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Exhibit 10.1  

 
 

MERGER AGREEMENT    
    

by
and among 

REGAL CINEMAS, INC.

and

RCI/RMS, LLC

and

SIGNATURE THEATRE INVESTORS, LLC

Dated
April 26, 2004 

  

 
 

TABLE OF CONTENTS    
    

	 
	 	 
	 	Page

	1.    DEFINITIONS AND USAGE	 	1
	 	1.1.	 	Definitions	 	1
	 	1.2.	 	Usage	 	9
	2.    BASIC TRANSACTION	 	10
	 	2.1.	 	Merger; Closing; Merger Consideration	 	10
	 	2.2.	 	Closing Deliverables.	 	11
	 	2.3.	 	Working Capital Adjustment.	 	14
	 	2.4.	 	Escrow.	 	16
	 	2.5.	 	Payments to Lenders.	 	16
	 	2.6.	 	Consents	 	16
	 	2.7.	 	Target Lease Estoppels and Consents	 	17
	 	2.8.	 	REA Estoppels and DDA Consents	 	17
	 	2.9.	 	SNDAs	 	18
	 	2.10.	 	Memoranda of Leases	 	18
	 	2.11.	 	Development Agreement	 	19
	 	2.12.	 	Delivery of Property; Minimum Concessions Inventory	 	19
	3.    REPRESENTATIONS AND WARRANTIES OF TARGET AND DESERT	 	19
	 	3.1.	 	Organization and Good Standing	 	19
	 	3.2.	 	Enforceability; Authority; No Conflict	 	19
	 	3.3.	 	Capitalization	 	20
	 	3.4.	 	Financial Statements	 	21
	 	3.5.	 	Books and Records	 	21
	 	3.6.	 	Title to Assets; Encumbrances; Condition of Tangible Personal Property	 	21
	 	3.7.	 	Condition of Real Property	 	23
	 	3.8.	 	Inventories	 	24
	 	3.9.	 	No Undisclosed Liabilities	 	24
	 	3.10.	 	Taxes	 	24
	 	3.11.	 	No Material Adverse Effect	 	25
	 	3.12.	 	Employee Benefits	 	26
	 	3.13.	 	Compliance with Legal Requirements; Governmental Authorizations	 	28
	 	3.14.	 	Legal Proceedings; Orders	 	29
	 	3.15.	 	Absence of Certain Changes and Events	 	29
	 	3.16.	 	Contracts; No Defaults	 	30
	 	3.17.	 	Insurance	 	31
	 	3.18.	 	Environmental Matters	 	31
	 	3.19.	 	Employees; Labor Disputes; Compliance	 	32
	 	3.20.	 	Intellectual Property	 	33
	 	3.21.	 	Notes and Accounts Receivable	 	33
	 	3.22.	 	Powers of Attorney	 	33
	 	3.23.	 	Brokers or Finders	 	33
	 	3.24.	 	Transactions with Affiliates	 	33
	 	3.25.	 	Representations and Warranties	 	33
	4.    REPRESENTATIONS AND WARRANTIES OF BUYER	 	34
	 	4.1.	 	Organization and Good Standing	 	34
	 	4.2.	 	Authority; No Conflict	 	34
	 	4.3.	 	Brokers or Finders	 	34
	 	4.4.	 	Representations and Warranties	 	35
	 	 	 	 	 

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	5.    COVENANTS OF TARGET PRIOR TO CLOSING	 	35
	 	5.1.	 	Access and Investigation	 	35
	 	5.2.	 	Operation of the Business of Target	 	36
	 	5.3.	 	Negative Covenant	 	36
	 	5.4.	 	Required Approvals	 	37
	 	5.5.	 	Notification	 	37
	 	5.6.	 	Reasonable Best Efforts	 	37
	 	5.7.	 	Interim Financial Statements	 	37
	 	5.8.	 	Payment of Liabilities	 	37
	 	5.9.	 	Current Evidence of Title	 	37
	 	5.10.	 	Tax Matters	 	39
	 	5.11.	 	Affiliate Guarantors	 	39
	 	5.12.	 	Desert	 	40
	6.    COVENANTS OF BUYER PRIOR TO CLOSING	 	40
	 	6.1.	 	Required Approvals	 	40
	 	6.2.	 	Reasonable Best Efforts	 	40
	 	6.3.	 	Notification	 	40
	7.    CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE	 	40
	 	7.1.	 	Accuracy of Representations	 	40
	 	7.2.	 	Target's Performance	 	41
	 	7.3.	 	Consents	 	41
	 	7.4.	 	Additional Documents	 	41
	 	7.5.	 	No Injunction	 	41
	 	7.6.	 	No Conflict	 	42
	 	7.7.	 	Title Insurance	 	42
	 	7.8.	 	Governmental Authorizations	 	42
	 	7.9.	 	Environmental Report; Physical Inspection	 	42
	 	7.10.	 	Target Lease Estoppels	 	42
	 	7.11.	 	REA and DDA Estoppels	 	42
	 	7.12.	 	SNDAs	 	42
	 	7.13.	 	Memoranda of Lease	 	43
	 	7.14.	 	Asset Purchase Agreement	 	43
	 	7.15.	 	Resignations	 	43
	 	7.16.	 	Target Real Property	 	43
	8.    CONDITIONS PRECEDENT TO TARGET'S OBLIGATION TO CLOSE	 	43
	 	8.1.	 	Accuracy of Representations	 	43
	 	8.2.	 	Buyer's Performance	 	43
	 	8.3.	 	Additional Documents	 	43
	 	8.4.	 	No Injunction	 	44
	 	8.5.	 	Asset Purchase Agreement	 	44
	9.    TERMINATION	 	44
	 	9.1.	 	Termination Events	 	44
	 	9.2.	 	Effect of Termination	 	45
	10.    ADDITIONAL COVENANTS	 	45
	 	10.1.	 	Assistance in Proceedings	 	45
	 	10.2.	 	Retention of and Access to Records	 	45
	 	10.3.	 	Final Tax Return; Audits	 	45
	 	10.4.	 	Further Assurances	 	46
	11.    INDEMNIFICATION; REMEDIES	 	46
	 	11.1.	 	Survival and Materiality	 	46
	 	 	 	 	 

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	 	11.2.	 	Indemnification and Reimbursement By Target and Subsidiaries	 	47
	 	11.3.	 	Indemnification and Reimbursement by Buyer	 	48
	 	11.4.	 	Limitations on Amount—Target and Desert	 	48
	 	11.5.	 	Limitations on Amount—Buyer	 	49
	 	11.6.	 	Time Limitations	 	49
	 	11.7.	 	Remedy	 	49
	 	11.8.	 	Third-Party Claims	 	49
	 	11.9.	 	Other Claims	 	51
	 	11.10.	 	Released Claims	 	51
	 	11.11.	 	Title Insurance	 	51
	12.    GENERAL PROVISIONS	 	52
	 	12.1.	 	Expenses	 	52
	 	12.2.	 	Public Announcements; Confidentiality	 	52
	 	12.3.	 	Notices	 	53
	 	12.4.	 	Jurisdiction; Service of Process	 	54
	 	12.5.	 	Enforcement of Agreement	 	54
	 	12.6.	 	Waiver; Remedies Cumulative	 	55
	 	12.7.	 	Entire Agreement and Modification	 	55
	 	12.8.	 	Disclosure Schedule	 	55
	 	12.9.	 	Assignments, Successors and No Third-Party Rights	 	55
	 	12.10.	 	Target Representative	 	56
	 	12.11.	 	Severability	 	56
	 	12.12.	 	Construction	 	56
	 	12.13.	 	Governing Law	 	56
	 	12.14.	 	Execution of Agreement	 	57

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LIST OF EXHIBITS    
    

	Exhibit 2.1(c)	 	Certificate of Merger
	Exhibit 2.2(a)(v)	 	Philip Harris Consulting Agreement
	Exhibit 2.2(a)(iii)(A)	 	Philip Harris Non-Competition Agreement
	Exhibit 2.2(a)(iii)(B)	 	George Mann Non-Competition Agreement
	Exhibit 2.2(a)(v)	 	Holdback Escrow Agreement
	Exhibit 2.2(a)(xii)	 	Letter Agreement—Theatre Advertising
	Exhibit 2.2(a)(xiii)	 	Letter Agreement—Concessions Inventories
	Exhibit 2.7(a)	 	Lessor Consent and Estoppel
	Exhibit 7.4(a)	 	Opinion of Target's Counsel
	Exhibit 8.3(b)	 	Opinion of Buyer's Counsel

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SCHEDULES  

	Schedule 2.1(d)	 	Allocation of Merger Consideration
	Schedule 2.7(c)	 	Documents to be Distributed to Target and Buyer by Closing Escrow Holder
	Schedule 2.5	 	Lender Payoffs
	Schedule 3.1(a)	 	Foreign Qualifications
	Schedule 3.2(b)	 	Disclosed Conflicts
	Schedule 3.2(c)	 	Required Consents
	Schedule 3.3	 	Capitalization
	Schedule 3.4(b)	 	Theatre Level Cash Flows
	Schedule 3.6(a)	 	Target Leases—Description
	Schedule 3.6(b)	 	Target Leases—Default
	Schedule 3.6(c)	 	Target Leases—Termination Rights
	Schedule 3.6(d)	 	Target Leases—Terms
	Schedule 3.6(e)	 	Real Property
	Schedule 3.6(f)	 	Unrecorded Documents
	Schedule 3.6(g)	 	Tangible Personal Property
	Schedule 3.6(h)	 	Permitted Non-Real Property Encumbrances
	Schedule 3.6(i)	 	Voluntary Monetary Lien
	Schedule 3.7(a)	 	Eminent Domain
	Schedule 3.7(b)	 	Violations
	Schedule 3.9	 	Undisclosed Liabilities
	Schedule 3.10(a)	 	Contested Taxes and Extensions
	Schedule 3.10(b)	 	Tax Matters
	Schedule 3.10(c)	 	Tax Assessments or Deficiencies
	Schedule 3.12(a)	 	Employee Benefit Plans
	Schedule 3.12(d)	 	Contributions
	Schedule 3.12(k)	 	Welfare Plans
	Schedule 3.13(a)	 	Legal Requirements
	Schedule 3.13(b)	 	Governmental Authorizations
	Schedule 3.14(a)	 	Legal Proceedings
	Schedule 3.14(b)	 	Orders
	Schedule 3.15	 	Absence of Certain Changes and Events
	Schedule 3.16(a)	 	List of Material Contracts
	Schedule 3.16(b)	 	Contract Consents
	Schedule 3.16(c)	 	Contract Matters
	Schedule 3.17(a)	 	Insurance—Description
	Schedule 3.17(b)	 	Insurance Matters
	Schedule 3.18	 	Environmental
	Schedule 3.18(b)	 	Environmental Reports
	Schedule 3.19(b)	 	Labor Matters
	Schedule 3.20(d)	 	Intellectual Property
	Schedule 3.24	 	Affiliate Transactions
	Schedule 5.11	 	Affiliate Guarantees and Affiliate Guarantors

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   MERGER AGREEMENT  

        This Merger Agreement (this "Agreement") is entered into as of April 26, 2004, by and among Regal
Cinemas, Inc., a Tennessee corporation ("Buyer"); RCI/RMS, LLC, a Delaware limited liability company and a wholly-owned Subsidiary of Buyer
("Merger Subsidiary"); and Signature Theatre Investors, LLC, a Delaware limited liability company
("Target"). Buyer, Merger Subsidiary and Target are referred to collectively herein as the "Parties." 

RECITALS  

        Whereas, Buyer desires to acquire Target, and Target desires to be acquired by Buyer; 

        Whereas,
the Parties desire to consummate Buyer's acquisition of Target through a merger between Target and Merger Subsidiary, after which Buyer will own all of the equity interests of
the entity surviving such merger, for the consideration and on the terms set forth in this Agreement. 

AGREEMENT  

        The parties, intending to be legally bound, agree as follows: 

1.     DEFINITIONS AND USAGE  

        1.1.    Definitions    

        For
purposes of this Agreement, the following terms and variations thereof have the meanings specified or referred to in this Section 1.1: 

        "2002 Agreement"—as defined in Section 12.2(b). 

        "Accounting Principles"—as defined in Section 2.3(a). 

        "Accounts Receivable"—(a) all trade accounts receivable and other rights to payment from customers of Target and the full
benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped, products sold or services rendered
to customers of Target, (b) all other accounts or notes receivable of Target and the full benefit of all security for such accounts or notes and (c) any claim, remedy or other right
related to any of the foregoing. 

        "Affected Persons"—as defined in Section 11.12. 

        "Affiliate"—of a Person means any other Person who directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such Person. "Control"—means the possession of power, directly or indirectly, to direct or
cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. 

        "Affiliate Guarantees"—as defined in Section 5.11. 

        "Affiliate Guarantor"—a guarantor under any of the Affiliate Guarantees that is identified on Schedule 5.11. 

        "Appurtenances"—any and all privileges, rights, easements, hereditaments and appurtenances belonging to or for the benefit of
the Real Property, including all easements appurtenant to and for the benefit of any Real Property (a "Dominant Parcel") for, and as the primary means
of access between, the Dominant Parcel and a public way, or for any other use upon which lawful use of the Dominant Parcel for the purposes for which it is presently being used is necessary or
appropriate, and any and all rights existing in and to any streets, alleys, passages and other 

1

 

rights-of-way
included thereon or adjacent thereto (before or after vacation thereof) and vaults beneath any such streets. 

        "Assets"—includes as to Target (a) all items classified as assets under GAAP, and (b) to the extent not included
in clause (a) above, also includes any and all Accounts Receivable, Appurtenances, Contracts, Contract rights, Environmental Permits, Governmental Authorizations, Inventories, cash, securities
and other investments, Leases, Real Property, intellectual property and other property rights, Tangible Personal Property, or rights or interests to any of the foregoing (whether contingent or
absolute). 

        "Balance Sheet"—as defined in Section 3.4. 

        "Baseline Working Capital"—as defined in Section 2.3(b). 

        "Basket"—as defined in Section 11.4(d). 

        "Breach Notice"—as defined in Section 11.1(a)(ii). 

        "Business Day"—any day other than (a) Saturday or Sunday or (b) any other day on which banks in California or
Tennessee are permitted or required to be closed. 

        "Buyer"—as defined in the first paragraph of this Agreement. 

        "Buyer Group"—as defined in Section 5.1(a). 

        "Buyer Indemnified Persons"—as defined in Section 11.2. 

        "Buyer Revised Statement"—as defined in Section 2.3(d). 

        "Buyer's Closing Documents"—as defined in Section 4.2. 

        "Certificate of Merger"—as defined in Section 2.1(d). 

        "Claim Notice"—as defined in Section 11.8(a). 

        "Closing"—as defined in Section 2.1(b). 

        "Closing Consideration"—as defined in Section 2.1(f). 

        "Closing Date"—the actual date of the Closing. 

        "Closing Deadline"—means September 30, 2004. 

        "Closing Escrow"—as defined in Section 2.1(c). 

        "Closing Escrow Holder"—as defined in Section 2.1(c). 

        "Closing Statement of Net Assets"—as defined in Section 2.3(c). 

        "Closing Working Capital"—as defined in Section 2.3(c). 

        "COBRA"—as defined in Section 3.12(g). 

        "Code"—the Internal Revenue Code of 1986. 

        "Concessions Inventories"—inventories of food and beverage and related concessions inventory and supplies of Target, wherever
located, used in connection with or at the Real Property. 

        "Consent"—any approval, consent, ratification, waiver or other authorization. 

        "Construction Escrow Holder"—means First American. 

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        "Construction Escrows"—means the amounts held back in escrow pursuant to the terms of the Development Agreements. 

        "Consulting Agreement"—as defined in Section 2.2(a)(iii). 

        "Contemplated Transactions"—all of the transactions contemplated by this Agreement. 

        "Contract"—any agreement, contract, lease, consensual obligation, promise or undertaking (whether written or oral and whether
express or implied), whether or not legally binding. 

        "Current Assets"—as defined in Section 2.3(a). 

        "Current Liabilities"—as defined in Section 2.3(a). 

        "DDA"—any disposition and development agreement relating to any Real Property. 

        "Damages"—as defined in Section 11.2. 

        "Defined Benefit Plan"—any Employee Plan that is or was a "defined benefit plan" as such term is defined in ERISA
Section 3(35). 

        "Delaware LLC Law"—the Delaware Limited Liability Company Act, as amended. 

        "Desert"—means Signature Desert Cinemas, LLC, a Delaware limited liability company and wholly owned subsidiary of Target. 

        "Desert APA"—means that certain Asset Purchase Agreement of even date herewith among Buyer, Desert, Signature Theatres, LLC,
and Turlock Cinemas, LLC. 

        "Development Agreements"—means the Development Agreement for Riverside Stadium 16 (Riverside, California) and the Development
Agreement for El Dorado Hills Stadium 14 (County of El Dorado, California). 

        "Disapproved Exceptions"—as defined in Section 5.9(a)(B). 

        "Disclosure Schedule" or "Schedule"—the disclosure schedules delivered by
Target to Buyer concurrently with the execution and delivery of this Agreement. 

        "Dispute Notice"—as defined in Section 2.3(d). 

        "Disputed Items"—as defined in Section 2.3(d). 

        "Due Diligence Deadline"—July 1, 2004. 

        "Effective Time"—as defined in Section 2.1(e)(i). 

        "Employee Plans"—as defined in Section 3.12(a). 

        "Encumbrance"—any charge, claim, community or other marital property interest, condition, equitable interest, lien, option,
pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, including any restriction on use, voting (in
the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership. 

        "Environmental Claims" means all demands, claims, actions or causes of action, assessments, complaints, directives, citations, information
requests issued by government authority, legal proceedings, orders, notices of potential responsibility, losses, damages (including, without limitation, diminution in value), liabilities, sanctions,
costs and expenses, including, without limitation, interest, penalties and attorneys' and experts' fees and disbursements, based on arising out of or otherwise relating to Environmental Laws,
Hazardous Materials, or other environmental matters. 

3

 

        "Environmental Laws" means any Legal Requirements (including, without limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act), relating to the generation, production, installation, use, storage, treatment, transportation, Release, threatened Release, or disposal of Hazardous Materials, or the protection of
human health or safety, natural resources, or the environment. 

        "Environmental Permits" means any permits, licenses, certificates and approvals required under any Environmental Law. 

        "ERISA"—the Employee Retirement Income Security Act of 1974, as amended. 

        "ERISA Affiliate"—as defined in Section 3.12(a). 

        "Estimated Closing Working Capital"—as defined in Section 2.3(d). 

        "First American"—means First American Title Insurance Company located at 550 South Hope Street, Suite 1950, Los Angeles,
California 90071 to the attention of Mary Owens, Vice President, National Account Manager. 

        "GAAP"—generally accepted accounting principles for financial reporting in the United States, applied on a consistent basis. 

        "Gift Certificate Obligations"—all obligations to honor gift certificates, special activities tickets and similar instruments
sold by Target prior to the Closing Date in accordance with each such certificate's or similar instrument's terms. 

        "Governing Documents"—with respect to any particular entity, (a) if a limited liability company, the certification of
formation (or similar documents) and operating agreement; (b) if another type of Person, any other charter or similar document adopted or filed in connection with the creation, formation or
organization of the Person; (c) all equity holders' agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or
documents relating to the organization, management, voting or operation of any Person or relating to the rights, duties and obligations of the equity holders of any Person; and (d) any
amendment or supplement to any of the foregoing. 

        "Governmental Authorization"—any Consent, license, registration or permit issued, granted, given or otherwise made available
by or under the authority of any Governmental Body or pursuant to any Legal Requirement including without limitation any consent required under the HSR Act or any variance, conditional use permit,
special use permit, non-conforming use permit or other zoning or land use permit. 

        "Governmental Body"—any: (a) nation, state, county, city, town, borough, village, district or other jurisdiction;
(b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any agency, branch, department, board,
commission, court, tribunal or other entity exercising governmental or quasi-governmental powers); (d) multinational organization or body; (e) body exercising, or entitled or purporting
to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; or (f) official of any of the foregoing. 

        "Hazardous Materials" means any wastes, substances, radiation, or materials (whether solids, liquids or gases) (a) which are
listed, defined, or otherwise subject to regulation under any Environmental Law; (b) which contain petroleum or petroleum products (including, without limitation, crude oil or any fraction
thereof) or (c) which consist of toxic mold. 

        "Holdback Escrow Agent"—means First American. 

        "Holdback Escrow Agreement"—as defined in Section 2.7(a)(vii). 

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        "Holdback Escrow Amount"—as defined in Section 2.4. 

        "Indemnified Person"—as defined in Section 11.8(a). 

        "Indemnifying Person"—as defined in Section 11.8(a). 

        "Intellectual Property Assets"—all intellectual property owned, licensed (as licensor or licensee), or otherwise used by
Target, including without limitation, (a) Target's name, all assumed fictional business names, trade names, registered and unregistered trademarks, service marks and applications, logos,
slogans, trade dress, and the goodwill of the business symbolized by the foregoing; (b) all patents, patent applications, together will all reissuances, continuations, revisions, extensions and
reexaminations thereof, and inventions and discoveries that may be patentable;(c) all registered and unregistered copyrights in both published works and unpublished works, including copyright
applications, and all other copyrightable works; (d) all rights in mask works; (e) all know-how, trade secrets, confidential or proprietary information, customer lists,
Software, technical information, data, process technology, plans, drawings and blue prints; and (f) all rights in internet web sites and internet domain names presently used by Target. 

        "Interests"—all and any equity, ownership, economic, membership, voting and other interest in a limited liability company. 

        "Inventories"—inventories of Target, wherever located, used in connection with or at the Real Property. 

        "IRS"—the United States Internal Revenue Service and, to the extent relevant, the United States Department of the Treasury. 

        "Knowledge of Target" or "Target's
Knowledge"—the actual knowledge of Philip Harris, George Mann or Clyde Cornell after reasonable inquiry of the employees of Target and Philip Harris &
Associates, Inc. and their agents and representatives. 

        "Known Breaches"—as defined in Section 11.1(a)(i). 

        "Lease" or "Target Lease"—any lease of Real Property or any rental agreement,
license, or other occupancy agreement pertaining to the leasing or use of any Real Property to which Target is a party. 

        "Legal Requirement"—any federal, state, local, municipal, foreign, international, multinational or other constitution, law,
ordinance, principle of common law, code, regulation, statute or treaty. 

        "Lessor Consent and Estoppel"—as defined in Section 2.7(a). 

        "Liability"—with respect to any Person, any liability or obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or
unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person. 

        "Marks"—means "Signature Theatres". 

        "Material Adverse Effect"—as defined in Section 3.1(a). 

        "Merger"—as defined in Section 2.1(a). 

        "Merger Consideration"—as defined in Section 2.1(f). 

        "Merger Subsidiary"—as defined in the first paragraph of this Agreement. 

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        "Minimum Concessions Inventories"—means an amount of Concessions Inventories per theatre included in the Real Property to
operate such theatre on a Friday during the summer months. 

        "Minimum Funding Plan"—any Employee Plan subject to the minimum funding standards of Code Section 412. 

        "Multiemployer Plan"—any "multiemployer plan" as such term is defined in ERISA Section 3(37). 

        "Neutral Accountant"—as defined in Section 2.3(e). 

        "Noncompetition Agreements"—as defined in Section 2.2(a)(iv). 

        "Non-Real Property Encumbrances"—as defined in Section 3.6(h). 

        "Occupational Safety and Health Law"—any Legal Requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, including the Occupational Safety and Health Act, and any program, whether governmental or private (such as those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful working conditions. 

        "Order"—any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Body or
arbitrator. 

        "Ordinary Course of Business"—an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business
only if that action: (a) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal,
day-to-day operations of such Person; (b) does not require authorization by the board of directors, managers, shareholders or members of such Person (or by any Person or
group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature; and (c) is similar in nature, scope and magnitude to actions
customarily taken, without any separate or special authorization, in the ordinary course of the normal, day-to-day operations of other Persons that are in the same line of
business as such Person. 

        "Other Closing Documents"—as defined in Section 2.2(a)(iv). 

        "Parties"—as defined in the first paragraph of this Agreement. 

        "Permitted Encumbrances"—collectively, the Permitted Non-Real Property Encumbrances and the Permitted Real
Property Encumbrances. 

        "Permitted Non-Real Property Encumbrances"—as defined in Section 3.6(h). 

        "Permitted Real Property Encumbrances"—(a) liens for real property taxes and assessments not yet delinquent; (b) any
Encumbrance affecting the Real Property created by or with the consent of Buyer; and (c) those title exceptions affecting the Real Property that are approved or deemed approved by Buyer in
accordance with Section 5.9. 

        "Person"—an individual, partnership, corporation, business trust, limited liability company, limited liability partnership,
joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Body. 

        "Predecessor Tenant"—a predecessor tenant (including its general partners, if any) that has continuing contingent liability
under an Assigned Lease and that is identified on Schedule 5.11. 

        "Proceeding"—any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal, whether public 

6

 

or
private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator. 

        "Real Property"—all real property leased, subleased or otherwise occupied by Target, including all leasehold or subleasehold
estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures, easements, or other interests in real property held by Target. 

        "REAs"—all reciprocal easement agreements benefiting or burdening any Real Property to which Target is a party or by which
Target is bound. 

        "Reasonable Best Efforts"—the efforts that a prudent Person desirous of achieving a result would use in similar circumstances
to achieve that result as expeditiously as possible, provided, however, that a Person required to use Reasonable Best Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this Agreement and the Contemplated Transactions or to dispose of or make any change to its business, to expend any material
funds or to incur any other material burden. 

        "Record"—information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is
retrievable in perceivable form. 

        "Related Party Contract"—means any Contract or other agreement to which Target is a party with another Person who is an
Affiliate of Target or a member of Target. 

        "Release" means any emission, spill, seepage, leak, escape, leaching, discharge, injection, pumping, pouring, emptying, dumping, disposal,
or release of Hazardous Materials into or upon the environment, including the air, soil, improvements, surface water, groundwater, the sewer, septic system, storm drain, publicly owned treatment
works, or waste treatment, storage, or disposal systems or any exposure to Hazardous Materials. 

        "Released Claims"—means any claim of a Buyer Indemnified Person (other than claims arising in accordance with
Section 11.2(a) or (b)) based upon (a) defects, latent or patent, in the physical condition of the Real Property, or the Tangible Personal Property, including, without limitation, the
compliance of the Real Property with any Legal Requirement, (b) the fitness of the Real Property and the Tangible Personal Property for Buyer's intended use thereof or (c) Subject to
Liabilities. 

        "Remediation" means any investigation, clean-up, removal action, remedial action, restoration, repair, response action,
corrective action, monitoring, sampling and analysis, installation, reclamation, closure, or post-closure in connection with the suspected, threatened or actual Release of Hazardous
Materials. 

        "Representatives"—with respect to Target, means its managers, members, officers, employees, affiliates, or representatives
(including, without limitation, financial advisors, attorneys or accountants) and with respect to Buyer, means it directors, officers, employees, affiliates or representatives (including, without
limitation, financial advisors, attorneys or accountants). 

        "Resolution Period"—as defined in Section 2.3(d). 

        "Restricted Contracts"—as defined in Section 2.6. 

        "Scheduled Closing Date"—as defined in Section 2.1(b). 

        "Software"—all computer software and subsequent versions thereof, including source code, object, executable or binary code,
objects, comments, screens, user interfaces, report formats, templates, menus, buttons and icons and all files, data, materials, manuals, design notes and other items and documentation related thereto
or associated therewith. 

7

 

        "Subject To Liabilities"—Encumbrances (other than those that Target either covenants to or elects to remove pursuant to
Section 5.9) which affect the Real Property to the extent such Encumbrances are the obligation, or diminish the rights, of the lessee or sublessee, as applicable, with respect to the Real
Property and of which Target has no Knowledge prior to the Effective Time. 

        "Subsidiary"—with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the
power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not
occurred), are held by the Owner or one or more of its Subsidiaries. 

        "Surviving LLC"—as defined in Section 2.1(a). 

        "Tangible Personal Property"—all machinery, equipment, tools, furniture, furnishings, fixtures, appliances, office equipment,
computer hardware, supplies, materials, vehicles and other items of tangible personal property (other than Inventories) of every kind owned or leased by Target (wherever located and whether or not
carried on Target's books) and used or useful solely or primarily in connection with Target's use, occupancy and operation of the Real Property or other Assets, together with any express or implied
warranty by the manufacturers or sellers or lessors of any item or component part thereof and all maintenance records and other documents relating thereto. 

        "Target"—as defined in the first paragraph of this Agreement. 

        "Target Contract"—any Contract to which Target or Desert is a party or bound by or to which their Assets are subject, other
than the Target Leases. 

        "Target Documents"—as defined in Section 11.12. 

        "Target Indemnified Persons"—as defined in Section 11.3. 

        "Target Leases"—as defined in Section 3.6(a). 

        "Target LLC Interests"—all Interests in the Target. 

        "Target Members"—Persons who hold Interests in Target. 

        "Target Parties"—as defined in Section 3.18(b). 

        "Target Representative"—as defined in Section 12.10. 

        "Target's Closing Documents"—as defined in Section 3.2(a). 

        "Target's Possession"—means, one of (i) physically located in the offices of Target or Philip Harris &
Associates, Inc., (ii) physically located at the Real Property or (iii) in the possession or control of the representatives or agents of Target or Philip Harris &
Associates, Inc. 

        "Target's Premium Portion"—as defined in Section 12.1. 

        "Tax"—any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees' income withholding, foreign or domestic withholding,
social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff,
charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable
under any tax-sharing agreement or any other Contract. 

8

 

        "Tax Return"—any return (including any information return), report, statement, schedule, notice, form, declaration, claim for
refund or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or
payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax. 

        "Theatre Level Cash Flows"—as defined in Section 3.4(b). 

        "Third Party"—a Person that is not a party to this Agreement. 

        "Third-Party Claim"—any claim against any Indemnified Person by a Third Party, whether or not involving a Proceeding. 

        "Title Company"—means First American. 

        "Title Documents"—as defined in Section 5.9(a) 

        "Title Policies"—as defined in Section 5.9(a)(C). 

        "Welfare Plan"—any "employee welfare benefit plan" as such term is defined in ERISA Section 3(1). 

        1.2.    Usage    

        (a)    Interpretation.    In this Agreement, unless a clear contrary intention appears: (i) the singular number
includes the plural number and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are not prohibited
by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iii) reference to any gender includes each other gender;
(iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;
(v) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules
and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and
constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) "hereunder," "hereof," "hereto," and words of similar
import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof; (vii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description preceding such term; (viii) "or" is used in the inclusive sense of "and/or"; (ix) with respect to the determination of
any period of time, "from" means "from and including" and "to" means "to but excluding"; and (x) references to documents, instruments or agreements shall be deemed to refer as well to annexes,
all addenda, exhibits, schedules or amendments thereto. 

        (b)    Accounting Terms and Determinations.    Unless otherwise specified herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP. 

        (c)    Legal Representation of the Parties.    This Agreement was negotiated by the parties with the benefit of legal
representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation
hereof. 

9

 

2.     BASIC TRANSACTION  

        2.1.    Merger; Closing; Merger Consideration    

        (a)   On
and subject to the terms and conditions of this Agreement, Merger Subsidiary will merge with and into Target (the
"Merger") at the Effective Time. Target shall be the entity surviving the Merger (the "Surviving LLC"). 

        (b)   The
closing of the Contemplated Transactions (the "Closing") will take place on the later of (a) July 15,
2004 (the "Scheduled Closing Date") or (b) the date that is five (5) Business Days following the satisfaction and/or waiver of all
conditions to Closing set forth in Articles 7 and 8 (other than those conditions contemplated to be satisfied at the Closing), unless Buyer and Target otherwise agree. Subject to the provisions of
Article 9, failure to consummate the Contemplated Transactions on the date determined pursuant to this Section 2.1 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement. In such a situation, the Closing will occur as soon as practicable, subject to Article 9. 

        (c)   Upon
execution of this Agreement, the parties hereto shall open an escrow (the "Closing Escrow") by depositing with Title
Company, in its capacity as escrow holder for this transaction ("Closing Escrow Holder") an executed counterpart of this Agreement. All escrow
instructions shall be addressed to Closing Escrow Holder, to the attention of Mary Owens, who shall be responsible, on behalf of the Closing Escrow Holder, for the escrow under this Agreement. This
Agreement shall serve as the instructions to the Closing Escrow Holder for consummation of the purchase and sale contemplated hereby. The Closing Escrow Holder shall signify its acknowledgment and
agreement to the escrow instructions contained herein by execution of the acknowledgment immediately following the signature page hereof. Target and Buyer shall execute such supplemental escrow
instructions as may be appropriate to enable the Closing Escrow Holder to comply with the terms of this Agreement. In the event of any conflict between the provisions of this Agreement and any
supplemental escrow instructions executed by either Buyer or Target, but not all parties, the terms of this Agreement shall control. In the event of any conflict between the provisions of this
Agreement and any supplemental escrow instructions executed by Buyer and Target, the terms of such supplemental escrow instructions shall control. Written instructions to the Closing Escrow Holder
from Target's counsel, in the case of Target, or from Buyer's counsel, in the case of Buyer, shall be deemed given by, and shall be binding upon, the party whose counsel gave such instructions to the
Closing Escrow Holder, provided that escrow instructions given by counsel may be supplemental to, but not inconsistent with, the terms of this Agreement. 

        (d)   At
the Closing, (i) Target will deliver to Buyer and Merger Subsidiary the various certificates, instruments, and documents referred to in Section 2.2(a)
and Article 7 below, (ii) Buyer and Merger Subsidiary will deliver to Target the various certificates, instruments, and documents referred to in Section 2.2(b) and
Section 8.3 below, (iii) Target and Merger Subsidiary will file with the Secretary of State of the State of Delaware a Certificate of Merger in the form attached hereto as
Exhibit 2.1(c) (the "Certificate of Merger"), and (iv) Buyer will deliver or cause Surviving LLC to deliver the Closing Consideration in
the manner provided below in Section 2.1(e). 

        (e)   (i)
The Merger shall become effective at the time (the "Effective Time") Target and Merger Subsidiary file the
Certificate of Merger with the Secretary of State of the State of Delaware. The Merger shall have the effect set forth in the Delaware LLC Law. Surviving LLC may, at any time after the Effective Time,
take any action (including executing and delivering any document) in the name and on behalf of either Target or Merger Subsidiary in order to carry out and effectuate the transactions contemplated by
this Agreement. 

10

  

         (ii)  The
certificate of formation of Surviving LLC shall be amended and restated at and as of the Effective Time to read as did the certificate of formation of Merger
Subsidiary immediately prior to the Effective Time. 

        (iii)  The
Operating Agreement of Surviving LLC shall be amended and restated at and as of the Effective Time to read as did the Operating Agreement of Merger Subsidiary
immediately prior to the Effective Time. 

        (iv)  The
manager, directors and officers of Merger Subsidiary shall become the manager, directors and officers of Surviving LLC at and as of the Effective Time (retaining
their respective positions and terms of office). 

         (v)  At
and as of the Effective Time, (A) each of the Target LLC Interests shall be converted into the right to receive a portion of the Merger Consideration, in cash
(without interest), as set forth in the schedule prepared by Target, attached hereto as Schedule 2.1(d), and (B) each of the Target LLC Interests shall be converted into interests in the
Surviving LLC, such that the Surviving LLC shall be owned by Buyer. No Target LLC Interests shall be deemed to be outstanding or to have any rights (other than those held by Buyer in Surviving LLC
after the Effective Time). 

        (f)    In
consideration for the Contemplated Transactions and Target's performance of its obligations under this Agreement, Buyer shall pay an aggregate purchase price (the
"Merger Consideration") of (i) $33,557,214 plus or minus the adjustments to the Merger Consideration pursuant to Section 2.3 (the
"Closing Consideration"). At Closing, in accordance with Section 2.2(b)(i), (ii), (iii) and (iv), Buyer shall pay through the Closing
Escrow Holder by wire transfer in immediately available United States funds (A) to the Target Representative for the ratable benefit of the Target Members to the account designated by the
Target Representative in writing to the Closing Escrow Holder at least three days prior to the Closing, the Closing Consideration (x) less the Holdback Escrow Amount (y) less the amounts
payable to lenders pursuant to Section 2.5 and (z) less the Construction Escrows, (B) to the lenders, the amounts payable pursuant to Section 2.5, (C) to the
Holdback Escrow Agent pursuant to the Holdback Escrow Agreement, the Holdback Escrow Amount and (D) to the Construction Escrow Holder pursuant to the Development Agreements, the Construction
Escrows. 

        (g)   All
funds required to be delivered to the Closing Escrow Holder pursuant to this Agreement shall be delivered on the Closing Date by wire transfer of immediately
available funds, prior to the time at which the Title Company shall record documents pursuant to Section 2.2(c) hereof, but not later than 9:30 a.m. Los Angeles time, pursuant to such
wiring instructions as Closing Escrow Holder shall provide
to Buyer and Target. All funds required to be delivered by the Closing Escrow Holder to Target Members on the Closing Date pursuant to this Agreement shall be delivered by wire transfer of immediately
available funds pursuant to wiring instructions to be delivered to the Closing Escrow Holder prior to the Closing Date. 

        (h)   After
the date of this Agreement, Target shall not allow any transfers of Target LLC Interests, and any such attempted transfers shall not be recognized by Target. 

        2.2.    Closing Deliverables.    In addition to any other documents to be delivered under other provisions of this
Agreement, including pursuant to this Article 2, Section 7.4, and Section 8.3, at the Closing: 

        (a)   Target
shall deliver as applicable: 

          (i)  to
Buyer, five original counterparts to the Development Agreement for Riverside Stadium 16 theatre (Riverside, California) in a form mutually agreed upon by Buyer and 

11

 

Target
prior to the Due Diligence Deadline executed by Philip Harris & Associates, Inc. and the consents thereto executed by the Target and the Architect and Contractor named therein; 

         (ii)  to
Buyer, five original counterparts to the Development Agreement for the El Dorado Hills Stadium 14 theatre (County of El Dorado, California) theatre in a form
mutually agreed upon by Buyer and Target prior to the Due Diligence Deadline, executed by Philip Harris & Associates, Inc. and the consents thereto executed by the Target and the
Architect and Contractor named therein; 

        (iii)  to
Buyer, if not previously delivered pursuant to the Desert APA, two original counterparts to the consulting agreement substantially in the form of
Exhibit 2.7(a)(iii), executed by Philip Harris III (the "Consulting Agreement"); 

        (iv)  to
Buyer, if not previously delivered pursuant to the Desert APA, (A) two original counterparts to the noncompetition agreement substantially in the form of
Exhibit 2.7(a)(vi)(A), executed by Philip Harris III, and (B) two original counterparts to the noncompetition agreement substantially in the form of Exhibit 2.7(a)(vi)(B),
executed by George Mann (the "Noncompetition Agreements"); 

         (v)  to
Buyer, five original counterparts to the escrow agreement substantially in the form of Exhibit 2.7(a)(vii), executed by Target and the Holdback Escrow Agent
(the "Holdback Escrow Agreement"); 

        (vi)  to
Buyer, two original counterparts of the certificate executed by Target as to the accuracy of its representations and warranties as of the date of this Agreement and
as of the Closing in accordance with Section 7.1 and as to Target's compliance with and performance of its covenants and obligations to be performed or complied with at or before the Closing in
accordance with Section 7.2; 

       (vii)  to
Buyer, a certificate of the manager or other governing body of Target certifying, as complete and accurate as of the Closing, attached copies of the Governing
Documents of Target, certifying and attaching all requisite resolutions or actions of Target's governing bodies and members approving the execution and delivery of this Agreement and the consummation
of the Contemplated Transactions and certifying to the incumbency and signatures of the officers or managers of Target executing this Agreement and any other document relating to the Contemplated
Transactions; 

      (viii)  to
Buyer, lien releases, Uniform Commercial Code termination statements and other similar documents as may be necessary to provide reasonable evidence that all items
of intangible personal property, Tangible Personal Property and fixtures comprising Purchased Assets are free and clear of Encumbrances, other than Permitted Encumbrances; 

        (ix)  to
the Closing Escrow Holder, if Buyer and Target reasonably determine that documentary transfer tax is payable or in any event if payment of such tax is required by
the county recorder, a separate statement of the documentary transfer tax payable in connection with the Contemplated Transactions, substantially in form agreed to by Buyer and Target; 

         (x)  to
the Closing Escrow Holder, with respect to each of the Target Leases which is encumbered by a mortgage or deed of trust on the Target's interest, a payoff demand
and/or a request for full reconveyance duly executed by the mortgagee or beneficiary thereof and/or a full reconveyance duly executed by the trustee thereof, and in form and substance satisfactory to
the Title Company; 

        (xi)  to
the Closing Escrow Holder, such other instruments, certificates and affidavits as may reasonably be requested by the Title Company in connection with the issuance of
the Title Policies; 

12

 

       (xii)  to
Buyer, two original counterparts to the letter agreement regarding theatre advertising arrangements in the form of Exhibit 2.7(a)(xii) executed by
Target and Target Representative; and 

      (xiii)  to
Buyer, two original counterparts to the letter agreement regarding Concessions Inventories in the form of Exhibit 2.7(a)(xiii) executed by Target and
Target Representative. 

        (b)   Buyer
shall deliver: 

          (i)  to
the Closing Escrow Holder, the Closing Consideration (x) less the Holdback Escrow Amount and (y) less the Construction Escrows to an account specified
by the Closing Escrow Holder in a writing delivered to Buyer at least three (3) business days prior to the Closing Date; 

         (ii)  to
the Closing Escrow Holder, the amounts payable to the lenders pursuant to Section 2.10 to an account specified by the Closing Escrow Holder in a writing
delivered to Buyer at least three (3) business days prior to the Closing Date; 

        (iii)  to
the Closing Escrow Holder, the Holdback Escrow Amount, by wire transfer to an account specified by the Closing Escrow Holder in a writing delivered to Buyer at
least three (3) days prior to the Closing Date; 

        (iv)  to
the Construction Escrow Holder, the Construction Escrows; 

         (v)  to
the Target Representative, four original counterparts to the Holdback Escrow Agreement, executed by Buyer and the Holdback Escrow Agent, 

        (vi)  to
Target Representative, four original counterparts to the Development Agreement for Riverside Stadium 16 theatre (Riverside, California) in a form mutually agreed
upon by Buyer and Target prior to the Due Diligence Deadline executed by Buyer; 

       (vii)  to
Target Representative, four original counterparts to the Development Agreement for the El Dorado Hills Stadium 14 theatre (County of El Dorado, California) in a
form mutually agreed upon by Buyer and Target prior to the Due Diligence Deadline executed by Buyer; 

      (viii)  to
the Target Representative, if not previously delivered pursuant to the Desert APA, two original counterparts of the Consulting Agreement executed by Buyer; 

        (ix)  to
the Target Representative, if not previously delivered pursuant to the Desert APA, two original counterparts of each of the Noncompetition Agreements executed by
Buyer; 

         (x)  to
the Target Representative, a certificate executed by Buyer as to the accuracy of its representations and warranties as of the date of this Agreement and as of the
Closing in accordance with Section 8.1 and as to its compliance with and performance of its covenants and obligations to be performed or complied with at or before the Closing in accordance
with Section 8.2; 

        (xi)  to
the Target Representative, a certificate of the Secretary of Buyer certifying, as complete and accurate as of the Closing, attached copies of the Governing Documents
of Buyer and certifying and attaching all requisite resolutions or actions of Buyer's board of directors approving the execution and delivery of this Agreement and the consummation of the Contemplated
Transactions and certifying to the incumbency and signatures of the officers of Buyer executing this Agreement and any other document relating to the Contemplated Transactions; 

       (xii)  to
Target Representative, two original counterparts to the letter agreement regarding theatre advertising arrangements in the form of
Exhibit 2.7(a)(xii) executed by Buyer; and 

13

 

      (xiii)  to
Target Representative, two original counterparts to the letter agreement regarding Concessions Inventories in the form of
Exhibit 2.7(a)(xiii) executed by Buyer. 

