<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 1998.
REGISTRATION NO. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CINEMARK USA, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
TEXAS 8932 75-2206284
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
7502 Greenville Avenue, Suite 800 Lee Roy Mitchell
Dallas, TX 75231-3830 7502 Greenville Avenue, Suite 800
(214) 696-1644 Dallas, TX 75231-3830
(ADDRESS,INCLUDING ZIP CODE, (214) 696-1644
AND TELEPHONE NUMBER,INCLUDING (NAME, ADDRESS,INCLUDING ZIP CODE
AREA CODE, OF REGISTRANTS' AND TELEPHONE NUMBER, INCLUDING
PRINCIPAL EXECUTIVE OFFICES) AREA CODE, OF AGENT FOR SERVICE)
---------------------------
COPIES TO:
Michael D. Cavalier Terry M. Schpok, P.C.
General Counsel Akin, Gump, Strauss, Hauer &
Cinemark USA, Inc. Feld, L.L.P.
7502 Greenville Avenue 1700 Pacific Avenue
Suite 800 Suite 4100
Dallas, Texas 75231-3830 Dallas, Texas 75201-4618
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
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<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OF OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 1/2% Series B Senior Subordinated $105,000,000 100% $105,000,000 $30,975
Notes due 2008................
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</TABLE>
(1) Estimated solely for the purpose of determining the registration fee.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion, Dated February 2, 1998
PRELIMINARY PROSPECTUS
[GRAPHIC LOGO]
CINEMARK USA, INC.
OFFER TO EXCHANGE ITS
8 1/2% SERIES B SENIOR SUBORDINATED NOTES
DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
8 1/2% SERIES A SENIOR SUBORDINATED NOTES
DUE 2008
---------------------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 p.m., NEW YORK CITY TIME,
ON __________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE")
Cinemark USA, Inc., a Texas corporation (the "Company"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange $1,000 principal amount of its 8 1/2% Series B Senior
Subordinated Notes due 2008 (the "Series B Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant
to a Registration Statement (as defined herein) of which this Prospectus is a
part, for each $1,000 principal amount of the outstanding 8 1/2% Series A
Senior Subordinated Notes due 2008 (the "Series A Notes"), of the Company of
which $105,000,000 principal amount is outstanding. The Series B Notes and the
Series A Notes are together referred to herein as the "Notes." The terms of the
Series B Notes are identical in all material respects to the terms of the
Series A Notes except that the registration and other rights relating to the
exchange of Series A Notes for Series B Notes and the restrictions on transfer
set forth on the face of the Series A Notes will not appear on the Series B
Notes. See "The Exchange Offer." The Series B Notes are being offered hereunder
in order to satisfy certain obligations of the Company under a Registration
Rights Agreement dated as of January 14, 1998 (the "Registration Rights
Agreement"). Based on an interpretation by the staff of the Securities and
Exchange Commission (the "Commission"), Series B Notes issued pursuant to the
Exchange Offer in exchange for Series A Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than a holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act of 1933, as amended (the "Securities Act")), without compliance with the
registration and (except as provided in the following paragraph) the prospectus
delivery provisions of the Securities Act, provided that such Series B Notes
are acquired in the ordinary course of such holder's business and such holder
has no arrangement with any person to participate in the distribution of such
Series B Notes.
Each broker-dealer that receives Series B Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Series B Notes received in exchange for Series A Notes where
such Series A Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of twelve months after the effective date hereof, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "The Exchange Offer."
(cover page continued)
<PAGE> 3
The Company will not receive any proceeds from the Exchange Offer and will
pay all the expenses incident to the Exchange Offer. Tenders of Series A Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. If the Company terminates the Exchange Offer and does not
accept for exchange any Series A Notes, it will promptly return the Series A
Notes to the holders thereof. See "The Exchange Offer."
Prior to this Exchange Offer, there has been no public market for the
Series A Notes or the Series B Notes. To the extent that Series A Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Series A Notes could be adversely affected. If a market for the
Series B Notes should develop, the Series B Notes could trade at a discount
from their principal amount. The Company does not currently intend to list the
Series B Notes on any securities exchange or to seek approval for quotation
through any automated quotation system. There can be no assurance that an
active public market for the Series B Notes will develop.
The Exchange Agent for the Exchange Offer is U.S. Trust Company of
Texas, N.A.
SEE "RISK FACTORS" ON PAGE 16 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN
THE NOTES.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------
The date of this Prospectus is _________________, 1998
3
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Series B Notes offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Series B Notes offered hereby, reference is made
to the Registration Statement, including the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of certain documents
are not necessarily complete, and, in each instance, reference is made to the
copy of the document filed as an exhibit to the Registration Statement. Each
such statement is qualified in its entirety by such reference. The Registration
Statement can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the Commission's regional offices at Suite 1400, Northwest
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661-2511, and 7
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can also be obtained from the Commission at prescribed rates through
its Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such material may also be accessed electronically by means of the Commission's
home page on the Internet at http://www.sec.gov.
In the event the Company is not subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") at any
time following the consummation of the Exchange Offer, the Company will be
required under the Indenture, dated as of January 14, 1998 (the "Indenture"),
among the Company and United States Trust Company of Texas, N.A., as trustee
(the "Trustee"), pursuant to which the Series A Notes were, and the Series B
Notes will be, issued, to continue to file with the Commission and furnish to
holders of the Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such financial information and
(ii) all reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such report. To permit compliance with
Rule 144A in connection with resales of Series A Notes, the Company will
furnish upon the request of a holder of a Series A Note and a prospective
purchaser designated by such holder the information required to be delivered
under Rule 144A(d)(4) under the Securities Act if at the time of such request
the Company is not a reporting company under Section 13 or 15(d) of the
Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder.
The Company is a reporting company under the Exchange Act and, as long as the
Company continues to be a reporting company, it will not be required to deliver
information required to be delivered under Rule 144A(d)(4).
4
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Company's Consolidated Financial Statements, including the
notes thereto, appearing elsewhere in this Prospectus. Unless the context
otherwise requires, references in this Prospectus to the "Company" include the
Company and its subsidiaries. Also, as used in this Prospectus, the term
"Restricted Subsidiary" refers to any direct or indirect subsidiary of the
Company (and such Restricted Subsidiaries, collectively with the Company, the
"Restricted Group") other than Cinemark International, Inc. ("Cinemark
International"), and its subsidiaries. The term "Unrestricted Subsidiary"
refers to Cinemark International or any direct or indirect subsidiaries of
Cinemark International (collectively, the "Unrestricted Group").
THE COMPANY
The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. At January 8, 1998, the Company
operated 1,782 screens in 189 theatres located in 30 states, Canada, Chile,
Mexico, Brazil, Argentina, Peru, El Salvador, Ecuador, Costa Rica and Japan
consisting of 1,445 screens in 146 "first run" theatres and 337 screens in 43
"discount" theatres. Of the Company's 1,782 screens, 1,345 (or 75%) were built
by the Company during the 1990's, and, as a result, the Company believes it
operates one of the most modern theatre circuits in the industry. All of the
Company's theatres are multiplex facilities with approximately 94% of the
Company's screens located in theatres of six or more screens. The Company
believes that its ratio of screens to theatres (9.4 to 1 at January 8, 1998) is
the highest of the five largest theatre circuits in the U.S. and is more than
50% higher than the industry average. From its fiscal year ended December 31,
1992 through the twelve months ended September 30, 1997, the Company has
increased consolidated revenues approximately 112% from $194.7 million to $413.2
million and has increased EBITDA (as defined herein) approximately 153% from
$32.1 million to $81.3 million.
The Company is an industry leader in new theatre construction and operation
and, according to industry sources, has constructed more screens than any other
exhibitor during the 1990s. The Company believes that the attractiveness,
comfort and viewing experience provided by its modern facilities result in the
Company's theatres more often being the preferred destination for moviegoers in
its markets.
The Company believes that a number of positive trends have developed in the
theatre exhibition industry, including the ongoing trend toward the development
of larger multiplexes. The Company is actively participating in this trend,
commonly referred to as the "rescreening of America." The Company's management
experience and financial flexibility permit it to introduce larger multiplex
theatre facilities into areas previously served by smaller theatres, thereby
capturing moviegoers who seek more attractive surroundings, wider variety of
films, better customer service, shorter lines, more convenient parking and a
greater choice of seating to view popular movies. The Company's larger multiplex
facilities increase per screen revenues and operating margins and enhance its
operating efficiencies. Such theatres enable the Company to present films
appealing to several segments of the moviegoing public while serving patrons
from common support facilities (such as box office, concession areas, rest rooms
and lobby). In addition, larger multiplex facilities provide the Company with
greater flexibility in staffing, movie scheduling and equipment utilization
while reducing congestion throughout the theatre.
Theatrical exhibition is the primary distribution channel for new motion
picture releases. The Company believes that the successful theatrical release of
a movie abroad and in "downstream" distribution channels, such as home video and
pay-per-view, network and syndicated television, is largely dependent on its
successful theatrical release in the U.S. The Company believes that as a result
of increased revenues from the successful release of films in both movie
theatres and other distribution channels, major film production companies have
increased and will continue to increase the number of films being produced.
Additionally, increased revenues permit major film production companies to
create "event" films such as Jurassic Park, Twister, Independence Day, The Lost
World and Titanic which utilize the latest advances in computer technology to
enhance production quality and special effects. The Company believes that an
increasing supply of quality feature films and "event" films will increase
theatre attendance. The Company also believes that international markets for
theatrical exhibition, which have historically been underserved due to
antiquated and/or run-down theatres, will continue to experience rapid growth as
additional multiplex theatres are introduced.
5
<PAGE> 6
In addition, the Company believes that certain demographic trends favor the
theatre exhibition industry. Information obtained from the U.S. Bureau of Census
indicates that the number of 12 to 20 year olds in the U.S., the largest
moviegoing segment of the population, is projected to grow an aggregate of 7.5%
through the year 2000. Furthermore, according to the Motion Picture Association
of America ("MPAA"), the number of patrons over 40 years old as a percentage of
the total movie audience has more than doubled from approximately 14% in 1986 to
approximately 32.4% in 1996. The Company believes that film producers have
recognized the importance of this segment of the population and are producing an
increased number of films primarily targeted to this more mature audience,
including films such as Forrest Gump, Apollo 13, Sense and Sensibility, The
English Patient, Shine and As Good as it Gets.
BUSINESS STRATEGY
The Company intends to continue to grow through new theatre development by
applying the same techniques it has implemented since it was founded. The
Company believes that it is unique among major theatre exhibitors in the
development and execution of the following four-part business strategy:
Continue to build in underserved mid-sized markets. The Company intends to
continue to build first run theatres in underserved mid-sized markets and
suburbs of major metropolitan areas with populations of 50,000 to 200,000 where
the Company frequently will be the sole or leading exhibitor in terms of first
run screens operated. The Company believes it gains maximum access to film
product, and thereby realizes a competitive advantage, by locating its modern
multiplex theatres in new and existing film zones where little or no competition
for film product exists.
Capitalize on popularity of "megaplex" concept. The Company intends to
expand its construction of larger "megaplex" entertainment centers in major
metropolitan areas. In December 1992, the Company opened its first megaplex,
Hollywood USA , a 15-screen, 52,000 square-foot complex containing a large video
arcade and a pizzeria. The Company subsequently opened two additional megaplexes
styled after the original Hollywood USA . Based upon the success of these
complexes, which consistently rank among the Company's top grossing facilities
on a per screen basis, the Company expanded the megaplex concept. In the last 24
months, the Company has developed 13 megaplexes, each exceeding 65,000 square
feet and featuring 15 or more screens with 75-foot screens in the largest
auditoriums, stadium seating, digital sound, a pizzeria, a coffee bar and a
large video arcade room.
Continue to exploit discount theatre niche. The Company intends to maintain
its discount theatre operations (admission of $1 to $2 per ticket) to serve
patrons who miss a film during its first run exhibition or who may not be able
to afford to attend first run theatres on a frequent basis. The Company believes
that its discount theatres allow it to serve these segments of the total
moviegoing population, increasing the number of potential customers beyond
traditional first run moviegoers. The Company's multiplex discount theatres
offer many of the same amenities as its first run theatres, including
wall-to-wall screens, comfortable seating with cupholder armrests, digital
sound, multiple concession stands and a video game room. The Company's discount
theatres generally have higher attendance, lower film costs and a greater
proportion of concession revenues than its first run theatres. As of January 8,
1998, approximately 20% of the Company's screens were housed in its discount
theatres.
Develop modern American-style theatres in underserved international
markets. The Company intends to continue to develop multiplex theatres directly
or through joint venture arrangements with local partners in underserved
international markets. The Company's activities to date in international markets
have been primarily directed toward Latin America, which the Company believes is
severely under-screened and is still typically served by one- and two-screen
theatres which are often antiquated and/or run-down. The Company believes that
the same economic factors giving rise to the multiplex rescreening trend in the
U.S. are similarly applicable to international markets. The Company believes
that it was the first U.S. circuit to open American-style modern multiplex
theatres in Chile and Mexico, and has begun developing multiplex theatres
directly or through joint venture arrangements with local partners in Argentina,
Brazil, Peru, Ecuador, El Salvador, Costa Rica and Japan.
6
<PAGE> 7
The Offering extended the average maturity of the Company's indebtedness.
The Company believes that this will enhance its financial flexibility in
pursuing its business strategy and allow it to take advantage of the growth
opportunities in the theatre exhibition industry.
The Company's principal offices are located at 7502 Greenville Avenue,
Suite 800, Dallas, Texas 75231-3830, and its telephone number at that location
is (214) 696-1644.
7
<PAGE> 8
THE EXCHANGE OFFER
REGISTRATION RIGHTS
AGREEMENT............... The Series A Notes were issued by the Company on
January 14, 1998 to the Initial Purchaser who
resold the Series A Notes to qualified
institutional buyers and purchases under
Regulation S under the Securities Act (the
"Offering"). In connection therewith, the Company
executed and delivered for the benefit of the
holders of the Series A Notes the Registration
Rights Agreement providing for, among other
things, the Exchange Offer.
THE EXCHANGE OFFER........... The Company is offering to issue $1,000 principal
amount of Series B Notes in exchange for each
$1,000 principal amount of Series A Notes validly
tendered pursuant to the Exchange Offer. As of
the date hereof, $105,000,000 in aggregate
principal amount of Series A Notes are
outstanding. The Company will issue the Series B
Notes to holders promptly following the
Expiration Date. See "Risk Factors--Consequences
of Failure to Exchange."
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that
Series B Notes issued pursuant to the Exchange
Offer in exchange for Series A Notes may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than a
"Restricted Holder," being a person that is an
affiliate of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that the holder is acquiring the Series
B Notes in the ordinary course of its business
and is not participating, and has no arrangement
or understanding with any person to participate,
in a distribution of the Series B Notes. Eligible
holders wishing to accept the Exchange Offer must
represent to the Company that such conditions
have been met. Any broker-dealer who holds Series
A Notes acquired for its own account as a result
of market-making or other trading activities, and
who receives Series B Notes in the exchange for
such Series A Notes pursuant to the Exchange
Offer, may be a statutory underwriter and must
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale
of Series B Notes, which prospectus may be the
prospectus for the Exchange Offer so long as it
contains a plan of distribution with respect to
such resale transactions. See "The Exchange
Offer."
RESALE....................... Based on an interpretation by the staff of the
Commission, the Company believes that Series B
Notes issued pursuant to the Exchange Offer in
exchange for Series A Notes may be offered for
resale and resold or otherwise transferred by
holders thereof (other than any Restricted
Holder) without compliance with the registration
and prospectus delivery provisions of the
Securities Act, provided that such Series B Notes
are acquired in the ordinary course of such
holders' business and such holders have no
arrangement with any person to participate in the
distribution of such Series B Notes. See "Mary
Kay Cosmetics, Inc.," SEC No-Action Letter
(available June 5, 1991); "Morgan Stanley & Co.,
Incorporated," SEC No-Action Letter (available
June 5, 1991); and "Exxon Capital Holdings
Corporation," SEC No-Action Letter (available May
13, 1988).
8
<PAGE> 9
Any broker dealer who holds Series A Notes
acquired for its own account as a result of
market-making or other trading activities, and
who receives Series B Notes in the exchange for
such Series A Notes pursuant to the Exchange
Offer, may be a statutory underwriter and must
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale
of Series B Notes, which prospectus may be the
prospectus for the Exchange Offer so long as it
contains a plan of distribution with respect to
such resale transactions. See "Shearman &
Sterling," No-Action Letter (available July 2,
1993).
If any person were to participate in the Exchange
Offer for the purpose of distributing securities
in a manner not permitted by the preceding
paragraph, such person (i) could not rely on the
position of the staff of the Commission
enunciated in "Exxon Capital Holdings
Corporation" or similar interpretive letters and
(ii) must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with a secondary
resale transaction. Therefore, each holder of
Series A Notes who accepts the Exchange Offer
must represent in the Letter of Transmittal that
it meets the conditions described above. See "The
Exchange Offer--Terms of the Exchange Offer."
EXPIRATION DATE.............. 5:00 p.m., New York City time, on __________,
1998 unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer
is extended. See "The Exchange Offer--Expiration
Date; Extensions; Amendments."
CONDITIONS TO THE EXCHANGE
OFFER....................... The Exchange Offer is subject to certain
customary conditions which may be waived by the
Company. See "The Exchange Offer--Conditions."
No federal or state regulatory requirements must
be complied with or approvals obtained in
connection with the Exchange Offer, other than
the registration provisions of the Securities Act
and any applicable registration or qualification
provisions of state securities laws.
PROCEDURE FOR TENDERING OLD
NOTES.........................Each holder of Series A Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with the Series A Notes
to be exchanged and any other required
documentation, to the Exchange Agent (as defined
herein) at the address set forth herein and
therein. Series A Notes may be physically
delivered but physical delivery is not required
if a confirmation of a book-entry of such Series
A Notes to the Exchange Agent's account at The
Depository Trust Company ("DTC" or the
"Depository") is delivered in a timely fashion.
By executing the Letter of Transmittal, each
holder will represent to the
9
<PAGE> 10
Company that, among other things, the Series B
Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business
of the person receiving such Series B Notes,
whether or not such person is the holder, that
neither the holder nor any such other person is
engaged in, or intends to engage in, or has an
arrangement or understanding with any person to
participate in, the distribution of such Series B
Notes and that neither the holder nor any such
other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company or
any Guarantor. Each broker or dealer that
receives Series B Notes for its own account in
exchange for Series A Notes, where such Series A
Notes were acquired by such broker or dealer as a
result of market-making activities or other
trading activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such Series B Notes. See "The Exchange
Offer--Procedures for Tendering" and "Plan of
Distribution." See "The Exchange Offer--Procedure
for Tendering" and "Plan of Distribution."
SPECIAL PROCEDURES FOR
BENEFICIAL HOLDERS............Any beneficial holder whose Series A Notes are
registered in the name of his broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender in the Exchange Offer
should contact such registered holder promptly
and instruct such registered holder to tender on
his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder
must, prior to completing and executing the
Letter of Transmittal and delivering his Series A
Notes, either make appropriate arrangements to
register ownership of the Series A Notes in such
holder's name or obtain a properly completed bond
power from the registered holder. The transfer of
record ownership may take considerable time. See
"The Exchange Offer--Procedure for Tendering."
GUARANTEED DELIVERY
PROCEDURES....................Holders of Series A Notes who wish to tender their
Series A Notes and whose Series A Notes are not
immediately available or who cannot deliver their
Series A Notes and a properly completed Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date, as the case may be,
may tender their Series A Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS.............Tenders of Series A Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on
the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders."
ACCEPTANCE OF SERIES A
NOTES AND DELIVERY OF
SERIES B NOTES................The Company will accept for exchange any and all
Series A Notes which are validly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Series B Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange
Offer."
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<PAGE> 11
CERTAIN TAX CONSIDERATIONS....The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal
income tax purposes. See "Federal Income Tax
Consequences."
EXCHANGE AGENT................U.S. Trust Company of Texas, N.A., the Trustee
under the Indenture, is serving as exchange
agent (the "Exchange Agent") in connection with
the Exchange Offer.
DESCRIPTION OF NOTES
SECURITIES OFFERED............$105,000,000 aggregate principal amount of 8 1/2%
Series B Senior Subordinated Notes due 2008.
MATURITY DATE.................August 1, 2008.
INTEREST......................Interest on the Notes will accrue at the rate of
8 1/2% per annum payable semi-annually in arrears
on February 1 and August 1 of each year,
commencing August 1, 1998.
OPTIONAL REDEMPTION...........The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after August 1, 2003, at the redemption prices
set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In
addition, on or before February 1, 2001, the
Company may redeem up to 35% of the original
aggregate principal amount of the Notes at a
redemption price of 108.5% of the principal amount
thereof, plus accrued and unpaid interest, if
any, to the date of redemption, with the net
proceeds of one or more Equity Offerings (as
defined herein); provided, however, that at least
65% of the original aggregate principal amount of
the Notes remain outstanding following each such
redemption. See "Description of Notes--Optional
Redemption."
CHANGE OF CONTROL OFFER.......Upon the occurrence of a Change of Control (as
defined herein), the Company will be required to
make an offer to repurchase the Notes at a price
equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the
date of repurchase. See "Description of
Notes--Repurchase at the Option of
Holders--Change of Control."
RANKING.......................The Notes will be general unsecured obligations
of the Company, subordinated in right of payment
to all existing and future Senior Indebtedness of
the Company, including all obligations of the
Company under the Credit Facility. As of January
20, 1998, the Company had outstanding $51 million
of Senior Indebtedness. The Series B Notes will be
effectively subordinated to the indebtedness of
the Company's subsidiaries ($30 million at
January 20, 1998). See "Description of
Notes--Subordination."
CERTAIN COVENANTS.............The Indenture pursuant to which the Notes will be
issued (the
11
<PAGE> 12
"Indenture") contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries to incur
additional Indebtedness, pay dividends or make
other distributions, repurchase any capital stock
or subordinated Indebtedness, make certain
investments, create certain liens, enter into
certain transactions with affiliates, sell assets
or enter into certain mergers and consolidations.
In addition, the Indenture contains a covenant
limiting the lines of business of certain
Unrestricted Subsidiaries. See "Description of
Notes--Certain Covenants."
USE OF PROCEEDS...............There will be no proceeds to the Company from any
exchange pursuant to the Exchange Offer.
RISK FACTORS
For a discussion of certain factors that should be considered before
exchanging Series A Notes for Series B Notes in the Exchange Offer, see "Risk
Factors."
12
<PAGE> 13
SUMMARY FINANCIAL AND OPERATING DATA
The following tables set forth selected consolidated financial data for the
Company for the periods and at the dates indicated for each of the five most
recent fiscal years ended December 31, 1996, for the twelve months ended
September 30, 1997 and for the nine months ended September 30, 1996 and 1997.
Supplemental financial data for the Restricted Group are derived from
supplemental schedules to the Consolidated Financial Statements appearing
elsewhere in this Prospectus. The financial data for the twelve months ended
September 30, 1997 and for the nine months ended September 30, 1996 and 1997
are derived from the unaudited financial statements of the Company. The Company
believes the financial data for the twelve months ended September 30, 1997 and
for the nine months ended September 30, 1996 and 1997 reflect all adjustments
(which include only normal recurring adjustments other than an adjustment
required by SFAS 121 as discussed in note 1 to the Consolidated Financial
Statements appearing elsewhere in this Prospectus) necessary for a fair
presentation of such data. Operating results for the twelve months ended
September 30, 1997 and for the nine months ended September 30, 1996 and 1997
are not necessarily indicative of results for the full fiscal year. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements, including the notes thereto, appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE NINE MONTHS
MONTHS ENDED
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------------------- SEPTEMBER 30, -------------------
1992 1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- -------- -------- ------------- -------- --------
(IN THOUSANDS, EXCEPT THEATRE, SCREEN AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (CONSOLIDATED):
Revenues........................... $194,652 $239,659 $283,077 $298,559 $341,731 $413,249 $255,463 $326,981
Theatre operating costs............ 154,825 185,100 218,748 227,719 262,138 308,770 194,962 241,594
General and administrative
expenses......................... 10,119 12,162 17,095 19,555 23,486 27,327 16,636 20,477
Depreciation and amortization...... 9,830 10,939 15,121 15,925 21,799 25,297 16,973 20,471
Operating income................... 19,878 31,458 32,113 35,361 34,308 51,855 26,892 44,439
Interest expense(1)................ 12,258 17,102 18,917 19,374 20,376 29,366 14,665 23,655
Income before extraordinary
items............................ 5,726 9,720 7,006 13,155 14,616 17,303 9,795 12,482
Net income(2)...................... 5,829 9,720 7,006 13,155 5,230 16,985 671 12,426
OTHER FINANCIAL DATA (CONSOLIDATED):
Cash flow from (used for)
operations....................... $ 23,376 $ 27,181 $ 32,665 $ 36,090 $ 58,754 $ 49,127 $ 33,833 $ 24,206
Theatre level cash flow(3)......... 39,827 54,559 64,329 70,840 79,593 104,479 60,501 85,387
EBITDA(4).......................... 32,117 45,808 50,851 55,708 62,579 81,296 49,008 67,725
Ratio of earnings to fixed
charges(5)....................... 1.43x 1.61x 1.46x 1.69x 1.65x 1.66x 1.58x 1.62x
Pro forma ratio of earnings to
fixed charges(6)................. 1.61x 1.63x 1.60x
SUPPLEMENTAL FINANCIAL DATA (RESTRICTED
GROUP):(7)
EBITDA(4).......................... $ 32,089 $ 45,433 $ 49,408 $ 54,319 $ 61,093 $ 79,180 $ 47,173 $ 65,260
Pro forma interest expense(8)...... 28,395 36,473 27,355
Ratio of EBITDA to pro forma
interest expense................. 2.15x 2.17x 2.39x
Pro forma long-term debt, including
current maturities (at period
end)(9).......................... $396,757 $396,757
Ratio of pro forma long-term debt
(at period end) to EBITDA(9)..... 5.01x N/A
OPERATING DATA:
United States (Restricted Group)
Theatres owned (at period
end)(10)....................... 147 153 154 150 158 156 153 156
Screens owned (at period
end)(10)....................... 1,010 1,084 1,121 1,155 1,339 1,396 1,230 1,396
Total attendance................. 51,087 59,632 63,401 61,006 63,774 72,341 48,252 56,819
Outside United States (Unrestricted Group)
Theatres owned (at period
end)(11)....................... -- -- 4 9 11 14 11 14
Screens owned (at period
end)(11)....................... -- -- 42 92 114 148 114 148
Total attendance................. -- -- 1,407 4,210 8,675 10,574 6,603 8,502
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1997
---------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 ACTUAL AS ADJUSTED(12)
-------- -------- -------- -------- -------- -------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (CONSOLIDATED):
Cash and temporary cash investments......... $ 29,368 $ 44,454 $ 31,056 $ 13,925 $ 14,383 $ 15,468 $ 15,468
Theatre properties and equipment -- net..... 93,952 117,017 155,798 224,482 377,421 484,015 484,015
Total assets................................ 147,661 189,361 217,185 267,747 432,905 566,688 566,688
Total long-term debt, including current
portion................................... 130,662 152,787 167,374 196,168 297,206 425,526 425,661
Shareholders' equity (deficiency)........... (11,094) (760) 2,732 11,345 57,363 67,411 67,411
</TABLE>
13
<PAGE> 14
- ----------------------
(1) Includes amortization of debt issue cost and debt discount.
(2) In 1996, an extraordinary loss of $9 million (net of related tax benefit)
was recognized in connection with the premium paid and the write-off of the
unamortized debt issue costs associated with the Senior Notes repurchased.
(3) Revenues less theatre operating costs (which is not a measure of financial
performance under generally accepted accounting principles ("GAAP")).
Theatre level cash flow is a financial measure commonly used in the
Company's industry and should not be construed as an alternative to cash
flow from operations (as determined in accordance with GAAP) as an
indicator of operating performance or as a measure of liquidity.
(4) Represents net income before depreciation and amortization, interest
expense, changes in deferred lease expense, accrued and unpaid compensation
expense relating to any stock appreciation and stock option plans, equity
in income (loss) of affiliates, gain (loss) on sale of assets, minority
interests, provision for income taxes and extraordinary items. EBITDA is a
financial measure commonly used in the Company's industry and should not be
construed as an alternative to cash flows from operating activities (as
determined in accordance with GAAP), as an indicator of operating
performance or as a measure of liquidity.
(5) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income before income taxes and extraordinary items plus
fixed charges excluding capitalized interest and (ii) fixed charges
consist of interest expense, capitalized interest, amortization of debt
issue cost and debt discount and the portion of rental expense which is
deemed to be representative of the interest factor.
(6) Gives effect to the Offering as if the Offering had occurred at the
beginning of the period. See "Use of Proceeds" and "Capitalization."
(7) The restrictive covenants in the Indenture apply only to the Restricted
Group and supplemental financial data represents data pertaining to the
Restricted Group only. See supplemental schedules to the Consolidated
Financial Statements, including the notes thereto, appearing elsewhere in
this Prospectus.
(8) Calculated based on debt outstanding at the end of the period for the
subsequent four quarter period. Gives effect to the Offering as if the
Offering had occurred at the end of such period and does not include
amortization of debt issue cost for the Notes.
(9) Gives effect to the Offering as if the Offering had occurred at the end of
such period. For purposes of calculating total long-term debt, amounts for
the Notes and the Company's $275 million aggregate principal amount of
9 5/8% Series B and Series D Senior Subordinated Notes due 2008 (the "Senior
Subodinated Notes") are based on the stated principal amount at maturity.
See "Capitalization."
14
<PAGE> 15
(10)The data as of period end 1992, 1993, 1994, 1995, September 1996 (and
period end September 1996) and September 1997 exclude two theatres (23
screens), two theatres (23 screens), three theatres (33 screens), five
theatres (64 screens) and eight theatres (66 screens), respectively,
operated by the Company pursuant to management agreements.
(11)The data as of period end 1993, 1994, 1995, September 1996 (and period end
September 1996) and September 1997 exclude two theatres (18 screens), two
theatres (18 screens), three theatres (25 screens) four theatres (37
screens) and eight theatres (66 screens) respectively, operated through
affiliates of the Company in Canada, Chile, Argentina, Peru, El Salvador
and Japan.
(12)Gives effect to the Offering.
15
<PAGE> 16
RISK FACTORS
Holders of Series C Notes should carefully consider the specific risk
factors as set forth below as well as the other information contained in this
Prospectus before deciding to tender their Series C Notes in the Exchange Offer
in evaluating an investment in the Notes offered hereby.
DEPENDENCE UPON MOTION PICTURE PRODUCTION AND PERFORMANCE
The Company's business is dependent both upon the availability of
suitable motion pictures for exhibition in its theatres and the performance of
such films in the Company's markets. Poor performance of films or disruption in
the production of motion pictures by the major studios and/or independent
producers could have a material adverse effect on the Company's business. Since
the major film distributors have historically released those films which they
anticipate will be the most successful during the summer and holiday seasons,
poor performance of such films or disruption in the release of films during
such periods could adversely affect the Company's results for a particular
quarter.
SUBSTANTIAL INDEBTEDNESS
As of January 20, 1998, the Company had total outstanding indebtedness
of $461.4 million. The Company's leveraged financial position poses substantial
risks to holders of the Notes, including the risks that: (i) a substantial
portion of the Company's cash flow from operations will be dedicated to the
payment of interest on the Notes and the payment of principal of and interest
on borrowings under the Credit Facility, the Senior Subordinated Notes and other
indebtedness; (ii) the Company's ability to obtain financing in the future for
working capital, capital expenditures and general corporate purposes may be
impeded; and (iii) the Company may be more vulnerable to economic downturns
which may limit its ability to withstand competitive pressures. The Company
believes that, based on its current level of operations, it will have
sufficient liquidity and access to capital to carry on its business and will be
able to meet its scheduled debt service requirements. However, there can be no
assurance that the future cash flow of the Company will be sufficient to meet
the Company's obligations and commitments. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," "Description of Notes," and "Description of Certain Debt
Instruments."
SUBORDINATION OF NOTES
The Notes will be general unsecured obligations of the Company and will
rank senior or pari passu in right of payment with all other general unsecured
subordinated obligations of the Company. The Notes will rank pari passu with
the Senior Subordinated Notes. The Notes will be subordinated in right of
payment to all existing and future Senior Indebtedness of the Company,
including obligations under the Credit Facility. As of January 20, 1998, the
Company had outstanding $51 million of Senior Indebtedness. Subject to certain
limitations, the Indenture will permit the Company to incur additional Senior
Indebtedness. See "Description of Notes--Certain Covenants--Limitation on
Indebtedness." In addition, the Notes will be effectively subordinated to
indebtedness of the Company's subsidiaries ($30 million as of January 20,
1998). The indebtedness under the Credit Facility will also become due prior to
the time the principal obligations under the Notes become due. As a result of
the subordination provisions contained in the Indenture, in the event of a
liquidation or insolvency of the Company, the assets of the Company will be
available to pay obligations on the Notes only after all Senior Indebtedness
has been paid in full, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. In addition,
substantially all of the assets of the Company and its subsidiaries may in the
future be pledged to secure other indebtedness of the Company. See "Description
of Notes" and "Description of Certain Debt Instruments."
SUBSTANTIAL CAPITAL EXPENDITURES; UNCERTAINTIES RELATING TO FUTURE EXPANSION
PLANS
The Company plans to open a total of approximately 380 and 300 screens in
the U.S. in 1998 and 1999, respectively. During 1997, the Company opened 12
theatres (165 screens), and has 3 theatres (217 screens) under construction. In
addition, as of January 20, 1998, the Company has 10 theatres (164 screens)
scheduled to begin construction and completed by the end of 1998. The Company
estimates that capital expenditures in connection with the development of these
680 screens in 1998 and 1999 will be approximately $350 million. As of January
20, 1998, the Company had expended approximately $49.3 million toward the
development of these screens. See "Management's Discussion and Analysis of
Financial Condition and
16
<PAGE> 17
Results of Operations--Liquidity and Capital Resources." These planned capital
expenditures are equal to or in excess of capital expenditures by the Company
over the last several years and there can be no assurance that the financial
performance of these screens will be equivalent to the performance of the
Company's existing screens.
The Company intends to pursue a strategy of expansion that will involve
the development of new theatres, both domestically and in international
markets, certain of which may be larger and more costly than those developed by
the Company to date. In addition, the Company's strategy of expansion may
involve acquisitions of existing theatres and theatre circuits. There is
significant competition for potential site locations and existing theatre and
theatre circuit acquisition opportunities. As a result of such competition, the
Company may be unable to acquire attractive site locations or existing theatres
or theatre circuits on terms the Company considers acceptable. Furthermore, the
Company can make no assurances that it will be able to successfully develop or
acquire suitable theatres in the future, that such theatres will be successful
or that the Company's expansion strategy will result in improvements to the
business, financial condition or profitability of the Company.
INTERNATIONAL OPERATIONS
Substantially all of the Company's operations outside of the U.S. and
expansion outside of the U.S. and Canada will be conducted through Cinemark
International, an Unrestricted Subsidiary under the Indenture. As of January 20,
1998, the Company, through Cinemark Mexico (USA), Inc. ("Cinemark Mexico"), a
subsidiary of Cinemark International, operated 13 (141 screens) in Mexico.
Additionally, the Company through Cinemark International operates and owns
interests in theatres in Canada, Chile, Brazil, Ecuador, Japan, Argentina, El
Salvador, Costa Rica and Peru. See "Business--International." The Company
continues to investigate opportunities in these and other international markets.
Governmental regulation of the motion picture industry in international markets
differs significantly from regulation in the U.S. The Company's international
operations are subject to certain political, economic and other uncertainties
not encountered in domestic operations. The Company's international operations
typically utilize union labor unlike U.S. operations. The Company's
international operations also face the additional risks of fluctuating currency
values, hard currency shortages and controls of foreign currency exchange.
Cinemark Mexico had net operating losses during fiscal years 1994, 1995, 1996
and the nine month period ended September 30, 1997 due principally to costs
associated with the development of new multiplex theatres, interest costs
relating to its debt obligations and the devaluation of the Mexican currency.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." As of January 20, 1998, the
Company has contributed approximately $75 million to the capital of Cinemark
International to fund theatre development principally in Latin America. The
Company, through Cinemark International, plans to invest up to $75 million in
international ventures, principally in Latin America, over the next two to three
years. The Company anticipates that investments in excess of Cinemark
International's available cash will be funded by the Company, subject to the
restrictive covenants in the Indenture or by debt or equity financing to be
provided by third parties directly to Cinemark International or its
subsidiaries. Indebtedness incurred by Unrestricted Subsidiaries is not subject
to the terms of the Indenture. See "Description of Notes."
In December, Cinemark Mexico completed Repurchase Offer and
Consent Solicitation (the "Mexico Exchange Offer") to repurchase the
outstanding Cinemark Mexico Notes (as hereinafter defined), See "Management's
Discussion and Analysis of Financial Conditions and Results of
Operation-Liquidity and Capital Resources."
RESTRICTIONS IMPOSED BY THE CREDIT FACILITY
The Credit Facility requires the Company to maintain specified financial
ratios and tests, including a Debt Service Coverage Ratio and a Total
Indebtedness to Annualized Cash Flow ratio, each as defined in the Credit
Facility. In addition, the Credit Facility restricts, among other things, the
Company's ability to incur additional indebtedness, make asset dispositions,
create or incur liens on any of the Company's assets, make certain payments and
dividends or merge or consolidate. A failure to comply with the restrictions
contained in the Credit Facility could lead to an event of default thereunder,
which could result in an acceleration of such indebtedness. There can be no
assurance that the Company
17
<PAGE> 18
would have sufficient resources or have access to sufficient resources to pay
its obligations under the Credit Facility if such indebtedness is accelerated.
See "Description of Certain Debt Instruments--Credit Facility."
COMPETITION
The motion picture business is highly competitive. The Company competes
against both local and national exhibitors. Some of the Company's competitors
have substantially greater financial resources than the Company. The Company's
theatres also face competition from a number of alternative downstream
distribution channels, such as home video and network, syndicated and
pay-per-view television. The Company is also subject to competition from other
forms of entertainment competing for the public's leisure time and disposable
income. See "Business--Competition."
EFFECTIVE CONTROL BY PRINCIPAL SHAREHOLDERS
As of January 20, 1998, the Company's Chief Executive Officer, Lee Roy
Mitchell and his affiliates beneficially owned an aggregate of 53.1% and
Cypress Merchant Banking Partners L.P. and Cypress Pictures Ltd. (collectively,
"Cypress") beneficially owned an aggregate of 46.1% of the outstanding shares
of common stock of the Company. Mr. Mitchell beneficially owns all of the
voting common stock of the Company and has the voting power to elect the entire
Board of Directors, subject to the ability of Cypress Advisors L.P. ("CALP") to
designate a specified number of Board members. Additionally, if such
shareholders were to vote all of their shares in a similar manner, they would
have sufficient voting power to determine the outcome of any corporate
transaction or other matter submitted to the shareholders for approval. See
"Principal Shareholders" and "Certain Transactions -- Cypress Investment."
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend, in large part, on the efforts,
abilities and experience of its executive officers and other key employees of
the Company. The loss of the services of such individuals could have a material
adverse effect on the Company's business. See "Management."
REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer to repurchase the Notes and the Senior Subordinated Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase. Certain events involving a Change
of Control will result in an event of default under the Credit Facility and the
Senior Subordinated Indentures (as hereinafter defined) and may result in an
event of default under other indebtedness of the Company that may be incurred in
the future. An event of default under the Credit Facility or other future Senior
Indebtedness could result in an acceleration of such indebtedness, in which case
the subordination provisions of the Notes and the Series B Notes would require
payment in full of such Senior Indebtedness before repurchase of the Notes and
the Senior Subordinated Notes. See "Description of Notes--Repurchase at the
Option of Holders--Change of Control," "--Subordination" and "Description of
Certain Debt Instruments -- Senior Subordinated Indentures" and "--Credit
Facility." There can be no assurance that the Company would have sufficient
resources to repurchase the Notes or the Senior Subordinated Notes or pay its
obligations if the indebtedness under the Credit Facility or other future Senior
Indebtedness were accelerated upon the occurrence of a Change of Control. The
inability to repay Senior Indebtedness of the Company, if accelerated, and to
repurchase all of the tendered Notes and the tendered Senior Subordinated Notes
would constitute an event of default under the Indenture. These provisions may
be deemed to have anti-takeover effects and may delay, defer or prevent a
merger, tender offer or other takeover attempt. No assurance can be given that
the terms of any future indebtedness will not contain cross default provisions
based upon Change of Control or other defaults under such debt instruments.
LACK OF PUBLIC MARKET
The Series B Notes are a new issue of securities for which there is
currently no trading market. The Company does not currently intend to list the
Series B Notes on any securities exchange or to seek approval for quotation
through the automated quotation system. There can be no assurance that an
active trading market for the Series B Notes will exist. If a market were to
exist, the Series B Notes could trade at prices that may be lower than the
initial offering price of the Series A Notes depending on many factors,
including prevailing interest rates and the markets for similar securities,
general economic conditions and the financial condition and performance of, and
prospects for, the Company. See "Description of Series B Notes -- Exchange
Offer; Registration Rights."
18
<PAGE> 19
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Series A Notes who do not exchange their Series A Notes for
Series B Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Series A Notes as set forth in the legend
thereon as a consequence of the issuance of the Series A Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. The
Company does not currently anticipate that it will register the Series A Notes
under the Securities Act. Series B Notes issued pursuant to the Exchange Offer
in exchange for Series A Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such holder which is an
"affiliate" of the Company or any Guarantor within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such Series
B Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such Notes. Each broker-dealer that receives Series B Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Series B Notes received in exchange for Series A Notes where
such Series A Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of twelve months after the effective date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution." However, to
comply with the securities laws of certain jurisdictions, if applicable, the
Series B Notes may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from registration or
qualification is available and is complied with. To the extent that Series A
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Series A Notes will be adversely
affected.
19
<PAGE> 20
THE EXCHANGE OFFER
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
The Series A Notes were sold by the Company on January 14, 1998 to initial
purchasers (the "Initial Purchasers"), who resold the Series A Notes to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and purchasers in reliance on Regulation S under the Securities Act. In
connection with the sale of the Series A Notes, the Company and the Initial
Purchasers entered into the Registration Rights Agreement pursuant to which the
Company agreed to use its best efforts to file with the Commission a
registration statement (the "Exchange Offer Registration Statement") with
respect to an offer to exchange the Series A Notes for Series B Notes within 30
days following the issuance of the Series A Notes. In addition, the Company
agreed to use its best efforts to cause the Exchange Offer Registration
Statement to become effective under the Securities Act and to issue the Series B
Notes pursuant to the Exchange Offer. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Exchange Offer Registration
Statement. See "Description of Notes--Exchange Offer; Registration Rights."
This Exchange Offer is being made pursuant to the Registration Rights
Agreement to satisfy the Company's obligations thereunder. The term "holder,"
with respect to the Exchange Offer, means any person in whose name Series A
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Series A Notes are held of record by the Depository Trust Company.
The Company is generally not required to file any registration statement to
register any outstanding Series A Notes. Holders of Series A Notes who do not
tender their Series A Notes or whose Series A Notes are tendered but not
accepted would have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act, if they wish to sell their
Series A Notes.
Based on an interpretation by the staff of the Commission, the Company
believes that Series B Notes issued pursuant to the Exchange Offer in exchange
for Series A Notes may be offered for resale, resold and otherwise transferred
by the holders thereof (other than a Restricted Holder) without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such Series B Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such Series B Notes. See "Mary Kay
Cosmetics, Inc.," SEC No-Action Letter (available June 5, 1991); "Morgan
Stanley & Co., Incorporated," SEC No-Action Letter (available June 5, 1991);
and "Exxon Capital Holdings Corporation," SEC No-Action Letter (available May
13, 1988). Any broker dealer who holds Series A Notes acquired for its own
account as a result of market-making or other trading activities, and who
receives Series B Notes in the exchange for such Series A Notes pursuant to the
Exchange Offer, may be a statutory underwriter and must deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
Series B Notes, which prospectus may be the prospectus for the Exchange Offer
so long as it contains a plan of distribution with respect to such resale
transactions. See "Shearman & Sterling," No-Action Letter (available July 2,
1993).
If any person were to participate in the Exchange Offer for the purpose
of distributing securities in a manner not permitted by the Commission's
interpretation, such person (i) could not rely on the position of the staff of
the Commission enunciated in "Exxon Capital Holdings Corporation" or similar
interpretive letters and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Accordingly, each eligible holder wishing to accept the
Exchange Offer must represent to the Company in the Letter of Transmittal that
the conditions described above have been met.
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Series A Notes in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or Blue Sky laws of such jurisdiction. Prior to the
Exchange Offer, however, the Company will use its best efforts to register or
qualify the Series B Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions as is necessary to permit consummation of the
Exchange Offer and do any and all other acts or things necessary or advisable
to enable the offer and sale in such jurisdiction of the Series B Notes.
20
<PAGE> 21
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept all
Series A Notes validly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. The exchange of Series B Notes for Series A Notes will be made
with respect to all Series A Notes validly tendered and not withdrawn on or
prior to the Expiration Date, within two business days following the Expiration
Date. The Series B Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. The Company will issue $1,000
principal amount of Series B Notes in exchange for each $1,000 principal amount
of outstanding Series A Notes accepted in the Exchange Offer. Holders may
tender some or all of their Series A Notes pursuant to the Exchange Offer in
denominations of $1,000 and integral multiples of $1,000 in excess thereof.
The form and terms of the Series B Notes will be the same in all material
respects as the form and terms of the Series A Notes, except that the Series B
Notes will be registered under the Securities Act and hence will not bear
legends restricting the transfer thereof.
Holders of Series A Notes do not have any appraisal or dissenters' rights
under the Texas Business Corporations Act or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the provisions of the Registration Rights Agreement. Series A
Notes which are not tendered for exchange or are tendered but not accepted in
the Exchange Offer will remain outstanding and be entitled to the benefits of
the Indenture, but will not be entitled to any registration rights under the
Registration Rights Agreement.
The Company shall be deemed to have accepted validly tendered Series A
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Series A Notes for the purpose of receiving Series B Notes from the
Company and delivering Series B Notes to such holders.
If any tendered Series A Notes are not accepted for exchange because of
an invalid tender or the occurrence of certain other events set forth herein,
certificates for any such unaccepted Series A Notes will be returned, without
expense, to the tendering holder thereof as promptly as practicable after the
Expiration Date.
The registration expenses to be incurred in connection with the Exchange
Offer, including fees and expenses of the Exchange Agent and accounting and
legal fees, will be paid by the Company. The Company has agreed to pay, subject
to the instructions in the Letter of Transmittal, all transfer taxes, if any,
relating to the sale or disposition of such holder's Series A Notes pursuant to
the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Exchange Offer will expire at 5:00 p.m., New York City time, on
________________, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date to which the Exchange Offer is extended. The Company will notify the
Exchange Agent of any extension by oral or written notice and will make a
public announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
The Company reserves the right (i) to delay accepting for exchange any
Series A Notes for Series B Notes, to extend the Exchange Offer or terminate
the Exchange Offer and to refuse to accept for exchange Series A Notes for
Series B Notes, if any of the conditions set forth herein under "--Conditions"
shall have occurred and shall not have been waived by the Company, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, and (ii) to amend the terms of the Exchange Offer in any manner. Any
such delay in acceptance, extension, termination or amendment will be followed
as promptly as practicable by public announcements. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the Series A Notes of such amendment, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
21
<PAGE> 22
disclosure to the holders of the Series B Notes, if the Exchange Offer would
otherwise expire during such five to ten business day period. The rights
reserved by the Company in this paragraph are in addition to the Company's
rights set forth below under the caption "Conditions."
Without limiting the manner in which the Company may choose to make
public announcements of any delay in acceptance, extension, termination or
amendment of the Exchange Offer, the Company shall have no obligation to
publish, advertise, or otherwise communicate any such public announcement,
other than by making a timely release to a financial news service.
PROCEDURE FOR TENDERING
Only a holder of Series A Notes may tender such Series A Notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Series A Notes are registered on the books of the Company
or any other person who has obtained a properly completed bond power from the
registered holder. To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Series A Notes (unless such tender is being effected pursuant
to the procedure for book-entry transfer described below) and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. Signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in the United States or by any other "Eligible Guarantor
Institution" as such term is defined in Rule 17Ad-15(a)(2) of the Exchange Act
(each an "Eligible Institution") unless the Series C Notes tendered pursuant
thereto are tendered (i) by a registered holder who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution.
Any financial institution that is a participant in the Depository's
Book-Entry Transfer Facility system may make book-entry delivery of the Series
A Notes by the Depository to transfer such Series A Notes into the Exchange
Agent's account in accordance with the Depository's procedure for such
transfer. Although delivery of Series A Notes may be effected through
book-entry transfer into the Exchange Agent's account at the Depository, the
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its address set forth in
"Exchange Agent" below prior to 5:00 p.m., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO THE DEPOSITORY IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Series A Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF SERIES A NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE
THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT
TO THE COMPANY. HOLDERS MAY ALSO REQUEST THAT THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES EFFECT SUCH TENDER FOR
SUCH HOLDERS.
If the Letter of Transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by
the Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Series A Notes will be
determined by the Company in its sole discretion, which determination will be
22
<PAGE> 23
final and binding. The Company reserves the absolute right to reject any and
all Series A Notes not properly tendered or any Series A Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Series A Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Series A Notes must be cured within such time as the
Company shall determine. Although the Company intends to request the Exchange
Agent to notify the holders of defects or irregularities with respect to
tenders of Series A Notes, neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Series A Notes nor shall any of them
incur any liability for failure to give such notification. Tenders of Series A
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Series A Notes received by the Exchange Agent that are not
validly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent without cost to the
tendering holder unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
By tendering, each holder will represent to the Company that, among other
things (i) it is not an affiliate of the Company, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Series B Notes to be issued
in the Exchange Offer and (iii) it is acquiring the Series B Notes in its
ordinary course of business. If the holder is a broker-dealer that will receive
Series B Notes for its own account in exchange for Series A Notes that were
acquired as a result of market-making activities or other trading activities,
such holder by tendering will acknowledge that it will deliver a prospectus in
connection with any resale of such Series B Notes.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (i) whose Series A
Notes are not immediately available, or (ii) who cannot deliver their Series A
Notes, the Letter of Transmittal or any other required documents to the
Exchange Agent, or cannot complete the procedure for book-entry transfer prior
to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Series A Notes, the
certificate number or numbers of such Series A Notes (if available) and the
principal amount of Series A Notes tendered, together with a duly executed
Letter of Transmittal (or facsimile thereof), stating that the tender is
being made thereby and guaranteeing that, within three business days after
the Expiration Date, the certificate(s) representing the Series A Notes to
be tendered in proper form for transfer (or a confirmation of a book-entry
transfer into the Exchange Agent's account at the Depository of Series A
Notes delivered electronically and any other documents required by the
Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with the certificate(s) representing all
tendered Series A Notes in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at the Depository of
Series A Notes delivered electronically) and all other documents required
by the Letter of Transmittal are received by the Exchange Agent within five
business days after the date of execution of the Notice of Guaranteed
Delivery.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.
23
<PAGE> 24
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date, unless previously accepted for exchange.
To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Series A Notes to be withdrawn (the "Depositor"), (ii)
identify the Series A Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Series A Notes), (iii) be signed by the
Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Series A Notes were tendered (including required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Trustee with respect to the Series A Notes to register the transfer
of such Series A Notes into the name of the Depositor withdrawing the tender
and (iv) specify the name in which any such Series A Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Series A Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no Series
B Notes will be issued with respect thereto unless the Series A Notes so
withdrawn are validly re-tendered. Any Series A Notes which have been tendered
but which are not accepted for exchange will be returned by the Exchange Agent
to the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Series A Notes may be retendered by following one of the procedures
described above under "--Procedure for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
In addition, and notwithstanding any other term of the Exchange Offer, the
Company will not be required to accept for exchange any Series A Notes for
Series B Notes tendered and may terminate or amend the Exchange Offer as
provided herein before the acceptance of such Series A Notes, if any of the
following conditions exist:
(i) there shall have been instituted, threatened or be pending any
action or proceeding before or by any court, governmental, regulatory or
administrative agency or instrumentality, or by any other person, in
connection with the Exchange Offer that is, or is reasonably likely to be,
or which would or might be, in the sole judgment of the Company, materially
adverse to the business, operations, properties, condition (financial or
otherwise), assets, liabilities or prospects of the Company and its
subsidiaries, taken as a whole, or which would or might, in the sole
judgment of the Company, prohibit, prevent, restrict or delay consummation
of the Exchange Offer or have a material adverse effect on the contemplated
benefits of the Exchange Offer to the Company; or
(ii) there shall have occurred any material adverse development, in the
sole judgment of the Company, with respect to any action or proceeding
concerning the Company and its subsidiaries, taken as a whole; or
(iii) there exists an order, statute, rule, regulation, executive
order, stay, decree, judgment or injunction that shall have been proposed,
enacted, entered, issued, promulgated, enforced or deemed applicable by any
court or governmental, regulatory or administrative agency or
instrumentality that, in the sole judgment of the Company, would or might
prohibit, prevent, restrict or delay consummation of the Exchange Offer, or
that is, or is reasonably likely to be, in the sole judgment of the
Company, materially adverse to the business, operations, properties,
condition (financial or otherwise), assets, liabilities or prospects of the
Company and its subsidiaries, taken as a whole; or
(iv) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of the Company or any of its
subsidiaries that, in the sole judgment of the Company, would or might
prohibit, prevent, restrict or delay consummation of, or could materially
impair the contemplated benefits to the Company of, the Exchange Offer; or
24
<PAGE> 25
(v) there shall have occurred (1) any general suspension of, or
limitation on prices for, trading in securities in the United States
securities or financial markets, (2) any significant adverse change in the
price of the Notes or in the United States securities or financial markets,
(3) a material impairment in the trading market for debt securities, (4) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (5) any
limitation (whether or not mandatory) by a government authority, or other
event that, in the reasonable judgment of the Company, might affect the
extension of credit by banks or other lending institutions in the United
States, (vi) a commencement of a war, armed hostilities or other national
or international crisis directly or indirectly involving the United States
or
(vii) in the case of any of the foregoing existing on the date hereof,
a material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in its sole discretion regardless of the circumstances
giving rise to such conditions, and may be waived by the Company, in whole or
in part at any time and from time to time, in its sole discretion. If the
Company waives or amends the foregoing conditions, the Company will, if
required by applicable law, extend the Exchange Offer for a minimum of five
business days from the date that the Company first gives notice, by public
announcement or otherwise, of such waiver or amendment, if the Exchange Offer
would otherwise expire within such five business-day period. Any determination
by the Company concerning the events described in this section shall be final
and binding upon all persons.
EXCHANGE AGENT
U.S. Trust Company of Texas, N.A., the Trustee under the Indenture, has
been appointed as Exchange Agent for the Exchange Offer. Questions and requests
for assistance and requests for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
By Hand Delivery, Mail U.S. Trust Company of Texas, N.A.
or Overnight Courier: 2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
Attn: Corporate Trust Department
Facsimile Transmission: (214) 754-1303
Attn: Corporate Trust Department
Confirm: (214) 754-1200
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
telegraph, telephone or in person by officers and regular employees of the
Company and its affiliates in person, by telegraph or telephone.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this Prospectus, Letters of Transmittal and related
documents to the beneficial owners of the Series A Notes and in handling or
forwarding tenders for exchange. The Company will pay the other expenses to be
incurred in connection with the Exchange Offer, including fees and expenses of
the Trustee, accounting and legal fees and printing costs.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Series A Notes pursuant to the Exchange Offer. If, however,
certificates representing Series B Notes or Series A Notes for principal
amounts not
25
<PAGE> 26
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the Series A Notes tendered, or if tendered Series A Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Series A Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange Offer
will be amortized by the Company over the term of the Series B Notes under
generally accepted accounting principles.
26
<PAGE> 27
CAPITALIZATION
The following table sets forth the actual unaudited consolidated
capitalization of the Company at September 30, 1997 and the consolidated
capitalization of the Company as adjusted to give effect to the Offering. This
table should be read in conjunction with the more detailed information and the
Company's Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Cash and temporary cash investments......................... $ 15,468 $ 15,468
======== ========
Long-term debt, including current maturities:
Credit Facility(2)........................................ $120,000 $ 16,185
12% Senior Subordinated PIK Notes of Cinemark Mexico due
2003(3)(4)............................................. 28,561 28,561
8 1/2% Senior Subordinated Notes Due 2008(5).............. -- 103,950
9 5/8% Series B Senior Subordinated Notes due 2008(6)..... 199,194 199,194
9 5/8% Series D Senior Subordinated Notes due 2008(7)..... 77,199 77,199
Other indebtedness........................................ 572 572
-------- --------
Total long-term debt.............................. 425,526 425,661
Minority interest in subsidiaries........................... 1,702 1,702
Shareholders' equity........................................ 67,411 67,411
-------- --------
Total capitalization.............................. $494,639 $494,774
======== ========
</TABLE>
- ---------------
(1) Gives effect to the Offering.
(2) A total of $225 million is available to the Company under the Credit
Facility, subject to compliance with the terms thereof. As of January 20,
1998, the amount outstanding under the Credit Facility was $51 million and
the effective interest rate on such borrowing was 7.1%. See "Description of
Certain Debt Instruments -- Credit Facility."
(3) The 12% Senior Subordinated PIK Notes (the "Cinemark Mexico Notes") were
issued by Cinemark Mexico, a subsidiary of Cinemark International and an
Unrestricted Subsidiary.
(4) On December 18, 1997, Cinemark Mexico repurchased all of the outstanding
Cinemark Mexico Notes. In November 1997, Cinemark International entered into
a $25 million Credit Facility with Bank of America National Trust and
Savings Association which was amended in December 1997 to provide borrowings
up to $30 million to fund the repurchase of the Cinemark Mexico Notes. See
"Description of Certain Debt Instruments -- Cinemark International Credit
Facility."
(5) The amount shown is net of an unamortized debt discount of approximately
$1.1 million associated with the Offering.
(6) The amount shown is net of an unamortized debt discount of approximately $.8
million associated with the issuance of the 9 5/8% Series B Senior
Subordinated Notes due 2008.
(7) The amount shown reflects a premium of approximately $2.2 million associated
with the issuance of the 9 5/8% Series D Senior Subordinated Notes due 2008.
27
<PAGE> 28
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables set forth selected consolidated financial data for the
Company for the periods and at the dates indicated for each of the five most
recent fiscal years ended December 31, 1996, for the twelve months ended
September 30, 1997 and for the nine months ended September 30, 1996 and 1997.
Supplemental financial data for the Restricted Group are derived from
supplemental schedules to the Consolidated Financial Statements appearing
elsewhere in this Prospectus. The financial data for the twelve months ended
September 30, 1997 and for the nine months ended September 30, 1996 and 1997
are derived from the unaudited financial statements of the Company. The Company
believes the financial data for the twelve months ended September 30, 1997 and
for the nine months ended September 30, 1996 and 1997 reflect all adjustments
(which include only normal recurring adjustments other than an adjustment
required by SFAS 121 as discussed in note 1 to the Consolidated Financial
Statements appearing elsewhere in this Offering Memorandum) necessary for a
fair presentation of such data. Operating results for the twelve months ended
September 30, 1997 and for the nine months ended September 30, 1996 and 1997
are not necessarily indicative of results for the full fiscal year. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements, including the notes thereto, appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE
MONTHS NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
----------------------------------------------------- SEPTEMBER 30, ---------------------
1992 1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- -------- --------- ------------- --------- ---------
(IN THOUSANDS, EXCEPT THEATRE, SCREEN AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
(CONSOLIDATED):
Revenues........................ $194,652 $239,659 $283,077 $298,559 $ 341,731 $ 413,249 $ 255,463 $ 326,981
Theatre operating costs......... 154,825 185,100 218,748 227,719 262,138 308,770 194,962 241,594
General and administrative
expenses...................... 10,119 12,162 17,095 19,555 23,486 27,327 16,636 20,477
Depreciation and amortization... 9,830 10,939 15,121 15,925 21,799 25,297 16,973 20,471
Operating income................ 19,878 31,458 32,113 35,361 34,308 51,855 26,892 44,439
Interest expense(1)............. 12,258 17,102 18,917 19,374 20,376 29,366 14,665 23,655
Income before extraordinary
items......................... 5,726 9,720 7,006 13,155 14,616 17,303 9,795 12,482
Net income(2)................... 5,829 9,720 7,006 13,155 5,230 16,985 671 12,426
OTHER FINANCIAL DATA
(CONSOLIDATED):
Cash flow from (used for)
Operations.................... $ 23,376 $ 27,181 $ 32,665 $ 36,090 $ 58,754 $ 49,127 $ 33,833 $ 24,206
Investing activities.......... (35,432) (35,560) (62,876) (80,268) (177,423) (197,267) (125,384) (145,228)
Financing activities.......... 35,509 25,051 13,273 32,031 119,690 149,193 92,629 122,132
Theatre level cash flow(3).... 39,827 54,559 64,329 70,840 79,593 104,479 60,501 85,387
EBITDA(4)....................... 32,117 45,808 50,851 55,708 62,579 81,296 49,008 67,725
Ratio of earnings to fixed
charges(5).................... 1.43x 1.61x 1.46x 1.69x 1.65x 1.66x 1.58x 1.62x
Pro forma ratio of earnings to
fixed charges(6).............. 1.61x 1.63x 1.60x
SUPPLEMENTAL FINANCIAL DATA (RESTRICTED GROUP):(7)
EBITDA(4)....................... $ 32,089 $ 45,433 $ 49,408 $ 54,319 $ 61,093 $ 79,180 $ 47,173 $ 65,260
Pro forma interest expense(8)... 28,395 36,473 27,355
Ratio of EBITDA to pro forma
interest expense.............. 2.15x 2.17x 2.39x
Pro forma long-term debt,
including current maturities
(at period end)(9)............ $ 396,757 $ 396,757
Ratio of pro forma long-term
debt to EBITDA (at period
end)(9)....................... 5.01x N/A
OPERATING DATA:
United States (Restricted Group)
Theatres owned (at period
end)(10).................... 147 153 154 150 158 156 153 156
Screens owned (at period
end)(10).................... 1,010 1,084 1,121 1,155 1,339 1,396 1,230 1,396
Total attendance.............. 51,087 59,632 63,401 61,006 63,774 72,341 48,252 56,819
Outside United States
(Unrestricted Group)
Theatres owned (at period
end)(11).................... -- -- 4 9 11 14 11 14
Screens owned (at period
end)(11).................... -- -- 42 92 114 148 114 148
Total attendance.............. -- -- 1,407 4,210 8,675 10,574 6,603 8,502
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
DECEMBER 31, -----------------------
---------------------------------------------------- AS
1992 1993 1994 1995 1996 ACTUAL ADJUSTED(12)
-------- -------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (CONSOLIDATED):
Cash and temporary cash investments............ $ 29,368 $ 44,454 $ 31,056 $ 13,925 $ 14,383 $ 15,468 $ 15,468
Theatre properties and equipment -- net........ 93,952 117,017 155,798 224,482 377,421 484,015 484,015
Total assets................................... 147,661 189,361 217,185 267,747 432,905 566,688 566,688
Total long-term debt, including current
portion...................................... 130,662 152,787 167,374 196,168 297,206 425,526 425,661
Shareholders' equity (deficiency).............. (11,094) (760) 2,732 11,345 57,363 67,411 67,411
</TABLE>
28
<PAGE> 29
- ----------------------
(1) Includes amortization of debt issue cost and debt discount.
(2) In 1996, an extraordinary loss of $9 million (net of related tax
benefit) was recognized in connection with the premium paid and the
write-off of the unamortized debt issue costs associated with the
Senior Notes repurchased.
(3) Revenues less theatre operating costs (which is not a measure of
financial performance under generally accepted accounting principles
("GAAP")). Theatre level cash flow is a financial measure commonly
used in the Company's industry and should not be construed as an
alternative to cash flow from operations (as determined in accordance
with GAAP) as an indicator of operating performance or as a measure of
liquidity.
(4) Represents net income before depreciation and amortization, interest
expense, changes in deferred lease expense, accrued and unpaid
compensation expense relating to any stock appreciation and stock
option plans, equity in income (loss) of affiliates, gain (loss) on
sale of assets, minority interests, provision for income taxes and
extraordinary items. EBITDA is a financial measure commonly used in
the Company's industry and should not be construed as an alternative
to cash flows from operating activities (as determined in accordance
with GAAP), as an indicator of operating performance or as a measure
of liquidity.
(5) For the purpose of calculating the ratio of earnings to fixed charges,
(i) earnings consist of income (loss) before income taxes and
extraordinary items plus fixed charges excluding capitalized interest
and (ii) fixed charges consist of interest expense, capitalized
interest, amortization of debt issue cost and debt discount and the
portion of rental expense which is deemed to be representative of the
interest factor.
(6) Gives effect to the Offering as if the Offering had occurred at the
beginning of the period. See "Use of Proceeds" and "Capitalization."
(7) The restrictive covenants in the Indenture apply only to the
Restricted Group and supplemental financial data represents data
pertaining to the Restricted Group only. See supplemental schedules to
the Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus.
(8) Calculated based on debt outstanding at the end of the period for the
subsequent four quarter period. Gives effect to the Offering as if the
Offering had occurred at the end of such period and does not include
amortization of debt issue cost for the Notes.
(9) Gives effect to the Offering as if the Offering had occurred at the
end of such period. For purposes of calculating total long-term debt,
amounts for the Notes and the Senior Subordinated Notes are based on
the stated principal amount at maturity. See "Capitalization."
29
<PAGE> 30
(10) The data as of period end 1992, 1993, 1994, 1995, September 1996 (and
period end September 1996) and September 1997 exclude two theatres
(23 screens), two theatres (23 screens), three theatres (33 screens),
five theatres (64 screens) and eight theatres (66 screens),
respectively, operated by the Company pursuant to management
agreements.
(11) The data as of period end 1993, 1994, 1995, September 1996 (and period
end September 1996) and September 1997 exclude two theatres (23
screens), two theatres (18 screens), three theatres (25 screens),
four theatres (37 screens) and eight theatres (66 screens),
respectively, operated through affiliates of the Company in Canada,
Chile, Argentina, Peru, El Salvador and Japan.
(12) Gives effect to the Offering.
30
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following is an analysis of the financial condition and results of
operations of the Company. This analysis should be read in conjunction with the
Company's Consolidated Financial Statements, including the notes thereto,
appearing elsewhere in this Prospectus.
The Company's revenues are generated primarily from box office receipts and
concession sales. The Company's revenues are affected by changes in attendance
and the average admission and concession revenues per patron. Attendance is
primarily affected by the commercial appeal of the films released during the
period or year reported. Since the Company's formation, attendance has grown
principally from the development and acquisitions of theatres. The Company has
generally experienced increases in average admission and concession revenues
per patron from ticket and concession price increases as well as the
development of theatres in markets that can support higher ticket and
concession prices. Additional revenues related to theatre operations are
generated by electronic video games installed in video arcades located in some
of the Company's theatres.
Film rentals, concession supplies, and salaries and wages vary directly with
changes in revenues. These expenses have historically represented approximately
65% of all theatre operating expenses and approximately 50% of revenues. Film
rental costs are based on a percentage of admissions revenues as determined by
film license agreements. The Company purchases concession supplies to replace
units sold. Although salaries and wages include a fixed component of cost
(i.e., the minimum staffing cost to operate a theatre facility during non-peak
periods), salaries and wages move in relation to revenues as theatre staffing
is adjusted to handle attendance volume.
Conversely, facility lease expense is primarily a fixed cost at the theatre
level as the Company's facility leases generally require a fixed monthly
minimum rent payment. Facility lease expense as a percentage of revenues is
also affected by the number of leased versus fee owned facilities. The addition
of a larger proportion of fee owned properties in the future should result in a
decrease in facility lease expense as a percentage of revenues and an increase
in the level of depreciation expense.
Additionally, advertising cost is primarily fixed at the theatre level as
daily movie directories placed in newspapers represent the largest component of
advertising costs. The monthly cost of these ads is based on the size of the
directory. However, advertising costs have remained relatively constant when
expressed as a percentage of revenues as screen growth results in the addition
of new or larger directory ads.
Utilities and other costs include certain costs that are fixed such as
property taxes, certain costs which are variable, such as liability insurance,
and certain costs that possess both fixed and variable components such as
utilities, repairs and maintenance and security services.
The results of operations of acquired theatres are included in the Company's
Consolidated Financial Statements from their date of acquisition. Fiscal years
ended December 31, 1994, 1995, and 1996 are not directly comparable due to the
effects of new theatre openings, acquired theatres and the impact of the debt
service associated with financing incurred. Theatre closings have had no
significant effect on the operations of the Company. See Notes 1 and 3 of notes
to the Consolidated Financial Statements.
RESULTS OF OPERATIONS
Set forth below is a summary of operating revenues and expenses, certain
income statement items expressed as a percentage of revenues, average screen
count and revenues per average screen count for the three most recent fiscal
years ended December 31, 1996 and the nine months ended September 30, 1996
and 1997.
31
<PAGE> 32
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ ---------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
OPERATING DATA (In millions):
Revenues
Admissions............................ $174.5 $183.1 $211.6 $157.1 $205.8
Concessions........................... 95.2 102.1 116.9 87.0 112.8
Other................................. 13.4 13.4 13.2 11.4 8.4
------ ------ ------ ------ ------
Total revenues................ $283.1 $298.6 $341.7 $255.5 $327.0
====== ====== ====== ====== ======
Cost of operations
Film rentals.......................... $ 84.0 $ 89.0 $104.1 $ 78.5 $103.6
Concession supplies................... 17.5 17.3 18.4 14.2 17.3
Salaries and wages.................... 39.5 40.6 46.9 34.6 42.1
Facility leases....................... 29.6 30.9 34.4 25.4 28.3
Advertising........................... 7.2 7.6 8.5 6.2 7.7
Utilities and other................... 40.9 42.3 49.8 36.1 42.6
------ ------ ------ ------ ------
Total cost of operations...... $218.7 $227.7 $262.1 $195.0 $241.6
====== ====== ====== ====== ======
OPERATING DATA AS A PERCENTAGE OF TOTAL
REVENUES(1):
Revenues
Admissions............................ 61.6% 61.3% 61.9% 61.5% 62.9%
Concessions........................... 33.6 34.2 34.2 34.0 34.5
Other................................. 4.8 4.5 3.9 4.5 2.6
------ ------ ------ ------ ------
Total revenues................ 100.0 100.0 100.0 100.0 100.0
Cost of operations
Film rentals(1)....................... 48.1 48.6 49.2 50.0 50.4
Concession supplies(1)................ 18.4 16.9 15.8 16.3 15.3
Salaries and wages.................... 14.0 13.6 13.7 13.5 12.9
Facility leases....................... 10.5 10.3 10.1 10.0 8.7
Advertising........................... 2.5 2.5 2.5 2.4 2.4
Utilities and other................... 14.4 14.2 14.6 14.1 13.0
Total cost of operations................ 77.3 76.3 76.7 76.3 73.9
General and administrative expenses..... 6.0 6.6 6.9 6.5 6.3
Depreciation and amortization........... 5.3 5.3 6.4 6.6 6.3
Operating income........................ 11.4 11.8 10.0 10.6 13.6
Interest expense........................ 6.7 6.4 6.0 5.7 7.2
Income before income taxes.............. 5.0 7.8 7.9 7.0 7.0
Net income.............................. 2.5 4.4 1.5 0.3 3.8
</TABLE>
- ---------------
(1) All costs are expressed as a percentage of total revenues, except film
rentals, which are expressed as a percentage of admissions revenue, and
concession supplies, which are expressed as a percentage of concessions
revenue.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average screen count (month end
average).............................. 1,131 1,195 1,322 1,299 1,490
======== ======== ======== ======== ========
Revenues per average screen count....... $250,289 $249,840 $258,495 $196,661 $219,450
======== ======== ======== ======== ========
</TABLE>
32
<PAGE> 33
COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
Operating results for the nine months ended September 30, 1997 are not
necessarily indicative of the results to be achieved for the full year.
Revenues. The Company generated revenues for the nine months ended
September 30, 1997 (the "1997 period") of $327.0 million compared to $255.5
million for the nine months ended September 30, 1996 (the "1996 period"), a
28.0% increase. The increase in revenues for the 1997 period is primarily
attributable to a 17.0% increase in attendance as the result of the net addition
of 166 screens since the third quarter of 1996 and a combined increase of 8.3%
in admissions and concessions per patron. Revenues per average screen increased
11.6% to $219,450 in the 1997 period from $196,661 in the 1996 period.
Cost of Operations. Cost of operations, as a percentage of revenues,
decreased to 73.9% in the 1997 period from 76.3% in the 1996 period. The
decrease as a percentage of revenues resulted from a decrease in concession
supplies as a percentage of concession revenues to 15.3% in 1997 from 16.3% in
1996, a decrease in facility leases as a percentage of revenues to 8.7% in 1997
from 10.0% in 1996 and a decrease in utilities and other as a percentage of
revenues to 13.0% in 1997 from 14.1% in 1996.
General and Administrative Expenses. For the 1997 period, general and
administrative costs decreased as a percentage of revenues to 6.3% from 6.5% for
the 1996 period. The decrease is primarily attributable to the 28.0% increase in
revenues from screen additions and increases in admissions and concessions per
patron. The absolute level of general and administrative expenses increased to
$20.5 million for the 1997 period from $16.6 million for the 1996 period. The
increase in general and administrative expenses is attributed to costs
(primarily salaries and wages) associated with the Company's expansion program
and compensation costs associated with the repurchase of non-qualified stock
options.
Depreciation and Amortization. For the 1997 period, depreciation and
amortization increased 20.6% to $20.5 million from $17.0 million in 1996. The
increase is a result of the net addition of $158.0 million in theatre property
and equipment since the third quarter of 1996, a 48.5% increase. The difference
in the percentage increase in depreciation and amortization compared to the
increase in theatre property and equipment is a result of the timing of when the
additions were placed in service during the period.
Interest Expense. Interest costs for the 1997 period, including
amortization of debt issue cost and debt discount, increased 44.0% to $25.0
million (including capitalized interest) from $17.4 million (including
capitalized interest) in the 1996 period. The increase in interest costs
incurred for the third quarter of 1997 and the 1997 period was due principally
to an increase in average debt outstanding resulting from borrowings under the
Company's Credit Facility and the issuance of the Senior Subordinated Notes.
Income Taxes. The effective tax rate for the 1997 period increased to 45.1%
from 44.9% for the 1996 period. The change in the effective tax rate was
primarily a result of the relative level of goodwill amortization and foreign
losses. The effective tax rates reflect the full reserve of the potential tax
benefit associated with the loss incurred by Cinemark Mexico.
Other Gains and Losses. Other gains for the 1996 period of $3.3 million is
primarily attributable to a gain from the settlement of litigation.
Extraordinary Items. In the third quarter of 1996, the Company issued $200
million aggregate principle of 9 5/8 Senior Subordinated Notes (the "Series B
Notes"), a portion of the proceeds of $193.2 million (net of discount, fees and
expenses) were used to repurchase 98.7% of the Company's $125 million 12% Senior
Notes due 2002 at a price of $1,098.33 per $1,000 principle amount. As a result,
an extraordinary loss of $8.8 million (net of related tax benefit) was
recognized in connection with the premium paid and the write-off of the
unamortized debt issue cost associated with the 12% Senior Notes repurchased.
The 1996 Period also includes an extraordinary loss of $.3 million (net of
related tax benefit) which was recognized in connection with the writeoff of the
Company's existing bank line of credit which was replaced with a new revolving
and term credit facility in February 1996.
Net Income. Net income of $12.4 million for the 1997 period and .7 million
for the 1996 period includes the consolidated losses of Cinemark International
of $1.7 million (net of minority interest) and $1.1 million (net of minority
interest), respectively.
33
<PAGE> 34
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Revenues. Revenues in 1996 increased to $341.7 million from $298.6
million, a 14.5% increase. The increase in revenues is primarily attributable
to a 11.1% increase in attendance resulting from strong industry performance,
the first full year of operations of 130 screens opened in 1995 and the net
addition of 206 screens since 1995. The contribution from the new screens
opened in 1996 is not fully reflected in the Company's operations as a majority
of the new screens were not opened until late 1996. Revenues were also
positively affected by an increase in admission and concession revenues per
patron of 6.2%. The strong industry performance and new screen openings
contributed to an increase of 3.5% in the revenues per average screen to
$258,495 for 1996 from $249,840 for 1995.
Cost of Operations. Cost of operations, as a percentage of revenue,
increased slightly to 76.7% in 1996 from 76.3% in 1995. The increase as
percentage of revenues resulted from increases during the period in film
rentals as a percentage of admission revenues to 49.2% in 1996 from 48.6% in
1995 and an increase in utilities and other as a percentage of revenues to
14.6% in 1996 from 14.2% in 1995. This increase was partially offset by a
decrease in concession supplies as a percentage of concession revenues to 15.8%
in 1996 from 16.9% in 1995.
General and Administrative Expenses. General and administrative
expenses, as a percentage of revenues, increased to 6.9% in 1996 from 6.6% in
1995. General and administrative expenses in absolute terms increased to $23.5
million in 1996 from $19.6 million in 1995. The increase as a percentage of
revenues and in absolute terms is primarily the result of a $1.8 million
special bonus payment paid to key employees during the second quarter of 1996
to provide for the estimated taxes due on the exercise of non-qualified stock
options and increases in salaries and wages, travel, and miscellaneous expenses
associated with the Company's international expansion.
Depreciation and Amortization. Depreciation and amortization increased
$5.9 million in 1996 to $21.8 million in 1995. The increase includes a $2.4
million charge pursuant to Statement of Financial Accounting Standards No. 121
(SFAS 121). In accordance with SFAS 121, the Company wrote down the assets of
certain theatres to their realizable value which exceeded their carrying value.
Depreciation and amortization before the affect of SFAS 121 increased $3.5
million for 1996. The increase is a result of the net addition of $163.3
million in theatre property and equipment during 1996, a 56.8% increase over
1995. The difference in the percentage increase in depreciation and
amortization compared to the increase in theatre property and equipment is a
result of the timing of when the additions were placed in service during the
period.
Interest Expense. Interest costs incurred, including amortization of
debt issue cost and debt discount, increased 15.1% to $24.3 million (including
the capitalization of $3.9 million of interest to properties under
construction) from $21.1 million in 1995 (including capitalized interest of
$1.7 million) . The increase in interest costs incurred during 1996 was due
principally to an increase in average debt outstanding resulting from
borrowings under the Credit Facility and the Series B Notes.
Income Taxes. Income taxes increased to $12.3 million in 1996 compared
to $10.1 million in 1995, a 22.2% increase, resulting primarily from the
increase in income before taxes and permanent differences associated with the
sale of certain assets. The Company's effective rate for 1996 increased to
45.8% from 43.4% in 1995. The effective tax rates reflect the full reserve of
the potential tax benefit associated with the loss incurred by Cinemark Mexico.
Other Gains and Losses. Other gains and losses for 1996 of $11.1
million is primarily attributable to a gain from the settlement of litigation
and the sale of 2 Day Video, Inc., an 84.4% subsidiary of the Company.
Extraordinary Items. In the third quarter of 1996, the Company issued
the Series B Notes. A portion of the proceeds of $193.2 million (net of
discount, fees and expenses) was used to repurchase 98.7% of the Senior Notes
at a price of $1,098.33 per $1,000 principal amount. As a result, an
extraordinary loss of $9 million (net of related tax benefit) was recognized in
connection with the premium paid and the write-off of the unamortized debt
issue costs associated with the Senior Notes repurchased. The remaining loss is
attributable to the refinancing of the Company's bank line of credit during
1996.
34
<PAGE> 35
Net Income. Net income before extraordinary items of $14.6 million for
1996 and net income of $13.2 million for 1995 included the consolidated losses
of Cinemark Mexico of $2.6 million (net of minority interest) and $2.7 million
(net of minority interest), respectively.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Revenues. Revenues in 1995 increased to $298.6 million from $283.1
million in 1994, a 5.5% increase. The increase is primarily attributable to a
combined increase of 5.1% in admission and concession revenues per patron.
Attendance remained constant despite the net addition of 130 screens. The
contribution from these new screens is not fully reflected in the Company's
operations, as a majority of the new screens were not opened until late 1995.
The contribution to revenues from admission and concession price increases was
partially offset by a decrease in per patron revenues in Mexico as a result of
the devaluation of the Mexican peso that began in late December 1994. Revenues
per average screen remained constant at approximately $250,000 per screen
despite average admission and concession price increases and improved revenues
per screen from new U.S. screen openings as revenues per screen for the 92
screens the Company operated in Mexico declined significantly as a result of
the Mexican peso devaluation.
Cost of Operations. Cost of operations, as a percentage of revenues,
decreased to 76.3% in 1995 from 77.3% in 1994. The decrease resulted primarily
from a decrease in concession costs as a percentage of concession revenue to
16.9% in 1995 from 18.4% in 1994 associated with an increase in concession
pricing which was partially offset by an increase in film rental expense as a
percentage of admission revenues to 48.6% in 1995 from 48.1% in 1994. Other
operating costs as a percentage of revenues remained relatively constant
between the two periods.
General and Administrative Expenses. General and administrative
expenses, as a percentage of revenues, increased to 6.6% in 1995 from 6% in
1994. General and administrative expenses increased to $19.6 million in 1995
from $17.1 million in 1994, primarily from increases in salaries and wages,
travel, and miscellaneous expenses associated with the Company's domestic and
international expansion and increased amortized compensation expense resulting
from the grant of stock options at less than fair market value.
Depreciation and Amortization. Depreciation and amortization increased
5.3% in 1995 to $15.9 million from $15.1 million in 1994. The increase is a
result of the net addition of $79.5 million in theatre property and equipment
during 1995, a 38.5% increase over 1994. Depreciation and amortization expense
did not increase in direct proportion with the increase in theatre property and
equipment as $43.7 million of the additions were either placed in service in
late 1995 or will be placed in service in 1996.
Interest Expense. Interest costs incurred, including amortization of
debt issue cost and debt discount, increased 2.4% during 1995 to $21.1 million
(including the capitalization of $1.7 million of interest to fee properties
under construction) from $19.5 million of interest costs in 1994 (including $.6
million of capitalized interest). The increase in interest costs incurred for
1995 was due principally to an increase in average debt outstanding resulting
from borrowings under the Company's bank line of credit.
Other Gains and Losses. In 1995, the Company recorded a gain on the
sale of 10 theatre properties (46 screens) of $5.5 million and losses of $.6
million relating to the disposition of an interest in Funtime Pizza
International and the write-off of costs, principally professional fees,
relating to merger negotiations with another theatre circuit which were
terminated in May 1995.
Income Taxes. Income taxes increased to $10.1 million in 1995 compared
to $7.1 million in 1994, a 42.9% increase, resulting from the increase in
income before taxes. The Company's effective tax rate for 1995 was 43.4%
compared to 50.2% for 1994. The decrease in the effective tax rate was
primarily a result of reduction in the relative level of goodwill and foreign
losses as a result of the increase in total earnings. The effective tax rates
reflect the full reserve of the potential tax benefit associated with the loss
incurred by Cinemark Mexico.
Net Income. Net income of $13.2 million in 1995 and $7 million in 1994
included the consolidated losses of Cinemark Mexico of $2.7 million (net of
minority interest) and $2.5 million (net of minority interest), respectively.
35
<PAGE> 36
INFLATION AND FOREIGN CURRENCY
The Mexican currency has experienced a significant devaluation since
December 1994. Cinemark Mexico's debt and certain of Cinemark Mexico's theatre
lease rents are denominated in U.S. dollars while its revenues are denominated
in Mexican pesos. As a result of the devaluation, certain costs of Cinemark
Mexico have almost doubled in relation to Cinemark Mexico's revenues.
Additionally, the majority of the equipment and interior finish material of
Cinemark Mexico's theatres have been imported from the U.S. As a result of the
devaluation, Cinemark Mexico has recognized a $11.1 million cumulative
unrealized currency translation loss adjustment in shareholders' equity as of
September 30, 1997. The devaluation has significantly and adversely affected the
Mexican economy and will impact the short term profitability of Cinemark
Mexico's theatres. Additionally, there is a reduced level of available capital
in the Mexican financial markets due to a significant rise in Mexican interest
rates. This in turn has resulted in the reduced availability of developer
financing for future projects. Such events have caused a reduction in the rate
of expansion initially anticipated by Cinemark Mexico.
Beginning in 1997, generally accepted accounting principles require
that the U.S. dollar be used as the functional currency of the Company's
Mexican subsidiary for U.S. reporting purposes. As a result, fluctuations in
the peso during 1997 affecting the Company's investment in Mexico will be
charged to exchange gain or loss rather than to cumulative foreign currency
translation adjustment included in shareholders equity. The exchange rate
during 1997 averaged N$7.9 to $1.00.
LIQUIDITY AND CAPITAL RESOURCES
The Company's revenues are collected in cash, primarily through box
office receipts and the sale of concession items. Because its revenues are
received in cash prior to the payment of related expenses, the Company has an
operating "float" and, as a result, historically has not required traditional
working capital financing. Primarily due to the lack of significant inventory
and accounts receivable, the Company has typically operated with a negative
working capital position for its ongoing theatre operations. The major film
distributors generally release during the summer and holiday seasons those
films which they anticipate will be the most successful. Consequently, the
Company typically generates higher revenues during such periods. The Company's
cash flow from operations was $58.8 million in 1996 compared to $36.1 million
in 1995 and $32.7 million in 1994.
The Company's theatres are typically equipped with modern projection and
sound equipment, with approximately 75% of the screens operated by the Company
having been built during the 1990's. Maintenance capital expenditures for all
theatres operated by the Company for 1996 were $6 million or approximately 1.8%
of revenues. The Company believes that future annual maintenance capital
expenditures will not significantly change as a percentage of revenues. The
Company's investing activities have been principally in connection with new
theatre openings and acquisitions of existing theatres and theatre circuits and
have amounted to $177.4 million, $80.3 million, and $62.9 million in 1996, 1995
and 1994, respectively. New theatre openings and acquisitions historically have
been financed with internally generated cash and by debt financing, including
borrowings under the Company's bank line of credit. Cash flow from financing
activities amounted to $119.7 million, $32 million and $13.3 million in 1996,
1995 and 1994, respectively. During 1997, the Company opened in the U.S. 12
theatres (165 screens) and has 13 theatres (217 screens) under construction. In
addition, as of January 8, 1998, the Company has 10 theatres (164 screens)
scheduled to begin construction and be completed by the end of 1998. Certain of
these theatres will be megaplexes which may cost in excess of $15 million per
theatre. The Company currently estimates that its capital expenditures for the
development of these 680 screens in the U.S. in 1998 and 1999 will be
approximately $350 million. As of January 20, 1998, the Company had expended
approximately $49.3 million toward the development of these screens. The Company
plans to fund capital expenditures for its development from cash flow from
operations and borrowings under the Credit Facility. Actual expenditures for
theatre development and acquisitions during 1998 and 1999 are subject to change
based upon the availability of attractive opportunities for expansion of the
Company's theatre circuit.
36
<PAGE> 37
On August 15, 1996, the Company issued the Series B Notes which bear
interest at a rate of 9 5/8% per annum, payable semi-annually on February 1 and
August 1 of each year. The Series B Notes were issued at 99.553% of the
principal face amount (a discount of $4.47 per $1,000 principal amount). The net
proceeds to the Company from the issuance of the Series B Notes (net of
discount, fees and expenses) were approximately $193.2 million. The proceeds
from the Series B Notes were used to repurchase 98.7% of the Company's
$125,000,000 aggregate principal amount 12% Senior Notes due 2002 (the "Senior
Notes") pursuant to a tender offer which expired on August 15, 1996. The Senior
Notes were purchased at a premium of $1,098.33 (including a consent fee of $25)
per $1,000 principal amount, plus accrued and unpaid interest up to the date of
repurchase. Excess proceeds were utilized to reduce borrowings under the
Company's Credit Facility and for general corporate purposes.
On June 2, 1997 the Company redeemed the remaining outstanding Senior Notes
($1.6 million). The Senior Notes were redeemed at a premium of $1,060 per $1,000
principal amount, plus accrued and unpaid interest up to the date of redemption.
On December 12, 1996, the Company replaced its existing credit facility
with the new credit facility ("Credit Facility") through a group of banks for
which Bank of America National Trust and Savings Association acts as
Administrative Agent. The Credit Facility provides for loans to the Company of
up to $225 million in the aggregate. The Credit Facility is a reducing revolving
credit facility with reductions in the aggregate commitment at the end of each
quarter during the calendar years 2000, 2001, 2002 and 2003, in the amount of
$8,437,500, $11,250,000, $14,062,500 and $22,500,000, respectively. The Company
is required to prepay all loans outstanding in excess of the aggregate
commitment from time to time. The Credit Facility is secured by a pledge of a
majority of the issued and outstanding capital stock of the Company. Pursuant to
the terms of the Credit Facility, funds borrowed currently bear interest at a
rate per annum equal to the Offshore Rate (as defined in the Credit Facility) or
the Base Rate (as defined in the Credit Facility), as the case may be, plus the
Applicable Amount (as defined in the Credit Facility). On December 12, 1997 the
Company executed an amendment to the Credit Facility which amended certain
restrictions relating to financial ratios with which the Company must comply. As
of January 20, 1998, the Company has borrowed $51 million under the Credit
Facility and the effective interest rate on such borrowings was 7.1% per annum.
See "Description of Certain Debt Instruments -- Credit Facility."
On June 26, 1997, the Company issued the Series D Notes which bear interest
at a rate of 9 5/8% per annum, payable semi-annually on February 1 and August 1
of each year. The Series D Notes were issued at 103% of the principal face
amount. The net proceeds to the Company from the issuance of the Series D Notes
(net of fees and expenses) was approximately $77.1 million. The proceeds of the
Series D Notes were applied to reduce the Company's indebtedness under the
Credit Facility.
In April 1997, the Company repurchased an aggregate of 1,242 shares of
Class B Common Stock issued to optionholders upon the exercise of options in
April 1996. The aggregate purchase price for such shares was $2,224,729. In June
1997, the Company repurchased options to purchase an aggregate 737 shares of
Class B Common Stock from retiring employees. The aggregate purchase price for
such options was approximately $1.3 million.
In 1992, the Company formed Cinemark International to develop and acquire
theatres in international markets. As of January 20, 1998, Cinemark
International operated 27 theatres (257 screens), principally in Latin America.
As of January 20, 1998 the Company has contributed approximately $75 million to
the capital of Cinemark International to fund theatre development, principally
in Latin America. Cinemark International plans to invest up to an additional $75
million in international ventures, principally in Latin America, over the next
two to three years. The Company anticipates that investments in excess of
Cinemark International's available cash will be funded by the Company or by debt
or equity financing to be provided by third parties directly to Cinemark
International or its subsidiaries.
In 1993, the Company incorporated Cinemark de Mexico, S.A. de C.V.
("Cinemark de Mexico") as an indirect subsidiary of Cinemark International to
pursue new development opportunities in Mexico. As of January 8, 1998, Cinemark
International and New Wave Investments AVV, an unaffiliated Aruba corporation
owned by Mexican citizens ("New Wave"), own 95.6% (95% on a fully diluted basis,
including the exercise of outstanding warrants) and 4.4% (4.4% on a fully
diluted basis, including the exercise of outstanding warrants), respectively, of
the common stock of Cinemark Mexico. As of January 20, 1998, Cinemark Mexico
operated 13 theatres (141 screens) and has begun construction on one theatre (10
screens).
