricted Subsidiaries pursuant to item (z) of clause (h) of Section 7.2.4 during such period. "Available Restricted Payment Amount" means, on any date (a "Reference Date"), an amount equal to the difference of (a) the sum, computed for the period commencing on the Closing Date (and after giving effect to the Transaction) and continuing through the Reference Date, of (i) the aggregate amount of net cash proceeds received by the Borrower during such periods (x) in respect of equity contributions made to the Borrower by Persons other than Subsidiaries and (y) from issuances of equity by the Borrower, and, in each case, not applied to redemption requirements pursuant to clause (b) or (c) of Section 7.2.5 or item (x) of clause (e) of Section 7.2.5, plus (ii) Available Cumulative Consolidated Net Income (if positive) on such Reference Date, minus (b) the sum, computed for the period commencing on the Closing Date (as aforesaid) and continuing through the Reference Date, of (i) the aggregate amount paid by the Borrower in connection with any prepayment, repurchase or redemption of the Subordinated Debt pursuant to item (y) of clause (e) of Section 7.2.5 during such period, plus (ii) the aggregate amount of all cash dividends on common or preferred stock (excluding, however, Qualified Preferred Stock) paid by the Borrower pursuant to clause (f) of Section 7.2.5 during such period, plus 10 12 (iii) the amount, if any, determined on the Reference Date, by which the amount computed pursuant to clause (b) of the definition of "Available Investment Amount" would exceed the sum determined pursuant to clause (a)(i) thereof. "Base Rate" means, at any time, the rate of interest then most recently established by the Administrative Agent in New York, New York as its base rate for Dollars loaned in the United States. The Base Rate is not necessarily intended to be the lowest rate of interest determined by the Administrative Agent in connection with extensions of credit. "Base Rate Loan" means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate. "Borrower" is defined in the preamble. "Borrowing" means the Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period made by all Lenders required to make such Loans on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1. "Borrowing Request" means a Loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B-1 hereto. "Business Day" means (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day which is a Business Day described in clause (a) and which is also a day on which dealings in Dollars are carried on in the London interbank eurodollar market. "Capital Expenditures" means, for any period, the sum of (a) the aggregate amount of all expenditures of the Borrower and Restricted Subsidiaries for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures, plus (b) without duplication, the aggregate amount of all cash payments made during such period in respect of all Capitalized Lease Liabilities allocable to the principal component thereof; provided, however, that the term "Capital Expenditures" shall not include (c) expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed from (x) insurance proceeds paid on account of the loss of or damage to the assets being replaced or restored or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced; 11 13 (d) the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time; (e) Capitalized Lease Liabilities paid in respect of equipment that is leased in substitution for, or as replacement in connection with the trade-in of, existing similar equipment; (f) the purchase of plant, property or equipment made within one year of the sale of any asset in replacement of such asset to the extent purchased with the proceeds of such sale and Capitalized Lease Liabilities paid in respect of such replaced asset; and (g) the portion of the purchase price in connection with any Permitted Acquisition that would otherwise be included as additions to property, plant or equipment and Capitalized Lease Liabilities assumed or incurred in connection with any Permitted Acquisition. "Capital Stock" means, relative to any Person, any and all shares, partnership or membership interests, participations or other equivalents (however designated, whether voting or non-voting) of capital of such Person, including, if such Person is a partnership, partnership interests (whether general or limited) and 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, such partnership. "Capitalized Lease Liability" means any monetary obligation of the Borrower or any Restricted Subsidiary under any leasing or similar arrangement which, in accordance with GAAP, is classified as a capitalized lease, and, for purposes of this Agreement and each other Loan Document, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP, and the stated maturity thereof shall be determined in accordance with GAAP. "Cash Equivalent Investment" means, at any time: (a) any direct obligation of (or guaranteed by) the United States government (or any agency or instrumentality thereof) maturing not more than two years after the date of acquisition thereof; (b) any direct obligation of (or guaranteed by) any state of the United States (or any political subdivision, agency or instrumentality thereof) maturing not more than two years after the date of acquisition thereof and, at the time of such acquisition, rated at least investment grade by either S&P or Moody's (or, if at any time neither S&P or Moody's shall be rating such obligations, then from another nationally recognized rating agency); (c) commercial paper, maturing not more than 12 months from the date of issue, which is issued by (x) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated at least A-2 by S&P or P-2 by Moody's (or, if at any time neither S&P or Moody's shall be rating such obligations, then by another comparable nationally recognized rating agency) or (y) any Lender (or its holding company); (d) any certificate of deposit or bankers acceptance, maturing not more than two years after the date of acquisition thereof, which is issued by either (x) any bank which has a combined capital 12 14 and surplus not less than $250,000,000 (or in the case of foreign banks, the Dollar equivalent thereof) or (y) any Lender; (e) any repurchase agreement entered into with any Lender or any commercial banking institution of the stature referred to in item (x) of clause (d) or securities dealers of recognized national standing which (x) is for underlying obligations of the type described in clause (a), (b) or (d) and (y) has a term of not more than 30 days; (f) shares of investment companies that are registered under the Investment Company Act of 1940 and invest solely in one or more of the types of securities described in clauses (a) through (e); and (g) short-term, high quality liquid investments made by a Foreign Subsidiary in the ordinary course of managing its cash. "CERCLA" is defined in the definition of "Environmental Law". "Change of Control" means, and shall be deemed to have occurred if: (a) either (i) the Sponsors, their respective successors and Affiliates and management of the Borrower shall cease to own in the aggregate, directly or indirectly, beneficially and of record, at least 35% of the outstanding Voting Stock of Surviving Regal, other than, as the result of (1) one or more public offerings of Capital Stock of Surviving Regal or (2) a widely distributed private placement of Capital Stock of Surviving Regal that does not provide any special director designation or special election rights or other special corporate governance rights to the holders of such Capital Stock, in each case whether by Surviving Regal or another Person), or (ii) any Person or "group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act) shall at any time have acquired direct or indirect beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of a percentage of the outstanding Voting Stock of Surviving Regal that exceeds in the aggregate the percentage of such Voting Stock then beneficially owned, directly or indirectly, by the Sponsors, their respective successors and Affiliates and management of the Borrower, unless, in the case of any such event occurring pursuant to clause (a), the Sponsors, their respective successors and Affiliates and management of the Borrower have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors of Surviving Regal; (b) at any time Continuing Directors shall not constitute a majority of the Board of Directors of Surviving Regal; or (c) any "Change of Control" shall occur under (as defined in) the 9 1/2% Subordinated Note Indenture or any analogous event shall occur under, or in respect of, any other Subordinated Debt. 13 15 "Closing Date" means the Business Day, if any, on or prior to June 15, 1998 when all of the conditions precedent set forth in Article V are satisfied (or waived by each Lender and each Agent) and the initial Credit Extensions are made. "Clark-Regal" means Clark-Regal, LLC, a California limited liability company. "Closing Date Certificate" means the closing date certificate executed and delivered by the Borrower pursuant to Section 5.1.15, substantially in the form of Exhibit H hereto. "Code" means the Internal Revenue Code of 1986, and the regulations thereunder, in each case as amended, reformed or otherwise modified from time to time. "Commitment" means, as the context may require, (x) a Lender's Term A Loan Commitment, Term B Loan Commitment, Term C Loan Commitment, Revolving Loan Commitment or Letter of Credit Commitment, (y) the Swing Line Lender's Swing Line Loan Commitment or (z) any Additional Commitment. No Lender shall have any Additional Commitment to make an Additional Loan of any Series unless it is a party to the Additional Financing Amendment pursuant to which such Additional Commitments were extended (and applicable percentage relating to such Additional Commitments is set forth below its signature thereto). "Commitment Amount" means, as the context may require, (x) the Term A Loan Commitment Amount, the Term B Loan Commitment Amount, the Term C Loan Commitment Amount, the Revolving Loan Commitment Amount or the Letter of Credit Commitment Amount, (y) the Swing Line Loan Commitment Amount or (z) the amount of any Additional Commitments obtained in accordance with Section 2.8. "Commitment Termination Event" means (a) the occurrence of any Event of Default described in clauses (a) through (d) of Section 8.1.9; or (b) the occurrence and continuance of any other Event of Default and either (x) the declaration of all or any portion of the Loans to be due and payable pursuant to Section 8.3 or (y) the giving of notice by the Administrative Agent, acting at the direction, or with the consent, of the Required Lenders, to the Borrower that the Commitments have been terminated. "Compliance Certificate" means a certificate duly completed and executed by the chief executive, financial or accounting Authorized Officer of the Borrower, substantially in the form of Exhibit D hereto, as amended, supplemented, amended and restated or otherwise modified from time to time, together with such changes thereto as the Agents may from time to time reasonably request for the purpose of monitoring the Borrower's compliance with the financial covenants contained herein. "Confidential Information" is defined in Section 10.12. "Consolidated Net Income" means, relative to the Borrower and Restricted Subsidiaries for any period, the aggregate of the Net Income of the Borrower and Restricted Subsidiaries for such period; provided, however, that (x) any net after-tax extraordinary gains or losses (less all fees and expenses relating thereto) shall be excluded, (y) any net after-tax gains or losses (less all fees and expenses relating 14 16 thereto) attributable to asset dispositions other than in the ordinary course of business shall be excluded and (z) the Net Income for such period of the Borrower or any Restricted Subsidiary attributable to any Person that is not a Restricted Subsidiary, or that is accounted for by the equity method of accounting, shall be included only to the extent of dividends or distributions or other net payments paid in cash (or to the extent converted into cash) to the Borrower or such Restricted Subsidiary (except for directors' qualifying shares) in respect of such period. "Contingent Liability" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, with or without recourse, to provide funds for payment to, to purchase from, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person, or guarantees the payment of dividends or other distributions upon Capital Stock of any other Person. The amount of any Person's obligation under any Contingent Liability shall (subject, however, to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith; provided, however, that the term "Contingent Liability" shall not include (w) indemnities entered into by such Person in the ordinary course of business in connection with management and director arrangements, (x) endorsements of instruments for deposit or collection in the ordinary course of business, (y) guarantees made by a Person of the obligations of a Restricted Subsidiary of such Person that do not constitute Indebtedness of such Restricted Subsidiary and are incurred in the ordinary course of business of such Restricted Subsidiary and (z) obligations arising from agreements providing for indemnification or adjustment of purchase price (or from guarantees supporting any obligations pursuant to any such agreements) incurred in connection with the disposition of any business of any assets or Restricted Subsidiary. "Continuation/Conversion Notice" means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto. "Continuing Director" means, at any date, an individual (x) who is a member of the Board of Directors of Surviving Regal immediately after the Closing Date, (y) who, as at such date, has been a member of such Board of Directors for at least the 12 preceding months (or, for the period comprising the first 12 months after the Closing Date, has been a member of such Board of Directors at least since the Closing Date) or (z) who has been nominated to be a member of such Board of Directors of the Borrower, directly or indirectly, by a Sponsor or its Affiliate or by Persons nominated by a Sponsor or its Affiliate or by a majority of the other Continuing Directors then in office. "Contractual Undertaking" means, relative to any Obligor, any provision of any debt or equity security issued by it or of any other Instrument or undertaking to which it is a party or by which it or any of its assets or property is bound or subject. "Conversion" is defined in clause (c) of the second recital. "Credit Extension" means, as the context may require, (a) the making of a Loan by a Lender; or 15 17 (b) the issuance of any Letter of Credit, or the extension of any Stated Expiry Date of any existing Letter of Credit, by the Issuer. "Credit Extension Request" means, as the context may require, any Borrowing Request or Issuance Request. "Current Compliance Certificate" means, on any date, the Compliance Certificate most recently delivered by the Borrower to the Administrative Agent pursuant to clause (c) of Section 7.1.1. Changes in the Applicable Commitment Fee or Applicable Margin resulting from a change in the Total Leverage Ratio shall become effective, as of the first day following the Fiscal Quarter in respect of which such Compliance Certificate was required to be delivered (a "Change Date"), upon delivery by the Borrower to the Administrative Agent of a new Compliance Certificate pursuant to clause (c) of Section 7.1.1. In the event such Compliance Certificate indicates a Total Leverage Ratio that would result in an Applicable Commitment Fee or Applicable Margin which is greater or lesser than the Applicable Commitment Fee or Applicable Margin then in effect, then (A) such greater or lesser Applicable Commitment Fee or Applicable Margin shall be deemed to be in effect for all purposes of this Agreement from the Change Date and (B) if the Borrower shall have made any payment of fees or interest in respect of the period from the Change Date, then, on the next Quarterly Payment Date, the Borrower shall pay in the form of a supplemental payment of fees or interest an amount which equals the difference between the amount of fees or interest that would otherwise have been paid based on such new Total Leverage Ratio and the amount of fees or interest so paid, or, as the case may be, an amount shall be deducted from the fees or interest then otherwise payable in an amount which equals the difference between the amount of fees or interest so paid and the amount of fees or interest that would otherwise have been paid based on such new Total Leverage Ratio. "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Defaulting Lender" means any Lender with respect to which a Lender Default is in effect. "Disbursement" is defined in Section 2.6.2. "Disbursement Date" is defined in Section 2.6.2. "Disclosure Schedule" means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented, amended and restated or otherwise modified from time to time by the Borrower with the consent of the Agents and the Required Lenders. "Disposition" means the sale (including in connection with a Real Estate Financing), conveyance, issuance or other disposition of any property, business or assets by the Borrower or any Restricted Subsidiary (including receivables of or owned by, and Capital Stock owned by, the Borrower or such Restricted Subsidiary, and in all cases whether now owned or hereafter acquired), other than (x) the issuance of Capital Stock of the Borrower and (y) sales, conveyances or other dispositions in the ordinary course of business (including sales, conveyances or other dispositions of inventory, the sale or discount of delinquent receivables and sales and dispositions of obsolete or worn out property, in each case, in the ordinary course). 16 18 "Documentation Agent" is defined in the preamble and, in addition, shall include each other Person as shall have been subsequently appointed as the successor Documentation Agent pursuant to Section 9.4. "Dollar" and the sign "$" mean lawful money of the United States. "Domestic Office" means, relative to any Lender, the office of such Lender designated as such Lender's "Domestic Office" below its name in Annex I hereto or as set forth in a Lender Assignment Agreement, or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto. "Domestic Restricted Subsidiary" means each Restricted Subsidiary that is not a Foreign Subsidiary. "Effective Date" means the date this Agreement becomes effective pursuant to Section 10.8. "Eligible Assignee" means and includes each Lender (and any Affiliate thereof), any commercial bank, any financial institution, any fund that is regularly engaged in making, purchasing or investing in loans or any Person that would satisfy the requirements of an "accredited investor" (as defined in SEC Regulation D, but excluding, however, a natural Person). "Environmental Claim" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by the Borrower or any Subsidiary (x) in the ordinary course of such Person's business or (y) as required in connection with a financing transaction or an acquisition or disposition of real estate) or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (collectively, "Claims"), including (1) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (2) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" means any and all present and future Applicable Laws pertaining to pollution (including Hazardous Materials), natural resources or the environment, whether federal, state, or local, including environmental response laws such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, and as the same may be further amended (collectively, "CERCLA"). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and regulations promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). 17 19 "ERISA Event" means any of the following if such event or occurrence could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect: (u) the failure to make a required contribution to a Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA; (v) a withdrawal by the Borrower or any ERISA Affiliate from a Pension 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) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (w) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (x) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, the receipt of any notice from the PBGC of its intent to terminate or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (y) an event or condition which might reasonably be expected to constitute grounds under Section 4042(a)(1), (2) or (3) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (z) the imposition of any liability under Title IV of ERISA other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate. "Event of Default" is defined in Section 8.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Agent" is defined in clause (d) of Section 5.1.8. "Exchange Fund" is defined in clause (d) of Section 5.1.8. "Federal Funds Rate" means, for any day, a fluctuating interest rate per annum equal to (a) the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Fee Letter" means each of (x) the confidential letter, dated April 30, 1998, between the Borrower and the Agents, (y) the confidential fee letter, dated April 30, 1998, between the Borrower and the Administrative Agent and (z) the confidential fee letter, dated April 30, 1998, between the Borrower, the Administrative Agent and the Syndication Agent. "Fiscal Quarter" or "FQ" means a period approximating three consecutive calendar months, commencing on the Friday immediately following the Thursday which is closest to December 31, March 31, June 30 and September 30 and continuing through the Thursday which is closest to the next succeeding March 31, June 30, September 30 and December 31, respectively; references to a Fiscal Quarter with numbers corresponding to a calendar year and a number corresponding to a Fiscal Quarter (e.g. "1998 FQ 1") refer to such Fiscal Quarter (i.e. the first) of such Fiscal Year. 18 20 "Fiscal Year" or "FY" means a period a period approximating 12 consecutive calendar months, commencing on the Friday immediately following the Thursday which is closest to December 31 of each calendar year and continuing through the Thursday which is closest to December 31 of the succeeding calendar year; references to a Fiscal Year with a number corresponding to any calendar year (e.g., "the 1998 Fiscal Year" or "1998 FY") refer to the Fiscal Year ending the Thursday closest to the end of such calendar year. "Fixed Charge Coverage Ratio" means, as of the close of any Fiscal Quarter, the ratio, computed for the period consisting of such Fiscal Quarter and each of the three immediately prior Fiscal Quarters, with respect to the Borrower and Restricted Subsidiaries on a consolidated basis of: (a) the difference (for such period) of (i) the sum of (without duplication) (x) Adjusted EBITDA of the Borrower and Restricted Subsidiaries plus (y) Rental Expense (to the extent deducted in determining Net Income or pro forma Net Income determined pursuant to clause (d) of the definition of "Adjusted EBITDA") of the Borrower and Restricted Subsidiaries; minus (ii) the lesser of (x) Maintenance Capital Expenditures of the Borrower and Restricted Subsidiaries and (y) 3% of the consolidated gross revenues of the Borrower and Restricted Subsidiaries for such period, determined in accordance with GAAP to (b) the sum (for such period) of (i) Interest Expense of the Borrower and Restricted Subsidiaries payable with respect to Total Funded Debt; plus (ii) the aggregate amount of all scheduled principal payments in respect of Total Funded Debt (including scheduled principal repayments of the Term Loans pursuant to clause (c) of Section 3.1.1 (after giving effect to the application thereto of all optional or mandatory non-scheduled prepayments)), but excluding, however, (x) repayments of Term Loans and Additional Loans made as term loans, in each case scheduled to become due on their respective Stated Maturity Dates, (y) Unrelated Final Maturity Payments of other Indebtedness and (z) mandatory reductions of revolving credit facilities, including the Revolving Commitments and all Additional Commitments which are revolving commitments; plus (iii) Rental Expense (to the extent deducted in determining Net Income or pro forma Net Income determined pursuant to clause (d) of the definition of "Adjusted EBITDA") of the Borrower and Restricted Subsidiaries; 19 21 plus (iv) the aggregate amount of all cash dividends paid on common or preferred stock (excluding, however, Qualified Preferred Stock) by the Borrower pursuant to clause (f) of Section 7.2.5. "Foreign Subsidiary" means any Subsidiary of the Borrower (x) which is organized under the laws of any jurisdiction outside of the United States, (y) which conducts the major portion of its business outside of the United States or (z) all or substantially all of the property and assets of which are located outside of the United States. "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "GAAP" is defined in Section 1.4. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guaranty" means the guaranty to be executed and delivered from time to time by each direct or indirect Domestic Restricted Subsidiary pursuant to Section 5.1.3 or 7.1.8, substantially in the form of Exhibit F hereto, as amended, supplemented, amended and restated or otherwise modified. "Hazardous Material" means any substance that is defined or listed as a hazardous, toxic or dangerous substance under any present or future Environmental Law or that is otherwise regulated or prohibited or subject to investigation or remediation under any present or future Environmental Law because of its hazardous, toxic, or dangerous properties, including (x) any substance that is a "hazardous substance" under CERCLA and (y) petroleum wastes or products. "Hedging Liability" means, relative to any Person, any liability of such Person under currency exchange agreements, interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, or any other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates. "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "HMTF" means HMTF Operating, Inc. "HMTF/KKR Swap" means the exchange by an Affiliate of HMTF with an Affiliate of KKR of Surviving Regal Preferred Shares valued at $75,000,000 for Common Stock of Act III, which will occur following the Merger. 20 22 "HMTF Merger Subsidiary" is defined in the second recital "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of the Borrower, any qualification or exception to such opinion or certification (x) which questions the status of the Borrower and Restricted Subsidiaries, taken as a whole, as a "going concern", (y) which relates to the limited scope of examination of any material portion of the records of the Borrower and Restricted Subsidiaries, taken as a whole, relevant to such financial statement or (z) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause the Borrower to be in default of any of its obligations under Section 7.2.3. "including" and "include" means including without limiting the generality of any description preceding such term. "Indebtedness" of any Person means, without duplication: (a) all obligations of such Person for borrowed money; (b) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; (c) all Capitalized Lease Liabilities of such Person; (d) net monetary liabilities of such Person under all Hedging Liabilities (calculated, at any time, as the aggregate amount (giving effect to any netting agreements) that such persons would be required to pay if the agreements giving rise to such Hedging Liabilities were terminated at such time); (e) all obligations of such Person to pay the deferred purchase price of property or services that, in accordance with GAAP, would be included on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined; (f) all indebtedness referred to in clauses (a), (b), (c) and (e) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; provided, however, that in the case of any such Indebtedness which is by its terms non-recourse to such Person, the amount of such Indebtedness shall, for the purpose of this clause, be deemed to be the lesser of (x) the aggregate unpaid principal amount of such Indebtedness and (y) the fair market value of the property subject to such Lien, as determined by such Person in good faith; and (g) all Contingent Liabilities of such Person in respect of any of the foregoing; provided, however, that accrued expenses incurred in the ordinary course of business and obligations in respect of operating leases shall not constitute "Indebtedness". "Indemnified Liability" is defined in Section 10.4. 21 23 "Indemnified Party" is defined in Section 10.4. "Insolvency Proceeding" means, relative to any Person, (x) any case, action or proceeding with respect to such Person before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, rehabilitation, dissolution, winding-up or relief of debtors or (y) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, undertaken under U.S. Federal, state or foreign law, including the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. ss. 101, et seq.). "Instrument" means any contract, agreement, indenture, mortgage, document or other writing (whether by formal agreement, letter or otherwise) under which any obligation is evidenced, assumed or undertaken or any Lien (or right or interest therein) is granted or perfected. "Interest Expense" means, for any period, the aggregate cash interest expense (net of cash interest income) of the Borrower and Restricted Subsidiaries for such period, as determined in accordance with GAAP, including the portion of any payments made in respect of Capitalized Lease Liabilities allocable to interest expense, but excluding, however, amortization of deferred financing costs and any other non-cash interest expense. "Interest Period" means, relative to any LIBO Rate Loan, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Sections 2.3 or 2.4 and ending on (but excluding) the day which numerically corresponds to such date one, two, three or six (or, if available from all the Lenders making such Loans as determined by such Lenders in good faith based on prevailing market conditions, nine or twelve) months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), as the Borrower may select in its relevant notice pursuant to Sections 2.3 or 2.4; provided, however, that (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than twenty different dates; (b) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (c) no Interest Period for any Loan may end later than the Stated Maturity Date for such Loan. "Investment" means, relative to any Person, (a) any loan or advance made by such Person to any other Person; (b) any Contingent Liability of such Person incurred in connection with Indebtedness of any other Person; (c) any ownership or similar interest held by such Person in any other Person; and 22 24 (d) payments in respect of tax savings or liabilities made by the Borrower or any Restricted Subsidiary to or for the benefit of an Unrestricted Subsidiary with whom the Borrower or such Restricted Subsidiary files a consolidated tax return. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity, or distributions or dividends paid, thereon and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair value of such property at the time of such Investment, as determined in good faith by the Borrower. "Issuance Request" means a Letter of Credit request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B-2 hereto. "Issuer" means Scotiabank in its capacity as issuer of the Letters of Credit, together with each other Person as shall have subsequently been appointed as the successor Issuer in accordance with Section 9.4. At the request of Scotiabank or such successor Issuer, another Lender with a Revolving Loan Commitment or an Affiliate of Scotiabank may, if it so desires, issue one or more Letters of Credit hereunder and shall be deemed to be the Issuer with respect to such Letters of Credit. "Key Management" means Michael L. Campbell, Gregory W. Dunn or Lewis Frazer III. "KKR" means Kohlberg Kravis Roberts & Co., L.P. "KKR Merger Subsidiary" is defined in the second recital. "Lender" is defined in the preamble and, in addition, shall include any Eligible Assignee that becomes a Lender pursuant to Section 10.11.1. "Lender Assignment Agreement" means a lender assignment agreement substantially in the form of Exhibit I hereto. "Lender Default" means, as a result of the appointment of a receiver or conservator for any Lender, at the direction or request of any regulatory agency or authority, either (x) the refusal or failure (which has not been retracted or cured) of such Lender to make available its portion of any Borrowing or to fund its portion of any unreimbursed payment under Section 2.6.1 or (y) such Lender having notified the Administrative Agent or the Borrower that it does not intend to comply with its obligations under Section 2.1, 2.3.2 or 2.6.1. "Lender's Environmental Liability" means any and all losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, costs, judgments, suits, proceedings, damages (including consequential damages), disbursements or expenses of any kind or nature whatsoever (including reasonable attorneys' fees at trial and appellate levels and reasonable experts' fees and disbursements and expenses incurred in investigating, defending against or prosecuting any litigation, claim or proceeding) which may at any time be imposed upon, incurred by or asserted or awarded against any Indemnified Party in connection with or arising from (w) any Hazardous Material on, in, under or affecting all or any portion of any property of the Borrower or any Subsidiary, the groundwater thereunder, or any surrounding areas thereof to the extent caused by Releases from the Borrower's or any Subsidiary's or any of their respective predecessors' properties; (x) any misrepresentation, inaccuracy or breach of any warranty, contained or 23 25 referred to in Section 6.12; (y) any violation or claim of violation by the Borrower or any Subsidiary of any Environmental Laws (including any Environmental Claim); or (z) the imposition of any lien for damages caused by or the recovery of any costs for the cleanup, release or threatened release of Hazardous Material by the Borrower or any Subsidiary, or in connection with any property owned or formerly owned by the Borrower or any Subsidiary. "Letter of Credit" is defined in clause (a) of Section 2.1.2. "Letter of Credit Commitment" means (x) relative to the Issuer, the Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.2 and (y) to each other Lender that has a Revolving Loan Commitment, the obligations of such Lender to participate in such Letters of Credit pursuant to Section 2.6.1. "Letter of Credit Commitment Amount" means, on any date (i) prior to the Act III Acquisition (if it shall occur), a maximum amount of $75,000,000 and (ii) on and after the Act III Acquisition (if it shall occur), a maximum amount of $150,000,000, in either case, as such amount may be permanently reduced from time to time pursuant to Section 2.2. "Letter of Credit Outstandings" means, on any date, an amount equal to the sum of (a) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit, plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "LIBO Rate" means, relative to each day during each Interest Period pertaining to a LIBO Rate Loan, the rate of interest per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Telerate Page 3750 as of 11:00 a.m., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Telerate Page 3750, "LIBO Rate" for the purposes of this paragraph shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by the Agents and the Borrower or, in the absence of such agreement, "LIBO Rate" for the purposes of this paragraph shall instead be the rate per annum equal to the arithmetic average of the respective rates notified to the Administrative Agent by each of the Reference Lenders as the rate at which such Reference Lender is offered Dollar deposits for the duration of such Interest Period in the amount of the LIBO Rate Loan to be made by such Lender at or about 11:00 a.m., London time, two Business Days prior to the beginning of such Interest Period, in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its LIBO Rate Loans are then being conducted for delivery. "LIBO Rate Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate. "LIBOR Office" means, relative to any Lender, the office of such Lender designated as such Lender's "LIBOR Office" below its name in Annex I hereto or as set forth in a Lender Assignment Agreement, or such other office of a Lender as designated from time to time by notice from such Lender 24 26 to the Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder. "Lien" means any mortgage, deed of trust, pledge, security interest, hypothecation, charge, lien (statutory or other), escrow or similar encumbrance of any kind, or any other type of similar preferential arrangement (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof). "Loan" means, as the context may require, (x) a Revolving Loan, a Term A Loan, a Term B Loan or a Term C Loan, (y) a Swing Line Loan or (z) an Additional Loan, in each case of any type. "Loan Document" means this Agreement, the Notes (if any), the Letters of Credit, the Pledge Agreement, the Guaranty, each Borrowing Request, each Issuance Request, the Fee Letters or any other Instrument or writing required to be delivered on the Closing Date pursuant to Section 5.1 or thereafter from time to time pursuant to Section 7.1.8. "Maintenance Capital Expenditures" means, for any period, the sum of the aggregate amount of all Capital Expenditures of the Borrower and Restricted Subsidiaries during such period, excluding, however, expenditures made, and Capitalized Lease Liabilities incurred, for the purpose of building or acquiring new motion picture theatres or making significant improvements, renovations or remodelings to existing motion picture theatres. "Management Rollover" is defined in clause (d) of the second recital. "Material Adverse Change" means any change in the business, assets, operations, properties or financial condition of the Borrower and Restricted Subsidiaries taken as a whole that would materially adversely affect the ability of the Borrower and the other Obligors taken as a whole to perform their obligations under this Agreement and the other Loan Documents taken as a whole. "Material Adverse Effect" means a circumstance or condition that (x) constitutes a Material Adverse Change or (y) would materially adversely affect the rights and remedies of the Administrative Agent, the Issuer or the Lenders under this Agreement and the other Loan Documents taken as a whole. "Material Restricted Subsidiary" means, at any time, each Restricted Subsidiary having at such time either (a) net sales (on a consolidated basis, including each of its Subsidiaries that constitutes a Restricted Subsidiary, but excluding, however, revenues received by any Restricted Subsidiary from the Borrower or any other Restricted Subsidiary) for the applicable Test Period in excess of 5% of the net sales of the Borrower and Restricted Subsidiaries for such Test Period, or (b) total assets (on a consolidated basis), as of the last day of the preceding Fiscal Quarter, constituting in excess of 5% of the total assets of the Borrower and Restricted Subsidiaries as of such day, in each case calculated, based upon the Borrower's most recent annual or quarterly financial statements delivered to the Administrative Agent under Section 7.1.1, in accordance with GAAP (it being acknowledged and understood that, in the event the determination of whether a Restricted Subsidiary is a 25 27 Material Restricted Subsidiary is to be made on or about the date such Restricted Subsidiary was created or acquired, such determination shall be made on a pro forma basis as if such Restricted Subsidiary were a Restricted Subsidiary at the commencement of such Test Period for purposes of clause (a) and on the last day of such Fiscal Quarter for purposes of clause (b); provided, however, that, notwithstanding anything to the contrary in the foregoing, if, at any time, "Material Restricted Subsidiaries" as defined above, taken together with the Borrower, on a consolidated basis, account for less than 80% of Adjusted EBITDA of the Borrower and Restricted Subsidiaries for the applicable Test Period based upon the Borrower's most recent annual or quarterly financial statements delivered to the Administrative Agent pursuant to Section 7.1.1, then the term "Material Restricted Subsidiaries" shall be deemed to include such number of the largest (pursuant to the foregoing criteria) Restricted Subsidiaries as is sufficient to cause "Material Restricted Subsidiaries," when taken together with the Borrower, to account for at least 80% of such Adjusted EBITDA as set forth above. "Merger" is defined in clause (b) of the second recital. "Merger Agreement" is defined in the second recital. "Merger Consideration" is defined in clause (c) of the second recital. "Merger Date" is defined in clause (b) of the second recital. "Merger Subsidiary" is defined in the second recital. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a "multiemployer plan," within the meaning of Section 4001(a)(3) of ERISA, with respect to which the Borrower or any ERISA Affiliate may have any liability. "NAIC" means the National Association of Insurance Commissioners or any successor thereto with similar authority. "Net Cash Proceeds" means, relative to any Disposition by the Borrower or any Restricted Subsidiary (other than a Disposition permitted pursuant to clause (a) or (b) of Section 7.2.6), proceeds in cash as and when received by such Person, net of (a) the costs and expenses relating to such Disposition; (b) the amount of all taxes paid or reasonably estimated to be payable by the Borrower or Restricted Subsidiary in connection therewith, but Net Cash Proceeds shall include the excess, if any, of the estimated taxes payable in connection with such Disposition over the actual amount of taxes paid, immediately after the payment of such taxes; (c) amounts required to be applied to repay principal, interest and prepayment premiums and penalties on Indebtedness secured by a Lien on the asset which is the subject of such Disposition; and (d) the amount of any reasonable reserve established in accordance with GAAP against any liabilities (other than any taxes deducted pursuant to clause (b)) associated with the assets 26 28 sold, disposed of or financed and retained by the Borrower or any Restricted Subsidiary; provided, however, that the amount of any subsequent reduction of such reserve (other than in connection with a payment in respect of any such liability) shall be deemed to be Net Cash Proceeds realized on the date of such reduction. "Net Income" means, for any period, the net income (or loss) included in accordance with GAAP as such on the consolidated financial statements of the Borrower and Restricted Subsidiaries for such period. "9 1/2% Subordinated Note" is defined in clause (b) of the fourth recital. "9 1/2% Subordinated Note Indenture" means the indenture, to be dated the Closing Date, between the Borrower and IBJ Schroder Bank and Trust Company, as trustee, pursuant to which the 9 1/2% Subordinated Notes will be issued. "9 1/2% Subordinated Note Offering Memorandum" means the final offering memorandum, dated May 21, 1998, with respect to the 9 1/2% Subordinated Notes. "Non-Defaulting Lender" means and includes each Lender other than a "Defaulting Lender". "Non-Performing Lender" means any Lender that either (x) refuses or fails (which refusal or failure has not been retracted or cured) to make available its portion of any Borrowing or to fund its portion of any unreimbursed payment under Section 2.6.1 or (y) has notified the Administrative Agent and/or the Borrower that it does not intend to comply with its obligations under Section 2.1 or 2.6.1. "Non-U.S. Lender" is defined in clause (d) of Section 4.6. "Non-U.S. Participant" means a Participant that is not incorporated or organized in or under the laws of the United States or a state thereof. "Note" means, as the context may require, (x) a Revolving Note, a Term A Note, a Term B Note or a Term C Note, (y) a Swing Line Note or (z) a promissory note evidencing an Additional Loan, if any. "Obligations" means all monetary obligations (whether absolute or contingent, matured or unmatured, direct or indirect, choate or inchoate, sole, joint, several or joint and several, due or to become due, heretofore or hereafter contracted or acquired) of the Borrower and each other Obligor to any Lender or Issuer or Agent arising under this Agreement (including as recorded in loan accounts maintained in accordance with Section 2.7), any Rate Protection Agreement, the Notes, the Letters of Credit and each other Loan Document. "Obligor" means, as the context may require, the Borrower, each Restricted Subsidiary and any other Person (other than any Agent, the Issuer or any Lender) to the extent such Person is obligated under this Agreement or any other Loan Document. "Offer to Purchase" is defined in the third recital. "Old Regal" is defined in clause (b) of the second recital. 27 29 "Old Regal 8 1/2% Subordinated Note" is defined in the third recital and, in addition, after the Closing Date shall refer to any Old Regal 8 1/2% Subordinated Note not tendered pursuant to the Offer to Purchase and remaining outstanding under the Old Regal 8 1/2 Subordinated Note Indenture as amended in accordance with Section 5.1.11. "Old Regal 8 1/2% Subordinated Note Indenture" is defined in the third recital. "Old Regal Share" is defined in clause (c) of the second recital. "Option Redemption" is defined in clause (d) of the second recital. "Organizational Document" means, relative to any Obligor, as applicable, its certificate of incorporation, by-laws, certificate of partnership, partnership agreement, certificate of formation or limited liability agreement and any certificate of designations or similar instrument relating to the rights of preferred shareholders of such Person. "Other Permitted Acquisition" means any Permitted Acquisition (excluding, however, an Act III Acquisition, if any). "Other Taxes" means any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, this Agreement or any other Loan Document. "Participant" is defined in Section 10.11.2. "Payment Default" means a Default pursuant to Section 8.1.1. "PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA (other than a Multiemployer Plan) with respect to which the Borrower or any ERISA Affiliate may have any liability. "Percentage" means, relative to any Lender, the applicable percentage relating to (x) Revolving Loans, Term A Loans, Term B Loans or Term C Loans, as the case may be, as set forth below its name in Annex I hereto under the applicable column heading or as set forth in a Lender Assignment Agreement under the applicable column heading or (y) Additional Loans of any Series as set forth below its name in the Additional Financing Amendment pursuant to which the Additional Commitments for such Additional Loans were extended, in each case as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and the Eligible Assignee(s) and delivered pursuant to Section 10.11.1.; provided that upon the making of any Additional Commitments or Additional Loans pursuant to Section 2.8, each Lender's percentage shall be adjusted to reflect any appropriate change to such percentage at such time which shall have resulted from the making of any such Additional Commitments or Additional Loans. No Lender shall have any Commitment to make Revolving Loans, Term A Loans, Term B Loans or Term C Loans (as the case may be) if its percentage under the respective column heading is zero (0%). 28 30 "Permitted Acquisition" is defined in clause (d) of Section 7.2.6. "Permitted Acquisition Come-Along Indebtedness" means any Indebtedness of a Person existing at the time of its becoming an Acquired Person and a Restricted Subsidiary as the result of a Permitted Acquisition which, when incurred, would have been permitted, assuming that such Person had then been a Restricted Subsidiary, pursuant to clause (i) of Section 7.2.1. "Permitted Acquisition Ordinary Course Indebtedness" means any Indebtedness of a Person existing at the time of its becoming an Acquired Person and a Restricted Subsidiary as the result of a Permitted Acquisition which, when incurred, would have been permitted, assuming that such Person had then been a Restricted Subsidiary, pursuant to clause (d) or (j) of Section 7.2.1. "Permitted Acquisition Subordinated Indebtedness" means: (a) any unsecured Indebtedness of a Person existing at the time of its merger with the Borrower pursuant to a Permitted Acquisition and which thereby becomes Indebtedness of the Borrower and is subject to subordination, postponement, standstill and related provisions which are materially no less favorable to holders of senior indebtedness than those generally prevailing in the high-yield senior subordinated debt market when such Indebtedness was incurred; provided, however, that the Agents shall be reasonably satisfied that (x) the merger of such Person with the Borrower shall have occurred in accordance with (and without violation of) the terms of the instruments evidencing or governing such Indebtedness and (y) all Obligations shall constitute "senior debt" or "senior indebtedness" or the functionally equivalent term used in such instruments and the Lenders shall be fully entitled to the benefits of such subordination, postponement, standstill and related provisions; and (b) any unsecured refinancing, refunding, renewal or extension by the Borrower of any Indebtedness referred to in clause (a) which, in the case of any refinancing or refunding, would constitute "Subordinated Debt" in accordance with clause (b) of the definition thereof; provided, however, that in the case of any bridge refinancing or refunding the interest rate applicable thereto need not comply with item (x) of such clause (b), subject, however, to the limitation that the interest rate and other compensation payable shall conform to pricing generally prevailing in the senior subordinated bridge loan market for issuers of comparable creditworthiness. "Permitted Additional Structured Indebtedness" means any Indebtedness which is assumed or incurred pursuant to clause (g) (excluding, however, Permitted Acquisition Ordinary Course Indebtedness, Permitted Acquisition Subordinated Indebtedness and Permitted Acquisition Come-Along Indebtedness) or (k) of Section 7.2.1 or pursuant to clause (b) of Section 2.8 as Additional Loans and which, on the date on which it is assumed or incurred, has a Weighted Average Life to Maturity which is at least as long as the Weighted Average Life to Maturity of Indebtedness (excluding, however, all Additional Loans, Additional Commitments and Revolving Credit Commitment Amount Increases) outstanding under this Agreement, assuming that the Revolving Credit Commitments are fully drawn. "Permitted Lien" means: (a) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or to the extent payment is not required pursuant to Section 7.1.4; 29 31 (b) Liens of carriers, warehousemen, mechanics, materialmen and landlords and other similar Liens imposed by law incurred in the ordinary course of business, in each case so long as such Liens could not reasonably be expected, to individually or in the aggregate, have a Material Adverse Effect; (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business in connection with workmen's compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory and regulatory obligations, bids, leases and contracts or other similar obligations (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds or performance or return-of-money bonds; (d) Liens consisting of judgment or judicial attachment liens in circumstances not constituting an Event of Default under Section 8.1.6; (e) easements, rights-of-way, municipal and zoning ordinances or similar restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Borrower or any Restricted Subsidiary; (f) Liens arising solely by virtue of any statutory or common law provision relating to banks' liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided, however, that such deposit account is not a cash collateral account; and (g) any interest or title of a lessor secured by a lessor's interest under any lease permitted by this Agreement, or any leases or subleases granted to others not interfering in any material respect with the business of the Borrower or the Restricted Subsidiary to which the property subject to such lease or sublease relates. "Permitted Ongoing Reinvestment Project" means the construction and completion of a motion picture theatre which was commenced, or is the subject of binding construction agreements which were executed and delivered, at a time when no Event of Default or Payment Default had occurred and was continuing. "Permitted Sale Leaseback" means any Sale Leaseback consummated by the Borrower or any Restricted Subsidiary with respect to any Real Estate of the Borrower or any Restricted Subsidiary; provided, however, that (x) such Sale Leaseback is consummated for fair value as determined at the time of consummation in good faith by the Board of Directors of the Borrower (which such determination may take into account any retained interest or other Investment of the Borrower or the applicable Restricted Subsidiary in connection with, and any other material economic terms of, such Sale Leaseback) and (y) the proceeds of such Sale Leaseback are, to the extent required by clause (d) of Section 3.1.1, applied to the prepayment of Term Loans. "Permitted Securitization" means any structured financing (or series of related structured financings) by the Borrower or any Restricted Subsidiary that involves the sale, transfer or other disposition of Real Estate of the Borrower or any Restricted Subsidiary to a Real Estate Financing Subsidiary and the issuance by such Real Estate Financing Subsidiary of commercial paper, medium-term 30 32 notes or any other forms of financing; provided, however, that (x) such structured financing is consummated for fair value as determined at the time of consummation in good faith by the Board of Directors of the Borrower (which such determination may take into account any retained interest or other Investment of the Borrower or the applicable Restricted Subsidiary in connection with, and any other material economic terms of, such structured financing) and (y) the proceeds of such structured financing are, to the extent required by clause (d) of Section 3.1.1, applied to the prepayment of Term Loans. "Person" means any natural person, corporation, limited liability company, partnership, joint venture, joint stock company, firm, association, trust or unincorporated organization, government, governmental agency, court or any other legal entity, whether acting in an individual, fiduciary or other capacity. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Borrower or any Subsidiary sponsors or maintains or to which the Borrower or any Subsidiary makes, is making or is obligated to make contributions and includes any Pension Plan. "Pledge Agreement" means the Pledge Agreement executed and delivered by the Borrower on the Closing Date substantially in the form of Exhibit E hereto, as from time to time thereafter amended, supplemented, amended and restated or otherwise modified. "PNC Letters of Credit" is defined in Section 2.6. "Pro Forma Balance Sheet" is defined in clause (c) of Section 6.5. "Proxy Statement" means the notice of annual meeting and proxy statement, dated April 16, 1998, mailed to stockholders of Old Regal relative to the special meeting of stockholders to be held on May 18, 1998. "Qualified Preferred Stock" means Capital Stock of the Borrower which, by its terms or by the terms of any security into which it is convertible, exchangeable or otherwise, (a) (x) is not, and, upon the happening of an event or passage of time, would not, be required to be redeemed (for consideration other than shares of common stock of the Borrower), (y) is not redeemable at the option of the holder thereof (for consideration other than shares of common stock of the Borrower) and (z) is not convertible into or exchangeable for debt securities of the Borrower (other than Subordinated Debt), in any case at any time prior to the tenth anniversary of the Closing Date; and (b) does not entitle the holders thereof to receive dividends payable in cash at any time except as permitted by clause (f) (i) of Section 7.2.5. "Quarterly Payment Date" means the last day of each December, March, June and September, or, if any such day is not a Business Day, the next succeeding Business Day. "Rate Protection Agreement" means, collectively, any interest rate swap, cap, collar or similar agreement entered into by the Borrower pursuant to the terms of this Agreement under which the counterparty to such agreement is (or at the time such Rate Protection Agreement was entered into, was) a Lender or an Affiliate of a Lender. 31 33 "Real Estate" means land, buildings and improvements owned or leased by the Borrower or any Subsidiary, but excluding, however, all operating fixtures and equipment, whether or not incorporated into improvements. "Real Estate Financing" means any Permitted Sale Leaseback or Permitted Securitization. "Real Estate Financing Subsidiary" means any special purpose entity of the Borrower or any Restricted Subsidiary formed in connection with a Permitted Securitization. "Reference Lender" means Scotiabank or Bank of America National Trust & Savings Association. "Refinancing" is defined in the clause (f) of the second recital. "Refunded Swing Line Loan" is defined in clause (b) of Section 2.3.2. "Register" is defined in clause (c) of Section 10.11.1. "Reimbursement Obligation" is defined in Section 2.6.3. "Rental Expense" means, for any period, the aggregate expense of the Borrower and Restricted Subsidiaries for such period, calculated on a consolidated basis in accordance with GAAP, in respect of all rental obligations under operating leases for real or personal property (excluding, however, real estate taxes, common area maintenance charges and Capitalized Lease Liabilities). "Replaced Lender" is defined in Section 4.4. "Replacement Lender" is defined in Section 4.4. "Required Lenders" means, at any time, (a) prior to the date of the making of the initial Credit Extensions hereunder, Non-Defaulting Lenders having a majority of the Commitments, taken as a whole, of all Non-Defaulting Lenders; and (b) on and after the Closing Date, Non-Defaulting Lenders having or holding a majority of the sum (without duplication) of (x) the aggregate outstanding principal amount of the Loans, (including Additional Loans if any), plus (y) the aggregate amount of the Letter of Credit Outstandings plus (z) the unfunded amount of the Revolving Loan Commitment Amount (including Additional Commitments, if any), in each case, taken as a whole, of all Non-Defaulting Lenders. "Required Revolving Lenders" means, at any time, Non-Defaulting Lenders having or holding a majority of the sum (without duplication) of (x) the aggregate outstanding principal amount of the Revolving Loans and Swing Line Loans, plus (y) the aggregate amount of the Letter of Credit Outstandings plus (z) the unfunded amount of the Revolving Loan Commitment Amount, in each case, taken as a whole, of all such Non-Defaulting Lenders. 32 34 "Required Term Lenders" means, at any time, (a) prior to the date of the making of the initial Credit Extensions hereunder, Non-Defaulting Lenders having a majority of the Term A Loan Commitment, the Term B Loan Commitment and the Term C Loan Commitment, taken as a whole, of all such Non-Defaulting Lenders; and (b) on and after Closing Date, Non-Defaulting Lenders then holding a majority of the aggregate outstanding principal amount of the Term Loans, taken as a whole, of all such Non-Defaulting Lenders. "Required Term Series Lenders" means, at any time relative to any Series of Term Loans, Non-Defaulting Lenders then holding a majority of the aggregate outstanding principal amount of all Term Loans of such Series, taken as a whole, of all such Non-Defaulting Lenders. "Responsible Officer" means, relative to any Person, its chief executive officer, its president or any vice president, managing director, chief financial officer, treasurer, controller and, with respect to non-financial matters, secretary or assistant secretary, or other officer thereof having substantially the same authority and responsibility. "Restricted Payment" means (x) any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any shares of any class of Capital Stock of the Borrower, (y) any purchase, redemption or other acquisition for value of any shares of Capital Stock of the Borrower or warrants, rights or options to acquire such shares, now or hereafter outstanding, or (z) any payment, prepayment, purchase, redemption or defeasance of any Subordinated Debt. "Restricted Subsidiary" means each Subsidiary of the Borrower which is neither an Unrestricted Subsidiary nor a Real Estate Financing Subsidiary. "Revolving Credit Commitment Amount Increase" is defined in Section 2.8. The aggregate amount, at any time, of Revolving Credit Commitment Amount Increases (including for purposes of Section 2.2.2, Section 2.8 and clauses (g) and (k) of Section 7.2.1) shall be the aggregate amount of all Revolving Credit Commitment Amount Increases made at or prior to such time pursuant to Section 2.8 less the aggregate amount of all voluntary reductions of the Revolving Loan Commitment Amount made while any such Revolving Credit Commitment Amount Increases shall be in effect and prior to such time; provided, however, that any Revolving Credit Commitment Amount Increase constituting Act III Additional Financing shall be excluded from calculations made pursuant to clause (b) of Section 2.8 and clauses (g) and (k) of Section 7.2.1. "Revolving Loan" is defined in clause (a) of Section 2.1.1. "Revolving Loan Commitment" is defined in clause (a) of Section 2.1.1. "Revolving Loan Commitment Amount" means, on any date, $350,000,000, as such amount may be from time to time increased by Revolving Credit Commitment Amount Increases pursuant to Section 2.8 or reduced pursuant to Section 2.2. 33 35 "Revolving Loan Commitment Termination Date" means the earliest of (a) June 15, 1998 (if the initial Credit Extensions have not occurred on or prior to such date); (b) the Business Day immediately preceding the seventh anniversary of the Closing Date; (c) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (d) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (c) or (d), the Revolving Loan Commitments shall terminate automatically and without any further action. "Revolving Note" means (x) a promissory note, if any, executed and delivered by the Borrower pursuant to clause (b) of Section 2.7 and payable to any Lender, in the form of Exhibit A-1 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Revolving Loans and (y) all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Sale Leaseback" means any transaction or series of related transactions pursuant to which the Borrower or any Restricted Subsidiary sells, transfers or otherwise disposes of any property, real or personal, whether now owned or hereafter acquired, and thereafter rents or leases such property or other property which it intends to use for substantially the same purpose or purposes as the property being sold, transferred or disposed. "S&P" means Standard & Poor's Rating Service. "Scotiabank" is defined in the preamble. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Leverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) the difference of (i) the excess on such day of Total Funded Debt outstanding (excluding, however, Subordinated Debt) over Unrestricted Cash, minus (ii) the lesser of (x) $50,000,000 and (y) Total Funded Debt outstanding on such day incurred in connection with the construction of motion picture theatres that, on such day, are not open for business 34 36 to (b) Adjusted EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters. "Series" means, relative to (a) Term Loans, as the context may require, all Term A Loans, all Term B Loans or all Term C Loans; and (b) Additional Loans made as term loans, all Additional Loans made pursuant to an Additional Financing Amendment as a single series of Additional Loans. "Sponsor" means HMTF or KKR. "Sponsor Fund Contribution" is defined in clause (a) of the second recital. "Stated Amount" of each Letter of Credit means the total amount available to be drawn under such Letter of Credit upon the issuance thereof, as such amount may be amended from time to time. "Stated Expiry Date" is defined in Section 2.6. "Stated Maturity Date" means (a) relative to all Swing Line Loans, Revolving Loans and Term A Loans, the seventh anniversary of the Closing Date; (b) relative to all Term B Loans, the eighth anniversary of the Closing Date; (c) relative to all Term C Loans, the ninth anniversary of the Closing Date; and (d) relative to Additional Loans, if any, the final stated maturity therefor established pursuant to Section 2.8. "Subordinated Debt" means (a) the 9 1/2% Subordinated Notes; (b) at any time after the Closing Date, any Old Regal 8 1/2% Subordinated Notes then remaining outstanding; (c) any other unsecured subordinated Indebtedness of the Borrower (w) having no mandatory payments or prepayments of principal, or mandatory redemptions which are scheduled or may otherwise be required to be made (excluding, however, pursuant to customary high-yield put rights arising upon the occurrence of (1) a change of control under circumstances no more advantageous to the holders of such Subordinated Debt than those provided under the definition of the term "Change of Control" in the 9 1/2% Subordinated Notes or (2) an asset sale the Net Cash Proceeds of which are retained by the Borrower in accordance with clause (b)(iii) of Section 3.1.2) 35 37 prior to the tenth anniversary of the Closing Date, (x) bearing interest at a rate not to exceed the rate then generally prevailing in the high-yield senior subordinated debt market for issuers of comparable creditworthiness, (y) having terms of subordination, standstill, postponement and related provisions which are materially no less favorable to the Lenders than the corresponding terms of the 9 1/2% Subordinated Note and (z) which are otherwise (except as otherwise consented to by the Agents) in all respects material to the Lenders (including as to voting percentages necessary for waivers, amendments, accelerations, rescissions and the commencement of litigation), consistent with customary high-yield senior subordinated debt issuances; and (d) Permitted Acquisition Subordinated Indebtedness. "Subsidiary" means, relative to any Person, any other corporation, partnership or other business entity of which more than 50% of the outstanding Voting Stock is at the time directly or indirectly owned by such Person. Unless the context otherwise specifically requires, the term "Subsidiary" shall be a reference to a Subsidiary of the Borrower. "Successor Borrower" is defined in clause (d) of Section 7.2.6. "Supermajority Revolving Lenders" means, at any time, Non-Defaulting Lenders having or holding at least 66-2/3% of the sum (without duplication) of the aggregate outstanding principal amount of the Revolving Loans and the Swing Line Loans, the aggregate amount of the Letter of Credit Outstandings the unfunded amount of the Revolving Loan Commitment Amount, in each case, taken as a whole, of all such Non-Defaulting Lenders. "Supermajority Term Lenders" means, at any time, (a) prior to the date of the making of the initial Credit Extension hereunder, Non-Defaulting Lenders having at least 66-2/3% of the Term A Loan Commitment, Term B Loan Commitment and Term C Loan Commitment, taken as a whole, of all such Non-Defaulting Lenders; and (b) on and after the Closing Date, Non-Defaulting Lenders having or holding at least 66-2/3% of the aggregate outstanding principal amount of all Term Loans, taken as a whole, of all such Non-Defaulting Lenders. "Surviving Regal" is defined in clause (b) of the second recital. "Surviving Regal Common Share" means a share of common stock, $0.00 par value per share, of Surviving Regal. "Surviving Regal Preferred Share" means a share of Series A Convertible Preferred Stock, $0.01 par value per share of Surviving Regal which is mandatorily convertible into Surviving Regal Common Shares on the seventh day after the Closing Date. "Swing Line Lender" means, subject to the terms of this Agreement, Scotiabank, its successors and assigns. "Swing Line Loan" is defined in clause (b) of Section 2.1.1. 36 38 "Swing Line Loan Commitment" is defined in clause (b) of Section 2.1.1. "Swing Line Loan Commitment Amount" means, on any date, $15,000,000, as such amount may be reduced from time to time pursuant to Section 2.2. "Swing Line Note" means (x) a promissory note, if any, executed and delivered by the Borrower pursuant to clause (b) of Section 2.7 and payable to the Swing Line Lender, in the form of Exhibit A-5 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to the Swing Line Lender resulting from outstanding Swing Line Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Syndication Agent" is defined in the preamble and, in addition, shall include each other Person as shall have subsequently been appointed as the successor Syndication Agent pursuant to Section 9.4. "Syndication Memorandum" means the confidential information memorandum, dated May 1998, containing information describing the Borrower for distribution to prospective Lenders in connection with this Agreement "Taxes" means any and all present or future taxes, levies, assessments, imposts, duties, deductions, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, however, in the case of each Lender and the Administrative Agent, respectively, taxes imposed on any Lender or the Administrative Agent as a result of a present or former connection between such Lender or the Administrative Agent and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Lender or the Administrative Agent having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement). "Telerate Page 3750" means the display designated as "Page 3750" on the Telerate Service (or such other page as may replace Page 3750 on the service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association interest settlement rates for Dollar deposits). "Term A Loan" is defined in clause (a) of Section 2.1.3. "Term A Loan Commitment" is defined in clause (a) of Section 2.1.3. "Term A Loan Commitment Amount" means, on any date, $120,000,000. "Term A, B, and C Loan Commitment Termination Date" means the earliest of (a) June 15, 1998 (if each of the Term Loans have not been made on or prior to such date); (b) the Closing Date (immediately after the making of the Term Loans on such date); and (c) the date on which any Commitment Termination Event occurs. 37 39 Upon the occurrence of any event described in clause (b) or (c), the Term A Loan Commitments, the Term B Loan Commitments and the Term C Loan Commitments shall terminate automatically and without any further action. "Term A Note" means (x) a promissory note, if any, executed and delivered by the Borrower pursuant to clause (b) of Section 2.7 and payable to any Lender, in the form of Exhibit A-2 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Term A Loans and (y) all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Term B Loan" is defined in clause (b) of Section 2.1.3. "Term B Loan Commitment" is defined in clause (b) of Section 2.1.3. "Term B Loan Commitment Amount" means, on any date, $120,000,000. "Term B Note" means (x) a promissory note, if any, executed and delivered by the Borrower pursuant to clause (b) of Section 2.7 and payable to any Lender, in the form of Exhibit A-3 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Term B Loans and (y) all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Term C Loan" is defined in clause (c) of Section 2.1.3. "Term C Loan Commitment" is defined in clause (c) of Section 2.1.3. "Term C Loan Commitment Amount" means, on any date, $135,000,000. "Term C Note" means (x) a promissory note, if any, executed and delivered by the Borrower pursuant to clause (b) of Section 2.7 and payable to any Lender, in the form of Exhibit A-4 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Term C Loans and (y) all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Term Loans" means, collectively, the Term A Loans, the Term B Loans and the Term C Loans and the Additional Loans, if any, made as term loans. "Test Period" means, relative to certain determinations to be made under this Agreement at any time, the four consecutive Fiscal Quarters most recently elapsed. "Total Funded Debt" means, on any date (and without duplication), the aggregate outstanding principal amount of all Indebtedness of the Borrower and Restricted Subsidiaries of the type referred to in clauses (a) and (c), and all unreimbursed drawings in respect of Indebtedness described in clause (b), in each case of the definition of "Indebtedness" (excluding, however, intercompany Indebtedness between the Borrower and any Restricted Subsidiary or between any Restricted Subsidiaries). 38 40 "Total Leverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio of (a) the excess on such day of Total Funded Debt outstanding over Unrestricted Cash to (b) Adjusted EBITDA computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters. "Transaction" means the Sponsor Fund Contributions, the Merger, the Conversion, the Management Roll-Over, the Option Redemption, the HMTF/KKR Swap, the issuances of the Additional Equity and 9 1/2% Subordinated Notes, the completion of the transactions contemplated to occur by the Offer to Purchase, the initial Credit Extensions, the Refinancing and all other transactions contemplated hereby (including pursuant to Section 5.1) to occur on the Closing Date, including the payment of Transaction Costs. "Transaction Cost" means any fee, cost, charge or expense payable by the Borrower or any Subsidiary in connection with the Transaction. "type" means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan. "U.C.C." means the Uniform Commercial Code as from time to time in effect in the State of New York. "UCP" is defined in Section 2.6.5. "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Plan pursuant to Section 412 of the Code for the applicable plan year. "United States" or "U.S." means the United States of America, its fifty states and the District of Columbia. "Unrelated Final Maturity Payment" means, relative to any Indebtedness of any Person, the final payment of principal of such Indebtedness becoming due on the final stated maturity thereof if such final payment would not, consistent with prevailing market practices, reasonably be considered to be substantively an interim installment of a set of related Indebtedness rather than a final maturity of a separate Indebtedness based on its contractual relationship with other Indebtedness and other indicia of common interests and risks (including requirements to share payments or collateral proceeds or abide by collective voting procedures). "Unrestricted Cash" means on any day the excess of (x) all cash of the Borrower and Restricted Subsidiaries on such day over (y) $3,000,000. 39 41 "Unrestricted Subsidiary" means (a) any Subsidiary that is first created or acquired by the Borrower or a Restricted Subsidiary after the Closing Date if (x) the acquisition price therefor is funded by the Borrower or such Restricted Subsidiary in accordance with clause (h) of Section 7.2.4 and (y) such Subsidiary is designated by the Borrower as an Unrestricted Subsidiary in a notice delivered to the Agents prior to or reasonably promptly after such creation or acquisition; (b) any Subsidiary that is first created or acquired after the Closing Date by an Unrestricted Subsidiary created or acquired in accordance with the provisions of this definition; (c) any Restricted Subsidiary existing on the Closing Date which is subsequently re-designated as an Unrestricted Subsidiary by the Borrower in a notice to the Agents; provided, however, that such re-designation shall be deemed to be an Investment pursuant to clause (h) of Section 7.2.4 on the date of such re-designation in an Unrestricted Subsidiary in an amount equal to the sum of (x) the net worth of such re-designated Restricted Subsidiary immediately prior to such re-designation (such net worth to be calculated without regard to any Guaranty provided by such re-designated Restricted Subsidiary) plus (y) the aggregate principal amount of any Indebtedness owed by such re-designated Restricted Subsidiary to the Borrower or any other Restricted Subsidiary immediately prior to such re-designation, all calculated, except as set forth in the parenthetical to the foregoing item (x), on a consolidated basis in accordance with GAAP; provided, however, that, in each case, the provisions of clause (h) of Section 7.2.4 are not breached in connection with such creation, acquisition or re-designation, and that promptly after the date of such creation, acquisition or re-designation, as applicable, such Subsidiary and the Borrower enter into a tax sharing agreement containing terms that, in the reasonable judgment of the Borrower and the Agents, provide for appropriate allocation of tax liabilities and benefits. Notwithstanding anything to the contrary herein, (d) a Restricted Subsidiary cannot be a Subsidiary of an Unrestricted Subsidiary; (e) an Unrestricted Subsidiary cannot be designated as a Restricted Subsidiary except (x) with prior notice to the Agents and (y) if a Default has occurred and is continuing or would result from such re-designation; at the time of any notice of re-designation by the Borrower to the Agents of any Unrestricted Subsidiary as a Restricted Subsidiary in accordance with this clause, the Unrestricted Subsidiary so re-designated shall no longer constitute an Unrestricted Subsidiary; and (f) in order for any Unrestricted Subsidiary to be permitted to be created or acquired (or re-designated in accordance with clause (c)) or to continue to exist, no recourse whatsoever may be had to the Borrower or any Restricted Subsidiary or any of their respective properties in respect of any obligations or liabilities (contingent or otherwise) of such Unrestricted Subsidiary except to the extent the aggregate maximum amount of such recourse constituted when made as an Investment permitted pursuant to clause (h) of Section 7.2.4. "Voting Stock" means, relative to any Person, Capital Stock of any class or kind, including any Capital Stock of such Person of any other class or kind which is then convertible Capital Stock of such class or kind but, ordinarily having the power to vote (and irrespective of whether at the time Capital Stock of such Person of any other class or kind shall or might upon the occurrence of a contingency have 40 42 voting power) for the election of directors, managers or other voting members of the governing body of such Person. "Weighted Average Life to Maturity" means, relative to any Indebtedness at any date, the number of years (rounded to the nearest one-twelfth) obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment of 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. "wholly-owned" means, relative to any direct or indirect Subsidiary, any Subsidiary all of the outstanding Capital Stock of which is owned directly or indirectly by the Borrower. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in each other Loan Document, the Disclosure Schedule, or any Borrowing Request, Issuance Request, Continuation/Conversion Notice, Compliance Certificate, Closing Date Certificate, solvency certificate, Lender Assignment Agreement, notice or other communications delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article, Section, definition or recital are references to such Article, Section, definition or recital of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section, definition or recital to any clause are references to such clause of such Article, Section, definition or recital. SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein or in any other Loan Document, or in any Compliance Certificate or solvency certificate, shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.3) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with, those generally accepted accounting principles and policies ("GAAP") applied in the preparation of the audited financial statements referred to in clause (a) of Section 6.5; provided, however, that at any time the computations determining compliance with Section 7.2 utilize accounting principles different from those utilized in the financial statements furnished to the Lenders pursuant to Section 7.1.1, such financial statements shall be accompanied by reconciliation work-sheets. Unless otherwise expressly provided, all financial covenants 41 43 and defined financial terms shall be computed on a consolidated basis for the Borrower and Restricted Subsidiaries, in each case without duplication. ARTICLE II COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES, NOTES AND LETTERS OF CREDIT SECTION 2.1. Commitments. On the terms and subject to the conditions of this Agreement (including Section 2.1.4, Section 2.1.5 and Article V), (a) each Lender severally agrees to make Loans (other than Swing Line Loans) pursuant to the Commitments and the Swing Line Lender severally agrees to make Swing Line Loans pursuant to the Swing Line Loan Commitment, in each case as described in this Section 2.1; and (b) the Issuer severally agrees that it will issue Letters of Credit pursuant to Section 2.1.2, and each other Lender that has a Revolving Loan Commitment severally agrees that it will purchase participation interests in such Letters of Credit pursuant to Section 2.6.1. SECTION 2.1.1. Revolving Loan Commitment and Swing Line Loan Commitment. From time to time on any Business Day occurring on and after the Closing Date but prior to the Revolving Loan Commitment Termination Date, (a) each Lender that has a Revolving Loan Commitment will make a loan (with respect to such Lender, its "Revolving Loan") to the Borrower equal to such Lender's Percentage of the aggregate amount of each Borrowing of the Revolving Loans requested by the Borrower to be made on such day (the Commitment of each such Lender described in this clause being its "Revolving Loan Commitment"). On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow the Revolving Loans. (b) the Swing Line Lender will make a loan (a "Swing Line Loan") to the Borrower equal to the principal amount of the Swing Line Loan requested by the Borrower to be made on such day (the Commitment of the Swing Line Lender described in this clause being its "Swing Line Loan Commitment"). On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Swing Line Loans. SECTION 2.1.2. Letter of Credit Commitment. From time to time on any Business Day occurring on and after the Closing Date but prior to the Revolving Loan Commitment Termination Date, the Issuer will (a) issue one or more standby or documentary letters of credit (a "Letter of Credit") for the account of the Borrower in the Stated Amount requested by the Borrower on such day; or (b) extend the Stated Expiry Date of an existing standby Letter of Credit previously issued hereunder to a date not later than the earlier of (x) the Revolving Loan Commitment Termination Date and (y) one year from the date of such extension. 42 44 SECTION 2.1.3. Term Loan Commitments. In a single Borrowing occurring on the Closing Date, each Lender that has a Term A Loan Commitment, a Term B Loan Commitment or a Term C Loan Commitment, as applicable, (a) will make a loan (with respect to such Lender, its "Term A Loan") to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of Term A Loans requested by the Borrower to be made on the Closing Date (the commitment of each such Lender described in this clause being its "Term A Loan Commitment"); (b) will make a loan (with respect to such Lender, its "Term B Loan") to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of Term B Loans requested by the Borrower to be made on the Closing Date (with the commitment of each such Lender described in this clause being its "Term B Loan Commitment"); and (c) will make a loan (with respect to such Lender, its "Term C Loan") to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of Term C Loans requested by the Borrower to be made on the Closing Date (the commitment of each such Lender described in this clause being its "Term C Loan Commitment"). No amounts paid or prepaid with respect to Term A Loans, Term B Loans or Term C Loans may be reborrowed. SECTION 2.1.4. Lenders Not Permitted or Required to Make Loans. No Lender shall be permitted or required to make any Loan if, after giving effect thereto, the aggregate outstanding principal amount of (a) all Revolving Loans (i) of all Lenders with a Revolving Loan Commitment and the outstanding principal amount of all Swing Line Loans, together with the aggregate amount of all Letter of Credit Outstandings, would exceed the then existing Revolving Loan Commitment Amount, or (ii) of such Lender with a Revolving Loan Commitment, together with such Lender's Percentage of the aggregate amount of all Letter of Credit Outstandings, and such Lender's Percentage of the outstanding principal amount of all Swing Line Loans, would exceed such Lender's Percentage of the then existing Revolving Loan Commitment Amount; (b) all Term A Loans, all Term B Loans or all Term C Loans (as the case may be) (i) of all Lenders made on the Closing Date would exceed the Term A Loan Commitment Amount (in the case of Term A Loans) or the Term B Loan Commitment Amount (in the case of Term B Loans) or the Term C Loan Commitment Amount (in the case of Term C Loans), or (ii) of such Lender with a Term A Loan Commitment, with a Term B Loan Commitment or with a Term C Loan Commitment Amount, as applicable, made on the 43 45 Closing Date would exceed such Lender's Percentage of the Term A Loan Commitment Amount (in the case of Term A Loans), the Term B Loan Commitment Amount (in the case of Term B Loans) or the Term C Loan Commitment Amount (in the case of Term C Loans); or (c) all Swing Line Loans would exceed the then existing Swing Line Loan Commitment Amount. SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit. The Issuer shall not be permitted or required to issue any Letter of Credit if, (a) after giving effect thereto, (x) the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount or (y) the sum of the aggregate amount of all Letter of Credit Outstandings plus the then outstanding aggregate principal amount of all Revolving Loans and Swing Line Loans would exceed the Revolving Loan Commitment Amount; or (b) a Lender Default known to the Issuer exists or the Issuer becomes aware of any Lender being a Non-Performing Lender, unless the Issuer has entered into arrangements reasonably satisfactory to it and the Borrower to eliminate the Issuer's risk with respect to the participation in Letter of Credit Outstandings by each Defaulting Lender and each Non-Performing Lender, including cash collateralizing such Defaulting Lender's (or such Non-Performing Lender's, as the case may be) Percentage of Letter of Credit Outstandings in respect thereof. SECTION 2.2. Reduction of the Commitment Amounts. The Commitment Amounts are subject to reduction from time to time pursuant to this Section 2.2. SECTION 2.2.1. Optional. The Borrower may, from time to time on any Business Day occurring after the Effective Date, voluntarily reduce the amount of the Revolving Loan Commitment Amount, the Swing Line Loan Commitment Amount or the Letter of Credit Commitment Amount on the Business Day so specified by the Borrower; provided, however, that all such reductions shall require at least three Business Day's prior notice to the Administrative Agent (and the Swing Line Lender in the case of a reduction to the Swing Line Commitment Amount) and shall be permanent, and any partial reduction of any Commitment Amount shall be in a minimum amount of $1,000,000 and in an integral multiple of $250,000. Upon termination of the Revolving Loan Commitment Amount, Letter of Credit Outstandings then existing which have been fully cash collateralized to the satisfaction of the applicable Issuers shall no longer be considered "Letter of Credit Outstandings" hereunder, and any participating interest heretofore granted by the applicable Issuers to the Lenders with a Revolving Loan Commitment shall be deemed terminated, provided that fees payable pursuant to Section 3.3.3. shall continue to accrue to the applicable Issuers with respect to the applicable Letters of Credit until the expiry thereof. SECTION 2.2.2. Mandatory. On each anniversary of the Closing Date set forth below, the then existing Revolving Loan Commitment Amount shall, without any further action, automatically and permanently be reduced to an amount equal to the product of (x) the percentage set forth below opposite such anniversary date times (y) the sum of the Revolving Loan Commitment Amount on the Effective Date plus the amount of the Revolving Credit Commitment Amount Increases effective on such anniversary date (unless on or prior to any such date the Revolving Loan Commitment Amount shall have 44 46 been reduced to a lesser amount, in which case the Revolving Loan Commitment Amount shall not be required to be reduced below):
% of Maximum Anniversary of Revolving Credit the Closing Date Commitment Amount - ------------------------- ---------------------------- Fourth 92% Fifth 80% Sixth 60%
provided, however, that on the Revolving Loan Commitment Termination Date, the Revolving Loan Commitment Amount shall be zero. SECTION 2.3. Obtaining Loans. Loans (other than Swing Line Loans) shall be made by the Lenders in accordance with Section 2.3.1, and Swing Line Loans shall be made by the Swing Line Lender in accordance with Section 2.3.2. SECTION 2.3.1. Borrowings. In the case of other than Swing Line Loans, by delivering a Borrowing Request to the Administrative Agent on or before 2:00 p.m., New York City time, on a Business Day, the Borrower may from time to time irrevocably request (including by telephonic notice promptly confirmed in writing), on not less than one Business Day's notice in the case of Base Rate Loans, or three Business Days' notice in the case of LIBO Rate Loans, and in either case not more than five Business Days' notice, that a Borrowing be made, in the case of LIBO Rate Loans, in a minimum amount of $5,000,000 and an integral multiple of $500,000, in the case of Base Rate Loans, in a minimum amount of $3,000,000 and an integral multiple of $500,000 or, in either case, in the unused amount of the applicable Commitment, or, in the case of Refunded Swing Line Loans, the amount thereof. On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day, specified in such Borrowing Request. In the case of other than Swing Line Loans, on or before 12:00 noon (New York City time) on such Business Day each Lender that has a Commitment to make the Loans being requested shall deposit with the Administrative Agent same day funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice, promptly followed (within one Business Day) by the delivery of a confirming Borrowing Request, to the Administrative Agent and the Swing Line Lender on or before 2:00 p.m., New York City time, on the Business Day the proposed Swing Line Loan is to be made, the Borrower may from time to time irrevocably request that a Swing Line Loan be made by the Swing Line Lender in an aggregate minimum principal amount of $250,000 and an integral multiple of $50,000. All Swing Line Loans shall be made as Base Rate Loans and shall not be entitled to be converted into LIBO Rate Loans. The proceeds of each Swing Line Loan shall be made available by the Swing Line Lender to the Borrower (x) in the case that telephonic notice is received on or prior to 11:00 a.m., New York City time on a Business Day, by 3:30 p.m., New York City time such the Business Day and (y) in the case that telephonic notice is received after 11:00 a.m. and before 2:00 p.m., 45 47 New York City time, by its close of business on such Business Day, by wire transfer to the account the Borrower shall have specified in its notice therefor. (b) If (x) any Swing Line Loan shall be outstanding for more than five Business Days, (y) any Swing Line Loan is or will be outstanding on a date when the Borrower requests that a Revolving Loan be made or (z) any Default shall occur and be continuing, then, each Lender with a Revolving Loan Commitment (other than the Swing Line Lender) irrevocably agrees that it will, at the request of the Administrative Agent (on behalf of, and at the request of, the Swing Line Lender), make a Revolving Loan (which shall initially be funded as a Base Rate Loan) in an amount equal to such Lender's Percentage of the aggregate principal amount of all such Swing Line Loans then outstanding (such outstanding Swing Line Loans being hereinafter referred to as the "Refunded Swing Line Loans"). On or before 11:00 a.m. (New York City time) on the first Business Day following receipt by each such Lender of a request to make Revolving Loans as provided in the preceding sentence, each such Lender shall deposit in an account specified by the Swing Line Lender the amount so requested in same day funds and such funds shall be applied by the Swing Line Lender to repay the Refunded Swing Line Loans. At the time such Lenders make such Revolving Loans, the Swing Line Lender shall be deemed to have made, in consideration of the making of the Refunded Swing Line Loans, Revolving Loans in an amount equal to its Percentage of the aggregate principal amount of the Refunded Swing Line Loans. Upon the making (or deemed making, in the case of the Swing Line Lender) of any Revolving Loans pursuant to this clause (b), the amount so funded shall become outstanding under such Lender's Revolving Note and shall no longer be owed under the Swing Line Note. All interest payable with respect to any Revolving Loans made (or deemed made, in the case of the Swing Line Lender) pursuant to this clause (b) shall be appropriately adjusted to reflect the period of time during which the Swing Line Lender had outstanding Swing Line Loans in respect of which such Revolving Loans were made. The obligation of each Lender with a Revolving Loan Commitment to make the Revolving Loans referred to in this clause (b) shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever; (2) the occurrence or continuance of any Default; (3) any adverse change in the condition (financial or otherwise) of the Borrower; (4) the acceleration or maturity of any Loans or the termination of any Commitment after the making of any Swing Line Loan; (5) any breach of this Agreement or any other Loan Document by the Borrower or any Lender; or (6) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. (c) Without in any way limiting the obligation of the Borrower to confirm in writing any notice it may give hereunder by telephone, the Administrative Agent or the Swing Line Lender, as the case may be, may act prior to receipt of written confirmation without liability upon the basis of such telephonic notice believed by the Administrative Agent or the Swing Line Lender, as the case may be, in good faith to be from an Authorized Officer of the Borrower (or a designee of such Authorized Officer). In each such case the record of the Administrative Agent or the Swing Line Lender, as the case may be, of the terms of any such telephonic notice shall be conclusive absent manifest error. SECTION 2.4. Continuation and Conversion Elections. By delivering a Continuation/ Conversion Notice to the Administrative Agent on or before 10:00 a.m., New York City time, on a Business Day, the Borrower may from time to time irrevocably elect, on not less than one Business Days' notice in the case of any Loans that are to be converted into Base Rate Loans, or three Business Days' notice in the case of any Loans that are to be continued as, or converted into, LIBO Rate Loans, and in either case not more than five Business Days' notice, that all, or any portion in an aggregate minimum amount of $5,000,000 46 48 and an integral multiple of $250,000, in the case of any Loans that are to be continued as, or converted into, LIBO Rate Loans, or an aggregate minimum amount of $3,000,000 and an integral multiple of $250,000, in the case of any Loans that are to be converted into Base Rate Loans, be, in the case of Base Rate Loans, converted into LIBO Rate Loans or be, in the case of LIBO Rate Loans, converted into Base Rate Loans or continued as LIBO Rate Loans (in the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three Business Days (but not more than five Business Days) before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically be continued as a LIBO Rate Loan having an Interest Period of one month); 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) if any Default is in existence at the applicable time of any proposed continuation of, or conversion into, any LIBO Rate Loans and the Administrative Agent has, or the Required Lenders have, determined in its or their sole discretion not to permit such continuation or conversion and have notified the Borrower telephonically or in writing thereof, the Borrower may not elect to have a Loan converted into or continued as a LIBO Rate Loan and any outstanding LIBO Rate Loans shall be automatically converted on the last day of the current Interest Period applicable thereto into a Base Rate Loan. SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility; provided, however, further, that in no event shall the Borrower be obligated to pay to any Lender any amounts pursuant to Sections 4.1, 4.2, 4.3, 4.5 or 4.6 that would not have arisen but for such Lender's election pursuant to the first sentence of this Section (it being acknowledged and agreed that any change in lending office or other action taken by a Lender in accordance with Section 4.7 shall not be considered to be an "election" by such Lender under this Section). SECTION 2.6. Issuance Procedures. By delivering to the Administrative Agent an Issuance Request on or before 10:00 a.m., New York City time, on a Business Day, the Borrower may, from time to time irrevocably request, on not less than three nor more than ten Business Days' notice, in the case of an initial issuance of a Letter of Credit for the account of the Borrower, and not less than three Business Days' prior notice to the date any issued Letter of Credit containing an "evergreen" or similar automatic extension feature is scheduled to automatically be extended unless the beneficiary thereof shall have received notice to the contrary from the Issuer and subject to the Issuer's right not to extend if the conditions precedent to issuance of such a Letter of Credit would not be satisfied, in the case of a request for the extension of the Stated Expiry Date of a standby Letter of Credit, that the Issuer issue, or extend the Stated Expiry Date of, as the case may be, an irrevocable Letter of Credit in such form as may be requested by the Borrower and complying with the provisions hereof. Each Letter of Credit shall by its terms be stated to expire on a date (its "Stated Expiry Date") no later than the earlier to occur of (a) in the case of a standby Letter of Credit, (x) the Revolving Loan Commitment Termination Date and (y) one year from the date of its issuance; and (b) in the case of a documentary Letter of Credit, (x) the Revolving Loan Commitment Termination Date and (y) 180 days from the date of its issuance. 