        (c)   Provided
that Closing Escrow Holder has received all the items to be delivered to it described in subsections (a) and (b) hereof, and provided further that
the Title Company is irrevocably and unconditionally prepared and committed to deliver to Buyer the Owner's Title Policy, Closing Escrow Holder is authorized and instructed as early as possible on the
Closing Date to do the following: 

          (i)  Record
the memorandum of leases, SNDAs, and NDAs in the official records of the county or counties where the respective Real Property are located, in such order or
orders as Buyer may reasonably request pursuant to separate written instructions given by Buyer to Closing Escrow Holder; 

         (ii)  Deliver
fully executed separate statements, if any, to the County Recorders of the respective California and Hawaii counties (to the extent separate statements are
permitted in Hawaii) in which the Real Property is located; 

        (iii)  Deliver
funds pursuant to Section 2.3 and Sections 2.7(b)(i) and (ii); provided, however, such payments shall include payments necessary to release or
discharge any monetary liens which Target is obligated to release or discharge under this Agreement; 

        (iv)  Deliver
to Target Representative each of the documents set forth on Schedule 2.7(c); 

         (v)  Deliver
to Buyer each of the documents set forth on Schedule 2.7(c); and 

        (vi)  Return
any other item to the party who delivered it to the Closing Escrow Holder; provided, however, any other item delivered by Target shall be delivered to Target
Representative by Closing Escrow Holder. 

        The
Closing Escrow Holder is hereby authorized and instructed to date as of the Closing Date any other document delivered by the parties hereto which has not theretofore been dated. The
Closing Escrow Holder is hereby authorized and instructed to insert the amount of the tax due on the separate statement, if any, as agreed to by Buyer and Target. As soon as reasonably practicable,
Target shall provide the Closing Escrow Holder with a copy of the Estimated Closing Working Capital agreed to by the parties in accordance with Section 2.3. The Closing Escrow holder shall
deliver the Title Policies to Buyer not more than seven Business Days after the Closing Date. 

        2.3.    Working Capital Adjustment.    

        (a)   As
used herein, "Working Capital" means all Current Assets of the Target as of the Closing Date, less all Current
Liabilities of the Target as of the Closing Date, determined in accordance with GAAP applied on a basis consistent with Target's past practice (the "Accounting
Principles"). "Current Assets" means assets of the character that would be reflected as current assets on a balance sheet
prepared on a basis consistent with the Accounting Principles; and "Current Liabilities" means liabilities of the character that would be reflected as
current liabilities on a balance sheet prepared on a basis consistent with the Accounting Principles, but shall exclude for purposes of this Agreement the current portion of long term liabilities, as
determined in accordance with GAAP. 

        (b)   The
"Baseline Working Capital" shall be the amount of Gift Certificate Obligations as agreed to by Buyer and Target in
good faith as of the Closing Date without duplication of any Gift Certificate Obligations assumed by Buyer under the Desert APA. 

        (c)   The
"Closing Working Capital" shall be the Working Capital as of the close of business on the Closing Date, as set forth
in a closing statement of Working Capital (the "Closing Statement of Net Assets"). The Closing Statement of Net Assets shall be prepared consistent with 

14

 

the
Accounting Principles in accordance with the procedure set forth in Sections 2.3(d) and, if applicable, 2.3(e). 

        (d)   A
preliminary and nonbinding estimate of Closing Working Capital ("Estimated Closing Working Capital") shall be prepared
by Target in good faith and delivered to Buyer before the Closing and, subject to the approval of the Estimated Closing Working Capital by Buyer, the Closing Consideration shall be increased by the
amount that the Estimated Closing Working Capital exceeds the Baseline Working Capital and decreased by the amount that the Estimated Closing Working Capital is less than the Baseline Working Capital.
The Estimated Closing Working Capital shall be calculated by Target in accordance with the Accounting Principles. Within 120 days following the Closing Date, Buyer shall review and revise the
Estimated Closing Working Capital amount prepared by Target, and shall prepare a statement (the "Buyer Revised Statement") of the actual Closing Working
Capital and shall deliver to the Target Representative the Buyer Revised Statement. At the Target Representative's request, Buyer shall also deliver or promptly make available to the Target
Representative reasonably detailed schedules supporting the Buyer Revised Statement and access to personnel and materials appropriate to verify the Buyer Revised Statement. The Buyer Revised Statement
shall be prepared in accordance with the Accounting Principles. The Target Representative and Buyer shall reasonably cooperate in good faith with each other in connection with calculating the Closing
Working Capital which shall include, without limitation, the prompt sharing of any reasonably requested books and records. If, within forty-five (45) days after the delivery of the
Buyer Revised Statement and supporting schedules, the Target Representative determines in good faith that the Buyer Revised Statement has not been prepared in accordance with the Accounting
Principles, is not mathematically accurate or has not been calculated or prepared in accordance with this Section 2.3, the Target Representative shall deliver to Buyer within such period
written notice (the "Dispute Notice") specifying in reasonable detail all disputed items and the basis therefor (collectively, the
"Disputed Items"). The failure by the Target Representative to provide a Dispute Notice within such forty-five (45) day period to
Buyer will constitute the Target Representative's and Target's and its Members' acceptance of the Buyer Revised Statement. The Target Representative shall be deemed to have agreed with all items and
amounts included in the Buyer Revised Statement except if such items are specifically disputed in the Dispute Notice. If the Target Representative provides Buyer with a timely Dispute Notice, Buyer
and the Target Representative shall, within forty-five (45) days (or such longer period as mutually agreed upon by Buyer and the Target Representative) following the delivery of
such Dispute Notice to Buyer (the "Resolution Period"), negotiate in good faith to resolve the Disputed Items to their mutual satisfaction. At the
conclusion of the Resolution Period, Buyer and the Target Representative shall refer all unresolved Disputed Items to the Neutral Accountant in accordance with Section 2.3(e) below. If during
the Resolution Period, Buyer and the Target Representative agree in writing as to the final Closing Working Capital amount, then such Closing Working Capital amount shall be final and binding upon the
parties hereto. 

        (e)   If
a dispute arises under Section 2.3(d) above as to determination of the Closing Working Capital and such dispute is not resolved within the time period set
forth therein, then each issue in dispute shall be submitted to arbitration before the offices of PricewaterhouseCoopers or such other accounting firm as may be acceptable to the Buyer and the Target
Representative (the "Neutral Accountant"). The parties agree to cooperate with one another in the engagement of the Neutral Accountant for such
purposes. The Neutral Accountant shall follow the terms and provisions of this Agreement in resolving any issues in dispute and making its determination, which determination shall be made on the sole
basis of whether the Buyer Revised Statement has been prepared in accordance with the Accounting Principles and the principles set forth in this Section 2.3. The Neutral Accountant shall
determine, based solely on presentations by the Buyer and the Target Representative and their respective representatives as to any issues raised in the Dispute Notice that are unresolved (and not by
independent review) and shall prepare a revised 

15

 

calculation
of Closing Working Capital and render a written report as to the dispute and the resulting calculation of Closing Working Capital which shall be conclusive and binding upon the parties. In
resolving any disputed item, the Neutral Accountant shall not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such
item claimed by either party. All costs of the Neutral Accountant shall be shared equally between Buyer and the funds in the Escrow Account. The decision of the Neutral Accountant shall be made not
later than 30 days following the submission of all relevant materials to the Neutral Accountant and shall be binding and conclusive on the parties hereto. 

        (f)    Upon
determination of the Closing Working Capital: 

          (i)  In
the event that Closing Working Capital is greater than the Estimated Closing Working Capital, Buyer shall pay to the Target Representative for the ratable benefit of
the Target Members an aggregate amount equal to such excess in cash within five (5) business days of the determination of Closing Working Capital pursuant to this Section 2.3. 

         (ii)  In
the event that Closing Working Capital is less than the Estimated Closing Working Capital, an aggregate amount equal to such deficiency shall be paid from the
Holdback Escrow Amount to the Buyer in cash within five (5) business days of the determination of Closing Working Capital pursuant to this Section 2.3. 

        (iii)  In
the event of a payment pursuant to either Section 2.3(f)(i) or (ii), such payment shall include interest thereon from the Closing Date to the date of
actual payment at a variable rate equal to the prime rate (as reported in The Wall Street Journal "Money Rates") from and including the Closing Date to,
but not including, the date of payment. 

        2.4.    Escrow.    

        $1,845,647
("Holdback Escrow Amount") shall be held back from the Merger Consideration and placed into an interest-bearing escrow account
for a period of twelve (12) months following Closing pursuant to the terms of the Holdback Escrow Agreement. Buyer shall be entitled to an offset against the portion of the Holdback Escrow
Amount under this Section 2.4 for any payments Target is required to make pursuant to Section 2.3 that has not been paid to Buyer in accordance with Section 2.3, or for any
indemnity payment pursuant to Article 11 of this Agreement. 

        2.5.    Payments to Lenders.    

        A
portion of the Closing Consideration, on a dollar for dollar basis in an amount equal to the balance owing by Target as of the Closing Date to the lenders identified on
Schedule 2.5 shall be wired by the Closing Escrow Holder directly to such lenders at Closing. 

        2.6.    Consents    

        Target
shall use its Reasonable Best Efforts to promptly obtain all Consents listed in Schedule 3.2(c). If there are any Consents that have not yet been obtained (or otherwise are
not in full force and effect) as of the Closing, in the case of Target Contract as to which such Consents were not obtained (or otherwise are not in full force and effect) (the
"Restricted Contracts"), Buyer may waive the closing conditions as to any such Consent and elect to have the Target Representative continue its efforts
to obtain the Consent. If Buyer elects to have the Target Representative continue its Reasonable Best Efforts to obtain any Consent and the Closing occurs Target Representative shall use Reasonable
Best Efforts to obtain the Consent relating to each Restricted Contract as quickly as practicable. Target Representative's failure or inability to obtain such Consent with respect to a Restricted
Contract after the exercise of Reasonable Best Efforts shall not constitute a breach by Target or Target Representative of any provision of this Agreement or give rise to a claim for Damages by Buyer. 

16

   
        2.7.    Target Lease Estoppels and Consents    

        (a)   With
respect to Target Leases, Target shall promptly after the date hereof request that the lessor and master lessor (with respect to any Target Lease which is a
sublease) thereunder execute an estoppel and consent in the form of Exhibit 2.7(a) attached hereto (the "Lessor Consent and Estoppel"). Target
shall use its Reasonable Best Efforts to promptly obtain such a Lessor Consent and Estoppel, completed and duly executed by such lessor or master lessor, on or prior to the Due Diligence Deadline. To
the extent that a lessor or master lessor fails or refuses to deliver such a Lessor Consent and Estoppel Target shall use its Reasonable Best Efforts to obtain a lessor consent and estoppel as similar
as reasonably possible to the Lessor Consent and Estoppel requested. 

        (b)   Target
and Buyer agree to pay to each such lessor or master lessor any fee, cost or expense (including attorneys' fees of such lessor or master lessor) to which such
lessor or master lessor is entitled under the Target Lease or master lease, as the case may be, within the time and in the manner provided in the Target Lease or master lease. Target and Buyer agree
to equally share any such fee, cost or expense for amounts up to $500 per Target Lease; provided, that, if such fee, cost or expense exceeds $500 per Target Lease, then Target shall pay the excess.
The parties shall not be obligated to pay any such fee, cost or expense unless the Target Lease provides for such payment by its written terms. 

        (c)   If
a lessor or master lessor requests that Buyer or Target and Target Representative, or any combination, execute a written instrument (other than this Agreement)
relating to the assumption or allocation of the lessee's obligations or liabilities under the Target Lease, and if Buyer or Target and Target Representative, or any combination, execute such
instrument, then the parties agree that such instrument shall be solely for the benefit of such lessor or master lessor, and shall not be enforceable by any person other than such lessor or master
lessor, it being the intention of the parties that the assumption and allocation of the lessee's obligations and liabilities under the Target Leases shall be governed solely by the terms of this
Agreement. 

        (d)   Within
5 calendar days of receipt by Target of any consent or estoppel executed by any such lessor or master lessor, Target shall deliver a true and complete copy
thereof to Buyer. Buyer may refuse to approve a lessor consent or estoppel on any reasonable grounds, including without limitation inconsistency, if any, between the facts set forth therein and the
facts set forth on Schedule 3.6(d). Except as set forth in Section 5.11, Buyer shall not be obligated to obtain any releases of any guaranties given by any Person who is an Affiliate of
Target, to furnish any guaranties, additional deposits, letters of credit or other security for performance of the lessee's obligations under any of the Target Leases. Upon written approval by Buyer
of any such consent and estoppel, in whatever form, such consent and estoppel shall be deemed the "Lessor Consent and Estoppel" with respect to such Target Lease. If
Target fully complies with its covenants in this Section 2.7, but is not able to deliver a consent and estoppel in form and substance satisfactory to Buyer within the time or in the manner set
forth herein, then Target shall not be liable for Damages for the non-delivery of such consent and estoppel. 

        2.8.    REA Estoppels and DDA Consents    

        (a)   With
respect to each REA relating to the Target Leases, Target shall promptly after the date hereof request that the parties thereto execute estoppels with respect to
such REA in the form, if any, contemplated by such REA. Each Target shall use its Reasonable Best Efforts to promptly obtain such an estoppel, completed and duly executed by such party or parties, on
or prior to the Due Diligence Deadline. If an REA does not contemplate estoppels, then Target shall have no obligation to seek or obtain estoppels with respect to such REA. Target and Buyer shall pay
to each such party or parties any reasonable fee, cost or expense (including attorneys' fees of such party or parties) to which such party or parties are entitled under the REA, within the time 

17

 

and
in the manner provided in the REA. Target and Buyer agree to equally share any such fee, cost or expense for amounts up to $500 per REA; provided, that, if such fee, cost or expense exceeds $500
per REA, then Target shall pay the excess. The parties shall not be obligated to pay any such fee, cost or expense unless the REA provides for such payment by its written terms. Within 5 calendar days
of receipt by Target of any such estoppel executed by any such party, Target shall deliver a true and complete copy thereof to Buyer. 

        (b)   With
respect to each DDA pursuant to which Target is acting as developer, Target shall promptly after the date hereof
request that the government agency that is party thereto execute a consent to the Contemplated Transactions. Target shall use its Reasonable Best Efforts to promptly obtain such consent, completed and
duly executed by such agency, on or prior to the Due Diligence Deadline. Within 5 calendar days of receipt by Target of any such consent executed by any such agency, Target shall deliver a true and
complete copy thereof to Buyer. If Target fully complies with its covenants in this Section 2.8, but is not able to deliver an estoppel or consent in form and substance satisfactory to Buyer
within the time or in the manner set forth herein, then Target shall not be liable for Damages to Buyer for the non-delivery of such estoppel or consent. 

        2.9.    SNDAs    

        With
respect to Target Leases which is a sublease, if any, Target shall promptly after the date hereof request that each master lessor execute a non-disturbance agreement in
form and substance reasonably acceptable to Buyer; provided that Target shall have no obligation to request any such non-disturbance agreement (a) from any master lessor that has
previously executed such a non-disturbance agreement which is assignable by Target to Buyer or (b) with respect to any master lease that expressly provides for
non-disturbance of any
subleasehold, upon the termination of the superior master lease, so long as the sublessee attorns to the superior master lessor and is not then in default, on terms and conditions that are reasonably
acceptable to Buyer. With respect to each of the Target Leases, if any, which is subordinate to a deed of trust executed by the lessor, or by a master lessor, Target shall promptly after the date
hereof request that the beneficiary of each such deed of trust execute a non-disturbance agreement in form and substance reasonably acceptable to Buyer, provided that Target shall have no
obligation to request any such non-disturbance agreement from any beneficiary that has previously executed such a non-disturbance agreement which is assignable by Target to
Buyer. Target shall use its Reasonable Best Efforts to promptly obtain such non-disturbance agreements from each party, completed and duly executed by such party prior to the Due Diligence
Deadline. Within 5 calendar days of receipt by Target of any such non-disturbance agreement executed by any such party, Target shall deliver a true and complete copy thereof to Buyer. If
Target fully complies with its covenants in this Section 2.9, but is not able to deliver a non-disturbance agreement in form and substance satisfactory to Buyer within the time or
in the manner set forth herein, then Target shall not be liable for Damages to Buyer for the non-delivery of such non-disturbance agreement. 

        2.10.    Memoranda of Leases    

        With
respect to Target Leases (other than Target Leases which are Related Party Contracts) for which a memorandum of lease is not recorded in the official real property records in which
the Real Property is located, Target shall promptly after the date hereof request that the lessor thereunder execute a memorandum of lease in form and substance reasonably acceptable to Buyer. Target
shall use its Reasonable Best Efforts to promptly obtain such memoranda of lease, duly executed and acknowledged by such lessor and otherwise in recordable form, on or prior to the Due Diligence
Deadline. Within 5 calendar days of receipt by Target of any such memorandum executed by any such lessor, Target shall deliver a true and complete copy thereof to Buyer. If Target fully complies with
its covenants in this Section 2.10, but is not able to deliver a memorandum of lease in form and substance 

18

 

satisfactory
to Buyer within the time or in the manner set forth herein, then Target shall not be liable for Damages to Buyer for the non-delivery of such memorandum of lease. 

        2.11.    Development Agreement    

        Target
and Buyer shall each use their Reasonable Best Efforts to agree to the terms of the Development Agreements by the Due Diligence Deadline. 

        2.12.    Delivery of Property; Minimum Concessions Inventory    

        (a)   Upon
Closing, Target shall make available to Buyer (i) originals, to the extent available, and otherwise copies of, Target Leases and Target Contracts;
(ii) copies or originals of all available books and records of account, contracts, copies of correspondence with tenants and suppliers, unpaid bills and other papers or documents which pertain
to the operation and management of Target Leases and Target Contracts; (iii) all available permits and warranties for such location; (iv) if in Target's Possession, the original
"as-built" plans and specification; and all other available plans and specifications and operation manuals; and (v) all keys, combinations and security codes. 

        (b)   Upon
Closing, Target shall use its Reasonable Best Efforts to insure that it has at each theatre covered by the Target Leases (and which is open for business as of the
Closing) the Minimum Concessions Inventories. 

3.     REPRESENTATIONS AND WARRANTIES OF TARGET AND DESERT  

        Target represents and warrants to Buyer and Merger Subsidiary that the following statements contained in this Section 3 are accurate as of the date of this
Agreement 

        3.1.    Organization and Good Standing    

        (a)   Schedule 3.1(a)
contains a complete and accurate list of jurisdictions in which Target is qualified to do business as a foreign entity. Target is a limited
liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, its jurisdiction of organization, with full power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under its Contracts. Target is duly qualified to do business as
a foreign limited liability company and is in good standing under the laws of California and each other state or other jurisdiction in which either the ownership or use of the properties owned or used
by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified could not have a material adverse effect on any of the business,
operations, assets or financial condition of Target or the Purchased Assets ("Material Adverse Effect"). 

        (b)   Complete
and accurate copies of the Governing Documents of Target and Desert, as currently in effect, have been delivered to Buyer. 

        (c)   Except
for Desert, Target's only Subsidiary, Target does not own any shares of capital stock, equity interests or other securities of any Person. Desert does not own any
shares of capital stock, equity interests or other securities of any Person. All of the issued and outstanding equity interests and other securities of Target and of Desert have been duly authorized
and are validly issued, fully paid, and non-assessable. Target holds of record and owns beneficially all of the outstanding shares and other equity interests of Desert, free and clear of
any Encumbrances, warrants or other purchase
rights. Neither Target nor Desert owns or has any right to acquire, directly or indirectly, any outstanding capital stock of, or other equity interests in, any Person. 

        3.2.    Enforceability; Authority; No Conflict    

        (a)   This
Agreement constitutes the legal, valid and binding obligation of Target, enforceable against it in accordance with its terms, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws 

19

 

affecting
the rights of creditors generally and by equitable principles. Upon the execution and delivery by Target of the Holdback Escrow Agreement, and each other agreement to be executed or
delivered by Target at the Closing (collectively, the "Target's Closing Documents"), Target's Closing Documents will constitute the legal, valid and
binding obligation of Target, enforceable against it in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium and similar laws affecting the rights of creditors generally and by equitable principles. Target has the power and authority to execute and deliver this Agreement and the Target's
Closing Documents and to perform its obligations under this Agreement and the Target's Closing Documents, and such action has been duly authorized by all necessary action by Target's members, managers
and any other governing body. 

        (b)   Except
as set forth in Schedule 3.2(b), neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of time): 

          (i)  breach
(A) any provision of any of the Governing Documents of Target or (B) any resolution or consent adopted by the members, managers or other governing
body or equity owners of Target; 

         (ii)  breach
or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under
any Legal Requirement or any Order to which Target, or any of the Assets, may be subject; 

        (iii)  contravene,
conflict with or result in a violation or breach of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is held by Target or that otherwise relates to the Assets; 

        (iv)  breach
any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment
under, or to cancel, terminate or modify, any Contract to which Target is a party or bound or their Assets are subject; or 

         (v)  result
in the imposition or creation of any Encumbrance upon or with respect to any of the Assets. 

        (c)   Except
as set forth in Schedule 3.2 (c), Target is not required to give any notice to or obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 

        3.3.    Capitalization    

        All
current members of Target and the Percentage Interests (as defined in the Governing Documents of Target) of each such member as of the date of the Agreement are set forth on
Schedule 3.3. All of such Interests have been duly authorized, are validly issued, fully paid and non-assessable and are held of record and are owned by such Persons set forth on
Schedule 3.3. Except as set forth on Schedule 3.3, Target is not a party to any Contracts relating to the issuance, sale or transfer of any membership interest or other securities of
Target and to the knowledge of Target, no member of Target is party to any Contract relating to voting of or the sale or transfer of any membership interest or other securities of Target. Except as
set forth on Schedule 3.3, there are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments
that could require Target or Desert to issue, sell, or otherwise cause to become outstanding any of their Interests. There are no outstanding or authorized appreciation, phantom, profit participation,
or similar rights with respect to Target or Desert. Except as 

20

 

set
forth on Schedule 3.3, Target is not party to any voting trusts, proxies, or other agreements or understandings with respect to the voting of the Interests of Target or Desert nor are there
any agreements or understandings with respect to registration rights for Interests of Target or Desert. The amounts to be paid by Buyer to the Target Members pursuant to this Agreement are in
accordance with the Governing Documents of Target and applicable Legal Requirements, and no Target Member shall have any claim against Buyer, Merger Subsidiary or Surviving LLC as a result of such
payments. 

        3.4.    Financial Statements    

        (a)   Target
has delivered to Buyer an audited consolidated balance sheet of Target as of December 31, 2003 (including the notes thereto, the
"Balance Sheet"), and the related consolidated audited statements of income and cash flows for the fiscal year then ended, including in each case the
notes thereto, together with the report thereon of Grant Thornton, independent certified public accountants. Such consolidated financial statements fairly and accurately present in all material
respects (and the
financial statements delivered pursuant to Section 5.7 will fairly and accurately present in all material respects) the financial condition and the results of operations and cash flows of
Target as at the respective dates of and for the periods covered by such financial statements, all in accordance with GAAP. The financial statements referred to in this Section 3.4 and
delivered pursuant to Section 5.7 reflect and will reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such
financial statements. The financial statements have been and will be prepared from and are in accordance with the accounting Records of Target. Target has also delivered to Buyer copies of all letters
from Target's auditors to Target or the audit or other similar committee thereof since Target's inception, together with copies of all responses thereto. 

        (b)   Schedule 3.4(b)
contains theatre level cash flows for each theatre included in the Real Property, together with adjusted home office expenses and revenues (net)
allocated to such theatre (the "Theatre Level Cash Flows"), for the twelve months ended December 31 2003. The Theatre Level Cash Flows were
prepared in good faith from the accounting records of Target in a manner consistent with past practices. 

        3.5.    Books and Records    

        The
books of account and other financial Records of Target, all of which have been made available to Buyer, are complete and correct and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system of internal controls. The minute books of Target, all of which have been made available to Buyer, contain accurate and complete
Records of all meetings held of, and all material action taken by, the members, managers and governing bodies of Target. 

        3.6.    Title to Assets; Encumbrances; Condition of Tangible Personal Property    

        (a)   Schedule 3.6(a)
accurately and completely identifies all of the written or oral instruments and agreements of any kind to which Target is a party or by which it
is bound as successor-in-interest, as either lessee or sublessee, for the leasing, rental or occupancy of any portion of the Real Property ("Target
Leases"). Schedule 3.6(a) also accurately and completely identifies all such leases and all amendments, modifications, supplements, waivers, renewals and extensions
thereof, and all documents evidencing the exercise of any options to renew, extend, terminate, expand or relocate thereunder, and all such instruments or agreements determining or purporting to
determine the square footage of the premises of such leases, or the improvements thereon, or of any other real property of which the premises are a part, or the improvements thereon, for the purpose
of calculating additional rent or otherwise, and any such instrument or agreement determining or purporting to determine the commencement or expiration date of the lease term, or any renewal or
extended term of such leases. Target does not own any real property. Schedule 3.6(a) contains an accurate and complete list of all development agreements, 

21

 

redevelopment
agreements, development and disposition agreements and similar agreements, and all amendments, modifications, supplements, waivers, renewals and extensions thereof to which Target is a
party or, to Target's Knowledge, by which it is bound. Complete and correct copies of each document set forth on Schedule 3.6(a) (to the extent not already provided to Buyer) shall be delivered
to Buyer within 10 days of the execution hereof. Such documents shall be in form and substance satisfactory to Buyer and if such a document is not delivered to Buyer in accordance with this
Section 3.6(a), it shall be deemed deleted and shall be deleted from Schedule 3.6(a) at or prior to Closing. 

        (b)   Except
as disclosed on Schedule 3.6(b), (i) all of the Target Leases are valid and binding by and against Target; and (ii) no defaults by Target
exist thereunder nor has any event occurred which, with the giving of notice or the lapse of any applicable cure period, or both, would constitute a default by Target under any Target Lease. Except as
disclosed on Schedule 3.6(b), (A) to Target's Knowledge, all of the Target Leases are valid and binding by and against the other parties thereto (or their successors in interest); and
(B) to Target's Knowledge, no defaults by the other parties thereto (or their successors in interest) exist thereunder nor has any event occurred which, with the giving of notice or the lapse
of any applicable cure period, or both, would constitute a default by such other parties under any Target Lease. 

        The
provision in Section 3.6(b)(ii) shall be deemed not to apply to any default under Target Lease based upon defects, latent or patent, in the physical condition of the
Real Property, including without limitation the compliance of the Real Property with any Legal Requirement which default is unasserted by the landlord as of the Effective Time. 

        (c)   Except
to the extent disclosed on Schedule 3.6(c) and subject to the receipt of the consent contained in the corresponding Lessor Consent and Estoppel, execution
of this Agreement and the consummation of the Contemplated Transactions, does not and shall not (i) give rise to a right on the part of any lessor or sublessor or, to Target's Knowledge, any
other person to purchase by virtue of any right granted by Target, to terminate Target Lease, or to recapture all or any portion of the Real Property, or (ii) result in the termination or
cancellation of any option to renew or extend the term of any Target
Lease, or of any other right or option otherwise exercisable by the lessee or sublessee, as applicable, under any of the Target Leases. 

        (d)   Schedule 3.6(d)
accurately and completely identifies, as of the date hereof, with respect to each Target Lease, (i) to Target's Knowledge, the correct name
of the current lessor; (ii) to Target's Knowledge, the address or addresses at which such lessor is entitled to receipt of notices that must or may be delivered by Target to such lessor under
the corresponding lease; (iii) the dates upon which the current term of the lease commenced and upon which it will expire not including any extension or termination rights set forth in the
corresponding lease; (iv) the period or periods of any remaining renewal or extended terms of the lease which Target has the option to exercise; (v) the current base rent payable under
the lease, and any scheduled increases in such base rent during the remainder of the current term of the lease; (vi) the manner in which any percentage rents payable during the current term of
the lease is determined; (vii) the operating expense passthroughs paid by Target for the most recent month prior to the date of this Agreement for which they were paid; (viii) the unused
or unapplied amount of any security deposit or letter of credit which such lessor holds in connection with the performance of Target's obligations under the lease; and (ix) the name and the
address of any guarantor of Target's obligations under the lease. 

        (e)   Schedule 3.6(e)
accurately and completely identifies all leases, pad leases, ground leases, subleases, licenses or concession agreements relating to the Real
Property for which Target is a party, or by which it is bound as successor in interest by written instrument, as either the lessor, groundlessor, sublessor, licensor or grantor; 

22

 

        (f)    To
Target's Knowledge, Schedule 3.6(f) accurately and completely identifies, as of the date of this Agreement, all other instruments and agreements (i.e., other
than the instruments and agreements identified on Schedule 3.6(a) and on Schedule 3.6(e)) which are not recorded in the real property records and which affect Target's occupancy of the
Real Property including, without limitation, any such unrecorded parking agreements, advertising agreements, merchant association agreements, development agreements, redevelopment agreements,
development and disposition agreements. Complete and correct copies of each document set forth on Schedule 3.6(f) (to the extent not already provided to Buyer) shall be delivered to Buyer
within 10 days of the execution hereof. If such a document is not delivered to Buyer in accordance with this Section 3.6(f), it shall be deemed deleted and shall be deleted from
Schedule 3.6(f) at or prior to Closing. 

        (g)   Schedule 3.6(g)
sets forth an accurate and complete list of all Tangible Personal Property which have a book value in excess of $2,000 per item. Except as set
forth on Schedule 3.6(g), each item of Tangible Personal Property is in good repair and good operating condition, ordinary wear and tear excepted, and is suitable for immediate use in the
Ordinary Course of Business. Schedule 3.6(g) accurately and completely identifies, as of the date hereof, with respect to each agreement for the lease or rental of any Tangible Personal
Property, the names of the parties to each such agreement, the date of each such agreement (including each amendment, modification or supplement thereto) and the items of personal
property leased or rented under such agreement. Schedule 3.6(g) also sets forth a list of all concession equipment that is located on the Real Property and is owned by a Person other than
Target or the landlord under the applicable Target Lease. 

        (h)   Target
has good and marketable title and/or validly owns the Assets (other than the Target Leases) free and clear of any Encumbrances other than Permitted
Non-Real Property Encumbrances ("Non-Real Property Encumbrances"). Target warrants to Buyer that, at the time of Closing, all of
the Assets (other than the Target Leases) shall be free and clear of all Non-Real Property Encumbrances other than those identified on Schedule 3.6(h) as acceptable to Buyer
("Permitted Non-Real Property Encumbrances"). 

        (i)    Schedule 3.6(i) contains
an accurate list of all agreements or instruments to which Target is a party and which provide for, create or perfect a voluntary
monetary lien which encumbers any one or more of the Target Leases or any interest therein. 

        3.7.    Condition of Real Property    

        (a)   Except
as disclosed on Schedule 3.7(a), (i) Target has not received written notice of any proceeding either instituted, or planned to be instituted,
respecting any taking, condemnation, action in eminent domain, or any voluntary conveyance in lieu thereof, of any part of the Real Property, or any interest therein or right accruing thereto or use
thereof and (ii) to Target's Knowledge, no taking or voluntary conveyance of all or part of any Real Property, or any interest therein or right accruing thereto or use thereof, as the result
of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Body affecting the Real Property or any portion thereof has been commenced or planned to be instituted
with respect to all or any portion of any Real Property. 

        (b)   Except
as disclosed on Schedule 3.7(b), (i) Target has received no written notice from any (A) Governmental Body that any of the Real Property is in
violation of any Occupational Safety and Health Law or any other Legal Requirement, or (B) third party that the Real Property is in violation of any REA or DDA affecting such Real Property, and
(ii) to Target's Knowledge, no such violations described in Section 3.7(b)(i) exist; and (iii) all improvements on the Real Property are in good repair and working order,
ordinary wear and tear excepted. 

        (c)   Target
has not received written notice of any adverse claims or demands with respect to the rights of access to public ways to permit the Real Property to be used for
its intended purpose. 

23

 

All
Real Property is served by operating water, electric and telephone services and to Target's Knowledge, sewer, sanitary sewer and storm drain facilities. To Target's Knowledge, all reciprocal
easement agreements affecting any Real Property or Property are in full force and effect and Target has not asserted any defaults against the other parties thereto and has not received any written
notice of any defaults there under. 

        (d)   To
Target's Knowledge, no building or structure on any Real Property or any Appurtenance thereto or equipment thereon, or the use, operation or maintenance thereof,
violates any restrictive covenant or encroaches on any easement or on any property owned by others, which violation or encroachment materially interferes with the use or could materially adversely
affect the value of such building, structure or appurtenance or which encroachment is necessary for the operation of the business at any Target Lease. 

        3.8.    Inventories    

        All
Inventory consists of a quality usable and saleable, in the Ordinary Course of Business of Target. The quantities of each item of Inventory are not excessive but are reasonable in
the present circumstances of Target. 

        3.9.    No Undisclosed Liabilities    

        Except
as set forth in Schedule 3.9, Target has no Liability (except for Liabilities reflected or reserved against in the Balance Sheet and current Liabilities incurred in the
Ordinary Course of Business of Target since the date of the Balance Sheet. 

        3.10.    Taxes    

        (a)   Target
and Desert have filed or caused to be filed on a timely basis all Tax Returns and all reports with respect to Taxes that are or were required to be filed pursuant
to applicable Legal Requirements. All Tax Returns and reports filed by Target and Desert are true, correct and complete in all material respects. Target and Desert have paid, or made provision for the
payment of, all Taxes that have or may have become due for all periods covered by the Tax Returns or otherwise, or pursuant to any assessment received by Target and Desert, except such Taxes, if any,
as are listed in Schedule 3.10(a) and are being contested in good faith and as to which adequate reserves (determined in accordance
with GAAP) have been provided in the Balance Sheet. Except as provided in Schedule 3.10(a), Target and Desert currently are not the beneficiary of any extension of time within which to file any
Tax Return. No claim has ever been made or to Target's Knowledge is expected to be made against Target or Desert by any Governmental Body in a jurisdiction where Target and Desert do not file Tax
Returns that they are or may be subject to taxation by that jurisdiction. There are no Encumbrances on any of the Assets for Taxes (other than for current Taxes not yet due and payable) or that arose
in connection with any failure (or alleged failure) to pay any Tax, and Target has no Knowledge of any basis for assertion of any claims attributable to Taxes which, if adversely determined, would
result in any such Encumbrance. 

        (b)   Target
has made available to Buyer copies of all Tax Returns filed by Target and Desert since its inception. Schedule 3.10(b) contains a complete and accurate
list of all Tax Returns of Target and Desert that have been audited or are currently under audit and accurately describe any deficiencies or other amounts that were paid or are currently being
contested. To the Knowledge of Target, no undisclosed deficiencies are expected to be asserted with respect to any such audit. All deficiencies proposed as a result of such audits have been paid,
reserved against, settled or are being contested in good faith by appropriate proceedings as described in Schedule 3.10(b). Target has made available to Buyer, copies of any examination
reports, statements or deficiencies or similar items with respect to such audits. Except as provided in Schedule 3.10(b), Target has no Knowledge that any Governmental Body is likely to assess
any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Taxes of Target or 

24

 

Desert
either (i) claimed or raised by any Governmental Body in writing or (ii) as to which Target has Knowledge. Schedule 3.10(b) contains a list of all Tax Returns for which the
applicable statute of limitations has not run. Except as described in Schedule 3.10(b), Target has not given or been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of Target or Desert or for which Target or Desert may be liable. 

        (c)   The
charges, accruals and reserves with respect to Taxes (other than deferred Taxes) on the Records of Target and Desert are adequate (determined in accordance with
GAAP) and are at least equal to Target's and Deserts' liability for Taxes. There exists no proposed tax assessment or deficiency against Target or Desert except as disclosed in the Balance Sheet or in
Schedule 3.10(c). 

        (d)   (i) All
Taxes that Target or Desert is or was required by Legal Requirements to withhold, deduct or collect have been duly withheld, deducted and collected and,
to the extent required, have been paid to the proper Governmental Body or other Person; (ii) there is no tax sharing agreement, tax allocation agreement, tax indemnity obligation or similar
written or unwritten agreement, arrangement, understanding or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other arrangement relating to Taxes);
(iii) each of Target and Desert (A) has not been a member of an affiliated group within the meaning of Code Section 1504(a) (or any similar group defined under a similar provision
of state, local or foreign law) and (B) has no liability for Taxes of any person (other than Target and Desert) under Treas. Reg. sect. 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor by contract or otherwise; and
(iv) Target and Desert have disclosed on their federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662. Neither Target nor Desert is a party to any agreement, contract, arrangement, or plan that has resulted or would result, separately or in the aggregate, in the
payment of any "excess parachute payment" within the meaning of Code §280G (or any corresponding provision of state, local, or foreign Tax law). Neither Target nor Desert has been a United
States real property holding corporation within the meaning of Code §897(c)(2) during the applicable period specified in Code §897(c)(1)(A)(ii). 

        (e)   Neither
Target nor Desert will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) "closing agreement" as
described in Code Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) intercompany
transactions or any excess loss account described in Treasury Regulations under Code Section 1502 (or any corresponding or similar provision of state, local or foreign income Tax law);
(iv) installment sale or open transaction disposition made on or prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date. 

        (f)    Neither
Target nor Desert has distributed stock or other securities of another Person, or has had its Interests distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Code Section 355 or Code Section 361. 

        3.11.    No Material Adverse Effect    

        Since
the date of the Balance Sheet, except for the transactions and transfers contemplated or consummated under the Desert APA (including the distributions to Target and to Target
Members of the consideration payable thereunder), no event or development has occurred or circumstance exists which has had or could otherwise be expected to have, individually or in the aggregate a
Material Adverse Effect. 

25

 

        3.12.    Employee Benefits    

        (a)   Set
forth in Schedule 3.12(a) is a complete and correct list of all "employee benefit plans" as defined by ERISA Section 3(3), all specified fringe benefit
plans as defined in Code Section 6039D, and all other material bonus, incentive-compensation, deferred-compensation, profit-sharing, stock-option, stock-appreciation-right, stock-bonus,
stock-purchase, employee-stock-ownership, savings, severance, change-in-control, supplemental-unemployment, layoff, salary-
continuation, retirement, pension, health, life-insurance, disability, accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit or Welfare Plan, and any other
material employee compensation or benefit plan, agreement, policy, practice, commitment, contract or understanding (whether qualified or nonqualified, currently effective or terminated within
12 months prior to the date of this Agreement, written or unwritten) and any trust, escrow or other agreement related thereto that (i) is maintained or contributed to by Target or any
other corporation or trade or business controlled by, controlling or under common control with Target (within the meaning of Code Section 414 or ERISA Section 4001(a)(14) or 4001(b)) but
excluding Philip Harris & Associates, Inc.("ERISA Affiliate") or has been maintained or contributed to in the last six (6) years by
Target or any ERISA Affiliate, or with respect to which Target or any ERISA Affiliate has or may have any liability, and (ii) provides benefits, or describes policies or procedures applicable
to any current or former director, officer, employee or service provider of Target or any ERISA Affiliate, or the dependents of any thereof, regardless of how (or whether) liabilities for the
provision of benefits are accrued or assets are acquired or dedicated with respect to the funding thereof (collectively the "Employee Plans"). Set forth
on Schedule 3.12(a) is a complete and correct list of all ERISA Affiliates of Target. 

        (b)   Target
does not participate in any Multiemployer Plan. 

        (c)   Target
has delivered to Buyer true, accurate and complete copies of (i) the documents comprising each Employee Plan (or, with respect to any Employee Plan which
is unwritten, a detailed written description of eligibility, participation, benefits, assets and any other matters which relate to the obligations of Target or any ERISA Affiliate); (ii) all
trust agreements, insurance contracts or any other funding instruments related to the Employee Plans; (iii) all rulings, determination letters, no-action letters or advisory
opinions from the IRS, the U.S. Department of Labor, or any other Governmental Body that pertain to each Employee Plan and any open requests therefore; (iv) the most recent actuarial and
financial reports (audited and/or unaudited) and the annual reports filed with any Government Body with respect to the Employee Plans during the current year and the preceding year; (v) all
collective bargaining agreements pursuant to which contributions to any Employee Plans have been made or obligations incurred (including both Defined Benefit Plans and Welfare Plans) by Target or any
ERISA Affiliate, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities; (vi) all securities registration statements
filed with respect to any Employee Plan; (vii) all executory contracts with third-party administrators, actuaries, investment managers, consultants and other independent contractors that relate
to any Employee Plan, and (viii) all summary plan descriptions, summaries of material modifications and memoranda, employee handbooks regarding the Employee Plans. 

        (d)   Except
as disclosed in Schedule 3.12(d), full payment has been made of all amounts that are required under the terms of each Employee Plan to be paid as
contributions with respect to all periods prior to and including the last day of the most recent fiscal year of such Employee Plan ended on or before the date of this Agreement and all periods
thereafter prior to the Closing Date. 

        (e)   Target
does not maintain a Minimum Funding Plan. 

        (f)    Target
does not maintain a Defined Benefit Plan. 

26

 

        (g)   Target
has, at all times, complied, and currently complies in all material respects, with the applicable continuation requirements for its Welfare Plans, including
(i) Code Section 4980B (as well as its predecessor provision, Code Section 162(k)) and ERISA Sections 601 through 608, inclusive, which provisions are hereinafter referred to
collectively as "COBRA" and (ii) any applicable state statutes mandating health insurance continuation coverage for employees. 

        (h)   The
form of all Employee Plans is in compliance with the applicable terms of ERISA, the Code, and any other applicable laws, including the Americans with Disabilities
Act of 1990, the Family Medical Leave Act of 1993 and the Health Insurance Portability and Accountability Act of 1996, and such plans have been operated in compliance with such laws and the written
Employee Plan documents. Neither Target nor any fiduciary of an Employee Plan has violated the requirements of ERISA Section 404 of ERISA. All required reports and descriptions of the Employee
Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of Material Modifications) have been (when required)
timely filed with the IRS, the U.S. Department of Labor or other Governmental Body and distributed as required, and all notices required by ERISA or the Code or any other Legal Requirement with
respect to the Employee Plans have been appropriately given. 

        (i)    Each
Employee Plan that is intended to be qualified under Code Section 401(a) or is a Defined Benefit Plan has received a favorable determination letter from the
IRS, and Target has no Knowledge of any circumstances that will or could result in the revocation of any such favorable determination letter. Each trust created under any Employee Plan has been
determined to be exempt from taxation under Code Section 501(a), and Target is not aware of any circumstance that will or could result in a revocation of such exemption. 

        (j)    There
is no material pending or to Target's Knowledge threatened Proceeding relating to any Employee Plan. Neither Target nor, to Target's Knowledge, any fiduciary of an
Employee Plan has engaged in a transaction with respect to any Employee Plan that, assuming the taxable period of such transaction expired as of the date hereof, would reasonably be expected to
subject Target, Surviving LLC or Buyer to a Tax or penalty imposed by either Code Section 4975 or ERISA Section 502(l) or a violation of ERISA Section 406. 

        (k)   Schedule 3.12(k)
lists all funded Welfare Plans that provide benefits to current or former employees of Target. The funding under each Welfare Plan does not
exceed and has not exceeded the limitations under Code Sections 419A(b) and Code 419A(c). Target is not subject to taxation on the income of any Welfare Plan's welfare benefit fund (as such term is
defined in Code Section 419(e)) under Code Section 419A(g). 

        (l)    Except
as required by Legal Requirements, the consummation of the Contemplated Transactions will not accelerate the time of vesting or the time of payment, or increase
the amount, of compensation due to any director, employee, officer, former employee or former officer of Target. There are no contracts or arrangements providing for payments that could subject any
person to liability for tax under Code Section 4999. 

        (m)  Except
for the continuation coverage requirements of COBRA, Target has no obligations or potential liability for benefits to employees, former employees or their
respective dependents following termination of employment or retirement under any of the Employee Plans that are Welfare Plans. 

        (n)   No
written or oral representations have been made to any employee or former employee of Target concerning the employee benefits of Buyer or Surviving LLC. 

