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EXHIBIT 10.25
Execution Counterpart
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AMENDED AND RESTATED
REIMBURSEMENT AND SECURITY AGREEMENT
Between
HARCOURT GENERAL, INC.
and
GC COMPANIES, INC.
Dated as of January 26, 1999
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TABLE OF CONTENTS
Page
1. Background; Amendment and Restatement; Definitions........................................1
1.1. Background.....................................................................1
1.2. Amendment and Restatement......................................................1
1.3. Definitions; Certain Rules of Construction.....................................1
2. Payment Provisions.......................................................................21
2.1. Reimbursement and Indemnification.............................................21
2.2. Guarantor's Fee...............................................................21
2.3. Interest on Overdue Payments..................................................21
3. General Covenants........................................................................21
3.1. Financial Statements and Reports..............................................21
3.1.1. Annual Reports.....................................................21
3.1.2. Quarterly Reports..................................................22
3.1.3. Public Reports.....................................................23
3.1.4. Notice of Litigation; Notice of Defaults...........................23
3.1.5. Management Letters.................................................23
3.1.6. South American Financing Documents.................................23
3.1.7. Other Information..................................................24
3.2. Liens.........................................................................24
3.3. Distributions.................................................................26
3.4. Merger, Consolidation and Dispositions of Assets..............................27
3.5. Issuance of Stock by Theatre Subsidiaries; Subsidiary Distributions...........30
3.5.1. Issuance of Stock by Theatre Subsidiaries..........................30
3.5.2. No Restrictions on Subsidiary Distributions........................30
3.6. Guaranteed Leases and Transferred Leases......................................30
3.6.1. No Transfer........................................................30
3.6.2. Amendments, Renewals, Extensions, etc..............................30
3.7. Conduct of Theatre Business...................................................31
3.7.1. Theatre Subsidiaries...............................................31
3.7.2. Theatre Business...................................................31
3.8. No Extension of Credit Agreement..............................................31
4. First Tier Covenants.....................................................................31
4.1. Consolidated Net Worth........................................................31
4.2. Consolidated Adjusted Cash Flow to Consolidated Fixed Charges.................31
4.3. Consolidated Adjusted EBITDA to Consolidated Interest Charges.................31
4.4. Consolidated Total Adjusted Debt to Consolidated Adjusted EBITDA..............32
4.5. Core Theatre Adjusted EBITDA to Core Theatre Fixed Charges....................32
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4.6. Problem Theatre Adjusted EBITDA...............................................32
4.7. South American Adjusted EBITDA................................................32
4.8. Investments and Acquisitions..................................................32
4.9. Capital Expenditures..........................................................33
5. Second Tier Covenants....................................................................33
5.1. Investments and Acquisitions..................................................33
5.2. Financing Debt................................................................34
5.3. Distributions.................................................................34
5.4. Capital Expenditures..........................................................35
5.5. Payment of Theatre Obligations................................................36
6. Representations and Warranties...........................................................36
6.1. Organization and Business.....................................................36
6.1.1. The Company........................................................36
6.1.2. Subsidiaries.......................................................36
6.1.3. Qualification......................................................36
6.2. Authorization and Enforceability..............................................36
6.3. No Legal Obstacle to Agreements...............................................37
6.4. Delivery of Collateral........................................................37
7. Defaults.................................................................................37
7.1. Events of Default.............................................................37
7.1.1. Payment............................................................37
7.1.2. Specified Covenants................................................38
7.1.3. Other Covenants....................................................38
7.1.4. Representations and Warranties.....................................38
7.1.5. Cross-Defaults, etc................................................38
7.1.6. Ownership; Liquidation; etc........................................38
7.1.7. Enforceability, etc................................................39
7.2. Certain Payments Upon an Event of Default.....................................40
7.3. Enforcement of Payment; Collateral; Setoff....................................40
7.4. Specific Performance; Exercise of Rights......................................40
7.5. Cumulative Remedies...........................................................40
7.6. Annulment of Defaults.........................................................40
7.7. Waivers.......................................................................41
7.8. Obligations Absolute..........................................................41
8. Security.................................................................................41
8.1. Collateral....................................................................41
8.1.1. Pledged Stock......................................................41
8.1.2. Pledged Rights.....................................................42
8.1.3. Proceeds and Products..............................................42
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8.2. Representations, Warranties and Covenants with Respect to the Collateral......42
8.2.1. Pledged Stock......................................................42
8.2.2. No Liens or Restrictions on Transfer or Change of Control..........42
8.2.3. Perfection of the Collateral.......................................42
8.3. Administration of Collateral..................................................43
8.3.1. Distributions on Pledged Securities................................43
8.3.2. Voting of Pledged Securities.......................................43
8.4. Right to Realize upon Collateral..............................................43
8.4.1. General Authority..................................................43
8.4.2. Marshaling, etc....................................................44
8.4.3. Sales of Collateral................................................45
8.4.4. Sale Without Registration..........................................45
8.4.5. Application of Proceeds............................................46
8.5. Custody of Collateral.........................................................46
9. Expenses; Indemnity......................................................................47
9.1. Expenses......................................................................47
9.2. General Indemnity.............................................................47
10. Successors and Assigns..................................................................47
11. Confidentiality.........................................................................47
12. Notices.................................................................................48
13. Course of Dealing; Amendments and Waivers...............................................48
14. Termination and Defeasance..............................................................49
15. General.................................................................................49
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AMENDED AND RESTATED
REIMBURSEMENT AND SECURITY AGREEMENT
This Amended and Restated Reimbursement and Security Agreement, dated
as of January 26, 1999, is between Harcourt General, Inc., a Delaware
corporation ("Harcourt"), and GC Companies, Inc., a Delaware corporation (the
"Company"). The parties agree as follows:
1. Background; Amendment and Restatement; Definitions.
1.1. Background. Prior to December 14, 1993, the Company was a
Wholly-Owned Subsidiary (as defined below) of Harcourt. On December 14, 1993,
pursuant to a transaction approved by the Board of Directors of Harcourt, (a)
Harcourt transferred its theatre business to the Company, (b) Harcourt
distributed all of the shares of capital stock of the Company to the
stockholders of Harcourt and (c) the Company became a publicly-owned corporation
(collectively, the "Spinoff"). Notwithstanding the Spinoff, Harcourt (i) has
secondary liability with respect to certain theatre leases assigned by Harcourt
to the Company and, in turn, assigned by the Company to certain Subsidiaries (as
defined below) of the Company and (ii) has guaranteed the obligations of certain
Subsidiaries of the Company under certain theatre leases to which such
Subsidiaries are parties. Hence, in connection with the Spinoff, the parties
entered into a Reimbursement and Security Agreement dated as of December 14,
1993 (the "Prior Agreement") pursuant to which, among other things, the Company
(A) agreed to reimburse and indemnify Harcourt for all amounts paid by Harcourt
in respect of any such secondary liability on, or guarantee of, any such theatre
lease and (B) pledged to Harcourt all of the capital stock of the Theatre
Subsidiaries (as defined below) to secure the payment and performance of the
Company's obligations under the Prior Agreement. The Company recently has
adopted a new business plan and, in order to implement such new business plan,
has requested that Harcourt amend certain provisions of the Prior Agreement.
1.2. Amendment and Restatement. Effective as of the date hereof, this
Agreement amends and restates in its entirety the Prior Agreement.
1.3. Definitions; Certain Rules of Construction. Certain capitalized
terms are used in this Agreement with the specific meanings defined below in
this Section 1. Except as otherwise explicitly specified to the contrary or
unless the context clearly requires otherwise, (a) the capitalized word
"Section" refers to sections of this Agreement, (b) the capitalized word
"Exhibit" refers to exhibits to this Agreement, (c) references to a particular
Section include all subsections thereof, (d) the word "including" shall be
construed as "including without limitation", (e) accounting terms not otherwise
defined herein have the meaning provided under GAAP, (f) terms defined in the
UCC and not otherwise defined herein have the meaning provided under the UCC,
(g) references to a particular statute or regulation include all rules and
regulations thereunder and any successor statute, regulation or rules, in each
case as from time to time in effect, and (h) references to a particular Person
include such Person's successors and assigns to the extent not prohibited by
this Agreement.
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1.3.1. "Administrative Agent" means the administrative agent
under the Credit Agreement.
1.3.2. "Affiliate" means, with respect to the Company (or any
other specified Person), any other Person directly or indirectly
controlling, controlled by or under direct or indirect common control
with the Company (or such specified Person); provided, however, that
the Company and its Subsidiaries, on the one hand, and Harcourt and its
Subsidiaries, on the other hand, shall not be deemed Affiliates of each
other for purposes of this Agreement.
1.3.3. "Argentina Credit Facility" means the Guaranteed
Secured Credit Agreement dated as of December 18, 1998 among the
Argentina Subsidiary, the lenders from time to time party thereto and
BankBoston, N.A., Nassau Branch, as agent.
1.3.4. "Argentina Subsidiary" means each of General Cinema de
Argentina S.A. and Hoyts Cinema de Argentina S.A.
1.3.5. "Asset-Specific EBITDA" means, with respect to any sale
of assets or Equity Interests by the Company or any of its Theatre
Subsidiaries, the lesser of (a) the amount of Consolidated Adjusted
EBITDA during the four fiscal quarters of the Company most recently
ended prior to the date of such sale that is attributable to such
assets or Equity Interests and (b) $1.
1.3.6. "B Theatres" means the theatres listed on Exhibit 1.3A.
1.3.7. "Bankruptcy Code" means Title 11 of the United States
Code.
1.3.8. "Bankruptcy Default" means an Event of Default referred
to in Section 7.1.8.
1.3.9. "Brazil Credit Facility" means a credit facility among
the Brazil Subsidiary and its senior lenders that contains terms which
are not significantly less favorable to the Company, the Brazil
Subsidiary and the other Subsidiaries of the Company than the terms
contained in the Argentina Credit Facility.
1.3.10. "Brazil Subsidiary" means General Cinema do Brasil
Empreendimentos Ltda.
1.3.11. "Capital Expenditures" means, for any period, amounts
added or required to be added to the property, plant and equipment or
other fixed assets account on the Consolidated balance sheet of the
Company (or other specified Person) and its Subsidiaries (or other
group of specified Persons), prepared in accordance with GAAP.
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1.3.12. "Capitalized Lease" means any lease which is required
to be capitalized on the balance sheet of the lessee in accordance with
GAAP, including Statement Nos. 13 and 98 of the Financial Accounting
Standards Board.
1.3.13. "Capitalized Lease Obligations" means the amount of
the liability reflecting the aggregate discounted amount of future
payments under all Capitalized Leases calculated in accordance with
GAAP, including Statement Nos. 13 and 98 of the Financial Accounting
Standards Board.
1.3.14. "Cash Equivalents" means:
(1) negotiable certificates of deposit, time deposits
(including sweep accounts), demand deposits and bankers' acceptances
issued by any United States financial institution having capital and
surplus and undivided profits aggregating at least $100,000,000 and
rated both Prime-1 by Xxxxx'x and A-1 by S&P;
(2) short-term corporate obligations rated both Prime-1 by
Xxxxx'x and A-1 by S&P;
(3) any direct obligation of the United States of America or
any agency or instrumentality thereof, or of any state or municipality
thereof, (i) which has a remaining maturity at the time of purchase of
not more than one year or (ii) which is subject to a repurchase
agreement with any financial institution referred to in clause (a)
above, exercisable within one year from the time of purchase and (iii)
which, in the case of obligations of any state or municipality, is
rated Aa or better by Xxxxx'x or AA or better by S&P;
(4) any mutual fund or other pooled investment vehicle rated
Aa or better by Xxxxx'x or AA or better by S&P which invests
principally in obligations described above; and
(5) any repurchase agreement with any financial institution
described in clause (a) above with respect to any obligations described
in clause (c) above.
1.3.15. "Chile Credit Facility" means a credit facility among
the Chile Subsidiary and its senior lenders that contains terms which
are not significantly less favorable to the Company, the Chile
Subsidiary and the other Subsidiaries of the Company than the terms
contained in the Argentina Credit Facility.
1.3.16. "Chile Subsidiary" means Hoyts Cinema de Chile S.A.
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1.3.17. "Cinema Ventures" means Cinema Ventures, LLC, a
Delaware limited liability company.
1.3.18. "Collateral" means all assets now or from time to time
hereafter subjected to a security interest, mortgage or charge (or
intended or required so to be subjected pursuant to this Agreement) to
secure the payment or performance of any of the Obligations, including
the assets described in Sections 8.1.1 through 8.1.3.
1.3.19. "Company" is defined in the preamble hereto.
1.3.20. "Computation Covenant" means each of Sections 3.2.10
through 3.2.15, 3.3.2, 3.4.5, 3.4.13, 4.1 through 4.7, 4.8.4, 4.8.5,
4.9 and, if applicable, Sections 5.1.6, 5.2.2, 5.2.4 and 5.4.
1.3.21. "Consolidated" and "Consolidating", when used with
reference to any term, mean that term as applied to the accounts of the
Company (or other specified Person) and all of its Subsidiaries (or
other specified group of Persons), or such of its Subsidiaries as may
be specified, consolidated (or combined) or consolidating (or
combining), as the case may be, in accordance with GAAP and with
appropriate deductions for minority interests in Subsidiaries.
1.3.22. "Consolidated Adjusted Cash Flow" means, for any
period, the sum of (a) Consolidated Adjusted EBITDA for such period
plus (b) the aggregate amount of all rental expense for real property
operating leases of the Company and its Majority-Owned Subsidiaries for
such period, all as determined on a Consolidated basis in accordance
with GAAP.