47 49 The Issuer will make available to the beneficiary thereof the original of each Letter of Credit which it issues hereunder. Notwithstanding anything to the contrary herein, the letters of credit described in Schedule II hereto are deemed to be "Letters of Credit" hereunder issued by PNC Bank, N.A. (the "PNC Letters of Credit") and PNC Bank, N.A. shall be an "Issuer" hereunder solely (as of the Closing Date) with respect to the PNC Letters of Credit. SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each Letter of Credit issued by the Issuer pursuant hereto, and without further action, each Lender (other than the Issuer) that has a Revolving Loan Commitment shall be deemed to have irrevocably purchased, to the extent of its Percentage of the Revolving Loan Commitment Amount, a participation interest in such Letter of Credit (including the Contingent Liability and any Reimbursement Obligation with respect thereto), and such Lender shall, to the extent of its Percentage of the Revolving Loan Commitment Amount, be responsible for reimbursing promptly (and in any event within one Business Day) the Issuer for Reimbursement Obligations which have not been reimbursed by the Borrower in accordance with Section 2.6.3. In addition, such Lender shall, to the extent of its Percentage of the Revolving Loan Commitment Amount, be entitled to receive a ratable portion of the Letter of Credit fees payable pursuant to Section 3.3.3 with respect to each Letter of Credit (other than the issuance fees payable to the Issuer of such Letter of Credit pursuant to the last sentence of Section 3.3.3) and of interest payable pursuant to Section 3.2 with respect to any Reimbursement Obligation. To the extent that any Lender has reimbursed the Issuer for a Disbursement as required by this Section, such Lender shall be entitled to receive its ratable portion of any amounts subsequently received (from the Borrower or otherwise) in respect of such Disbursement. SECTION 2.6.2. Disbursements. The Issuer will notify the Borrower and the Administrative Agent promptly of the presentment for payment of any Letter of Credit issued by the Issuer, together with notice of the date (the "Disbursement Date") such payment shall be made (each such payment, a "Disbursement"). Subject to the terms and provisions of such Letter of Credit and this Agreement, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 11:00 a.m., New York City time, on the first Business Day following the Disbursement Date, the Borrower will reimburse the Administrative Agent, for the account of the Issuer, for all amounts which the Issuer has disbursed under such Letter of Credit, together with interest thereon at a rate per annum then in effect for Base Rate Loans plus the Applicable Margin for Revolving Loans pursuant to Section 3.2 for the period from the Disbursement Date through the date of such reimbursement; provided, however, that unless the Borrower shall have notified the Administrative Agent and the Issuer prior to such time on the Disbursement Date, the Borrower will be deemed to have requested (and shall deliver a Borrowing Request within one Business Day of the Disbursement Date confirming) that a Swing Line Loan be made in the amount of such reimbursement and the Administrative Agent shall so notify the Swing Line Lender which shall, subject, however, to the conditions of Section 2.3.2 (except for the notice, the minimum principal amount and the integral amount requirements), make a Swing Line Loan in such amount (the proceeds of which will be wired to the Issuer unless the Issuer and the Swing Line Lender are the same Person, in which case a book-entry transfer may be made). Without limiting in any way the foregoing and notwithstanding anything to the contrary contained herein or in any separate application for any Letter of Credit, the Borrower hereby acknowledges and agrees that it shall be obligated to reimburse the Issuer upon each Disbursement of a Letter of Credit. SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with respect to each Disbursement (including interest thereon), and, upon the failure of the Borrower to reimburse the Issuer, each Lender's (to the extent it has a Revolving Loan Commitment) obligation under Section 2.6.1 to reimburse the Issuer, shall 48 50 be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or such Lender, as the case may be, may have or have had against the Issuer or any such Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such Disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit; provided, however, that, after paying in full its Reimbursement Obligation hereunder, nothing herein shall preclude the right of such Lender to commence any proceeding against the Issuer for any wrongful Disbursement made by the Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or wilful misconduct as determined by a court of competent jurisdiction on the part of the Issuer; provided, however, further, that, in any event, the Borrower may have a claim against the Issuer, and the Issuer may be liable to the extent (but only to the extent) of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by the Issuer's wilful misconduct or gross negligence as determined by a court of competent jurisdiction or the Issuer's wilful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a demand for payment strictly complying with the terms and conditions of such Letter of Credit. SECTION 2.6.4. Nature of Reimbursement Obligations. The Borrower and, to the extent set forth in Section 2.6.1, each Lender with a Revolving Loan Commitment shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuer (except to the extent of its own gross negligence or wilful misconduct) shall not be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuer or any Lender with a Revolving Loan Commitment hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by the Issuer in good faith (and not constituting gross negligence or willful misconduct) shall be binding upon the Borrower and each such Lender, and shall not put the Issuer under any resulting liability to the Borrower or any such Lender, as the case may be. 49 51 SECTION 2.6.5. Uniform Customs and Practice. The Uniform Customs and Practice for Documentary Credits as published by the International Chamber of Commerce ("UCP") most recently at the time of issuance of any Letter of Credit shall (unless otherwise expressly provided in the Letters of Credit) apply to such Letter of Credit. SECTION 2.7. Loan Accounts and Notes. (a) The Loans made by each Lender and the Letters of Credit issued by the Issuer shall be evidenced by one or more loan accounts or records maintained by the Administrative Agent in the ordinary course of business. The loan accounts or records maintained by the Administrative Agent shall be conclusive absent clearly demonstrable error of the amount of the Loans made by the Lenders to, and the Letters of Credit issued by the Issuer for the account of, the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Loans and the Reimbursement Obligations. (b) Upon the request of any Lender made through the Administrative Agent, solely to facilitate the pledge or assignment of its Loans to any Federal Reserve Bank or to comply with state law or regulations applicable to such Lender pursuant to clause (b) of Section 10.11.1, the Loans made by such Lender may be evidenced by one or more Notes, instead of or in addition to loan accounts. Each such Lender is irrevocably authorized by the Borrower to endorse on the schedules annexed to its Note(s) the date, amount and maturity of each Loan made, continued or converted by it and the amount of each payment of principal made by the Borrower with respect thereto. Each such Lender's record shall be conclusive absent clearly demonstrable error; provided, however, that the failure of a Lender to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Borrower hereunder or under any such Note to such Lender. SECTION 2.8. Additional Commitments and Loans, etc. Anything in this Agreement (including Section 10.1) to the contrary notwithstanding, any Lender may agree with the Borrower and the Agents (which Agents shall not unreasonably withhold their agreement) and without the consent of the Required Lenders (a) to increase (a "Revolving Credit Commitment Amount Increase") its Revolving Loan Commitment (and such Lender's Percentage and the Revolving Loan Commitment Amount may be increased accordingly) and to make additional term loans hereunder, to refinance, in connection with an Act III Acquisition becoming effective on or prior to the date which is 120 days after the Effective Date, all Obligations then outstanding under (and as defined in) the Act III Credit Agreement and to repay the Subordinated Debt issued by Act III (and as defined in the Act III Credit Agreement), provided, however, that such Revolving Credit Commitment Amount Increases and Additional Loans (collectively, the "Act III Additional Financing") shall (i) be in an amount (which shall include all Loans outstanding under (and as defined in) the Act III Credit Agreement immediately prior to such refinancing by the Act III Additional Financing and the portion of the "Revolving Loan Commitments" under (and as defined in) the Act III Credit Agreement to be included as Additional Commitments hereunder), the aggregate of which shall not exceed $495,000,000 plus the amount of all interest, fees and other expenses then accrued and unpaid under the Act III Credit Agreement, (ii) have a Weighted Average Life to Maturity on the day of such refinancing which is at least as long as the Weighted Average Life to Maturity on such day of all Loans outstanding immediately prior to such refinancing under (and as defined in) the Act III Credit Agreement as in effect on the Effective Date and (iii) have rates of interest 50 52 calculated in a manner which is no higher than the rates provided under the existing Act III Credit Agreement as in effect on the Effective Date; and (b) to extend additional commitments (together with the Act III Additional Financing, the "Additional Commitments") to make other revolving credit loans or term loans hereunder (together with the Loans constituting the Act III Additional Loans, "Additional Loans"), to finance Other Permitted Acquisitions, provided, that, (w) the sum on the date of the financing of each such Other Permitted Acquisition of the aggregate original principal amount of the Revolving Credit Commitment Amount Increases and Additional Commitments (in each case, other than pursuant to the Act III Additional Financing) to finance such Other Permitted Acquisition, plus the aggregate amount of all Revolving Credit Commitment Amount Increases and all continuing Additional Commitments (or, in the case of Additional Commitments for term loans, the outstanding principal amount thereof) made previously to finance Other Permitted Acquisitions plus the aggregate outstanding principal amount of Indebtedness permitted by clauses (g) (excluding, however, Permitted Acquisition Ordinary Course Indebtedness, Permitted Acquisition Subordinated Indebtedness and Permitted Acquisition Come-Along Indebtedness) and (k) of Section 7.2.1, shall not exceed $350,000,000, (x) the aggregate amount by which the amounts described in item (w) exceed $200,000,000 must constitute Permitted Additional Structured Indebtedness and (y) such Revolving Credit Commitment Amount Increases and Additional Commitments shall constitute "Senior Indebtedness" under (and as defined in) the 9 1/2% Subordinated Note Indenture and (z) to the extent representing additional revolving credit commitments other than an increase of the Revolving Loan Commitment, the material terms of any such Additional Commitments shall be satisfactory to the Agents; provided, however, that in the case of either clause (a) or (b), (c) after giving effect to such Permitted Acquisition and the incurrence of such Indebtedness, (x) no Default shall have occurred and be continuing and (y) on a pro forma basis as of the last day of the Fiscal Quarter most recently ended, the Borrower shall be in compliance with clauses (a) and (b) of Section 7.2.3, as set forth in a pro forma Compliance Certificate delivered to the Administrative Agent pursuant to clause (d) of Section 7.2.6; (d) the Borrower pledges the Capital Stock of any Acquired Person acquired thereby to the Administrative Agent to the extent required under Section 7.1.8, which shall (notwithstanding the proviso therein set forth), with respect to the Act III Acquisition, include the Capital Stock of Act III Cinemas, Inc. and Act III Theatres Inc. (or, if such entities have merged, of the surviving corporation) whether or not at such time such Person is a direct Restricted Subsidiary; (e) such Acquired Person and each of its Subsidiaries that become Domestic Restricted Subsidiaries executes a supplement to the Guaranty to the extent required under Section 7.1.8, which shall (notwithstanding the proviso therein set forth), with respect to the Act III Acquisition, include a Guaranty of Act III Cinemas, Inc. and Act III Theatres Inc. (or, if such entities have merged, of the surviving corporation) and their Domestic Subsidiaries, (f) if such Acquired Person has any Indebtedness (other than Permitted Acquisition Ordinary Course Indebtedness or Permitted Acquisition Come-Along Indebtedness) which is secured, its Obligations under the Guaranty, if required to be supplemented pursuant to clause (e), are secured equally and ratably with such other Indebtedness; and 51 53 (g) to the extent determined by the Administrative Agent to be necessary to ensure pro rata borrowings commencing with the initial Borrowing after giving effect to such increase, the Borrower shall prepay any LIBO Rate Loans outstanding immediately prior to such initial Borrowings. Upon the effectiveness of Additional Commitments to make Additional Loans, such Additional Loans shall become Loans hereunder subject, however, to the specific terms of such Additional Loans that the applicable Lenders in respect thereof and the Borrower may agree to that may differ from the corresponding terms applicable to the Term Loans and the Revolving Loans, including interest rates, fees and repayment schedules; provided, however, that (x) for the purposes of voting matters, this Agreement shall be deemed amended to include protection for any class of Lenders having Additional Loans or Additional Commitments corresponding to those protections set forth thereunder for other classes of Lenders and (y) the Administrative Agent is hereby authorized by the Lenders to enter into any technical amendments or supplements with the Borrower to this and any other Loan Document to the extent necessary to implement the foregoing and include such Additional Loans and Additional Commitments hereunder. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments; Application. SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in full the unpaid principal amount of each Loan upon the applicable Stated Maturity Date therefor. Prior thereto, payments and prepayments of Loans shall or may be made as set forth below. (a) Voluntary Prepayments. From time to time on any Business Day, the Borrower may make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any (i) Loans (other than Swing Line Loans and Additional Loans); provided, however, that (A) any such prepayment of the Term A Loans, Term B Loans or Term C Loans shall be applied to the Term A Loans, Term B Loans or Term C Loans as the Borrower shall direct (or, in the absence of any such direction, pro rata among Term A Loans, Term B Loans and Term C Loans)(with the amounts so allocated to the Term A Loans, the Term B Loans or the Term C Loans being applied to the remaining amortization payments for the Term A Loans, the Term B Loans and the Term C Loans, as the case may be, in such amounts as the Borrower shall determine), (B) all such voluntary prepayments shall require at least one but no more than five Business Days' prior notice to the Administrative Agent, and (C) all such voluntary partial prepayments shall be, in the case of LIBO Rate Loans, in an aggregate minimum amount of $1,000,000 and an integral 52 54 multiple of $250,000 and, in the case of Base Rate Loans, in an aggregate minimum amount of $1,000,000 and an integral multiple of $250,000, (ii) Swing Line Loans; provided, however, that (A) all such voluntary prepayments shall require prior telephonic notice to the Administrative Agent (which shall promptly notify the Swing Line Lender) on or before 2:00 p.m., New York City time, on the day of such prepayment (such notice to be confirmed in writing by the Borrower within 24 hours thereafter), and (B) all such voluntary partial prepayments shall be in an aggregate minimum amount of $250,000 and an integral multiple of $100,000, and (iii) Additional Loans as agreed by the Borrower and the Lenders making such Additional Loans in accordance with Section 2.8. (b) Exceeding the Revolving Loan Commitment Amount, etc. (i) On each date when the sum of (x) the aggregate outstanding principal amount of all Revolving Loans and Swing Line Loans plus (y) the aggregate amount of all Letter of Credit Outstandings exceeds the Revolving Loan Commitment Amount (as it may be reduced from time to time, including pursuant to Sections 2.2 and 3.1), the Borrower shall make a mandatory prepayment of first, all Swing Line Loans, then, all Revolving Loans and, if necessary, give cash collateral to the Administrative Agent pursuant to an agreement satisfactory to the Agents to collateralize Letter of Credit Outstandings, in an aggregate amount equal to such excess, to be applied to such Loans as agreed by the Borrower and the Lenders making such Loans. (ii) On each date when the aggregate outstanding principal amount of Additional Loans made pursuant to Additional Commitments which are revolving credit commitments exceeds the amount of such Additional Commitments (as they may be reduced from time to time as agreed by the Borrower and the Lenders extending such Additional Commitments in accordance with Section 2.8), the Borrower shall make a mandatory prepayment of such Additional Loans in an aggregate amount equal to such excess. (c) Scheduled Repayments of Term A, B and C Loans. (i) On each anniversary of the Closing Date prior to and on the Stated Maturity Date for any particular Term Loans specified below, the Borrower shall make a scheduled repayment of the aggregate outstanding principal amount, if any, of such Term Loans in respective amount set forth below (after giving effect to any adjustments in respect of any optional or mandatory non-scheduled prepayments of such Term Loan) opposite such anniversary: 53 55
Term A Loans Term B Loans Term C Loans Principal Principal Principal Anniversary of Repayment Repayment Repayment Closing Date Amount Amount Amount - -------------- --------------- --------------- --------------- First $ 1,200,000 $ 1,200,000 $ 1,350,000 Second $ 1,200,000 $ 1,200,000 $ 1,350,000 Third $ 1,200,000 $ 1,200,000 $ 1,350,000 Fourth $ 1,200,000 $ 1,200,000 $ 1,350,000 Fifth $ 1,200,000 $ 1,200,000 $ 1,350,000 Sixth $ 1,200,000 $ 1,200,000 $ 1,350,000 Seventh $ 112,800,000 $ 1,200,000 $ 1,350,000 Eighth $ 111,600,000 $ 1,350,000 Ninth $ 124,200,000
(ii) the Borrower shall make scheduled repayments of the aggregate outstanding principal amount of Additional Loans on such dates, and in such amounts, as shall be agreed by the Borrower and the Lenders making such Additional Loans in accordance with Section 2.8. (d) Asset Dispositions and Real Estate Financings. If the Borrower or any Restricted Subsidiary shall at any time (x) consummate a Disposition (other than a Real Estate Financing or a Disposition permitted pursuant to clause (a) or (b) of Section 7.2.6) having Net Cash Proceeds which, when taken together with the Net Cash Proceeds for all previous Dispositions, exceeds $1,000,000 or (y) consummate a Real Estate Financing, then (i) the Borrower or such Restricted Subsidiary may, for a period not exceeding 540 days after the receipt by the Borrower or such Restricted Subsidiary of such Net Cash Proceeds, (x) reinvest up to 100% of such Net Cash Proceeds in the businesses of the Borrower and Restricted Subsidiaries described in Section 7.1.11, but (1) in the case of any such reinvestment involving payments when due in respect of any Permitted Ongoing Reinvestment Project, only if, on the date of such reinvestment, no Payment Default shall have occurred and be continuing and (2) in the case of any other such reinvestment, only if, and to the extent that, on the date of such reinvestment, no Event of Default or Payment Default shall have occurred and be continuing, (y) prepay the Term A Loans, Term B Loans, Term C Loans and Additional Loans made as term loans in an amount equal to such Net Cash Proceeds (or a portion thereof) or (z) retain the amount of such Net Cash Proceeds not so applied pending such reinvestment or prepayment, and (ii) to the extent such Net Cash Proceeds are not so reinvested during such 540-day period and the aggregate amount of all such Net Cash Proceeds not so reinvested since the last prepayment made pursuant to this clause (d) equals or exceeds $2,000,000, the Borrower shall, except as and to the extent otherwise provided in clause (b)(iii) of Section 3.1.2, make a mandatory prepayment of the Term A Loans, Term B Loans, Term C Loans and Additional Loans made as term loans on the Business Day immediately succeeding the last day of such 540-day period in an aggregate amount equal to the portion of such Net Cash Proceeds not so applied. 54 56 (e) Acceleration of Maturity. Immediately upon any acceleration of the Stated Maturity Date of any Loans pursuant to Section 8.2 or 8.3, the Borrower shall repay all the Loans, unless, pursuant to Section 8.3, only a portion of all the Loans is so accelerated (in which case the portion so accelerated shall be so prepaid). Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by Section 4.5. No prepayment of principal of any Revolving Loans or Swing Line Loans pursuant to clause (a) or (b) shall cause a reduction in the Revolving Loan Commitment Amount or the Swing Line Loan Commitment Amount, as the case may be. SECTION 3.1.2. Application. Amounts prepaid shall be applied as set forth in this Section. (a) Subject to clauses (b) and (c), each prepayment or repayment of the principal of Loans (other than Swing Line Loans) shall be applied, to the extent of such prepayment or repayment, as the Borrower shall direct (and in the absence of such direction, shall be applied first, to the principal amount thereof being maintained as Base Rate Loans, and second, to the principal amount thereof being maintained as LIBO Rate Loans with the shortest Interest Periods remaining); provided, however, that prepayments or repayments of LIBO Rate Loans not made on the last day of the Interest Period with respect thereto, shall be prepaid or repaid subject to the provisions of Section 4.5 (together with a payment of all accrued interest). In the case of any mandatory prepayments of Loans to be made pursuant to clause (d) of Section 3.1.1, at the Borrower's option, exercised in writing to the Administrative Agent at least one Business Day before such prepayment is to be distributed, such prepayments pursuant to this Section 3.1.2 shall not be applied to any Loan of a Defaulting Lender, but shall be allocated ratably to the Loans of the Non-Defaulting Lenders. (b) Each prepayment made pursuant to clause (d) of Section 3.1.1 shall be applied to a mandatory prepayment of the outstanding principal amount of all Term A Loans, Term B Loans, Term C Loans and Additional Loans made as term loans, pro rata according to the respective aggregate outstanding principal amounts thereof (with the amount of such prepayment of the Term A Loans, the Term B Loans, the Term C Loans and such Additional Loans being applied to the scheduled repayments thereafter remaining to become due prior to and on their respective Stated Maturity Dates pursuant to clause (c) of Section 3.1.1, first, sequentially, in the order of their maturity, to each of the next two such unpaid scheduled repayments thereof and second, pro rata according to their respective amounts, to the remaining scheduled repayments); provided, however, that (i) the Borrower will, prior to prepaying any such Loans, give the Administrative Agent telephonic notice (promptly confirmed in writing) requesting that the Administrative Agent provide notice of such prepayment to each Lender entitled to receive any portion of such prepayment, (ii) each such Lender will have the right to refuse any such prepayment by giving notice of such refusal to the Borrower within seven Business Days after such Lender's receipt of notice from the Administrative Agent of such prepayment (and the Borrower shall not prepay any such Term A Loans, Term B Loans, Term C Loans or Additional Loans until such seventh Business Day or such time as the Borrower receives notice from such Lender that it consents to such prepayment, whichever is earlier), and 55 57 (iii) the aggregate amount of any prepayment so refused may be retained by the Borrower. (c) Interest Periods. In lieu of making any payment pursuant to clause (d) of Section 3.1.1 in respect of any LIBO Rate Loan other than on the last day of the Interest Period therefor, so long as no Default shall have occurred and be continuing, the Borrower at its option may deposit with the Administrative Agent an amount equal to the amount of the LIBO Rate Loan to be prepaid and such LIBO Rate Loan shall be repaid on the last day of the Interest Period therefor in the required amount (it being understood and agreed that such LIBO Rate Loan shall not be considered repaid until such last day of such Interest Period). Such deposit shall be held by the Administrative Agent in a corporate time deposit account established on terms reasonably satisfactory to the Administrative Agent, earning interest (for the account of the Borrower) at the then customary rate for accounts of such type. Such deposit shall cash collateralize the Obligations, provided, however, that the Borrower may at any time direct that such deposit be applied to make the applicable payment required pursuant to Section 3.1.1, subject to the provisions of Section 4.5. SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2. SECTION 3.2.1. Rates. Subject to the first sentence of Section 2.3.1 and clause (a) of Section 2.3.2 regarding telephonic notice, pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (a) on that portion maintained from time to time as a Base Rate Loan, equal to the sum of the Alternate Base Rate from time to time in effect plus the Applicable Margin; provided, however, that all Swing Line Loans shall always accrue interest at a rate per annum equal to the higher of (x) the Alternate Base Rate (for Revolving Loans maintained as Base Rate Loans) and (y) the sum of the Alternate Base Rate (for Revolving Loans maintained as Base Rate Loans) plus the Applicable Margin (for Revolving Loans maintained as Base Rate Loans) minus the Applicable Commitment Fee; and (b) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate for such Interest Period plus the Applicable Margin. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount of any Loan or Reimbursement Obligation is due and payable (whether on its Stated Maturity Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before the entry of judgment thereon) on such overdue amounts at a rate per annum equal to the Alternate Base Rate from time to time in effect plus the Applicable Margin plus a margin of 2%. Anything herein to the contrary notwithstanding, the obligations of the Borrower to any Lender hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Lender would be 56 58 contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Lender, and in such event the Borrower shall pay such Lender interest at the highest rate permitted by applicable law. SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any payment or prepayment of Loans other than Base Rate Loans, in whole or in part, of principal outstanding on such Loan on the principal amount so paid or prepaid; (c) with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the Closing Date; (d) with respect to LIBO Rate Loans, on the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on each date occurring at three-month intervals after the first day of such Interest Period); (e) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and (f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on a Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this Section 3.3. All such fees shall be non-refundable. SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender, for the period (including any portion thereof when any of its Commitments are suspended by reason of the Borrower's inability to satisfy any condition of Article V) commencing on the Closing Date and continuing through the Revolving Loan Commitment Termination Date, a commitment fee in an amount equal to the Applicable Commitment Fee, in each case on such Lender's Percentage of the sum of the average daily unused portion of the Revolving Loan Commitment Amount (net of Letter of Credit Outstandings). All commitment fees payable pursuant to this Section shall be calculated on a year comprised of 365 days or 366 days, as the case may be, and payable by the Borrower in arrears on each Quarterly Payment Date, commencing with the first Quarterly Payment Date following the Closing Date, and on the Revolving Loan Commitment Termination Date. The making of Swing Line Loans shall not constitute usage of the Revolving Loan Commitment with respect to the calculation of commitment fees to be paid by the Borrower to the Lenders. 