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On November 18, 1997, Cinemark International executed a credit agreement
with Bank of America National Trust and Savings Association for itself and as
Administrative Agent as amended in December 1997 (the "Cinemark International
Credit Agreement"). The Cinemark International Credit Agreement is a revolving
credit facility and provides for a loan to Cinemark International of up to $30
million in the aggregate. The Cinemark International Credit Agreement is secured
by a pledge of substantially all of the stock of Cinemark Mexico and an
unconditional guaranty of Cinemark Mexico. Pursuant to the terms of the Cinemark
International Credit Agreement, funds borrowed bear interest at a rate per annum
equal to the Offshore Rate (as defined in the Cinemark International Credit
Agreement) or the Base Rate (as defined in the Cinemark International Credit
Agreement) as the case may be, plus the Applicable Margin (as defined in the
Cinemark International Credit Agreement). As of January 20, 1998, Cinemark
International has borrowed $30 million under the Cinemark International Credit
Agreement and the effective interest rate on such borrowings was 7.6% per annum,
the proceeds of which were used to repurchase all of the outstanding Cinemark
Mexico Notes. See "Description of Certain Debt Instruments -- Cinemark
International Credit Agreement."
In November 1992, Cinemark International entered into a joint venture
agreement with a Chilean theatre operator to develop state-of-the-art multiplex
theatres in Chile. The joint venture's business is conducted through Cinemark
Chile, S.A., which currently operates two theatres (13 screens), and plans to
open or begin construction on five theatres (46 screens) in 1998.
In December 1995, Cinemark entered into a joint venture agreement with
Argentine theatre operators to develop state-of-the-art multiplex theatres in
Argentina. The joint venture's business is conducted through Cinemark Argentina,
S.A., which is owned by Cinemark Investments Argentina, S.A. Cinemark
International owns 50% of Cinemark Investments Argentina, S.A. Cinemark
Argentina opened three theatres (28 screens) during 1997 and by the end of 1998
intends to begin construction on three additional theatres (28 screens). In
addition, in December 1997, the Company formed a wholly-owned Argentine
subsidiary through which the Company plans to develop three additional theatres
(31 screens) during the remainder of 1998.
In January 1997, Cinemark International and its Chilean partner entered
into a joint venture agreement to develop state-of-the-art multiplex theatres in
Peru. The joint venture conducts its business through Cinemark del Peru, S.A.,
which is 50% owned by Cinemark International and 50% owned by Cinemark's Chilean
partner. Cinemark del Peru, S.A. opened one theatre (12 screens) in July 1997
and plans to begin construction on two theatres (16 screens) during 1998.
In September 1996, Cinemark International entered into a joint venture
agreement with The Wright Group, a group of prominent Ecuadorian individuals and
companies, to develop state-of-the-art multiplex theatres in Ecuador. The joint
venture agreement provides for the licensing of the Company's technology,
trademark and name. The joint venture conducts its business through Cinemark del
Ecuador, S.A. ("Cinemark Ecuador") which is 60% owned by Cinemark International
and 40% owned by The Wright Group. Cinemark Ecuador opened two theatres (16
screens) during 1997.
In 1996, Cinemark LTDA, a Brazilian limited liability company, was
organized as an indirect subsidiary of Cinemark International. In November 1997,
Cinemark International, through a wholly-owned subsidiary entered into a joint
venture agreement with Brazilian strategic partners and converted Cinemark LTDA
to a Brazilian corporation, Cinemark Brasil S.A., which is approximately 60%
indirectly owned by Cinemark International and approximately 40% owned by
Brazilian strategic partners. Cinemark Brasil S.A. opened three theatres (30
screens) in 1997 and expects to begin construction on eight theatres (92
screens) in 1998.
In January 1997, Cinemark International entered into a joint venture
agreement with Cines de Centroamerica to develop state-of-the-art multiplex
theatres throughout Central America. The joint venture provides for the
licensing of the Company's technology, trademarks and name. During 1997 the
Central America joint venture opened one theatre (eight screens) in Costa Rica
and one theatre (two screens) in El Salvador. During 1998 the Central American
joint venture plans to begin construction on two theatres (14 screens).
In February 1997, Cinemark International entered into a joint venture
agreement with Shochiku Co., Ltd., a Japanese distributor, exhibitor and
producer of movies ("Shochiku") and several other Japanese companies to develop
state-of-the-art multiplex theatres in Japan. The joint venture will conduct its
business through Shochiku Cinemark Theatres, which is 26.7% owned by Cinemark
International, 26.7% owned by Shochiku, and the remaining 46.6% owned by a
consortium of prominent Japanese companies. Shochiku Cinemark Theatres opened
its first theatre (seven screens) in March 1997 and plans to begin construction
on one theatre (12 screens) during the remainder of 1998.
RECENT DEVELOPMENTS
In October 1997, the Company signed an agreement with IMAX to build 12 IMAX
3D theatres as part of the Company's multiplexes in the U.S., Mexico and South
America over the next three years. A minimum of three theatres will be built in
each of 1998 and 1999 and six theatres will be built in 2000. The Company will
lease at least eight of the theatre systems from IMAX while up to four theatres
may be joint ventures between the Company and IMAX.
On January 5, 1998, the Company purchased approximately 31% of the limited
partnership interest in Cinemark Partners II, Ltd. for $3,024,000. Additionally,
the Company purchased 77.1 units for an aggregate purchase price of $3,700,000.
After consummating such transactions, the Company owns approximately 50.1% of
Cinemark Partners II, Ltd.
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BUSINESS
THE COMPANY
The Company is the fifth largest motion picture exhibitor in North
America in terms of the number of screens in operation. At January 20, 1998,
the Company operated 1,782 screens in 189 theatres located in 30 states,
Canada, Chile, Mexico, Brazil, Argentina Peru, El Salvador, Japan and Ecuador,
consisting of 1,445 screens in 146 "first run" theatres and 337 screens in 43
"discount" theatres. Of the Company's 1,782 screens, 1,345 (or 75%) were built
by the Company during the 1990's, and, as a result, the Company believes it
operates one of the most modern theatre circuits in the industry. All of the
Company's theatres are multiplex facilities with approximately 94% of the
Company's screens located in theatres of six or more screens. The Company
believes that its ratio of screens to theatres (9.4 to 1 at January 20, 1998)
is the highest of the five largest theatre circuits in the U.S. and is more
than 50% higher than the industry average. From its fiscal year ended December
31, 1992 through the twelve months ended September 30, 1997, the Company has
increased consolidated revenues approximately 112% from $194.7 million to
$413.2 million and has increased EBITDA (as defined herein) approximately 153%
from $32.1 million to $81.3 million.
The Company is an industry leader in new theatre construction and
operation and, according to industry sources, has constructed more screens than
any other exhibitor during the 1990s. The Company believes that the
attractiveness, comfort and viewing experience provided by its modern
facilities result in the Company's theatres more often being the preferred
destination for moviegoers in its markets.
The Company is actively participating in the ongoing trend toward the
development of larger multiplexes, commonly referred to as "the rescreening of
America." The Company's management experience and financial flexibility permit
it to introduce larger multiplex theatre facilities into areas previously
served by smaller theatres, thereby capturing moviegoers who seek more
attractive surroundings, wider variety of films, better customer service,
shorter lines, more convenient parking and a greater choice of seating to view
popular movies. The Company's larger multiplex facilities increase per screen
revenues and operating margins and enhance its operating efficiencies. Such
theatres enable the Company to present films appealing to several segments of
the moviegoing public while serving patrons from common support facilities
(such as box office, concession areas, rest rooms and lobby). In addition,
larger multiplex facilities provide the Company with greater flexibility in
staffing, movie scheduling and equipment utilization while reducing congestion
throughout the theatre. Larger multiplex facilities also provide increased
flexibility in determining the length of time that a film will run. The Company
can lengthen the run of a film by switching it to a smaller auditorium after
peak demand has subsided and has the potential to generate higher profits as
film license agreements typically provide for a lower film rent to be paid
later in a film's run.
OVERVIEW OF THE THEATRE INDUSTRY -
The theatre exhibition industry in the U.S. is comprised of
approximately 460 exhibitors, approximately 240 of which operate four or more
theatres. As of May 1996, the 10 largest exhibitors (in terms of number of
screens) operated approximately 55% of the total screens, with no one exhibitor
operating more than 10% of the total screens.
U.S. box office sales of approximately $5.9 billion in 1996 was a
record for the industry. Overall attendance has remained stable during this
decade with no single year varying more than 8% from the average. The Company
believes that the primary reason for the variances in the year-to-year
attendance is the overall audience appeal of the films released. The following
table represents the results of a survey by the National Association of Theatre
Owners outlining the historical trends in U.S. theatre attendance, average
ticket prices and box office sales for the last seven years.
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<TABLE>
<CAPTION>
U.S. Box
Attendance Average Office Sales
Year (Millions) Ticket Price (Millions)
---- --------- ------------ ------------
<S> <C> <C> <C>
1990 1,189 $4.225 $5,022
1991 1,141 $4.211 $4,803
1992 1,173 $4.152 $4,871
1993 1,244 $4.143 $5,154
1994 1,292 $4.178 $5,386
1995 1,263 $4.351 $5,494
1996 1,339 $4.416 $5,912
</TABLE>
Theatrical exhibition is the primary distribution channel for new motion
picture releases. The Company believes that the successful theatrical release
of a movie abroad and in "downstream" distribution channels, such as home video
and pay-per-view, network and syndicated television, is largely dependent on
its successful theatrical release in the U.S. The Company further believes that
the emergence of new motion picture distribution channels has not adversely
affected attendance at theatres and that these distribution channels do not
provide an experience comparable to the out-of-home experience of viewing a
movie in a theatre. The Company believes that the public will continue to
recognize the advantages of viewing a movie on a large screen with superior
audio and visual quality, while enjoying a variety of concessions and sharing
the experience with a large audience.
The Company believes that as a result of increased revenues from the
successful release of films in both movie theatres and other distribution
channels, major film production companies have increased and will continue to
increase the number of films being produced. Film producers have increased
their revenues from these distribution channels by approximately 237% since
1985 to $19.9 billion in 1996. The increased revenue potential from film
distribution in recent years can be attributed to increased demand resulting
from the domestic and international growth of the movie theatre industry and
the home video industry, and the significantly increased channel capacity
created by enhanced cable and satellite-based transmission systems. Moreover,
the Company believes independent producers and distributors, such as Gramercy
Pictures, Turner Pictures (which includes New Line Cinemas and Castle Rock
Entertainment) and Dreamworks SKG, the highly-publicized partnership among
Jeffrey Katzenberg, Steven Spielberg and David Geffen, should help increase
motion picture production. Additionally, increased revenues permit major film
production companies to create "event" films such as Jurassic Park, Twister,
Independence Day, The Lost World and Titanic which utilize the latest advances
in computer technology to enhance production quality and special effects. The
Company believes that an increasing supply of quality feature films and "event"
films exhibited with advanced projection and stereo sound equipment such as
Digital Theatre Sound Systems, Dolby -- Digital Sound and Sony -- Dynamic
Digital Sound will enhance the moviegoing experience and will increase the
theatre attendance of exhibitors with modern multiplex theatres designed to
exhibit such motion pictures.
Increased international distribution is also producing important sources of
revenue for film distributors and growth opportunities for exhibitors. The
international market share of total box office receipts in 1996 was 50% up from
30.4% in 1985. Since 1985, international box office receipts have grown at a
11.9% compounded annual rate. The Company believes that many international
markets for theatrical exhibition, which have historically been underserved due
to antiquated and/or run-down theatres, will continue to experience rapid
growth as additional multiplex theatres are introduced.
In addition, the Company believes that certain demographic trends favor the
theatre exhibition industry. Information obtained from the U.S. Bureau of
Census indicates that the number of 12 to 20 year olds in the U.S., the largest
moviegoing segment of the population, is projected to grow an aggregate of 7.5%
through the year 2000. Furthermore, according to MPAA, the number of patrons
over 40 years old as a percentage of the total movie audience has more than
doubled from approximately 14% in 1986 to approximately 33% in 1996. The
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Company believes that film producers have recognized the importance of this
segment of the population and are producing an increased number of films
primarily targeted to this more mature audience, including films such as
Forrest Gump, Apollo 13, Sense and Sensibility, The English Patient, Shine and
As Good As It Gets.
BUSINESS STRATEGY
The Company intends to continue to grow through new theatre development by
applying the same techniques it has implemented since it was founded. The
Company believes that it is unique among major theatre exhibitors in the
development and execution of the following four-part business strategy:
Continue to build in underserved mid-sized markets. The Company intends to
continue to build first run theatres in underserved mid-sized markets and
suburbs of major metropolitan areas with populations of 50,000 to 200,000 where
the Company frequently will be the sole or leading exhibitor in terms of first
run screens operated. The Company believes it gains maximum access to film
product, and thereby realizes a competitive advantage, by locating its modern
multiplex theatres in new and existing film zones where little or no
competition for film product exists.
Capitalize on popularity of "megaplex" concept. The Company intends to
expand its construction of larger "megaplex" entertainment centers in major
metropolitan areas. In December 1992, the Company opened its first megaplex,
Hollywood USA , a 15-screen, 52,000 square-foot complex containing a large
video arcade and a pizzeria. The Company subsequently opened two additional
megaplexes styled after the original Hollywood USA . Based upon the success of
these complexes, which consistently rank among the Company's top grossing
facilities on a per screen basis, the Company expanded the megaplex concept. In
the last 24 months, the Company has developed thirteen megaplexes, each
exceeding 80,000 square feet and featuring 16 or more screens with 75 foot
screens in the largest auditoriums, stadium seating, digital sound, a pizzeria,
a coffee bar and a large video arcade room.
Continue to exploit discount theatre niche. The Company intends to maintain
its discount theatre operations (admission of $1 to $2 per ticket) to serve
patrons who miss a film during its first run exhibition or who may not be able
to afford to attend first run theatres on a frequent basis. The Company
believes that its discount theatres allow it to serve these segments of the
total moviegoing population, increasing the number of potential customers
beyond traditional first run moviegoers. The Company's multiplex discount
theatres offer many of the same amenities as its first run theatres, including
wall-to-wall screens, comfortable seating with cupholder armrests, digital
sound, multiple concession stands and a video game room. The Company's discount
theatres generally have higher attendance, lower film costs and a greater
proportion of concession revenues than its first run theatres. As of January 20,
1998, approximately 20% of the Company's screens were housed in its discount
theatres.
Develop modern American-style theatres in underserved international
markets. The Company intends to continue to develop multiplex theatres directly
or through joint venture arrangements with local partners in underserved
international markets. The Company's activities to date in international
markets have been primarily directed toward Latin America, which the Company
believes is severely underscreened and is still typically served by one- and
two-screen theatres which are often antiquated and/or run-down. The Company
believes that the same economic factors giving rise to the multiplex
rescreening trend in the U.S. are similarly applicable to international
markets. The Company believes that it was the first U.S. circuit to open
American-style modern multiplex theatres in Chile and Mexico, and has begun
developing multiplex theatres directly or through joint venture arrangements
with local partners in Argentina, Brazil, Peru, Ecuador, El Salvador, Costa
Rica and Japan.
OPERATIONS
The Company's corporate office, which employed approximately 160
individuals as of January 20, 1998 is responsible for theatre development and
site selection, lease negotiation, theatre design and construction, film
licensing and settlements, concession vendor negotiations and financial and
accounting activities. The Company's theatre operations are divided into six
geographic divisions, each of which is headed by a regional leader. The
Company's regional leaders have an average of 10 years experience in the movie
theatre industry and each is responsible for supervising approximately 15% of
the Company's theatre managers. Theatre managers are
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responsible for the day-to-day operations of the Company's theatres including
optimizing staffing, developing innovative theatre promotions, preparing movie
schedules, purchasing concession inventory, maintaining a clean and functioning
facility and training theatre staff.
To maintain quality and consistency within the Company's theatres, the
Company conducts regular inspections of each theatre and operates a program
which involves unannounced visits by unidentified customers who report on the
quality of service, film presentation and cleanliness of the theatre.
Theatre Development
The Company continually evaluates existing and new markets for potential
theatre locations. The Company generally seeks to develop theatres in markets
that are underscreened as a result of changing demographic trends or that are
served by aging theatre facilities. Some of the factors the Company considers
in determining whether to develop a theatre in a particular location are the
market's population and average household income, the proximity to retail
corridors, convenient roadway access, the proximity to competing theatres and
the effect on the Company's existing theatres in the market, if any.
The Company designs its multiplex theatres with bright colors, neon, tile
and marble and state-of-the-art technology, to create a festive and memorable
experience for the customer. The Company has designed several prototype
theatres, each of which can be adapted to suit the size requirements of a
particular location and the availability of parking, and to respond to
competitive factors or specific area demographics. The Company believes the
fully designed prototypes result in significant construction and operating cost
savings. More importantly, the Company believes that construction and operation
of high quality theatres provides significant competitive advantages as theatre
patrons, and therefore film distributors, seek clean, conveniently located,
modern facilities with state-of-the-art equipment.
The Company's theatres typically contain auditoriums consisting of 100 to
400 seats each and feature wall-to-wall screens, high back rocking chairs with
cupholder armrests, digital sound, multiple concession stands and video game
rooms. The Company's megaplex facilities typically will exceed 65,000 square
feet, feature 15 or more screens with 75 foot screens in the largest
auditoriums, stadium seating, digital sound, a pizzeria, a coffee bar and a
large video arcade room. The Company believes that, in particular, stadium
style auditoriums with digital sound provide an entertainment experience which
is superior to that available at a conventional theatre. Jurassic Park,
released in the summer of 1993, was the first major motion picture to utilize
digital sound. The Company estimates that at least a majority of the films
produced in 1997 will have digital soundtracks available as an alternative to
the standard stereo soundtrack. More than 65% of the Company's first run
theatres have one or more auditoriums with digital sound capabilities, and the
Company is continuing to add digital sound capabilities.
Film Licensing
Films are typically licensed from film distributors owned by major film
production companies and from independent film distributors that distribute
films for smaller production companies. For first run films, film distributors
typically establish geographic zones and offer each available film to all
theatres in a zone. The size of a film zone is generally determined by the
population density, demographics and box office potential of a particular
market or region, and can range from a radius of three to five miles in major
metropolitan and suburban areas to up to 15 miles in small towns. The Company
currently operates theatres in approximately 105 first run film zones. Each
film, regardless of the distributor, is generally licensed to only one theatre
in each zone. New film releases are licensed at the discretion of the film
distributors on an allocation or previewed bid basis. In film zones where the
Company has little or no competition, the Company selects those pictures it
believes will be most successful. In film zones where the Company faces
competition, the Company usually licenses films on an allocation basis. Under
an allocation process, a particular distributor will rotate films among
exhibitors, typically providing movies to competing exhibitors solely based on
the order of their release. For second run films, film distributors establish
availability on a market-by-market basis after the completion of exhibition at
first run theatres, and permit each theatre within a market to exhibit such
films without regard to film zones.
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The Company licenses films through its booking office located at the
Company's corporate headquarters in Dallas, Texas. All of the major motion
picture studios and distributors also maintain offices in Dallas. The Company's
film bookers have significant experience in the theatre industry and have
developed long-standing relationships with the film distributors. Each film
booker is responsible for a geographic region and maintains relationships with
representatives of each of the major motion picture studios and distributors
having responsibility for their respective geographic regions. The Company
licenses films from all of the major distributors and is not dependent on any
one studio for motion picture product.
Prior to negotiating for a film license, the Company's booking personnel
evaluate the prospects for the film. The criteria considered for each film
include cast, director, plot, performance of similar films, estimated film
rental costs, expected MPAA rating and the outlook for other upcoming films.
Successful licensing depends upon knowledge of the tastes of local residents.
A film license typically specifies a rental fee to be paid to the
distributor based on the higher result of either a gross receipts formula or a
theatre admissions revenue sharing formula. Under a gross receipts formula, the
distributor receives a specified percentage of box office receipts, with the
percentage generally declining over the term of the run. First run film rental
percentages usually begin at 70% of box office receipts and gradually decline
to as low as 30% over a period of four to seven weeks. Second run film rental
percentages typically begin at 35% of box office receipts and often decline to
30% after the first week. Under the theatre admissions revenue sharing formula
(commonly known as the "90/10" clause), the distributor receives a specified
percentage (i.e., 90%) of the excess of box office receipts over a negotiated
reimbursement for theatre expenses. In general, most distributors follow an
industry practice of adjusting or renegotiating the terms of a film license
subsequent to exhibition based upon the film's success.
Concessions
Concession sales are the Company's second largest revenue source,
representing 34.5% of total revenues for 1997. The Company has devoted
considerable management effort to increasing concession sales and improving the
operating income margins from concession sales. These efforts include
implementation of the following strategies:
o Optimization of product mix. The Company's primary concession products
are various sizes of popcorn, soft drinks, candy and hot dogs, all of which the
Company sells at each of its theatres. However, different varieties and brands
of candy and soft drinks are offered at theatres based on preferences in that
particular geographic region. The Company has also implemented "combo-meals,"
and "movie meals" for children and senior citizens, both of which offer a
pre-selected assortment of concession products.
o Introduction of new products. The Company continues to introduce new
concession products designed to attract additional concession purchases. New
offerings have recently included bottled water, bulk candy, frozen yogurt and
ice cream. Additionally, the Company has introduced pizza, pastries and
specialty coffee in many of its megaplexes.
o Staff training. Employees are continually trained in "cross-selling" and
"upselling" techniques. This training occurs through situational role-playing
conducted at the Company's "Customer Service University" as well as continual
on-the-job training. Individual theatre managers receive a portion of their
compensation based on concession sales at their theatres and are therefore
motivated to maximize concession purchases.
o Theatre design. Newer theatres are designed to include at least two to
three concession stands, with each stand having multiple service stations to
make it easier to serve larger numbers of customers rapidly. Strategic
placement of large concession stands within theatres heightens their
visibility, aids in reducing the length of concession lines and improves
traffic flow around the concession stands.
o Cost control. The Company negotiates prices for its concession supplies
directly with concession vendors on a bulk rate basis and distributes its
concession supplies through a national concession contract distributor. The
concession distributor provides inventory and distribution services to the
theatres, which place volume orders
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directly with the concession distributor. The concession distributor is paid a
fee for such service equal to a percentage of the Company's concession supply
purchases. The Company believes that utilization of a concession distributor is
more cost effective than establishing a concession warehousing network owned by
the Company.
Marketing
In order to attract customers, the Company relies principally upon
newspaper display advertisements (substantially paid for by film distributors)
and newspaper directory film schedules (generally paid for by the exhibitor) to
inform its patrons of film titles and show times. Radio and television
advertising spots (generally paid for by film distributors) are used to promote
certain motion pictures and special events. The Company also exhibits previews
in its theatres of coming attractions and films presently playing on the other
screens which it operates in the same theatre or market.
Theatre Management
Each theatre is managed by one theatre manager and a number of assistant
managers. A typical ten screen movie theatre has approximately 40 employees and
two to three assistant managers, while a 16-screen megaplex has approximately
200 employees, including eight assistant managers. The theatre manager is paid
a salary and a commission based upon concession sales. A theatre manager can
increase the profitability of the theatre and his/her own compensation by
ensuring that the staff is properly trained to encourage patrons to "trade up"
in size or purchase additional concession items. The goal of a theatre manager
is to operate a theatre in the most efficient and profitable manner in order to
be promoted from managing a smaller theatre to managing a megaplex.
The Company believes strongly in customer service and it promotes this
through employee empowerment. Each theatre employee is authorized to deal with
all customer needs and complaints in a variety of ways, including offering free
tickets or free concession items, if necessary. Prior to peak seasons, the
Company teaches its employees customer service at its Customer Service
University training program. The Customer Service University is an active
training program consisting of role-playing exercises as well as typical
classroom instruction.
Management Information Systems
The Company has developed its own point of sale ("POS") management
information system to further enhance its ability to maximize revenues, control
costs and efficiently manage the Company's theatre circuit. The POS information
system provides corporate management with a detailed daily admission and
concession revenue report by the start of business the following morning. This
information allows management to make real-time adjustments to movie schedules,
prolong runs or increase the number of screens on which successful movies are
being played and substitute films when gross receipts cease to meet expected
goals. Real-time seating and box office information is available to box office
personnel, making it possible for theatre management to avoid overselling a
particular film and providing faster and more accurate response to customer
inquiries regarding showings and available seating. The POS information system
also tracks concession sales and provides weekly in-theatre inventory reports,
leading to better inventory management and control.
INTERNATIONAL
The motion picture exhibition business has become increasingly global and
rising box office receipts from international markets indicate that some
international markets are poised for rapid growth. The Company believes that
its experience in developing and operating multiplex theatres provides it with
a significant advantage in developing multiplex facilities in international
markets. The Company's strategy in these markets is to form partnerships or
joint ventures with local operators, sharing risk and obtaining valuable market
insight.
Due to the enormous potential of the international markets, Cinemark
International is introducing state-of-the-art multiplex theatres to
"under-screened" international markets. Currently, Cinemark International
operates 27 first run theatres (257 screens) in Mexico, Chile, Brazil,
Argentina, Peru, Ecuador, El Salvador, Costa Rica and Japan, with an aggregate
of 28 theatres (271 screens) scheduled to open or begin construction during the
remainder of 1998. Additionally, Cinemark International operates two discount
theatres (24 screens) in Alberta, Canada. Cinemark International's strategy will
be to continue to form strategic partnerships or joint ventures with local
partners, thereby sharing risk and obtaining valuable market insight.
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Mexico
Cinemark International, through its subsidiary Cinemark Mexico, is
developing state-of-the-art multiplex theatres comparable to theatres developed
by the Company in the U.S. Cinemark Mexico's operations are conducted through
its subsidiary Cinemark de Mexico which has its head office in Mexico City.
Cinemark Mexico currently operates 13 theatres (141 screens), and has begun
construction or intends to begin construction on four theatres (32 screens) in
1998. The Company manages all of Cinemark Mexico's theatres pursuant to a
management agreement. Cinemark Mexico's theatres are staffed primarily with
Mexican nationals who report to the Company's regional and corporate office
personnel. The Company provides all corporate operating functions, including
film booking and accounting.
Chile
In November 1992, Cinemark International entered into a joint venture
agreement with Conate, S.A., a Chilean movie theatre operator ("Conate"), to
develop state-of-the-art multiplex theatres in Chile. The joint venture provides
for the development of multiplex theatres and the licensing of the Company's
technology, trademark and name. The joint venture conducts its business through
Cinemark Chile, S.A. which is 50% owned by Inversiones Cinemark, S.A., a
subsidiary of Cinemark International, and 50% owned by Conate. Cinemark Chile,
S.A. which is based in Santiago, Chile, currently operates two theatres (13
screens), and plans to open or begin construction on five additional theatres
(46 screens) in 1998.
Argentina
In December 1995, Cinemark International entered into a joint venture
agreement with D'Alimenti S.A., an Argentinean corporation ("DASA"), and
Prodecine S.A., an Argentinean corporation ("Prodecine"), to develop
state-of-the-art multiplex theatres in Argentina. The joint venture agreement
also provides for the licensing of the Company's technology, trademark and name.
The joint venture's business is conducted through Cinemark Argentina, S.A.,
which is owned by Cinemark Investments Argentina, S.A. and Prodecine (which
acquired DASA's interest in the joint venture). Cinemark International and
Conate each own 50% of Cinemark Investments Argentina, S.A. Cinemark Argentina,
S.A. opened three theatres (28 screens) in 1997, and intends to begin
construction by the end of 1998 on three theatres (28 screens).
In December 1997, the Company formed a wholly-owned Argentine subsidiary,
Cinemark Rio de la Plata Associates S.R.L. through which the Company plans to
begin construction on three theatres (31 screens) during the remainder of 1998.
Brazil
In 1996, Cinemark LTDA was organized as an indirect subsidiary of Cinemark
International. In November 1997, Cinemark International, through a wholly-owned
subsidiary, entered into a joint venture agreement with Brazilian strategic
partners and converted Cinemark LTDA to a Brazilian corporation, Cinemark Brazil
S.A., which is approximately 60% indirectly owned by Cinemark International and
approximately 40% owned by Brazilian strategic partners. Cinemark Brazil opened
three theatres (30 screens) in 1997 and expects to begin construction on eight
theatres (92 screens) in 1998.
Ecuador
In September 1996, Cinemark International entered into a joint venture
agreement with The Wright Group, a group of prominent Ecuadorian individuals and
companies, to develop state-of-the-art multiplex theatres in Ecuador. The joint
venture agreement provides for the licensing of the Company's technology,
trademark and name. The joint venture conducts its business through Cinemark del
Ecuador, S.A. ("Cinemark Ecuador") which is 60% owned by Cinemark International
and 40% owned by The Wright Group. Cinemark Ecuador opened two theatres (16
screens) during 1997.
Peru
In December 1996, Cinemark International and Conate entered into a joint
venture agreement to develop state-of-the-art multiplex theatres in Peru. The
joint venture provides for the licensing of the Company's technology, trademark
and name. The joint venture conducts its business through Cinemark del Peru,
S.A., which is 50% owned by Cinemark International and 50% owned by Conate.
Cinemark del Peru, S.A. opened one theatre (12 screens) during 1997 and plans to
begin construction on two theatres (16 screens) during the remainder of 1998.
Central America
In January 1997, Cinemark International entered into a joint venture
agreement with Cines de Centroamerica to develop state-of-the-art multiplex
theatres throughout Central America. The joint venture provides for the
licensing of the Company's technology, trademarks and name. During 1997 the
Central America joint venture opened one theatre (eight screens) in Costa Rica
and one theatre (two screens) in El Salvador. During 1998 the Central American
joint venture plans to begin construction on two theatres (14 screens).
45
<PAGE> 46
Japan
In February 1997, Cinemark International entered into a joint venture
agreement with Shochiku and several other Japanese companies to develop
state-of-the-art multiplex theatres in Japan. The joint venture will conduct its
business through Shochiku Cinemark Theatres, which is 26.7% owned by Cinemark
International, 26.7% owned by Shochiku, and the remaining 46.6% owned by a
consortium of prominent Japanese companies. Shochiku Cinemark Theatres opened
its first theatre (seven screens) in March 1997 and plans to begin construction
on one theatre (12 screens) during the remainder of 1998.
Canada
Cinemark International, through its wholly owned subsidiary Cinemark
Holdings Canada, Inc., owns a 50% interest in Cinemark Theatres Alberta, Inc.
("Cinemark Alberta") which currently operates two discount theatres (24 screens)
managed by the Company pursuant to a management agreement.
COMPETITION
The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. The Company competes against
both local and national exhibitors, some of which have substantially greater
financial resources than the Company.
In film zones where the Company has little or no direct competition
(approximately 70% of the Company's theatres), the Company selects those
pictures it believes will be most successful in its markets from among those
offered to it by distributors. Where the Company faces competition, it usually
licenses films based on an allocation process. The Company currently operates in
approximately 105 first run film zones in the U.S. The Company believes that no
individual film zone is material to the Company. See "-- Operations -- Film
Licensing." The Company believes that the principal competitive factors with
respect to film licensing include capacity and location of an exhibitor's
theatre, theatre comfort, quality of projection and sound equipment, level of
customer service and licensing terms. The competition for customers is dependent
upon factors such as the availability of popular films, the location of
theatres, the comfort and quality of theatres and ticket prices. The Company
believes its admission prices at its first run and discount theatres are
competitive with admission prices of respective competing theatres.
The Company's theatres face competition from a number of other motion
picture exhibition delivery systems, such as network, syndicated and pay
television, pay-per-view and home video systems. The impact of such delivery
systems on the motion picture exhibition industry is difficult to determine, and
there can be no assurance that existing or future alternative delivery systems
will not have an adverse impact on attendance. The Company's theatres also face
competition from other forms of entertainment competing for the public's leisure
time and disposable income.
PROPERTIES
Of the 1,501 screens operated by the Company in the U.S. at January 20,
1998, 29 theatres (381 screens) are owned, 125 theatres (1,046 screens) are
leased pursuant to building leases, one theatre (10 screens) is leased pursuant
to ground leases and five theatres (64 screens) are managed. The Company's
leases are generally entered into on a long-term basis with terms (including
options) generally ranging from 20 to 40 years. Approximately 28 of the
Company's theatre leases (covering 139 screens) have remaining terms (including
renewal periods) of less than five years and approximately 39 of the Company's
theatre leases (covering 416 screens) have remaining terms (including renewal
periods) more than 15 years. Rent is typically calculated as a percentage of box
office receipts or total theatre revenues, subject to an annual minimum. The
Company leases office space in Dallas, Texas for its corporate office which
expires on June 30, 1998. See note 9 of the Company's Notes to the Consolidated
Financial Statements for information with respect to the Company's lease
commitments.
As of January 20, 1998, the Company operated 29 theatres (281 screens)
outside of the U.S. with 13 theatres (124 screens) under commitment with
executed leases. Of the 29 theatres operated outside of the U.S., 28 theatres
(269 screens) are leased pursuant to ground or building leases and one theatre
(12 screens) is fee owned. The leases generally provide for contingent rental
based upon operating results (subject to an annual minimum). Generally, these
leases will include renewal options for various periods at stipulated rates. The
Company attempts to obtain lease terms that provide for build-to-suit
construction obligations of the landlord.
46
<PAGE> 47
EMPLOYEES
As of January 20, 1998, the Company had approximately 7,000 employees in the
U.S., approximately 15% of whom are full time employees in the U.S. and 85% of
whom are part time employees. The Company is a party to collective bargaining
agreements with five unions of which approximately 10 employees are members.
The Company's international operations typically utilize union labor. The
Company considers its relations with its employees to be satisfactory.
REGULATION
The Company is subject to various general regulations applicable to its
operations including the Americans with Disabilities Act (the "ADA"). The
Company has established a program to review and evaluate the Company's existing
theatres and its specifications for new theatres and to make any changes to
such theatres and specifications required by the ADA. The Company develops new
theatres to be accessible to the disabled and believes that it is otherwise in
substantial compliance where readily achievable with current regulations
relating to accommodating the disabled. The Company believes that the cost of
complying with the ADA will not be material.
LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
arising from the ordinary course of its business operations, such as personal
injury claims, employment matters and contractual disputes. The Company
believes that its potential liability with respect to proceedings currently
pending is not material in the aggregate to the Company's consolidated
financial position or results of operations.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lee Roy Mitchell* 60 Chairman of the Board; Chief Executive Officer;
Director
Tandy Mitchell 47 Vice Chairman of the Board; Executive Vice
President; Secretary; Director
Alan W. Stock+ 37 President; Chief Operating Officer; Director
Jeffrey J. Stedman 35 Senior Vice President; Treasurer; Chief Financial
Officer; Assistant Secretary; Director
Rob Carmony 39 Senior Vice President-Director of Operations
Margaret E. Richards 39 Vice President-Real Estate; Assistant Secretary
Jerry Brand 52 Vice President-Film Licensing
Walter Hebert 52 Vice President-Purchasing
Don Harton 40 Vice President-Construction
Randy Hester 45 Vice President-Marketing
Philip Wood 34 Vice President
W. Bryce Anderson*+ 55 Director
Heriberto Guerra, Jr.+ 47 Director
James A. Stern 47 Director
James L. Singleton+ 41 Director
Denny Rydberg 52 Director
</TABLE>
- ---------------------------
* Member Audit Committee
+ Member Compensation Committee
47
<PAGE> 48
The Shareholders' Agreement (as defined herein) contains a voting
agreement pursuant to which Mr. Mitchell agreed to vote his shares to elect
designees of CALP to the Board of Directors of the Company. As of January 20,
1998, CALP had the right to designate two board members. Additionally, the
Shareholders' Agreement provides that the Company must obtain the written
consent of CALP for certain corporate acts. See "Certain Transactions--Cypress
Investment."
The directors of the Company are elected each year by the shareholders to
serve for a one-year term or until their successors are elected and qualified.
Directors of the Company are reimbursed for expenses actually incurred for each
Board meeting which they attend. In addition, Directors who are not employees
of the Company receive a fee of $1,000 for each meeting of the Board of
Directors attended by such person. The executive officers of the Company are
elected by the Board of Directors to serve at the discretion of the Board.
The following is a brief description of the business experience of the
directors and executive officers of the Company for at least the past five
years. All compensation of directors and officers is paid by the Company.
Lee Roy Mitchell has served as Chairman of the Board since March 1996 and
as Chief Executive Officer and a Director of the Company since its inception in
1987. Mr. Mitchell was Vice Chairman of the Board of Directors from March 1993
to March 1996 and was President of the Company from its inception in 1987 until
March 1993. From 1985 to 1987, Mr. Mitchell served as President and Chief
Executive Officer of a predecessor corporation. Mr. Mitchell has served on the
Board of Directors of the National Association of Theatre Owners since 1991.
Mr. Mitchell has been engaged in the motion picture exhibition business for
more than 36 years.
Tandy Mitchell has served as Vice Chairman of the Board since March 1996,
as a Director of the Company since April 1992, as Executive Vice President of
the Company since October 1989 and as Secretary of the Company since its
inception in 1987. Mrs. Mitchell was General Manager of the theatre division of
a predecessor corporation from 1985 to 1987. From 1978 to 1985, Mrs. Mitchell
was employed by Southwest Cinemas Corporation, most recently as director of
operations. Mrs. Mitchell is the wife of Lee Roy Mitchell.
Alan W. Stock has served as President of the Company since March 1993, as
a Director of the Company since April 1992 and as Chief Operating Officer of
the Company since March 1992. Mr. Stock was Senior Vice President of the
Company from October 1989 to March 1993. Mr. Stock was General Manager of the
Company from its inception in 1987 to March 1992. Mr. Stock was employed by the
theatre division of a predecessor corporation from January 1986 to December
1987 as Director of Operations. From 1981 to 1985, he was employed by
Consolidated Theaters, most recently as District Manager.
Jeffrey J. Stedman has served as a Director of the Company since March
1996, as Senior Vice President since July 1997 and as Vice President, Treasurer
and Chief Financial Officer of the Company since April 1993. From December 1989
to April 1993, Mr. Stedman was Director of Finance of the Company. Prior to
joining the Company in December 1989, Mr. Stedman was a Manager in the tax
department of Deloitte & Touche LLP, where he was employed from December 1984 to
December 1989. Mr. Stedman is a certified public accountant.
Robert F. Carmony has served as Senior Vice President-Director of
Operations since July 14, 1997, as Vice President-Director of Operations since
March 1996 and has served as Director of Operations of the Company since June
1988. Prior to joining the Company. Mr. Carmony was an owner of O.C.
Enterprises, a software development firm, from 1986 to 1988. Prior to forming
his own software company, Mr. Carmony worked for Plitt-Cineplex Odeon theatres
from 1985 to 1986. Mr. Carmony also worked as a Systems Analyst for Electronic
Data Systems from 1984 to 1985.
Margaret E. Richards has served as a Vice President and Assistant
Secretary of the Company since October 1989 and as Vice President-Real Estate
since March 1994. Ms. Richards has been Director of Leasing of the Company
since its inception in 1987 and was employed by the theatre division of a
predecessor corporation in its real estate section from August 1986 to December
1987.
48
<PAGE> 49
Jerry Brand has served as Vice President-Film Licensing since March 1996.
Mr. Brand has over 27 years of experience in the theatre industry, beginning
his career with Paramount Pictures in 1968. Prior to joining the Company, Mr.
Brand served as Senior Vice President and Head Film Buyer with Cobb Theatres
where he was employed from 1983 to March 1996.
Walter Hebert has served as Vice President -- Purchasing of the Company
since 1997 and was the Director of Purchasing from October 1996 until July
1997. Mr. Hebert was the President of 2 Day Video, Inc., a 21-store video
chain that was a subsidiary of the Company, from December 1995 until October
1996, when 2 Day Video, Inc. was sold to Blockbuster Entertainment, Inc. Prior
to joining the Company, Mr. Hebert worked for Dillards Department Stores from
1973 to 1993, serving as a Divisional Merchandise Manager in the Arkansas
Division from 1981 until 1993.
Don Harton has served as Vice President-Construction since July 1997. From
August 1996 to July 1997, Mr. Harton was Director of Construction of the
Company. Prior to joining the Company in August 1996, Mr. Harton was an
architect with Urban Architecture, where he was employed from October 1983
until July 1996.
Randy Hester has served as Vice President-Marketing since July 1997. From
January 1989 to July 1997, Mr. Hester was Director of Corporate Development of
the Company. Prior to joining the Company in January 1989, Mr. Hester was Chief
Financial Officer of Presidio Theatres in Austin, Texas, where he was employed
from 1986 to 1989.
Philip Wood has served as Vice President since July 1997. From February
1988 to July 1997 Mr. Wood was MIS Director of the Company. Prior to joining
the Company in February 1988, Mr. Wood was a systems organizer with Electronic
Data Systems where he was employed from 1986 to 1988.
W. Bryce Anderson has served as a Director of the Company since June 1992.
Mr. Anderson has been Chairman of the Board of Directors of Ennis Steel
Industries, Inc., a steel fabricator, since 1980 and Chairman of the Board of
Directors of Reflex Glass Bead Co., Inc., a manufacturer of glass beads, since
September 1990. Mr. Anderson was Chairman of the Board of Centerline
Industries, Inc., an industrial paint manufacturer, from January 1989 to
December 1992. From 1976 to 1989, Mr. Anderson was Chairman of the Board of
Directors and Chief Executive Officer of Ennis Paint Manufacturing, Inc., an
industrial paint manufacturer.
Heriberto Guerra, Jr. has served as a Director of the Company since
December 1993. Mr. Guerra has been Managing Director-Corporate Development for
Southwestern Bell Telephone since 1995. From September 1985 to January 1987, he
was Area Manager-Marketing Operations for Southwestern Bell, and from 1987 to
1995, he was Executive Director-Government Relations for Southwestern Bell.
Prior to that, he served in an owner or manager capacity for various hotel,
restaurant and movie theatre businesses in Texas. Mr. Guerra is also a director
of Cinemark Mexico (USA), Inc. and Play by Play Toys and Novelties.
James A. Stern was elected Director of the Company in March 1996. Mr.
Stern has been Chairman of The Cypress Group L.L.C. ("Cypress Group") since its
formation in April 1994. Prior to joining Cypress Group, Mr. Stern spent his
entire career with Lehman Brothers, an investment banking firm, most recently
as head of the Merchant Banking Group. He served as head of Lehman's High Yield
and Primary Capital Markets Groups, and was co-head of Investment Banking. In
addition, Mr. Stern was a member of the firm's Operating Committee. Mr. Stern
is a director of Noel Group, Inc., Lear Corporation, R.P. Scherer Corporation
and K&F Industries.
James L. Singleton was elected Director of the Company in March 1996. Mr.
Singleton has been Vice Chairman of Cypress since its formation in April 1994.
Prior to joining Cypress Group, Mr. Singleton was a Managing Director with
Lehman Brothers Inc., an investment banking firm. Mr. Singleton is a director of
Able Body Corporation and L.P. Thebault Company.
Denny Rydberg was elected Director of the Company in July 1997. Mr.
Rydberg has been President of Young Life since July 1993. Prior to joining
Young Life, Mr. Rydberg was Director of University Ministries at University
Presbyterian Church, Vice President of Youth Specialties and Director of
Operations for Inspirational Films.
49
<PAGE> 50
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
Compensation
Awards
Securities
Underlying All Other
Salary (A) Bonus Options/SARs Compensation
Name and Principal Position Year ($) ($) (#) ($)
--------------------------- ---- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Lee Roy Mitchell, Chairman of the Board 1997 $ 324,101 $1,675,910 -- $ 120,794(B)
and Chief Executive Officer 1996 294,632 1,703,357 120,794(C)
1995 267,852 1,733,976 -- 120,828(D)
Alan Stock, President and Chief Operating 1997 $ 252,484.43 $ 74,991.81 -- $ 7,125(E)
Officer 1996 192,500 83,739 921,623(F)
1995 175,000 80,043 -- 6,930(E)
Jeffrey J. Stedman, Senior Vice President, Treasurer 1997 $ 174,999.50 $ 57,499.63 -- $ 7,125(E)
and Chief Financial Officer 1996 125,000 102,160 221,311(G)
1995 110,000 46,809 -- 6,930(E)
Gary R. Gibbs, Vice President 1997 $ 87,500 $ 20,192.52 $1,584,190.53(H)
and General Counsel (J) 1996 110,000 $ 24,136 264,188(I)
1995 100,000 26,153 600 6,930(E)
Jerry Brand, Vice President 1997 $ 187,249.92 $ 42,130.77 7,125(E)
Film Licensing (K) 1996 149,616.20 31,826.95 --
1995 -- -- -- --
</TABLE>
===============================================================================
- ---------------------------
(A) Amounts shown include cash and non-cash compensation earned and
received by executive officers as well as amounts earned but deferred
at the election of those officers.
(B) Represents $98,844 of life insurance premiums paid by the company for
the benefit of Mr. Mitchell, a $1,950 annual contribution to the
Company's 401(k) and $20,000 representing the value of the use of a
Company vehicle for one year.
(C) Represents $98,844 of life insurance premiums paid by the Company for
the benefit of Mr. Mitchell, a $1,950 annual contribution to the
Company's 401(k) savings plan and $20,000 representing the value of
the use of a Company vehicle for one year.
(D) Represents $98,844 of life insurance premiums paid by the Company for
the benefit of Mr. Mitchell, a $1,984 annual contribution to the
Company's 401(k) savings plan and $20,000 representing the value of
the use of a Company vehicle for one year.
(E) Represents the Company's annual contribution to the Company's 401(k)
savings plan.
(F) Represents a $6,930 annual contribution by the Company to the Company's
401(k) savings plan, $535,402 of compensation relating to the value of
stock options exercised over the exercise price of $1.00 per share,
and $379,291 reimbursement for estimated tax obligations incurred upon
exercise of stock options.
(G) Represents a $6,930 annual contribution by the Company to the
Company's 401(k) savings plan, $125,485 of compensation relating to
the value of stock options exercised over the exercise price of $1.00
per share, and $88,896 reimbursement for estimated tax obligations
incurred upon exercise of stock options.
(H) Represents a $937,741.78 of compensation relating to the value of
stock options exercised over the exercise price of $1.00 per share,
and $646,448.75 reimbursement for estimated tax obligations incurred
upon exercise of stock options.
50
<PAGE> 51
(I) Represents a $6,930 annual contribution by the Company to the
Company's 401(k) savings plan, $150,582 of compensation relating to
the value of stock options exercised over the exercise price of $1.00
per share and $106,676 reimbursement for estimated tax obligations
incurred upon exercise of stock options.
(J) Mr. Gibbs retired from the Company as Vice President-General Counsel
effective June 27, 1997.
(K) Mr. Brand joined the Company as Vice President-Film Licensing in March
1996.
51
<PAGE> 52
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
There were no Options/SAR grants to the named Executive Officers for
fiscal year ended December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired on Exercisable/ Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable Unexercisable
---- ----------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Lee Roy Mitchell -- -- -- --
Alan Stock 320 $535,722 1817/0 (A)
Jeffrey J. Stedman 75 125,560 305/120 (A)
Gary R. Gibbs (B) 90 150,672 510/0 (A)
Jerry Brand -- -- 40/160 (A)
</TABLE>
- ------------------------------------------------
(A) The Company has the right to call the shares issuable upon exercise of
the options for terminating employees. The call price increases over
the five year vesting period of the options.
(B) Mr. Gibbs retired as Vice President-General Counsel effective June 27,
1997.
401(K) PENSION PLAN
The Company sponsors a defined contribution savings plan (the "401(k)
Plan") whereby certain employees of the Company or its subsidiaries may (under
current administrative rules) elect to contribute, in whole percentages between
1% and 15% of such employee's compensation, provided no employee's elective
contribution shall exceed the amount permitted under Section 402(g) of the
Internal Revenue Code of 1986, as amended ($9,500 in 1996). A discretionary
matching contribution is made by the Company annually (with contributions
totaling $613,213 in 1996). The Company's matching contribution is subject to
vesting and forfeitures. The Company's contributions vest at the rate of twenty
percent (20%) per year beginning two years from the date of employment. After
an employee has worked for six years, employees have full and immediate vesting
rights to all of the Company's matching contributions. The Company's
contributions to the accounts of the named Executive Officers are included in
the Summary Compensation Table.
EMPLOYMENT AGREEMENTS
Mr. and Mrs. Mitchell each have an employment agreement with the Company
which contains the terms described below.
Lee Roy Mitchell's 1997 base salary was $324,101 and will increase
thereafter at the rate of 10% per year. In addition, Mr. Mitchell (i) is
entitled to receive an annual bonus, subject to approval by the Board of
Directors, in an amount not exceeding 10% of the aggregate amount of
consolidated theatre level cash flow of the Company in excess of $25 million
for each year, which bonus was approximately $1.68 million for the year ended
December 31, 1997, (ii) is reimbursed for expenses incurred by him in
connection with his duties, and (iii) receives the use of an automobile of his
choice to be replaced at his election every three years, a club membership of
his choice, a whole life insurance policy in the amount of $3,300,000 insuring
his life during the period of his employment and any other benefits generally
available to the executives of the Company. The maximum base salary and bonus
which Mr. Mitchell is entitled to receive for any calendar year is limited to
$2 million and the payment of any bonus requires board approval. The employment
agreement terminates on the earlier of (i) Mr. Mitchell's death
52
<PAGE> 53
or permanent disability (except with respect to amounts payable as described in
the following sentence) or (ii) December 31, 2001. In the event of Mr.
Mitchell's permanent disability, he will be entitled to receive $10,000 per
month for a period of 60 months.
Tandy Mitchell's 1997 base salary was $144,946 and will increase
thereafter at the rate of 10% per year. In addition, Mrs. Mitchell (i) is
reimbursed for expenses incurred by her in connection with her duties and (ii)
receives the use of an automobile of her choice to be replaced at her election
every three years, a whole life insurance policy in the amount of $1,000,000
insuring her life during the period of her employment and any other benefits
generally available to the executives of the Company. The employment agreement
terminates on the earlier of (i) Mrs. Mitchell's death or permanent disability
or (ii) December 31, 2001.
The employment agreements of Mr. and Mrs. Mitchell provide that their
employment may be terminated by the unanimous decision of the Board of
Directors of the Company (other than the terminated party) for cause if the
terminated party is convicted of a felony and incarcerated or willfully refuses
to perform any of the duties required under the employment agreement for a
period of 60 days after notice from the Board of Directors.
The employment of Mr. and Mrs. Mitchell will be deemed to be
constructively terminated if, among other things, there is a change of control
(as defined in Item 6(c) under Regulation 14A promulgated under the Exchange
Act (as defined herein) of the Company, a merger or consolidation of the
Company, a sale of all or substantially all of the assets of the Company, or if
certain changes related to their respective status or compensation by the
Company occur. In the event of termination of employment by the Company without
cause, Mr. and Mrs. Mitchell will be entitled to receive the amounts that would
otherwise be paid under their respective employment agreements for the
remaining term of such agreements.
The employment agreements of Mr. and Mrs. Mitchell further provide that
they will be indemnified against certain liabilities that may arise by reason
of their status or service as executive officers of the Company. The employment
agreements of Mr. and Mrs. Mitchell do not prohibit their engaging in
activities competitive with those of the Company, including the acquisition of
theatres (subject to fiduciary duties to the Company imposed by applicable law
or contractual obligation imposed upon Mr. Mitchell by the Shareholders'
Agreement (as defined herein)). See "Certain Transactions--Cypress Investment."
STOCK OPTIONS
Employee Stock Option Plan
The Company has a Nonqualified Stock Option Plan (the "Plan") under which
the Chief Executive Officer of the Company, in his sole discretion, may grant
employees of the Company options to purchase up to an aggregate of 10,685
shares of the Company's Class B Common Stock. The Chief Executive Officer of
the Company has the ability to set the exercise price and the term (of up to
ten years) of the options. All options vest at the rate of one-fifth of the
total options granted per year generally beginning one year from the date of
grant, subject to acceleration by the Chief Executive Officer of the Company.
An employee's options are forfeited if the employee is terminated for cause.
Upon termination of an employee's employment with the Company and provided that
no public market exists for any class of common stock of the Company at such
time, the Company has the option to repurchase any shares of capital stock of
the Company that were acquired by the employee pursuant to the Plan at a
specified formula price based on theatre cash flow. As of January 20, 1998 there
were outstanding options to purchase 7,635 shares of the Company's Class B
Common Stock.
During 1997, the Company granted options under the Plan to purchase 730
shares of Class B Common Stock of the Company at an exercise price of $1.00 per
share. The options expire 10 years from the date of grant. The Company believes
that the market value of a share of Class B Common Stock on the date of grant
exceeded the option price by approximately $1,790. As a result, the Company
accrued $1.3 million for unearned compensation
53
<PAGE> 54
and will amortize this noncash expense at a rate of approximately $260,000 per
year during the five year vesting period for the options granted.
Independent Director Stock Options
The Company has granted the unaffiliated directors of the Company options
to purchase up to an aggregate of 900 shares of the Company's Class B Common
Stock at an exercise price of $833.34 per share (the "Director Options").
Effective April 1995, the Company amended the Director Options to reduce the
aggregate number of shares of Common Stock issuable pursuant to the Director
Options from 900 to 600 shares and to reduce the exercise price of the Director
Options from $833.34 per share to $1.00 per share. The options vested on June 1,
1997. The options expire ten years from the date of grant. A director's options
are forfeited if the director resigns or is removed from the Board of Directors
of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In January 1995, the Board of Directors established a Compensation
Committee of the Board to study senior management compensation and make
recommendations to the Board of Directors as a whole relating to said
compensation. Messrs. Stock, Anderson, Guerra and Singleton currently serve as
members of the Compensation Committee, with Mr. Stock being the only member who
is an officer or employee of the Company or any of its subsidiaries.
54
<PAGE> 55
PRINCIPAL SHAREHOLDERS
The following table and the accompanying footnotes set forth, as of January
20, 1998, the beneficial ownership of the Company's Common Stock by (i) each
person who is known to the Company to own beneficially more than 5% of either
class of its outstanding Common Stock, (ii) each director and named executive
officer, and (iii) all directors and officers as a group:
<TABLE>
<CAPTION>
COMBINED
NUMBER OF PERCENT
NAMES AND ADDRESSES(1) TITLE OF CLASS SHARES(2) PERCENT OF CLASS OF CLASSES
---------------------- -------------------- --------- ---------------- ----------
<S> <C> <C> <C> <C>
Lee Roy Mitchell(3)....... Class A Common Stock 1,500 100.0% 42.9%
7502 Greenville Ave. Class B Common Stock 77,687 42.5%
Suite 800
Dallas, TX 75231
Cypress Merchant.......... Class A Common Stock -- -- 42.6%
Banking Partners, L.P. Class B Common Stock 78,469 42.9%
65 East 55th St.
New York, NY 10022
Cypress Pictures Ltd...... Class A Common Stock -- -- 2.2%
c/o W.S. Walker Co. Class B Common Stock 4,079 2.2%
Second Floor
Caledonian House
Mary St., P.O. Box 265
George Town,
Grand Cayman
Cayman Islands
The Mitchell Special
Trust................... Class A Common Stock -- -- 7.8%
7502 Greenville Ave. Class B Common Stock 14,667 8%
Suite 800
Dallas, TX 75231
Tandy Mitchell(4)......... Class A Common Stock -- -- --
Class B Common Stock -- --
Alan W. Stock(5).......... Class A Common Stock -- -- *
Class B Common Stock 1,817 *
Jeffrey J. Stedman(6)..... Class A Common Stock -- -- *
Class B Common Stock 305 *
Gary R. Gibbs............. Class A Common Stock -- -- *
Class B Common Stock -- *
Jerry Brand(7)............ Class A Common Stock -- -- *
Class B Common Stock 40 *
W. Bryce Anderson......... Class A Common Stock -- -- --
Class B Common Stock -- --
Heriberto Guerra, Jr...... Class A Common Stock -- -- --
Class B Common Stock -- --
James A. Stern............ Class A Common Stock -- -- --
Class B Common Stock -- --
James L. Singleton........ Class A Common Stock -- -- --
Class B Common Stock -- --
</TABLE>
55
<PAGE> 56
<TABLE>
<CAPTION>
COMBINED
NUMBER OF PERCENT
NAMES AND ADDRESSES(1) TITLE OF CLASS SHARES(2) PERCENT OF CLASS OF CLASSES
---------------------- -------------------- --------- ---------------- ----------
<S> <C> <C> <C> <C>
Denny Rydberg............. Class A Common Stock -- -- --
Class B Common Stock -- --
Directors and Officers
as a Group
(16 persons)(8)......... Class A Common Stock 1,500 100.0% 45.1%
Class B Common Stock 81,681 44.6%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, the Company believes the beneficial owner has
both sole voting and investment powers over such shares.
(2) As of January 20, 1998, 1,500 shares of Class A Common Stock and 182,950
shares of Class B Common Stock were issued and outstanding. Includes 6,148
shares of Class B Common Stock issuable upon the exercise of options that
may be exercised within 60 days of the date of this Prospectus.
(3) Does not include 15,937 shares of Class B Common Stock held in trust for the
benefit of certain of Mr. Mitchell's grandchildren, as to which Mr. Mitchell
disclaims beneficial ownership. Mr. Mitchell is the co-trustee of such
trusts.
(4) Excludes any shares owned by Mr. Mitchell that Mrs. Mitchell may be deemed
to own as a result of community property laws.
(5) Includes 1,817 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this
Prospectus.
(6) Includes 305 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this Prospectus.
(7) Includes 40 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this Prospectus.
(8) Includes 3,994 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this
Prospectus. Does not include 15,937 shares of Class B Common Stock held in
trust for the benefit of certain of Mr. Mitchell's grandchildren, as to
which Mr. Mitchell disclaims beneficial ownership. Mr. Mitchell is the
co-trustee of such trusts.
56
<PAGE> 57
COMMON STOCK
The rights of the holders of Class A and Class B common stock are
identical except for voting and conversion rights. Each share of Class A Common
Stock is entitled to one vote on all matters submitted to a vote of the
Company's shareholders. Class B Common Stock is non-voting. Subject to
contractual limitations regarding conversion of Class B Common Stock into Class
A Common Stock contained in the Shareholders' Agreement and in Stock Transfer
Restriction Agreements between the Company and certain former employees, each
share of Class B Common Stock is convertible at any time, at the option of and
without cost to the shareholder, into the same number of shares of Class A
Common Stock upon surrender to the Company of the certificate or certificates
evidencing the Class B Common Stock to be converted, together with a written
notice of the election of such shareholder to convert such shares into Class A
Common Stock. Holders of Class A and Class B Common Stock are entitled to
receive pro rata per share such dividends as the Board of Directors may from
time to time declare out of funds of the Company legally available for the
payment of dividends. Upon liquidation, dissolution or winding-up of the
Company, the holders of Class A and Class B Common Stock are entitled to share
ratably in all assets available for distribution after payment in full of
creditors. In a merger, consolidation or other business combination, the
consideration to be received per share by holders of Class A and Class B Common
Stock must be identical, except that in any such transaction in which shares of
common stock are distributed, such shares may differ to the extent that voting
rights differ among existing classes of Common Stock. See "Certain
Transactions -- Cypress Investment."
57
<PAGE> 58
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENTS
The Company currently manages seven theatres (90 screens) for affiliates
under long term management agreements. The Company provides all operating
functions, including film booking, accounting and the operation and maintenance
of the theatres, in the same manner as such functions are performed by Company
personnel for Company owned or leased theatres. The operating and maintenance
expenses of the theatres are paid by the owners of the theatres. The Company
receives a specified percentage of the gross revenues of the theatres managed
by the Company and in some cases a percentage of the theatre cash flow above
certain targeted amounts. The Company may in the future enter into additional
management agreements with affiliates and/or third parties to manage theatres.
Movie Theatre Investors
The Company manages three theatres (37 screens) for Movie Theatre
Investors, Ltd. ("Movie Theatre Investors"). Mr. Mitchell is the sole
shareholder of one of the general partners of Movie Theatre Investors. In
addition, Mr. Mitchell owns 10.1%, Mrs. Mitchell and affiliates own 7.4% and
the Company owns 1.1% of the limited partnership interests in Movie Theatre
Investors. The Company received $257,360 in management fees from Movie Theatre
Investors in 1996.
Laredo Joint Venture
The Company manages one theatre (12 screens) for Laredo Theatre, Ltd.
("Laredo"). Lone Star Theatres, Inc. owns 25% of the limited partnership
interests in Laredo. Cinemark International is the sole general partner and
owns the remaining limited partnership interests. Lone Star Theatres, Inc. is
owned 100% by Mr. David Roberts, who is Mr. Mitchell's son-in-law. The Company
received $179,821 in management fees from Laredo in 1996.
Cinemark Partners II
The Company manages one theatre (17 screens) for Cinemark Partners II,
Ltd. ("Cinemark Partners II"). Cinemark Partners I, Inc., a wholly owned
subsidiary of the Company, is the sole general partner of Cinemark Partners II.
Mr. Mitchell owns 10% and Cinemark Partners I, Inc. owns 1% of the limited
partnership interests in Cinemark Partners II. The Company received $59,467 in
management fees from Cinemark Partners II in 1996.
On January 5, 1998, the Company purchased approximately 31% of the limited
partnership interest in Cinemark Partners II, Ltd. for $3,024,000.
Additionally, the Company purchased 77.1 units for an aggregate purchase price
of $3,700,000. After consummating such transactions, the Company owns
approximately 50.1% of Cinemark Partners II Ltd.
Cinemark Alberta
The Company manages two discount theatres (24 screens) for Cinemark
Alberta. Cinemark Holdings Canada, Inc., a wholly owned subsidiary of Cinemark
International, owns 50% of Cinemark Alberta. The Company received $97,073 in
management fees from Cinemark Alberta in 1996.
58
<PAGE> 59
STARPLEX CINEMAS, INC.
On June 21, 1994, the Company executed a ground lease on property located
in Lewisville, Texas. The Company constructed and equipped an eight screen
multiplex theatre. The Company leases the theatre and the equipment to Starplex
Cinemas, Inc. ("Starplex"). The Company has recorded only $450,000 of rental
income since the inception of this lease as the theatre is performing below
expectations and Starplex is delinquent in making its required rent payments.
Starplex is 100% owned by Mr. Mitchell's brother.
CYPRESS INVESTMENT
The Company entered into the Shareholders' Agreement dated March 12, 1996
with Mr. Mitchell, his affiliates and Cypress (the "Shareholders' Agreement").
Among other things, the Shareholders' Agreement provides that, subject to
certain conditions, the Company must obtain (with certain exceptions) the
consent of CALP for certain corporate acts including, but not limited to,
amendments to the Articles of Incorporation of the Company, approval of annual
budgets under certain circumstances, asset dispositions or acquisitions in
excess of specified amounts, merger or consolidation of the Company, incurrence
of indebtedness over specified amounts, certain stock redemptions or dividends,
transactions with affiliates over specified amounts, certain management changes
or new compensation plans, financing theatres through limited partnerships,
settlements of litigation over specified amounts and issuance of common stock
under certain conditions. The Shareholders' Agreement also provides that
Cypress may not convert its Class B Common Stock to Class A Common Stock unless
certain events occur such as a Change of Control (as defined in the
Shareholders' Agreement) or the consummation of a public offering of the
Company's common stock. The above-described provisions terminate on the earlier
of (i) the public owning 25% or more of the common stock of the Company, (ii)
the merger of the Company with and into any publicly traded company or (iii) 10
years after the date of the Shareholders' Agreement. The Shareholders'
Agreement also contains a voting agreement pursuant to which Mr. Mitchell
agrees to vote his shares of common stock to elect certain designees of CALP to
the Board of Directors of the Company.
Mr. Mitchell also agreed that in the event any corporate opportunity is
presented to Mr. Mitchell or any of his affiliates to acquire or enter into any
business transaction involving the motion picture exhibition business that
would be significant to the Company, he would submit such opportunity to the
Board of Directors of the Company before taking any action.
The Shareholders' Agreement further provides that the shareholders agree
to form a new corporation as the parent corporation of the Company and to
contribute their respective shares for like shares of this new corporation.
Company and the shareholders are pursuing plans to create such a holding
company during January 1998.
EMPLOYEE STOCK TRANSACTIONS
In April 1996, employees exercised options to purchase 1,509 shares of
Class B Common Stock of the Company. The Company incurred compensation expense
of $1.8 million resulting from the payment of a cash bonus to key employees to
reimburse them for the taxes due upon the exercise of nonqualified stock
options. The Company received a current tax benefit equal to the total cash
bonus paid, as a result of being allowed a tax deduction for the value of the
bonus and the difference between the value and exercise price of the
nonqualified options. For GAAP purposes, the Company will recognize the tax
benefit for the deduction arising from the differences in value between the
option and its exercise price as additional paid-in capital(rather than as a
reduction of tax expense). In April 1997, the Company repurchased an aggregate
of 1,242 shares of Class B Common Stock issued to employees upon exercise of
options in April 1996. The aggregate purchase price for such shares was
$2.2 million. In June 1997, the Company repurchased options to purchase an
aggregate 737 shares of Class B Common Stock from retiring employees. The
aggregate purchase price for such options was approximately $1.3 million.
59
<PAGE> 60
INDEMNIFICATION OF DIRECTORS
The Company has adopted provisions in its Articles of Incorporation and
Bylaws which provide for indemnification of its officers and directors to the
maximum extent permitted under the Texas Business Corporation Act. In addition,
the Company has entered into separate indemnification agreements with each of
its directors which requires the Company, among other things, to indemnify them
against certain liabilities that may arise by reason of their status or service
as directors to the maximum extent permitted under the Texas Business
Corporation Act. The Company has obtained an insurance policy providing for
indemnification of officers and directors of the Company and certain other
persons against liabilities and expenses incurred by any of them in certain
stated proceedings and under certain stated conditions.
60
<PAGE> 61
DESCRIPTION OF SERIES B NOTES
The Series A Notes were issued, and the Series B Notes will be issued,
under the Indenture dated as of January 14, 1998 (the "Indenture"), among the
Company and U.S. Trust Company of Texas, N.A., as Trustee (the "Trustee"). The
Series A Notes were issued pursuant to the Company's Offering Memorandum dated
January 8, 1998 (the "Offering Memorandum"). The Series B Notes will be issued
solely in exchange for an equal principal amount of the outstanding Series A
Notes pursuant to the Exchange Offer. The terms of the Series B Notes will be
identical in all material respects to the form and terms of the Series A Notes
except that: (i) the Series B Notes will have been registered under the
Securities Act (and will generally be freely transferable by holders thereof
who are not Restricted Holders); and (ii) the Registration Rights and
Liquidated Damages (as defined herein) applicable to the Series A Notes are not
applicable to the Series B Notes. The Series A Notes and the Series B Notes are
collectively referred to herein as the "Notes."
The following summary of the terms of the Indenture and the Notes is based
on certain provisions of the Indenture and the form of Note attached thereto.
It does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all of the provisions of the Indenture. The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." Capitalized terms used herein and not otherwise
defined shall have the respective meanings assigned to them in the Indenture.
Copies of the proposed forms of Indenture and Registration Rights Agreement
will be made available as set forth below under "--Additional Information."
The Notes will be general unsecured obligations of the Company and will
rank senior or pari passu in right of payment with all other general unsecured
subordinated obligations of the Company. The Notes will rank pari passu with
the Senior Subordinated Notes. The Notes will be subordinated in right of
payment to all present and future Senior Indebtedness of the Company.
As of the date of the Indenture, all Subsidiaries of the Company will be
Restricted Subsidiaries, other than the Existing Unrestricted Subsidiaries.
However, under certain circumstances, the Company will be able to designate
additional current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to most of the restrictive
covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate original principal amount to $105
million and will mature on August 1, 2008. Interest on the Notes will accrue at
the rate of 8 1/2% per annum and will be payable semi-annually in arrears on
February 1 and August 1 of each year, commencing August 1, 1998 to Holders of
record on the immediately preceding January 15 and July 15. Interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of original issuance. Interest will
be computed on the basis of a 360-day year consisting of twelve 30-day months.
Principal of, and premium, if any, and interest on, the Notes will be payable
at the corporate trust office of the Trustee in New York City or at the office
of any Paying Agent in New York City appointed pursuant to the Indenture. At
the option of the Company, payment of interest may be made by check mailed to
the Holders of Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments with respect to Global Notes and
Certificated Securities the Holders of whom have given wire transfer
instructions to the Company will be required to be made by wire transfer of
same day funds to the accounts specified by the Holders thereof. The Notes will
be issued in denominations of $1,000 and integral multiples thereof.
The Trustee is Paying Agent and Registrar under the Indenture. The Company
may act as Paying Agent or Registrar under the Indenture, and the Company may
change the Paying Agent or Registrar without notice to the Holders of the
Notes.
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<PAGE> 62
SUBORDINATION
The payment of principal of, premium, if any, and interest on, and other
Obligations evidenced by, the Notes will be subordinated in right of payment,
as set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full in cash (or U.S. dollar-denominated Cash Equivalents)
of all Obligations due in respect of such Senior Indebtedness (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Indebtedness) before the holders of Notes will be
entitled to receive any payment of any kind or character with respect to the
Notes, and until all Obligations with respect to Senior Indebtedness are paid
in full in cash (or U.S. dollar-denominated Cash Equivalents), any distribution
to which the holders of Notes would be entitled will be made to the holders of
Senior Indebtedness; provided that, notwithstanding the foregoing, holders of
Notes may receive (i) securities that are subordinated at least to the same
extent as the Notes to Senior Indebtedness and any securities issued in
exchange for Senior Indebtedness and (ii) payments made from the trust
described under "-- Satisfaction and Discharge of Indenture; Defeasance."
The Company also may not make any payment of any kind or character upon or
in respect of the Notes (except in such subordinated securities or from the
trust described under "-- Satisfaction and Discharge of Indenture Defeasance")
if (i) a default in the payment of the principal of, premium, if any, or
interest on Designated Senior Indebtedness occurs and is continuing or (ii) any
other default occurs and is continuing with respect to Designated Senior
Indebtedness that permits holders of the Designated Senior Indebtedness as to
which such default relates to accelerate its maturity and the Trustee receives
a notice of such default (a "Payment Blockage Notice") from the Company or the
holders of any Designated Senior Indebtedness. Payments on the Notes may and
will be resumed (a) in the case of a payment default, upon the date on which
such default is cured or waived and (b) in the case of a nonpayment default,
upon the earlier of (i) the date on which such nonpayment default is cured or
waived or (ii) 179 days after the date on which the applicable Payment Blockage
Notice is received by the Trustee (unless the maturity of any Designated Senior
Indebtedness has been accelerated or unless the subordination provisions of the
Indenture otherwise do not permit such payment). In no event shall more than
one period of payment blockage be made in any 360 consecutive day period. No
nonpayment default that existed or was continuing on the date of receipt by the
Trustee of any Payment Blockage Notice will be, or be made, the basis for a
subsequent Payment Blockage Notice. Following the expiration of any period
during which the Company is prohibited from making payments on the Notes
pursuant to a Payment Blockage Notice, the Company will be obligated to resume
making any and all required payments in respect of the Notes, including without
limitation any missed payments.
The Indenture requires that the Company and the Trustee promptly notify
holders of Designated Senior Indebtedness if payment of the Notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. The Indenture
limits, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Indebtedness, that the Company and its
Restricted Subsidiaries can incur. See "-- Certain Covenants -- Limitation on
Indebtedness." As of January 20, 1998, the Company had outstanding
approximately $51 million of Senior Indebtedness. The Notes are effectively
subordinated to Indebtedness of the Company's subsidiaries, which aggregated
$30 million as of January 20, 1998.
OPTIONAL REDEMPTION
The Notes are not redeemable at the option of the Company prior to August
1, 2003. Thereafter, the Notes will be redeemable, at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 calendar
days' prior notice to each Holder of Notes to be redeemed, at the redemption
prices (expressed as
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<PAGE> 63
percentages of the principal amount) set forth below, plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve month period beginning on August 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003...................... 104.250%
2004...................... 102.833%
2005...................... 101.417%
2006 and thereafter....... 100.000%
</TABLE>
Notwithstanding the foregoing, on and prior to February 1, 2001, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
originally outstanding at a redemption price of 108.5% of the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, with
the net proceeds of one or more Equity Offerings of the Company or, if
applicable, a Parent; provided that at least 65% of the aggregate principal
amount of the Notes originally issued remains outstanding immediately after the
occurrence of such redemption (but such unredeemed Notes may be redeemed
pursuant to the optional redemption procedure described in the immediately
preceding paragraph); and provided, further, that such notice of redemption
shall be given not later than 30 days, and such redemption shall occur not
later than 90 days, after the date of the closing of any such Equity Offering.
Notice of redemption shall be mailed at least 30 but not more than 60
calendar days before the redemption date to each Holder of Notes to be redeemed
at such Holder's registered address. The notice of redemption shall identify
the Notes to be redeemed and shall state the redemption date; the redemption
price and any accrued and unpaid interest; the name and address of the Paying
Agent; that Notes called for redemption must be surrendered to the Paying Agent
to collect the redemption price plus accrued interest; and that, unless the
Company defaults in making such redemption payment, interest on Notes called
for redemption ceases to accrue on and after the redemption date. If fewer than
all of the Notes are to be redeemed, the Trustee shall select the Notes to be
redeemed in compliance with the requirements of any applicable depositary and
securities exchange requirements, or if the Notes are not so listed, on a pro
rata basis, by lot or by such other method as the Trustee may deem fair and
appropriate and in such manner as complies with any such requirements. The
Trustee shall make the selection from Notes outstanding and not previously
called for redemption. Notes and portions thereof selected by the Trustee for
redemption shall be in amounts of $1,000 or integral multiples of $1,000.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
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<PAGE> 64
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control. The Indenture provides that upon the occurrence of a
Change of Control, the Company shall be required to make an offer (a "Change of
Control Offer") to Holders to repurchase any and all of the Notes (but only in
denominations of $1,000 or integral multiples of $1,000) at a purchase price
(the "Change of Control Offer Price") equal to 101% of the aggregate principal
amount, plus accrued and unpaid interest, if any, to the date of purchase
("Change of Control Purchase Date").
Notice of a Change of Control Offer shall be mailed by the Company, with a
copy to the Trustee, or, at the Company's option, by the Trustee (at the
Company's expense) not more than 30 calendar days after the Change of Control
to each Holder of the Notes at such Holder's last registered address appearing
in the Register. In such notice, the Company shall describe the transaction
that constitutes the Change of Control and offer to repurchase Notes pursuant
to the procedures required by the Indenture and described in such notice;
provided that, prior to complying with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Indebtedness to permit
the repurchase of Notes required by this covenant. The notice shall contain all
instructions and materials necessary to enable Holders to tender Notes pursuant
to the Change of Control Offer. The Company will comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Notes as a result of a Change of
Control.
On the Change of Control Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof validly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money in immediately
available funds sufficient to pay the purchase price of all Notes or portions
thereof so accepted, and (iii) deliver to the Trustee Notes so accepted
together with an Officer's Certificate stating the Notes or portions thereof
accepted for payment by the Company. If the Company complies with its
obligations set forth in the immediately preceding sentence, whether or not a
Default or Event of Default has occurred and is continuing on the Change of
Control Purchase Date, the Paying Agent shall as promptly as practicable mail
or deliver to each Holder of Notes so accepted payment in an amount equal to
the purchase price, and the Company shall execute and the Trustee shall as
promptly as practicable authenticate and mail or deliver to such Holder a new
Note equal in principal amount to any unpurchased portion of the Note
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. Any Notes not so accepted
shall be as promptly as practicable mailed or delivered by the Trustee to the
Holders thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as promptly as practicable after the Change of Control
Purchase Date. For purposes of this covenant, the Trustee shall act as the
Paying Agent.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
Asset Sales. The Indenture also contains provisions in respect of offers
to purchase Notes with Net Proceeds in the event of certain Asset Dispositions.
See "-- Certain Covenants -- Limitation on Asset Sales."
Credit Facility. Certain events involving a Change of Control will result
in an event of default under the Credit Facility. An event of default under the
Credit Facility could result in an acceleration of indebtedness, in which case
the subordination provisions of the Notes would require payment in full of such
Senior Indebtedness before repurchases or other payments in respect of the
Notes. Any future credit agreements or other agreements relating to Senior
Indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs or a Net
Proceeds Offer is required by the Indenture at a time when the Company is
prohibited from purchasing Notes, the Company could seek the consent of its
lenders to the purchase of Notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company may remain prohibited from purchasing Notes.
In such case, the Company's failure to purchase tendered Notes would constitute
an Event of Default under the
64
<PAGE> 65
Indenture which would, in turn, constitute a default under the Credit Facility.
In such circumstances, the subordination provisions in the Indenture would
likely restrict payments to the holders of the Notes.
Senior Subordinated Notes. The indentures governing the Senior Subordinated
Notes provide that upon the occurrence of a Change of Control (as defined
therein), the Company shall be required to make an offer to the holders of the
Senior Subordinated Notes to repurchase any or all of the Senior Subordinated
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase. Such
event would result in an event of default under the Credit Facility.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for
the full definition of all such terms as well as any other terms used herein
for which no definition is provided.
"Acquired Indebtedness" of any particular Person means Indebtedness of any
other Person existing at the time such other Person merged with or into or
became a Subsidiary of such particular Person or assumed by such particular
Person in connection with the acquisition of assets from any other Person, and
not incurred by such other Person in connection with, or in contemplation of,
such other Person merging with or into such particular Person or becoming a
Subsidiary of such particular Person or such acquisition.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Disposition" means any sale, lease, conveyance, transfer or other
disposition (or series of related sales, leases, conveyances, transfers or
dispositions) of any Capital Stock of a Restricted Subsidiary of the Company
(whether or not upon issuance), or of any Capital Stock of Cinemark
International by the Company (but not the issuance and sale of Capital Stock by
Cinemark International), or of any other property or other assets (each
referred to for the purposes of this definition as a "disposition") by the
Company or any of its Restricted Subsidiaries, whether for cash or other
consideration, other than (i) a disposition by a Restricted Subsidiary of the
Company to the Company or a Wholly Owned Subsidiary of the Company that is a
Restricted Subsidiary, (ii) a disposition by the Company to a Wholly Owned
Subsidiary of the Company that is a Restricted Subsidiary, (iii) a disposition
that is a Permitted Investment or a Restricted Payment not prohibited by the
"Limitation on Restricted Payments" covenant (to the extent such Permitted
Investment or Restricted Payment may be deemed to constitute an Asset
Disposition), (iv) dispositions of inventory in the ordinary course of
business, (v) a disposition that is governed by the "Consolidation and Merger"
covenant, (vi) exchanges of theatre properties that comply with the
requirements described in the final paragraph under "-- Certain Covenants --
Limitation on Asset Sales ," provided that payment of any Other Consideration
(as defined therein) shall, to the extent provided therein, be treated as an
Asset Disposition, (vii) a designation of a Restricted Subsidiary as an
Unrestricted Subsidiary, if the Company elects to treat such designation as an
Investment and not as an Asset Disposition, or (viii) a disposition of Capital
Stock, property or assets in a single transaction or a series of related
transactions (other than dispositions of the type described in clauses (i)
through (vii) above) having a Fair Market Value of less than $2 million. For
purposes of this definition, "Fair Market Value" of any Capital Stock, property
or other assets means the fair market value of such Capital Stock, property or
other assets at the time of disposition, which in the case of any disposition
or series of related dispositions having an aggregate fair market value of $2
million or more shall be determined in good faith (taking into account, without
limitation, any assumption of indebtedness in connection with such disposition)
by resolution of the Board of Directors of the Company. Notwithstanding any
provision of the Indenture to the contrary, the expiration or non-renewal of
any lease of theatre properties or equipment at the
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normal expiration date thereof without payment to the Company or any of its
Restricted Subsidiaries of consideration therefor shall not constitute an Asset
Disposition.
"Asset Disposition Expenses" shall have the meaning assigned to such term
in the definition of the term "Net Proceeds."
"Bankruptcy Law" means Title 11, United States Code, as may be amended
from time to time, or any similar federal or state law for the relief of
debtors.
"Capitalized Lease Obligations" means the capitalized amount of the rental
obligations of any Person under any lease of any property (whether real,
personal or mixed) which, in accordance with GAAP, is required to be
capitalized on the balance sheet of such Person.
"Capital Stock" of any Person means (i) any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock and any warrants, options and similar rights to acquire such
capital stock, (ii) in the case of a partnership, partnership interests
(whether general or limited) and (iii) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) direct obligations of the United States of
America or any agency thereof having maturities of not more than one year from
the date of acquisition, (ii) time deposits and certificates of deposit of any
domestic commercial bank of recognized standing having capital and surplus in
excess of $500 million, with maturities of not more than one year from the date
of acquisition, (iii) repurchase obligations issued by any bank described in
clause (ii) above with a term not to exceed 30 days; (iv) commercial paper
rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the
equivalent thereof by Moody's, in each case maturing within one year after the
date of acquisition and (v) shares of any money market mutual fund, or similar
fund, in each case having assets in excess of $500 million, which invests
predominantly in investments of the types described in clauses (i) through (iv)
above.
"Change of Control" means (i) the acquisition, including through merger,
consolidation or otherwise, by any Person or any Persons acting together which
would constitute a "group" (a "Group") for purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), together with
all affiliates and associates (as defined in Rule 12b-2 under the Exchange Act)
thereof, of direct or indirect beneficial ownership (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of (A) the outstanding shares of
common stock of the Company or (B) the total voting power of all classes of
Capital Stock of the Company entitled to vote generally in the election of
directors, or (ii) the election by any Person or Group, together with all
affiliates and associates thereof, of a sufficient number of its or their
nominees to the Board of Directors of the Company such that such nominees, when
added to any existing directors remaining on such Board of Directors after such
election who are affiliates or associates of such Person or Group, shall
constitute a majority of such Board of Directors; provided, however, that, for
purposes of this definition, the terms "Person" and "Group" shall be deemed not
to include (i) the Company, (ii) any Restricted Subsidiary of the Company that
is a Wholly Owned Subsidiary, (iii) Lee Roy Mitchell or Tandy Mitchell, or any
descendant of Lee Roy Mitchell or the spouse of any such descendant, the estate
of Lee Roy Mitchell, Tandy Mitchell, any descendant of Lee Roy Mitchell or the
spouse of any such descendant or any trust or other arrangement for the benefit
of Lee Roy Mitchell, Tandy Mitchell, any descendant of Lee Roy Mitchell or the
spouse of any such descendant (collectively, the "Mitchell Family"), (iv) any
group which includes any member or members of the Mitchell Family if a majority
of the Capital Stock of the Company held by such group is beneficially owned
(including the power to vote such Capital Stock of the Company) by such member
or members or by one or more affiliates at least 80% of the equity interests of
which are owned by such member or members or (v) Cypress Merchant Banking
Partners L.P. or Cypress Pictures Ltd., and provided, further, that, the term
"Change of Control" shall be deemed not to include any transaction or series of
transactions that results in the Capital Stock of the Company being held by one
or more Persons if the beneficial ownership,
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direct or indirect, of the Company after such transaction or series of
transactions is substantially the same as the beneficial ownership, direct or
indirect, of the Company prior to such transaction or series of transactions.
"Consolidated EBITDA" of any Person means, for any period (without
duplication), (i) the sum of (A) Consolidated Net Income, (B) Consolidated
Interest Expense, (C) provisions for taxes based on or calculated with respect
to income, (D) depreciation expense, (E) amortization expense, and (F) all
other non-cash items reducing Consolidated Net Income, less all non-cash items
increasing Consolidated Net Income, minus (ii) any decrease in deferred lease
expenses, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" of any Person means, for any period,
without duplication, the total interest expense of such Person and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP, including (i) non-cash, payable-in-kind interest, (ii) interest expense
attributable to capital leases, (iii) amortization of debt discount and debt
issue cost (excluding related legal and accounting fees), but only with respect
to transactions consummated after the Start Date, (iv) commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, (v) net costs under Hedging Obligations (including
amortizations of discount), (vi) preferred stock dividends in respect of
preferred stock of Restricted Subsidiaries of such Person, other than
payable-in-kind dividends in respect of preferred stock that is not
Disqualified Stock, held by Persons other than such Person or one of its Wholly
Owned Subsidiaries that is a Restricted Subsidiary, and (vii) dividends in
respect of Disqualified Stock of such Person.
"Consolidated Net Income" of any Person means, for any period, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP,
however, including, in the case of the Company and its Restricted Subsidiaries,
only those management fees actually received by the Company from its
Unrestricted Subsidiaries, and excluding amortization of debt discount and debt
issue costs with respect to transactions consummated on or prior to the Start
Date, provided that (i) accrued but unpaid compensation expenses related to any
stock appreciation or stock option plans shall not be deducted until such time
as such expenses result in a cash expenditure, (ii) compensation expenses
related to tax payment plans implemented by the Company from time to time in
connection with the exercise and/or repurchase of stock options shall not be
deducted from Net Income to the extent of the related tax benefits arising
therefrom, (iii) the Net Income of any Person that is not a Restricted
Subsidiary of such Person or that is accounted for by such Person by the equity
method of accounting shall not be included in such Consolidated Net Income,
except that the Company's equity in the Net Income of any such Person for any
such period or any previous period shall be so included only up to the
aggregate amount of cash dividends or distributions paid to the Company or one
of its Restricted Subsidiaries, and (iv) the Net Income (if positive) of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded. For purposes of this
definition, "Net Income" of any Person means, for any period, the net income
(or loss) of such Person determined in accordance with GAAP, excluding,
however, from the determination (i) any extraordinary loss resulting from early
extinguishment of debt on or prior to the Initial Issuance Date, (ii) any net
gain or loss from any extraordinary item (net of all related taxes, fees, costs
and expenses), (iii) any net gain or loss (net of all related taxes and Asset
Disposition Expenses) realized upon the sale or other disposition during such
period (including without limitation dispositions pursuant to sale and
leaseback transactions) of any real property, equipment or other asset of such
Person, which is not sold or otherwise disposed of in the ordinary course of
business, or of any Capital Stock of such Person or a Restricted Subsidiary of
such Person, and (iv) the cumulative effect of changes in accounting
principles.
"Consolidated Net Worth" of any Person means, as of any date, the amount
which, in accordance with GAAP, would be set forth under the caption
"Shareholders' Equity" (or any like caption) on a consolidated balance sheet of
such Person and its Restricted Subsidiaries, less amounts attributable to
Disqualified Stock of such Person or any of its Restricted Subsidiaries.
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"Consolidated Tangible Assets" of any Person means, as of any date, the
amount which, in accordance with GAAP, would be set forth under the caption
"Total Assets" (or any like caption) on a consolidated balance sheet of such
Person and its Restricted Subsidiaries, less all intangible assets, including,
without limitation, goodwill, organization costs, patents, trademarks,
copyrights, franchises, and research and development costs.
"Credit Facility" means that certain First Amended and Restated Reducing
Revolving Credit Agreement, dated as of December 12, 1996, among the Company,
the financial institutions from time to time parties thereto, and Bank of
America National Trust and Savings Association, as agent for such financial
institutions, and the various ancillary documents provided for therein, as the
same may be amended, extended, increased, renewed, restated, supplemented or
otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time, and any
agreement or agreements governing Indebtedness incurred to refinance, replace,
restructure or refund such agreements in whole or in part from time to time
(whether with the original agent and lenders or other agents and lenders or
otherwise, and whether provided for under the original Credit Facility or
otherwise).
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator, custodian or similar official under any Bankruptcy Law.
"Default" means any event, act or condition which is, or after notice or
passage of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Credit Facility and all
Indebtedness thereunder and (ii) any other Senior Indebtedness issued after the
Start Date and permitted under the Indenture, the principal amount of which is
$10 million or more and that has been designated by the Company as Designated
Senior Indebtedness.
"Disqualified Stock" of any Person means any Capital Stock of such Person
that, by its terms (or by the terms of any security into which it is
convertible or for which it is exercisable, redeemable or exchangeable),
matures, or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof, in whole or in
part (but only to the extent of such part), on or prior to the Stated Maturity
of the Notes.
"EBITDA Ratio" of any Person means the ratio of (i) the aggregate amount
of Consolidated EBITDA of such Person for the four full fiscal quarters
immediately prior to the date of the transaction giving rise to the need to
calculate the EBITDA Ratio (the "Determination Date") to (ii) the aggregate
Consolidated Interest Expense which such Person shall accrue during the fiscal
quarter in which the Determination Date occurs and the three fiscal quarters
immediately subsequent to such fiscal quarter, assuming that the Consolidated
Interest Expense shall accrue on the amount of such Person's Indebtedness on
the Determination Date, including any Indebtedness proposed to be incurred on
such date (as though all such Indebtedness was incurred on the first day of the
quarter in which the Determination Date occurred), but specifically excluding
Indebtedness proposed to be repaid or defeased (or with respect to the
defeasance of which a deposit satisfying the defeasance requirements of such
Indebtedness has irrevocably been made) on such date (as though all such
Indebtedness was repaid on the first day of the quarter in which the
Determination Date occurred); provided that if during the four-quarter period
referred to in clause (i) above, the Person for which the EBITDA Ratio is being
determined or any of its Restricted Subsidiaries shall have acquired any assets
other than assets acquired as a result of capital expenditures made in the
ordinary course of business of such Person, the EBITDA Ratio of such Person as
of such Determination Date shall be calculated on a pro forma basis, as if such
acquisition had occurred at the beginning of such four-quarter period. For
purposes of this definition, interest on Indebtedness determined on a
fluctuating basis for periods succeeding the Determination Date shall be
calculated as if the rate in effect on the Determination Date had been the
applicable rate for the entire period, taking into account any Hedging
Obligations applicable to such Indebtedness.
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"Equity Offering" means either (i) a bona fide underwritten sale to the
public of Common Stock of the Company or a Parent pursuant to a registration
statement (other than a Form S-8 or any other form relating to securities
issuable under any employee benefit plan of the Company) that is declared
effective by the Commission, or (ii) a privately negotiated sale of Common
Stock of the Company or a Parent by the Company or such Parent, as the case may
be, to a Person that, immediately prior to the time of such sale, is not an
Affiliate of the Company or such Parent, in each case completed following the
Start Date and resulting in aggregate gross proceeds to the Company or such
Parent of at least $20 million; provided , that in the case of any such sale of
Common Stock of a Parent, (x) the net proceeds of such sale shall be
contributed within 30 days by such Parent to the Company or (y) the Parent
shall use such proceeds to purchase Capital Stock of the Company that is not
Disqualified Stock.
"Existing Unrestricted Subsidiaries" means Cinemark International and its
Subsidiaries.
"50% Entity" shall have the meaning assigned to such term in the
definition of the term "Subsidiary."
"GAAP" means generally accepted accounting principles as applied in the
United States set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States, which are applicable
as of the date of determination; provided that the definitions in the Indenture
and all ratios and calculations contained in the covenants shall be determined
in accordance with GAAP as in effect and applied by the Company as of the Start
Date, consistently applied; provided, further, that in the event of any such
change in GAAP or in any change by the Company in GAAP applied that would
result in any change in any such ratio or calculation, the Company shall
deliver to the Trustee each time any such ratio or calculation is required to
be determined or made, an Officer's Certificate setting forth the computations
showing the effect of such change or application on such ratio or calculation.
"guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Indebtedness of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
participation arrangements, by agreement to keep well, or to maintain financial
statement conditions or otherwise), (ii) to purchase, sell or lease (as lessee
or lessor) property, or to purchase or sell services, primarily for the purpose
of enabling such other Person to make payment of such Indebtedness, (iii) to
supply funds to or in any other manner invest in such other Person (including
any agreement to pay for property or services irrespective of whether such
property is received or such services are rendered), or (iv) entered into for
the purpose of assuring the obligee of such Indebtedness in any other manner of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term "guarantee" shall not include (i)
endorsements for collection or deposit in the ordinary course of business, and
(ii) leases entered into in the ordinary course of business.
"Hedging Obligation" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Holder" or "Securityholder" means a Person in whose name a Note is
registered on the Register.