1.3.23. "Consolidated Adjusted EBITDA" means, for any period,
the total of:
(1) Consolidated Net Income for such period; plus
(2) without duplication and only to the extent reflected as a
charge in the statement of Consolidated Net Income for such period, the
sum of:
(1) Consolidated Interest Charges, taxes,
depreciation and amortization expenses of the Company and its
Majority-Owned Subsidiaries for such period; plus
(2) expenses or losses from any Permitted
Non-Theatre Investments; plus
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(3) any extraordinary, unusual or non-recurring
expenses or losses for such period; plus
(4) all general and administrative expenses of GCCI
and its Majority-Owned Subsidiaries for such period; provided,
however, that if the general and administrative expenses of
GCCI and its Majority-Owned Subsidiaries for such period
exceed $4,250,000, then only $4,250,000 of such expenses shall
be added to Consolidated Net Income for such period pursuant
to this clause (iv); minus
(3) without duplication and only to the extent reflected as an
addition (or, as the case may be, reduction) in the statement of
Consolidated Net Income for such period, the sum of:
(1) any income or gains from any Permitted
Non-Theatre Investments; plus
(2) any extraordinary, unusual or non-recurring
income or gains; plus
(3) the part of Consolidated Net Income for such
period that is attributable to the Consolidated net income (or
loss) of all Foreign Subsidiaries of the Company for such
period;
all as determined on a Consolidated basis in accordance with GAAP.
1.3.24. "Consolidated Excess Cash Flow" means, for any period,
the total of:
(1) Consolidated Adjusted EBITDA for such period; plus
(2) the net cash proceeds paid to or for the account of the
Company during such period in respect of the issuance of additional
Equity Interests of the Company; minus
(3) Consolidated Interest Charges for such period; minus
(4) Capital Expenditures of the Company and its Majority-Owned
Subsidiaries for such period; minus
(5) all regularly scheduled payments of principal of
Consolidated Total Financing Debt (other than Foreign Non-Recourse
Debt) payable during such period; minus
(6) Distributions made by the Company during such period;
minus
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(7) cash taxes paid by the Company and its Majority-Owned
Subsidiaries during such period;
all as determined on a Consolidated basis in accordance with GAAP.
1.3.25. "Consolidated Excess Theatre Cash Flow" means, for any
period, the total of:
(1) Consolidated Excess Cash Flow for such period; minus
(2) without duplication and only to the extent reflected as an
addition to Consolidated Excess Cash Flow for such period, any income
or gains from any Permitted Non-Theatre Investments for such period;
plus
(3) without duplication and only to the extent reflected as a
charge to Consolidated Excess Cash Flow during such period, any
expenses or losses from any Permitted Non-Theatre Investments for such
period.
1.3.26. "Consolidated Fixed Charges" means, for any period,
the sum of:
(1) all regularly scheduled payments of principal of
Consolidated Total Financing Debt (other than Foreign Non-Recourse
Debt) payable during such period; plus
(2) Consolidated Interest Charges for such period; plus
(3) the aggregate amount of all rental expense for real
property operating leases of the Company and its Majority-Owned
Subsidiaries for such period;
all as determined on a Consolidated basis in accordance with GAAP.
1.3.27. "Consolidated Interest Charges" means, for any period,
the total of (a) the aggregate amount of interest, including interest
expense under Capitalized Leases, paid or accrued by the Company or any
of its Majority-Owned Subsidiaries during such period, minus (b) the
aggregate amount of interest, including interest expense under
Capitalized Leases, paid or accrued by any of the Majority-Owned
Subsidiaries of the Company which are Foreign Subsidiaries during such
period on or in respect of any Foreign Non-Recourse Debt, all as
determined on a Consolidated basis in accordance with GAAP.
1.3.28. "Consolidated Net Income" means, for any period, the
Consolidated net income (or loss) of the Company and its Majority-Owned
Subsidiaries for such period, determined in accordance with GAAP on a
Consolidated basis.
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1.3.29. "Consolidated Net Investment Cash Flow" means, for any
period, the total of:
(1) Net Cash Proceeds received by the Company or any of its
Majority-Owned Subsidiaries during such period from the sale or other
transfer of any Permitted Non-Theatre Investments; plus
(2) without duplication, all cash income and other cash gains,
including cash interest, cash dividends and other cash Distributions,
received by the Company or any of its Majority-Owned Subsidiaries from
Permitted Non-Theatre Investments during such period; minus
(3) all cash expenses and cash losses incurred or sustained by
the Company or any of its Majority-Owned Subsidiaries from Permitted
Non-Theatre Investments during such period; plus
(4) without duplication, non-cash losses realized by the
Company or any of its Majority-Owned Subsidiaries during such period
from Permitted Non-Theatre Investments to the extent of any write-downs
or write-offs of any thereof taken by the Company or any of its
Majority-Owned Subsidiaries in such period;
all as determined on a Consolidated basis in accordance with GAAP.
1.3.30. "Consolidated Net Worth" means, at any date,
stockholders' equity of the Company and its Majority-Owned
Subsidiaries, determined on a Consolidated basis in accordance with
GAAP; provided, however, that for purposes of determining the
Consolidated Net Worth, the amount thereof shall be adjusted so as to
eliminate the effect of any unrealized gains or any unrealized losses
in the total market value as at such date of the Investments of the
Company and its Majority-Owned Subsidiaries in the Equity Interests of
each of Global Telesystems Group, Inc. and GrandVision relative to the
total market value of such Investments as reflected on the audited
Consolidated balance sheet of the Company and its Subsidiaries as at
October 31, 1998.
1.3.31. "Consolidated Total Adjusted Debt" means, at any date,
the total of (a) Consolidated Total Financing Debt as at such date,
minus (b) to the extent included in Consolidated Total Financing Debt
as at such date, the Foreign Non-Recourse Debt of the Foreign
Subsidiaries of the Company as at such date, minus (c) the aggregate of
the Eligible Securities Values of all Eligible Securities as at such
date.
1.3.32. "Consolidated Total Financing Debt" means, at any
date, the Financing Debt of the Company and its Majority-Owned
Subsidiaries outstanding on and as of such date, determined on a
Consolidated basis.
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1.3.33. "Core Theatre" means, at any date, each theatre which (a) is
owned or operated by the Company or any of its Subsidiaries and (b) is located
in the Northeast or Midwest regions of the United States, including the theatres
listed on Exhibit 1.3B.
1.3.34. "Core Theatre Adjusted EBITDA" means, at any date, the total
of:
(1) Consolidated net income of the Core Theatres for such
period; plus
(2) without duplication and only to the extent reflected as a
charge in the statement of Consolidated net income of the Core Theatres for such
period, the sum of:
(1) the aggregate amount of interest, including interest
expense under Capitalized Leases, paid or accrued by the Core
Theatres during such period; plus
(2) income taxes, depreciation and amortization expenses
of the Core Theatres for such period; plus
(3) non-operating expenses of the Core Theatres for such
period; plus
(4) lease expenses of the Core Theatres for such period;
minus
(3) without duplication and only to the extent reflected as an
addition (or, as the case may be, reduction) in the statement of Consolidated
net income of the Core Theatres for such period, all non-operating income of the
Core Theatres for such period;
all as determined on a Consolidated basis in accordance with GAAP.
1.3.35. "Core Theatre Fixed Charges" means, for any period, the sum of:
(1) all regularly scheduled payments of principal of Financing
Debt of the Core Theatres payable during such period; plus
(2) the aggregate amount of interest, including interest
expense under Capitalized Leases, paid or accrued by the Core Theatres during
such period; plus
(3) lease expenses of the Core Theatres for such period;
all as determined on a Consolidated basis in accordance with GAAP.
1.3.36. "Credit Agreement" means the Revolving Credit Agreement dated
as of January 26, 1999 among the Company, the lenders from time to time party
thereto,
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BancBoston Xxxxxxxxx Xxxxxxxx, Inc., as syndication agent and arranger, The Bank
of Nova Scotia, as documentation agent, and BankBoston, N.A., as administrative
agent.
1.3.37. "Cumulative Excess Theatre Cash Flow" means, on any date, the
aggregate of the Consolidated Excess Theatre Cash Flows for all fiscal years of
the Company ending on or after October 31, 1998 but prior to such date;
provided, however, that Consolidated Excess Theatre Cash Flow for any such
particular fiscal year of the Company shall not, for purposes of this
definition, be added to and included in Cumulative Excess Theatre Cash Flow
until the later of (a) the first business day after delivery to Harcourt of
the financial statements required to be delivered by the Company to Harcourt
pursuant to Section 3.1.1 or (b) if any First Tier Default or Default shall
exist when such financial statements are delivered to Harcourt, the first
business day thereafter on which no First Tier Default or Default shall exist.
1.3.38. "Cumulative Net Investment Cash Flow" means, on any date, the
aggregate of the Consolidated Net Investment Cash Flows for all fiscal quarters
of the Company ending on or after October 31, 1998 but prior to such date;
provided, however, that Consolidated Net Investment Cash Flow for any such
particular fiscal quarter of the Company shall not, for purposes of this
definition, be added to and included in Cumulative Net Investment Cash Flow
until the later of (a) the first business day after delivery to Harcourt of
the financial statements required to be delivered by the Company to Harcourt
pursuant to Section 3.1.2 or (b) if any First Tier Default or Default shall
exist when such financial statements are delivered to Harcourt, the first
business day thereafter on which no First Tier Default or Default shall exist.
1.3.39. "Default" means any Event of Default and any event or condition
which with the passage of time or giving of notice, or both, would become an
Event of Default.
1.3.40. "Distribution" means, with respect to the Company (or other
specified Person):
(1) the declaration or payment of any dividend or distribution
on or in respect of any shares of any class of capital stock of or other equity
interest in the Company (or such specified Person);
(2) the purchase, redemption or other retirement of any shares
of any class of capital stock of or other equity interest in the Company (or
such specified Person) or of options, warrants or other rights for the purchase
of such shares, directly, indirectly through a Subsidiary or otherwise;
(3) any other distribution on or in respect of any shares of
any class of capital stock of or equity or other beneficial interest in the
Company (or such specified Person);
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(4) any prepayment, purchase, redemption or defeasance of any
Subordinated Indebtedness of the Company (or such specified Person); and
(5) any payment, loan or advance by the Company (or such
specified Person) to, or any other Investment by the Company (or such specified
Person) in, any beneficial owner of 5% or more of any class of capital stock of
or other equity interest in the Company (or such specified Person) or any
Affiliate of such beneficial owner;
provided, however, that the term "Distribution" shall not include (i) dividends
payable in common stock of or other equity interests in the Company (or such
specified Person) or (ii) payments in the ordinary course of business in respect
of (A) reasonable compensation paid to employees, officers and directors, (B)
advances and reimbursements to employees for travel expenses, drawing accounts,
relocation costs and similar expenditures, (C) rent paid to, or accounts payable
for services rendered or goods sold by, non-Affiliates that own capital stock of
or other equity interests in the Company (or such specified Person) or (D)
intercompany accounts payable and real property leases to non-Affiliates that
own capital stock of or other equity interests in the Company (or such specified
Person).
1.3.41. "Eligible Securities" means, with respect to any particular
marketable Securities of any particular issuer:
(1) at any date prior to the date on which the Credit
Agreement terminates, marketable Securities of such issuer that (i) are owned by
the Company or by any of its Majority-Owned Subsidiaries as at such date free
and clear of all Liens and (ii) are determined by the Administrative Agent in
its sole and complete discretion to be "Eligible Securities" as at such date for
the purposes of this Agreement, each such determination by the Administrative
Agent to be in each case final and binding on the Company for all purposes of
this Agreement; and
(2) at any date on or after the date on which the Credit
Agreement terminates, marketable Securities of such issuer that (i) are owned by
the Company or by any of its Majority-Owned Subsidiaries as at such date free
and clear of all Liens and (ii) are determined by Harcourt in its sole and
complete discretion to be "Eligible Securities" as at such date for the purposes
of this Agreement, each such determination by Harcourt to be in each case final
and binding on the Company for all purposes of this Agreement.
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1.3.42. "Eligible Securities Value" means, with respect to any
particular Eligible Securities of any particular issuer:
(1) at any date prior to the date on which the Credit
Agreement terminates, the product of (i) the Fair Market Value of such Eligible
Securities as at such date, as such Fair Market Value shall be determined by
mutual agreement of the Company and the Administrative Agent, multiplied by (ii)
the percentage used or to be used by the Administrative Agent in calculating the
Eligible Securities Value of such Eligible Securities as at such date, which
percentage (A) shall be no greater than 50% and (B) shall be determined by the
Administrative Agent in its sole and complete discretion, each such
determination by the Administrative Agent to be in each case final and binding
on the Company for all purposes of this Agreement; provided, however, that the
percentage which shall be so used by the Administrative Agent for the marketable
Securities of each of Global Telesystems Group, Inc. and GrandVision shall, as
determined by the Administrative Agent on or as of the date hereof, be and
remain 50%; and
(2) at any date on or after the date on which the Credit
Agreement terminates, the product of (i) the Fair Market Value of such Eligible
Securities as at such date, as such Fair Market Value shall be determined by
mutual agreement of the Company and Harcourt, multiplied by (ii) the percentage
used or to be used by Harcourt in calculating the Eligible Securities Value of
such Eligible Securities as at such date, which percentage (A) shall be no
greater than 50% and (B) shall be determined by Harcourt in its sole and
complete discretion, each such determination by Harcourt to be in each case
final and binding on the Company for all purposes of this Agreement; provided,
however, that the percentage which shall be so used by Harcourt for the
marketable Securities of each of Global Telesystems Group, Inc. and GrandVision
shall, as determined by Harcourt on or as of the date hereof, be and remain 50%.
1.3.43. "Equity Interests" means: (a) in the case of any corporation,
any corporate capital stock of any class or series; (b) in the case of any
association or business entity, any shares, interests, participations, rights or
other equivalents (howsoever designated) of corporate capital stock; (c) in the
case of any partnership or limited liability company, partnership or membership
interests (whether general or limited); and (d) any warrants, options or other
rights to purchase or otherwise acquire any capital stock, shares or interests
of the kind described in clause (a), (b) or (c) above.
1.3.44. "Event of Default" is defined in Section 7.1.
1.3.45. "Exchange Act" means the federal Securities Exchange Act of
1934.