57 59 SECTION 3.3.2. Arrangement and Agency Fees. The Borrower agrees to pay to the Administrative Agent, for its own account and the account of each Agent (as the case may be), the fees in the amounts and on the dates set forth in the applicable Fee Letter. SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay to the Administrative Agent, for the pro rata account of the Issuer and each other Lender that has a Revolving Loan Commitment, a Letter of Credit fee in an amount equal to (a) with respect to each standby Letter of Credit, a rate per annum equal to the then Applicable Margin for Revolving Loans maintained as LIBO Rate Loans, minus 1/8 of 1% per annum, multiplied by the Stated Amount of each such Letter of Credit; and (b) with respect to each documentary Letter of Credit, 1/8 of 1% multiplied by the Stated Amount of each such Letter of Credit, such fees being payable quarterly in arrears on each Quarterly Payment Date. The Borrower further agrees to pay to the Issuer (x) quarterly in arrears payable on each Quarterly Payment Date, an issuance fee as specified in the applicable Fee Letter and (y) from time to time promptly after demand, the normal issuance, presentation, amendment and other processing fees, and other standard administrative costs and charges, of the Issuer relating to Letters of Credit as from time to time in effect. ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine (which determination shall, upon notice thereof to the Borrower and the Lenders, be conclusive and binding on the Borrower absent demonstrable error) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make, continue or maintain or to convert any Loan into, a LIBO Rate Loan shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist (which notice the Administrative Agent shall give promptly upon the applicable circumstances ceasing to exist), and all outstanding LIBO Rate Loans of such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion. Each Lender agrees to promptly give notice to the Administrative Agent and the Borrower when the circumstances causing such suspension cease to exist. SECTION 4.2. Deposits Unavailable. If the Required Lenders shall have determined that (x) Dollar deposits in the relevant amount and for the relevant Interest Period are neither available to such Required Lenders in the eurodollar market nor available to them in their respective relevant markets, or (y) by reason of circumstances arising on or after the Effective Date affecting the eurodollar market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Sections 2.3 and 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the 58 60 Lenders that the circumstances causing such suspension no longer exist. Upon receipt of notice from the Administrative Agent that the Required Lenders are unable to determine the LIBO Rate, the Borrower may revoke any Borrowing Request or Conversion/Continuation Notice then submitted by it. If the Borrower does not revoke such Borrowing Request or Continuation/Conversion Notice, the Lenders shall make, convert or continue the Loans, as proposed by the Borrower, in the amount specified in the applicable notice submitted by the Borrower, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBO Rate Loans. SECTION 4.3. Change of Circumstances. If, after the Effective Date, the introduction of or any change in or in the interpretation of, or any change in the application of, any law or any regulation (including Regulation D of the Board) or guideline issued by any central bank or other Governmental Authority (whether or not having the force of law), or by NAIC or any other comparable agency charged with the interpretation or administration thereof or including any reserve or special deposit requirement or any tax (other than Taxes covered by Section 4.6 and taxes on a Lender's general income) or any capital requirement, has, due to a Lender's compliance has the effect, directly or indirectly, of (x) increasing the cost to such Lender of performing its obligations hereunder (including the making, continuing or maintaining of any Loans as or converting any Loans into, LIBO Rate Loans), (y) reducing any amount received or receivable by such Lender hereunder or its effective return hereunder or on its capital or (z) causing such Lender to make any payment or to forego any return based on any amount received or receivable by such Lender hereunder, then, upon demand of such Lender to the Borrower through the Administrative Agent, accompanied by notice showing in reasonable detail the basis for calculation of any such amounts, from time to time, the Borrower shall be obligated to pay such amounts and shall compensate such Lender promptly after receipt of such notice and demand for any such cost, reduction, payment or foregone return. Any certificate of a Lender in respect of the foregoing will be conclusive and binding upon the Borrower, except for clearly demonstrable error. SECTION 4.4. Replacement of Lender. If (w) the Borrower receives notice from any Lender requesting increased costs or additional amounts under Section 4.3 or 4.6, (x) any Lender is affected in the manner described in Section 4.1, (y) a Lender becomes a Non-Performing Lender or a Defaulting Lender or (z) S&P or Moody's, after the date that any Person becomes a Lender with a Revolving Loan Commitment, downgrades the long-term certificate of deposit ratings of such Lender, and the resulting rating is below BBB- or Baa3, respectively, or the equivalent, then (a) in each case, the Borrower shall have the right, so long as no Event of Default shall have occurred and be continuing and unless, (i) in the case of item (w), such Lender has removed or cured the conditions which resulted in the obligation to pay such increased costs or additional amounts or agreed to waive and otherwise forego any right it may have to any payments provided for under Section 4.3 or 4.6 in respect of such conditions, or (ii) in the case of item (z), such Lender's rating is upgraded by S&P or Moody's to a rating of at least BBB- or Baa3, respectively, or the equivalent, and (b) in the case of item (z), the Swing Line Lender and the Issuer shall have the right (with the consent of the Borrower, which consent shall not be unreasonably withheld) but not the obligation, 59 61 to replace in its entirety such Lender (the "Replaced Lender"), upon prior notice to the Administrative Agent and such Replaced Lender, with one or more other Eligible Assignee(s) (collectively, the "Replacement Lender") reasonably acceptable to the Administrative Agent and, in the case of item (w), (x) or (z) and in the event the Replaced Lender is a Lender with a Revolving Loan Commitment, the Swing Line Lender and the Issuer (which acceptance, in each case, shall not be unreasonably withheld); provided, however, that, at the time of any replacement pursuant to this Section, the Replaced Lender and the Replacement Lender shall enter into (each Replaced Lender hereby unconditionally agreeing to enter into) one or more Lender Assignment Agreements (appropriately completed), pursuant to which (A) the Replacement Lender shall acquire all of the Commitments and outstanding Revolving Loans and Term Loans of, and participations in Swing Line Loans and Letter of Credit Outstandings of, the Replaced Lender and, in connection therewith, shall pay (1) to the Replaced Lender in respect thereof an amount equal to the sum of the principal of, and all accrued but unpaid interest on, all outstanding Loans of the Replaced Lender plus all accrued but theretofore unpaid fees owing to the Replaced Lender pursuant to Section 3.3 and (2) to the Issuer, an amount equal to any portion of the Replaced Lender's funding of an unpaid drawing under a Letter of Credit as to which the Replaced Lender is then in default and (B) the Borrower shall pay to the Replaced Lender any other amounts payable to the Replaced Lender under this Agreement (including amounts payable under Sections 3.3.3, 4.1, 4.3, 4.5 and 4.6 which have accrued to the date of such replacement). Upon the execution of the Lender Assignment Agreement(s), the payment of the amounts referred to in the preceding sentence and, if so requested by the Replacement Lender in accordance with clause (b) of Section 10.11.1, delivery to the Replacement Lender of the applicable Notes executed by the Borrower, the Replacement Lender shall automatically become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions under this Agreement, which shall survive as to such Replaced Lender. It is understood and agreed that if any Replaced Lender shall fail to enter into a Lender Assignment Agreement in accordance with the foregoing, it shall be deemed to have entered into such a Lender Assignment Agreement. SECTION 4.5. Funding Losses. In the event any Lender shall reasonably incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of (w) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise, (x) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor, (y) any Loans not being made or continued as, or continued into, LIBO Rate Loans as a result of a withdrawn or revoked Borrowing Request or Continuation/Conversion Notice or for any other reason (other than a default by any Lender or the Administrative Agent) or (z) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/ Conversion Notice therefor, then, upon the notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, promptly after its receipt thereof, pay to the Administrative Agent for the account of such Lender such amounts required to compensate such Lender for any additional losses, costs or expenses that such Lender may reasonably incur as a result of such payment, failure to convert or failure to continue, including any loss, cost or expense (excluding, however, loss of anticipated profits) actually incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such LIBO Rate Loan. Such notice (which shall set forth in reasonable detail the basis for requesting such amount and include calculations in reasonable detail in support thereof) shall, in the absence of clearly demonstrable error, be conclusive and binding on the Borrower. 60 62 SECTION 4.6. Taxes. (a) Any and all payments by the Borrower to each Lender and the Administrative Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, the Borrower shall pay all Other Taxes to the relevant taxing authority or other authority in accordance with applicable law. (b) If the Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent, then, (x) the sum payable shall be increased as necessary so that, after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section), such Lender or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (y) the Borrower shall make such deductions and withholdings and (z) the Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law and shall as promptly as possible thereafter send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original receipt (or other written evidence) showing payment thereof. (c) The Borrower agrees to indemnify and hold harmless each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes that are payable by such Lender or the Administrative Agent and any penalties, interest, additions to tax, expenses or other similar liabilities arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment under this indemnification shall be made within 45 days after the date such Lender or the Administrative Agent makes written demand therefor. (d) Each Lender that is not incorporated or organized in or under the laws of the United States or a state thereof (a "Non-U.S. Lender") shall: (i) deliver to the Borrower and the Administrative Agent, prior to the first day on which the Borrower is required to make any payments hereunder to such Lender, two copies of either United States Internal Revenue Service Form 1001 or Form 4224 or, in the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any subsequent versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a certificate representing that such Non-U.S. Lender (x) is not a bank for purposes of Section 881(c) of the Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements, (y) is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and (z) is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code)), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. Federal withholding tax on payments by the Borrower under this Agreement; (ii) deliver to the Borrower and the Administrative Agent two further copies of any such form of certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and 61 63 (iii) obtain such extensions of time for filing and completing such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; unless in any such case any change in treaty, law or regulation has occurred prior to the date on which any such delivery would otherwise be required that renders any such form inapplicable or would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Each Non-U.S. Lender that shall become a Participant pursuant to Section 10.11.2 or a Lender pursuant to Section 10.11.1 shall, upon the effectiveness of the related transfer, be required to provide all the forms and statements required pursuant to this clause (d), provided, however, that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. (e) The Borrower shall not be required to indemnify any Non-U.S. Lender or the Administrative Agent, or to pay any additional amounts to such Non-U.S. Lender or the Administrative Agent, in respect of U.S. Federal withholding tax pursuant to clause (a) to the extent that (x) the obligation to withhold amounts with respect to U.S. Federal withholding tax existed on the date such Non-U.S. Lender became a party to this Agreement (or, in the case of a Non-U.S. Participant, on the date such Participant became a Participant hereunder) or as of the date such Non-U.S. Lender changes its applicable lending office (provided, however, that this item (x) shall not apply to the extent that (1) in the case of an assignee Lender or a Participant or a change in the Lender's applicable lending office, the indemnity payments or additional amounts any Lender (or Participant) would be entitled to receive (without regard to this item (x)) do not exceed the indemnity payment or additional amounts that the Person making the assignment, participation, transfer or change in lending office would have been entitled to receive in the absence of such assignment, participation, transfer or change in lending office, or (2) such assignment, participation, transfer or change in lending office had been requested by the Borrower), (y) the obligation to pay such additional amounts would not have arisen but for a failure by such Non-U.S. Lender or Non-U.S. Participant to comply with the provisions of clause (d) or (z) any of the representations or certifications made by a Non-U.S. Lender or Non-U.S. Participant pursuant to clause (d) are incorrect at the time a payment hereunder is made, other than by reason of any change in treaty, law or regulation having effect after the date such representations or certifications were made. (f) If the Borrower determines in good faith that a reasonable basis exists for contesting any Taxes for which indemnification has been demanded hereunder, the relevant Lender (to the extent such Lender reasonably determines in good faith that it will not suffer any adverse effect as a result thereof) or the Administrative Agent, as applicable, shall cooperate with the Borrower in challenging such Taxes at the Borrower's expense if so requested by the Borrower in writing. If any Lender or the Administrative Agent, as applicable, receives a refund of a Tax for which a payment has been made by the Borrower pursuant to this Agreement, which refund in the good faith judgment of such Lender or the Administrative Agent, as the case may be, is attributable to the Borrower, then such Lender or the Administrative Agent, as the case may be, shall reimburse the Borrower for such amount as such Lender or the Administrative Agent, as the case may be, determines to be the proportion of the refund as will leave it, after such reimbursement, in no better or worse position than it would have been in if the payment had not been required. Neither the Lenders nor the Administrative Agent shall be obliged to disclose information regarding its tax affairs or computations to the Borrower in connection with this clause (f) or any other provision of this Section. (g) Promptly after the date of any payment by the Borrower of Taxes or Other Taxes, the Borrower shall furnish to each Lender and the Administrative Agent the original or a certified copy of a 62 64 receipt evidencing payment thereof, or other evidence of payment satisfactory to such Lender or the Administrative Agent. SECTION 4.7. Change of Lending Office. Each Lender agrees that, as promptly as practicable after it becomes aware of the occurrence of an event or the existence of a condition that would give rise to the operation of Section 4.1, 4.3 or clause (b) or (c) of Section 4.6 with respect to such Lender, it will exercise commercially reasonable efforts to make, fund or maintain the affected Loans of such Lender through another lending office and to take such other actions as it deems appropriate to remove or lessen the impact of such condition and if, as determined by such Lender in its sole discretion, the making, funding or maintaining of such affected Loans through such other lending office or the taking of such other actions would not otherwise adversely affect such Loans or such Lender and would not, in such Lender's sole discretion, be commercially unreasonable. Nothing in this Section 4.7 shall affect or postpone any of the Obligations of the Borrower or the right of any Lender provided in Section 4.1, 4.3 or clause (b) or (c) of Section 4.6. SECTION 4.8. Payments, Computations, etc. Unless otherwise expressly provided, all payments by the Borrower pursuant to this Agreement, the Notes, each Letter of Credit or any other Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 1:00 p.m., New York City time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower. Funds received after 3:30 p.m., New York City time, on such due date shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender. All computations of interest for LIBO Rate Loans and Base Rate Loans (calculated at the Federal Funds Rate) shall be made on the basis of a 360-day year and actual days elapsed. All other computations (including for interest on Base Rate Loans (calculated at other than the Federal Funds Rate) and fees) shall be made on the basis of a year or 365 or 366 days, as the case may be, and actual days elapsed. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of "Interest Period") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. SECTION 4.9. Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan or Reimbursement Obligation (other than pursuant to the terms of Section 4.3, 4.4, 4.5 or 4.6) in excess of its pro rata share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Credit Extensions made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to a fraction having a numerator of (x) the amount of such selling Lender's required repayment to the purchasing Lender and a denominator of (y) 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 that any Lender so purchasing a participation from another Lender pursuant to this 63 65 Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.10) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 4.10. Setoff. Each Lender shall, upon the occurrence and during the continuance of any Default described in clauses (a) through (d) of Section 8.1.9 or, with the consent of the Required Lenders, upon the occurrence and during the continuance of any other Event of Default, without prior notice to the Borrower (any such notice being waived by the Borrower to the fullest extent permitted by law), have the right to appropriate and apply to the payment of the Obligations then due and payable to it, any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender; provided, however, that any such appropriation and application shall be subject to the provisions of Section 4.9. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. SECTION 4.11. Notice of Certain Costs. Notwithstanding anything in this Agreement to the contrary, to the extent any notice required by Section 4.1, 4.3 or 4.6 is given by any Lender more than 180 days after such Lender has knowledge of the occurrence of the event giving rise to the additional cost, reduction in amounts, loss, tax or other additional amounts described in such Sections, such Lender shall not be entitled to compensation under Section 4.1, 4.3 or 4.6, as the case may be, for any such amounts incurred or accruing more than 180 days prior to the giving of such notice to the Borrower. ARTICLE V CONDITIONS TO CREDIT EXTENSIONS SECTION 5.1. Initial Credit Extensions. The obligations of the Lenders and, if applicable, the Issuer, to fund the initial Credit Extensions shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.1. SECTION 5.1.1. Resolutions, etc. The Administrative Agent shall have received from each Obligor, as applicable, (a) good standing certificates for each Obligor from the Secretary of State (or similar, applicable Governmental Authority) of such Obligor's state of incorporation; and (b) a certificate, dated the Closing Date and with counterparts for each Agent and copies for each Lender, duly executed and delivered by such Obligor's Secretary or Assistant Secretary, as to 64 66 (i) resolutions of each such Obligor's Board of Directors then in full force and effect authorizing, to the extent relevant, the execution, delivery and performance of this Agreement, the Notes, each other Loan Document to be executed by such Obligor and the Transaction; (ii) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Notes and each other Loan Document to be executed by such Obligor; and (iii) each Organizational Document of such Obligor, upon which certificates each Agent and each Lender may conclusively rely until it shall have received a further certificate of the Secretary or Assistant Secretary of any such Obligor canceling or amending the prior certificate of such Obligor. SECTION 5.1.2. Pledge Agreement. The Administrative Agent shall have received, with counterparts for each Lender, (a) the Pledge Agreement, dated the Closing Date, duly executed and delivered by an Authorized Officer of Surviving Regal, together with certificates evidencing all of the issued and outstanding shares of Capital Stock pledged pursuant to the Pledge Agreement (which shall include all of the issued and outstanding shares of Capital Stock of each direct Domestic Restricted Subsidiary (other than Clark-Regal) and 65% of the issued and outstanding shares of Capital Stock of each direct Foreign Subsidiary that is also a Material Restricted Subsidiary, if any, all as such direct Domestic Subsidiaries and direct Foreign Subsidiaries which are also Material Restricted Subsidiaries are listed on Schedule I to the Pledge Agreement), which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any securities subject thereto are uncertificated securities, confirmation and evidence satisfactory to the Agents that the control of such uncertificated securities has been transferred to, and the security interest therein has been perfected by, the Administrative Agent for the benefit of the Lenders in accordance with Section 9-115 of the Uniform Commercial Code, as in effect in the State of New York, and all laws otherwise applicable to the perfection of the pledge of such shares; and (b) the Agents and their counsel shall be satisfied that (i) the Lien granted to the Administrative Agent, for the benefit of the Agents, the Issuers and the Lenders, in the collateral described in clause (a) is a first priority security interest; and (ii) no Lien exists on any of the collateral described clause (a) other than the Lien created in favor of the Administrative Agent, for the benefit of the Agents, the Issuers and the Lenders, pursuant to the Pledge Agreement. SECTION 5.1.3. Guaranty. The Administrative Agent shall have received, with counterparts for each Lender, a Guaranty, dated the Closing Date, duly executed and delivered by an Authorized Officer of each direct and indirect Domestic Restricted Subsidiary (other than Clark-Regal). 65 67 SECTION 5.1.4. No Material Adverse Change. Except as may be disclosed by the financial statements referred to in clause (b) of Section 6.5., no material adverse change has occurred since January 2, 1998 with respect to the business, assets, operations, results of operations, properties, condition (financial or otherwise) or prospects of Old Regal and its Subsidiaries, taken as a whole. SECTION 5.1.5. Approvals. All necessary material governmental and third-party Approvals in connection with the Merger and the other transactions contemplated by the Merger Agreement and the execution, delivery and performance of this Agreement and the other Loan Documents shall have been duly obtained and all applicable waiting periods shall have expired without, in all such cases, any action being taken by any competent authority that restrains, prevents or imposes materially adverse conditions or material increased costs upon the consummation of the Merger or the Transaction. SECTION 5.1.6. Litigation. Neither the Borrower nor any Subsidiary shall be subject to any material litigation, governmental or administrative proceeding that would reasonably be expected to have a material adverse effect on the business, assets, operations, properties, financial condition or prospects of the Borrower and Subsidiaries, taken as whole, or on the ability of the parties to consummate the Merger and the Transaction. SECTION 5.1.7. Sponsor Fund Contributions. Each Merger Subsidiary shall have received its Sponsor Fund Contribution in the amount referred to in clause (a) of the second recital from its respective Sponsor or its Affiliates in cash in immediately available funds. SECTION 5.1.8. Additional Equity. The KKR Merger Subsidiary shall have received net cash proceeds of at least approximately $50,000,000 constituting the Additional Equity. SECTION 5.1.9. Consummation of Merger. Currently with the initial funding hereunder, pursuant to the Merger Agreement (which shall not have been amended nor shall any provision thereof have been waived by any party thereto, in each case unless such amendment or waiver is not adverse in any material respect to the interests of the Lenders) (a) a majority of the stockholders of Old Regal entitled to vote at the Special Meeting (as defined in the Proxy Statement) shall have approved the Merger in accordance with the Tennessee Business Corporation Act (which approval shall not have been rescinded or withdrawn); (b) the Merger (and the other transactions contemplated by the Merger Agreement) shall have been consummated in accordance with applicable law and pursuant to the Merger Agreement; (c) the Sponsors and their Affiliates shall have received pursuant to the Merger, Surviving Regal Preferred Shares and Surviving Regal Common Shares in the aggregate sufficient that the Sponsors and their Affiliates shall own in the aggregate approximately 93.2% of the Surviving Regal Preferred Shares and Surviving Regal Common Shares issued and outstanding after giving effect to the Transaction; (d) the Merger Consideration shall have been transferred to the paying agent appointed pursuant to the Merger Agreement (the "Exchange Agent") to be paid as the Merger Consideration for the Old Regal Shares (the "Exchange Fund"); and 66 68 (e) the Additional Investor shall have received, pursuant to the Merger, Surviving Regal Preferred Shares and Surviving Regal Common Shares. SECTION 5.1.10. Issuance of 9 1/2% Subordinated Notes. Surviving Regal shall have (w) duly authorized, executed and delivered the 9 1/2% Subordinated Note Indenture in substantially the form of the draft thereof dated May 26, 1998 furnished to the Lenders in connection with the execution and delivery of this Agreement, (x) issued pursuant thereto to the initial purchasers at 99.831% of par 9 1/2% Subordinated Notes in an aggregate original principal amount of at least $400,000,000, (y) received from the initial purchasers thereof net proceeds of at least $399,324,000 in immediately available funds and (z) delivered to the Administrative Agent true and correct copies of certificates, documents, agreements, consents and opinion letters furnished pursuant to or in connection therewith, the terms and conditions of which shall be consistent with the 9 1/2% Subordinated Note Offering Memorandum. SECTION 5.1.11. Offer to Purchase, etc. Pursuant to the Offer to Purchase, Surviving Regal shall have (x) purchased at least $120,000,000 aggregate outstanding principal amount of the Old Regal 8 1/2% Subordinated Notes and (y) entered into with the trustee under the Old Regal 8 1/2% Subordinated Note Indenture a supplemental indenture substantially as described in the Offer to Purchase or otherwise satisfactory as to terms material to the Lenders in form and substance to the Agents. SECTION 5.1.12. Payment of Outstanding Indebtedness, etc. All Indebtedness identified in Item 7.2.1(b) ("Indebtedness to be Paid") of the Disclosure Schedule, together with all interest, all prepayment premiums and other amounts due and payable with respect thereto, shall have been paid in full from or, as the case may be, defeased with the proceeds of the initial Credit Extensions and the commitments in respect of such Indebtedness shall have been terminated, and all Liens securing payment of any such Indebtedness have been released and the Administrative Agent shall have received all Uniform Commercial Code Form UCC-3 termination statements or other instruments as may be suitable or appropriate in connection therewith. SECTION 5.1.13. Total Equity Capitalization, etc. After giving effect to the Merger and the Transaction, (a) the total equity capitalization of the Borrower (including the Sponsor Fund Contributions, the Additional Equity and the Management Roll-Over) shall be at least $790,000,000; (b) the Borrower and Subsidiaries shall have outstanding no Indebtedness other than (w) Indebtedness under this Agreement, (x) Old Regal 8 1/2% Subordinated Notes in an aggregate outstanding principal amount not to exceed $1,000,000, (y) the 9 1/2% Subordinated Notes and (z) other Indebtedness existing on the Closing Date and permitted to be outstanding Section 7.2.1 (other than clauses (g), (h), (k) and (n)); and (c) the Pro Forma Balance Sheet shall be accurate and complete in all material respects. SECTION 5.1.14. Solvency. The Administrative Agent shall have received, with counterparts for each Lender, a letter, dated the Closing Date, from Houlihan, Lokey, Howard & Zukin as to the solvency of Surviving Regal and Subsidiaries, taken as a whole after giving effect to the Merger and the Transaction in the form of Exhibit G hereto. 