"Indebtedness" of any Person means, at any date, and without duplication,
any obligation of such Person or its Restricted Subsidiaries for or in respect
of: (i) money borrowed (whether or not for a cash consideration and whether or
not the recourse of the lender is to the whole of the assets of such Person or
only a portion thereof) and
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premiums (if any) and capitalized interest (if any) in respect thereof; (ii)
any debenture, bond, note or similar instrument (whether or not issued for a
cash consideration), if it would appear as a liability on a balance sheet of
such Person prepared in accordance with GAAP; (iii) any letter of credit (other
than in respect of Trade Payables), bankers' acceptance or note purchase
facility or any liability with respect to any recourse receivables purchase,
factoring or discounting arrangement; (iv) Capitalized Lease Obligations
(whether in respect of buildings, machinery, equipment or otherwise), except
any such obligation that represents a Trade Payable; (v) any deferred purchase
or conditional sale agreement or arrangement representing the deferred and
unpaid balance of the purchase price of any property (including pursuant to
financing leases), except any such balance which represents a Trade Payable;
(vi) all obligations to purchase, redeem, retire, defease or otherwise acquire
for value any Disqualified Stock of such Person (or any warrants, rights or
options to acquire such Disqualified Stock) valued, in the case of Disqualified
Stock, at the greatest amount payable in respect thereof on a liquidation
(whether voluntary or involuntary), prior to the Stated Maturity of the Notes,
plus accrued and unpaid dividends; (vii) preferred stock of Restricted
Subsidiaries of such Person held by Persons other than such Person or one of
its Wholly Owned Subsidiaries that is a Restricted Subsidiary; (viii) direct or
indirect guarantees of all Indebtedness of other Persons referred to in clauses
(i) through (vii) above; and (ix) all Indebtedness of the types referred to in
clauses (i) through (viii) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on any asset owned by such Person or its Restricted Subsidiaries (even
though such Person or its Restricted Subsidiaries have not assumed or become
liable for the payment of such Indebtedness); provided, that the term
"Indebtedness" shall not be deemed to include any liability for federal, state,
local or other taxes owed or owing by the Company. The amount of Indebtedness
of any Person or its Restricted Subsidiaries at any date shall be (without
duplication) (i) the outstanding balance at such date of all unconditional
Indebtedness obligations as described above and the maximum liability of any
such contingent Indebtedness obligations at such date, (ii) in the case of
Indebtedness of others secured by a Lien to which the property or assets owned
or held by such Person or its Restricted Subsidiaries is subject, the lesser of
the fair market value at such date of any property and assets subject to a Lien
securing the Indebtedness of others and the amount of the Indebtedness secured,
and (iii) in the case of Indebtedness of others guaranteed by such Person as
described above, the lesser of the maximum amount of such guaranty and the
amount of the Indebtedness guaranteed. A guaranty of Indebtedness of the
Company or a Restricted Subsidiary of the Company that is permitted under the
Indenture shall not constitute a separate incurrence of Indebtedness.
"Initial Issuance Date" means the date of original issuance of the Series
A Notes.
"Investment" means any direct or indirect advance, loan or other extension
of credit or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other securities issued by, any other Person, other than (i)
loans or advances made to employees in the ordinary course of business not in
excess of $50,000 outstanding at any time to any employee, (ii) advances to
customers or suppliers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of any Person or its Subsidiaries and
any securities received in settlement thereof or as a result of a bankruptcy or
an insolvency proceeding, (iii) workers' compensation, utility, lease and
similar deposits and prepaid expenses in the ordinary course of business, (iv)
Capital Stock, bonds, notes, debentures and other assets received as a result
of Asset Dispositions not prohibited by the "Limitation on Asset Sales"
covenant, and (v) endorsements of negotiable instruments and documents in the
ordinary course of business. In addition, (i) the fair market value of the
assets (net of liabilities) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary shall constitute
an Investment in such Subsidiary in such amount, if the Company has elected
that such designation be deemed to be an Investment and not an Asset
Disposition, and (ii) the lesser of (A) the amount of Restricted Payments made
to any Unrestricted Subsidiary or (B) the fair market value of the assets (net
of liabilities) of such Unrestricted Subsidiary, in each case at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary of the
Company, shall constitute a return of capital and a decrease in the amount of
the Company's Investment in such Subsidiary.
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"Lien" means any mortgage, lien, pledge, security interest, conditional
sale or other title retention agreement, charge or other security interest or
encumbrance of any kind (including any agreement to give any security
interest).
"Marketable Equity Securities" means shares of Capital Stock of any Person
that are listed on the New York Stock Exchange, the American Stock Exchange or
the national market tier of The Nasdaq Stock Market and, upon receipt by the
Company or a Restricted Subsidiary, such shares are freely tradeable under the
Securities Act and applicable state securities laws and are so listed or
included for trading privileges.
"Net Proceeds" means the aggregate amount of consideration in the form of
cash, Temporary Cash Investments or Marketable Equity Securities received by
the Company or any of its Restricted Subsidiaries with respect to any Asset
Disposition, after deducting therefrom brokerage commissions, appraisal fees,
survey charges, engineering fees, title insurance premiums, legal fees,
finder's fees, loan origination and similar fees, underwriting fees, investment
banking fees and other similar commissions or fees, and any filing, recording
or registration fees, costs and expenses, recording taxes, transfer taxes,
provisions for all taxes payable as a result of such Asset Disposition, amounts
required to be paid to any Person owning a beneficial interest in the assets
subject to such Asset Disposition, and appropriate amounts to be provided as a
reserve in accordance with GAAP against any liabilities associated with such
Asset Disposition after such Asset Disposition (to the extent such reserves are
not subsequently reversed), including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Disposition ("Asset Disposition Expenses"), and also less any
amounts required to be applied to retire all or a portion of the Notes or
Indebtedness permitted under the "Limitation on Indebtedness" covenant having
the benefit of a Lien on the property or assets so transferred, to the extent,
but only to the extent, that such amounts are paid by the Company or one of its
Restricted Subsidiaries or are amounts for which the Company or one of its
Restricted Subsidiaries is directly and not contingently liable, as the case
may be, and properly attributable to the transaction in respect of which such
consideration is received or to the asset that is the subject of such
transaction.
"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offer" means a Change of Control Offer or Net Proceeds Offer, as the case
may be.
"Offer Purchase Date" means a Change of Control Purchase Date or Net
Proceeds Purchase Date, as the case may be.
"Parent" shall mean a Person or group of Persons created to effectuate a
holding company structure for the Company and its Subsidiaries.
"Permitted Investment" means (i) an Investment in the Company or a
Wholly-Owned Subsidiary of the Company that is a Restricted Subsidiary; (ii) an
Investment in a Person, if such Person or a Subsidiary of such Person will, as
a result of the making of such Investment and all other contemporaneous related
transactions, become a Wholly-Owned Subsidiary of the Company that is a
Restricted Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to the Company or a Wholly-Owned
Subsidiary of the Company that is a Restricted Subsidiary; (iii) a Temporary
Cash Investment; (iv) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP; (v) stock, obligations or securities received
in settlement of debts owing to the Company or a Restricted Subsidiary of the
Company as a result of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection, enforcement or agreement in lieu of foreclosure of any
Lien in favor of the Company or a Restricted Subsidiary of the Company; (vi)
refundable construction advances made with respect to the construction of
properties of a nature or type that are used in a business similar or related
to the business of the Company or its Restricted Subsidiaries in the ordinary
course of business; (vii) advances or extensions of credit
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on terms customary in the industry in the form of accounts or other receivables
incurred, or pre-paid film rentals, and loans and advances made in settlement of
such accounts receivable, all in the ordinary course of business; (viii)
guarantees not prohibited by the "Limitation of Indebtedness" covenant; (ix)
entry into and Investments in joint ventures, partnerships and other Persons
engaged or proposing to engage in the indoor motion picture exhibition business,
provided that (A) the Person into which such Investment is made is either a
Restricted Subsidiary of the Company, or such Person or a Subsidiary of such
Person will, as a result of the making of such Investment and all other
contemporaneous related transactions, become a Restricted Subsidiary of the
Company and (B) the amount of such Investment, valued at the time made, together
with all Investments previously made pursuant to this clause (ix) and clause (x)
of the corresponding provision of the indentures governing the Senior
Subordinated Notes, without duplication, valued at the respective times made,
shall not exceed 10% of Consolidated Tangible Assets of the Company as of the
last day of the full fiscal quarter ending immediately prior to the date of such
Investment; (x) any Investment made solely with funds the payment or application
of which is not restricted as described in "-- Certain Covenants -- Limitation
on Restricted Payments"; (xi) Investments in the Notes and Senior Subordinated
Notes; (xii) any consolidation or merger of a Restricted Subsidiary that is a
Wholly Owned Subsidiary of the Company to the extent otherwise permitted under
the Indenture; (xiii) payments of up to $1.5 million annually to repurchase
Capital Stock of the Company issued under the Company's employee stock option
plans; (xiv) Hedging Obligations of the Company or any of its Restricted
Subsidiaries to the extent otherwise permitted under the Indenture; (xv)
Investments in Cinemark International not to exceed $40 million; and (xvi) other
Investments not to exceed $10 million.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Restricted Subsidiary" means (i) any Subsidiary of the Company in
existence on the Start Date other than the Existing Unrestricted Subsidiaries,
(ii) any Subsidiary of the Company (other than a Subsidiary that is also a
Subsidiary of an Unrestricted Subsidiary) organized or acquired after the Start
Date, unless such Subsidiary shall have been designated as an Unrestricted
Subsidiary by resolution of the Board of Directors as provided in and in
compliance with the definition of "Unrestricted Subsidiary," and (iii) any
Unrestricted Subsidiary which is designated as a Restricted Subsidiary by the
Board of Directors of the Company; provided that, immediately after giving
effect to the designation referred to in clause (iii), no Default or Event of
Default shall have occurred and be continuing and the Company could incur at
least $1.00 of additional Indebtedness under the first paragraph under the
"Limitation on Indebtedness" covenant. The Company shall evidence any such
designation to the Trustee by promptly filing with the Trustee an Officer's
Certificate certifying that such designation has been made and stating that
such designation complies with the requirements of the immediately preceding
sentence.
"Senior Indebtedness" means (i) Indebtedness under the Credit Facility and
(ii) any other Indebtedness permitted to be incurred by the Company under the
terms of the Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness will not include (x) the Notes and the Senior
Subordinated Notes, (y) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, or (z) any Indebtedness that is incurred in
violation of the Indenture.
"Senior Subordinated Notes" means the aggregate $275 million principal
amount of the Company's 9 5/8% Senior Subordinated Notes, Series B and Series
D, issued under indentures dated August 15, 1996 and June 26, 1997 with U.S.
Trust Company of Texas, N.A., as Trustee.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Company that, together with its Restricted
Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for
more than 5% of the consolidated revenues of the Company and its Restricted
Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more
than 5% of the consolidated assets of the Company and its Restricted
Subsidiaries, all as set forth on the most recently available consolidated
financial statements of the Company for such fiscal year.
"Start Date" means August 15, 1996.
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"Stated Maturity" means, when used with respect to any security, the date
specified in such security as the fixed date on which an amount equal to the
principal of such security is due and payable.
"Subsidiary" means, with respect to any Person, (i) a Person a majority of
whose Capital Stock with voting power under ordinary circumstances to elect
directors (or Persons having similar or corresponding powers and
responsibilities) is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) upon designation by the Company, and until
designation by the Company to the contrary, a Person, 50% of whose Capital
Stock with voting power under ordinary circumstances to elect directors (or
Persons having similar or corresponding powers and responsibilities) is at the
time, directly or indirectly, owned by such Person, by one or more Subsidiaries
of such Person or by such Person and one or more Subsidiaries thereof (a "50%
Entity"). The Company shall evidence any designation pursuant to clause (ii) of
the immediately preceding sentence to the Trustee by filing with the Trustee
within 45 days of such designation an Officer's Certificate certifying that
such designation has been made. All references within the Indenture to
designations of Unrestricted Subsidiaries as Restricted Subsidiaries or
Restricted Subsidiaries as Unrestricted Subsidiaries shall be deemed to include
designations of 50% Entities as Restricted Subsidiaries and Restricted
Subsidiaries as 50% Entities, respectively.
"Temporary Cash Investments" means any Investment in the following kinds
of instruments: (A) readily marketable obligations issued or unconditionally
guaranteed as to principal and interest by the United States of America or by
any agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America if, on the date of purchase or
other acquisition of any such instrument by the Company or any Restricted
Subsidiary of the Company, the remaining term to maturity or interest rate
adjustment is not more than two years; (B) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued or guaranteed by a depository institution or trust company
incorporated under the laws of the United States of America, any state thereof,
the District of Columbia, Canada or any province or territory thereof, provided
that (1) such instrument has a final maturity not more than one year from the
date of purchase thereof by the Company or any Restricted Subsidiary of the
Company and (2) such depository institution or trust company has at the time of
the Company's or such Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, (x) capital, surplus and undivided
profits (as of the date of such institution's most recently published financial
statements) in excess of $100 million and (y) the long-term unsecured debt
obligations (other than such obligations rated on the basis of the credit of a
Person other than such institution) of such institution, at the time of the
Company's or such Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, are rated in the highest rating
category of both Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc. ("S&P"), and Moody's Investors Service, Inc. ("Moody's"); (C) commercial
paper issued by any corporation, if such commercial paper has, at the time of
the Company's or any Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, credit ratings of at least A-1 by S&P
and P-1 by Moody's; (D) money market mutual or similar funds having assets in
excess of $100 million; (E) readily marketable debt obligations issued by any
corporation, if at the time of the Company's or any Restricted Subsidiary's
Investment therein or contractual commitment providing for such Investment (1)
the remaining term to maturity is not more than two years and (2) such debt
obligations are rated in one of the two highest rating categories of both S&P
and Moody's; (F) demand or time deposit accounts used in the ordinary course of
business with commercial banks the balances in which are at all times fully
insured as to principal and interest by the Federal Deposit Insurance
Corporation or any successor thereto or any Canadian equivalent thereof; (G)
demand or time deposit accounts used in the ordinary course of business with
overseas branches of commercial banks incorporated under the laws of the United
States of America, any state thereof, the District of Columbia, Canada or any
province or territory thereof, provided that such commercial bank has, at the
time of the Company's or such Restricted Subsidiary's Investment therein, (1)
capital, surplus and undivided profits (as of the date of such institution's
most recently published financial statements) in excess of $100 million and (2)
the long-term unsecured debt obligations (other than such obligations rated on
the basis of the credit of a Person other than such institution) of such
institution, at the time of the Company's or any Restricted Subsidiary's
Investment therein, are rated in the highest rating category of both S&P and
Moody's and (H) to the extent not otherwise included herein, Cash Equivalents.
In the event that either S&P or Moody's ceases to publish
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ratings of the type provided herein, a replacement rating agency shall be
selected by the Company with the consent of the Trustee, and in each case the
rating of such replacement rating agency most nearly equivalent to the
corresponding S&P or Moody's rating, as the case may be, shall be used for
purposes hereof.
"Trade Payables" of any Person means accounts payable or any other
indebtedness or monetary obligations to trade creditors created, assumed or
guaranteed by such Person or any of its Subsidiaries in the ordinary course of
business in connection with the obtaining of materials or services.
"Unrestricted Subsidiary" means, until such time as any of the following
shall be designated as a Restricted Subsidiary of the Company by the Board of
Directors of the Company as provided in and in compliance with the definition
of "Restricted Subsidiary," (i) each of the Existing Unrestricted Subsidiaries,
(ii) any Subsidiary of the Company or of a Restricted Subsidiary of the Company
organized or acquired after the Start Date that is designated concurrently with
its organization or acquisition as an Unrestricted Subsidiary by resolution of
the Board of Directors of the Company, (iii) any Subsidiary of any Unrestricted
Subsidiary, and (iv) any Restricted Subsidiary of the Company that is
designated as an Unrestricted Subsidiary by resolution of the Board of
Directors of the Company, provided that, (A) immediately after giving effect to
such designation, no Default or Event of Default shall have occurred and be
continuing and (B) any such designation shall be deemed, at the election of the
Company at the time of such designation, to be either (but not both) (x) the
making of a Restricted Payment at the time of such designation in an amount
equal to the Investment in such Subsidiary subject to the restrictions
contained in the "Limitation on Restricted Payments" covenant or (y) the making
of an Asset Disposition at the time of such designation in an amount equal to
the Investment in such Subsidiary subject to the restrictions contained in the
"Limitation on Asset Sales" covenant. The Company shall evidence any
designation pursuant to clause (ii) or (iv) of the immediately preceding
sentence to the Trustee by filing with the Trustee within 45 days of such
designation an Officer's Certificate certifying that such designation has been
made and, in the case of clause (iv), the related election of the Company in
respect thereof.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian, with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt; provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
"Weighted Average Life" means, as of any date, with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of the
number of years from such date to the dates of each successive scheduled
principal payment (including any sinking fund payment requirements) of such
debt security multiplied by the amount of such principal payment, by (ii) the
sum of all such principal payments.
"Wholly Owned Subsidiary" of any Person means any Subsidiary of such
Person all of whose Capital Stock with voting power under ordinary
circumstances to elect directors (or Persons having similar or corresponding
powers and responsibilities), other than directors' qualifying shares if
required by applicable law, is owned by such Person (either directly or
indirectly through Wholly Owned Subsidiaries).
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CERTAIN COVENANTS
Limitation on Restricted Payments. The Indenture provides that, the
Company shall not, and shall not permit any of the Restricted Subsidiaries of
the Company to, directly or indirectly, (i) declare or pay any dividend on, or
make any distribution to the holders of, any Capital Stock of the Company or a
Restricted Subsidiary, other than dividends or distributions (A) from a
Restricted Subsidiary of the Company to the Company or to a Restricted
Subsidiary or (B) payable in Capital Stock of the Company that is not
Disqualified Stock; (ii) repay, redeem or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Subsidiaries (other than Wholly
Owned Subsidiaries of the Company that are Restricted Subsidiaries), other than
a Permitted Investment; (iii) prepay, repay, redeem, defeasance or otherwise
acquire or retire for value prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the Company
that is pari passu with or subordinated in right of payment to the Notes, other
than a Permitted Investment and except (A) as permitted pursuant to clause
(vii) under the second paragraph under "-- Limitation on Indebtedness", (B)
upon a change of control, as defined in and to the extent required by the
indenture or other agreement or instrument pursuant to which such pari passu or
subordinated Indebtedness was issued, provided the Company is then in
compliance with the covenant described under "-- Repurchase at the Option of
Holders -- Change of Control" , (C) any payment pursuant to a Pari Passu Offer
(as defined in the "Limitation on Asset Sales" covenant) and (D) any
prepayment, repayment, redemption, defeasance or other acquisition or
retirement for value of (1) the Series B Notes or (2) other Indebtedness of the
Company that is pari passu with the Notes if such prepayment, repayment,
redemption, defeasance or other acquisition or retirement for value of such
other Indebtedness is made contemporaneously with (and prorata with) a
prepayment, repayment, redemption, defeasance or other acquisition or
retirement for value of the Notes ; or (iv) make any Investment other than a
Permitted Investment or as permitted under clauses (ii) and (iii) above (the
foregoing actions set forth in clauses (i) through (iv) being referred to
hereinafter as "Restricted Payments"), if at the time of any such Restricted
Payment, and after giving effect thereto on a pro forma basis, (A) a Default or
an Event of Default shall have occurred and be continuing or would result
therefrom or (B) the aggregate amount of all Restricted Payments declared or
made after the Start Date including such Restricted Payment (the value of any
such payment, if other than cash, shall be the value determined in good faith
by resolution of the Board of Directors of the Company) shall exceed the sum
of: (1) 50% of the aggregate Consolidated Net Income (after deducting from such
Consolidated Net Income accrued but unpaid compensation expenses related to any
stock appreciation or stock option plans net of tax benefits), or, in the event
such aggregate Consolidated Net Income shall be a loss, minus 100% of such
loss, of the Company and its Restricted Subsidiaries earned subsequent to the
Initial Issuance Date to the end of the fiscal quarter immediately preceding
the date of such Restricted Payment (treated as a single accounting period),
plus (2) the aggregate net proceeds received by the Company from the issuance
or sale (other than to a Subsidiary of the Company) of Capital Stock of the
Company, including any such shares issued upon exercise of any warrants,
options or similar rights (other than Disqualified Stock), subsequent to the
Start Date, plus (3) the aggregate net proceeds received by the Company from
the issuance or sale of Indebtedness that is convertible into Capital Stock
after the Start Date, to the extent that such Indebtedness is actually
converted into Capital Stock (other than Disqualified Stock), plus (4) the
aggregate net proceeds received after the Start Date by the Company as capital
contributions to the Company (other than from a Subsidiary), plus (5) an amount
equal to the net reduction in Investments resulting from payments of principal
of Indebtedness, return of capital and other transfers of assets, in each case
to the Company or any Restricted Subsidiary of the Company (but excluding any
such amounts included in Consolidated Net Income), or from designations of
Unrestricted Subsidiaries as Restricted Subsidiaries, plus (6) $15 million.
The provisions of this covenant shall not prevent (i) the payment of any
dividend within 60 calendar days after the date of its declaration if the
dividend would have been permitted on the date of declaration, (ii) the
repayment, redemption, acquisition or retirement for value of any Capital Stock
of the Company or any of its Subsidiaries in exchange for, or out of the
aggregate net proceeds of, a substantially concurrent issuance (other than to
the Company or any of its Restricted Subsidiaries) of Capital Stock of the
Company or a Restricted Subsidiary of the Company, (iii) the prepayment,
repayment, redemption, defeasance or other acquisition or retirement for value
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Indebtedness of the Company that is pari passu with or
subordinated in right of payment to the Notes, in exchange for, or out of the
aggregate net proceeds of, a substantially concurrent issuance (other than to
the Company or a Restricted
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Subsidiary) of Capital Stock of the Company or a Restricted Subsidiary of the
Company, (iv) the prepayment, repayment, redemption, defeasance or other
acquisition or retirement for value prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment of any Indebtedness of the Company
that is pari passu with or subordinated in right of payment to the Notes, in
exchange for, or out of the aggregate net proceeds of, a substantially
concurrent issuance (other than to the Company or a Restricted Subsidiary) of
Indebtedness of the Company that is pari passu with or subordinated in right of
payment to, the Notes, but only if the Weighted Average Life and period of time
to Stated Maturity of such new Indebtedness are each greater than the Weighted
Average Life and period of time to Stated Maturity of such retired
Indebtedness, and (v) the payment of any dividend or distribution to any holder
of Capital Stock of a Restricted Subsidiary of the Company, other than a holder
that is an Affiliate of the Company (except a holder that is an Affiliate of
the Company solely by virtue of the ownership of such Capital Stock), as part
of a pro rata dividend or distribution to all holders of such class or series
of Capital Stock (but only the amount of such dividend or distribution paid to
a Person other than the Company or a Restricted Subsidiary of the Company shall
constitute a Restricted Payment). For purposes of calculating the aggregate
amount of Restricted Payments made pursuant to the first sentence of the
immediately preceding paragraph, payments made under this paragraph (other than
under clause (iv) hereof) shall be included in such amount; provided that
dividends paid within 60 calendar days of the date of declaration shall be
deemed to be paid at the date of declaration.
Limitation on Indebtedness. The Indenture provides that the Company shall
not, and shall not permit any Restricted Subsidiary of the Company to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to, any Indebtedness (collectively,
an "incurrence"; with respect to any non-interest bearing or other discount
Indebtedness, an "incurrence" shall be deemed to have occurred only on the date
of original issuance thereof), unless, after giving effect to the incurrence of
such Indebtedness and the application of the net proceeds therefrom, the EBITDA
Ratio (as calculated on the Determination Date) is greater than 2.0 to 1.0;
provided that if the Indebtedness which is the subject of a determination under
this provision is Acquired Indebtedness, then the Consolidated EBITDA of the
Company shall be determined by giving effect (on a pro forma basis, as if the
transaction had occurred at the beginning of the immediately preceding
four-quarter period) to both the incurrence or assumption of such Acquired
Indebtedness by the Company and the inclusion in the Consolidated EBITDA of the
Person whose Indebtedness would constitute Acquired Indebtedness.
Notwithstanding the foregoing, Indebtedness may be incurred as follows:
(i) Indebtedness under the Credit Facility in an aggregate principal amount not
to exceed $195 million at any one time outstanding, less the aggregate amount
of all permanent reductions thereto pursuant to the "Limitation on Asset Sales"
covenant, (ii) Indebtedness represented by amounts due under Hedging
Obligations (provided that the obligations under such Hedging Obligations are
related to Indebtedness otherwise permitted by the terms of this covenant and
that the aggregate notional principal amount of such Hedging Obligations shall
not exceed 105% of the total amount of the related underlying Indebtedness);
(iii) Indebtedness represented by property, liability and workers' compensation
insurance, performance bonds (which may be in the form of letters of credit)
for construction contracts let by the Company and its Restricted Subsidiaries
in the ordinary course of business (provided that to the extent that such
performance bonds secure Indebtedness, such Indebtedness is otherwise permitted
under this covenant), surety bonds and appeal bonds (which, in each case, may
be in the form of letters of credit) required in the ordinary course of
business or in connection with the enforcement of rights or claims of the
Company or any Restricted Subsidiary of the Company or in connection with
judgments that do not result in a Default or an Event of Default; (iv)
Indebtedness of the Company evidenced by the Notes and the Indenture and the
Senior Subordinated Notes and the indentures governing the Senior Subordinated
Notes; (v) Indebtedness owing to a Wholly Owned Subsidiary of the Company that
is a Restricted Subsidiary or to the Company; (vi) Acquired Indebtedness,
provided that such Indebtedness if incurred by the Company would be in
compliance with the first paragraph of this covenant; (vii) Indebtedness issued
in exchange for, or the proceeds of which are used to repay or refund or
refinance or discharge or otherwise retire for value, Indebtedness of the
Company or any of its Restricted Subsidiaries permitted under clauses (iv) and
(vi) above, clause (viii) below and the first paragraph under this covenant
("Refinancing
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Indebtedness" ) in a principal amount not to exceed the principal amount of the
Indebtedness so refinanced plus any premium and accrued interest plus customary
fees, expenses and costs related to the incurrence of such Refinancing
Indebtedness, provided that with respect to any Refinancing Indebtedness which
refinances Indebtedness which ranks junior in right of payment to the Notes, (A)
such Refinancing Indebtedness is subordinated in right of payment at least to
the same extent as the Indebtedness to be refunded or refinanced if such
Indebtedness had remained outstanding and (B) the Refinancing Indebtedness has a
Weighted Average Life and Stated Maturity that are equal to or greater than
those of the Indebtedness to be repaid or refunded or refinanced or discharged
or otherwise retired for value at the time of such incurrence; (viii)
Indebtedness outstanding on the Initial Issuance Date; (ix) Indebtedness of the
Company or a Restricted Subsidiary of the Company to an Unrestricted Subsidiary
for money borrowed, provided that such Indebtedness is subordinated in right of
payment to the Notes and the Weighted Average Life of such Indebtedness is
greater than the Weighted Average Life of the Notes; and (x) $25 million.
Limitation on Liens. The Indenture provides that the Company shall not, and
shall not permit any of the Restricted Subsidiaries of the Company to, create,
incur, assume or suffer to exist any Lien upon any of its property or assets
(including assets acquired after the Initial Issuance Date), except for (i)
Liens incurred after the Initial Issuance Date securing Indebtedness of the
Company that ranks pari passu or junior in right of payment to the Notes, if the
Notes are secured equally and ratably with such Indebtedness, (ii) Liens
outstanding on the Initial Issuance Date, (iii) Liens for taxes, assessments,
governmental charges or claims not yet delinquent or which are being contested
in good faith by appropriate proceedings, provided, that adequate reserves with
respect thereto are maintained on the books of the Company or its Restricted
Subsidiaries, as the case may be, in conformity with GAAP, (iv) Landlords',
carriers', warehousemen's, mechanics', materialmen's, repairmen's or the like
Liens arising by contract or statute in the ordinary course of business and with
respect to amounts which are not yet delinquent or are being contested in good
faith by appropriate proceedings, (v) pledges or deposits made in the ordinary
course of business (A) in connection with leases, performance bonds and similar
obligations, or (B) in connection with workers' compensation, unemployment
insurance and other social security legislation, (vi) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
encumbrances which, in the aggregate, do not materially detract from the value
of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Company or such Restricted Subsidiary, (vii) any
attachment or judgment Lien that does not constitute an Event of Default, (viii)
Liens securing Acquired Indebtedness, provided that such Liens attach solely to
the acquired assets or the assets of the acquired entity and do not extend to or
cover any other assets of the Company or any of its Restricted Subsidiaries,
(ix) Liens to secure Senior Indebtedness, (x) Liens in favor of the Trustee for
its own benefit and for the benefit of the Securityholders, (xi) any interest or
title of a lessor pursuant to a lease constituting a Capitalized Lease
Obligation, (xii) Liens on accounts receivable and inventory or cash deposits
collateralizing reimbursement obligations with respect to letters of credit, in
either case securing Indebtedness permitted to be incurred under clause (i)
under the second paragraph under the "Limitation on Indebtedness" covenant,
(xiii) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory or regulatory obligations, banker's acceptances, surety
and appeal bonds, government contracts, performance and return-of-money bonds
and other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (xiv)
Liens (including extensions and renewals thereof) upon real or personal property
acquired after the Initial Issuance Date; provided that (a) such Lien is created
solely for the purpose of securing Indebtedness incurred, in accordance with the
"Limitation on Indebtedness" covenant, (1) to finance the cost (including the
cost of improvement or construction) of the item of property or assets subject
thereto and such Lien is created prior to, at the time of or within six months
after the later of the acquisition, the completion of construction or the
commencement of full operation of such property or (2) to refinance any
Indebtedness previously so secured, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such cost and (c) any such Lien
shall not extend to or cover any property or assets other than such item of
property or assets and any improvements on such item; (xv) leases or subleases
granted to others that do not materially interfere with the ordinary course of
business of the Company and its Restricted Subsidiaries, taken as a whole; (xvi)
Liens encumbering property or assets under construction arising from progress or
partial payments by a customer of the Company or its Restricted Subsidiaries
relating to such property or assets; (xvii) any interest or title of a lessor in
the property subject to any Capitalized Lease Obligation
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or operating lease; (xviii) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; (xix) Liens on property of, or on shares
of stock or Indebtedness of, any Person existing at the time such Person
becomes, or becomes a part of, any Restricted Subsidiary, provided that such
Liens do not extend to or cover any property or assets of the Company or any
Restricted Subsidiary other than the property or assets acquired; (xx) Liens in
favor of the Company or any Restricted Subsidiary; (xxi) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (xxii) Liens
encumbering deposits securing Indebtedness under Hedging Obligations; (xxiii)
Liens arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in accordance with
the past practices of the Company and its Restricted Subsidiaries; (xxiv) Liens
on or sales of receivables; (xxv) the rights of film distributors under film
licensing contracts entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business on a basis customary in the
movie exhibition industry; and (xxvi) any renewal of or substitution for any
Liens permitted by any of the preceding clauses, provided that the Indebtedness
secured is not increased (other than by any premium and accrued interest, plus
customary fees, expenses and costs related to such renewal or substitution of
Liens or the incurrence of any related refinancing of Indebtedness) nor the
Liens extended to any additional assets (other than proceeds and accessions).
This covenant does not authorize the incurrence of any Indebtedness not
otherwise permitted by the "Limitation on Indebtedness" covenant.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company shall not, and shall not
permit any of the Restricted Subsidiaries of the Company to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction on the ability of such Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock, or pay any Indebtedness owed, to the Company or any of its Restricted
Subsidiaries, (ii) make any Investment in the Company or any of its Restricted
Subsidiaries, (iii) transfer any of its properties or assets to the Company or
any of its Restricted Subsidiaries or (iv) guarantee any Indebtedness of the
Company or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (A) applicable law, (B) any
instrument governing Acquired Indebtedness permitted to be incurred under the
"Limitation on Indebtedness" covenant which encumbrances or restrictions are
not applicable to any Person or the properties or assets of any Person, other
than the Person so acquired or its Subsidiaries, or the property or assets of
the Person so acquired or its Subsidiaries, (C) any restrictions existing under
agreements in effect on the Initial Issuance Date, (D) any restrictions with
respect to a Restricted Subsidiary imposed pursuant to an agreement which has
been entered into for the sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary, provided, that such
disposition is permitted pursuant to the "Limitation on Asset Sales" covenant,
(E) any agreement governing Indebtedness otherwise permitted under the
Indenture restricting the sale or other disposition of property securing such
Indebtedness if such agreement does not expressly restrict the ability of a
Restricted Subsidiary to pay dividends or to make distributions, loans or
advances, (F) the issuance of preferred stock by a Restricted Subsidiary or the
payment of dividends thereon in accordance with the terms thereof, provided
that issuance of such preferred stock is permitted pursuant to the "Limitation
on Indebtedness" covenant and the terms of such preferred stock do not
expressly restrict the ability of a Restricted Subsidiary to pay dividends or
make any other distributions on its Capital Stock (other than requirements to
pay dividends or liquidation preferences on such preferred stock prior to
paying any dividends or making any other distributions on such other Capital
Stock), (G) the Indenture, (H) the Credit Facility and other Senior
Indebtedness, (I) supermajority voting requirements existing under corporate
charters, bylaws, stockholders agreements and the like; (J) in the case of
clause (iii) of this covenant, agreements (1) that restrict in a customary
manner the subletting, pledging, assignment or transfer of any property or
asset that is a lease, license, conveyance or contract or similar property or
asset, or (2) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by the Indenture,
including, without limitation, transfer restrictions on any specific properties
or assets that are subject to a sale agreement otherwise permitted pursuant to
the "Limitation on Asset Sales" covenant; (K) existing under any agreement
which refinances or replaces any of the agreements in the preceding clauses;
provided, that the terms and conditions of any such restrictions are not
materially less favorable to the Holders than those contained
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in the agreements refinanced or replaced; or (L) any instrument governing
Indebtedness of the Company that is (1) pari passu with the Notes and (2)
otherwise permitted under the Indenture; provided that the terms and conditions
of any such restrictions are not materially more restrictive than those
contained in the Indenture. Nothing contained in this "Limitation on Dividend
and Other Payment Restrictions Affecting Restricted Subsidiaries" covenant
shall prevent the Company or any Restricted Subsidiary from (1) creating,
incurring, assuming or suffering to exist any Liens otherwise permitted in the
"Limitation on Liens" covenant or (2) restricting the sale or other disposition
of property or assets of the Company or any of its Restricted Subsidiaries that
secure Indebtedness of the Company or any of its Restricted Subsidiaries.
Limitation on Layering Debt. The Indenture provides that the Company will
not incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Indebtedness of the Company but senior in any respect in right of payment to
the Notes.
Limitation on Transactions With Affiliates. The Indenture provides that
the Company shall not, and shall not permit any Restricted Subsidiary of the
Company to, directly or indirectly, enter into any transaction (including
without limitation the purchase, sale, lease or exchange of any property or the
rendering of any service) with a Person that, immediately prior to such
transaction, was an Affiliate (an "Affiliate Transaction"), unless such
transaction is on terms no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained in a comparable arms' length
transaction with an entity that is not an Affiliate; provided that continued
performance under agreements as in effect on the Initial Issuance Date and
described in the Prospectus, or consummation, on the terms described in the
Prospectus, of transactions described herein that are not consummated prior to
the Initial Issuance Date (and renewals and extensions of such agreements and
transactions on terms not materially less favorable to the Holders than the
terms of such original agreements and transactions), shall not be subject to
such limitation.
In addition, the Company shall not, and shall not permit any of the
Restricted Subsidiaries of the Company to, enter into (i) an Affiliate
Transaction involving or having an expected value of more than $2 million
unless such transaction shall have been approved in good faith by resolution of
the Board of Directors of the Company and such resolution provides that such
Affiliate Transaction complies with the requirements of this covenant or (ii)
an Affiliate Transaction involving or having an expected value of more than $15
million, unless the Company has received an opinion of a nationally recognized
independent investment banking firm, accounting firm, appraisal firm or other
experts of nationally recognized standing if, in each case, such firm is
regularly engaged to render opinions of such type, to the effect that the
transaction is fair to the Company (or, if the Company is not a party to such
Affiliate Transaction, then to such Restricted Subsidiary) from a financial
point of view.
Notwithstanding anything to the contrary contained in the Indenture, the
foregoing provisions shall not apply to (i) transactions between the Company
and a Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary or
between Wholly Owned Subsidiaries of the Company that are Restricted
Subsidiaries, (ii) payments required to be made to the Company by Cinemark
International or by any Subsidiary of Cinemark International under the Cinemark
International Management Agreement or under a Subsidiary management agreement,
as the case may be, (iii) payments pursuant to any tax sharing agreement or
arrangement among the Company and its Subsidiaries, (iv) transactions with any
current or former employee, officer or director of the Company or any of its
Restricted Subsidiaries pursuant to reasonable employee benefit plans or
compensation arrangements or agreements entered into in the ordinary course of
business on or prior to the Start Date, or amended or created thereafter with
the approval of the Board of Directors of the Company, (v) transactions with
any employee of the Company pursuant to which the Company purchases or
otherwise acquires Capital Stock of the Company from such employee as permitted
under the "Limitation on Restricted Payments" covenant, or (vi) transactions
constituting (A) a Restricted Payment not prohibited by the "Limitation on
Restricted Payments" covenant and not constituting a Permitted Investment, or
(B) an investment not constituting an "Investment" by reason of a specific
exclusion from such definition.
Limitation on Asset Sales. The Indenture provides that the Company shall
not, and shall not permit any of the Restricted Subsidiaries of the Company to,
make any Asset Disposition, unless (i) the consideration received from
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such Asset Disposition is at least equal to the Fair Market Value of the
Capital Stock, property or other assets sold, (ii) at least 75% of the
consideration received from such Asset Disposition is in the form of cash,
Temporary Cash Investments or Marketable Equity Securities (the "75% Test" ),
provided that the amount of any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto) of
the Company or such Restricted Subsidiary which are assumed by the transferee,
cancelled or satisfied in any Asset Disposition (other than liabilities that
are incurred in connection with or in anticipation of such Asset Disposition)
as a credit against the purchase price therefor shall be deemed to be cash to
the extent of the amount so credited for purposes of the 75% Test, and (iii)
the Company applies, or causes its Restricted Subsidiaries to apply, 100% of
the Net Proceeds from any Asset Disposition to an offer (a "Net Proceeds
Offer") to purchase Notes outstanding having a Net Proceeds Offer Price (as
defined below) at least equal to such Net Proceeds, such Net Proceeds Offer to
commence on a date not later than 360 calendar days after the date of such
Asset Disposition at a purchase price (the "Net Proceeds Offer Price") equal to
100% of the principal amount thereof, plus accrued interest to the closing date
of the Net Proceeds Offer (the "Net Proceeds Purchase Date"), except to the
extent that such Net Proceeds have been applied either to the permanent
repayment of principal and interest on Senior Indebtedness or Indebtedness of
the Restricted Subsidiary of the Company that made such Asset Disposition or to
the purchase of assets or businesses in the same line of business as the
Company and its Restricted Subsidiaries or assets incidental thereto.
Notwithstanding anything to the contrary in this covenant, the Company will not
be required to make a Net Proceeds Offer with respect to any Net Proceeds from
Asset Dispositions until the aggregate amount of Net Proceeds from Asset
Dispositions in any period of 12 consecutive months which are not applied
either to the permanent repayment of principal and interest on Indebtedness (as
described above) or to the purchase of assets or businesses (as described
above) exceeds $10 million. For purposes of this covenant, the principal amount
of Notes for which a Net Proceeds Offer shall be made is referred to as the
"Net Proceeds Offer Amount." To the extent required by any pari passu
Indebtedness, and provided there is a permanent reduction in the principal
amount of such pari passu Indebtedness, the Company shall simultaneously with
the Net Proceeds Offer make an offer to purchase such pari passu Indebtedness
(a "Pari Passu Offer") in an amount (the "Pari Passu Offer Amount") equal to
the Net Proceeds Offer Amount, as determined above, multiplied by a fraction,
the numerator of which is the outstanding principal amount of such pari passu
Indebtedness and the denominator of which is the sum of the outstanding
principal amount of the Notes and such pari passu Indebtedness, in which case
the Net Proceeds Offer Amount shall be correspondingly reduced by such Pari
Passu Offer Amount.
The Company may credit against its obligation to make a Net Proceeds Offer
pursuant to the immediately preceding paragraph up to $2 million aggregate
principal amount of Notes, at 100% of the principal amount thereof, which have
been acquired by the Company and surrendered for cancellation after the making
of the Net Proceeds Offer and which have not been used as a credit against or
acquired pursuant to any prior obligation to make an offer to purchase Notes
pursuant to the provisions set forth under "-- Redemption at the Option of
Holders -- Change of Control" or this covenant.
Upon notice of a Net Proceeds Offer provided to the Trustee by the
Company, notice of such Net Proceeds Offer shall be mailed by the Trustee (at
the Company's expense) not less than 30 calendar days nor more than 60 calendar
days before the Net Proceeds Purchase Date to each Holder of Notes at such
Holder's last registered address appearing in the Register. The Company shall
provide the Trustee with copies of all materials to be delivered with such
notice. The notice shall contain all instructions and material necessary to
enable such Holders to tender Notes pursuant to the Net Proceeds Offer. If
Notes in a principal amount in excess of the Net Proceeds Offer Amount are
surrendered pursuant to the Net Proceeds Offer, the Company shall purchase
Notes on a pro rata basis (with such adjustments as may be deemed appropriate
by the Company so that only Notes in denominations of $1,000 or integral
multiples of $1,000 shall be acquired).
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Net Proceeds Offer.
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On the Net Proceeds Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof validly tendered pursuant to the Net Proceeds
Offer (on a pro rata basis if required), (ii) deposit with the Paying Agent
money in immediately available funds, sufficient to pay the purchase price of
all Notes or portions thereof so accepted, and (iii) deliver to the Trustee
Notes so accepted together with an Officer's Certificate stating the Notes or
portions thereof accepted for payment by the Company. If the Company complies
with its obligations set forth in the immediately preceding sentence, whether
or not a Default or Event of Default has occurred and is continuing on the Net
Proceeds Purchase Date, the Paying Agent shall as promptly as practicable mail
to each Holder of Notes so accepted payment in an amount equal to the purchase
price, and the Company shall execute and the Trustee shall as promptly as
practicable authenticate and mail or deliver to such Holder a new Note equal in
principal amount to any unpurchased portion of the Note surrendered. Any Notes
not so accepted shall be as promptly as practicable mailed or delivered by the
Company to the Holders thereof. The Company shall publicly announce the results
of the Net Proceeds Offer on or as promptly as practicable after the Net
Proceeds Purchase Date. For purposes of this covenant, the Trustee shall act as
the Paying Agent.
Notwithstanding anything to the contrary contained in the Indenture, the
Company or any of its Restricted Subsidiaries may engage in transactions in
which theatre properties will be transferred in exchange for one or more other
theatre properties; provided that if the Fair Market Value of the theatre
properties to be transferred by the Company or such Restricted Subsidiary, plus
the Fair Market Value of any other consideration paid or credited by the
Company or such Restricted Subsidiary (the "Transaction Value") exceeds $2
million, such transaction shall require approval of the Board of Directors of
the Company. In addition, each such transaction shall be valued at an amount
equal to all consideration received by the Company or such Restricted
Subsidiary in such transaction, other than the theatre properties received
pursuant to such exchange ("Other Consideration") for purposes of determining
whether an Asset Disposition has occurred. If the Other Consideration is of an
amount and character such that such transaction constituted an Asset
Disposition, then the first paragraph of this "Limitation on Asset Sales"
covenant shall be applicable to any Net Proceeds of such Other Consideration.
Covenant with Respect to Cinemark International and its Subsidiaries. The
Indenture provides that the Company shall cause Cinemark International and its
Subsidiaries on a consolidated basis to be engaged principally in the
acquisition, construction and operation of indoor motion picture theatres and
other activities incidental thereto outside the United States and Canada.
Consolidation or Merger. The Indenture provides that the Company shall not
consolidate with or merge with or into or sell, assign or lease all or
substantially all of the properties and assets of the Company and its
Restricted Subsidiaries, taken as a whole, to any Person (other than the
Company or a Wholly Owned Subsidiary of the Company that is a Restricted
Subsidiary), or permit any Person (other than a Wholly Owned Subsidiary of the
Company that is a Restricted Subsidiary) to merge with or into the Company
unless: (i) the Company shall be the continuing Person, or the Person formed by
such consolidation or into which the Company is merged or to which the
properties and assets of the Company and its Restricted Subsidiaries taken as a
whole are transferred (the "surviving entity") shall be a corporation organized
and existing under the laws of the United States or any state thereof or the
District of Columbia and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture, and the
Indenture shall remain in full force and effect, and (ii) immediately before
and immediately after giving effect to such transaction, no Event of Default
and no Default shall have occurred and be continuing, (iii) unless the
applicable transaction involves the merger of a Restricted Subsidiary of the
Company into the Company, the Company or, in the case of a consolidation or
merger in which the Company is not the continuing Person, the surviving entity,
after giving pro forma effect to such transaction could incur $1.00 of
additional Indebtedness (assuming a market rate of interest with respect to
such additional Indebtedness) under the first paragraph under the "Limitation
on Indebtedness" covenant, and (iv) unless the applicable transaction involves
the merger of a Restricted Subsidiary of the Company into the Company,
immediately after giving effect to such transaction, the Consolidated Net Worth
of the Company, or, in the case of a consolidation or merger in which the
Company is not the continuing Person, the surviving entity, shall be equal to
or greater than the Consolidated Net Worth of the Company immediately before
such transaction.
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Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole in accordance with the foregoing, the successor corporation formed by
such consolidation or into which the Company is merged or to which such
transfer is made, shall succeed to, and be substituted for, and may exercise
every right and power of the Company under the Indenture with the same effect
as if such successor corporation had been named as the Company therein; and
thereafter, if the Company is dissolved following a transfer of all or
substantially all of its assets in accordance with the Indenture, the Company
shall be discharged and released from all obligations and covenants under the
Indenture and the Notes. The Trustee shall enter into a supplemental indenture
to evidence the succession and substitution of such successor Person and such
discharge and release of the Company.
Limitation on Restrictive Covenants. The Indenture provides that
notwithstanding any other provision of the Indenture, the restrictive covenants
set forth in the Indenture, including, without limitation, those described
under "Limitation on Restricted payments," "Limitation on Indebtedness,"
"Limitation on Transactions with Affiliates", "Limitation on Asset Sales" and
"Consolidation or Merger" shall be deemed limited to the extent necessary so
that the creation, existence and effectiveness of such restrictive covenants
shall not result in a breach of Section 4.8 of the indentures that govern the
Senior Subordinated Notes relating to Limitation or Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.
DEFAULTS AND REMEDIES
Under the Indenture, an "Event of Default" occurs if one of the following
shall have occurred and be continuing: (i) the Company defaults in the payment
of (A) the principal of (or premium, if any, on) any Notes when the same
becomes due and payable at maturity, by acceleration or otherwise, (B) the
redemption price on any redemption date, or (C) the Change of Control Offer
Price or the Net Proceeds Offer Price on the applicable Offer Purchase Date
relating to such Offer; (ii) the Company defaults in the payment of interest on
any Note when the same becomes due and payable, which default continues for a
period of 30 calendar days; (iii) the Company or any Subsidiary of the Company
fails to comply with any of its covenants or agreements in the Notes or the
Indenture (other than those referred to in clauses (i) and (ii) above) and such
failure continues for 45 calendar days after receipt by the Company of a Notice
of Default specifying such Default; (iv) an event of default on any other
Indebtedness for borrowed money of the Company or any of its Restricted
Subsidiaries having an aggregate amount outstanding in excess of $5 million
which default (A) is caused by a failure to pay when due (after giving effect
to any grace periods) any principal, premium, if any, or interest on such
Indebtedness or (B) has caused the holders thereof to declare such Indebtedness
due and payable in advance of its scheduled maturity; (v) the Company or any
Significant Subsidiary of the Company pursuant to or within the meaning of any
Bankruptcy Law: (A) commences a voluntary case or proceeding, (B) consents to
the entry of an order for relief against it in an involuntary case or
proceeding, (C) consents to the appointment of a Custodian of it or for all or
substantially all of its property, (D) makes a general assignment for the
benefit of its creditors, or (E) admits in writing its inability to pay its
debts generally as they become due; (vi) a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law that: (A) is for relief
against the Company or any Significant Subsidiary of the Company in an
involuntary case or proceeding, (B) appoints a Custodian of the Company or any
Significant Subsidiary of the Company or for all or substantially all of its
respective properties, or (C) orders the liquidation of the Company or any
Significant Subsidiary of the Company; and in each case the order or decree
remains unstayed and in effect for 60 calendar days; or (vii) final
non-appealable judgments for the payment of money which in the aggregate exceed
$5 million (net of applicable insurance coverage which is acknowledged in
writing by the insurer) shall be rendered against the Company or any
Significant Subsidiary of the Company by a court and shall remain unstayed or
undischarged for a period of 60 calendar days.
A Default under clause (iii) of the immediately preceding paragraph is not
an Event of Default until the Trustee notifies the Company, or the Holders of
at least 25% in aggregate principal amount of the Notes at the time outstanding
notify the Company and the Trustee, of the Default and the Company does not
cure such Default within the time specified in clause (iii) of the immediately
preceding paragraph after receipt of such notice. If any Event of Default under
clauses (i), (ii), (iii), (vi) or (vii) of the immediately preceding paragraph
occurs and is continuing, then the Holders of at least 25% in aggregate
principal amount of the Notes may declare principal of
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the Notes and accrued interest immediately due and payable. If any Event of
Default under clauses (v) or (vi) of the immediately preceding paragraph
occurs, all principal and interest on the Notes will immediately become due and
payable. If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect any
payment due, or to enforce the performance of any provision, under the Notes or
the Indenture. The Trustee may withhold from holders of the Notes notice of any
continuing Default or Event of Default (except under clauses (i) or (ii) of the
immediately preceding paragraph) if it determines that withholding notice is in
their interest. The Holders of a majority in aggregate principal amount of the
Notes then outstanding, by written notice to the Trustee and to the Company,
may rescind an acceleration (except an acceleration due to a default in payment
of the principal of or interest on any of the Notes) upon conditions provided
in the Indenture. Except to enforce the right to receive payments of principal
of, or premium and interest on, the Notes when due, no Holder of a Note may
pursue any remedy with respect to the Indenture or the Notes unless (i) the
Holder has given to the Trustee written notice of a continuing Event of
Default, (ii) Holders of at least 25% in aggregate principal amount of the
Notes issued under the Indenture then outstanding have made a written request
to the Trustee to pursue the remedy, (iii) such Holders have offered to provide
the Trustee indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense, (iv) the Trustee has not complied with the request within
60 calendar days after receipt of the request and the offer of indemnity, and
(v) during such 60-day period, the Holders of a majority in aggregate principal
amount of the Notes then outstanding have not given the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding under the Indenture may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or the Indenture or that the Trustee
determines may be unduly prejudicial to the rights of another Holder or that
involves the Trustee in personal liability. The Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction. Any money collected by the Trustee in respect to the Notes shall be
paid out first, to the Trustee for any amounts owed to it under the Indenture,
second, to the Holders for amounts due and unpaid on the Notes, and finally, if
there is any balance remaining, to the Company.
Notwithstanding the foregoing, if an Event of Default specified in clause
(iv) above shall have occurred and be continuing, such Event of Default and any
consequential acceleration shall be automatically rescinded if (i) the
Indebtedness that is the subject of such Event of Default has been repaid, or
(ii) if the default relating to such Indebtedness is waived or cured and if
such Indebtedness has been accelerated, then the holders thereof have rescinded
their declaration of acceleration in respect of such Indebtedness.
Under the Indenture, an officer of the Company is required to certify to
the Trustee in each fiscal quarter whether or not he knows of any Default or
Event of Default that occurred during the prior fiscal quarter and, if
applicable, describe such Default or Event of Default and the status thereof.
In addition, for each fiscal year, the Company's independent certified public
accountants are to provide a report, in connection with their audit
examination, as to compliance by the Company with certain covenants as they
relate to accounting matters.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Trustee and the Holders of Notes (i) all quarterly
and annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required
to file such forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that describes the financial
position and results of operations of the Company and its Subsidiaries and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability
(unless the Commission will not accept such a filing) and make such information
available to prospective investors upon request.
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The Company shall include an unaudited consolidating balance sheet and
related statements of income and cash flows for the Company and its
Subsidiaries, separately identifying the Restricted Group and the Unrestricted
Group, in all reports containing the consolidated financial statements (which
in the case of annual reports shall be audited) of the Company and its
consolidated Subsidiaries which are required to be delivered by the Company to
the Securityholders pursuant to the Indenture, including the Company's Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q.
PAYMENTS FOR CONSENT
The Indenture prohibits the Company and any of its Subsidiaries from,
directly or indirectly, paying or causing to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any terms or provisions of
the Notes unless such consideration is offered to be paid or agreed to be paid
to all Holders of the Notes which so consent, waive or agree to amend in the
time frame set forth in solicitation documents relating to such consent, waiver
or agreement.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Indenture will be discharged and cancelled upon the delivery by the
Company to the Trustee for cancellation of all the Notes or upon irrevocable
deposit with the Trustee, within not more than one year prior to the maturity
of the Notes, or when the Notes are to be called for redemption within one year
under arrangements satisfactory to the Trustee, of funds sufficient for the
payment or redemption of all the Notes. In addition, the Indenture will provide
that the Company, subject to certain conditions specified below, may at any
time (i) defease and be discharged from its obligations in respect of the Notes
("Legal Defeasance") (except for certain obligations to register the transfer,
substitution or exchange of Notes, to replace stolen, lost or mutilated Notes
and to maintain an office or agency and the rights, obligations and immunities
of the Trustee) or (ii) defease and be discharged from its obligations with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment)
described under "-- Defaults and Remedies" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, the
Company must irrevocably deposit, or caused to be deposited, with the Trustee
(or another trustee satisfying the requirements of the Indenture), in trust for
such purpose, (i) money in an amount, (ii) U.S. Government Obligations which
through the payment of principal and interest in accordance with their terms
will provide money in an amount, or (iii) a combination thereof, sufficient in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to pay
the principal of, premium, if any, and interest on the outstanding Notes at
maturity or upon redemption, together with all other amounts payable by the
Company under the Indenture. Such Legal Defeasance or Covenant Defeasance will
become effective 91 days after such deposit if and only if (i) no Default or
Event of Default with respect to the Notes has occurred and is continuing
immediately prior to the time of such deposit, (ii) no Default or Event of
Default under clauses (v) and (vi) of the definition of the term "Event of
Default" shall have occurred at any time in the period ending on the 91st day
after the date of such deposit and shall be continuing on such 91st day, (iii)
such defeasance does not result in a breach or violation of, or constitute a
default under, any other agreement or instrument to which the Company is a
party or by which it is bound (and, in furtherance of such condition, no
Default or Event of Default shall result under the Indenture due to the
incurrence of Indebtedness to fund such deposit and the entering into of
customary documentation in connection therewith, even though such documentation
may contain provisions that would otherwise give rise to a Default or Event of
Default), and (iv) the Company has delivered to the Trustee (A)(1) in the case
of Legal Defeasance, an Opinion of Counsel to the effect that (x) there has
been published by the Internal Revenue Service a ruling or (y) since the date
of the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the
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same times as would have been the case if such Legal Defeasance had not
occurred, or (2) in the case of Covenant Defeasance, an Opinion of Counsel to
the effect that the Holders of the Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amount, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; and (B) an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent relating to such defeasance
have been complied with. Notwithstanding the foregoing, the Company's
obligations to pay principal, premium, if any, and interest, if any, on the
Notes shall continue until the Internal Revenue Service ruling or Opinion of
Counsel referred to in clause (iv)(A) above is provided without regard to and
without reliance upon such obligations continuing to be obligations of the
Company.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, neither the Registrar nor the Company is
required to transfer or exchange any Note for a period of 15 days before (i) a
selection of Notes to be redeemed, (ii) an interest payment date, or (iii) the
mailing of notice of a Net Proceeds Offer or a Change of Control Offer.
The registered Holder of a Note will be treated as the owner of such Note
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the
Notes, (iii) reduce the rate of or change the time for payment of interest on
any Note, (iv) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest on, the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of, premium, if any, or interest on, the Notes,
(vii) waive a redemption payment with respect to any Note or (viii) make any
change in the foregoing amendment and waiver provisions. In addition, any
amendment to the provisions of the Indenture relating to subordination will
require the consent of the Holders of at least 66-2/3% in aggregate principal
amount of the Notes then outstanding if such amendment would adversely affect
the rights of Holders of the Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the
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Indenture of any such Holder, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
and the Registration Rights Agreement without charge by writing to Cinemark
USA, Inc., 7502 Greenville Avenue, Suite 800, Dallas, Texas 75231, Attention:
Jeffrey J. Stedman.
BOOK-ENTRY, DELIVERY AND FORM
Series B Notes to be resold as set forth herein will initially be
issued in the form of one or more Global Notes, in definitive, fully registered
form without interest coupon (the "Global Note"). The Global Note will be
deposited on the date of the closing of the Exchange Offer (the "Closing Date")
with the Trustee, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture and, if applicable, those of Euroclear and Cedel Bank.
Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Notes held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
The Company expects that DTC will take any action permitted to be taken by
a holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in a Global Note is credited and only in respect of such portion
of the aggregate principal amount of Notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the Notes, DTC will exchange the applicable Global Note for
Certificated Notes, which it will distribute to its participants and which may
be legended as set forth under the heading "Transfer Restrictions."
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of certificates
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
Notes that are issued as described below under "--Certificated
Securities," will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Such Certificated Securities may, unless the
Global Note has previously been exchanged for Certificated Securities, be
exchanged for an interest in the Global Note representing the principal amount
of Notes being transferred.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants that have tendered Series A Notes with portions of the
principal amount of the Global Note and (ii) ownership of the Notes evidenced
by the Global Note will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by the Depositary (with respect
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to the interests of the Depositary's Participants), the Depositary's
Participants and the Depositary's Indirect Participants. Prospective purchasers
are advised that the laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer Notes evidenced by the Global Note will be limited to
such extent.
So long as the Global Note Holder is the registered owner of any
Notes, the Global Note Holder will be considered the sole holder under the
Indenture of any Notes evidenced by the Global Note. Beneficial owners of Notes
evidenced by the Global Note will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
Accordingly, beneficial owners of an interest in the Global Note must rely upon
procedures of the Global Note Holder, and if such Person is not a Participant,
on the procedures of the Participant through which such Person owns its
interest, to exercise any rights and fulfill any obligations of a holder under
the Indenture. No beneficial owner of a beneficial interest in the Global Note
will be able to transfer that interest except in accordance with the Global
Note Holder's procedures in addition to those provided by the Indenture.
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records of the Depositary or for maintaining, supervising
or reviewing any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest
on any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons
in whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Notes. The Company
believes, however, that it is currently the policy of the Depositary to
immediately credit the accounts of the relevant Participants with such
payments, in amounts proportionate to their respective holdings of beneficial
interests in the relevant security as shown on the records of the Depositary.
Payments by the Depositary's Participants and the Depositary's Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Depositary's Participants or the Depositary's Indirect Participants.
Certificated Securities. Subject to certain conditions, any person
having a beneficial interest in the Global Note may, upon request to the
Trustee, exchange such beneficial interest for Notes in the form of
Certificated Securities. Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). All such
certificated Notes would be subject to the legend requirements described herein
under "Notice to Investors." In addition, if (i) the Company notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Company is unable to locate a qualified successor within 90
days or, if at any time the Depositary ceases to be a "clearing agency"
registered under the Exchange Act, or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the
form of Certificated Securities under the Indenture, then, upon surrender by
the Global Note Holder of its Global Note, Notes in such form will be issued to
each person that the Global Note Holder and the Depositary identify as being
the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by
the Global Note Holder or the Depositary in identifying the beneficial owners
of Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same Day Settlement and Payment. The Indenture requires that payments
in respect of the Notes represented by the Global Note (including principal,
premium, if any, interest and Liquidated Damages, if any) be made by wire
transfer of immediately available funds to the accounts specified by the Global
Note Holder. With respect to any Certificated Securities, the Company will make
all payments of principal, premium, if any, interest and Liquidated Damages, if
any, by wire transfer of immediately available funds to the accounts specified
by the Holders thereof or, if no such account is specified, by mailing a check
to each such Holder's registered address. Secondary trading in long-term notes
and debentures of corporate issuers is generally settled in clearing-house or
next-day funds. In contrast, the Notes represented by the Global Note are
expected to be eligible to trade in the PORTAL Market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes
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will, therefore, be required by the Depositary to be settled in immediately
available funds. The Company expects that secondary trading in any Certificated
Securities will also be settled in immediately available funds.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into the Registration
Rights Agreement. Pursuant to the Registration Rights Agreement, the Company
agrees to use its best efforts to file with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act, with
respect to the Series B Notes. The Series B Notes will be substantially
identical to the Series A Notes, except that the Series B Notes will not
contain terms with respect to transfer restrictions (other than as might be
imposed by state securities laws) or provide for the payment of Liquidated
Damages. Upon the effectiveness of the Exchange Offer Registration Statement,
the Company will offer to the Holders of Transfer Restricted Securities (as
defined below) pursuant to the Exchange Offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted
Securities for an equal principal amount of Series B Notes. Interest on each
Series B Note will accrue from the most recent interest payment date on which
interest on the Series A Notes shall have been paid, or if no interest shall
yet have been paid on the Series B Notes, from the date of original issuance of
the Series A Notes. If (i) the Company is not required to file the Exchange
Offer Registration Statement or not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Transfer Restricted Securities notifies the
Company within the specified time period that (A) it is prohibited by a change
in applicable law or Commission policy from participating in the Exchange Offer
or (B) that it may not resell the Series B Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales or (C) that it is a broker-dealer and owns Series A
Notes acquired directly from the Company or an affiliate of the Company, the
Company will file with the Commission a Shelf Registration Statement to cover
resales of the Series A Notes by the Holders thereof who satisfy certain
conditions relating to the provision of information in connection with the
Shelf Registration Statement. The Company will use its best efforts to cause
the applicable registration statement to be declared effective by the
Commission within the period specified below. For purposes of the foregoing,
"Transfer Restricted Securities" means each Series A Note until (i) the date on
which such Series A Note has been exchanged by a person for a Series B Note in
the Exchange Offer and entitled to be resold to the public by such person
without complying with the prospectus delivery requirements of the Securities
Act, (ii) following exchange by a broker-dealer in the Exchange Offer of a Note
for a Series B Note, the date on which such Series B Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Series A Note has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement, (iv) the date on which such Series A Note may be
distributed to the public pursuant to Rule 144 under the Securities Act, or (v)
the date such Series A Note ceases to be outstanding.
Under current Commission staff interpretations, the Series B Notes
would in general be freely transferable after the Exchange Offer without
further registration under the Securities Act, provided that broker-dealers
("Participating Broker-Dealers") receiving Series B Notes in the Exchange Offer
will have a prospectus delivery requirement with respect to resales of such
Series B Notes. The Commission staff has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirement with respect
to the Series B Notes (other than a resale of an unsold original allotment from
the original sale of the Series A Notes) with the prospectus contained in the
Exchange Offer Registration Statement. However, any purchaser of Series A Notes
who is an "affiliate" of the Company or who intends to participate in the
Exchange Offer for the purpose of distributing the Series B Notes (i) will not
be able to rely on the interpretation by the staff of the Commission; (ii) will
not be able to tender its Series A Notes in the Exchange Offer, and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Series A Notes
unless such sale or transfer is made pursuant to an exemption from such
requirements.
The Registration Rights Agreement provides that (i) the Company will
use its best efforts to file an Exchange Offer Registration Statement with the
Commission on or prior to 30 days after the Closing Date, (ii) the Company will
use its best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 90 days after the Closing Date,
(iii) unless the Exchange Offer would not be permissible by applicable law or
Commission policy, the Company will commence the Exchange Offer and use its
best efforts to issue
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<PAGE> 89
on or prior to 30 days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, Series B Notes in exchange
for all Series A Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on or
prior to 30 days after such filing obligation arises (and in any event within
150 days after the Closing Date) and to cause the Shelf Registration to be
declared effective by the Commission on or prior to 120 days after such
obligation arises. If applicable, the Company will use its best efforts to keep
the Shelf Registration Statement effective for a period of three years after
the Closing Date, subject to certain exceptions.
If (a) the Company fails to file any of the Registration Statements
required by the Registration Rights Agreement on or before the date specified
for such filing, (b) any of such Registration Statements is not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Company fails to
consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement without being succeeded
immediately by a post-effective amendment to such Registration Statement that
cures such failure and that it itself immediately declared effective (each such
event, a "Registration Default"), then the Company will be required to pay
liquidated damages ("Liquidated Damages") to each Holder of Notes, which shall
equal an increase in the annual interest rate on the Notes by .5% until the
Exchange Offer is consummated or the Shelf Registration declared effective.
Holders of Series A Notes will be required to make certain
representations to the Company (as described in the Registration Rights
Agreement) in order to participate in the Exchange Offer, including that (i) it
is not an Affiliate of the Company, (ii) any Series B Notes to be received by
it were acquired in the ordinary course of business, and (iii) at the time of
commencement of the Exchange Offer, it had no arrangement with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Series B Notes. Holders may also be required to make such representations
as may be required to permit offers and sales of the Series A Notes under state
securities laws. Each Holder of Series A Notes will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material federal income tax consequences
of holding and disposing of the Series B Notes. This summary is based upon
provisions of the Internal Revenue Code of 1986, as amended, and regulations,
rulings and judicial decisions thereunder as of the date hereof, all of which
are subject to change (possibly on a retroactive basis). This summary does not
discuss all aspects of federal income taxation that may be relevant to
investors in light of their personal investment circumstances or to certain
types of holders subject to special treatment under the federal income tax laws
(for example, dealers in securities, tax-exempt organizations, insurance
companies, real estate trusts, regulated investment companies, financial
institutions, persons holding Notes as part of a hedging or conversion
transaction or a straddle, individual retirement accounts and other tax
deferred accounts, and foreign taxpayers), and does not discuss the
consequences to a holder under state, local or foreign tax laws. Prospective
investors are advised to consult their own tax advisors regarding the federal,
state, local and other tax considerations of holding, converting and disposing
of the Series B Notes.
STATED INTEREST AND LIQUIDATED DAMAGES
The Series A Notes were not, and the Series B Notes will not be issued at
an "original issue discount" for federal tax purposes. Accordingly, all
interest payments on a Note will be includible in a holder's income in
accordance with such holder's method of accounting for tax purposes. A cash
basis holder will include interest in income when received (or when made
available for receipt, if earlier). An accrual basis holder will generally
include interest in income when all events necessary to establish the right to
receive such interest have occurred.
The Company is obligated to pay Liquidated Damages (in the form of
additional interest on the Notes) to the holders of Notes under certain
circumstances described under "Description of Notes--Exchange Offer;
Registration Rights." Under the Treasury Regulations regarding contingent
payment debt instruments, any payment subject to a remote or incidental
contingency (i.e., there is a remote likelihood that the payment will be
required or the potential amount of the payment is insignificant relative to
the remaining payments on the debt instrument) is not considered a contingent
payment and is ignored for purposes of computing original issue discount
accruals. The Company intends to take the position that the Liquidated Damages
payments are subject to either a remote or incidental contingency. Accordingly,
a holder of a Note should be required to report any Liquidated Damages as
interest income for federal income tax purposes in accordance with such
holder's method of accounting.
EXCHANGE OFFER
The exchange of Series A Notes for Series B Notes pursuant to the Exchange
Offer should not constitute a taxable event for federal income tax purposes.
Accordingly, such exchange should have no federal income tax consequences to
holders of Series A Notes and the holding period of the Series B Notes will
include the holding period of the Series A Notes and the basis of the Series B
Notes will be the same as the basis of the Series A Notes immediately before
the exchange.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Upon the sale, exchange or retirement (including a redemption at the
option of a holder upon a Change of Control) of a Series B Note, a holder of a
Series B Note generally will recognize gain or loss in an amount equal to the
difference between the amount of cash and the fair market value of any property
received on the sale, exchange or retirement of the Series B Note (other than
in respect of accrued and unpaid interest on the Series B Note)) which amounts
are treated as ordinary interest income, and such holder's adjusted tax basis
in the Series B Note. If a holder holds the Series B Note as a capital asset,
such gain or loss will be capital gain or loss, except to the extent of any
accrued market discount (see "Market Discount" below), and will be long-term
capital gain or loss if the Series B Note has been held for more than one year
at the time of sale, exchange or retirement. Under current law, net capital
gains of individuals are, under certain circumstances, taxed at lower rates
than items of ordinary income. The deductibility of capital losses is subject
to limitations.
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MARKET DISCOUNT
If a holder purchased a Series A Note for an amount that is less than its
stated redemption price at maturity, the amount of the difference will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a specified de minimis amount. Market discount
generally will accrue ratably during the period for the date of acquisition to
the maturity date of the Note, unless the holder elects to accrue such discount
on the basis of the constant interest method.
A holder in whose hands a Series A Note is a market discount bond
generally will be required to treat as ordinary income any gain recognized on
the sale, exchange, redemption or other disposition (excluding involuntary
conversion) of the Series A Note to the extent of accrued market discount. A
holder of a Series A Note acquired at market discount also may be required to
defer the deduction of all or a portion of the interest on any indebtedness
incurred or maintained to purchase or carry the Series A Note until it is
disposed of in a taxable transaction, unless, as described more fully in the
next paragraph, the holder elects to include market discounts into income as it
accrues.
A holder of a Series A Note acquired at a market discount may elect to
include market discount in income as it accrues, in which case the rule
regarding deferral of interest deductions would not apply. This election would
apply to all market discount bonds acquired by the electing holder on or after
the first day of the first taxable year to which the election applies. The
election may be revoked only with the consent of the Internal Revenue Service.
AMORTIZABLE BOND PREMIUM
If a holder purchases a Series A Note for an amount that exceeds its
stated redemption price at maturity (including any excess arising upon original
issue of a Note), such holder may elect to offset, against interest income on
the Series A Note, the amount of such excess purchase price as "amortizable
bond premium" (computed under a constant interest rate method) over the
remaining term of the Series A Note, with corresponding adjustments to such
holder's basis in the Series A Note. Amortizable bond premium on a Series A
Note held by a holder that does not state such an election will decrease the
gain or increase the loss otherwise recognized on disposition of the Series A
Note. This election would apply to all debt instruments held by such holder at
the beginning of the first day of the first taxable year to which the election
applies and to all debt instruments thereafter acquired. The election may be
revoked only with the consent of the Internal Revenue Service.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to interest
payments on the Notes and to the proceeds of the disposition of a Series B Note
made to holders other than certain exempt recipients (such as corporations). A
31 percent backup withholding tax will apply to such payments only if the
holder (i) fails to furnish its social security or other taxpayer
identification number ("TIN") within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report properly
interest or dividends, or (iv) fails, under certain circumstances, to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
its correct number and that it is not subject to backup withholding. Any amount
withheld from a payment to a holder under backup withholding rules is allowable
as a refund or as a credit against such holder's federal income tax liability,
provided that the required information is furnished to the Internal Revenue
Service. Holders of Series B Notes should consult their tax advisors as to
their qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
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DESCRIPTION OF CERTAIN DEBT INSTRUMENTS
SERIES B INDENTURE
The Company is a party to an Indenture (the "Series B Indenture") dated
August 15, 1996 with United States Trust Company of Texas, N.A. as trustee (the
"Trustee"), governing the Company's $200 million aggregate principal amount 9
5/8% Series B Senior Subordinated Notes (the "Series B Notes")and an Indenture
(the "Series D Indenture") dated June 26, 1997 with the Trustee governing the
Company's $75 million aggregate principal amount 9 5/8% Series D Senior
Subordinated Notes (the "Series D Notes"). The Series B Notes and the Series D
Notes are collectively referred to in this Prospectus as the Senior Subordinated
Indentures. The Senior Subordinated Indentures are substantially similar to the
Indenture, and (unless the context requires otherwise) defined terms in the
Senior Subordinated Indentures have the same meanings ascribed to such terms in
the Indenture. See "Description of Notes."
The Senior Subordinated Notes are not redeemable at the option of the
Company prior to August 1, 2001. Thereafter, the Senior Subordinated Notes will
be redeemable, at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 calendar days' prior notice to each holder of Senior
Subordinated Notes to be redeemed, at the redemption prices (expressed as
percentages of the principal amount) set forth below, plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the 12
month period beginning on August 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001...................... 104.813%
2002...................... 102.406%
2003 and thereafter....... 100%
</TABLE>
Notwithstanding the foregoing, on and prior to August 1, 1999, the Company
may redeem up to 35% of the aggregate principal amount of the Senior
Subordinated Notes originally outstanding at a redemption price of 110% of the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date, with the net proceeds of one or more Equity Offerings of the
Company or, if applicable, a Parent; provided that at least 65% of the aggregate
principal amount of the Senior Subordinated Notes originally issued remains
outstanding immediately after the occurrence of such redemption (but such
unredeemed Senior Subordinated Notes may be redeemed pursuant to the optional
redemption procedure described in the immediately preceding paragraph); and
provided, further, that such notice of redemption shall be given not later than
30 days, and such redemption shall occur not later than 90 days, after the date
of the closing of any such Equity Offering.
Covenants and provisions contained in the Senior Subordinated Indentures
restrict, to substantially the same extent as set forth in the Indenture, among
other things, the Company's or any Restricted Subsidiary's ability, with certain
exceptions, (i) to make certain restricted payments, (ii) to make certain
investments, (iii) to incur additional indebtedness unless certain financial
tests are met, (iv) to create or incur any additional liens on any assets, (v)
to encumber or restrict dividends or other payments to the Company, (vi) to
issue preferred stock of a Restricted Subsidiary other than to the Company or to
a Restricted Subsidiary, (vii) to enter into certain transactions with
affiliates and (viii) to sell assets of the business.
Events of default under the Senior Subordinated Indentures are
substantially similar to corresponding events of default in the Indenture and
include (i) any failure of the Company to pay principal, or any sinking fund or
redemption or repurchase payment, when due, or to pay interest when due, which
failure to pay interest remains unremedied for 30 days after the due date, (ii)
breach of certain other covenants and agreements in the Senior Subordinated
Indentures, (iii) a default under any other indebtedness of the Company or a
Restricted Subsidiary in an amount exceeding $5 million, which default is either
a payment default or which default has become the basis for the acceleration of
such indebtedness, (iv) certain acts of bankruptcy, insolvency or dissolution
and (v) final judgments for payment of money which in the aggregate exceed $5
million rendered against the Company or any significant Subsidiary.
CREDIT FACILITY
On December 12, 1996, the Company replaced its existing credit
facility with a reducing revolving credit agreement (the "Credit Facility")
through a group of banks for which Bank of America National Trust and Savings
Association acts as administrative agent (the "Administrative Agent"). The
Credit Facility provides for loans to the Company of up to $225 million in the
aggregate. The Credit Facility is a reducing revolving credit facility;
therefore, at the end of each quarter during the calendar years 2000, 2001,
2002 and 2003, the aggregate commitment shall automatically be reduced by
$8,437,500, $11,250,000, $14,062,500 and $22,500,000
92
<PAGE> 93
respectively. The Company is required to prepay all loans outstanding in excess
of the aggregate commitment as reduced pursuant to the terms of the Credit
Facility. Borrowings under the Credit Facility are secured by a pledge of a
majority of the issued and outstanding capital stock of the Company.
Pursuant to the terms of the Credit Facility, funds borrowed currently
bear interest at a rate per annum equal to the Offshore Rate (as defined in the
Credit Facility) or the Base Rate (as defined in the Credit Facility, as the
case may be), plus the Applicable Amount (as defined in the Credit Facility).
As of January 20, 1998, the effective interest rate was 7.1%.
Covenants and provisions contained in the Credit Facility restrict, with
certain exceptions, among other things, the Company's or any Restricted
Subsidiary's ability (i) to create or incur any additional liens on any assets,
(ii) to sell assets of the business, (iii) to engage in mergers, consolidations
or conveyances of all or substantially all of its assets, (iv) to make any
loans to or other investments in other persons or entities, (v) to incur
additional indebtedness, (vi) to enter into certain transactions with
affiliates, (vii) to invest in margin stock, (viii) to enter into capital or
operating leases, (ix) to declare or pay dividends or make certain other
restricted payments, (x) to prepay certain indebtedness, including without
limitation, the Senior Subordinated Notes and the Notes, (xi) to engage in a
material line of business substantially different from the line of business
currently conducted, (xii) to make significant changes in accounting treatment
or reporting practices or change the Company's or any consolidated Restricted
Subsidiary's fiscal year, (xiii) to restrict the ability of any Restricted
Subsidiary to make payments to the Company, or (xiv) to restrict the ability of
the Company to create or assume a lien in favor of the Bank upon its property or
assets. The Credit Facility also requires the Company to maintain specified
financial ratios.
Events of default under the Credit Facility include, among other things:
(i) any failure of the Company to pay principal thereunder when due, or to pay
within two business days after the due date any interest or any other amount
due, (ii) material inaccuracy of any representation or warranty given by the
Company in the Credit Facility, (iii) breach of certain covenants and
agreements in the Credit Facility by the Company, (iv) the continuance of a
default by the Company in the performance of or compliance with specific terms
or covenants in the Credit Facility for a period of three days or other terms
or covenants in the Credit Facility or other loan documents for twenty days
after notice thereof, (v) default by the Company or its Restricted Subsidiaries
under any other indebtedness in the aggregate principal amount of $1 million,
(vi) a default under the Indenture or the Senior Subordinated Indentures, (vii)
certain acts of bankruptcy, insolvency or dissolution, (viii) final judgments
for payment of money aggregating $500,000 or more against the Company or certain
of its Subsidiaries, (ix) certain other judgments against the Company or certain
of its Subsidiaries, (x) certain defects or claimed defects in the liens
securing the Credit Facility or in other documentation relating to the Credit
Facility, (xi) the occurrence of a Material Adverse Effect (as defined therein),
and (xii) certain changes of control.
CINEMARK INTERNATIONAL CREDIT AGREEMENT
On November 18, 1997, Cinemark International executed a credit agreement
with Bank of America National Trust and Savings Association for itself and as
Administrative Agent, as amended in December 1997 (the "Cinemark International
Credit Agreement"). The Cinemark International Credit Agreement is a revolving
credit facility and provides for a loan to Cinemark International of up to $30
million in the aggregate. The Cinemark International Credit Agreement, is
secured by a pledge of substantially all of the stock of Cinemark Mexico and an
unconditional guaranty by Cinemark Mexico. Pursuant to the terms of the Cinemark
International Credit Agreement funds borrowed bear interest at a rate per annum
equal to the
93
<PAGE> 94
Offshore Rate (as defined in the Cinemark International Credit Agreement) or the
Base Rate (as defined in the Cinemark International Credit Agreement) as the
case may be, plus the Applicable Margin (as defined in the Cinemark
International Credit Agreement). As of January 20, 1998, Cinemark International
has borrowed $30 million under the Cinemark International Credit Agreement and
the effective interest rate on such borrowings was 7.6% per annum.
Covenants and certain other provisions contained in the Cinemark
International Credit Agreement restrict, among other things, Cinemark
International or any of its Restricted Subsidiary's ability, with certain
exceptions, (i) to create or incur any liens on any assets, (ii) to make
payments or prepayments on intercompany subordinated indebtedness, (iii) to
engage in mergers, consolidations or conveyances of all or substantially all of
its assets, (iv) to incur additional indebtedness, (v) to enter into certain
transactions with affiliates, (vi) to invest in margin stock, (vii) to enter
into capital leases, (viii) to declare or pay dividends or make other
distributions, (ix) incur any obligations to pay management fees other than the
management fee payable by Cinemark Mexico to the Company, (x) to engage in a
material line of business substantially different from the line of business
currently conducted, (xi) to make significant changes in accounting treatment or
reporting practices or change the fiscal year of the Cinemark International or
any consolidated Restricted Subsidiary, (xii) to restrict the ability of the
Cinemark International to create or assume a lien in favor of the lender upon
its property or assets. The Cinemark International Credit Agreement also
requires the Company to maintain specified financial ratios.
Events of default under the Cinemark International Credit Agreement
include, among other things: (i) any failure of the Cinemark International to
pay principal thereunder when due, or to pay interest or any other amount due
within two business days after the due date, (ii) material inaccuracy of any
representation or warranty given by the Cinemark International in the Cinemark
International Credit Agreement, (iii) breach by the Cinemark International of
certain terms, covenants or agreements in the Cinemark International Credit
Agreement, (iv) the continuance of a default by the Cinemark International in
the performance of or compliance with specific terms or covenants in the
Cinemark International Credit Agreement for a period of three days or other
terms or covenants in the Cinemark International Credit Agreement or other loan
documents for a period of twenty days after the earlier of (A) the date an
executive officer of the Cinemark International knew or should have known of
such default or (B) notice thereof, (v) default by the Cinemark International or
its Restricted Subsidiaries under any other indebtedness in the aggregate
principal amount of $1 million, and (vi) certain changes of control and acts of
bankruptcy, insolvency or dissolution.
94
<PAGE> 95
CINEMARK MEXICO SENIOR CREDIT FACILITY
On December 4, 1995, Cinemark International and Cinemark Mexico entered
into a Senior Secured Credit Facility (the "Mexico Senior Credit Facility").
The Mexico Senior Credit Facility provides for loans by Cinemark International
to Cinemark Mexico of up to $10 million in the aggregate at an interest rate of
12% per annum. Any amounts borrowed by Cinemark Mexico under the Mexico Senior
Credit Facility will be borrowed on a term loan basis. The loans will be
payable as follows: (i) all accrued and unpaid interest shall be payable on the
first anniversary of the initial loan and quarterly thereafter on January 15,
April 15, July 15 and October 15 and (ii) on December 31, 2001, all unpaid
principal, accrued but unpaid interest and fees on the loans shall be paid.
Borrowing under the Mexico Senior Credit Facility is secured by a pledge of
substantially all of the assets of Cinemark Mexico.
Conditions and provisions in the Mexico Senior Credit Facility restrict,
among other things, Cinemark Mexico and Cinemark de Mexico's ability, with
certain exceptions, to (i) create, incur or assume indebtedness, (ii) create or
incur any additional liens, (iii) engage in mergers, consolidations or
acquisitions or convey all or substantially all of its assets, (iv) change the
manager operating the theatres owned by Cinemark de Mexico under present
management agreements or (v) make investments other than specified permitted
investments. The Mexico Senior Credit Facility also requires Cinemark Mexico to
maintain specified financial ratios.
Events of default under the Mexico Senior Credit Facility include, among
other things: (i) any failure of Cinemark Mexico or Cinemark de Mexico to pay
principal when due or pay interest within five days after the due date, (ii)
breach of certain covenants and agreements in the Mexico Senior Credit
Facility, (iii) material inaccuracy of any representation or warranty given by
Cinemark Mexico in the Mexico Senior Credit Facility, (iv) certain acts of
bankruptcy, insolvency or dissolution, (v) default by Cinemark Mexico or
Cinemark de Mexico on any other indebtedness, (vi) Cinemark International not
having a valid first priority perfected security interest in the collateral,
(vii) change of control of Cinemark Mexico, (viii) judgments against Cinemark
Mexico or Cinemark de Mexico which in the aggregate exceed $100,000 and (ix)
default by Cinemark Mexico or Cinemark de Mexico under the Cinemark Mexico
Indenture.
The Mexico Senior Credit Facility permits Cinemark Mexico to relend any
funds borrowed to Cinemark de Mexico to finance construction of uncompleted
locations, the acquisition and installment of furniture, fixtures and equipment
at such locations and for general corporate purposes and working capital. Funds
borrowed by Cinemark de Mexico bear interest at the rate of 14.1% and are
secured by a pledge of all of the assets of Cinemark de Mexico.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Series B Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series A Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Series B Notes received in
exchange for Series A Notes where such Series A Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of twelve months after the effective date of this
Prospectus, it will make this Prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Series B Notes
by broker-dealers. Series B Notes received by broker-dealers for their own
accounts pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Series B Notes or a combination of such
methods of resale, at market prices at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Series B Notes. Any
broker-dealer
95
<PAGE> 96
that resells Series B Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Series B Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Series B
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of twelve months after the effective date of this Prospectus,
the Company will promptly send additional copies of this Prospectus and any
amendment to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed, in connection with the
Exchange Offer, to indemnify the holders of Series A Notes against certain
liabilities, including liabilities under the Securities Act.
By acceptance of the Exchange offer, each broker-dealer that receives
Series B Notes pursuant to the Exchange Offer hereby agrees to notify the
Company prior to using the Prospectus in connection with the sale or transfer
of Series B Notes, and acknowledges and agrees that, upon receipt of notice
from the Company of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not
misleading (which notice the Company agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented prospectus
to such broker-dealer.
LEGAL MATTERS
Certain legal matters in connection with the Series B Notes exchanged
hereby will be passed upon for the Company by Michael D. Cavalier, General
Counsel of the Company.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and 1996 and for each of the three years in the period ended December 31,
1996 included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and have been
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
96
<PAGE> 97
CINEMARK USA, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT ........................................................................... F-3
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES:
Consolidated Balance Sheets, December 31, 1995 and 1996, and September 30, 1997 (Unaudited) ............ F-4
Consolidated Statements of Income for the Years Ended December 31, 1994, 1995 and 1996,
and the Nine Months Ended September 30, 1996 and 1997 (Unaudited) ................................ F-5
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1994,
1995 and 1996, and the Nine Months Ended September 30, 1997 (Unaudited) .......................... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996, and the Nine Months Ended September 30, 1996 and 1997 (Unaudited) .......................... F-7
Notes to Consolidated Financial Statements ............................................................. F-8
SUPPLEMENTAL SCHEDULES REQUIRED BY THE INDENTURE
Schedule
A Consolidating Balance Sheet Information, December 31, 1996................................... S-1
B Consolidating Statement of Operations Information for the Year Ended
December 31, 1996............................................................................ S-2
C Consolidating Statement of Cash Flows Information for the Year Ended
December 31, 1996............................................................................ S-3
D Consolidating Balance Sheet Information, September 30, 1997.................................. S-4
E Consolidating Statement of Operations Information for the Nine Months Ended
September 30, 1997 .......................................................................... S-5
F Consolidating Statement of Cash Flows Information for the Nine Months Ended
September 30, 1997 .......................................................................... S-6
</TABLE>
F-1
<PAGE> 98
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-2
<PAGE> 99
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Cinemark USA, Inc.:
We have audited the accompanying consolidated balance sheets of
Cinemark USA, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Cinemark USA, Inc. and
subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
At January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," as discussed in Note 1.