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1.3.46. "Fair Market Value" means, with respect to any Securities or
other property, the price which could be negotiated in an arm's-length,
free-market transaction between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction.
1.3.47. "Fee Percentage" means:
(1) on any date prior to the Reset Date:
(1) if the Lease Exposure on such date is greater than
$400,000,000, 0.0625%;
(2) if the Lease Exposure on such date is less than or
equal to $400,000,000 but greater than $350,000,000, 0.045%;
(3) if the Lease Exposure on such date is less than or
equal to $350,000,000 but greater than $250,000,000, 0.030%;
and
(4) if the Lease Exposure on such date is less than or
equal to $250,000,000, 0.015%; and
(2) on the Reset Date and any date thereafter, 0.015%.
1.3.48. "First Tier Default" means any failure by the Company to
perform or observe any of the provisions of Section 4.
1.3.49. "Financing Debt" means each of the items described in clauses
(a) through (g) of the definition of the term "Indebtedness" and, without
duplication, any guarantees of such items.
1.3.50. "Foreign Non-Recourse Debt" means, with respect to any Foreign
Subsidiary of the Company at any time, all or any portion of the Financing Debt
of such Foreign Subsidiary at such time:
(1) as to which neither the Company nor any of its
Subsidiaries (other than Foreign Subsidiaries) (i) provides any credit support
of any kind (including any undertaking, agreement or instrument that would
constitute a guarantee), (ii) is directly or indirectly obligated or liable (as
a guarantor under a guarantee or otherwise) or (iii) constitutes the lender or
obligor thereof;
(2) with respect to which neither the Company nor any of its
Subsidiaries (other than Foreign Subsidiaries) has granted any Liens to secure
the payment or performance of all or any part thereof; and
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(3) no default with respect to which (including any rights
that the holders thereof may have to take any Enforcement Action (as defined in
the Intercreditor Agreement) against any Foreign Subsidiary) would permit (upon
notice or lapse of time or both) any holder of any Financing Debt (other than
Financing Debt under the Credit Agreement) of the Company or of any of its
Subsidiaries to declare a default on such other Financing Debt or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
1.3.51. "Foreign Subsidiary" means each Subsidiary that is organized
under the laws of, and conducting its business primarily in, a jurisdiction
outside of the United States of America and that is not domesticated or dually
incorporated under the laws of the United States of America or any state
thereof.
1.3.52. "GAAP" means generally accepted accounting principles as from
time to time in effect, including the statements and interpretations of the
United States Financial Accounting Standards Board, applied on a consistent
basis (except for changes concurred with by the independent public accountants
of the Company) with the most recent audited consolidated financial statements
of the Company and its Majority-Owned Subsidiaries delivered to Harcourt
pursuant to Section 3.1.1; provided, however, that if any party notifies the
other party that such party wishes to determine compliance with any covenant
contained in Section 3.3.2, 3.4.13, 4.1 through 4.7, 4.8.4, 4.9 or 5.4 to
eliminate or otherwise modify the effect of any change in generally accepted
accounting principles after October 31, 1998, then until the earlier of (a) the
date on which such notice is withdrawn and (b) the date on which such covenant
is amended in a manner mutually satisfactory to Harcourt and the Company,
for purposes of determining compliance with such covenant and the related
definitions, "GAAP" means generally accepted accounting principles as in effect
immediately prior to the effectiveness of such change.
1.3.53. "GCCI" means GCC Investments, Inc., a Delaware corporation and
Wholly-Owned Subsidiary of the Company.
1.3.54. "Guaranteed Lease" means each lease of real property, as from
time to time in effect, which Harcourt has guaranteed pursuant to a Guarantee.
1.3.55. "Guarantees" means the respective guarantees provided by
Harcourt to lessors of real property leased by Subsidiaries of the Company, as
from time to time in effect.
1.3.56. "Harcourt" is defined in the preamble hereto.
1.3.57. "HGC South America" means Hoyts General Cinema South America,
Inc., a Cayman Islands corporation.
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1.3.58. "Indebtedness" means all obligations, contingent or otherwise,
which in accordance with GAAP are required to be classified upon the balance
sheet of the Company (or other specified Person) as liabilities, but in any
event including (without duplication):
(1) borrowed money;
(2) Indebtedness evidenced by notes, debentures or similar
instruments;
(3) Capitalized Lease Obligations;
(4) the deferred purchase price of assets, services or
Securities, including related noncompetition, consulting and stock repurchase
obligations (other than normal trade accounts payable in the ordinary course of
business);
(5) mandatory redemption or dividend rights on capital stock
(or other equity);
(6) reimbursement obligations, whether contingent or matured,
with respect to letters of credit, bankers' acceptances, surety bonds, other
financial guarantees and Interest Rate Protection Agreements (without
duplication of other Indebtedness supported or guaranteed thereby);
(7) unfunded pension liabilities;
(8) obligations that are immediately and directly due and
payable out of the proceeds of or production from property;
(9) liabilities secured by any Lien existing on property owned
or acquired by the Company (or such specified Person), whether or not the
liability secured thereby shall have been assumed; and
(10) all guarantees and endorsements in respect of
Indebtedness of others.
1.3.59. "Indemnified Party" is defined in Section 9.2.
1.3.60. "Intercreditor Agreement" means the Intercreditor Agreement
dated as of January 26, 1999, as amended and in effect from time to time, among
BankBoston, N.A., as administrative agent for itself and the other lenders under
the Credit Agreement, Harcourt and the Company.
1.3.61. "Interest Rate Protection Agreement" means any interest rate
swap, interest rate cap, interest rate hedge or other contractual arrangement
that converts
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variable interest rates into fixed interest rates, fixed interest rates into
variable interest rates or other similar arrangements.
1.3.62. "Investment" means, with respect to the Company (or other
specified Person):
(1) any share of capital stock, partnership or other equity interest,
evidence of Indebtedness or other security issued by any other Person;
(2) any loan, advance or extension of credit to, or contribution to the
capital of, any other Person;
(3) any guarantee of the Indebtedness of any other Person;
(4) any acquisition of all or any part of the business of any other
Person or the assets comprising such business or part thereof;
(5) any commitment or option to make any Investment if the
consideration for such commitment or option exceeds $1,000; and
(6) any other similar investment.
The investments described in the foregoing clauses (a) through (f)
shall be included in the term "Investment" whether they are made or acquired by
purchase, exchange, issuance of stock or other Securities, merger,
reorganization or any other method; provided, however, that the term
"Investment" shall not include (i) current trade and customer accounts
receivable for property leased, goods furnished or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms, (ii) deposits, advances and prepayments to suppliers for property leased,
goods furnished and services rendered in the ordinary course of business, (iii)
advances to employees for travel expenses, drawing accounts, relocation costs
and similar expenditures, (iv) stock or other Securities acquired in connection
with the satisfaction or enforcement of Indebtedness or claims due to the
Company (or such specified Person) or as security for any such Indebtedness or
claim or (v) demand deposits in banks or similar financial institutions.
1.3.63. "Lease Exposure" means, at any time, the sum of (a) all present
and future rental payments and other amounts guaranteed by Harcourt under the
Guarantees plus (b) all present and future rental payments and other amounts
owing under the Transferred Leases.
1.3.64. "Lien" means, with respect to the Company (or any other
specified Person):
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(1) any lien, encumbrance, mortgage, pledge, charge or security
interest of any kind upon any property or assets of the Company (or such
specified Person), whether now owned or hereafter acquired, or upon the income
or profits therefrom;
(2) any arrangement or agreement which prohibits the Company (or such
specified Person) from creating encumbrances, mortgages, pledges, liens, charges
or security interests;
(3) the acquisition of, or the agreement to acquire, any property or
asset upon conditional sale or subject to any other title retention agreement,
device or arrangement (including a Capitalized Lease);
(4) the sale, assignment, pledge or transfer for security of any
accounts, general intangibles or chattel paper of the Company (or such specified
Person), with or without recourse;
(5) the transfer of any tangible property or assets for the purpose of
subjecting such items to the payment of Indebtedness in priority to payment of
the general creditors of the Company (or such specified Person); and
(6) the existence for a period of more than 90 consecutive days of any
Indebtedness against the Company (or such specified Person) which if unpaid
would by law or upon a Bankruptcy Default be given any priority over general
creditors.
1.3.65. "Majority-Owned Subsidiary" means any Subsidiary of which a
majority of the outstanding capital stock (or other shares of beneficial
interest) entitled to vote generally (other than directors' qualifying shares
and, in the case of Foreign Subsidiaries, nominal shares required by applicable
law to be held by foreign nationals) is owned by the Company (or other specified
Person) directly or indirectly through one or more Majority-Owned Subsidiaries;
provided, however, that except (a) for purposes of Sections 3.1.1 and 3.1.2 and
(b) as and to the extent otherwise required by GAAP, none of (i) Cinema Ventures
and its Subsidiaries and (ii) Sundance and its Subsidiaries shall constitute a
Majority-Owned Subsidiary of the Company or any of its Subsidiaries.
1.3.66. "Moody's" means Xxxxx'x Investor Service, Inc.
1.3.67. "Net Cash Proceeds" means, with respect to any sale or transfer
of any Investment or other property by any Person, the cash portion of the Net
Proceeds from such sale or transfer, including all such cash paid from time to
time under any instruments evidencing or securing any obligations to pay all or
any part of the purchase price or other consideration payable in connection with
such sale or transfer.
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1.3.68. "Net Proceeds" means, with respect to any sale or transfer of
any Investment or other property by any Person, all cash and other property
(including instruments evidencing or securing indebtedness and Equity Interests
or other Securities) payable to or receivable by such Person from such sale or
transfer, net of (a) all income, sales, use, transfer or other taxes (state,
federal or local) solely attributable to such sale or transfer and reasonably
estimated to be payable in cash by such Person for the taxable year in which
such sale or transfer occurred, (b) all sales or other similar commissions and
fees, costs and other expenses incurred in connection with such sale or transfer
and (c) appropriate amounts to be provided by such Person as a reserve, in
accordance with GAAP, against any liabilities associated with such Investment or
property and retained by such Person after such sale or transfer, or against any
indemnification obligations associated with the sale or transfer of such
Investment or other property.
1.3.69. "Non-Theatre Subsidiary" means each Subsidiary of the Company
that is not a Theatre Subsidiary.
1.3.70. "Obligations" means all present and future liabilities,
obligations and Indebtedness of the Company owing to Harcourt under or in
connection with this Agreement, including interest and fees under Section 2,
reimbursement, indemnification and guarantee obligations under Section 2,
payment obligations under Sections 7.2 and 9 and other charges, indemnities and
expenses from time to time owing hereunder (all whether accruing before or after
a Bankruptcy Default and regardless of whether allowed as a claim in bankruptcy
or similar proceedings).
1.3.71. "Payment Default" means any failure by the Company to perform
or observe any of the provisions of Section 2 or 7.2.
1.3.72. "Permitted Non-Theatre Investments" means each of (a)
Investments made by the Company in GCCI or any of the Majority-Owned
Subsidiaries of GCCI and (b) Investments made by GCCI or any of its
Majority-Owned Subsidiaries in any other Person.
1.3.73. "Person" means any present or future natural person or any
corporation, association, partnership, joint venture, limited liability, joint
stock or other company, business trust, trust, organization, business or
government or any governmental agency or political subdivision thereof.
1.3.74. "Pledged Rights" is defined in Section 8.1.2.
1.3.75. "Pledged Securities" means, collectively, the Pledged Stock and
the Pledged Rights.
1.3.76. "Pledged Stock" is defined in Section 8.1.1.
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1.3.77. "Pledged Theatre Subsidiary" means each present or future
Theatre Subsidiary; provided, however, that none of (a) the Foreign Subsidiaries
of HGC South America, (b) Cinema Ventures and its Subsidiaries and (c) Sundance
and its Subsidiaries shall constitute a Pledged Theatre Subsidiary.
1.3.78. "Present Value Lease Exposure" means, at any time, the sum of
the then present values of (a) all present and future rental payments and other
amounts guaranteed by Harcourt under the Guarantees plus (b) all present and
future rental payments and other amounts owing under the Transferred Leases,
calculated by discounting each such rental payment and each such other amount
from its payment date to the date of calculation of such present value at a per
annum interest rate equal to the sum of (i) the then prevailing rate of interest
on debt Securities customarily issued by the Treasury of the United States
having a 10-year maturity date plus (ii) 0.75%.
1.3.79. "Prior Agreement" is defined in Section 1.1.
1.3.80. "Problem Theatres" means the theatres listed on Exhibit 1.3C.
1.3.81. "PPI" means the Producer Price Index for Finished Goods
published by the Bureau of Labor Statistics (1982 = 100).
1.3.82. "Reset Date" means the date on which:
(1) no First Tier Default or Default exists;
(2) Consolidated Adjusted Cash Flow during the period of four
consecutive fiscal quarters of the Company most recently ended equals or exceeds
130% of Consolidated Fixed Charges during such period of four consecutive fiscal
quarters; and
(3) Consolidated Adjusted EBITDA during the period of four consecutive
fiscal quarters of the Company most recently ended equals or exceeds 350% of
Consolidated Interest Charges during such period of four consecutive fiscal
quarters.
1.3.83. "S&P" means Standard & Poor's, a division of The McGraw Hill
Companies, Inc.
1.3.84. "Securities" means any Equity Interests, bonds, debentures,
notes or other evidences of indebtedness for borrowed money, whether secured or
unsecured, and whether convertible, subordinated or otherwise, or, in general,
any instruments commonly known as "securities".
1.3.85. "Securities Act" means the federal Securities Act of 1933.
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1.3.86. "Xxxxx Family Group" means the group of Persons originally
party to the Xxxxx-Xxxxx/Marks Stockholders Agreement dated as of December 15,
1993 (whether or not such agreement is terminated) and the progeny of each such
Person.