67 69 SECTION 5.1.15. Closing Date Certificate. The Administrative Agent shall have received, with copies for each Lender, the Closing Date Certificate, dated the Closing Date, duly executed and delivered by an Authorized Officer of Surviving Regal, in which certificate Regal shall agree and acknowledge that the statements made therein shall be deemed to be true and correct representations and warranties in all material respects of the Borrower made as of the Closing Date and under this Agreement, and, at the time such certificate is delivered, such statements shall in fact be true and correct in all material respects. All documents and agreements required to be appended to the Closing Date Certificate (which shall include true and complete, as certified in such certificate, copies of the Merger Agreement, the Offer to Purchase, the Proxy Statement, the Syndication Memorandum, the 9 1/2% Subordinated Note Offering Memorandum, the 9 1/2% Subordinated Note Indenture and any tax sharing agreement) shall be in form and substance reasonably satisfactory to each Agent and such certificate shall specify that none of such documents or agreements have been modified except as set forth in such certificate. SECTION 5.1.16. Opinions of Counsel. The Administrative Agent shall have received opinions, dated the date of the initial Credit Extensions and addressed to each Agent, each Lender and the Issuer, from (a) Simpson Thacher & Bartlett, special counsel to the Obligors, substantially in the form of Exhibit J-1 hereto; and (b) Wagner, Myers and Sanger, P.C., counsel to the Borrower and each of the other Obligors, substantially in the form of Exhibit J-2 hereto. SECTION 5.1.17. Closing Fees, Expenses, etc. The Administrative Agent shall have received evidence of payment by the Borrower of (x) all accrued and unpaid fees, costs and expenses to the extent then due and payable under this Agreement or the Fee Letters and (y) all reasonable and documented legal costs and expenses of the Agents to the extent then or theretofore invoiced prior to the Closing Date, including any such fees, costs and expenses arising under or referenced in Sections 3.3 and 10.3. SECTION 5.2. All Credit Extensions. The obligation of each Lender and the Issuer to make any Credit Extension (including the initial Credit Extensions) shall be subject to Sections 2.1.4 and 2.1.5 and the satisfaction of each of the conditions precedent set forth in this Section 5.2. SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before and after giving effect to any Credit Extension: (a) the representations and warranties set forth in Article VI and in each other Loan Document shall, in each case, be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date); and (b) no Default shall have then occurred and be continuing. SECTION 5.2.2. Credit Extension Request, etc. Subject to Sections 2.3.1, 2.3.2 and 2.6.2, the Administrative Agent shall have received a Borrowing Request if Loans are being requested, or an Issuance Request if a Letter of Credit is being requested or extended. Each of the delivery of a Borrowing Request or Issuance Request, the giving of telephonic notice pursuant to Sections 2.3.1 and 2.3.2 and the deemed making of a request for a Swing Line Loan as set forth in Section 2.6.2 and the acceptance by the 68 70 Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct in all material respects. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Lenders, the Issuer and each Agent to enter into this Agreement and to make Credit Extensions hereunder, the Borrower represents and warrants unto each Agent, the Issuer and each Lender as set forth in this Article VI. SECTION 6.1. Organization, etc. Each Obligor: (a) is a corporation or limited partnership validly organized and existing and in good standing under the laws of the state or jurisdiction of its incorporation or organization; (b) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification; and (c) has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes and each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially as currently conducted by it, except with respect to each Material Restricted Subsidiary and each other Obligor other than the Borrower, and, in the case of clause (b), with respect to the Borrower and each Material Restricted Subsidiary and each other Obligor, to the extent that the failure of which could not reasonably be expected to have a Material Adverse Effect. SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Borrower of this Agreement, the Notes and each other Loan Document executed or to be executed by it, the execution, delivery and performance by each other Obligor of each Loan Document executed or to be executed by it, the granting of the Liens contemplated by the Pledge Agreement, the consummation of the Merger and the Transaction, and the Borrower's, each Material Restricted Subsidiary's and each other Obligor's participation in the consummation of all aspects of the Transaction, are in each case within each such Person's corporate or partnership powers, have been duly authorized by all necessary corporate or partnership action, and do not (a) contravene any such Person's Organizational Documents; (b) contravene any material Contractual Undertaking binding on or affecting any such Person or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under the terms of any material Contractual Undertaking to which the Borrower or any of the Restricted Subsidiaries is a party or by which it or any of its property or assets is bound; 69 71 (c) contravene any material Applicable Law; or (d) result in, or require the creation or imposition of, any Lien on any of such Person's material properties (except as permitted by this Agreement). SECTION 6.3. Government Approval, Regulation, etc. No Approval by any Governmental Authority and no authorization, approval or other action by, or notice or other filing with, any other Person (other than those that have been, or on the Closing Date will be, duly obtained or made and which are, or on the Closing Date will be, in full force and effect and other than those, singly or in the aggregate, with respect to which the failure to obtain or make could not reasonably be expected to have a Material Adverse Effect) is necessary or required for the consummation of the Transaction or the due execution, delivery or performance by, or enforcement against, the Borrower or any other Obligor of this Agreement, the Notes or any other Loan Document to which it is a party or the granting of the Liens contemplated by the Pledge Agreement or as of the Closing Date, the consummation of the Transaction. Neither the Borrower nor any other Obligor nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 6.4. Validity, etc. This Agreement constitutes, and the Notes and each other Loan Document, executed by the Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms; and each other Loan Document executed pursuant hereto by each other Obligor will, on the due execution and delivery thereof by such Obligor, constitute the legal, valid and binding obligation of such Obligor enforceable against such Obligor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and by principles of equity. SECTION 6.5. Financial Information. The following financial information previously furnished by or on behalf of the Borrower to the Administrative Agent, the Issuer and the Lenders: (a) the audited consolidated balance sheets as of January 2, 1997 and January 1, 1998, and the consolidated statements of income, changes in shareholders' equity and cash flows for each of the three Fiscal Years in the period ended January 1, 1998, certified by Coopers & Lybrand, (b) the summary unaudited consolidated financial data for each of the five Fiscal Years in the period ended January 1, 1998 and for 1997 FQ 1 and 1998 FQ 1 set forth in the 9 1/2% Subordinated Note Offering Memorandum, (c) the unaudited pro forma consolidated balance sheet of Surviving Regal and its Subsidiaries as of April 2, 1998, assuming that the Merger and the Transaction had occurred on such date (the "Pro Forma Balance Sheet"), set forth in the 9 1/2% Subordinated Note Offering Memorandum, and (d) the unaudited pro forma consolidated statement of operations of Surviving Regal and its Subsidiaries for the 1997 FQ 1, the 1998 FQ 1 and for the Fiscal Year ended January 1, 1998, and the summary unaudited pro forma financial data of Surviving Regal and its Subsidiaries for the Fiscal Year ending January 1, 1998, for 1997 FQ 1 and 1998 FQ 1 and for the 12 month period ending April 2, 1998, all assuming that the Merger and the Transaction had occurred on January 3, 1997 and as set forth in the 9 1/2% Subordinated Note Offering Memorandum, 70 72 have been prepared (to the extent GAAP may be applied to such preparation) in accordance with GAAP consistently applied, except as otherwise expressly noted therein and subject to normal year-end audit adjustments, and present fairly in all material respects (subject, however, in the case of pro forma financial information specified therein, including as to the occurrence of the Merger and the Transaction at an earlier date) the consolidated financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended. All balance sheets, all statements of operations, shareholders' equity, earnings and cash flow and all other financial information of each of the Borrower and Subsidiaries furnished pursuant to Section 7.1.1 will for periods following the Closing Date be prepared in accordance with GAAP consistently applied, except as otherwise expressly noted therein and subject to normal year-end audit adjustments, and do or will present fairly in all material respects the consolidated financial condition of the Persons covered thereby as at the dates thereof and the results of their operations for the periods then ended. SECTION 6.6. No Material Adverse Change. Except as may be disclosed in the financial statements referred to in clause (a) of Section 6.5 or in the Syndication Memorandum, there has been no Material Adverse Change since January 2, 1998. SECTION 6.7. Litigation, etc. There is no pending or, to the knowledge of the Borrower, threatened litigation, action or proceeding affecting the Borrower or any Subsidiary which could reasonably be expected to have a Material Adverse Effect, except as disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule. SECTION 6.8. Subsidiaries. On the Closing Date, the Borrower will have no Subsidiaries, except those Subsidiaries which are identified in Item 6.8 ("Existing Subsidiaries") of the Disclosure Schedule (and each Material Restricted Subsidiary as of the Closing Date has been so designated therein). SECTION 6.9. Ownership of Properties. The Borrower and each Material Restricted Subsidiary has good title to, or leasehold interests in, all of its properties that are necessary for the operation of their respective businesses as currently conducted and proposed to be conducted, free and clear of all Liens or claims, except (x) for Liens permitted pursuant to Section 7.2.2 and (y) where the failure to have such good title or leasehold interests could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the Borrower and Material Restricted Subsidiaries owns or are licensed or otherwise have the right to use all of the trademarks, copyrights, patents, licenses and other rights that are reasonably necessary for the operation of each of their respective businesses, without, to the knowledge of the Borrower, conflict with the rights of any other Person and free of burdensome restrictions, except where the failure to have any such rights could not reasonably be expected to have a Material Adverse Effect. SECTION 6.10. Taxes. The Borrower, the Restricted Subsidiaries and all other Persons with whom the Borrower or any Restricted Subsidiary joins in the filing of a consolidated tax return have filed all Federal income tax returns and other material tax returns and reports, domestic and foreign, required by Applicable Law to have been filed, and have paid all material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable except those not yet delinquent, those which are being contested in good faith or those for which the unpaid amount, in the aggregate, is not significant. The Borrower, each Restricted Subsidiary and each such other Person with whom the Borrower or any Restricted Subsidiary joins in the filing of a consolidated tax return have paid, or have provided adequate reserves (in the good faith judgement of the management of the Borrower) in accordance with GAAP for the payment of all such material taxes, 71 73 assessments, fees and charges relating to all prior taxable years and the current taxable year of the Borrower, each Restricted Subsidiary and each such other Person with whom the Borrower or any Restricted Subsidiary joins in the filing of a consolidated tax return. To the best knowledge of the Borrower, there is no proposed tax assessment against the Borrower or any Subsidiary or any such other Person with whom the Borrower or any Subsidiary joins in the filing of a consolidated tax return that could reasonably be expected to have a Material Adverse Effect. SECTION 6.11. ERISA Compliance. Except as specifically disclosed in Item 6.11 ("Employee Benefit Plans") of the Disclosure Schedule: (a) Each Plan is in compliance in all material respects with the terms thereof and the applicable provisions of ERISA, the Code and other federal or state law except to the extent that failure to comply would not result, individually or in the aggregate, in an amount of liability that could reasonably be expected to have a Material Adverse Effect. The Borrower and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the best knowledge of Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Pension Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. (c) (x) No ERISA Event has occurred or is reasonably expected to occur; and (y) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could reasonably be expected to be subject to Section 4069 or 4212(c) of ERISA and could reasonably be expected to have a Material Adverse Effect. SECTION 6.12. Compliance with Environmental Laws. The Borrower and each Subsidiary is in compliance with all applicable Environmental Laws in respect of the conduct of its business and the ownership of its property, except such noncompliance as could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Without limiting the effect of the preceding sentence: (a) neither the Borrower nor any Subsidiary has received a complaint, order, citation, notice or other written communication with respect to the existence or alleged existence of a violation of, or liability arising under, any Environmental Law, the outcome of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (b) to the best of the Borrower's knowledge, after due inquiry, there are no environmental, health or safety conditions existing or reasonably expected to exist at any real property owned, operated, leased or used by the Borrower or any existing or former Subsidiary including off-site treatment or disposal facilities used by the Borrower or its existing or former Subsidiaries or any of their respective predecessors, for wastes treatment or disposal, which could reasonably be expected to require any construction or other capital costs or clean-up obligations to be incurred prior to the Stated Maturity Date for all Term C Loans in order to assure compliance with any Environmental Law, including provisions regarding clean-up, to the extent that any of such conditions, construction or other capital costs or clean-up obligations, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and 72 74 (c) neither the Borrower nor any current or former Subsidiary has treated, stored, transported or disposed of Hazardous Materials at or from any currently or formerly owned Real Estate or facility in a manner that could reasonably be expected to have a Material Adverse Effect. SECTION 6.13. Regulations U and X. Neither the Borrower nor any Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no use of any proceeds of any Credit Extensions will violate F.R.S. Board Regulation U or X. Terms for which meanings are provided in F.R.S. Board Regulation U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 6.14. Year 2000 Compliance. The Borrower does not believe that the risk that the computer applications of the Borrower and its Subsidiaries may not be able to perform properly date sensitive functions after December 31, 1999 could reasonably be expected to cause a Material Adverse Effect. SECTION 6.15. Accuracy of Information. (a) All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of the Borrower or any Subsidiary in writing to any Agent, the Issuer or any Lender on or before the Closing Date (including (v) the Offer to Purchase, (w) the Proxy Statement, (x) the Syndication Memorandum, (y) the 9 1/2% Subordinated Note Offering Memorandum and (z) all information contained in the Loan Documents) for purposes of or in connection with this Agreement or Transaction is true and complete in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided, it being understood and agreed that for purposes of this clause (a), such factual information shall not include projections and pro forma financial information. (b) The projections contained in the factual information referred to in clause (a) were or are based on good faith estimates and assumptions believed to be reasonable at the time made, it being recognized by the Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ significantly from the projected results. ARTICLE VII COVENANTS SECTION 7.1. Affirmative Covenants. The Borrower agrees with each Agent, the Issuer and each Lender that, until all Commitments have terminated, all Letters of Credit have terminated or expired and all Obligations have been paid and performed in full, the Borrower will perform or cause to be performed the obligations set forth in this Section 7.1. SECTION 7.1.1. Financial Information, Reports, Notices, etc. The Borrower will furnish, or will cause to be furnished to the Administrative Agent for distribution to each Lender and the Issuer copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year (commencing on the last day of 1998 FQ 3), unaudited 73 75 consolidated balance sheets of the Borrower and Restricted Subsidiaries and, to the extent available, unaudited consolidated balance sheets of the Borrower and Subsidiaries, in each case as of the end of such Fiscal Quarter and unaudited consolidated statements of earnings and cash flow of the Borrower and Restricted Subsidiaries and, to the extent available, unaudited consolidated statements of earnings and cash flow of the Borrower and Subsidiaries, in each case for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, certified by a Responsible Officer of the Borrower as fairly presenting in all material respects, in accordance with GAAP (subject to year-end audit adjustments), the financial position and results of operations of the Borrower and Subsidiaries covered thereby as of the date thereof; (b) as soon as available and in any event within (x) 90 days after the end of Fiscal Year 1998 and (y) 120 days after the end of each Fiscal Year other than Fiscal Year 1998, a copy of the annual audited financial statements for such Fiscal Year for the Borrower and Restricted Subsidiaries, including therein consolidated balance sheets of the Borrower and Restricted Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Borrower and Restricted Subsidiaries for such Fiscal Year, in each case as audited (without any Impermissible Qualification) by a nationally recognized independent public accounting firm, together in any event with a certificate of such accounting firm stating that in the course of its regular audit of the business of the Borrower and Restricted Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge of any Default or Event of Default relating to clause (a) or (b) of Section 7.2.3 that has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof; (c) within 45 days following the end of any 1998 FQ, a Compliance Certificate, executed by a Responsible Officer of the Borrower, showing in reasonable detail, including with respect to appropriate calculations and computations, the Total Leverage Ratio for the purpose of determining the Applicable Commitment Fee and the Applicable Margin for each Loan, and concurrently with the financial information delivered pursuant to clause (a) or (b), (i) a Compliance Certificate, executed by a Responsible Officer of the Borrower, showing in reasonable detail, including with respect to appropriate calculations and computations, (w) pro forma calculations showing the effect of Permitted Acquisitions proposed to be made during the succeeding Fiscal Quarter, (x) the identity of all Permitted Ongoing Reinvestment Projects which shall have been publicly announced or disclosed or as to which permitting or construction activity shall have commenced during the prior Fiscal Quarter, (y) compliance with the financial covenants set forth in Section 7.2.3 and (z) the Total Leverage Ratio for the purpose of determining the Applicable Commitment Fee and the Applicable Margin for each Loan, and (ii) financial statements prepared on a pro forma basis (x) assuming each Permitted Acquisition consummated during the Test Period relating to the financial statements then being delivered pursuant to clause (a) or (b) had been consummated on the first day of such Test Period and (y) otherwise consistent with the proviso to the definition of the term "Adjusted EBITDA", together with a pro forma Compliance Certificate based thereon executed by the chief executive, financial or accounting Authorized Officer of the Borrower; 74 76 (d) promptly after any Responsible Officer of the Borrower or any Restricted Subsidiary obtains knowledge of the occurrence of a Default (including any default, or event which after notice or lapse of time or both would constitute a default, under any Subordinated Debt), a statement of a Responsible Officer of the Borrower setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto; (e) promptly after any Responsible Officer of the Borrower or any Restricted Subsidiary obtains knowledge of (x) the occurrence of any material adverse development with respect to any litigation, action, proceeding or labor controversy or (y) the commencement of any litigation, action, proceeding or labor controversy, in each case to the extent the same, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, notice thereof; (f) promptly after any receipt of any notice of acceleration, redemption or purchase demands or other similar notices provided by the holder of or the trustee for the 9 1/2% Subordinated Notes or any other Subordinated Debt, notice thereof and copies of all documentation relating thereto; (g) promptly upon filing thereof, copies of any reports filed on Forms 10-K, 10-Q, and 8-K, effective registration statements filed on Forms S-1, S-2, S-3 and S-4, and any proxy statements, as well as any substitute or similar documents to substantially the same effect as the foregoing, including, to the extent requested by the Administrative Agent, the schedules and exhibits thereto, in such each case as filed with the SEC by the Borrower or any Restricted Subsidiary (other than immaterial amendments to any such registration statement); (h) promptly after transmission thereof, copies of any notices of reports that the Borrower or any Subsidiary shall send to the holders of any publicly issued debt of the Borrower (including any Subordinated Debt) or any Subsidiary in their capacity as such holders (in each case to the extent not theretofore delivered to the Administrative Agent or the Lenders pursuant to this Agreement); (i) promptly after a Responsible Officer of the Borrower or any Restricted Subsidiary obtains knowledge of the occurrence of any ERISA Event (but in no event, in the case of an ERISA Event described in clause (u) of the definition of "ERISA Event", more than 10 days, and in the case of any other ERISA Event, 30 days after such Responsible Officer obtains knowledge of such ERISA Event), notice thereof together with a copy of any notice with respect to such event that is filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Borrower or any ERISA Affiliate with respect to such event; (j) promptly when available and in any event within 60 Business Days after the end of each Fiscal Year (ending after the Closing Date), a budget for the then current Fiscal Year as customarily prepared by the management of the Borrower for its internal use, which budget shall be prepared on a Fiscal Quarter basis and shall set forth the principal assumptions on which such budget is based; (k) promptly after obtaining knowledge of any one or more of the following environmental matters, unless such environmental matters would not, individually or when aggregated with all other such matters, be reasonably expected to result in a Material Adverse Effect, notice of: 75 77 (i) any pending or threatened Environmental Claim against the Borrower or any Subsidiary or any Real Estate, (ii) any condition or occurrence on any Real Estate that (x) results in noncompliance by the Borrower or any Subsidiary with any applicable Environmental Law or (y) could reasonably be anticipated to form the basis of an Environmental Claim against the Borrower or any Subsidiary or any Real Estate, (iii) any condition or occurrence on any Real Estate that could reasonably be anticipated to cause such Real Estate to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Estate under any Environmental Law, and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Estate, all such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the Borrower's response thereto; and (l) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any Subsidiary as any Agent, or the Required Lenders through the Administrative Agent, may from time to time reasonably request in writing. SECTION 7.1.2. Preservation of Corporate Existence, etc. The Borrower will, and will cause each Restricted Subsidiary to: (a) preserve and maintain in full force and effect its corporate or partnership existence under the laws of its state or jurisdiction of incorporation or organization (provided, however, that the Borrower and Restricted Subsidiaries may consummate any transaction permitted under Section 7.2.6), except, in the case of any such Restricted Subsidiary, to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) preserve and maintain in full force and effect its good standing under the laws of its state or jurisdiction of incorporation or organization and all material governmental rights, privileges, qualification, permits, licenses and franchises necessary in the normal conduct of its business except in each case to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. SECTION 7.1.3. Maintenance of Properties. The Borrower will, and will cause each Restricted Subsidiary to, ensure that its properties and equipment used or useful in its business, in whomsoever's possession they may be to the extent that it is within the Borrower's or such Restricted Subsidiary's control to cause same, are kept in good repair, working order and condition, normal wear and tear excepted, and that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, to the extent and in the manner customary for companies in similar businesses and consistent with third-party leases, except in each case to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect. 76 78 SECTION 7.1.4. Payment of Taxes. The Borrower will, and will cause each Subsidiary to, pay and discharge all material taxes, assessments and governmental charges or levies upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which material penalties attach thereto, and all lawful material claims that, if unpaid, could reasonably be expected to become a material Lien upon any properties of the Borrower or any Restricted Subsidiary; provided, however, that neither the Borrower nor any Subsidiary shall be required hereunder to pay any such tax, assessment, charge, levy or claim that is being contested in good faith if it has maintained adequate reserves (in the good faith judgment of the management of the Borrower or such Subsidiary) with respect thereto in accordance with GAAP. SECTION 7.1.5. Compliance with Statutes, etc. The Borrower will, and will cause each Subsidiary to comply, in all material respects, with all Applicable Laws (including Environmental Laws) having jurisdiction over it or its business, except such as may be contested in good faith or as to which a bona fide dispute may exist or except to the extent that the failure to so comply could not reasonably be expected to have a Material Adverse Effect. SECTION 7.1.6. Insurance. The Borrower shall, and shall cause each Restricted Subsidiary to, at all times maintain in full force and effect, with insurance companies which the Borrower believes (in the good faith judgment of the management of the Borrower) are financially sound and responsible at the time the relevant coverage is placed or renewed, insurance with respect to its properties and business (including business interruption insurance) against such casualties and contingencies and of such types and in such amounts, and with such deductibles, retentions, self-insured amounts and reinsurance provisions, as are customarily maintained by companies engaged in the same or similar businesses and will, upon request of the Administrative Agent, furnish to each Lender information presented in reasonable detail as to the insurance maintained by the Borrower and Restricted Subsidiaries. SECTION 7.1.7. Inspection Of Property and Books and Records. The Borrower will, and will cause each Restricted Subsidiary to, permit officers and designated representatives of the Agents or the Required Lenders, upon reasonable advance notice and at reasonable times and intervals, to visit and inspect any of its properties or its assets, to discuss its financial matters with its officers and independent public accountant and to examine (and, at the expense of the Borrower, photocopy extracts from) any of its books or other corporate records, provided, that, the Borrower shall be given reasonable prior notice of any such contact with such officers or accountants and shall have the right (which, if not exercised, does not otherwise affect the obligations hereunder) to participate in such discussions. The Borrower shall pay any fees of such independent public accountant incurred in connection with such Agent's or any Lender's reasonable exercise of its rights pursuant to this Section. SECTION 7.1.8. Future Subsidiaries. Upon (w) any Person becoming, after the Closing Date, a Subsidiary of the Borrower (other than any Unrestricted Subsidiary), (x) the Borrower acquiring additional Capital Stock of any existing Restricted Subsidiary the Capital Stock of which is then pledged under the Pledge Agreement, (y) any indirect Restricted Subsidiary becoming a direct Restricted Subsidiary or (z) any Unrestricted Subsidiary being designated as a Restricted Subsidiary, the Borrower shall notify the Agents of such event, and, unless otherwise agreed to among the Borrower, the Agents and the Required Lenders, (a) such Person shall, if it is a Domestic Restricted Subsidiary and not theretofore a party to the Guaranty, execute and deliver to the Administrative Agent a supplement to the Guaranty in the form of Annex I thereto for the purposes of becoming a guarantor thereunder; 77 79 (b) the Borrower shall, if such Person is a direct Domestic Restricted Subsidiary of the Borrower or a direct Foreign Subsidiary which is a Material Restricted Subsidiary, pledge to the Administrative Agent pursuant to the Pledge Agreement all of the outstanding shares of Capital Stock of such Subsidiary owned directly by it (provided, however, that, in the event such Subsidiary is a Foreign Subsidiary, the Borrower shall not be required to pledge more than 65% of the outstanding shares of the Capital Stock of such Subsidiary), along with undated stock powers for such certificates, executed in blank (or, if any such shares of capital stock are uncertificated, confirmation and evidence satisfactory to the Agents that the control of such uncertificated securities has been transferred to, and the security interest therein has been perfected by, the Administrative Agent, for the benefit of the Lenders, the Agents and the Issuer, in accordance with Section 9-115 of the U.C.C. or any other similar law which may be applicable); and (c) if and to the extent required by clause (g)(iii) or (k)(ii) of Section 7.2.1, such Subsidiary shall secure its Obligations under the Guaranty by executing and delivering to the Administrative Agent security instruments satisfactory to the Administrative Agent and taking all such further actions as may reasonably be required by the Administrative Agent so as to create in favor of the Administrative Agent a pari passu Lien on all assets of such Subsidiary in which a Lien shall continue in existence pursuant to clause (e) or (f) of Section 7.2.2; provided, however, that the Borrower may, by notice to the Administrative Agent on the date of any Permitted Acquisition, elect to exclude the Restricted Subsidiary so becoming a Restricted Subsidiary (and elect to continue so to exclude any Restricted Subsidiaries previously so designated in a notice delivered pursuant to this proviso) from the requirements of this Section if such Restricted Subsidiary has no Contingent Liability in respect of any Subordinated Debt and the aggregate outstanding principal amount of all other Indebtedness of such Restricted Subsidiary outstanding pursuant to clause (g) (excluding, however, Permitted Acquisition Come-Along Indebtedness, Permitted Acquisition Subordinated Indebtedness and Permitted Acquisition Ordinary Course Indebtedness) and (k) of Section 7.2.1 is at least $10,000,000 and does not exceed, together with the aggregate outstanding principal amount of all such Indebtedness of all other such Restricted Subsidiaries continuing to be so designated, $50,000,000 (it being understood that the Borrower shall comply on the date of delivering a notice pursuant to this proviso with the requirements of this Section as to any Restricted Subsidiary (x) which shall have been so designated in such a notice previously delivered pursuant to this proviso and (y) which shall not continue to be so designated in such notice). SECTION 7.1.9. Use of Proceeds. The Borrower shall apply the proceeds of the Credit Extensions (a) to finance the Merger (and the other transactions contemplated by the Merger Agreement); (b) to complete the Offer to Purchase and to repay or, as the case may be, defease the Indebtedness identified in Item 7.2.1(b) ("Indebtedness to be Paid") of the Disclosure Schedule; (c) for working capital and general corporate purposes of the Borrower and Restricted Subsidiaries, including Permitted Acquisitions by such Persons; and (d) to pay Transaction Costs. 