27

  

        (o)   Target
has (i) filed or caused to be filed all returns and reports on the Employee Plans that it is required to file and (ii) paid or made adequate
provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made
relating to those returns or reports. All other fees, interest, penalties and assessments that are payable by or for Target have been timely reported, fully paid and discharged. There are no unpaid
fees, penalties, interest or assessments due from Target or from any other person that are or could become an Encumbrance on any Target Asset or could otherwise adversely affect the businesses of the
Target Asset. Target has collected or withheld all amounts that are required to be collected or withheld by them to discharge their obligations in connection with its Employee Plans, and all of those
amounts have been paid to the appropriate governmental agencies or set aside in appropriate accounts for future payment when due. 

        3.13.    Compliance with Legal Requirements; Governmental Authorizations    

        (a)   Except
as set forth in Schedule 3.13(a) and other than those Legal Requirements that are governed by Section 3.7: (i) Target is, and at all times
has been, in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets except where the
failure to be in compliance could not have a Material Adverse Effect; (ii) no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute
or result in a violation by Target of, or a failure on the part of Target to comply with, any Legal Requirement or (B) may give rise to any obligation on the part of Target to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature, except where such event or circumstance could not have a Material Adverse Effect; and (iii) Target has not received
any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding, (A) any actual, alleged or potential violation by Target of, or failure on
the part of Target to comply with, any Legal Requirement or (B) any actual, alleged or potential obligation on the part of Target to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature. 

        (b)   Schedule 3.13(b)
contains a complete and accurate list of each Governmental Authorization that is held by Target related to the Assets or that is held by a Person
other than Target that is required in connection with the present and contemplated operation of the Assets. Each Governmental Authorization listed or required to be listed in Schedule 3.13(b)
is valid and in full force and effect. Except as set forth in Schedule 3.13(b): (i) Target has been in full compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Schedule 3.13(b) except where the failure to be in compliance would not reasonably by expected to have a Material Adverse Effect;
(ii) no event has occurred or circumstance exists that may (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of Target or a failure
on the part of Target to comply with any term or requirement of any Governmental Authorization listed or required to be listed in Schedule 3.13(b) or (B) result directly or indirectly in
the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any Governmental Authorization listed or required to be listed in Schedule 3.13(b) except where
such event or circumstance could not have a Material Adverse Effect; and (iii) Target has not received any notice or other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible or potential violation by Target of or failure on the part of Target to comply with any term or requirement of any Governmental
Authorization or (B) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of or modification to any Governmental Authorization. 

28

 

        3.14.    Legal Proceedings; Orders    

        (a)   Except
as set forth in Schedule 3.14(a), there is no pending or, to Target's Knowledge, threatened Proceeding: (i) by or against Target or that otherwise
relates to or may affect the business of, or any of the assets owned or used by, Target; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or
otherwise interfering with, any of the Contemplated Transactions. There are no Proceedings listed or required to be listed in Schedule 3.14(a) that could have a Material Adverse Effect. There
is no Proceeding with respect to which the defense is not being provided by the insurer under the insurance policies referenced in Section 3.17. 

        (b)   Except
as set forth in Schedule 3.14(b), there is no Order to which Target, its business or any of the Assets is subject, and Target is and has been in compliance
with all terms and requirements of each Order to which it or any of the Assets is or has been subject. 

        3.15.    Absence of Certain Changes and Events    

        Except
as set forth in Schedule 3.15, except for the transactions and transfers contemplated or consummated under the Desert APA (including the distributions to Target and to
Target Members of
the consideration payable thereunder), since the date of the Balance Sheet, Target has conducted its business only in the Ordinary Course of Business and there has not been any: 

        (a)   Amendment
to the Governing Documents of Target; 

        (b)   Damage
to or destruction or loss of any of the Assets, whether or not covered by insurance except where such damage or destruction could not otherwise have a Material
Adverse Effect; 

        (c)   Sale
(other than sales processing, use or other disposition of Inventories and collection of Accounts Receivable in the Ordinary Course of Business, and depletion of
Concessions Inventories not in the Ordinary Course of Business), lease or other disposition of any Asset or property of Target or the creation of any Encumbrance on any Asset; 

        (d)   Cancellation
or waiver of any claims or rights with a value to Target in excess of $250,000; or 

        (e)   Material
Contract outside the Ordinary Course of Business entered into by Target or any Subsidiary; 

        (f)    Acceleration,
termination, material modification to, or cancellation of any Material Contract to which Target or Desert is a party or by which any of them is bound; 

        (g)   Encumbrance
by Target or Desert upon any of its Assets, tangible or intangible; 

        (h)   Material
capital investment in, or any material loan to, any other Person by Target or Desert; 

        (i)    Creation,
incurrence, assumption, or guarantee in aggregate indebtedness for borrowed money and capitalized lease obligations by Target or Desert; 

        (j)    Issuance,
sale, or other disposition of any of Interests, or grant of any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange,
or exercise) any of its Interests by Target or Desert; 

        (k)   Declaration,
set aside, or payment of any dividend or distribution with respect to its Interests (whether in cash or in kind) or redemption, purchase, or other
acquisition of any of its Interests by Target or Desert, except for regular, monthly distributions of cash to Target Members in the ordinary course of business and consistent with past practice; 

29

 

        (l)    Loan
to, or any other transaction with, any of Target's or Desert's members, managers, officers, and employees or Affiliates; 

        (m)  Grant
of any increase in the base compensation of any of its managers, officers, and employees outside the Ordinary Course of Business or any other material change in
employment terms for any of its managers, officers, and employees outside the Ordinary Course of Business by Target or Desert; 

        (n)   Amendment,
modification, or termination of any bonus, profit sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any other Employee Plan) by Target or Desert; and 

        (o)   Commitment
to any of the foregoing by Target or Desert. 

        3.16.    Contracts; No Defaults    

        (a)   Except
as set forth in Schedules 3.6(a), 3.12(a) and 3.16(a), Target is not party to any oral or written (i) employment, consulting or severance agreement,
collective bargaining agreement, or pension, profit-sharing, incentive compensation, deferred compensation stock purchase, stock option, stock appreciation right, group insurance, severance pay, or
retirement plan or agreement or any similar Contract, (ii) Contract, mortgage, note, installment obligation, agreement or other instrument relating to the borrowing of money by Target or the
guaranty of any obligation for the borrowing of money by Target, (iii) Contract affecting the ownership of, leasing of, title to, use of or any leasehold or other interest in any Target Lease,
(iv) Contract relating to the renovation or construction of any theatre, or Contract which involves an obligation or right to receive payment of more than $50,000, (v) any agreement
concerning a partnership or joint venture; (vi) any capitalized lease obligation; (vii) (A) any material Contract concerning confidentiality or non-solicitation of
employees or customers or (B) any Contract that restricts Target from engaging in its business or from competing with other Persons or from soliciting the customers of other Persons;
(viii) any material Contract with any of its Affiliates; (ix) any Contract under which the consequences of a default or termination could have a have a Material Adverse Effect; or
(xi) any settlement, conciliation or similar Contract (collectively, "Material Contracts"). Complete and correct copies of all Material Contracts
have been made available to Buyer by Target. All such Schedules contain an accurate and complete list of all
amendments, modifications, supplements, waivers, renewals and extensions to the Material Contracts and the Target Leases. 

        (b)   Except
as set forth in Schedule 3.16(b), (i) Target Contract is in full force and effect and is valid and enforceable in accordance with its terms against
Target except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws affecting the rights of creditors
generally and by equitable principles, and to the Knowledge of Target each other Person party thereto; and (ii) Target Contract will be enforceable by Surviving LLC after the Merger without the
consent of any other Person. 

        (c)   Except
as set forth in Schedule 3.16(c), (i) Target is, and has been, in compliance with all applicable terms and requirements of Target Contract except
where such non-compliance could not otherwise have a material Adverse Effect; (ii) to Target's Knowledge each other Person that has any Liability under any Target Contract, is, and
has been, in full compliance with all applicable terms and requirements of such Contract; (iii) no event has occurred or circumstance exists as a result of any act or omission by Target that
may give any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, any Target
Contract; (iv) no event has occurred or circumstance exists as a result of any act or omission of Target that would cause the creation of any Encumbrance affecting any of the Assets; and
(v) Target has not given to or received from any 

30

 

other
Person any notice or other communication (whether oral or written) regarding any actual, alleged or potential violation or breach of, or default under, any Target Contract. 

        (d)   Target
is not involved in any renegotiations of, attempts to renegotiate or outstanding rights to renegotiate any material amounts paid or payable to Target under Target
Contract with any Person having the contractual or statutory right to demand or require such renegotiation and no such Person has made written demand on Target for such renegotiation. 

        3.17.    Insurance    

        (a)   Schedule 3.17(a)
sets forth the following information with respect to each insurance policy (including policies providing property, casualty, liability, and
workers' compensation coverage and bond and surety arrangements) with respect to which Target or Desert is a party, a named insured, or otherwise the beneficiary of coverage (but excluding any
policies solely covering assets of Desert to be acquired by Buyer pursuant to the Desert APA): 

          (i)  the
name, address, and telephone number of the agent; 

         (ii)  the
name of the insurer, the name of the policyholder, and the name of each covered insured; 

        (iii)  the
policy number and the period of coverage; 

        (iv)  the
scope (including an indication of whether the coverage is on a claims made, occurrence, or other basis) and amount (including a description of how deductibles and
ceilings are calculated and operate) of coverage; and 

         (v)  a
description of any retroactive premium adjustments or other material loss-sharing arrangements. 

        (b)   Except
as set forth in Schedule 3.17(b): (i) all policies of insurance to which Target is a party or that provide coverage to Target (but excluding any
policies solely covering assets of Desert to be acquired by Buyer pursuant to the Desert APA): (A) are valid and outstanding; (B) taken together, provide adequate insurance coverage for
the Assets and the operations of Target for all risks normally insured against by a Person carrying on the same business or businesses as Target in the same location (ii) Target has not
received (A) any refusal of coverage or any notice that a defense will be afforded with reservation of rights or (B) any notice cancellation or any other indication that any policy of
insurance is no longer in full force or effect or that the issuer of any policy of insurance is not willing or able to perform its obligations thereunder; (iii) Target has paid all premiums
due, and has otherwise performed all of its obligations, under each policy of insurance to which it is a party or that provides coverage to Target and (iv) Target has given notice to the
insurer of all claims of which Target has Knowledge that may be insured thereby. Schedule 3.17(b) describes any self-insurance arrangements regarding Target. 

        3.18.    Environmental Matters    

        (a)   Except
as disclosed in Schedule 3.18: 

          (i)  With
respect to the operations at, on or affecting the Real Property, Target has complied and is in compliance with, all Environmental Laws. 

         (ii)  Target
has no and will not have any liability, under any Environmental Law, nor is Target responsible for any liability of any other Person under any Environmental Law,
whether by contract, by operation of law or otherwise, with respect to facts, circumstances, Releases or conditions (A) first existing, initiated or occurring during Target's tenancy at any
Real Property; (B) of which Target has Knowledge; or (C) caused by Target or Target's employees, agents, contractors, subcontractors, officers or directors
("Target Parties"). No Environmental 

31

 

Claim
is pending, or to Target's Knowledge, threatened against or relating to Target respecting any Real Property. 

        (iii)  Target
has been duly issued and currently maintains all Environmental Permits necessary to operate the assets of Target at the Real Property as currently operated. A
true and complete list of all such Environmental Permits is set out in the Schedule 3.18. All of Target's Environmental Permits are transferable and none require consent, notification, or other
action to remain in full force and effect following consummation of the transaction contemplated by this Agreement. 

        (iv)  None
of the following first became present at any Real Property during Target's ownership, operation or tenancy at any Real Property, none of the following became
present at the Real Property as a result of the actions of Target Parties, and, to Target's Knowledge, none of the following currently exist at the Real Property: (A) underground improvements,
including but not limited to treatment or storage tanks, or underground piping associated with such tanks, used currently or in the past for the management of Hazardous Materials, (B) a dump or
landfill; (C) filled in land or wetlands; (D) PCBs; (E) asbestos-containing materials; or (F) toxic mold. 

         (v)  Target
has not arranged, by contract, agreement, or otherwise, for the transportation, treatment or disposal of Hazardous Materials originating at the Real Property at
any location such that it is or could be liable for Remediation of such location pursuant to Environmental Laws. 

        (b)   Target
has furnished to Buyer or shall deliver to Buyer in accordance herewith within 10 days after execution of this Agreement, copies of all environmental
assessments, reports, audits and other documents in Target's Possession that relate to the current or past environmental condition of any Real Property or Target's past or present compliance with or
liability under Environmental Laws respecting any Real Property, a true and complete list of which is set forth in Schedule 3.18(b). To Target's Knowledge, all such information that Target has
furnished to Buyer is accurate and complete. 

        3.19.    Employees; Labor Disputes; Compliance    

        (a)   Target
has complied in all respects with all Legal Requirements relating to employment practices, terms and conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment and withholding of Taxes and occupational safety and health except where such non-compliance
could not otherwise have a Material Adverse Effect. No claim or proceeding is pending, or to Target's Knowledge, threatened with respect to any actual, alleged, or potential failure to comply with any
of the foregoing Legal Requirements. 

        (b)   Except
as disclosed in Schedule 3.19(b), (i) Target has not been, and is not now, a party to any collective bargaining agreement or other labor contract;
(ii) there has not been, there is not presently pending or existing, and to Target's Knowledge there is not threatened, any strike, slowdown, picketing, work stoppage or employee grievance
process involving Target; (iii) there is not pending or, to Target's Knowledge, threatened against or affecting Target any Proceeding relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or complaint filed with the National Labor Relations Board or any comparable Governmental Body, and there is no organizational
activity or other labor dispute against or affecting Target or its Assets (including the Real Property); (v) no application or petition for an election of or for certification of a collective
bargaining agent is pending; (vi) no grievance or arbitration Proceeding exists that might have an adverse effect upon Target or the conduct of its business; (vii) there is no lockout of
any employees by Target, and no 

32

 

such
action is contemplated by Target; and (viii) to Target's Knowledge there has been no charge of discrimination filed against or threatened against Target with the Equal Employment
Opportunity Commission or similar Governmental Body. 

        3.20.    Intellectual Property    

        (a)   Except
for the Marks and off-the-shelf computer programs, there are no other Intellectual Property Assets. 

        (b)   Subject
to the rights of use of Signature Theatres, LLC and Turlock Cinemas, LLC, Target is the sole owner of, and has the right to sell or license the Marks to Buyer,
free and clear of all Encumbrances. The Marks constitute all the trademarks and service marks owned or used by Target in connection with the operation of the Target Assets. There is no pending or to
Target's Knowledge, threatened opposition or other legal or governmental proceeding before any court or registration authority against or involving the Marks. To Target's Knowledge, Buyer's use of the
Marks in a manner consistent with Target's use prior to the Effective Date will not interfere with, infringe upon or misappropriate any intellectual property right of any third party. There are no
settlements, judgments, orders or other agreements which restrict the rights of Target, and which may restrict the rights of Buyer, to use the Marks in connection with the Target Assets. The
Contemplated Transactions will not require any Governmental Authorization or the Consent of any third party in respect of the Marks. 

        (c)   Schedule 3.20(d)
contains a complete and accurate list and summary description, and Target has delivered to Buyer accurate and complete copies, of all Contracts
relating to the Intellectual Property Assets. There are no outstanding or, to Target's Knowledge, threatened disputes or disagreements with respect to any such Contract. 

        3.21.    Notes and Accounts Receivable    

        All
notes and accounts receivable of Target and Desert are reflected properly on their books and records, are valid receivables subject to no setoffs or counterclaims except as reflected
or disclosed in the Balance Sheet or the notes thereto, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the Balance Sheet (rather than in any notes thereto) as adjusted for operations and transactions through the Closing Date. 

        3.22.    Powers of Attorney    

        There
are no outstanding powers of attorney granted by Target in favor of any third-party attorney-in-fact, except as shall have been terminated or revoked by
Target prior to the Closing. 

        3.23.    Brokers or Finders    

        Neither
Target nor any of its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar
payments in connection with the sale of Target's business or Assets or the Contemplated Transactions. 

        3.24.    Transactions with Affiliates    

        Except
as set forth on Schedule 3.24, as of the Closing Date, no current or former manager, director, executive officer or member of Target or any Affiliate of Target will be
party to any Material Contract or Target Lease or, to Target's Knowledge, has a material interest in any Material Contract or Target Lease. 

        3.25.    Representations and Warranties    

        Other
than with respect to the representations and warranties made in Article 4 of this Agreement and the ancillary agreements and certificates hereto (and subject to the
limitations contained in and 

33

 

provisions
of this Agreement), Target acknowledges that neither Buyer nor any of its Affiliates or Representatives makes or has made any representation or warranty, either express or implied,
including as to the accuracy or completeness of or will have any Liability with respect to any of the information provided or made available to Target or their Representatives. 

4.     REPRESENTATIONS AND WARRANTIES OF BUYER  

        Buyer represents and warrants to Target that the following statements contained in this Article 4 are accurate as of the date of this Agreement: 

        4.1.    Organization and Good Standing    

        Buyer
is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with full corporate power and authority to conduct its business as
it is now conducted. 

        4.2.    Authority; No Conflict    

        This
Agreement constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws affecting the rights of creditors generally and by equitable principles. Upon the execution and
delivery by Buyer of this Agreement, the Holdback Escrow Agreement and each other agreement to be executed or delivered by Buyer at Closing (collectively, the "Buyer's Closing
Documents"), each of the Buyer's Closing Documents will constitute the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its respective
terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws affecting the rights of creditors
generally and by equitable principles. Buyer has the power and authority to execute and deliver this Agreement and the Buyer's Closing Documents and to perform its obligations under this Agreement and
the Buyer's Closing Documents, and such action has been duly authorized by all necessary corporate action. 

        4.3.    Brokers or Finders    

        Neither
Buyer nor any of its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar
payment in connection with the Contemplated Transactions. 

34

   
        4.4.    Representations and Warranties    

        (a)   Other
than with respect to the representations and warranties made in Article 3 of this Agreement as modified by the Disclosure Schedule and the ancillary
agreements and certificates hereto (and subject to the limitations contained in and provisions of this Agreement), Buyer acknowledges that none of Target or any of its Affiliates or Representatives
makes or has made any representation or warranty, either express or implied, including as to the accuracy or completeness of or will have any Liability with respect to any of the information provided
or made available to Buyer or its Representatives. 

        (b)   Buyer
further acknowledges that any projections, pro formas and forecasts provided by Target to Buyer and prepared in good faith and based on reasonable assumptions for
Target's operations and business practices are not to be viewed as facts or representations or warranties by Target, and that actual results of operations during the periods covered by such forecasts,
pro formas and projections (whether conducted by Target or by Buyer) may differ from the projected or forecasted results; and no such differences shall constitute a breach by any Target of a
representation or warranty. 

5.     COVENANTS OF TARGET PRIOR TO CLOSING  

        5.1.    Access and Investigation    

        (a)   Between
the date of this Agreement and the Closing Date, and upon reasonable advance notice received from Buyer, Target shall (a) afford Buyer and its
Representatives (collectively, "Buyer Group") reasonable access, during regular business hours, to Target's personnel, properties, Contracts,
Governmental Authorizations, books and Records and other documents and data, such rights of access to be exercised in a manner that does not unreasonably interfere with the operations of Target;
(ii) permit Buyer Group to make copies at Buyer's sole expense of all such Contracts, Governmental Authorizations, books and Records and other existing documents and data as Buyer may
reasonably request; (ii) furnish Buyer Group with such additional financial, operating and other data and information relating to the Assets as Buyer may reasonably request; and
(iv) otherwise cooperate and assist, to the extent reasonably requested by Buyer, with Buyer's investigation of the properties, assets and financial condition related to Target. 

        (b)   In
addition, Buyer shall have the right to have the Real Property, and Tangible Personal Property inspected by Buyer Group, at Buyer's sole cost and expense, for
purposes of determining the physical condition and legal characteristics of the Real Property and Tangible Personal Property, including such engineering, seismic, asbestos, environmental and mold
surveys and inspections as Buyer deems appropriate. Any such inspection shall be scheduled upon reasonable advance notice to Target and conducted as described in clause (i) above and, if
applicable, as hereinafter provided. In the event subsurface testing, any testing involving the taking of samples or other physically destructive or invasive testing is recommended by any of Buyer
Group, no such testing shall be performed without the prior consent of Target (which shall not be unreasonably withheld) and, if required under the Target Lease, the lessor or sublessor thereunder.
Subject to applicable Legal Requirements, upon the completion of any inspection or test, Buyer shall reasonably restore the Real Property to its condition prior to such inspection or test. Buyer shall
indemnify Target and hold harmless Target and will reimburse Target for Damages to the extent caused by Buyer in connection with its physical inspection of the Real Property conducted pursuant to this
Section 5.1(b); except that in no event shall Buyer be deemed to have caused Damages as a result of Buyer's discovery of any adverse condition. 

35

 

        5.2.    Operation of the Business of Target    

        Between
the date of this Agreement and the Closing, except for the transactions and transfers contemplated or consummated under the Desert APA (including the distributions to Target and
to Target Members of the consideration payable thereunder), each of Target and Desert shall: 

        (a)   conduct
its business only in the Ordinary Course of Business (provided that Target may deplete its Concessions Inventories in anticipation of the Closing, if Target so
chooses); 

        (b)   without
making any commitment on Buyer's behalf, use its Reasonable Best Efforts to preserve intact its current business organization, keep available the services of its
officers, managers, employees and agents and maintain its relations and good will with customers, landlords, creditors, employees, agents and others having business relationships with it; 

        (c)   provide
copies of theatre renovation or construction plans related to the Real Property and any material changes to such plans; 

        (d)   make
no material changes in management personnel; 

        (e)   maintain
the Assets in a state of repair and condition that complies with Legal Requirements and is consistent with the requirements and normal conduct of Target's
business; 

        (f)    keep
in full force and effect, without amendment, all material rights relating to Target's business; 

        (g)   comply
with all Legal Requirements and contractual obligations applicable to the operations of Target's business; 

        (h)   continue
in full force and effect the insurance coverage under its policies or substantially equivalent policies; 

        (i)    cooperate
with Buyer and assist Buyer in identifying the Governmental Authorizations required by Buyer to operate the business from and after the Closing Date and either
transferring existing Governmental Authorizations of Target to Surviving LLC, where permissible, or obtaining new Governmental Authorizations for Surviving LLC; 

        (j)    not
declare, set aside or pay any dividend, distribution or other amount with respect to its and Desert's Interest, except for such monthly distributions as are made in
the Ordinary Course of Business, or redeem, purchase or otherwise acquire any of its or Desert's Interest or amend its Governing Documents; and 

        (k)   maintain
all books and Records of Target and Desert relating to Target's and Desert's business in the Ordinary Course of Business. 

        5.3.    Negative Covenant    

        Except
as otherwise expressly permitted herein, between the date of this Agreement and the Closing Date, Target shall not, (a) take any affirmative action, or fail to take any
reasonable action within its control, as a result of which any of the changes or events listed in Section 3.11 and Section 3.15 would occur or reasonably be expected to occur;
(b) terminate, cancel, amend, modify, supplement or waive performance of any Contract, Target Lease or Governmental Authorization or take any other action with respect to any of the foregoing
in a manner that is not in the Ordinary Course of Business or amend any theatre construction or renovation plans without the prior consent of Buyer, which consent shall not be unreasonably withheld or
enter into any construction contracts other than with respect to the projects that are the subject of the Development Agreements and upon the prior consent of Buyer, which consent shall not be
unreasonably withheld; (c) allow the levels of supplies or other materials included in the Inventories to vary materially from the levels customarily maintained except as permitted by the
Concessions Letter Agreement; or (d) enter into any 

36

 

compromise
or settlement of any litigation, proceeding or governmental investigation relating to the Assets or the business of Target. 

        5.4.    Required Approvals    

        As
promptly as practicable after the date of this Agreement, Target shall make all filings required to be made by them to obtain Governmental Authorizations or pursuant to Legal
Requirements in order to consummate the Contemplated Transactions. Target and Desert also shall cooperate with Buyer and its Representatives with respect to all filings that Buyer elects to make or,
pursuant to Legal Requirements or to obtain a Governmental Authorization, shall be required to make in connection with the Contemplated Transactions. Target also shall cooperate with Buyer and its
Representatives in obtaining all Consents; provided, however, that Target shall not be required to dispose of or make any change to its business, expend any material funds or incur any other burden in
order to comply with this Section 5.4. 

        5.5.    Notification    

        Between
the date of this Agreement and the Closing, Target shall promptly notify Buyer in writing if it becomes aware of (a) any fact or condition that causes or constitutes a
breach of its representations and warranties made as of the date of this Agreement or (b) the occurrence after the date of this Agreement of any fact or condition that would or be reasonably
likely to (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had that representation or warranty been made as of the time of the
occurrence of, or Target's discovery of, such fact or condition. Should any such fact or condition require any change to the Disclosure Schedule, Target shall promptly deliver to Buyer a supplement to
the Disclosure Schedule specifying such change. Such delivery shall not be deemed to amend or supplement Target's Disclosure Schedule or prevent or cure any breach or affect any rights of Buyer under
Article 7, Article 9 and Article 11. During the same period, Target also shall promptly notify Buyer of the occurrence of any
breach of any covenant of Target in this Article 5 or of the occurrence of any event that may make the satisfaction of the conditions in Article 7 impossible or unlikely. 

        5.6.    Reasonable Best Efforts    

        Target
shall use its Reasonable Best Efforts to cause the conditions in Article 7 to be satisfied by the Scheduled Closing Date. 

        5.7.    Interim Financial Statements    

        Until
the Closing Date, Target shall deliver to Buyer within ten days after the end of each month and within 45 days after the end of each fiscal quarter a copy of the financial
statements for such month and fiscal quarter, respectively. Such financial statements and the deliveries under Section 2.8 shall be prepared in a manner and containing information consistent
with and certified by Target's chief financial officer as to compliance of such financial statements with the third, fourth and fifth sentences of Section 3.4. 

        5.8.    Payment of Liabilities    

        Between
the date hereof and the Effective Time, Target shall pay or otherwise satisfy in the Ordinary Course of Business all of its Liabilities and obligations which become due and
payable. 

        5.9.    Current Evidence of Title    

        (a)   As
soon as is reasonably possible, the parties shall cause to be furnished to Buyer, at Target's expense, preliminary title reports issued by the Title Company for each
of the leasehold estates under the Target Leases, together with complete and legible copies of all recorded documents appearing as exceptions thereon (the "Title
Documents"). As soon as reasonably possible, Target shall cause to be furnished to Buyer, at Target's expense, (i) true and complete 

37

 

copies
of all policies of title insurance previously obtained by Target with respect to the Target Leases, the Real Property or any portion thereof, which are in Target's Possession, and
(ii) true and complete copies of all boundary, land or ALTA surveys, if any, of the Real Property or any portion thereof, in Target's Possession. 

        (A)  Buyer
shall have the right, but not the obligation, at Buyer's sole cost and expense, to cause to be furnished to the Title Company a current survey of all or any
portion of the Real Property or a current update of a pre-existing survey. 

        (B)  On
or before the Due Diligence Deadline, Buyer shall deliver to Target written notice setting forth its objections, if any, to the exceptions to title reflected therein
or in the updated surveys (the "Disapproved Exceptions"). At or prior to Closing, Target shall cause the removal of all voluntary monetary liens, all
involuntary monetary liens which exist to Target's Knowledge as of the date hereof and all other involuntary monetary liens having a face amount of less than $1,000,000 individually, provided that
Target shall only be obligated to discharge such voluntary and involuntary liens to the extent attributable to an act or omission of Target or persons claiming under or through Target (as distinct
from Target's lessor or master lessor, as applicable), and provided further that Target shall not be obligated to discharge the liens of real property taxes and assessments that are not yet
delinquent, such taxes being prorated pursuant to this Agreement. Target shall make Reasonable Best Efforts to remove all other Disapproved Exceptions that are reasonably disapproved by Buyer, but
Target shall not be required to incur any substantial costs or to institute litigation in connection therewith. Such removal may be by way of deletion of the exception or by endorsement over the
exception by the Title Company (and may be accomplished by Target by bonding) in form and substance satisfactory to Buyer. If any new exception shall appear in any supplement to the Title Documents
and if such new exception existed prior to the date hereof but was not disclosed in the Title Documents, then Buyer shall have the right to object in writing to such exception within five
(5) Business Days after Buyer's receipt of such supplement, and such exception shall thereafter be a Disapproved Exception. If such new exception did not exist prior to the date hereof, then
Target shall promptly (but not later than Closing) remove such exception to Buyer's satisfaction subject to the limitations set forth above on Target's removal obligations respecting involuntary
monetary liens, and provided Target shall have no obligation to remove new exceptions caused by the acts or omissions of Buyer or its Representatives. If Target fail to cause the removal of any
exception which Target is obligated by this paragraph to remove, then Buyer's election to close shall not constitute a waiver of Buyer's rights hereunder, which shall survive Closing. 

        (C)  As
contemplated by Section 7.7, it shall be a condition to Buyer's obligation to close that Title Company be unconditionally committed at Closing, subject only to
the payment of the applicable premium, to issue policies of title insurance (the "Title Policies") with respect to Target Leases in amounts reasonably
acceptable to Buyer and the Title Company (but in no event shall the aggregate amount exceed the Merger Consideration), naming Buyer as insured and, if requested, Buyer's lender as insured, and
containing no exceptions other than those which Buyer has approved in writing pursuant to Section 5.9(a). The Title Policies for the Target Leases naming Surviving LLC as insured shall be the
ALTA Extended Coverage Leasehold Owner's Policy of Title Insurance—1970 Form and the Title Policies for the Target Leases naming Surviving LLC's lender as insured shall be the ALTA
Extended Coverage Leasehold Lender's Policy of Title Insurance—1970 Form, if and so long as Buyer obtains Title Company's written commitment prior to the Due Diligence Deadline to issue
such forms, otherwise Buyer shall accept the corresponding current ALTA form policies. If coverage equivalent to new Title Policies can be obtained with endorsements to the existing Title 

38

 

Policies,
if any, previously issued to Target respecting the Target Leases, the term Title Policies shall be deemed to be a reference to such endorsement. 

        (b)   Buyer
shall have the right, but not the obligation, to conduct complete and current searches, at Buyer's sole cost and expense, in the name of Target and other
appropriate parties of all Uniform Commercial Code Financing Statements records maintained by the Secretary of State of the state in which Target is organized, the state in which Target maintains its
principal place of business, each jurisdiction in which a filing would be required in order to perfect a security interest in the Assets, the clerk or recorder of deeds (or other governmental office
where real property documents are filed for recording) of each county in which any Target Lease is located and wherever else Target or Buyer, based upon its investigation, is aware that a Uniform
Commercial Code Financing Statement has been filed. Prior to Closing, Target shall deliver to Buyer releases, termination statements and other documents as may be necessary to provide reasonable
evidence that all items of intangible personal property, Tangible Personal Property and fixtures comprising a part of the Assets are free and clear of Encumbrances, other than as permitted under this
Agreement. 

        (c)   On
or before the Due Diligence Deadline, Buyer shall deliver to Target a written notice setting forth its objections, if any, to the physical condition of the Real
Property. Target shall use Reasonable Best Efforts to cure each such objection to Buyer's reasonable satisfaction on or before the Closing Deadline; provided however, that Target shall not be required
to spend more than $25,000 to cure any individual objection, or $500,000 in the aggregate to cure all such objections. 

        (d)   Nothing
herein waives Buyer's right to claim a right to indemnification as provided in Section 11.2 if Buyer suffers Damages as a result of any breach by Target
of any express representation by Target set forth in this Agreement with respect to the condition of title to the Real Property. 

        5.10.    Tax Matters    

        Without
the prior written consent of Buyer, neither Target nor Desert shall make or change any election, change an annual accounting period, adopt or change any accounting method, file
any amended Tax Return, enter into any closing agreement, settle any Tax claim or assessment relating to Target or Desert, surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment relating to Target or Desert, or take any other similar action relating to the filing of any Tax Return or the payment of any
Tax, if such election, adoption, change, amendment, agreement, settlement, surrender, consent or other action would have the effect of increasing the Tax liability of Target or Desert or Surviving LLC
for any period ending after the Closing Date or decreasing any Tax attribute of Target or any Subsidiary existing on the Closing Date. 

        5.11.    Affiliate Guarantors    

        Buyer
and Target shall use their Reasonable Best Efforts to assist the Affiliate Guarantors in securing the release of the Affiliate Guarantors from their respective obligations under
the affiliate guarantees of the Target Leases set forth in Schedule 5.11 ("Affiliate Guarantees"). Such Reasonable Best Efforts of Buyer shall
include Buyer's offer to provide a lease guaranty on terms substantially equivalent to the Affiliate Guarantee. In the event that such an Affiliate Guarantee is not released, then Buyer shall
indemnify the corresponding Affiliate Guarantor for Damages incurred by such Affiliate that constitute an Assumed Liability to the extent incurred with respect to the related Affiliate Guarantee in
the same manner that Buyer indemnifies Target for Assumed Liabilities pursuant to Article 11. Only for the purposes of the foregoing indemnity as between Buyer and an Affiliate Guarantor,
(a) a Predecessor Tenant shall be considered an Affiliate Guarantor and (b) the applicable 

39

 

Affiliate
Guarantor shall have the same rights and procedural obligations as those of a Target under Article 11. 

        5.12.    Desert    

        In
the event that Buyer acquires the assets of Desert pursuant to the Desert APA, it is understood and agreed that as of the effective time of such asset purchase, Target shall not cause
Desert to enter into any contracts or agreements or take any actions other than to comply with Legal Requirements. 

6.     COVENANTS OF BUYER PRIOR TO CLOSING  

        6.1.    Required Approvals    

        As
promptly as practicable after the date of this Agreement, Buyer shall make, or cause to be made, all filings required by Legal Requirements to be made by it to consummate the
Contemplated Transactions. Buyer also shall cooperate, and cause its Representatives and Affiliates to cooperate, with Target (a) with respect to all filings Target shall be required by Legal
Requirements to make and (b) in obtaining all Consents identified in Schedule 3.2(c), provided, however, that Buyer shall not be required to dispose of or make any change to its
business, expend any material funds or incur any other burden in order to comply with this Section 6.1. 

        6.2.    Reasonable Best Efforts    

        Buyer
shall use its Reasonable Best Efforts to cause the conditions in Article 8 to be satisfied by the Scheduled Closing Date. 

        6.3.    Notification    

        Between
the date of this Agreement and the Closing, Buyer shall promptly notify Target in writing if it becomes aware of (a) any fact or condition that causes or constitutes a
breach of its representations and warranties made as of the date of this Agreement or (b) the occurrence after the date of this Agreement of any fact or condition that would or be reasonably
likely to (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had that representation or warranty been made as of the time of the
occurrence of, or Buyer's discovery of, such fact or condition. Should any such fact or condition require any change to the Disclosure Schedule, Buyer
shall promptly deliver to Target a supplement to the Disclosure Schedule specifying such change. Such delivery shall not be deemed to amend or supplement the Disclosure Schedule or prevent or cure any
breach or affect any rights of Target under Article 8, Article 9 and Article 11. During the same period, Buyer also shall promptly notify Target of the occurrence of any breach of
any covenant of Buyer in this Article 6 or of the occurrence of any event that may make the satisfaction of the conditions in Article 8 impossible or unlikely. 

7.     CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE  

        Buyer's and Merger Subsidiary's obligations to effect the Merger and to take the other actions required to be taken by them at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part): 

        7.1.    Accuracy of Representations    

        Target's
representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), shall have been accurate
in all material respects as of the date of this Agreement, and shall be accurate in all material respects as of the time of the Closing as if then made except to the extent that such representations
and warranties are qualified by the term "material," "Material Adverse Effect" or similar qualification in which case such representations and warranties (as so written, including the term "material",
"Material Adverse Effect" 

40

 

or
such similar qualification) shall be true and correct in all respects at and as of the date of this Agreement and the Closing Date, in all cases without giving effect to any supplement to the
Disclosure Schedule. If Damages for a breach or breaches of such representations and warranties exceed $167,786 individually or in the aggregate, such breach or breaches shall be deemed to be a
failure of the condition precedent set forth in this Section 7.1. 

        7.2.    Target's Performance    

        All
of the covenants and obligations that Target is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), shall have been duly performed and complied with in all material respects. 

        7.3.    Consents    

        Each
of the Consents set forth on Schedule 3.2(c) and required to be obtained in connection with the Contemplated Transactions shall have been obtained and shall be in full force
and effect. 

        7.4.    Additional Documents    

        Target
shall have caused the documents and instruments required by Section 2.2(a) and the following documents to be delivered (or tendered subject only to Closing) to Buyer: 

        (a)   an
opinion of counsel of Target, dated the Closing Date, the substance of which is set forth in Exhibit 7.4(a); 

        (b)   releases
of all Encumbrances on the Purchased Assets (other than the Target Leases), other than Permitted Non-Real Property Encumbrances; 

        (c)   evidence
of termination of any management agreements between Target or Desert and Signature Theatres Management, LLC; 

        (d)   certificates
dated as of a date not earlier than the third Business Day prior to the Closing as to the good standing of Target and payment of all applicable Taxes by
Target, executed by the appropriate officials of the State of Delaware and California and each jurisdiction in which Target is licensed or qualified to do business as a foreign corporation as
specified in Schedule 3.1(a); and 

        (e)   such
other documents as Buyer may reasonably request for the purpose of: 

          (i)  evidencing
the accuracy of Target's representations and warranties; 

         (ii)  evidencing
the performance by Target or the compliance by Target, with any covenant or obligation required to be performed or complied with by Target; 

        (iii)  evidencing
the satisfaction of any condition referred to in this Article 7; or 

        (iv)  otherwise
facilitating the consummation or performance of any of the Contemplated Transactions. 

        7.5.    No Injunction    

        There
shall not be in effect any Legal Requirement or injunction or other Order that (a) prohibits the consummation of the Contemplated Transaction, (b) has been adopted as
issued, or has otherwise become effective since the date of this Agreement, (c) cause any of the Contemplated Transactions to be rescinded following consummation, (d) adversely affect
the right of Buyer to own Surviving LLC Interests and to control Surviving LLC, Target and Desert, or (e) materially and adversely affect the right of Buyer or Desert to own Target and its
Assets and to operate their business (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect). 

41

 

        7.6.    No Conflict    

        Neither
the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), contravene or conflict with
or result in a violation of or cause Buyer or any Affiliate of Buyer (including Surviving LLC or Merger Subsidiary) to suffer any adverse consequence under (a) any applicable Legal Requirement
or Order or (b) any Legal Requirement or Order that has been published by any Governmental Body. 

        7.7.    Title Insurance    

        Buyer
shall have received irrevocable and binding commitments to issue the Title Policies consistent with Section 5.9, if any, between Closing and recordation. Target shall
furnish to the Title Company a standard gap indemnity in form sufficient to allow the Title Company to issue the Title Policies without any exception for matters arising due to acts or omissions of
Target (as distinct from any acts or omissions of Target's lessor or master lessor, as applicable) and otherwise in a form reasonably acceptable to Target. 

        7.8.    Governmental Authorizations    

        Buyer
shall have received such Governmental Authorizations as are necessary or desirable to allow Buyer and Surviving LLC to operate the Assets from and after the Closing. 

        7.9.    Environmental Report; Physical Inspection    

        Buyer
shall have obtained on or before the Due Diligence Deadline, at Buyer's sole cost and expense, environmental site assessment reports and physical inspection and structural
engineering reports with respect to the Real Property, which reports shall be acceptable in form and substance to Buyer in its sole discretion and Buyer shall have conducted, at Buyer's sole cost and
expense, any further testing or diligence recommended in such reports. If Buyer disapproves the results of any such inspections and investigations, then, in addition to the rights specified in
Section 9.1, Buyer shall have the right to terminate this Agreement by written notice delivered to Target before the Due Diligence Deadline. If Buyer fails so to terminate this Agreement on or
before the Due Diligence Deadline, then the condition precedent in this Section 7.9 shall be deemed waived by Buyer. 

        7.10.    Target Lease Estoppels    

        Target
shall have delivered to Buyer pursuant to Section 2.12 hereof, on or prior to the Due Diligence Deadline, a Lessor Consent and Estoppel duly executed and delivered by each
lessor and master lessor under each of the Target Leases, in form and substance satisfactory to Buyer. 

        7.11.    REA and DDA Estoppels    

        Target
shall have delivered to Buyer pursuant to Section 2.8 hereof on or before the Due Diligence Deadline estoppels duly executed and delivered by each of the other parties to
the REAs, in form and substance reasonably satisfactory to Buyer. Target shall have delivered to Buyer pursuant to Section 2.8 hereof, consents from each of the agencies to the DDAs, in form
and substance reasonably satisfactory to Buyer. 

        7.12.    SNDAs    

        Target
shall have delivered to Buyer pursuant to Section 2.9 hereof on or before the Due Diligence Deadline original non-disturbance agreements duly executed,
acknowledged and delivered by each of the parties described therein, in recordable form and otherwise in form and substance satisfactory to Buyer. 

42

 

        7.13.    Memoranda of Lease    

        Target
shall have delivered to Buyer pursuant to Section 2.10 hereof, on or prior to the Due Diligence Deadline, original memoranda of lease duly executed, acknowledged and
delivered by the lessors under the Target Leases, in recordable form and otherwise in form and substance satisfactory to Buyer. 

        7.14.    Asset Purchase Agreement    

        The
transactions contemplated by the Desert APA shall have been consummated. 

        7.15.    Resignations    

        Buyer
shall have received the resignations, effective as of the Closing, of each manager, director and officer of Target and Desert. 

        7.16.    Target Real Property    

        No
damage or destruction or other change has occurred with respect to any of the Real Property or any portion thereof that, individually or in the aggregate, would materially impair the
use or occupancy of the Real Property or the operation of the business of Target and Desert. 

8.     CONDITIONS PRECEDENT TO TARGET'S OBLIGATION TO CLOSE  

        Target's obligation to effect the Contemplated Transactions and to take the other actions required to be taken by it at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by the Target in whole or in part): 

        8.1.    Accuracy of Representations    

        All
of Buyer's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement and shall be accurate in all material respects as of the time of the Closing as if then made except to the extent that such
representations and warranties are qualified by the term "material" or similar qualification in which case such representations and
warranties (as so written, including the term "material" or such similar qualification) shall be true and correct in all respects at and as of the date of this Agreement and the Closing Date. 

        8.2.    Buyer's Performance    

        All
of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), shall have been performed and complied with in all material respects. Without limiting the generality of the foregoing, Buyer shall have
tendered payment of the Merger Consideration in the manner required under this Agreement 

        8.3.    Additional Documents    

        (a)   Buyer
shall have caused the documents and instruments required by Section 2.2(b) and the following documents to be delivered (or tendered subject only to Closing)
to Target Representative such other documents as Target may reasonably request for the purpose of: 

          (i)  evidencing
the accuracy of any representation or warranty of Buyer, 

         (ii)  evidencing
the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer, or 

        (iii)  evidencing
the satisfaction of any condition referred to in this Article 8; or 

43

 

        (iv)  otherwise
facilitating the consummation or performance of the Contemplated Transactions. 

        (b)   Buyer
shall have caused to be delivered to the Target Representative, an opinion of Buyer's counsel, dated the Closing Date, the substance of which is set forth in
Exhibit 8.3(b). 

        8.4.    No Injunction    

        There
shall not be in effect any Legal Requirement or any injunction or other Order that (a) prohibits the consummation of the Contemplated Transactions and (b) has been
adopted or issued, or has otherwise become effective, since the date of this Agreement. 

        8.5.    Asset Purchase Agreement    

        The
transactions contemplated by the Desert APA shall have been consummated. 

9.     TERMINATION  

        9.1.    Termination Events    

        By
notice given prior to or at the Closing, subject to Section 9.2, this Agreement may be terminated as follows: 

        (a)   by
Buyer if a material breach of any provision of this Agreement has been committed by Target and such breach has not been waived by Buyer or cured within 10 days
by Target after written notice from Buyer thereof; 

        (b)   by
Target if a material breach of any provision of this Agreement has been committed by Buyer and such breach has not been waived by Target or cured within
10 days by Buyer after written notice from Target of the breach; 

        (c)   by
either Buyer or Target if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before the Closing Deadline; or 

        (d)   by
mutual consent of Buyer and Target, at any time. 