1.3.87. "South American Adjusted EBITDA" means, for any period, the
total of:
(1) Consolidated net income of the South American Subsidiaries for such
period; plus
(2) without duplication and only to the extent reflected as a charge in
the statement of Consolidated net income of the South American Subsidiaries for
such period, the sum of:
(1) the aggregate amount of interest, including interest expense
under Capitalized Leases, paid or accrued by the South American
Subsidiaries during such period; plus
(2) taxes, depreciation and amortization expenses of the South
American Subsidiaries for such period; plus
(3) any extraordinary, unusual or non-recurring expenses or losses
for such period; minus
(3) without duplication and only to the extent reflected as an addition
(or, as the case may be, reduction) in the statement of Consolidated net income
of the South American Subsidiaries for such period, any extraordinary, unusual
or non-recurring income or gains for such period;
all as determined on a Consolidated basis in accordance with GAAP.
1.3.88. "South American Subsidiaries" means each of HGC South America,
the Argentina Subsidiary, the Brazil Subsidiary, the Chile Subsidiary, the
Uruguay Subsidiary and the other Subsidiaries of HGC South America which are
Foreign Subsidiaries and Theatre Subsidiaries.
1.3.89. "Spinoff" is defined in Section 1.1.
1.3.90. "Subordinated Indebtedness" means Indebtedness of the Company
(or other specified Person) which by its terms or any agreement is subordinated
to the prior payment of any Financing Debt of the Company (or such specified
Person).
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1.3.91. "Subsidiary" means any Person of which the Company (or other
specified Person) shall at the time, directly or indirectly through one or more
of its Subsidiaries, (a) own at least 50% of the outstanding capital stock (or
other shares of beneficial interest) entitled to vote generally, (b) hold at
least 50% of the partnership, joint venture or similar interests or (c) be a
general partner or joint venturer.
1.3.92. "Sundance" means Sundance Cinema Circuit, LLC, a Delaware
limited liability company.
1.3.93. "Theatre Subsidiary" means each present and future Subsidiary
of the Company that is engaged in whole or in part in the business of (a) motion
picture exhibition or (b) managing the motion picture exhibition or concession
business of any other Person.
1.3.94. "Transferred Lease" means each theatre lease transferred by
Harcourt to the Company and, in turn, by the Company to a Subsidiary of the
Company in connection with the Spinoff, as from time to time in effect.
1.3.95. "UCC" means the Uniform Commercial Code as in effect in
Massachusetts; provided, however, that with respect to the perfection of
Harcourt's Lien on the Collateral and the effect of perfection or nonperfection
thereof, the term "UCC" means the Uniform Commercial Code as in effect in any
jurisdiction the laws of which are made applicable by Section 9-103 of the
Uniform Commercial Code as in effect in Massachusetts.
1.3.96. "Uruguay Credit Facility" means a credit facility among the
Uruguay Subsidiary and its senior lenders that contains terms which are not
significantly less favorable to the Company, the Uruguay Subsidiary and the
other Subsidiaries of the Company than the terms contained in the Argentina
Credit Facility.
1.3.97. "Uruguay Subsidiary" means Telnir S.A.
1.3.98. "Wholly-Owned Subsidiary" means any Subsidiary of which all of
the outstanding capital stock (or other shares of beneficial interest) entitled
to vote generally (other than directors' qualifying shares and, in the case of
Foreign Subsidiaries, nominal shares required by applicable law to be held by
foreign nationals) is owned by the Company (or other specified Person) directly
or indirectly through one or more Wholly-Owned Subsidiaries.
2. Payment Provisions.
2.1. Reimbursement and Indemnification. The Company hereby
unconditionally and irrevocably agrees (a) to pay Harcourt, immediately upon
written notice by Harcourt, any and all
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amounts paid by Harcourt pursuant to, or in respect of, any Guarantee or
Transferred Lease and (b) to indemnify, defend and hold harmless Harcourt and
its Affiliates and their respective directors, officers, employees and agents
from and against any and all claims, losses, liabilities, damages, cost and
expenses (including reasonable attorneys' fees and expenses) arising from or in
connection with any Guarantee or Transferred Lease.
2.2. Guarantor's Fee. Commencing on February 1, 1999, the Company will
pay to Harcourt a quarterly guarantor's fee, payable in advance on the first
business day of each February, May, August and November in an amount equal to
the product of (a) the Fee Percentage multiplied by (b) the Present Value Lease
Exposure as of such day.
2.3. Interest on Overdue Payments. The Company will, on demand, pay to
Harcourt interest on any overdue payment required to be made under this
Agreement at a per annum rate equal to the sum of (a) 2% plus (b) the rate of
interest from time to time announced by BankBoston, N.A. as its "base rate".
3. General Covenants. The Company covenants that it will, and it will
cause its Subsidiaries to, comply with the following provisions:
3.1. Financial Statements and Reports.
3.1.1. Annual Reports. The Company will furnish to Harcourt as
soon as available, and in any event within 110 days after the end of
each fiscal year of the Company, the Consolidated balance sheet of the
Company and its Majority-Owned Subsidiaries as at the end of such
fiscal year and the Consolidated statements of income, of changes in
shareholders' equity and of cash flows of the Company and its
Majority-Owned Subsidiaries for such fiscal year and the last fiscal
quarter of such fiscal year (all in reasonable detail), all accompanied
by:
(1) reports of Deloitte & Touche (or, if they cease to be auditors
of the Company and its Majority-Owned Subsidiaries, other independent
certified public accountants of recognized national standing),
containing no material qualification, to the effect that they have
audited the foregoing Consolidated financial statements (other than the
financial statements for the last quarter of such fiscal year) in
accordance with generally accepted auditing standards and that such
audited Consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its
Majority-Owned Subsidiaries covered thereby at the date thereof and the
results of their operations for the period covered thereby in
conformity with GAAP;
(2) the statement of such accountants that they have caused this
Agreement to be reviewed and that in the course of their audit of the
Company and its Majority-Owned Subsidiaries no facts have come to their
attention that cause them to believe that any First Tier Default or
Default exists or, if such is not the case, specifying such First Tier
Default
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or Default and the nature thereof; provided, however, that this statement is
furnished by such accountants with the understanding that the examination of
such accountants cannot be relied upon to give such accountants knowledge of any
such First Tier Default or Default except as it relates to accounting or
auditing matters within the scope of their audit;
(3) a certificate of the Company signed by the chief financial officer
or treasurer of the Company to the effect that such officer has caused this
Agreement to be reviewed and has no knowledge of any First Tier Default or
Default, or if such officer has such knowledge, specifying such First Tier
Default or Default and the nature thereof and what action the Company has taken,
is taking or proposes to take with respect thereto;
(4) computations by the Company demonstrating, as of the end of such
fiscal year and the last fiscal quarter of such fiscal year, compliance with the
Computation Covenants; and
(5) in reasonable detail, management's discussion and analysis of (i)
the results of operations and the financial condition of the Company and its
Subsidiaries as at the end of and for each of (A) such fiscal year and (B) the
last fiscal quarter of such fiscal year and (ii) the progress of the Company in
implementing its new business plan as presented by the Company to the Special
Committee of the Board of Directors of Harcourt on November 15, 1998.
3.1.2. Quarterly Reports. The Company will furnish to Harcourt as soon
as available and, in any event within 55 days after the end of each of the first
three fiscal quarters of each fiscal year of the Company, the internally
prepared Consolidated balance sheet of the Company and its Majority-Owned
Subsidiaries as of the end of such fiscal quarter and the Consolidated
statements of income, of changes in shareholders' equity and of cash flows of
the Company and its Majority-Owned Subsidiaries for such month and for the
portion of the fiscal year then ended (all in reasonable detail), all
accompanied by:
(1) a certificate of the Company signed by the chief financial officer
or treasurer of the Company to the effect that such financial statements have
been prepared in accordance with GAAP and present fairly, in all material
respects, the financial position of the Company and its Majority-Owned
Subsidiaries covered thereby at the dates thereof and the results of their
operations for the periods covered thereby, subject only to normal year-end
audit adjustments and the addition of footnotes;
(2) a certificate of the Company signed by the chief financial officer
or treasurer of the Company to the effect that such officer has caused this
Agreement to be reviewed and has no knowledge of any First Tier Default or
Default, or if such officer has such knowledge, specifying such First Tier
Default or Default and the nature thereof and what action the Company has taken,
is taking or proposes to take with respect thereto;
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(3) computations by the Company demonstrating, as of the
end of such fiscal quarter, compliance with the Computation Covenants;
and
(4) in reasonable detail, management's discussion and
analysis of (i) the results of operations and the financial condition
of the Company and its Subsidiaries as at the end of and for such
fiscal quarter and (ii) the progress of the Company in implementing its
new business plan as presented by the Company to the Special Committee
of the Board of Directors of Harcourt on November 15, 1998.
3.1.3. Public Reports. The Company will promptly furnish to
Harcourt such registration statements, proxy statements and reports,
including Forms 10-K, 10-Q and 8-K, as may be filed by the Company with
the Securities and Exchange Commission.
3.1.4. Notice of Litigation; Notice of Defaults. The Company
will promptly furnish to Harcourt notice of (i) any notice or other
communication from any lessor that the Company or any Theatre
Subsidiary is in default under any Guaranteed Lease or any Transferred
Lease; (ii) any litigation or administrative or arbitration proceeding
commenced, or to the knowledge of the Company, threatened, relating to
any Guaranteed Lease or any Transferred Lease; and (iii) any other
litigation or administrative or arbitration proceeding commenced, or to
the knowledge of the Company, threatened, against or relating to the
Company or any of its Subsidiaries if the damages claimed in such
proceeding are $5,000,000 or more or if such proceeding may result in a
material adverse change in the business or assets or in the condition,
financial or otherwise, of the Company and its Subsidiaries on a
Consolidated basis or of the Company on an individual basis. Promptly
upon acquiring knowledge thereof, the Company will notify Harcourt of
the existence of any First Tier Default or Default, specifying the
nature thereof and what action the Company or any Subsidiary has taken,
is taking or proposes to take with respect thereto.
3.1.5. Management Letters. The Company will promptly furnish
to Harcourt any management letters furnished to the Company or any of
its Subsidiaries by the Company's auditors.
3.1.6. South American Financing Documents. The Company will
promptly furnish to Harcourt any agreement relating to any Financing
Debt of any South American Subsidiary and all financial statements and
financial compliance certificates required to be delivered from time to
time by the Company or any South American Subsidiary to any lender
under such agreement.
3.1.7. Other Information. From time to time upon request of
any authorized officer of Harcourt, each of the Company and its
Subsidiaries will furnish to Harcourt such other information regarding
the business, assets, financial condition, income or
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prospects of the Company and its Subsidiaries as such officer may
reasonably request. Harcourt's authorized officers and representatives
shall have the right during normal business hours upon reasonable
notice and at reasonable intervals to examine the books and records of
the Company and its Subsidiaries, to make copies, notes and abstracts
therefrom and to make an independent examination of such books and
records for the purpose of verifying the accuracy of the reports
delivered by the Company and its Subsidiaries pursuant to this Section
3.1 and ascertaining compliance with or obtaining enforcement of this
Agreement.
3.2. Liens. Neither the Company nor any of its Subsidiaries shall
create, incur or enter into, or suffer to be created or incurred or to exist,
any Lien (including any arrangement or agreement which prohibits it from
creating any Lien), except the following:
3.2.1. Liens on the Collateral that secure the Obligations
for the benefit of Harcourt.
3.2.2. Liens to secure taxes and assessments and other
governmental charges if (a) the validity or amount of such tax,
assessment or other governmental charge is being contested in good
faith by the Company or any of its Subsidiaries by appropriate
proceedings and (b) the Company or such Subsidiary, in accordance with
GAAP, has set aside on its books adequate reserves with respect
thereto; provided, however, that each of the Company and its
Subsidiaries will pay or bond, or cause to be paid or bonded, all such
taxes, assessments or other governmental charges immediately upon the
commencement of proceedings to foreclose any Lien which may have
attached as security therefor (except to the extent such proceedings
have been dismissed or stayed).
3.2.3. Deposits or pledges made (a) in connection with, or
to secure payment of, workers' compensation, unemployment insurance,
old age pensions or other social security, (b) in connection with
casualty insurance, (c) to secure the performance of bids, tenders,
contracts (other than contracts relating to Financing Debt) or leases,
(d) to secure statutory obligations or surety or appeal bonds or (e) to
secure indemnity, performance or other similar bonds in the ordinary
course of business.
3.2.4. Liens in respect of judgments or awards (a) which
have been in force for less than the applicable appeal period or (b) in
respect of which the Company or any of its Subsidiaries shall at the
time in good faith be prosecuting an appeal or proceeding for review
and, in the case of each of clauses (a) and (b), the Company or such
Subsidiary shall have taken appropriate reserves therefor in accordance
with GAAP and execution of such judgment or award shall not be levied.
3.2.5. Liens of carriers, warehousemen, mechanics and
similar Liens, which in each case (a) are being contested in good faith
by the Company or any Subsidiary in appropriate proceedings (so long as
the Company or such Subsidiary shall, in accordance
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with GAAP, have set aside on its books adequate reserves with respect
thereto) and (b) do not materially detract from the value of any asset
or other property material to the operations or business of the Company
or any of its Subsidiaries or impair the use thereof in the business of
the Company or any of its Subsidiaries.
3.2.6. Encumbrances in the nature of (a) zoning
restrictions, (b) easements, (c) restrictions of record on the use of
real property, (d) landlords' and lessors' Liens on rented premises and
(e) restrictions on transfers or assignment of leases, which in each
case do not materially detract from the value of any asset or other
property material to the operations or business of the Company or any
of its Subsidiaries or impair the use thereof in the business of the
Company or any of its Subsidiaries.
3.2.7. Restrictions under federal and state securities laws
on the transfer of Securities.
3.2.8. Liens constituting (a) purchase money security
interests existing or created on the date on which such property is
acquired, and (b) the renewal, extension or refunding of any security
interest referred to in the foregoing clause (a) in an amount not to
exceed the amount thereof remaining unpaid immediately prior to such
renewal, extension or refunding; provided, however, that each such
security interest shall attach solely to the particular item of
property so acquired, and the principal amount of Indebtedness
(including Indebtedness in respect of Capitalized Lease Obligations)
secured thereby shall not exceed the cost (including all such
Indebtedness secured thereby, whether or not assumed) of such item of
property.