Our audits were conducted for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The supplemental
schedules of certain consolidating information as of December 31, 1996 and for
the year then ended, listed in the index on page F-1 are presented for the
purpose of additional analysis of the basic consolidated financial statements
rather than to present the financial position, results of operations and cash
flows of the individual companies, and are not a required part of the basic
consolidated financial statements. These schedules are the responsibility of
the Company's management. Such schedules have been subjected to the auditing
procedures applied in our audits of the basic consolidated financial statements
and, in our opinion, are fairly stated in all material respects when considered
in relation to the basic consolidated financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 10, 1997
F-3
<PAGE> 100
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 13,649,724 $ 14,081,226 $ 15,157,597
Temporary cash investments................................ 275,126 301,408 310,408
Inventories............................................... 1,061,580 1,296,323 1,919,751
Co-op advertising and other receivables (Notes 12)........ 4,095,819 8,631,462 12,970,671
Prepaid expenses and other................................ 145,660 2,638,991 5,304,782
------------ ------------ ------------
Total current assets................................ 19,227,909 26,949,410 35,663,209
THEATRE PROPERTIES AND EQUIPMENT (Note 5):
Land...................................................... 14,335,343 39,734,644 46,089,365
Buildings................................................. 62,540,849 143,907,477 174,622,582
Leasehold interests and improvements...................... 50,891,524 69,172,660 97,289,158
Theatre furniture and equipment........................... 125,172,486 166,596,341 191,938,203
Theaters under construction............................... 29,218,015 31,431,790 63,516,430
Videocassette rental inventory............................ 5,383,873
------------ ------------ ------------
Total............................................... 287,542,090 450,842,912 573,455,738
Less accumulated depreciation and amortization............ 63,059,873 73,421,992 89,440,869
------------ ------------ ------------
Theatre properties and equipment -- net................. 224,482,217 377,420,920 484,014,869
OTHER ASSETS:
Certificates of deposit (Note 9).......................... 1,822,954 1,525,852 1,525,852
Investments in and advances to affiliates (Note 12)....... 4,275,602 6,049,992 17,249,811
Intangible assets -- net (Note 3)......................... 7,718,292 5,417,049 4,617,097
Deferred charges and other -- net (Note 4) 10,220,127 15,542,244 23,616,871
------------ ------------ ------------
Total other assets.................................. 24,036,975 28,535,137 47,009,631
------------ ------------ ------------
TOTAL............................................... $267,747,101 $432,905,467 $566,687,709
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term liabilities (Note 5)......... $ 377,737 $ 1,002,313 $ 510,738
Accounts payable.......................................... 14,213,239 24,831,236 18,463,816
Accrued film rentals...................................... 6,463,548 9,753,208 9,243,658
Accrued interest.......................................... 2,826,262 8,267,591 5,489,214
Accrued payrolls.......................................... 2,139,721 3,094,472 4,496,391
Accrued property taxes and other liabilities.............. 10,522,260 13,022,916 13,162,416
Notes payable to related parties (Note 6)................. 2,051,642 -- --
Income taxes payable (Note 10)............................ 1,648,629 -- 1,219,587
------------ ------------ ------------
Total current liabilities........................... 40,243,038 59,971,736 52,585,820
LONG-TERM LIABILITIES:
Long-term debt, less current portion (Note 5)............. 196,139,904 296,553,642 425,364,770
Deferred lease expenses (Note 9).......................... 9,811,038 11,580,629 12,783,184
Theater development advance, less current portion......... 1,125,703 769,657 373,562
Deferred income taxes (Note 10)........................... 4,296,211 5,926,609 6,467,176
------------ ------------ ------------
Total long-term liabilities......................... 211,372,856 314,830,537 444,988,692
COMMITMENTS AND CONTINGENCIES (Note 9)
MINORITY INTERESTS IN SUBSIDIARIES (Note 8):
Common shareholders' equity............................... 1,362,033 539,853 1,501,752
Common stock warrants with mandatory redemption
requirements............................................ 3,424,132 200,729 200,729
SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value; 10,000,000 shares
authorized, 3,000, 1,500 and 1,500 shares issued and
outstanding, at December 31, 1995 and 1996 and September
30, 1997, respectively.................................. 30 15 15
Class B common stock, no par value; 1,000,000 shares
authorized, 205,570, 233,176 and 233,913 shares issued,
at December 31, 1995 and 1996 and September 30, 1997,
respectively............................................ 10,967,419 49,536,710 49,537,447
Additional paid-in capital................................ 6,604,037 9,182,880 10,181,790
Unearned compensation -- stock options.................... (2,848,738) (2,434,717) (1,764,223)
Retained earnings......................................... 27,161,692 32,391,591 44,818,043
Treasury stock, 54,791, 54,965 and 57,211 Class B shares at
cost, at December 31, 1995 and 1996 and September 30, 1997
respectively.............................................. (20,000,000) (20,184,416) (24,198,890)
Cumulative foreign currency translation adjustment........ (10,539,398) (11,129,451) (11,163,466)
------------ ------------ ------------
Total shareholders' equity.......................... 11,345,042 57,362,612 67,410,716
------------ ------------ ------------
TOTAL............................................... $267,747,101 $432,905,467 $566,687,709
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 101
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ ---------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Admissions......................... $174,470,503 $183,100,626 $211,581,569 $157,070,386 $205,767,673
Concessions........................ 95,159,610 102,077,542 116,943,658 86,964,258 112,743,129
Other (Note 11)...................... 13,446,676 13,380,589 13,205,703 11,428,384 8,470,150
------------ ------------ ------------ ------------ ------------
Total....................... 283,076,789 298,558,757 341,730,930 255,463,028 326,980,952
COSTS AND EXPENSES:
Cost of operations (Note 11)
Film rentals..................... 83,978,465 88,978,423 104,156,508 78,492,838 103,625,591
Concession supplies.............. 17,562,650 17,277,411 18,431,926 14,195,192 17,240,657
Salaries and wages............... 39,548,147 40,653,338 46,868,814 34,586,807 42,107,401
Facility leases.................. 29,599,702 30,873,208 34,406,046 25,433,526 28,302,633
Advertising...................... 7,189,436 7,623,475 8,500,631 6,168,604 7,687,632
Utilities and other.............. 40,869,506 42,312,878 49,774,114 36,084,609 42,630,329
------------ ------------ ------------ ------------ ------------
Total cost of operations.... 218,747,906 227,718,733 262,138,039 194,961,576 241,594,243
General and administrative
expenses......................... 17,094,964 19,554,615 23,486,530 16,636,133 20,476,515
Depreciation and amortization...... 15,121,120 15,924,794 21,798,673 16,973,399 20,471,274
------------ ------------ ------------ ------------ ------------
Total....................... 250,963,990 263,198,142 307,423,242 228,571,108 282,542,032
------------ ------------ ------------ ------------ ------------
OPERATING INCOME..................... 32,112,799 35,360,615 34,307,688 26,891,920 44,438,920
OTHER INCOME (EXPENSE):
Interest expense (Note 11)......... (18,133,438) (18,549,833) (19,551,655) (14,111,297) (23,071,897)
Amortization of debt issue cost and
bond discount.................... (783,515) (824,014) (824,743) (554,185) (583,362)
Interest Income (Note 11).......... 1,415,026 1,779,339 1,393,441 690,054 547,756
Other gains and losses............. (512,329) 4,796,727 11,130,996 3,319,685 336,973
Equity in income of affiliates..... 2,709 693,415 362,443 1,417,171 957,906
Minority interests in (income) loss
of subsidiaries.................. (27,306) 288 144,291 120,518 113,232
------------ ------------ ------------ ------------ ------------
Total....................... (18,038,853) (12,104,078) (7,345,227) (9,118,054) (21,699,392)
------------ ------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS................ 14,073,946 23,256,537 26,962,461 17,773,866 22,739,528
INCOME TAXES (Note 10)............... 7,068,275 10,101,405 12,346,451 7,978,470 10,257,330
------------ ------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEMS.... 7,005,671 13,155,132 14,616,010 9,795,396 12,482,198
EXTRAORDINARY ITEMS (Note 5):
Losses on early extinguishments of
debt, net of income tax benefit
of $6,057,922, $6,083,007, and
$42,054 at December 31, 1996 and
September 30, 1996 and 1997,
respectively..................... -- -- (9,386,111) (9,124,510) (55,746)
------------ ------------ ------------ ------------ ------------
NET INCOME........................... $ 7,005,671 $ 13,155,132 $ 5,229,899 $ 670,886 $ 12,426,452
============ ============ ============ ============ ============
EARNINGS PER SHARE:
Before extraordinary item.......... $ 43.21 $ 80.32 $ 79.93 $ 53.85 $ 66.49
============ ============ ============ ============ ============
Net income......................... $ 43.21 $ 80.32 $ 28.60 $ 3.69 $ 66.19
============ ============ ============ ============ ============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING...... 162,113 163,776 182,866 181,898 187,729
============ ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 102
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
--------------- --------------------- ADDITIONAL UNEARNED
SHARES SHARES PAID-IN COMPENSATION RETAINED TREASURY
ISSUED AMOUNT ISSUED AMOUNT CAPITAL STOCK OPTIONS EARNINGS STOCK
------ ------ ------- ----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994... 3,000 $ 30 205,570 $10,967,419 $ 3,205,887 $(1,877,691) $ 7,000,889 $(20,000,000)
Net income................ -- -- -- -- -- -- 7,005,671 --
Unearned compensation from
stock options granted.... -- -- -- -- 1,120,000 (1,120,000) -- --
Amortization of unearned
compensation............. -- -- -- -- -- 836,081 -- --
Foreign currency
translation adjustment... -- -- -- -- -- -- -- --
------ ---- ------- ----------- ----------- ----------- ----------- ------------
BALANCE DECEMBER 31,
1994..................... 3,000 30 205,570 10,967,419 4,325,887 (2,161,610) 14,006,560 (20,000,000)
Net income................ -- -- -- -- -- -- 13,155,132 --
Unearned compensation from
stock options granted.... -- -- -- -- 2,278,150 (2,278,150) -- --
Amortization of unearned
compensation............. -- -- -- -- -- 1,591,022 -- --
Foreign currency
translation adjustment... -- -- -- -- -- -- -- --
------ ---- ------- ----------- ----------- ----------- ----------- ------------
BALANCE DECEMBER 31,
1995..................... 3,000 30 205,570 10,967,419 6,604,037 (2,848,738) 27,161,692 (20,000,000)
Net income................ -- -- -- -- -- -- 5,229,899 --
Common stock issuance..... (1,500) (15) 25,393 38,567,078 -- -- -- --
Unearned compensation from
stock options granted.... -- -- -- -- 1,127,117 (1,127,117) -- --
Unearned compensation from
stock options
forfeited................ -- -- -- -- (216,282) 151,810 -- --
Amortization of unearned
compensation............. -- -- -- -- -- 1,389,328 -- --
Stock options exercised,
including tax benefit.... -- -- 2,213 2,213 897,800 -- -- --
Net effect of exchange of
Cinemark Mexico Sr. Notes
and conversion of
warrants to Sr. Notes,
including tax benefit
adjustment............... -- -- -- -- 770,208 -- -- --
Foreign currency
translation adjustment... -- -- -- -- -- -- -- --
Purchase of treasury
stock, 174 Class B
shares, at cost.......... -- -- -- -- -- -- -- (184,416)
------ ---- ------- ----------- ----------- ----------- ----------- ------------
BALANCE DECEMBER 31,
1996..................... 1,500 15 233,176 49,536,710 9,182,880 (2,434,717) 32,391,591 (20,184,416)
Net income................ -- -- -- -- -- -- 12,426,452 --
Unearned compensation from
stock options granted.... -- -- -- -- 1,073,296 (1,073,296) -- --
Unearned compensation from
stock options
forfeited................ -- -- -- -- (74,386) 74,386 -- --
Amortization of unearned
compensation............. -- -- -- -- -- 1,669,404 -- --
Stock options exercised,
including tax benefit.... -- -- 737 737 -- -- -- (737)
Foreign currency
translation adjustment... -- -- -- -- -- -- -- --
Purchase of treasury
stock, 737 Class B
shares, at cost.......... -- -- -- -- -- -- -- (4,013,737)
------ ---- ------- ----------- ----------- ----------- ----------- ------------
BALANCE SEPTEMBER 30, 1997
(UNAUDITED).............. 1,500 $ 15 233,913 $49,537,447 $10,181,790 $(1,764,223) $44,818,043 $(24,198,890)
====== ==== ======= =========== =========== =========== =========== ============
<CAPTION>
CUMULATIVE
TRANSLATION
ADJUSTMENT TOTAL
------------ -----------
<S> <C> <C>
BALANCE JANUARY 1, 1994... $ (56,080) $ (759,546)
Net income................ -- 7,005,671
Unearned compensation from
stock options granted.... -- --
Amortization of unearned
compensation............. -- 836,081
Foreign currency
translation adjustment... (4,349,900) (4,349,900)
------------ -----------
BALANCE DECEMBER 31,
1994..................... (4,405,980) 2,732,306
Net income................ -- 13,155,132
Unearned compensation from
stock options granted.... -- --
Amortization of unearned
compensation............. -- 1,591,022
Foreign currency
translation adjustment... (6,133,418) (6,133,418)
------------ -----------
BALANCE DECEMBER 31,
1995..................... (10,539,398) 11,345,042
Net income................ -- 5,229,899
Common stock issuance..... -- 38,567,063
Unearned compensation from
stock options granted.... -- --
Unearned compensation from
stock options
forfeited................ -- (64,472)
Amortization of unearned
compensation............. -- 1,389,328
Stock options exercised,
including tax benefit.... -- 900,013
Net effect of exchange of
Cinemark Mexico Sr. Notes
and conversion of
warrants to Sr. Notes,
including tax benefit
adjustment............... -- 770,208
Foreign currency
translation adjustment... (590,053) (590,053)
Purchase of treasury
stock, 174 Class B
shares, at cost.......... -- (184,416)
------------ -----------
BALANCE DECEMBER 31,
1996..................... (11,129,451) 57,362,612
Net income................ -- 12,426,452
Unearned compensation from
stock options granted.... -- --
Unearned compensation from
stock options
forfeited................ -- --
Amortization of unearned
compensation............. -- 1,669,404
Stock options exercised,
including tax benefit.... -- --
Foreign currency
translation adjustment... (34,015) (34,015)
Purchase of treasury
stock, 737 Class B
shares, at cost.......... -- (4,013,737)
------------ -----------
BALANCE SEPTEMBER 30, 1997
(UNAUDITED).............. $(11,163,466) $67,410,716
============ ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 103
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------- -----------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income................................... $ 7,005,671 $ 13,155,132 $ 5,229,899 $ 670,886 $ 12,426,452
Loss on early extinguishment of debt......... -- -- 15,444,033 15,207,517 --
Noncash items in net income:
Depreciation............................... 10,860,816 12,716,099 18,633,707 14,046,142 19,656,382
Amortization -- intangibles and other
assets................................... 4,900,756 3,868,241 3,819,462 3,329,820 1,291,627
Deferred lease expenses.................... 1,366,135 1,051,774 2,199,854 1,843,211 1,202,555
Amortization of prepaid leases............. -- -- -- -- 517,330
Deferred income tax expense................ 1,514,177 1,213,034 1,630,398 (150,094) 540,567
Debt issued for accrued interest........... 314,756 184,134 2,006,371 2,006,371 2,850,100
Amortization of debt discount.............. 143,063 164,468 170,247 151,622 55,875
Amortized compensation -- stock options.... 836,081 1,591,022 1,324,856 932,110 1,669,404
Other gains and losses..................... 301,915 (5,196,922) (7,760,774) 344,740 (408,068)
Equity in income of affiliates............. (2,709) (693,415) (362,443) (1,417,171) (957,906)
Minority interest in income (loss) of
subsidiaries............................. 27,306 (288) (144,291) (120,518) (113,232)
Cash from (used for) operating working
capital:
Inventories................................ (16,831) (176,881) (234,743) (314,127) (623,428)
Co-op advertising and other receivables.... (771,681) (1,000,649) (3,902,355) (696,257) (4,339,209)
Prepaid expenses and other................. (1,007,532) 1,356,167 (2,493,331) (2,788,408) (2,665,791)
Accounts payable........................... 3,289,736 5,111,906 12,111,884 1,584,826 (6,367,420)
Accrued liabilities........................ 3,677,829 1,451,003 12,729,888 850,629 (1,749,006)
Income taxes payable....................... 225,205 1,295,074 (1,648,629) (1,648,629) 1,219,587
------------ ------------ ------------- ------------- -------------
Net cash from operating activities..... 32,664,693 36,089,899 58,754,033 33,832,670 24,205,819
INVESTING ACTIVITIES:
Additions to theater properties and
equipment.................................. (53,862,918) (89,287,667) (177,953,281) (115,955,178) (125,842,263)
Sale of theater properties and equipment..... 10,500 8,022,500 206,537 -- --
Proceeds from 2 Day Video Inc. sale.......... -- -- 9,439,466 -- --
Proceeds from affiliate sale................. -- 800,000 781,300 -- --
Decrease (increase) in certificates of
deposit.................................... 797,933 (323,034) 297,102 -- --
Decrease (increase) in temporary cash
investments................................ (3,981,970) 4,207,280 (26,282) (6,900) (9,000)
Decrease (increase) in investments in and
advances to affiliates..................... (3,914,574) (828,065) (1,715,364) (46,731) (10,241,913)
Increase in other assets..................... (1,924,649) (2,859,127) (8,452,094) (9,375,678) (9,134,384)
------------ ------------ ------------- ------------- -------------
Net cash used for investing
activities........................... (62,875,678) (80,268,113) (177,422,616) (125,384,487) (145,227,560)
FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes........ -- -- 199,106,000 199,106,000 77,250,000
Retirement of Senior Notes................... -- -- (123,370,000) (123,370,000) (1,630,000)
Repurchase premium on retired Senior Notes... -- -- (12,371,954) (12,206,774) --
Increase in long-term debt................... 15,890,000 46,000,000 97,510,000 70,500,000 127,365,000
Reductions of long-term debt................. (233,184) (15,025,359) (77,530,536) (77,520,568) (77,518,172)
Payment on notes payable to related
parties.................................... (2,061,556) -- (2,086,513) (2,086,513) --
Decrease in theater development advance...... (321,858) (370,808) (356,046) (356,046) (396,095)
Minority investment in subsidiaries, net..... -- 102,625 (677,889) -- 1,075,131
Purchase of Treasury Stock................... -- -- -- -- (4,013,737)
Net proceeds from common stock issuance...... -- -- 38,567,063 38,562,509 --
Common stock issued for options exercised.... -- -- 900,013 -- --
Issuance of subsidiary common stock
warrants................................... -- 1,324,132 -- -- --
------------ ------------ ------------- ------------- -------------
Net cash from financing activities..... 13,273,402 32,030,590 119,690,138 92,628,608 122,132,127
FOREIGN CURRENCY TRANSLATION ADJUSTMENT........ (441,887) (776,726) (590,053) 344,916 (34,015)
------------ ------------ ------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. (17,379,470) (12,924,350) 431,502 1,421,707 1,076,371
CASH AND CASH EQUIVALENTS:
Beginning of period.......................... 43,953,544 26,574,074 13,649,724 13,649,724 14,081,226
------------ ------------ ------------- ------------- -------------
End of period................................ $ 26,574,074 $ 13,649,724 $ 14,081,226 $ 15,071,431 $ 15,157,597
============ ============ ============= ============= =============
</TABLE>
SUPPLEMENTAL INFORMATION (Note 13):
See notes to consolidated financial statements.
F-7
<PAGE> 104
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Cinemark USA, Inc. (the Company) and its subsidiaries own or
lease and operate motion picture theatres in 29 states and in Mexico at
December 31, 1996. The following summarizes theatre transactions during 1994,
1995 and 1996:
<TABLE>
<CAPTION>
Theatres Screens
-------- -------
<S> <C> <C>
Active at January 1, 1994 ............................................ 153 1,084
Acquisitions .................................................... 2 9
Openings ........................................................ 7 82
Closings/Sales ....................................................... (4) (12)
----------------
Active at December 31, 1994 .......................................... 158 1,163
Openings ....................................................... 11 130
Sales ........................................................... (10) (46)
----------------
Active at December 31, 1995 .......................................... 159 1,247
Openings ........................................................ 17 237
Closings/Sales .................................................. (7) (31)
----------------
Active at December 31, 1996 .......................................... 169 1,453
================
</TABLE>
At December 31, 1996, the Company also manages three theatres (37 screens)
for Movie Theatre Investors, Ltd.; one theatre (17 screens) for Cinemark
Partners II; and two theatres (24 screens) for Cinemark Theatres Alberta, Inc.,
a Canadian corporation, all related parties (Notes 11 and 12).
CONSOLIDATED FINANCIAL STATEMENTS include the accounts of Cinemark USA,
Inc. and its wholly owned subsidiaries, which include Cinemark International,
Inc. (f/k/a Cinemark II, Inc.) and ENT Holdings, Inc. Cinemark International,
Inc. ("Cinemark International") owns 97.1% of Cinemark Mexico (USA), Inc.
(Cinemark Mexico), which owns 99.9% of Cinemark de Mexico S.A. de C.V.
(Cinemark de Mexico), a Mexican corporation. Cinemark de Mexico includes the
operations of Cinemark del Norte S.A. de C.V. and Servicio Cinemark S.A. de
C.V. Cinemark International owns 100% of Cinemark Empreendimentos e
Participacoes, LTDA, a Brazilian corporation, whose subsidiary will operate in
Brazil beginning in 1997. Cinemark International also owns 50% interests in
affiliates operating in Chile, Canada, Argentina and Peru and a 60% interest in
an affiliate operating in Ecuador. ENT Holdings, Inc. ("ENT") owns 100% of
Funtime Entertainment, Inc. The consolidated financial statements also include
2 Day Video, Inc. (2 Day) and subsidiary, a video rental "superstore" chain
through the date of its sale in October 1996, Entertainment Amusements, Inc., a
50%-owned holding company whose subsidiary provides video game machines to many
of the Company's theatres, and a 50% interest in Brainerd, Ltd, a theatre joint
venture. Majority-owned companies are consolidated; 50% owned companies and
minority investments are accounted for under the equity method (Note 12). The
results of all of these subsidiaries and affiliates are included in the
financial statements effective with their formation or from their dates of
acquisition. Significant intercompany balances and transactions are eliminated
in the consolidation.
BASIS OF PRESENTATION - In preparing the financial statements, management
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the financial statements and
revenues and expenses for the period. Actual results could differ significantly
from those estimates. The
F-8
<PAGE> 105
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimates most susceptible to significant change are those used in determining
the valuation of certain accrued liabilities and the valuation of the
investments in operations located in foreign countries. Although some
variability is inherent in these estimates, management believes the amounts
provided are adequate. The devaluation of the Mexican peso and the resultant
economic uncertainties in Mexico create certain business risks for the Company's
investment in Mexico.
Beginning in 1997, generally accepted accounting principles require that
the U.S. dollar be used as the functional currency of the Company's Mexican
subsidiary for U.S. reporting purposes. As a result, fluctuations in the peso
during 1997 affecting the Company's investment in Mexico will be charged to
exchange gain or loss rather than to the cumulative adjustment account.
INTERIM FINANCIAL STATEMENTS - The accompanying condensed consolidated
financial statements have been prepared by the Company, without audit,
according to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, these interim financial statements
reflect all adjustments (which include only normal recurring adjustments)
necessary to state fairly the financial position and results of operations as
of and for the periods indicated. Operating results for the interim periods are
not necessarily indicative of the results to be achieved for the full year.
REVENUES are recognized when admissions and concessions sales are received
at the theatres. Film rental costs are accrued based on the applicable box
office receipts and the terms of the film licenses.
CASH AND CASH EQUIVALENTS consist of operating funds held in financial
institutions, petty cash held by the theatres and highly liquid investments
with original maturities of three months or less when purchased.
TEMPORARY CASH INVESTMENTS consist primarily of time deposits and
government securities which are classified as available for sale and are stated
at amortized cost which approximates market.
INVENTORIES of concession products are stated at the lower of cost
(first-in, first-out method) or market.
THEATRE PROPERTIES AND EQUIPMENT are stated at cost less accumulated
depreciation and amortization. Property additions include $1,745,721 and
$3,928,454 of interest incurred during development and construction and
capitalized in 1995 and 1996, respectively. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets as follows:
buildings - 18 to 40 years, theatre furniture and equipment - 5 to 15 years.
Leasehold interests and improvements are amortized using the straight-line
method over the lesser of the lease period or the estimated useful lives of the
leasehold improvements. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption
of SFAS No. 121 did not have a material effect on the Company's financial
statements. During the third quarter of 1996 the Company determined that an
impairment charge of $2,381,998 was required for certain theatres.
INTANGIBLE ASSETS represent primarily the excess of cost over the fair
values of the net assets of theatre businesses acquired, less accumulated
amortization ($8,853,793 and $8,616,821 at December 31, 1995 and 1996,
respectively). For financial reporting purposes, these goodwill amounts are
being amortized primarily over 10 to 20 years, which approximate the remaining
lease terms of the businesses acquired.
DEFERRED CHARGES AND OTHER ASSETS, as applicable, are amortized using the
straight-line method over the primary financing terms ended June 2000 to August
2003 for debt issue costs and over the three to eight year terms of the
noncompete agreements.
DEFERRED INCOME TAXES are provided under the liability method for
temporary differences between revenue and expenses that are recognized for tax
return and financial reporting purposes.
EARNINGS PER SHARE are computed using the weighted average number of
shares of Class A common stock and common stock equivalents outstanding during
each period, including, when applicable, the Class B common shares and options
for Class B common shares (Note 7).
F-9
<PAGE> 106
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUES OF FINANCIAL INSTRUMENTS are estimated by the Company using
available market information and other valuation methodologies in accordance
with Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
About Fair Value of Financial Instruments." The estimated fair value amounts
for specific groups of financial instruments are presented in Note 5. Values
are based on available market quotes or estimates using a discounted cash flow
approach based on the interest rates currently available for similar debt. The
fair value of financial instruments for which estimated fair value amounts are
not specifically presented are estimated to approximate the related recorded
value.
RECLASSIFICATIONS have been made to certain 1994 and 1995 amounts to
conform to 1996 presentation.
INTERIM FINANCIAL INFORMATION as of September 30, 1997, and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements, have been included. The results of operations for the
interim periods are not necessarily indicative of the results to be achieved
for the entire fiscal year.
2. FOREIGN CURRENCY TRANSLATION
The cumulative foreign currency translation adjustment in shareholders'
equity of $10,539,398 and $11,129,451 at December 31, 1995 and 1996,
respectively, primarily relates to the unrealized adjustments resulting from
translating the financial statements of Cinemark de Mexico. The functional
currency of Cinemark de Mexico is the peso. Accordingly, assets and liabilities
of Cinemark de Mexico are translated to U.S. dollars at year-end exchange
rates. Income and expense items are translated at the average rates prevailing
during the year. Changes in exchange rates which affect cash flows and the
related payables are recognized as realized transaction gains and losses in the
determination of net income. At December 31, 1996, the total assets of Cinemark
de Mexico were $33,357,719. The Company's other consolidated foreign
subsidiaries were in the development stage and had insignificant translation
adjustments. In 1997, the Company will be required to utilize the U.S. dollar
as the functional currency of Cinemark de Mexico for U.S. reporting purposes
due to Mexico's highly inflationary economy. Thus devaluations in the peso
during 1997 that will affect the Company's investment will be charged to
exchange loss rather than to the cumulative adjustment account.
3. ACQUISITIONS AND INVESTMENT ACTIVITY
In September 1996, Cinemark Holdings Canada, Inc., a 100% subsidiary of
Cinemark International and 50% owner of Cinemark Theatres Alberta, Inc.,
contributed an additional $400,000 to assist in funding the construction of an
additional 12 screen theatre in Alberta, Canada. The other 50% owner of
Cinemark Theatres Alberta, Inc.
contributed an equal amount.
Cinemark International acquired an additional 2,661,450 shares of common
stock of Cinemark Mexico for $10.0 million for a cumulative interest of 97.1%
(96.5% on a fully diluted basis). Cinemark International sold its 50%
partnership interest in Beaumont Cinema Ventures, Ltd., which operated two
theatres in Texas, for $781,300, resulting in a gain of $547,750 in September
1996. Cinemark International also contributed funding of $1,200,000 to its 100%
owned Brazilian subsidiary, $600,000 to its Argentine affiliate, and $100,000
to its Peruvian affiliate.
F-10
<PAGE> 107
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1995, ENT sold its 50% ownership in Funtime International, Inc., an
international pizza and video arcade restaurant developer, to the other
shareholders of Funtime International, Inc. In connection with this sale, a
$2,000,000 note and related interest due to ENT were canceled; a $500,000 note
payable by ENT was canceled; and Funtime International, Inc. paid $800,000 cash
and issued notes payable of $200,000 and $600,000 to ENT. Also in connection
with the sale, ENT granted Funtime International, Inc. a 12-month option to
purchase the assets of the Company's remaining Funtime Pizza restaurant and
other related equipment for $400,000. As a result of this transaction, ENT
incurred a loss of approximately $294,000. In May 1996, Funtime International
exercised this option, issuing a note payable to ENT from Entertainment
Technologies, Inc. (parent company of Funtime International) for $400,000; this
resulted in a gain of $48,464 for ENT.
In 1994 and 1995, the Company wrote off as amortization expense $1,507,217
and $323,249, respectively, of goodwill and $351,361 and $92,389, respectively,
of noncompete agreements related to the closing of certain Funtime Pizza
restaurants acquired in 1992. In October 1996, the Company invested $571,633 in
Brainerd, Ltd., a limited partnership, which will own and operate a theatre.
In August 1995, Cinemark Inversiones, Inc., a 100%-owned subsidiary of
Cinemark International and 50% owner of Cinemark Chile, contributed an
additional $500,000 to Cinemark Chile to fund theatre construction. The other
50% owner of Cinemark Chile contributed an equal amount.
In October 1996, the Company sold its entire interest in 2 Day (Class A
common stock) for cash of $9,439,466 and a receivable of $633,288, resulting in
a gain of $7 million.
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Debt issue cost ....................................... $ 6,149,523 $ 9,741,136
Noncompete agreements ................................. 835,564 758,145
----------- -----------
Total ........................................ 6,985,087 10,499,281
Less accumulate amortization .......................... 2,662,939 3,345,867
----------- -----------
Net ................................................... 4,322,148 7,153,414
Equipment, lease and other deposits ................... 1,067,756 1,064,123
Funtime International, Inc.:
Note receivable, 10% interest, paid in 1996 ........ 200,000
$600,000 convertible note receivable - net, due .... 445,224 445,224
Entertainment Technologies, Inc:
Note receivable, 10% interest, due June 2000 ....... 358,269
Construction advances and other ....................... 4,184,999 6,521,214
----------- -----------
Total ........................................ $10,220,127 $15,542,244
=========== ===========
</TABLE>
F-11
<PAGE> 108
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The $600,000 convertible note receivable from Funtime International, Inc.,
discounted to $445,224 for imputed interest, is non-interest-bearing through
May 2000 and bears interest at 10% from June 2000 through its maturity date at
May 2005. Funtime International, Inc. has granted ENT the option anytime after
May 16, 2000, to convert the entire unpaid principal of this note receivable
and any unpaid interest into a 15% interest in Funtime International, Inc.
(Note 3).
5. LONG-TERM DEBT AND THEATRE DEVELOPMENT ADVANCE
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Senior Notes due 2002, discussed below............... $125,000,000 $ 1,630,000 $ --
Senior Subordinated Notes due 2008, discussed
below.............................................. 199,137,042 276,392,165
Senior Subordinated Notes of Cinemark Mexico due
2003, less unamortized discount of $2,015,751 at
December 31, 1995, discussed below................. 20,549,249 25,710,900 28,561,000
Revolving credit line of $225,000,000, discussed
below........................................... 50,000,000 70,000,000 120,000,000
Other notes payable.................................. 618,392 728,013 572,343
------------ ------------ ------------
Total long-term debt................................. 196,167,641 297,205,955 425,525,508
Less current portion................................. 27,737 652,313 160,738
------------ ------------ ------------
Long-term debt, less current portion................. $196,139,904 $296,553,642 $425,364,770
============ ============ ============
</TABLE>
SENIOR NOTES - In June 1992, the Company completed a public offering of
$125,000,000 senior notes payable ("Senior Notes"). The Senior Notes bear
interest at the rate of 12% per annum, payable semiannually on June 1 and
December 1 of each year. In August 1996, the Company utilized proceeds from a
$200 million issuance of Senior Subordinated Notes, due 2008, to repurchase
$123,370,000 of the Senior Notes at a premium of $1,098.33 per $1,000.00
principal amount. This resulted in a net outstanding balance of $1,630,000 in
Senior Notes at December 31, 1996. An extraordinary loss of $9.0 million, net
of related tax benefit, was recognized in connection with the premium paid and
the write-off of the unamortized debt issue costs ($2,463,560) associated with
the repurchased Senior Notes (Notes 4). The remaining Senior Notes are
redeemable at the option of the Company, in whole or in part, beginning June 1,
1997, ranging in redemption price from 106% in 1997 to 100% in 2000 and
thereafter.
SENIOR SUBORDINATED NOTES - In August 1996, the Company issued
$200,000,000 of Senior Subordinated Notes due 2008 (the "Subordinated Notes").
The Subordinated Notes bear interest at the rate of 9-5/8% per annum, payable
semi-annually on February 1 and August 1 of each year. The Subordinated Notes
were issued at 99.553% of the principal face amount (a discount of $4.47 per
$1,000 principal amount) for an aggregate
F-12
<PAGE> 109
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
discount of $894,000. The net proceeds to the Company from the issuance of the
Subordinated Notes (net of discount, fees and expenses) were approximately
$193.2 million. The Subordinated Notes require the Company to maintain a
specified interest expense coverage ratio; restricts the payment of dividends,
payment of subordinated debt prior to maturity and issuance of preferred stock
and other indebtedness; and other restrictive covenants. The Subordinated Notes
are redeemable at the option of the Company, beginning August 2001, ranging in
redemption price from 104.8% in 2001 to 100% in 2003 and thereafter. Any
outstanding Subordinated Note are due August 1, 2008.
In June 1997, the Company issued $75 million of Senior Subordinated Notes
due 2008 ("New Subordinated Notes"). The New Subordinated Notes are
substantially identical in all material respects to the Subordinated Notes,
including rate of interest. The New Subordinated Notes were issued at 103.0% of
the principal face amount (a premium of $30.00 per $1,000 principal amount).
(Unaudited)
SENIOR SUBORDINATED NOTES, MEXICO - In 1993, Cinemark Mexico issued
$20,400,000 of 12% Senior Subordinated Notes due 2003 (the "Mexican
Subordinated Notes") with detachable warrants (the Warrants) (Note 8). Cinemark
de Mexico guarantees the notes on a senior subordinated basis. The Mexican
Subordinated Notes were issued at a discount of $102.94 per $1,000 note,
totaling $2,100,000, and bear interest at 12% per annum payable semiannually on
August 1 and February 1. In 1994, Cinemark Mexico issued an additional
$2,000,000 of Mexican Subordinated Notes due 2003 with the terms governed by
the indenture from the initial offering of Mexican Subordinated Notes. These
notes were issued at a discount of $55 per $1,000 note, totaling $110,000, and
bear interest at 12% per annum payable semiannually on August 1 and February 1.
The entire $22,400,000 in Mexican Subordinated Notes and $1,971,500 of
accrued interest were exchanged in September 1996 for new senior subordinated
notes (the "New Mexican Notes"). The form and terms are identical in all
material respects to the previous notes except that interest on the New Mexican
Notes may be paid through the issuance of additional notes of the same series
at the option of Cinemark Mexico through and including February 1, 2000. If the
Company elects to pay accrued interest in the form of additional notes,
interest will accrue at 13% during that period. In connection with the
exchange, Warrants (Note 8) for 356,851 shares of common stock were exchanged
for $1,339,400 in New Mexican Notes. As a result of the note exchange and
retirement of the Warrants, a net benefit of $.8 million, including tax
benefit, was credited to additional paid in capital.
The indenture for the New Mexican Notes requires a sinking fund payment of
$6,667,000 on each of August 1, 2001, and August 1, 2002; the amounts are to be
utilized on such respective dates to retire a like face amount of the
outstanding New Mexican Notes. The indenture governing the New Mexican Notes
restricts the ability of Cinemark Mexico and Cinemark de Mexico to, among other
things, pay dividends; make investments; incur additional indebtedness; redeem
stock; use proceeds of asset disposals; create liens; engage in transactions
with affiliates; and to merge, consolidate or sell all or substantially all the
assets of the companies.
REDUCING, REVOLVING CREDIT FACILITY - In December 1996, the Company
amended its revolving credit line with a reducing, revolving credit facility
(the "Credit Facility") with a group of banks. The Credit Facility provides for
loans of up to $225,000,000 in the aggregate and bears interest at a defined
floating rate, adjusted in accordance with certain financial ratios. The
weighted average interest rate and current interest rate at December 31, 1996,
was 6.75% and 6.53%, respectively.
F-13
<PAGE> 110
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Credit Facility is a reducing revolving credit facility, with
commitments automatically reduced each calendar quarter by $8,437,500,
$11,250,000, $14,062,500 and $22,500,000 in calendar year 2000, 2001, 2002 and
2003, respectively. The Company is required to prepay all loans outstanding in
excess of the aggregate commitment as reduced pursuant to the terms of the
Credit Facility. Borrowings are secured by a pledge of a majority of the issued
and outstanding capital stock of the Company, and the credit agreement requires
that the Company maintains certain financial ratios; restricts the payment of
dividends, payment of subordinated debt prior to maturity and issuance of
preferred stock and other indebtedness; and other restrictive covenants. This
credit facility amended a new revolving credit line of $175,000,000 that the
Company had entered into on February 1996. The $175,000,000 credit facility
replaced the Company's previous credit facility. An extraordinary loss of $.4
million, net of related tax benefit, was recognized in connection with the
write-off of debt issue costs related to the Company's previous credit
facility.
Long-term debt at December 31, 1996, matures as follows: $652,313 in 1997;
$6,126 in 1998; $5,895 in 1999; $3,477 in 2000; $6,670,880 in 2001; and
$289,867,264 thereafter.
The estimated fair value of the Company's long-term debt of $296.6 million
at December 31, 1996, was approximately $300.5 million. Such amounts do not
include prepayment penalties which would be incurred upon the early
extinguishment of certain debt issues.
DEBT ISSUE COSTS - Debt issue costs of $6,149,523 and $9,741,136, net of
accumulated amortization of $2,010,268 and $2,664,766, related to the
Subordinated Notes, the New Mexican Notes and the Reducing, Revolving Credit
Facility, are included in deferred charges at December 31, 1995 and 1996,
respectively. The 1996 period includes an extraordinary loss recognized in
connection with the writeoff of debt issue costs relating to the Company's
prior bank line of credit and repurchase of Senior Notes.
THEATRE DEVELOPMENT ADVANCE - The current portion of long-term liabilities
also includes $350,000 at December 31, 1995 and 1996, for the estimated amount
to be payable in the following year on a theatre development advance. The
remaining long-term portion of this advance of $769,657 at December 31, 1996,
will be repayable based on the future operations of a theatre opened in 1992.
6. NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Note payable to The Peble Corp. (a former shareholder,
bearing interest at 8.5% ........................... $1,041,147 $ --
Note payable to an officer and shareholder, bearing
interest at 8.5% .............................. 1,010,495
---------- ----------
$2,051,642 $ --
========== ==========
</TABLE>
In March 1996, the Company paid the note payable to The Peble Corp. and
the note payable to an officer and shareholder.
F-14
<PAGE> 111
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. CAPITAL STOCK
COMMON AND PREFERRED STOCKS - Class A common shareholders have exclusive
voting rights. Class B common shareholders have no voting rights except upon
any proposed amendments to the articles of incorporation. However they may
convert at their option to Class A common stock. In the event of any
liquidation, the Class A and Class B shareholders will be entitled to their pro
rata share of assets remaining after any preferred shareholders have received
their preferential amounts based on their respective shares held.
In February 1996, the Company entered into a Securities Purchase Agreement
(the "Purchase Agreement") pursuant to which the Company issued to Cypress
Merchant Banking Partners L.P. and Cypress Pictures Ltd. (collectively,
"Cypress") an aggregate 23,893 shares of Class B Common Stock for an aggregate
purchase price of $41.0 million. As part of the Purchase Agreement, existing
shareholders sold an additional 58,655 of Class B Common Stock, including 1,500
shares of Class A Common stock that were exchanged for Class B Common Stock, to
Cypress for a total purchase price of approximately $98.2 million. The closing
of the issuance and sale of common stock of the Company to Cypress occurred in
March 1996. The net proceeds from the issuance of stock by the Company were
$38,567,063.
In November 1996, the Company repurchased 174 shares and 267 shares,
respectively, of Class B Common Stock as treasury stock.
In April 1997, the Company repurchased an aggregate of 1,242 shares of
Class B Common Stock issued to optionholders upon the exercise of stock in
April 1996. The aggregate purchase price for such shares was $2,2224,729
(unaudited).
At December 31, 1996, the Company has reserved Class A common stock in the
amount of 178,211 shares for potential conversions of outstanding Class B
common stock and 8,442 shares for potential conversions of Class B common stock
issuable under the stock option plan. The Company has 1,000,000 shares of
preferred stock, $1.00 par value, authorized with none issued or outstanding.
STOCK OPTION PLAN - Under terms of the Company's stock option plan,
nonquailifed options to purchase up to 10,685 shares of the Company's Class B
common stock may be granted to key employees. At January 1, 1994, 7,608 options
with an exercise price of $1.00 per share were outstanding.
The total options granted in 1994, 1995 and 1996 were 896, 1,381 and 600
shares, respectively, of the Class B common stock at an exercise price of $1.00
per share. All options vest and are exercisable over a period of five years
from the date of grant and expire ten years from date of grant. During 1996,
2213 vested options were exercised and an additional 430 options were
forfeited, accounting for a reduction of 1996 compensation expense of $64,472.
At December 31, 1996, 6,110 options were exercisable out of a total of 7,842
outstanding.
INDEPENDENT DIRECTOR STOCK OPTIONS - In 1993, the Company granted the
unaffiliated directors of the Company options to purchase up to an aggregate of
900 shares of the Company's Class B Common Stock at an exercise price of
$833.34 per share (the "Director Options"). In 1995, the Company amended the
Director
F-15
<PAGE> 112
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Options to reduce the aggregate number of shares of Common Stock
issuable pursuant to the Director Options from 900 to 600 shares and to reduce
the exercise price of the Director Options from $833.34 per share to $1.00 per
share. The options vest on June 1, 1997, subject to acceleration in certain
circumstances. The options expire ten years from the date of grant. A
director's options are forfeited if the director resigns or is removed from the
Board of Directors of the Company. Compensation expense of $414,000 was
immediately recognized upon this exchange, with unearned compensation expense
of $276,000 to be recognized over the remaining vesting period of 15 months.
The excess of the estimated fair market value of the stock at the dates of
the grant over the exercise price of the options are accounted for as
additional paid-in capital and as unearned compensation, which is amortized to
operations over the vesting period. As a result of the above grants unearned
compensation of $1,120,000, $2,278,150 and $1,127,117 was recorded in 1994,
1995 and 1996, respectively. Compensation expense under this stock option plan
was $836,081, $1,591,022 and $1,324,856 in 1994, 1995 and 1996, respectively.
The Company applies APB Opinion 25 and related interpretations in
accounting for the Company's stock option plan and Cinemark Mexico's stock
option plan, as described below. Had compensation costs for the Company's stock
option plan been determined based on the fair value at the date of grant for
awards under the plan consistent with the method of Statement of Financial
Accounting Standards (SFAS) No. 123, utilizing the Black-Scholes option pricing
model, the effect on income and earnings per share would not have changed from
the amounts presented in the financial statements. The results are
substantially the same pursuant to SFAS No. 123 as a result of the value of the
underlying stock at the date of grant being significantly higher than the
$1.00 per share exercise price of the options.
8. MINORITY INTERESTS IN SUBSIDIARIES
COMMON SHAREHOLDERS' EQUITY - Minority ownership interests in subsidiaries
and affiliates of the Company are as follows at December 31:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Cinemark Mexico - 2.93% interest ............... $ 405,634 $ 187,103
Laredo Theatres, Ltd. - 25% interest (owned by a
relative of the majority shareholder) 574,448 362,176
2 Day Video - 16.9% interest (Note 3) .......... 381,951
Cinemark del Ecuador, S.A. - 40% interest ...... (9,426)
----------- ----------
Total ...................... $ 1,362,033 $ 539,853
=========== ==========
</TABLE>
COMMON STOCK WARRANTS - In connection with the issuance of the
Subordinated Notes (Note 5), Cinemark Mexico issued Warrants for $2.1 million
which were exercisable into 226,662 shares of Cinemark Mexico's common stock.
In August 1995, Cinemark Mexico sold additional Warrants for $1,324,132
exercisable into 152,411 shares, which when aggregated with the previously
purchased Warrants convert to 20% of the ownership on a fully diluted basis at
December 31, 1995, of Cinemark Mexico's common stock. In September 1996,
356,851 Warrants were exchanged for $1,339,400 in New Mexican Notes resulting
in a remaining balance of $200,729 for 22,222 Warrants outstanding (1% of fully
diluted ownership) (Note 5). The remaining Warrants are exercisable at $.001
per share subject to the following terms and expire on August 1, 2003. At any
time after January 31, 1998, Cinemark Mexico may redeem the Warrants in whole
or in part at their
F-16
<PAGE> 113
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
appraised value. If the Warrants have not been redeemed by August 1, 1998, the
Company must offer to purchase one-third of the Warrants on each of July 31,
1998, 1999, and 2000, utilizing the appraised value on such dates. At December
31, 1996, Cinemark Mexico has reserved 22,222 shares of common stock for the
potential conversion of the Warrants.
STOCK OPTION PLAN - Cinemark Mexico has a nonqualified stock option plan
under which key employees may be granted options to purchase up to 100,000
shares of Cinemark Mexico's common stock. The exercise price and terms of the
options are discretionary and determined when the options are granted. In 1994
and 1996, Cinemark Mexico granted options to purchase 16,704 and 7,500 shares
of common stock, respectively, at an exercise price of $.10 per share to
certain employees, resulting in unearned compensation of $183,292 and $28,180
in 1994 and 1996 respectively. In 1995, 12,528 of the options granted in 1994
were canceled. The outstanding options vest over a period of six years from the
date of grant and expire ten years from the date of grant. At December 31,
1996, 835 options were exercisable.
9. COMMITMENTS AND CONTINGENCIES
LEASES - The Company conducts a significant part of its theatre operations
in leased premises under noncancelable operating leases with terms of 5 to 30
years. In addition to the minimum annual lease payment, most of these leases
provide for contingent rentals based on operating results and require the
payment of taxes, insurance and other costs applicable to the property.
Generally, these leases include renewal options for various periods at
stipulated rates. Some leases also provide for escalating rent payments
throughout the lease term. Deferred lease expenses of $9,811,038 and
$11,580,629 at December 31, 1995 and 1996, respectively, have been provided to
account for lease expenses on a straight-line basis, where lease payments are
not made on such basis. Rent expense for the years ended December 31, 1994,
1995 and 1996, totaled $29,916,187, $31,273,367 and $34,841,041 respectively.
Future minimum payments under noncancelable operating leases with initial
or remaining terms in excess of one year at December 31, 1996, are due as
follows:
<TABLE>
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . $ 34,012,608
1998 . . . . . . . . . . . . . . . . . . . . 33,226,975
1999 . . . . . . . . . . . . . . . . . . . . 32,908,418
2000 . . . . . . . . . . . . . . . . . . . . 32,061,124
2001 . . . . . . . . . . . . . . . . . . . . 32,167,331
Thereafter . . . . . . . . . . . . . . . . . 338,542,424
------------
Total . . . . . . . . . . . . . . . . . . . $502,918,880
============
</TABLE>
After December 31, 1996, the Company entered into other lease agreements
that are contingent on the lessors' obtaining financing and completing
construction of theatre facilities. Upon satisfaction of the contingency, the
agreements will require future minimum lease payments over 15 to 25 years
estimated to be $139 million for nine theatre facilities in the United States,
three theatres in Mexico and four theatres in Brazil.
F-17
<PAGE> 114
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYMENT AGREEMENTS - As of December 31, 1996, the Company has
employment agreements with certain principal officers and a shareholder
providing for total minimum future annual payments as follows:
<TABLE>
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . $ 469,061
1998 . . . . . . . . . . . . . . . . . . . . 515,967
1999 . . . . . . . . . . . . . . . . . . . . 567,564
2000 . . . . . . . . . . . . . . . . . . . . 624,320
2001 . . . . . . . . . . . . . . . . . . . . 686,752
----------
Total . . . . . . . . . . . . . . . . . . . $2,863,664
==========
</TABLE>
These employment agreements terminate on the earlier of death, permanent
disability or December 31, 2001.
RETIREMENT SAVINGS PLAN - The Company has a 401(k) profit sharing plan for
the benefit of all employees and makes discretionary contributions as
determined annually by the Board of Directors. Contributions of $427,963,
$415,121 and $613,213 were made in 1994, 1995 and 1996, respectively.
LETTERS OF CREDIT AND COLLATERAL - At December 31, 1996, the Company has
outstanding letters of credit of $1,525,852 in connection with property and
liability insurance coverage and certain lease matters. Certificates of deposit
of $1,525,852 are pledged as collateral on the letters of credit.
LITIGATION SETTLEMENT - In April 1996, the Company entered into a
settlement agreement regarding litigation on the development of a proposed
theatre. The Company recognized a gain of $3,667,646 net of expenses, as a
result of the settlement.
10. INCOME TAXES
Income tax expense includes a benefit from the extraordinary loss on early
extinguishment of debt of $6,057,922 and consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ------------ ----------
<S> <C> <C> <C>
Current:
Federal - before utilization of credits ... $ 5,543,239 $ 8,927,814 $3,909,114
Utilization of tax credits ................ (987,000) (1,908,821)
State ..................................... 997,859 1,869,378 749,017
----------- ------------ ----------
Total current expense .... 5,554,098 8,888,371 4,658,131
Deferred:
Temporary differences ..................... 787,177 (466,356) 1,630,398
Reestablished from utilization of
tax credits ......................... 727,000 1,679,390
----------- ------------ ----------
Total deferred expense ... 1,514,177 1,213,034 1,630,398
----------- ------------ ----------
Income tax expense ....... $ 7,068,275 $ 10,101,405 $6,288,529
=========== ============ ==========
</TABLE>
F-18
<PAGE> 115
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation between income tax expense and taxes computed by applying
the applicable statutory federal income tax rate to income before income taxes
follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ----------
<S> <C> <C> <C>
Computed normal tax expense ................. $ 4,925,882 $ 8,139,788 $4,031,450
Goodwill amortization, not deductible
for tax purposes .................. 934,044 361,647 363,044
State and local income taxes, net of federal
income tax benefit ................ 711,226 1,151,411 501,887
Foreign subsidiaries losses not utilized
currently ......................... 445,872 874,897 997,056
Benefit of net operating loss carryforwards
utilized currently ................ (165,329)
Jobs tax credits ............................ (260,000) (127,267)
Other - net ................................. 476,580 (299,071) 395,092
------------ ------------ ----------
$ 7,068,275 $ 10,101,405 $6,288,529
============ ============ ==========
</TABLE>
The tax effects of significant temporary differences and carryforwards
comprising the net long-term deferred income tax liability at December 31, 1995
and 1996, consist of the following:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Deferred liabilities:
Accelerated tax depreciation ................................ $ 11,293,935 $ 15,165,608
Basis difference of assets acquired ......................... 324,878 220,610
Other ....................................................... 944,740 473,371
------------ ------------
Total ...................................... 12,563,553 15,859,589
Deferred assets:
Deferred lease expense ...................................... 3,799,182 4,404,794
Section 263(a) inventory adjustment ......................... 715,632 1,191,173
Amortization of unearned compensation ....................... 1,372,454 1,461,548
Self-insurance accruals ..................................... 1,118,393 1,233,432
Asset Impairment loss ....................................... 737,578
Original issue discount ..................................... 321,429
Deferred gain on sale of interest rate swap ................. 117,909
Tax operating loss carryforward for foreign subsidiaries .... 1,320,769 2,317,825
Valuation allowance - operating loss carryforward ........... (1,320,769) (2,317,825)
Other expenses, not currently deductible for tax purposes ... 1,143,772 583,026
------------ ------------
Total ...................................... 8,267,342 9,932,980
------------ ------------
Net long-term deferred income tax liability ................. $ 4,296,211 $ 5,926,609
============ ============
</TABLE>
F-19
<PAGE> 116
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. OTHER RELATED PARTY TRANSACTIONS
Transactions with related companies are included in the Company's financial
statements as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Facility lease expense - theatre and equipment
leases with shareholder affiliates ................... $ 347,917 $ 306,937 $ 306,238
Interest expense - The Peble Corp. (Note 6) .................... 118,094 83,989 17,457
Interest expense - an officer and shareholder
of the Company (Note 6) .............................. 115,149 81,515 17,414
Video game machine income - a subsidiary
of Entertainment Amusements, Inc.(Note 12) ........... 1,157,105 1,394,467 1,745,731
Management fees - Movie Theatre Investors, Ltd. (Note 12)
for property and theatre management services ......... 274,304 300,662 257,360
Management fees - Cinemark Theatres Alberta, Inc. (Note 12)
for property and theatre management services ......... 64,426 74,928 97,073
Management fees - Cinemark Partners II, Ltd. (Note 12)
for property and theatre management services ......... 171,500 59,467
Rental revenue - theatre lease with shareholder affiliate ...... 200,000 250,000
</TABLE>
The majority shareholder and certain employees of the Company own a
minority portion of both Cinemark Partners II, Ltd. and Movie Theatre
Investors, Ltd.
The Company leases a theatre facility to a relative of the Company's
majority shareholder.
12. INVESTMENTS IN AND ADVANCES TO AFFILIATES
The Company has the following investments and advances to affiliates at
December 31:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Cinemark Chile, S.A. - investment, at equity (Note 3) ... $1,775,435 $2,225,518
Entertainment Amusements, Inc. - investment,
at equity ..................................... 831,381 521,926
Cinemark Theatres Alberta, Inc. - investment,
at equity (Note 3) ............................ 1,408,228 1,848,316
Brainerd, Ltd. - partnership interest (Note 3) .......... 571,633
Cinemark Argentina, S.A. (Note 3) ....................... 606,144
Cinemark del Peru, S.A. (Note 3) ........................ 137,586
Movie Theatre Investors, Ltd. - partnership interest .... 55,869 55,869
Cinemark Partners II, Ltd - partnership interest ........ 83,000 83,000
Other ................................................... 121,689
---------- ----------
Total ............................... $4,275,602 $6,049,992
========== ==========
</TABLE>
F-20
<PAGE> 117
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other receivables at December 31 include amounts due from the following:
<TABLE>
<CAPTION>
1995 1996
-------- ----------
<S> <C> <C>
A subsidiary of Entertainment Amusements, Inc. ...... $155,137 $ 264,633
Movie Theatre Investors, Ltd. ....................... 394,345 1,090,771
Cinemark Chile, S.A ................................. 62,549 46,654
Cinemark Partners II, Ltd. .......................... 614,620 724,404
Related party rent receivable (Note 11) ............. 199,967 449,940
</TABLE>
13. SUPPLEMENTAL CASH FLOW INFORMATION
The following is provided as supplemental information to the consolidated
statement of cash flows:
<TABLE>
<CAPTION>
September 30,
1994 1995 1996 1997
----------- ----------- ----------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Interest paid $17,477,121 $19,864,594 $17,928,251 $24,644,847
=========== =========== =========== ===========
Income taxes paid $ 5,520,885 $ 7,195,765 $ 4,974,320 $ 6,935,511
=========== =========== =========== ===========
Noncash investing and financing activities:
Note issued for stock of Funtime
Entertainment, Inc. $ 500,000
Canceled note payable and accrued interest
due to former owners for Funtime
Pizza (Notes 3 and 6) $ 552,192
Canceled investment, note receivable and
accrued interest due from Funtime
International, Inc. (Notes 3 and 4) 2,291,837
Issued note receivable due from Funtime
International, Inc. (Notes 3 and 4) 445,224
Issued note receivable for sale of Funtime
Pizza Two, Inc. stock and related assets $ 400,000
Issued receivable due from sale of
2 Day Video, Inc. stock 633,288
Issued note payable for purchase of treasury
stock, less related taxes 130,156
Retirement of Cinemark Mexico senior
subordinated notes and issuance of new
senior subordinated notes (Note 5) 22,400,000
Issuance of Cinemark Mexico senior
subordinated notes for redeemed
warrants (Notes 5 and 8) 1,339,400
Net effect of exchange of Cinemark Mexico
senior subordinated notes and conversion
of warrants to senior subordinated notes
on additional paid-in capital
(Notes 5 and 8) 172,456
</TABLE>
F-21
<PAGE> 118
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. JAPANESE JOINT VENTURE
In March 1997, Cinemark International invested $6.5 million into a joint
venture with Shochiku Co., Ltd., a Japanese distributor, exhibitor and producer
of movies ("Shochiku") and several other Japanese companies to develop
state-of-the-art multiplex theatres in Japan. The joint venture will conduct
its business through Shochiku Cinemark Theatres, which is 26.7% owned by
Cinemark International, 26.7% owned by Shochiku, and 46.6% owned by a
consortium of prominent Japanese companies. Shochiku Cinemark Theatres opened
its first theatre (7 screens) in March 1997.
15. SUBSEQUENT EVENTS (UNAUDITED)
On December 18, 1997, Cinemark Mexico (USA), Inc. repurchased all of the
outstanding New Mexican Notes. As a result, an extraordinary loss of $260,038
(net of related tax benefit) was recognized in connection with the discount on
principal and the write-off of the unamortized debt issue cost associated with
the New Mexican Notes repurchased.
On January 8, 1998, the Company sold $105,000,000 8 1/2% Senior
Subordinated Notes due 2008 with interest payable on February 1 and August 1.
The covenants included in the $105,000,000 indenture are substantially the same
as those already included in the $75,000,000 indenture.
On January 5, 1998, the Company purchased approximately 31% of the limited
partnership interest in Cinemark Partners II, Ltd. for $3,024,000.
Additionally, the Company purchased an additional 77.1 units for an aggregate
purchase price of $3,700,000. After consummating such transactions, the Company
owns approximately 50.1% of Cinemark Partners II, Ltd.
F-22
<PAGE> 119
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE A
CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................. $ 3,056,375 $ 11,024,851 $ -- $ 14,081,226
Temporary cash investments ............................ 301,408 301,408
Inventories ........................................... 1,187,268 109,055 1,296,323
Other current assets .................................. 12,147,847 3,312,533 (4,189,927) 11,270,453
------------- ------------ ------------- -------------
Total current assets ............................... 16,391,490 14,747,847 (4,189,927) 26,949,410
THEATRE PROPERTIES AND
EQUIPMENT -Net ....................................... 350,549,600 26,871,320 377,420,920
OTHER ASSETS:
Certificates of deposit ............................... 1,525,852 1,525,852
Investments in and advances to affiliates ............. 14,838,634 4,817,563 (13,606,205) 6,049,992
Intangible assets - net ............................... 7,732,399 (2,315,350) 5,417,049
Deferred charges and other - net ...................... 11,767,041 3,775,203 15,542,244
------------- ------------ ------------- -------------
Total other assets ................................. 35,863,926 8,592,766 (15,921,555) 28,535,137
------------- ------------ ------------- -------------
TOTAL .................................................... $ 402,805,016 $ 50,211,933 ($ 20,111,482) $ 432,905,467
============= ============ ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term liabilities .............. $ 1,002,313 $ -- $ -- $ 1,002,313
Accounts payable, accrued expenses and other
current liabilities ................................. 55,135,724 7,768,671 (3,934,972) 58,969,423
------------- ------------ ------------- -------------
Total current liabilities .......................... 56,138,037 7,768,671 (3,934,972) 59,971,736
LONG-TERM LIABILITIES:
Long term debt, less current portion .................. 270,842,742 25,710,900 296,553,642
Deferred lease expenses ............................... 11,248,587 332,042 11,580,629
Theatre development advance ........................... 769,657 769,657
Deferred income taxes ................................. 6,081,205 100,359 (254,955) 5,926,609
------------- ------------ ------------- -------------
Total long-term liabilities ........................ 288,942,191 26,143,301 (254,955) 314,830,537
MINORITY INTERESTS IN SUBSIDIARIES ....................... 362,176 378,406 740,582
SHAREHOLDERS' EQUITY:
Common stock .......................................... 49,536,725 1,000 (1,000) 49,536,725
Additional paid-in capital ............................ 9,182,880 31,014,208 (31,014,208) 9,182,880
Unearned compensation - stock options ................. (2,434,717) (2,434,717)
Retained earnings (deficit) ........................... 32,391,591 (3,937,978) 3,937,978 32,391,591
Treasury stock ........................................ (20,184,416) (20,184,416)
Cumulative foreign currency translation adjustment .... (11,129,451) (11,155,675) 11,155,675 (11,129,451)
------------- ------------ ------------- -------------
Total shareholders' equity ......................... 57,362,612 15,921,555 (15,921,555) 57,362,612
------------- ------------ ------------- -------------
TOTAL .................................................... $ 402,805,016 $ 50,211,933 ($ 20,111,482) $ 432,905,467
============= ============ ============= =============
</TABLE>
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
S-1
<PAGE> 120
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE B
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES .................................... $ 320,132,158 $ 22,376,485 $ (777,713) $ 341,730,930
COSTS AND EXPENSES:
Cost of operations ....................... 243,847,698 18,290,341 262,138,039
General and administrative expenses ...... 20,631,921 3,632,322 (777,713) 23,486,530
Depreciation and amortization ............ 20,185,109 1,750,432 (136,868) 21,798,673
------------- ------------- ------------- -------------
Total ................................. 284,664,728 23,673,095 (914,581) 307,423,242
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) ..................... 35,467,430 (1,296,610) 136,868 34,307,688
OTHER INCOME (EXPENSE):
Interest expense ......................... (16,570,723) (2,980,932) (19,551,655)
Amortization of debt issue cost and
discount ............................. (583,270) (241,473) (824,743)
Equity in income (loss) of affiliates .... (2,391,464) 599,228 2,154,679 362,443
Other income, net ........................ 10,942,743 1,581,694 12,524,437
Minority interests in subsidiaries ....... (83,666) 227,957 144,291
------------- ------------- ------------- -------------
Total ................................. (8,686,380) (813,526) 2,154,679 (7,345,227)
------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM ............. 26,781,050 (2,110,136) 2,291,547 26,962,461
INCOME TAXES ................................ 12,165,040 181,411 12,346,451
------------- ------------- ------------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS .... 14,616,010 (2,291,547) 2,291,547 14,616,010
EXTRAORDINARY ITEMS:
Loss on early extinguishments of debt, net
of income tax benefit of $6,057,922 ... (9,386,111) (9,386,111)
------------- ------------- ------------- -------------
NET INCOME (LOSS) ........................... $ 5,229,899 ($ 2,291,547) $ 2,291,547 $ 5,229,899
============= ============= ============= =============
</TABLE>
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
S-2
<PAGE> 121
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE C
CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net income (loss) ........................................ $ 5,229,899 $ (2,839,297) $ 2,839,297 $ 5,229,899
Loss on early extinguishment of debt ..................... 15,444,033 15,444,033
Noncash items in net income (loss):
Depreciation .......................................... 16,887,679 1,746,028 18,633,707
Amortization .......................................... 3,849,658 106,672 (136,868) 3,819,462
Deferred lease expenses ............................... 2,069,727 130,127 2,199,854
Deferred income tax expense ........................... 1,530,039 100,359 1,630,398
Debt issued for accrued interest ...................... 34,871 1,971,500 2,006,371
Amortization of debt discount ......................... 31,042 139,205 170,247
Amortized compensation - stock options ................ 1,324,856 1,324,856
Gain on sale of assets ................................ (7,527,224) (233,550) (7,760,774)
Equity in (income) loss of affiliates ................. 3,076,082 (599,228) (2,839,297) (362,443)
Minority interest ..................................... 83,666 (227,957) (144,291)
Cash used for operating working capital .................. 14,037,692 3,163,176 (638,154) 16,562,714
------------- ------------- ------------- -------------
Net cash from operations ........................... 56,072,020 3,457,035 (775,022) 58,754,033
INVESTING ACTIVITIES:
Additions to theatre properties and equipment ......... (167,788,339) (10,164,942) (177,953,281)
Sale of theater properties and equipment .............. 206,537 206,537
Proceeds from 2 Day Video Inc. sale ................... 9,439,466 9,439,466
Proceeds from affiliate sale .......................... 781,300 781,300
Decrease in certificates of deposit ................... 297,102 297,102
Increase in temporary cash investments ............... (26,282) (26,282)
Increase in investments in and advances to affiliate... (10,802,381) (912,983) 10,000,000 (1,715,364)
Decrease (increase) in other assets ................... (9,022,874) 433,912 136,868 (8,452,094)
------------- ------------- ------------- -------------
Net cash used for investing activities ............. (177,670,489) (9,888,995) 10,136,868 (177,422,616)
FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes ................. 199,106,000 199,106,000
Retirement of Senior Notes ............................ (123,370,000) (123,370,000)
Repurchase premium on retired Senior Notes ............ (12,371,954) (12,371,954)
Increase in long-term debt ............................ 97,510,000 97,510,000
Reductions of long-term debt .......................... (77,530,536) (77,530,536)
Payment on notes payable to related parties ........... (2,086,513) (638,154) 638,154 (2,086,513)
Decrease in theater developement advance .............. (356,046) (356,046)
Minority investment in subsidiaries, net .............. (677,889) (677,889)
Issuance of common stock to Cypress ................... 38,567,063 38,567,063
Common stock issued for options exercised ............. 900,013 900,013
Cinemark USA investment in Cinemark
International ...................................... 10,000,000 (10,000,000)
------------- ------------- ------------- -------------
Net cash from financing activities ................. 119,690,138 9,361,846 (9,361,846) 119,690,138
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT .......................................... (590,053) (590,053)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ......................................... (1,908,331) 2,339,833 431,502
CASH AND CASH EQUIVALENTS:
Beginning of period ................................... 4,964,706 8,685,018 13,649,724
------------- ------------- ------------- -------------
End of period ......................................... $ 3,056,375 $ 11,024,851 $ 14,081,226
============= ============= ============= =============
</TABLE>
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
S-3
<PAGE> 122
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE D
CONSOLIDATING BALANCE SHEET INFORMATION
SEPTEMBER 30, 1997
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
ASSETS
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................... $ 7,887,268 $ 7,270,329 $ -- $ 15,157,597
Temporary cash investments................... 310,408 310,408
Inventories.................................. 1,444,120 475,631 1,919,751
Tax and other receivables.................... 25,506,628 14,581,699 (21,812,874) 18,275,453
------------ ------------ ------------ ------------
Total current assets.................. 34,838,016 22,638,067 (21,812,874) 35,663,209
THEATRE PROPERTIES AND EQUIPMENT -- net........ 433,946,453 50,068,416 484,014,869
OTHER ASSETS:
Certificates of deposit...................... 1,525,852 1,525,852
Investments in and advances to affiliates.... 36,751,641 15,591,867 (35,093,697) 17,249,811
Intangible assets -- net..................... 6,829,796 (2,212,699) 4,617,097
Deferred charges and other -- net............ 16,158,772 8,881,267 (1,423,168) 23,616,871
------------ ------------ ------------ ------------
Total other assets....................... 61,266,061 24,473,134 (38,729,564) 47,009,631
------------ ------------ ------------ ------------
TOTAL................................. $530,050,530 $ 97,179,617 ($60,542,438) $566,687,709
============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term liabilities..... $ 510,738 $ -- $ -- $ 510,738
Accounts payable and accrued expenses........ 44,316,779 28,351,480 (21,812,764) 50,855,495
Income taxes payable......................... 1,219,587 1,219,587
------------ ------------ ------------ ------------
Total current liabilities............. 46,047,104 28,351,480 (21,812,764) 52,585,820
LONG-TERM LIABILITIES:
Long term debt, less current portion......... 396,803,770 28,561,000 425,364,770
Deferred lease expenses...................... 12,206,364 576,820 12,783,184
Theatre development advance.................. 373,562 373,562
Deferred income taxes........................ 6,806,324 1,084,020 (1,423,168) 6,467,176
------------ ------------ ------------ ------------
Total long-term liabilities........... 416,190,020 30,221,840 (1,423,168) 444,988,692
MINORITY INTERESTS IN SUBSIDIARIES
SHAREHOLDERS' EQUITY:........................ 402,690 1,299,791 1,702,481
Common stock................................. 49,537,462 1,000 (1,000) 49,537,462
Additional paid-in capital................... 10,181,790 54,164,208 (54,164,208) 10,181,790
Unearned compensation -- stock options....... (1,764,223) (1,764,223)
Retained earnings (deficit).................. 44,818,043 (5,670,027) 5,670,027 44,818,043
Treasury stock............................... (24,198,890) (24,198,890)
Cumulative foreign currency translation
adjustment................................. (11,163,466) (11,188,675) 11,188,675 (11,163,466)
------------ ------------ ------------ ------------
Total shareholders' equity............... 67,410,716 37,306,506 (37,306,506) 67,410,716
------------ ------------ ------------ ------------
TOTAL................................. $530,050,530 $ 97,179,617 ($60,542,438) $566,687,709
============ ============ ============ ============
</TABLE>
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
S-4
<PAGE> 123
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE E
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 1997
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES.................................. $301,245,692 $27,010,807 $(1,275,547) $326,980,952
COSTS AND EXPENSES:
Cost of operations...................... 220,817,933 20,776,310 241,594,243
General and administrative expenses..... 17,450,459 4,301,603 (1,275,547) 20,476,515
Depreciation and amortization........... 18,891,141 1,682,784 (102,651) 20,471,274
------------ ----------- ----------- ------------
Total........................... 257,159,533 26,760,697 (1,378,198) 282,542,032
------------ ----------- ----------- ------------
OPERATING INCOME.......................... 44,086,159 250,110 102,651 44,438,920
OTHER INCOME (EXPENSE):
Interest expense........................ (20,326,293) (2,745,604) (23,071,897)
Amortization of debt issue costs and
debt discount........................ (502,030) (81,332) (583,362)
Equity in income (loss) of affiliates... (1,245,527) 573,925 1,629,508 957,906
Other income, net....................... 974,897 (90,058) (110) 884,729
Minority interests in subsidiaries...... (40,514) 153,746 113,232
------------ ----------- ----------- ------------
Total........................... (21,139,467) (2,189,323) 1,629,398 (21,699,392)
------------ ----------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY
ITEMS................................... 22,946,692 (1,939,213) 1,732,049 22,739,528
INCOME TAXES.............................. 10,464,494 (207,164) 10,257,330
------------ ----------- ----------- ------------
INCOME BEFORE EXTRAORDINARY ITEM.......... 12,482,198 (1,732,049) 1,732,049 12,482,198
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt,
net of income tax benefit of
$42,054.............................. (55,746) (55,746)
------------ ----------- ----------- ------------
NET INCOME (LOSS)......................... $ 12,426,452 $(1,732,049) $ 1,732,049 $ 12,426,452
============ =========== =========== ============
</TABLE>
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
S-5
<PAGE> 124
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE F
CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 1997
(NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net income (loss)....................................... $ 12,426,452 $ (1,732,049) $ 1,732,049 $ 12,426,452
Noncash items in net income (loss):
Depreciation.......................................... 17,975,422 1,680,960 19,656,382
Amortization.......................................... 1,311,122 83,156 (102,651) 1,291,627
Deferred lease expenses............................... 957,777 244,778 1,202,555
Amortization of prepaid leases........................ 517,330 517,330
Deferred income tax (expense) benefit................. (443,094) 983,661 540,567
Debt issued for accrued interest...................... 2,850,100 2,850,100
Amortization of debt discount......................... 55,875 55,875
Amortized compensation -- stock options............... 1,669,404 1,669,404
Equity in income (loss) of affiliates................. 1,348,068 (573,925) (1,732,049) (957,906)
Minority interests.................................... 40,514 (153,746) (113,232)
Other gains........................................... (403,650) (4,418) (408,068)
Cash from (used for) operating working capital.......... (23,472,334) 8,947,067 (14,525,267)
------------- ------------ ------------ ------------
Net cash from (used for) operations............... 11,465,556 12,842,914 (102,651) 24,205,819
INVESTING ACTIVITIES:
Additions to theatre properties and equipment........... (100,968,625) (24,873,638) (125,842,263)
Increase in temporary cash investments.................. (9,000) (9,000)
Decrease (increase) in advances to affiliates........... (23,191,534) (10,200,379) 23,150,000 (10,241,913)
Decrease (increase) in other assets..................... (3,530,485) (5,706,550) 102,651 (9,134,384)
------------- ------------ ------------ ------------
Net cash used for investing activities............ (127,690,644) (40,789,567) 23,252,651 (145,227,560)
FINANCING ACTIVITIES:
Increase in long-term debt.............................. 204,615,000 204,615,000
Reductions in long-term debt............................ (79,148,172) (79,148,172)
Decrease in theatre development advance................. (396,095) (396,095)
Purchase of treasury stock.............................. (4,013,737) (4,013,737)
Minority investment in subsidiaries, net................ 1,075,131 1,075,131
Cinemark USA investment in Cinemark International....... 23,150,000 (23,150,000) --
------------- ------------ ------------ ------------
Net cash from financing activities................ 121,056,996 24,225,131 (23,150,000) 122,132,127
FOREIGN CURRENCY TRANSLATION ADJUSTMENT................... (1,015) (33,000) (34,015)
------------- ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... 4,830,893 (3,754,522) 1,076,371
CASH AND CASH EQUIVALENTS:
Beginning of period..................................... 3,056,375 11,024,851 14,081,226
------------- ------------ ------------ ------------
End of period........................................... $ 7,887,268 $ 7,270,329 $ -- $ 15,157,597
============= ============ ============ ============
</TABLE>
- ---------------
Note: "Restricted Subsidiaries" and "Unrestricted Subsidiaries" are defined in
the Indenture for the Senior Subordinated Notes dated August 15, 1996.
S-6
<PAGE> 125
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION TO OR MAKE ANY
REPRESENTATIONS NOT IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CINEMARK
USA, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SERIES B NOTES
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SERIES B NOTES TO ANYONE IN ANY JURISDICTION WHERE, OR
TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN A CHANGE IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------------------
TABLE OF CONTENTS
PAGE
----
Available Information......................................... 4
Prospectus Summary............................................ 5
Risk Factors.................................................. 16
The Exchange Offer............................................ 20
Capitalization................................................ 27
Selected Consolidated Financial
and Operating Data............................................ 28
Management's Discussion and
Analysis of Financial Condition and
Results of Operation......................................... 31
Business...................................................... 39
Management.................................................... 47
Principal Shareholders........................................ 55
Certain Transactions.......................................... 58
Description of Series B Notes................................. 61
Federal Income Tax
Consequences.................................................. 90
Description of Certain
Debt Instruments............................................. 92
Plan of Distribution.......................................... 95
Legal Matters................................................. 96
Index to Financial Statements................................. F-1
Independent Auditors Report................................... F-3
$105,000,000
[GRAPHIC]
CINEMARK USA, INC.
Offer to Exchange its 8-1/2% Series B Senior Subordinated
Notes Due 2008 which have been registered under the
Securities Act for any and all of its outstanding 8-1/2%
Series A Senior Subordinated Notes due 2008
---------------------------
PROSPECTUS
---------------------------
_____________, 1998
<PAGE> 126
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Company is empowered by Art. 2.02-1 of the Texas Business Corporation
Act, subject to the procedures and limitations stated therein, to indemnify any
person who was, is or is threatened to be made a named defendant or respondent
in a proceeding because the person is or was a director or officer against
judgments, penalties (including excise and similar taxes), fines, settlements
and reasonable expenses (including court costs and attorneys' fees) actually
incurred by the person in connection with the proceeding. The Company is
required by Art. 2.02-1 to indemnify a director or officer against reasonable
expenses (including court costs and attorneys' fees) incurred by him in
connection with a proceeding in which he is a named defendant or respondent
because he is or was a director or officer if he has been wholly successful, on
the merits or otherwise, in the defense of the proceeding. The statute provides
that indemnification pursuant to its provisions is not exclusive of other
rights of indemnification to which a person may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors, or otherwise. The
articles and bylaws of the Company provide for indemnification by the Company
of its directors and officers to the fullest extent permitted by the Texas
Business Corporation Act. In addition, the Company has, pursuant to Article
1302-7.06 of the Texas Miscellaneous Corporation Laws Act, provided in its
articles of incorporation that, to the fullest extent permitted by applicable
law, a director of the Company shall not be liable to the Company or its
shareholders for monetary damages for an act or omission in a director's
capacity as director of the Company.
The Company has obtained an insurance policy providing for indemnification
of officers and directors of the Company and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions. The Company has entered into separate
indemnification agreements with each of its directors which may require the
Company, among other things, to indemnify such directors against certain
liabilities that may arise by reason of their status or service as directors to
the maximum extent permitted under Texas law.
Section 9 of Mr. Mitchell's Employment Agreement and Section 7 of Mrs.
Mitchell's Employment Agreement with the Company provide that the Company shall
indemnify and hold harmless Mr. and Mrs. Mitchell from and against any claims,
damages, expenses (including, but not limited to, attorneys' fees and other
expenses), judgments, fines and amounts paid in settlement incurred by either
of them in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
any action by or in the right of the Company) to which either of them is a
party or is threatened to be made a party by reason of or arising out of the
performance by them or the Company of any provision of their respective
Employment Agreement, provided that they acted in good faith and in a manner
they reasonably believed to be in, or not opposed to, the best interest of the
Company. Mr. and Mrs. Mitchell are entitled to select counsel of their own
choosing to defend any such action or proceeding and the Company shall pay all
fees and expenses in connection with such defense. Such expenses shall be paid
by the Company in advance of the final disposition of any such action or
proceeding if so requested by them.
II-1
<PAGE> 127
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
*1 Purchase Agreement dated January 14, 1998 between the Company and Morgan,
Stanley & Co. Incorporated and Banc America Robertson Stephens
**3.1(a) Amended and Restated Articles of Incorporation of the Company filed
with the Texas Secretary of State on June 3, 1992
**3.1(b) Articles of Merger filed with the Texas Secretary of State on June
27, 1988 merging Gulf Drive-In Theatres, Inc. and Cinemark of
Louisiana, Inc. into the Company
**3.1(c) Articles of Merger filed with the Texas Secretary of State dated
October 27, 1989 merging Premiere Cinemas Corp. into the Company
**3.1(d) Articles of Merger filed with the Texas Secretary of State dated
October 27, 1989 merging Tri-State Entertainment Incorporated into
the Company
**3.1(e) Articles of Merger filed with the Texas Secretary of State on
December 27, 1990 merging Cinema 4, Inc. into the Company
**3.1(f) Articles of Merger filed with the Texas Secretary of State on
December 27, 1990 merging Cinema 4, Inc. into the Company
**3.2(a) Bylaws of the Company, as amended
**3.2(b) Amendment to Bylaws of the Company dated March 12, 1996
*4.1 Indenture dated January 14, 1998 between the Company and U.S. Trust
Company of Texas, N.A. governing the Notes, with a form of Series A
Note attached
*4.2 Exchange Registration Rights Agreement dated January 14, 1998 between
the Company and Morgan Stanley & Co. Incorporated and Banc America
Robertson Stephens
***5 Form of Opinion of the Company concerning the legality of the New
Notes
**10.1(a) Indenture for Series B Notes, with form of Series B Note attached.
**10.1(b) Indenture for Series D Notes, with form of Series D Note attached.
**10.2 Promissory Note dated September 4, 1987 executed by The Pebble
Group, Ltd. in the original principal amount of $700,000 payable to
Citizens Savings and Loan, and assumed by the Company.
**10.3 Management Agreement dated as of March 1, 1991 between Movie Theatre
Investors, Ltd. and the Company.
**10.4(a) Management Agreement dated as of March 1, 1991 between Movie Theatre
Investors, Ltd. and the Company.
**10.4(b) Management Agreement between the Company and Cinemark II, Inc.
("Cinemark II") dated as of June 10, 1992.
**10.4(c) First Amendment to Management Agreement effective as of December 2,
1991 among the Company, Movie Theatre Holdings, Inc. and E. William
Savage
**10.4(d) Management Agreement, dated as of July 28, 1993, between the Company
and Cinemark Mexico (USA).
**10.4(e) Management Agreement, dated as of September 10, 1992, between the
Company and Cinemark de Mexico.
**10.4(f) Management Agreement dated December 10, 1993 between Laredo Joint
Venture and the Company.
**10.4(g) Management Agreement dated September 1, 1994 between Cinemark
Partners II, Ltd. and the Company.
**10.5 Agreement Regarding Right of First Refusal dated March 28, 1991
between the Company and Movie Theatre Investors, Ltd.
</TABLE>
II-2
<PAGE> 128
<TABLE>
<S> <C>
**10.6(a) Employment Agreement dated as of October 17, 1991 between the
Company and Lee Roy Mitchell.
**10.6(b) First Amendment to Employment Agreement dated as of April 7, 1992
between the Company and Lee Roy Mitchell.
**10.6(c) Employment Agreement dated as of October 17, 1991 between the
Company and Tandy Mitchell.
**10.6(d) First Amendment to Employment Agreement dated as of April 7, 1992
between the Company and Tandy Mitchell.
**10.6(e) Second Amendment to Employment Agreement between the Company and Lee
Roy Mitchell dated as of June 10, 1992.
**10.7(a) 1991 Nonqualified Stock Option Plan of Cinemark USA, Inc.
**10.7(b) Cinemark Mexico Nonqualified Stock Option Plan.
**10.8(a) License Agreement as of July 23, 1990 between the Company and Movie
Theatre Investors, Ltd.
**10.8(b) License Agreement dated December 10, 1993 between Laredo Joint
Venture and the Company.
**10.9(a) Tax Sharing Agreement between the Company and Cinemark II dated as
of June 10, 1992.
**10.9(b) Tax Sharing Agreement dated as of July 28, 1993, between the Company
and Cinemark Mexico (USA).
**10.9(c) License Agreement dated September 1, 1994 between Cinemark Partners
II, Ltd. and the Company.
**10.10(a) Indemnification Agreement between the Company and Lee Roy Mitchell
dated as of July 13, 1992.
**10.10(b) Indemnification Agreement between the Company and Tandy Mitchell
dated as of July 13, 1992.
**10.10(d) Indemnification Agreement between the Company and Alan W. Stock
dated as of July 13, 1992.
**10.10(f) Indemnification Agreement between the Company and W. Bryce Anderson
dated as of July 13, 1992.
**10.10(g) Indemnification Agreement between the Company and Sheldon I. Stein
dated as of July 13, 1992.
**10.10(h) Indemnification Agreement between the Company and Heriberto Guerra
dated as of December 3, 1993
**10.10(i) Indemnification Agreement between the Company and Gary R. Gibbs
dated as of July 19, 1995.
**10.11(a) Credit Agreement dated as of December 12, 1996 among the Banks and
the Agent.
*10.11(b) First Amendment to Credit Agreement dated December 12, 1997 among the
Company, the Banks, and the Agent.
**10.11(c) Pledge Agreement dated as of December 12, 1996 executed by the
pledgors listed on the signature page thereto for the benefit of the
Agent and the Banks.
**10.11(d) Note of the Company dated as of December 12, 1996 in the original
principal amount of $50,000,000 payable to the order of Bank of
America National Trust and Savings Association
**10.11(e) Note of the Company dated as of December 12, 1996 in the original
principal amount of $35,000,000 payable to the order of NationsBank
of Texas, N.A.
**10.11(f) Note of the Company dated as of December 12, 1996 in the original
principal amount of $20,000,000 payable to the order of First
National Bank of Boston
**10.11(g) Note of the Company dated as of December 12, 1996 in the original
principal amount of $15,000,000 payable to the order of Fleet Bank,
N.A.
**10.11(h) Note of the Company dated as of December 12, 1996 in the original
principal amount of $15,000,000 payable to the order of The Fuji
Bank, Limited
**10.11(i) Note of the Company dated as of December 12, 1996 in the original
principal amount of $25,000,000 payable to the order of Bank of New
York
**10.11(j) Note of the Company dated as of December 12, 1996 in the original
principal amount of $25,000,000 payable to the order of CIBC Inc.
</TABLE>
II-3
<PAGE> 129
<TABLE>
<S> <C>
**10.11(k) Note of the Company dated as of December 12, 1996 in the original
principal amount of $20,000,000 payable to the order of Bank of Nova
Scotia
**10.11(l) Note of the Company dated as of December 12, 1996 in the original
principal amount of $20,000,000 payable to the order of Comerica
Bank-Texas
**10.12(a) Letter Agreements with directors of the Company regarding stock
options.
**10.12(b) Letter Agreements with directors of the Company amending stock
options.
*10.13(a) Credit Agreement dated November 18, 1997 between Cinemark
International and the Banks.
*10.13(b) First Amendment to Credit Agreement dated December 16, 1997 between
Cinemark International and the Banks.
*10.13(c) Pledge Agreement dated November 18, 1997 between Cinemark
International and the Banks.
*10.13(d) Guaranty of Cinemark Mexico (USA), Inc. for the benefit of the Banks.
**10.14 Senior Secured Credit Agreement dated December 4, 1995 among
Cinemark II, Cinemark Mexico (USA) and Cinemark de Mexico
**10.15(a) Security Purchase Agreement dated February 20, 1996 among the
Company, Cypress Merchant Banking Partners L.P., Cypress Pictures
Ltd., The Broadhead Limited Partnership and T&LRM Family Limited
Partnership
**10.15(b) Shareholders' Agreement dated March 12, 1996 among the Company, Mr.
Mitchell, Cypress Merchant Banking Partners L.P., Cypress Pictures
Ltd. and Mr. Mitchell and Mr. Don Hart as Co-Trustees of certain
trusts signatory thereto
**10.16 Joint Venture Agreement dated December 31, 1995 among Cinemark II,
Inc., D'Alimenti S.A. and Prodecine S.A.
*12 Calculation of Earnings to Fixed Charges.
*21 Subsidiaries of the Registrant
*23.1 Consent of Deloitte & Touche LLP
***23.2 Consent of Michael D. Cavalier, General Counsel of the Company
(included in Exhibit 5.1)
24 Power of Attorney (set forth on page II-6)
</TABLE>
II-4
<PAGE> 130
<TABLE>
<S> <C>
***25 T-1 Statement of Eligibility and Qualifications under the Trust
Indenture Act of 1939 of the United States Trust Company of Texas,
N.A. relating to the Series B Notes
*27 Financial Data Schedule
</TABLE>
- -----------------
*Filed herewith
**Incorporated by Reference
***To be filed by amendment
(b) Financial Statement Schedules
All of the Financial Statement Schedules have been omitted because
they are not applicable or not required or the required information is
included in the Financial Statements or notes thereto.
Item 22. Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day
of receipt of such request, and to send the incorporated documents by
first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
Company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registration has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Dallas,
State of Texas, on February 2nd, 1998.
CINEMARK USA, INC.
By: /s/ Alan W. Stock
-----------------------
Name: Alan W. Stock
Title: President
The undersigned directors and officers of Cinemark USA, Inc. hereby
constitute Lee Roy Mitchell and Jeffrey J. Stedman and each of them, with full
power to act without the other and with full power of substitution and
resubstitution, our true and lawful attorneys-in-fact with full power to
execute in our name and behalf in the capacities indicated below any and all
amendments (including post-effective amendments and amendments thereto) to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission and hereby ratify and confirm all that such attorneys-in-fact, or
either of them, or their substitutes shall lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/ Lee Roy Mitchell Chairman of the February 2, 1998
- --------------------------------
Lee Roy Mitchell Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
/s/ Tandy Mitchell Director, Executive Vice February 2, 1998
- --------------------------------
Tandy Mitchell President and Secretary
/s/ Alan W. Stock
- --------------------------------
Alan W. Stock Director February 2, 1998
/s/ Jeffrey J. Stedman Vice President (Principal
- --------------------------------
Jeffrey J. Stedman Financial Officer)
February 2, 1998
/s/ W. Bryce Anderson Director February 2, 1998
- --------------------------------
W. Bryce Anderson
/s/ Heriberto Guerra, Jr. Director February 2, 1998
- --------------------------------
Heriberto Guerra, Jr.
/s/ James L. Singleton Director February 2, 1998
- --------------------------------
James L. Singleton
/s/ James A. Stern Director February 2, 1998
- --------------------------------
James A. Stern
/s/ Denny Rydberg Director February 2, 1998
- --------------------------------
Denny Rydberg
</TABLE>
II-6
<PAGE> 132
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
*1 Purchase Agreement dated January 14, 1998 between the
Company and Banc America Robertson Stephens, and Morgan
Stanley & Co. Incorporated
**3.1(a) Amended and Restated Articles of Incorporation of the Exhibit 3.1(a) to
Company filed with the Texas Secretary of State on June the Company's
3, 1992 Annual Report (file
33-47040) on Form
10-K filed March
31, 1993
**3.1(b) Articles of Merger filed with the Texas Secretary of State Exhibit 3.1(b) to
on June 27, 1988 merging Gulf Drive-In Theatres, Inc. the Company's
and Cinemark of Louisiana, Inc. into the Company Registration
Statement (file 33-
47040) on Form S-
1 filed on April 9,
1992
**3.1(c) Articles of Merger filed with the Texas Secretary of State Exhibit 3.1(d) to
dated October 27, 1989 merging Premiere Cinemas Corp. the Company's
into the Company Registration
Statement (file 33-
47040) on Form S-
1 filed on April 9,
1992
**3.1(d) Articles of Merger filed with the Texas Secretary of State Exhibit 3.1(e) to
dated October 27, 1989 merging Tri-State Entertainment the Company's
Incorporated into the Company Registration
Statement (file 33-
47040) on Form S-
1 filed on April 9,
1992
**3.1(e) Articles of Merger filed with the Texas Secretary of State Exhibit 3.1(f) to the
on December 27, 1990 merging Cinema 4, Inc. into the Company
Company s Registration
Statement (file 33-
47040) on form S-1
filed on April 9,
1992
</TABLE>
E-1
<PAGE> 133
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**3.1(f) Articles of Merger filed with the Texas Secretary of State Exhibit 3.1(f) to the
on December 27, 1990 merging Cinema 4, Inc. into the Company's Annual
Company Report (file 33-
47040) on Form 10-
K filed March 31,
1993
**3.2(a) Bylaws of the Company, as amended Exhibit 3.2 to the
Company's
Registration
Statement (file 33-
47040) on Form S-
1 filed on April 9,
1992
**3.2(b) Amendment to Bylaws of the Company dated March 12, Exhibit 3.2(b) to
1996 the Company's
Annual Report (file
33-47040) on Form
10-K filed March
26, 1997
*4.1 Indenture dated January 14, 1998 between the Company Page ______
and U.S. Trust Company of Texas, N.A. governing the
Notes, with form of Series A Note attached.
*4.2 Exchange Registration Rights Agreement dated January Page ______
14, 1998 between the Company and Morgan Stanley & Co.
Incorporated and Banc America Robertson Stephens
***5 Opinion of the Company concerning the legality of the Page ______
Series D New Notes
**10.1(a) Indenture for Series B Notes, with form of Series B Note Exhibit 4.1 to the
attached. Company's
Registration
Statement file 33-
41895) on Form S-
4 filed September
13, 1996
**10.1(b) Indenture dated June 26, 1997 between the Company and Exhibit 4.1 to the
U.S. Trust Company of Texas, N.A. governing the Notes, Company's Registration
with a form of Series C Note attached Statement (file 333-
32949) on Form S-4
filed August 6, 1997
</TABLE>
E-2
<PAGE> 134
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.2 Promissory Note dated September 4, 1987 executed by The Exhibit 10.5 to the
Pebble Group, Ltd. in the original principal amount of Company's
$700,000 payable to Citizens Savings and Loan, and Registration
assumed by the Company. Statement (file 33-
47040) on Form S-1
filed on April 9,
1992.
**10.3 Management Agreement dated as of March 1, 1991 between Exhibit 10.6(a) to
Movie Theatre Investors, Ltd. and the Company. the Company's
Registration
Statement (file
33- 47040)
on Form S-1 filed
on April 9, 1992.
**10.4(a) Management Agreement dated as of March 1, 1991 between Exhibit 10.6(b) to
Movie Theatre Investors, Ltd. and the Company. the Company's
Registration Statement
(file 33-47040) on
Form S-1 filed on
April 9, 1992.
**10.4(b) Management Agreement between the Company and Exhibit 10.6(c) to
Cinemark II, Inc. ("Cinemark II") dated as of June 10, 1992. the Company's
Annual Report (file
33-47040) on
Form 10-K filed
March 31, 1993.
**10.4(c) First Amendment to Management Agreement effective as of Exhibit 10.6(e) to
December 2, 1991 among the Company, Movie Theatre the Company's
Holdings, Inc. and E. William Savage Registration
Statement (file 33-
47040) on Form S-1
filed on April 9,
1992
</TABLE>
E-3
<PAGE> 135
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.4(d) Management Agreement, dated as of July 28, 1993, between Exhibit 10.7 to
the Company and Cinemark Mexico (USA). Cinemark Mexico
(USA)'s
Registration
Statement (file 33-
72114) on Form S-4
filed on November
24, 1994.
**10.4(e) Management Agreement, dated as of September 10, 1992, Exhibit 10.8 to
between the Company and Cinemark de Mexico. Cinemark Mexico
(USA)'s Registration
Statement (file
33-72114) on
Form S-4 filed
on November 24, 1994.
**10.4(f) Management Agreement dated December 10, 1993 between Exhibit 10.14(b) to
Laredo Joint Venture and the Company. the Company's
Annual Report (file
33-47040) on form
10-K filed March 31,
1994.
**10.4(g) Management Agreement dated September 1, 1994 between Exhibit 10.4(i) to
Cinemark Partners II, Ltd. and the Company. the Company's Annual
Report (file
33-47040) on Form
10-K filed March 29,
1995.
**10.5 Agreement Regarding Right of First Refusal dated March Exhibit 10.10 to
28, 1991 between the Company and Movie Theatre CUSA's
Investors, Ltd. Registration
Statement (file
33-47040) on Form
S-1 filed on April
9, 1992.
</TABLE>
E-4
<PAGE> 136
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.6(a) Employment Agreement dated as of October 17, 1991 Exhibit 10.11(a) to
between the Company and Lee Roy Mitchell. the Company's
Registration
Statement (file 33-
47040) on Form S-1
filed on April 9,
1992.
**10.6(b) First Amendment to Employment Agreement dated as of Exhibit 10.11(b) to
April 7, 1992 between the Company and Lee Roy Mitchell. the Company's
Registration Statement
(file 33-47040)
on Form S-1 filed
on April 9, 1992.
**10.6(c) Employment Agreement dated as of October 17, 1991 Exhibit 10.11(c) to
between the Company and Tandy Mitchell. the Company's Registration
Statement (file
33-47040) on Form
S-1 filed on
April 9, 1992.
**10.6(d) First Amendment to Employment Agreement dated as of Exhibit 10.11(d) to
April 7, 1992 between the Company and Tandy Mitchell. the Company's Registration
Statement (file
33-47040) on
Form S-1 filed
on April 9, 1992.
**10.6(e) Second Amendment to Employment Agreement between Exhibit 10.11(e) to
the Company and Lee Roy Mitchell dated as of June 10, the Company's
1992. Annual Report (file
33-47040) on Form
10-K filed
March 31, 1993.
</TABLE>
E-5
<PAGE> 137
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.7(a) 1991 Nonqualified Stock Option Plan of Cinemark USA, Exhibit 10.14 to the
Inc. Company's
Registration
Statement (file 33-
47040) on Form S-1
filed on April 9,
1992.
**10.7(b) Cinemark Mexico Nonqualified Stock Option Plan. Exhibit 10.9 to
Cinemark Mexico
(USA)'s
Registration
Statement (file 33-
72114) on Form S-4
filed on November
24, 1994.
**10.8(a) License Agreement dated as of July 23, 1990 between the Exhibit 10.18(a) to
Company and Movie Theatre Investors, Ltd. the Company's
Registration
Statement (file 33-
47040) on Form S-1
filed on April 9,
1992.
**10.8(b) License Agreement dated December 10, 1993 between Exhibit 10.14(c) to
Laredo Joint Venture and the Company. the Company's
Annual Report (file
33-47040) on Form
10-K filed March
31, 1994
**10.8(c) License Agreement dated September 1, 1994 between Exhibit 10.10(c) to
Cinemark Partners II, Ltd. and the Company. the Company's
Annual Report
(file 33-47040)
on Form 10-K
filed March 29, 1995.
</TABLE>
E-6
<PAGE> 138
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.9(a) Tax Sharing Agreement between the Company and Exhibit 10.22 to the
Cinemark II dated as of June 10, 1992. Company's Annual
Report (file 33-
47040) on Form 10-
K filed March 31,
1993.
**10.9(b) Tax Sharing Agreement dated as of July 28, 1993, between Exhibit 10.10 to
the Company and Cinemark Mexico (USA). Cinemark Mexico
(USA)'s Registration
Statement (33-72114)
on Form S-4 filed
on November 24, 1994.
**10.10(a) Indemnification Agreement between the Company and Lee Exhibit 10.23(a) to
Roy Mitchell dated as of July 13, 1992. the Company's Annual
Report (file
33-47040) on Form
10-K filed March 31,
1993.