44

   
        9.2.    Effect of Termination    

        (a)   Each
party's right of termination under Section 9.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of such
right of termination will not be an election of remedies. Notwithstanding the foregoing, if this Agreement is terminated pursuant to Section 9.1 by any party, such termination shall be without
liability for Damages to the other parties to this Agreement, and all obligations of all of the parties under this Agreement will terminate, except that the obligations of the parties in the last
sentence of Section 5.1(b), this Section 9.2 and Article 12 (except for those in Section 12.5) will survive; provided,  however, that,
if this Agreement is terminated pursuant to Section 9.1(a) or 9.1(b) and the breach resulted from the willful and deliberate
failure of any party to fulfill a condition to the performance of the other party, or the willful and deliberate failure to perform a covenant of this Agreement, or the willful and deliberate breach
of a representation or warranty contained in this Agreement, then the terminating party's (and non-terminating party's) right to pursue legal remedies will survive such termination
unimpaired. 

        (b)   Target
and Buyer acknowledge that the agreements contained in Section 9.2(a) are an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Target and Buyer would not enter into this Agreement; accordingly, if any party initiates litigation to recover Damages from the other pursuant to the proviso of
Section 9.2(a), then the prevailing party shall be entitled to its costs and expenses (including reasonable attorneys' fees) in connection with such suit, together with interest from the date
of termination of this Agreement on the amounts owed at the "prime" rate of interest as published from time to time by The Wall Street Journal in its "Money Rates" section of its Western Edition
newspaper in effect from time to time during such period plus two percent. 

10.   ADDITIONAL COVENANTS  

        10.1.    Assistance in Proceedings    

        Target
Representative will reasonably cooperate with Buyer and its counsel in the contest or defense of, and make available its personnel and provide any testimony and access to its
books and Records in connection with, any Proceeding against Buyer after the Closing Date involving or relating to (a) any Contemplated Transaction or (b) any action, activity,
circumstance, condition, conduct, event, fact,
failure to act, incident, occurrence, plan, practice, situation, status or transaction on or before the Closing Date involving Target or its business. 

        10.2.    Retention of and Access to Records    

        After
the Closing Date, Buyer shall retain for a period consistent with Buyer's record-retention policies and practices (but no less than seven (7) years) those Records of Target
delivered to Buyer. Buyer also shall provide the Target Representative and its Representatives reasonable access thereto, during normal business hours and on at least ten (10) days' prior
written notice, to enable them to prepare financial statements or tax returns or deal with tax audits. 

        10.3.    Final Tax Return; Audits    

        Target
Representative shall have the sole right to prepare and file all final information and tax returns for Target and Desert for periods ending on the Closing Date, and in connection
therewith, Buyer shall make available to Target Representative and its Representatives all financial and other information and records necessary to permit Tax Representative to prepare and file such
returns. In the event any Governmental Body initiates an audit of any taxable period of Target (or any portion thereof) ending on or before the Closing Date, Target Representative shall have the sole
authority to handle such audit on behalf of Target and Surviving LLC, except to the extent that such audit involves any tax liability or tax adjustments for periods after the Closing Date, in which
case Target 

45

 

Representative
and Buyer shall cooperate with each other in good faith to resolve any such overlapping audit. 

        10.4.    Further Assurances    

        Subject
to the provisos in Sections 5.1 and 6.1, the parties and Target Representative shall cooperate reasonably with each other and their respective Representatives in connection with
any steps required to be taken as part of their respective obligations under this Agreement, and shall (a) furnish upon request to each other such further information; (b) execute and
deliver to each other such other documents; and (c) do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and
the Contemplated Transactions. 

11.   INDEMNIFICATION; REMEDIES  

        11.1.    Survival and Materiality    

        (a)   All
representations, warranties, covenants and obligations in this Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule, the certificates
delivered pursuant to Section 2.2 and any other certificate or document delivered pursuant to this Agreement shall survive the Closing and the consummation of the Contemplated Transactions,
subject to Section 11.6. 

          (i)  Notwithstanding
the foregoing, in the event that there is or are any breach or breaches of the representations and warranties of Target that become known to Buyer prior
to Closing based upon supplements to the Disclosure Schedules or through Buyer's exercise of its rights under Section 5.1 ("Known Breaches") and
(A) the Damages related to such Known Breaches are less than or equal to $167,786, then Buyer may elect to proceed to Closing and the amount by which the Damages related to such Known Breaches
are less than or equal to $167,786 shall be applied against the Basket, or (B) if the Damages related to such Known Breaches exceed $167,786 and Buyer elects to proceed to Closing, then
(x) Buyer shall have waived any claim for indemnification based upon the Known Breaches to the extent that the Damages therefor exceed $167,786 and (y) such claims and Damages up to
$167,786 shall be satisfied in full by application against the Basket so that the amount remaining in the Basket is $0. Notices of any such claims by Buyer and disputes over the alleged amount of
Damages shall be handled as provided in the following paragraph. 

         (ii)  Prior
to Closing, Buyer shall deliver to Target a notice setting forth the Known Breaches, together with such supplemental information as shall be reasonably necessary
or appropriate to enable Target to determine the accuracy thereof ("Breach Notice"). The Breach Notice shall be based upon the most current and reliable
information reasonably available to Buyer at the time of its delivery. Within 2 Business Days after receipt of the Breach Notice, Target shall notify the Buyer in writing whether Target disapproves of
the Breach Notice. If Target disputes the Breach Notice, or fails to notify Buyer of its disapproval in the manner and within the time specified above, then the Breach Notice shall be as delivered to
Target. If Target disapproves a Breach Notice, then Target and Buyer shall use their Reasonable Best Efforts for a period of 5 Business Days to agree to the Breach Notice, and the Breach Notice shall
be amended accordingly. If Target and Buyer cannot agree upon the Breach Notice, then the accounting firm of PricewaterhouseCoopers, or its successor, is designated to act as sole arbitrator and to
decide all points of disagreement with respect to the Breach Notice, such decision to be binding on both parties. If such firm is unwilling or unable to serve in such capacity, Target and Buyer shall
use Reasonable Best Efforts to designate and retain another mutually acceptable nationally-recognized accounting firm not retained for general audit purposes by either of them as the sole arbitrator
under this 

46

 

Section 11.1(a)(ii).
The costs and expenses of the arbitrator, whether the firm designated above, or otherwise designated, shall be shared equally by Target and Buyer. 

        (b)   For
purposes of determining whether there has been any such misrepresentation or breach of warranty pursuant to this Article 11 and for purposes of calculating
the amount of Damages arising therefrom, the representations and warranties of Target and Buyer shall be deemed not to be qualified by any concept of "material", "Material Adverse Effect" or similar
qualification. 

        11.2.    Indemnification and Reimbursement By Target and Subsidiaries    

        Target
shall indemnify and hold harmless Buyer and Surviving LLC, and its Representatives and Affiliates (collectively, the "Buyer Indemnified
Persons"), and will reimburse the Buyer Indemnified Persons for any loss, liability, claim, damage, expense (including costs of investigation and defense and reasonable
attorneys' fees and expenses) or diminution of value, whether or not involving a Third-Party Claim (but excluding any Damages not involving a Third Party Claim based on lost profits, consequential or
punitive damages)(collectively, "Damages"), arising from or in connection with: 

        (a)   any
breach of any representation or warranty made by Target in (i) Article 3 of this Agreement (without giving effect to any supplement to the Disclosure
Schedule), (ii) the Disclosure Schedule, (iii) the supplements to the Disclosure Schedule, (iv) the certificates delivered pursuant to Section 2.2 or (v) any
transfer instrument; 

        (b)   any
breach of any covenant or obligation of Target in (i) this Agreement, (ii) the certificates delivered pursuant to Section 2.2, or
(iii) any transfer instrument; 

        (c)   any
claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding made, or alleged to have been made,
by any Person with Target (or any Person acting on its behalf) in connection with any of the Contemplated Transactions; 

        (d)   any
Liability that arises after the Effective Time but that arises out of or relates to any breach that occurred prior to the Effective Time; 

        (e)   any
Liability for Taxes, including (A) any Taxes arising as a result of Target's operation of its business or ownership of the Assets prior to the Effective Time,
(B) any Taxes that will arise as a result of the Merger pursuant to this Agreement, or (C) any deferred Taxes of any nature; 

        (f)    (i) any
Liability under the Employee Plans or (ii) relating to payroll, vacation, sick leave, workers' compensation, unemployment benefits, pension
benefits, employee stock option or profit-sharing plans, health care plans or benefits, COBRA, or any other employee plans or benefits of any kind for Target's or Deserts' employees or former
employees or both arising out of or relating to any facts, circumstances or conditions existing, initiated or occurring on or prior to the Effective Time; 

        (g)   any
Liability under any employment, severance, retention or termination agreement with any employee of Target or Desert or any of their Affiliates that arises out of or
relates to the Contemplated Transactions or from any facts, circumstances, or conditions existing, initiated or occurring on or prior to the Effective Time; 

        (h)   any
Liability arising out of or relating to any employee grievance from any facts, circumstances or conditions existing, initiated or occurring on or prior to the
Effective Time, whether or not the affected employees are retained or hired by Surviving LLC or Buyer; 

        (i)    any
Liability of Target or Desert to their members or any of their Affiliates that arises out of or relates to the Contemplated Transactions or from any facts,
circumstances or conditions existing, initiated or occurring on or prior to the Effective Time; 

47

 

        (j)    any
Liability to indemnify, reimburse or advance amounts to any manager, officer, director, employee or agent of Target or Desert that arises out of or relates to the
Contemplated Transactions or from any facts, circumstances or conditions existing, initiated or occurring on or prior to the Effective Time; 

        (k)   any
Liability arising out of any Proceeding relating to Target or Desert pending as of the Effective Time; 

        (l)    any
Liability arising out of any Proceeding commenced after the Effective Time and arising out of or relating to any facts, circumstances or conditions existing,
initiated or occurring on or prior to the Effective Time; 

        (m)  any
Liability arising out of or resulting from Target's or Desert's compliance or noncompliance with any Legal Requirement or Order of any Governmental Body that arises
out of or relates to the Contemplated Transactions or from any facts, circumstances or conditions existing, initiated or occurring on or prior to the Effective Time; 

        (n)   any
Liability relating or arising from facts, circumstances, or conditions existing, initiated or occurring prior to the Effective Time, which has or will result in
Liability to Surviving LLC, Buyer or Target or Desert under Environmental Law; and 

        (o)   any
Liability arising out of the ownership or operation of the business of the Target or Desert prior to the Effective Time. 

        Notwithstanding
anything to the contrary in this Section 11.2, in no event shall Target have any liability or responsibility to indemnify any Buyer Indemnified Person, nor shall
any Buyer Indemnified person have or assert any claim against Target, Target Representative or the Holdback Escrow Amount on account of or with respect to any of the following Liabilities: Released
Claims; all Liabilities under any Target Lease or Target Contract that arise after the Effective Time and relate to facts, circumstances or conditions existing, initiated or occurring after the
Effective Time; all Liabilities arising after the Effective Time for Target's obligations under Permitted Encumbrances; Gift Certificate Obligations; and current liabilities of Target as of the
Closing Date that are set forth on the Closing Statement of Net Assets except to the extent that any such current liability is a breach of a representation or warranty of Target hereunder. 

        11.3.    Indemnification and Reimbursement by Buyer    

        Buyer
will indemnify and hold harmless Target and its respective Representatives and Affiliates (collectively "Target Indemnified
Persons"), and will reimburse Target Indemnified Persons for any Damages arising from or in connection with: 

        (a)   any
breach of any representation or warranty made by Buyer in Article 4 of this Agreement or in any transfer instrument; 

        (b)   any
breach of any covenant or obligation of Buyer in this Agreement or in any transfer instrument; or 

        (c)   any
claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding made, or alleged to have been made,
by such Person with Buyer (or any Person acting on Buyer's behalf) in connection with any of the Contemplated Transactions. 

        11.4.    Limitations on Amount—Target and Desert    

        Target
shall have no liability (for indemnification or otherwise) with respect to claims under Section 11.2(a) or 11.2(b) until the total of all Damages with respect to such
matters exceeds $167,786 and then only for the amount by which such Damages exceed $167,786 (such amount being the 

48

 

 "Basket"). However, subject to the provisions of the last paragraph of Section 11.2, the limitations of this Section 11.4 will not apply to (i) claims
under Section 11.2(c) through (o), (ii) to matters arising in respect of Sections 2.3, 3.2, 3.6(h), 3.10, 3.24 or 12.1, (iii) a breach of this Article 11 or
(iv) Target's fraud. In no event shall Target's aggregate liability for claims under Sections 11.2(a) and 11.2(b) exceed the Holdback Escrow Amount. 

        11.5.    Limitations on Amount—Buyer    

        Buyer
will have no liability (for indemnification or otherwise) with respect to claims brought by Target under Sections 11.3(a) and 11.3(b) until the total of all Damages with respect to
such matters exceeds $167,786 and then only for the amount by which such Damages exceed $167,786. However, this Section 11.5 will not apply to (i) claims under
Section 11.3(c) (ii) matters arising in respect of Section 2.3, the last sentence of Section 5.1(b), Sections 4.2, 4.3 or 12.1, (iii) a breach of this
Article 11 or (iv) Buyer's fraud. In no event shall Buyer's aggregate liability for claims to Target under Sections 11.3(a) and 11.3(b) exceed the Holdback Escrow Amount. 

        11.6.    Time Limitations    

        (a)   If
the Closing occurs, Target will have liability (for indemnification or otherwise) with respect to Section 11.2(a) or Section 11.2(b) only if on or
before the one year anniversary of the Closing Date, Buyer notifies Target of a claim specifying the factual basis of the claim in reasonable detail to the extent then known by Buyer. However, the
limitation of the preceding sentence of this Section 11.6(a) will not apply to Target's fraud. 

        (b)   If
the Closing occurs, Buyer will have liability (for indemnification or otherwise) with respect to Section 11.3(a) or Section 11.3(b) only if on or before
the one year anniversary of the Closing Date, Target notifies Buyer of a claim specifying the factual basis of the claim in reasonable detail to the extent then known by Target. However, the
limitation of the preceding sentence of this Section 11.6(b) will not apply to Buyer's fraud. 

        11.7.    Remedy    

        Subject
to Section 9.2(a), the provisions of this Article 11 shall provide the sole and exclusive recourse and remedy of Buyer with respect to any claims made or with
respect to which indemnification may be sought under Section 11.2(a) through 11.2(o). Subject to Section 9.2(a), the provisions of this Article 11 shall provide the sole and
exclusive recourse and remedy of Target with respect to any claims made or with respect to which indemnification may be sought under Sections 11.3(a) through 11.3(c). 

        11.8.    Third-Party Claims    

        (a)   Promptly
after receipt by a Person entitled to indemnity under Section 11.2 or 11.3 (an "Indemnified Person") of
notice of the assertion of a Third-Party Claim against it, such Indemnified Person shall give notice (a "Claim Notice") to the Person obligated to
indemnify under such Section (an "Indemnifying Person") of the assertion of such Third-Party Claim, provided that the failure to notify the Indemnifying
Person will not relieve the Indemnifying Person of any liability that it may have to any Indemnified Person, except to the extent that the Indemnifying Person demonstrates that the defense of such
Third-Party Claim is prejudiced by the Indemnified Person's failure to give such notice. 

        (b)   The
Indemnifying Person shall have ten (10) days after receipt of the Claim Notice to notify the Indemnified Person (i) whether or not the Indemnifying
Person disputes its liability to the Indemnified Person with respect to such claim, and (ii) notwithstanding such dispute, whether or not the Indemnifying Person desires to defend the
Indemnified Person against such claim. 

49

 

        (c)   If
the Indemnifying Person does not elect to assume the defense of such claim, the Indemnified Person may engage counsel of its choosing and proceed to defend the claim
and reserve its right to recover its Damages from the Indemnifying Person if the latter wrongfully refused to defend such claim. Any action by Indemnified Person against Indemnifying Person for
wrongful refusal to defend shall be brought within the applicable period of limitations under applicable state law. 

        (d)   If
an Indemnified Person gives notice to the Indemnifying Person pursuant to Article 11 of the assertion of a Third-Party Claim, the Indemnifying Person shall be
entitled to participate in the defense of such Third-Party Claim and, if it so elects (unless (i) the Indemnifying Person is also a Person against whom the Third-Party Claim is made and the
Indemnified Person determines in good faith that joint representation would be inappropriate, or (ii) the Indemnifying Person fails to provide reasonable assurance to the Indemnified Person of
its financial capacity to defend such Third-Party Claim and provide indemnification with respect to such Third-Party Claim), the Indemnifying Person may assume the defense of such Third-Party Claim
with counsel of its own choosing that is reasonably satisfactory to the Indemnified Person. After notice from the Indemnifying Person to the Indemnified Person of its election to assume the defense of
such Third-Party Claim, the Indemnifying Person shall not, so long as it diligently conducts such defense, be liable to the Indemnified Person under this Article 11 for any fees of other
counsel or any other expenses with respect to the defense of such Third-Party Claim, in each case subsequently incurred by the Indemnified Person in connection with the defense of such Third-Party
Claim, other than reasonable costs of investigation. If the Indemnifying Person assumes the defense of a Third-Party Claim, (A) such assumption shall not constitute an admission by the
Indemnifying Person that the claims made in that Third-Party Claim are within the scope of and subject to indemnification, and (B) no compromise or settlement of such Third-Party Claims may be
effected by the Indemnifying Person without the Indemnified Person's Consent unless: (I) there is no finding or admission of any violation of Legal Requirement or any violation of the rights of
any Person by the Indemnified Person; (II) the sole relief provided is monetary damages that are paid in full by the Indemnifying Person; and (III) the Indemnified Person shall have no
liability with respect to any compromise or settlement of such Third-Party Claims effected without its Consent. 

        (e)   Except
where the Indemnifying Person (i) timely elects to defend the Indemnified Person (in which case Section 11.8(d) shall govern), or (ii) the
Indemnifying Person disputes its liability in a timely manner, the Indemnifying Person will be bound by any determination made in such Third-Party Claim or any compromise or settlement effected by the
Indemnified Person, subject to their respective limits on indemnification under Sections 11.4 and 11.5. 

        (f)    Notwithstanding
the foregoing, if an Indemnified Person determines in good faith that there is a reasonable probability that a Third-Party Claim may adversely affect it
or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Person may, by notice to the Indemnifying Person,
assume the exclusive right to defend, compromise or settle such Third-Party Claim, but the Indemnifying Person will not be bound by any determination of any Third-Party Claim so defended for the
purposes of this Agreement or any compromise or settlement effected without its consent (which may not be unreasonably withheld). 

        (g)   With
respect to any Third-Party Claim subject to indemnification under this Article 11 (i) both the Indemnified Person and the Indemnifying Person, shall
keep the other Person reasonably informed of the status of such Third-Party Claim and any related Proceedings at all stages thereof where such Person is not represented by its own counsel, and
(ii) the parties agree (each at its own expense) to render to each other such assistance as they may reasonably require 

50

 

of
each other and to cooperate in good faith with each other in order to ensure the proper and adequate defense of any Third-Party Claim. 

        (h)   With
respect to any Third-Party Claim subject to indemnification under this Article 11, the parties agree to cooperate in such a manner as to preserve in full (to
the extent possible) the confidentiality of all Confidential Information and the attorney-client and work-product privileges. In connection therewith, each party agrees that (i) it
will use its Reasonable Best Efforts, in respect of any Third-Party Claim in which it has assumed or participated in the defense, to avoid production of Confidential Information (consistent with
applicable Legal Requirements and rules of procedure), and (ii) all communications between any party hereto and counsel responsible for or participating in the defense of any Third-Party Claim
shall, to the extent possible, be made so as to preserve any applicable attorney-client or work-product privilege. 

        11.9.    Other Claims    

        A
claim for indemnification for any matter not involving a Third-Party Claim may be asserted by notice to the party from whom indemnification is sought and shall be paid promptly after
such notice. 

        11.10.    Released Claims    

        Buyer
agrees not to assert any claims against Target or Target Representative (whether by way of demand, suit, cross-complaint, impleader or otherwise) and covenants not to sue Target or
Target Representative for Damages with respect to the Released Claims and, as between Buyer and Target
and Target Representative, releases Target and Target Representative from any Liability with respect thereto. 

        11.11.    Title Insurance    

        As
between Buyer and Target and Target Representative, Buyer agrees that Buyer's sole recourse respecting any Subject To Liabilities shall be against the Title Company under the Title
Policies. Notwithstanding the foregoing, to the extent that Buyer has recourse against Persons other than Target and Target Representative with respect to the Subject To Liabilities nothing herein
shall prevent Buyer from pursuing such remedies. 

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   12.   GENERAL PROVISIONS  

        12.1.    Expenses    

        Except
as otherwise provided in this Agreement, each party to this Agreement will bear its respective fees and expenses incurred in connection with the preparation, negotiation,
execution and performance of this Agreement and the Contemplated Transactions, including all fees and expense of its Representatives. At Closing, Target shall pay (a) fees for recording of the
reconveyances, the memoranda of lease and (b) documentary transfer taxes. At Closing, Buyer and Target shall share equally that portion of the title premiums for the Title Policies equivalent
to the basic premium that would have been payable for standard CLTA coverage ("Target's Premium Portion"). At Closing, Buyer shall pay (i) fees
for recording of the SNDAs and NDAs; (ii) premiums for the Title Policies in excess of the Target's Premium Portion including, without limitation, the difference between standard coverage and
extended coverage, the additional premiums if any attributable to the issuance of the lender's policies, and the additional premiums if any attributable to the issuance of any endorsements to the
owner's or lender's policies; and (iii) the penalty payable in connection with election not to file preliminary change of ownership reports in California. Buyer will pay one-half
and Target will pay one-half of (A) the fees and expenses of the Closing Escrow Holder under this Agreement; and (B) the Holdback Escrow Agent under the Holdback Escrow
Agreement; provided that the fees payable under the Holdback Escrow Agreement shall be paid to the Holdback Escrow Agent pursuant to the Holdback Escrow Agreement. If this Agreement is terminated, the
obligation of each party to pay its own fees and expenses will be subject to any rights of such party arising from a breach of this Agreement by another party. 

        12.2.    Public Announcements; Confidentiality    

        (a)   Any
public announcement, press release or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and
in such manner as the parties mutually agree, subject to any Legal Requirement applicable to Buyer or Target. Except with the prior consent of the other parties or as permitted by this Agreement,
neither Buyer, Target nor any of their respective Representatives shall disclose to any Person (i) the fact that any Confidential Information of Target has been disclosed to Buyer or its
Representatives, that Buyer or its Representatives have inspected any portion of the Confidential Information of Target or (ii) any information about the Contemplated Transactions, including
the status of such discussions or negotiations, the execution of
any documents (including this Agreement) or any of the terms of the Contemplated Transactions or the related documents (including this Agreement). Target and Buyer will consult with each other
concerning the means by which the employees, customers, suppliers and others having dealings with Target will be informed of the Contemplated Transactions, and Buyer will have the right to be present
for any such communication through one of its Representatives. 

        (b)   Buyer
and Target acknowledge that they entered into a letter agreement dated May 17, 2002 regarding confidentiality and non-disclosure of certain
information regarding Target and its business in connection with a possible transaction among the parties (the "2002 Agreement"). Buyer and Target
hereby agree that the terms and provisions of the 2002 Agreement shall apply to the Contemplated Transactions and, consequently, hereby reinstate such terms and provisions and incorporate them herein
by this reference for a term of one year from the later of the Agreement Date or the date on which this Agreement is terminated under Section 9.1;  provided that Buyer's obligations to maintain the
confidentiality of Information (as defined in the 2002 Agreement) comprising Assets shall terminate
effective upon consummation of the Contemplated Transactions on the Closing Date. This Section 12.2(b) shall survive the termination of this Agreement. 

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        12.3.    Notices    

        All
notices, consents, waivers and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the
transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or
e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party
may designate by notice to the other parties): 

        If
to Target prior to the Effective Time: 

Signature
Theatres Investors, LLC

c/o Signature Theatres Management Company

3000 Executive Parkway, Suite 150

San Ramon, CA 94583

Attention: Philip Harris, President

Fax No: (925) 884-4901

Phone No.: (925) 884-4800 

with
a mandatory copy to: 

Greene
Radovsky Maloney & Share LLP

Four Embarcadero Center, Suite 4000

San Francisco, California 94111-4106

Attention: Donald R. Share, Esq.

Fax No.: (415) 777-4961

Phone No.: (415) 981-1400 

        If
to Target from and after the Effective Time: 

Target
Representative

Philip Harris

c/o Signature Theatres Management Company

3000 Executive Parkway, Suite 150

San Ramon, CA 94583

Attention: Philip Harris, President

Fax No: (925) 884-4901

Phone No.: (925) 884-4800 

with
a mandatory copy to: 

Greene
Radovsky Maloney & Share LLP

Four Embarcadero Center, Suite 4000

San Francisco, California 94111-4106

Attention: Donald R. Share, Esq.

Fax No.: (415) 777-4961

Phone No.: (415) 981-1400 

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Merger
Subsidiary

Attention: General Counsel

7132 Regal Lane

Knoxville, TN 37918

Fax no.: (865) 922-6085

Phone No.: (865) 922-1123 

Hogan &
Hartson L.L.P.

1200 17th Street, Suite 1500

Denver, CO 80202

Attention: Christopher J. Walsh

Fax no.: (303) 899-7333 

Buyer:
Regal Cinemas, Inc.

Attention: General Counsel

7132 Regal Lane

Knoxville, TN 37918

Fax no.: (865) 922-6085

Phone No.: (865) 922-1123 

with
a mandatory copy to: 

Hogan &
Hartson L.L.P.

1200 17th Street, Suite 1500

Denver, CO 80202

Attention: Christopher J. Walsh

Fax no.: (303) 899-7333

Phone No.: (303) 454-2480 

        12.4.    Jurisdiction; Service of Process    

        Any
Proceeding arising out of or relating to this Agreement or any Contemplated Transaction may be brought in the federal or state courts of the State of Delaware, and each of the
parties irrevocably submits to the exclusive jurisdiction of each such court in any such Proceeding, and waives any objection it may now or hereafter have to venue or to convenience of forum. The
parties agree that any of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement between the parties irrevocably to waive
any objections to venue or to convenience of forum. Process in any Proceeding referred to in the first sentence of this section may be served on any party anywhere in the world. 

        12.5.    Enforcement of Agreement    

        Target
and the Target Representative acknowledge and agree that Buyer would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by Target could not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to
which Buyer may be entitled, at law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent
injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking. 

54

 

        12.6.    Waiver; Remedies Cumulative    

        The
rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by any party in exercising any right, power or privilege
under this Agreement or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in this Agreement. 

        12.7.    Entire Agreement and Modification    

        This
Agreement supersedes all prior agreements, whether written or oral, between the parties with respect to its subject matter and constitutes (along with the Disclosure Schedule,
Exhibits and other documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended, supplemented, or otherwise modified except by a written agreement executed by the party to be charged with the amendment. Notwithstanding anything contrary in this
Agreement, all Related Party Contracts between an Affiliate of Target and Buyer and/or an Affiliate of Buyer shall be governed by the terms of the Related Party Contract as between those parties. 

        12.8.    Disclosure Schedule    

        (a)   The
information in the Disclosure Schedule constitutes (i) exceptions to particular representations, warranties, covenants and obligations of Target as set forth
in this Agreement or (ii) descriptions or lists of assets and liabilities and other items referred to in this Agreement. If there is any inconsistency between the statements in this Agreement
and those in the Disclosure Schedule (other than an exception expressly set forth as such in the Disclosure Schedule with respect to a specifically identified representation or warranty), the
statements in this Agreement will control. 

        (b)   The
statements in the Disclosure Schedule, and those in any supplement thereto, relate only to the provisions in the Section of this Agreement to which they expressly
relate and not to any other provision in this Agreement. 

        12.9.    Assignments, Successors and No Third-Party Rights    

        No
party may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other parties, except that either or both of Buyer
and Merger Subsidiary may assign any of its rights and delegate any of its obligations under this Agreement to any of its subsidiaries; provided that Regal Cinemas, Inc. shall remain jointly
and severally liable with such assignee for the payment of the Merger Consideration hereunder and for the payment and performance of all of its indemnity obligations under Article 11 hereof.
Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any
provision of this Agreement, except such rights as shall inure to a successor or permitted assignee pursuant to this Section 12.9 and to the 

55

 

Affiliate
Guarantors pursuant to Section 5.11 in which respect such Affiliate Guarantors are intended third-party beneficiaries of the agreements set forth in Section 5.11. 

        12.10.    Target Representative    

        As
of the Effective Time, Target hereby irrevocably appoints Philip Harris III as its true and lawful attorney-in-fact and agent on behalf of and in the name of
Target for the purposes of this Agreement, the Escrow Agreement and any other agreements executed by Target in connection with the Closing (the "Target
Representative"). From and after the Effective Time, the
Target Representative shall receive written notices for the Target under this Agreement, the Escrow Agreement and any other agreements executed by Target in connection with the Closing (collectively,
"Target Documents") and shall have full power and authority to represent all Persons who as of the Closing Date hold equity interests in Target
("Affected Persons"), with respect to all matters arising under the Target Documents, and all action taken by the Target Representative hereunder,
pursuant to authority granted herein, shall be binding upon Target and the Affected Persons. Without limiting the generality of the foregoing, with respect to all matters under this Agreement, the
Target Representative shall have full power and authority, on behalf of Target and the Affected Persons, to interpret all the terms and provisions of the Target Documents, to negotiate and compromise
any dispute which may arise under the Target Documents, to sign any releases or other documents with respect to any such dispute, to authorize payments to be made with respect thereto, and to retain
such counsel and consultants as appropriate and necessary to carry out its duties. The Target Representative, or any successor hereafter appointed, may resign and shall be discharged of his duties
hereunder upon the appointment of a successor Target Representative as hereinafter provided. In case of such resignation, or in the event of the death or inability to act of the Target Representative,
a successor shall be named by the prior Target Representative or by the holders of a majority of the interests of the Affected Persons (as determined immediately prior to the Closing). Each such
successor Target Representative shall, after agreeing to become a party hereto by signing a counterpart signature page as the Target Representative, have all the power, authority, rights, and
privileges hereby conferred upon an original Target Representative, and the term "Target Representative," as used herein, shall be deemed to include each such successor Target Representative. The
power-of-attorney granted in this Section 12.10 is coupled with an interest and is irrevocable. The other Parties hereto shall be entitled to rely exclusively upon any
communication given or other action taken by the Target Representative pursuant to this Agreement, and shall not be liable for any action taken or not taken in reliance on a communication or other
instruction from the Target Representative. 

        12.11.    Severability    

        If
any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.
Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 

        12.12.    Construction    

        The
headings of Articles and Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Articles," "Sections"
and "Schedules" refer to the corresponding Articles, Sections and Schedules of this Agreement and the Disclosure Schedule. 

        12.13.    Governing Law    

        This
Agreement will be governed by and construed under the laws of the State of Delaware without regard to conflicts-of-laws principles that would require the
application of any other law. 

56

 

        12.14.    Execution of Agreement    

        This
Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as
to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes. 

57

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

	

 	
 	
Buyer:
	

 	
 	
REGAL CINEMAS, INC.
	

 	
 	

By:	
 	

/s/  MICHAEL L. CAMPBELL      

	 	 	 	 	Name:	 	Michael L. Campbell

	 	 	 	 	Title:	 	Chief Executive Officer

	

 	
 	
Merger Subsidiary:
	

 	
 	
RCI/RMS, LLC
	

 	
 	

By:	
 	

/s/  MICHAEL L. CAMPBELL      

	 	 	 	 	Name:	 	Michael L. Campbell

	 	 	 	 	Title:	 	President

	

 	
 	
Target:
	

 	
 	
SIGNATURE THEATRE INVESTORS, LLC
	

 	
 	

By:	
 	

/s/  PHILIP HARRIS      

	 	 	 	 	Name:	 	Philip Harris

	 	 	 	 	Title:	 	President

	

 	
 	
TARGET REPRESENTATIVE
	

 	
 	
By:	
 	

/s/  PHILIP HARRIS      
 Philip Harris III

        TO:
Regal Cinemas, Inc., as Buyer,                        , LLC, as Merger Subsidiary, and Signature Theatre Investors, LLC, as
Target 

        The
undersigned hereby acknowledges receipt of a fully executed copy of the Merger Agreement dated as of April    , 2004 (the "Merger
Agreement") by and among Buyer, Merger Subsidiary and Target. The undersigned agrees to serve as Closing Escrow Holder pursuant to the terms of the Merger Agreement. 

	

Dated: May 19, 2004	
 	
FIRST AMERICAN TITLE INSURANCE COMPANY
	

 	
 	

By:	
 	

/s/  MIRIAM BROWN      

	 	 	Name:	 	Miriam Brown

	 	 	Its:	 	Senior Escrow Officer

        Each
of the undersigned, being the direct or indirect owner of all of the outstanding capital stock of the Buyer, hereby jointly and severally guaranty, for the benefit of the applicable
Affiliate Guarantors, the payment and performance of Buyer of its indemnity obligations under Section 5.11 of the Agreement. 

	

 	
 	
REGAL ENTERTAINMENT GROUP
	

 	
 	

By:	
 	

/s/  MICHAEL L. CAMPBELL      

	 	 	Name:	 	Michael L. Campbell

	 	 	Title:	 	Chairman, Chief Executive Officer

	

 	
 	
REGAL ENTERTAINMENT HOLDINGS, INC.
	

 	
 	

By:	
 	

/s/  R. E. HARDY      

	 	 	Name:	 	R. E. Hardy

	 	 	Title:	 	Executive Vice President, Secretary

	

 	
 	
REGAL CINEMAS CORPORATION
	

 	
 	

By:	
 	

/s/  MICHAEL L. CAMPBELL      

	 	 	Name:	 	Michael L. Campbell

	 	 	Title:	 	Chief Executive Officer

QuickLinks

MERGER AGREEMENT

TABLE OF CONTENTS

LIST OF EXHIBITSQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.2    
    

 
 

ASSET PURCHASE AGREEMENT    
    

by
and among 

REGAL CINEMAS, INC.  

and 

SIGNATURE THEATRES, LLC  

 TURLOCK CINEMAS, LLC  

and 

SIGNATURE DESERT CINEMAS, LLC  

Dated April 26, 2004 

   TABLE OF CONTENTS  

	 
	 	 
	 	 
	 	Page

	1.	 	DEFINITIONS AND USAGE	 	1
	 	 	1.1.	 	Definitions	 	1
	 	 	1.2.	 	Usage.	 	9
	2.	 	SALE AND TRANSFER OF PURCHASED ASSETS; CLOSING	 	9
	 	 	2.1.	 	Purchased Assets to be Sold.	 	9
	 	 	2.2.	 	Excluded Assets.	 	10
	 	 	2.3.	 	Consideration; Delivery of Funds.	 	11
	 	 	2.4.	 	Liabilities.	 	11
	 	 	2.5.	 	Allocation.	 	13
	 	 	2.6.	 	Closing.	 	13
	 	 	2.7.	 	Closing Obligations.	 	14
	 	 	2.8.	 	Prorations Adjustment.	 	18
	 	 	2.9.	 	Holdback Escrow.	 	21
	 	 	2.10.	 	Closing Payments to Lenders.	 	22
	 	 	2.11.	 	Consents	 	22
	 	 	2.12.	 	Lessor Consents and Estoppels	 	22
	 	 	2.13.	 	REA Estoppels and DDA Consents	 	24
	 	 	2.14.	 	SNDAs	 	24
	 	 	2.15.	 	Memoranda of Leases	 	25
	 	 	2.16.	 	Development Agreements	 	25
	 	 	2.17.	 	Delivery of Property; Minimum Concessions Inventory	 	25
	3.	 	REPRESENTATIONS AND WARRANTIES OF SELLERS	 	25
	 	 	3.1.	 	Organization and Good Standing	 	25
	 	 	3.2.	 	Enforceability; Authority; No Conflict	 	26
	 	 	3.3.	 	Capitalization	 	27
	 	 	3.4.	 	Financial Statements	 	27
	 	 	3.5.	 	Books and Records	 	27
	 	 	3.6.	 	Title to Purchased Assets; Encumbrances; Condition of Tangible Personal Property	 	28
	 	 	3.7.	 	Condition of Leased Real Property	 	30
	 	 	3.8.	 	Inventories	 	30
	 	 	3.9.	 	No Undisclosed Liabilities	 	30
	 	 	3.10.	 	Taxes	 	30
	 	 	3.11.	 	No Material Adverse Effect	 	32
	 	 	3.12.	 	Employee Benefits	 	32
	 	 	3.13.	 	Compliance with Legal Requirements; Governmental Authorizations	 	34
	 	 	3.14.	 	Legal Proceedings; Orders	 	34
	 	 	3.15.	 	Absence of Certain Changes and Events	 	35
	 	 	3.16.	 	Contracts; No Defaults	 	35
	 	 	3.17.	 	Insurance	 	36
	 	 	3.18.	 	Environmental Matters	 	36
	 	 	3.19.	 	Employees; Labor Disputes; Compliance	 	37
	 	 	3.20.	 	Brokers or Finders	 	37
	 	 	3.21.	 	Transactions with Affiliates	 	38
	 	 	3.22.	 	Representations and Warranties	 	38
	4.	 	REPRESENTATIONS AND WARRANTIES OF BUYER	 	38
	 	 	4.1.	 	Organization and Good Standing	 	38
	 	 	4.2.	 	Authority; No Conflict	 	38
	 	 	4.3.	 	Brokers or Finders	 	38
	 	 	 	 	 	 	 

i

 

	 	 	4.4.	 	Representations and Warranties	 	38
	5.	 	COVENANTS OF SELLERS PRIOR TO CLOSING	 	39
	 	 	5.1.	 	Access and Investigation	 	39
	 	 	5.2.	 	Operation of the Business of Sellers	 	39
	 	 	5.3.	 	Negative Covenant	 	40
	 	 	5.4.	 	Required Approvals	 	40
	 	 	5.5.	 	Notification	 	41
	 	 	5.6.	 	Reasonable Best Efforts	 	41
	 	 	5.7.	 	Interim Financial Statements	 	41
	 	 	5.8.	 	Payment of Liabilities	 	41
	 	 	5.9.	 	Current Evidence of Title	 	41
	 	 	5.10.	 	Affiliate Guarantors	 	43
	6.	 	COVENANTS OF BUYER PRIOR TO CLOSING	 	43
	 	 	6.1.	 	Required Approvals	 	43
	 	 	6.2.	 	Reasonable Best Efforts	 	44
	 	 	6.3.	 	Notification	 	44
	7.	 	CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE	 	44
	 	 	7.1.	 	Accuracy of Representations	 	44
	 	 	7.2.	 	Seller's Performance	 	44
	 	 	7.3.	 	Consents	 	44
	 	 	7.4.	 	Additional Documents	 	45
	 	 	7.5.	 	No Injunction	 	45
	 	 	7.6.	 	No Conflict	 	45
	 	 	7.7.	 	Title Insurance	 	45
	 	 	7.8.	 	Governmental Authorizations	 	46
	 	 	7.9.	 	Environmental Report; Physical Inspection	 	46
	 	 	7.10.	 	Assigned Lease Estoppels	 	46
	 	 	7.11.	 	REA and DDA Estoppels	 	46
	 	 	7.12.	 	SNDAs	 	46
	 	 	7.13.	 	Memoranda of Lease	 	46
	 	 	7.14.	 	Merger Agreement	 	46
	8.	 	CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE	 	47
	 	 	8.1.	 	Accuracy of Representations	 	47
	 	 	8.2.	 	Buyer's Performance	 	47
	 	 	8.3.	 	Additional Documents	 	47
	 	 	8.4.	 	No Injunction	 	47
	 	 	8.5.	 	Merger Agreement	 	47
	9.	 	TERMINATION	 	48
	 	 	9.1.	 	Termination Events	 	48
	 	 	9.2.	 	Effect of Termination	 	48
	10.	 	ADDITIONAL COVENANTS	 	48
	 	 	10.1.	 	Assistance in Proceedings	 	48
	 	 	10.2.	 	Retention of and Access to Records	 	49
	 	 	10.3.	 	Further Assurances	 	49
	11.	 	INDEMNIFICATION; REMEDIES	 	49
	 	 	11.1.	 	Survival and Materiality	 	49
	 	 	11.2.	 	Indemnification and Reimbursement By Sellers	 	50
	 	 	11.3.	 	Indemnification and Reimbursement by Buyer	 	51
	 	 	11.4.	 	Limitations on Amount—Sellers	 	51
	 	 	11.5.	 	Limitations on Amount—Buyer	 	51
	 	 	 	 	 	 	 

ii

 

	 	 	11.6.	 	Time Limitations	 	51
	 	 	11.7.	 	Remedy	 	52
	 	 	11.8.	 	Third-Party Claims	 	52
	 	 	11.9.	 	Other Claims	 	53
	 	 	11.10.	 	Released Claims	 	53
	 	 	11.11.	 	Title Insurance	 	54
	12.	 	GENERAL PROVISIONS	 	54
	 	 	12.1.	 	Expenses	 	54
	 	 	12.2.	 	Public Announcements; Confidentiality	 	54
	 	 	12.3.	 	Notices	 	55
	 	 	12.4.	 	Jurisdiction; Service of Process	 	57
	 	 	12.5.	 	Enforcement of Agreement	 	57
	 	 	12.6.	 	Waiver; Remedies Cumulative	 	57
	 	 	12.7.	 	Entire Agreement and Modification	 	57
	 	 	12.8.	 	Disclosure Schedule	 	57
	 	 	12.9.	 	Assignments, Successors and No Third-Party Rights; Several Liability	 	58
	 	 	12.10.	 	Desert Representative	 	58
	 	 	12.11.	 	Severability	 	59
	 	 	12.12.	 	Construction	 	59
	 	 	12.13.	 	Governing Law	 	59
	 	 	12.14.	 	Execution of Agreement	 	59

iii

 
LIST OF EXHIBITS  

	Exhibit 2.7(a)(i)	 	Bill of Sale, Assignment and Assumption
	Exhibit 2.7(a)(ii)	 	Trademark License Agreement
	Exhibit 2.7(a)(v)	 	Lease Assignment and Assumption
	Exhibit 2.7(a)(vii)	 	Philip Harris Consulting Agreement
	Exhibit 2.7(a)(viii)(A)	 	Philip Harris Non-Competition Agreement
	Exhibit 2.7(a)(viii)(B)	 	George Mann Non-Competition Agreement
	Exhibit 2.7(a)(viii)(C)	 	Seller Non-Competition Agreement
	Exhibit 2.7(a)(ix)	 	Holdback Escrow Agreement
	Exhibit 2.7(a)(xii)	 	Certificate of Non-Foreign Status
	Exhibit 2.7(a)(xv)	 	Statement of Documentary Transfer Tax
	Exhibit 2.7(a)(xix)	 	Grant Deed
	Exhibit 2.7(a)(xx)	 	Letter Agreement—Theatre Advertising
	Exhibit 2.7(a)(xxi)	 	Letter Agreement—Concessions Inventories
	Exhibit 2.12A	 	Lessor Consent and Estoppel
	Exhibit 2.12B	 	Related Party Lessor Consent and Estoppel
	Exhibit 7.4(a)	 	Opinion of Sellers' Counsel
	Exhibit 8.3(b)	 	Opinion of Buyer's Counsel

iv

 
SCHEDULES  

	Schedule 2.1(a)	 	Assigned Leases
	Schedule 2.1(b)	 	Purchased Real Property
	Schedule 2.1(g)	 	Purchased Contracts
	Schedule 2.4(a)(v)	 	VIP Courtesy Passes
	Schedule 2.5	 	Allocation of the Purchase Price
	Schedule 2.7(a)(x)	 	Amendments to the Assigned Leases
	Schedule 2.7(c)	 	Documents to be Distributed to Sellers and Buyer by Closing Escrow Holder
	Schedule 2.10	 	Lender Payoffs
	Schedule 3.1(a)	 	Foreign Qualifications
	Schedule 3.1(c)	 	Ownership of Other Securities
	Schedule 3.2(b)	 	Disclosed Conflicts
	Schedule 3.2(c)	 	Required Consents
	Schedule 3.3	 	Capitalization
	Schedule 3.4(b)	 	Theatre Level Cash Flows
	Schedule 3.6(b)	 	Assigned Leases—Default
	Schedule 3.6(c)	 	Assigned Leases—Termination Rights
	Schedule 3.6(d)	 	Assigned Leases—Terms
	Schedule 3.6(e)	 	Leased Real Property
	Schedule 3.6(f)	 	Unrecorded Documents
	Schedule 3.6(g)	 	Tangible Personal Property
	Schedule 3.6(h)	 	Permitted Non-Real Property Encumbrances
	Schedule 3.6(i)	 	Voluntary Monetary Lien
	Schedule 3.7(a)	 	Eminent Domain
	Schedule 3.7(b)	 	Violations
	Schedule 3.9	 	Undisclosed Liabilities
	Schedule 3.10(a)	 	Contested Taxes and Extensions
	Schedule 3.10(b)	 	Tax Matters
	Schedule 3.10(c)	 	Tax Assessments or Deficiencies
	Schedule 3.12(a)	 	Employee Benefit Plans
	Schedule 3.12(d)	 	Contributions
	Schedule 3.12(k)	 	Welfare Plans
	Schedule 3.13(a)	 	Legal Requirements
	Schedule 3.13(b)	 	Governmental Authorizations
	Schedule 3.14(a)	 	Legal Proceedings
	Schedule 3.14(b)	 	Orders
	Schedule 3.15	 	Absence of Certain Changes and Events
	Schedule 3.16(a)	 	List of Material Contracts
	Schedule 3.16(b)	 	Contract Consents
	Schedule 3.16(c)	 	Contract Matters
	Schedule 3.17	 	Insurance
	Schedule 3.18	 	Environmental
	Schedule 3.18(b)	 	Environmental Reports
	Schedule 3.19(b)	 	Labor Matters
	Schedule 3.21	 	Affiliate Transactions
	Schedule 5.10	 	Affiliate Guarantees and Affiliate Guarantors

v

  

 
 

ASSET PURCHASE AGREEMENT    
    

        This Asset Purchase Agreement ("Agreement") is dated April 26, 2004, by and among Regal
Cinemas, Inc., a Tennessee corporation ("Buyer"), Signature Theatres, LLC, a California limited liability company
("Signature"), Turlock Cinemas, LLC, a California limited liability company ("Turlock") and Signature
Desert Cinemas, LLC, a Delaware limited liability company ("Desert") (Signature, Turlock and Desert are sometimes collectively referred to herein as
"Sellers" and individually as "Seller"). 