3.2.9. Liens consisting of covenants contained in agreements
relating to senior Financing Debt of the Company prohibiting the
Company and its Subsidiaries from creating encumbrances, mortgages,
liens, charges or security interests on their assets (other than Liens
on the Collateral which secure the Obligations for the benefit of
Harcourt).
3.2.10. Liens on the capital stock of the Argentina
Subsidiary granted to BankBoston, N.A., Nassau Branch, as agent under
the Argentina Credit Facility, to secure up to $75,000,000 of
obligations of the Argentina Subsidiary under the Argentina Credit
Facility.
3.2.11. Liens on the capital stock of the Brazil Subsidiary
granted to the senior lenders of the Brazil Subsidiary to secure up to
$17,250,000 in obligations of the Brazil Subsidiary under the Brazil
Credit Facility.
3.2.12. Liens on the capital stock of the Chile Subsidiary
granted to the senior lenders of the Chile Subsidiary to secure up to
$15,000,000 in obligations of the Chile Subsidiary under the Chile
Credit Facility.
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3.2.13. Liens on the capital stock of the Uruguay Subsidiary
granted to the senior lenders of the Uruguay Subsidiary to secure up to
$5,000,000 in obligations of the Uruguay Subsidiary under the Uruguay
Credit Facility.
3.2.14. If any South American Subsidiaries combine their
respective credit facilities into a joint senior credit facility, Liens
on the capital stock of such combining South American Subsidiaries
granted to their senior lenders to secure their obligations under such
joint senior credit facility; provided, however, that the aggregate
amount of obligations of such South American Subsidiaries secured
pursuant to Sections 3.2.10 through 3.2.13 and this Section 3.2.14
shall not exceed the aggregate amount of obligations of such South
American Subsidiaries permitted to be secured pursuant to Sections
3.2.10 through 3.2.13.
3.2.15. Liens granted by the Theatre Subsidiaries on theatre
assets acquired after the date hereof and located in the United States
to secure the financing used to acquire such theatre assets; provided,
however, that (a) each such Lien shall attach solely to the particular
item of property so acquired, (b) the principal amount of such
financing secured thereby shall not exceed the cost (including all such
financing secured thereby, whether or not assumed) of such item of
property and (c) the aggregate amount of financing secured by all such
Liens shall not exceed $10,000,000.
3.2.16. Liens on the capital stock and assets of each of
Cinema Ventures, Sundance and their respective Subsidiaries.
3.3. Distributions. Neither the Company nor any of its Subsidiaries
shall make any Distribution, except the following:
3.3.1. Any Subsidiary of the Company may make Distributions
to its equityholders which (a) are in proportion to the respective
Equity Interests of such Subsidiary owned by such equityholders or (b)
are disproportionately favorable to the Company or any of its other
Subsidiaries based on the respective Equity Interests owned by the
equityholders of such Subsidiary.
3.3.2. At any time after the delivery by the Company to
Harcourt of the financial statements required to be delivered pursuant
to Section 3.1.1 for the fiscal year of the Company ending on October
31, 1999, so long as immediately before and after giving effect thereto
no First Tier Default or Default exists, the Company may make
Distributions to its stockholders; provided, however, that the
aggregate amount of all such Distributions shall not exceed the total
of (a) 50% of Cumulative Excess Theatre Cash Flow minus (b) to the
extent included in clause (a) above, gains from the sale of assets of
the Theatre Subsidiaries.
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3.4. Merger, Consolidation and Dispositions of Assets. Neither the
Company nor any of the Theatre Subsidiaries shall (a) become a party to any
merger or consolidation or shall sell, lease, sell and leaseback, sublease or
otherwise dispose of any of its assets, or (b) contract, or make other
arrangements, with any Person (other than a Theatre Subsidiary) to manage the
theatre business of, or provide concession services to, any Theatre Subsidiary,
except the following:
3.4.1. Any Theatre Subsidiary may sell or otherwise dispose
of (a) inventory in the ordinary course of business, (b) tangible
assets to be replaced in the ordinary course of business by other
tangible assets of equal or greater value and (c) tangible assets that
are no longer used or useful in the business of the Company or such
Theatre Subsidiary.
3.4.2. Any Theatre Subsidiary may merge or liquidate into
any other Theatre Subsidiary so long as after giving effect thereto the
surviving company is a directly owned Wholly-Owned Subsidiary of the
Company.
3.4.3. The Company may sell or otherwise dispose of
Investments other than Investments in Theatre Subsidiaries which are
not South American Subsidiaries.
3.4.4. The Theatre Subsidiaries may sell the assets of the
Theatre Subsidiaries listed on Exhibit 3.4.4.
3.4.5. The Company and the Theatre Subsidiaries may transfer
the assets or Equity Interests of any Problem Theatre so long as (a)
such transfer effects a release of Harcourt from all obligations under
each Guaranteed Lease and Transferred Lease relating to such assets or
Equity Interests or (b) such assets or Equity Interests are transferred
to a transferee having a Consolidated net worth of at least $10,000,000
and the aggregate amount of buyout payments made by the Company and its
Subsidiaries to such transferee in connection with such transfer does
not exceed the product of (i) four multiplied by (ii) the negative cash
flow generated by the assets of such Problem Theatre during the period
of four consecutive fiscal quarters of the Company most recently ended;
provided, however, that the aggregate amount of all buyout payments
made by the Company and its Subsidiaries in connection with transfers
of assets and Equity Interests pursuant to this clause (b) shall not
exceed $15,000,000.
3.4.6. The Company and the Theatre Subsidiaries may sell the
assets or Equity Interests of any B Theatre so long as (a) such sale
effects a release of Harcourt from all obligations under each
Guaranteed Lease and Transferred Lease relating to such assets or
Equity Interests or (b) such assets are sold to a buyer having a
Consolidated net worth of at least $10,000,000 and the cash
consideration received by the Company and its Subsidiaries in
connection with such sale equals or exceeds the product of (i) four
multiplied by (ii) the cash flow generated by the assets of such B
Theatre during the period of four consecutive fiscal quarters of the
Company most recently ended.
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3.4.7. The Company and the Theatre Subsidiaries may transfer
the assets or Equity Interests of any Problem Theatre or B Theatre to
any transferee having a Consolidated net worth of at least $10,000,000
in exchange for theatre assets of such transferee having substantially
the same cash flow during the period of four consecutive fiscal
quarters of the Company most recently ended as the assets of such
Problem Theatre or B Theatre.
3.4.8. Any South American Subsidiary may merge or liquidate
into any other South American Subsidiary.
3.4.9. Any South American Subsidiary may merge into any
Person (other than any other Theatre Subsidiary which is not a Foreign
Subsidiary) so long as contemporaneously with such merger (a) an amount
of Financing Debt (other than Foreign Non-Recourse Debt) of such South
American Subsidiary equal to the lesser of (i) the Net Cash Proceeds
received by such South American Subsidiary in connection with such
merger and (ii) the Financing Debt (other than Foreign Non-Recourse
Debt) of such South American Subsidiary, is indefeasibly discharged in
full and (b) guarantees by the Company and any of its Subsidiaries of
an amount of Indebtedness (including Financing Debt) of such South
American Subsidiary equal to the lesser (i) the Net Cash Proceeds
received by such South American Subsidiary in connection with such
merger and (ii) the Financing Debt (other than Foreign Non-Recourse
Debt) of such South American Subsidiary, are irrevocably terminated;
provided, however, that if such South American Subsidiary and any other
South American Subsidiary are co-obligors with respect to any Financing
Debt (other than Foreign Non-Recourse Debt), then for purposes of
determining the amount of such Financing Debt (A) which is required to
be indefeasibly discharged in full pursuant to clause (a) above and (B)
in respect of which all guarantees are required to be irrevocably
terminated pursuant to clause (B) above, each co-obligor shall be
deemed to be the sole obligor in respect of its equitable proportion of
such Financing Debt, which apportionment shall be based on the relative
portions of South American Adjusted EBITDA during the period of four
consecutive fiscal quarters of the Company most recently ended that are
attributable to such co-obligors.
3.4.10. Any South American Subsidiary may sell all or any
portion of its assets or all or any portion of its Equity Interests in
any other Person, in each case so long as contemporaneously with such
sale (a) an amount of Financing Debt (other than Foreign Non-Recourse
Debt) of such South American Subsidiary equal to the lesser of (i) the
Net Cash Proceeds received by such South American Subsidiary in
connection with such sale and (ii) the Financing Debt (other than
Foreign Non-Recourse Debt) of such South American Subsidiary, is
indefeasibly discharged in full and (b) guarantees by the Company and
any of its Subsidiaries of an amount of Indebtedness (including
Financing Debt) of such South American Subsidiary equal to the lesser
of (i) the Net Cash Proceeds received by such South American Subsidiary
in connection with such sale
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and (ii) the Financing Debt (other than Foreign Non-Recourse Debt) of
such South American Subsidiary, are irrevocably terminated; provided,
however, that if such South American Subsidiary and any other South
American Subsidiary are co-obligors with respect to any Financing Debt
(other than Foreign Non-Recourse Debt), then for purposes of
determining the amount of such Financing Debt (A) which is required to
be indefeasibly discharged in full pursuant to clause (a) above and (B)
in respect of which guarantees are required to be irrevocably
terminated pursuant to clause (b) above, each co-obligor shall be
deemed to be the sole obligor in respect of its equitable proportion of
such Financing Debt, which apportionment shall be based on the relative
portions of South American Adjusted EBITDA during the period of four
consecutive fiscal quarters of the Company most recently ended that are
attributable to such co-obligors.
3.4.11. Each of Cinema Ventures, Sundance and their
respective Subsidiaries may merge or be liquidated into any other
Person.
3.4.12. Each of Cinema Ventures, Sundance and their
respective Subsidiaries may sell all or any portion of its assets or
all or any portion of its Equity Interests in any other Person.
3.4.13. In addition to the foregoing, (a) the Company may
sell any (but not substantially all) of its assets or all of its Equity
Interests in any Theatre Subsidiary and (b) any Theatre Subsidiary
(other than any South American Subsidiary) may sell all or any of its
assets, in each case so long as:
(1) either (A) such sale effects a release of
Harcourt from all obligations under each Guaranteed Lease and
Transferred Lease relating to such assets or Equity Interests
or (B) such assets or Equity Interests are transferred to a
transferee having a Consolidated net worth of at least
$10,000,000;
(2) the consideration received by the Company or
such Theatre Subsidiary in exchange for such assets or Equity
Interests equals or exceeds the Fair Market Value of such
assets or Equity Interests;
(3) immediately before and after giving effect
to such sale, no First Tier Default or Default exists; and
(4) immediately before and after giving effect to
any such sale, the aggregate amount of Asset-Specific EBITDA
attributable to all of the assets and Equity Interests sold
pursuant to this Section 3.4.13 shall not exceed 10% of
Consolidated Adjusted EBITDA of the Company and its
Majority-Owned Subsidiaries for the period of four consecutive
fiscal quarters of the Company most recently ended for which
financial statements have been delivered by the Company to
Harcourt pursuant to Section 3.1.1 or 3.1.2.
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3.5. Issuance of Stock by Theatre Subsidiaries; Subsidiary
Distributions.
3.5.1. Issuance of Stock by Theatre Subsidiaries. No present
Majority-Owned Subsidiary of the Company which is a Theatre Subsidiary
shall issue or sell any shares of its capital stock or other evidence
of beneficial ownership to any Person other than (a) to the Company or
any of its Wholly-Owned Subsidiaries which is a Theatre Subsidiary and
(b) as required by applicable law or licensing authorities.
3.5.2. No Restrictions on Subsidiary Distributions. Except
for this Agreement and agreements relating to Financing Debt of the
Company, the South American Subsidiaries, Cinema Ventures, Sundance and
the respective Subsidiaries of Cinema Venture and Sundance, neither the
Company nor any of its Subsidiaries shall enter into or be bound by any
agreement (including covenants requiring the maintenance of specified
amounts of net worth or working capital) restricting the right of any
such Subsidiary to make Distributions or extensions of credit to the
Company (directly or indirectly through another Subsidiary of the
Company).
3.6. Guaranteed Leases and Transferred Leases.
3.6.1. No Transfer. No Theatre Subsidiary shall transfer,
assign or sublease any Guaranteed Lease or any Transferred Lease to any
other Person (other than another Theatre Subsidiary) without the prior
written consent of Harcourt; provided, however, that the Theatre
Subsidiaries may transfer and assign any Guaranteed Lease or
Transferred Lease in connection with any sale of assets or Equity
Interests permitted under Section 3.4.4, 3.4.5, 3.4.6 or 3.4.7 or
3.4.13.
3.6.2. Amendments, Renewals, Extensions, etc. No Theatre
Subsidiary shall (a) amend, modify or terminate any Guaranteed Lease or
Transferred Lease if, as a result of such amendment, modification or
termination, Harcourt's liability with respect to such Guaranteed Lease
or Transferred Lease shall be increased or the time period for which
Harcourt has any liability for such Guaranteed Lease or Transferred
Lease shall be extended or (b) renew or extend the term of any
Guaranteed Lease or Transferred Lease unless Harcourt shall not be
liable for any Theatre Subsidiary's obligations with respect to such
renewed or extended term.
3.7. Conduct of Theatre Business.
3.7.1. Theatre Subsidiaries. The Theatre Subsidiaries will
engage only in the business of owning and operating theatres for motion
picture exhibition and other activities incidental thereto; provided,
however, that Cinema Ventures may also engage in the business of owning
and operating full-service restaurants in its theatres.