**10.10(b) Indemnification Agreement between the Company and Exhibit 10.23(b) to
Tandy Mitchell dated as of July 13, 1992. the Company's Annual
Report (file
33-47040) on Form
10-K filed March
31, 1993.
**10.10(c) Indemnification Agreement between the Company and Exhibit 10.23(d) to
Alan W. Stock dated as of July 13, 1992. the Company's Annual
Report (file 33-47040)
on Form 10-K filed
March 31, 1993.
**10.10(d) Indemnification Agreement between the Company and Exhibit 10.23(f) to
W. Bryce Anderson dated as of July 13, 1992. the Company's
Annual Report (file
33-47040) on Form
10-K filed March
31, 1993.
</TABLE>
E-7
<PAGE> 139
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
10.10(e) Indemnification Agreement between the Company and Exhibit 10.23(g) to
Sheldon I. Stein dated as of July 13, 1992. the Company's
Annual Report (file
33-47040) on Form
10-K filed March
31, 1993.
**10.10(f) Indemnification Agreement between the Company and Exhibit 10.13(f) to
Heriberto Guerra dated as of December 3, 1993 the Company's
Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996
**10.10(g) Indemnification Agreement between the Company and Gary Exhibit 10.13(g) to
R. Gibbs dated as of July 19, 1995. the Company's
Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996
**10.11(a) Credit Agreement dated as of December 12, 1996 among Exhibit 10.12(a) to
the Company, the Banks and the Agent. Company's Annual
Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
*10.11(b) First Amendment to Credit Agreement dated December 12, 1997 Page_______
among the Company, the Banks and the Agent.
**10.11(c) Pledge Agreement dated as of December 12, 1996 executed Exhibit 10.12(b) to
by the pledgors listed on the signature page thereto for the Company's Annual
benefit of the Agent and the Banks. Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
</TABLE>
E-8
<PAGE> 140
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.11(d) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(c) to
original principal amount of $50,000,000 payable to the Company's Annual
order of Bank of America National Trust and Savings Report (file 33-
Association 47040 and 333-
11895) on Form 10-
K filed March 27,
1997
**10.11(e) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(d) to
original principal amount of $35,000,000 payable to the Company's Annual
order of NationsBank of Texas, N.A. Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
**10.11(f) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(e) to
original principal amount of $20,000,000 payable to the Company's Annual
order of First National Bank of Boston Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
**10.11(g) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(f) to
original principal amount of $15,000,000 payable to the Company's Annual
order of Fleet Bank, N.A. Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
**10.11(h) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(g) to
original principal amount of $15,000,000 payable to the Company's Annual
order of The Fuji Bank, Limited Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
</TABLE>
E-9
<PAGE> 141
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.11(i) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(h) to
original principal amount of $25,000,000 payable to the Company's Annual
order of Bank of New York Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
**10.12(j) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(i) to
original principal amount of $25,000,000 payable to the Company's Annual
order of CIBC, Inc. Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
**10.11(k) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(j) to
original principal amount of $20,000,000 payable to the Company's Annual
order of Bank of Nova Scotia Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
**10.11(l) Note of the Company dated as of December 12, 1996 in the Exhibit 10.12(k) to
original principal amount of $20,000,000 payable to the Company's Annual
order of Comerica Bank-Texas Report (file 33-
47040 and 333-
11895) on Form 10-
K filed March 27,
1997
**10.12(a) Letter Agreements with directors of the Company regarding Exhibit 10.15 to the
stock options. Company's Annual
Report (file 33-
47040) on Form 10-
K filed March 31,
1993.
</TABLE>
E-10
<PAGE> 142
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
*10.12(b) Letter Agreements with directors of the Company amending Exhibit 10.15(c) to
stock options the Company's
Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996
*10.13(a) Credit Agreement dated November 18, 1997 between Cinemark Page _____
International and the Banks.
*10.13(b) First Amendment to Credit Agreement dated December 16, 1997 Page _____
between Cinemark International and the Banks.
*10.13(c) Pledge Agreement dated November 18, 1997 between Cinemark Page _____
International and the Banks.
*10.13(d) Guaranty of Cinemark Mexico (USA), Inc. for the benefit of Page _____
the Banks.
</TABLE>
E-11
<PAGE> 143
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.13(e) Subscription Agreement dated as of December 31, 1994 Exhibit 10.4(a) to
between the Company and Cinemark International. Cinemark Mexico
(USA)'s Annual
Report (file 33-
72114) on Form
10-K filed March
31, 1995
**10.13(f) Subscription Agreement dated June 1, 1995 among Exhibit 10.16(j) to
Cinemark Mexico (USA) and Cinemark International the Company's
Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996
**10.13(g) Purchase Agreement dated August 30, 1995 among Exhibit 10.16(k) to
Cinemark Mexico (USA) and the purchasers thereto the Company's
Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996
**10.13(h) Warrant Certificates Exhibit 10.16(l) to
the Company's
Registration
Statement (file 333-
11895) on Form S-4
filed September 13,
1996
**10.14 Senior Secured Credit Agreement dated December 4, 1995 Exhibit 10.18 to the
among Cinemark II, Cinemark Mexico (USA) and Company's Annual
Cinemark de Mexico Report (file 33-
47040) on Form 10-
K filed April 1,
1996
</TABLE>
E-12
<PAGE> 144
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<C> <C> <C>
**10.15(a) Security Purchase Agreement dated February 20, 1996 Exhibit 10.19(a) to
among the Company, Cypress Merchant Banking Partners the Company's
L.P., Cypress Pictures Ltd., The Broadhead Limited Annual Report (file
Partnership and T&LRM Family Limited Partnership 33-47040) on Form
10-K filed April 1,
1996
**10.15(b) Shareholders' Agreement dated March 12, 1996 among the Exhibit 10.19(b) to
Company, Mr. Mitchell, Cypress Merchant Banking the Company's
Partners L.P., Cypress Pictures Ltd. and Mr. Mitchell and Annual Report (file
Mr. Don Hart as Co-Trustees of certain trusts signatory 33-47040) on Form
thereto 10-K filed April 1,
1996
**10.16 Joint Venture Agreement dated December 31, 1995 among Exhibit 10.20 to the
Cinemark II, Inc., D'Alimenti S.A. and Prodecine S.A. Company's Annual
Report (file 33-
47040) on Form 10-
K filed April 1,
1996
*12 Calculation of Earnings to Fixed Charges. Page _____
*21 Subsidiaries of the Registrant Page _____
*23.1 Consent of Deloitte & Touche LLP, Independent Auditors Page _____
***23.2 Consent of Michael D. Cavalier, General Counsel of the
Company (included in Exhibit 5.1)
24 Power of Attorney (set forth on page II-6)
***25 Form of T-1 Statement of Eligibility and Qualification Exhibit 25 to the Company's
under the Trust Indenture Act of 1939 of United States Registration Statement (file
Trust Company of Texas, N.A. relating to the Series B 333-32959) on Form S-4 filed
Notes September 18, 1997
*27 Financial Data Schedule
</TABLE>
* Filed herewith
** Incorporated by Reference
*** To be filed by amendment
E-13
<PAGE> 1
EXHIBIT 1
CINEMARK USA, INC.
$105,000,000
8-1/2% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
January 8, 1998
MORGAN STANLEY & CO. INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
<PAGE> 2
CINEMARK USA, INC.
$105,000,000
8-1/2% Senior Subordinated Notes due 2008
PURCHASE AGREEMENT
January 8, 1998
New York, New York
MORGAN STANLEY & CO. INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Ladies & Gentlemen:
Cinemark USA, Inc., a Texas corporation ("Cinemark"), proposes
to issue and sell to Morgan Stanley & Co. Incorporated and BancAmerica
Robertson Stephens (the "Initial Purchasers") an aggregate of $105,000,000
principal amount of 8-1/2% Senior Subordinated Notes due 2008 (the "Notes"),
subject to the terms and conditions set forth herein. The Notes will be issued
pursuant to an indenture (the "Indenture"), to be dated the Closing Date (as
defined below), between Cinemark and U.S. Trust Company of Texas, N.A., as
trustee (the "Trustee") which shall be in a form substantially similar to those
certain existing indentures between Cinemark and the Trustee dated as of August
15, 1996 and June 26, 1997.
1. ISSUANCE OF SECURITIES.
Cinemark proposes, upon the terms and subject to the
conditions set forth herein, to issue and sell to the Initial Purchasers an
aggregate of $105,000,000 principal amount of the Notes. The Notes and the
Exchange Notes (as defined below) issuable in exchange therefor are
collectively referred to herein as the "Securities." The proceeds to Cinemark
from the sale to the Initial Purchasers of the Notes will be used as described
under "Use of Proceeds" in the Offering Memorandum (as defined below).
Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act of 1933, as amended (the "Act"), the Notes (and all securities issued in
exchange therefor or in substitution thereof) shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT
OF, ANY PERSON EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT IT WILL NOT
PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE
DATE OF ORIGINAL ISSUANCE OF THIS SECURITY AND THE LAST DATE
ON WHICH CINEMARK OR ANY AFFILIATE OF CINEMARK WAS THE OWNER
OF
<PAGE> 3
THIS SECURITY (THE "RESALE RESTRICTION TERMINATION DATE")
RESELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A)
TO CINEMARK, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO
A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH THE RESALE PROVISIONS OF RULE 144A, (C) PURSUANT TO
OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
(F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (BASED UPON
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO CINEMARK IF
CINEMARK SO REQUESTS) SUBJECT IN EACH OF THE FOREGOING CASES
TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY
OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS
CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. THE FOREGOING RESTRICTIONS ON
RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION
TERMINATION DATE.
2. OFFERING.
The Notes will be offered and sold to the Initial Purchasers
pursuant to an exemption from the registration requirements under the Act.
Cinemark will prepare an offering memorandum dated the date hereof in form and
substance satisfactory to the Initial Purchasers (the "Offering Memorandum"),
relating to Cinemark and its subsidiaries and the issuance of the Notes.
The Initial Purchasers have advised Cinemark that the Initial
Purchasers will make offers of the Notes on the terms to be set forth in the
Offering Memorandum, as amended or supplemented, solely (1) within the United
States to persons whom the Initial Purchasers reasonably believe to be
"qualified institutional buyers," as defined in Rule 144A under the Act
("QIBs") and (2) outside the United States to persons other than U.S. persons
in compliance with Regulation S under the Act. The QIBs and the non-U.S.
persons from whom the Initial Purchasers will solicit offers to buy, and to
whom the Initial Purchasers will offer to sell, the Notes in compliance with
Regulation S also are referred to herein as the "Eligible Purchasers." Sales
to Eligible Purchasers under this Agreement are referred to herein as "Exempt
Resales". The Initial Purchasers will offer the Notes to such Eligible
Purchasers at prices to be determined by the Initial Purchasers from time to
time.
Holders (including subsequent transferees) of the Notes will
have the registration rights set forth in an exchange registration rights
agreement relating thereto (the "Registration Rights Agreement"), to be dated
the Closing Date, which will be in substantially the form of those certain
2
<PAGE> 4
registration rights agreements dated as of August 15, 1996 and June 26, 1997 by
and among Cinemark and the Purchasers named therein, for so long as such Notes
constitute "Transfer Restricted Securities" (as defined in such Registration
Rights Agreements). Pursuant to terms and conditions contained in the
Registration Rights Agreement, Cinemark will agree to use its best efforts to
file with the Securities and Exchange Commission (the "Commission"), under the
circumstances set forth therein, (i) a registration statement under the Act
(the "Exchange Offer Registration Statement") relating to a second series of
8-1/2% Senior Subordinated Notes due 2008 (the "Exchange Notes") to be offered
in exchange for the Notes (the "Exchange Offer") and (ii) a shelf registration
statement pursuant to Rule 415 under the Act (the "Shelf Registration
Statement") relating to the resale by certain holders of the Notes, and to use
its best efforts to cause such Registration Statements to be declared effective
and to consummate the Exchange Offer. This Purchase Agreement (this
"Agreement"), the Securities, the Indenture and the Registration Rights
Agreement are hereinafter sometimes referred to collectively as the "Operative
Documents."
3. PURCHASE, SALE AND DELIVERY.
(a) On the basis of the representations, warranties and
covenants contained in this Agreement, and subject to its terms and conditions,
Cinemark agrees to issue and sell to the Initial Purchasers, and each Initial
Purchaser agrees, severally and not jointly, to purchase from Cinemark, that
aggregate principal amount of the Notes set forth opposite its name on Schedule
I hereto. The Initial Purchasers shall pay a purchase price equal to 99.00% of
the principal amount of the Notes.
(b) Delivery of, and payment of the purchase price for, the
Notes shall be made at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1700 Pacific Avenue, Suite 4100, Dallas, Texas 75201 or such other
location as may be mutually acceptable. Such delivery and payment shall be
made at 9:30 a.m. New York City time on January 14, 1998 or at such other date
and time as shall be agreed upon by the Initial Purchasers and Cinemark. The
time and date of such delivery and payment are herein called the "Closing
Date."
(c) On the Closing Date, one or more of the Notes in
definitive form, registered in such names and in such denominations as
specified by the Initial Purchasers at least two business days prior to such
date, having an aggregate principal amount of $105,000,000 shall be delivered
by Cinemark to the Initial Purchasers (or as the Initial Purchasers direct),
against payment by the Initial Purchasers of the purchase price therefor by
wire transfer of same day funds to an account or accounts designated by
Cinemark, provided that Cinemark shall give at least two business days' prior
written notice to the Initial Purchasers of the information required to effect
such wire transfer. The Notes shall be made available to the Initial
Purchasers for inspection not later than 9:30 a.m. New York City time on the
business day immediately preceding the Closing Date.
4. AGREEMENTS OF CINEMARK.
Cinemark covenants and agrees with the Initial Purchasers as
follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing,
of (i) the issuance by any state securities commission of any stop
order suspending the qualification or exemption from qualification of
any of the Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purpose by any state securities
commission or other regulatory authority and (ii) the happening of any
event that makes any statement of a material fact made in the Offering
Memorandum untrue or that requires the making of any additions to or
changes in the Offering Memorandum in order to make the
3
<PAGE> 5
statements therein, in the light of the circumstances under which they
are made, not misleading. Cinemark shall use its best efforts to
prevent the issuance of any stop order or order suspending the
qualification or exemption of any of the Securities under any state
securities or Blue Sky laws and, if at any time any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption of any of the Securities
under any state securities or Blue Sky laws, Cinemark shall use its
best efforts to obtain the withdrawal or lifting of such order at the
earliest practicable time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to Cinemark, without charge, as
many copies of the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchasers may reasonably request.
Cinemark consents to the use of the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the
Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Offering Memorandum prior
to the Closing Date unless the Initial Purchasers shall previously
have been advised thereof and shall have consented to, or not have
reasonably objected thereto, in writing within a reasonable time after
being furnished a copy thereof. Cinemark shall promptly prepare, upon
the Initial Purchasers' request, any amendment or supplement to the
Offering Memorandum that the Initial Purchasers or Cinemark believe
may be necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of
any Exempt Resale, any event shall occur as a result of which, in the
judgment of Cinemark or in the opinion of counsel for Cinemark or
counsel for the Initial Purchasers, it becomes necessary or advisable
to amend or supplement the Offering Memorandum in order to make the
statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser which is a
prospective purchaser, not misleading, or if it is necessary or
advisable to amend or supplement the Offering Memorandum to comply
with applicable law, (i) to notify the Initial Purchasers and (ii)
forthwith to prepare an appropriate amendment or supplement to such
Offering Memorandum so that the statements therein as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Offering Memorandum will
comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel for
the Initial Purchasers in connection with the qualification or
registration of the Notes under the securities or Blue Sky laws of
such jurisdictions as the Initial Purchasers may reasonably request
and to continue such qualification in effect so long as required for
the Exempt Resales; provided, however that Cinemark shall not be
required in connection therewith to register or qualify as a foreign
corporation where it is not now so qualified or to take any action
that would subject it to service of process in suits or taxation, in
each case, except as to matters and transactions relating to Exempt
Resales, in any jurisdiction where it is not now so subject.
(f) To use the proceeds from the sale of the Notes in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(g) Not to claim voluntarily, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders
of any Securities.
4
<PAGE> 6
(h) To do and perform all things required to be done and
performed under this Agreement by it prior to the Closing Date and use
its best efforts to satisfy all conditions precedent on its part to
the delivery of the Notes.
(i) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Notes in a manner that
would require the registration under the Act of the sale to the
Initial Purchasers or the QIBs of the Notes or to take any other
action that would result in the Exempt Resales not being exempt from
registration under the Act.
(j) For so long as any of the Securities remain outstanding
and during any period in which Cinemark is not subject to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to make available to any holder of the Notes in
connection with any sale thereof and any prospective purchaser of such
Notes designated by such holder, the information required by Rule
144A(d)(4) under the Act.
(k) To use its best efforts to cause the Exchange Offer to be
made in accordance with and subject to the terms set forth in the
Registration Rights Agreement in the appropriate form to permit
registered Exchange Notes to be offered in exchange for the Notes and
to comply with all applicable federal and state securities laws in
connection with the Exchange Offer.
(l) To comply in all material respects with all of the
agreements set forth in the Operative Documents and in the
representation letter of Cinemark to The Depository Trust Company
("DTC") relating to the approval of the Securities by DTC for
"book-entry" transfer.
(m) To cooperate with the Initial Purchasers to effect the
inclusion of the Securities in the National Association of Securities
Dealers, Inc. ("NASD") Private Offering, Resales and Trading through
Automated Linkages ("PORTAL") market and to obtain approval of the
Securities by DTC for "book-entry" transfer.
(n) During a period of two years following the Closing Date,
to deliver without charge to the Initial Purchasers promptly upon
their becoming available, copies of (i) all reports or other publicly
available information that Cinemark shall mail or otherwise make
available to its stockholders and (ii) all reports, financial
statements and proxy or information statements filed by Cinemark with
the Commission or any national securities exchange and such other
publicly available information concerning Cinemark and its
subsidiaries including without limitation, press releases, as the
Initial Purchasers may reasonably request.
(o) Not to, and to cause its affiliates not to, offer, sell,
contract to sell or grant any option to purchase or otherwise transfer
or dispose of any Securities or any other debt security issued by
Cinemark (other than a private loan, credit or financing agreement
with a bank or similar financing institution) or any security
convertible into or exchangeable or exercisable for any such debt
security, for a period of 90 days after the Closing Date, without the
Initial Purchasers' prior written consent, except for (i) sales or
transfers between affiliates of Cinemark and (ii) the issue and
exchange of the Exchange Notes for the Notes in the Exchange Offer.
(p) Prior to the Closing Date, to furnish to the Initial
Purchasers, as soon as they have been prepared by Cinemark, a copy of
any unaudited interim financial statements for any period
5
<PAGE> 7
subsequent to the periods covered by the financial statements
appearing in the Offering Memorandum.
(q) Not to, and not to permit any of its subsidiaries to,
take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of Cinemark to facilitate
the sale or resale of either the Notes or the Exchange Notes. Except
as permitted by the Act, Cinemark will not distribute any (i) offering
memorandum, including, without limitation, the Offering Memorandum or
(ii) other offering material, in connection with the offering and sale
of the Securities.
5. REPRESENTATIONS AND WARRANTIES.
(a) Cinemark represents and warrants to the Initial Purchasers
that as of the date hereof (except as otherwise expressly provided):
(i) The Offering Memorandum is being prepared in
connection with the Exempt Resales. The Offering Memorandum and any
supplement or amendment to it will not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained
in this paragraph shall not apply to statements in or omissions from
the Offering Memorandum (or any supplement or amendment thereto) made
in reliance upon and in conformity with information relating to the
Initial Purchasers furnished to Cinemark in writing by the Initial
Purchasers expressly for use therein. No stop order preventing the
use of the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(ii) Cinemark (x) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, (y) has all requisite corporate power
and authority to carry on its business as it is being conducted
currently and as will be described in the Offering Memorandum and to
own, lease and operate its properties, and (z) is duly qualified and
in good standing as a foreign corporation authorized to do business in
each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, except where the
failure to be so qualified (a) could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on
the properties, business, results of operations or financial condition
of Cinemark and its subsidiaries taken as a whole or (b) could not,
individually or in the aggregate, reasonably be expected to materially
interfere with or materially adversely affect the issuance of the
Securities pursuant hereto, or (c) could not in any manner interfere
with Cinemark's ability to perform its obligations under this
Agreement or any other Operative Document or any of the transactions
to be described in the Offering Memorandum under the caption "Use of
Proceeds" (any of the events set forth in clauses (a), (b) or (c), a
"Material Adverse Effect").
(iii) Each of Cinemark International, Inc. and Cinemark
Properties, Inc. (collectively, the "Material Subsidiaries") (A) has
been duly organized or incorporated, as applicable, and is validly
existing and in good standing under the laws of its jurisdiction of
organization or incorporation, (B) has all requisite power (corporate
or other) and authority to carry on its business as it is currently
being conducted and as will be described in the Offering Memorandum
and to own, lease and operate its properties, and (C) is duly
qualified and in good standing as a foreign
6
<PAGE> 8
organization or corporation, as applicable, authorized to do business
in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except
where the failure to be so qualified could not reasonably be expected
to have a Material Adverse Effect.
(iv) All of the issued and outstanding shares of capital
stock of Cinemark's subsidiaries have been duly authorized, validly
issued and are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights. Cinemark owns,
directly or indirectly, shares of capital stock of each of its
subsidiaries, as listed on Schedule 5(a)(iv). Except as will be set
forth in the Offering Memorandum, all such shares of capital stock of
its subsidiaries are owned, directly or indirectly, by Cinemark free
and clear of any material lien, encumbrance, claim, security interest,
restriction on transfer, stockholders' agreement, voting trust or
other restrictions. Cinemark does not directly or indirectly own any
shares of capital stock or any other securities or any corporation or
have any equity interest in any firm, partnership, association or
other entity except as described on Schedule 5(a)(iv).
(v) All of the outstanding shares of capital stock of
Cinemark have been duly authorized, validly issued, and are fully paid
and nonassessable and were not issued in violation of any preemptive
or similar rights. On September 30, 1997, after giving pro forma
effect to the issuance and sale of the Notes pursuant hereto and the
other transactions described therein, Cinemark would have had an
authorized and outstanding capitalization as will be set forth in the
Offering Memorandum under the caption "Capitalization," subject to the
notes and assumptions included therein.
(vi) Except as will be set forth in the Offering
Memorandum, there are not currently any outstanding material
subscriptions, rights, warrants, calls, commitments of sale or options
to acquire, or instruments convertible into or exchangeable for,
capital stock or other equity interests of Cinemark or any of its
subsidiaries.
(vii) Cinemark has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Operative Documents and to consummate the transactions contemplated
hereby and thereby, including, without limitation, the corporate power
and authority to issue, sell and deliver the Securities as provided
herein and therein.
(viii) When the Notes are issued and delivered pursuant to
this Agreement, no Note will be of the same class (within the meaning
of Rule 144A under the Act) as securities of Cinemark that are listed
on a national securities exchange under Section 6 of the Exchange Act
or that are quoted in a United States automated inter-dealer
quotation system.
(ix) This Agreement has been duly and validly authorized,
executed and delivered by Cinemark and (assuming the due
authorization, execution and delivery of this Agreement by the Initial
Purchasers) is the legal, valid and binding agreement of Cinemark,
enforceable against Cinemark in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity (regardless of
whether such enforcement is sought in a proceeding in equity or at
law) (the "Enforceability Exceptions").
(x) The Indenture has been duly and validly authorized by
Cinemark and, when duly executed and delivered by Cinemark, the
Indenture will be the legal, valid and binding obligation
7
<PAGE> 9
of Cinemark, enforceable against Cinemark in accordance with its
terms, subject to the Enforceability Exceptions. The Offering
Memorandum will contain an accurate summary of the material terms of
the Indenture.
(xi) The Registration Rights Agreement has been duly and
validly authorized by Cinemark and, when duly executed and delivered
by Cinemark, the Registration Rights Agreement will be the legal,
valid and binding obligation of Cinemark, enforceable against Cinemark
in accordance with its terms, subject to the Enforceability
Exceptions. The Offering Memorandum will contain an accurate summary
of the material terms of the Registration Rights Agreement.
(xii) The Notes have been duly and validly authorized by
Cinemark for issuance and sale to the Initial Purchasers pursuant to
this Agreement and, when issued and authenticated in accordance with
the terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof and thereof, the Notes will be the
legal, valid and binding obligations of Cinemark, enforceable against
Cinemark in accordance with their terms and entitled to the benefits
of the Indenture, subject to the Enforceability Exceptions. The
Offering Memorandum will contain an accurate summary of the material
terms of the Notes.
(xiii) When the Exchange Notes have been duly and validly
authorized for issuance by Cinemark and, when issued and authenticated
in accordance with the terms of the Exchange Offer and the Indenture,
the Exchange Notes will be the legal, valid and binding obligations of
Cinemark, enforceable against Cinemark in accordance with their terms
and entitled to the benefits of the Indenture, subject to the
Enforceability Exceptions.
(xiv) Neither Cinemark nor any of its subsidiaries is (A)
in violation of its charter or bylaws or equivalent documents, (B) in
default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which it
is a party or by which it is bound or to which any of its properties
is subject, or (C) in violation of any local, state, federal or
foreign law, statute, ordinance, rule, regulation, judgment or court
decree applicable to it or any of its assets or properties (whether
owned or leased), except, in the case of clauses (A) (with respect to
subsidiaries other than the Material Subsidiaries), (B) and (C), for
any such violation or default that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
To the best knowledge of Cinemark, there exists no condition that,
with notice or the passage of time or both, would constitute such a
default under any such document or instrument except for any such
default that could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(xv) None of (A) the execution, delivery or performance by
Cinemark of this Agreement and the other Operative Documents, (B) the
issuance and sale of the Securities, nor (C) the consummation by
Cinemark of the transactions to be described in the Offering
Memorandum under the caption "Use of Proceeds", violates, conflicts
with or constitutes a breach of any of the terms or provisions of, or
a default under (or an event that with notice or the lapse of time, or
both, would constitute a default), or requires consent (other than
those consents that have been obtained or will be obtained prior to
the Closing Date) under, or results in the imposition of a lien or
encumbrance on any properties of Cinemark or its subsidiaries, or an
acceleration of any indebtedness of Cinemark or its subsidiaries
pursuant to, (i) the charter or bylaws (or equivalent documents) of
Cinemark or any of its subsidiaries, (ii) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which Cinemark or any of its subsidiaries is a party or by which
Cinemark or any of its subsidiaries is bound or to
8
<PAGE> 10
which any of their respective properties is subject, (iii) any
statute, rule or regulation applicable to Cinemark or any of its
subsidiaries or their respective assets or properties or (iv) any
judgment, order or decree of any court or governmental agency or
authority having jurisdiction over Cinemark or any of its subsidiaries
or their respective assets or properties, except in the case of
clauses (ii), (iii) and (iv), for any such violation, default,
consent, imposition of a lien or acceleration that could not,
individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect. Except as may be required under applicable
state securities or Blue Sky laws, and except for any NASD filings and
the filing of a registration statement under the Act and qualification
of the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") in connection with the Registration Rights
Agreement, no consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court
or governmental agency, body or administrative agency or any other
person is required for (1) the execution, delivery and performance by
Cinemark of this Agreement and the other Operative Documents or (2)
the issuance and sale of the Securities and the transactions
contemplated thereby, except such as have been obtained and made and
except where the failure to obtain such consents or waivers would not,
individually or in the aggregate, have a Material Adverse Effect.
(xvi) There is (i) no action, suit, investigation or
proceeding before or by any court, arbitrator or governmental agency,
body or official, domestic or foreign, now pending or, to the
knowledge of Cinemark, threatened or contemplated to which Cinemark or
any of its subsidiaries is or may be a party or to which the business
or property of Cinemark or any of its subsidiaries is or may be
subject, (ii) no statute, rule, regulation or order that has been
enacted, adopted or issued by any governmental agency or, to the
knowledge of Cinemark, that has been proposed by any governmental
body, and (iii) no injunction, restraining order or order of any
nature by a federal or state court or foreign court of competent
jurisdiction to which Cinemark or any of its subsidiaries is or may be
subject or to which the business, assets, or property of Cinemark or
any of its subsidiaries is or may be subject, that, in the case of
clauses (i), (ii) and (iii) above, (A) is required to be disclosed in
the Offering Memorandum and that will not be so disclosed or (B)
could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(xvii) No action has been taken and no statute, rule,
regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Securities or
prevents or suspends the use of the Offering Memorandum; no
injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction has been issued that prevents
the issuance of the Securities or prevents or suspends the sale of the
Securities in any jurisdiction referred to in Section 4(e) hereof; and
every request of any securities authority or agency of any
jurisdiction for additional information has been complied with in all
material respects.
(xviii) There is (i) no significant unfair labor practice
complaint pending against Cinemark or any of its subsidiaries, nor, to
the knowledge of Cinemark, threatened against any of them, before the
National Labor Relations Board, any state or local labor relations
board or any foreign labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against
Cinemark or any of its subsidiaries or, to the knowledge of Cinemark,
threatened against any of them, (ii) no significant strike, labor
dispute, slowdown or stoppage pending against Cinemark or any of its
subsidiaries nor, to the knowledge of Cinemark, threatened against any
of them and (iii) no union organizing or union representation question
existing with respect to the employees of Cinemark
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<PAGE> 11
or any of its subsidiaries. No claim has been filed against Cinemark
or any of its subsidiaries alleging violation of (A) any federal,
state or local law or foreign law relating to discrimination in
hiring, promotion or pay of employees, (B) any applicable wage or hour
laws or (C) any provision of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or the rules and regulations
thereunder, except as could not reasonably be expected to have a
Material Adverse Effect.
(xix) Neither Cinemark nor any of its subsidiaries, nor any
of their respective officers, directors, employees, agents or
affiliates or any other person acting on their behalf has, directly or
indirectly, given or agreed to give any money, gift or similar benefit
to any customer, supplier, employee or agent of a customer or
supplier, official or employee of any governmental agency,
instrumentality of any government or any political party or candidate
for office (domestic or foreign) or other person who was, at the time,
in a position to help or hinder the business of Cinemark or its
subsidiaries (or assist Cinemark or its subsidiaries in connection
with any actual or proposed transaction) which would at the time have
been reasonably likely to subject Cinemark or its subsidiaries to any
damage or penalty in any civil, criminal or governmental litigation or
proceeding (domestic or foreign) except for such damages or penalties,
either individually or in the aggregate, that could not reasonably be
expected to have a Material Adverse Effect.
(xx) Each of Cinemark and its subsidiaries has (A) good
and indefeasible title to all of the properties and assets material to
the business of Cinemark and its subsidiaries taken as a whole as
owned by it, free and clear of all liens, charges, encumbrances and
restrictions (except (i) liens constituting Permitted Liens under the
Indenture and (ii) liens, charges, encumbrances and restrictions that
do not in the aggregate materially detract from the value of such
properties and assets or materially impair the use thereof in the
operation of the business of Cinemark and its subsidiaries, taken as a
whole), (B) peaceful and undisturbed possession under all material
leases to which any of them is a party as lessee and each of which
lease is valid and binding and no default which would have a Material
Adverse Effect exists thereunder, (C) all licenses, certificates,
permits, authorizations, approvals, franchises and other rights from,
and has made all declarations and filings with, all federal, state and
local authorities, all self-regulatory authorities and all courts and
other tribunals (each, an "Authorization") necessary to engage in the
business conducted by any of them in the manner to be described in the
Offering Memorandum, except as could not reasonably be expected to
have a Material Adverse Effect and (D) no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such Authorization. All such Authorizations are valid
and in full force and effect and each of Cinemark and its subsidiaries
is in compliance in all material respects with the terms and
conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having jurisdiction with
respect thereto. All leases to which Cinemark or any of its
subsidiaries is a party are valid and binding and no default by
Cinemark or any such subsidiary, as the case may be, has occurred and
is continuing thereunder and no material defaults by the landlord are
existing under any such lease, except in each case as could not
reasonably be expected to have a Material Adverse Effect.
(xxi) All Federal and other material tax returns required
to be filed by Cinemark or any of its subsidiaries in all
jurisdictions have been so filed. All Federal and other material
taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such
entities or that are due and payable have been paid, other than those
being contested in good faith and for which adequate reserves have
been provided. There are no material proposed additional tax
assessments against Cinemark or any of its subsidiaries, or the
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<PAGE> 12
assets or property of Cinemark or any of its subsidiaries which could
reasonably be expected to, if the assessments were made, have a
Material Adverse Effect.
(xxii) To the knowledge of Cinemark and without independent
verification, the properties of Cinemark and its subsidiaries, taken
as a whole, are structurally sound with no known defects which would
have a Material Adverse Effect, are in operating condition and good
repair (reasonable wear and tear excepted) and are adequate for their
uses.
(xxiii) The Company and its subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or other approvals
would not, singly or in the aggregate, have a Material Adverse Effect
on the Company and its subsidiaries, taken as a whole.
(xxiv) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(xxv) Neither Cinemark nor any of its subsidiaries is an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), or analogous foreign laws and
regulations.
(xxvi) There are no holders of securities of Cinemark or any
of its subsidiaries who, by reason of the execution by Cinemark of
this Agreement or any other Operative Document or the consummation by
Cinemark of the transactions contemplated hereby and thereby, have the
right to request or demand that Cinemark or any of its subsidiaries
register under the Act or analogous foreign laws and regulations
securities held by them.
(xxvii) Cinemark believes that it and each of its
subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect
thereto.
(xxviii) Cinemark and each of its subsidiaries maintains, or
Cinemark maintains on behalf of its subsidiaries, insurance covering
its or their material properties, operations, personnel and
businesses. Cinemark believes that such insurance insures against
such losses and risks as are
11
<PAGE> 13
adequate to protect Cinemark and its subsidiaries and their respective
businesses. Neither Cinemark nor any of its subsidiaries has received
notice from any insurer or agent of such insurer that substantial
capital improvements or other material expenditures will have to be
made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof and will be
outstanding and duly in force on the terms in effect on the date
hereof on commercially reasonable terms.
(xxix) Neither Cinemark nor any of its subsidiaries has (i)
taken, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of Cinemark or any of its
subsidiaries to facilitate the sale or resale of the Notes or (ii)
since January 6, 1998 sold, bid for, purchased or paid any person any
compensation for soliciting purchases of the Notes or paid or agreed
to pay to any person any compensation for soliciting another to
purchase any other securities of Cinemark or any of its subsidiaries.
(xxx) No registration under the Act of the Notes is
required for the sale of the Notes to the Initial Purchasers as
contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Notes in the Exempt Resales are Eligible
Purchasers and (ii) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in
connection with the sale of the Notes to the Initial Purchasers and
the Exempt Resales contained herein. No form of general solicitation
or general advertising was used by Cinemark or any of its subsidiaries
or any of their representatives (although no representation or
warranty is made as to actions taken by the Initial Purchasers and its
representatives) in connection with the offer and sale of any of the
Notes or in connection with Exempt Resales, including, but not limited
to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising. No securities of the
same class as the Notes have been issued and sold by Cinemark or any
of its subsidiaries within the six-month period immediately prior to
the date hereof.
(xxxi) The execution and delivery of this Agreement, the
other Operative Documents and the sale of the Notes to be purchased by
the Eligible Purchasers will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986. The representations made in the
preceding sentence are made in reliance upon and subject to the
accuracy of, and compliance with, the representations and covenants
made or deemed made by the QIBs as will be set forth in the Offering
Memorandum under the caption "Notice to Investors."
(xxxii) The Offering Memorandum, as of its date, and each
amendment or supplement thereto, as of its date, will contain the
information specified in, and meets the requirements of, Rule
144A(d)(4) under the Act.
(xxxiii) Subsequent to the respective dates as of which
information will be given in the Offering Memorandum and up to the
Closing Date, except as will be set forth in the Offering Memorandum,
(A) neither Cinemark nor any of its subsidiaries has incurred any
liabilities or obligations, direct or contingent, which are material,
individually or in the aggregate, to Cinemark and its subsidiaries,
taken as a whole, nor entered into any material transaction not in the
ordinary course of business, (B) there has not been, individually or
in the aggregate, any change or development of which Cinemark is aware
which could reasonably be expected to result in a
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<PAGE> 14
Material Adverse Effect of the type described in clause (a) of such
definition and (C) there has been no dividend or distribution of any
kind declared, paid or made by Cinemark or any of its subsidiaries on
any class of their capital stock.
(xxxiv) None of the execution, delivery and performance of
this Agreement, the issuance and sale of the Securities, the
application of the proceeds from the issuance and sale of the
Securities and the consummation of the transactions contemplated
thereby as set forth in the Offering Memorandum, will violate
Regulations G, T, U or X promulgated by the Board of Governors of the
Federal Reserve System or analogous foreign laws and regulations.
(xxxv) The accountants who have certified or will certify
the financial statements included or to be included as part of the
Offering Memorandum are independent accountants. The annual
historical financial statements of Cinemark to be included in the
Offering Memorandum comply as to form in all material respects with
the requirements applicable to registration statements on Form S-1
under the Act and will present fairly in all material respects the
financial position and results of operations of Cinemark at the
respective dates and for the respective periods indicated. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods presented. The pro forma adjustments and as
adjusted information to be included in the Offering Memorandum will
give effect to assumptions made on a reasonable basis and will present
fairly in all material respects the historical and proposed
transactions contemplated by the Offering Memorandum and this
Agreement. The other financial and statistical information and data
to be included in the Offering Memorandum, historical, as adjusted and
pro forma, will be accurately presented on a basis consistent with the
financial statements to be included in the Offering Memorandum and the
books and records of Cinemark.
(xxxvi) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between or among Cinemark or
any of its subsidiaries and any other person that would reasonably be
expected to give rise to a valid claim against Cinemark or any of its
subsidiaries or the Initial Purchasers for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase
and sale of the Securities.
(xxxvii) After giving effect to the transactions contemplated
by the Offering Memorandum, the Company shall be solvent as determined
in accordance with the applicable provisions of the Texas Business
Corporation Act.
(xxxviii) There exist no conditions that would constitute a
default by Cinemark (or an event which with notice or the lapse of
time, or both, would constitute a default) under any of the Operative
Documents.
(xxxix) Each certificate signed by any officer of Cinemark
and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by
Cinemark to the Initial Purchasers as to the matters covered thereby.
Cinemark acknowledges that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel to Cinemark and counsel to the Initial Purchasers
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
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<PAGE> 15
(b) Each Initial Purchaser, severally and not jointly,
represents, warrants and covenants to Cinemark and agrees that:
(i) Such Initial Purchaser is a QIB as defined in Rule
144A under the Act.
(ii) Such Initial Purchaser (A) is not acquiring the Notes
with a view to any distribution thereof that would violate the Act or
the securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the
Notes only to Eligible Purchasers in reliance on the exemption from
the registration requirements of the Act provided by Rule 144A and
Regulation S.
(iii) No form of general solicitation or general
advertising has been or will be used by such Initial Purchaser or any
of its representatives in connection with the Exempt Resales,
including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(iv) Such Initial Purchaser agrees that, in connection
with the Exempt Resales, it will solicit offers to buy the Notes only
from, and will offer to sell the Notes only to, Eligible Purchasers.
Such Initial Purchaser further agrees (A) that it will offer to sell
the Notes only to, and will solicit offers to buy the Notes only from
(1) QIBs who in purchasing such Notes will be deemed to have
represented and agreed that they are purchasing the Notes for their
own accounts or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are QIBs and (2)
non-U.S. persons outside the United States in reliance on Regulation S
and (B) that such Notes will not have been registered under the Act
and may be resold, pledged or otherwise transferred only (x)(I) to a
person who the seller reasonably believes is a QIB in a transaction
meeting the requirements of Rule 144A, (II) in a transaction meeting
the requirements of Rule 144, (III) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904
under the Act or (IV) in accordance with another exemption from the
registration requirements of the Act (and based upon an opinion of
counsel reasonably acceptable to Cinemark if Cinemark so requests),
(y) to Cinemark, (z) pursuant to an effective registration statement
under the Act and, in each case, in accordance with any applicable
securities laws of any state of the United States or any other
applicable jurisdiction and (C) that the holder will, and each
subsequent holder is required to, notify any purchaser from it of the
security evidenced thereby of the resale restrictions set forth in (B)
above.
(v) Such Initial Purchaser represents and agrees that (A)
it has not offered or sold and prior to the date six months after the
Closing Date will not offer or sell any Notes to persons in the United
Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal
or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer
to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (B) it has complied and will
comply with all applicable provisions of the Financial Services Act
1986 and the Public Offers of Securities Regulations 1995 with respect
to anything done by it in relation to the Notes in, form or otherwise
involving the United Kingdom, and (C) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Notes to a person
who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements)
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<PAGE> 16
(Exemptions) Order 1996 (as amended) or is a person to whom such
document may otherwise lawfully be issued or passed on.
Each Initial Purchaser understands that Cinemark and, for
purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 8 hereof, counsel to Cinemark and counsel to the
Initial Purchasers will rely upon the accuracy and truth of the
foregoing representations and hereby consents to such reliance.
6. INDEMNIFICATION.
(a) Cinemark agrees to indemnify and hold harmless, to the
fullest extent permitted by applicable law, each Initial Purchaser,
each person, if any, who controls any Initial Purchaser within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and the respective officers, directors, partners, employees,
representatives and agents of any Initial Purchaser or any controlling
persons, against any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to reasonable
attorneys' fees and any and all reasonable expenses whatsoever
incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any
and all amounts paid in settlement of any claim or litigation
(collectively, "Losses")), joint or several, to which they or any of
them may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Offering Memorandum, or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
provided, however, that Cinemark will not be liable in any such case
to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission
made in the Offering Memorandum in reliance upon and in conformity
with written information furnished to Cinemark by or on behalf of the
Initial Purchasers expressly for use therein. This indemnity
agreement will be in addition to any liability which Cinemark may
otherwise have, including under this Agreement.
(b) Each Initial Purchaser agrees, severally and not jointly,
to indemnify and hold harmless Cinemark, each person, if any, who
controls Cinemark within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and the respective officers,
directors, partners, employees, representatives and agents of Cinemark
or any controlling persons, against any and all Losses to which they
may become subject under the Act, the Exchange Act or otherwise,
insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Offering Memorandum, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to Cinemark by or on behalf of the Initial
Purchasers expressly for use therein; provided, however, that in no
case shall any Initial Purchaser be liable or responsible under this
subsection (b) for any amount in excess of the
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<PAGE> 17
discounts and commissions received by the Initial Purchaser unless
such Losses are a result of the gross negligence or willful misconduct
of the Initial Purchaser. This indemnity will be in addition to any
liability which any Initial Purchaser may otherwise have, including
under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection,
notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it
may have under this Section 6, except to the extent that it has been
prejudiced in any material respect by such failure, or from any
liability which it may otherwise have). In case any such action is
brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent it may elect by
written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume
the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified
party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless
(i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of
such action and the indemnifying party has agreed in writing to pay
the fees and expenses of such counsel, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such
action within a reasonable time after notice of commencement of the
action, or (iii) such indemnified party or parties shall have
concluded, upon the advice of counsel, that there may be defenses
available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which
case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties),
in any of which events such fees and expenses of counsel shall be
borne by the indemnifying parties; provided, however, that the
indemnifying party under subsection (a) or (b) above, shall only be
liable for the legal expenses of one counsel (in addition to any local
counsel) for all indemnified parties in each jurisdiction in which any
claim or action is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable
for any settlement of any claim or action effected without its prior
written consent; provided, however, that such consent was not
unreasonably withheld.
7. CONTRIBUTION.
In order to provide for contribution in circumstances in which
the indemnification provided for in Section 6 is for any reason held to be
unavailable or is insufficient to hold harmless a party indemnified thereunder,
Cinemark, on the one hand, and the Initial Purchasers, on the other hand, shall
contribute to the aggregate losses, claims, damages, liabilities and expenses
of the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by Cinemark, any contribution received by
Cinemark from persons, other than the Initial Purchasers, who may also be
liable for contribution, including persons who control Cinemark within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act) to which
Cinemark and the Initial Purchasers may be subject, in such proportion as is
appropriate to reflect the relative benefits received by Cinemark, on the one
hand, and the Initial Purchasers, on the other hand, from the offering of the
Notes or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the
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<PAGE> 18
indemnifying party not having received notice as provided in Section 6, in such
proportion as is appropriate to reflect not only the relative benefits referred
to above but also the relative fault of Cinemark, on the one hand, and the
Initial Purchasers, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by Cinemark, on the one hand, and the Initial Purchasers, on
the other hand, shall be deemed to be in the same proportion as (x) the total
proceeds from the offering of Notes (net of discounts and commissions but
before deducting expenses) received by Cinemark, and (y) the discounts and
commissions received by the Initial Purchasers, respectively. The relative
fault of Cinemark, on the one hand, and of the Initial Purchasers, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
Cinemark, on the one hand, or the Initial Purchasers, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Cinemark and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of this
Section 7, (i) in no case shall the Initial Purchasers be required to
contribute any amount in excess of the amount by which the discounts and
commissions applicable to the Notes purchased by the Initial Purchasers
pursuant to this Agreement exceeds the amount of any damages which the Initial
Purchasers have otherwise been required to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 7, each
person, if any, who controls the Initial Purchasers within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and the respective
officers, directors, partners, employees, representatives and agents of the
Initial Purchasers or any controlling persons shall have the same rights to
contribution as the Initial Purchasers, and each person, if any, who controls
Cinemark, within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and the respective officers, directors, partners, employees,
representatives and agents of Cinemark or any controlling persons shall have
the same rights to contribution as Cinemark, subject in each case to clauses
(i) and (ii) of this Section 7. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 7, notify such
party or parties from whom contribution may be sought, but the failure to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 7 or otherwise.
8. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS.
The obligations of the Initial Purchasers to purchase and pay
for the Notes, as provided herein, shall be subject to the following
conditions:
(a) All of the representations and warranties of Cinemark
contained in this Agreement shall be true and correct on the date
hereof and on the Closing Date with the same force and effect as if
made on and as of the date hereof and the Closing Date, respectively.
Cinemark shall have performed or complied with all of the agreements
herein contained and required to be performed or complied with by it
at or prior to the Closing Date.
(b) The Offering Memorandum shall have been prepared in form
and substance satisfactory to the Initial Purchasers and shall have
been printed and copies distributed to the
17
<PAGE> 19
Initial Purchasers in New York as soon as practicable after the date
of this Agreement but not later than 12:00 p.m., New York City time,
on January 13, 1998 or at such later date and time as to which the
Initial Purchasers may agree, and no stop order suspending the
qualification or exemption from qualification of the Notes in any
jurisdiction referred to in Section 4(e) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be
pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which could, as of the Closing Date, reasonably be
expected to have a Material Adverse Effect; no action, suit or
proceeding shall have been commenced and be pending against or
affecting or threatened against, Cinemark or any of its subsidiaries
before any court or arbitrator or any governmental body, agency or
official that, if adversely determined, could reasonably be expected
to result in a Material Adverse Effect; and no stop order shall have
been issued preventing the use of the Offering Memorandum, or any
amendment or supplement thereto, or which could reasonably be expected
to have a Material Adverse Effect.
(d) Since the dates as of which information is given in the
Offering Memorandum and other than as set forth in the Offering
Memorandum, (i) there shall not have been any material and adverse
change or any development that is reasonably likely to result in a
material and adverse change in the long-term debt, or material
increase in the short-term debt, of Cinemark or any of its
subsidiaries from that set forth in the Offering Memorandum, (ii) no
dividend or distribution of any kind shall have been declared, paid or
made by Cinemark or any of its subsidiaries on any class of its
capital stock, and (iii) neither Cinemark nor any of its subsidiaries
shall have incurred any liabilities or obligations other than
contracts entered into in the ordinary course of business, direct or
contingent, that individually or in the aggregate could have a
Material Adverse Effect and that are required to be disclosed on a
balance sheet or notes thereto in accordance with generally accepted
accounting principles and are not disclosed on the latest balance
sheet or notes thereto included in the Offering Memorandum. Since the
date hereof and since the dates as of which information is given in
the Offering Memorandum, there shall not have occurred any material
adverse change in the properties, business, results of operations,
condition (financial or otherwise), affairs or prospects of Cinemark
and its subsidiaries taken as a whole.
(e) The Initial Purchasers shall have received a certificate,
dated the Closing Date, signed on behalf of Cinemark by its president
and chief operating officer and its chief financial officer (i)
confirming as of the Closing Date, the matters set forth in paragraphs
(a), (b), (c) and (d) of this Section 8, (ii) stating that on the
Closing Date, Cinemark will use the proceeds of the offering and sale
of the Notes as set forth in the Offering Memorandum, and (iii)
stating that as of the Closing Date, no facts have come to such
officers' attention that would cause such officers to believe that the
Offering Memorandum, as of its date or the Closing Date, contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(f) The Initial Purchasers shall have received on the Closing
Date (i) the opinion, dated the Closing Date, of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., Dallas, Texas, counsel to Cinemark,
substantially to the effect set forth in Exhibit B hereto and (ii) a
statement of Michael D. Cavalier, General Counsel of Cinemark, to the
effect set forth in Exhibit C hereto. In providing such opinion, Akin,
Gump, Strauss, Hauer & Feld, L.L.P., shall opine as to the federal
laws of
18
<PAGE> 20
the United States, the laws of the State of Texas and, to the extent
set forth therein, the laws of the State of New York.
(g) The Initial Purchasers shall have received on the Closing
Date the opinion, dated the Closing Date, of Haynes & Boone, counsel
to the Trustee, to the effect that (i) the Trustee is a national
banking association or state chartered bank or trust company and is
duly incorporated and validly existing in good standing under the laws
of the jurisdiction in which it is incorporated, (ii) the Trustee has
the corporate power and authority necessary to enter into the
Indenture and authenticate the Securities as Trustee thereunder, (iii)
the Indenture has been duly and validly authorized, executed and
delivered by the Trustee and is the legal, valid and binding agreement
of the Trustee enforceable against the Trustee in accordance with its
terms and (iv) the Notes have been duly authenticated and delivered by
the Trustee pursuant to the terms of this Agreement and the Indenture.
(h) The Initial Purchasers shall have received on the Closing
Date the opinion, dated the Closing Date, of Simpson Thacher &
Bartlett (a partnership which includes professional corporations),
counsel to the Initial Purchasers, covering such matters as are
customarily covered in such opinions.
(i) Prior to the printing of the Offering Memorandum and at
the Closing Date the Initial Purchasers shall have received from
Deloitte & Touche, L.L.P., independent public accountants for
Cinemark, dated as of the date of this Agreement and as of the Closing
Date, customary comfort letters addressed to the Initial Purchasers
and in form and substance previously agreed upon by the Initial
Purchasers and counsel to the Initial Purchasers with respect to the
financial statements and certain financial information of Cinemark and
its subsidiaries contained in the Offering Memorandum.
(j) Cinemark and the Trustee shall have entered into the
Indenture and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(k) Cinemark shall have entered into the Registration Rights
Agreement and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(l) Simpson Thacher & Bartlett shall have been furnished with
such documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in this Section 8 and in order to
evidence the accuracy, completeness or satisfaction in all material
respects of any of the representations, warranties or conditions
herein contained.
(m) Prior to the Closing Date, Cinemark shall have furnished
to the Initial Purchasers such further information, certificates and
documents as the Initial Purchasers may reasonably request.
All opinions, certificates, letters and other documents
required by this Section 8 to be delivered by Cinemark will be in compliance
with the provisions hereof only if they are reasonably satisfactory in form and
substance to the Initial Purchasers and their counsel. Cinemark will furnish
the Initial Purchasers with such conformed copies of such opinions,
certificates, letters and other documents as they shall reasonably request.
19
<PAGE> 21
9. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS.
All representations and warranties, covenants and agreements
of the Initial Purchasers and Cinemark contained in this Agreement, including
without limitation, the agreements contained in Sections 10(d) and 13, the
indemnity agreements contained in Section 6 and the contribution agreements
contained in Section 7, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Initial Purchasers,
any controlling person thereof or by or on behalf of Cinemark or any
controlling person thereof, and shall survive delivery of and payment for the
Notes to and by the Initial Purchasers. The representations contained in
Section 5 and the agreements contained in Sections 6, 7 and 10(d) and 12 shall
survive the termination of this Agreement, including any termination pursuant
to Section 10.
10. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate
this Agreement at any time prior to the Closing Date by notice to Cinemark from
the Initial Purchasers, without liability (other than with respect to Sections
6 and 7) on the Initial Purchasers' part to Cinemark if, on or prior to such
date, (i) Cinemark shall have failed, refused or been unable to perform in any
material respect any agreement on its part to be performed hereunder, (ii) any
other condition to the obligations of the Initial Purchasers hereunder as
provided in Section 8 is not fulfilled when and as required in any material
respect, (iii) in the reasonable judgment of the Initial Purchasers, any
material adverse change shall have occurred since the respective dates as of
which information is given in the Offering Memorandum in the condition
(financial or otherwise), business, properties, assets, liabilities, prospects,
net worth, results of operations or cash flows of Cinemark and its
subsidiaries, taken as a whole, other than as set forth in the Offering
Memorandum, or (iv)(A) any domestic or international event or act or occurrence
has materially disrupted, or in the opinion of the Initial Purchasers will in
the immediate future materially disrupt, the market for Cinemark's securities
or for securities in general; or (B) trading in securities generally on the New
York Stock Exchange, the American Stock Exchange or the Nasdaq National Market
shall have been suspended or materially limited, or minimum or maximum prices
for trading shall have been established, or maximum ranges for prices for
securities shall have been required, on such exchange, or by such exchange or
other regulatory body or governmental authority having jurisdiction; or (C)
trading of any securities of Cinemark shall have been suspended on any exchange
or in any over-the-counter market; or (D) a banking moratorium shall have been
declared by federal or state authorities, or a moratorium in foreign exchange
trading by major international banks or persons shall have been declared; or
(E) there is an outbreak or escalation of armed hostilities involving the
United States on or after the date hereof, or if there has been a declaration
by the United States of a national emergency or war, the effect of which shall
be, in the Initial Purchasers' judgment, to make it inadvisable or
impracticable to proceed with the offering or delivery of the Notes on the
terms and in the manner contemplated in the Offering Memorandum; or (F) there
shall have been such a material adverse change in general economic, political
or financial conditions or if the effect of international conditions on the
financial markets in the United States shall be such as, in the Initial
Purchasers' judgment, makes it inadvisable or impracticable to proceed with the
offering or delivery of the Notes as contemplated thereby; or (G) (1) there
shall have occurred a downgrading in the rating accorded the Notes by any
"nationally recognized statistical rating organization" as that term is defined
by the Commission for purposes of Rule 436(g)(2) of the rules and regulations
of the Commission under the Act or (2) any such organization shall have
publicly announced that it has
20
<PAGE> 22
under surveillance or review (other than an announcement with positive
implications of a possible upgrading), its rating of the Notes.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone, telex, telephonic facsimile, or telegraph, confirmed in
writing by letter within three days thereof.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (other than a termination pursuant to Section 11(b)(iv))
or if the sale of the Notes provided for herein is not consummated because any
condition to the obligations of the Initial Purchasers set forth herein is not
satisfied or because of any refusal, inability or failure on the part of
Cinemark to perform any agreement herein or comply with any provision hereof,
Cinemark will, subject to demand by the Initial Purchasers, reimburse the
Initial Purchasers for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of Initial Purchasers' counsel), incurred by the
Initial Purchasers in connection herewith.
11. DEFAULTING INITIAL PURCHASERS.
(a) If, on the Closing Date, any Initial Purchaser defaults
in the performance of its obligations under this Agreement, the remaining
non-defaulting Initial Purchaser may make arrangements for the purchase of the
Notes by other persons satisfactory to Cinemark and the non-defaulting Initial
Purchaser, but if no such arrangements are made within 36 hours after such
default, this Agreement shall terminate without liability on the part of the
non-defaulting Initial Purchaser or Cinemark, except that Cinemark will
continue to be liable for the payment of expenses only to the extent set forth
in Sections 11(d) and 13(a) and except that the provisions of Sections 6 and 7
shall not terminate and shall remain in effect. As used in this Agreement, the
term "Initial Purchaser" includes, for all purposes of this Agreement unless
the context otherwise requires, any party not listed in Schedule I hereto who,
pursuant to this Section 12, purchases the Notes which a defaulting Initial
Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Initial Purchaser of any liability it may have to Cinemark or the
non-defaulting Initial Purchaser for damages caused by its default. If other
persons are obligated or agree to purchase the Notes of a defaulting Initial
Purchaser, either the non-defaulting Initial Purchaser or Cinemark may postpone
the Closing Date for up to seven full business days in order to effect any
changes that in the opinion of counsel for Cinemark or counsel for the Initial
Purchasers may be necessary in the Offering Memorandum or in any other document
or arrangement and Cinemark agrees to promptly make any amendment or supplement
to the Offering Memorandum that effects any such changes.
12. FEES AND EXPENSES.
(a) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is terminated,
Cinemark agrees to pay all costs, expenses, fees and taxes in connection with
this Agreement and the transactions contemplated hereby and by the other
Operative Documents, including without limitation all costs, expenses, fees and
taxes relating to: (i) the preparation, printing, filing and distribution of
the Offering Memorandum (including, without limitation, financial statements)
and all amendments and supplements thereto required pursuant hereto, (ii) the
preparation (including, without limitation, duplication costs) and delivery of
this Agreement, the other Operative Documents, all preliminary and final Blue
Sky memoranda and all other agreements, memoranda, correspondence and other
documents prepared and delivered in connection herewith and with the Exempt
Resales, (iii) the issuance, transfer and delivery by Cinemark of the
Securities to the Initial Purchasers, (iv) the qualification or registration of
the Securities for offer and sale under the securities or
21
<PAGE> 23
Blue Sky laws of the jurisdictions referred to in paragraph (e) above
(including, without limitation, the cost of printing and mailing a preliminary
and final Blue Sky Memorandum and the reasonable fees and disbursements of
counsel to the Initial Purchasers relating thereto), (v) furnishing such copies
of the Offering Memorandum, and all amendments and supplements thereto, as may
be reasonably requested for use in connection with Exempt Resales, (vi) the
preparation of certificates for the Securities (including, without limitation,
printing and engraving thereof), (vii) the fees, disbursements and expenses of
counsel to Cinemark and its independent public accountants, (viii) all expenses
and listing fees in connection with the application for quotation of the Notes
in the PORTAL market, (ix) all fees and expenses (including fees and expenses
of counsel to Cinemark) of Cinemark in connection with the approval of the
Securities by DTC for "book-entry" transfer, (x) rating the Securities by
rating agencies, (xi) the fees and expenses of the Trustee and its counsel in
connection with the Indenture and the Securities, (xii) the performance by
Cinemark of its other obligations under this Agreement and the other Operative
Documents and (xiii) other expenses incurred by Cinemark in connection with the
marketing and sale of the Securities.
(b) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is terminated,
and except as otherwise provided in Section 11(d), the Initial Purchasers agree
to pay all of their out-of-pocket expenses not specifically provided for in
Section 13(a) hereof, including the fees and expenses of Initial Purchasers'
counsel.
13. NOTICE.
All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, or telexed, telegraphed or telecopied
and confirmed in writing to Simpson Thacher & Bartlett, 425 Lexington Avenue,
New York, New York 10017, Attention: Gary L. Sellers, Esq., telecopy number:
(212) 455-2502; and if sent to Cinemark, shall be mailed, delivered or telexed,
telegraphed or telecopied and confirmed in writing to Cinemark USA, Inc., 7502
Greenville Avenue, Suite 800, Dallas, Texas 75231, Attention: Jeffrey J.
Stedman and Michael D. Cavalier, telecopy number: (214) 369-9972, with a copy
to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1700 Pacific Avenue, Suite 4100,
Dallas, Texas 75201, Attention: Terry M. Schpok, P.C., telecopy number:
(214) 969-4343; provided, however, that any notice pursuant to Sections 6 or 7
shall be mailed, delivered or telexed, telegraphed or telecopied and confirmed
in writing within three days thereof.
14. PARTIES.
This Agreement shall inure solely to the benefit of, and shall
be binding upon, the Initial Purchasers, Cinemark and the controlling persons
and agents referred to in Sections 6 and 7, and their respective successors and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained. The term "successors and assigns"
shall not include a purchaser, in its capacity as such, of the Notes from the
Initial Purchasers.
15. CONSTRUCTION.
This Agreement shall be construed in accordance with the
internal laws of the State of New York. Time is of the essence in this
Agreement.
22
<PAGE> 24
16. CAPTIONS.
The captions included in this Agreement are included solely
for convenience of reference and are not to be considered a part of this
Agreement.
23
<PAGE> 25
17. COUNTERPARTS.
This Agreement may be executed in various counterparts which
together shall constitute one and the same instrument.
Very truly yours,
CINEMARK USA, INC.
By: /s/ JEFFREY J. STEDMAN
--------------------------------
Name: Jeffrey J. Stedman
Title: Senior Vice President
Accepted and agreed to as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
By: /s/ JOEL P. FELDMANN
---------------------------
Name: Joel P. Feldman
Title: Managing Director
BANCAMERICA ROBERTSON STEPHENS
By: /s/ BRUCE R. THOMPSON
---------------------------
Name: Bruce R. Thompson
Title: Managing Director
24
<PAGE> 26
SCHEDULE I
<TABLE>
<CAPTION>
Aggregate Principal
Initial Purchasers Amount of Notes
- ------------------ ---------------
<S> <C>
Morgan Stanley & Co. Incorporated $ 94,500,000
BancAmerica Robertson Stephens 10,500,000
----------
Total $105,000,000
</TABLE>
S-1
<PAGE> 1
EXHIBIT 4.1
================================================================================
CINEMARK USA, INC.
8-1/2% SENIOR SUBORDINATED NOTES DUE 2008
-----------------
INDENTURE
Dated as of January 14, 1998
-----------------
U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
-----------------
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3,7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6,7.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6,11.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3,11.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5, 11.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.3. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . 15
Section 1.4. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2
THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.3. Trustee, Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.4. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.5. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.7. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.8. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.9. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.13. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.14. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 3
REDEMPTION AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . 27
Section 3.1. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.2. Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.4. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.5. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.6. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.7. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.8. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 4
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.1. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.3. Provisions of Reports and Other Information . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.4. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.6. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.7. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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Section 4.8. Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.9. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.10. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.11. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.12. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.13. Limitation on Layering Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.14. Offer to Repurchase Upon Change of Control . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.15. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.16. Covenant with Respect to Cinemark International and its Subsidiaries . . . . . . . . . . . 44
Section 4.17. Limitation on Restrictive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 5
SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.1. Merger, Consolidation, or Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.2. Successor Company Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 6
DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.7. Rights of Holders of Notes to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 7
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.3. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.6. Reports by Trustee to Holders of the Notes . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.9. Successor Trustee by Merger, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 8
DEFEASANCE AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . 54
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Section 8.2. Legal Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.3. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.4. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.5. Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.6. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.7. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.8. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . . . . . . . . . . . . 58
Section 9.1. Without Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.2. With Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.3. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.4. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.5. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.6. Trustee to Sign Amendments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 9.7. Payments for Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 10
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.1. Agreement to Subordinate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.2. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.3. Default on Designated Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.4. Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.5. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.6. Notice by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.7. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.8. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.9. Subordination May Not Be Impaired by the Company . . . . . . . . . . . . . . . . . . . . . 63
Section 10.10. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.11. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.12. Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE 11
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.1. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.3. Communication by Holders of Notes with Other Holders of Notes . . . . . . . . . . . . . . . 66
Section 11.4. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . 67
Section 11.5. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.6. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.7. No Personal Liability of Directors, Officers, Employees and Others. . . . . . . . . . . . . 67
Section 11.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.9. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.10. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.12. Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.13. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
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EXHIBITS
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Exhibit A FORM OF NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B CERTIFICATE OF TRANSFEROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Exhibit C FORM OF REGULATION S CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Exhibit D FORM OF RULE 144A CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
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This INDENTURE, dated as of January 14, 1998, is by and between
Cinemark USA, Inc., a Texas corporation (the "Company"), and U.S. Trust Company
of Texas, N.A., as trustee (the "Trustee").
The parties listed above agree as follows for the benefit of
each other and for the equal and ratable benefit of the Holders of the 8-1/2%
Senior Subordinated Notes due 2008, Series A (the "Series A Notes") and the
8-1/2% Senior Subordinated Notes due 2008, Series B (the "Series B Notes" and,
together with the Series A Notes, the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1. Definitions.
"Acquired Indebtedness" of any particular Person means
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such particular Person or assumed by
such particular Person in connection with the acquisition of assets from any
other Person, and not incurred by such other Person in connection with, or in
contemplation of, such other Person merging with or into such particular Person
or becoming a Subsidiary of such particular Person or such acquisition.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar or Paying Agent.
"Applicable Law", except as the context may otherwise require,
means all applicable laws, rules, regulations, ordinances, judgments, decrees,
injunctions, writs and orders of any court or governmental or congressional
agency or authority and rules, regulations, orders, licenses and permits of any
United States federal, state, municipal, regional, or other governmental body,
instrumentality, agency or authority.
"Asset Disposition" means any sale, lease, conveyance,
transfer or other disposition (or series of related sales, leases, conveyances,
transfers or dispositions) of any Capital Stock of a Restricted Subsidiary of
the Company (whether or not upon issuance), or of any Capital Stock of Cinemark
International by the Company (but not the issuance and sale of Capital Stock by
Cinemark International), or of any other property or other assets (each
referred to for the purposes of this definition as a "disposition") by the
Company or any of its Restricted Subsidiaries, whether for cash or other
consideration, other than (i) a disposition by a Restricted Subsidiary of the
Company to the Company or a Wholly Owned Subsidiary of the Company that is a
Restricted Subsidiary, (ii) a disposition by the Company to a Wholly Owned
Subsidiary of the Company that is a Restricted Subsidiary, (iii) a disposition
that is a Permitted Investment or a Restricted Payment not prohibited by
Section 4.7 (to the extent such Permitted Investment or Restricted Payment may
be deemed to constitute an Asset
<PAGE> 8
Disposition), (iv) dispositions of inventory in the ordinary course of
business, (v) a disposition pursuant to Section 5.1, (vi) exchanges of theatre
properties that comply with the requirements described in Section 4.10(f),
provided that payment of any Other Consideration shall, to the extent provided
therein, be treated as an Asset Disposition, (vii) a designation of a
Restricted Subsidiary as an Unrestricted Subsidiary, if the Company elects to
treat such designation as an Investment and not as an Asset Disposition, or
(viii) a disposition of Capital Stock, property or assets in a single
transaction or a series of related transactions (other than dispositions of the
type described in clauses (i) through (vii) above) having a Fair Market Value
of less than $2 million. For purposes of this definition, "Fair Market Value"
of any Capital Stock, property or other assets means the fair market value of
such Capital Stock, property or other assets at the time of disposition, which
in the case of any disposition or series of related dispositions having an
aggregate fair market value of $2 million or more shall be determined in good
faith (taking into account, without limitation, any assumption of indebtedness
in connection with such disposition) by resolution of the Board of Directors.
Notwithstanding any provision of this Indenture to the contrary, the expiration
or non-renewal of any lease of theatre properties or equipment at the normal
expiration date thereof without payment to the Company or any of its Restricted
Subsidiaries of consideration therefor shall not constitute an Asset
Disposition.
"Asset Disposition Expenses" shall have the meaning assigned
to such term in the definition of the term "Net Proceeds."
"Bankruptcy Law" means Title 11, United States Code, as may be
amended from time to time, or any similar federal or state law for the relief
of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Saturday, Sunday,
public holiday or day on which banking institutions in New York (or, with
respect to any payments or transfers to be made by the Trustee or any Agent, as
applicable, in the city where such Trustee or Agent is located) are authorized
or obligated by law or executive order to close.
"Capitalized Lease Obligations" means the capitalized amount
of the rental obligations of any Person under any lease of any property
(whether real, personal or mixed) which, in accordance with GAAP, is required
to be capitalized on the balance sheet of such Person.
"Capital Stock" of any Person means (i) any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock and any warrants, options and similar rights to acquire
such capital stock, (ii) in the case of a partnership, partnership interests
(whether general or limited) and (iii) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash" means money or currency or a credit balance in a
Deposit Account.
"Cash Equivalents" means (i) direct obligations of the United
States of America or any agency thereof having maturities of not more than one
year from the date of acquisition, (ii) time deposits and certificates of
deposit of any domestic commercial bank of recognized standing having capital
and surplus in excess of $500 million, with maturities of not more than one
year from the date of acquisition, (iii) repurchase obligations issued by any
bank described in clause (ii) above with a term not to exceed 30 days; (iv)
commercial paper rated at least A-1 or the
2
<PAGE> 9
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's,
in each case maturing within one year after the date of acquisition and (v)
shares of any money market mutual fund, or similar fund, in each case having
assets in excess of $500 million, which invests predominantly in investments of
the types described in clauses (i) through (iv) above.
"Cedel Bank" means Cedel Bank, societe anonyme.
"Change of Control" means (i) the acquisition, including
through merger, consolidation or otherwise, by any Person or any Persons acting
together which would constitute a "group" (a "Group") for purposes of Section
13(d) of the Exchange Act, together with all affiliates and associates (as
defined in Rule 12b-2 under the Exchange Act) thereof, of direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of (A) the outstanding shares of Common Stock of the Company or (B)
the total voting power of all classes of Capital Stock of the Company entitled
to vote generally in the election of directors, or (ii) the election by any
Person or Group, together with all affiliates and associates thereof, of a
sufficient number of its or their nominees to the Board of Directors such that
such nominees, when added to any existing directors remaining on such Board of
Directors after such election who are affiliates or associates of such Person
or Group, shall constitute a majority of such Board of Directors; provided,
however, that, for purposes of this definition, the terms "Person" and "Group"
shall be deemed not to include (i) the Company, (ii) any Restricted Subsidiary
of the Company that is a Wholly Owned Subsidiary, (iii) Lee Roy Mitchell or
Tandy Mitchell, or any descendant of Lee Roy Mitchell or the spouse of any such
descendant, the estate of Lee Roy Mitchell, Tandy Mitchell, any descendant of
Lee Roy Mitchell or the spouse of any such descendant or any trust or other
arrangement for the benefit of Lee Roy Mitchell, Tandy Mitchell, any descendant
of Lee Roy Mitchell or the spouse of any such descendant (collectively, the
"Mitchell Family"), (iv) any group which includes any member or members of the
Mitchell Family if a majority of the Capital Stock of the Company held by such
group is beneficially owned (including the power to vote such Capital Stock of
the Company) by such member or members or by one or more affiliates at least
80% of the equity interests of which are owned by such member or members or (v)
Cypress Merchant Banking Partners L.P. or Cypress Pictures Ltd., and provided,
further, that, the term "Change of Control" shall be deemed not to include any
transaction or series of transactions that results in the Capital Stock of the
Company being held by one or more Persons if the beneficial ownership, direct
or indirect, of the Company after such transaction or series of transactions is
substantially the same as the beneficial ownership, direct or indirect, of the
Company prior to such transaction or series of transactions.
"Cinemark International" means Cinemark International, Inc., a
Texas corporation.
"Cinemark International Management Agreement" means the
Management Agreement, dated as of June 10, 1992, between the Company and
Cinemark International, as such agreement may be amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof and
thereof.
"Commission" or "SEC" means the Securities and Exchange
Commission, and any successor thereto.
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
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<PAGE> 10
"Consolidated EBITDA" of any Person means, for any period
(without duplication), (i) the sum of (A) Consolidated Net Income, (B)
Consolidated Interest Expense, (C) provisions for taxes based on or calculated
with respect to income, (D) depreciation expense, (E) amortization expense, and
(F) all other non-cash items reducing Consolidated Net Income, less all
non-cash items increasing Consolidated Net Income, minus (ii) any decrease in
deferred lease expenses, all as determined on a consolidated basis for such
Person and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" of any Person means, for any
period, without duplication, the total interest expense of such Person and its
Restricted Subsidiaries determined on a consolidated basis in accordance with
GAAP, including (i) non-cash, payable-in-kind interest, (ii) interest expense
attributable to capital leases, (iii) amortization of debt discount and debt
issue cost (excluding related legal and accounting fees), but only with respect
to transactions consummated after the Start Date, (iv) commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, (v) net costs under Hedging Obligations (including
amortizations of discount), (vi) preferred stock dividends in respect of
preferred stock of Restricted Subsidiaries of such Person, other than
payable-in-kind dividends in respect of preferred stock that is not
Disqualified Stock, held by Persons other than such Person or one of its Wholly
Owned Subsidiaries that is a Restricted Subsidiary, and (vii) dividends in
respect of Disqualified Stock of such Person.
"Consolidated Net Income" of any Person means, for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
however, including, in the case of the Company and its Restricted Subsidiaries,
only those management fees actually received by the Company from its
Unrestricted Subsidiaries, and excluding amortization of debt discount and debt
issue costs with respect to transactions consummated on or prior to the Start
Date, provided that (i) accrued but unpaid compensation expenses related to any
stock appreciation or stock option plans shall not be deducted until such time
as such expenses result in a cash expenditure, (ii) compensation expenses
related to tax payment plans implemented by the Company from time to time in
connection with the exercise and/or repurchase of stock options shall not be
deducted from Net Income to the extent of the related tax benefits arising
therefrom, (iii) the Net Income of any Person that is not a Restricted
Subsidiary of such Person or that is accounted for by such Person by the equity
method of accounting shall not be included in such Consolidated Net Income,
except that the Company's equity in the Net Income of any such Person for any
such period or any previous period shall be so included only up to the
aggregate amount of cash dividends or distributions paid to the Company or one
of its Restricted Subsidiaries, and (iv) the Net Income (if positive) of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded. For purposes of this
definition, "Net Income" of any Person means, for any period, the net income
(or loss) of such Person determined in accordance with GAAP, excluding,
however, from the determination (i) any extraordinary loss resulting from early
extinguishment of debt on or prior to the Start Date, (ii) any net gain or loss
from any extraordinary item (net of all related taxes, fees, costs and
expenses), (iii) any net gain or loss (net of all related taxes and Asset
Disposition Expenses) realized upon the sale or other disposition during such
period (including without limitation dispositions pursuant to sale and
leaseback transactions) of any real property, equipment or other asset of such
Person, which is not sold or otherwise disposed of in the ordinary course of
business, or of any Capital Stock of such Person or a Restricted Subsidiary of
such Person, and (iv) the cumulative effect of changes in accounting
principles.
"Consolidated Net Worth" of any Person means, as of any date,
the amount which, in accordance with GAAP, would be set forth under the caption
"Shareholders' Equity" (or any like
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<PAGE> 11
caption) on a consolidated balance sheet of such Person and its Restricted
Subsidiaries, less amounts attributable to Disqualified Stock of such Person or
any of its Restricted Subsidiaries.
"Consolidated Tangible Assets" of any Person means, as of any
date, the amount which, in accordance with GAAP, would be set forth under the
caption "Total Assets" (or any like caption) on a consolidated balance sheet
of such Person and its Restricted Subsidiaries, less all intangible assets,
including, without limitation, goodwill, organization costs, patents,
trademarks, copyrights, franchises, and research and development costs.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.2 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facility" means that certain First Amended and
Restated Reducing Revolving Credit Agreement, dated as of December 12, 1996,
among the Company, the financial institutions from time to time parties
thereto, and Bank of America National Trust and Savings Association, as agent
for such financial institutions, and the various ancillary documents provided
for therein, as the same may be amended, extended, increased, renewed,
restated, supplemented or otherwise modified (in whole or in part, and without
limitation as to amount, terms, conditions, covenants and other provisions)
from time to time, and any agreement or agreements governing Indebtedness
incurred to refinance, replace, restructure or refund such agreements in whole
or in part from time to time (whether with the original agent and lenders or
other agents and lenders or otherwise, and whether provided for under the
original Credit Facility or otherwise).
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator, custodian or similar official under any Bankruptcy Law.
"Default" means any event, act or condition which is, or after
notice or passage of time or both would be, an Event of Default.
"Definitive Notes" means Notes that are in the form of the
Notes attached hereto as Exhibit A that do not include the paragraph called for
by footnote 1 or the schedule called for by footnote 3 thereof.
"Deposit Account" means a demand, savings, passbook, money
market or like account with a commercial bank, savings and loan association or
like organization or a government securities dealer, other than an account
evidenced by a negotiable certificate of deposit.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.3
hereof as the Depositary with respect to the Notes, until a successor shall
have been appointed and become such pursuant to the applicable provision of
this Indenture, and, thereafter, "Depositary" shall mean or include such
successor.
"Designated Senior Indebtedness" means (i) the Credit Facility
and all Indebtedness thereunder and (ii) any other Senior Indebtedness issued
after the Start Date and permitted under the terms of this Indenture, the
principal amount of which is $10 million or more and that has been designated
by the Company as Designated Senior Indebtedness.
"Disqualified Stock" of any Person means any Capital Stock of
such Person that, by its terms (or by the terms of any security into which it
is convertible or for which it is exercisable,
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<PAGE> 12
redeemable or exchangeable), matures, or is mandatorily redeemable, pursuant to
a sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part (but only to the extent of such part), on
or prior to the Stated Maturity of the Notes.
"EBITDA Ratio" of any Person means the ratio of (i) the
aggregate amount of Consolidated EBITDA of such Person for the four full fiscal
quarters immediately prior to the date of the transaction giving rise to the
need to calculate the EBITDA Ratio (the "Determination Date") to (ii) the
aggregate Consolidated Interest Expense which such Person shall accrue during
the fiscal quarter in which the Determination Date occurs and the three fiscal
quarters immediately subsequent to such fiscal quarter, assuming that the
Consolidated Interest Expense shall accrue on the amount of such Person's
Indebtedness on the Determination Date, including any Indebtedness proposed to
be incurred on such date (as though all such Indebtedness was incurred on the
first day of the quarter in which the Determination Date occurred), but
specifically excluding Indebtedness proposed to be repaid or defeased (or with
respect to the defeasance of which a deposit satisfying the defeasance
requirements of such Indebtedness has irrevocably been made) on such date (as
though all such Indebtedness was repaid on the first day of the quarter in
which the Determination Date occurred); provided that if during the
four-quarter period referred to in clause (i) above, the Person for which the
EBITDA Ratio is being determined or any of its Restricted Subsidiaries shall
have acquired any assets other than assets acquired as a result of capital
expenditures made in the ordinary course of business of such Person, the EBITDA
Ratio of such Person as of such Determination Date shall be calculated on a pro
forma basis, as if such acquisition had occurred at the beginning of such
four-quarter period. For purposes of this definition, interest on Indebtedness
determined on a fluctuating basis for periods succeeding the Determination Date
shall be calculated as if the rate in effect on the Determination Date had been
the applicable rate for the entire period, taking into account any Hedging
Obligations applicable to such Indebtedness.
"Equity Offering" means either (i) a bona fide underwritten
sale to the public of Common Stock of the Company or a Parent pursuant to a
registration statement (other than a Form S-8 or any other form relating to
securities issuable under any employee benefit plan of the Company) that is
declared effective by the Commission, or (ii) a privately negotiated sale of
Common Stock of the Company or a Parent by the Company or such Parent, as the
case may be, to a Person that, immediately prior to the time of such sale, is
not an Affiliate of the Company or such Parent, in each case completed
following the Start Date and resulting in aggregate gross proceeds to the
Company or such Parent of at least $20 million; provided, that in the case of
any such sale of Common Stock of a Parent, (x) the net proceeds of such sale
shall be contributed within 30 days by such Parent to the Company or (y) the
Parent shall use such proceeds to purchase Capital Stock of the Company that is
not Disqualified Stock.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Exchange Notes" means the Series B Notes to be issued by the
Company upon the expiration of the Exchange Offer pursuant to the terms of the
Registration Rights Agreement, containing terms identical in all material
respects to the Series A Notes (except that (i) the transfer restrictions
thereon shall be eliminated (other than as may be imposed by state securities
laws) and (ii) there will be no provision for the payment of Liquidated
Damages).
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<PAGE> 13
"Exchange Offer" means, subject to the terms of the
Registration Rights Agreement, the offer by the Company to the Holders of the
opportunity to exchange their Series A Notes for Exchange Notes pursuant to a
registration statement filed with the Commission.
"Existing Unrestricted Subsidiaries" means Cinemark
International and its Subsidiaries.
"50% Entity" shall have the meaning assigned to such term in
the definition of the term "Subsidiary."
"GAAP" means generally accepted accounting principles as
applied in the United States set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession of the United
States, which are applicable as of the date of determination; provided that the
definitions contained in this Indenture and all ratios and calculations
contained in the covenants contained herein shall be determined in accordance
with GAAP as in effect and applied by the Company as of the Start Date,
consistently applied; provided, further, that in the event of any such change
in GAAP or in any change by the Company in GAAP applied that would result in
any change in any such ratio or calculation, the Company shall deliver to the
Trustee each time any such ratio or calculation is required to be determined or
made, an Officer's Certificate setting forth the computations showing the
effect of such change or application on such ratio or calculation.
"Global Notes" has the meaning specified in 2.1(a).
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America or any agency or
instrumentality thereof for the payment of which guarantee or obligations the
full faith and credit of the United States is pledged.
"guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
participation arrangements, by agreement to keep well, or to maintain financial
statement conditions or otherwise), (ii) to purchase, sell or lease (as lessee
or lessor) property, or to purchase or sell services, primarily for the purpose
of enabling such other Person to make payment of such Indebtedness, (iii) to
supply funds to or in any other manner invest in such other Person (including
any agreement to pay for property or services irrespective of whether such
property is received or such services are rendered), or (iv) entered into for
the purpose of assuring the obligee of such Indebtedness in any other manner of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided that the term "guarantee" shall not include (i)
endorsements for collection or deposit in the ordinary course of business, and
(ii) leases entered into in the ordinary course of business.
"Hedging Obligation" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index swap
or option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing)
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<PAGE> 14
or any combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Holder" or "Securityholder" means a Person in whose name a
Note is registered on the Register.
"Indebtedness" of any Person means, at any date, and without
duplication, any obligation of such Person or its Restricted Subsidiaries for
or in respect of: (i) money borrowed (whether or not for a cash consideration
and whether or not the recourse of the lender is to the whole of the assets of
such Person or only a portion thereof) and premiums (if any) and capitalized
interest (if any) in respect thereof; (ii) any debenture, bond, note or similar
instrument (whether or not issued for a cash consideration), if it would appear
as a liability on a balance sheet of such Person prepared in accordance with
GAAP; (iii) any letter of credit (other than in respect of Trade Payables),
bankers' acceptance or note purchase facility or any liability with respect to
any recourse receivables purchase, factoring or discounting arrangement; (iv)
Capitalized Lease Obligations (whether in respect of buildings, machinery,
equipment or otherwise), except any such obligation that represents a Trade
Payable; (v) any deferred purchase or conditional sale agreement or arrangement
representing the deferred and unpaid balance of the purchase price of any
property (including pursuant to financing leases), except any such balance
which represents a Trade Payable; (vi) all obligations to purchase, redeem,
retire, defease or otherwise acquire for value any Disqualified Stock of such
Person (or any warrants, rights or options to acquire such Disqualified Stock)
valued, in the case of Disqualified Stock, at the greatest amount payable in
respect thereof on a liquidation (whether voluntary or involuntary), prior to
the Stated Maturity of the Notes, plus accrued and unpaid dividends; (vii)
preferred stock of Restricted Subsidiaries of such Person held by Persons other
than such Person or one of its Wholly Owned Subsidiaries that is a Restricted
Subsidiary; (viii) direct or indirect guarantees of all Indebtedness of other
Persons referred to in clauses (i) through (vii) above; and (ix) all
Indebtedness of the types referred to in clauses (i) through (viii) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on any asset owned by such
Person or its Restricted Subsidiaries (even though such Person or its
Restricted Subsidiaries have not assumed or become liable for the payment of
such Indebtedness); provided, that the term "Indebtedness" shall not be deemed
to include any liability for federal, state, local or other taxes owed or owing
by the Company. The amount of Indebtedness of any Person or its Restricted
Subsidiaries at any date shall be (without duplication) (i) the outstanding
balance at such date of all unconditional Indebtedness obligations as described
above and the maximum liability of any such contingent Indebtedness obligations
at such date, (ii) in the case of Indebtedness of others secured by a Lien to
which the property or assets owned or held by such Person or its Restricted
Subsidiaries is subject, the lesser of the fair market value at such date of
any property and assets subject to a Lien securing the Indebtedness of others
and the amount of the Indebtedness secured, and (iii) in the case of
Indebtedness of others guaranteed by such Person as described above, the lesser
of the maximum amount of such guaranty and the amount of the Indebtedness
guaranteed. A guaranty of Indebtedness of the Company or a Restricted
Subsidiary of the Company that is permitted under the Indenture shall not
constitute a separate incurrence of Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Initial Issuance Date" means the date of original issuance of
the Series A Notes.
"Interest Payment Date" means each of February 1 and August 1.
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<PAGE> 15
"Investment" means any direct or indirect advance, loan or
other extension of credit or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities issued by, any other Person, other
than (i) loans or advances made to employees in the ordinary course of business
not in excess of $50,000 outstanding at any time to any employee, (ii) advances
to customers or suppliers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of any Person or its Subsidiaries
and any securities received in settlement thereof or as a result of a
bankruptcy or an insolvency proceeding, (iii) workers' compensation, utility,
lease and similar deposits and prepaid expenses in the ordinary course of
business, (iv) Capital Stock, bonds, notes, debentures and other assets
received as a result of Asset Dispositions not prohibited by Section 4.10, and
(v) endorsements of negotiable instruments and documents in the ordinary course
of business. In addition, (i) the fair market value of the assets (net of
liabilities) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary shall constitute an
Investment in such Subsidiary in such amount, if the Company has elected that
such designation be deemed to be an Investment and not an Asset Disposition,
and (ii) the lesser of (A) the amount of Restricted Payments made to any
Unrestricted Subsidiary or (B) the fair market value of the assets (net of
liabilities) of such Unrestricted Subsidiary, in each case at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary of the
Company, shall constitute a return of capital and a decrease in the amount of
the Company's Investment in such Subsidiary.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the Company's principal place of business, the City of
New York or at a place of payment are authorized by law, regulation or
executive order to remain closed. If a payment date is a Legal Holiday at a
place of payment, payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
"Lien" means any mortgage, lien, pledge, security interest,
conditional sale or other title retention agreement, charge or other security
interest or encumbrance of any kind (including any agreement to give any
security interest).
"Liquidated Damages" means liquidated damages as defined in
Section 5 of the Registration Rights Agreement.
"Marketable Equity Securities" means shares of Capital Stock
of any Person that are listed on the New York Stock Exchange, the American
Stock Exchange or the national market tier of The Nasdaq Stock Market and, upon
receipt by the Company or a Restricted Subsidiary, such shares are freely
tradeable under the Securities Act and applicable state securities laws and are
so listed or included for trading privileges.
"Moody's" means Moody's Investors Service, Inc.
"Net Proceeds" means the aggregate amount of consideration in
the form of Cash, Temporary Cash Investments or Marketable Equity Securities
received by the Company or any of its Restricted Subsidiaries with respect to
any Asset Disposition, after deducting therefrom brokerage commissions,
appraisal fees, survey charges, engineering fees, title insurance premiums,
legal fees, finder's fees, loan origination and similar fees, underwriting
fees, investment banking fees and other similar commissions or fees, and any
filing, recording or registration fees, costs and expenses, recording taxes,
transfer taxes, provisions for all taxes payable as a result of such Asset
Disposition, amounts required to be paid to any Person owning a beneficial
interest in the assets subject to such Asset
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<PAGE> 16
Disposition, and appropriate amounts to be provided as a reserve in accordance
with GAAP against any liabilities associated with such Asset Disposition after
such Asset Disposition (to the extent such reserves are not subsequently
reversed), including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Disposition ("Asset Disposition Expenses"), and also less any amounts required
to be applied to retire all or a portion of the Notes or Indebtedness permitted
under Section 4.9 having the benefit of a Lien on the property or assets so
transferred, to the extent, but only to the extent, that such amounts are paid
by the Company or one of its Restricted Subsidiaries or are amounts for which
the Company or one of its Restricted Subsidiaries is directly and not
contingently liable, as the case may be, and properly attributable to the
transaction in respect of which such consideration is received or to the asset
that is the subject of such transaction.
"Note Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.
"Obligations" means any principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Offer" means a Change of Control Offer or Net Proceeds Offer,
as the case may be.
"Offer Purchase Date" means a Change of Control Purchase Date
or Net Proceeds Purchase Date, as the case may be.
"Offering Memorandum" means the Offering Memorandum, dated
January 8, 1998, relating to the offering of the Series A Notes.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Secretary, any Assistant Secretary, or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the Chairman
of the Board, the President or the Chief Financial Officer of the Company, that
meets the requirements of Section 11.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
11.5 hereof. The counsel may be counsel to the Company, any Subsidiary of the
Company or the Trustee.
"Parent" shall mean a Person or group of Persons created to
effectuate a holding company structure for the Company and its Subsidiaries.
"Permitted Investment" means (i) an Investment in the Company
or a Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary;
(ii) an Investment in a Person, if such Person or a Subsidiary of such Person
will, as a result of the making of such Investment and all other
contemporaneous related transactions, become a Wholly Owned Subsidiary of the
Company that is a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to the Company
or a Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary;
(iii) a Temporary Cash Investment; (iv) payroll, travel and similar advances to
cover matters
10
<PAGE> 17
that are expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP; (v) stock, obligations or securities received
in settlement of debts owing to the Company or a Restricted Subsidiary of the
Company as a result of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection, enforcement or agreement in lieu of foreclosure of any
Lien in favor of the Company or a Restricted Subsidiary of the Company; (vi)
refundable construction advances made with respect to the construction of
properties of a nature or type that are used in a business similar or related
to the business of the Company or its Restricted Subsidiaries in the ordinary
course of business; (vii) advances or extensions of credit on terms customary
in the industry in the form of accounts or other receivables incurred, or
pre-paid film rentals, and loans and advances made in settlement of such
accounts receivable, all in the ordinary course of business; (viii) guarantees
not prohibited by Section 4.9; (ix) entry into and Investments in joint
ventures, partnerships and other Persons engaged or proposing to engage in the
indoor motion picture exhibition business, provided that (A) the Person into
which such Investment is made is either a Restricted Subsidiary of the Company,
or such Person or a Subsidiary of such Person will, as a result of the making
of such Investment and all other contemporaneous related transactions, become a
Restricted Subsidiary of the Company and (B) the amount of such Investment,
valued at the time made, together with all Investments previously made pursuant
to this clause (ix) (and, without duplication, all Investments made pursuant to
clause (ix) of the definition of "Permitted Investments" as set forth in
Section 1.1 of the Senior Subordinated Indentures shall be deemed made pursuant
to this clause (ix) as well), valued at the respective times made, shall not
exceed 10% of Consolidated Tangible Assets of the Company as of the last day of
the full fiscal quarter ending immediately prior to the date of such
Investment; (x) any Investment made solely with funds the payment or
application of which is not restricted pursuant to Section 4.7; (xi)
Investments in the Notes and the Senior Subordinated Notes; (xii) any
consolidation or merger of a Restricted Subsidiary that is a Wholly Owned
Subsidiary of the Company to the extent otherwise permitted under the
Indenture; (xiii) payments of up to $1.5 million annually to repurchase Capital
Stock of the Company issued under the Company's employee stock option plans;
(xiv) Hedging Obligations of the Company or any of its Restricted Subsidiaries
to the extent otherwise permitted under the Indenture; (xv) Investments in
Cinemark International not to exceed $40 million; and (xvi) other Investments
not to exceed $10 million.
"Person" means any individual, corporation, partnership,
joint venture, limited liability company, incorporated or unincorporated
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof or other entity of
any kind.
"Qualified Institutional Buyer" has the meaning set forth in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties thereto, as such agreement may be amended, modified or supplemented
from time to time.