 
 

RECITALS    
    

        Whereas, each Seller desires to sell, and Buyer desires to purchase, the Purchased Assets of each Seller for the consideration and on the terms set forth in this
Agreement. 

        Now,
therefore, the parties, intending to be legally bound, agree as follows: 

 
 

RECITALS    
    

1.     DEFINITIONS AND USAGE  

        1.1.    Definitions    

        For
purposes of this Agreement, the following terms and variations thereof have the meanings specified or referred to in this Section 1.1: 

        "2002 Agreement"—as defined in Section 12.2(b). 

        "Accounts Receivable"—(a) all trade accounts receivable and other rights to payment from customers of a Seller and the full
benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped, products sold or services rendered
to customers of a Seller, (b) all other accounts or notes receivable of a Seller and the full benefit of all security for such accounts or notes and (c) any claim, remedy or other right
related to any of the foregoing. 

        "Affiliate"—of a Person means any other Person who directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such Person. "Control"—means the possession of power, directly or indirectly, to direct or
cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. 

        "Affiliate Guarantees"—as defined in Section 5.10. 

        "Affiliate Guarantor"—a guarantor under any of the Affiliate Guarantees that is identified on Schedule 5.10. 

        "Appurtenances"—any and all privileges, rights, easements, hereditaments and appurtenances belonging to or for the benefit of
the Real Property, including all easements appurtenant to and for the benefit of any Real Property (a "Dominant Parcel") for, and as the primary means
of access between, the Dominant Parcel and a public way, or for any other use upon which lawful use of the Dominant Parcel for the purposes for which it is presently being used is necessary or
appropriate, and any and all rights existing in and to any streets, alleys, passages and other rights-of-way included thereon or adjacent thereto (before or after vacation
thereof) and vaults beneath any such streets. 

        "Assigned Leases"—as defined in Section 2.1(a). 

        "Assumed Liabilities"—as defined in Section 2.4(a). 

1

 

        "Balance Sheet"—as defined in Section 3.4(a). 

        "Basket"—as defined in Section 11.4(d). 

        "Bill of Sale, Assignment and Assumption "—as defined in Section 2.7(a)(i). 

        "Breach Notice"—as defined in Section 11.1(a)(ii). 

        "Business Day"—any day other than (a) Saturday or Sunday or (b) any other day on which banks in California or
Tennessee are permitted or required to be closed. 

        "Buyer"—as defined in the first paragraph of this Agreement. 

        "Buyer Group"—as defined in Section 5.1(a). 

        "Buyer Indemnified Persons"—as defined in Section 11.2. 

        "Buyer's Closing Documents"—as defined in Section 4.2. 

        "Claim Notice"—as defined in Section 11.8(a). 

        "Closing Consideration"—as defined in Section 2.3(a). 

        "Closing"—as defined in Section 2.6(a). 

        "Closing Date"—the date on which the Closing actually takes place. 

        "Closing Deadline" means September 30, 2004. 

        "Closing Escrow"—as defined in Section 2.6(b). 

        "Closing Escrow Holder"—as defined in Section 2.6(b). 

        "COBRA"—as defined in Section 3.12(h). 

        "Code"—the Internal Revenue Code of 1986. 

        "Concessions Inventories"—inventories of food and beverage and related concessions inventory and supplies of a Seller,
wherever located, used in connection with or at the Leased Real Property or the Purchased Real Property. 

        "Concessions Letter Agreement"—as defined in Section 2.7(a)(xxi). 

        "Consent"—any approval, consent, ratification, waiver or other authorization. 

        "Construction Escrows"—means the amounts held back in escrow pursuant to the terms of the Development Agreements. 

        "Construction Escrow Holder"—means First American. 

        "Consulting Agreement"—as defined in Section 2.7(a)(vii). 

        "Contemplated Transactions"—all of the transactions contemplated by this Agreement. 

        "Contract"—any agreement, contract, lease, consensual obligation, promise or undertaking (whether written or oral and whether
express or implied), whether or not legally binding. 

        "DDA"—any disposition and development agreement relating to any Leased Real Property or Purchased Real Property. 

        "Damages"—as defined in Section 11.2. 

        "Defined Benefit Plan"—any Employee Plan that is or was a "defined benefit plan" as such term is defined in ERISA
Section 3(35). 

2

 

        "Desert Representative"—as defined in Section 12.10. 

        "Development Agreements"—means the Development Agreement for the Ukiah 6 (Ukiah, California) theatre, the Development
Agreement for the Stockton Holiday 8 (Stockton, California) theatre and the Development Agreement for the Signature Palm Springs theatre. 

        "Disapproved Exceptions"—as defined in Section 5.9(a)(B). 

        "Disclosure Schedule" or "Schedule"—the disclosure schedules delivered by each
Seller to Buyer concurrently with the execution and delivery of this Agreement. 

        "Due Diligence Deadline"—June 2, 2004. 

        "Effective Time"—11:59 p.m. on the Closing Date. 

        "Employee Plans"—as defined in Section 3.12(a). 

        "Encumbrance"—any charge, claim, community or other marital property interest, condition, equitable interest, lien, option,
pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, including any restriction on use, voting (in
the case of any security or equity interest), transfer, receipt of income or exercise of any other attribute of ownership. 

        "Environmental Claims" means all demands, claims, actions or causes of action, assessments, complaints, directives, citations, information
requests issued by government authority, legal proceedings, orders, notices of potential responsibility, losses, damages (including, without limitation, diminution in value), liabilities, sanctions,
costs and expenses, including, without limitation, interest, penalties and attorneys' and experts' fees and disbursements, based on arising out of or otherwise relating to Environmental Laws,
Hazardous Materials, or other environmental matters. 

        "Environmental Laws" means any Legal Requirements (including, without limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act), relating to the generation, production, installation, use, storage, treatment, transportation, Release, threatened Release, or disposal of Hazardous Materials, or the protection of
human health or safety, natural resources, or the environment. 

        "Environmental Permits" means any permits, licenses, certificates and approvals required under any Environmental Law. 

        "ERISA"—the Employee Retirement Income Security Act of 1974, as amended. 

        "ERISA Affiliate"—as defined in Section 3.12(a). 

        "Exchange Act"—the Securities Exchange Act of 1934. 

        "Excluded Assets"—as defined in Section 2.2. 

        "Final Settlement Statement"—as defined in Section 2.8(e). 

        "First American"—means First American Title Insurance Company located at 550 South Hope Street, Suite 1950, Los Angeles,
California 90071 to the attention of Mary Owens, Vice President, National Account Manager. 

        "GAAP"—generally accepted accounting principles for financial reporting in the United States, applied on a consistent basis. 

        "Gift Certificate Obligations"—all obligations to honor gift certificates, special activities tickets and similar instruments
sold by a Seller prior to the Closing Date in accordance with each such certificate's or similar instrument's terms. 

3

 

        "Grant Deed"—as defined in Section 2.7(a)(xix). 

        "Governing Documents"—with respect to any particular entity, (a) if a limited liability company, the articles of
organization and operating agreement; (b) if another type of Person, any other charter or similar document adopted or filed in connection with the creation, formation or organization of the
Person; (c) all equity holders' agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or documents relating to the
organization, management or operation of any Person or relating to the rights, duties and obligations of the equity holders of any Person; and (d) any amendment or supplement to any of the
foregoing. 

        "Governmental Authorization"—any Consent, license, registration or permit issued, granted, given or otherwise made available
by or under the authority of any Governmental Body or pursuant to any Legal Requirement including without limitation any consent required under the HSR Act or any variance, conditional use permit,
special use permit, non-conforming use permit or other zoning or land use permit. 

        "Governmental Body"—any (a) nation, state, county, city, town, borough, village, district or other jurisdiction;
(b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any agency, branch, department, board,
commission, court, tribunal or other entity exercising governmental or quasi-governmental powers); (d) multinational organization or body; (e) body exercising, or entitled or purporting
to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; or (f) official of any of the foregoing. 

        "Hazardous Materials" means any wastes, substances, radiation, or materials (whether solids, liquids or gases) (a) which are
listed, defined, or otherwise subject to regulation under any Environmental Law; (b) which contain petroleum or petroleum products (including, without limitation, crude oil or any fraction
thereof) or (c) which consist of toxic mold. 

        "Holdback Escrow Agent"—shall mean First American. 

        "Holdback Escrow Agreement"—as defined in Section 2.7(a)(ix). 

        "Holdback Escrow Amount"—as defined in Section 2.9. 

        "HSR Act"—the Hart-Scott-Rodino Antitrust Improvements Act. 

        "Indemnified Person"—as defined in Section 11.8(a). 

        "Indemnifying Person"—as defined in Section 11.8(a). 

        "Intellectual Property Assets"—all intellectual property owned, licensed (as licensor or licensee), or otherwise used by a
Seller, including without limitation, (a) a Seller's name, all assumed fictional business names, trade names, registered and unregistered trademarks, service marks and applications, logos,
slogans, trade dress, and the goodwill of the business symbolized by the foregoing; (b) all patents, patent applications, together will all reissuances, continuations, revisions, extensions and
reexaminations thereof, and inventions and discoveries that may be patentable; (c) all registered and unregistered copyrights in both published works and unpublished works, including copyright
applications, and all other copyrightable works; (d) all rights in mask works; (e) all know-how, trade secrets, confidential or proprietary information, customer lists,
Software, technical information, data, process technology, plans, drawings and blue prints; and (f) all rights in internet web sites and internet domain names presently used by a Seller. 

        "Inventories"—inventories of a Seller, wherever located, used in connection with or at the Leased Real Property or the
Purchased Real Property, including Concessions Inventories. 

4

 

        "IRS"—the United States Internal Revenue Service and, to the extent relevant, the United States Department of the Treasury. 

        "Knowledge of Seller" or "Seller's
Knowledge"—the actual knowledge of Philip Harris, George Mann or Clyde Cornell after reasonable inquiry of the employees of Sellers and Philip Harris &
Associates, Inc. and their agents and representatives. 

        "Known Breaches"—as defined in Section 11.1(a)(i). 

        "Lease"—any lease of Real Property or any rental agreement, license, or other occupancy agreement pertaining to the leasing or
use of Real Property to which any Seller is a party. 

        "Lease Assignment and Assumption"—as defined in Section 2.7(a)(v). 

        "Leased Real Property"—means that portion of the Real Property demised under the Assigned Leases. 

        "Legal Requirement"—any federal, state, local, municipal, foreign, international, multinational or other constitution, law,
ordinance, principle of common law, code, regulation, statute or treaty. 

        "Lessor Consent and Estoppel"—as defined in Section 2.12. 

        "Liability"—with respect to any Person, any liability or obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or
unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person. 

        "Material Adverse Effect"—as defined in Section 3.1(a). 

        "Material Contracts"—as defined in Section 3.16(a). 

        "Minimum Concessions Inventories"—means an amount of Concessions Inventories per theatre included in the Leased Real Property
and the Purchased Real Property to operate such theatre on a Friday during the summer months. 

        "Minimum Funding Plan"—any Employee Plan subject to the minimum funding standards of Code Section 412. 

        "Multiemployer Plan"—any "multiemployer plan" as such term is defined in ERISA Section 3(37). 

        "Noncompetition Agreements"—as defined in Section 2.7(a)(viii). 

        "Non-Real Property Encumbrances"—as defined in Section 3.6(h). 

        "Occupational Safety and Health Law"—any Legal Requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, including the Occupational Safety and Health Act, and any program, whether governmental or private (such as those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful working conditions. 

        "Order"—any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Body or
arbitrator. 

        "Ordinary Course of Business"—an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business
only if that action (a) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day
operations of such Person; (b) does not require authorization by the board of 

5

 

directors,
managers, shareholders or members of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any
nature; and (c) is similar in nature, scope and magnitude to actions customarily taken, without any separate or special authorization, in the ordinary course of the normal,
day-to-day operations of other Persons that are in the same line of business as such Person. 

        "Other Closing Documents"—as defined in Section 2.7(a)(vi). 

        "Permitted Encumbrances"—collectively, the Permitted Non-Real Property Encumbrances and the Permitted Real
Property Encumbrances. 

        "Permitted Non-Real Property Encumbrances"—as defined in Section 3.6(h). 

        "Permitted Real Property Encumbrances"—(a) liens for real property taxes and assessments not yet delinquent; (b) any
Encumbrance affecting the Leased Real Property or the Purchased Real Property created by or with the consent of Buyer; and (c) those title exceptions affecting the Leased Real Property or the
Purchased Real Property that are approved or deemed approved by Buyer in accordance with Section 5.9. 

        "Person"—an individual, partnership, corporation, business trust, limited liability company, limited liability partnership,
joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Body. 

        "Predecessor Tenant"—a predecessor tenant (including its general partners, if any) that has continuing contingent liability
under an Assigned Lease and that is identified on Schedule 5.10. 

        "Preliminary Settlement Statement"—as defined in Section 2.8(a). 

        "Proceeding"—any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal, whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or
arbitrator. 

        "Post Closing Settlement Statement"—as defined in Section 2.8(d) 

        "Purchase Price"—as defined in Section 2.3(a). 

        "Purchased Assets"—as defined in Section 2.1. 

        "Purchased Contracts"—as defined in Section 2.1(g). 

        "Purchased Real Property"—as defined in Section 2.1(b). 

        "REAs"—all reciprocal easement agreements benefiting or burdening any Leased Real Property or Purchased Real Property to which
a Seller is a party or by which a Seller is bound. 

        "Real Property"—(i) with respect to Signature and Turlock, means all real property leased, subleased or otherwise
occupied by Signature or Turlock as applicable and (ii) with respect to Desert means all real property owned, leased, subleased or otherwise occupied by Desert. 

        "Reasonable Best Efforts"—the efforts that a prudent Person desirous of achieving a result would use in similar circumstances
to achieve that result as expeditiously as possible; provided, however, that a Person required to use Reasonable Best Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this Agreement and the Contemplated Transactions or to dispose of or make any change to its business, to expend any material
funds or to incur any other material burden. 

6

 

        "Record"—information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is
retrievable in perceivable form. 

        "Related Party Lessor Consent and Estoppel"—as defined in Section 2.12(e). 

        "Related Party Contract"—means any Assigned Lease, Contract or other agreement to which a Seller is a party with another
Person who is an Affiliate of such Seller or a member of such Seller. 

        "Release"—means any emission, spill, seepage, leak, escape, leaching, discharge, injection, pumping, pouring, emptying,
dumping, disposal, or release of Hazardous Materials into or upon the
environment, including the air, soil, improvements, surface water, groundwater, the sewer, septic system, storm drain, publicly owned treatment works, or waste treatment, storage, or disposal systems
or any exposure to Hazardous Materials. 

        "Released Claims"—means any claim of a Buyer Indemnified Person (other than claims arising in accordance with
Section 11.2(a) or (b)) based upon (a) defects, latent or patent, in the physical condition of the Leased Real Property, the Purchased Real Property or the Tangible Personal Property,
including, without limitation, the compliance of the Leased Real Property or Purchased Real Property with any Legal Requirement, (b) the fitness of the Leased Real Property, the Purchased Real
Property and the Tangible Personal Property for Buyer's intended use thereof or (c) Subject to Liabilities. 

        "Remediation"—means any investigation, clean-up, removal action, remedial action, restoration, repair, response
action, corrective action, monitoring, sampling and analysis, installation, reclamation, closure, or post-closure in connection with the suspected, threatened or actual Release of
Hazardous Materials. 

        "Representatives"—with respect to a Seller, means its managers, members, officers, employees, affiliates, or representatives
(including, without limitation, financial advisors, attorneys or accountants) and with respect to Buyer, means it directors, officers, employees, affiliates or representatives (including, without
limitation, financial advisors, attorneys or accountants). 

        "Restricted Contracts"—as defined in Section 2.11(a). 

        "Retained Liabilities"—as defined in Section 2.4(b). 

        "Scheduled Closing Date"—as defined in Section 2.6(a). 

        "Seller(s)"—as defined in the first paragraph of this Agreement. 

        "Seller Indemnified Persons"—as defined in Section 11.3. 

        "Seller Parties"—as defined in Section 3.18(b). 

        "Seller's Closing Documents"—as defined in Section 3.2(a). 

        "Seller's Possession"—means, with respect to the applicable Seller, either (i) physically located in the offices of
Sellers or Philip Harris & Associates, Inc. (ii) physically located at any of such Seller's Leased Real Property or Purchased Real Property or (iii) in the possession or
control of the representatives or agents of Seller or Philip Harris & Associates, Inc. 

        "Sellers' Premium Portion"—as defined in Section 12.1. 

        "Software"—all computer software and subsequent versions thereof, including source code, object, executable or binary code,
objects, comments, screens, user interfaces, report formats, templates, menus, buttons and icons and all files, data, materials, manuals, design notes and other items and documentation related thereto
or associated therewith. 

7

 

        "Subject To Liabilities"—Encumbrances (other than those that Sellers either covenant to or elect to remove pursuant to
Section 5.9) which affect the Leased Real Property or the Purchased Real Property to the extent such Encumbrances are the obligation, or diminish the rights, of the lessee or sublessee, as
applicable, under the Assigned Leases or the owner thereof with respect to the Purchased Real Property and of which the Sellers have no Knowledge prior to the Effective Time. 

        "Subsidiary"—with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the
power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not
occurred), are held by the Owner or one or more of its Subsidiaries. 

        "Tangible Personal Property"—all machinery, equipment, tools, furniture, furnishings, fixtures, appliances, office equipment,
computer hardware, supplies, materials, vehicles and other items of tangible personal property (other than Inventories) of every kind owned or leased by a Seller (wherever located and whether or not
carried on a Seller's books) which is used or useful solely or primarily in connection with a Seller's use, occupancy and operation of the Leased Real Property, the Purchased Real Property or other
Purchased Assets, together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof and all maintenance records and other documents
relating thereto. 

        "Tax"—any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital stock, franchise, employees' income withholding, foreign or domestic withholding,
social security, unemployment, disability, real property, personal property, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff,
charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable
under any tax-sharing agreement or any other Contract. 

        "Tax Return"—any return (including any information return), report, statement, schedule, notice, form, declaration, claim for
refund or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or
payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax. 

        "Theatre Level Cash Flows"—as defined in Section 3.4(b). 

        "Third Party"—a Person that is not a party to this Agreement. 

        "Third-Party Claim"—any claim against any Indemnified Person by a Third Party, whether or not involving a Proceeding. 

        "Title Company"—means First American. 

        "Title Documents"—as defined in Section 5.9(a)(i). 

        "Title Policies"—as defined in Section 5.9(a)(iii). 

        "Trademark License Agreement"—as defined in Section 2.7(a)(ii). 

8

  

        "Welfare Plan"—any "employee welfare benefit plan" as such term is defined in ERISA Section 3(1). 

        1.2.    Usage.    

        (a)    Interpretation.    In this Agreement, unless a clear contrary intention appears: (i) the singular number
includes the plural number and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are not prohibited
by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iii) reference to any gender includes each other gender;
(iv) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;
(v) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules
and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and
constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) "hereunder," "hereof," "hereto," and words of similar
import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof; (vii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description preceding such term; (viii) "or" is used in the inclusive sense of "and/or"; (ix) with respect to the determination of
any period of time, "from" means "from and including" and "to" means "to but excluding"; and (x) references to documents, instruments or agreements shall be deemed to refer as well to annexes,
all addenda, exhibits, schedules or amendments thereto. 

        (b)    Accounting Terms and Determinations.    Unless otherwise specified herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP. 

        (c)    Legal Representation of the Parties.    This Agreement was negotiated by the parties with the benefit of legal
representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation
hereof. 

2.     SALE AND TRANSFER OF PURCHASED ASSETS; CLOSING  

        2.1.    Purchased Assets to be Sold.    

        Upon
the terms and subject to the conditions set forth in this Agreement, at the Closing, but effective as of the Effective Time, each Seller shall sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase and acquire from each Seller, all of each Seller's right, title and interest in and to the following property and assets, real, personal or mixed, tangible
and intangible, of every kind and description, wherever located: 

        (a)   such
Seller's interests in, to and under all of the Leases listed or otherwise identified in Schedule 2.1(a) (the "Assigned
Leases") and in and to all of the Leased Real Property leased or otherwise demised to the Seller under the Assigned Leases; 

        (b)   Desert's
fee interest in the Real Property identified in Schedule 2.1(b) including any buildings or improvements located thereon (the
"Purchased Real Property"); 

        (c)   any
buildings or improvements located on the Leased Real Property demised under the Assigned Leases; 

9

 

        (d)   any
Appurtenances which benefit the Leased Real Property or the Purchased Real Property including, without limitation, any REAs, DDAs, rights of way, easements and
licenses to the extent benefiting such leasehold or fee interests under the Assigned Leases or the Purchased Real Property; 

        (e)   all
Tangible Personal Property, including those items listed in Schedule 3.6(g); 

        (f)    all
Inventories (except to the extent specified in Section 2.2(j)); 

        (g)   the
Contracts listed in Schedule 2.1(g) (not including the Assigned Leases listed on Schedule 2.1(a)) ("Purchased
Contracts"); 

        (h)   all
Governmental Authorizations, and all pending applications therefor or renewals thereof, listed in Schedule 3.13(b) and held by a Seller relating to the
Purchased Assets; 

        (i)    all
data and Records related to the operation of the Purchased Assets, including client and customer lists and Records, advertising materials, promotional materials,
studies, reports, correspondence and other similar documents and, subject to Legal Requirements, copies of all personnel Records; 

        (j)    all
property insurance benefits, including rights and proceeds, claimed in connection with Purchased Assets impaired as of the Closing Date; 

        (k)   all
claims of any Seller against third parties arising out of or relating to the Assumed Liabilities, whether known or unknown, contingent or noncontingent and all
claims of any Seller against third parties relating to any Purchased Asset impaired as of the Closing Date, whether known or unknown, contingent or noncontingent; 

        (l)    all
rights of a Seller relating to deposits, prepaid rents, and prepaid expenses, claims for refunds and rights to offset in respect thereof that are related to the
Purchased Assets; 

        (m)  all
theatre cash remaining on the Closing Date in the theatres being acquired as part of the Leased Real Property or the Purchased Real Property in an amount that varies
per theatre and will be agreed upon in writing before the Due Diligence Deadline; and 

        (n)   all
goodwill associated with the Purchased Assets. 

        All
of the property and assets to be transferred to Buyer hereunder are herein referred to collectively as the "Purchased Assets."
Notwithstanding the foregoing, the transfer of the Purchased Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Purchased Assets unless Buyer expressly
assumes that Liability pursuant to Section 2.4(a). 

        2.2.    Excluded Assets.    Notwithstanding anything elsewhere in this Agreement, all of the assets of a Seller not
specifically listed in Section 2.1 (collectively, the "Excluded Assets") are not part of the sale and
purchase contemplated hereunder, are excluded from the Purchased Assets and shall remain the property of the applicable Seller after the Closing, including: 

        (a)   all
cash, cash equivalents and short-term investments (except as specified in 2.1(l)); 

        (b)   all
Accounts Receivable; 

        (c)   all
minute books, stock Records and tax records; 

        (d)   all
insurance policies and rights thereunder (except to the extent specified in Section 2.1(i)); 

        (e)   all
Contracts of a Seller that are not listed in Schedule 2.1(a) or Schedule 2.1(g), including all Contracts of a Seller that are concession arrangements,
beverage agreements, and theatre advertising arrangements; 

10

 

        (f)    all
Intellectual Property Assets; 

        (g)   all
personnel Records and other Records that a Seller is required by law to retain in its possession; 

        (h)   all
claims for refund of Taxes and other governmental charges of whatever nature; 

        (i)    all
rights in connection with and assets of the Employee Plans; 

        (j)    Concessions
Inventories in excess of the Minimum Concessions Inventories except as agreed to in the Concessions Letter Agreement; and 

        (k)   all
shares of capital stock or other ownership interest in any other Person. 

        2.3.    Consideration; Delivery of Funds.    

        (a)   In
consideration for the Purchased Assets and each Seller's performance of its respective obligations under this Agreement, Buyer shall pay an aggregate purchase price
(the "Purchase Price") of (i) $166,442,786 plus or minus the adjustments to the Purchase Price pursuant to Section 2.8 (the
"Closing Consideration") and (ii) the assumption by Buyer of the Assumed Liabilities. At Closing, in accordance with Section 2.7(b)(i),
(ii), (iii) and (iv), Buyer shall pay through the Closing Escrow Holder by wire transfer in immediately available United States funds (A) to Sellers, the Closing Consideration
(x) less the Holdback Escrow Amount (y) less the amounts payable to lenders pursuant to Section 2.10 and (z) with respect to Signature, less the Construction Escrows,
(B) to the lenders, the amounts payable pursuant to Section 2.10, (C) to the Holdback Escrow Agent pursuant to the Holdback Escrow Agreement, the Holdback Escrow Amount and
(D) to the Construction Escrow Holder pursuant to the Development Agreements, the Construction Escrows. The Closing Consideration (I) less the Holdback Escrow Amount (II) less the
amounts paid to lenders pursuant to Section 2.10 and (III) and with respect to Signature, less the Construction Escrows shall be allocated among the Sellers consistent with the
allocation of the Purchase Price on Schedule 2.5 after adjusting for the effect of the reductions, if any, pursuant to clause (II) and/or clause (III) for the applicable Seller(s)
only. 

        (b)   All
funds required to be delivered to the Closing Escrow Holder pursuant to this Agreement shall be delivered on the Closing Date by wire transfer of immediately
available funds, prior to the time at which the Title Company shall record documents pursuant to Section 2.7(c) hereof, but not later than 9:30 a.m. Los Angeles time, pursuant to such
wiring instructions as Closing Escrow Holder shall provide to Buyer and Sellers. All funds required to be delivered by the Closing Escrow Holder to Sellers on the Closing Date pursuant to this
Agreement shall be delivered by wire transfer of immediately available funds pursuant to wiring instructions to be delivered to the Closing Escrow Holder prior to the Closing Date. 

        2.4.    Liabilities.    (a)    Assumed
Liabilities.    On the Closing Date, but effective as of the Effective Time, Buyer shall assume and agree to discharge only the following Liabilities of a Seller with
respect to the Purchased Assets (the "Assumed Liabilities"): 

          (i)  all
Liabilities under Purchased Assets that arise after the Effective Time and relate to facts, circumstances or conditions existing, initiated or occurring after the
Effective Time (except as set forth in Section 2.4(b) below); 

         (ii)  all
Liabilities arising after the Effective Time for a Seller's obligations under Permitted Encumbrances; 

        (iii)  Taxes
to be paid or assumed by Buyer pursuant to Section 2.8; 

        (iv)  the
Gift Certificate Obligations; and 

11

 

         (v)  a
Seller's obligations to honor (without charge to the holder thereof) those "VIP courtesy passes" listed on Schedule 2.4(a)(v) through the stated
expiration date of such courtesy passes. 

        (b)    Retained Liabilities.    The Retained Liabilities shall remain the sole responsibility of and shall be
retained, paid, performed and discharged solely by the applicable Seller. "Retained Liabilities" shall mean every Liability of Sellers other than the
Assumed Liabilities, including without limitation: 

          (i)  any
Liability under any Purchased Assets that arises after the Effective Time but that relates to facts, circumstances or conditions that occurred prior to the
Effective Time including without limitation any breach or non-compliance of a Purchased Contract or an Assigned Lease; 

         (ii)  any
Liability for Taxes, including (A) any Taxes arising as a result of a Seller's operation of its business or ownership of the Purchased Assets prior to the
Effective Time, (B) any Taxes that will arise as a result of the sale of the Purchased Assets pursuant to this Agreement (including but not limited to any documentary transfer taxes or sales
taxes payable in connection with the sale by each Seller to Buyer of the Purchased Assets), (C) any deferred Taxes of any nature, and (D) Taxes related to the Excluded Assets.
Notwithstanding anything to the contrary in this Agreement, any supplemental taxes for the period after the Closing or increase in taxes resulting from the sale by each Seller to Buyer of the Assigned
Leases or the Purchased Real Property shall be payable by Buyer. Notwithstanding anything to the contrary contained in this Agreement, each Seller reserves the right to meet with governmental
officials and to contest any reassessment or assessment of the Leased Real Property, the Purchased Real Property or any portion thereof and to attempt to obtain a refund for any Taxes previously paid
by such Seller. Each Seller shall retain all rights with respect to any refund of Taxes to the extent applicable to any period through the Closing Date, inclusive; 

        (iii)  any
Liability under any Contract not assumed by Buyer under Section 2.4(a), including any Liability arising out of or relating to a Seller's credit facilities
or any security interest related thereto; 

        (iv)  any
Liability under the Employee Plans or relating to payroll, vacation, sick leave, workers' compensation, unemployment benefits, pension benefits, employee stock
option or profit-sharing plans, health care plans or benefits, COBRA, or any other employee plans or benefits of any kind for a Seller's employees or former employees or both; 

         (v)  any
Liability under any employment, severance, retention or termination agreement with any employee of a Seller or any of its Affiliates; 

        (vi)  any
Liability arising out of or relating to any employee grievance whether or not the affected employees are hired by Buyer; 

       (vii)  any
Liability of a Seller to any member or Affiliates of such Seller or any member; 

      (viii)  any
Liability to indemnify, reimburse or advance amounts to any manager, officer, director, employee or agent of a Seller; 

        (ix)  any
Liability to distribute to any of a Seller's members or otherwise apply all or any part of the consideration received hereunder; 

         (x)  any
Liability arising out of any Proceeding pending as of the Effective Time; 

        (xi)  any
Liability arising out of any Proceeding commenced after the Effective Time and arising out of or relating to any occurrence or event happening prior to the
Effective Time; 

12

 

       (xii)  any
Liability arising out of or resulting from a Seller's compliance or noncompliance with any Legal Requirement or Order of any Governmental Body; 

      (xiii)  any
Liability relating to or arising from facts, circumstances, or conditions existing, initiated or occurring prior to the Effective Time, which has or will result
in Liability to a Seller or Buyer under Environmental Law; 

      (xiv)  any
Liability of a Seller based upon a Seller's acts or omissions occurring after the Effective Time; 

       (xv)  any
Liability arising out of the ownership or operation of the Purchased Assets attributable to a Seller prior to the Effective Time; and 

      (xvi)  any
Liability relating or arising from the Excluded Assets. 

        2.5.    Allocation.    The Purchase Price shall be allocated separately to each of the Assigned Leases, the Purchased
Real Property and the other Purchased Assets in accordance with Schedule 2.5. At and after the Closing, the parties shall make consistent use of the allocation, fair market value and useful
lives specified in Schedule 2.5 for all Tax purposes and in all filings, declarations and reports with the IRS in respect thereof, including the reports required to be filed under
Section 1060 of the Code, payment of documentary transfer tax, any re-assessments of the value of the Leased Real Property or Purchased Real Property pursuant to California Revenue
and Taxation Code Section 60 et seq. and withholding pursuant to California Revenue and Taxation Code Section 18662 et seq. Buyer shall prepare and deliver IRS Form 8594 to each
Seller within forty-five (45) days after the Closing Date to be filed with the IRS. In any Proceeding related to the determination of any Tax, neither Buyer nor Sellers shall
contend or represent that such allocation is not a correct allocation. The parties acknowledge and agree that (i) Schedule 2.5 attached upon the execution of this Agreement is
preliminary and is based upon Seller's projected balance sheet as of May 31, 2004, (ii) the applicable Sellers will spend additional funds in connection with the construction projects
that are the subject of the Development Agreements through the Closing Date, and (iii) that there will be other accounting adjustments to reflect that the Scheduled Closing Date is other than
at the end of a month. Consistent with the application of accounting principles used to prepare the original Schedule 2.5, each Seller shall prepare and deliver a revised Schedule 2.5 to
the Buyer within 60 days after the Closing. Such revised Schedule 2.5 shall be subject to Buyer's approval and in the event the parties can not agree to the revised Schedule 2.5,
then the parties shall resolve the dispute as set forth in Section 2.8(e). 

        2.6.    Closing.    

        (a)   The
purchase and sale provided for in this Agreement (the "Closing") will take place on the later of
(i) June 17, 2004 (the "Scheduled Closing Date") or (ii) the date that is five (5) Business Days following the satisfaction
and/or waiver of all conditions to Closing set forth in Sections 7 and 8 (other than those conditions contemplated to be satisfied at the Closing), unless Buyer and Sellers otherwise agree. Subject to
the provisions of Article 9, failure to consummate the purchase and sale provided for in this Agreement on the date determined pursuant to this Section 2.6 will not result in the
termination of this Agreement and will not relieve any party of any obligation under this Agreement. In such a situation, the Closing will occur as soon as practicable, subject to Article 9. 

        (b)   Upon
execution of this Agreement, the parties hereto shall open an escrow (the "Closing Escrow") by depositing with Title
Company, in its capacity as escrow holder for this transaction ("Closing Escrow Holder") an executed counterpart of this Agreement. All escrow
instructions shall be addressed to Closing Escrow Holder, to the attention of Mary Owens, who shall be responsible, on behalf of the Closing Escrow Holder, for the escrow under this Agreement. This
Agreement shall serve as the instructions to the Closing Escrow Holder for consummation of the purchase and sale contemplated hereby. The Closing Escrow Holder shall signify its 

13

 

acknowledgment
and agreement to the escrow instructions contained herein by execution of the acknowledgment immediately following the signature page hereof. Sellers and Buyer shall execute such
supplemental escrow instructions as may be appropriate to enable the Closing Escrow Holder to comply with the terms of this Agreement. In the event of any conflict between the provisions of this
Agreement and any supplemental escrow instructions executed by either Buyer or a Seller, but not all parties, the terms of this Agreement shall control. In the event of any conflict between the
provisions of this Agreement and any supplemental escrow instructions executed by Buyer and Sellers, the terms of such supplemental escrow instructions shall control. Written instructions to the
Closing Escrow Holder from Sellers' counsel, in the case of Sellers, or from Buyer's counsel, in the case of Buyer, shall be deemed given by, and shall be binding upon, the party whose counsel gave
such instructions to the Closing Escrow Holder, provided that escrow instructions given by counsel may be supplemental to, but not inconsistent with, the terms of this Agreement. 

        2.7.    Closing Obligations.    In addition to any other documents to be delivered under other provisions of this
Agreement, including without limitation under this Article II, Section 7.4 or Section 8.3, at the Closing: 

        (a)   Each
of the Sellers shall deliver as applicable: 

          (i)  to
Buyer, two original counterparts of the bill of sale, assignment and assumption agreement substantially in the form of Exhibit 2.7(a)(i) (the
"Bill of Sale, Assignment and Assumption")" executed by such Seller; 

         (ii)  to
Buyer, two original counterparts to the trademark license agreement substantially in the form of Exhibit 2.7(a)(ii) ("Trademark
License Agreement") executed by such Seller; 

        (iii)  to
Buyer, two original counterparts to the Development Agreement for the Ukiah 6 (Ukiah, California) theatre in a form mutually agreed upon by Buyer and the applicable
Seller prior to the Due Diligence Deadline, executed by Philip Harris & Associates, Inc. and the consents thereto executed by the applicable Seller and the Architect and Contractor named
therein; 

        (iv)  to
Buyer, two original counterparts to the Development Agreement for the Stockton Holiday 8 (Stockton, California) theatre in a form mutually agreed upon by Buyer and
the applicable Seller prior to the Due Diligence Deadline, executed by Philip Harris & Associates, Inc. and the consents thereto executed by the applicable Seller and the Architect and
Contractor named therein; 

         (v)  to
Closing Escrow Holder, for each Assigned Lease, two original counterparts of an assignment and assumption agreement duly executed and acknowledged by such Seller,
substantially in the form of Exhibit 2.7(a)(v) and otherwise in recordable form (the "Lease Assignment and Assumption"), together with a
separate statement of the documentary transfer tax, if any, due in connection with the recording of the corresponding Lease Assignment and Assumption (to the extent separate statements are permitted
in Hawaii), it being agreed that such transfer tax shall not be shown on the face of the corresponding Lease Assignment and Assumption; it also being agreed that the fee or penalty, if any, for
non-filing of any required preliminary change of ownership report shall be paid by Buyer in lieu of the filing of such a report; 

        (vi)  to
Buyer or Closing Escrow Holder, as applicable, such other bills of sale, assignments, certificates of title, documents and other instruments of transfer and
conveyance as may reasonably be requested by Buyer, each in form and substance reasonably satisfactory to Buyer and its legal counsel and executed by such Seller ("Other
Closing Documents"); 

14

 

       (vii)  to
Buyer, two original counterparts to the consulting agreement substantially in the form of Exhibit 2.7(a)(vii), executed by Philip Harris III (the
"Consulting Agreement"); 

      (viii)  to
Buyer, (A) two original counterparts to the noncompetition agreement substantially in the form of Exhibit 2.7(a)(viii)(A), executed by Philip Harris
III, (B) two original counterparts to the noncompetition agreement substantially in the form of Exhibit 2.7(a)(viii)(B), executed by George Mann, and (C) two original counterparts
to the noncompetition agreement substantially in the form of Exhibit 2.7(a)(viii)(C), executed by each Seller (the "Noncompetition Agreements"); 

        (ix)  to
Buyer, five original counterparts to the escrow agreement substantially in the form of Exhibit 2.7(a)(ix), executed by Sellers and the Holdback Escrow Agent
(the "Holdback Escrow Agreement"); 

         (x)  to
the Closing Escrow Holder, two original counterparts of the amendments to the Assigned Leases described on Schedule 2.7(a)(x), executed by the applicable
Seller; 

        (xi)  to
Buyer, two original counterparts of the certificate executed by such Seller as to the accuracy of its representations and warranties as of the date of this Agreement
and as of the Closing in accordance with Section 7.1 and as to such Seller's compliance with and performance of its covenants and obligations to be performed or complied with at or before the
Closing in accordance with Section 7.2; 

       (xii)  to
the Closing Escrow Holder, one original of a certificate of non-foreign status of such Seller in the form of Exhibit 2.7(a)(xii) attached
hereto; 

      (xiii)  to
Buyer, a certificate of the manager or other governing body of such Seller certifying, as complete and accurate as of the Closing, attached copies of the Governing
Documents of such Seller, certifying and attaching all requisite resolutions or actions of such Seller's governing bodies and members approving the execution and delivery of this Agreement and the
consummation of the Contemplated Transactions and certifying to the incumbency and signatures of the officers or managers of such Seller executing this Agreement and any other document relating to the
Contemplated Transactions; 

      (xiv)  to
Buyer, lien releases, Uniform Commercial Code termination statements and other similar documents as may be necessary to provide reasonable evidence that all items
of intangible personal property, Tangible Personal Property and fixtures comprising Purchased Assets are free and clear of Encumbrances, other than Permitted Encumbrances; 

       (xv)  to
the Closing Escrow Holder, if Buyer and Seller reasonably determine that documentary transfer tax is payable in connection with the assignment contemplated by any
Lease Assignment and Assumption, but in any event if payment of such tax is required by the county recorder to record the corresponding Lease Assignment and Assumption in California, a separate
statement of the documentary transfer tax payable in connection with the recording of such Lease Assignment and Assumption, substantially in the form of Exhibit 2.7(a)(xv); 

      (xvi)  to
the Closing Escrow Holder, with respect to each of the Assigned Leases or the Purchased Real Property which is encumbered by a mortgage or deed of trust on the
Seller's interest, a payoff demand and/or a request for full reconveyance duly executed by the mortgagee or beneficiary thereof and/or a full reconveyance duly executed by the trustee thereof, and in
form and substance satisfactory to the Title Company; 

     (xvii)  to
the Closing Escrow Holder, such other instruments, certificates and affidavits as may reasonably be requested by the Title Company in connection with the issuance
of the Title Policies; 

15

 

    (xviii)  to
the Closing Escrow Holder, one original of a real estate withholding exemption certificate on FTB Form 593-W, duly executed by Sellers and in
form and substance reasonably satisfactory to Buyer; 

      (xix)  to
the Closing Escrow Holder, one original grant deed in the form of Exhibit 2.7(a)(xix) ("Grant Deed")
executed and acknowledged by Desert and otherwise in recordable form; together with a separate statement of the documentary transfer tax, if any, due in connection with the recording of the Grant
Deed, it being agreed that such transfer tax shall not be shown on the face of the corresponding Grant Deed; it also being agreed that the fee or penalty, if any, for non-filing of any
required preliminary change of ownership report shall be paid by Buyer in lieu of the filing of such a report; 

       (xx)  to
Buyer, two original counterparts to the letter agreement regarding theatre advertising arrangements in the form of Exhibit 2.7(a)(xx) executed by such
Seller; 

      (xxi)  to
Buyer, two original counterparts to the letter agreement regarding Concessions Inventories in the form of Exhibit 2.7(a)(xxi) executed by such Seller
("Concessions Letter Agreement"); and 

     (xxii)  to
Buyer, two original counterparts to the Development Agreement for the Signature Palm Springs theatre in a form mutually agreed upon by Buyer and the applicable
Seller prior to the Due Diligence Deadline, executed by Philip Harris & Associates, Inc. and the consents thereto executed by the applicable Seller and the Architect and Contractor named
therein. 