78 80 SECTION 7.1.10. Transactions with Affiliates. The Borrower shall, and shall cause each Restricted Subsidiary to, conduct all transactions with any of its Affiliates (other than the Borrower and Restricted Subsidiaries) upon terms that are substantially as favorable to the Borrower or such Restricted Subsidiary as it would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Borrower or such Restricted Subsidiary; provided, however, that the foregoing restrictions shall not apply to (a) the payment of customary annual fees and reimbursement of expenses to the Sponsors and their Affiliates for management, consulting and financial services rendered to the Borrower and Restricted Subsidiaries, and customary investment banking fees paid to the Sponsors and their Affiliates for services rendered to the Borrower or to Restricted Subsidiaries in connection with divestitures, acquisitions, financings and other transactions; (b) customary fees paid to members of the Board of Directors of the Borrower and any Restricted Subsidiary; and (c) the performance of the management agreements entered into with the Borrower identified in Item 7.1.10 ("Management Agreements with the Borrower") of the Disclosure Schedule; and (d) employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith. SECTION 7.1.11. Business Activities. The Borrower will, and will cause each Restricted Subsidiary to, engage primarily in the business referred to in the first recital or such other activities as are reasonably related, incidental or substantially similar thereto. SECTION 7.1.12. End of Fiscal Year. The Borrower will, for financial reporting purposes, cause each of its, and each Domestic Restricted Subsidiary's, Fiscal Years to end on the Thursday which is the closest to each December 31; provided, however, that the Borrower may, upon prior notice to the Administrative Agent, change the last day of its Fiscal Year to any other date reasonably acceptable to the Administrative Agent, in which case the Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary in order to reflect such change in financial reporting. SECTION 7.2. Negative Covenants. The Borrower agrees with each Agent, the Issuer and each Lender that, until all Commitments have terminated, all Letters of Credit have terminated or expired and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 7.2. SECTION 7.2.1. Indebtedness. The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Credit Extensions and other Obligations; 79 81 (b) until the date of the initial Credit Extension, Indebtedness identified in Item 7.2.1(b) ("Indebtedness to be Paid") of the Disclosure Schedule; (c) Indebtedness existing as of the Effective Date which is identified in Item 7.2.1(c) ("Ongoing Indebtedness") of the Disclosure Schedule; (d) unsecured Indebtedness incurred in the ordinary course of business of the Borrower and Restricted Subsidiaries (consisting of open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services and Indebtedness in respect of performance, surety or appeal bonds provided in the ordinary course of business, but excluding, however, Indebtedness incurred through the borrowing of money and Contingent Liabilities in respect thereof); (e) Indebtedness in respect of Capitalized Lease Liabilities (other than any Indebtedness permitted by clauses (i) or (g)) at any time not exceeding $50,000,000; (f) unsecured Indebtedness between the Borrower and Restricted Subsidiaries and unsecured Indebtedness between Restricted Subsidiaries; (g) Indebtedness of a Person existing at the time of its becoming an Acquired Person as a result of a Permitted Acquisition; provided, however, that (i) such Indebtedness existed at the time such Person became an Acquired Person or at the time such assets were acquired and, in each case, was not created in anticipation thereof, (ii) such Indebtedness is not guaranteed in any respect by the Borrower or any other Restricted Subsidiary (other than any other Acquired Person which was the parent or a Subsidiary of the Person so being acquired and it being understood that a merger does not constitute a guarantee), (iii) if such Person becomes a Restricted Subsidiary, concurrently therewith, the requirements of Section 7.1.8 are satisfied to the extent required thereby, and (iv) if such Indebtedness subordinates the rights of the holders thereof to any other creditors, such Indebtedness qualifies as Permitted Acquisition Subordinated Indebtedness; (h) unsecured Subordinated Debt of the Borrower; (i) Indebtedness (including Indebtedness constituting Capitalized Lease Liabilities) incurred by the Borrower or any Restricted Subsidiary specifically to finance the acquisition, improvement or construction of fixed or capital assets of a particular motion picture theatre and its directly related assets which (x) is incurred substantially concurrently therewith or within 270 days prior to or after the completion thereof and (y) either (1) is secured by a Lien permitted by clause (d)(iii) of Section 7.2.2 or (2) has the benefit of a covenant which restricts the Borrower or such Restricted Subsidiary from liening, mortgaging or otherwise disposing of such asset (or any or all assets comprising such motion picture theatre and its directly related assets and up to four additional motion picture theatres and their directly related assets); 80 82 (j) Indebtedness in respect of Hedging Liabilities of the Borrower or any Restricted Subsidiary incurred in the ordinary course of business and not for speculative purposes (as determined in good faith by the Borrower); (k) Indebtedness of the Borrower or any Restricted Subsidiary incurred to finance a Permitted Acquisition; provided, however, that (i) such Indebtedness is not guaranteed in any respect by any other Restricted Subsidiary (other than any Person which as a result of such Permitted Acquisition becomes an Acquired Person) or, in the case of Indebtedness of any Restricted Subsidiary, by the Borrower (it being understood that a merger does not constitute a guarantee), and (ii) concurrently therewith, the requirements of Section 7.1.8 are satisfied to the extent required thereby; (l) any refinancing, refunding, renewal or extension of any Indebtedness permitted under clauses (c) through (g) and (i) through (k); provided, however, that (x) the principal amount thereof is not increased above the principal amount thereof outstanding immediately prior to such refinancing, refunding, renewal or extension (except to the extent otherwise permitted under this Section) and (y) the direct and contingent obligors with respect to such Indebtedness are not changed unless permitted under the applicable provisions hereof; (m) Contingent Liabilities of the Borrower or any Restricted Subsidiary (i) in respect of any Indebtedness which is (x) permitted by any other clause of this Section to be incurred by the Borrower or any other Restricted Subsidiary and (y) which, by the terms of such other clause, is not restricted from being guaranteed by the Borrower or Restricted Subsidiaries (provided, however, that the Contingent Liability of a Restricted Subsidiary in respect of any Subordinated Debt of the Borrower shall be subordinated to such Restricted Subsidiary's Guaranty on terms identical to the terms of the subordination of the Borrower's obligations in respect of such Subordinated Debt to the Obligations), and (ii) in respect of any Indebtedness of other Persons (including in Unrestricted Subsidiaries), but only if such Contingent Liability (x) is incurred when the Total Leverage Ratio as of the last day of the most recently ended Fiscal Quarter was greater than 4.0:1.0 and (y) was permitted to have been made as an Investment pursuant to clause (h) of Section 7.2.4; (n) additional Indebtedness in an aggregate principal amount not exceeding $125,000,000 at any time outstanding; and (o) Indebtedness of Surviving Regal to former stockholders of Old Regal in respect of Merger Consideration, including after the release by the Exchange Agent of the Exchange Fund; provided, however, that (x) the sum of (1) the aggregate outstanding principal amount of all Indebtedness permitted by clauses (g) (excluding, however, Permitted Acquisition Ordinary Course Indebtedness, Permitted Acquisition Subordinated Indebtedness and Permitted Acquisition Come-Along Indebtedness) and (k) plus (2) to the extent not constituting Act III Additional Financing, the Revolving Credit 81 83 Commitment Amount Increase plus the aggregate outstanding principal amount of all Additional Loans shall not at any time exceed $350,000,000 and (y) on each date of incurring any such Indebtedness as the result of which the aggregate outstanding principal amount of all such Indebtedness shall exceed $200,000,000, an aggregate principal amount of such Indebtedness in the amount of such excess shall constitute Permitted Additional Structured Indebtedness. SECTION 7.2.2. Liens. The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations granted pursuant to any Loan Document or any Rate Protection Agreement; (b) until the date of the initial Credit Extension, Liens securing payment of Indebtedness permitted by clause (b) of Section 7.2.1; (c) Liens existing as of the Effective Date securing Indebtedness of the type permitted by clause (c) of Section 7.2.1 and described in Item 7.2.1(c) ("Ongoing Indebtedness") of the Disclosure Schedule; (d) Liens securing (i) payment of foreign currency exchange or rate swap and similar agreements referred to in clause (j) of Section 7.2.1, in each case to the extent the counterparty to any such agreement is (or at the time such agreement was entered into, was) a Lender or an Affiliate of a Lender, (ii) Indebtedness of the type permitted by clause (e) of Section 7.2.1 (which Liens shall extend to only the assets that are the subject of the lease giving rise to such Capitalized Lease Liabilities), and (iii) Indebtedness of the type permitted by clause (i) of Section 7.2.1 (which Liens shall extend to only (x) the asset the construction, improvement or acquisition of which was financed with the proceeds of such Indebtedness, or (y) any and all assets comprising (1) the motion picture theatre and directly related assets of which such asset is a part or (2) up to four additional motion picture theatres and their directly related assets), and renewals, extensions and refinancing of such Indebtedness; provided, however, that the Liens permitted by this clause shall only cover the same assets (or substitutions or replacements therefor of the same general type) which originally secured the Indebtedness incurred pursuant to such clauses; (e) Liens existing on the assets of any Person that becomes a Restricted Subsidiary, or existing on assets acquired, pursuant to a Permitted Acquisition under clause (d) of Section 7.2.6 to the extent such Liens secure Indebtedness permitted by clause (g) of Section 7.2.1; provided, however, that such Liens (x) existed on the date of such Permitted Acquisition and were not created in anticipation thereof, (y) attach only to a specific asset or type of asset of such Person and not assets of such Person generally and (z) attach at all times only to the same assets that such 82 84 Liens attached to, and secure only the same Indebtedness that such Liens secured, immediately prior to such Permitted Acquisition; (f) Liens placed upon the Capital Stock or assets of any Restricted Subsidiary acquired pursuant to a Permitted Acquisition under clause (d) of Section 7.2.6 to the extent such Liens secure Indebtedness incurred pursuant to clause (k) of Section 7.2.1 to finance the Acquisition of such Restricted Subsidiary by the Borrower or any of its other Restricted Subsidiaries; (g) Permitted Liens; (h) other Liens securing Indebtedness permitted by Section 7.2.1 in an aggregate outstanding amount not to exceed $25,000,000 at any time; and (i) the replacement, extension or renewal of any Lien permitted by clauses (c) or (e) through (h) upon or in the same assets theretofore subject to such Lien (or substitution or replacement assets of the same general type) or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor except to the extent otherwise permitted under this Agreement) of the Indebtedness secured thereby. SECTION 7.2.3. Financial Condition and Operations. The Borrower will not permit to occur any of the events set forth below. (a) Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed Charge Coverage Ratio as of the last day of any Fiscal Quarter ending on or about any date set forth below or occurring during any period set forth below to be less than the ratio set forth opposite such period:
Fixed Charge Period Coverage Ratio ------ -------------- 12/31/1998 through 06/30/1999 1.20:1 09/30/1999 through 12/31/1999 1.25:1 03/31/2000 through 12/31/2000 1.30:1 03/31/2001 through 12/31/2001 1.40:1 03/31/2002 and thereafter 1.50:1.
(b) Maximum Senior Leverage Ratio. The Borrower will not permit the Senior Leverage Ratio as of the last day of any Fiscal Quarter ending on or about any date set forth below or occurring during any period set forth below to be greater than the ratio set forth opposite such date or such period, as applicable: 83 85
Maximum Senior Period Leverage Ratio ------ -------------- 12/31/1998 through 06/30/1999 5.000:1 09/30/1999 through 12/31/1999 4.750:1 03/31/2000 through 06/30/2000 4.625:1 09/30/2000 through 12/31/2000 4.500:1 03/31/2001 through 06/30/2001 4.375:1 09/30/2001 through 12/31/2001 4.250:1 03/31/2002 through 06/30/2002 4.125:1 09/30/2002 through 12/31/2002 3.875:1 03/31/2003 through 12/31/2003 3.625:1 03/31/2004 and thereafter 3.500:1
SECTION 7.2.4. Investments. The Borrower will not, and will not permit any Restricted Subsidiary to, make, incur, assume or suffer to exist any Investment in any other Person, except: (a) Investments existing on the Effective Date and identified in Item 7.2.4(a) ("Ongoing Investments") of the Disclosure Schedule and any extensions, renewals, modifications, restatements or replacements thereof, provided, that, no such extension, renewal, modification, restatement or replacement shall increase the amount of the original Investment; (b) Cash Equivalent Investments; (c) without duplication, Investments to the extent permitted as Indebtedness pursuant to Section 7.2.1; (d) without duplication, Investments permitted by Section 7.2.6; (e) Investments by way of contributions to capital or purchases of equity by the Borrower in any Restricted Subsidiary or by any Restricted Subsidiary in the Borrower or any other Restricted Subsidiary; (f) Investments constituting (x) accounts receivable arising, (y) trade debt granted or (z) deposits made in connection with the purchase price of goods or services, in each case in the ordinary course of business; (g) Investments constituting loans and advances to officers, directors and employees of the Borrower or any Restricted Subsidiary (x) to finance the purchase of Capital Stock of the Borrower and (y) for additional purposes not contemplated by item (x), in an aggregate principal amount at any time outstanding not exceeding $25,000,000; (h) additional Investments (including Contingent Liabilities) by the Borrower or any Restricted Subsidiary (including in Unrestricted Subsidiaries); provided, however, that at any time 84 86 that the Total Leverage Ratio as of the last day of the most recently ended Fiscal Quarter is greater than 4.0:1.0, additional Investments may not be made pursuant to this clause if, after giving effect thereto, the aggregate amount of all Investments made pursuant to this clause at such time would exceed the sum of (x) $100,000,000 plus (y) with respect to each Permitted Acquisition, the greater, on the date of such Permitted Acquisition, of (1) 100% of Adjusted EBITDA of such Acquired Person determined for its four most recently elapsed fiscal quarters and (2) 20% of the total value of all of such Acquired Person's assets on such date plus (z) the then Available Investment Amount; (i) payments made in accordance with tax sharing agreements of the nature referred to in the proviso to the definition of "Unrestricted Subsidiary"; (j) promissory notes and other non-cash consideration received by the Borrower and any Restricted Subsidiary in connection with asset sales permitted pursuant to Section 7.2.6; (k) Investments (including debt obligations and Capital Stock) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, suppliers arising in the ordinary course of business; provided, however, that (l) any Investment which when made complies with the requirements of clause (a), (b) or (c) of the definition of "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; (m) no Investment otherwise permitted by clause (d) or (h) shall be permitted to be made if any Event of Default or Payment Default has occurred and is continuing or would result therefrom; (n) no Contingent Liability shall be permitted to be incurred pursuant to clause (c) (insofar as it relates to clause (m) of Section 7.2.1) or (h) if, after giving effect thereto, the aggregate amount of all Contingent Liabilities then outstanding pursuant to clauses (c) (insofar as it relates to clause (m) of Section 7.2.1) and (h) shall exceed the sum determined at such time pursuant to the proviso to clause (h); and (o) notwithstanding anything herein to the contrary, the aggregate Investments made pursuant to this Section in Clark-Regal shall not exceed $10,000,000 unless, on or prior to the date which is 90 days after the Closing Date, Clark-Regal shall have delivered a Guaranty and the Borrower shall have pledged to the Administrative Agent, on behalf of the Lenders, its Capital Stock of Clark-Regal. SECTION 7.2.5. Restricted Payments, etc. The Borrower will not, and will not permit any Restricted Subsidiary to, make any Restricted Payment; provided, however, except that, so long as before and after giving effect to any such payment no Default shall have occurred, the Borrower may: (a) declare and make dividends or other distributions payable solely in shares of its Capital Stock; 85 87 (b) purchase, redeem or otherwise acquire shares of common stock of the Borrower or warrants or options to acquire any such shares with the proceeds received from the substantially concurrent issuance of new shares of common stock of the Borrower; (c) redeem or exchange in whole or in part any Capital Stock of the Borrower for another class of Capital Stock or rights to acquire such other class of Capital Stock of the Borrower; provided, however, that such other class of Capital Stock contains terms and provisions (taken as a whole) at least as advantageous to the Lenders as those contained in the Capital Stock redeemed or exchanged thereby; (d) repurchase shares of its Capital Stock (together with options or warrants in respect of any thereof) held by the officers, directors and employees of the Borrower, so long as such repurchase is pursuant to, and in accordance with the terms of, management and/or employee stock plans, stock subscription agreements or shareholder agreements; (e) subject to the subordination provisions applicable thereto (1), redeem, defease or otherwise prepay or retire any Subordinated Debt (x) from the net proceeds of the issuance of other Subordinated Debt, Qualified Preferred Stock or common stock of the Borrower or (y) in an aggregate amount not to exceed at any time the then Available Restricted Payment Amount, or (2) redeem any 8 1/2 % Regal Notes not purchased on the Closing Date; (f) pay cash dividends on common stock or preferred stock to the extent that (i) the Borrower shall have delivered to the Administrative Agent (x) financial statements prepared on a pro forma basis after giving effect to the payment of such cash dividends for the period of four consecutive Fiscal Quarters ending with the Fiscal Quarter then last ended for which financial statements and the Compliance Certificate relating thereto have been delivered to the Administrative Agent pursuant to Section 7.1.1 and (y) a certificate of the Borrower executed by a Responsible Officer demonstrating that the financial results reflected in such financial statements would (1) comply with the requirements of clauses (a) and (b) of Section 7.2.3 for the Fiscal Quarter in which such dividend is to be made and (2) satisfy a requirement (A) in the case of Qualified Preferred Stock, that the Fixed Charge Coverage Ratio (which shall be adjusted to include the amount of such dividend being paid as additional Interest Expense in clause (b)(i) of the definition of such term) shall be at least 1.15:1.00 and (B) in the case of other preferred stock or common stock, that the Total Leverage Ratio as at the end of such period be not greater than 4.0:1.0, and (ii) the aggregate amount expended by the Borrower with respect to dividends on common and preferred (excluding, however, Qualified Preferred Stock) stock pursuant to this clause shall not at any time exceed in the aggregate of then Available Restricted Payment Amount. SECTION 7.2.6. Consolidations and Mergers; Sales of Assets. The Borrower shall not, and shall not suffer or permit any Restricted Subsidiary to, merge, consolidate or otherwise combine or liquidate with or into, or enter into or consummate any Disposition (other than any Disposition resulting from a casualty or condemnation) or any Acquisition, whether in one transaction or in a series of transactions to or in favor of, any Person, except: 86 88 (a) any Restricted Subsidiary may merge or otherwise consolidate with (x) the Borrower (provided, however, that the Borrower shall be the continuing or surviving corporation) or (y) any other Restricted Subsidiary; (b) any Restricted Subsidiary may sell or otherwise transfer its assets (upon voluntary liquidation or otherwise) to the Borrower or any other Restricted Subsidiary, and the Borrower may sell or otherwise transfer its assets to any Restricted Subsidiary (which Restricted Subsidiary shall, immediately after giving effect to such transfer, continue to be a Restricted Subsidiary); (c) the Borrower or any Restricted Subsidiary may consummate one or more Dispositions; provided, however, that (x) the Borrower complies with the requirements of clause (d) of Section 3.1.1, (y) such Disposition is made for fair value (as determined in good faith by the Borrower) and (z) the aggregate consideration received for all assets disposed of in Dispositions not constituting Real Estate Financings from and after the Closing Date pursuant to this clause shall not exceed the sum of (1) $150,000,000 plus (2) at any time, 25% of the total value (determined, with respect to each Permitted Acquisition, on the date of such Permitted Acquisition) of the assets acquired pursuant to all Permitted Acquisitions consummated at or prior to such time; (d) the Borrower or any Restricted Subsidiary may consummate an Acquisition (any such Acquisition permitted pursuant to this clause, a "Permitted Acquisition"), so long as (i) such Acquisition and all transactions related thereto are consummated in accordance with applicable law, (ii) in the case of an Acquisition of Capital Stock or other equity interest by the Borrower or a Restricted Subsidiary of any Person, (A) such Acquisition results in the issuer of such Capital Stock or other equity interest becoming a Restricted Subsidiary, (B) the Borrower pledges the Capital Stock of such Person to the Administrative Agent to the extent required under Section 7.1.8, and (C) such Person executes a supplement to the Guaranty to the extent required under Section 7.1.8, (iii) in the case of a merger of the Borrower with another Person that results in such Person being the surviving entity, (u) the Person formed by or surviving any such merger or consolidation (if other than the Borrower) shall be a corporation organized or existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof (such Person being the "Successor Borrower"), (v) the Successor Borrower shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents pursuant to a supplement hereto or thereto in form and substance reasonably satisfactory to the Administrative Agent, (w) no Default would occur as a result of the consummation of such merger or consolidation, (x) the Successor Borrower shall be in compliance, on a pro forma basis as set forth in clause (d)(vii), (y) each Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Guaranty confirmed that its Guaranty shall continue to be effective with 87 89 respect to the Successor Borrower's Obligations under this Agreement and (z) the Borrower shall have delivered to the Administrative Agent an officer's certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Guaranty comply with this Agreement, in which event, if all of the foregoing are satisfied, the Successor Borrower will succeed to, and be substituted for, the Borrower under this Agreement, (iv) no Capital Stock or other equity interest or assets acquired in connection with such Acquisition shall be subject to any Lien (other than Liens permitted by Section 7.2.2), (v) neither the Borrower nor any other Restricted Subsidiary shall assume or incur, directly or indirectly, any Indebtedness in connection with such Acquisition (other than as specifically permitted by clause (g) or (k) of Section 7.2.1), (vi) after giving effect to such Acquisition, no Default shall have occurred and be continuing (provided, however, that, for purposes of this clause, the pendency of a change of control put right with respect to any Permitted Acquisition Subordinated Indebtedness shall not constitute a Default), (vii) in the case that the total cash and non-cash consideration with respect to such Acquisition is $30,000,000 or more, the Borrower shall have delivered to the Administrative Agent prior to the consummation of such Acquisition (A) financial statements or reconciliations prepared on a pro forma basis for the period of four consecutive Fiscal Quarters ending with the Fiscal Quarter then last ended for which financial statements and the Compliance Certificate relating thereto have been delivered to the Administrative Agent pursuant to Section 7.1.1 (assuming, for purposes of such pro forma calculation, that such Acquisition had been consummated on the first day of such period), and (B) a certificate of the Borrower executed by its chief financial Authorized Officer demonstrating that the financial results reflected in such financial statements would comply with the requirements of Section 7.2.3 for the Fiscal Quarter in which such Acquisition is to be made, (viii) after giving effect to such Acquisition, not more than the greater of (x) 20% of the Adjusted EBITDA and (y) 20% of the total assets of the Borrower and Restricted Subsidiaries, shall be attributable to Foreign Subsidiaries. SECTION 7.2.7. Modification of Subordinated Instruments. The Borrower will not, and will not permit any Restricted Subsidiary to, consent to or permit or suffer to exist any amendment, supplement or other modification of the 9 1/2% Subordinated Note Indenture, the Old Regal 8 1/2% Subordinated Note Indenture (as amended through the Closing Date) or any other Instrument evidencing or applicable to any other Subordinated Debt in a manner which would be adverse to Lenders in any material respect. SECTION 7.2.8. Designation of Senior Indebtedness. The Borrower will not designate any Indebtedness as "Designated Senior Indebtedness" pursuant to clause (ii) of the definition of such term in the 9 1/2% Subordinated Note Indenture. 