"Regulation S" means Regulation S under the Securities Act and
any successor regulation thereto.
"Regulation S Global Note" has the meaning specified in
Section 2.1(a).
"Representative" means, for any Senior Indebtedness, the
trustee, agent or representative with respect to such Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other
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<PAGE> 18
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of his knowledge of and familiarity with the particular
subject.
"Restricted Global Note" has the meaning specified in Section
2.1(a).
"Restricted Period" has the meaning specified in Section
2.1(b)(A).
"Restricted Subsidiary" means (i) any Subsidiary of the
Company in existence on the Start Date other than the Existing Unrestricted
Subsidiaries, (ii) any Subsidiary of the Company (other than a Subsidiary that
is also a Subsidiary of an Unrestricted Subsidiary) organized or acquired after
the Start Date, unless such Subsidiary shall have been designated as an
Unrestricted Subsidiary by resolution of the Board of Directors as provided in
and in compliance with the definition of "Unrestricted Subsidiary," and (iii)
any Unrestricted Subsidiary which is designated as a Restricted Subsidiary by
the Board of Directors; provided that, immediately after giving effect to the
designation referred to in clause (iii), no Default or Event of Default shall
have occurred and be continuing and the Company could incur at least $1.00 of
additional Indebtedness under Section 4.9(a). The Company shall evidence any
such designation to the Trustee by promptly filing with the Trustee an
Officer's Certificate certifying that such designation has been made and
stating that such designation complies with the requirements of the immediately
preceding sentence.
"Rule 144" means Rule 144 under the Securities Act and any
successor rule thereto.
"Rule 144A" means Rule 144A under the Securities Act and any
successor rule thereto.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Senior Indebtedness" means (i) Indebtedness under the Credit
Facility and (ii) any other Indebtedness permitted to be incurred by the
Company under the terms of this Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness will not include (x) the Notes
and the Senior Subordinated Notes, (y) any Indebtedness of the Company to any
of its Subsidiaries or other Affiliates, or (z) any Indebtedness that is
incurred in violation of the terms of this Indenture.
"Senior Subordinated Indentures" means collectively the
indenture, dated as of August 15, 1996, by and between the Company and the
Trustee, as amended by that certain First Supplemental Indenture thereto, dated
as of June 26, 1997, and as further amended or supplemented from time to time,
and the indenture, dated as of June 26, 1997, by and between the Company and
the Trustee, as amended or supplemented from time to time.
"Senior Subordinated Notes" means the aggregate $275 million
principal amount of the Company's 9-5/8% Senior Subordinated Notes due 2008,
Series B and Series D, issued by the Company pursuant to the Senior
Subordinated Indentures.
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<PAGE> 19
"Significant Subsidiary" means, at any date of determination,
any Restricted Subsidiary of the Company that, together with its Restricted
Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for
more than 5% of the consolidated revenues of the Company and its Restricted
Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more
than 5% of the consolidated assets of the Company and its Restricted
Subsidiaries, all as set forth on the most recently available consolidated
financial statements of the Company for such fiscal year.
"Start Date" means August 15, 1996.
"Stated Maturity" means, when used with respect to any
security, the date specified in such security as the fixed date on which an
amount equal to the principal of such security is due and payable.
"Subsidiary" means, with respect to any Person, (i) a Person a
majority of whose Capital Stock with voting power under ordinary circumstances
to elect directors (or Persons having similar or corresponding powers and
responsibilities) is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) upon designation by the Company, and until
designation by the Company to the contrary, a Person, 50% of whose Capital
Stock with voting power under ordinary circumstances to elect directors (or
Persons having similar or corresponding powers and responsibilities) is at the
time, directly or indirectly, owned by such Person, by one or more Subsidiaries
of such Person or by such Person and one or more Subsidiaries thereof (a "50%
Entity"). The Company shall evidence any designation pursuant to clause (ii) of
the immediately preceding sentence to the Trustee by filing with the Trustee
within 45 days of such designation an Officer's Certificate certifying that
such designation has been made. All references within the Indenture to
designations of Unrestricted Subsidiaries as Restricted Subsidiaries or
Restricted Subsidiaries as Unrestricted Subsidiaries shall be deemed to include
designations of 50% Entities as Restricted Subsidiaries and Restricted
Subsidiaries as 50% Entities, respectively.
"Temporary Cash Investments" means any Investment in the
following kinds of instruments: (A) readily marketable obligations issued or
unconditionally guaranteed as to principal and interest by the United States of
America or by any agency or authority controlled or supervised by and acting as
an instrumentality of the United States of America if, on the date of purchase
or other acquisition of any such instrument by the Company or any Restricted
Subsidiary of the Company, the remaining term to maturity or interest rate
adjustment is not more than two years; (B) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued or guaranteed by a depository institution or trust company
incorporated under the laws of the United States of America, any state thereof,
the District of Columbia, Canada or any province or territory thereof, provided
that (1) such instrument has a final maturity not more than one year from the
date of purchase thereof by the Company or any Restricted Subsidiary of the
Company and (2) such depository institution or trust company has at the time of
the Company's or such Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, (x) capital, surplus and undivided
profits (as of the date of such institution's most recently published financial
statements) in excess of $100 million and (y) the long-term unsecured debt
obligations (other than such obligations rated on the basis of the credit of a
Person other than such institution) of such institution, at the time of the
Company's or such Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment, are rated in the highest rating
category of both S&P and Moody's; (C) commercial paper issued by any
corporation, if such commercial paper has, at the time of the Company's or any
Restricted Subsidiary's Investment therein or contractual commitment providing
for such Investment, credit ratings of at least A-1 by S&P and P-1 by Moody's;
(D) money market mutual or similar funds having assets in excess of $100
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<PAGE> 20
million; (E) readily marketable debt obligations issued by any corporation, if
at the time of the Company's or any Restricted Subsidiary's Investment therein
or contractual commitment providing for such Investment (1) the remaining term
to maturity is not more than two years and (2) such debt obligations are rated
in one of the two highest rating categories of both S&P and Moody's; (F) demand
or time deposit accounts used in the ordinary course of business with
commercial banks the balances in which are at all times fully insured as to
principal and interest by the Federal Deposit Insurance Corporation or any
successor thereto or any Canadian equivalent thereof; (G) demand or time
deposit accounts used in the ordinary course of business with overseas branches
of commercial banks incorporated under the laws of the United States of
America, any state thereof, the District of Columbia, Canada or any province or
territory thereof, provided that such commercial bank has, at the time of the
Company's or such Restricted Subsidiary's Investment therein, (1) capital,
surplus and undivided profits (as of the date of such institution's most
recently published financial statements) in excess of $100 million and (2) the
long-term unsecured debt obligations (other than such obligations rated on the
basis of the credit of a Person other than such institution) of such
institution, at the time of the Company's or any Restricted Subsidiary's
Investment therein, are rated in the highest rating category of both S&P and
Moody's; and (H) to the extent not otherwise included herein, Cash Equivalents.
In the event that either S&P or Moody's ceases to publish ratings of the type
provided herein, a replacement rating agency shall be selected by the Company
with the consent of the Trustee, and in each case the rating of such
replacement rating agency most nearly equivalent to the corresponding S&P or
Moody's rating, as the case may be, shall be used for purposes hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) and the rules and regulations thereunder, as in effect
on the date on which this Indenture is qualified under the TIA (except as
provided in Sections 9.1(e) and 9.3 hereof).
"Trade Payables" of any Person means accounts payable or any
other indebtedness or monetary obligations to trade creditors created, assumed
or guaranteed by such Person or any of its Subsidiaries in the ordinary course
of business in connection with the obtaining of materials or services.
"Transfer Restricted Securities" means securities that bear or
are required to bear the legend set forth in Section 2.6 hereof.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means, until such time as any of the
following shall be designated as a Restricted Subsidiary of the Company by the
Board of Directors as provided in and in compliance with the definition of
"Restricted Subsidiary," (i) each of the Existing Unrestricted Subsidiaries,
(ii) any Subsidiary of the Company or of a Restricted Subsidiary of the Company
organized or acquired after the Start Date that is designated concurrently with
its organization or acquisition as an Unrestricted Subsidiary by resolution of
the Board of Directors, (iii) any Subsidiary of any Unrestricted Subsidiary,
and (iv) any Restricted Subsidiary of the Company that is designated as an
Unrestricted Subsidiary by resolution of the Board of Directors, provided that,
(A) immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing and (B) any such designation
shall be deemed, at the election of the Company at the time of such
designation, to be either (but not both) (x) the making of a Restricted Payment
at the time of such designation in an amount equal to the Investment in such
Subsidiary subject to the restrictions contained in Section 4.7 or (y) the
making of an Asset Disposition at the time of such designation in an amount
equal to the Investment in such Subsidiary subject to the restrictions
contained in Section 4.10. The Company shall evidence any
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<PAGE> 21
designation pursuant to clause (ii) or (iv) of the immediately preceding
sentence to the Trustee by filing with the Trustee within 45 days of such
designation an Officer's Certificate certifying that such designation has been
made and, in the case of clause (iv), the related election of the Company in
respect thereof.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America, the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depository receipt issued by a
bank (as defined in Section 3(a)(2) of the Securities Act), as custodian, with
respect to any such U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository receipt; provided,
however, that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest on
the U.S. Government Obligation evidenced by such depository receipt.
"Weighted Average Life" means, as of any date, with respect to
any debt security, the quotient obtained by dividing (i) the sum of the
products of the number of years from such date to the dates of each successive
scheduled principal payment (including any sinking fund payment requirements)
of such debt security multiplied by the amount of such principal payment, by
(ii) the sum of all such principal payments.
"Wholly Owned Subsidiary" of any Person means any Subsidiary
of such Person all of whose Capital Stock with voting power under ordinary
circumstances to elect directors (or Persons having similar or corresponding
powers and responsibilities), other than directors' qualifying shares if
required by applicable law, is owned by such Person (either directly or
indirectly through Wholly Owned Subsidiaries).
Section 1.2. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---------------------------------------------- ----------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . 4.11
"Change of Control Offer" . . . . . . . . . . 4.14(a)
"Change of Control Offer Price" . . . . . . . 4.14(a)
"Change of Control Purchase Date" . . . . . . 4.14(a)
"Covenant Defeasance" . . . . . . . . . . . . 8.3
"Discharge" . . . . . . . . . . . . . . . . . 8.5
"DTC" . . . . . . . . . . . . . . . . . . . . 2.1(b)
"DTC Participants" . . . . . . . . . . . . . . 2.1(b)
"Event of Default" . . . . . . . . . . . . . . 6.1
"Incurrence" . . . . . . . . . . . . . . . . . 4.9(a)
"Legal Defeasance" . . . . . . . . . . . . . . 8.2
"Net Proceeds Offer" . . . . . . . . . . . . . 4.10(a)
"Net Proceeds Offer Amount" . . . . . . . . . 4.10(a)
"Net Proceeds Offer Price" . . . . . . . . . . 4.10(a)
</TABLE>
15
<PAGE> 22
<TABLE>
<S> <C>
"Net Proceeds Purchase Date" . . . . . . . . . 4.10(a)
"Other Consideration" . . . . . . . . . . . . 4.10(f)
"Pari Passu Offer" . . . . . . . . . . . . . . 4.10(b)
"Pari Passu Offer Amount" . . . . . . . . . . 4.10(b)
"Paying Agent" . . . . . . . . . . . . . . . . 2.3
"Payment Blockage Notice" . . . . . . . . . . 10.3
"Refinancing Indebtedness" . . . . . . . . . . 4.9(a)
"Register" . . . . . . . . . . . . . . . . . . 2.3
"Registrar" . . . . . . . . . . . . . . . . . 2.3
"Restricted Payments" . . . . . . . . . . . . 4.7(a)
"SEC" . . . . . . . . . . . . . . . . . . . . 1.1 ("Commission")
"75% Test" . . . . . . . . . . . . . . . . . . 4.10(a)
"Surviving Entity" . . . . . . . . . . . . . . 5.1
"Transaction Value" . . . . . . . . . . . . . 4.10(f)
</TABLE>
Section 1.3. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
Section 1.4. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular;
(e) provisions apply to successive events and
transactions;
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<PAGE> 23
(f) references to sections of or rules under the Exchange
Act or the Securities Act shall be deemed to include substitute,
replacement of successor sections or rules adopted by the SEC from
time to time; and
(g) "herein," "hereof" and other words or similar import
refer to this Indenture as a whole (as amended or supplemented from
time to time) and not to any particular Article, Section or other
subdivision.
ARTICLE 2
THE NOTES
Section 2.1. Form and Dating.
(a) General Form of Notes. The Notes and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A
hereto, which Exhibit is part of this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange rule or usage. Each
Note shall be dated the date of its authentication. The Notes shall be in
minimum denominations of $1000 and integral multiples thereof. The terms and
provisions contained in the Notes shall constitute, and are hereby expressly
made, a part of this Indenture and the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes offered and sold to Qualified Institutional Buyers in
reliance on Rule 144A under the Securities Act will initially be issued only in
the form of one or more permanent global Notes in definitive, fully registered
form without interest coupons (each a "Restricted Global Note"). Restricted
Global Notes shall be substantially in the form of Exhibit A attached hereto
(including the text and schedule called for by footnotes 1 and 3 thereto).
Notes offered and sold outside the United States in reliance on Regulation S
under the Securities Act will initially be issued only in the form of one or
more permanent global Notes in definitive, fully registered form without
interest coupons (each a "Regulation S Global Note"; together with Restricted
Global Notes, the "Global Notes"). Regulation S Global Notes shall be
substantially in the form of Exhibit A attached hereto (including the text and
schedule called for by footnotes 1 and 3 thereto). Notes offered and sold in
reliance on any other exemption from registration under the Securities Act will
be issued only in the form of Definitive Notes. Definitive Notes shall be
substantially in the form of Exhibit A attached hereto (excluding the text and
schedule called for by footnotes 1 and 3 thereto). Global Notes or Definitive
Notes issued as Exchange Notes will not include the legend called for by
footnote 2 of Exhibit A.
(b) Form of Global Notes. (A) Each Restricted Global
Note (i) shall represent such portion of the outstanding Notes as shall be
specified therein, (ii) shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions,
(iii) shall be registered in the name of the Depositary or its nominee, duly
executed by the Company and authenticated by the Trustee as provided herein,
for credit to the respective accounts of the Holders (or such accounts as they
may direct) at the Depositary, (iv) shall be delivered by the Trustee or its
Agent to the Depositary or a Note Custodian pursuant to the Depositary's
instructions and (v) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company or its agent for
registration of
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<PAGE> 24
transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as is
required by an authorized representative of DTC (and any
payment hereon is made to Cede & Co or to such other entity as
is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein."
(B) Each Regulation S Global Note (i) shall represent
such portion of the outstanding Notes as shall be specified therein, (ii) shall
provide that it shall represent the aggregate amount of outstanding Notes from
time to time endorsed thereon and that the aggregate amount of outstanding
Notes represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions, (iii) shall be registered in
the name of the Depositary or its nominee, duly executed by the Company and
authenticated by the Trustee as provided herein, for credit to the accounts of
Morgan Guaranty Trust Company of New York, Brussels office, as operator of the
Euroclear and Cedel Bank, (iv) shall be delivered by the Trustee or its Agent
to the Depositary or a Note Custodian pursuant to the Depositary's instructions
and (v) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company or its agent for
registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or
such other name as is required by an authorized representative
of DTC (and any payment hereon is made to Cede & Co or to such
other entity as is requested by an authorized representative
of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein."
Prior to the 40th day after the Closing Date (the "Restricted Period"),
beneficial interests in the Regulation S Global Note may only be held through
Euroclear or Cedel Bank, and any resale or transfer of such interests to U.S.
Persons shall not be permitted during such period unless such resale or
transfer is made pursuant to Rule 144A or Regulation S.
(C) Members of, or participants in, the Depositary ("DTC
Participants") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depositary, and the Depositary may be
treated by the Company, the Trustee, and any agent of the Company or the
Trustee as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee, or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished to the Depositary
or impair, as between the Depositary and its agent members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Note.
Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Note Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.6 hereof.
(c) Form of Definitive Notes. Definitive Notes may be
produced in any manner determined by the Officers of the Company executing such
Notes, as evidenced by their execution of such Notes. The Trustee must
register Definitive Notes so issued in the name of, and cause the same to be
delivered to, such Person (or its nominee). Subject to the provisions of
Section 2.6, any Person having a beneficial
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<PAGE> 25
interest in a Global Note may exchange such beneficial interest, upon request
to the Trustee, for fully certificated Definitive Notes in duly registered
form.
(d) Provisions Applicable to Forms of Notes. The Notes
may also have such additional provisions, omissions, variations or
substitutions as are not inconsistent with the provisions of this Indenture,
and may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with this
Indenture, any Applicable Law or with any rules made pursuant thereto or with
the rules of any securities exchange or governmental agency or as may be
determined consistently herewith by the Officer of the Company executing such
Notes, as conclusively evidenced by their execution of such Notes. All Notes
shall be otherwise substantially identical except as provided herein.
Subject to the provisions of this Article 2, a registered
Holder of a beneficial interest in a Global Note may grant proxies and
otherwise authorize any Person to take any action that a Holder is entitled to
take under this Indenture or the Notes.
Section 2.2. Execution and Authentication.
An Officer shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal may be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid or obligatory for any purpose or
entitled to the benefits of the Indenture until authenticated by the manual
signature of the Trustee or its authenticating agent. The signature shall be
conclusive evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon the delivery to the Trustee of a
written order of the Company signed by two Officers, from time to time,
authenticate Notes for original issue up to an aggregate principal amount of
$105,000,000. The aggregate principal amount of Notes outstanding at any time
may not exceed such amount except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Notes. An authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
the Company or an Affiliate of the Company.
Section 2.3. Trustee, Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register ("Register") of the Notes and of their
transfer and exchange. The Company may also from time to time appoint one or
more co-registrars and one or more additional paying agents. The term
"Registrar" includes any co-registrar and the term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent or Registrar
upon notice to the Holders. The Company shall notify the Trustee in writing of
the name and address of any Agent not a party to this Indenture. If the
Company fails to appoint or maintain another
19
<PAGE> 26
entity as Registrar or Paying Agent, the Trustee shall act, subject to the last
paragraph of this Section 2.3, as such. The Company or any of its Subsidiaries
may act as Paying Agent or Registrar; provided, however, that none of the
Company, its Subsidiaries or the Affiliates of the foregoing shall act (i) as
Paying Agent in connection with redemptions, offers to purchase, discharges and
defeasance, as otherwise specified in this Indenture, and (ii) as Paying Agent
or Registrar if a Default or Event of Default has occurred and is continuing.
The Company hereby appoints U.S. Trust Company of Texas, N.A.,
at its Corporate Trust Office, as the Trustee hereunder and U.S. Trust Company
of Texas, N.A. hereby accepts such appointment. The Trustee shall have the
powers and authority granted to and conferred upon it in the Notes and hereby
and such further powers and authority to act on behalf of the Company as may be
mutually agreed upon by the Company and the Trustee, and the Trustee shall keep
a copy of this Indenture available for inspection during normal business hours
at its Corporate Trust Office.
The Company initially appoints DTC to act as Depositary with
respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
All of the terms and provisions with respect to such powers
and authority contained in the Notes are subject to and governed by the terms
and provisions hereof.
The Trustee may resign as Registrar or Paying Agent upon 30
days prior written notice to the Company.
Section 2.4. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal of, or premium, if any, or interest on, the Notes, and
shall notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon
payment of all such money over to the Trustee, the Paying Agent (if other than
the Company or a Subsidiary) shall have no further liability for the money. If
the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold
in a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to
the Company, the Trustee shall serve as Paying Agent for the Notes.
Section 2.5. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable to it the most recent list available to it of the names
and addresses of all Holders and, after the consummation of the Exchange Offer,
shall otherwise strictly comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may require of the names and addresses of the Holders of Notes and,
after the consummation of the Exchange Offer, the Company shall otherwise
strictly comply with TIA Section 312(a).
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<PAGE> 27
Section 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Definitive Notes. If
Definitive Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal
principal amount of Definitive Notes of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instruction of transfer in form
satisfactory to the Registrar duly executed
by such Holder or by such Holder's attorney,
duly authorized in writing; and
(ii) in the case of a Definitive Note that is a
Transfer Restricted Security, such request
shall be accompanied by the following
additional information and documents, as
applicable:
(A) if such Transfer Restricted Security
is being delivered to the Registrar
by a Holder for registration in the
name of such Holder, without
transfer, a certification to that
effect from such Holder (in
substantially the form of Exhibit B
hereto); or
(B) if such Transfer Restricted Security
is being transferred to a "qualified
institutional buyer" (as defined in
Rule 144A under the Securities Act)
in accordance with Rule 144A under
the Securities Act or pursuant to an
exemption from registration in
accordance with Rule 144 or Rule 904
under the Securities Act or pursuant
to an effective registration
statement under the Securities Act,
a certification to that effect from
such Holder (in substantially the
form of Exhibit B hereto); or
(C) if such Transfer Restricted Security
is being transferred in reliance on
another exemption from the
registration requirements of the
Securities Act, a certification to
that effect from such Holder (in
substantially the form of Exhibit B
hereto) and an Opinion of Counsel
from such Holder or the transferee
reasonably acceptable to the Company
and to the Registrar to the effect
that such transfer is in compliance
with the Securities Act.
(b) Restrictions on Transfer of a Definitive Note for a
Beneficial Interest in a Global Note. A Definitive Note may not be exchanged
for a beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
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(i) if such Definitive Note is a Transfer
Restricted Security, a certification from the
Holder thereof (in substantially the form of
Exhibit B hereto) to the effect that such
beneficial interest is being transferred to a
"qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the
Securities Act or pursuant to an exemption
from registration in accordance with Rule 144
or Rule 904 under the Securities Act; and
(ii) whether or not such Definitive Note is a
Transfer Restricted Security, written
instructions from the Holder thereof
directing the Trustee to make, or to direct
the Note Custodian to make, an endorsement on
the Global Note to reflect an increase in the
aggregate principal amount of the Notes
represented by the Global Note,
in which case the Trustee or its agent shall cancel such Definitive Note in
accordance with Section 2.11 hereof and cause, or direct the Note Custodian to
cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Note Custodian, the aggregate principal amount
of Notes represented by the Global Note to be increased accordingly. If no
Global Notes are then outstanding, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.2 hereof, the Trustee
shall authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of a Beneficial Interest in a
Global Note. The transfer and exchange of beneficial interests in Global Notes
shall be effected through the Depositary, in accordance with this Indenture and
the procedures of the Depositary therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Notwithstanding the foregoing, in the case of a Transfer
Restricted Security, a beneficial interest in a Global Note being transferred
in reliance on an exemption from the registration requirements of the
Securities Act (other than in accordance with Rule 144A, Rule 144 or Rule 904
under the Securities Act) may only be transferred for a Definitive Note and
pursuant to the provisions of Section 2.6(d) below.
(d) Transfer and Exchange of a Beneficial Interest in a
Global Note for a Definitive Note.
(i) Any Person having a beneficial interest in a
Global Note may upon request exchange such
beneficial interest for a Definitive Note.
Upon receipt by the Trustee of written
instructions or such other form of
instructions as is customary for the
Depositary, from the Depositary or its
nominee on behalf of any Person having a
beneficial interest in a Global Note, and, in
the case of a Transfer Restricted Security,
the following additional information and
documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being
transferred to the Person designated
by the Depositary as being the
beneficial owner, a certification to
that effect from such Person (in
substantially the form of Exhibit B
hereto); or
(B) if such beneficial interest is being
transferred to a "qualified
institutional buyer" (as defined in
Rule 144A under the Securities Act)
in accordance with Rule 144A under
the Securities Act or pursuant to an
exemption from registration in
accordance with Rule 144 or Rule 904
under the Securities Act or pursuant
to an effective registration
statement under the Securities Act,
a certification to that effect from
the transferor (in substantially the
form of Exhibit B hereto); or
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<PAGE> 29
(C) if such beneficial interest is being
transferred in reliance on another
exemption from the registration
requirements of the Securities Act,
a certification to that effect from
the transferor (in substantially the
form of Exhibit B hereto) and an
Opinion of Counsel from the
transferee or transferor reasonably
acceptable to the Company and to the
Registrar to the effect that such
transfer is in compliance with the
Securities Act,
in which case the Trustee or the Note
Custodian, at the direction of the Trustee,
shall, in accordance with the standing
instructions and procedures existing between
the Depositary and the Note Custodian, cause
the aggregate principal amount of Global
Notes to be reduced accordingly and,
following such reduction, the Company shall
execute and, upon receipt of an
authentication order in accordance with
Section 2.2 hereof, the Trustee shall
authenticate and deliver to the transferee a
Definitive Note in the appropriate principal
amount.
(ii) Definitive Notes issued in exchange for a
beneficial interest in a Global Note pursuant
to this Section 2.6(d) shall be registered in
such names and in such authorized
denominations as the Depositary, pursuant to
instructions from its direct or indirect
participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such
Definitive Notes to the Persons in whose
names such Notes are so registered.
(e) Transfer from Restricted Global Note to Regulation S
Global Note. If a holder of a beneficial interest in the Restricted Global
Note deposited with DTC wishes at any time to exchange its interest in such
Restricted Global Note for an interest in the Regulation S Global Note, or to
transfer its interest in such Restricted Global Note to a Person who wishes to
take delivery thereof in the form of an interest in such Regulation S Global
Note, such holder may, subject to the rules and procedures of DTC and to the
requirements set forth in the following sentence, exchange or cause the
exchange or transfer or cause the transfer of such interest for an equivalent
beneficial interest in such Regulation S Global Note. Upon receipt by the
Trustee, as Transfer Agent, at its office in The City of New York of (1)
instructions given in accordance with DTC's procedures from or on behalf of a
holder of a beneficial interest in the Restricted Global Note, directing the
Trustee, as Transfer Agent, to credit or cause to be credited a beneficial
interest in the Regulation S Global Note in an amount equal to the beneficial
interest in the Restricted Global Note to be exchanged or transferred, (2) a
written order given in accordance with DTC's procedures containing information
regarding the Euroclear or Cedel Bank account to be credited with such increase
and the name of such account, and (3) a certificate in the form of Exhibit C
given by the holder of such beneficial interest stating that the exchange or
transfer of such interest has been made pursuant to and in accordance with Rule
903 or Rule 904 of Regulation S or Rule 144 under the Securities Act, the
Trustee, as Transfer Agent, shall promptly deliver appropriate instructions to
DTC, its nominee, or the custodian for DTC, as the case may be, to reduce or
reflect on its records a reduction of the Restricted Global Note by the
aggregate principal amount of the beneficial interest in such Restricted Global
Note to be so exchanged or transferred from the relevant participant, and the
Trustee, as Transfer Agent, shall promptly deliver appropriate instructions to
DTC, its nominee, or the custodian for DTC, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
principal amount of such Regulation S Global Note by the aggregate principal
amount of the beneficial interest in such Restricted Global Note to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the Person specified in such instructions (who shall be the agent member of
Euroclear or Cedel Bank, or both, as the case may be) a beneficial interest in
such Regulation S Global Note equal to the reduction in the principal amount of
such Restricted Global Note.
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(f) Transfer from Regulation S Global Note to Restricted
Global Note. If a holder of a beneficial interest in the Regulation S Global
Note wishes at any time to exchange its interest in such Regulation S Global
Note for an interest in the Restricted Global Note, or to transfer its interest
in such Regulation S Global Note to a Person who wishes to take delivery
thereof in the form of an interest in such Restricted Global Note, such holder
may, subject to the rules and procedures of Euroclear or Cedel Bank and DTC, as
the case may be, and to the requirements set forth in the following sentence,
exchange or cause the exchange or transfer or cause the transfer of such
interest for an equivalent beneficial interest in such Restricted Global Note.
Upon receipt by the Trustee, as Transfer Agent, at its office in The City of
New York of (l) instructions given in accordance with the procedures of
Euroclear or Cedel Bank and DTC, as the case may be, from or on behalf of a
beneficial owner of an interest in the Regulation S Global Note directing the
Trustee, as Transfer Agent, to credit or cause to be credited a beneficial
interest in the Restricted Global Note in an amount equal to the beneficial
interest in the Regulation S Global Note to be exchanged or transferred, (2) a
written order given in accordance with the procedures of Euroclear or Cedel
Bank and DTC, as the case may be, containing information regarding the account
with DTC to be credited with such increase and the name of such account, and
(3) prior to the expiration of the Restricted Period, a certificate in the form
of Exhibit D given by the holder of such beneficial interest and stating that
the Person transferring such interest in such Regulation S Global Note
reasonably believes that the Person acquiring such interest in such Restricted
Global Note is a Qualified Institutional Buyer (as defined in Rule 144A) and is
obtaining such beneficial interest in a transaction meeting the requirements of
Rule 144A and any applicable securities laws of any state of the United States
or any other jurisdiction, the Trustee, as Transfer Agent, shall promptly
deliver appropriate instructions to DTC, its nominee, or the custodian for DTC,
as the case may be, to reduce or reflect on its records a reduction of the
Regulation S Global Note by the aggregate principal amount of the beneficial
interest in such Regulation S Global Note to be exchanged or transferred, and
the Trustee, as Transfer Agent, shall promptly deliver appropriate instructions
to DTC, its nominee, or the custodian for DTC, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
principal amount of such Restricted Global Note by the aggregate principal
amount of the beneficial interest in such Regulation S Global Note to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the Person specified in such instructions a beneficial interest in such
Restricted Global Note equal to the reduction in the principal amount of such
Regulation S Global Note. After the expiration of the Restricted Period, the
certification requirement set forth in clause (3) of the second sentence of
this Section 2.6(f) will no longer apply to such transfers.
(g) Restrictions on Transfer and Exchange of Global
Notes. Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (h) of this Section 2.6), a Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(h) Authentication of Definitive Notes in Absence of
Depositary. If at any time:
(i) the Depositary for the Notes notifies the
Company that the Depositary is unwilling or
unable to continue as Depositary for the
Global Notes or, if at any time such
Depositary ceases to be a "clearing agency"
registered under the Exchange Act, and a
successor Depositary for the Global Notes is
not appointed by the Company within 90 days
after delivery of such notice; or
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<PAGE> 31
(ii) the Company, at its sole discretion, notifies
the Trustee in writing that it elects to
cause the issuance of Definitive Notes under
this Indenture in exchange for all or any
part of the Notes represented by a Global
Note or Global Notes,
the Depositary or the Note Custodian shall surrender such Global Note to the
Trustee, without charge, and then the Company shall execute, and the Trustee
shall, upon receipt of an authentication order in accordance with Section 2.2
hereof, authenticate and deliver in exchange for such Global Notes, Definitive
Notes in an aggregate principal amount equal to the principal amount of such
Global Notes. Such Definitive Notes shall be registered in such names as the
Depositary shall direct in writing.
(i) Legends.
(i) Except as permitted by the following
paragraphs (ii), and (iii), each Note
certificate evidencing Global Notes and
Definitive Notes (and all Notes issued in
exchange therefor or substitution thereof)
shall bear legends in substantially the
following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY PERSON EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER AGREES THAT IT WILL NOT
PRIOR TO THE DATE WHICH IS TWO YEARS AFTER
THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF
THIS NOTE AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS
THE OWNER OF THIS NOTE (THE "RESALE
RESTRICTION TERMINATION DATE") RESELL, PLEDGE
OR OTHERWISE TRANSFER THIS NOTE, EXCEPT (A)
TO THE COMPANY, (B) FOR SO LONG AS THE NOTES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT, TO A PERSON WHOM
THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF ANOTHER
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH THE RESALE PROVISIONS OF RULE 144A, (C)
PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE RESALE LIMITATIONS PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, (BASED UPON AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY IF THE COMPANY SO REQUESTS) SUBJECT
IN EACH OF THE FOREGOING CASES TO ANY
REQUIREMENT OF LAW THAT THE DISPOSITION OF
ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT
BE AT ALL TIMES WITHIN ITS CONTROL AND TO
COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. THE FOREGOING RESTRICTIONS ON RESALE
WILL NOT APPLY SUBSEQUENT TO THE RESALE
RESTRICTION TERMINATION DATE.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer
Restricted Security represented by a Global
Note) pursuant to Rule 144 under the
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<PAGE> 32
Securities Act or pursuant to an effective
registration statement under the Securities
Act:
(A) in the case of any Transfer
Restricted Security that is a
Definitive Note, the Registrar shall
permit the Holder thereof to
exchange such Transfer Restricted
Security for a Definitive Note that
does not bear the legend set forth
in (i) above and rescind any
restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer
Restricted Security represented by a
Global Note, such Transfer
Restricted Security shall not be
required to bear the legend set
forth in (i) above, but shall
continue to be subject to the
provisions of Section 2.6(c) hereof;
provided, however, that with respect
to any request for an exchange of a
Transfer Restricted Security that is
represented by a Global Note for a
Definitive Note that does not bear
the legend set forth in (i) above,
which request is made in reliance
upon Rule 144, the Holder thereof
shall certify in writing to the
Registrar that such request is being
made pursuant to Rule 144 (such
certification to be substantially in
the form of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon
consummation of the Exchange Offer, the
Company shall issue and, upon receipt of an
authentication order in accordance with
Section 2.2 hereof, the Trustee shall
authenticate Series B Notes in exchange for
Series A Notes accepted for exchange in the
Exchange Offer, which Series A Notes shall
not bear the legend set forth in (i) above,
and the Registrar shall rescind any
restriction on the transfer of such Notes, in
each case unless the Holder of such Series A
Notes is either (A) a broker-dealer, (B) a
Person participating in the distribution of
the Series A Notes or (C) a Person who is an
affiliate (as defined in Rule 144A) of the
Company.
(j) Cancellation and/or Adjustment of Global Notes. At
such time as all beneficial interests in Global Notes have been exchanged for
Definitive Notes, redeemed, repurchased or cancelled, all Global Notes shall be
returned to or retained and cancelled by the Trustee or its agent in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for Definitive Notes,
redeemed, repurchased or cancelled, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note, by the Trustee or the Notes Custodian, at the
direction of the Trustee, to reflect such reduction.
(k) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the
Trustee shall authenticate Definitive Notes
and Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder
for any registration of transfer or exchange,
but the Company may require payment of a sum
sufficient to cover any transfer tax or
similar governmental charge payable in
connection therewith (other than any such
transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to
Sections 2.2, 2.10, 3.6, 3.7, 4.10, 4.14 and
9.5 hereto).
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(iii) All Definitive Notes and Global Notes issued
upon any registration of transfer or exchange
of Definitive Notes or Global Notes shall be
the valid obligations of the Company,
evidencing the same debt, and entitled to the
same benefits under this Indenture, as the
Definitive Notes or Global Notes surrendered
upon such registration of transfer or
exchange.
(iv) Neither the Registrar nor the Company shall
be required:
(A) to issue, to register the transfer
of or to exchange Notes during a
period beginning at the opening of
business 15 Business Days before the
day of any selection of Notes for
redemption under Section 3.2 hereof
and ending at the close of business
on the day of selection; or
(B) to register the transfer of or to
exchange any Note so selected for
redemption in whole or in part,
except the unredeemed portion of any
Note being redeemed in part; or
(C) to register the transfer of or to
exchange a Note between a record
date and the next succeeding
Interest Payment Date.
(v) The Trustee shall authenticate Definitive
Notes and Global Notes in accordance with the
provisions of Section 2.2 hereof.
(l) Certain Transfers in Connection with and after the
Exchange Offer. Notwithstanding any other provision
of this Indenture: (i) no Series B Note may be
exchanged by the Holder thereof for a Series A Note;
(ii) accrued and unpaid interest on the Series A
Notes being exchanged in the Exchange Offer shall be
due and payable on the next Interest Payment Date for
the Series B Notes following the Exchange Offer; and
(iii) interest on the Series B Notes to be issued in
the Exchange Offer shall accrue from the date of the
Exchange Offer.
Section 2.7. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, the Company shall, upon the written
request of the Holder thereof, issue and the Trustee, upon the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by such Holder that
is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
The provisions of this Section 2.7 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
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Section 2.8. Outstanding Notes.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it (or its agent),
those delivered to it (or its agent) for cancellation, those reductions in the
interest in a Global Note effected by the Trustee in accordance with the
provisions hereof, and those described in this Section as not outstanding.
Except as set forth in Section 2.9 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.7 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note (other than a mutilated Note surrendered for
replacement) is held by a bona fide purchaser (as such term is defined in
Section 8-302 of the Uniform Commercial Code as in effect in the State of New
York).
If the principal amount of any Note is considered paid under
Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, Cash
or Cash Equivalents sufficient to pay Notes payable on that date, then on and
after that date such Notes shall be deemed to be no longer outstanding and
shall cease to accrue interest.
Section 2.9. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Responsible Officer of the
Trustee has actual knowledge are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes.
Until such exchange, Holders of temporary Notes shall be
entitled to all of the benefits of this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee or
its Agent for cancellation. The Registrar and Paying Agent shall forward to
the Trustee any Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee (or its Agent) and no one else shall cancel
all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall destroy cancelled Notes (subject to the
record retention requirement of the Exchange Act). Certification of the
destruction of all cancelled Notes shall be delivered to the Company from time
to time. The Company may not issue new Notes to replace Notes that it has paid
or that have been delivered to the Trustee (or
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<PAGE> 35
its Agent) for cancellation. If the Company acquires any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee (or its Agent) for cancellation pursuant to this
Section 2.11.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.1 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such defaulted interest to be paid.
Section 2.13. Persons Deemed Owners.
Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent, the Company and any agent of the foregoing
shall deem and treat the Person in whose name any Note is registered as the
absolute owner of such Note for all purposes (including the purpose of
receiving payment of principal of and interest on such Notes; provided that
defaulted interest shall be paid as set forth in Section 2.12), and none of the
Trustee, any Agent, the Company or any agent of the foregoing shall be affected
by notice to the contrary.
Section 2.14. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company will print CUSIP
numbers on the Notes, and the Trustee may use CUSIP numbers in notices of
redemption and purchase as a convenience to Holders; provided, however, that
any such notices may state that no representation is made as to the correctness
of such numbers as printed on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes, and any such redemption
or purchase shall not affected by any defect or omission in such numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.1. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date (unless a
shorter period is acceptable to the Trustee), an Officers' Certificate setting
forth (i) the clause of Section 3.7 pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed, (iv) the redemption price and accrued and unpaid interest and (v)
whether it requests the Trustee to give notice of such redemption. Any such
notice may be
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<PAGE> 36
cancelled at any time prior to the mailing of notice of such redemption to any
Holder and shall thereby be void and of no effect.
Section 3.2. Selection of Notes to Be Redeemed.
If fewer than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed among the Holders of the
Notes in compliance with the requirements of any applicable Depositary and
securities exchange requirements or, if the Notes are not so listed, on a pro
rata basis, by lot or in accordance with any other method the Trustee considers
fair and appropriate and in such manner as complies with any such requirements
and any applicable legal requirements; provided that no Notes of $1,000
principal amount or less shall be redeemed in part. In the event of partial
redemption by lot, the particular Notes to be redeemed shall be selected,
unless otherwise provided herein, not less than 30 nor more than 60 days prior
to the redemption date by the Trustee from the outstanding Notes not previously
called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a redemption
date, the Company shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder whose Notes are to be redeemed at such
Holder's registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price and accrued and unpaid interest;
(c) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date and the only remaining right
of the Holders of such Notes is to receive payment of the redemption
price upon surrender to the Paying Agent of the Notes redeemed;
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(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 40 days prior to the
redemption date (unless a shorter period is acceptable to the Trustee), an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
Section 3.4. Effect of Notice of Redemption.
Unless otherwise stated therein, once notice of redemption is
mailed in accordance with Section 3.3 hereof, Notes called for redemption
become irrevocably due and payable on the redemption date at the redemption
price.
Section 3.5. Deposit of Redemption Price.
On or prior to the redemption date, the Company shall deposit
with the Paying Agent (other than the Company or any of its Subsidiaries) money
sufficient in same day funds to pay the redemption price of and accrued
interest on all Notes to be redeemed on that date. The Paying Agent shall
promptly return to the Company any money deposited with the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of, and
accrued interest on, all Notes to be redeemed. If the money is deposited on
the redemption date, such deposit shall be made by 10:00 a.m. Dallas, Texas
time.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption whether or not such
Notes are presented for payment, and the only remaining right of the Holders of
such Notes shall be to receive payment of the redemption price upon surrender
to the Paying Agent of the Notes redeemed. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal from the redemption date until
such principal is paid and to the extent lawful, on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.1 hereof.
Section 3.6. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
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<PAGE> 38
Section 3.7. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.7,
the Company shall not have the option to redeem the Notes pursuant to this
Section 3.7 prior to August 1, 2003. Thereafter, the Notes will be subject to
redemption at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve month period beginning on August 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 104.250%
2004 102.833%
2005 101.417%
2006 and thereafter 100.000%
</TABLE>
(b) Notwithstanding the foregoing, on and prior to February
1, 2001, the Company may redeem up to 35% of the aggregate principal amount of
the Notes originally outstanding at a redemption price of 108.5% of the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date, with the net proceeds of one or more Equity Offerings of the
Company or, if applicable, a Parent; provided that at least 65% of the
aggregate principal amount of the Notes originally issued remains outstanding
immediately after the occurrence of such redemption (but such unredeemed Notes
may be redeemed pursuant to the optional redemption procedure described in
Section 3.7(a)); and provided, further, that such notice of redemption shall be
given not later than 30 days, and such redemption shall occur not later than 90
days, after the date of the closing of any such Equity Offering.
(c) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Sections 3.1 through 3.6 hereof.
Section 3.8. Mandatory Redemption.
Except as set forth under Sections 4.10 and 4.14 hereof, the
Company shall not be required to make mandatory redemption payments with
respect to the Notes.
ARTICLE 4
COVENANTS
Section 4.1. Payment of Notes.
The Company shall pay or cause to be paid in New York, New
York the principal of, premium, if any, and interest on the Notes on the dates
and in the manner provided in the Notes. Principal, premium, if any, and
interest shall be considered paid on the date due if the Paying Agent, if other
than the Company or a Subsidiary thereof, holds as of 10:00 a.m. New York City
time on the due date money deposited by the Company in same day funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. The Paying Agent shall return to the Company, no later than
three Business Days following the date of payment, any money (including accrued
interest) in excess of the amounts paid on the Notes.
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<PAGE> 39
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at a
rate equal to 1% per annum in excess of the then applicable interest rate on
the Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law to the extent that such
interest is an allowed claim against the debtor under such Bankruptcy Law) on
overdue installments of interest (without regard to any applicable grace
period) at the same rate to the extent lawful.
Section 4.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.3.
Section 4.3. Provisions of Reports and Other Information.
(a) Whether or not required by the rules and regulations of
the Commission, so long as any Notes are outstanding, the Company will furnish
to the Trustee and the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial position and results of
operations of the Company and its Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports. In addition, whether or not required by the rules and regulations of
the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission will
not accept such a filing) and make such information available to prospective
investors upon request. The Company shall include an unaudited consolidating
balance sheet and related statements of income and cash flows for the Company
and its Subsidiaries, separately identifying the Company and its Restricted
Subsidiaries as one group and the Company's Unrestricted Subsidiaries as a
separate group, in all reports containing the consolidated financial statements
(which in the case of annual reports shall be audited) of the Company and its
consolidated Subsidiaries which are required to be delivered by the Company to
the Securityholders pursuant to this Section 4.3, including the Company's
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. If required by
the terms thereof, the Company shall also comply with the provisions of TIA
Section 314(a).
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<PAGE> 40
(b) So long as any of the Transfer Restricted Securities
remain outstanding, the Company shall furnish to the Holders of the Transfer
Restricted Securities and to prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
(c) If the Company instructs the Trustee to distribute any of
the documents described in Section 4.3(a) to the Holders, the Company shall
provide the Trustee with a sufficient number of copies of all such documents
that the Company may be required to deliver to such Holders.
Section 4.4. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 45
days after the end of each of the first three fiscal quarters of each year, and
within 90 days after the end of the last fiscal quarter of each year, an
Officers' Certificate stating that a review of the activities of the Company
and its Subsidiaries during the preceding fiscal quarter, or fiscal year, as
appropriate, has been made under the supervision of the signing Officers with a
view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture, and further stating, as to each
such Officer signing such certificate, that to the best of his or her knowledge
the Company has kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of this Indenture
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company is taking or proposes to take with respect thereto) and that
to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of, or
interest on, the Notes are prohibited or, if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.3 above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Article 4 or Article 5 hereof
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
Section 4.5. Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except (i) such as are contested in good faith and by
appropriate proceedings or (ii) such as for which reserve or other appropriate
provision, if any, as shall be required to be in conformity with GAAP, has been
made therefor, or (iii) where the failure to effect such payment is not adverse
in any material respect to the Holders of the Notes.
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<PAGE> 41
Section 4.6. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.7. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
on, or make any distribution to the holders of, any Capital Stock of the
Company or a Restricted Subsidiary, other than dividends or distributions (A)
from a Restricted Subsidiary of the Company to the Company or to a Restricted
Subsidiary or (B) payable in Capital Stock of the Company that is not
Disqualified Stock; (ii) repay, redeem or otherwise acquire or retire for value
any Capital Stock of the Company or any of its Subsidiaries (other than Wholly
Owned Subsidiaries of the Company that are Restricted Subsidiaries), other than
a Permitted Investment; (iii) prepay, repay, redeem, defease or otherwise
acquire or retire for value prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the Company
that is pari passu with or subordinated in right of payment to the Notes, other
than a Permitted Investment and except (A) as permitted pursuant to clause
(vii) of Section 4.9(b), (B) upon a change of control, as defined in and to the
extent required by the indenture or other agreement or instrument pursuant to
which such pari passu or subordinated Indebtedness was issued, provided the
Company is then in compliance with the provisions of Section 4.14, (C) any
payment pursuant to a Pari Passu Offer and (D) any prepayment, repayment,
redemption, defeasance or other acquisition or retirement for value of (1) the
Senior Subordinated Notes or (2) other Indebtedness of the Company that is pari
passu with the Notes if such prepayment, repayment, redemption, defeasance or
other acquisition or retirement for value of such other Indebtedness is made
contemporaneously with (and pro rata with) a prepayment, repayment, redemption,
defeasance or other acquisition or retirement for value of the Notes; or (iv)
make any Investment other than a Permitted Investment or as permitted under
clauses (ii) and (iii) above (the foregoing actions set forth in clauses (i)
through (iv) being referred to hereinafter as "Restricted Payments"), if at the
time of any such Restricted Payment, and after giving effect thereto on a pro
forma basis:
(A) a Default or Event of Default shall have occurred and be
continuing or would result therefrom; or
(B) the aggregate amount of all Restricted Payments declared
or made after the Start Date including such Restricted Payment (the
value of any such payment, if other than cash, shall be the value
determined in good faith by resolution of the Board of Directors)
shall exceed the sum of: (1) 50% of the aggregate Consolidated Net
Income (after deducting from such Consolidated Net Income accrued but
unpaid compensation expenses related to any stock appreciation or
stock option plans net of tax benefits), or, in the event such
aggregate Consolidated Net Income shall be a loss, minus 100% of such
loss, of the Company and its Restricted Subsidiaries earned subsequent
to the Start Date to the end of the fiscal quarter immediately
preceding the date of such Restricted Payment (treated as a single
accounting period), plus (2) the aggregate net proceeds received by
the Company from the issuance or sale (other than to a Subsidiary of
the Company) of Capital Stock of the Company, including any such
shares issued upon exercise of any warrants, options or similar rights
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<PAGE> 42
(other than Disqualified Stock), subsequent to the Start Date, plus
(3) the aggregate net proceeds received by the Company from the
issuance or sale of Indebtedness that is convertible into Capital
Stock after the Start Date, to the extent that such Indebtedness is
actually converted into Capital Stock (other than Disqualified Stock),
plus (4) the aggregate net proceeds received after the Start Date by
the Company as capital contributions to the Company (other than from a
Subsidiary), plus (5) an amount equal to the net reduction in
Investments resulting from payments of principal of Indebtedness,
return of capital and other transfers of assets, in each case to the
Company or any Restricted Subsidiary of the Company (but excluding any
such amounts included in Consolidated Net Income), or from
designations of Unrestricted Subsidiaries as Restricted Subsidiaries,
plus (6) $15 million.
(b) The foregoing provisions of this Section 4.7 shall
not prohibit:
(i) the payment of any dividend within 60 calendar days
after the date of declaration thereof, if at the date
of declaration such dividend would have complied with
the provisions of this Indenture;
(ii) the repayment, redemption, acquisition or retirement
for value of any Capital Stock of the Company or any
of its Subsidiaries in exchange for, or out of the
aggregate net proceeds of, a substantially concurrent
issuance (other than to the Company or any of its
Restricted Subsidiaries) of Capital Stock of the
Company or a Restricted Subsidiary of the Company;
(iii) the prepayment, repayment, redemption, defeasance or
other acquisition or retirement for value prior to
any scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Indebtedness of
the Company that is pari passu with or subordinated
in right of payment to the Notes, in exchange for, or
out of the aggregate net proceeds of, a substantially
concurrent issuance (other than to the Company or a
Restricted Subsidiary) of Capital Stock of the
Company or a Restricted Subsidiary of the Company;
(iv) the prepayment, repayment, redemption, defeasance or
other acquisition or retirement for value prior to
any scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Indebtedness of
the Company that is pari passu with or subordinated
in right of payment to the Notes, in exchange for, or
out of the aggregate net proceeds of, a substantially
concurrent issuance (other than to the Company or a
Restricted Subsidiary) of Indebtedness of the Company
that is pari passu with or subordinated in right of
payment to, the Notes, but only if the Weighted
Average Life and period of time to Stated Maturity of
such new Indebtedness are each greater than the
Weighted Average Life and period of time to Stated
Maturity of such retired Indebtedness; and
(v) the payment of any dividend or distribution to any
holder of Capital Stock of a Restricted Subsidiary of
the Company, other than a holder that is an Affiliate
of the Company (except a holder that is an Affiliate
of the Company solely by virtue of the ownership of
such Capital Stock), as part of a pro rata dividend
or distribution to all holders of such class or
series of Capital Stock (but only the amount of such
dividend or distribution paid to a Person other than
the Company or a Restricted Subsidiary of the Company
shall constitute a Restricted Payment).
For purposes of calculating the aggregate amount of Restricted
Payments made pursuant to Section 4.7(a)(B) above, payments made under this
Section 4.7(b) (other than under clause (iv) hereof)
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<PAGE> 43
shall be included in such amount; provided that dividends paid within 60
calendar days of the date of declaration shall be deemed to be paid at the date
of declaration.
Section 4.8. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any of the
Restricted Subsidiaries of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of such Restricted Subsidiary to (i)
pay dividends or make any other distributions on its Capital Stock, or pay any
Indebtedness, owed to the Company or any of its Restricted Subsidiaries, (ii)
make any Investment in the Company or any of its Restricted Subsidiaries, (iii)
transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries or (iv) guarantee any Indebtedness of the Company or
any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (A) applicable law, (B) any
instrument governing Acquired Indebtedness permitted to be incurred under
Section 4.9 which encumbrances or restrictions are not applicable to any Person
or the properties or assets of any Person, other than the Person so acquired or
its Subsidiaries, or the property or assets of the Person so acquired or its
Subsidiaries, (C) any restrictions existing under agreements in effect on the
Initial Issuance Date, (D) any restrictions with respect to a Restricted
Subsidiary imposed pursuant to an agreement which has been entered into for the
sale or disposition of all or substantially all the Capital Stock or assets of
such Restricted Subsidiary, provided, that such disposition is permitted
pursuant to Section 4.10, (E) any agreement governing Indebtedness otherwise
permitted under the Indenture restricting the sale or other disposition of
property securing such Indebtedness if such agreement does not expressly
restrict the ability of a Restricted Subsidiary to pay dividends or to make
distributions, loans or advances, (F) the issuance of preferred stock by a
Restricted Subsidiary or the payment of dividends thereon in accordance with
the terms thereof, provided that issuance of such preferred stock is permitted
pursuant to Section 4.9 and the terms of such preferred stock do not expressly
restrict the ability of a Restricted Subsidiary to pay dividends or make any
other distributions on its Capital Stock (other than requirements to pay
dividends or liquidation preferences on such preferred stock prior to paying
any dividends or making any other distributions on such other Capital Stock),
(G) this Indenture, (H) the Credit Facility and other Senior Indebtedness, (I)
supermajority voting requirements existing under corporate charters, bylaws,
stockholders agreements and the like, (J) in the case of clause (iii) above,
agreements (1) that restrict in a customary manner the subletting, pledging,
assignment or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, or (2) existing by virtue
of any transfer of, agreement to transfer, option or right with respect to, or
Lien on, any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by this Indenture, including, without limitation, transfer
restrictions on any specific properties or assets that are subject to a sale
agreement otherwise permitted pursuant Section 4.10, (K) existing under any
agreement which refinances or replaces any of the agreements in the preceding
clauses; provided, that the terms and conditions of any such restrictions are
not materially less favorable to the Holders than those contained in the
agreements refinanced or replaced or (L) any instrument governing Indebtedness
of the Company that is (1) pari passu with the Notes and (2) otherwise
permitted under this Indenture, provided that the terms and conditions of any
such restrictions are not materially more restrictive than those contained in
this Indenture. Nothing contained in this Section 4.8 shall prevent the Company
or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted under Section 4.12 or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company
or any of its Restricted Subsidiaries.
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Section 4.9. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary of the Company to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to, any Indebtedness (collectively, an "incurrence"; with respect to
any non-interest bearing or other discount Indebtedness, an "incurrence" shall
be deemed to have occurred only on the date of original issuance thereof),
unless, after giving effect to the incurrence of such Indebtedness and the
application of the net proceeds therefrom, the EBITDA Ratio (as calculated on
the Determination Date) is greater than 2.0 to 1.0; provided that if the
Indebtedness which is the subject of a determination under this provision is
Acquired Indebtedness, then the Consolidated EBITDA of the Company shall be
determined by giving effect (on a pro forma basis, as if the transaction had
occurred at the beginning of the immediately preceding four-quarter period) to
both the incurrence or assumption of such Acquired Indebtedness by the Company
and the inclusion in the Consolidated EBITDA of the Person whose Indebtedness
would constitute Acquired Indebtedness.
(b) Notwithstanding the foregoing, Indebtedness may be
incurred as follows:
(i) Indebtedness under the Credit Facility in an
aggregate principal amount not to exceed $195 million
at any one time outstanding, less the aggregate
amount of all permanent reductions thereto pursuant
to Section 4.10;
(ii) Indebtedness represented by amounts due under Hedging
Obligations (provided that the obligations under such
Hedging Obligations are related to Indebtedness
otherwise permitted by the terms of this Section 4.9
and that the aggregate notional principal amount of
such Hedging Obligations shall not exceed 105% of the
total amount of the related underlying Indebtedness);
(iii) Indebtedness represented by property, liability and
workers' compensation insurance, performance bonds
(which may be in the form of letters of credit) for
construction contracts let by the Company and its
Restricted Subsidiaries in the ordinary course of
business (provided that to the extent that such
performance bonds secure Indebtedness, such
Indebtedness is otherwise permitted under this
Section 4.9), surety bonds and appeal bonds (which,
in each case, may be in the form of letters of
credit) required in the ordinary course of business
or in connection with the enforcement of rights or
claims of the Company or any Restricted Subsidiary of
the Company or in connection with judgments that do
not result in a Default or an Event of Default;
(iv) Indebtedness of the Company evidenced by the Notes
and this Indenture and by the Senior Subordinated
Notes and the Senior Subordinated Indentures;
(v) Indebtedness owing to a Wholly Owned Subsidiary of
the Company that is a Restricted Subsidiary or to the
Company;
(vi) Acquired Indebtedness, provided that such
Indebtedness if incurred by the Company would be in
compliance with the first paragraph of this covenant;
(vii) Indebtedness issued in exchange for, or the proceeds
of which are used to repay or refund or refinance or
discharge or otherwise retire for value, Indebtedness
of the Company or any of its Restricted Subsidiaries
permitted under clauses (iv) and (vi) above, clause
(viii)
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<PAGE> 45
below and Section 4.9(a) ("Refinancing Indebtedness")
in a principal amount not to exceed the principal
amount of the Indebtedness so refinanced plus any
premium and accrued interest plus customary fees,
expenses and costs related to the incurrence of such
Refinancing Indebtedness, provided that with respect
to any Refinancing Indebtedness which refinances
Indebtedness which ranks junior in right of payment
to the Notes, (A) such Refinancing Indebtedness is
subordinated in right of payment at least to the same
extent as the Indebtedness to be refunded or
refinanced if such Indebtedness had remained
outstanding and (B) the Refinancing Indebtedness has
a Weighted Average Life and Stated Maturity that are
equal to or greater than those of the Indebtedness to
be repaid or refunded or refinanced or discharged or
otherwise retired for value at the time of such
incurrence;
(viii) Indebtedness outstanding on the Initial Issuance
Date;
(ix) Indebtedness of the Company or a Restricted
Subsidiary of the Company to an Unrestricted
Subsidiary for money borrowed, provided, that such
Indebtedness is subordinated in right of payment to
the Notes and the Weighted Average Life of such
Indebtedness is greater than the Weighted Average
Life of the Notes; and
(x) other Indebtedness not to exceed $25 million.
Section 4.10. Limitation on Asset Sales.
(a) The Company shall not, and shall not permit any of the
Restricted Subsidiaries of the Company to, make any Asset Disposition, unless
(i) the consideration received from such Asset Disposition is at least equal to
the Fair Market Value of the Capital Stock, property or other assets sold, (ii)
at least 75% of the consideration received from such Asset Disposition is in
the form of Cash, Temporary Cash Investments or Marketable Equity Securities
(the "75% Test"), provided that the amount of any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or such Restricted Subsidiary which are assumed
by the transferee, cancelled or satisfied in any Asset Disposition (other than
liabilities that are incurred in connection with or in anticipation of such
Asset Disposition) as a credit against the purchase price therefor shall be
deemed to be Cash to the extent of the amount so credited for purposes of the
75% Test, and (iii) the Company applies, or causes its Restricted Subsidiaries
to apply, 100% of the Net Proceeds from any Asset Disposition to an offer (a
"Net Proceeds Offer") to purchase Notes outstanding having a Net Proceeds Offer
Price at least equal to such Net Proceeds, such Net Proceeds Offer to commence
on a date not later than 360 calendar days after the date of such Asset
Disposition at a purchase price (the "Net Proceeds Offer Price") equal to 100%
of the principal amount thereof, plus accrued interest thereon to the closing
date of the Net Proceeds Offer (the "Net Proceeds Purchase Date"), except to
the extent that such Net Proceeds have been applied either to (i) the permanent
repayment of principal and interest on Senior Indebtedness or Indebtedness of
the Restricted Subsidiary of the Company that made such Asset Disposition or to
(ii) the purchase of assets or businesses in the same line of business as the
Company and its Restricted Subsidiaries or assets incidental thereto.
Notwithstanding anything to the contrary in this Section 4.10, the Company will
not be required to make a Net Proceeds Offer with respect to any Net Proceeds
from Asset Dispositions until the aggregate amount of Net Proceeds from Asset
Dispositions in any period of 12 consecutive months which are not applied
either to the permanent repayment of principal and interest on Indebtedness (as
described above) or to the purchase of assets or businesses (as described
above), exceeds $10 million. For purposes of this Section 4.10, the principal
amount of Notes for which a Net Proceeds Offer shall be made is referred to as
the "Net Proceeds Offer Amount."
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(b) To the extent required by any pari passu Indebtedness,
and provided there is a permanent reduction in the principal amount of such
pari passu Indebtedness, the Company shall simultaneously with the Net Proceeds
Offer make an offer to purchase such pari passu Indebtedness (a "Pari Passu
Offer") in an amount (the "Pari Passu Offer Amount") equal to the Net Proceeds
Offer Amount, as determined above, multiplied by a fraction, the numerator of
which is the outstanding principal amount of such pari passu Indebtedness and
the denominator of which is the sum of the outstanding principal amount of the
Notes and such pari passu Indebtedness, in which case the Net Proceeds Offer
Amount shall be correspondingly reduced by such Pari Passu Offer Amount.
(c) The Company may credit against its obligation to make a
Net Proceeds Offer pursuant to this Section 4.10 up to $2 million aggregate
principal amount of Notes, at 100% of the principal amount thereof, which have
been acquired by the Company and surrendered for cancellation after the making
of the Net Proceeds Offer and which have not been used as a credit against or
acquired pursuant to any prior obligation to make an offer to purchase Notes
pursuant to the provisions set forth under Section 4.14 or this Section 4.10.
(d) Upon notice of a Net Proceeds Offer provided to the
Trustee by the Company, notice of such Net Proceeds Offer shall be mailed by
the Trustee (at the Company's expense) not less than 30 calendar days nor more
than 60 calendar days before the Net Proceeds Purchase Date to each Holder of
Notes at such Holder's last registered address appearing in the Register. The
Company shall provide the Trustee with copies of all materials to be delivered
with such notice. The notice shall contain all instructions and material
necessary to enable such Holders to tender Notes pursuant to the Net Proceeds
Offer. In such notice, the Company shall state: (1) that the Net Proceeds
Offer is being made pursuant to this Section 4.10 and that it will purchase the
principal amount of Notes equal to the Net Proceeds Offer Amount; (2) the Net
Proceeds Offer Price and the Net Proceeds Purchase Date; (3) that any Note not
tendered will continue to accrue interest; (4) that, unless the Company
defaults in the payment of the Net Proceeds Offer Price, all Notes accepted for
payment pursuant to the Net Proceeds Offer shall cease to accrue interest after
the Net Proceeds Purchase Date; (5) that Holders electing to have any Notes
purchased pursuant to such Net Proceeds Offer will be required to surrender the
Notes, and complete the section entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes or transfer beneficial ownership of such Notes by
book-entry transfer, to the Company, the Depositary (if appointed by the
Company), or the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Net Proceeds
Purchase Date; (6) that Holders will be entitled to withdraw their election if
the Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the close of business on the third Business Day preceding the
Net Proceeds Purchase Date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes delivered
for purchase, and a statement that such Holder is withdrawing his election to
have the Notes purchased; and (7) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered (or transferred by book-entry
transfer), provided that the principal amount of such unpurchased portion must
be equal to $1,000 or an integral multiple thereof. If Notes in a principal
amount in excess of the Net Proceeds Offer Amount are surrendered pursuant to
the Net Proceeds Offer, the Company shall purchase Notes on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000 or integral multiples of $1,000 shall be
acquired). The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Net Proceeds Offer.
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(e) On the Net Proceeds Purchase Date, the Company shall (i)
accept for payment Notes or portions thereof validly tendered pursuant to the
Net Proceeds Offer (on a pro rata basis if required), (ii) deposit with the
Paying Agent money in immediately available funds, sufficient to pay the
purchase price of all Notes or portions thereof so accepted, and (iii) deliver
to the Trustee Notes so accepted together with an Officer's Certificate stating
the Notes or portions thereof accepted for payment by the Company. If the
Company complies with its obligations set forth in the immediately preceding
sentence, whether or not a Default or Event of Default has occurred and is
continuing on the Net Proceeds Purchase Date, the Paying Agent shall as
promptly as practicable mail to each Holder of Notes so accepted payment in an
amount equal to the purchase price, and the Company shall execute and the
Trustee shall as promptly as practicable authenticate and mail or deliver to
such Holder a new Note equal in principal amount to any unpurchased portion of
the Note surrendered. Any Notes not so accepted shall be as promptly as
practicable mailed or delivered by the Company to the Holders thereof. The
Company shall publicly announce the results of the Net Proceeds Offer on or as
promptly as practicable after the Net Proceeds Purchase Date. For purposes of
this covenant, the Trustee shall act as the Paying Agent.
(f) Notwithstanding anything to the contrary contained in
this Indenture, the Company or any of its Restricted Subsidiaries may engage in
transactions in which theatre properties will be transferred in exchange for
one or more other theatre properties; provided that if the Fair Market Value of
the theatre properties to be transferred by the Company or such Restricted
Subsidiary, plus the Fair Market Value of any other consideration paid or
credited by the Company or such Restricted Subsidiary (the "Transaction Value")
exceeds $2 million, such transaction shall require approval of the Board of
Directors. In addition, each such transaction shall be valued at an amount
equal to all consideration received by the Company or such Restricted
Subsidiary in such transaction, other than the theatre properties received
pursuant to such exchange ("Other Consideration"), for purposes of determining
whether an Asset Disposition has occurred. If the Other Consideration is of an
amount and character such that such transaction constitutes an Asset
Disposition, then Section 4.10(a) shall be applicable to any Net Proceeds of
such Other Consideration.
Section 4.11. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, directly or indirectly, enter into any
transaction (including without limitation the purchase, sale, lease or exchange
of any property or the rendering of any service) with a Person that,
immediately prior to such transaction, was an Affiliate (an "Affiliate
Transaction"), unless such transaction is on terms no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained in a
comparable arms' length transaction with an entity that is not an Affiliate;
provided that continued performance under agreements as in effect on the
Initial Issuance Date and described in the Offering Memorandum, or
consummation, on the terms described in the Offering Memorandum, of
transactions described therein that are not consummated prior to the Initial
Issuance Date (and renewals and extensions of such agreements and transactions
on terms not materially less favorable to the Holders than the terms of such
original agreements and transactions), shall not be subject to such limitation.
In addition, the Company shall not, and shall not permit any
of the Restricted Subsidiaries of the Company to, enter into (i) an Affiliate
Transaction involving or having an expected value of more than $2 million
unless such transaction shall have been approved in good faith by resolution of
the Board of Directors and such resolution provides that such Affiliate
Transaction complies with the requirements of this Section 4.11 or (ii) an
Affiliate Transaction involving or having an expected value of more than $15
million, unless the Company has received an opinion of a nationally recognized
independent investment banking firm, accounting firm, appraisal firm or other
experts of nationally recognized
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standing if, in each case, such firm is regularly engaged to render opinions of
such type, to the effect that the transaction is fair to the Company (or, if
the Company is not a party to such Affiliate Transaction, then to such
Restricted Subsidiary) from a financial point of view.
Notwithstanding anything to the contrary contained in this
Indenture, the foregoing provisions shall not apply to (i) transactions between
the Company and a Wholly Owned Subsidiary of the Company that is a Restricted
Subsidiary or between Wholly Owned Subsidiaries of the Company that are
Restricted Subsidiaries, (ii) payments required to be made to the Company by
Cinemark International or by any Subsidiary of Cinemark International under the
Cinemark International Management Agreement or under a Subsidiary management
agreement, as the case may be, (iii) payments pursuant to any tax sharing
agreement or arrangement among the Company and its Subsidiaries, (iv)
transactions with any current or former employee, officer or director of the
Company or any of its Restricted Subsidiaries pursuant to reasonable employee
benefit plans or compensation arrangements or agreements entered into in the
ordinary course of business on or prior to the Start Date, or amended or
created thereafter with the approval of the Board of Directors, (v)
transactions with any employee of the Company pursuant to which the Company
purchases or otherwise acquires Capital Stock of the Company from such employee
as permitted under Section 4.7, or (vi) transactions constituting (A) a
Restricted Payment not prohibited by Section 4.7 and not constituting a
Permitted Investment, or (B) an investment not constituting an "Investment" by
reason of a specific exclusion from such definition.
Section 4.12. Limitation on Liens.
The Company shall not, and shall not permit any of the
Restricted Subsidiaries of the Company to, create, incur, assume or suffer to
exist any Lien upon any of its property or assets (including assets acquired
after the Initial Issuance Date), except for:
(i) Liens incurred after the Initial Issuance Date
securing Indebtedness of the Company that ranks pari
passu or junior in right of payment to the Notes, if
the Notes are secured equally and ratably with such
Indebtedness;
(ii) Liens outstanding on the Initial Issuance Date;
(iii) Liens for taxes, assessments, governmental charges or
claims not yet delinquent or which are being
contested in good faith by appropriate proceedings,
provided that adequate reserves with respect thereto
are maintained on the books of the Company or its
Restricted Subsidiaries, as the case may be, in
conformity with GAAP;
(iv) Landlords', carriers', warehousemen's, mechanics',
materialmen's, repairmen's or the like Liens arising
by contract or statute in the ordinary course of
business and with respect to amounts which are not
yet delinquent or are being contested in good faith
by appropriate proceedings;
(v) pledges or deposits made in the ordinary course of
business (A) in connection with leases, performance
bonds and similar obligations, or (B) in connection
with workers' compensation, unemployment insurance
and other social security legislation;
(vi) easements, rights-of-way, restrictions, minor defects
or irregularities in title and other similar
encumbrances which, in the aggregate, do not
materially detract from the value of
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the property subject thereto or materially interfere
with the ordinary conduct of the business of the
Company or such Restricted Subsidiary;
(vii) any attachment or judgment Lien that does not
constitute an Event of Default;
(viii) Liens securing Acquired Indebtedness, provided that
such Liens attach solely to the acquired assets or
the assets of the acquired entity and do not extend
to or cover any other assets of the Company or any of
its Restricted Subsidiaries;
(ix) Liens to secure Senior Indebtedness;
(x) Liens in favor of the Trustee for its own benefit and
for the benefit of the Securityholders;
(xi) any interest or title of a lessor pursuant to a lease
constituting a Capitalized Lease Obligation;
(xii) Liens on accounts receivable and inventory or cash
deposits collateralizing reimbursement obligations
with respect to letters of credit, in either case
securing Indebtedness permitted to be incurred under
clause (i) of Section 4.9(b);
(xiii) Liens incurred or deposits made to secure the
performance of tenders, bids, leases, statutory or
regulatory obligations, banker's acceptances, surety
and appeal bonds, government contracts, performance
and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of
borrowed money);
(xiv) Liens (including extensions and renewals thereof)
upon real or personal property acquired after the
Initial Issuance Date; provided that (a) such Lien is
created solely for the purpose of securing
Indebtedness incurred, in accordance with Section
4.9, (1) to finance the cost (including the cost of
improvement or construction) of the item of property
or assets subject thereto and such Lien is created
prior to, at the time of or within six months after
the later of the acquisition, the completion of
construction or the commencement of full operation of
such property or (2) to refinance any Indebtedness
previously so secured, (b) the principal amount of
the Indebtedness secured by such Lien does not exceed
100% of such cost and (c) any such Lien shall not
extend to or cover any property or assets other than
such item of property or assets and any improvements
on such item;
(xv) leases or subleases granted to others that do not
materially interfere with the ordinary course of
business of the Company and its Restricted
Subsidiaries, taken as a whole;
(xvi) Liens encumbering property or assets under
construction arising from progress or partial
payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or
assets;
(xvii) any interest or title of a lessor in the property
subject to any Capitalized Lease Obligation or
operating lease;
(xviii) Liens arising from filing Uniform Commercial Code
financing statements regarding leases;
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(xix) Liens on property of, or on shares of stock or
Indebtedness of, any Person existing at the time such
Person becomes, or becomes a part of, any Restricted
Subsidiary, provided that such Liens do not extend to
or cover any property or assets of the Company or any
Restricted Subsidiary other than the property or
assets acquired;
(xx) Liens in favor of the Company or any Restricted
Subsidiary;
(xxi) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of
customs duties in connection with the importation of
goods;
(xxii) Liens encumbering deposits securing Indebtedness
under Hedging Obligations;
(xxiii) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for
the sale of goods entered into by the Company or any
of its Restricted Subsidiaries in the ordinary course
of business in accordance with the past practices of
the Company and its Restricted Subsidiaries;
(xxiv) Liens on or sales of receivables;
(xxv) the rights of film distributors under film licensing
contracts entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of
business on a basis customary in the movie exhibition
industry; and
(xxvi) any renewal of or substitution for any Liens
permitted by any of the preceding clauses, provided
that the Indebtedness secured is not increased (other
than by any premium and accrued interest, plus
customary fees, expenses and costs related to such
renewal or substitution of Liens or the incurrence of
any related refinancing of Indebtedness) nor the
Liens extended to any additional assets (other than
proceeds and accessions).
The provisions of this Section 4.12 do not authorize the
incurrence of any Indebtedness not otherwise permitted by Section 4.9.
Section 4.13. Limitation on Layering Debt.
The Company will not incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior
in right of payment to any Senior Indebtedness of the Company but senior in any
respect in right of payment to the Notes.
Section 4.14. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company
shall be required to make an offer (a "Change of Control Offer") to Holders to
repurchase any and all of the Notes (but only in denominations of $1,000 or
integral multiples of $1,000) at a purchase price (the "Change of Control Offer
Price") equal to 101% of the aggregate principal amount, plus accrued and
unpaid interest thereon to the date of purchase ("Change of Control Purchase
Date").
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(b) Notice of a Change of Control Offer shall be mailed by
the Company, with a copy to the Trustee, or, at the Company's option, by the
Trustee (at the Company's expense) not more than 30 calendar days after the
Change of Control to each Holder of the Notes at such Holder's last registered
address appearing in the Register. In such notice, the Company shall describe
the transaction that constitutes the Change of Control and offer to repurchase
Notes pursuant to the procedures required by this Section 4.14 and described in
such notice. The notice shall contain all instructions and materials necessary
to enable Holders to tender Notes pursuant to the Change of Control Offer. In
addition, the notice shall state: (1) that the Change of Control Offer is
being made pursuant to this Section 4.14 and that all Notes tendered will be
accepted for payment; (2) the Change of Control Offer Price and the Change of
Control Purchase Date, which shall be no sooner than 60 nor later than 90 days
after the Change of Control; (3) that any Note not tendered will continue to
accrue interest; (4) that, unless the Company defaults in the payment of the
Change of Control Offer Price, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Purchase Date; (5) that Holders electing to have any Notes purchased
pursuant to a Change of Control Offer will be required to deliver the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Notes completed, or transfer by book-entry transfer, to the Company, the
Depositary (if appointed by the Company), or the Paying Agent at the address
specified in the notice prior to the close of business on the third Business
Day preceding the Change of Control Purchase Date; (6) that Holders will be
entitled to withdraw their election if the Company, the Depositary or the
Paying Agent, as the case may be, receives, not later than the close of
business on the third Business Day preceding the Change of Control Purchase
Date, a telegram, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Notes
purchased; and (7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered (or transferred by book-entry transfer), which
unpurchased portion must be equal to at least $1,000 in principal amount or an
integral multiple thereof. The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
(c) On the Change of Control Purchase Date, the Company shall
(i) accept for payment Notes or portions thereof validly tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money in
immediately available funds sufficient to pay the purchase price of all Notes
or portions thereof so accepted, and (iii) deliver to the Trustee Notes so
accepted together with an Officer's Certificate stating the Notes or portions
thereof accepted for payment by the Company. If the Company complies with its
obligations set forth in the immediately preceding sentence, whether or not a
Default or Event of Default has occurred and is continuing on the Change of
Control Purchase Date, the Paying Agent shall as promptly as practicable mail
or deliver to each Holder of Notes so accepted payment in an amount equal to
the purchase price, and the Company shall execute and the Trustee shall as
promptly as practicable authenticate and mail or deliver to such Holder a new
Note equal in principal amount to any unpurchased portion of the Note
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. Any Notes not so accepted
shall be as promptly as practicable mailed or delivered by the Trustee to the
Holders thereof. The Company shall publicly announce the results of the Change
of Control Offer on or as promptly as practicable after the Change of Control
Purchase Date. For purposes of this Section 4.14, the Trustee shall act as the
Paying Agent.
(d) Prior to complying with the other provisions of this
Section 4.14, but in any event within 90 days following a Change of Control,
the Company shall either repay all outstanding Senior
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Indebtedness or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Indebtedness to permit the repurchase of Notes
required by this Section 4.14.
Section 4.15. Corporate Existence.
Except as otherwise permitted pursuant to the terms hereof,
the Company shall do or cause to be done all things necessary to preserve and
keep in full force and effect (i) its corporate existence, and the corporate,
partnership or other existence of each of its Significant Subsidiaries, in
accordance with their respective organizational documents (as the same may be
amended from time to time), and (ii) the material rights (charter and
statutory), licenses and franchises of the Company and its Significant
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise of itself or any of its
Significant Subsidiaries, or the corporate, partnership or other existence of
any of its Significant Subsidiaries, if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the
Notes.
Section 4.16. Covenant with Respect to Cinemark International and its
Subsidiaries.
The Company shall cause Cinemark International and its
Subsidiaries on a consolidated basis to be engaged principally in the
acquisition, construction and operation of indoor motion picture theatres and
other activities incidental thereto outside the United States and Canada.
Section 4.17. Limitation on Restrictive Covenants.
Notwithstanding any other provision of this Indenture, the
restrictive covenants set forth in this Indenture, including, without
limitation, those set forth in Sections 4.7, 4.9, 4.10, 4.11 and 5.1 shall be
and shall be deemed limited to the extent necessary so that the creation,
existence and effectiveness of such restrictive covenants shall not result in a
breach of the covenant set forth in Section 4.8 of the Senior Subordinated
Indentures.
ARTICLE 5
SUCCESSORS
Section 5.1. Merger, Consolidation, or Sale of Assets.
The Company shall not consolidate with or merge with or into,
or sell, assign or lease all or substantially all of the properties and assets
of the Company and its Restricted Subsidiaries, taken as a whole, to any Person
(other than the Company or a Wholly Owned Subsidiary of the Company that is a
Restricted Subsidiary), or permit any Person (other than a Wholly Owned
Subsidiary of the Company that is a Restricted Subsidiary) to merge with or
into the Company unless:
(i) the Company shall be the continuing Person, or the
Person formed by such consolidation or into which the
Company is merged or to which the properties and
assets of the Company and its Restricted Subsidiaries
taken as a whole are transferred (the "surviving
entity") shall be a corporation organized and
existing under the laws of the United States or any
state thereof or the District of Columbia and shall
expressly assume, by a
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supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and the
Indenture, and the Indenture shall remain in full
force and effect;
(ii) immediately before and immediately after giving
effect to such transaction, no Event of Default and
no Default shall have occurred and be continuing;
(iii) unless the applicable transaction involves the merger
of a Restricted Subsidiary of the Company into the
Company, the Company or, in the case of a
consolidation or merger in which the Company is not
the continuing Person, the surviving entity, after
giving pro forma effect to such transaction, could
incur $1.00 of additional Indebtedness (assuming a
market rate of interest with respect to such
additional Indebtedness) pursuant to Section 4.9(a);
and
(iv) unless the applicable transaction involves the merger
of a Restricted Subsidiary of the Company into the
Company, immediately after giving effect to such
transaction, the Consolidated Net Worth of the
Company, or, in the case of a consolidation or merger
in which the Company is not the continuing Person,
the surviving entity, shall be equal to or greater
than the Consolidated Net Worth of the Company
immediately before such transaction.
Section 5.2. Successor Company Substituted.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole in accordance with Section 5.1 hereof, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of the Company under the Indenture with the
same effect as if such successor corporation had been named as the Company
therein; and thereafter, if the Company is dissolved following a transfer of
all or substantially all of its assets in accordance with this Indenture, the
Company shall be discharged and released from all obligations and covenants
under this Indenture and the Notes. The Trustee shall enter into a
supplemental indenture to evidence the succession and substitution of such
successor Person and such discharge and release of the Company.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if one of the following shall
have occurred and be continuing:
(a) the Company defaults in the payment of (i) the
principal of (or premium, if any, on) any Notes when the same becomes
due and payable at maturity, by acceleration or otherwise, (ii) the
redemption price on any redemption date, or (iii) the Change of
Control Offer Price or the Net Proceeds Offer Price on the applicable
Offer Purchase Date relating to such Offer;
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(b) the Company defaults in the payment of interest on
any Note when the same becomes due and payable, which default
continues for a period of 30 calendar days;
(c) the Company or any Subsidiary of the Company fails to
comply with any of its covenants or agreements in the Notes or this
Indenture (other than those referred to in clauses (a) and (b) above)
and such failure continues for 45 calendar days after receipt by the
Company of a Notice of Default specifying such Default;
(d) an event of default on any other Indebtedness for
borrowed money of the Company or any of its Restricted Subsidiaries
having an aggregate amount outstanding in excess of $5 million which
default (i) is caused by a failure to pay when due (after giving
effect to any grace periods) any principal, premium, if any, or
interest on such Indebtedness or (ii) has caused the holders thereof
to declare such Indebtedness due and payable in advance of its
scheduled maturity;
(e) the Company or any Significant Subsidiary of the
Company pursuant to or within the meaning of any Bankruptcy Law: (i)
commences a voluntary case or proceeding, (ii) consents to the entry
of an order for relief against it in an involuntary case or
proceeding, (iii) consents to the appointment of a Custodian of it or
for all or substantially all of its property, (iv) makes a general
assignment for the benefit of its creditors, or (v) admits in writing
its inability to pay its debts generally as they become due;
(f) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief against the
Company or any Significant Subsidiary of the Company in an involuntary
case or proceeding, (ii) appoints a Custodian of the Company or any
Significant Subsidiary of the Company or for all or substantially all
of its respective properties, or (iii) orders the liquidation of the
Company or any Significant Subsidiary of the Company; and in each case
the order or decree remains unstayed and in effect for 60 calendar
days; or
(g) final non-appealable judgments for the payment of
money which in the aggregate exceed $5 million (net of applicable
insurance coverage which is acknowledged in writing by the insurer)
shall be rendered against the Company or any Significant Subsidiary of
the Company by a court and shall remain unstayed or undischarged for a
period of 60 calendar days.
A Default under clause (c) above is not an Event of Default
until the Trustee notifies the Company, or the Holders of at least 25% in
aggregate principal amount of the Notes at the time outstanding notify the
Company and the Trustee, of the Default and the Company does not cure such
Default within 45 days after receipt of such notice. Such notice must be in
writing and specify the Default, demand that it be remedied and state that the
notice is a "Notice of Default."
Notwithstanding the foregoing, if an Event of Default
specified in clause (d) above occurs and is continuing, such Event of Default
and all consequences thereof (including, without limitation, any acceleration
or resulting payment default) shall be annulled and rescinded, automatically
and without any action by the Trustee or the holders of the Notes, if (i) the
Indebtedness that is the subject of such Event of Default has been repaid, or
(ii) the default relating to such Indebtedness is waived or cured (and if such
Indebtedness has been accelerated, then the holders thereof have rescinded
their declaration of acceleration in respect of such Indebtedness).
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Section 6.2. Acceleration.
If any Event of Default specified in clauses (a), (b), (c),
(d) or (g) of Section 6.1 hereof occurs and is continuing, then the Holders of
at least 25% in aggregate principal amount of the then outstanding Notes by
written notice to the Company and the Trustee may declare the unpaid principal
of, and any accrued interest on, all the Notes to be due and payable
immediately. If any Event of Default with respect to the Company specified in
clauses (e) or (f) of Section 6.1 hereof occurs, all outstanding principal and
interest on the Notes shall be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in aggregate principal amount of the Notes then outstanding, by
written notice to the Trustee and to the Company, may rescind an acceleration
(except an acceleration due to a default in payment of the principal of, or
premium or interest on, any of the Notes) if the rescission would not conflict
with any judgment or decree and if all existing Events of Default (except
nonpayment of principal, premium or interest that have become due solely
because of the acceleration) have been cured or waived.
Section 6.3. Other Remedies.
Subject to Section 6.2, if an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect any payment due on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.4. Waiver of Past Defaults.
Subject to Section 9.2, Holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may, on
behalf of the Holders of all of the Notes, waive an existing Default or Event
of Default and its consequences hereunder (including without limitation
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
Section 6.5. Control by Majority.
The Holders of a majority in aggregate principal amount of the
Notes then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture or that the Trustee determines may be
unduly prejudicial to the rights of another Holder or that involves the Trustee
in personal liability. The Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction.
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Section 6.6. Limitation on Suits.
Subject to the provisions of Section 6.7 hereof, no Holder of
a Note may pursue any remedy with respect to this Indenture or the Notes
(including without limitation the institution of any proceeding, judicial or
otherwise, with respect to the Notes or this Indenture or for the appointment
of a receiver or trustee for the Company and/or any of its Subsidiaries)
unless:
(a) the Holder has given to the Trustee written notice of
a continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding have made a written request to
the Trustee to pursue the remedy;
(c) such Holders have offered to provide to the Trustee
indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee has not complied with the request within
60 calendar days after receipt of the request and the offer of
indemnity; and
(e) during such 60-day period, the Holders of a majority
in aggregate principal amount of the Notes then outstanding have not
given the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 6.7. Rights of Holders of Notes to Receive Payment.
The right of any Holder of a Note to receive payment of
principal of, and premium, if any, and interest on, the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
Section 6.8. Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for principal
of, and premium, if any, and interest on, the Notes and interest on overdue
principal and, to the extent lawful, interest, and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.9. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
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custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.7 hereof. To the extent that the
payment of any such reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.7 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.7 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest ratably, without preference
or priority of any kind, according to the amounts due and payable on the Notes
for principal, premium, if any, and interest, respectively; and
Third: the remainder to the Company or to such party as a
court of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, each party to this Indenture agrees, and each
Holder by its acceptance of its Notes shall be deemed to have agreed, that any
court in its discretion may require the filing by any party litigant in the
suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and
good faith of the claims or defenses made by the party litigant. This Section
does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant
to Section 6.7 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in its
exercise, as a prudent Person would exercise or use under the circumstances in
the conduct of its own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee shall not be liable hereunder
except for such duties of the Trustee which shall be
determined solely by the express provisions of this Indenture
and the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not such documents conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer,
unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.5 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), and (c) of this Section 7.1.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability whatsoever in
the performance of any of its duties hereunder or in the exercise of any of its
rights or powers hereunder. The Trustee shall be under no obligation to
exercise any of its rights and powers under this Indenture at the request of
any Holders, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it in its sole subjective discretion (which
discretion shall be exercised in good faith) against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
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Section 7.2. Rights of Trustee.
(a) Subject to Section 7.1, the Trustee may conclusively
rely upon any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it
may consult with counsel and require an Officers' Certificate or an Opinion of
Counsel or both. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officers' Certificate or
Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes in its sole subjective
discretion (which discretion shall be exercised in good faith) to be authorized
or within the rights or powers conferred upon it by this Indenture.
(e) The permissive right of the Trustee to act hereunder
shall not be construed as a duty.
(f) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(g) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee security or indemnity satisfactory to the Trustee in its sole
subjective discretion (which discretion shall be exercised in good faith)
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction.
(h) The Trustee shall not be required to take notice or
deemed to have notice of any Event of Default hereunder, except failure by the
Company to make any of the payments to the Trustee pursuant to Section 6.1(a)
or Section 6.1(b) hereof, unless the Trustee shall be specifically notified in
writing of such Event of Default by the Company or by one or more of the
Holders.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest (as such term is defined in TIA Section 310(b)), it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee (to the extent permitted under TIA Section 310(b)) or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
Section 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein
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or any statement in the Notes or any other document in connection with the sale
of the Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.5. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after such event
occurs. Except in the case of a Default or Event of Default under Section
6.1(a) or (b), the Trustee may withhold such notice if it determines that
withholding the notice is in the interests of the Holders of the Notes.
Section 7.6. Reports by Trustee to Holders of the Notes.
Within 60 days after each July 31 beginning with the July 31
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if
no event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA Section
313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Notes are listed in accordance with and to
the extent required by TIA Section 313(d). The Company shall promptly notify
the Trustee if the Notes become listed on any stock exchange or automatic
quotation system.
Section 7.7. Compensation and Indemnity.
Absent any other agreement to the contrary, the Company shall
pay to the Trustee from time to time compensation as shall be agreed upon
between the Company and the Trustee for its acceptance of this Indenture and
services hereunder. The Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Company shall reimburse
the Trustee promptly upon request for all reasonable disbursements, advances
and expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the
Company (including this Section 7.7) and defending itself against any claim
(whether asserted by the Company or any Holder or any other Person) or
liability in connection with the exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, liability or expense
may be attributable to its negligence or bad faith. The Trustee shall promptly
notify the Company of any claim for which it may seek indemnity. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel; provided that the Company will not be required to
pay such fees and expenses if it assumes the Trustee's defense with counsel
acceptable to and approved by the Trustee (such approval not to be unreasonably
withheld) and there is no conflict of interest between the Company and the
Trustee in connection with such defense. The Company need not pay for any
settlement made without its written consent, which consent shall not be
unreasonably withheld. The Company need not reimburse the Trustee
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for any expense or indemnity against any liability or loss of the Trustee to
the extent such expense, liability or loss is attributable to the negligence,
bad faith or willful misconduct of the Trustee.
The obligations of the Company under this Section 7.7 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(e) or (f) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2).
Section 7.8. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing upon 60 days notice and be
discharged from the trust hereby created by so notifying the Company in
writing. The Holders of Notes of a majority in principal amount of the then
outstanding Notes may remove the Trustee by so notifying the Trustee and the
Company in writing and may appoint a successor trustee with the consent of the
Company. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a receiver, Custodian or public officer takes charge
of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint or
request the Trustee to appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount
of the then outstanding Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
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If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7
hereof shall continue for the benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
DEFEASANCE AND DISCHARGE
Section 8.1. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.2 or 8.3 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
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Section 8.2. Legal Defeasance.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.2, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.6 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged pursuant to this Indenture:
(a) the rights of Holders of outstanding Notes to receive solely from the trust
fund described in Section 8.4 hereof, and as more fully set forth in such
Section, payments in respect of the principal of, and premium, if any, and
interest on, such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.2 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith and (d) this Article 8.
Subject to compliance with this Article 8, the Company may exercise its option
under this Section 8.2 notwithstanding the prior exercise of its option under
Section 8.3 hereof.
Section 8.3. Covenant Defeasance.
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.3, and subject to the satisfaction of the
conditions set forth in Section 8.4 hereof, the Company shall be released from
its obligations under the covenants contained in Sections 4.4, 4.5, 4.7, 4.8,
4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 5.1, and 5.2 with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 6.1 hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Company's exercise under Section 8.1
hereof of the option applicable to this Section 8.3 hereof, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, Sections 6.1(c)
through 6.1(g) hereof shall not constitute Events of Default.
Section 8.4. Conditions to Legal or Covenant Defeasance.
In order to exercise either Legal Defeasance or Covenant
Defeasance, the Company must irrevocably deposit, or caused to be deposited,
with the Trustee (or another trustee satisfying the requirements of this
Indenture), in trust for such purpose, (1) money in an amount, (2) U.S.
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide money in an amount, or (3) a
combination thereof, sufficient in the opinion of a nationally
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recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay the principal of, and
premium, if any, and interest on, the outstanding Notes at maturity or upon
redemption, together with all other amounts payable by the Company under the
Indenture. Such Legal Defeasance or Covenant Defeasance will become effective
91 days after such deposit if and only if:
(i) no Default or Event of Default with respect
to the Notes shall have occurred and be continuing immediately
prior to the time of such deposit;
(ii) no Default or Event of Default pursuant to
Sections 6.1(e) or 6.1(f) shall have occurred at any time in
the period ending on the 91st day after the date of such
deposit and shall be continuing on such 91st day;
(iii) such defeasance does not result in a breach
or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by
which it is bound (and, in furtherance of such condition, no
Default or Event of Default shall result under this Indenture
due to the incurrence of Indebtedness to fund such deposit and
the entering into of customary documentation in connection
therewith, even though such documentation may contain
provisions that would otherwise give rise to a Default or
Event of Default); and
(iv) the Company has delivered to the Trustee
(A)(1) in the case of Legal Defeasance, an Opinion of Counsel
to the effect that (x) there has been published by the
Internal Revenue Service a ruling or (y) since the date of
this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the
Holders of the Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not
occurred, or (2) in the case of Covenant Defeasance, an
Opinion of Counsel to the effect that the Holders of the Notes
will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amount, in the same
manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; and (B) an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent relating to such Legal
Defeasance or Covenant Defeasance have been complied with.
Section 8.5. Discharge.