        (b)   Buyer
shall deliver: 

          (i)  to
the Closing Escrow Holder, the Closing Consideration (x) less the Holdback Escrow Amount and (y) less the Construction Escrows to an account specified
by the Closing Escrow Holder in a writing delivered to Buyer at least three (3) business days prior to the Closing Date; 

         (ii)  to
the Closing Escrow Holder, the amounts payable to the lenders pursuant to Section 2.10 to an account specified by the Closing Escrow Holder in a writing
delivered to Buyer at least three (3) business days prior to the Closing Date; 

        (iii)  to
the Closing Escrow Holder, the Holdback Escrow Amount, by wire transfer to an account specified by the Closing Escrow Holder in a writing delivered to Buyer at
least three (3) days prior to the Closing Date; 

        (iv)  to
the Construction Escrow Holder, the Construction Escrows; 

         (v)  to
the Sellers, four original counterparts to the Holdback Escrow Agreement, executed by Buyer and the Holdback Escrow Agent, 

        (vi)  to
each of the Sellers, two original counterparts of the applicable Bill of Sale, Assignment and Assumption executed by Buyer; 

       (vii)  to
each of the Sellers, two original counterparts to the letter agreement regarding the Trademark License Agreement executed by Buyer; 

      (viii)  to
the applicable Seller, four original counterparts to the Development Agreement for the Ukiah 6 (Ukiah, California) theatre in a form mutually agreed upon by Buyer
and the applicable Seller prior to Closing executed by Buyer; 

        (ix)  to
the applicable Seller, four original counterparts to the Development Agreement for the Stockton Holiday 8 (Stockton, California) theatre in a form mutually agreed
upon by Buyer and the applicable Seller prior to the Due Diligence Deadline executed by Buyer; 

16

  

         (x)  to
the Closing Escrow Holder, two original counterparts of each Lease Assignment and Assumption executed by Buyer; 

        (xi)  to
the Sellers, two original counterparts of the Consulting Agreement executed by Buyer; 

       (xii)  to
the Sellers, two original counterparts of each of the Noncompetition Agreements executed by Buyer; 

      (xiii)  to
the Sellers, a certificate executed by Buyer as to the accuracy of its representations and warranties as of the date of this Agreement and as of the Closing in
accordance with Section 8.1 and as to its compliance with and performance of its covenants and obligations to be performed or complied with at or before the Closing in accordance with
Section 8.2; 

      (xiv)  to
the Sellers, a certificate of the Secretary of Buyer certifying, as complete and accurate as of the Closing, attached copies of the Governing Documents of Buyer and
certifying and attaching all requisite resolutions or actions of Buyer's board of directors approving the execution and delivery of this Agreement and the consummation of the Contemplated Transactions
and certifying to the incumbency and signatures of the officers of Buyer executing this Agreement and any other document relating to the Contemplated Transactions; 

       (xv)  to
each of the Sellers, two original counterparts to the letter agreement regarding theatre advertising arrangements in the form of Exhibit 2.7(a)(xx) executed
by Buyer; 

      (xvi)  to
each of the Sellers, two original counterparts to the Concessions Letter Agreement executed by Buyer; and 

     (xvii)  to
the applicable Seller, four original counterparts to the Development Agreement for the Signature Palm Springs theatre in a form mutually agreed upon by Buyer and
Seller prior to the Due Diligence Deadline executed by Buyer. 

        (c)   Provided
that Closing Escrow Holder has received all the items to be delivered to it described in subsections (a) and (b) hereof, and provided further that the
Title Company is irrevocably and unconditionally prepared and committed to deliver to Buyer the Owner's Title Policy, Closing Escrow Holder is authorized and instructed as early as possible on the
Closing Date to do the following: 

          (i)  Record
the Lease Assignments and Assumptions, memorandum of leases, SNDAs, and NDAs in the official records of the county or counties where the respective Leased Real
Property are located, in such order or orders as Buyer may reasonably request pursuant to separate written instructions given by Buyer to Closing Escrow Holder; 

         (ii)  Record
the Grant Deed in the official records of the county or counties where the Purchased Real Property is located; 

        (iii)  Deliver
fully executed separate statements to the County Recorders of the respective California and Hawaii counties (to the extent separate statements are permitted in
Hawaii) in which the Leased Real Property and the Purchased Real Property are located; 

        (iv)  Deliver
funds pursuant to Section 2.3 and Sections 2.7(b)(i) and (ii); provided, however, such payments shall include payments necessary to release or
discharge any monetary liens which Sellers are obligated to release or discharge under this Agreement; 

         (v)  Deliver
to Sellers each of the documents set forth on Schedule 2.7(c); 

        (vi)  Deliver
to Buyer each of the documents set forth on Schedule 2.7(c); and 

17

 

       (vii)  Return
any other item to the party who delivered it to the Closing Escrow Holder. 

The
Closing Escrow Holder is hereby authorized and instructed to date the Lease Assignment and Assumptions as of the Closing Date. The Closing Escrow Holder is hereby authorized and instructed to date
as of the Closing Date any other document delivered by the parties hereto which has not theretofore been dated. The Closing Escrow Holder is hereby authorized and instructed to insert the amount of
the tax due on the separate statement in accordance with the Preliminary Settlement Statement. As soon as reasonably practicable, Seller shall provide the Closing Escrow Holder with a
copy of the Preliminary Settlement Statement agreed to by the parties in accordance with Section 2.8. The Closing Escrow Holder shall deliver the Title Policies and a conformed copy of the
Lease Assignments and Assumptions to Buyer not more than seven Business Days after the Closing Date. 

        2.8.    Prorations Adjustment.    

        (a)   The
items of income and expense or asset or liability, as the case may be, set forth below shall be prorated as of the Effective Time, so that Sellers shall bear all
such income and expense with respect to the Leased Real Property and the Purchased Real Property through and including the period preceding the Effective Time, and Buyer shall bear all such income and
expense with respect to the Leased Real Property and the Purchased Real Property on and after the Effective Time. Prorations shall be made pursuant to a preliminary settlement statement
("Preliminary Settlement Statements") prepared in good faith and delivered by each Seller to Buyer not earlier than 20 calendar days and not later than
10 calendar days prior to Closing, together with such supplemental calculations and information as shall be reasonably necessary or appropriate to enable Buyer to determine the accuracy thereof. The
Preliminary Settlement Statements shall be based upon the most current and reliable information reasonably available to such Seller at the time of its delivery, and may be based upon estimates where
actual amounts are impractical to obtain or verify. Within 5 calendar days of Buyer's receipt of the Preliminary Settlement Statements, Buyer shall notify the Sellers in writing whether Buyer approves
the Preliminary Settlement Statements. If Buyer approves the Preliminary Settlement Statements, or fails to notify a Seller of its disapproval at the time specified above, then the proration amount
shall be as set forth on applicable Preliminary Settlement Statement initially delivered by a Seller to Buyer. If Buyer disapproves a Preliminary Settlement Statement, then the applicable Seller and
Buyer shall use their Reasonable Best Efforts to agree upon the amounts to be set forth on such Preliminary Settlement Statement. The amounts set forth on the Preliminary Settlement Statements shall
be subject to adjustment or correction on the Final Settlement Statements. Buyer's approval or disapproval of a Preliminary Settlement Statement shall not be a condition to Closing, and any
disagreements regarding the Preliminary Settlement Statement shall be resolved at the time and in the manner provided for resolution of disagreements about the Final Settlement Statements. If the
applicable parties are unable to resolve all disagreements regarding the Preliminary Settlement Statement of a Seller prior to the Closing, then the proration amount shall be as set forth on the
Preliminary Settlement Statement initially delivered by such Seller to Buyer, with such modifications thereto, if any, to which the parties have agreed. 

        (b)   Each
Preliminary Settlement Statement shall set forth the following information as a credit or debit to Buyer or a Seller as applicable: 

          (i)  (A) Real
property taxes and assessments which are (x) a lien against the Leased Real Property or the Purchased Real Property, (y) separately
assessed against such premises and (z) payable by a Seller directly to the tax collector or reimbursed dollar for dollar to the corresponding lessor, shall be prorated as of the Closing Date
and any such amount up to and including the Closing Date shall be Seller's obligation and any amount after the Closing Date shall be Buyer's obligation and (B) real property Taxes and
assessments which are a lien 

18

 

against
the Leased Real Property, but are not separately assessed, or are neither payable by a Seller directly to the tax collector or reimbursed dollar for dollar to the lessor, shall be allocated
between Buyer and the applicable Seller in a reasonable manner, based upon the best estimates of the parties and prior billings therefor by the corresponding lessor. 

         (ii)  Personal
property taxes, sales taxes, and other state, county and municipal Taxes other than those Taxes on real property described in Section 2.8(b)(i) above
(but not including any Tax based on income), imposed on a periodic basis and payable for a taxable period that includes (but does not end on) the Closing Date and arising out of the ownership or
operation of the Purchased Assets, shall be prorated as of the Closing Date and any such amount up to and including the Closing Date shall be Sellers' obligation and any amount after the Closing Date
shall be Buyer's obligation. 

        (iii)  Monthly
or other periodic rent under the Assigned Leases, whether paid in arrears or in advance. 

        (iv)  Additional
rent under the Assigned Leases including without limitation additional rent to cover taxes, insurance, utilities, maintenance and other operating costs and
expenses incurred, or to be incurred, in connection with the ownership, operation, maintenance and management of the Leased Real Property, whether paid in arrears or in advance. 

         (v)  Payments
and charges under Purchased Contracts or Assigned Leases (to the extent such payments and charges are included in the Assumed Liabilities). 

        (vi)  Electrical,
gas, telephone, sewer and water utility service. Each Seller shall make reasonable efforts to cause meters to be read for such utilities as close to the
Effective Time as possible. To the extent such meters are read, adjustments shall be based upon such readings, using the number of business days prior to and after the reading, and prior to and after
the Effective Time. To the extent such meters are not read, adjustments shall be made using the most recently received bill for such utility service. In no event shall Sellers cause any of the
services to be physically terminated, shut off or interrupted; provided, however, Sellers shall not be responsible for any service interruption if Buyer does not make reasonable efforts to establish
or continue any service with the applicable utility service provider following the Closing Date. 

       (vii)  Payments
or assessments in respect of any REAs affecting the Leased Real Property to the extent payable by the lessee under any of the Assigned Leases or in respect of
any REAs affecting the Purchased Real Property. 

      (viii)  Buyer
shall be entitled to a credit to the Purchase Price in an amount equal to (A) the Gift Certificate Obligations liability of a Seller, which for the
purposes of the Preliminary Settlement Statement shall be in the amount set forth on the interim balance sheet of such Seller furnished to Buyer pursuant to Section 5.7 most recently in advance
of the Closing Date, plus (B) 90% of any increase in the amount of such Seller's Gift Certificate Obligations between the date of such financial statement and the Closing Date, minus
(C) 100% of any decrease in the amount of such Seller's Gift Certificate Obligations. 

        (ix)  Each
Seller shall be entitled to a credit for theatre cash remaining on the Closing Date in Seller's theatres being acquired as part of the Leased Real Property and
Purchased Real Property. 

         (x)  Each
Seller shall be entitled to a credit in an amount equal to the Excess Concessions Inventory (as defined in the Concessions Letter Agreement). 

19

 

        (xi)  Buyer
shall be entitled to a credit for prepaid amounts under the theatre advertising arrangements to the extent such amounts relate to the 90-day period
described in the letter agreement attached as Exhibit 2.7(a)(xx). 

        (c)   To
the extent the aggregate of the applicable Seller's credits and Buyer's obligations with respect to such Seller exceed the aggregate of Buyer's credits and Seller's
obligations set forth in Sections 2.8(i) through (xi) above, such Seller shall receive a credit to its allocation the Purchase Price in the amount of such excess. To the extent the aggregate of
Buyer's credits and a Seller's obligations exceed the aggregate of a Seller's credits and Buyer's obligations with respect to such Seller set forth in Sections 2.8(i) through (xi) above, the
Seller's allocation of the Purchase Price shall be reduced by the amount of such excess. 

        (d)   Buyer
shall deliver a post-closing settlement statement (the "Post-Closing Settlement Statement")
to each Seller not later than 120 days after Closing, together with such supplemental calculations and information as shall be reasonably necessary or appropriate to enable such Seller to
determine the accuracy thereof. The Post-Closing Settlement Statements shall be based upon the most current and reliable information reasonably available to Buyer at the time of its
delivery. Within 30 calendar days of the applicable Seller's receipt of the Post-Closing Settlement Statement, such Seller shall notify the Buyer in writing whether such Seller approves
the applicable Post-Closing Settlement Statement. If a Seller approves the applicable Post-Closing Settlement Statement, or fails to notify Buyer of its disapproval in the
manner and within the time specified above, then the Post-Closing Settlement Statement shall be as delivered to such Seller. If a Seller disapproves the Post-Closing Settlement
Statement, then the applicable Seller and Buyer shall use their Reasonable Best Efforts to agree upon the amounts to be set forth in the Post-Closing Settlement Statement, and the
Post-Closing Settlement Statement shall be amended accordingly. If a Seller and Buyer cannot agree upon the amounts to be set forth in the Post-Closing Settlement Statement,
then (except to the extent that such amounts in disagreement relate to operating expense passthroughs under the Assigned Leases or percentage rent payable under the Assigned Leases) the accounting
firm of PricewaterhouseCoopers, or its successor, is designated to act as sole arbitrator and to decide all points of disagreement with respect to the Post-Closing Settlement Statement,
such decision to be binding on the parties. If such firm is unwilling or unable to serve in such capacity, then the applicable Seller and Buyer shall use Reasonable Best Efforts to designate and
retain another mutually acceptable nationally-recognized accounting firm not retained for general audit purposes by either of them as the sole arbitrator under this Section 2.8. The costs and
expenses of the arbitrator, whether the firm designated above, or otherwise designated, shall be shared equally by the applicable Seller and Buyer and in the event that all Sellers object, then
Sellers' aggregate share of the costs and expenses of the arbitrator shall be fifty percent. Within 5 business days after the Post-Closing Settlement Statement has been agreed upon or
disagreements resolved, Buyer or the applicable Seller, as the case may be, shall promptly make a payment by wire transfer of immediately available funds to the other party in an amount equal to the
difference between the Closing Payment set forth on the Preliminary Settlement Statement and the proration amount set forth on the Post-Closing Settlement Statement, together with an
interest rate per annum for the period from and including the Closing Date through and including the date of payment at the "prime" rate of interest as published from time to time by The Wall Street
Journal in its "Money Rates" section of its Western Edition newspaper in effect from time to time during such period. To the extent that amounts in disagreement relate to operating expense
passthroughs under the Assigned Leases or percentage rent payable under the Assigned Leases and are not resolved prior to referral to arbitration, then the prorations therefor shall remain as set
forth on the Preliminary Settlement Statement, with such modifications thereto, if any, to which the parties have agreed, and any remaining disagreements regarding such amounts shall be resolved at
the time and in the manner provided for resolution of disagreements about the Final Settlement Statement. 

20

 

        (e)   Buyer
shall deliver a final settlement statement ("Final Settlement Statement") to each Seller not later than
April 15, 2005, together with such supplemental calculations and information as shall be reasonably necessary or appropriate to enable Sellers to determine the accuracy thereof. The Final
Settlement Statements shall be solely for the purpose of determining final prorations for operating expense passthroughs under the Assigned Leases and percentage rent paid or payable under the
Assigned Leases. The Final Settlement Statements shall be based upon the most current and reliable information reasonably available to Buyer at the time of its delivery. Within 30 calendar days of a
Seller's receipt of the applicable Final Settlement Statement, such Seller shall notify the Buyer in writing whether such Seller approves the Final Settlement Statement. If a Seller approves the Final
Settlement Statement, or fails to notify Buyer of its disapproval in the manner and within the time specified above, then the Final Settlement Statement shall be as delivered to the applicable Seller.
If a Seller disapproves a Final Settlement Statement, then the applicable Seller and Buyer shall use their Reasonable Best Efforts to agree upon the amounts to be set forth in the Final Settlement
Statement, and the Final Settlement Statement shall be amended accordingly. If a Seller and Buyer cannot agree upon the amounts to be set forth in the Final Settlement Statement, then the accounting
firm of PricewaterhouseCoopers, or its successor, is designated to act as sole arbitrator and to decide all points of disagreement with respect to the Final Settlement Statement, such decision to be
binding on both parties. If such firm is unwilling or unable to serve in such capacity, the applicable Seller and Buyer shall use Reasonable Best Efforts to designate and retain another mutually
acceptable nationally-recognized accounting firm not retained for general audit purposes by either of them as the sole arbitrator under this Section 2.8. The costs and expenses of the
arbitrator, whether the firm designated above, or otherwise designated, shall be shared equally by the applicable Seller and Buyer and in the event that all Sellers object, then Sellers' aggregate
share of the costs and expenses of the arbitrator shall be fifty percent. Within 5 business days after the Final Settlement Statement has been agreed upon or disagreements resolved, Buyer or Seller,
as the case may be, shall promptly make a payment by wire transfer of immediately available funds to the other party in an amount equal to the difference between the Closing Payment set forth on the
Preliminary Settlement Statement and the proration amount set forth on the Final Settlement Statement, together with an interest rate per annum for the period from and including the Closing Date
through and including the date of payment at the "prime" rate of interest as published from time to time by The Wall Street Journal in its "Money Rates" section of its Western Edition newspaper in
effect from time to time during such period. 

        2.9.    Holdback Escrow.    

        (a)   $7,947,684
shall be held back from the Closing Consideration allocated to Signature and placed into an interest-bearing escrow account for a period of twelve
(12) months following Closing pursuant to the terms of the Holdback Escrow Agreement. 

        (b)   $651,990
shall be held back from the Closing Consideration allocated to Turlock and placed into an interest-bearing escrow account for a period of twelve
(12) months following Closing pursuant to the terms of the Holdback Escrow Agreement. 

        (c)   $554,679
shall be held back from the Closing Consideration allocated to Desert and placed into an interest-bearing escrow account for a period of twelve
(12) months following Closing pursuant to the terms of the Holdback Escrow Agreement. 

        (d)   The
aggregate amount held back from the Closing Consideration pursuant to Sections 2.9(a) through 2.9(c) is referred to herein as the
"Holdback Escrow Amount". Buyer shall be entitled to an offset against the portion of the Holdback Escrow Amount allocated to a Seller under this
Section 2.9 for any payments such Seller is required to make pursuant to Section 2.8 that has not been paid to Buyer in accordance with Section 2.8, for any indemnification claim 

21

 

pursuant
to the Trademark License Agreement or for any indemnity payment pursuant to Article 11 of this Agreement. 

        2.10.    Closing Payments to Lenders.    

        A
portion of the Closing Consideration, on a dollar for dollar basis in an amount equal to the balance owing by the Sellers as of the Closing Date to the lenders identified on
Schedule 2.10, shall be wired by the Closing Escrow Holder directly to such lenders at Closing. 

        2.11.    Consents    

        (a)   Each
Seller shall use its Reasonable Best Efforts to promptly obtain all Consents listed in Schedule 3.2(c). If there are any Consents that have not yet been
obtained (or otherwise are not in full force and effect) as of the Closing, in the case of each Purchased Contract as to which such Consents were not obtained (or otherwise are not in full force and
effect) (the "Restricted Contracts"), Buyer may waive the closing conditions as to any such Consent and either: (i) elect to have the applicable
Seller continue its efforts to obtain the Consent; or (ii) elect to have the applicable Seller retain that Restricted Contract and all Liabilities arising therefrom or relating thereto. 

        (b)   If
Buyer elects to have the applicable Seller continue its Reasonable Best Efforts to obtain any Consent and the Closing occurs, notwithstanding Sections 2.1 and
2.4, neither this Agreement nor the Bill of Sale, Assignment and Assumption nor any other document related to the consummation of the Contemplated Transactions shall constitute a sale, assignment,
assumption, transfer, conveyance or delivery or an attempted sale, assignment, assumption, transfer, conveyance or delivery of the Restricted Contract, and following the Closing, the applicable Seller
shall use Reasonable Best Efforts to obtain the Consent relating to each Restricted Contract as quickly as practicable. Once a Consent for the sale, assignment, assumption, transfer, conveyance and
delivery of a Restricted Contract is obtained, the applicable Seller shall promptly assign, transfer, convey and deliver such Restricted Contract to Buyer, and Buyer shall assume the obligations under
such Restricted Contract from and after the date of assignment to Buyer pursuant to a special-purpose assignment and assumption agreement substantially similar in terms to those of the Bill of Sale,
Assignment and Assumption, as applicable. A Seller's failure or inability to obtain such Consent with respect to a Restricted Contract after the exercise of Reasonable Best Efforts shall not
constitute a breach by such Seller of any provision of this Agreement or give rise to a claim for Damages by Buyer. 

        2.12.    Lessor Consents and Estoppels    

        (a)   With
respect to each of the Assigned Leases (other than Assigned Leases which are Related Party Contracts), Sellers shall promptly after the date hereof request that the
lessor and master lessor (with respect to any Assigned Lease which is a sublease) thereunder execute an estoppel and consent in the form of Exhibit 2.12(a) attached hereto (the
"Lessor Consent and Estoppel"). Each Seller shall use its Reasonable Best Efforts to promptly obtain such a Lessor Consent and Estoppel, completed and
duly executed by such lessor or master lessor, on or prior to the Due Diligence Deadline. To the extent that a lessor or master lessor fails or refuses to deliver such a Lessor Consent and Estoppel,
each Seller shall use its Reasonable Best Efforts to obtain a lessor consent and estoppel as similar as reasonably possible to the Lessor Consent and Estoppel requested. 

        (b)   Sellers
and Buyer agree to pay to each such lessor or master lessor any fee, cost or expense (including attorneys' fees of such lessor or master lessor) to which such
lessor or master lessor is entitled under the Assigned Lease or master lease, as the case may be, within the time and in the manner provided in the Assigned Lease or master lease. The applicable
Seller and Buyer agree to equally share any such fee, cost or expense for amounts up to $500 per Assigned 

22

 

Lease;
provided, that, if such fee, cost or expense exceeds $500 per Assigned Lease, then such Seller shall pay the excess. The parties shall not be obligated to pay any such fee, cost or expense
unless the Assigned Lease provides for such payment by its written terms. 

        (c)   If
a lessor or master lessor requests that Buyer or Seller, or both, execute a written instrument (other than this Agreement and the related Lease Assignment and
Assumption in the form attached hereto) relating to the assumption or allocation of the lessee's obligations or liabilities under the Assigned Lease, and if Buyer or Seller, or both, execute such
instrument, then the parties agree that such instrument shall be solely for the benefit of such lessor or master lessor, and shall not be enforceable by any person other than such lessor or master
lessor, it being the intention of the parties that the assumption and allocation of the lessee's obligations and liabilities under the Assigned Leases shall be governed solely by the terms of this
Agreement, and the related Lease Assignment and Assumption in the form attached hereto. 

        (d)   Within
5 calendar days of receipt by any Seller of any consent or estoppel executed by any such lessor or master lessor, Sellers shall deliver a true and complete copy
thereof to Buyer. Buyer may refuse to approve a lessor consent or estoppel on any reasonable grounds, including without limitation inconsistency, if any, between the facts set forth therein and the
facts set forth on Schedule 3.6(d). Except as set forth in Section 5.10, Buyer shall not be obligated to obtain any releases of any guaranties given by any Person who is an Affiliate of
a Seller, to furnish any guaranties, additional deposits, letters of credit or other security for performance of the lessee's obligations under any of the Assigned Leases. Upon written approval by
Buyer of any such consent and estoppel, in whatever form, such consent and
estoppel shall be deemed the "Lessor Consent and Estoppel" with respect to such Assigned Lease. If a Seller fully complies with its covenants in this Section 2.12, but is not able to deliver a
consent and estoppel in form and substance satisfactory to Buyer within the time or in the manner set forth herein, then such Seller shall not be liable for Damages for the non-delivery of
such consent and estoppel. 

        (e)   With
respect to each of the Assigned Leases which are Related Party Contracts, Sellers shall within 10 calendar days after the date hereof cause the lessor thereunder to
execute and deliver an estoppel and consent in the form of Exhibit 2.12(b) attached hereto (the "Related Party Lessor Consent and Estoppel").
Sellers shall pay to each such lessor any fee, cost or expense (including attorneys' fees) to which such lessor is entitled under the Assigned Lease within the time and in the manner provided in the
Assigned Lease. Sellers shall not be obligated to pay any such fee, cost or expense unless the Assigned Lease provides for such payment by its written terms. Buyer may refuse to approve a Related
Party Lessor Consent and Estoppel on any reasonable grounds, including without limitation inconsistency, if any, between the facts set forth therein and the facts set forth on Schedule 3.6(d). 

        (f)    Notwithstanding
anything to the contrary in this Section 2.12, the Lessor Consent and Estoppel for Windward Stadium 10 shall be deemed to be a failure to
meet the condition set forth in Section 7.10 if such Lessor Consent and Estoppel does not contain an agreement from the landlord that the fixed rent payable by tenant thereunder shall not be
increased pursuant to Article 15 thereof. 

        (g)   Notwithstanding
anything to the contrary in this Section 2.12, the Lessor Consent and Estoppel for the Holiday Cinemas 8 (Stockton, California) shall be
deemed to be a failure to meet the condition set forth in Section 7.10 if such Lessor Consent and Estoppel does not contain an agreement from the landlord that Buyer or its permitted assignee
has no obligation and shall not be in default under the related lease with respect to the non-payment of percentage rent that otherwise might be payable under such lease with respect to
any period prior to Closing. 

23

 

        2.13.    REA Estoppels and DDA Consents    

        (a)   With
respect to each REA relating to the Leased Real Property or the Purchased Real Property the applicable Seller shall promptly after the date hereof request that the
other party or parties thereto execute estoppels with respect to such REA in the form, if any contemplated by such REA. Each Seller shall use its Reasonable Best Efforts to promptly obtain such an
estoppel, completed and duly executed by such party or parties, on or prior to the Due Diligence Deadline. If an REA does not contemplate estoppels, then the applicable Seller shall have no obligation
to seek or obtain estoppels with respect to such REA. The applicable Seller and Buyer shall pay to each such party or parties any reasonable fee, cost or expense (including attorneys' fees of such
party or parties) to which such party or parties are entitled under the REA, within the time and in the manner provided in the REA. The applicable Seller
and Buyer agree to equally share any such fee, cost or expense for amounts up to $500 per REA; provided, that, if such fee, cost or expense exceeds $500 per REA, then such Seller shall pay the excess.
The parties shall not be obligated to pay any such fee, cost or expense unless the REA provides for such payment by its written terms. Within 5 calendar days of receipt by any Seller of any such
estoppel executed by any such party, such Seller shall deliver a true and complete copy thereof to Buyer. 

        (b)   With
respect to each DDA pursuant to which a Seller is acting as developer, the applicable Seller shall promptly after the date hereof request that the government agency
that is party thereto execute a consent to assignment by such Seller to Buyer of the DDA, the rights thereunder and of the related Assigned Lease. Each Seller shall use its Reasonable Best Efforts to
promptly obtain such consent, completed and duly executed by such agency, on or prior to the Due Diligence Deadline. Within 5 calendar days of receipt by any Seller of any such consent executed by any
such agency, such Seller shall deliver a true and complete copy thereof to Buyer. If a Seller fully complies with its covenants in this Section 2.13, but is not able to deliver an estoppel or
consent in form and substance satisfactory to Buyer within the time or in the manner set forth herein, then such Seller shall not be liable for Damages to Buyer for the non-delivery of
such estoppel or consent. 

        2.14.    SNDAs    

        With
respect to each of the Assigned Leases which is a sublease, if any, the applicable Seller shall promptly after the date hereof request that each master lessor execute a
non-disturbance agreement in form and substance reasonably acceptable to Buyer; provided that such Seller shall have no obligation to request any such non-disturbance agreement
(a) from any master lessor that has previously executed such a non-disturbance agreement which is assignable by such Seller to Buyer or (b) with respect to any master lease
that expressly provides for non-disturbance of any subleasehold, upon the termination of the superior lease, so long as the sublessee attorns to the superior lessor and is not then in
default, on terms and conditions that are reasonably acceptable to Buyer. With respect to each of the Assigned Leases, if any, which is subordinate to a deed of trust executed by the lessor, or by a
master lessor, the applicable Seller shall promptly after the date hereof request that the beneficiary of each such deed of trust execute a non-disturbance agreement in form and substance
reasonably acceptable to Buyer, provided that such Seller shall have no obligation to request any such non-disturbance agreement from any beneficiary that has previously executed such a
non-disturbance agreement which is assignable by such Seller to Buyer. Each Seller shall use its Reasonable Best Efforts to promptly obtain such non-disturbance agreements from
each party, completed and duly executed by such party prior to the Due Diligence Deadline. Within 5 calendar days of receipt by a Seller of any such non-disturbance agreement executed by
any such party, such Seller shall deliver a true and complete copy thereof to Buyer. If a Seller fully complies with its covenants in this Section 2.14, but are not able to deliver a
non-disturbance agreement in form and substance satisfactory to Buyer within the time or in the manner set forth herein, then such Seller shall not be liable for Damages to Buyer for the
non-delivery of such non-disturbance agreement. 

24

 

        2.15.    Memoranda of Leases    

        (a)   With
respect to each of the Assigned Leases (other than Assigned Leases which are Related Party Contracts) for which a memorandum of lease is not recorded in the
official real property records in which the Leased Real Property is located, the applicable Seller shall promptly after the date hereof request that the lessor thereunder execute a memorandum of lease
in form and substance reasonably acceptable to Buyer. Sellers shall use their Reasonable Best Efforts to promptly obtain such memoranda of lease, duly executed and acknowledged by such lessor and
otherwise in recordable form, on or prior to the Due Diligence Deadline. Within 5 calendar days of receipt by a Seller of any such memorandum executed by any such lessor, such Seller shall deliver a
true and complete copy thereof to Buyer. If a Seller fully complies with its covenants in this Section 2.15, but is not able to deliver a memorandum of lease in form and substance satisfactory
to Buyer within the time or in the manner set forth herein, then such Seller shall not be liable for Damages to Buyer for the non-delivery of such memorandum of lease. 

        (b)   With
respect to each of the Assigned Leases which is a Related Party Contract and for which a memorandum of lease is not recorded in the official real property records
in which the Leased Real Property is located, the applicable Seller shall cause the lessor thereof to execute and deliver a memorandum of lease in form and substance reasonably acceptable to Buyer
within 10 calendar days of the date hereof. Within 5 calendar days of receipt by a Seller of any such memorandum executed by any such lessor, such Seller shall deliver a true and complete copy thereof
to Buyer. 

        2.16.    Development Agreements    

        The
applicable Sellers and Buyer shall each use their Reasonable Best Efforts to agree to the terms of the Development Agreements by the Due Diligence Deadline. 

        2.17.    Delivery of Property; Minimum Concessions Inventory    

        (a)   Upon
Closing, each Seller shall deliver possession of the Leased Real Property and Purchased Real Property to Buyer. Immediately following Closing, Seller shall make
available to Buyer (i) originals, to the extent available, and otherwise copies of, Assigned Leases and Purchased Contracts that relate to such location; (ii) copies or originals of all
available books and records of account, contracts, copies of correspondence with tenants and suppliers, unpaid bills and other papers or documents which pertain to the operation and management of such
location; (iii) all available permits and warranties for such location; (iv) if in Seller's Possession, the original "as-built" plans and specification; and all other
available plans and specifications and operation manuals; and (v) all keys, combinations and security codes. 

        (b)   Upon
Closing, each Seller shall deliver to Buyer at each theatre included in the Leased Real Property and the Purchased Real Property, the Minimum Concessions
Inventories. 

3.     REPRESENTATIONS AND WARRANTIES OF SELLERS  

        Each Seller severally (and not jointly) represents and warrants to Buyer with respect to itself (and not with respect to the other Sellers) that the following
statements contained in this Article 3 are accurate as of the date of this Agreement: 

        3.1.    Organization and Good Standing    

        (a)   Schedule 3.1(a)
contains a complete and accurate list of jurisdictions in which it is qualified to do business as a foreign entity. Each of Signature and Turlock
is a limited liability company duly organized, validly existing and in good standing under the laws of the State of California, its jurisdiction of organization, with full power and authority to
conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, 

25

 

and
to perform all its obligations under its Contracts. Desert is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, its
jurisdiction of organization, with full power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform
all its obligations under its Contracts. Seller is duly qualified to do business as a foreign limited liability company and is in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the failure to be so qualified could
not have a material adverse effect on any of the business, operations, assets or financial condition of a Seller or the Purchased Assets ("Material Adverse
Effect"). 

        (b)   Complete
and accurate copies of the Governing Documents of Seller, as currently in effect, have been delivered to Buyer. 

        (c)   Except
as disclosed in Schedule 3.1(c), Seller does not own any shares of capital stock or other securities of any other Person. 

        3.2.    Enforceability; Authority; No Conflict    

        (a)   This
Agreement constitutes the legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws affecting the rights of creditors generally and by equitable principles. Upon the
execution and delivery by Seller of the Bill of Sale, Assignment and Assumption, Holdback Escrow Agreement, and each other agreement to be executed or delivered by Seller at the Closing (collectively,
the "Seller's Closing Documents"), Seller "s Closing Documents will constitute the legal, valid and binding obligation of Seller, enforceable against it
in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws affecting the
rights of creditors generally and by equitable principles. Seller has the power and authority to execute and deliver this Agreement and the Seller "s Closing Documents and to perform its obligations
under this Agreement and the Seller's Closing Documents, and such action has been duly authorized by all necessary action by Seller's members, managers and any other governing body. 

        (b)   Except
as set forth in Schedule 3.2(b), neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of time): 

          (i)  breach
(A) any provision of any of the Governing Documents of Seller or (B) any resolution or consent adopted by the members, managers or other governing
body of Seller; 

         (ii)  breach
or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under
any Legal Requirement or any Order to which Seller, or any of the Purchased Assets, may be subject; 

        (iii)  contravene,
conflict with or result in a violation or breach of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is held by Seller or that otherwise relates to the Purchased Assets; 

        (iv)  breach
any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment
under, or to cancel, terminate or modify, any Contract to which Seller is a party unless such Person has waived in writing such breach or other right with respect to such Contract as described on
Schedule 3.2(b); or 

26

 

         (v)  result
in the imposition or creation of any Encumbrance upon or with respect to any of the Purchased Assets. 

        (c)   Except
as set forth in Schedule 3.2(c) and the notice required under the HSR Act, Seller is not required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 

        3.3.    Capitalization    

        All
current members of Seller and the Percentage Interests (as defined in the Governing Documents of Seller) of each such member as of the date of the Agreement are set forth in
Schedule 3.3. Except as set forth on Schedule 3.3, Seller is not party to any Contract relating to the issuance, sale or transfer of any membership interest or other securities of Seller
and to the Knowledge of Seller, no member of Seller is party to any Contract relating to voting of or the sale or transfer of any membership interest or other securities of Seller. 

        3.4.    Financial Statements    

        (a)   Signature
has delivered to Buyer: (i) an audited balance sheet of Signature as of December 31, 2003 (including the notes thereto, the
"Balance Sheet"), and the related audited statements of income and cash flows for the fiscal year then ended, including in each case the notes thereto,
together with the report thereon of Grant Thornton, independent certified public accountants; and (ii) audited balance sheets of Signature as of December 31 in each of the fiscal years
2000 through 2002, and the related audited statements of income and cash flows for each of the fiscal years then ended, including in each case the notes thereto together with the report thereon of
Grant Thornton, independent certified public accountants for the calendar year 2002 and Arthur Andersen, independent certified public accountants, for the calendar years 2000 and 2001. Turlock has
delivered to Buyer management-prepared financial statements for each of its fiscal years ended December 31, 2000 through 2003. Such financial statements of Signature and Turlock fairly and
accurately present in all material respects (and the financial statements delivered pursuant to Section 5.7 will fairly and accurately present in all material respects) the financial condition
and the results of operations and cash flows of Seller as at the respective dates of and for the periods covered by such financial statements, all in accordance with GAAP. The financial statements
referred to in this Section 3.4 and delivered pursuant to Section 5.7 reflect and will reflect the consistent application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. The financial statements have been and will be prepared from and are in accordance with the accounting Records of Seller. Seller has also
delivered to Buyer copies of all letters from Seller's auditors to Seller or the audit or other similar committee thereof during the thirty-six (36) months preceding the execution
of this Agreement, together with copies of all responses thereto. 

        (b)   Schedule 3.4(b)
contains theatre level cash flows for each theatre included in the Leased Real Property and the Purchased Real Property, together with adjusted
home office expenses and revenues (net) allocated to such theatre (the "Theatre Level Cash Flows"), for the twelve months ended December 31,
2003. The Theatre Level Cash Flows were prepared in good faith from the accounting records of Seller in a manner consistent with past practices. 

        3.5.    Books and Records    

        The
books of account and other financial Records of Seller, all of which have been made available to Buyer, are complete and correct and have been maintained in accordance with sound
business practices, including the maintenance of an adequate system of internal controls. The minute books of Seller, all of which have been made available to Buyer, contain accurate and complete
Records of all material meetings held of, and all material action taken by, the members, managers and governing bodies of Seller. 

27

   
        3.6.    Title to Purchased Assets; Encumbrances; Condition of Tangible Personal Property    

        (a)   Schedule 2.1(a)
accurately and completely identifies all of the written or oral instruments and agreements of any kind to which Seller is a party, or by which it
is bound as successor in interest, as either lessee or sublessee, for the leasing, rental or occupancy of any portion of the Leased Real Property. Schedule 2.1(a) also accurately and completely
identifies all such leases and all amendments, modifications, supplements, waivers, renewals and extensions thereof, and all documents evidencing the exercise of any options to renew, extend,
terminate, expand or relocate thereunder, and all such instruments or agreements determining or purporting to determine the square footage of the premises of such leases, or the improvements thereon,
or of any other real property of which the premises are a part, or the improvements thereon, for the purpose of calculating additional rent or otherwise, and any such instrument or agreement
determining or purporting to determine the commencement or expiration date of the lease term, or any renewal or extended term of such leases. Except for the Purchased Real Property identified in
Schedule 2.1(b), Desert does not own any real property. Neither Turlock nor Signature own any real property. Complete and correct copies of each document set forth on Schedule 2.1(a) (to
the extent not already provided to Buyer) shall be delivered to Buyer within 10 days of the execution hereof. Such documents shall be in form and substance satisfactory to Buyer and if such a
document is not delivered to Buyer in accordance with this Section 3.6(a), it shall be deemed deleted and shall be deleted from Schedule 2.1(a) at or prior to Closing. 

        (b)   Except
as disclosed on Schedule 3.6(b), (i) all of the Assigned Leases are valid and binding by and against Seller; and (ii) no defaults by Seller
exist thereunder nor has any event occurred which, with the giving of notice or the lapse of any applicable cure period, or both, would constitute a default by Seller under any Assigned Lease. Except
as disclosed on Schedule 3.6(b), (A) to Seller's Knowledge, all of the Assigned Leases are valid and binding by and against the other parties thereto (or their successors in interest);
and (B) to Seller's Knowledge, no defaults by the other parties thereto (or their successors in interest) exist thereunder nor has any event occurred which, with the giving of notice or the
lapse of any applicable cure period, or both, would constitute a default by such other parties under any Assigned Lease. 

        The
provision in Section 3.6(b)(ii) shall be deemed not to apply to any default under a Assigned Lease based upon defects, latent or patent, in the physical condition of
the Leased Real Property, including without limitation the compliance of the Leased Real Property with any Legal Requirement which default is unasserted by the landlord as of the Effective Time. 

        (c)   Except
to the extent disclosed on Schedule 3.6(c) and subject to the receipt of the consent contained in the corresponding Lessor Consent and Estoppel, execution
of this Agreement and the consummation of the Contemplated Transactions, including assignment by Seller to Buyer as of Closing of Seller's
right, title and interest in and to the Assigned Leases, does not and shall not (i) give rise to a right on the part of any lessor or sublessor or, to Seller's Knowledge, any other person to
purchase by virtue of any right granted by the applicable Seller, to terminate a Assigned Lease, or to recapture all or any portion of the Leased Real Property or the Purchased Real Property, or
(ii) result in the termination or cancellation of any option to renew or extend the term of any Assigned Lease, or of any other right or option otherwise exercisable by the lessee or sublessee,
as applicable, under any of the Assigned Leases. 

        (d)   Schedule 3.6(d)
accurately and completely identifies, as of the date hereof, with respect to each Assigned Lease, (i) to Seller's Knowledge, the correct
name of the current lessor; (ii) to Seller's Knowledge, the address or addresses at which such lessor is entitled to receipt of notices that must or may be delivered by Seller to such lessor
under the corresponding lease; (iii) the dates upon which the current term of the lease commenced and upon which it will expire not including any extension or termination rights set forth in
the corresponding lease; (iv) the period 

28

 

or
periods of any remaining renewal or extended terms of the lease which Seller has the option to exercise; (v) the current base rent payable under the lease, and any scheduled increases in
such base rent during the remainder of the current term of the lease; (vi) the manner in which any percentage rents payable during the current term of the lease is determined; (vii) the
operating expense passthroughs paid by Seller for the most recent month prior to the date of this Agreement for which they were paid; (viii) the unused or unapplied amount of any security
deposit or letter of credit which such lessor holds in connection with the performance of Seller's obligations under the lease; and (ix) the name and the address of any guarantor of Seller's
obligations under the lease. 

        (e)   Schedule 3.6(e)
accurately and completely identifies all leases, pad leases, ground leases, subleases, licenses or concession agreements relating to the Leased
Real Property or the Purchased Real Property or for which the applicable Seller is a party, or by which it is bound as successor in interest by written instrument, as either the lessor, groundlessor,
sublessor, licensor or grantor. 

        (f)    To
Seller's Knowledge, Schedule 3.6(f) accurately and completely identifies, as of the date of this Agreement, all other instruments and agreements (i.e., other
than the instruments and agreements identified on Schedule 2.1(a) and on Schedule 3.6(e)) which are not recorded in the real property records and which affect Seller's occupancy of the
Leased Real Property or right of possession concerning the Purchased Real Property including, without limitation, any such unrecorded parking agreements, advertising agreements, merchant association
agreements, development agreements, redevelopment agreements, development and disposition agreements. Complete and correct copies of each document set forth on Schedule 3.6(f) (to the extent
not already provided to Buyer) shall be delivered to Buyer within 10 days of the execution hereof. Such documents shall be in form and substance satisfactory to Buyer and if such a document is
not delivered to Buyer in accordance with this Section 3.6(f), it shall be deemed deleted and shall be deleted from Schedule 3.6(f) at or prior to Closing. 

        (g)   Schedule 3.6(g)
sets forth an accurate and complete list of all Tangible Personal Property which have a book value in excess of $2,000 per item. Except as set
forth on Schedule 3.6(g), each item of Tangible Personal Property is in good repair and good operating condition, ordinary wear and tear excepted, and is suitable for immediate use in the
Ordinary Course of Business. Schedule 3.6(g) accurately and completely identifies, as of the date hereof, with respect to each agreement for the lease or rental of any Tangible Personal
Property, the names of the parties to each such agreement, the date of each such agreement (including each amendment, modification or supplement thereto) and the items of personal property leased or
rented under such agreement. Schedule 3.6(g) also sets forth a list of all concession equipment that is located on the Leased Real Property or the Purchased Real Property that is owned by a
Person other than Seller or the landlord under the applicable Assigned Lease. 

        (h)   Seller
has good and marketable title and/or validly owns the Purchased Assets (other than the Assigned Leases and Purchased Real Property) free and clear of any
Encumbrances other than Permitted Non-Real Property Encumbrances ("Non-Real Property Encumbrances"). Seller warrants to Buyer
that, at the time of Closing, all of the Purchased Assets (other than the Assigned Leases and the Purchased Real Property) shall be free and clear of all Non-Real Property Encumbrances
other than those identified on Schedule 3.6(h) as acceptable to Buyer ("Permitted Non-Real Property Encumbrances"). 

        (i)    Schedule 3.6(i) contains
an accurate list of all agreements or instruments to which a Seller is a party and which provide for, create or perfect a
voluntary monetary lien which encumbers any one or more of the Assigned Leases, the Purchased Real Property or any interest therein. 