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3.7.2. Theatre Business. The Company's motion picture
exhibition business in the United States and activities incidental
thereto will be conducted only by the Theatre Subsidiaries. The Company
shall own and hold all interests in (a) the Theatre Subsidiaries which
are not Foreign Subsidiaries directly or indirectly through General
Cinema Theatres, Inc. and (b) the Theatre Subsidiaries which are
Foreign Subsidiaries directly or indirectly through General Cinema
International, Inc.; provided, however, that each of Knights Holding
Corp., Knights Realty Corp. and Knights Theatre Corp. may be owned
indirectly by the Company so long as it is inactive and does not engage
in any operations or activities or own any material assets.
3.8. No Extension of Credit Agreement. Prior to the date on which
the Intercreditor Agreement terminates, without the prior written consent of
Harcourt, the Company shall not (a) extend the maturity date of any Financing
Debt under the Credit Agreement or any other Loan Document (as defined in the
Credit Agreement) beyond January 26, 2002 or (b) extend the term of the
commitment of any lender under the Credit Agreement or any other Loan Document
(as defined in the Credit Agreement) to make extensions of credit to the Company
or any of its Subsidiaries beyond January 26, 2002.
4. First Tier Covenants. The Company covenants that, at any time when
Consolidated Net Worth is less than the then Present Value Lease Exposure, it
will comply with the following provisions:
4.1. Consolidated Net Worth. Consolidated Net Worth shall at all
times equal or exceed the sum of (a) $135,000,000 plus (b) 50% of Consolidated
Net Income (if positive) for each fiscal year of the Company ending on or after
October 31, 1998.
4.2. Consolidated Adjusted Cash Flow to Consolidated Fixed Charges.
On the last day of each fiscal quarter of the Company, Consolidated Adjusted
Cash Flow during the period of four consecutive fiscal quarters then ended shall
equal or exceed 100% of Consolidated Fixed Charges during such period of four
consecutive fiscal quarters.
4.3. Consolidated Adjusted EBITDA to Consolidated Interest Charges.
On the last day of each fiscal quarter of the Company, Consolidated Adjusted
EBITDA during the period of four consecutive fiscal quarters then ended shall
equal or exceed 230% of Consolidated Interest Charges during such period of four
consecutive fiscal quarters.
4.4. Consolidated Total Adjusted Debt to Consolidated Adjusted
EBITDA. On the last day of each fiscal quarter of the Company, Consolidated
Total Adjusted Debt shall not exceed 420% of Consolidated Adjusted EBITDA during
the period of four consecutive fiscal quarters then ended.
4.5. Core Theatre Adjusted EBITDA to Core Theatre Fixed Charges. On
the last day of each fiscal quarter of the Company, Core Theatre Adjusted EBITDA
during the period of four
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consecutive fiscal quarters then ended shall equal or exceed 105% of Core
Theatre Fixed Charges during such period of four consecutive fiscal quarters.
4.6. Problem Theatre Adjusted EBITDA. The portion of Consolidated
Adjusted EBITDA that is attributable to the Problem Theatres owned by the
Company or any of its Subsidiaries on October 31, 2000 shall not be less than
negative $10,000,000 for the fiscal year of the Company ending on October 31,
2000.
4.7. South American Adjusted EBITDA. On each of October 31, 1999
and October 31, 2000, South American Adjusted EBITDA during the period of four
consecutive fiscal quarters then ended shall equal or exceed $1.
4.8. Investments and Acquisitions. On or prior to the Reset Date,
neither the Company nor any of its Subsidiaries shall have outstanding, acquire,
hold or commit itself to acquire any Investment (including any Investment
consisting of the acquisition of any business), except the following:
4.8.1. Investments of the Company and its Subsidiaries
outstanding immediately prior to the date hereof; provided, however,
that unless permitted pursuant to Section 4.8.4, neither the Company
nor any of its Subsidiaries shall exercise any option to make an
Investment held by it prior to the date hereof.
4.8.2. Investments of the Company and its Subsidiaries in
the Theatre Subsidiaries (other than Cinema Ventures, Sundance and
their respective Subsidiaries).
4.8.3. Investments of the Company and its Subsidiaries in
Cash Equivalents.
4.8.4. Permitted Non-Theatre Investments of the Company,
GCCI and the Subsidiaries of GCCI; provided, however, that no such
Permitted Non-Theatre Investment shall be acquired if immediately
before or after giving effect to such Permitted Non-Theatre Investment
any First Tier Default or Default shall exist; and provided, further,
that the aggregate amount of all such Permitted Non-Theatre Investments
shall not exceed the total of (a) $125,000,000 minus (b) the aggregate
amount of Permitted Non-Theatre Investments outstanding immediately
prior to the date hereof, including the Permitted Non-Theatre
Investments listed on Exhibit 4.8.4, plus (c) 50% of Cumulative Excess
Theatre Cash Flow plus (d) Cumulative Net Investment Cash Flow.
4.8.5. Investments of the Company and its Majority-Owned
Subsidiaries in Cinema Ventures, Sundance or any of their respective
Subsidiaries; provided, however, that no such Investment shall be
acquired if immediately before or after giving effect to such
Investment any First Tier Default or Default shall exist; and provided,
further, that the aggregate amount of all such Investments after the
date hereof shall not exceed $25,000,000.
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4.9. Capital Expenditures. On or prior to the Reset Date, neither
the Company nor any of its Majority-Owned Subsidiaries shall make any Capital
Expenditures, except for Capital Expenditures in an aggregate amount not to
exceed the lesser of (a) the aggregate amount of Capital Expenditures which the
Company and its Majority-Owned Subsidiaries are permitted to make under the
Credit Agreement, as amended and in effect from time to time, and (b) the sum of
(i) the aggregate amount of Capital Expenditures which the Company and its
Majority-Owned Subsidiaries are permitted to make under the Credit Agreement as
in effect on the date hereof, plus (ii) $10,000,000.
5. Second Tier Covenants. The Company covenants that it will, and it will
cause its Subsidiaries to, comply with the provisions of this Section 5 during
the period from the date on which any First Tier Default occurs to the date on
which the Company is in compliance with each of the provisions of Section 4 as
are then applicable.
5.1. Investments and Acquisitions. Neither the Company nor any of
its Subsidiaries shall have outstanding, acquire, hold or commit itself to
acquire any Investment (including any Investment consisting of the acquisition
of any business), except the following:
5.1.1. Investments of the Company and its Subsidiaries
outstanding immediately prior to the date of such First Tier Default;
provided, however, that unless permitted pursuant to Section 5.1.6,
neither the Company nor any of its Subsidiaries shall exercise any
option to make an Investment held by it prior to the date of such First
Tier Default.
5.1.2. Cash equity investments of the Company in, and loans
from the Company to, Theatre Subsidiaries; provided, however, that the
proceeds of such Investments and loans shall be applied by the Theatre
Subsidiaries solely as provided in Section 5.5.
5.1.3. Loans from Non-Theatre Subsidiaries to the Company
and the Theatre Subsidiaries; provided, however, that (a) in the case
of loans to the Company, (i) such loans shall be subordinated on terms
satisfactory to Harcourt to the prior payment of the Obligations and
(ii) the proceeds of such loans shall be used solely to pay the
Obligations or to make Investments in Theatre Subsidiaries permitted by
Section 5.1.2 and (b) in the case of loans to the Theatre Subsidiaries,
the proceeds of such loans shall be applied by the Theatre Subsidiaries
solely as provided in Section 5.5.
5.1.4. Loans from Theatre Subsidiaries to other Theatre
Subsidiaries; provided, however, that the proceeds of such loans shall
be applied by the Theatre Subsidiaries solely as provided in Section
5.5.
5.1.5. Investments of the Company and its Subsidiaries in
Cash Equivalents.
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5.1.6. Follow-on equity Investments of the Company
and the Non-Theatre Subsidiaries which maintain the
proportionate equity interest of the Company or any
Non-Theatre Subsidiary in Persons that are not Wholly-Owned
Subsidiaries in which the Company or such Non-Theatre
Subsidiary held an equity Investment immediately prior to the
date of such First Tier Default; provided, however, that the
aggregate amount of all such follow-on Investments made during
each period when the provisions of Section 5 apply shall not
exceed $10,000,000.
5.2. Financing Debt. Neither the Company nor any of its
Subsidiaries shall create, incur, assume or otherwise become or remain
liable with respect to any Financing Debt, except the following:
5.2.1. Financing Debt outstanding immediately prior
to such First Tier Default.
5.2.2. Financing Debt of the Company incurred under
the Credit Agreement after such First Tier Default; provided,
however, that the aggregate amount of Financing Debt incurred
pursuant to this Section 5.2.2 shall not exceed $5,000,000.
5.2.3. Financing Debt consisting of inter-company
loans and advances among the Company and its Subsidiaries
which are not prohibited by Section 5.1.
5.2.4. Additional Financing Debt of the Company
consisting of Indebtedness for borrowed money, the proceeds of
which are used to finance Investments permitted by Section
5.1.6; provided, however, that the aggregate amount of
Financing Debt outstanding pursuant to this Section 5.2.4
shall not at any one time exceed $10,000,000.
5.3. Distributions. Neither the Company nor any of its
Subsidiaries shall make any Distribution, except the following:
5.3.1. Distributions by Non-Theatre Subsidiaries to
the Company or any Wholly-Owned Subsidiary of the Company.
5.3.2. Distributions in cash by any Theatre
Subsidiary to its equityholders which (a) are in proportion to
the respective Equity Interests of such Subsidiary owned by
such equityholders or (b) are disproportionately favorable to
the Company or any of its other Subsidiaries based on the
respective Equity Interests owned by the equityholders of such
Subsidiary; provided, however, that the Company shall use the
proceeds of all such Distributions received by the Company to
make: (i) payments of principal of and interest on Financing
Debt owing to the lenders under the Credit Agreement; (ii)
regularly scheduled payments of principal of and interest on
Financing Debt owing to non-Affiliates and permitted under
Section 5.2.1 as required by the terms of such Financing Debt
as in effect immediately prior to the date of such First Tier
Default; (iii) regularly scheduled payments of principal of
and interest on Financing Debt permitted under
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Section 5.2.4; (iv) payments of general and administrative
expenses, taxes, assessments and other expenses (other than
principal of and interest on Financing Debt) incurred in the
ordinary course of business consistent with past practice; or
(v) payments to Harcourt pursuant to Sections 2, 7.2 or 9.
5.4. Capital Expenditures. Neither the Company nor any of
its Subsidiaries shall make any Capital Expenditures, except (a)
Capital Expenditures necessary to (i) maintain facilities operated by
the Company and its Subsidiaries immediately prior to the date of such
First Tier Default or (ii) equip new theatres under commitments made by
Theatre Subsidiaries prior to the date of such First Tier Default with
customary theatre equipment and facilities and (b) Capital Expenditures
made for purposes of remaining competitive with other theatre
operators; provided, however, that the aggregate amount of such Capital
Expenditures made by the Company and its Subsidiaries at any time that
the provisions of this Section 5 apply shall not exceed the amount
equal to the product of (A) $5,000,000 multiplied by (B) the sum of (1)
one plus (2) the percentage increase (expressed as a decimal) in the
PPI during the period from December 31, 1993 to the month immediately
preceding the date of such First Tier Default; and provided, further,
that in the event that the provisions of this Section 5 apply during
two or more nonconsecutive periods during any 12-month period, the
aggregate amount of such Capital Expenditures made during such 12-month
period shall not exceed the product of (x) $5,000,000 multiplied by (y)
the sum of (1) one plus (2) the percentage increase in the PPI during
the period from December 31, 1993 to the month immediately preceding
the commencement of such 12-month period. For purposes of this Section
5.4, Capital Expenditures to increase the number of auditoriums in a
facility or otherwise expand such facility or to improve the quality of
seats, carpeting, refreshment stands or other amenities within a
facility may only be made for purposes of remaining competitive with
other theatre operators and shall not be considered Capital
Expenditures made solely to maintain facilities pursuant to clause
(a)(1) above.
5.5. Payment of Theatre Obligations. The Theatre
Subsidiaries shall use cash generated from operations, cash reserves,
proceeds of borrowings and other funds of the Theatre Subsidiaries only
to pay obligations of the Theatre Subsidiaries under leases of real
property, (b) to make Distributions permitted under Section 5.3.2, (c)
to make Capital Expenditures permitted under Section 5.4, (d) to make
Investments permitted under Section 5.1.4 and (e) to pay accounts
payable, taxes, assessments and other expenses of the Theatre
Subsidiaries incurred in the ordinary course of business.
6. Representations and Warranties. In order to induce Harcourt to enter
into this Agreement, the Company represents and warrants as follows:
6.1. Organization and Business.
6.1.1. The Company. The Company is a duly organized and
validly existing corporation, in good standing under the laws of
Delaware, with all power and authority, corporate or otherwise,
necessary to (a) enter into and perform this Agreement, (b) grant
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the security interests in the Collateral to secure the Obligations and
(c) own its properties and carry on the business now conducted or
proposed to be conducted by it.
6.1.2. Subsidiaries. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized, with all power and authority,
corporate or otherwise, necessary to own its properties and carry on
the business now conducted or proposed to be conducted by it. Exhibit
6.1.2A lists each Theatre Subsidiary as of the date hereof. Exhibit
6.1.2B lists each Pledged Theatre Subsidiary as of the date hereof.
6.1.3. Qualification. Each of the Company and its Subsidiaries
is duly and legally qualified to do business as a foreign corporation
or other entity and is in good standing in each state or jurisdiction
in which such qualification is required and is duly authorized,
qualified and licensed under all laws, regulations, ordinances or
orders of public authorities, or otherwise, to carry on its business in
the places and in the manner in which it is conducted, except for
failures to be so qualified, authorized or licensed which would not in
the aggregate have, or create a material risk of having, any material
adverse effect on the Company and its Subsidiaries taken as a whole.
6.2. Authorization and Enforceability. The Company has taken all
corporate action required to execute, deliver and perform this Agreement. No
consent of stockholders of the Company is necessary in order to authorize the
execution, delivery or performance of this Agreement. This Agreement constitutes
the legal, valid and binding obligation of the Company and is enforceable
against the Company in accordance with its terms.