If (i) the Company shall deliver to the Trustee for
cancellation all Notes theretofore authenticated and delivered (other than any
Notes which shall have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore cancelled, or (ii) all Notes not theretofore surrendered or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee, and the Company shall irrevocably deposit with the Trustee, as trust
funds solely for the benefit of the Holders for that purpose, an amount
sufficient to pay at maturity or upon redemption all of the Notes (other than
any Notes which shall have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
not theretofore surrendered or delivered to the Trustee for cancellation,
including principal, premium, if any, and interest due or to become due to such
date of maturity or redemption date, as the case may be, then this Indenture
shall
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cease to be of further force or effect (except as to rights of registration of
transfer or exchange of the Notes provided in this Indenture) and, at the
written request of the Company, accompanied by an Officer's Certificate and
Opinion of Counsel, each stating that all conditions precedent provided for
herein relating to the satisfaction and discharge of this Indenture have been
complied with, and upon payment of the costs, charges and expenses incurred or
to be incurred by the Trustee in relation thereto or in carrying out the
provisions of this Indenture, the Trustee shall satisfy and discharge this
Indenture ("Discharge"); provided that the Company's obligations with respect
to the payment of principal, premium, if any, and interest will not terminate
until the same shall apply the moneys so deposited to the payment to the
Holders of Notes of all sums due and to become due thereon.
Section 8.6. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.7 hereof, all money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.6, the
"Trustee") pursuant to Section 8.4 or 8.5 hereof in respect of the outstanding
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company or any of its Subsidiaries or
Affiliates acting as Paying Agent) as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of
principal, premium, if any, and interest but such money need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or U.S.
Government Obligations deposited pursuant to this Section 8.6 or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or U.S. Government Obligations held by it as
provided in this Section 8.6 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4 hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance, Covenant
Defeasance or Discharge.
Section 8.7. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company or any of its Subsidiaries or Affiliates, in trust for
the payment of the principal of, or premium, if any, or interest on, any Note
and remaining unclaimed for one year after such principal, premium, if any, or
interest has become due and payable shall be paid to the Company on its request
or (if then held by the Company or any of its Subsidiaries or Affiliates) shall
be discharged from such trust; and the Holder of such Note shall thereafter, as
an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such
trust money, and all liability of the Company or any of its Subsidiaries or
Affiliates as trustee thereof, shall thereupon cease; provided, however, that
the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a
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date specified therein, which shall not be less than 30 days from the date of
such notification or publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
Section 8.8. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United
States dollars or U.S. Government Obligations in accordance with Section 8.2,
8.3 or 8.5 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Section 8.2, 8.3 or 8.5 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such assets in accordance
with Section 8.2, 8.3 or 8.5 hereof, as the case may be; provided, however,
that, if the Company makes any payment of principal of, or premium, if any, or
interest on, any Note following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1. Without Consent of Holders of Notes.
Notwithstanding Section 9.2 of this Indenture, the Company and
the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(c) to provide for the assumption of the Company's
obligations to the Holders of Notes in the case of a merger or
consolidation pursuant to Article 5 hereof;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any such Holder; or
(e) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA
as then in effect.
Upon the request of the Company and upon receipt by the
Trustee of the documents described in Section 7.2 hereof, the Trustee shall
join with the Company in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained.
Section 9.2. With Consent of Holders of Notes.
Except as provided below in this Section 9.2, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and, subject to Sections 6.4 and
6.7 and the last sentence of Section
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6.1 hereof, any existing Default or Event of Default (other than a Default or
Event of Default in the payment of principal of, premium, if any, or interest
on, the Notes, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.2 hereof, the Trustee shall join with the Company in the execution of
such amended or supplemental Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee
shall not be obligated to enter into such amended or supplemental Indenture
that adversely affects its own rights, duties, liabilities or immunities under
this Indenture or otherwise.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.2 becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the
Holders of a majority in principal amount of the Notes then outstanding may
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Notes. However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter the provisions with respect to the redemption of the
Notes;
(c) reduce the rate of or change the time for payment of
interest on any Note;
(d) waive a Default or Event of Default in the payment of
principal of, or premium, if any, or interest on, the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of, premium, if any, or interest on,
the Notes;
(g) waive a redemption payment with respect to any Note; or
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(h) make any change in the foregoing amendment and waiver
provisions.
In addition, any amendment to the provisions of Article 10 of
this Indenture requires the consent of the Holders of at least 66-2/3% in
aggregate principal amount of the Notes then outstanding if such amendment
would adversely affect the rights of Holders of the Notes.
Section 9.3. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in an amended or supplemental Indenture that complies with
the TIA as then in effect.
Section 9.4. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent
Holder of a Note may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment has been approved by the requisite Holders. An amendment, supplement
or waiver becomes effective when approved by the requisite Holders and executed
by the Trustee (or, if otherwise provided in such waiver, supplement or
amendment, in accordance with its terms) and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such
amendment or waiver or revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date. No consent shall be
valid or effective for more than 90 days after such record date except to the
extent that the requisite number of consents to the amendment, supplement or
waiver have been obtained within such 90-day period or as set forth in the next
paragraph of this Section 9.4.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes a change described in any of clauses
(a) through (h) of Section 9.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same
indebtedness as the consenting Holder's Note.
Section 9.5. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue, and the Trustee shall
authenticate, new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
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Section 9.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
In executing any amended or supplemental indenture, the Trustee shall be
entitled to receive and (subject to Section 7.1) shall be fully protected in
relying upon, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
Section 9.7. Payments for Consent.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any
terms or provisions of the Notes unless such consideration is offered to be
paid or agreed to be paid to all Holders of the Notes which so consent, waive
or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
ARTICLE 10
SUBORDINATION
Section 10.1. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note
agrees, that the payment of principal of, and premium, if any, and interest on,
and other Obligations evidenced by, the Notes is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all Senior Indebtedness (whether outstanding on the
date hereof or hereafter incurred), and that the subordination is for the
benefit of the holders of Senior Indebtedness.
Section 10.2. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, an assignment for the benefit of creditors or any marshalling of the
Company's assets and liabilities:
(1) holders of Senior Indebtedness shall be entitled to
receive payment in full in Cash (or U.S. dollar-denominated Cash
Equivalents) of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior
Indebtedness) before the Holders of Notes shall be entitled to receive
any payment of any kind or character with respect to the Notes; and
(2) until all Obligations with respect to Senior
Indebtedness are paid in full in Cash (or U.S. dollar-denominated
Cash Equivalents), any distribution to which the Holders of Notes
would be entitled but for this Article 10 shall be made to the holders
of such Senior Indebtedness.
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Notwithstanding the foregoing, Holders of Notes may receive
(i) securities that are subordinated at least to the same extent as the Notes
to Senior Indebtedness and any securities issued in exchange for Senior
Indebtedness and (ii) payments made from the trusts described in Sections 8.4
and 8.5 hereof.
Section 10.3. Default on Designated Senior Indebtedness.
The Company may not make any payment of any kind or character
upon or in respect of the Notes (other than in (i) securities that are
subordinated to the same extent as the Notes to Senior Indebtedness and any
securities issued in exchange for Senior Indebtedness and (ii) payments made
from the trusts described in Sections 8.4 and 8.5 hereof) if:
(i) a default in the payment of the principal of, premium, if
any, or interest on Designated Senior Indebtedness occurs and is
continuing; or
(ii) any other default occurs and is continuing with respect
to Designated Senior Indebtedness that permits holders of the
Designated Senior Indebtedness as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or the holders
of any Designated Senior Indebtedness.
Payments on the Notes may and shall be resumed:
(a) in the case of default referred to in Section 10.3(i),
upon the date on which such default is cured or waived, and
(b) in case of a default referred to in Section 10.3(ii), upon
the earlier of (i) the date on which such default is cured or waived
or (ii) 179 days after the date on which the applicable Payment
Blockage Notice is received by the Trustee (unless the maturity of any
Designated Senior Indebtedness has been accelerated or unless the
provisions of this Article 10 otherwise do not permit such payment).
In no event shall more than one period of payment blockage be
made in any 360 consecutive day period. No nonpayment default that existed or
was continuing on the date of receipt by the Trustee of any Payment Blockage
Notice shall be, or be made, the basis for a subsequent Payment Blockage
Notice. Following the expiration of any period during which the Company is
prohibited from making payments on the Notes pursuant to a Payment Blockage
Notice, the Company will be obligated to resume making any and all required
payments in respect of the Notes, including without limitation any missed
payments.
Section 10.4. Acceleration of Notes.
The Company and the Trustee shall promptly notify holders of
Designated Senior Indebtedness if payment on the Notes is accelerated because
of an Event of Default.
Section 10.5. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the Trustee
or such Holder, as applicable, has actual knowledge that such payment is
prohibited by Section 10.3 hereof, such payment shall be held by the Trustee or
such Holder, in trust for the benefit of and, upon written request, shall be
paid forthwith over and delivered to, the
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holders of Senior Indebtedness as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to
which Senior Indebtedness may have been issued, as their respective interests
may appear, for application to the payment of all Obligations with respect to
Senior Indebtedness remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior
Indebtedness.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
10, except if such payment is made as a result of the willful misconduct or
gross negligence of the Trustee.
Section 10.6. Notice by the Company.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure
to give such notice shall not affect the subordination of the Notes to the
Senior Indebtedness as provided in this Article.
Section 10.7. Subrogation.
After all Senior Indebtedness is irrevocably paid in full in
Cash or U.S. dollar-denominated Cash Equivalents reasonably satisfactory to the
holders thereof and until the Notes are paid in full, Holders shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the
Notes) to the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness to the extent that distributions otherwise
payable to the Holders have been applied to the payment of Senior Indebtedness.
A distribution made under this Article to holders of Senior Indebtedness that
otherwise would have been made to Holders is not, as between the Company and
Holders, a payment by the Company on the Notes.
Section 10.8. Relative Rights.
This Article defines the relative rights of Holders and
holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors
of the Company other than their rights in relation to holders of
Senior Indebtedness; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Holders.
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If the Company fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.
Section 10.9. Subordination May Not Be Impaired by the Company.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to
holders of Senior Indebtedness, the distribution may be made and the notice
given to their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
10.
Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair
the claims of, or payments to, the Trustee under or pursuant to Section 7.7
hereof.
The Trustee shall be entitled to rely on the delivery to it of
a written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a Representative of such holder) to establish that such notice
has been given by a holder of Senior Indebtedness (or a Representative of any
such holder). In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article 10, and if such
evidence is not furnished, the Trustee may defer any payment which it may be
required to make for the benefit of such Person pursuant to the terms of this
Indenture pending judicial determination as to the rights of such Person to
receive such payment.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
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Section 10.12. Authorization to Effect Subordination.
Each Holder of a Note by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes.
ARTICLE 11
MISCELLANEOUS
Section 11.1. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), such TIA-imposed
duties shall control.
Section 11.2. Notices.
Any notice or communication by the Company or the Trustee to
the other is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company:
Cinemark USA, Inc.
7502 Greenville Avenue
Suite 800
Dallas, Texas 75231
Phone No.: (214) 696-1644
Telecopier No.: (214) 369-9972
Attention: General Counsel
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Phone No.: (214) 969-2800
Telecopier No.: (214) 969-4343
Attention: Terry M. Schpok, P.C.
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If to the Trustee:
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Phone No.: (214) 754-1255
Telecopier No.: (214) 754-1303
Attention: Corporate Trust Department
With a copy to:
Haynes and Boone, L.L.P.
20201 Main Street, Suite 2200
Fort Worth, Texas 76102-6866
Phone No.: (817) 347-6600
Telecopier No.: (817) 347-6650
Attention: William Greenhill, Esq.
The Company or the Trustee, by notice to the other, may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and
the next Business Day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery, in each case to the
address shown above. Notwithstanding the foregoing, notices to the Trustee
shall only be effective upon actual receipt thereof by the Trustee at the
Corporate Trust Office of the Trustee.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also be
so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
Section 11.3. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
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Section 11.4. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 11.5 hereof) stating that, in the
opinion of the signers, all conditions precedent and covenants, if
any, provided for in this Indenture relating to the proposed action
have been satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 11.5 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants
have been satisfied.
Section 11.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions
of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) the opinion of such Person, that he or she has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(c) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
Section 11.6. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
Section 11.7. No Personal Liability of Directors, Officers, Employees and
Others.
No past, present or future director, officer, employee, agent,
manager, incorporator, stockholder or other Affiliate of the Company, as such,
shall have any liability for any obligations of the Company under any of the
Notes, this Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Section 11.8. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE AND THE NOTES.
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Section 11.9. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
Section 11.10. Successors.
This Indenture shall inure to the benefit of and be binding
upon the parties hereto and each of their respective successors and assigns,
except that the Company may not assign this Indenture or its obligations
hereunder except as expressly permitted by Sections 5.1 and 5.2. Without
limiting the generality of the foregoing, this Indenture shall inure to the
benefit of all Holders from time to time. Except as set forth in Article 10,
nothing expressed or mentioned in this Indenture is intended or shall be
construed to give any Person, other than the parties hereto, their respective
successors and assigns, and the Holders, any legal or equitable right, remedy
or claim under or in respect of this Indenture or any provision herein
contained.
Section 11.11. Severability.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 11.12. Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
Section 11.14. Counterparts.
This Indenture may be signed in counterparts and by the
different parties hereto in separate counterparts, each of which shall
constitute an original and all of which together shall constitute one and the
same instrument.
[Signatures on following page]
70
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have executed this Indenture
this January 14, 1998.
CINEMARK USA, INC.
By:
------------------------------------
Name:
Title:
U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By:
------------------------------------
Name:
Title:
S-71
<PAGE> 78
================================================================================
Exhibit A
(Face of Note)
Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the Company or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.(1)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT IT WILL
NOT PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF THE DATE OF
ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (THE "RESALE RESTRICTION
TERMINATION DATE") RESELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE, EXCEPT (A)
TO THE COMPANY, (B) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON WHOM THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE
RESALE PROVISIONS OF RULE 144A, (C) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE RESALE LIMITATIONS PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
(BASED UPON AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY IF THE
COMPANY SO REQUESTS) SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT
OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE
AT ALL TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THE
FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE
RESTRICTION TERMINATION DATE.(2)
- ----------------------------------
(1.) This paragraph should be included only if the Note is issued in global
form.
(2.) This legend not required in the case of (1) a Note issued pursuant to
Section 2.6(i)(ii) of the Indenture or (2) a Series B Note issued
pursuant to Section 2.6(i)(iii) of the Indenture.
A-1
<PAGE> 79
CINEMARK USA, INC.
8-1/2% [Series A] [Series B] Senior Subordinated Notes due 2008
No. $__________
CUSIP #__________
Cinemark USA, Inc., a Texas corporation (the "Company")
promises to pay to
or registered assigns,
the principal sum of __________________________Dollars on August 1, 2008
Interest Payment Dates: February 1 and August 1, commencing on August 1, 1998
Record Dates: January 15 and July 15
Dated: _____________, 1998
CINEMARK USA, INC.
By:
----------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the
Notes referred to in the
within-mentioned Indenture:
U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By:
----------------------------------
Authorized Signatory
Dated:
-------------------------------
A-2
<PAGE> 80
(Back of Note)
8-1/2% [Series A] [Series B] Senior Subordinated Notes due 2008
Capitalized terms used herein but not defined shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. Interest. The Notes will be limited in aggregate principal
amount to $105 million and will mature on August 1, 2008. The Company promises
to pay interest on the principal amount of this Note from the Initial Issuance
Date until maturity. The Company will pay interest semi-annually on February 1
and August 1 of each year, commencing August 1, 1998, or if any such day is not
a Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue at the rate of 8-1/2% per annum from
the most recent date to which interest has been paid or, if no interest has
been paid, from the Initial Issuance Date. The Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law to
the extent that such interest is an allowed claim enforceable against the
debtor under such Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at the rate equal to 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of
a 360-day year of twelve 30-day months. Notwithstanding any other provision of
the Indenture or this Note: (i) accrued and unpaid interest on the Series A
Notes being exchanged in the Exchange Offer shall be due and payable on the
next Interest Payment Date for the Series B Notes following the Exchange Offer,
(ii) interest on the Series B Notes to be issued in the Exchange Offer shall
accrue from the date the Exchange Offer is consummated and (iii) the Series B
Notes shall have no provisions for Liquidated Damages.
2. Method of Payment. The Company shall pay the principal of,
and premium and interest on, the Notes on the dates and in the manner provided
herein and in the Indenture. Principal of, and premium and interest on,
Definitive Notes will be payable, and Definitive Notes may be presented for
registration of transfer or exchange, at the office or agency of the Company
maintained for such purpose. Principal of, and premium and interest on, Global
Notes will be payable by the Company through the Trustee to the Depository in
immediately available funds. Holders of Definitive Notes will be entitled to
receive interest payments by wire transfer in immediately available funds if
appropriate wire transfer instructions have been received in writing by the
Trustee not less than 15 days prior to the applicable Interest Payment Date.
Such wire instructions, upon receipt by the Trustee, shall remain in effect
until revoked by such Holder. If wire instructions have not been received by
the Trustee with respect to any Holder of a Definitive Note, payment of
interest may be made by check in immediately available funds mailed to such
Holder at the address set forth upon the Register maintained by the Registrar.
3. Paying Agent and Registrar. Initially, U.S. Trust Company of
Texas, N.A., the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity, except that none of the Company, its Subsidiaries or their Affiliates
shall act (i) as Paying Agent in connection with any redemption, offer to
purchase, discharge or defeasance, as otherwise specified in the Indenture, and
(ii) as Paying Agent or Registrar if a Default or Event of Default has occurred
and is continuing.
A-3
<PAGE> 81
4. Indenture.
The Company issued the Notes under an Indenture dated as of January
14,1998 (as such may be amended, supplemented or restated from time to time,
the "Indenture") between the Company and the Trustee. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. The
Notes are general unsecured obligations of the Company limited to $105 million
in aggregate principal amount.
The payment of principal of, and premium, if any, and interest on, and
other Obligations evidenced by, the Notes is subordinated in right of payment,
to the extent and in the manner provided in the Indenture, to the prior payment
in full of all present and future Senior Indebtedness (as defined in the
Indenture) of the Company. Each Holder of this Note, by accepting the same,
(i) agrees to such provisions, (ii) authorizes and directs the Trustee on such
Holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (iii) appoints
the Trustee to act as attorney-in-fact for any and all such purposes.
5. Optional Redemption.
The Notes will not be redeemable at the Company's option prior to
August 1, 2003, except as provided below. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice to the Holders, at the
redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the twelve month period beginning on August 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . 104.250%
2004 . . . . . . . . . . . . . . . . . . . . . 102.833%
2005 . . . . . . . . . . . . . . . . . . . . . 101.417%
2006 and thereafter . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, on and prior to February 1, 2001, the
Company may redeem up to 35% of the aggregate principal amount of the Notes
originally outstanding at a redemption price of 108.5% of the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, with
the net proceeds of one or more Equity Offerings of the Company or, if
applicable, a Parent, as described in Section 3.7 of the Indenture; provided
that at least 65% of the aggregate principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of such redemption
(but such unredeemed Notes may be redeemed pursuant to the optional redemption
procedure described in the immediately preceding paragraph; and provided,
further, that such notice of redemption shall be given not later than 30 days,
and such redemption shall occur not later than 90 days, after the date of the
closing of any such Equity Offering. On and after the redemption date,
interest ceases to accrue on the Notes or portions thereof called for
redemption.
A-4
<PAGE> 82
6. Mandatory Redemption.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon a Change of Control, the Company shall be required to
make an offer to Holders to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of each Holder's Notes at a purchase price equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the date of purchase as provided in, and subject to the
terms of, the Indenture.
(b) If the Company or any Restricted Subsidiary consummates any
Asset Disposition, the Company may be required, subject to the terms and
conditions of the Indenture, to utilize a certain portion of the proceeds
received from such Asset Disposition to repurchase Notes at a purchase price
equal to 100% of the principal amount thereof, plus accrued interest thereon to
the date of purchase.
8. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
10. Unclaimed Money . If money for the payment of principal,
premium or interest remains unclaimed for one year, the Trustee and the Paying
Agent will pay the money back to the Company at its request. After that, all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
11. Defeasance Prior to Redemption or Maturity. Subject to
certain conditions contained in the Indenture, the Company at any time may
terminate some or all of its obligations under the Notes and the Indenture if
the Company deposits with the Trustee money or U.S. Government Obligations
sufficient to pay the principal of, and premium and interest on, the Notes to
redemption or maturity, as the case may be.
12. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding, and any existing Default or Event or Default or compliance
with any provision of the Indenture or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture or the Notes may be
amended or supplemented to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations to Holders of
Notes in case of a merger or consolidation, to
A-5
<PAGE> 83
make any change that would provide any additional rights or benefits to the
Holders of the Notes or that does not adversely affect the legal rights under
the Indenture of any such Holder, or to comply with the requirements of the SEC
in order to effect or maintain the qualification of the Indenture under the TIA
as then in effect.
13. Defaults and Remedies. Events of Default include: (i)
default by the Company in the payment of (A) the principal of (or premium, if
any, on) any Notes when the same becomes due and payable at maturity, by
acceleration or otherwise, (B) the redemption price on any redemption date, or
(C) the Change of Control Offer Price or the Net Proceeds Offer Price on the
applicable Offer Purchase Date relating to such Offer; (ii) default by the
Company in the payment of interest on any Note when the same becomes due and
payable, which default continues for a period of 30 calendar days; (iii)
failure by the Company or any Subsidiary of the Company to comply with any of
its covenants or agreements in the Notes or the Indenture (other than those
referred to in clauses (i) and (ii) above), which failure continues for 45
calendar days after receipt by the Company of a Notice of Default specifying
such Default; (iv) an event of default on any other Indebtedness for borrowed
money of the Company or any of its Restricted Subsidiaries having an aggregate
amount outstanding in excess of $5 million which default (A) is caused by a
failure to pay when due (after giving effect to any grace periods) any
principal of, or premium, if any, or interest on, such Indebtedness or (B) has
caused the holders thereof to declare such Indebtedness due and payable in
advance of its scheduled maturity; (v) certain events of bankruptcy or
insolvency with respect to the Company or any Significant Subsidiary of the
Company; or (vi) the rendering of final non-appealable judgments for the
payment of money which in the aggregate exceed $5 million (net of applicable
insurance coverage which is acknowledged in writing by the insurer) against the
Company or any Significant Subsidiary of the Company by a court and which
remain unstayed or undischarged for a period of 60 calendar days.
A Default under clause (iii) of the immediately preceding paragraph is
not an Event of Default until the Trustee notifies the Company, or the Holders
of at least 25% in principal amount of the Notes at the time outstanding notify
the Company and the Trustee, of the Default and the Company does not cure such
Default within 45 days after receipt of such notice. Notwithstanding the
foregoing, if an Event of Default specified in clause (iv) of the immediately
preceding paragraph occurs and is continuing, such Event of Default and all
consequences thereof (including, without limitation, any acceleration or
resulting payment default) shall be annulled and rescinded, automatically and
without any action by the Trustee or the holders of the Notes, if (i) the
Indebtedness that is the subject of such Event of Default has been repaid, or
(ii) the default relating to such Indebtedness is waived or cured (and if such
Indebtedness has been accelerated, then the holders thereof have rescinded
their declaration of acceleration in respect of such Indebtedness). If any
Event of Default under clauses (i), (ii), (iii), (iv) or (vi) of the
immediately preceding paragraph occurs and is continuing, then the Holders of
at least 25% in aggregate principal amount of the then outstanding Notes by
written notice to the Company and the Trustee may declare the unpaid principal
of, and any accrued interest on, all the Notes to be due and payable
immediately. If any Event of Default with respect to the Company specified in
clause (v) of the immediately preceding paragraph occurs, all outstanding
principal and interest on the Notes shall be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Trustee and to the Company, may rescind
an acceleration (except an acceleration due to a default in payment of the
principal of, or premium or interest on, any of the Notes) if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default (except nonpayment of principal, premium or interest that have become
due solely because of the acceleration) have been cured or waived.
A-6
<PAGE> 84
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect any
payment due, or to enforce the performance of any provision, under the Notes or
the Indenture. The Trustee may refuse to enforce the Indenture or the Notes
unless it receives reasonable indemnity or security. Holders of Notes may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Notes notice of any continuing Default
or Event of Default (except under clauses (i) or (ii) above) if it determines
that withholding notice is in their interest.
14. Trustee's Dealings with Company. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee, subject to the
provisions of TIA Section 310.
15. No Recourse Against Others. A director, officer, employee,
agent, manager, incorporator, stockholder or other Affiliate of the Company, as
such, shall not have any liability for any obligations of the Company under any
of the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. Additional Rights of Holders of Transfer Restricted
Securities. In addition to the rights provided to Holders under the Indenture,
Holders of Transfer Restricted Securities shall have all the rights set forth
in the Registration Rights Agreement.
19. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
20. Governing Law. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED
AND CONSTRUED BY THE INTERNAL LAW OF THE STATE OF NEW YORK.
21. Successor Corporation. In the event a successor corporation
assumes all the obligations of the Company under the Notes and the Indenture,
pursuant to the terms thereof, the Company will be released from all such
obligations.
A-7
<PAGE> 85
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Cinemark USA, Inc.
7502 Greenville Avenue
Suite 800
Dallas, Texas 75231
Phone No.: (214) 696-1644
Telecopier No.: (214) 369-9972
Attention: General Counsel
A-8
<PAGE> 86
Assignment Form
To assign this Note, fill in the form below and have your
signature guaranteed: (I) or (we) assign and transfer this
Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_______________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date: Your Name:
------------------------- --------------------------------
(Print your name exactly as it appears on
the face of this Note)
Your Signature:
---------------------------
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee(*):
-------------------
- --------------------------
(*) Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-9
<PAGE> 87
Option of Holder to Elect Purchase
If you elect to have this Note purchased by the Company pursuant to
Section 4.10 or Section 4.14 of the Indenture, check the appropriate box below:
[ ] Section 4.10 [ ] Section 4.14
If you elect to have only part of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount (in
minimum denominations of $1000 or integral multiples thereof) you elect to have
purchased: $___________
Date: Your Name:
-------------- --------------------------------------
(Print your name exactly as it appears
on the face of this Note)
Your Signature:
---------------------------------
(Sign exactly as your name appears on
the Note)
Social Security or Tax Identification No.:
------
Signature Guarantee(*):
---------------------------
- ----------------------
(*) Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-10
<PAGE> 88
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE(3)
The following exchanges of a part of this Global Note for
Definitive Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this
Global Note Signature of
Amount of decrease in Amount of increase in following such authorized officer of
Principal Amount of Principal Amount of decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------------------------
(3.) This schedule should be included only if the Note is issued in global form.
A-11
<PAGE> 89
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: 8-1/2% Series A Senior Subordinated Notes due 2008 of Cinemark USA, Inc.
This Certificate relates to $_____ principal amount of Notes held
in(*) global or (*) definitive form by ________________ (the "Transferor").
The Transferor(*):
[ ] has requested the Trustee by written order to deliver, in exchange
for its beneficial interest in the Global Note held by the Depositary, a Note or
Notes in definitive, registered form or a beneficial interest in the Series B
Global Note issued pursuant to the Exchange Offer, in both cases in the
authorized denominations in an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof indicated
above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that it is familiar with the Indenture relating
to the above captioned Notes, and the transfer of this Note does not require
registration under the Securities Act of 1933, as amended (the "Securities
Act") because such Note*:
[ ] is being acquired for the Transferor's own account, without
transfer;
[ ] is being transferred pursuant to an effective registration
statement;
[ ] is being transferred to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act), in reliance on
such Rule 144A;
[ ] is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;**
[ ] is being transferred pursuant to Rule 144 under the Securities
Act; or
- ----------------------------
(*) Check applicable box.
(**) If this box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
B-1
<PAGE> 90
[ ] is being transferred pursuant to another exemption from the
registration requirements of the Securities Act (explain:
__________________________________________________________)(***)
Date: Your Name:
-------------- ---------------------------------------
(Print your name exactly as it appears on
the face of the Note)
Your Signature:
----------------------------------
(Sign exactly as your name appears on the
Note)
Social Security or Tax Identification No.:
----------
Signature Guarantee(****):
--------------------------
- ----------------------
(***) If this box is checked, this certificate must be accompanied by a
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
(****) Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
B-2
<PAGE> 91
EXHIBIT C
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM RESTRICTED GLOBAL NOTE
TO REGULATION S GLOBAL NOTE
(Transfers pursuant to Section 2.6(e) of Indenture)
U.S. Trust Company of Texas, N.A.
as Trustee
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust
Re: Cinemark USA, Inc.
8-1/2% Senior Subordinated Notes Due 2008 (the "Notes")
Reference is hereby made to the Indenture dated as of January 14, 1998,
(as such may be amended, supplemented or restated from time to time, (the
"Indenture") between Cinemark USA, Inc. and U.S Trust Company of Texas, N.A., as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given them in the Indenture.
This letter relates to U.S.$_________ (being U.S.$1,000 and any
integral multiple thereof) principal amount of Notes beneficially held through
interests in the Restricted Global Note (CUSIP No. _________) with DTC in the
name of ________(the "Transferor") account no. ______. The Transferor hereby
requests that on [INSERT DATE] such beneficial interest in the Restricted
Global Note be transferred or exchanged for an interest in the Regulation S
Global Note (CUSIP (CINS) No. _________) in the same principal denomination and
transfer to (account no. ________). If this is a partial transfer, a minimum
amount of U.S.$1,000 and any integral multiple thereof of the Restricted Global
Note will remain outstanding.
In connection with such request and in respect of such Notes, the
Transferor does hereby certify that such transfer has been effected in
accordance with the transfer restrictions set forth in the Indenture and the
Notes and pursuant to and in accordance with Rule 903 or 904 of Regulation S
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and accordingly the Transferor further certifies that:
(A) (1) the offer of the Notes was not made to a Person in the
United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any Person acting
on our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither
the Transferor nor any Person acting on our behalf knows that the
transaction was prearranged with a buyer in the United States,
C-1
<PAGE> 92
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
OR
(B) Such transfer is being made in accordance with Rule 144 under
the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company. Terms used in this certificate and not
otherwise defined in the Indenture have the meanings set forth in Regulation S
under the Securities Act.
Dated:
--------------
[Name of Transferor]
By:
-----------------------------
Name:
Title:
Telephone No.:
Signatures must be guaran-
teed by an "eligible guar-
antor institution" meeting
the requirements of the
Transfer Agent, which
requirements include mem-
bership or participation
in STAMP or such other
"signature guarantee pro-
gram" as may be determined
by the Transfer Agent in
addition to, or in substi-
tution for, STAMP, all in
accordance with the Secu-
rities Exchange Act of
1934, as amended.
- ------------------------------
Signature Guarantee
Please print name and address (including zip code number)
cc: The Company
<PAGE> 93
EXHIBIT D
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM REGULATION S GLOBAL NOTE
TO RESTRICTED GLOBAL NOTE
PRIOR TO EXPIRATION OF RESTRICTED PERIOD
(Transfers pursuant to Section 2.6(f) of Indenture)
U.S. Trust Company of Texas, N.A.
as Trustee
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201
Attention: Corporate Trust
Re: Cinemark USA, Inc.
8-1/2% Senior Subordinated Notes Due 2008 (the "Notes")
Reference is hereby made to the Indenture dated as of January 14,
1998, (as such may be amended, supplemented or restated from time to time, (the
"Indenture") between Cinemark USA, Inc. and U.S. Trust Company of Texas, N.A.,
as Trustee. Capitalized terms used but not defined herein shall have the
meanings given them in the Indenture.
This letter relates to U.S.$__________ (being U.S.$1,000 and integral
multiples thereof) principal amount of Notes beneficially held through
interests in the Regulation S Global Note (CUSIP (CINS) No. __________) with
[Euroclear] [Cedel Bank] (Common Code No. ______) through DTC in the name of
_______________ (the "Transferor") [Euroclear] [Cedel Bank] account no. ______.
The Transferor hereby requests that on [INSERT DATE] such beneficial interest
in the Regulation S Global Note be transferred or exchanged for an interest in
the Restricted Global Note (CUSIP No. _________) in the same principal
denomination and transferred to ______________ (DTC account no. ________). If
this is a partial transfer, a minimum of U.S.$1,000 and any integral multiple
thereof of the Regulation S Global Note will remain outstanding.
In connection with such request, and in respect of such Notes, the
Transferor does hereby certify that such Notes are being transferred in
accordance with Rule 144A under the United States Securities Act of 1933, as
amended (the "Securities Act"), to a transferee that the Transferor reasonably
believes is purchasing the Notes for its own account or an account with respect
to which the transferee exercises sole investment discretion and the transferee
and any such account is a "qualified institutional buyer" within the meaning of
Rule 144A, in each case in a transaction meeting the requirements of Rule 144A
and in accordance with any applicable securities laws of any state of the
United States or any other jurisdiction.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated:
----------------
D-1
<PAGE> 94
[Name of Transferor]
By:
---------------------------
Name:
Title:
Telephone No.:
Signatures must be guaran-
teed by an "eligible guar-
antor institution" meeting
the requirements of the
Transfer Agent, which
requirements include mem-
bership or participation
in STAMP or such other
"signature guarantee pro-
gram" as may be determined
by the Transfer Agent in
addition to, or in substi-
tution for, STAMP, all in
accordance with the Secu-
rities Exchange Act of
1934, as amended.
- ------------------------------
Signature Guarantee
Please print name and address (including zip code number)
cc: The Company
D-2
<PAGE> 95
IN WITNESS WHEREOF, the parties hereto have executed this Indenture
this January 14, 1998.
CINEMARK USA, INC.
By: /s/ JEFFREY J. STEDMAN
--------------------------------
Name: Jeffrey J. Stedman
Title: Senior Vice President
U.S. TRUST COMPANY OF TEXAS, N.A.
as Trustee
By: /s/ BILL BARBER
--------------------------------
Name: Bill Barber
Title: Vice President
S-69
<PAGE> 1
EXHIBIT 4.2
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Dated as of January 14, 1998
by and between
CINEMARK USA, INC.
and
MORGAN STANLEY & CO. INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
<PAGE> 2
This Exchange and Registration Rights Agreement (this "Agreement") is
made and entered into as of January 14, 1998 by and among Cinemark USA, Inc., a
Texas corporation ("Cinemark") and Morgan Stanley & Co. Incorporated and
BancAmerica Robertson Stephens (the "Purchasers").
Pursuant to the Purchase Agreement, dated January 8, 1998 (the
"Purchase Agreement"), by and between Cinemark and the Purchasers, the
Purchasers have agreed to purchase the aggregate principal amount of Cinemark's
8-1/2% Senior Subordinated Notes due 2008 (the "Notes") set forth on Schedule I
thereto.
In order to induce the Purchasers to purchase the Notes, Cinemark has
agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Purchasers set forth in Section 8 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Business Day: Any day except a Saturday, Sunday or other day in the
City of New York on which banks are authorized to close.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Act of the Exchange Offer Registration
Statement relating to the Exchange Notes to be issued in the Exchange Offer,
(ii) the maintenance of such Registration Statement continuously effective and
the keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof, and (iii) the delivery by
Cinemark to the Trustee under the Indenture of the Exchange Notes in the same
aggregate principal amount as the aggregate principal amount of the Notes that
were validly tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: Cinemark's 8-1/2% Senior Subordinated Notes due 2008
to be issued pursuant to the Indenture in the Exchange Offer.
Exchange Offer: The registration by Cinemark under the Act of the
Exchange Notes pursuant to an Exchange Offer Registration Statement pursuant to
which Cinemark offers the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities held by such Holders for Exchange Notes in an aggregate principal
amount equal to the aggregate principal amount of the Transfer Restricted
Securities validly tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
<PAGE> 3
Exempt Resales: The transactions in which the Purchasers propose to
sell the Notes to certain "qualified institutional buyers," as such term is
defined in Rule 144A under the Act, and outside the United States in reliance
upon Regulation S under the Act.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of January 14, 1998, between
Cinemark and U.S. Trust Company of Texas, N.A., as trustee (the "Trustee"),
pursuant to which the Securities are to be issued, as such Indenture is amended
or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the
Securities.
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
Notes: As defined in the preamble hereto.
Person: An individual, partnership, corporation, limited liability
company, joint venture, association, trust or other organization whether or not
a legal entity, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Purchaser: As defined in the preamble hereto.
Record Holder: With respect to any Damages Payment Date relating to
the Securities, each Person who is a Holder of the Securities on the record
date with respect to the Interest Payment Date on which such Damages Payment
Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of Cinemark
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
Securities: The Notes and the Exchange Notes.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration: A registration effected by the filing of a Shelf
Registration Statement pursuant to Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 as in effect on the date of the
Indenture.
Transfer Restricted Securities: Each of the Securities, until the
earliest to occur, with respect to a particular Security, of (a) the date on
which such Security is exchanged in the Exchange Offer and entitled to be
2
<PAGE> 4
resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such
Security has been effectively registered under the Act and disposed of in
accordance with a Shelf Registration Statement, (c) the date on which such
Security may be distributed to the public pursuant to Rule 144 under the Act or
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date such Security ceases to be outstanding.
Underwritten Registration or Underwritten Offering: A registration
in which securities of Cinemark are sold to an underwriter for reoffering to
the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The Securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed
to be a holder of Transfer Restricted Securities (each, a "Holder") whenever
such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (so long as the procedures set forth in
Section 6(a) below are being or have been complied with), Cinemark shall (i)
use its best efforts to cause to be filed with the Commission, not later than
30 days after the Closing Date, the Exchange Offer Registration Statement under
the Act relating to the Exchange Notes and the Exchange Offer, (ii) use its
best efforts to cause such Exchange Offer Registration Statement to be declared
effective by the Commission at the earliest practicable time, but not later
than 120 days after the Closing Date, (iii) in connection with the foregoing,
file (A) all pre-effective amendments to such Exchange Offer Registration
Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) if applicable, a post-effective
amendment to such Exchange Offer Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings in connection with the
registration and qualification of the Exchange Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The
Exchange Offer shall be on an appropriate form permitting registration of the
Exchange Notes to be offered in exchange for the Transfer Restricted Securities
and to permit resales of Securities held by Broker-Dealers as contemplated by
Section 3(c) below. If, after such Exchange Offer Registration Statement
initially is declared effective by the Commission, the Exchange Offer or the
issuance of Exchange Notes thereunder or the sale of Transfer Restricted
Securities pursuant thereto as contemplated by Section 3(c) below is interfered
with by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such Exchange Offer
Registration Statement shall be deemed not to have become effective for
purposes of this Agreement during the period that such stop order, injunction
or other similar order or requirement shall remain in effect.
(b) Cinemark shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. Cinemark shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Securities
shall be included in the Exchange Offer Registration Statement. Cinemark shall
use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but not later than 30 days thereafter.
(c) Cinemark shall indicate in a "Plan of Distribution" section
contained in the Prospectus included in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Notes that are Transfer Restricted
3
<PAGE> 5
Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from Cinemark), may exchange such Notes
pursuant to the Exchange Offer; provided, however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Exchange Notes received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such resales
by Broker-Dealers that the Commission may require in order to permit such
resales pursuant thereto, but such "Plan of Distribution" shall not name any
such Broker-Dealer or disclose the amount of Securities held by any such
Broker-Dealer except to the extent required by the Commission.
Cinemark shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Securities acquired by
Broker-Dealers for their own accounts as a result of market-making activities
or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of twelve months
from the date on which the Exchange Offer Registration Statement is declared
effective.
Cinemark shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) Cinemark is not required to file an
Exchange Offer Registration Statement or consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or Commission policy (so
long as the procedures set forth in Section 6(a) below are being or have been
complied with) or (ii) any Holder of Transfer Restricted Securities shall
notify Cinemark on or prior to the 20th Business Day following the Consummation
of the Exchange Offer that (A) such Holder is prohibited by a change in
applicable law or Commission policy from participating in the Exchange Offer,
(B) such Holder may not resell the Exchange Notes to be acquired by it in the
Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is
a Broker-Dealer and owns Notes acquired directly from Cinemark or an affiliate
of Cinemark, then Cinemark shall:
(x) use its best efforts to cause to be filed a shelf
registration statement pursuant to Rule 415 under the Act, which may be an
amendment to the Exchange Offer Registration Statement (in either event,
the "Shelf Registration Statement"), on or prior to the 30th day after the
obligation to file such Shelf Registration Statement arises (the "Shelf
Filing Deadline"), which Shelf Registration Statement shall provide for
resales of all Transfer Restricted Securities, the Holders of which shall
have provided the information required pursuant to Section 4(b) hereof;
and
(y) use its best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the
120th day after the obligation to file such Shelf Registration Statement
arises (but in any event within 150 days after the Closing Date).
Cinemark shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Securities by the Holders of Transfer Restricted
Securities entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least three years following the Closing Date.
4
<PAGE> 6
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
Cinemark in writing, within 20 Business Days after receipt of a request
therefor, such information as Cinemark may reasonably request specified in Item
507 and Item 508 of Regulation S-K under the Act for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to Cinemark all information required to be
disclosed in order to make the information previously furnished to Cinemark by
such Holder not materially misleading. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have used its best efforts to provide all
such reasonably requested information.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), Cinemark hereby agrees
to pay liquidated damages ("Liquidated Damages") to each Holder of Transfer
Restricted Securities on each Interest Payment Date. Liquidated Damages shall
equal an increase in the annual interest rate on the Notes by 0.5% until the
Exchange Offer is consummated or the Shelf Registration is declared effective.
Cinemark shall notify the Trustee within one business day after (i) each and
every Registration Default and (ii) the date the Registration Default has been
so cured. All accrued Liquidated Damages shall be paid to Record Holders by
Cinemark in New York, New York by wire transfer of immediately available funds
or by federal funds check on each Interest Payment Date. Following the cure of
all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of Liquidated Damages with respect to such Transfer
Restricted Securities will cease.
All obligations of Cinemark set forth in the preceding paragraph that
are outstanding with respect to any Transfer Restricted Security at the time
such security ceases to be a Transfer Restricted Security shall survive until
such time as all such obligations with respect to such Security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, Cinemark shall comply with all of the provisions of Section
6(c) below, shall use its best efforts to effect such exchange to permit the
sale of Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and shall comply with all
of the following provisions:
(i) If in the reasonable opinion of counsel to Cinemark there
is a question as to whether the Exchange Offer is permitted by applicable
law, Cinemark hereby agrees to seek a no-action letter or other favorable
decision from the Commission, including oral advice from the staff of the
Commission, allowing Cinemark to Consummate an Exchange Offer for such
Notes. Cinemark hereby agrees to pursue the issuance of such a decision
to the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of Commission policy.
In connection with the foregoing, Cinemark hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to Cinemark setting
forth the legal bases, if any, upon which such counsel has
5
<PAGE> 7
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of Cinemark, prior
to the Consummation thereof, a written representation to Cinemark (which
may be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
affiliate of Cinemark, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes to be issued in the
Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary
course of business. Each Holder hereby acknowledges and agrees that any
Broker-Dealer who acquired Notes directly from Cinemark or any affiliate
of Cinemark and any such Holder intending to use the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated
in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction should be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Exchange Notes obtained by such
Holder in exchange for Notes acquired by such Holders directly from
Cinemark.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, Cinemark shall provide a supplemental letter to the Commission
(A) stating that Cinemark is registering the Exchange Offer in reliance on
the position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) and, if applicable, any no-action letter obtained
pursuant to clause (i) above, (B) including a representation that Cinemark
has not entered into any arrangement or understanding with any Person to
distribute the Exchange Notes to be received in the Exchange Offer and
that, to the best of Cinemark's information and belief, each Holder
participating in the Exchange Offer is acquiring the Exchange Notes in its
ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, Cinemark shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration
to permit the sale of the Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto Cinemark will as expeditiously as practicable prepare and file
with the Commission a Registration Statement relating to the registration on
any appropriate form under the Act, which form shall be available for the sale
of the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without
limitation, any Registration Statement and the related Prospectus required to
permit resales of Securities by Broker-Dealers), Cinemark shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable;
upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this
Agreement, Cinemark shall file promptly an appropriate amendment to such
Registration Statement, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B),
use its best efforts to cause such amendment to be declared effective and
such Registration Statement and the related Prospectus to become usable
for their intended purpose(s) as soon as reasonably practicable
thereafter;
6
<PAGE> 8
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been exchanged or sold or until such
Transfer Restricted Securities no longer constitute Transfer Restricted
Securities or are no longer outstanding; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with the applicable provisions of Rules 424 and 430A under
the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) advise promptly the underwriter(s), if any, and selling
Holders and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes or (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, Cinemark
shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest practicable time;
(iv) furnish to the Purchaser, each selling Holder named in any
Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus if requested by such person, which documents will be subject to
the review of such Holders and underwriter(s) in connection with such
sale, if any, for a period of at least five Business Days, and Cinemark
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or Prospectus
if requested by such person to which a selling Holder of Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s) in connection with such sale, if any, shall reasonably
object within five Business Days after the receipt thereof. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission or fails to comply with the applicable
requirements of the Act.
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, if
requested by any selling Holders or the underwriter(s), if any, within
five business days after receipt of notification thereof from Cinemark,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make Cinemark's representatives available for
discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as
such selling Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of Cinemark and
cause Cinemark' officers, directors and employees to supply all
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<PAGE> 9
information reasonably requested by any such Holder, underwriter, attorney
or accountant in connection with such Registration Statement subsequent to
the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s)
in connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and such
underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriter(s), the purchase price being paid therefor and
any other terms of the offering of the Transfer Restricted Securities to
be sold in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after
Cinemark is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(viii) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Holders of a majority
in aggregate principal amount of Notes covered thereby or the
underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits if so requested by such person;
(x) deliver to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may
request; Cinemark hereby consents to the use of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriter(s), if any, in connection with the offering and the sale
of the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to any Registration Statement contemplated by this Agreement, all to such
extent as may be reasonably acceptable to Cinemark and reasonably
requested by the Purchasers or by any Holder of Transfer Restricted
Securities or any underwriter in connection with any sale or resale
pursuant to any Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and whether or
not the registration is an Underwritten Registration, Cinemark shall:
(A) furnish to each Purchaser, each selling Holder and each
underwriter, in such substance and scope as they may reasonably
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the Consummation of
the Exchange Offer and, if applicable, upon the effectiveness of the
Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (x) the
President or any Vice President and (y) a principal financial or
accounting officer of Cinemark, confirming, as the date thereof,
the matters set forth in paragraphs (a), (b), (c) and (d) of
Section 8 of the Purchase Agreement and such other matters as
such parties may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for
Cinemark, covering the matters set forth in paragraph (f) of
Section 8 of the Purchase Agreement and such other matters as
such parties may reasonably request, and in any event including
a statement to the effect that such counsel has participated in
conferences with officers and other representatives of Cinemark,
representatives of the independent public accountants for
Cinemark, the Purchaser'
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<PAGE> 10
representatives and the Purchaser' counsel at which the contents
of such Registration Statement and the related Prospectus were
discussed, although such counsel has not undertaken to
investigate or independently verify and does not assume any
responsibility for, the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the
basis of the foregoing (relying as to materiality to a large
extent upon facts provided to such counsel by officers and other
representatives of Cinemark and without independent check or
verification), no facts came to such counsel's attention that
caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any
post-effective amendment thereto became effective, and, in the
case of the Exchange Offer Registration Statement, as of the
date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further
that such counsel makes no comment with respect to, assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial and statistical data
included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from
Cinemark's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 8(h) of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section;
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by Cinemark
pursuant to this clause (xi), if any; and
(D) if at any time the representations and warranties of
Cinemark contemplated in clause (A)(1) above cease to be true and
correct, Cinemark shall so advise the Purchasers and the
underwriter(s), if any, and each Holder promptly and, if requested by
such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities
or Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may reasonably request and do any and all other
acts or things necessary or advisable (including, without limitation, the
imposition of such restrictions on offers or sales of the Securities as
are referred to in paragraph 3(b) of this Agreement) to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided, however, that
Cinemark shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, except
as to matters and transactions relating to the Registration Statement, in
any jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Notes
covered by the Shelf Registration Statement, Exchange Notes, having an
aggregate principal amount equal to the aggregate principal amount of
Notes surrendered to Cinemark by such Holder in exchange therefor or being
sold by such Holder; such
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<PAGE> 11
Exchange Notes to be registered in the name of such Holder or in the name
of the purchaser(s) of such Exchange Notes, as the case may be; in return,
the Notes held by such Holder shall be surrendered to Cinemark for
cancellation;
(xiv) cooperate with the selling Holders and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities
in such denominations (which denominations shall be of $1,000 and integral
multiples thereof) and such names as the Holders or the underwriter(s), if
any, may request at least two Business Days prior to such sale of Transfer
Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s),
if any, to consummate the disposition of such Transfer Restricted
Securities;
(xvi) if any fact or event contemplated by Section 6(c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
covering such Transfer Restricted Securities and provide the Trustee under
the Indenture with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the Depository
Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that
is required to be retained in accordance with the rules and regulations of
the NASD, and use its best efforts to cause such Registration Statement to
become effective and approved by such governmental agencies or authorities
as may be necessary to enable the Holders selling Transfer Restricted
Securities to consummate the disposition of such Transfer Restricted
Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to Holders, as soon as reasonably practicable, a consolidated
earnings statement meeting the requirements of Rule 158 under the Act
(which need not be audited) covering a twelve-month period (A) beginning
at the end of any fiscal quarter in which Transfer Restricted Securities
are sold to underwriters in a firm or best efforts Underwritten Offering
or (B) if not sold to underwriters in such an offering, commencing with
the first month of Cinemark's first fiscal quarter commencing after the
effective date of the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate, with the Trustee
and the Holders of Securities to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance with
the terms of the TIA; and execute, and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
(xxi) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15 of the Exchange Act; and
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<PAGE> 12
(xxii) use its best efforts to cause all Transfer Restricted
Securities covered by the Registration Statement to be listed on each
securities exchange on which similar securities issued by Cinemark are
then listed if requested by the Holders of a majority in aggregate
principal amount of Notes covered by such Registration Statement or the
managing underwriter(s), if any.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of any notice from Cinemark of
the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof,
such Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing
(the "Advice") by Cinemark that the use of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus. If so directed by Cinemark, each
Holder will deliver to Cinemark (at Cinemark's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event Cinemark shall give any such notice, the
time period regarding the effectiveness of such Registration Statement set
forth in Section 3 or 4 hereof, as applicable, shall be extended by the number
of days during the period from and including the date of the giving of such
notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when
each selling Holder covered by such Registration Statement shall have received
the copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to Cinemark's performance of or compliance
with this Agreement will be borne by Cinemark, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made by any
Purchaser or Holder with the NASD (and, if applicable, the reasonable fees and
expenses of any "qualified independent underwriter" and its counsel that may be
required by the rules and regulations of the NASD)); (ii) all fees and expenses
incurred in connection with compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for Cinemark, and in accordance with
Section 7(b) below, the Holders of Transfer Restricted Securities; (v) if
applicable, all application and filing fees in connection with listing
Securities on a national securities exchange or automated quotation system
pursuant to the requirements hereof; and (vi) all fees and disbursements of
independent certified public accountants of Cinemark (including the expenses of
any special audit and comfort letters required by or incident to such
performance).
Cinemark will bear its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by Cinemark.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), Cinemark will reimburse the
Purchasers and the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant
to the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, which shall be Simpson Thacher &
Bartlett (a partnership which includes professional corporations) or such other
counsel as may be chosen by the Holders of a majority in principal amount of
the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
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<PAGE> 13
SECTION 8. INDEMNIFICATION
(a) Cinemark agrees to indemnify and hold harmless, to the fullest
extent permitted by applicable law, each of the Holders, each person, if any,
who controls any Holder within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act and the respective officers, directors, partners,
employees, representatives and agents of each Holder or any controlling person,
against any and all losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to reasonable attorneys' fees and any and
all reasonable expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation) (collectively, "Losses"), joint or several, to which they or any of
them may become subject under the Act, the Exchange Act or otherwise, insofar
as such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus, or in any supplement thereto or amendment thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that Cinemark will not be liable in any such case to the
extent, but only to the extent, that any such Loss arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to Cinemark by or on behalf of any Holders expressly for
use therein. This indemnity will be in addition to any liability which
Cinemark may otherwise have, including, under this Agreement.
(b) Each of the Holders agrees, severally and not jointly, to
indemnify and hold harmless Cinemark, each person, if any, who controls
Cinemark within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and the respective officers, directors, partners, employees,
representatives and agents of Cinemark or any controlling person, against any
and all Losses, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to Cinemark by or on behalf of
such Holder expressly for use therein; provided, however, that in no case shall
any Holder be liable or responsible for any amount in excess of the dollar
amount of the proceeds received by such Holder upon the sale of the Securities
giving rise to such indemnification obligation, unless such Losses are a result
of the gross negligence or willful misconduct of such Holder. This indemnity
will be in addition to any liability which any Holder may otherwise have,
including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action and the indemnifying party has
agreed in writing to pay the fees and expenses of such counsel, (ii) the
indemnifying parties
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<PAGE> 14
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have concluded, upon the advice of
counsel, that there may be defenses available to it or them which are different
from or additional to those available to one or all of the indemnifying parties
(in which case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any
of which events such fees and expenses of counsel shall be borne by the
indemnifying parties; provided, however, that the indemnifying party under
subsection (a) or (b) above, shall only be liable for the legal expenses of one
counsel (in addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action is brought. Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in which
the indemnification provided for in this Section 8 is for any reason held to be
unavailable or is insufficient to hold harmless a party indemnified hereunder,
Cinemark, on the one hand, and each Holder, on the other hand, shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the
nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by Cinemark any contribution received by
Cinemark from persons, other than the Holders, who may also be liable for
contribution, including persons who control Cinemark within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act) to which Cinemark
and any Holder may be subject, in such proportion as is appropriate to reflect
the relative benefits received by Cinemark, on the one hand, and any such
Holder, on the other hand, or, if such allocation is not permitted by
applicable law or if indemnification is not available as a result of the
indemnifying party not having received notice as provided in this Section 8, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of Cinemark, on the one hand, and
the Holders, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative benefits
received by Cinemark, on the one hand, and any Holder, on the other hand, shall
be deemed to be in the same proportion as (x) the total proceeds from the
offering of the Securities (net of discounts and commissions but before
deducting expenses) received by Cinemark and (y) the total proceeds received by
such Holder upon its sale of Securities which would otherwise give rise to the
indemnification obligation, respectively. The relative fault of Cinemark, on
the one hand, and of the Holders, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by Cinemark or the Holders and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Cinemark and each Holder
agree that it would not be just and equitable if contribution pursuant to this
Section 8 were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to above. Notwithstanding the provisions of this Section 8, (i) no
Holder shall be required to contribute, in the aggregate, any amount in excess
of the dollar amount by which the proceeds received by such Holder with respect
to the sale of its Securities exceeds the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls a Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of a Holder or any controlling
person shall have the same rights to contribution as such Holder, and each
person, if any, who controls Cinemark within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and the respective officers,
directors, partners, employees, representatives and agents of Cinemark or any
controlling person shall have the same rights to contribution as Cinemark,
subject in each case to clauses (i) and (ii) of this Section 8(d). Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a
claim for contribution may be made against another party or parties under this
Section 8, notify such party or parties from whom contribution may be sought,
but the failure to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have under this Section 8 or otherwise.
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SECTION 9. RULE 144A
Cinemark hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to Cinemark (it being understood that Morgan Stanley &
Co. Incorporated and BancAmerica Robertson Stephens are reasonably
satisfactory); such investment bankers and manager or managers are referred to
herein as the "underwriters".
SECTION 12. MISCELLANEOUS
(a) Remedies. Cinemark agrees that monetary damages (including the
Liquidated Damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Cinemark will not on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of Cinemark's securities under any agreement
in effect on the date hereof.
(c) Adjustments Affecting the Securities. Cinemark will not take
any action, or permit any change to occur, with respect to the Securities that
would materially and adversely affect the ability of the Holders to Consummate
any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless Cinemark has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being
tendered pursuant to the Exchange Offer or registered pursuant to the Shelf
Registration and that does not affect directly or indirectly the rights of
other Holders whose securities are not being tendered pursuant to such Exchange
Offer or registered pursuant to the Shelf Registration may be given by the
Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities being tendered or registered, as applicable.
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<PAGE> 16
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to Cinemark:
Cinemark USA, Inc.
7502 Greenville Avenue
Suite 800
Dallas, Texas 75231
Phone No.: (214) 696-1644
Telecopier No.: (214) 569-9972
Attention: Jeffrey J. Stedman
With copies to:
Cinemark USA, Inc.
7502 Greenville Avenue
Suite 800
Dallas, Texas 75231
Phone No.: (214) 696-1644
Telecopier No.: (214) 569-9972
Attention: Michael Cavalier
and
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Phone No.: (214) 969-2800
Telecopier No.: (214) 969-4343
Attention: Terry M. Schpok, P.C.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
15
<PAGE> 17
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by
Cinemark with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
16
<PAGE> 18
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
CINEMARK USA, INC.
By: /s/ JEFFREY J. STEDMAN
------------------------------
Name: Jeffrey J. Stedman
Title: Senior Vice President
MORGAN STANLEY & CO. INCORPORATED
By: /s/ JOEL P. FELDMANN
-------------------------------
Name: Joel P. Feldmann
Title: Managing Director
BANCAMERICA ROBERTSON STEPHENS
By: /s/ BRUCE R. THOMPSON
-------------------------------
Name: Bruce R. Thompson
Title: Managing Director
<PAGE> 1
EXHIBIT 10.11(b)
FIRST AMENDMENT TO
FIRST AMENDED AND RESTATED REDUCING REVOLVING CREDIT
AGREEMENT
THIS FIRST AMENDMENT TO FIRST AMENDED AND RESTATED REDUCING REVOLVING
CREDIT AGREEMENT is made and dated as of December 12, 1997 (this "First
Amendment") among CINEMARK USA, INC., a Texas corporation (the "Company"), the
financial institutions (collectively, the "Banks") party to the Credit
Agreement referred to below, and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent (the "Administrative Agent"), and amends
that certain First Amended and Restated Reducing Revolving Credit Agreement
dated as of December 12, 1996, among the Company, the Banks and the
Administrative Agent (as so amended or modified from time to time, "Agreement").
RECITAL
The Company has requested that the Banks and the Administrative Agent
amend certain provisions of the Agreement, and the Banks and the Administrative
Agent are willing to do so on the terms and conditions set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Terms. All terms used herein shall have the same meanings as in
the Agreement unless otherwise defined herein. All references to the Agreement
shall mean the Agreement as hereby amended.
2. Amendments to Agreement.
2.1 The chart in the definition of "Applicable Amount" in Section 1.1 of
the Agreement is amended and restated in its entirety as follows:
<TABLE>
<CAPTION>
"Ratio of Total Indebtedness
To Annualized Offshore Base Commitment
Cash Flow Rate Loans(1) Rate Loans Fee
- ---------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
x > or = 5.00 1.875% 0.625% 0.3750%
4.50 < or = x < 5.00 1.750% 0.500% 0.3750%
4.00 < or = x < 4.50 1.500% 0.250% 0.3500%
3.50 < or = x < 4.00 1.250% -- 0.3250%
3.00 < or = x < 3.50 1.000% -- 0.2750%
2.50 < or = x < 3.00 0.750% -- 0.2250%
2.00 < or = x < 2.50 0.625% -- 0.2000%
x < 2.00 0.500% -- 0.1875%
</TABLE>
- -------------------
(1) See provisos immediately following this table for adjustments to Applicable
Amount for Offshore Rate Loans.
-1-
<PAGE> 2
2.2 The chart in Section 7.12 of the Agreement is amended and restated in
its entirety as follows:
<TABLE>
<CAPTION>
"Fiscal Quarters Ending Maximum Ratio
----------------------- -------------
<S> <C>
Closing Date through 12/31/98 6.00 to 1
1/1/99 through 12/31/99 5.00 to 1
1/1/2000 and thereafter 4.50 to 1"
</TABLE>
3. Representations and Warranties. The Company represents and warrants
to Banks and Administrative Agent that, on and as of the date hereof, and after
giving effect to this First Amendment:
3.1 Authorization. The execution, delivery and performance of this First
Amendment have been duly authorized by all necessary corporate action by the
Company and this First Amendment has been duly executed and delivered by the
Company.
3.2 Binding Obligation. This First Amendment is the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally or be equitable principles relating to
enforceability.
3.3 No Legal Obstacle to Agreement. The execution, delivery and
performance of this First Amendment will not (a) contravene the terms of the
Company's certificate of incorporation, by-laws or other organization document;
(b) conflict with or result in any breach or contravention of the provisions of
any contract to which the company is a party, or the violation of any law,
judgment, decree or governmental order, rule or regulation applicable to the
Company, or result in the creation under any agreement or instrument of any
security interest, lien, charge, or encumbrance upon any of the assets of the
Company. No approval or authorization of any governmental authority is required
to permit the execution, delivery or performance by the Company of this First
Amendment, or the transactions contemplated hereby.
3.4 Incorporation of Certain Representations. The representations and
warranties of the Company set forth in Section 5 of the Agreement are true and
correct in all respects on and as of the date hereof as though made on and as
of the date hereof, except as to such representations made as of an earlier
specified date.
3.5 Default. No Default or Event of Default under the Agreement has
occurred and is continuing.
4. Conditions, Effectiveness. The effectiveness of this First Amendment
shall be subject to the delivery of the following to the Administrative Agent
in form and substance satisfactory to the Administrative Agent and the Banks:
-2-
<PAGE> 3
4.1 Authorized Signatories. A certificate, signed by the Secretary or an
Assistant Secretary of the Company and dated the date of this First Amendment,
as to the incumbency of the person or persons authorized to execute and deliver
this First Amendment and any instrument or agreement required hereunder on
behalf of the Company.
4.2 Other Evidence. Such other evidence with respect to the Company or
any Restricted Subsidiary as of the Administrative Agent or any Bank may
reasonably request in connection with this First Amendment and the compliance
with the conditions set forth herein.
5. Miscellaneous.
5.1 Effectiveness of the Agreement and the Loan Documents. Except as
hereby expressly amended, the Agreement and each other Loan Document shall each
remain in full force and effect, and are hereby ratified and confirmed in all
respects on and as of the date hereof.
5.2 Waivers. This First Amendment is specific in time and in intent
and does not constitute, nor should it be construed as, a waiver of any other
right, power or privilege under the Agreement, or under any agreement,
contract, indenture, document, or instrument mentioned in the Agreement; nor
does it preclude any exercise thereof or the exercise of any other right, power
or privilege, nor shall any future waiver of any right, power, privilege or
default hereunder, or under the Agreement or any agreement, contract,
indenture, document or instrument mentioned in the Agreement, constitute a
waiver of any other default of the same or of any other term or provision.
5.3 Counterparts. This First Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument. This First Amendment shall not become
effective until the Company, the Administrative Agent and the Majority Banks
shall have signed a copy hereof, and the Pledgors shall have consented hereto,
whether the same or counterparts, and the same shall have been delivered to the
Administrative Agent.
5.4. Jurisdiction. This First Amendment shall be governed by and
construed under the laws of the State of New York.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be duly executed and delivered as of the date first written above.
CINEMARK USA, INC.
By: /s/ JEFF STEDMAN
---------------------------------
Name: Jeff Stedman
-------------------------------
Title: Vice President
------------------------------
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
AS ADMINISTRATIVE AGENT
By: /s/ DAVID PRICE
---------------------------------
David Price
Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION, AS A BANK
By: /s/ ROBERT J. LAGACE
---------------------------------
Name: Robert J. Lagace
-------------------------------
Title: Managing Director
------------------------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ WHITNEY L. BEISSE
---------------------------------
Name: Whitney L. Beisse
-------------------------------
Title: Vice President
------------------------------
CIBC INC.
By: /s/ COLLEEN RISOTO
---------------------------------
Name: Colleen Risoto
-------------------------------
Title: Authorized Signatory
------------------------------
(Signatures continue)
-4-
<PAGE> 5
THE BANK OF NEW YORK
By: /s/ EDWARD F. RYAN, JR.
------------------------------
Name: Edward F. Ryan, Jr.
----------------------------
Title: Senior Vice President
---------------------------
BANKBOSTON N.A.
By: /s/ REGINALD T. DAWSON
------------------------------
Name: Reginald T. Dawson
----------------------------
Title: Director
---------------------------
COMERICA BANK-TEXAS
By: /s/ WILLIAM J. ROLLEY
------------------------------
Name: William J. Rolley
----------------------------
Title: Vice President
---------------------------
FLEET BANK N.A.
By: /s/ ERIC S. MEYER
------------------------------
Name: Eric S. Meyer
----------------------------
Title: Vice President
---------------------------
THE FUJI BANK, LIMITED
By: /s/ TEIJI TERAMOTO
------------------------------
Name: Teiji Teramoto
----------------------------
Title: Vice President & Manager
---------------------------
THE BANK OF NOVA SCOTIA
By: /s/ TERRY K. FRYETT
------------------------------
Name: Terry K. Fryett
----------------------------
Title: Authorized Signatory
---------------------------
-5-
<PAGE> 6
CONSENT OF PLEDGORS
The undersigned Pledgors under that certain First Amended and Restated
Mitchell Family Pledge Agreement dated as of December 12, 1996 executed by
Pledgors for the benefit of Bank of America National Trust and Savings
Association as Administrative Agent hereby consent to the foregoing First
Amendment dated as of the date first written above to the First Amended and
Restated Reducing Revolving Credit Agreement dated as of December 12, 1996,
among Cinemark USA, Inc., the Banks named therein and Bank of America National
Trust and Savings Association as Administrative Agent, and represent and
warrant to the Administrative Agent and the Banks that there is no defense,
counterclaim or offset of any type or nature under the Pledge Agreement, and
that the same remain in full force and effect as to them after giving effect
hereto and thereto.
/s/ LEE ROY MITCHELL /s/ TANDY MITCHELL
------------------------- -------------------------
LEE ROY MITCHELL TANDY MITCHELL, SPOUSE OF
LEE ROY MITCHELL
MITCHELL SPECIAL TRUST MITCHELL GRANDCHILDREN TRUST
FOR CRYSTAL LEE ROBERTS
MITCHELL GRANDCHILDREN TRUST MITCHELL GRANDCHILDREN
FOR ASHLEY ANN LEE TRUST FOR LASEY MARIE LEE
MITCHELL GRANDCHILDREN TRUST MITCHELL GRANDCHILDREN
FOR SKYLER KAYE MITCHELL TRUST FOR CASSIE ANN ROBERTS
By: /s/ LEE ROY MITCHELL
-------------------------
Name:
-----------------------
Trustee
By: /s/ DON HART
-------------------------
Name: Don Hart
-----------------------
Trustee
-1-
<PAGE> 1
EXHIBIT 10.13(a)
Credit Agreement
Dated as of November 18, 1997
Among
Cinemark International, Inc.
Bank of America National Trust
and Savings Association,
as Administrative Agent
and
The Other Financial Institutions Party Hereto
[Bank of America Logo]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C> <C>
SECTION 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1 Amounts and Terms of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Loan Accounts and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Procedure for Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.5 Limitation on Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.6 Termination or Reduction of Aggregate Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Voluntary Termination or Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Automatic Reduction of Aggregate Commitment . . . . . . . . . . . . . . . . . . . . . . 19
(c) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.7 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.8 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.9 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.11 Computation of Fees and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.12 Payments by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.13 Payments by the Banks to the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.14 Sharing of Payments, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.15 Security and Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.1 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3 Increased Costs and Reduction of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.5 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.1 Conditions of Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.2 Conditions to All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.2 Corporate Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.3 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
5.6 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.7 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.11 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.13 Capital Stock; Pledge Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.14 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.15 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.16 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.17 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.18 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.20 Swap Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.21 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.4 Preservation of Corporate Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.5 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.7 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.9 Inspection of Property and Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.10 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.1 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.2 Payment of Intercompany Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.3 Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.4 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.5 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.6 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.7 No ERISA Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.8 Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.9 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.10 Limitation on Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.11 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.11 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.12 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.13 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.14 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.15 Limitations on Negative Pledges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.1 Appointment and Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.3 Liability of Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.8 Administrative Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.9 Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.10 Collateral Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.5 General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.6 Marshalling; Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.8 Assignments, Participations, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.9 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.10 Notification of Addresses, Lending Offices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.13 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.14 Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.15 GOVERNING LAW AND JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.16 WAIVER OF JURY TRLAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.17 NOTICE OF CLAIMS; CLAIMS BAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.18 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.19 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
<PAGE> 5
EXHIBITS
Form of:
A Notice of Borrowing
B Notice of Conversion/Continuation
c Borrower Pledge Agreement (Pledging stock of Cinemark Mexico)
D Notice of Assignment and Acceptance
E Promissory Note
F Cinemark Mexico Guaranty
G Letter of Responsibility
H Intercompany Subordination Agreement
SCHEDULES
1.1 Proforma Cash Flow for Annualized Theatres
2.1 Commitments
5.13 Options, Shareholder Agreements, Etc. re Cinemark Mexico stock
7.1 Existing Liens
10.2 Addresses for Domestic and Offshore Lending Offices and Notices
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of November 18, 1997 among
CINEMARK INTERNATIONAL, INC., a Texas corporation (the "Borrower"), the several
financial institutions from time to time party to this Agreement (collectively,
the "Banks"; individually, a "Bank"), and Bank of America National Trust and
Savings Association, as agent for the Banks (the "Administrative Agent").
RECITAL
The Banks desire to provide a secured revolving credit facility to
Borrower upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms. In addition to the terms defined elsewhere in
this Agreement, the following terms have the following meanings:
"Administrative Agent" means BofA, when acting in its capacity as the
Administrative Agent under any of the Loan Documents, or any successor
Administrative Agent.
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of 10% or more
of the voting interest of a Person shall for the purposes of this Agreement, be
deemed to control the other Person. In no event shall any Bank be deemed an
"Affiliate" of Borrower or of any Subsidiary of Borrower.
"Agent-Related Persons" means BofA and any successor administrative
agent arising under Section 9.9, together with their respective Affiliates, and
the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"Aggregate Commitment" means the combined Commitments of the Banks in
the amount of $25,000,000, as such amount may be reduced from time to time
pursuant to this Agreement.
"Agreement" means this Credit Agreement, as amended, modified,
supplemented or waived from time to time in accordance with the terms hereof:
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<PAGE> 7
"Annualized Cash Flow" means, for any period, for any Person, the sum
of (a) the Cash Flow of such Person for such period plus (b) the Proforma Cash
Flow for Annualized Theatres operated by such Person less (c) the Cash Flow
from Annualized Theatres operated by such Person; provided, however, that if
during the period for which Annualized Cash Flow is being determined, such
Person shall have acquired any assets identified to the Administrative Agent
other than assets acquired as a result of Capital Expenditures made in the
ordinary course of business (including without limitation acquisition by merger
or consolidation) or disposed of assets, the Cash Flow of such Person shall be
calculated on a pro forma basis as if such acquisition or disposition had
occurred at the beginning of such period.
"Annualized Theatres" means, for any period, newly constructed
theatres identified to the Administrative Agent that have had more than one
complete Fiscal Quarter of operation, but less than four complete Fiscal
Quarters of operation (each, an "Annualized Theatre"); provided, however, that
the Via Coapa theatre in Mexico City shall be included as an Annualized Theatre
prior to being operated for one complete Fiscal Quarter, and the Cash Flow
attributable to such theatre shall be included in Proforma Cash Flow for
Annualized Theatres in accordance with the definition thereof.
"Applicable Margin" means the percentage specified below applicable to
interest rates opposite the applicable Borrower Leverage Ratio, as set forth in
the most recent certificate received by the Administrative Agent pursuant to
Section 4.1(j) or 6.2(a):
<TABLE>
<CAPTION>
Borrower Offshore Base
Leverage Ratio Rate Loans Rate Loans
-------------------- ---------- ----------
<S> <C> <C>
3.50 < or = x < 3.75 1.750% 50.00
3.00 < or = x < 3.50 1.500% 25.00
2.50 < or = x < 3.00 1.250% 00
2.00 < or = x < 2.50 1.125% 00
x < 2.00 1.000% 00
</TABLE>
The Applicable Margin shall be in effect from the date the most recent
certificate delivered pursuant to Section 4.1(j) or 6.2(a) is received by the
Administrative Agent to but excluding the date the next such certificate is
received; provided, however, that if Borrower fails to timely deliver the next
such certificate, the Applicable Margin from date such certificate was due to
but excluding the date such certificate is received by the Administrative Agent
(the "Delinquent Period") shall be the higher of (a) the Applicable Margin
already in effect and (b) the Applicable Margin as set forth in such certificate
when received, retroactively applied to the Delinquent Period.
"Assignee" has the meaning specified in Section 10.8(a).
"Bank" has the meanings specified in the introductory clause hereto,
and any successors to, and permitted assigns of, such Banks.
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<PAGE> 8
"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is a Subsidiary of a Bank or of a Person of which a
Bank is a Subsidiary.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (12
U.S.C. Section 101, et seq.).
"Base Rate" means the higher of: (a) the rate of interest publicly
announced from time to time by BofA in San Francisco, California, as its
"reference rate." It is a rate set by BofA based upon various factors including
BofA's costs and desired return, general economic conditions and other factors,
and is used as a reference point for pricing some loans, which may be priced
at, above, or below such announced rate; and (b) one-half percent per annum
above the Federal Funds Rate. Any change in the reference rate announced by
BofA shall take effect at the opening of business on the day specified in the
public announcement of such change.
"Base Rate Loan" means a Loan that bears interest based on the Base
Rate.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association, and any successors thereto under this Agreement.
"Borrower" has the meaning set forth in the introductory paragraph
hereto.
"Borrower Leverage Ratio" means, as of any date of determination, the
ratio of (a) all interest bearing indebtedness of Borrower and Cinemark Mexico,
calculated on an unconsolidated basis for such Persons (excluding Intercompany
Subordinated Indebtedness and Indebtedness of Cinemark Mexico to Borrower) to
(b) the Annualized Cash Flow of Borrower and Cinemark Mexico on a
unconsolidated basis.
"Borrower Party" means any Person, other than the Administrative Agent
and the Banks, which now or hereafter is a party to any of the Loan Documents.
"Borrowing" means a borrowing hereunder consisting of Loans made to
Borrower on the same day by the Banks pursuant to Section 2.
"Borrowing Date" means the date a Borrowing is made.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City or San Francisco are authorized
or required by law to close and, if the applicable Business Day relates to any
Offshore Rate Loan, means such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
"Capital Lease" has the meaning specified in the definition of Capital
Lease Obligations.
"Capital Lease Obligations" means all monetary obligations of Borrower
or any of its Restricted Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, is classified as a capital lease ("Capital
Lease").
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<PAGE> 9
"Capital Stock" of any Person means (a) any and all shares, interest,
participations or other equivalents (however designated) of such Persons'
capital stock and any warrants, options and similar rights to acquire such
capital stock, (b) in the case of a partnership, partnership interests (whether
general or limited) and (c) any other interest or participation that confers on
a Person the right to receive a share of the profits and losses of, or
distributions or assets of, the issuing Person.
"Cash Flow" means, for any period, for any Person, or, as applicable,
with respect to certain properties or assets of any Person, determined in
accordance with GAAP, the sum of (a) net income (or net loss) plus (b) all
amounts treated as expenses for depreciation and Interest Expense (including
amortization of debt issue costs) and the amortization of intangibles of any
kind to the extent included in the determination of such net income (or loss),
plus (c) all accrued taxes on or measured by income to the extent included in
the determination of such net income (or loss) plus (d) increases in deferred
lease expense, plus (e) other non cash items reducing net income, plus (f)
management fees payable to Cinemark USA and its Subsidiaries less (g) decreases
in deferred lease expense, plus (h) with respect to the Cash Flow of the
Borrower, the general and administrative expenses of the Borrower so long as
such general and administrative expenses are funded through Intercompany
Subordinated Indebtedness or equity contributions from Cinemark USA to
Borrower, plus (i) costs of Swap Contracts associated with foreign currency
hedges; provided, however that net income (or loss) shall be computed for these
purposes without giving effect to gains or losses on dispositions, exchange,
gains or losses relating to foreign currency fluctuations, or extraordinary
losses or extraordinary gains.
"Cash Income Taxes" means, with respect to any fiscal period, taxes on
or measured by the income of Borrower that are paid or currently payable in
cash by Borrower during that fiscal period.
"Cash Interest Expense" means, for any period, Interest Expense paid
or due to be paid during such period in cash.
"CERCLA" has the meaning specified in the definition of "Environmental
Laws."
"Change in Control Event" means (a) Cinemark USA failing to own at
least 51% of the outstanding Capital Stock of Borrower, or (b) Borrower
failing to own at least 95% of the outstanding Capital Stock of Cinemark
Mexico.
"Cinemark Mexico" means Cinemark Mexico (USA), Inc., a Texas
corporation.
"Cinemark Mexico Guaranty" means a Continuing Guaranty substantially
in the form of Exhibit F, as amended, supplemented, modified, renewed and
replaced from time to time.
"Cinemark USA" means Cinemark USA, Inc. a Texas corporation.
"Closing Date" means the date on which all conditions precedent set
forth in Section 4.1 are satisfied or waived by all Banks.
-4-
<PAGE> 10
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by the Borrower upon which a Lien now
or hereafter exists in favor of the Banks, or the Administrative Agent on
behalf of the Banks, whether under this Agreement or under any other documents
executed by any such persons and delivered to the Administrative Agent or the
Banks, for the purpose of securing the Obligations.
"Collateral Documents" means, collectively, (a) the Pledge Agreement
and all other security agreements, and other similar agreements between any
Person and the Administrative Agent now or hereafter delivered to the
Administrative Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable documents) now
or hereafter filed in accordance with the UCC (or comparable law) against any
Person as debtor in favor of the Administrative Agent for the benefit of itself
and the Banks, and (b) any amendments, supplements, modifications, renewals,
replacements, consolidations, substitutions and extensions of any of the
foregoing.
"Commitment", with respect to each Bank, has the meaning specified in
Section 2.1.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary obligations") of
another Person (other than a Restricted Subsidiary) (the "primary obligor"),
including any obligation of that Person, whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item,
level of income or financial condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, (d) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof, or (e) in respect of any Swap Contract. The amount of any Contingent
Obligation shall be deemed equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or,
in the case of Contingent Obligations other than in respect of Swap Contracts,
if not stated or if indeterminable, the maximum reasonably anticipated
liability in respect thereof and, in the case of Contingent Obligations in
respect of Swap Contracts, shall be equal to the Swap Termination Value;
provided, however, guarantees of (A) payroll and operating accounts below
$500,000 incurred in the ordinary course of business by a Subsidiary, (B) costs
and expenses relating to shipments of furniture, fixtures and equipment to
Subsidiaries and (C) operating leases of Subsidiaries, shall not be deemed to
be Contingent Obligations.
"Contractual Obligation" means, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust
-5-
<PAGE> 11
or other instrument, document or agreement to which such Person is a party or
by which it or any of its property is bound.
"Controlled Group" means Borrower and all Persons (whether or not
incorporated) under common control or treated as a single employer with
Borrower pursuant to Section 414(b), (c), (m) or (o) of the Code.
"Conversion Date" means any date on which Borrower elects to convert a
Base Rate Loan into an Offshore Rate Loan; continue an Offshore Rate Loan as an
Offshore Rate Loan; or convert an Offshore Rate Loan into a Base Rate Loan.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the United
States.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any
such country, and having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting through a branch or agency
located in the United States; and (c) any Bank Affiliate.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden
or non-sudden, accidental or non-accidental placement, spills, leaks,
discharges, emissions or releases) of any Hazardous Material at, in, or from
Property, whether or not owned by Borrower or any Restricted Subsidiary, or (b)
any other circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, safety and land use matters; including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the Clean Air Act, the Federal Water Pollution Control Act of 1972,
the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery
Act, the Toxic Substances Control Act, the Emergency Planning and Community
Right-to-Know Act.
-6-
<PAGE> 12
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with Borrower within the meaning of Section
414(b), 414(c) or 414(m) of the Code.
"Event of Default" means any of the events or circumstances specified
in Section 8.1.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended from time to time, and regulations promulgated thereunder.
"Federal Funds Rate" means the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day of determination
(or if such day of determination is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"Fiscal Quarter" means the fiscal quarter of Borrower ending on each
March 31, June 30, September 30 and December 31.
"Fiscal Year" means the fiscal year of Borrower ending on each
December 31.
"Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal
Quarter, for Borrower and its Restricted Subsidiaries on an unconsolidated
basis, the ratio of (a) the sum of (i) Annualized Cash Flow for the four Fiscal
Quarters ended on such date plus (ii) lease expense (excluding deferred lease
expense) for the following four Fiscal Quarters to (b) the sum of (i) scheduled
principal payments on Indebtedness (excluding principal payments on the Loans)
for the following four Fiscal Quarters plus (ii) Cash Interest Expense for the
following four Fiscal Quarters (based on the principal amount of Indebtedness
(including the Loans) outstanding as of such date and interest rates then in
effect) plus (iii) lease expense (excluding deferred lease expense) for the
following four Fiscal Quarters plus (iv) Maintenance Capital Expenditures for
the four Fiscal Quarters ending on such date plus (v) Cash Income Taxes
(including profit sharing taxes) paid or payable during the four Fiscal
Quarters ending on such date.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies
with similar functions of comparable stature and authority within the
accounting profession), or in such other statements by such other entity as may
be in general use by significant segments of the U.S. accounting profession,
which are applicable to the circumstances as of the date of determination.
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<PAGE> 13
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
"Guarantied Leverage Ratio" means, as of any date of determination,
the ratio of (a) the aggregate of all interest bearing Indebtedness of
Borrower, Cinemark Mexico and any Guarantied Unrestricted Subsidiaries,
calculated on an unconsolidated basis for such Persons (excluding Intercompany
Subordinated Indebtedness of Borrower, Cinemark Mexico and any Guarantied
Unrestricted Subsidiaries) to (b) the aggregate Annualized Cash Flow of
Borrower, Cinemark Mexico and any Guarantied Unrestricted Subsidiaries on an
unconsolidated basis.
"Guarantied Unrestricted Subsidiaries" means any Unrestricted
Subsidiary with respect to which Borrower has Contingent Obligations relating
to such Guaranteed Restricted Subsidiaries' Indebtedness.
"Hazardous Materials" means all those substances which are regulated
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables, coupons and gift certificates entered into in the
ordinary course of business pursuant to ordinary terms); (c) all reimbursement
obligations with respect to surety bonds, letters of credit, bankers'
acceptances and similar instruments (in each case, to the extent material or
non-contingent); (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses (but excluding trade
accounts payable or similar accrued liabilities arising in the ordinary course
of business); (e) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either
case with respect to Property acquired by the Person (even though the rights
and remedies of the seller or bank under such agreement in the event of default
are limited to repossession or sale of such property); (f) all Capital Lease
Obligations; (g) all indebtedness referred to in clauses (a) through (f) above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in Property
(including accounts and contracts rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness (provided, however, that the amount of any such Indebtedness which
is non-recourse to such Person shall be the lesser of the fair market value of
the Property subject to the Lien and the amount of the Indebtedness secured);
and (h) all Contingent Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (f) above.
"Insolvency Proceeding" means (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation,
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<PAGE> 14
receivership, dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of assets for
creditors or other, similar arrangement in respect of its creditors generally
or any substantial portion of its creditors; in each case (a) and (b)
undertaken under U.S. Federal, State or foreign law.
"Intercompany Subordinated Indebtedness" means any Indebtedness of
Borrower owing to Cinemark USA.
"Intercompany Subordination Agreement" means the Intercompany
Subordination Agreement substantially in the form of Exhibit H, as amended,
supplemented, modified, renewed and replaced from time to time.
"Interest Expense" means, for any period, gross interest expense for
the period determined in accordance with GAAP (including all commissions,
discounts, fees and other charges in connection with standby letters of credit
and similar instruments and amortization of debt issue costs) for Borrower and
its Restricted Subsidiaries on an unconsolidated basis, plus (a) the portion of
the upfront costs and expenses for Swap Contracts of Borrower and its
Restricted Subsidiaries (to the extent not included in gross interest expense)
fairly allocated to such Swap Contracts as expenses for such period, and (b)
capitalized interest of Borrower and its Restricted Subsidiaries for the
period.
"Interest Payment Date" means, with respect to any Offshore Rate Loan,
the last Business Day of each Interest Period applicable to such Loan; with
respect to any Base Rate Loan, the last Business Day of each calendar quarter;
and with respect to all Loans, the Maturity Date; provided, however, that if
any Interest Period for an Offshore Rate Loan exceeds three months, interest
shall also be paid on the date which falls three, six and nine months, as
applicable, after the beginning of such Interest Period.
"Interest Period" means, with respect to any Offshore Rate Loan, the
period commencing on the Borrowing Date or the Conversion Date for such
Offshore Rate Loan and ending on the date 1, 2, 3, 6 or, if available to all
Banks in their sole discretion, 12 months thereafter, as selected by Borrower
in its Notice of Borrowing or Notice of Conversion/Continuation; provided that:
(a) if any Interest Period pertaining to an Offshore Rate Loan
would otherwise end on a day which is not a Business Day, that Interest Period
shall be extended to the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another calendar month,
in which event such Interest Period shall end on the immediately preceding
Business Day;
(b) any Interest Period pertaining to an Offshore Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of the calendar month
at the end of such Interest Period; and
(c) no Interest Period for any Loan shall extend beyond the
Maturity Date.
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<PAGE> 15
"Lending Office" means, with respect to any Bank, the office or
offices of the Bank specified as its "Lending Office," "Domestic Lending
Office" or "Offshore Lending Office," as the case may be, under its name on
Schedule 10.2 hereto, or such other office or offices of the Bank as it may
from time to time specify in writing to Borrower and the Administrative Agent.
"Letter of Responsibility" means the letter of responsibility
substantially in the form of Exhibit G.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preference, priority or other security interest or preferential
arrangement of any kind or nature whatsoever (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease Obligation, any
financing lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the UCC or any comparable
law) and any contingent or other agreement to provide any of the foregoing, but
not including the interest of a lessor under an Operating Lease.
"Loan" means an extension of credit by a Bank to Borrower pursuant to
Section 2, and may be a Base Rate Loan or an Offshore Rate Loan. The conversion
or continuation of any Loan pursuant to Section 2.4 shall not be deemed to be a
new extension of credit, but instead shall be deemed to be the same Loan.
"Loan Documents" means this Agreement, any Notes, the Collateral
Documents, the Intercompany Subordination Agreement, the Letter of
Responsibility, the Cinemark Mexico Guaranty, all exhibits thereto, all
documents delivered to the Administrative Agent or any Bank in connection
therewith.
"Maintenance Capital Expenditures" means a capital expenditure for
the maintenance, repair, restoration, or refurbishment of any existing theatre,
excluding any capital expenditures which materially adds to or further improves
such existing theatre.
"Majority Banks" means at any time Banks then holding at least 5 1% of
the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Banks then having at least 5 1% of the
Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Federal Reserve Board.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of Borrower or Borrower and its
Restricted Subsidiaries taken as a whole; (b) a material impairment of the
ability of Borrower to perform under any Loan Document and avoid any Event of
Default; or (c) a material adverse effect upon (i) the legality, validity,
binding effect or enforceability of any Loan Document, or (ii) the perfection
or priority of any Lien granted to the Banks or to the Administrative Agent for
the benefit of the Banks under the Pledge Agreement.
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<PAGE> 16
"Maturity Date" means the earlier to occur of (a) November 17, 1999;
and (b) the date on which the Aggregate Commitment shall terminate in
accordance with the provisions of this Agreement.
"Note" means a promissory note of Borrower payable to the order of a
Bank substantially in the form of Exhibit E evidencing the aggregate
Indebtedness of Borrower to such Bank resulting from Loans made by such Bank.
"Notice of Assignment and Acceptance" has the meaning specified in
Section 10.8(a).
"Notice of Borrowing" means a notice given by Borrower to the
Administrative Agent pursuant to Section 2.3, in substantially the form of
Exhibit A.
"Notice of Conversion/Continuation" means a notice given by Borrower
to the Administrative Agent pursuant to Section 2.4, in substantially the form
of Exhibit B.
"Notice of Lien" means any "notice of lien" or similar document
intended to be filed or recorded with any court, registry, recorder's office,
central filing office or other Governmental Authority for the purpose of
evidencing, creating, perfecting or preserving the priority of a Lien securing
obligations owing to a Governmental Authority.
"Obligations" means all Loans, and other Indebtedness, advances,
debts, liabilities, obligations, covenants and duties owing by any Borrower
Party to any of the Banks, the Administrative Agent, or any other Person
required to be indemnified, under any Loan Document, of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, arising under this Agreement, under any other Loan Document,
whether or not for the payment of money, whether arising by reason of an
extension of credit, loan, guaranty, indemnification or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute
or contingent, due or to become due, now existing or hereafter arising and
however acquired.
"Offshore Rate" means, for each Interest Period for any Offshore Rate
Loan, an interest rate per annum (rounded upward to the nearest 1/100 of one
percent) determined pursuant to the following formula:
Offshore Rate = LIBOR
----------------------------------
1.00-Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means the maximum
reserve percentage (expressed as a decimal rounded upward to
the next 1/100 of one percent) in effect on the date LIBOR for
such Interest Period is determined (whether or not applicable
to any Bank) under regulations issued from time to time by the
Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to
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<PAGE> 17
Eurocurrency funding (currently referred to as "Eurocurrency
Liabilities") having a term equal to such Interest Period; and
"LIBOR" means the rate of interest per annum (rounded
upward to the nearest 1/32nd of 1%) notified to the
Administrative Agent by BofA as the rate of interest at which
dollar deposits in the approximate amount of the amount of the
Loan to be made or continued as, or converted into, an
Offshore Rate Loan by BofA and having a maturity comparable to
such Interest Period would be offered to major banks in the
London interbank market at their request at or about 11:00
a.m. (London time) on the second Business Day prior to the
commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on the
Offshore Rate.
"Operating Lease" means, as applied to any Person, any lease of
Property which is not a Capital Lease.
"Participant" has the meaning specified in Section 10.8(d).
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower or any member of the Controlled Group sponsors or
maintains or to which Borrower or any member of the Controlled Group makes, is
making or is obligated to make contributions.
"Pledge Agreement" means the Pledge Agreement substantially in the
form of Exhibit C, as amended, supplemented, modified, renewed or replaced from
time to time.
"Pledged Collateral" means the Collateral pledged pursuant to the
Pledge Agreement.
"Property" means any estate or interest in any kind of property or
asset, whether real, personal or mixed, and whether tangible or intangible.
"Proforma Cash Flow for Annualized Theatres" means, for any period,
the sum of the proforma Cash Flow for each Annualized Theatre, calculated on an
Annualized Theatre by Annualized Theatre basis in accordance with the formula
set forth in Schedule 1.1; provided however, that the Cash Flow attributable to
the Via Coapa theatre in Mexico City for the period ending on September 30,
1997 shall be deemed to be $1,100,000.
"Pro Rata Share" means, as to any Bank, the percentage equivalent of
such Bank's Commitment divided by the Aggregate Commitment.
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<PAGE> 18
"Purchase Money Obligation" means any Indebtedness secured by a Lien
on assets related to the business of the Borrower its Restricted Subsidiaries,
and any additions and accessions thereto, which are purchased or constructed by
the Borrower or any Restricted Subsidiary of the Borrower at any time after the
Closing Date (excluding the assets of any Person at the time such Person
becomes a Restricted Subsidiary of the Borrower;) provided that (a) the
security agreement, conditional sales or other title retention contract
pursuant to which the Lien on such assets is created (together, for the
purposes of this definition, the "Security Agreement") shall be entered into
within 180 calendar days after the purchase or substantial completion of the
construction of such assets and shall at all times be confined solely to the
assets so purchased or acquired, any additions and accessions thereto and any
proceeds therefrom, (b) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in connection
with the purchase of additions and accessions thereto and except in respect of
fees and other obligations in respect of such Indebtedness, and (c)(i) the
aggregate outstanding principal amount of Indebtedness secured thereby
(determined on a per asset basis in the case of any additions and accessions)
shall not at the time such Security Agreement is entered into exceed 80% of the
purchase price to the Borrower or any Restricted Subsidiary of the Borrower of
the assets subject thereto or (ii) the Indebtedness secured thereby shall be
with recourse solely to the assets so purchased or acquired, any additions and
accessions thereto and any proceeds therefrom; provide further, that if the
Borrower or any Restricted Subsidiary of the Borrower has entered into a
legally binding commitment to execute a Security Agreement with respect to a
specified asset or assets and the Borrower or such Restricted Subsidiary
executes such Security Agreement within 30 calendar days after the date (for
the purposes of this definition, the "commitment date") on which it entered
into such commitment, the Security Agreement shall be deemed to have been
entered into on the commitment date.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person
or any of its property or to which the Person or any of its property is
subject.