29

 

        3.7.    Condition of Leased Real Property    

        (a)   Except
as disclosed on Schedule 3.7(a), (i) Seller has not received written notice of any proceeding either instituted, or planned to be instituted,
respecting any taking, condemnation, action in eminent domain, or any voluntary conveyance in lieu thereof, of any part of the Leased Real Property or the Purchased Real Property, or any interest
therein or right accruing thereto or use thereof and (ii) to Seller's Knowledge, no taking or voluntary conveyance of all or part of any Leased Real Property or Purchased Real Property, or any
interest therein or right accruing thereto or use thereof, as the result of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Body affecting the Leased Real
Property or Purchased Real Property or any portion thereof has been commenced or planned to be instituted with respect to all or any portion of any Leased Real Property or Purchased Real Property. 

        (b)   Except
as disclosed on Schedule 3.7(b), (i) Seller has received no written notice from any (A) Governmental Body that any of the Leased Real
Property or Purchased Real Property is in violation of any Occupational Safety and Health Law or any other Legal Requirement, or (B) third
party that the Leased Real Property or Purchased Real Property is in violation of any REA or DDA affecting such Leased Real Property or Purchased Real Property, and (ii) to Seller's Knowledge,
no such violations described in Section 3.7(b)(i) exist; and (iii) all improvements on the Leased Real Property and Purchased Real Property are in good repair and working order,
ordinary wear and tear excepted. 

        (c)   Seller
has not received written notice of any adverse claims or demands with respect to the rights of access to public ways to permit the Leased Real Property or
Purchased Real Property to be used for its intended purpose. All Leased Real Property and Purchased Real Property is served by operating water, electric and telephone services and to Seller's
Knowledge, sewer, sanitary sewer and storm drain facilities. To Seller's Knowledge, all reciprocal easement agreements affecting any Leased Real Property or Purchased Real Property are in full force
and effect and Seller has not asserted any defaults against the other parties thereto and has not received any written notice of any defaults there under. 

        (d)   To
Seller's Knowledge, no building or structure on any Leased Real Property, the Purchased Real Property or any Appurtenance thereto or equipment thereon, or the use,
operation or maintenance thereof, violates any restrictive covenant or encroaches on any easement or on any property owned by others, which violation or encroachment materially interferes with the use
or could materially adversely affect the value of such building, structure or appurtenance or which encroachment is necessary for the operation of the business at any Assigned Lease or Purchased Real
Property. 

        3.8.    Inventories    

        All
Inventory consists of a quality usable and saleable, in the Ordinary Course of Business of Seller. The quantities of each item of Inventory are not excessive but are reasonable in
the present circumstances of Seller. 

        3.9.    No Undisclosed Liabilities    

        Except
as set forth in Schedule 3.9, Seller has no Liability except for Liabilities reflected or reserved against in the Balance Sheet and current Liabilities incurred in the
Ordinary Course of Business of Seller since the date of the Balance Sheet. 

        3.10.    Taxes    

        (a)   Seller
has filed or caused to be filed on a timely basis all Tax Returns and all reports with respect to Taxes that are or were required to be filed pursuant to
applicable Legal Requirements. All Tax Returns and reports filed by Seller are true, correct and complete in all material respects. 

30

 

Seller
has paid, or made provision for the payment of, all Taxes that have or may have become due for all periods covered by the Tax Returns or otherwise, or pursuant to any assessment received by
Seller, except such Taxes, if any, as are listed in Schedule 3.10(a) and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been
provided in the Balance Sheet. Except as provided in Schedule 3.10(a), Seller currently is not the beneficiary of any extension of time within which to file any Tax Return. No claim has ever
been made or to Seller's Knowledge, is reasonably expected to be made against Seller by any Governmental Body in a jurisdiction where Seller does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Encumbrances on any of the Purchased Assets for Taxes (other than for current Taxes not yet due and payable) or that arose in connection with any failure
(or alleged failure) to pay any Tax, and Seller has no Knowledge of any basis for assertion of any claims attributable to Taxes which, if adversely determined, would result in any such Encumbrance. 

        (b)   Seller
has made available to Buyer copies of all Tax Returns filed since 2000. Schedule 3.10(b) contains a complete and accurate list of all Tax Returns of Seller
that have been audited or are currently under audit and accurately describe any deficiencies or other amounts that were paid or are currently being contested. To the Knowledge of Seller, no
undisclosed deficiencies are expected to be asserted with respect to any such audit. All deficiencies proposed as a result of such audits have been paid, reserved against, settled or are being
contested in good faith by appropriate proceedings as described in Schedule 3.10(b). Seller has made available to Buyer, copies of any examination reports, statements or deficiencies or similar
items with respect to such audits. Except as provided in Schedule 3.10(b), Seller has no Knowledge that any Governmental Body is likely to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim concerning any Taxes of Seller either (i) claimed or raised by any Governmental Body in writing or (ii) as to which Seller has
Knowledge. Schedule 3.10(b) contains a list of all Tax Returns for which the applicable statute of limitations has not run. Except as described in Schedule 3.10(b), Seller has not given
or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) of any statute of limitations relating to the payment of Taxes of Seller
or for which Seller may be liable. 

        (c)   The
charges, accruals and reserves with respect to Taxes (other than deferred Taxes) on the Records of Seller are adequate (determined in accordance with GAAP) and are
at least equal to Seller's liability for Taxes. There exists no proposed tax assessment or deficiency against Seller except as disclosed in the Balance Sheet or in Schedule 3.10(c). 

        (d)   (i) All
Taxes that Seller is or was required by Legal Requirements to withhold, deduct or collect have been duly withheld, deducted and collected and, to the
extent required, have been paid to the proper Governmental Body or other Person; (ii) there is no tax sharing agreement, tax allocation agreement, tax indemnity obligation or similar written or
unwritten agreement, arrangement, understanding or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other arrangement relating to Taxes);
(iii) Seller (A) has not been a member of an affiliated group within the meaning of Code Section 1504(a) (or any similar group defined under a similar provision of state, local or
foreign law) and (B) has no liability for Taxes of any person (other than Seller and its Subsidiaries) under Treas. Reg. sect. 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor by contract or otherwise; and (iv) Seller has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code Section 6662. 

31

 

        3.11.    No Material Adverse Effect    

        Since
the date of the Balance Sheet, no event or development has occurred or circumstance exists which has had or could otherwise be expected to have, individually or in the aggregate a
Material Adverse Effect. 

        3.12.    Employee Benefits    

        (a)   Set
forth in Schedule 3.12(a) is a complete and correct list of all "employee benefit plans" as defined by ERISA Section 3(3), all specified fringe benefit
plans as defined in Code Section 6039D, and all other material bonus, incentive-compensation, deferred-compensation, profit-sharing, stock-option, stock-appreciation-right, stock-bonus,
stock-purchase, employee-stock-ownership, savings, severance, change-in-control, supplemental-unemployment, layoff, salary-continuation, retirement, pension, health,
life-insurance, disability, accident, group-insurance, vacation, holiday, sick-leave, fringe-benefit or Welfare Plan, and any other material employee compensation or benefit
plan, agreement, policy, practice, commitment, contract or understanding (whether qualified or nonqualified, currently effective or terminated within 12 months prior to the date of this
Agreement, written or unwritten) and any trust, escrow or other agreement related thereto that (i) is maintained or contributed to by Seller or any other corporation or trade or business
controlled by, controlling or under common control with Seller (within the meaning of Code Section 414 or ERISA Section 4001(a)(14) or 4001(b)), but excluding Philip Harris &
Associates, Inc. ("ERISA Affiliate") or has been maintained or contributed to in the last six (6) years by Seller or any ERISA Affiliate,
or with respect to which Seller or any ERISA Affiliate has or may have any liability, and (ii) provides benefits, or describes policies or procedures applicable to any current or former
director, officer, employee or service provider of Seller or any ERISA Affiliate, or the dependents of any thereof, regardless of how (or whether) liabilities for the provision of benefits are accrued
or assets are acquired or dedicated with respect to the funding thereof (collectively the "Employee Plans"). Set forth on Schedule 3.12(a) is a
complete and correct list of all ERISA Affiliates of Seller. 

        (b)   Seller
does not participate in any Multiemployer Plan. 

        (c)   Seller
has delivered to Buyer true, accurate and complete copies of (i) the documents comprising each Employee Plan (or, with respect to any Employee Plan which
is unwritten, a detailed written description of eligibility, participation, benefits, assets and any other matters which relate to the obligations of Seller or any ERISA Affiliate); (ii) all
trust agreements, insurance contracts or any other funding instruments related to the Employee Plans; (iii) all rulings, determination letters, no-action letters or advisory
opinions from the IRS, the U.S. Department of Labor, or any other Governmental Body that pertain to each Employee Plan and any open requests therefore; (iv) the most recent actuarial and
financial reports (audited and/or unaudited) and the annual reports filed with any Government Body with respect to the Employee Plans during the current year and the preceding year; (v) all
collective bargaining agreements pursuant to which contributions to any Employee Plans have been made or obligations incurred (including both Defined Benefit Plans and Welfare Plans) by Seller or any
ERISA Affiliate, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities; (vi) all securities registration statements
filed with respect to any Employee Plan; (vii) all executory contracts with third-party administrators, actuaries, investment managers, consultants and other independent contractors that relate
to any Employee Plan, and (viii) all summary plan descriptions, summaries of material modifications and memoranda, employee handbooks regarding the Employee Plans. 

        (d)   Except
as disclosed in Schedule 3.12(d), full payment has been made of all amounts that are required under the terms of each Employee Plan to be paid as
contributions with respect to all periods prior to and including the last day of the most recent fiscal year of such Employee Plan 

32

 

ended
on or before the date of this Agreement and all periods thereafter prior to the Closing Date. 

        (e)   Seller
does not maintain a Minimum-Funding Plan. 

        (f)    Seller
does not maintain a Defined Benefit Plan. 

        (g)   Seller
has, at all times, complied, and currently complies, in all material respects with the applicable continuation requirements for its Welfare Plans, including
(i) Code Section 4980B (as well as its predecessor provision, Code Section 162(k)) and ERISA Sections 601 through 608, inclusive, which provisions are hereinafter referred to
collectively as "COBRA" and (ii) any applicable state statutes mandating health insurance continuation coverage for employees. 

        (h)   The
form of all Employee Plans is in compliance with the applicable terms of ERISA, the Code, and any other applicable laws, including the Americans with Disabilities
Act of 1990, the Family Medical Leave Act of 1993 and the Health Insurance Portability and Accountability Act of 1996, and such plans have been operated in compliance with such laws and the written
Employee Plan documents. Neither Seller nor any fiduciary of an Employee Plan has violated the requirements of ERISA Section 404 of ERISA. All required reports and descriptions of the Employee
Plans (including Internal Revenue Service Form 5500 Annual Reports, Summary Annual Reports and Summary Plan Descriptions and Summaries of Material Modifications) have been (when required)
timely filed with the IRS, the U.S. Department of Labor or other Governmental Body and distributed as required, and all notices required by ERISA or the Code or any other Legal Requirement with
respect to the Employee Plans have been appropriately given. 

        (i)    Each
Employee Plan that is intended to be qualified under Code Section 401(a) or is a Defined Benefit Plan has received a favorable determination letter from the
IRS, and Seller has no Knowledge of any circumstances that will or could result in the revocation of any such favorable determination letter. Each trust created under any Employee Plan has been
determined to be exempt from taxation under Code Section 501(a), and Seller is not aware of any circumstance that will or could result in a revocation of such exemption. 

        (j)    There
is no material pending or, to Seller's Knowledge, threatened Proceeding relating to any Employee Plan. Neither Seller nor, to Seller's Knowledge, any fiduciary of
an Employee Plan has engaged in a transaction with respect to any Employee Plan that, assuming the taxable period of such transaction expired as of the date hereof, would reasonably be expected to
subject Seller or Buyer to a Tax or penalty imposed by either Code Section 4975 or ERISA Section 502(l) or a violation of ERISA Section 406. 

        (k)   Schedule 3.12(k)
lists all funded Welfare Plans that provide benefits to current or former employees of Seller. The funding under each Welfare Plan does not
exceed and has not exceeded the limitations under Code Sections 419A(b) and Code 419A(c). Seller is not subject to taxation on the income of any Welfare Plan's welfare benefit fund (as such term is
defined in Code Section 419(e) under Code Section 419A(g)). 

        (l)    Except
as required by Legal Requirements, the consummation of the Contemplated Transactions will not accelerate the time of vesting or the time of payment, or increase
the amount, of compensation due to any director, employee, officer, former employee or former officer of Seller. There are no contracts or arrangements providing for payments that could subject any
person to liability for tax under Code Section 4999. 

        (m)  Except
for the continuation coverage requirements of COBRA, Seller has no obligations or potential liability for benefits to employees, former employees or their
respective dependents following termination of employment or retirement under any of the Employee Plans that are Welfare Plans. 

33

 

        (n)   No
written or oral representations have been made to any employee or former employee of Seller concerning the employee benefits of Buyer. 

        (o)   Seller
has (i) filed or caused to be filed all returns and reports on the Employee Plans that it is required to file and (ii) paid or made adequate
provision for all fees, interest, penalties, assessments or deficiencies that have become due pursuant to those returns or reports or pursuant to any assessment or adjustment that has been made
relating to those returns or reports. There are no unpaid fees, penalties, interest or assessments due from Seller or from any other person that are or could become an Encumbrance on any Purchased
Asset or could otherwise adversely affect the businesses of the Purchased Asset. 

        3.13.    Compliance with Legal Requirements; Governmental Authorizations    

        (a)   Except
as set forth in Schedule 3.13(a) and other than those Legal Requirements that are governed by Section 3.7: (i) Seller is, and at all times
has been, in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets except where the
failure to be in compliance could not have a Material Adverse Effect; (ii) no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute
or result in a violation by Seller of, or a failure on the part of Seller to comply with, any Legal Requirement or (B) may give rise to any obligation on the part of Seller to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature, except where such event or circumstance could not have a Material Adverse Effect; and (iii) Seller has not received
any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged or potential violation by Seller of, or failure on
the part of Seller to comply with, any Legal Requirement or (B) any actual, alleged or potential obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature. 

        (b)   Schedule 3.13(b)
contains a complete and accurate list of each Governmental Authorization that is held by Seller related to the Purchased Assets or that is held
by a Person other than Seller that is required in connection with the present and contemplated operation of the Purchased Assets. Each Governmental Authorization listed or required to be listed in
Schedule 3.13(b) is valid and in full force and effect. Except as set forth in Schedule 3.13(b): (i) Seller has been in full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be identified in Schedule 3.13(b) except where the failure to be in compliance would not reasonably be expected to have a Material
Adverse Effect; (ii) no event has occurred or circumstance exists that may (with or without
notice or lapse of time) (A) constitute or result directly or indirectly in a violation of Seller or a failure on the part of Seller to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Schedule 3.13(b) or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation or termination of, or any
modification to, any Governmental Authorization listed or required to be listed in Schedule 3.13(b), except where such event or circumstance could not have a Material Adverse Effect;
(iii) Seller has not received any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or
potential violation by Seller of or failure on the part of Seller to comply with any term or requirement of any Governmental Authorization or (B) any actual, proposed, possible or potential
revocation, withdrawal, suspension, cancellation, termination of or modification to any Governmental Authorization. 

        3.14.    Legal Proceedings; Orders    

        (a)   Except
as set forth in Schedule 3.14(a), there is no pending or, to Seller's Knowledge, threatened Proceeding: (i) by or against Seller or that otherwise
relates to or may affect the business of, or any of the assets owned or used by, Seller; or (ii) that challenges, or that may have 

34

 

the
effect of preventing, delaying, making illegal or otherwise interfering with, any of the Contemplated Transactions. There are no Proceedings listed or required to be listed in
Schedule 3.14(a) that could have a Material Adverse Effect. There is no Proceeding with respect to which the defense is not being provided by the insurer under the insurance policies referenced
in Section 3.17. 

        (b)   Except
as set forth in Schedule 3.14(b), there is no Order to which Seller, its business or any of the Purchased Assets is subject and Seller is and has been in
compliance with all terms and requirements of each Order to which it or any of the Purchased Assets is or has been subject. 

        3.15.    Absence of Certain Changes and Events    

        Except
as set forth in Schedule 3.15, since the date of the Balance Sheet, Seller has conducted its business only in the Ordinary Course of Business and there has not been any: 

        (a)   Amendment
to the Governing Documents of Seller; 

        (b)   Damage
to or destruction or loss of any Purchased Asset, whether or not covered by insurance except where such damage or destruction could not otherwise have a Material
Adverse Effect; 

        (c)   Sale
(other than sales, processing, use or other disposition of Inventories and collection of Accounts Receivable in the Ordinary Course of Business, and depletion of
Concessions Inventories not in the Ordinary Course of Business), lease or other disposition of any Purchased Asset or property of Seller or the creation of any Encumbrance on any Purchased Asset; 

        (d)   Cancellation
or waiver of any claims or rights with a value to Seller in excess of $250,000; or 

        (e)   Contract
by Seller to do any of the foregoing. 

        3.16.    Contracts; No Defaults    

        (a)   Except
as set forth in Schedules 2.1(a), 2.1(g), 3.12(a) and 3.16(a), Seller is not party to any oral or written (i) employment, consulting or severance
agreement, collective bargaining agreement, or pension, profit-sharing, incentive compensation, deferred compensation stock purchase, stock option, stock appreciation right, group insurance, severance
pay, or retirement plan or agreement or any similar Contract, (ii) Contract, mortgage, note, installment obligation, agreement or other instrument relating to the borrowing of money by Seller
or the guaranty of any obligation for the borrowing of money by Seller, (iii) Contract affecting the ownership of, leasing of, title to, use of or any leasehold or other interest in any
Assigned Lease, (iv) Contract relating to the renovation or construction of any theatre or (iv) Contract which involves an obligation or right to receive payment of more than $50,000
(all such Contracts other than the Assigned Leases are collectively referred to as, "Material Contracts"). All such Schedules contain an accurate and
complete list of all amendments, modifications, supplements, waivers, renewals and extensions to the Material Contracts and the Assigned Leases. Complete and correct copies of all Material Contracts
have been made available to Buyer by Seller. 

        (b)   Except
as set forth in Schedule 3.16(b), (i) each Purchased Contract is in full force and effect and is valid and enforceable in accordance with its terms
against Seller, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws affecting the rights of
creditors generally and by equitable principles, and to the Knowledge of Seller, each other Person party thereto; and (ii) each Purchased Contract is assignable by Seller to Buyer without the
consent of any other Person. 

        (c)   Except
as set forth in Schedule 3.16(c), (i) Seller is, and has been, in compliance with all applicable terms and requirements of each Purchased Contract
except where such non-compliance 

35

 

could
not otherwise have a Material Adverse Effect; (ii) to Seller's Knowledge each other Person that has any Liability under any Purchased Contract is and has been in full compliance with all
applicable terms and requirements of such Contract; (iii) no event has occurred or circumstance exists as a result of any act or omission of Seller that may give any other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or payment under, or to cancel, terminate or modify, any Purchased Contract; (iv) no event has
occurred or circumstance exists as a result of any act or omission of Seller that would cause the creation of any Encumbrance affecting any of the Purchased Assets; and (v) Seller has not given
to or received from any other Person any notice or other communication (whether oral or written) regarding any actual, alleged, or potential violation or breach of, or default under, any Purchased
Contract. 

        (d)   Seller
is not involved in any renegotiations of, attempts to renegotiate or outstanding rights to renegotiate any material amounts paid or payable to Seller under a
Purchased Contract with any Person having the contractual or statutory right to demand or require such renegotiation and no such Person has made written demand upon Seller for such renegotiation. 

        3.17.    Insurance    

        Except
as set forth in Schedule 3.17: (i) all policies of insurance to which Seller is a party or that provide coverage to Seller: (A) are valid and outstanding;
(B) taken together, provide adequate insurance coverage for the operations of Seller for all risks normally insured against by a Person carrying on the same business or businesses as Seller in
the same location; (ii) Seller has not received (A) any refusal of coverage or any notice that a defense will be afforded with reservation of rights or (B) any notice of
cancellation or any other indication that any policy of insurance is no longer in full force or effect or that the issuer of any policy of insurance is not willing or able to perform its obligations
thereunder; (iii) Seller has paid all premiums due, and has otherwise performed all of its obligations, under each policy of insurance to which it is a party or that provides coverage to
Seller; and (iv) Seller has given notice to the insurer of all claims of which Seller has Knowledge that may be insured thereby. 

        3.18.    Environmental Matters    

        (a)   Except
as disclosed in Schedule 3.18: 

          (i)  With
respect to operations at, on, or affecting the Purchased Assets, Seller has complied and is in compliance with, all Environmental Laws. 

         (ii)  Seller
has no and will not have any liability under any Environmental Law, nor is Seller responsible for any liability of any other Person under any Environmental Law,
whether by contract, by operation of law or otherwise, with respect to facts, circumstances, Releases or conditions (A) first existing, initiated or occurring during Seller's tenancy at any
Leased Real Property or ownership at any Purchased Real Property; (B) of which Seller has Knowledge; or (C) caused by Seller or Seller's employees, agents, contractors, subcontractors,
officers or directors ("Seller Parties"). No Environmental Claim is pending, or to Seller's Knowledge, threatened against or relating to Seller
respecting any Leased Real Property or Purchased Real Property. 

        (iii)  Seller
has been duly issued and currently maintains all Environmental Permits necessary to operate the assets of Seller at the Leased Real Property and the Purchased
Real Property as currently operated. A true and complete list of all such Environmental Permits is set out in the Schedule 3.18. All of Seller's Environmental Permits are transferable and none
require consent, notification, or other action to remain in full force and effect following consummation of the transaction contemplated by this Agreement. 

36

 

        (iv)  None
of the following first became present at any Leased Real Property or Purchased Real Property during Seller's ownership, operation or tenancy at any Leased Real
Property or Purchased Real Property, none of the following became present at the Leased Real Property or the Purchased Real Property as a result of the actions of Seller Parties, and, to Seller's
Knowledge, none of the following currently exist at the Leased Real Property or the Purchased Real Property: (A) underground improvements, including but not limited to treatment or storage
tanks, or underground piping associated with such tanks, used currently or in the past for the management of Hazardous Materials, (B) a dump or landfill; (C) filled in land or wetlands;
(D) PCBs; (E) asbestos-containing materials; or (F) toxic mold. 

         (v)  Seller
has not arranged, by contract, agreement, or otherwise, for the transportation, treatment or disposal of Hazardous Materials originating at the Leased Real
Property or Purchased Real Property at any location such that it is or could be liable for Remediation of such location pursuant to Environmental Laws. 

        (b)   Seller
has furnished to Buyer, or shall deliver to Buyer in accordance herewith within ten (10) days of the execution hereof, copies of all environmental
assessments, reports, audits and other documents in Seller's Possession that relate to the current or past environmental condition of any Leased Real Property or Purchased Real Property or Seller's
past or present compliance with or liability under Environmental Laws respecting any Leased Real Property or Purchased Real Property, a true and
complete list of which is set forth in Schedule 3.18(b). To Seller's Knowledge, all such information that Seller has furnished to Buyer is accurate and complete. 

        3.19.    Employees; Labor Disputes; Compliance    

        (a)   Seller
has complied in all respects with all Legal Requirements relating to employment practices, terms and conditions of employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment and withholding of Taxes and occupational safety and health except where such non-compliance
could not otherwise have a Material Adverse Effect. No claim or proceeding is pending, or to Seller's Knowledge, threatened with respect to any actual, alleged, or potential failure to comply with any
of the foregoing Legal Requirements. 

        (b)   Except
as disclosed in Schedule 3.19(b), (i) Seller has not been, and is not now, a party to any collective bargaining agreement or other labor contract;
(ii) there has not been, there is not presently pending or existing, and to Seller's Knowledge there is not threatened, any strike, slowdown, picketing, work stoppage or employee grievance
process involving Seller; (iii) there is not pending or, to Seller's Knowledge, threatened against or affecting Seller any Proceeding relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or complaint filed with the National Labor Relations Board or any comparable Governmental Body, and there is no organizational
activity or other labor dispute against or affecting Seller or the theatres at the Leased Real Property or the Purchased Real Property; (iv) no application or petition for an election of or for
certification of a collective bargaining agent is pending; (v) no grievance or arbitration Proceeding exists that might have an adverse effect upon Seller or the conduct of its business;
(vi) there is no lockout of any employees by Seller, and no such action is contemplated by Seller; and (vii) to Seller's Knowledge there has been no charge of discrimination filed
against or threatened against Seller with the Equal Employment Opportunity Commission or similar Governmental Body. 

        3.20.    Brokers or Finders    

        Neither
Seller nor any of its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar
payments in connection with the sale of Seller's business or the Purchased Assets or the Contemplated Transactions. 

37

   
        3.21.    Transactions with Affiliates    

        Except
as set forth in Schedule 3.21, as of the Closing Date no current or former manager, director, executive officer or member of Seller, any Seller or any Affiliate of Seller
will be party to any Material Contract or Assigned Lease or, to Seller's Knowledge, has a material interest in any Material Contract or Assigned Lease. 

        3.22.    Representations and Warranties    

        Other
than with respect to the representations and warranties made in Article 4 of this Agreement and the ancillary agreements and certificates hereto (and subject to the
limitations contained in and provisions of this Agreement), Sellers acknowledge that neither Buyer nor any of its Affiliates or Representatives makes or has made any representation or warranty, either
express or implied, including as to the accuracy or completeness of or will have any Liability with respect to any of the information provided or made available to Sellers or their Representatives. 

4.     REPRESENTATIONS AND WARRANTIES OF BUYER  

        Buyer represents and warrants to each Seller that the following statements contained in this Article 4 are accurate as of the date of this Agreement: 

        4.1.    Organization and Good Standing    

        Buyer
is a corporation duly organized, validly existing and in good standing under the laws of the State of Tennessee, with full corporate power and authority to conduct its business as
it is now conducted. 

        4.2.    Authority; No Conflict    

        This
Agreement constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium and similar laws affecting the rights of creditors generally and by equitable principles. Upon the execution and
delivery by Buyer of the Bill of Sale, Assignment and Assumption, the Lease Assignment and Assumption, the Holdback Escrow Agreement and each other agreement to be executed or delivered by Buyer at
Closing (collectively, the "Buyer's Closing Documents"), each of the Buyer's Closing Documents will constitute the legal, valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its respective terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium and similar laws affecting the rights of creditors generally and by equitable principles. Buyer has the power and authority to execute and deliver this Agreement and the Buyer's Closing
Documents and to perform its obligations under this Agreement and the Buyer's Closing Documents, and such action has been duly authorized by all necessary corporate action. 

        4.3.    Brokers or Finders    

        Neither
Buyer nor any of its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar
payment in connection with the Contemplated Transactions. 

        4.4.    Representations and Warranties    

        (a)   Other
than with respect to the representations and warranties made in Article 3 of this Agreement as modified by the Disclosure Schedule and the ancillary
agreements and certificates hereto (and subject to the limitations contained in and provisions of this Agreement), Buyer acknowledges that none of Sellers or any of their respective Affiliates or
Representatives makes or has made any representation or warranty, either express or implied, including as to the accuracy or 

38

 

completeness
of or will have any Liability with respect to any of the information provided or made available to Buyer or its Representatives. 

        (b)   Buyer
further acknowledges that any projections, pro formas and forecasts provided by Sellers to Buyer and prepared in good faith and based on reasonable assumptions for
Sellers' operations and business practices are not to be viewed as facts or representations or warranties by Sellers, and that actual results of operations during the periods covered by such
forecasts, pro formas and projections (whether conducted by a Seller or by Buyer) may differ from the projected or forecasted results; and no such differences shall constitute a breach by any Seller
of a representation or warranty. 

5.     COVENANTS OF SELLERS PRIOR TO CLOSING  

        5.1.    Access and Investigation    

        (a)   Between
the date of this Agreement and the Closing Date, and upon reasonable advance notice received from Buyer, each Seller shall (i) afford Buyer and its
Representatives (collectively, "Buyer Group") reasonable access, during regular business hours, to such Seller's personnel, properties, Contracts,
Governmental Authorizations, books and Records and other documents and data, such rights of access to be exercised in a manner that does not unreasonably interfere with the operations of such Seller;
(ii) permit Buyer Group to make copies at Buyer's sole expense of all such Contracts, Governmental Authorizations, books and Records and other existing documents and data as Buyer may
reasonably request; (ii) furnish Buyer Group with such additional financial, operating and other data and information relating to the Purchased Assets as Buyer may reasonably request; and
(iv) otherwise cooperate and assist, to the extent reasonably requested by Buyer, with Buyer's investigation of the properties, assets and financial condition related to such Seller. 

        (b)   In
addition, Buyer shall have the right to have the Leased Real Property, Purchased Real Property and Tangible Personal Property inspected by Buyer Group, at Buyer's
sole cost and expense, for purposes of determining the physical condition and legal characteristics of the Leased Real Property, Purchased Real Property and Tangible Personal Property, including such
engineering, seismic, asbestos, environmental and mold surveys and inspections as Buyer deems appropriate. Any such inspection shall be scheduled upon reasonable advance notice to the applicable
Seller and conducted as described in clause (i) above and, if applicable, as hereinafter provided. In the event subsurface testing, any testing involving the taking of samples or other
physically destructive or invasive testing is recommended by any of Buyer Group, no such testing shall be performed without the prior consent of the applicable Seller (which shall not be unreasonably
withheld) and, if required under the applicable Assigned Lease, the lessor or sublessor thereunder. Subject to applicable Legal Requirements, upon the completion of any inspection or test, Buyer shall
reasonably restore the Leased Real Property and the Purchased Real Property to its condition prior to such inspection or test. Buyer shall indemnify the applicable Seller and hold harmless such Seller
and will reimburse such Seller for Damages to the extent caused by Buyer in connection with its physical inspection of the Leased Real Property and Purchased Real Property conducted pursuant to this
Section 5.1(b); except that in no event shall Buyer be deemed to have caused Damages as a result of Buyer's discovery of any adverse condition. 

        5.2.    Operation of the Business of Sellers    

        Between
the date of this Agreement and the Closing, each Seller shall: 

        (a)   conduct
its business only in the Ordinary Course of Business (provided that a Seller may deplete its Concessions Inventories in anticipation of the Closing, if such
Seller so chooses); 

39

 

        (b)   without
making any commitment on Buyer's behalf, use its Reasonable Best Efforts to preserve intact its current business organization, keep available the services of its
officers, managers, employees and agents and maintain its relations and good will with customers, landlords, creditors, employees, agents and others having business relationships with it; 

        (c)   provide
copies of theatre renovation plans related to a Assigned Lease; 

        (d)   make
no material changes in Seller's management personnel; 

        (e)   maintain
the Purchased Assets in a state of repair and condition that complies with Legal Requirements and is consistent with the requirements and normal conduct of
Seller's business; 

        (f)    keep
in full force and effect, without amendment, all material rights relating to Seller's business; 

        (g)   comply
with all Legal Requirements and contractual obligations applicable to the operations of Seller's business, including compliance with federal and state W.A.R.N.
Act or similar statutes; 

        (h)   continue
in full force and effect the insurance coverage under its policies or substantially equivalent policies; 

        (i)    cooperate
with Buyer and assist Buyer in identifying the Governmental Authorizations required by Buyer to operate the business from and after the Closing Date and either
transferring existing Governmental Authorizations of such Seller to Buyer, where permissible, or obtaining new Governmental Authorizations for Buyer; and 

        (j)    maintain
all books and Records of such Seller relating to such Seller's business in the Ordinary Course of Business. 

        5.3.    Negative Covenant    

        Except
as otherwise expressly permitted herein, between the date of this Agreement and the Closing Date, each Seller shall not (a) take any affirmative action, or fail to take any
reasonable action within its control, as a result of which any of the changes or events listed in Section 3.11 and Section 3.15 would occur or reasonably be expected to occur;
(b) terminate, cancel, amend, modify, supplement or waive performance of any Purchased Contract, Assigned Lease or Governmental Authorization or take any other action with respect to any of the
foregoing in a manner that is not in the Ordinary Course of Business or amend any theatre renovation plans without the prior consent of Buyer, which consent shall not be unreasonably withheld or enter
into any construction contracts other than with respect to the projects that are the subject of the Development Agreements and upon the prior consent of Buyer, which consent shall not be unreasonably
withheld; (c) allow the levels of supplies or other materials included in the Inventories to vary materially from the levels customarily maintained except as permitted by the Concessions Letter
Agreement; or (d) enter into any compromise or settlement of any litigation, proceeding or governmental investigation relating to the Purchased Assets, the business of Seller or the Assumed
Liabilities. 

        5.4.    Required Approvals    

        As
promptly as practicable after the date of this Agreement, each Seller shall make all filings required to be made by it to obtain Governmental Authorizations or pursuant to Legal
Requirements in order to consummate the Contemplated Transactions (including all filings under the HSR Act). Each Seller also shall cooperate with Buyer and its Representatives with respect to all
filings that Buyer elects to make or, pursuant to Legal Requirements or to obtain a Governmental Authorization, shall be required to make in connection with the Contemplated Transactions. Each Seller
also shall cooperate with Buyer and its Representatives in obtaining all Consents (including taking all commercially reasonable actions requested by Buyer to cause early termination of any applicable
waiting period 

40

 

under
the HSR Act); provided, however, that Sellers shall not be required to dispose of or make any change to their business, expend any material funds or incur any other burden in order to comply
with this Section 5.4. 

        5.5.    Notification    

        Between
the date of this Agreement and the Closing, each Seller shall promptly notify Buyer in writing if it becomes aware of (a) any fact or condition that causes or constitutes
a breach of its representations and warranties made as of the date of this Agreement or (b) the occurrence after the date of this Agreement of any fact or condition that would or be reasonably
likely to (except as expressly
contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had that representation or warranty been made as of the time of the occurrence of, or Seller's
discovery of, such fact or condition. Should any such fact or condition require any change to the Disclosure Schedule, the applicable Seller shall promptly deliver to Buyer a supplement to the
Disclosure Schedule specifying such change. Such delivery shall not be deemed to amend or supplement the Disclosure Schedule or prevent or cure any breach or affect any rights of Buyer under
Article 7, Article 9 and Article 11. During the same period, each Seller also shall promptly notify Buyer of the occurrence of any breach of any covenant of such Seller in this
Article 5 or of the occurrence of any event that may make the satisfaction of the conditions in Article 7 impossible or unlikely. 

        5.6.    Reasonable Best Efforts    

        Each
Seller shall use its Reasonable Best Efforts to cause the conditions in Article 7 to be satisfied by the Scheduled Closing Date. 

        5.7.    Interim Financial Statements    

        Until
the Closing Date, each Seller shall deliver to Buyer within ten (10) days after the end of each month and within forty-five (45) days after the end of
each fiscal quarter a copy of the financial statements for such month and fiscal quarter, respectively. Such financial statements and the deliveries under Section 2.8 shall be prepared in a
manner and containing information consistent with such Seller's current practices and certified by such Seller's chief financial officer as to compliance of such financial statements with the third,
fourth and fifth sentences of Section 3.4. 

        5.8.    Payment of Liabilities    

        Between
the date hereof and the Closing Date, each Seller shall pay or otherwise satisfy in the Ordinary Course of Business all of its Liabilities and obligations which become due and
payable. 

        5.9.    Current Evidence of Title    

        (a)   As
soon as is reasonably possible, the parties shall cause to be furnished to Buyer, at Sellers' expense, preliminary title reports issued by the Title Company for each
of the leasehold estates under the Assigned Leases and for the Purchased Real Property, together with complete and legible copies of all recorded documents appearing as exceptions thereon. As soon as
reasonably possible, Sellers shall cause to be furnished to Buyer, at Sellers' expense, (i) true and complete copies of all policies of title insurance previously obtained by the applicable
Seller with respect to the Assigned Leases, the Leased Real Property, the Purchased Real Property or any portion thereof, which are in Seller's Possession,
and (ii) true and complete copies of all boundary, land or ALTA surveys, if any, of the Purchased Real Property or the Leased Real Property, or any portion thereof, in Seller's Possession. 

        (A)  Buyer
shall have the right, but not the obligation, at Buyer's sole cost and expense, to cause to be furnished to the Title Company a current survey of all or any
portion of the Leased Real Property and the Purchased Real Property, or a current update of a pre-existing survey. 

41

 

        (B)  On
or before the Due Diligence Deadline, Buyer shall deliver to Sellers a written notice setting forth its objections, if any, to the exceptions to title reflected
therein or in the updated surveys (the "Disapproved Exceptions"). At or prior to Closing, Sellers shall cause the removal of all voluntary monetary
liens, all involuntary monetary liens which exist to Seller's Knowledge as of the date hereof and all other involuntary monetary liens having a face amount of less than $1,000,000 individually,
provided that Seller shall only be obligated to discharge such voluntary and involuntary liens to the extent attributable to an act or omission of the applicable Seller or persons claiming under or
through such Seller (as distinct from such Seller's lessor or master lessor, as applicable), and provided further that Seller shall not be obligated to discharge the liens of real property taxes and
assessments that are not yet delinquent, such taxes being prorated pursuant to this Agreement. Sellers shall make Reasonable Best Efforts to remove all other Disapproved Exceptions that are reasonably
disapproved by Buyer, but Seller shall not be required to incur any substantial costs or to institute litigation in connection therewith. Such removal may be by way of deletion of the exception or by
endorsement over the exception by the Title Company (and may be accomplished by the Sellers by bonding) in form and substance satisfactory to Buyer. If any new exception shall appear in any supplement
to the Title Documents and if such new exception existed prior to the date hereof but was not disclosed in the Title Documents, then Buyer shall have the right to object in writing to such exception
within five (5) Business Days after Buyer's receipt of such supplement, and such exception shall thereafter be a Disapproved Exception. If such new exception did not exist prior to the date
hereof, then Sellers shall promptly (but not later than Closing) remove such exception to Buyer's satisfaction subject to the limitations set forth above on Sellers' removal obligations respecting
involuntary monetary liens, and provided Sellers shall have no obligation to remove new exceptions caused by the acts or omissions of Buyer or its Representatives. If Sellers fail to cause the removal
of any exception which Sellers are obligated by this paragraph to remove, then Buyer's election to close shall not constitute a waiver of Buyer's rights hereunder, which shall survive Closing. 

        (C)  As
contemplated by Section 7.7, it shall be a condition to Buyer's obligation to close that Title Company be unconditionally committed at Closing, subject only to
the payment of the applicable premium, to issue policies of title insurance with respect to each of the Assigned Leases and the Purchased Real Property in amounts reasonably acceptable to Buyer and
the Title Company (but in no event shall the aggregate amount exceed the Purchase Price), naming Buyer as insured and, if requested, Buyer's lender as insured, and containing no exceptions other than
those which Buyer has approved in writing pursuant to Section 5.9(a). The Title Policies for the Assigned Leases naming Buyer as insured shall be the ALTA Extended Coverage Leasehold Owner's
Policy of Title Insurance—1970 Form and the Title Policies for the Assigned Leases naming Buyer's lender as insured shall be the ALTA Extended Coverage Leasehold Lender's Policy of Title
Insurance—1970 Form, if and so long as Buyer obtains Title Company's written commitment prior to the Due Diligence Deadline to issue such forms, otherwise Buyer shall accept the
corresponding current ALTA form policies. The Title Policies for the Purchased Real Property naming Buyer as insured shall be the ALTA Extended Coverage Owner's Policy of Title
Insurance—1970 Form and the Title Policies for the Purchased Real Property naming Buyer's lender as insured shall be the ALTA Extended Coverage Lender's Policy of Title
Insurance—1970 Form if and so long as Buyer obtains Title Company's written commitment prior to the Due Diligence Deadline to issue such forms, otherwise Buyer shall accept the
corresponding current ALTA form policies 

42

  

        (b)   Buyer
shall have the right, but not the obligation, to conduct complete and current searches, at Buyer's sole cost and expense, in the name of each Seller and other
appropriate parties of all Uniform Commercial Code Financing Statements records maintained by the Secretary of State of the state in which the applicable Seller is organized, the state in which such
Seller maintains its principal place of business, each jurisdiction in which a filing would be required in order to perfect a security interest in the Purchased Assets, the clerk or recorder of deeds
(or other governmental office where real property documents are filed for recording) of each county in which any Assigned Lease is located and wherever else a Seller or Buyer, based upon its
investigation, is aware that a Uniform Commercial Code Financing Statement has been filed. Prior to Closing, Seller shall deliver to Buyer releases, termination statements and other documents as may
be necessary to provide reasonable evidence that all items of intangible personal property, Tangible Personal Property and fixtures to be sold under this Agreement are free and clear of Encumbrances,
other than as permitted under this Agreement. 

        (c)   On
or before the Due Diligence Deadline, Buyer shall deliver to Seller a written notice setting forth its objections, if any, to the physical condition of the Leased
Real Property and the Purchased Real Property. Seller shall use Reasonable Best Efforts to cure each such objection to Buyer's reasonable satisfaction on or before the Closing Deadline; provided
however, that Sellers shall not be required to spend more than $25,000 to cure any individual objection, or $500,000 in the aggregate to cure all such objections. 

        (d)   Nothing
herein waives Buyer's right to claim a right to indemnification as provided in Section 11.2 if Buyer suffers Damages as a result of any breach by any
Seller of any express representation by such Seller set forth in this Agreement with respect to the condition of title to the Leased Real Property and the Purchased Real Property. 

        5.10.    Affiliate Guarantors    

        Buyer
and Sellers shall use their Reasonable Best Efforts to assist the Affiliate Guarantors in securing the release of the Affiliate Guarantors from their respective obligations under
the affiliate guarantees of the Assigned Leases set forth in Schedule 5.10 ("Affiliate Guarantees"). Such Reasonable Best Efforts of Buyer shall
include Buyer's offer to provide a lease guaranty on terms substantially equivalent to the Affiliate Guarantee. In the event that such an Affiliate Guarantee is not released, then Buyer shall
indemnify the corresponding Affiliate Guarantor for Damages incurred by such Affiliate Guarantor that constitute an Assumed Liability to the extent incurred with respect to the related Affiliate
Guarantee in the same manner that Buyer indemnifies a Seller for Assumed Liabilities pursuant to Article 11. Only for the purposes of the foregoing indemnity as between Buyer and an Affiliate
Guarantor, (a) a Predecessor Tenant shall be considered an Affiliate Guarantor and (b) the
applicable Affiliate Guarantor shall have the same rights and procedural obligations as those of a Seller under Article 11. 

6.     COVENANTS OF BUYER PRIOR TO CLOSING  

        6.1.    Required Approvals    

        As
promptly as practicable after the date of this Agreement, Buyer shall make, or cause to be made, all filings required by Legal Requirements (including all filings under the HSR Act)
to be made by it to consummate the Contemplated Transactions. Buyer also shall cooperate, and cause its Representatives and Affiliates to cooperate, with each Seller (a) with respect to all
filings each Seller shall be required by Legal Requirements to make and (b) in obtaining all Consents identified in Schedule 3.2(c), provided, however, that Buyer shall not be required
to dispose of or make any change to its business, expend any material funds or incur any other burden in order to comply with this Section 6.1. 

43

 

        6.2.    Reasonable Best Efforts    

        Buyer
shall use its Reasonable Best Efforts to cause the conditions in Article 8 to be satisfied by the Scheduled Closing Date. 

        6.3.    Notification    

        Between
the date of this Agreement and the Closing, Buyer shall promptly notify each Seller in writing if it becomes aware of (a) any fact or condition that causes or constitutes
a breach of its representations and warranties made as of the date of this Agreement or (b) the occurrence after the date of this Agreement of any fact or condition that would or be reasonably
likely to (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had that representation or warranty been made as of the time of the
occurrence of, or Buyer's discovery of, such fact or condition. Should any such fact or condition require any change to the Disclosure Schedule, Buyer shall promptly deliver to each Seller a
supplement to the Disclosure Schedule specifying such change. Such delivery shall not be deemed to amend or supplement the
Disclosure Schedule or prevent or cure any breach or affect any rights of a Seller under Article 8, Article 9 and Article 11. During the same period, Buyer also shall promptly
notify each Seller of the occurrence of any breach of any covenant of Buyer in this Article 6 or of the occurrence of any event that may make the satisfaction of the conditions in
Article 8 impossible or unlikely. 