88 90 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default". SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall default in the payment or prepayment when due of (a) any principal of any Loan; or (b) any interest on any Loan, any Reimbursement Obligation, any fee described in Article III or of any other amount payable hereunder or under any other Loan Document and such default shall continue unremedied for a period of five days. SECTION 8.1.2. Breach of Warranty. Any representation or warranty of the Borrower or any other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or any other writing or certificate furnished by or on behalf of the Borrower or any other Obligor to any Agent, the Issuer or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article V), is or shall be untrue when made or deemed to have been made in any material respect. SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. The Borrower shall default in the due performance and observance of any of its obligations under (x) clause (d) or (f) of Section 7.1.1 or Section 7.2 or (y) Section 8 of the Pledge Agreement. SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. The Borrower or any other Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrower or such other Obligor, as applicable, by the Administrative Agent or the Required Lenders. SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness described in Section 8.1.1) of the Borrower or any Restricted Subsidiary having a principal amount, individually or in the aggregate, in excess of $20,000,000, or a default or other event shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness (subject, however, to any applicable grace period) if the effect of such default or event is to accelerate the maturity of any such Indebtedness or such default or event shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause or declare such Indebtedness to become due and payable or to require such Indebtedness to be prepaid, redeemed, purchased or defeased, or to cause an offer to purchase or defease such Indebtedness to be required to be made, prior to its expressed maturity. SECTION 8.1.6. Judgments. Any judgment, order, decree or arbitration award for the payment of money in excess of $20,000,000 (to the extent not fully covered by insurance, other than self-insurance 89 91 (less any applicable deductible) or indemnification and as to which the insurer or the indemnifying party, as the case may be, has not disputed in writing its responsibility to cover such judgment, order, decree or arbitration award) shall be rendered against the Borrower or any Restricted Subsidiary and either (x) enforcement proceedings have been commenced by any creditor upon such judgement or order or (y) the same shall not have been satisfied or vacated or discharged or stayed or bonded pending appeal within 60 days after the entry thereof. SECTION 8.1.7. ERISA. An ERISA Event shall occur with respect to a Pension Plan or Multiemployer Plan. SECTION 8.1.8. Control of the Borrower. Any Change of Control shall occur. SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any Material Restricted Subsidiary shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness generally to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect thereof, and, if any such case or proceeding is not commenced by the Borrower or any such Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Borrower or such Subsidiary, as the case may be, or shall result in the entry of an order for relief or shall remain for 60 days undismissed; or (e) take any corporate action authorizing, or in furtherance of, any of the foregoing. SECTION 8.1.10. Impairment of Security, etc. The Pledge Agreement or the Guaranty, in whole or in material part, or any Lien granted under the Pledge Agreement, shall (except in accordance with its terms and except as a result of acts or omissions of any Agent or Lender) terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; the Borrower, any other Obligor or any other party shall, directly or indirectly, deny or disaffirm in writing such effectiveness, validity, binding nature or enforceability; or, except as permitted under any Loan Document, any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien and, in any such event, the Borrower or such Obligor shall have failed to cure such invalidity within 5 days after notice thereof from the Administrative Agent. SECTION 8.2. Action if Bankruptcy. If any Event of Default described in clauses (a) through (d) of Section 8.1.9 shall occur with respect to the Borrower, the Commitments (if not theretofore terminated) 90 92 shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations (including Reimbursement Obligations) shall automatically be and become immediately due and payable, without notice or demand, the Issuer shall terminate any Letter of Credit that may be terminated in accordance with its terms, and the Borrower shall automatically and immediately be obligated to pay to the Administrative Agent at the Administrative Agent's Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations for drawings that may subsequently occur thereunder, equal to the aggregate Stated Amount of all Letters of Credit issued and then outstanding. SECTION 8.3. Action if Other Event of Default. If any Event of Default (other than any Event of Default with respect to the Borrower described in clauses (a) through (d) of Section 8.1.9) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower (w) declare all Commitments (if not theretofore terminated) to be terminated, whereupon the Commitments shall terminate, (x) declare all or any portion of the outstanding principal amount of the Loans and other Obligations (including Reimbursement Obligations) to be due and payable, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, (y) terminate any Letter of Credit that may be terminated in accordance with its terms; and (z) direct the Borrower to pay (and the Borrower agrees that upon receipt of such notice it will pay) to the Administrative Agent at the Administrative Agent's Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations for drawings that may subsequently occur thereunder, equal to the aggregate Stated Amount of all Letters of Credit issued and then outstanding. ARTICLE IX THE AGENTS SECTION 9.1. Actions. (a) Each Lender hereby appoints (x) Scotiabank as its Administrative Agent, (y) BancAmerica Robertson Stephens as its Syndication Agent and (z) The Chase Manhattan Bank as its Documentation Agent, in each case under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes each such Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by any particular Agent (with respect to which each Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel in order to avoid contravention of applicable law), to exercise such powers hereunder and thereunder as are specifically delegated to or required of such Agent by the terms hereof or thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) each of the Agents and their respective directors, officers, employees or agents, ratably in accordance with each such Lender's respective Term Loans outstanding and Commitments (or, if no Term Loans or Commitments are at the time outstanding or in effect, then ratably in accordance with the principal amount of Term Loans held by such Lender, and each such Lender's respective Commitments as in effect in each case on the date of the termination of this Agreement), from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, such Agent, in any way relating to or arising out of this Agreement, the Notes and any other Loan Document, including reasonable attorneys' fees, and as to which the same is not reimbursed by the 91 93 Borrower; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the gross negligence or wilful misconduct of such Agent or any of its directors, officers, employees or agents. No Agent shall be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of any Agent shall be or become, in such Agent's determination inadequate, such Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given. (b) Each Lender with a Revolving Loan Commitment hereby irrevocably appoints the Issuer to act on behalf of such Lender with respect to any Letters of Credit issued by the Issuer and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for such Issuer with respect thereto; provided, however, that the Issuer shall have all of the benefits and immunities (x) provided to the Administrative Agent in this Article with respect to any acts taken or omissions suffered by the Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent", as used in this Article, included the Issuer with respect to such acts or omissions and (y) as additionally provided in this Agreement with respect to the Issuer. SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New York City time, on the Business Day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender will make such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing, in the case of the Borrower, and, in the case of a Lender, at the Federal Funds Rate for the first two Business Days after which such amount has not been repaid, and thereafter at the interest rate applicable to Loans comprising such Borrowing. SECTION 9.3. Exculpation. None of the Agents nor any of their respective directors, officers, employees or agents shall be liable to any Lender or the Issuer for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own wilful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrower of its obligations hereunder or under any other Loan Document. Any such inquiry which may be made by any such Agent shall not obligate such Person to make any further inquiry or to take any action. Each of the Agents shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which it believes to be genuine and to have been presented by a proper Person. 92 94 SECTION 9.4. Successor. Any Agent may resign as such at any time upon at least 30 days' prior notice to the Borrower and all Lenders. If any Agent at any time shall resign, the Required Lenders may appoint another Lender reasonably acceptable to the Borrower as a successor to such Agent which shall thereupon become an Agent hereunder in such capacity as the retiring Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having (x) a combined capital and surplus of at least $1,000,000,000 and (y) a credit rating of AA or better by Moody's or a comparable rating by S&P; provided, however, that if, after expending all reasonable commercial efforts, such retiring Agent is unable to find a commercial banking institution which is willing to accept such appointment and which meets the qualifications set forth in item (y), such retiring Agent, shall be permitted to appoint as its successor from all available commercial banking institutions willing to accept such appointment such institution having the highest credit rating of all such available and willing institutions. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Agent under this Agreement, and Sections 10.3 and 10.4 shall continue to inure to its benefit. SECTION 9.5. Loans by Agents. Each Agent shall have the same rights and powers with respect to (x) the Credit Extensions made by it or any of its Affiliates, and (y) the Notes held by it or any of its Affiliates, as any other Lender and may exercise the same as if it were not an Agent hereunder. Each Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not an Agent hereunder. SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has, independently of each Agent and each other Lender, and based on such Lender's review of the financial information of the Borrower, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of each Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. SECTION 9.7. Copies, etc. Each Agent shall give prompt notice to each Lender and each other Agent of each notice or request required or permitted to be given to such Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower). Each Agent will distribute to each Lender and each other Agent each document or instrument received for its account and copies of all other communications received by such Agent from the Borrower for distribution to the Lenders by the such Agent in accordance with the terms of this Agreement or any other Loan Document. 93 95 ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, waived or otherwise modified, if such amendment, waiver or modification is in writing and consented to by the Borrower and the Required Lenders (except as provided in Section 2.8) provided, however, that no such amendment, waiver or modification shall: (a) extend the Revolving Loan Commitment Termination Date or the Term A, B and C Loan Commitment Termination Date, change any Commitment to any other Commitment, amend, waive or modify any provision of this Section 10.1 or reduce the percentages specified in the definitions of the terms "Required Lenders", "Supermajority Revolving Lenders" or "Supermajority Term Lenders", or consent to the assignment or transfer by the Borrower of its rights and obligations under any Loan Document to which it is a party, in each case without the consent of each Lender directly and adversely affected thereby; (b) forgive any principal of or interest on any Lender's Loan, reduce the stated rate of any interest hereunder or any fees described in Article III payable to any Lender, extend the Stated Maturity Date for any Lender's Loan or extend any scheduled time of payment of such interest or such fees (other than as a result of waiving the applicability of any post-default increase in interest rates) without the consent of such Lender; (c) increase the aggregate amount of any Lender's Percentage of any Commitment Amount or increase the aggregate amount of any Loans required to be made by a Lender pursuant to its Commitments without the consent of such Lender; (d) extend the due date (other than the Stated Maturity Date, as to which clause (b) applies) for any scheduled repayment of or any scheduled reduction of a Commitment, or decrease the relative proportion of any mandatory prepayment to be received by the Lenders holding (i) Revolving Loans without the consent of the Required Revolving Lenders, or (ii) any Series of Term Loans without the consent of the Required Term Series Lenders for such Series; (e) except to the extent expressly permitted under the Loan Documents, release (i) all or substantially all of the Obligors that are guarantors under the Guaranty from their obligations under the Guaranty, or (ii) all or substantially all of the collateral security provided under the Loan Documents, including all Pledged Shares (as such term is defined in the Pledge Agreement), in either case without the consent of (x) the Supermajority Revolving Lenders and (y) the Supermajority Term Lenders; or 94 96 (f) affect adversely the interests, rights or obligations of any Agent qua such Agent, the Swing Line Lender qua the Swing Line Lender or the Issuer qua the Issuer, unless consented to by such Agent, the Swing Line Lender or the Issuer, as the case may be; provided, however, that no extension of Additional Commitments (nor the making and repayment of Additional Loans pursuant thereto nor the securing of Additional Loans pursuant to Guaranty and Pledge Agreement as Loans hereunder) pursuant to an Additional Financing Amendment shall require the consent of the Required Lenders or shall be construed as a decrease of the "relative proportion of any mandatory prepayment" of any Lenders pursuant to clause (d). No failure or delay on the part of any Agent, the Issuer or any Lender in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by any Agent, the Issuer or any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. SECTION 10.2. Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address or facsimile number set forth below its signature hereto, in the case of the Borrower or any Agent, or set forth below its name in Annex I hereto or in a Lender Assignment Agreement, in the case of any Lender (including in its separate capacity as the Swing Line Lender or Issuer, if applicable), or at such other address or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when the confirmation of transmission thereof is received by the transmitter. SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay or reimburse on demand all reasonable and documented costs and expenses of the Agents (including the reasonable, itemized fees and out-of-pocket expenses of a single primary counsel to the Agents and of each local and foreign counsel, if any, who may be retained by counsel to the Agents) in connection with (a) the negotiation, preparation, execution, delivery and syndication of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required; (b) the filing, recording, refiling or rerecording of any Loan Document and/or any Uniform Commercial Code financing statements relating thereto and all amendments, supplements, amendments and restatements and other modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or the terms of any Loan Document; and (c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. 95 97 The Borrower further agrees to pay, and to save each Agent, the Issuer and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement (subject to the applicable provisions of Article IV), the Credit Extensions hereunder, or the issuance of the Notes, Letters of Credit or any other Loan Documents. The Borrower also agrees to reimburse each Agent, the Issuer and each Lender upon demand for all reasonable and documented out-of-pocket costs and expenses (including reasonable attorneys' fees and legal expenses of counsel to each Agent, the Issuer and each Lender) incurred by such Agent, the Issuer or such Lender in connection with (x) the negotiation of any restructuring or "work-out" with the Borrower, whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. SECTION 10.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower hereby indemnifies, exonerates and holds each Agent, the Issuer and each Lender and each of their respective Affiliates, and each other Person controlling any of the foregoing within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each of their respective officers, directors, employees, trustees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements, whether incurred in connection with actions between or among the parties hereto or the parties hereto and third parties (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Credit Extension; (b) the entering into, performance and enforcement of this Agreement and any other Loan Document by any of the Indemnified Parties; (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by the Borrower or any Subsidiary of all or any portion of the stock or assets of any Person, whether or not any Agent, the Issuer or any Lender is party thereto; (d) any investigation, litigation or proceeding regarding the Borrower or any Subsidiary related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by the Borrower or any Subsidiary of any Hazardous Material; (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower or any Subsidiary thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the Borrower or such Subsidiary; or (f) each Lender's Environmental Liability (the indemnification herein shall survive payment in full of the Obligations and any transfer of the property of the Borrower or any Subsidiary by foreclosure or by a deed in lieu of foreclosure for any Lender's Environmental Liability, regardless of whether caused by, or within the control of, the Borrower or such Subsidiary); 96 98 except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or wilful misconduct or resulting from disputes among the Agents, the Lenders and/or their transferees or, with respect to a Lender, resulting from a material breach by such Lender of its obligations hereunder. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 10.5. Survival. The obligations of the Borrower under Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under Section 9.1, shall in each case survive any assignment from one Lender to another (in the case of Sections 10.3 and 10.4) and any termination of this Agreement, the payment in full of all the Obligations and the termination of all the Commitments. The representations and warranties made by the Borrower and each other Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 10.6. Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 10.7. Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower, each Agent and each Lender (or notice thereof satisfactory to the Agents) shall have been received by the Administrative Agent and notice thereof shall have been given by the Administrative Agent to the Borrower and each Lender. SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT (INCLUDING PROVISIONS WITH RESPECT TO INTEREST, LOAN CHARGES AND COMMITMENT FEES) SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST OR MORTGAGE HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. This Agreement, the Notes, the other Loan Documents and each of the Regal Fee Letters constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect thereto. 97 99 SECTION 10.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: (a) the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Agents and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11. SECTION 10.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes. Each Lender may assign, or sell participations in, its Loans, Letters of Credit Outstandings and Commitments to one or more other Persons in accordance with this Section. SECTION 10.11.1. Assignments. (a) Upon prior notice to the Borrower and the Administrative Agent, any Lender may at any time assign and delegate to one or more Eligible Assignees with the consent of the Borrower and the Administrative Agent (which consents shall not be required if the Eligible Assignee is a Lender or an Affiliate of a Lender and shall not be unreasonably withheld or delayed if such consents are in fact required), all or any fraction of such Lender's total Loans, Letter of Credit Outstandings and Commitments in a minimum aggregate amount of the lesser of $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent in their sole and absolute discretion) and the entire remaining amount of such Lender's Loans, Letter of Credit Outstandings and Commitments (except that no such minimum shall be applicable on an assignment to a Lender or an Affiliate of a Lender); provided, however, that with respect to assignments solely of Revolving Loans, the assigning Lender must assign a pro-rata portion of each of its Revolving Loan Commitments, Revolving Loans and interest in Letters of Credit Outstandings. The Borrower and each other Obligor and each of the Agents shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Eligible Assignee until (i) notice of such assignment and delegation, together with (A) payment instructions, (B) the Internal Revenue Service Forms or other statements contemplated or required to be delivered pursuant to Section 4.6, if applicable, (C) addresses and related information with respect to such Eligible Assignee, shall have been delivered to the Borrower and the Administrative Agent by such Lender and such Eligible Assignee and (D) the Administrative Agent has made the appropriate entries in the Register; (ii) such Eligible Assignee shall have executed and delivered to the Borrower and the Administrative Agent a Lender Assignment Agreement, accepted by such Agent; and (iii) the processing fees described below shall have been paid. From and after the date that such Agent accepts such Lender Assignment Agreement, (x) the Eligible Assignee thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Eligible Assignee in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Accrued interest on that part of the Loans assigned, if any, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest and accrued fees shall be paid at the same time or 98 100 times provided in this Agreement. Such assignor Lender or such Eligible Assignee must also pay a processing fee in the amount of $3,500 to the Administrative Agent upon delivery of any Lender Assignment Agreement. Notwithstanding any other term of this Section, the agreement of the Swing Line Lender to provide the Swing Line Loan Commitment shall not impair or otherwise restrict in any manner the ability of the Swing Line Lender to make any assignment of its Loans or Commitments, it being understood and agreed that the Swing Line Lender may terminate its Swing Line Loan Commitment, either in whole or in part, in connection with the making of any assignment. Any attempted assignment and delegation not made in accordance with this Section shall be null and void. (b) Notwithstanding anything to the contrary set forth above, any Lender may (without requesting the consent of the Borrower or the Administrative Agent) pledge its Loans to a Federal Reserve Bank in support of borrowings made by such Person from such Federal Reserve Bank. Upon the request of the Lender, solely to facilitate the pledge or assignment of its Loans to any Federal Reserve Bank, the Borrower shall issue Notes to such Lender. Upon the request of an assignor Lender, if applicable, solely to facilitate such pledge or assignment of its Loans to any Federal Reserve Bank, the Borrower shall issue a reduced Note to such assignor in exchange and replacement for its then existing Note. The reasonable costs and expenses incurred in connection with the issuance of each Note shall be for the account of the Borrower. (c) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent specified below its signature hereto (or at such other address as may be designated by the Administrative Agent from time to time in accordance with Section 10.2) a copy of each Lender Assignment Agreement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitment of and principal amount of the Loans owing to each Lender from time to time. The entries in the Register shall be conclusive and binding, in the absence of clearly demonstrable error, and the Borrower, the Agents and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. SECTION 10.11.2. Participations. Upon prior notice to the Borrower and the Administrative Agent, any Lender may at any time sell to one or more commercial lenders, financial institutions or other Persons (each of such commercial lenders, financial institutions or other Persons, a "Participant") participating interests in any of the Loans, Letter of Credit Outstandings, Commitments, or other interests of such Lender hereunder (including loan derivatives and similar swap arrangements based on such Lender's interests hereunder); provided, however, that (a) no participation contemplated in this Section shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document; (b) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations; (c) the Borrower and each other Obligor and each Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents; 99 101 (d) no Participant, unless such Participant is an Affiliate of such Lender or is itself a Lender, or unless the Borrower otherwise agrees in writing, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, to the extent requiring the consent of such Lender, take any action of the type described in clause (b) of Section 10.1; and (e) the Borrower shall not be required to pay any amount under this Agreement that is greater than the amount which it would have been required to pay had no participating interest been sold. Each Participant shall only be indemnified for increased costs pursuant to Section 4.3, 4.5 or 4.6 if and to the extent that the Lender which sold such participating interest to such Participant concurrently is entitled to make, and does make, a claim on the Borrower for such increased costs. Any Lender that sells a participating interest in any Loan, Commitment or other interest to a Participant under this Section shall indemnify and hold harmless the Borrower and each Agent from and against any taxes, penalties, interest or other costs or losses (including reasonable attorneys' fees and expenses) incurred or payable by the Borrower or such Agent as a result of the failure of the Borrower or such Agent to comply with its obligations to deduct or withhold any Taxes from any payments made pursuant to this Agreement to such Lender or such Agent, as the case may be, which Taxes would not have been incurred or payable if such Participant had been a Non-U.S. Lender that was entitled to deliver to the Borrower, such Agent or such Lender, and did in fact so deliver, a duly completed and valid Form 1001 or 4224 (or applicable successor form) entitling such Participant to receive payments under this Agreement without deduction or withholding of any United States federal taxes. If amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. SECTION 10.12. Confidentiality. Each Lender agrees to maintain, in accordance with its customary procedures for handling confidential information, the confidentiality of all information provided to it by or on behalf of the Borrower or any Subsidiary, or by any Agent on the Borrower's or such Subsidiary's behalf, under this Agreement or any other Loan Document ("Confidential Information"), and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with the Borrower or any Subsidiary, except to the extent such information (x) was or becomes generally available to the public other than as a result of disclosure by the Lender or (y) was or becomes available on a non-confidential basis from a source other than the Borrower, provided that such source is not bound by a confidentiality agreement with the Borrower known to the Lender; provided, however, that any Lender may disclose such information (A) at the request or pursuant to any requirement of the NAIC or any Governmental Authority to which the Lender is subject or in connection with an examination of such Lender by any such Governmental Authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any Applicable Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which any Agent, any Lender or their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Lender's independent auditors and other professional advisors who have been advised that such information is confidential pursuant to this Section; (G) to any Participant or Eligible 100 102 Assignee, actual or potential, provided, however, that such Person shall have agreed in writing to keep such information confidential to the same extent required of the Lenders hereunder; and (H) to its Affiliates who have been advised that such information is confidential pursuant to this Section. Unless prohibited by applicable law or court order, each Lender and each Agent shall notify the Borrower of any request by any Governmental Authority (other than any request in connection with an examination of the financial condition of such Lender) for disclosure of Confidential Information prior to such disclosure; provided, however, further, that in no event shall any Agent or any Lender be obligated to return any materials furnished by the Borrower or any Subsidiary. This Section shall supersede any confidentiality letter or agreement with respect to the Borrower or the Facilities entered into prior to the date hereof. SECTION 10.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY AGENT, THE LENDERS, THE ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK IN THE SATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION, SUBJECT TO THE BORROWER'S RIGHT TO CONTEST SUCH JUDGMENT BY MOTION OR APPEAL ON ANY GROUNDS NOT EXPRESSLY WAIVED IN THIS SECTION. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK AT THE ADDRESS FOR NOTICES SPECIFIED IN SECTION 10.2. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 101 103 SECTION 10.14. Waiver of Jury Trial. THE AGENTS, THE LENDERS, THE ISSUER AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY AGENT, THE LENDERS, THE ISSUER OR THE BORROWER IN CONNECTION HEREWITH OR THEREWITH. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE LENDERS AND THE ISSUER ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. 102 104 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. REGAL CINEMAS, INC. By ------------------------------------- Title: Executive Vice President Address: 7132 Commercial Park Drive Knoxville, Tennessee 37918 Facsimile No.: (310) 553-3928 Attention: Executive Vice President and Chief Financial Officer with copies to: Hicks, Muse, Tate & First Incorporated 200 Crescent Court Suite 1600 Dallas, Texas 75201 Facsimile No.: 214-720-7888 Attention: Lawrence D. Stuart, Jr. and Patrick K. McGee Kohlberg Kravis Roberts & Co., L.P. 9 West 57th Street New York, N.Y. 10022 Facsimile No.: 212-750-0003 Attention: Alexander Navab, Jr. 105 AGENTS: THE BANK OF NOVA SCOTIA, as the Administrative Agent By ------------------------------------------- Title: Senior Relationship Manager Address: One Liberty Plaza New York, New York 10006 Facsimile No.: (212) 225-5090 Attention: Eric Knight and Stuart Malakoff BANCAMERICA ROBERTSON STEPHENS, as the Syndication Agent By -------------------------------------------- Title: Vice President Address: 335 Madison Avenue 6th Floor New York, New York 10017 Facsimile No.: (212) 503-7502 Attention: Michael O'Brien THE CHASE MANHATTAN BANK, as the Documentation Agent By -------------------------------------------- Title: Vice President Address: 270 Park Avenue 4th Floor New York, New York 10017 Facsimile No.: (212) 270-1063 Attention: John Sorice 106 SCHEDULE I DISCLOSURE SCHEDULE 107 SCHEDULE II PNC LETTERS OF CREDIT
Beneficiary Account Party Face Amount Type of Letter Issuance Expiry Date of Credit Date County of Hearico, Virginia Regal Cinemas, Inc. $41,970 Standby 2/2/94 2/2/99 Township of Edgmont Regal Cinemas, Inc. $44,880 Standby 12/12/96 11/18/98 Theodore Lappas, Jr. Regal Cinemas, Inc. $40,002 Standby 9/6/97 6/9/98 Township of Upper Providence Regal Cinemas, Inc. $1,275,000 Standby 11/5/97 1/1/99 Florida Power & Light Regal Cinemas, Inc. $450,000 Standby 3/9/98 3/9/98
106 108 ANNEX I LENDER INFORMATION
1. THE BANK OF NOVA SCOTIA Domestic Office: LIBOR Office: ---------------- ------------- Revolving Loan Commitment Address: One Liberty Plaza Address: One Liberty Plaza __% New York, NY 10006 New York, NY 10006 Term A Loan Commitment Facsimile No.: (212) 225-5090 Facsimile No.: (212) 225-5090 __% Attention: Paul Weissenberger Attention: Paul Weissenberger Term B Loan Commitment __% Term C Loan Commitment __% 2. BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION Domestic Office: LIBOR Office: ---------------- ------------- Revolving Loan Commitment Address: 200 West Jackson Blvd. Address: 335 Madison Avenue __% Chicago, IL 60697 6th Floor New York, NY 10017 Term A Loan Commitment Facsimile No.: (312) 974-9626 __% Facsimile No.: (212) 503-7502 Attention: Renee Walker Term B Loan Commitment Attention: Michael O'Brien __% Term C Loan Commitment __%
109 3. THE CHASE MANHATTAN BANK Domestic Office: ---------------- Address: LIBOR Office: ------------- Revolving Loan Commitment Address: __% Facsimile No.: Facsimile No.: Term A Loan Commitment Attention: __% Attention: Term B Loan Commitment __% Term C Loan Commitment __%
A-2 EX-27 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF REGAL CINEMAS, INC. FOR THE SIX MONTHS ENDED JULY 2, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-02-1998 JUL-02-1998 27,480 0 1,080 0 2,194 46,753 769,413 (131,232) 784,414 74,405 0 0 0 (118,941) 42,803 784,414 82,041 288,143 12,995 116,982 190,152 0 13,327 (32,087) (3,912) 0 0 (11,890) 0 (40,065) 0 0
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