6.3. No Legal Obstacle to Agreements. Neither the execution and
delivery of this Agreement, nor the securing of the Obligations with the
Collateral, nor the consummation of any transaction referred to in or
contemplated by this Agreement, nor the fulfillment of the terms hereof or of
any other agreement or instrument contemplated by this Agreement, has
constituted or resulted in or will constitute or result in:
(1) any breach or termination of the provisions of any
agreement, instrument, deed or lease to which the Company or any of its
Subsidiaries is a party or by which it is bound, or of the charter or
by-laws of the Company or any of its Subsidiaries;
(2) the violation of any law, statute, judgment, decree or
governmental order, rule or regulation applicable to the Company or any
of its Subsidiaries;
(3) the creation under any agreement, instrument, deed or
lease of any Lien (other than Liens on the Collateral which secure the
Obligations) upon any of the assets of the Company or any of its
Subsidiaries; or
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(4) any redemption, retirement or other repurchase obligation
of the Company or any of its Subsidiaries under any charter, by-law,
agreement, instrument, deed or lease.
No approval, authorization or other action by, or declaration to or filing with,
any governmental or administrative authority or any other Person is required to
be obtained or made by the Company in connection with the execution, delivery
and performance of this Agreement, the transactions contemplated hereby or the
securing of the Obligations with the Collateral (other than filings necessary to
perfect Harcourt's security interest in the Collateral).
6.4. Delivery of Collateral. The Company has delivered to Harcourt in
pledge as part of the Collateral certificates representing all the Equity
Interests owned by the Company in the Pledged Theatre Subsidiaries listed on
Exhibit 6.1.2B, accompanied by stock transfer powers therefor executed by the
Company.
7. Defaults.
7.1. Events of Default. The following events are referred to as "Events
of Default":
7.1.1. Payment. The Company shall fail to make any payment in
respect of amounts required under Section 2 as the same shall become
due.
7.1.2. Specified Covenants. The Company or any of its
Subsidiaries shall fail to perform or observe any of the provisions of
Sections 3.2 through 3.7 or, if applicable, Section 5.
7.1.3. Other Covenants. The Company or any of its Subsidiaries
shall fail to perform or observe any other covenant, agreement or
provision to be performed or observed by it under this Agreement (other
than Section 4), and such failure shall not be rectified or cured to
the written satisfaction of Harcourt within 30 days after the earlier
of (a) notice thereof by Harcourt to the Company or (b) the date on
which the Company shall have actual knowledge thereof.
7.1.4. Representations and Warranties. Any representation or
warranty of or with respect to the Company or any of its Subsidiaries
made to Harcourt in, pursuant to or in connection with this Agreement
shall be materially false on the date as of which it was made.
7.1.5. Cross-Defaults, etc. The Company or any of its
Subsidiaries shall fail to make any payment when due (after giving
effect to any applicable grace periods) in respect of any Financing
Debt outstanding in an aggregate amount of principal and accrued
interest exceeding $1,000,000;
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(1) the Company or any of its Subsidiaries shall fail to perform or
observe the terms of any agreement relating to such Financing Debt, and
such failure shall continue, without having been duly cured, waived or
consented to, beyond the period of grace, if any, specified in such
agreement, and such failure shall permit the acceleration of such Financing
Debt;
(2) all or any part of such Financing Debt of the Company or any of
its Subsidiaries shall be accelerated or become due or payable prior to its
stated maturity (except with respect to voluntary prepayments thereof) for
any reason whatsoever;
(3) any Lien on any property of the Company or any of its Subsidiaries
securing any such Financing Debt shall be enforced by foreclosure or
similar action; or
(4) any holder of any such Financing Debt shall exercise any right of
rescission with respect to the issuance thereof.
7.1.6. Ownership; Liquidation; etc. Except as permitted by Section
3.4:
(1) the Company shall cease to own directly all the capital stock of
the Theatre Subsidiaries that were Wholly-Owned Subsidiaries as of the date
of the Spinoff;
(2) any Person (other than a member of the Xxxxx Family Group),
together with "affiliates" and "associates" of such Person within the
meaning of Rule 12b-2 of the Exchange Act, shall become the beneficial
owner within the meaning of Rule 13d-3 of the Exchange Act of more voting
stock or total equity capital of the Company than that beneficially owned
by the Xxxxx Family Group and such Person, together with such "affiliates"
and "associates", is also the beneficial owner within the meaning of Rule
13d-3 of the Exchange Act of at least 15% of either the voting stock or
total equity capital of the Company; or
(3) the Company or any Theatre Subsidiary shall initiate any action to
dissolve, liquidate or otherwise terminate its existence.
7.1.7. Enforceability, etc. This Agreement shall cease for any reason
(other than the scheduled termination thereof in accordance with its terms)
to be in full force and effect; or any party hereto shall so assert in a
judicial or similar proceeding; or the security interests created by this
Agreement shall cease to be enforceable and of the same effect and priority
purported to be created hereby.
7.1.8. The Company or any of its Subsidiaries shall:
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(1) commence a voluntary case under the Bankruptcy Code or authorize,
by appropriate proceedings of its board of directors or other governing
body, the commencement of such a voluntary case;
(2) have filed against it a petition commencing an involuntary case
under the Bankruptcy Code which shall not have been dismissed within 30
days after the date on which said petition is filed, or file an answer or
other pleading within said 30-day period admitting or failing to deny the
material allegations of such a petition or seeking, consenting to or
acquiescing in the relief therein provided;
(3) have entered against it an order for relief in any involuntary
case commenced under the Bankruptcy Code;
(4) seek relief as a debtor under any applicable law, other than the
Bankruptcy Code, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief;
(5) have entered against it an order by a court of competent
jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering or
approving its liquidation, reorganization or any modification or alteration
of the rights of its creditors or (iii) assuming custody of, or appointing
a receiver or other custodian for, all or a substantial portion of its
property; or
(6) make an assignment for the benefit of, or enter into a composition
with, its creditors, or appoint, or consent to the appointment of, or
suffer to exist a receiver or other custodian for, all or a substantial
portion of its property.
7.2. Certain Payments Upon an Event of Default. If one or more Events of
Default shall occur and be continuing, then Harcourt may by notice in writing to
the Company require the Company immediately to deposit with Harcourt in cash an
amount equal to the then Present Value Lease Exposure (which cash shall be held
by Harcourt and applied to the payment of the Company's Obligations under
Section 2) and thereupon such amount shall become immediately due and payable
without presentation, protest or further demand or notice of any kind, all of
which are hereby expressly waived; provided, however, that if a Bankruptcy
Default shall have occurred, such amount shall automatically become immediately
due and payable.
7.3. Enforcement of Payment; Collateral; Setoff. If any one or more Payment
Defaults shall occur, Harcourt (a) may proceed to enforce payment of the
Obligations in such manner as it may elect and to realize upon any and all
rights in the Collateral and (b) may offset and apply toward the payment of the
Obligations (and/or toward the curing of any Event of Default) any Indebtedness
from Harcourt to the Company or any of its Subsidiaries, regardless of the
adequacy
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of any security for the Obligations. Harcourt shall have no duty to determine
the adequacy of any such security in connection with any such offset.
7.4. Specific Performance; Exercise of Rights. If any one or more Events of
Default has occurred and is continuing or if one or more Payment Defaults shall
occur, Harcourt may proceed to protect and enforce its rights by suit in equity,
action at law and/or other appropriate proceeding, either for specific
performance of any covenant or condition contained in this Agreement or in any
instrument or assignment delivered pursuant to this Agreement, or in aid of the
exercise of any power granted in this Agreement or any such instrument or
assignment.
7.5. Cumulative Remedies. To the extent not prohibited by applicable law
which cannot be waived, all of the Harcourt's rights hereunder and under, or
with respect to, each Guarantee and Transferred Lease shall be cumulative.
7.6. Annulment of Defaults. A First Tier Default or a Payment Default shall
be deemed not to have occurred or to exist for any purpose hereunder, and an
Event of Default shall be deemed not to have occurred and be continuing for any
purpose hereunder, in each case if Harcourt shall have waived it in writing,
stated in writing that it has been cured to Harcourt's reasonable satisfaction
or entered into an amendment to this Agreement which by its express terms cures
such First Tier Default or such Event of Default. No such action by Harcourt
shall extend to or affect any subsequent First Tier Default or Event of Default
or impair any rights of Harcourt upon the occurrence thereof.
7.7. Waivers. To the extent that such waiver is not prohibited by the
provisions of applicable law that cannot be waived, the Company waives:
(1) all presentments, demands for performance, notices of
nonperformance (except to the extent required by the provisions of this
Agreement), protests, notices of protest and notices of dishonor;
(2) any requirement of diligence or promptness on the part of Harcourt
in the enforcement of its rights under this Agreement;
(3) any and all notices of every kind and description which may be
required to be given by any statute or rule of law; and
(4) any defense (other than indefeasible payment in full) which it now
or hereafter may have with respect to its liability under this Agreement or
with respect to the Obligations.
7.8. Obligations Absolute. The obligations of the Company under Sections
2.1, 2.2, 7.2 and 9 are absolute and unconditional and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
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(1) the invalidity, unenforceability or irrecoverability of any
obligations under any Guarantee, any Guaranteed Lease or any Transferred
Lease;
(2) any change in the terms of, any amendment to or any waiver,
consent or modification of, any Guarantee, any Guaranteed Lease or
Transferred Lease; or
(3) any other circumstance which might constitute a defense available
to, or a discharge of, Harcourt or the Company (other than, in the case of
the Company, indefeasible payment in full).
8. Security.
8.1. Collateral. As security for the payment and performance of the
Obligations, the Company hereby mortgages, pledges and collaterally grants and
assigns to Harcourt, and hereby creates a security interest in favor of Harcourt
in, all of the Company's right, title and interest in and to (but none of its
obligations or liabilities with respect to) the items and types of present and
future property described in Sections 8.1.1 through 8.1.3, whether now owned or
hereafter acquired, all of which shall be included in the term "Collateral":
8.1.1. Pledged Stock. All Equity Interests in any Pledged Theatre
Subsidiary. All such Equity Interests are collectively referred to as the
"Pledged Stock".
8.1.2. Pledged Rights. All rights to receive profits or surplus of, or
other Distributions (including income, return of capital and liquidating
distributions) from, any Pledged Theatre Subsidiary that is a partnership,
joint venture or limited liability company, including any distributions by
any such Person to partners, joint venturers or members. All such rights
are collectively referred to as the "Pledged Rights".
8.1.3. Proceeds and Products. All proceeds, including insurance
proceeds, and products of the items of Collateral described or referred to
in Sections 8.1.1 and 8.1.2 and, to the extent not included in the
foregoing, all Distributions with respect to the Pledged Securities.
8.2. Representations, Warranties and Covenants with Respect to the
Collateral. The Company hereby represents, warrants and covenants that:
8.2.1. Pledged Stock. All shares of capital stock, limited partnership
interests, membership interests and similar Securities included in the
Pledged Stock are and shall be at all times duly authorized, validly
issued, fully paid and (in the case of capital stock and limited
partnership interests) nonassessable. The Company will deliver to Harcourt
certificates representing the Pledged Stock, registered, if Harcourt so
requests, in the name of Harcourt or its nominee, as pledgee, or
accompanied by a stock transfer power
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executed in blank and, if Harcourt so requests, with the signature
guaranteed, all in form and manner reasonably satisfactory to Harcourt.
Pledged Stock that is not evidenced by a certificate will be registered in
the name of Harcourt or its nominee, as pledgee, on the issuer's records,
all in form and substance reasonably satisfactory to Harcourt. Upon the
occurrence of a Default, Harcourt may transfer into its name or the name of
its nominee, as pledgee, any Pledged Securities.
8.2.2. No Liens or Restrictions on Transfer or Change of Control. All
Collateral shall be free and clear of any Liens and restrictions on the
transfer thereof, except for Liens permitted by Section 3.2. None of the
Pledged Stock is subject to any options to purchase or similar rights of
any Person. Except with the written consent of Harcourt, neither the
Company nor any Pledged Theatre Subsidiary is, and neither Harcourt nor any
Pledged Theatre Subsidiary will be, party to or bound by any agreement,
license or franchise which restricts the change of control or ownership of
any Pledged Theatre Subsidiary.
8.2.3. Perfection of the Collateral. Upon Harcourt's request from time
to time, the Company will make, execute, acknowledge and deliver, and file
and record in the proper filing and recording places, all such instruments,
and will take all such other action, as Harcourt deems advisable for
confirming to it the Collateral or to carry out any other purpose of this
Agreement.
8.3. Administration of Collateral. The Collateral shall be administered as
follows, and if a Payment Default shall have occurred, Section 8.4 shall also
apply.
8.3.1. Distributions on Pledged Securities.
(1) Until an Event of Default shall occur and be continuing, the
Company shall be entitled, to the extent permitted by this Agreement, to
receive all Distributions on or with respect to the Pledged Securities
(other than Distributions constituting additional Pledged Securities). All
Distributions constituting additional Pledged Securities will be retained
by Harcourt (or if received by the Company shall be held by the Company in
trust and shall be immediately delivered by the Company to Harcourt in the
original form received, endorsed in blank) and held by Harcourt as part of
the Collateral.
(2) If an Event of Default shall have occurred and be continuing, all
Distributions on or with respect to the Pledged Securities shall be
retained by Harcourt (or if received by the Company shall be held by the
Company in trust and shall be immediately delivered by it to Harcourt in
the original form received, endorsed in blank) and held by Harcourt as part
of the Collateral or applied by Harcourt in accordance with Section 8.4.5.
8.3.2. Voting of Pledged Securities.
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(1) Until an Event of Default shall occur and be continuing, the
Company shall be entitled to vote or consent with respect to the Pledged
Securities in any manner not inconsistent with the terms of this Agreement,
and Harcourt will, if so requested, execute appropriate revocable proxies
therefor.