7.     CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE  

        Buyer's obligation to purchase the Purchased Assets and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part): 

        7.1.    Accuracy of Representations    

        Each
Seller's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement, and shall be accurate in all material respects as of the time of the Closing as if then made, except to the extent that such
representations and warranties are qualified by the term "material," "Material Adverse Effect" or similar qualification in which case such representations and warranties (as so written, including the
term "material", "Material Adverse Effect" or such similar qualification) shall be true and correct in all respects at and as of the date of this Agreement and the Closing Date, in all cases without
giving effect to any supplement to the Disclosure Schedule. If Damages for a breach or breaches of such representations and warranties exceed $1,000,000 individually or in the aggregate, such breach
or breaches shall be deemed to be a failure of the condition precedent set forth in this Section 7.1. 

        7.2.    Seller's Performance    

        All
of the covenants and obligations that each Seller is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each
of these covenants and obligations (considered individually), shall have been duly performed and complied with in all material respects. 

        7.3.    Consents    

        Each
of the Consents set forth on Schedule 3.2(c) and required to be obtained in connection with the Contemplated Transactions shall have been obtained and shall be in full force
and effect. 

44

 

        7.4.    Additional Documents    

        Each
Seller shall have caused the documents and instruments required by Section 2.7(a) and the following documents to be delivered (or tendered subject only to Closing) to Buyer: 

        (a)   an
opinion of Sellers' counsel, dated the Closing Date, the substance of which is set forth in Exhibit 7.4(a); 

        (b)   evidence
of termination of the Concession Lease Agreement between Signature and Pacific Concessions, Inc.; 

        (c)   release
of Buyer Indemnified Parties from Pacific Concessions, Inc. in connection with proceeds to be paid to it by Signature as a result of the Contemplated
Transactions; 

        (d)   releases
of all Encumbrances on the Purchased Assets (other than the Assigned Leases and the Purchased Real Property), other than Permitted Non-Real Property
Encumbrances; 

        (e)   certificates
dated as of a date not earlier than the third Business Day prior to the Closing as to the good standing of each Seller and payment of all applicable state
Taxes by each Seller, executed by the appropriate officials of the State of California and each jurisdiction in which a Seller is licensed or qualified to do business as a foreign corporation as
specified in Schedule 3.1(a); and 

        (f)    such
other documents as Buyer may reasonably request for the purpose of: 

          (i)  evidencing
the accuracy of any of a Seller's representations and warranties; 

         (ii)  evidencing
the performance by a Seller or the compliance by a Seller, with any covenant or obligation required to be performed or complied with by such Seller; 

        (iii)  evidencing
the satisfaction of any condition referred to in this Article 7; or 

        (iv)  otherwise
facilitating the consummation or performance of any of the Contemplated Transactions. 

        7.5.    No Injunction    

        There
shall not be in effect any Legal Requirement or injunction or other Order that (a) prohibits the consummation of the Contemplated Transaction and (b) has been adopted
as issued, or has otherwise become effective since the date of this Agreement. Without limiting the generality of the foregoing, the applicable waiting period under the HSR Act shall have expired or
been terminated, and neither the Department of Justice nor the Federal Trade Commission shall have instituted any litigation to enjoin or delay consummation of the Contemplated Transactions. 

        7.6.    No Conflict    

        Neither
the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), contravene or conflict with
or result in a violation of or cause Buyer or any Affiliate of Buyer to suffer any adverse consequence under (a) any applicable Legal Requirement or Order or (b) any Legal Requirement or
Order that has been published by any Governmental Body. 

        7.7.    Title Insurance    

        Buyer
shall have received irrevocable and binding commitments to issue the Title Policies consistent with Section 5.9, if any, between Closing and recordation. Seller shall
furnish to the Title Company a standard gap indemnity in form sufficient to allow the Title Company to issue the Title Policies without any exception for matters arising due to acts or omissions of
Seller (as distinct from 

45

 

any
acts or omissions of such Seller's lessor or master lessor, as applicable) and otherwise in a form reasonably acceptable to Seller. 

        7.8.    Governmental Authorizations    

        Buyer
shall have received such Governmental Authorizations as are necessary or desirable to allow Buyer to operate the Purchased Assets from and after the Closing. 

        7.9.    Environmental Report; Physical Inspection    

        Buyer
shall have obtained on or before the Due Diligence Deadline, at Buyer's sole cost and expense, environmental site assessment reports and physical inspection and structural
engineering reports with respect to the Leased Real Property and Purchased Real Property, which reports shall be acceptable in form and substance to Buyer in its sole discretion and Buyer shall have
conducted, at Buyer's sole cost and expense, any further testing or diligence recommended in such reports. If Buyer disapproves the results of any such inspections and investigations, then, in
addition to the rights specified in Section 9.1, Buyer shall have the right to terminate this Agreement by written notice delivered to Sellers before the Due Diligence Deadline. If Buyer fails
so to terminate this Agreement on or before the Due Diligence Deadline, then the condition precedent in this Section 7.9 shall be deemed waived by Buyer. 

        7.10.    Assigned Lease Estoppels    

        Sellers
shall have delivered to Buyer pursuant to Section 2.12 hereof, on or prior to the Due Diligence Deadline, a Lessor Consent and Estoppel duly executed and delivered by each
lessor and master lessor under each of the Assigned Leases, in form and substance satisfactory to Buyer. 

        7.11.    REA and DDA Estoppels    

        Sellers
shall have delivered to Buyer pursuant to Section 2.13 hereof, on or prior to the Due Diligence Deadline, estoppels duly executed and delivered by each of the other
parties to the REAs, in form and substance reasonably satisfactory to Buyer. Sellers shall have delivered to Buyer pursuant to Section 2.13 hereof, consents from each of the agencies to the
DDAs, in form and substance reasonably satisfactory to Buyer. 

        7.12.    SNDAs    

        Sellers
shall have delivered to Buyer pursuant to Section 2.14 hereof, on or prior to the Due Diligence Deadline, original non-disturbance agreements duly executed,
acknowledged and
delivered by each of the parties described therein, in recordable form and otherwise in form and substance satisfactory to Buyer. 

        7.13.    Memoranda of Lease    

        Sellers
shall have delivered to Buyer pursuant to Section 2.15 hereof, on or prior to the Due Diligence Deadline, original memoranda of lease duly executed, acknowledged and
delivered by the lessors under the Assigned Leases, in recordable form and otherwise in form and substance satisfactory to Buyer. 

        7.14.    Merger Agreement    

        Buyer
and Signature Theatre Investors, LLC shall have entered into a Merger Agreement for the acquisition of Signature Theatre Investors, LLC by Buyer or its designees, and such Merger
Agreement shall not have been terminated by any Person party thereto. 

46

 

8.     CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE  

        Each Seller's obligation to sell the Purchased Assets and to take the other actions required to be taken by it at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may be waived by the applicable Seller in whole or in part): 

        8.1.    Accuracy of Representations    

        All
of Buyer's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement and shall be accurate in all material respects as of the time of the Closing as if then made except to the extent that such
representations and warranties are qualified by the term "material" or similar qualification in which case such representations and warranties (as so written, including the term "material" or such
similar qualification) shall be true and correct in all respects at and as of the date of this Agreement and the Closing Date. 

        8.2.    Buyer's Performance    

        All
of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), shall have been performed and complied with in all material respects. Without limiting the generality of the foregoing, Buyer shall have
tendered payment of the Purchase Price in the manner required under this Agreement. 

        8.3.    Additional Documents    

        (a)   Buyer
shall have caused the documents and instruments required by Section 2.7(b) and the following documents to be delivered (or tendered subject only to Closing)
to Sellers, and such other documents as Sellers may reasonably request for the purpose of: 

          (i)  evidencing
the accuracy of any representation or warranty of Buyer, 

         (ii)  evidencing
the performance by Buyer of, or the compliance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer, 

        (iii)  evidencing
the satisfaction of any condition referred to in this Article 8, or 

        (iv)  otherwise
facilitating the consummation or performance of the Contemplated Transactions. 

        (b)   Buyer
shall have caused to be delivered to Sellers, an opinion of Buyer's counsel, dated the Closing Date, the substance of which is set forth in Exhibit 8.3(b). 

        8.4.    No Injunction    

        There
shall not be in effect any Legal Requirement or any injunction or other Order that (a) prohibits the consummation of the Contemplated Transactions and (b) has been
adopted or issued, or has otherwise become effective, since the date of this Agreement. Without limiting the generality of the foregoing, the applicable waiting period under the HSR Act shall have
expired or been terminated, and
neither the Department of Justice nor the Federal Trade Commission shall have instituted any litigation to enjoin or delay consummation of the Contemplated Transactions. 

        8.5.    Merger Agreement    

        Buyer
and Signature Theatre Investors, LLC shall have entered into a Merger Agreement for the acquisition of Signature Theatre Investors, LLC by Buyer or its designees and such Merger
Agreement shall not have been terminated by any Person party thereto. 

47

 

9.     TERMINATION  

        9.1.    Termination Events    

        By
notice given prior to or at the Closing, subject to Section 9.2, this Agreement may be terminated as follows: 

        (a)   by
Buyer if a material breach of any provision of this Agreement has been committed by a Seller and such breach has not been waived by Buyer or cured within
10 days by the applicable Seller after written notice from Buyer of the breach; 

        (b)   by
a Seller if a material breach of any provision of this Agreement has been committed by Buyer and such breach has not been waived by such Seller or cured within
10 days by Buyer after written notice from such Seller of the breach; 

        (c)   by
either Buyer or a Seller if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before the Closing Deadline; or 

        (d)   by
mutual consent of Buyer and each Seller, at any time. 

        9.2.    Effect of Termination    

        (a)   Each
party's right of termination under Section 9.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of such
right of termination will not be an election of remedies. Notwithstanding the foregoing, if this Agreement is terminated pursuant to Section 9.1 by any party, such termination shall be without
liability for Damages to the other parties to this Agreement, and all obligations of all of the parties under this Agreement will terminate, except that the obligations of the parties in the last
sentence of Section 5.1(b), this Section 9.2 and Article 12 (except for those in Section 12.5) will survive; provided,  however, that,
if this Agreement is terminated pursuant to Section 9.1(a) or 9.1(b) and the breach resulted from the willful and deliberate
failure of any party to fulfill a condition to the performance of the other party, or the willful and deliberate failure to perform a covenant of this Agreement, or the willful and deliberate breach
of a representation or warranty contained in this Agreement, then the terminating party's (and non-terminating party's) right to pursue legal remedies will survive such termination
unimpaired. 

        (b)   Each
of the Sellers and Buyer acknowledge that the agreements contained in Section 9.2(a) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, the Sellers and Buyer would not enter into this Agreement; accordingly, if any party initiates litigation to recover Damages from the other pursuant to the proviso
of Section 9.2(a), then the prevailing party shall be entitled to its costs and expenses (including reasonable attorneys' fees) in connection with such suit, together with interest from the
date of termination of this Agreement on the amounts owed at the "prime" rate of interest as published from time to time by The Wall Street Journal in its "Money Rates" section of its Western Edition
newspaper in effect from time to time during such period plus two percent. 

10.   ADDITIONAL COVENANTS  

        10.1.    Assistance in Proceedings    

        Each
Seller will reasonably cooperate with Buyer and its counsel in the contest or defense of, and make available its personnel and provide any testimony and access to its books and
Records in connection with, any Proceeding against Buyer after the Closing Date involving or relating to (a) any Contemplated Transaction or (b) any action, activity, circumstance,
condition, conduct, event, fact, 

48

 

failure
to act, incident, occurrence, plan, practice, situation, status or transaction on or before the Closing Date involving such Seller or its business. 

        10.2.    Retention of and Access to Records    

        After
the Closing Date, Buyer shall retain for a period consistent with Buyer's record-retention policies and practices (but no less than five (5) years) those Records of each
Seller delivered to Buyer. Buyer also shall provide the applicable Seller and its Representatives reasonable access thereto, during normal business hours and on at least ten (10) days' prior
written notice, to enable them to prepare financial statements or tax returns or deal with tax audits. After the Closing Date, each Seller shall provide Buyer and its Representatives reasonable access
to Records that are Excluded Assets, during normal business hours and on at least ten (1) days' prior written notice, for any reasonable business purpose necessary to the ownership or operation
of the Purchased Assets specified by Buyer in such notice. 

        10.3.    Further Assurances    

        Subject
to the provisos in Section 5.1 and Section 6.1, the parties shall cooperate reasonably with each other and with their respective Representatives in connection with
any steps required to be taken as part of their respective obligations under this Agreement, and shall (a) furnish upon request to each other such further information; (b) execute and
deliver to each other such other documents; and (c) do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and
the Contemplated Transactions. 

        10.4.    Annual Passes    

        For
each of the calendar years 2005 through and ending with calendar year 2014, Buyer shall provide Signature (through Philip Harris & Associates, Inc.) with a total of 25
annual passes for free admission to any motion picture theatre operated by Buyer. 

11.   INDEMNIFICATION; REMEDIES  

        11.1.    Survival and Materiality    

        (a)   All
representations, warranties, covenants and obligations in this Agreement, the Disclosure Schedule, the supplements to the Disclosure Schedule, the certificates
delivered pursuant to Section 2.7 and any other certificate or document delivered pursuant to this Agreement shall survive the Closing and the consummation of the Contemplated Transactions,
subject to Section 11.6. 

          (i)  Notwithstanding
the foregoing, in the event that there is or are any breach or breaches of the representations and warranties of Sellers that become known to Buyer
prior to Closing based upon supplements to the Disclosure Schedules or through Buyer's exercise of its rights under Section 5.1 ("Known
Breaches") and (A) the Damages related to such Known Breaches are less than or equal to $1,000,000, then Buyer may elect to proceed to Closing and the amount by which
the Damages related to such Known Breaches are less than or equal to $1,000,000 shall be applied against the Basket, or (B) if the Damages related to such Known Breaches exceed $1,000,000 and
Buyer elects to proceed to Closing, then (x) Buyer shall have waived any claim for indemnification based upon the Known Breaches to the extent that the Damages therefor exceed $1,000,000 and
(y) such claims and Damages up to $1,000,000 shall be satisfied in full by application against the Basket so that the amount remaining in the Basket is $0. Notices of any such claims by Buyer
and disputes over the alleged amount of Damages shall be handled as provided in the following paragraph. 

         (ii)  Prior
to Closing, Buyer shall deliver to Sellers a notice setting forth the Known Breaches, together with such supplemental information as shall be reasonably necessary
or 

49

 

appropriate
to enable Sellers to determine the accuracy thereof ("Breach Notice"). The Breach Notice shall be based upon the most current and reliable
information reasonably available to Buyer at the time of its delivery. Within 2 Business Days after receipt of the Breach Notice, a Seller shall notify the Buyer in writing whether such Seller
disapproves of the Breach Notice. If a Seller disputes the Breach Notice, or fails to notify Buyer of its disapproval in the manner and within the time specified above, then the Breach Notice shall be
as delivered to Seller. If a Seller disapproves a Breach Notice, then such Seller and Buyer shall use their Reasonable Best Efforts for a period of 5 Business Days to agree to the Breach Notice, and
the Breach Notice shall be amended accordingly. If a Seller and Buyer cannot agree upon the Breach Notice, then the accounting firm of PricewaterhouseCoopers, or its successor, is designated to act as
sole arbitrator and to decide all points of disagreement with respect to the Breach Notice, such decision to be binding on both parties. If such firm is unwilling or unable to serve in such capacity,
the Seller and Buyer shall use Reasonable Best Efforts to designate and retain another mutually acceptable nationally-recognized accounting firm not retained for general audit purposes by either of
them as the sole arbitrator under this Section 11.2(a)(ii). The costs and expenses of the arbitrator, whether the firm designated above, or otherwise designated, shall be shared equally by the
applicable Seller and Buyer and in the event that all Sellers object, then Sellers' aggregate share of the costs and expenses of the arbitrator shall be fifty percent. 

        (b)   For
purposes of determining whether there has been any such misrepresentation or breach of warranty pursuant to this Article 11 and for purposes of calculating
the amount of Damages arising therefrom, the representations and warranties of Sellers and Buyer shall be deemed not to be qualified by any concept of "material", "Material Adverse Effect" or similar
qualification. 

        11.2.    Indemnification and Reimbursement By Sellers    

        Sellers,
severally based upon such Seller's respective percentage allocation of the Purchase Price and not jointly, shall indemnify and hold harmless Buyer, and its Representatives, and
Affiliates (collectively, the "Buyer Indemnified Persons"), and will reimburse the Buyer Indemnified Persons for any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable attorneys' fees and expenses) or diminution of value, whether or not involving a Third-Party Claim (but excluding any Damages not
involving a Third-Party Claim based on lost profits, consequential or punitive damages) (collectively, "Damages"), arising from or in connection with: 

        (a)   any
breach of any representation or warranty made by such Seller in (i) Article 3 of this Agreement (without giving effect to any supplement to the
Disclosure Schedule), (ii) the Disclosure Schedule, (iii) the supplements to the Disclosure Schedule, (iv) the certificates delivered pursuant to Section 2.7, or
(v) any transfer instrument; 

        (b)   any
breach of any covenant or obligation of such Seller in (i) this Agreement (ii) the certificates delivered pursuant to Section 2.7, or
(iii) any transfer instrument; 

        (c)   any
claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding made, or alleged to have been made,
by any Person with such Seller (or any Person acting on its behalf) in connection with any of the Contemplated Transactions; or 

        (d)   any
Retained Liabilities (other than for Damages that arise from the Released Claims). 

50

   
        11.3.    Indemnification and Reimbursement by Buyer    

        Buyer
will indemnify and hold harmless each of the Sellers and its respective Representatives and Affiliates (collectively, "Seller Indemnified
Persons"), and will reimburse Seller Indemnified Persons, for any Damages arising from or in connection with: 

        (a)   any
breach of any representation or warranty made by Buyer in Article 4 of this Agreement or in any transfer instrument; 

        (b)   any
breach of any covenant or obligation of Buyer in (i) this Agreement or (ii) any transfer instrument; 

        (c)   any
claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding made, or alleged to have been made,
by such Person with Buyer (or any Person acting on Buyer's behalf) in connection with any of the Contemplated Transactions; or 

        (d)   any
Assumed Liabilities. 

        11.4.    Limitations on Amount—Sellers    

        (a)   Signature
shall have no liability (for indemnification or otherwise) with respect to claims under Section 11.2(a) and 11.2(b) until the total of all Damages with
respect to such matters exceeds $722,517 and then only for the amount by which such Damages exceed $722,517. 

        (b)   Turlock
shall have no liability (for indemnification or otherwise) with respect to claims under Section 11.2(a) and 11.2(b) until the total of all Damages with
respect to such matters exceeds $59,272 and then only for the amount by which such Damages exceed $59,272. 

        (c)   Desert
shall have no liability (for indemnification or otherwise) with respect to claims under Section 11.2(a) and 11.2(b) until the total of all Damages with
respect to such matters exceeds $50,425 and then only for the amount by which such Damages exceed $50,425. 

        (d)   The
aggregate sum of the amounts in Sections 11.4(a), (b) and (c) is referred to herein as the "Basket".
However, the limitation of Sections 11.4(a), (b) and (c) will not apply to (i) claims under Section 11.2(c) and 11.2(d), (ii) to matters arising in respect of
Sections 2.4(b), 2.8, 3.2, 3.6(h), 3.10, 3.20 or 12.1, (iii) a breach of this Article 11 or (iv) a Seller's fraud. In no event shall a Seller's aggregate liability for claims
under Section 11.2(a) and 11.2(b) exceed the portion of the Holdback Escrow Amount allocated to such Seller in Section 2.9. 

        11.5.    Limitations on Amount—Buyer    

        Buyer
will have no liability (for indemnification or otherwise) with respect to claims brought by a Seller under Section 11.3(a) and 11.3(b) until the total of all Damages with
respect to such matters exceeds the portion of the Basket allocated to such Seller in Section 11.4 and then only for the amount by which such Damages exceed such portion of the Basket allocated
to such Seller in Section 11.4. However, the limitation of the preceding sentence of this Section 11.5 will not apply to (i) claims under Section 11.3(c) and 11.3(d),
(ii) matters arising in respect of Section 2.4(a), 2.8, the last sentence of Section 5.1(b), Sections 4.2, 4.3 or 12.1, (iii) a breach of this Article 11 or
(iv) Buyer's fraud. In no event shall Buyer's aggregate liability for claims to a Seller under Section 11.3(a) and 11.3(b) exceed an amount equal to the portion of the Holdback Escrow
Amount allocated to such Seller in Section 2.9. 

        11.6.    Time Limitations    

        (a)   If
the Closing occurs, a Seller will have liability (for indemnification or otherwise) with respect to Section 11.2(a) or Section 11.2(b) only if on or
before the one year anniversary of the Closing Date, Buyer notifies such Seller of a claim specifying the factual basis of the claim in 

51

 

reasonable
detail to the extent then known by Buyer. However, the limitation of the preceding sentence of this Section 11.6(a) will not apply to a Seller's fraud. 

        (b)   If
the Closing occurs, Buyer will have liability (for indemnification or otherwise) with respect to Section 11.3(a) or Section 11.3(b) only if on or before
the one year anniversary of the Closing Date, a Seller notifies Buyer of a claim specifying the factual basis of the claim in reasonable detail to the extent then known by such Seller. However, the
limitation of the preceding sentence of this Section 11.6(b) will not apply to Buyer's fraud. 

        11.7.    Remedy    

        Subject
to Section 9.2(a), the provisions of this Article 11 shall provide the sole and exclusive recourse and remedy of Buyer with respect to any claims made or with
respect to which indemnification may be sought under Section 11.2(a) through 11.2(d). Subject to Section 9.2(a), the provisions of this Article 11 shall provide the sole and
exclusive recourse and remedy of Sellers with respect to any claims made or with respect to which indemnification may be sought under Section 11.3(a) through 11.3(d). 

        11.8.    Third-Party Claims    

        (a)   Promptly
after receipt by a Person entitled to indemnity under Section 11.2 or 11.3 (an "Indemnified Person") of
notice of the assertion of a Third-Party Claim against it, such Indemnified Person shall give notice (a "Claim Notice") to the Person obligated to
indemnify under such Section (an "Indemnifying Person") of the assertion of such Third-Party Claim, provided that the failure to notify the Indemnifying
Person will not relieve the Indemnifying Person of any liability that it may have to any Indemnified Person except to the extent that the Indemnifying Person demonstrates that the defense of such
Third-Party Claim is prejudiced by the Indemnified Person's failure to give such notice. 

        (b)   The
Indemnifying Person shall have ten (10) days after receipt of the Claim Notice to notify the Indemnified Person (i) whether or not the Indemnifying
Person disputes its liability to the Indemnified Person with respect to such claim, and (ii) notwithstanding such dispute, whether or not the Indemnifying Person desires to defend the
Indemnified Person against such claim. 

        (c)   If
the Indemnifying Person does not elect to assume the defense of such claim, the Indemnified Person may engage counsel of its choosing and proceed to defend the claim
and reserve its right to recover its Damages from the Indemnifying Person if the latter wrongfully refused to defend such claim. Any action by Indemnified Person against Indemnifying Person for
wrongful refusal to defend shall be brought within the applicable period of limitations under applicable state law. 

        (d)   If
an Indemnified Person gives notice to the Indemnifying Person pursuant to Article 11 of the assertion of a Third-Party Claim, the Indemnifying Person shall be
entitled to participate in the defense of such Third-Party Claim and, if it so elects (unless (i) the Indemnifying Person is also a Person against whom the Third-Party Claim is made and the
Indemnified Person determines in good faith that joint representation would be inappropriate, or (ii) the Indemnifying Person fails to provide reasonable assurance to the Indemnified Person of
its financial capacity to defend such Third-Party Claim and provide indemnification with respect to such Third-Party Claim), the Indemnifying Person may assume the defense of such Third-Party Claim
with counsel of its own choosing that is reasonably satisfactory to the Indemnified Person. After notice from the Indemnifying Person to the Indemnified Person of its election to assume the defense of
such Third-Party Claim, the Indemnifying Person shall not, so long as it diligently conducts such defense, be liable to the Indemnified Person under this Article 11 for any fees of other
counsel or any other expenses with respect to the defense of such Third-Party Claim, in each case subsequently incurred by the Indemnified Person in connection with the defense of such Third- 

52

 

Party
Claim, other than reasonable costs of investigation. If the Indemnifying Person assumes the defense of a Third-Party Claim, (A) such assumption shall not constitute an admission by the
Indemnifying Person that the claims made in that Third-Party Claim are within the scope of and subject to indemnification, and (B) no compromise or settlement of such Third-Party Claims may be
effected by the Indemnifying Person without the Indemnified Person's Consent unless: (I) there is no finding or admission of any violation of Legal Requirement or any violation of the rights of
any Person by the Indemnified Person; (II) the sole relief provided is monetary damages that are paid in full by the Indemnifying Person; and (III) the Indemnified Person shall have no
liability with respect to any compromise or settlement of such Third-Party Claims effected without its Consent. 

        (e)   Except
where the Indemnifying Person (i) timely elects to defend the Indemnified Person (in which case Section 11.8(d) shall govern), or (ii) the
Indemnifying Person disputes its liability in a timely manner, the Indemnifying Person will be bound by any determination made in such Third-Party Claim or any compromise or settlement effected by the
Indemnified Person, subject to their respective limits on indemnification under Sections 11.4 and 11.5. 

        (f)    Notwithstanding
the foregoing, if an Indemnified Person determines in good faith that there is a reasonable probability that a Third-Party Claim may adversely affect it
or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Person may, by notice to the Indemnifying Person,
assume the exclusive right to defend, compromise or settle such Third-Party Claim, but the Indemnifying Person will not be bound by any determination of any Third-Party Claim so defended for the
purposes of this Agreement or any compromise or settlement effected without its consent (which may not be unreasonably withheld). 

        (g)   With
respect to any Third-Party Claim subject to indemnification under this Article 11 (i) both the Indemnified Person and the Indemnifying Person, shall
keep the other Person reasonably informed of the status of such Third-Party Claim and any related Proceedings at all stages thereof where such Person is not represented by its own counsel, and
(ii) the parties agree (each at its own expense) to render to each other such assistance as they may reasonably require of each other and to cooperate in
good faith with each other in order to ensure the proper and adequate defense of any Third-Party Claim. 

        (h)   With
respect to any Third-Party Claim subject to indemnification under this Article 11, the parties agree to cooperate in such a manner as to preserve in full (to
the extent possible) the confidentiality of all Confidential Information and the attorney-client and work-product privileges. In connection therewith, each party agrees that (i) it
will use its Reasonable Best Efforts, in respect of any Third-Party Claim in which it has assumed or participated in the defense, to avoid production of Confidential Information (consistent with
applicable Legal Requirements and rules of procedure), and (ii) all communications between any party hereto and counsel responsible for or participating in the defense of any Third-Party Claim
shall, to the extent possible, be made so as to preserve any applicable attorney-client or work-product privilege. 

        11.9.    Other Claims    

        A
claim for indemnification for any matter not involving a Third-Party Claim may be asserted by notice to the party from whom indemnification is sought and shall be paid promptly after
such notice. 

        11.10.    Released Claims    

        Buyer
agrees not to assert any claims against Sellers (whether by way of demand, suit, cross-complaint, impleader or otherwise) and covenants not to sue Sellers for Damages with respect
to the Released Claims and, as between Buyer and Sellers, releases Sellers from any Liability with respect thereto. 

53

 

        11.11.    Title Insurance    

        As
between Buyer and Sellers, Buyer agrees that Buyer's sole recourse respecting any Subject To Liabilities shall be against the Title Company under the Title Policies. Notwithstanding
the foregoing, to the extent that Buyer has recourse against Persons other than Sellers with respect to the Subject To Liabilities nothing herein shall prevent Buyer from pursuing such remedies. The
provisions of this Section 11.11 shall survive the delivery of and shall not merge into the Grant Deed delivered to Buyer at Closing respecting the Purchased Real Property. 

12.   GENERAL PROVISIONS  

        12.1.    Expenses    

        Except
as otherwise provided in this Agreement, each party to this Agreement will bear its respective fees and expenses incurred in connection with the preparation, negotiation,
execution and performance of this Agreement and the Contemplated Transactions, including all fees and expense of its Representatives. At Closing, Sellers shall pay (a) fees for recording of the
reconveyances, the memoranda of lease and Lease Assignments and Assumptions and (b) documentary transfer taxes. At Closing, Buyer and the applicable Seller shall share equally that portion of
the title premiums for the Title Policies equivalent to the basic premium that would have been payable for standard CLTA coverage ("Sellers' Premium
Portion"). At Closing, Buyer shall pay (i) fees for recording of the SNDAs and NDAs; (ii) premiums for the Title Policies in excess of the Sellers' Premium
Portion including, without limitation, the difference between standard coverage and extended coverage, the additional premiums if any attributable to the issuance of the lender's policies, and the
additional premiums if any attributable to the issuance of any endorsements to the owner's or lender's policies; and (iii) the penalty payable in connection with election not to file
preliminary change of ownership reports in California. Buyer will pay one-half and the Seller will pay one-half of (A) the HSR Act filing fee; (B) the fees and
expenses of the Closing Escrow Holder under this Agreement; (C) the Holdback Escrow Agent under the Holdback Escrow Agreement; provided that the HSR Act filing fee will be paid by Buyer and
Sellers at the time of the filing of the HSR Act filing and not through the Closing Escrow Holder and the fees payable under the Holdback Escrow Agreement shall be paid to the Holdback Escrow Agent
pursuant to the Holdback Escrow Agreement. If this Agreement is terminated, the obligation of each party to pay its own fees and expenses will be subject to any rights of such party arising from a
breach of this Agreement by another party. 

        12.2.    Public Announcements; Confidentiality    

        (a)   Any
public announcement, press release or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and
in such manner as the parties mutually agree, subject to any Legal Requirement applicable to Buyer or Sellers. Except with the prior consent of the other parties or as permitted by this Agreement,
neither Buyer, Seller nor any of their respective Representatives shall disclose to any Person (i) the fact that any Confidential Information of Sellers has been disclosed to Buyer or its
Representatives, that Buyer or its Representatives have inspected any portion of the Confidential Information of Sellers or (ii) any information about the Contemplated Transactions, including
the status of such discussions or negotiations, the execution of any documents (including this Agreement) or any of the terms of the Contemplated Transactions or the related documents (including this
Agreement). Sellers and Buyer will consult with each other concerning the means by which the employees, customers, suppliers and others having dealings with Sellers will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any such communication through one of its Representatives. 

        (b)   Buyer
and Sellers acknowledge that they entered into a letter agreement dated May 17, 2002 regarding confidentiality and non-disclosure of certain
information regarding Sellers and their 

54

 

business
in connection with a possible transaction among the parties (the "2002 Agreement"). Buyer and Sellers hereby agree that the terms and
provisions of the 2002 Agreement shall apply to the Contemplated Transactions and, consequently, hereby reinstate such terms and provisions and incorporate them herein by this reference for a term of
one year from the later of the Agreement Date or the date on which this Agreement is terminated under Section 9.1; provided that Buyer's
obligations to maintain the confidentiality of Information (as defined in the 2002 Agreement) comprising Purchased Assets shall terminate effective upon consummation of the Contemplated Transactions
on the Closing Date. This Section 12.2(b) shall survive the termination of this Agreement. 

        12.3.    Notices    

        All
notices, consents, waivers and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when (a) delivered to the
appropriate address by hand or by nationally-recognized overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with confirmation of transmission by the
transmitting equipment; or (c) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or
e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party
may designate by notice to the other parties): 

        Sellers:

Signature
Theatres, LLC

c/o Signature Theatres Management Company

3000 Executive Parkway, Suite 150

San Ramon, CA 94583

Attention: Philip Harris, President

Fax No: (925) 884-4901

Phone No.: (925) 884-4800 

with
a mandatory copy to: 

Greene
Radovsky Maloney & Share LLP

Four Embarcadero Center, Suite 4000

San Francisco, California 94111-4106

Attention: Donald R. Share, Esq.

Fax No.: (415) 777-4961

Phone No.: (415) 981-1400 

Turlock
Cinemas, LLC

c/o Signature Theatres Management Company

3000 Executive Parkway, Suite 150

San Ramon, CA 94583

Attention: Philip Harris, President

Fax No: (925) 884-4901

Phone No.: (925) 884-4800 

55

 

with
a mandatory copy to: 

Greene
Radovsky Maloney & Share LLP

Four Embarcadero Center, Suite 4000

San Francisco, California 94111-4106

Attention: Donald R. Share, Esq.

Fax No.: (415) 777-4961

Phone No.: (415) 981-1400 

        Until
the Effective Time: 

Signature
Desert Cinemas, LLC

c/o Signature Theatres Management Company

3000 Executive Parkway, Suite 150

San Ramon, CA 94583

Attention: Philip Harris, President

Fax No: (925) 884-4901

Phone No.: (925) 884-4800 

        From
and after the Effective Time: 

Desert
Representative

c/o Signature Theatres Management Company

3000 Executive Parkway, Suite 150

San Ramon, CA 94583

Attention: Philip Harris

Fax No: (925) 884-4901

Phone No.: (925) 884-4800 

with
a mandatory copy to: 

Greene
Radovsky Maloney & Share LLP

Four Embarcadero Center, Suite 4000

San Francisco, California 94111-4106

Attention: Donald R. Share, Esq.

Fax No.: (415) 777-4961

Phone No.: (415) 981-1400 

Buyer:
Regal Cinemas, Inc.

Attention: General Counsel

7132 Regal Lane

Knoxville, TN 37918

Fax No.: (865) 922-6085

Phone No.: (865) 922-1123 

with
a mandatory copy to: 

Hogan &
Hartson L.L.P.

1200 17 Street, Suite 1500

Denver, CO 80202

Attention: Christopher J. Walsh

Fax No.: (303) 899-7333

Phone No.: (303) 454-2480 

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        12.4.    Jurisdiction; Service of Process    

        Any
Proceeding arising out of or relating to this Agreement or any Contemplated Transaction may be brought in the federal or state courts of the State of Delaware, and each of the
parties irrevocably submits to the exclusive jurisdiction of each such court in any such Proceeding, and waives any objection it may now or hereafter have to venue or to convenience of forum. The
parties agree that any of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement between the parties irrevocably to waive
any objections to venue or to convenience of forum. Process in any Proceeding referred to in the first sentence of this section may be served on any party anywhere in the world. 

        12.5.    Enforcement of Agreement    

        Sellers
acknowledge and agree that Buyer would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with its specific terms and that any
breach of this Agreement by Sellers could not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to which Buyer may be entitled, at
law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches
or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking. 

        12.6.    Waiver; Remedies Cumulative    

        The
rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by any party in exercising any right, power or privilege
under this Agreement or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in this Agreement. 

        12.7.    Entire Agreement and Modification    

        This
Agreement supersedes all prior agreements, whether written or oral, between the parties with respect to its subject matter and constitutes (along with the Disclosure Schedule,
Exhibits and other documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of
the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented, or otherwise modified except by a written agreement executed by the party to be
charged with the amendment. Notwithstanding anything contrary in this Agreement, all Related Party Contracts between an Affiliate of a Seller and Buyer and/or an Affiliate of Buyer shall be governed
by the terms of the Related Party Contract as between those parties. 

        12.8.    Disclosure Schedule    

        (a)   The
information in the Disclosure Schedule constitutes (i) exceptions to particular representations, warranties, covenants and obligations of Sellers as set forth
in this Agreement or (ii) descriptions or lists of assets and liabilities and other items referred to in this Agreement. If there is any inconsistency between the statements in this Agreement
and those in the Disclosure 

57

 

Schedule
(other than an exception expressly set forth as such in the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in this Agreement will
control. 

        (b)   The
statements in the Disclosure Schedule, and those in any supplement thereto, relate only to the provisions in the Section of this Agreement to which they expressly
relate and not to any other provision in this Agreement. 

        12.9.    Assignments, Successors and No Third-Party Rights; Several Liability    

        No
party may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other parties, except that Buyer may assign any of
its rights and delegate any of its obligations under this Agreement to any of its subsidiaries or Affiliates; provided that Regal Cinemas, Inc. shall remain jointly and severally liable with
such assignee for the payment of the Purchase Price hereunder and for the payment and performance of all of its indemnity obligations under Article 11 hereof. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement,
except such rights as shall inure to a successor or permitted assignee pursuant to this Section 12.9 and to the Affiliate Guarantors pursuant to Section 5.10 in which respect such
Affiliate Guarantors are intended third-party beneficiaries of the agreements set forth in Section 5.10. Notwithstanding anything to the contrary in this Agreement, the obligations of each
Seller under this Agreement are several and not joint with those of the other Seller; each Seller shall have responsibility only for the representations, warranties and covenants given and made with
respect to itself under this Agreement, and such Seller shall not be responsible or liable (for indemnification or otherwise) for breaches by the other Seller of such other Seller's own
representations, warranties or covenants under this Agreement. 

        12.10.    Desert Representative    

        As
of the Effective Time, Desert hereby irrevocably appoints Philip Harris III as its true and lawful attorney-in-fact and agent on behalf of and in the name of
Desert for the purposes of this Agreement, the Escrow Agreement and any other agreements executed by Desert in connection with the Closing (the "Desert
Representative"). From and after the Effective Time, the Desert Representative shall receive written notices for the Desert under this Agreement, the Escrow Agreement and any
other agreements executed by Desert in connection with the Closing (collectively, "Desert Documents") and shall have full power and authority to
represent all Persons who as of the Closing Date directly or indirectly through Signature Theatre Investors, LLC ("STI") hold equity interests in Desert
("Affected Persons"), with respect to all matters arising under the Desert Documents, and all action taken by the Desert Representative hereunder,
pursuant to authority granted herein, shall be binding upon Desert and the Affected Persons. Without limiting the generality of the foregoing, with respect to all matters under this Agreement, the
Desert Representative shall have full power and authority, on behalf of Desert and the Affected Persons, to interpret all the terms and provisions of the Desert Documents, to negotiate and compromise
any dispute which may arise under the Desert Documents, to sign any releases or other documents with respect to any such dispute, to authorize payments to be made with respect thereto, and to retain
such counsel and consultants as appropriate and necessary to carry out its duties. The Desert Representative, or any successor hereafter appointed, may resign and shall be discharged of his duties
hereunder upon the appointment of a successor Desert Representative as hereinafter provided. In case of such resignation, or in the event of the death or inability to act of the Desert Representative,
a successor shall be named by the prior Desert Representative or by the holders of a majority of the interests of the Affected Persons (as determined immediately prior to the Closing). Each such
successor Desert Representative shall, after 

58

 

agreeing
to become a party hereto by signing a counterpart signature page as the Desert Representative, have all the power, authority, rights, and privileges hereby conferred upon an original Desert
Representative, and the term "Desert Representative" as used herein shall be deemed to include each such successor Desert Representative. The power-of-attorney granted in this
Section 12.10 is coupled with an interest and is irrevocable. The other Parties hereto shall be entitled to rely exclusively upon any communication given or other action taken by the Desert
Representative pursuant to this Agreement, and shall not be liable for any action taken or not taken in reliance on a communication or other instruction from the Desert Representative. Consistent with
the foregoing, it is understood and agreed that in the event after the Closing Date, Buyer or one or more of its Affiliates acquires STI, the sole member of Desert (through merger or otherwise), then
neither Buyer nor any such Affiliate shall be deemed to be a successor of Desert for purposes of this Section 12.10, nor shall Buyer or any such Affiliate succeed to any rights of Desert under
this Agreement or right of representation by the Desert Representative. 

        12.11.    Severability    

        If
any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.
Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 

        12.12.    Construction    

        The
headings of Articles and Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Articles," "Sections"
and "Schedules" refer to the corresponding Articles, Sections and Schedules of this Agreement and the Disclosure Schedule. 

        12.13.    Governing Law    

        This
Agreement will be governed by and construed under the laws of the State of Delaware without regard to conflicts-of-laws principles that would require the
application of any other law. 

        12.14.    Execution of Agreement    

        This
Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as
to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes. 

59

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. 

	 	 	 	 	 	 	 	 	Buyer:
	

 	
 	

 	
 	

 	
 	

 	
 	
REGAL CINEMAS, INC.
	

 	
 	

 	
 	

 	
 	

 	
 	

By:	
 	

/s/  MICHAEL L. CAMPBELL      

	 	 	 	 	 	 	 	 	 	 	Name:	 	Michael L. Campbell

	 	 	 	 	 	 	 	 	 	 	Title:	 	Chief Executive Officer

	
Sellers:	
 	

 	
 	

 	
 	

 
	
SIGNATURE THEATRES, LLC	
 	

 	
 	

 	
 	

 
	

By:	
 	

Signature Theatres Management Company, Its Manager	
 	

 	
 	

 	
 	

 
	

 	
 	

By:	
 	

/s/  PHILIP HARRIS      
	
 	

 	
 	

 	
 	

 
	 	 	 	 	Name:	 	Philip Harris
	 	 	 	 	 	 
	 	 	 	 	Title:	 	President
	 	 	 	 	 	 
	
TURLOCK CINEMAS, LLC	
 	

 	
 	

 	
 	

 
	

By:	
 	

Signature Theatres Management Company, Its Manager	
 	

 	
 	

 	
 	

 
	

 	
 	

By:	
 	

/s/  PHILIP HARRIS      
	
 	

 	
 	

 	
 	

 
	 	 	 	 	Name:	 	Philip Harris
	 	 	 	 	 	 
	 	 	 	 	Title:	 	President
	 	 	 	 	 	 
	
SIGNATURE DESERT CINEMAS, LLC	
 	

 	
 	

 	
 	

 
	

By:	
 	

Signature Theatres Management Company, Its Manager	
 	

 	
 	

 	
 	

 
	

 	
 	

By:	
 	

/s/  PHILIP HARRIS      
	
 	

 	
 	

 	
 	

 
	 	 	 	 	Name:	 	Philip Harris
	 	 	 	 	 	 
	 	 	 	 	Title:	 	President
	 	 	 	 	 	 
	
DESERT REPRESENTATIVE:	
 	

 	
 	

 	
 	

 
	

/s/  PHILIP HARRIS III      
 Philip Harris III	
 	

 	
 	

 	
 	

 

        TO:
Regal Cinemas, Inc., as Buyer and Signature Theatres, LLC, Turlock Cinemas, LLC and Signature Desert Cinemas, LLC, as Sellers 

        The
undersigned hereby acknowledges receipt of a fully executed copy of the Asset Purchase Agreement dated as of April     , 2004 (the "Purchase
Agreement") between Sellers and Buyer. The undersigned agrees to serve as Closing Escrow Holder pursuant to the terms of the Purchase Agreement. 

	Dated: April 19, 2004	 	FIRST AMERICAN TITLE INSURANCE COMPANY
	

 	
 	

By:	
 	

/s/  MIRIAM BROWN      

	 	 	Name:	 	Miriam Brown

	 	 	Its:	 	Certified Senior Escrow Officer

        Each
of the undersigned, being the direct or indirect owner of all of the outstanding capital stock of the Buyer, hereby jointly and severally guaranty, for the benefit of Sellers and,
to the extent applicable, the Affiliate Guarantors, the payment and performance of Buyer of (i) Buyer's indemnity obligations under Section 11.3(d) of the Agreement that relate to
Liabilities under the Assigned Leases that arise after the Effective Time and relate to facts, circumstances or conditions existing, initiated or occurring after the Effective Time (except as set
forth in Section 2.4(b)) and (ii) Buyer's indemnity obligations under Section 5.10 of the Agreement. 

	 	 	REGAL ENTERTAINMENT GROUP
	

 	
 	

By:	
 	

/s/  MICHAEL L. CAMPBELL      

	 	 	Name:	 	Michael L. Campbell

	 	 	Title:	 	Chairman, Chief Executive Officer

	

 	
 	
REGAL ENTERTAINMENT HOLDINGS, INC.
	

 	
 	

By:	
 	

/s/  R. E. HARDY      

	 	 	Name:	 	R. E. Hardy

	 	 	Title:	 	Executive Vice President, Secretary

	

 	
 	
REGAL CINEMAS CORPORATION
	

 	
 	

By:	
 	

/s/  MICHAEL L. CAMPBELL      

	 	 	Name:	 	Michael L. Campbell

	 	 	Title:	 	Chief Executive Officer

QuickLinks

Exhibit 10.2

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT

RECITALS

RECITALS

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