(2) If an Event of Default shall have occurred and be continuing, if
and to the extent that Harcourt shall so notify the Company in writing,
only Harcourt shall be entitled to vote or consent or take any other action
with respect to the Pledged Securities and the Company will, if so
requested, execute or cause to be executed appropriate proxies therefor.
8.4. Right to Realize upon Collateral. Except to the extent prohibited by
applicable law that cannot be waived, this Section 8.4 shall govern Harcourt's
right to realize upon the Collateral if any Payment Default shall have occurred.
The provisions of this Section 8.4 are in addition to any rights and remedies
available at law or in equity.
8.4.1. General Authority. To the extent specified in written notice
from Harcourt to the Company, the Company grants Harcourt full and
exclusive power and authority, subject to the other terms hereof and
applicable law, to take any or all of the following actions (for the sole
benefit of Harcourt but at the Company's expense):
(1) to ask for, demand, take, collect, xxx for and receive all
payments in respect of any Pledged Securities which the Company could
otherwise ask for, demand, take, collect, xxx for and receive for its own
use.
(2) to extend the time of payment of Pledged Securities and to make
any allowance or other adjustment with respect thereto;
(3) to settle, compromise, prosecute or defend any action or
proceeding with respect to Pledged Securities and to enforce all rights and
remedies thereunder which the Company could otherwise enforce.;
(4) to enforce the payment of any Pledged Securities, either in the
name of the Company or in its own name, and to endorse the name of the
Company on all checks, drafts, money orders and other instruments tendered
to or received in payment of any Collateral;
(5) to notify the third party payor with respect to any Pledged
Securities of the existence of the security interest created hereby and to
cause all payments in respect thereof thereafter to be made directly to
Harcourt; provided, however, that whether or not Harcourt shall have so
notified such payor, the Company will at its expense render all
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reasonable assistance to Harcourt in collecting such items and in enforcing
claims thereon; and
(6) to sell, transfer, assign or otherwise deal in or with any
Collateral or the proceeds thereof, as fully as the Company otherwise could
do.
8.4.2. Marshaling, etc. Harcourt shall not be required to make any
demand upon, or pursue or exhaust any of its rights or remedies against,
the Company or any guarantor, pledgor or any other Person with respect to
the payment of the Obligations or to pursue or exhaust any of its rights or
remedies with respect to any collateral therefor or any direct or indirect
guarantee thereof. Harcourt shall not be required to marshal the Collateral
or any guarantee of the Obligations or to resort to the Collateral or any
such guarantee in any particular order, and all of its rights hereunder or
otherwise shall be cumulative. To the extent it may lawfully do so, the
Company hereby absolutely and irrevocably waives and relinquishes the
benefit and advantage of, and covenants not to assert against Harcourt, any
valuation, stay, appraisement, extension, redemption or similar laws now or
hereafter existing which, but for this provision, might be applicable to
the sale of any Collateral made under the judgment, order or decree of any
court, or privately under the power of sale conferred by this Agreement, or
otherwise. Without limiting the generality of the foregoing, the Company
(a) agrees that it will not invoke or utilize any law which might prevent,
cause delay in or otherwise impede the enforcement of the rights of
Harcourt in the Collateral, (b) waives all such laws and (c) agrees that it
will not invoke or raise as a defense to any enforcement by Harcourt of its
rights and remedies relating to the Collateral or the Obligations any legal
or contractual requirement with which Harcourt may have in good faith
failed to comply. In addition, the Company hereby waives any right to prior
notice (except to the extent expressly required by this Agreement) or
judicial hearing in connection with foreclosure on or disposition of any
Collateral, including any such right which the Company would otherwise have
under the Constitution of the United States of America or of any state or
territory thereof or any other jurisdiction.
8.4.3. Sales of Collateral. All or any part of the Collateral may be
sold for cash or other value in any number of lots at public or private
sale, without demand, advertisement or notice; provided, however, that
Harcourt shall give the Company 10 days' prior written notice of the time
and place of any public sale, or the time after which a private sale may be
made, which notice each of the Company and Harcourt hereby agrees to be
reasonable. At any sale or sales of Collateral, Harcourt or any of its
officers acting on its behalf, or Harcourt's assigns, may bid for and
purchase all or any part of the property and rights so sold, may use all or
any portion of the Obligations owed to Harcourt as payment for the property
or rights so purchased, and upon compliance with the terms of such sale may
hold and dispose of such property and rights without further accountability
to the Company, except for the proceeds of such sale or sales pursuant to
Section 8.4.5. The Company acknowledges that any such sale will be made by
Harcourt on an "as is" basis with disclaimers of all warranties, whether
express or implied, to the
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extent permitted by applicable law. The Company agrees that (a) Harcourt
may, in its sole discretion, restrict any such sale to one or more
purchasers who will agree to guarantee the payment and performance of the
Guaranteed Leases and Transferred Leases of Pledged Theatre Subsidiaries,
the Pledged Securities of which are included in such sale and who, in the
reasonable judgment of Harcourt, are financially capable of performing such
guarantee and (b) such manner of disposition is commercially reasonable
notwithstanding the possibility that a substantially higher price might be
realized if such sale were not so restricted. The Company will execute and
deliver or cause to be executed and delivered such instruments, documents,
assignments, waivers, certificates and affidavits, will supply or cause to
be supplied such further information and will take such further action as
Harcourt shall require in connection with any such sale.
8.4.4. Sale Without Registration. The Company agrees that if, at any
time when Harcourt shall determine to exercise its rights hereunder to sell
all or part of the Securities included in the Collateral, the Securities in
question shall not be effectively registered under the Securities Act (or
other applicable law), Harcourt may, in its sole discretion, sell such
Securities by private or other sale not requiring such registration in such
manner and in such circumstances as Harcourt may deem necessary or
advisable in order that such sale may be effected in a commercially
reasonable manner in accordance with applicable law without such
registration and the related delays, uncertainty and expense. Without
limiting the generality of the foregoing, in any event Harcourt may, in its
sole discretion, (a) approach and negotiate with a single purchaser or one
or more possible purchasers to effect such sale, (b) restrict such sale to
one or more purchasers each of whom will represent and agree that such
purchaser is purchasing for its own account, for investment and not with a
view to the distribution or sale of such Securities and (c) cause to be
placed on certificates representing the Securities in question a legend to
the effect that such Securities have not been registered under the
Securities Act (or other applicable law) and may not be disposed of in
violation of the provisions thereof. The Company hereby agrees that such
manner of disposition is commercially reasonable, that it will upon
Harcourt's request give any such purchaser access to such information
regarding the issuer of the Securities in question as Harcourt may
reasonably request and that Harcourt shall not incur any responsibility for
selling all or part of the Securities included in the Collateral at any
private or other sale not requiring such registration, notwithstanding the
possibility that a substantially higher price might be realized if the sale
were deferred until after registration under the Securities Act (or other
applicable law) or until made in compliance with certain other rules or
exemptions from the registration provisions under the Securities Act (or
other applicable law). The Company acknowledges that there is no adequate
remedy at law for breach by it of this Section 8.4.4 and that such breach
would not be adequately compensable in damages and therefore agrees that
this Section 8.4.4 may be specifically enforced.
8.4.5. Application of Proceeds. The proceeds of all sales and
collections in respect of any Collateral or other assets of the Company,
all funds collected from the
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Company and any cash contained in the Collateral, the application of which
is not otherwise specifically provided for herein, shall be applied as
follows:
(1) first, to the payment of the costs and expenses of such sales and
collections, the reasonable expenses of Harcourt and the reasonable fees
and expenses of its special counsel;
(2) second, any surplus then remaining to the payment of the
Obligations in such order and manner as Harcourt may in its sole discretion
determine; and
(3) third, any surplus then remaining shall be paid to the Company,
subject, however, to the rights of the holder of any then existing Lien of
which Harcourt has actual notice.
8.5. Custody of Collateral. Except as provided by applicable law that
cannot be waived, Harcourt will have no duty as to the custody and protection of
the Collateral, the collection of any part thereof or of any income thereon or
the preservation or exercise of any rights pertaining thereto, including rights
against prior parties, except for the use of reasonable care in the custody and
physical preservation of any Collateral in its possession. Harcourt will not be
liable or responsible for any loss or damage to any Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any agent
selected by Harcourt acting in good faith.
9. Expenses; Indemnity.
9.1. Expenses. The Company will pay:
(1) all recording and filing fees and transfer and documentary stamp
and similar taxes at any time payable in respect of this Agreement or any
Collateral; and
(2) all other reasonable expenses incurred by Harcourt in connection
with the enforcement of any rights hereunder, including costs of collection
and reasonable attorneys' fees and expenses.
9.2. General Indemnity. The Company hereby agrees to indemnify Harcourt,
each of the directors, officers, employees and agents of Harcourt, and each
Person, if any, who controls Harcourt (Harcourt and each of such directors,
officers, employees, agents and control Persons is referred to as an
"Indemnified Party"), and hold each of them harmless from and against any and
all claims, damages, liabilities and reasonable expenses (including reasonable
fees and disbursements of counsel with whom any Indemnified Party may consult in
connection therewith and all reasonable expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party in connection with (a) the existence or exercise of any
security rights with respect to the Collateral in accordance with this
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Agreement or (b) this Agreement or any transaction contemplated hereby, except
for (i) litigation commenced by the Company against Harcourt which seeks
enforcement of any of the rights of the Company hereunder and is determined
adversely to Harcourt in a final nonappealable judgment and (ii) the extent such
claims, damages, liabilities and expenses result from the gross negligence or
willful misconduct of Harcourt.
10. Successors and Assigns. Any reference in this Agreement to any party
hereto shall be deemed to include the successors and assigns of such party, and
all covenants and agreements by or on behalf of the Company or Harcourt that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns; provided, however, that the Company may not
assign its rights or obligations under this Agreement.
11. Confidentiality. Harcourt agrees that it will make no disclosure of
confidential information furnished to it by the Company or any of its
Subsidiaries unless such information shall have become public, except:
(1) in connection with operations under or the enforcement of this
Agreement;
(2) pursuant to any statutory or regulatory requirement or any
mandatory court order, subpoena or other legal process;
(3) to its counsel, auditors and other professional advisors with an
instruction to such Person to keep such information confidential; and
(4) with the prior written consent of the Company, to any other
Person.
12. Notices. Except as otherwise specified in this Agreement, any notice
required to be given pursuant to this Agreement shall be given in writing. Any
notice, demand or other communication in connection with this Agreement shall be
deemed to be given if given in writing (including telex, telecopy or similar
teletransmission) addressed as provided below (or to the addressee at such other
address as the addressee shall have specified by notice actually received by the
addressor), and if actually delivered in fully legible form to such address
(evidenced in the case of a telex by receipt of the correct answerback).
If to Harcourt, to it at:
00 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: General Counsel
If to the Company, to it at:
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0000 Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Attention: General Counsel
13. Course of Dealing; Amendments and Waivers. No course of dealing between
Harcourt, on one hand, and the Company, any of its Subsidiaries or any of their
respective Affiliates, on the other hand, shall operate as a waiver of any of
the rights of Harcourt under this Agreement or with respect to the Obligations.
The Company acknowledges that if Harcourt, without being required to do so by
this Agreement, gives any notice or information to the Company, any of its
Subsidiaries or any of their respective Affiliates, Harcourt shall not by
implication have amended, waived or modified any provision of this Agreement, or
created any duty to give any such notice or information or to obtain any such
consent on any future occasion. No delay or omission on the part of Harcourt in
exercising any right under this Agreement or with respect to the Obligations
shall operate as a waiver of such right or any other right hereunder or
thereunder. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right or remedy on any future occasion. No waiver, consent or
amendment with respect to this Agreement shall be binding unless it is in
writing and signed by Harcourt and, in the case of an amendment, signed by the
Company. Although Harcourt shall have no duty to agree to any waiver, consent or
amendment with respect to this Agreement, Harcourt shall give due consideration
in accordance with its business judgment to each request made by the Company for
any such waiver, consent or amendment.
Any waiver, consent, amendment or notice of termination entered into by
any party for any of the following purposes need not be specifically authorized
or approved by the Board of Directors of such party (or any duly appointed
committee of the Board of Directors of such party with authority to act for such
purposes) if such waiver, consent, amendment or notice of termination is
approved by an officer of such party who is authorized to approve such type of
waiver, consent, amendment or notice of termination: (a) to cure any ambiguity
herein; (b) to cure, correct or supplement any defect or inconsistent provision
contained herein; or (c) to make any provision in regard to matters or questions
arising hereunder which is not inconsistent with the provisions of this
Agreement and which does not adversely affect the interests of such party.
14. Termination and Defeasance. This Agreement may be terminated at any time by
Harcourt in its sole discretion by providing written notice to the Company. This
Agreement shall terminate at such time as the Present Value Lease Exposure is
less than $50,000,000 if at such time no First Tier Default, Payment Default or
Event of Default has occurred and is continuing; provided, however, that
Sections 2, 3.1, 3.6, 9, 10, 11 and 12 and Sections 7.3 through 7.8 (insofar as
they relate to Sections 2, 3.1 and 3.6) shall survive the termination of this
Agreement. Upon any such termination, the Collateral shall revert to the Company
and the right, title and interest of Harcourt therein shall terminate.
Thereupon, on the Company's demand and at its cost and expense, Harcourt shall
execute proper instruments, acknowledging satisfaction of and
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discharging this Agreement, and shall redeliver to the Company any Collateral
then in its possession.
15. General. The invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of any other provision hereof. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement constitutes the
entire understanding of the parties with respect to the subject matter hereof
and thereof and supersedes all prior and current understandings and agreements,
whether written or oral, with respect to such subject matter. This Agreement may
be executed in any number of counterparts which together shall constitute one
instrument. This Agreement shall be governed by and construed in accordance with
the laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts, except as may be required by the UCC with respect to matters
involving the perfection of Harcourt's Lien on the Collateral and the
enforcement of such Lien.
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Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first above written.
HARCOURT GENERAL, INC.
By _________________________________
Title:
GC COMPANIES, INC.
By _________________________________
Title:
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