"Responsible Officer" means the chief executive officer, chief
operating officer or any vice president of Borrower, or any other officer
having substantially the same authority and responsibility; or, with respect to
compliance with financial covenants, the chief financial officer or the
treasurer of Borrower, or any other officer having substantially the same
authority and responsibility.
"Restricted Subsidiary means Cinemark Mexico (USA), Inc., a Texas
corporation and any other Subsidiary of Borrower from time to time designated
as a Restricted Subsidiary and consented to by the Majority Banks
(collectively, the "Restricted Subsidiaries") such consent not to be
unreasonably withheld or delayed.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the Property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code and, in the alternative, for purposes of the
Uniform
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<PAGE> 19
Fraudulent Transfer Act; (b) the present fair saleable value of the Property of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; (c) such Person is able to realize upon its Property and pay its debts
and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (d) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (e) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Subsidiary" means, with respect to any Person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by one or more Subsidiaries of such Person or by such Person
and one or more Subsidiaries thereof, (b) any other Person (other than a
corporation) in which such Person, one or more Subsidiaries thereof or such
Person and one or more Subsidiaries thereof, directly or indirectly, at the
date of determination thereof has at least a majority ownership interest and
the power to direct the policies, management and affairs thereof, (c) upon
designation by Borrower, and until designation by Borrower to the contrary, a
Person, 50% or more of whose Capital Stock with voting power under ordinary
circumstances to elect directors (or Persons having similar or corresponding
powers and responsibilities) is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (d) any corporation, partnership or other
entity of which an aggregate of more than 20% of the capital stock or other
equity interests are owned directly or indirectly, legally or beneficially,
through one or more intermediaries by Borrower or which is controlled by
Borrower. Borrower shall evidence any designation pursuant to clause (c) of the
immediately preceding sentence to the Agent by filing with the Administrative
Agent within 45 days of such designation a certificate signed by a Responsible
Officer certifying that such designation has been made. Borrower shall be
deemed to control another Person if Borrower possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise.
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to
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<PAGE> 20
market value(s) for such Swap Contracts, as determined based upon one or more
mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include any Bank.)
"Taxes" has the meaning specified in Section 3.1(a).
"UCC" means the Uniform Commercial Code as in effect in any
jurisdiction.
"Unrestricted Subsidiary" means any Subsidiary of Borrower which is
not a Restricted Subsidiary.
1.2 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified herein or therein,
all terms defined in this Agreement shall have the defined meanings when used
in any certificate or other document made or delivered pursuant hereto. The
meaning of defined terms shall be equally applicable to the singular and plural
forms of the defined terms. Terms (including uncapitalized terms) not otherwise
defined herein and that are defined in the UCC shall have the meanings therein
described.
(b) Certain Common Terms. The term "documents" includes any and
all instruments, documents, agreements, certificates, indentures, notices and
other writings, however evidenced. The term "including" is not limiting and
means "including without limitation.
(c) Performance; Time. Whenever any performance obligation
hereunder (other than a payment obligation) shall be stated to be due or
required to be satisfied on a day other than a Business Day, such performance
shall be made or satisfied on the next succeeding Business Day. In the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to and including." If
any provision of this Agreement refers to any action taken or to be taken by
any Person, or which such Person is prohibited from taking, such provision
shall be interpreted to encompass any and all means, direct or indirect, of
taking, or not taking, such action.
(d) Contracts. Unless otherwise expressly provided herein,
references to agreements and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document.
(e) Laws. References to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
(f) Captions. The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
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<PAGE> 21
(g) Independence of Provisions. The parties acknowledge that this
Agreement and other Loan Documents may use several different limitations, tests
or measurements to regulate the same or similar matters, and that such
limitations, tests and measurements are cumulative and must each be performed,
except as expressly stated to the contrary in this Agreement.
(h) Accounting Principles. Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
SECTION 2
THE CREDITS
2.1 Amounts and Terms of Commitments. Each Bank severally agrees,
on the terms and conditions hereinafter set forth, to make Loans from time to
time on any Business Day during the period from the Closing Date to the
Maturity Date, in an aggregate amount not to exceed at any time outstanding the
amount set forth opposite such Bank's name in Schedule 2.1 under the heading
"Commitment" (such amount as the same may be reduced pursuant to Section 2.6 or
as a result of one or more assignments pursuant to Section 10.8, such Bank's
"Commitment"); provide, however, that, after giving effect to any Borrowing of
Loans, the aggregate principal amount of all outstanding Loans shall not at any
time exceed the Aggregate Commitment; provided, further, that the aggregate
principal amount of the Loans of any Bank shall not at any time exceed such
Bank's Commitment. Within the limits of each Bank's Commitment, and subject to
the other terms and conditions hereof, Borrower may borrow under this Section
2.1, prepay pursuant to Section 2.7 and reborrow pursuant to this Section 2.1.
2.2 Loan Accounts and Notes. (a) Subject to Section 2.2(b), the
Loans made by each Bank and the fees due hereunder shall be evidenced by one or
more loan accounts or records maintained by such Bank in the ordinary course of
business. The loan accounts or records maintained by the Administrative Agent
and each Bank shall be conclusive absent manifest error of the amount of the
Loans made by the Banks to Borrower and the interest and payments thereon and
fees due hereunder. Any failure so to record or any error in doing so shall
not, however, limit or otherwise affect the obligation of Borrower hereunder to
pay any amount owing with respect to the Loans or such fees.
(b) Upon the request of any Bank made through the Administrative
Agent, the Loans made by such Bank may be evidenced by one or more Notes,
instead of loan accounts. Each such Bank may endorse on the schedules annexed
to its Note(s), the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by Borrower with respect thereto. Each
such Bank is irrevocably authorized by Borrower to endorse its Note(s) and each
Bank's record shall be conclusive absent manifest error; provide, however, that
the failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of
Borrower hereunder or under any such Note to such Bank.
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<PAGE> 22
2.3 Procedure for Borrowing.
(a) Each Borrowing shall be made upon irrevocable written notice
in the form of a Notice of Borrowing, which notice must be received by the
Administrative Agent prior to 9:00 a.m. (San Francisco time) (i) three Business
Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans;
and (ii) one Business Day prior to the requested Borrowing Date, in the case of
Base Rate Loans, specifying: (i) the amount of the Borrowing, which, in the
case of a borrowing of Offshore Rate Loans, shall be in an aggregate minimum
principal amount of $1,000,000 and any multiple of $250,000 in excess thereof,
and in the case of a borrowing of Base Rate Loans, shall be in an aggregate
minimum principal amount of $500,000 and any multiple of $200,000 in excess
thereof, (ii) the requested Borrowing Date, which shall be a Business Day;
(iii) whether the Borrowing is to be comprised of Offshore Rate Loans, Base
Rate Loans or any combination thereof, and (iv) the duration of the Interest
Period applicable to Offshore Rate Loans included in such notice. If the Notice
of Borrowing shall fail to specify the duration of the Interest Period for any
Borrowing comprised of Offshore Rate Loans, such Interest Period shall be one
month; provided, however, that with respect to the Borrowing to be made on the
Closing Date, the Notice of Borrowing shall be delivered to the Administrative
Agent not later than 9:00 a.m. (San Francisco time) one Business Day before the
Closing Date and such Borrowing will consist of Base Rate Loans only; provided,
further, that if so requested by the Administrative Agent, all Borrowings
during the first 60 days following the Closing Date shall have the same
Interest Period and shall be Base Rate or Offshore Rate Loans for Interest
Periods no longer than one month.
(b) Promptly after receipt of a Notice of Borrowing, the
Administrative Agent shall notify each Bank of the proposed Borrowing. Each
Bank shall make available to the Administrative Agent its Pro Rata Share of the
amount (if any) by which the principal amount of the proposed Borrowing exceeds
the principal amount of the Loans (if any) being converted or continued on the
Borrowing Date, in immediately available funds, by remitting such funds to:
Bank of America National Trust and Savings Association, ABA No.121-000-358,
Attn: Agency Administrative Services #5596 For credit to: BANCONTROL Account
No. Reference: Cinemark International, Inc., no later than 11:00 a.m. (San
Francisco time) on the Borrowing Date. Upon satisfaction of the conditions set
forth in Section 4.2, the Administrative Agent shall make available to Borrower
in like funds on such Borrowing Date the aggregate of the amounts (if any) so
made available by the Banks by causing an amount equal to such aggregate amount
(if any) received by the Administrative Agent to be credited to the account of
Borrower as specified by Borrower in writing. If the conditions set forth in
Section 4.2 are not satisfied, the Administrative Agent shall promptly return
such funds to the Banks making the same available.
(c) Unless the Majority Banks shall otherwise agree, during the
existence of an Event of Default, Borrower may not elect to have a Loan be made
as an Offshore Rate Loan.
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<PAGE> 23
2.4 Conversion and Continuation Elections.
(a) Borrower may (i) elect to convert on any Business Day, any
Base Rate Loans (or any part thereof in an amount not less than $1,000,000 or
an integral multiple of $250,000 in excess thereof) into Offshore Rate Loans;
(ii) elect to convert on the last day of the Interest Period therefor, any
Offshore Rate Loans (or any part thereof in an amount not less than $500,000 or
an integral multiple of $200,000 in excess thereof) into Base Rate Loans; or
(iii) elect to continue, on the last day of the Interest Period therefor, any
Offshore Rate Loans (or any part thereof in an amount not less than $1,000,000
or an integral multiple of $250,000 in excess thereof); provided, that if the
aggregate amount of Offshore Rate Loans shall have been reduced, by payment,
prepayment, or conversion of part thereof to be less than $1,000,000, Offshore
Rate Loans shall automatically convert into Base Rate Loans.
(b) Each conversion or continuation shall be made upon irrevocable
written notice in the form of a Notice of Conversion/Continuation, which notice
must be received by the Administrative Agent prior to 9:00 a.m. (San Francisco
time) (i) three Business Days in advance of the Conversion Date, if the Loans
are to be converted into or continued as Offshore Rate Loans; and (ii) one
Business Day prior to the Conversion Date, if the Loans are to be converted
into Base Rate Loans, in each case specifying: (A) the proposed Conversion
Date; (B) the aggregate amount of Loans to be converted or continued; (C) the
nature of the proposed conversion or continuation; and (D) the duration of the
requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, Borrower has failed to select a new Interest Period to be
applicable thereto, or if any Event of Default shall then exist, Borrower shall
be deemed to have elected to convert such Offshore Rate Loans into Base Rate
Loans effective as of the expiration date of such current Interest Period.
(d) Upon receipt of a Notice of Conversion/Continuation, the
Administrative Agent will promptly notify each Bank thereof, or, if no timely
notice is provided by Borrower, the Administrative Agent will promptly notify
each Bank of the details of any automatic conversion. All conversions and
continuations shall be made pro rata according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given held
by each Bank.
(e) Unless the Majority Banks shall otherwise agree, during the
existence of an Event of Default, Borrower may not elect to have a Loan
converted into or continued as an Offshore Rate Loan.
2.5 Limitation on Interest Periods. Notwithstanding any other
provision contained in this Agreement, after giving effect to any Borrowing or
conversion or continuation of any Loans, there shall not be more than 10
different Interest Periods for Loans in effect without the consent of the
Administrative Agent and the Majority Banks.
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<PAGE> 24
2.6 Termination or Reduction of Aggregate Commitment.
(a) Voluntary Termination or Reduction. Borrower may, upon not
less than one Business Day's prior written notice to the Administrative Agent,
terminate the Aggregate Commitment or permanently reduce the Aggregate
Commitment by an aggregate minimum amount of $1,000,000 or any multiple
thereof, provided that no such reduction or termination shall be permitted if,
after giving effect thereto and to any prepayments of the Loans made on the
effective date thereof, the then outstanding principal amount of the Loans
would exceed the Aggregate Commitment then in effect and, provided, further,
that once reduced in accordance with this Section 2.6, the Aggregate Commitment
may not be increased.
(b) Automatic Reduction of Aggregate Commitment. Upon a Change of
Control, the Aggregate Commitment shall be automatically and concurrently
reduced to zero.
(c) General. All accrued commitment fees to, but not including the
effective date of the reduction or termination of the Aggregate Commitment,
shall be paid on the effective date of the reduction or termination. Any
reduction of the Aggregate Commitment shall be applied to each Bank's
Commitment in accordance with such Bank's Pro Rata Share.
2.7 Optional Prepayments. Subject to Section 3.4, Borrower may, at
any time or from time to time, upon written notice, which notice must be
received by the Administrative Agent at least (a) three Business Days prior to
any prepayment of Offshore Rate Loans; and (b) on the Business Day of the
prepayment of any Base Rate Loans, ratably prepay Loans in whole or in part, in
amounts of (i) with respect to Offshore Rate Loans, $500,000 or any multiple
thereof in excess thereof, and (ii) with respect to Base Rate Loans, $200,000
or any integral multiple of $250,000 in excess thereof Such notice of
prepayment shall specify the date and amount of such prepayment and whether
such prepayment is of Base Rate Loans or Offshore Rate Loans, or any
combination thereof. Such notice shall not thereafter be revocable by Borrower,
and the Administrative Agent will promptly notify each Bank of such Bank's Pro
Rata Share of such prepayment. If such notice is given by Borrower, Borrower
shall make such prepayment and the payment amount specified in such notice
shall be due and payable on the date specified therein, together with accrued
interest in the case of Offshore Rate Loans to each such date on the amount
prepaid and any amounts required pursuant to Section 3.4.
2.8 Maturity Date. All principal and accrued and unpaid interest
on all Loans shall be due on the Maturity Date.
2.9 Interest.
(a) Subject to Section 2.9(c) and (d), each Loan shall bear
interest on the outstanding principal amount thereof from the date when made
until it becomes due at a rate per annum equal to the Offshore Rate or the Base
Rate, as the case may be, plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any
prepayment of Offshore Rate Loans pursuant to
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Section 2.7 for the portion of the Loans so prepaid and upon payment (including
prepayment) in full thereof and, during the existence of any Event of Default,
interest shall be paid on demand.
(c) Subject to Section 2.9(d), during the continuation of any
Event of Default or after acceleration pursuant to Section 8.2, Borrower shall
pay interest (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all Obligations due and unpaid, at
a rate per annum which is determined by adding 2% per annum to the Applicable
Margin then in effect for such Loans and, in the case of Obligations not
subject to an Applicable Margin, at a rate per annum equal to the Base Rate
plus the Applicable Margin plus 2%; provided, however, that, on and after the
expiration of any Interest Period applicable to any Offshore Rate Loan
outstanding on the date of occurrence of such Event of Default or acceleration,
the principal amount of such Loan shall, during the continuation of such Event
of Default or after acceleration, bear interest at a rate per annum equal to
the Base Rate plus the Applicable Margin plus 2%.
(d) It is the intention of the parties hereto to comply with
applicable usury laws (now or hereafter enacted); accordingly, notwithstanding
any provision to the contrary in this Agreement, any Notes, the other Loan
Documents, or any other document relating hereto, in no event shall this
Agreement or any such other document require the payment or permit the
collection of interest in excess of the maximum amount permitted by such laws.
If for any circumstances whatsoever, fulfillment of any provision of any Loan
Document shall involve transcending the limit of validity prescribed by law for
the collection or charging of interest, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if for any such
circumstances a Bank shall ever receive anything of value as interest or deemed
interest by applicable law under this Agreement, any Notes, the other Loan
Documents, or any other document pertaining hereto or otherwise an amount that
would exceed the highest lawful rate, such amount that would be excessive
interest shall be applied to the reduction of the principal amount owing
hereunder and under any Notes or on account of any other indebtedness of
Borrower to the Administrative Agent and the Banks, and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
of such indebtedness, such excess shall be refunded to Borrower. In determining
whether or not the interest paid or payable with respect to any indebtedness of
Borrower to the Administrative Agent and the Banks, under any specific
contingency, exceeds the highest lawful rate, Borrower and the Administrative
Agent and the Banks shall, to the maximum extent permitted by applicable law,
(a) characterize any non-principal payment as an expense, fee or premium rather
than as interest, (b) exclude voluntary prepayments and the effects thereof,
(c) amortize, prorate, allocate and spread the total amount of interest
throughout the term of such indebtedness so that the actual rate of interest on
account of such indebtedness does not exceed the maximum amount permitted by
applicable law, and/or (d) allocate interest between portions of such
indebtedness to the end that no such portion shall bear interest at a rate
greater than that permitted by applicable law.
For purpose of this Section 2.9(d), the term "applicable law" means
the internal laws of the State of New York, but, to the extent, contrary to the
express intent of the parties, New York law is found to be inapplicable to this
Agreement, then "applicable law" also means that law in effect from time to
time and applicable to this loan transaction which lawfully permits the
charging and collection of the highest permissible, lawful, non-usurious rate
of interest on such
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loan transaction and this Agreement, and, to the extent controlling, laws of
the United States of America.
2.10 Fees.
(a) Arrangement Fee. Borrower shall pay to BofA for its own
account an arrangement fee in an amount and at the time set forth in a letter
November 13, 1997, as supplemented.
(b) Commitment Fees. Borrower shall pay to the Administrative
Agent for the account of each Bank a commitment fee on the average daily unused
portion of such Bank's Commitment, computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter based upon the daily utilization
for that quarter as calculated by the Administrative Agent, at a rate per annum
equal to 0.50%. Such commitment fee shall accrue from the Closing Date to the
Maturity Date and shall be due and payable quarterly in arrears on the last
Business Day of each quarter commencing December 31, 1997, with the final
payment to be made on the Maturity Date; provided that, in connection with the
termination of the Aggregate Commitment pursuant to Section 2.6, the accrued
commitment fee calculated for the period ending on such date shall also be paid
on the date of the termination. The commitment fees provided in this Section
shall accrue at all times after the above-mentioned commencement date,
including at anytime during which one or more conditions in Section 4 are not
met.
(c) Agency Fee. Borrower shall pay to the Administrative Agent for
the Administrative Agent's own account an agency fee in the amount and at the
times as agreed upon in writing between Borrower and the Administrative Agent.
2.11 Computation of Fees and Interest.
(a) All computations of interest payable in respect of Base Rate
Loans at all times as the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed. All other computations of fees and interest under this
Agreement shall be made on the basis of a 360-day year and actual days elapsed,
which results in more interest being paid than if computed on the basis of a
365-day year. Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b) The Administrative Agent will, with reasonable promptness,
notify Borrower and the Banks of each determination of an Offshore Rate;
provided that any failure to do so shall not relieve Borrower of any liability
hereunder or provide the basis for any claim against the Administrative Agent.
Any change in the interest rate on a Loan resulting from a change in the
Applicable Margin or Eurodollar Reserve Percentage shall become effective as of
the opening of business on the day on which such change in the Applicable
Margin or Eurodollar Reserve Percentage becomes effective. The Administrative
Agent will with reasonable promptness notify Borrower and the Banks of the
effective date and the amount of each such change, provided that any failure to
do so shall not relieve Borrower of any liability hereunder or provide the
basis for any claim against the Administrative Agent.
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(c) Any change in the interest rate on a Loan resulting from a
change in the Applicable Margin or Eurodollar Reserve Percentage shall become
effective as of the opening of business on the day on which such change in the
Applicable Margin or Eurodollar Reserve Percentage becomes effective. Each
determination of an interest rate by the Administrative Agent pursuant hereto
shall be conclusive and binding on Borrower and the Banks in the absence of
manifest error.
2.12 Payments by Borrower.
(a) All payments of principal, interest and fees hereunder shall
be in immediately available funds and delivered to the Administrative Agent for
credit to:
Bank of America National Trust
and Savings Association
Att: Agency Administrative Services #5596
ABA No.121-000-358
Bancontrol Account No.___________
Reference: Cinemark International, Inc.
not later than 11:00 A.M. (San Francisco time) on the date due; funds received
by the Administrative Agent after that time shall be deemed to have been paid
by Borrower on the next succeeding Business Day.
(b) Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be; subject to
the provisions set forth in the definition of "Interest Period" herein.
(c) Unless the Administrative Agent shall have received notice
from Borrower prior to the date on which any payment is due to the Banks
hereunder that Borrower will not make such payment in full as and when required
hereunder, the Administrative Agent may assume that Borrower has made such
payment in full to the Administrative Agent on such date in immediately
available funds and the Administrative Agent may (but shall not be so
required), in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If and
to the extent Borrower shall not have made such payment in full to the
Administrative Agent, each Bank shall repay to the Administrative Agent on
demand such amount distributed to such Bank, together with interest thereon for
each day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Administrative Agent, at the Federal Funds
Rate as in effect for each such day.
2.13 Payments by the Banks to the Administrative Agent.
(a) Unless the Administrative Agent shall have received notice
from a Bank on the Closing Date or, with respect to each Borrowing after the
Closing Date, by 9:30 a.m. (San Francisco time) (i) one Business Day prior to
the date of any proposed Borrowing of Offshore
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Rate Loans, or (ii) on the date of any proposed Borrowing of Base Rate Loans
that such Bank will not make available to the Administrative Agent as and when
required hereunder for the account of Borrower the amount of that Bank's Pro
Rata Share of the Borrowing, the Administrative Agent may assume that each Bank
has made such amount available to the Administrative Agent in immediately
available funds on the Borrowing date and the Administrative Agent may (but
shall not be so required), in reliance upon such assumption, make available to
Borrower on such date a corresponding amount. If and to the extent any Bank
shall not have made its full amount available to the Administrative Agent in
immediately available funds and the Administrative Agent in such circumstances
has made available to Borrower such amount, that Bank shall on the next
Business Day following the date of such Borrowing make such amount available to
the Administrative Agent, together with interest at the Federal Funds Rate for
and determined as of each day during such period. A notice of the
Administrative Agent submitted to any Bank with respect to amounts owing under
this Section 2.13(a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Administrative Agent shall constitute
such Bank's Loan on the date of Borrowing for all purposes of this Agreement.
If such amount is not made available to the Administrative Agent on the next
Business Day following the date of such Borrowing, the Administrative Agent
shall notify Borrower of such failure to fund and, upon demand by the
Administrative Agent, Borrower shall pay such amount to the Administrative
Agent for the Administrative Agent's account, together with interest thereon
for each day elapsed since the date of such Borrowing, at a rate per annum
equal to the interest rate applicable at the time to the Loans comprising such
Borrowing.
(b) The failure of any Bank to make any Loan on any date of
borrowing shall not relieve any other Bank of any obligation hereunder to make
a Loan on the date of such borrowing, but no Bank shall be responsible for the
failure of any other Bank to make the Loan to be made by such other Bank on the
date of any Borrowing.
2.14 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share of payments on account
of the Loans obtained by all the Banks, such Bank shall forthwith (a) notify
the Administrative Agent of such fact, and (b) purchase from the other Banks
such participations in the Loans made by them as shall be necessary to cause
such purchasing Bank to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's Pro Rata Share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. Borrower agrees
that any Bank so purchasing a participation from another Bank pursuant to this
Section 2.14 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off, but subject to Section 10.9)
with respect to such participation as fully as if such Bank were the direct
creditor of Borrower in the amount of such participation. The Administrative
Agent will keep records (which shall be conclusive and binding in the absence
of
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manifest error) of participations purchased pursuant to this Section 2.14 and
will in each case notify the Banks following any such purchases or repayments.
2.15 Security and Guaranty. All Obligations shall be secured in
accordance with the Pledge Agreement and guarantied in accordance with the
Cinemark Mexico Guaranty.
SECTION 3
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes.
(a) Subject to Section 3.1 (g), any and all payments by any
Borrower Party to each Bank or the Administrative Agent under this Agreement
shall be made free and clear of, and without deduction or withholding for, any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Administrative Agent, such taxes (including income taxes
or franchise taxes) as are imposed on or measured by each Bank's net income by
the jurisdiction under the laws of which such Bank or the Administrative Agent,
as the case may be, is organized or maintains a Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes").
(b) In addition, Borrower shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents (hereinafter referred to as "Other Taxes").
(c) Subject to Section 3.1(g), Borrower shall indemnify and hold
harmless each Bank and the Administrative Agent for the full amount of Taxes or
Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 3.1) paid by such Bank or the Administrative
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted, provided that, in the case
of penalties, interest, additions to tax and expenses, such Bank or the
Administrative Agent has timely notified Borrower after it has been notified of
its liability for such amounts. Payment under this indemnification shall be
made within 30 days from the date the Bank or the Administrative Agent makes
written demand therefor.
(d) If any Borrower Party shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank or the Administrative Agent, then, subject to Section
3.1(g): (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 3.1) such Bank or the Administrative Agent, as
the case may be, receives an amount equal to the sum it would have received had
no such deductions been made; (ii) such Borrower Party shall make such
deductions, and (iii) Borrower
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shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(e) Within 30 days after the date of any payment by any Borrower
Party of Taxes or Other Taxes, Borrower shall furnish to the Administrative
Agent the original or a certified copy of a receipt evidencing payment thereof,
or other evidence of payment reasonably satisfactory to the Administrative
Agent.
(f) Each Bank which is a foreign person (i.e., a person other than
a United States person for United States Federal income tax purposes) agrees
that: (i) it shall, no later than the Closing Date (or, in the case of a Bank
which becomes a party hereto pursuant to Section 10.8 after the Closing Date,
the date upon which the Bank becomes a party hereto) deliver to Borrower
through the Administrative Agent two accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto ("Form 4224"), or
two accurate and complete signed originals of Internal Revenue Service Form
1001 or any successor thereto ("Form 1001"), as appropriate, in each case
indicating that the Bank is on the date of delivery thereof entitled to receive
payments of principal, interest and fees under this Agreement free from
withholding of United States Federal income tax; (ii) if at any time the Bank
makes any changes necessitating a new Form 4224 or Form 1001, it shall with
reasonable promptness deliver to Borrower through the Administrative Agent in
replacement for, or in addition to, the forms previously delivered by it
hereunder, two accurate and complete signed originals of Form 4224; or two
accurate and complete signed originals of Form 1001, as appropriate, in each
case indicating that the Bank is on the date of delivery thereof entitled to
receive payments of principal, interest and fees under this Agreement free from
withholding of United States Federal income tax; (iii) it shall, before or
promptly after the occurrence of any event (including the passing of time but
excluding any event mentioned in (ii) above) requiring a change in or renewal
of the most recent Form 4224 or Form 1001 previously delivered by such Bank,
deliver to Borrower through the Administrative Agent two accurate and complete
original signed copies of Form 4224 or Form 1001 in replacement for the forms
previously delivered by the Bank; and (iv) it shall, promptly upon Borrower's
or the Administrative Agent's reasonable request to that effect, deliver to
Borrower or the Administrative Agent (as the case may be) such other forms or
similar documentation as may be required from time to time by any applicable
law, treaty, rule or regulation in order to establish such Bank's tax status
for withholding purposes.
(g) Borrower will not be required to pay any additional amounts in
respect of United States Federal income tax pursuant to Section 3.1(d) to any
Bank for the account of any Lending Office of such Bank or to indemnify any
Bank pursuant to Section 3.l(c):(i) if the obligation to pay such additional
amounts would not have arisen but for a failure by such Bank to comply with its
obligations under Section 3.1 (f) in respect of such Lending Office; (ii) if
such Bank shall have delivered to Borrower a Form 4224 in respect of such
Lending Office pursuant to Section 3.1(f), and such Bank at any time shall
not be entitled to exemption from deduction or withholding of United States
Federal income tax in respect of payments by Borrower hereunder for the account
of such Lending Office for any reason other than a change in United States law
or regulations or in the official interpretation of such law or regulations by
any governmental authority charged with the interpretation or administration
thereof (whether or not having the force of law) after the date of delivery of
such Form 4224; or (iii) if the Bank shall
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<PAGE> 31
have delivered to Borrower a Form 1001 in respect of such Lending Office
pursuant to Section 3.1(f), and such Bank at any time shall not be entitled
to exemption from deduction or withholding of United States Federal income tax
in respect of payments by Borrower hereunder for the account of such Lending
Office for any reason other than a change in United States law or regulations
or any applicable tax treaty or regulations or in the official interpretation
of any such law, treaty or regulations by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form 1001.
(h) If, at any time, Borrower requests any Bank to deliver any
forms or other documentation pursuant to Section 3.1 (f)(iv), then Borrower
shall, on demand of such Bank through the Administrative Agent, reimburse such
Bank for any costs and expenses (including reasonable expenses of outside legal
counsel and the reasonable allocated costs of in-house counsel) reasonably
incurred by such Bank in the preparation or delivery of such forms or other
documentation.
(i) If Borrower is required to pay additional amounts to any Bank
or the Administrative Agent pursuant to Section 3.1(d), then such Bank shall
use its reasonable best efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by Borrower which may thereafter accrue
if such change in the judgment of such Bank is not otherwise disadvantageous to
such Bank.
3.2 Illegality.
(a) If any Bank shall reasonably determine that the introduction
of any Requirement of Law, or any change in any Requirement of Law or in the
interpretation or administration thereof, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Bank or its Lending Office to make Offshore Rate Loans, then, on notice
thereof by the Bank to Borrower through the Administrative Agent, the
obligation of that Bank to make Offshore Rate Loans shall be suspended until
the Bank shall have notified the Administrative Agent and Borrower that the
circumstances giving rise to such determination no longer exists.
(b) If a Bank shall determine that it is unlawful to maintain any
Offshore Rate Loan, Borrower shall be deemed to have converted in full all
Offshore Rate Loans of that Bank then outstanding into Base Rate Loans either
on the last day of the Interest Period thereof if the Bank may lawfully
continue to maintain such Offshore Rate Loans to such day, or immediately, if
the Bank may not lawfully continue to maintain such Offshore Rate Loans. At
the time of conversion, Borrower shall pay all interest accrued thereon,
together with any amounts required to be paid in connection therewith pursuant
to Section 3.4.
(c) If the obligation of any Bank to make or maintain Offshore
Rate Loans has been terminated, Borrower may elect, by giving notice to the
Bank through the Administrative Agent that all Loans which would otherwise be
made by the Bank as, or converted into, Offshore Rate Loans shall be instead
Base Rate Loans.
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(d) Before giving any notice to the Administrative Agent pursuant
to this Section 3.2, the affected Bank shall designate a different Lending
Office with respect to its Offshore Rate Loans if such designation will avoid
the need for giving such notice or making such demand and will not, in the
judgment of the Bank, be illegal or otherwise disadvantageous to the Bank.
3.3 Increased Costs and Reduction of Return. (a) If any Bank shall
reasonably determine that, due to either (i) the introduction of or any change
in or in the interpretation of any law or regulation or (ii) the compliance
with any guideline or request of general applicability from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Loans (except for changes in the rate
of tax on the overall net income of such Bank imposed by the jurisdiction in
which such Bank's principal executive office or Lending Office is located),
then Borrower shall be liable for, and shall from time to time, upon demand
therefor by such Bank (with a copy of such demand to the Administrative Agent),
pay to such Bank, additional amounts as are sufficient to compensate such Bank
for such increased costs.
(b) If any Bank shall have reasonably determined that the
introduction of any applicable law, rule, regulation or guideline of general
applicability regarding capital adequacy, or any change therein or any change
in the interpretation or administration thereof by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or compliance by the Bank (or its Lending Office) or any corporation
controlling the Bank, with any request, guideline or directive of general
applicability regarding capital adequacy (whether or not having the force of
law) of any such central bank or other authority issued after the date hereof,
affects or would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and (taking into
consideration such Bank's or such corporation's policies with respect to
capital adequacy and such Bank's desired return on capital) determines that the
amount of such Bank's capital is increased as a consequence of its obligations
hereunder, then, upon demand of such Bank, Borrower shall immediately pay to
the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase.
3.4 Funding Losses. Borrower agrees to reimburse each Bank and to
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur (excluding the loss of anticipated profits) from the liquidation or
reemployment of funds obtained by it to maintain its Offshore Rate Loans
hereunder or from fees payable to terminate the deposits from which such funds
were obtained as a consequence of: (a) the failure of Borrower to make any
prepayment of principal of any Offshore Rate Loan or to make any payment after
any acceleration thereof; (b) the failure of Borrower to borrow or continue an
Offshore Rate Loan or convert a Base Rate Loan to an Offshore Rate Loan after
Borrower has given (or is deemed to have given) a Notice of Borrowing or a
Notice of Conversion/Continuation; (c) the failure of Borrower to make any
prepayment of an Offshore Rate Loan after Borrower has given a notice in
accordance with Section 2.7; or (d) the prepayment of an Offshore Rate Loan on
a day which is not the last day of the Interest Period with respect thereto.
Solely for purposes of calculating amounts payable by Borrower to the Banks
under this Section 3.4, each Offshore Rate Loan
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<PAGE> 33
made by a Bank (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the LIBOR (as
defined in the definition of "Offshore Rate") used in determining the Offshore
Rate for such Offshore Rate Loan by a matching deposit or other borrowing in
the interbank eurodollar market for a comparable amount and for a comparable
period, whether or not such Offshore Rate Loan is in fact so funded.
3.5 Inability to Determine Rates. If the Majority Banks shall
have determined that for any reason adequate and reasonable means do not exist
for ascertaining the Offshore Rate for any requested Interest Period with
respect to a proposed Offshore Rate Loan or if the Majority Banks advise the
Administrative Agent that the Offshore Rate applicable for any requested
Interest Period with respect to a proposed Offshore Rate Loan does not
adequately and fairly reflect the cost to them of funding such Loan, they shall
notify the Administrative Agent who will forthwith give notice of such
determination to Borrower and each Bank. Thereafter, the obligation of the
Banks to make Offshore Rate Loans hereunder shall be suspended until the
Administrative Agent upon the instruction of the Majority Banks revokes such
notice in writing. Upon receipt of such notice, Borrower may revoke any Notice
of Borrowing or Notice of Conversion/Continuation then submitted by it. If
Borrower does not revoke such notice with respect to Loans, the Banks shall
make, convert or continue the Loans, as proposed by Borrower, in the amount
specified in the applicable notice submitted by Borrower, but such Loans shall
be made, converted or continued as Base Rate Loans instead of Offshore Rate
Loans.
3.6 Survival. The agreements and obligations of Borrower in this
Section 3 shall survive the payment of all other Obligations. Any claim or
demand by any Bank for reimbursement or compensation under this Section 3 must
be made in writing; provided, however, that no such claim or demand may be made
in respect of any expense, cost, or economic loss incurred or suffered more
than 12 months prior to the date of such claim or demand.
SECTION 4
CONDITIONS PRECEDENT
4.1 Conditions of Initial Loans. The obligation of each Bank to
make its initial Loan hereunder is subject to the condition that the
Administrative Agent shall have received on or before the Closing Date all of
the following, in form and substance satisfactory to the Administrative Agent
and each Bank and (except for the instruments or documents representing Pledged
Collateral) in sufficient copies for each Bank:
(a) Credit Agreement and Notes. This Agreement executed and
delivered by Borrower, the Administrative Agent and each of the Banks and, if
requested by any Bank pursuant to Section 2.2(b), the Note(s) for such Bank
executed by Borrower.
(b) Resolutions, Incumbency.
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(i) Copies of the resolutions of the Board of
Directors or the executive committee of Borrower and Cinemark
Mexico approving and authorizing the execution, delivery and
performance by Borrower and Cinemark Mexico, respectively, of
the Loan Documents to which it is a party and authorizing the
borrowing of the Loans by Borrower, certified as of the
Closing Date by the Secretary or an Assistant Secretary of
Borrower and Cinemark Mexico, respectively; and
(ii) A certificate of the Secretary or Assistant
Secretary of Borrower and Cinemark Mexico, certifying the
names and true signatures of the officers of Borrower and
Cinemark Mexico, respectively, authorized to execute and
deliver the Loan Documents to which its is a party.
(c) Articles of Incorporation, By-laws and Good Standing.
Each of the following documents:
(i) The articles or certificate of incorporation
of Borrower and Cinemark Mexico as in effect on the Closing
Date, certified by the Secretary of State of the State of
incorporation of Borrower as of a recent date and by the
Secretary or Assistant Secretary of Borrower and Cinemark
Mexico, respectively, as of the Closing Date and the
bylaws of Borrower and Cinemark Mexico as in effect on
the Closing Date, certified by the Secretary or Assistant
Secretary of Borrower and Cinemark Mexico, respectively, as
of the Closing Date; and
(ii) A good standing certificate for Borrower and
Cinemark Mexico from the Secretary of State of its state of
incorporation and each state where Borrower is qualified to do
business as a foreign corporation as of a recent date.
(d) Intercompany Subordination Agreement. The Intercompany
Subordination agreement, executed and delivered by the parties thereto.
(e) Legal Opinions. An opinion of the general counsel of
Borrower addressed to the Administrative Agent and the Banks.
(f) Payment of Fees. Borrower shall have paid all accrued and
unpaid fees, costs and expenses to the extent then due and payable on the
Closing Date, together with reasonable attorney fees, costs and expenses
(including the allocated cost of Administrative Agent's inhouse counsel and
staff) to the extent invoiced prior to or on the Closing Date, together with
such additional amounts of such fees, costs and expenses as shall constitute
BofA's and the Administrative Agent's reasonable estimate of such reasonable
fees, costs and expenses incurred or to be incurred through the closing
proceedings, provided that such estimate shall not thereafter preclude final
settling of accounts between Borrower and the Administrative Agent; including
any such costs, fees and expenses arising under or referenced in Section 2.10.
To the extent not invoiced by the Closing Date, Borrower shall pay such fees,
costs and expenses within 30 days of being invoiced therefor.
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(g) Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date (i) stating that: (A) the representations and
warranties contained in Section 5 are true and correct in all material respects
on and as of such date, as though made on and as of such date; (B) no Default
or Event of Default exists or would result from the initial Loan; and (C) there
has occurred since December 31, 1996, no event or circumstance that could
reasonably be expected to result in a Material Adverse Effect; and (ii) showing
in detail the calculations supporting such statement in respect of Sections
7.11, 7.12 and 7.13 as of September 30, 1997.
(h) Other Documents. Such other approvals, opinions or documents
as the Administrative Agent or any Bank may request.
4.2 Conditions to All Borrowings. The obligation of each Bank to
make any Loan to be made by it hereunder (including its initial Loan) is
subject to the satisfaction of the following conditions precedent on the
relevant Borrowing Date:
(a) Cinemark Mexico Guaranty. Concurrently with making the
initial Loans hereunder, the Cinemark Mexico Guaranty, executed and delivered
by Cinemark Mexico;
(b) Pledge Agreement. Concurrently with making the initial Loans
hereunder, the Pledge Agreement, executed and delivered by the Borrower, in
appropriate form for recording, where necessary, together with all certificates
and instruments representing the Pledged Collateral and stock transfer powers
executed in blank.
(c) Letter of Responsibility. Concurrently with making the
initial Loans hereunder, the Letter of Responsibility, executed and delivered
by Cinemark USA.
(d) Notice of Borrowing. The Administrative Agent shall have
received a Notice of Borrowing;
(e) Continuation of Representations and Warranties. The
representations and warranties made by Borrower contained in Section 5 shall be
true and correct in all material respects on and as of such Borrowing Date,
both before and after giving effect to such Borrowing, with the same effect as
if made on and as of such Borrowing Date (except to the extent such
representations and warranties relate to an earlier date, in which case they
were true and correct as of such date); and
(f) No Existing Default. No Default or Event of Default shall
exist or shall result from such Borrowing.
Each Notice of Borrowing submitted by Borrower hereunder shall
constitute a representation and warranty by Borrower hereunder that, as of the
date of each such notice and as of each Borrowing Date, the conditions in
Section 4.2 are satisfied.
SECTION 5
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to the Administrative Agent and each
Bank that:
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5.1 Corporate Existence and Power. Borrower and each of its
Restricted Subsidiaries: (a) is a corporation (with respect to Borrower and
Cinemark Mexico) or a corporation or other limited liability entity (with
respect to Restricted Subsidiaries organized under the laws of a foreign
jurisdiction), in each case duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation;
(b) has the power and authority and all governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and execute,
deliver, and perform its obligations under, the Loan Documents; (c) is duly
qualified as a foreign corporation or other limited liability entity, licensed
and in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification; and (d) is in compliance with all Requirements of Law; except,
in each case referred to in clause (b), (c) or clause (d), to the extent that
the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
5.2 Corporate Authorization, No Contravention. The execution,
delivery and performance by Borrower, of this Agreement and any other Loan
Document to which Borrower is party, have been duly authorized by all necessary
corporate action, and do not and would not be expected to: (a) contravene the
terms of any of Borrower's articles of incorporation, bylaws or other
organization documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation to which Borrower is a party or any order,
injunction, writ or decree of any Governmental Authority to which Borrower or
its Property is subject; or (c) violate any Requirement of Law.
5.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, Borrower of the
Agreement or any other Loan Document, except for (a) such filings, recordations
and registrations as contemplated by the Pledge Agreement in order to perfect,
continue or enforce the security interests in the Collateral thereunder and (b)
routine corporate filings to maintain the corporate good standing of Borrower
and its Restricted Subsidiaries unless failure to do so could not reasonably be
expected to have a Material Adverse Effect.
5.4 Binding Effect. This Agreement and each other Loan Document
to which Borrower is a party constitute the legal, valid and binding
obligations of Borrower, enforceable against such Borrower in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.5 Litigation. There are no actions, suits, proceedings, claims
or disputes pending, or to the knowledge of Borrower, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against Borrower, or its Restricted Subsidiaries or any of their
respective Properties which: (a) purport to affect or pertain to this
Agreement, or any other Loan Document, or any of the transactions contemplated
hereby or thereby or (b) if determined adversely to Borrower, or its Restricted
Subsidiaries, could reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to
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enjoin or restrain the execution, delivery and performance of this Agreement or
any other Loan Document, or directing that the transactions provided for herein
or therein not be consummated as herein or therein provided.
5.6 No Default. No Default or Event of Default exists or would
result from the incurring of any Obligations by any Borrower Party or the grant
or perfection of the Administrative Agent's Liens on the Collateral. Neither
Borrower nor any of its Restricted Subsidiaries has received notice or has
actual knowledge that it is in default under or with respect to any Contractual
Obligation in any respect which, individually or together with all such
defaults, could reasonably be expected to have a Material Adverse Effect.
5.7 ERISA. Neither Borrower nor any ERISA Affiliate maintains or
sponsors any Plan nor is obligated to make contributions under any Plan, and
Borrower has no liability under ERISA. Borrower is not a member of any
Controlled Group.
5.8 Use of Proceeds. The proceeds of the Loans are intended to be
and shall be used solely for the purposes set forth in and permitted by Section
6.11, and are intended to be and shall be used in compliance with Section 7.6.
5.9 Title to Properties. Borrower and each of its Restricted
Subsidiaries has good record and marketable (or indefeasible in the State of
Texas) title in fee simple to, or valid leasehold interests in, all real
Property necessary or used in the ordinary conduct of its business, except for
such defects in title as could not, individually or in the aggregate, have a
Material Adverse Effect. As of the Closing Date, the Property of Borrower and
its Restricted Subsidiaries is subject to no Liens, other than as permitted by
Section 7.1.
5.10 Taxes. Borrower and its Restricted Subsidiaries have filed
all Federal and other material tax returns and reports required to be filed,
and have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their Properties, income or
assets that are due pursuant to such returns or reports before any such taxes,
assessments, fees or other charges became delinquent or any penalty accrued
with respect thereto, except those which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP and no Notice of Lien has been filed or recorded. To
Borrower's knowledge there is no proposed tax assessment against Borrower or
any of its Restricted Subsidiaries which could reasonably be expected to, if
the assessment were made, have a Material Adverse Effect.
5.11 Financial Condition.
(a) The consolidated financial statements of financial condition
of Borrower and its Subsidiaries dated December 31, 1996 as reported in the
Supplemental Schedules in the financial statements of Cinemark USA., and the
related consolidated statements of operations, shareholders' equity and cash
flows for the Fiscal Year ended on that date: (i) were prepared in accordance
with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; (ii) fairly present the financial condition
of Borrower and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and
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(iii) show all material indebtedness and other liabilities, direct or contingent
of Borrower and its consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent Obligations that are
required to be included on Borrower's consolidated financial statements in
accordance with GAAP.
(b) Since December 31, 1996, there has been no event which could
reasonably be expected to have a Material Adverse Effect.
5.12 Environmental Matters.
(a) The on-going operations of Borrower and each of its Restricted
Subsidiaries comply in all respects with all Environmental Laws, except such
non-compliance which would not (if enforced in accordance with applicable law)
result in liability which could reasonably be expected to have a Material
Adverse Effect. Borrower and each of its Restricted Subsidiaries has obtained
all licenses, permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for its ordinary
course operations, all such Environmental Permits are in good standing, and
Borrower and each of its Restricted Subsidiaries is in compliance with all
material terms and conditions of such Environmental Permits.
(b) To the knowledge of Borrower, none of Borrower, any of its
Restricted Subsidiaries or any of their respective present Property or
operations is subject to any outstanding material written order from or
agreement with any Governmental Authority nor subject to any judicial or
docketed administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Material. There are no Hazardous Materials or
other conditions or circumstances existing with respect to any Property, or
arising from operations prior to the Closing Date, of Borrower or any of its
Restricted Subsidiaries that would reasonably be expected to give rise to
Environmental Claims with a potential liability of Borrower and its Restricted
Subsidiaries that could reasonably be expected to have a Material Adverse
Effect for any such condition, circumstance or Property. In addition, (i)
neither Borrower's nor any of its Restricted Subsidiaries' Properties have any
underground storage tanks (x) that are not properly registered or permitted
under applicable Environmental Laws, or (y) that are leaking or disposing of
Hazardous Materials off-site in an amount that would require remediation under
Environmental Laws, and (ii) to Borrower's actual knowledge Borrower and its
Restricted Subsidiaries have notified all of their employees of the existence,
if any, of any health hazard arising from the conditions of their employment
and have met all notification requirements under Title III of CERCLA and all
other Environmental Laws.
5.13 Capital Stock, Pledge Agreement. The Pledged Collateral
constitutes 95% of the outstanding capital stock of Cinemark Mexico issued and
outstanding, and except as disclosed on Schedule 5.13 there are no
shareholders, options, warrants, shareholder agreements, calls or commitments
of any character whatsoever relating to any of the Pledged Collateral. The
provisions of the Pledge Agreement are effective to create, in favor of the
Administrative Agent for the benefit of the Banks, a legal, valid and
enforceable security interest in all of the Pledged Collateral described
therein; and the Pledged Collateral was delivered to the Administrative Agent
or its nominee in accordance with the terms thereof Upon delivery of the
Pledged
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Collateral the Lien of the Pledge Agreement constitutes a perfected, first
priority security interest in all right, title and interest of the Borrower in
the Pledged Collateral described therein, prior and superior to all other Liens
and interests.
5.14 Regulated Entities. None of Borrower, any Person controlling
Borrower, or any Subsidiary of Borrower, is (a) an "Investment Company" within
the meaning of the Investment Company Act of 1940; or (b) subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Interstate Commerce Act, any state public utilities code, or any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.15 No Burdensome Restrictions. Neither Borrower nor any of its
Restricted Subsidiaries is a party to or bound by any Contractual Obligation
(other than this Agreement, the Indenture governing Cinemark Mexico's 12%
Senior Subordinated Pik Notes and the Senior Secured Credit Agreement between
Borrower and Cinemark Mexico), or subject to any charter or corporate
restriction, or any Requirement of Law, which could reasonably be expected to
have a Material Adverse Effect.
5.16 Solvency. Borrower and Cinemark Mexico are Solvent.
5.17 Labor Relations. There are no strikes, lockouts or other
labor disputes against Borrower or any of its Restricted Subsidiaries, or, to
Borrower's knowledge, threatened against or affecting Borrower or any of its
Restricted Subsidiaries, and no significant unfair labor practice complaint is
pending against Borrower or any of its Restricted Subsidiaries or, to the
knowledge of Borrower, threatened against any of them before any Governmental
Authority, in each case, which could reasonably be expected to have a Material
Adverse Effect.
5.18 Copyrights, Patents, Trademarks and Licenses, etc. Borrower
or its Restricted Subsidiaries own or are licensed or otherwise have the right
to use all of the patents, trademarks, service marks, trade names, copyrights,
franchises, authorizations and other rights that are material to the operation
of their respective businesses, without conflict with the rights of any other
Person. To the knowledge of Borrower, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or
now contemplated to be employed by Borrower or any of its Restricted
Subsidiaries infringes upon any rights held by any other Person; no claim or
litigation regarding any of the foregoing is pending or to the knowledge of
Borrower threatened, and no patent, invention, device, application, principle
or any statute, law, rule, regulation, standard or code is to the knowledge of
Borrower pending or proposed, which, in either case, could reasonably be
expected to have a Material Adverse Effect.
5.19 Insurance. The Properties of Borrower and its Restricted
Subsidiaries are insured with financially sound and reputable insurance
companies or self-insured (including insurance through a related captive
insurance company), in such amounts, with such deductibles and covering such
risks as Borrower believes is adequate in character and amount.
5.20 Swap Obligations. Neither Borrower nor any of its
Subsidiaries has incurred any outstanding obligations under any Swap Contracts.
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5.21 Full Disclosure. None of the representations or warranties
made by Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in
each report or certificate (including any exhibits to such report or
certificate) furnished by or on behalf of Borrower or any of its Restricted
Subsidiaries in connection with the Loan Documents, contains any untrue
statement of a material fact or omits any material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading.
SECTION 6
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any Bank shall have any
Commitment hereunder, or any Loan or other Obligation (exclusive of future,
contingent, or unliquidated amounts arising under indemnity agreements) shall
remain unpaid or unsatisfied, unless the Majority Banks waive compliance in
writing:
6.1 Financial Statements. Borrower shall deliver to the
Administrative Agent (who shall deliver the same to the Banks) in form and
detail satisfactory to the Administrative Agent and the Majority Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 90 days after the end
of each Fiscal Year:
(i) a copy of the consolidated and consolidating balance
sheets of Borrower and its consolidated Subsidiaries as at the end of
such Fiscal Year and the related consolidated and consolidating
statements of income, shareholders' equity and cash flows for such
Fiscal Year and the Supplemental Schedules in the financial statements
of Cinemark USA, setting forth in each case in comparative form the
figures for the previous Fiscal Year, which consolidated statements
shall be accompanied by the report of Deloitte & Touche L.L.P. or
another nationally-recognized independent public accounting firm which
report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity
with GAAP applied on a basis consistent with prior Fiscal Years except
to the extent set forth therein. Such opinion shall not be qualified
or limited because of a restricted or limited examination by such
accountant of any material portion of Borrower's or any consolidated
Subsidiary's records, Such consolidating financial statements shall be
certified by an appropriate Responsible Officer as fairly presenting,
in accordance with GAAP (subject to normal year end adjustments), the
financial position and the results of operations of Borrower and its
Subsidiaries;
(ii) a copy of the audited balance sheet of Cinemark
Mexico as at the end of such Fiscal Year and the related statements of
income, shareholders' equity and cash flows for such Fiscal Year,
setting forth in each case in comparative form the figures for the
previous Fiscal Year, and accompanied by the report of Deloitte &
Touche L.L.P. or another nationally-recognized
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independent public accounting firm which report shall state that such
financial statements present fairly the financial position for the
periods indicated in conformity with GAAP applied on a basis
consistent with prior Fiscal Years except to the extent set forth
therein. Such opinion shall not be qualified or limited because of a
restricted or limited examination by such accountant of any material
portion of Cinemark Mexico's records; and
(iii) a copy of the unaudited balance sheets of each
Guarantied Unrestricted Subsidiary as at the end of such Fiscal Year
and the related statements of income, shareholders' equity and cash
flows for such Fiscal Year, setting forth in each case in comparative
form the figures for the previous Fiscal Year. Such financial
statements shall be certified by an appropriate Responsible Officer as
fairly presenting, in accordance with GAAP (subject to normal year end
adjustments), the financial position and the results of operations of
such Guarantied Unrestricted Subsidiaries.
(b) as soon as available, but not later than 45 days after the end
of each of the first three Fiscal Quarters of each year:
(i) a copy of the unaudited consolidated and
consolidating balance sheets of Borrower and its consolidated
Subsidiaries as of the end of such Fiscal Quarter and the related
consolidated and consolidating statements of income, shareholders'
equity and cash flows for the period commencing on the first day and
ending on the last day of such Fiscal Quarter, and certified by an
appropriate Responsible Officer as fairly presenting, in accordance
with GAAP (subject to normal year end adjustments), the financial
position and the results of operations of Borrower and its
Subsidiaries; and
(ii) a copy of the unaudited balance sheets of Cinemark
Mexico and each Guarantied Unrestricted Subsidiary as of the end of
such Fiscal Quarter and the related statements of income,
shareholders' equity and cash flows for the period commencing on the
first day and ending on the last day of such Fiscal Quarter, and
certified by an appropriate Responsible Officer as fairly presenting,
in accordance with GAAP (subject to normal year end adjustments), the
financial position and the results of operations of Cinemark Mexico
and each Guarantied Unrestricted.
6.2 Certificates, Other information. Borrower shall furnish to
the Administrative Agent (who shall deliver the same to the Banks), with
sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in Sections 6.1 (a) and (b) above, a certificate of a Responsible
Officer (i) stating that, to such officer's knowledge, Borrower, during such
period, has observed and performed all of its covenants and other agreements,
and satisfied every condition contained in this Agreement to be observed,
performed or satisfied by it, and that such officer has obtained no knowledge
of any Default or Event of Default except as specified (by applicable Section
reference) in such certificate, and (ii)
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showing in detail the calculations supporting such statement in respect of
Sections 7.4(e), 7.9(e), 7.11, 7.12 and 7.13;
(b) as soon as available, but not later than 60 days after the
beginning of each Fiscal Year an annual operating budget for Borrower and its
Restricted Subsidiaries for such Fiscal Year in a format satisfactory to the
Administrative Agent and the Banks;
(c) promptly after the same are sent, copies of all financial
statements and reports which Borrower sends to its shareholders; and
(d) promptly, such additional business, financial, corporate
affairs and other information as the Administrative Agent, at the request of
any Bank, may from time to time reasonably request.
6.3 Notices. Borrower shall promptly notify the Administrative
Agent (who shall notify the Banks):
(a) of the occurrence of any Default or Event of Default, and of
the occurrence or existence of any event or circumstance that could reasonably
be expected to become a Default or Event of Default;
(b) of (i) any breach or non-performance of, or any default under,
any Contractual Obligation of Borrower or any of its Restricted Subsidiaries
which could reasonably be expected to result in a Material Adverse Effect; (ii)
any dispute, litigation, investigation, proceeding or suspension which may
exist at any time between Borrower or any of its Restricted Subsidiaries and
any Governmental Authority which could reasonably be expected to result in a
Material Adverse Effect, and (iii) any dispute, litigation or proceeding in
which the relief sought is an injunction or other stay of the performance of
this Agreement or any Loan Document;
(c) of the commencement of, or any material development in, any
litigation or proceeding affecting Borrower or any Restricted Subsidiary (i) in
which the amount of damages claimed is $1,000,000 (or its equivalent in another
currency or currencies) or more, (ii) in which injunctive or similar relief is
sought, which, with respect to clauses (i) and (ii) of this subsection (c), if
adversely determined, could reasonably be expected to have a Material Adverse
Effect, or (iii) in which the relief sought is an injunction or other stay of
the performance of this Agreement or any Loan Document;
(d) upon, but in no event later than 10 days after, becoming aware
of (in each case only to the extent that the amount involved exceeds $500,000)
(i) any and all enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened against Borrower or any
of its Restricted Subsidiaries or any of their respective Properties pursuant
to any applicable Environmental Laws, (ii) any other Environmental Claims, and
(iii) any environmental or similar condition on any real property adjoining or
in the vicinity of the property of Borrower or any Restricted Subsidiary that
could reasonably be anticipated to cause such property or any part thereof to
be subject to any restrictions on the ownership, occupancy, transferability or
use of such property under any Environmental Laws;
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(e) any Material Adverse Effect subsequent to the date of the most
recent audited financial statements of Borrower delivered to the Banks pursuant
to Section 6.1(a);
(f) of any material change in accounting policies or financial
reporting practices by Borrower or any of its Restricted Subsidiaries;
(g) of any labor controversy resulting in or threatening to result
in any strike, work stoppage, boycott, shutdown or other labor disruption
against or involving Borrower or any of its Restricted Subsidiaries, which
could reasonably be expected to have a Material Adverse Effect; and
(h) upon the request from time to time of the Administrative
Agent, the Swap Termination Values, together with a description of the method
by which such values were determined, relating to any then-outstanding Swap
Contracts to which Borrower or any of its Restricted Subsidiaries is party.
Each notice pursuant to this Section shall be accompanied by a written
statement by a Responsible Officer of Borrower setting forth details of the
occurrence referred to therein, and stating what action Borrower proposes to
take with respect thereto and at what time. Each notice under Section 6.3(a)
shall describe with particularity any and all clauses or provisions of this
Agreement or other Loan Document that have been breached or violated.
6.4 Preservation of Corporate Existence, Etc. Borrower shall, and
shall cause each of its Restricted Subsidiaries to: (a) preserve and maintain
in full force and effect its corporate existence and good standing under the
laws of its state or jurisdiction of incorporation; provided, that Borrower
shall not be required to maintain the existence of any Restricted Subsidiary if
the Board of Directors of Borrower determines that the existence of such
Subsidiary is no longer necessary or desirable in the conduct of Borrower's
business; (b) preserve and maintain in full force and effect all rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business as presently conducted; (c) use
its reasonable efforts, in the ordinary course of business, to preserve its
business organization and preserve the goodwill and business of the customers,
suppliers and others having material business relations with it; and (d)
preserve or renew all of its registered trademarks, trade names and service
marks, the non-preservation of which could reasonably be expected to have a
Material Adverse Effect.
6.5 Maintenance of Property. Borrower shall maintain, and shall
cause each of its Restricted Subsidiaries to maintain, and preserve all its
Property which is used or useful in its business in good working order and
condition, ordinary wear and tear excepted and make all necessary repairs
thereto and renewals and replacements thereof except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
6.6 Insurance. Borrower shall maintain, and shall cause each of
its Restricted Subsidiaries to maintain, with financially sound and reputable
independent insurers or self insurance (including insurance through a related
captive insurance company), insurance with respect to its Properties and
business against loss or damage of the kinds as Borrower believes is
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adequate in character and amount; including workers' compensation insurance,
public liability and property and casualty insurance.
6.7 Payment of Obligations. Borrower shall, and shall cause its
Restricted Subsidiaries to, pay and discharge (a) all tax liabilities,
assessments and governmental charges or levies upon it or its properties or
assets before any penalty accrues thereon, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by Borrower or such Restricted Subsidiary; and
(b) all lawful claims which, if unpaid, would by law become a Lien upon its
Property prior to the time when any penalty or fine shall be incurred with
respect thereto, unless the same are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by Borrower or such Restricted Subsidiary.
6.8 Compliance with Laws. Borrower shall comply, and shall cause
each of its Restricted Subsidiaries to comply, with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist, or where
the failure to so comply could not reasonably be expected to have a Material
Adverse Effect.
6.9 Inspection of Property and Books and Records. Borrower shall
maintain and shall cause each of its Restricted Subsidiaries to maintain proper
books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of Borrower and such
Restricted Subsidiaries. Borrower shall permit, and shall cause each of its
Restricted Subsidiaries to permit, representatives and independent contractors
of the Administrative Agent or any Bank to visit and inspect any of their
respective Properties, to examine their respective corporate, financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants of the Borrower at such
reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to Borrower; provided, however, when an
Event of Default has occurred and is continuing the Administrative Agent or any
Bank may do any of the foregoing at the expense of Borrower at any time during
normal business hours and without advance notice.
6.10 Environmental Laws. Borrower shall, and shall cause each of
its Restricted Subsidiaries to, conduct its operations and keep and maintain
its Property in compliance with all Environmental Laws, except where the
failure could not reasonably be expected to, individually or in the aggregate,
result in liability in excess of $2,500,000. Upon the written request of the
Administrative Agent or any Bank, Borrower shall submit and cause each of its
Restricted Subsidiaries to submit, to the Administrative Agent with sufficient
copies for each Bank, at Borrower's sole cost and expense, at reasonable
intervals, a report providing an update of the status of any environmental,
health or safety compliance, hazard or liability issue identified in any notice
or report required pursuant to Section 6.3(d), that could, individually or in
the aggregate, result in liability in excess of $2,500,000.
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6.11 Use of Proceeds. Borrower shall use the proceeds of the Loans
(a) to repurchase all or substantially all of Cinemark Mexico's issued and
outstanding series of 12% Senior Subordinated PIK Notes, (b) for the
acquisition, construction and furnishing of theatres in Mexico or other
activities incidental thereto and (c) for working capital and other general
corporate purposes.
6.12 Further Assurances. Borrower shall ensure that all written
information and reports and certificates (including any exhibits thereto)
furnished to the Administrative Agent or the Banks do not and will not contain
any untrue statement of a material fact and do not and will not omit to state
any material fact or any fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made, and will
promptly disclose to the Administrative Agent and the Banks and correct any
defect or error that may be discovered therein or in any Loan Document or in
the execution, acknowledgement or recordation thereof.
SECTION 7
NEGATIVE COVENANTS
Borrower hereby covenants and agrees that, so long as any Bank shall
have any Commitment hereunder, or any Loan or other Obligation (exclusive of
future, contingent or unliquidated amounts arising under indemnity agreements)
shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance
in writing:
7.1 Limitation on Liens. Borrower shall not, and shall not suffer
or permit any of its Restricted Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its Property, whether now owned or hereafter acquired, other than the
following:
(a) Any Lien (other than Liens on the Collateral) existing on the
property of the Borrower or its Restricted Subsidiaries on the Closing Date and
set forth on Schedule 7.1;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.7;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business which are not delinquent or remain payable without penalty
or are being contested in good faith by appropriate proceedings and adequate
reserves in accordance with GAAP are being maintained by Borrower or such
Restricted Subsidiary;
(e) Liens consisting of pledges or deposits required in the
ordinary course of business as presently conducted in connection with workers'
compensation, unemployment insurance and other social security legislation;
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(f) Liens (other than Liens on the Collateral) on the Property of
Borrower or any of its Restricted Subsidiaries securing (i) the performance of
bids, trade contracts (other than for borrowed money), leases, and statutory
obligations, (ii) contingent obligations on surety and appeal bonds, and (iii)
other obligations of a like nature; in each case, incurred in the ordinary
course of business provided that all Liens securing delinquent performance or
obligations could not (even if enforced) reasonably be expected to have a
Material Adverse Effect;
(g) any attachment or judgment Lien, unless the judgment it
secures shall not have been discharged within 30 calendar days after the
expiration of any stay or final appeals;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title, Liens on assets outside of the United States and other
similar encumbrances which, in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect or materially interfere with the
ordinary conduct of the businesses of Borrower and its Restricted Subsidiaries;
(i) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by Borrower in excess of those set forth by regulations promulgated by
the Federal Reserve Board, and (ii) such deposit account is not intended by
Borrower or any of its Restricted Subsidiaries to provide collateral to the
depository institution;
(j) Liens securing Purchase Money Obligations not exceeding
$250,000 in the aggregate at any one time;
(k) Lien of the trustee under the Indenture governing Cinemark
Mexico's 12% Senior Subordinated PIK Notes on money or property held or
collected by the trustee thereunder; and
(l) Any renewal of or substitution for any Lien permitted by any
of the preceding subsections, including without limitation, in connection with
refinancings of any Indebtedness secured by such Liens (including all accrued
interest and any prepayment premium, if any, thereon); provided that the
Indebtedness secured is not increased nor the Lien extended to any additional
assets (other than proceeds and accessions).
7.2 Payment of Intercompany Subordinated Indebtedness. Borrower
shall not, and shall not suffer or permit any of its Restricted Subsidiaries
to, directly or indirectly, pay or prepay any amount of principal or cash
interest with respect to any Intercompany Subordinated Indebtedness, or
purchase or redeem any Intercompany Subordinated Indebtedness, if a Default or
Event of Default then exists or would result therefrom.
7.3 Consolidations and Mergers. Borrower shall not, and shall not
suffer or permit any of its Restricted Subsidiaries to, merge, consolidate with
or into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or
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substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except:
(a) any Restricted Subsidiary of Borrower may merge (i) with Borrower,
provided that Borrower shall be the continuing or surviving corporation and
(ii) with any one or more Restricted Subsidiaries of Borrower; and
(b) any Restricted Subsidiary of Borrower may sell all or substantially all
of its assets (upon voluntary liquidation or otherwise), to Borrower.
7.4 Limitation on Indebtedness. Borrower shall not, and shall not suffer or
permit any of its Restricted Subsidiaries to, create, incur, assume, suffer to
exist, or otherwise become or remain directly or indirectly liable with respect
to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) endorsements for collection or deposit in the ordinary course of
business as presently conducted;
(d) Intercompany Subordinated Indebtedness; and
(e) unsecured Contingent Obligations of Borrower and any Restricted
Subsidiary with respect to Indebtedness of Guarantied Unrestricted Subsidiaries
provided that immediately prior to and after giving effect to incurring such
Contingent Obligations, the Guarantied Leverage Ratio shall not exceed 3.75 to
1 and no Default or Event of Default exists or would result therefrom.
7.5 Transactions with Affiliates. Borrower shall not, and shall not suffer
or permit any of its Restricted Subsidiaries to, enter into any transaction
with any Affiliate of Borrower or of any such Restricted Subsidiary, except (a)
as expressly permitted by this Agreement, or (b) unless such transaction is on
terms no less favorable to Borrower or such Restricted Subsidiary than would be
obtained in a comparable arm's-length transaction with a Person not an
Affiliate of Borrower or such Restricted Subsidiary; provided, however, that
transactions between or among Borrower and its Restricted Subsidiaries which
are not otherwise prohibited by this Agreement, transactions permitted under
Section 7.9 and any employment agreement entered into by Borrower or its
Restricted Subsidiaries in the ordinary course of business, in each case shall
not be deemed a transaction with an Affiliate.
7.6 Use of Proceeds. Borrower shall not and shall not suffer or permit any
of its Subsidiaries to use any portion of the Loan, directly or indirectly, (a)
to purchase or carry Margin Stock, (b) to repay or otherwise refinance
indebtedness of Borrower or others incurred to purchase or carry Margin Stock,
or (c) to extend credit for the purpose of purchasing or carrying any Margin
Stock.
7.7 No ERISA Plans. Borrower shall not, and shall not suffer or permit any
of its ERISA Affiliates to, maintain or sponsor any Plan nor become obligated
to make contributions
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under any Plan. Neither Borrower nor any of its ERISA Affiliates shall become a
member of any Controlled Group.
7.8 Lease Obligations. Borrower shall not, and shall not suffer or permit
any Restricted Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any Property under lease or agreement to lease, except for:
(a) Leases of Borrower and its Subsidiaries in existence on the Closing Date
and any renewal, extension or refinancing thereof,
(b) Operating Leases entered into or assumed by Borrower or any of its
Restricted Subsidiaries after the Closing Date in the ordinary course of
business, including without limitation sale-leaseback transactions; and
(c) guaranties of operating leases of any Subsidiary.
7.9 Restricted Payments. Borrower shall not, and shall not suffer or permit
any of its Restricted Subsidiaries to, (i) declare or make any dividend payment
or other distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of the capital stock of
Borrower or a Restricted Subsidiary, or (ii) purchase, redeem or otherwise
acquire for value any shares of the capital stock of Borrower or any Subsidiary
(other than Subsidiaries of Borrower that are Restricted Subsidiaries) or any
warrants, rights or options to acquire such shares, now or hereafter
outstanding or (iii) prepay, repay, redeem, defease or otherwise acquire or
retire for value prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any Indebtedness of Borrower or any of its
Subsidiaries, including Intercompany Subordinated Indebtedness; except that
Borrower and any Restricted Subsidiary may:
(a) declare and make dividend payments or other distributions payable solely
in its capital stock or in options, warrants or rights to acquire its capital
stock;
(b) declare and make dividends payments or other distributions from a
Subsidiary of Borrower to Borrower or to another Subsidiary of Borrower that is
a Restricted Subsidiary;
(c) purchase, redeem or otherwise acquire shares of its capital stock or
warrants or options to acquire any such shares with the proceeds received from
the substantially concurrent issue of new shares of its capital stock;
(d) prepay, repay, redeem, defease or otherwise acquire or retire for value
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, repay, prepay, redeem, defease or otherwise acquire for value
Intercompany Subordinated Indebtedness; provide that immediately prior to and
after giving effect to such repayment, no Default or Event of Default exists or
would result therefrom; and
(e) repurchase, refinance or retire Cinemark Mexico's outstanding 12% Senior
Subordinated PIK Notes, together with accrued interest and prepayment premium,
if any, thereon.
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7.10 Limitation on Management Fees. Borrower shall not, and shall not suffer
or permit any of its Restricted Subsidiaries to, create, incur, assume, suffer
to exist, or otherwise become or remain directly or indirectly liable with
respect to, any management fees, except that Cinemark Mexico may pay and accrue
management fees to Cinemark USA in an aggregate amount not exceeding 5% of
Cinemark Mexico's total revenues provided, that such management fees are
subordinated on terms and conditions substantially the same as Intercompany
Subordinated Indebtedness and no Default or Event of Default exists or would
result from such payment and such management fees may be paid only if no
Default or Event of Default exists or would result therefrom.
7.11 Borrower Leverage Ratio. Borrower shall not permit the Borrower
Leverage Ratio to exceed the 3.75 to 1 at any time.
7.12 Guaranteed Leverage Ratio. Borrower shall not permit the Guarantied
Leverage Ratio to exceed the 3.75 to 1 at any time.
7.13 Fixed Charge Coverage Ratio. Borrower shall not permit the Fixed Charge
Coverage Ratio to be less than 1.60 to 1.00 at any time.
7.14 Change in Business. Borrower shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in any material line of business
substantially different from those lines of business carried on by it on the
date hereof.
7.15 Accounting Changes. Borrower shall not, and shall not suffer or permit
any of its Restricted Subsidiaries to, make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change the Fiscal Year of Borrower or of any of its consolidated Restricted
Subsidiaries.
7.16 Limitations on Negative Pledges. Borrower shall not, and shall not
suffer or permit any of its Restricted Subsidiaries to, agree to any
restriction or limitation on the upstreaming of payments from any Restricted
Subsidiary to Borrower other than immaterial amounts in the ordinary course of
business.
SECTION 8
EVENTS OF DEFAULT
8.1 Event of Default. Any of the following shall constitute an "Event of
Default":
(a) Non-Payment. Borrower fails to pay, when and as required to be paid
herein, any principal of any Loan, or shall fail to pay within two Business
Days of the due date hereof any interest, fees or other amount payable
hereunder or pursuant to any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by Borrower
made or deemed made herein, in any Loan Document, or which is contained in any
certificate, document or financial or other statement by Borrower or its
Responsible Officers, furnished at
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any time under this Agreement, or in or under any Loan Document, shall prove to
have been incorrect in any material respect on or as of the date made or deemed
made; or
(c) Specific Defaults. Borrower fails to perform or observe any term,
covenant or agreement contained in Section 7.2, 7.3, 7.9, 7.10, 7.11, 7.12,
7.13 or 7.15; or
(d) Other Defaults. Borrower fails to perform or observe any other term or
covenant contained in Section 6.1, 6.2, 6.3, 6.9 or Section 7 (other than the
subsections thereof set forth in subsection (c) above) and such default shall
continue unremedied for a period of three days, or Borrower fails to perform or
observe any other term or covenant contained in this Agreement or any Loan
Document, and such default under other terms or covenants shall continue
unremedied for a period of 20 days after the earlier of (i) the date upon which
a Responsible Officer of Borrower knew or should have known of such failure or
(ii) the date upon which written notice thereof is given to Borrower by the
Administrative Agent or any Bank; or
(e) Cross-Defaults. (i) Borrower or any of its Restricted Subsidiaries (A)
fails to make any payment in respect of any Indebtedness having an aggregate
principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated
credit arrangement) of $ 1,000,000 or more when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and such
failure continues after the applicable grace or notice period, if any,
specified in the document relating thereto on the date of such failure; or (B)
fails to perform or observe any other condition or covenant, or any other event
shall occur or condition exist, under any agreement or instrument relating to
any such Indebtedness having an aggregate principal amount of $1,000,000 or
more, and such failure continues after the applicable grace or notice period,
if any, specified in the document relating thereto on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or any Contingent Obligation in
an amount of $ 1, 000,000 or more to become payable or cash collateral in
respect thereof to be demanded, or (ii) there occurs under any Swap Contract an
Early Termination Date (as defined in such Swap Contract) resulting from (A)
any event of default under such Swap Contract as to which Borrower or any
Restricted Subsidiary is the Defaulting Party (as defined in such Swap
Contract) or (B) any Termination Event (as so defined) as to which Borrower or
any Subsidiary is an Affected Party (as so defined), and, in either event, the
Swap Termination Value owed by Borrower or such Subsidiary as a result thereof
is greater than $1,000,000; or
(f) Insolvency; Voluntary Proceedings. Borrower or any of its Restricted
Subsidiaries (i) ceases or fails to be Solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject
to applicable grace periods, if any, whether at stated maturity or otherwise;
(ii) commences any Insolvency Proceeding with respect to itself, or (iii) takes
any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is
commenced or filed against Borrower or any Restricted Subsidiary of Borrower,
or any writ,
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judgment, warrant of attachment, execution or similar process, is issued or
levied against a substantial part of Borrower's or any of its Restricted
Subsidiaries' Properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) Borrower or any of its Restricted
Subsidiaries admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under non-U.S.
law) is ordered in any Insolvency Proceeding; or (iii) Borrower or any of its
Restricted Subsidiaries acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
Property or business;
(h) Monetary Judgments. One or more final (non-interlocutory) judgments,
orders or decrees shall be entered against Borrower or any of its Restricted
Subsidiaries involving in the aggregate a liability (to the extent not covered
by insurance, including insurance through a related captive insurance company,
but excluding self-insurance) as to any single or related series of
transactions, incidents or conditions, of $500,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of 30
days after the entry thereof, or
(i) Non-Monetary Judgments. Any non-monetary judgment, order or decree
shall be rendered against Borrower or any of its Restricted Subsidiaries which
does or could reasonably be expected to have a Material Adverse Effect, and
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(j) Collateral. Any material provision of any Collateral Document shall for
any reason cease to be valid and binding on or enforceable against the Borrower
or the Borrower shall so state in writing or bring an action to limit its
obligations or liabilities thereunder; or any Collateral Document shall for any
reason (other than pursuant to the terms thereof) cease to create a valid
security interest in the Collateral purported to be covered thereby or such
security interest shall for any reason cease to be a perfected and first
priority security interest, and if, in either case, such cessation is the
result of a change in law, such cessation shall continue for 10 days after the
earlier of (i) the date upon which a Responsible Officer of Borrower knew or
should have known of such cessation or (ii) the date upon which written notice
thereof is given to Borrower by the Administrative Agent or any Bank; or
(k) Loan Documents. Any material provision of any Loan Document at any time
after its execution and delivery and for any reason other than the agreement of
the Banks or satisfaction in full of all the Obligations, ceases to be in full
force and effect or is declared by a court of competent jurisdiction to be null
and void, invalid or unenforceable in any respect which, in any such event in
the reasonable opinion of the Banks, is materially adverse to the interests of
the Banks; or any Borrower Party denies that it has any or further liability or
obligation under any Loan Document, or purports to revoke, terminate or rescind
same; or any Event of Default (as such term is or may hereafter be specifically
defined in any other Loan Document) occurs under any other Loan Document; or
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(l) Adverse Change. There shall occur a Material Adverse Effect; or
(m) Change in Control. There shall occur a Change in Control Event.
8.2 Remedies. If any Event of Default occurs and is continuing, the
Administrative Agent shall, at the request of, or may, with the consent of, the
Majority Banks, (a) declare the Commitment of each Bank to make Loans to be
terminated, whereupon such Commitments and obligations shall forthwith be
terminated; (b) declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable;
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by Borrower; and (c) exercise on behalf of itself
and the Banks all rights and remedies available to it and the Banks under the
Loan Documents or applicable law; provided, however , that upon the occurrence
of any event specified in paragraph (f) or (g) of Section 8.1 above (in the
case of clause (i) of paragraph (g), upon the expiration of the 60-day period
mentioned therein), the obligation of each Bank to make Loans shall
automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically
become due and payable without further act of the Administrative Agent or any
Bank.
8.3 Rights Not Exclusive. The rights provided for in this Agreement and the
other Loan Documents are cumulative and are not exclusive of any other rights,
powers, privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
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SECTION 9
THE ADMINISTRATIVE AGENT
9.1 Appointment and Authorization. Each Bank hereby irrevocably appoints,
designates and authorizes the Administrative Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to
it by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent. Without limiting
the generality of the foregoing sentence, the use of the term "agent" in this
Agreement with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter
of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
9.2 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects with reasonable care.
9.3 Liability of Administrative Agent. None of the Agent-Related Persons
shall (a) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document (except
for its own gross negligence or willful misconduct), or (b) be responsible in
any manner to any of the Banks for any recital, statement, representation or
warranty made by Borrower or any Subsidiary or Affiliate of Borrower, or any
officer thereof, contained in this Agreement or in any other Loan Document, or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or any other Loan Document, or for the value of any Collateral
or the validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document, or for any failure of Borrower or
any other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Properties, books or records of Borrower or any of
Borrower's Subsidiaries or Affiliates.
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9.4 Reliance by Administrative Agent.
(a) The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Banks as it deems appropriate and, if it so requests, it shall first
be indemnified to its satisfaction by the Banks against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Majority
Banks and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions specified in
Sections 4.1 and 4.2, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with each
document or other matter either sent by the Administrative Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank, unless
an officer of the Administrative Agent responsible for the transactions
contemplated by the Loan Documents shall have received notice from the Bank
prior to the initial Borrowing specifying its objection thereto and either
such objection shall not have been withdrawn by notice to the Administrative
Agent to that effect or the Bank shall not have made available to the
Administrative Agent the Bank's ratable portion of such Borrowing.
9.5 Notice of Default. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Banks,
unless the Administrative Agent shall have received written notice from a Bank
or Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Banks. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
requested by the Majority Banks in accordance with Section 8; provided,
however, that unless and until the Administrative Agent shall have received any
such request, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable or in the best interest of the
Banks.
9.6 Credit Decision. Each Bank expressly acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it and that no
act by the Administrative Agent hereinafter taken, including any review of the
affairs of Borrower and its
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Subsidiaries shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Bank. Each Bank represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of
Borrower and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated thereby, and made its own decision to enter
into this Agreement and extend credit to Borrower hereunder. Each Bank also
represents that it will, independently and without reliance upon the
Administrative Agent and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrower. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Administrative Agent, the Administrative Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Borrower which may come into the possession of
any of the Agent-Related Persons.
9.7 Indemnification. Whether or not the transactions contemplated hereby
shall be consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of Borrower and without
limiting the obligation of Borrower to do so), ratably from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements of any kind whatsoever which may at
any time (including at any time following the repayment of the Loans and the
termination or resignation of the related Administrative Agent) be imposed on,
incurred by or asserted against any such Person any way relating to or arising
out of this Agreement or any document contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by any such Person under or in connection with any of the foregoing;
provided, however that no Bank shall be liable for the payment to the
Agent-Related Persons of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from such Person's gross negligence or willful misconduct.
Without limitation of the foregoing, each Bank shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including fees and expenses of counsel and the
allocated cost of in-house counsel) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of
Borrower. Without limiting the generality of the foregoing, if the Internal
Revenue Service or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered, was not properly executed, or
because such Bank failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or
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reduction of, withholding tax ineffective, or for any other reason) such Bank
shall indemnify the Administrative Agent fully for all amounts paid, directly
or indirectly, by the Administrative Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to the Administrative Agent under this Section, together
with all costs and expenses (including fees and expenses of counsel and the
allocated cost of in-house counsel). The obligation of the Banks in this
Section shall survive the payment of all Obligations hereunder.
9.8 Administrative Agent in Individual Capacity. BofA and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory or other business with Borrower and its Subsidiaries
and Affiliates as though BofA were not the Administrative Agent hereunder and
without notice to or consent of the Banks. With respect to its Loans, BofA
shall have the same rights and powers under this Agreement as any other Bank
and may exercise the same as though it were not the Administrative Agent, and
the terms "Bank" and "Banks" shall include B of A in its individual capacity.
9.9 Successor Administrative Age. The Administrative Agent may, and at the
request of the Majority Banks shall, resign as Administrative Agent upon 30
days' notice to the Banks. If the Administrative Agent shall resign as
Administrative Agent under this Agreement, the Majority Banks shall appoint
from among the Banks a successor agent for the Banks which successor agent
shall be approved by Borrower. If no successor agent is appointed prior to the
effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Banks and Borrower,
a successor agent from among the Banks. Upon the acceptance of its appointment
as successor agent hereunder, such successor agent shall succeed to all the
rights, powers and duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Section 9 and
Sections 10.4 and 10.5 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement. If no successor agent has accepted appointment as Administrative
Agent by the date which is 30 days following a retiring Administrative Agent's
notice of resignation, the retiring Administrative Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Majority Banks appoint a successor agent as provided for above.
9.10 Collateral Matters.
(a) The Administrative Agent is authorized on behalf of all the Banks,
without the necessity of any notice to or further consent from the Banks, from
time to time to take any action with respect to any Collateral or the Pledge
Agreement which may be necessary to perfect and maintain perfected the security
interest in and Liens upon the Collateral granted pursuant to the Pledge
Agreement.
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(b) The Banks irrevocably authorize the Administrative Agent, at its option
and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Collateral (i) upon termination of the
Commitments and payment in full of all Loans and all other Obligations payable
under this Agreement and under any other Loan Document; (ii) constituting
Property sold or to be sold or disposed of as part of or in connection with any
Disposition permitted hereunder; (iii) constituting Property in which Borrower
or any Subsidiary of Borrower owned no interest at the time the Lien was
granted or at any time thereafter; (iv) constituting Property leased to
Borrower or any Subsidiary of Borrower under a lease which has expired or been
terminated in a transaction permitted under this Agreement or is about to
expire and which has not been, and is not intended by Borrower or such
Subsidiary to be, renewed or extended; (v) consisting of an instrument
evidencing Indebtedness or other debt instrument, if the indebtedness evidenced
thereby has been paid in full; or (vi) if approved, authorized or ratified in
writing by the Majority Banks or all the Banks, as the case may be, subject to
Section 10.1(f). Upon request by the Administrative Agent at any time, the Banks
will confirm in writing the Administrative Agent's authority to release
particular types or items of Collateral pursuant to this Section 9.10(b).
(c) Each Bank agrees with and in favor of each other (which agreement shall
not be for the benefit of Borrower or any of its Subsidiaries) that Borrower's
obligation to such Bank under this Agreement and the other Loan Documents is
not and shall not be secured by any real property collateral now or hereafter
acquired by such Bank.
SECTION 10
MISCELLANEOUS
10.1 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower therefrom, shall be effective unless the same shall be in
writing and signed by the Majority Banks, Borrower and acknowledged by the
Administrative Agent, and then such waiver shall be effective only in the
specific instance and for the specific purpose for which given; provide,
however, that no such waiver, amendment, or consent shall, unless in writing
and signed by all the Banks, Borrower and acknowledged by the Administrative
Agent, do any of the following: (a) increase or extend the Commitment of any
Bank (or reinstate any Commitment terminated pursuant to Section 8.2(a)) or
subject any Bank to any additional obligations hereunder or under any Loan
Document; (b) postpone or delay any date fixed for any payment of principal,
interest, fees or other amounts due to the Banks (or any of them) hereunder or
under any Loan Document (other than Swap Contracts); (c) reduce the principal
of, or the rate of interest specified herein on any Loan, or of any fees or
other amounts payable hereunder or under any Loan Document; (d) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans which shall be required for the Banks or any of them to take any
action hereunder or under any Loan Document; (e) amend this Section 10.1 or
Section 2.14; or (f) discharge any Borrower Party, or release any part of the
Collateral; provided further, that no amendment, waiver or consent shall, unless
in writing and signed by the Administrative Agent in addition to the Majority
Banks or all the Banks, as the case may be, affect the rights or duties of the
Administrative Agent under this Agreement or any other Loan Document.
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10.2 Notices. All notices, requests and other communications provided for
hereunder shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed,
transmitted or delivered, if to Borrower to its address specified on Schedule
10.2 hereto; if to any Bank, to its Domestic Lending Office specified on
Schedule 10.2 hereto; and if to the Administrative Agent, to its address
specified on Schedule 10.2 hereto; or, as to Borrower or the Administrative
Agent, to such other address as shall be designated by such party in a written
notice to the other parties, and as to each other party at such other address
as shall be designated by such party in a written notice to Borrower and the
Administrative Agent. All such notices and communications shall be effective
when delivered for overnight delivery, delivered to the telegraph company,
transmitted by telecopier and confirmed by telephone, transmitted by telex and
confirmed by telex answerback or delivered to the cable company, as applicable,
or if delivered, upon delivery, except that written notices pursuant to Section
2 shall not be effective until received by the Administrative Agent.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Bank, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
10.4 Costs and Expenses. Borrower shall, whether or not the contemplated
hereby shall be consummated:
(a) reimburse BofA (including in its capacity as Administrative Agent) on
demand for all reasonable costs and expenses incurred in connection with the
development, syndication, preparation, delivery, administration and execution
of, and any amendment, supplement, waiver or modification to, this Agreement,
any Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including the reasonable costs and expenses of counsel to BofA
(including in its capacity as Administrative Agent) (and the allocated cost of
internal counsel) with respect thereto;
(b) reimburse each Bank and the Administrative Agent on demand for all
reasonable costs and expenses incurred by them in connection with the
enforcement or preservation of any rights (including in connection with any
"workout" or restructuring regarding the Loans) under this Agreement, any Loan
Document, and any such other documents, including fees and out-of-pocket
expenses of counsel (and the allocated cost of internal counsel) to the
Administrative Agent and to each of the Banks; and
(c) reimburse the Administrative Agent on demand for all reasonable
appraisal, audit, search and filing fees, incurred or sustained by the
Administrative Agent in connection with the matters referred to under
paragraphs (a) and (b) above.
10.5 General Indemnity. Borrower shall pay, indemnify, and hold each Bank,
the Administrative Agent and each of their respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified
Person") harmless from and against any and all
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liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, charges, expenses or disbursements (including reasonable fees and
out-of-pocket expenses of counsel and the allocated cost of internal counsel)
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement and any other
Loan Documents, or the transactions contemplated hereby and thereby, and with
respect to any investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to this Agreement or the
Loans, or the use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that Borrower shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities (i) arising from
the gross negligence or willful misconduct of such Indemnified Person (ii) with
respect to judicial proceedings commenced against such Indemnified Person by
any holder of the debt or equity securities of such Indemnified Person based
solely on the rights afforded such holder in its capacity as such, and (iii)
with respect to judicial proceedings commenced solely against such Indemnified
Person by another Bank, Assignee or Participant to the extent based on a cause
of action against such Indemnified Person and not Borrower or any Restricted
Subsidiary. The obligations in this Section 10.5 shall survive payment of all
other Obligations. Borrower shall have the right to undertake, conduct and
control through counsel of its own choosing (which counsel shall be acceptable
to the Indemnified Persons acting reasonably) and at the sole expense of
Borrower, the conduct and settlement of any Indemnified Liabilities, and the
Indemnified Person shall cooperate with Borrower in connection therewith;
provided that Borrower shall permit the Indemnified Person to participate in
such conduct and settlement through counsel chosen by the Indemnified Person,
but the fees and expenses of such counsel shall be borne by the Indemnified
Person. Notwithstanding the foregoing, the Indemnified Person shall have the
right to employ its own counsel, and the reasonable fees and expenses of such
counsel shall be at Borrower's cost and expense if the interests of Borrower
and the Indemnified Person become adverse in any such claim or course of
action; provided, however, Borrower, in such event, shall only be liable for
the reasonable legal expenses of one counsel for all of such Indemnified
Persons. Borrower shall not be liable for any settlement of any claim or action
effected without its prior written consent, such consent not to be unreasonably
withheld. All amounts owing under this Section 10.5 shall be paid within 30
days after demand.
10.6 Marshalling; Payments Set Aside. Neither the Administrative Agent nor
the Banks shall be under any obligation to marshall any assets in favor of
Borrower or any other Person or against or in payment of any or all of the
Obligations. To the extent that Borrower makes a payment or payments to the
Administrative Agent or the Banks, or the Administrative Agent or the Banks
enforce their Liens or exercise their rights of set-off, and such payment or
payments or the proceeds of such enforcement or set-off or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party in
connection with any Insolvency Proceeding, or otherwise, then to the extent of
such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or set-off had not occurred.
10.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except
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that Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of the Administrative Agent
and each Bank.
10.8 Assignments, Participations, etc.
(a) Any Bank may, with the prior written consent of
Borrower at all times other than during the existence of an Event of Default,
and the Administrative Agent, which consents shall not be unreasonably
withheld, at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of Borrower or the Administrative Agent shall
be required in connection with any assignment and delegation by a Bank to a
Bank Affiliate of such Bank) (each an "Assignee") all, or any ratable part of
all, of the Loans, the Commitments and the other rights and obligations of such
Bank hereunder, in a minimum amount of $10,000,000 and multiples of $ 1,000,000
in excess thereof, provided, however, that (i) Borrower and the Administrative
Agent may continue to deal solely and directly with such Bank in connection
with the interest so assigned to an Assignee until (A) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to Borrower and
the Administrative Agent by such Bank and the Assignee; (B) such Bank and its
Assignee shall have delivered to Borrower and the Administrative Agent a Notice
of Assignment and Acceptance in the form of Exhibit D ("Notice of Assignment
and Acceptance") together with any Note or Notes subject to such assignment and
(C) the assignor Bank or Assignee has paid to the Administrative Agent a
processing fee in the amount of $2,500.
(b) From and after the date that the Administrative Agent
notifies the assignor Bank that it has received an executed Notice of
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Notice of Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Notice of Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Documents.
(c) Within five Business Days after its receipt of notice
by the Administrative Agent that it has received an executed Notice of
Assignment and Acceptance and payment of the processing fee, Borrower shall,
upon the request of the Assignee made through the Administrative Agent, execute
and deliver to the Administrative Agent, one or more new Notes evidencing such
Assignee's assigned Loans and Commitment and, if the assignor Bank had
previously requested one or more Notes and has retained a portion of its Loans
and its Commitment, replacement Notes in the principal amount of the Loans
retained by the assignor Bank (such Notes to be in exchange for, but not in
payment of, the Notes held by such Bank). Immediately upon each Assignee's
making its processing fee payment under the Notice of Assignment and
Acceptance, this Agreement, shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Bank
pro tanto.
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(d) Any Bank may at any time sell to one or more
commercial banks or other Persons not Affiliates of Borrower (a "Participant")
participating interests in any Loans, the Commitment of that Bank and the other
interests of that Bank (the "originating Bank") hereunder and under the other
Loan Documents; provided, however, that (i) the originating Bank's obligations
under this Agreement shall remain unchanged, (ii) the originating Bank shall
remain solely responsible for the performance of such obligations, (iii)
Borrower and the Administrative Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights and obligations under this Agreement and the other Loan Documents, and
(iv) no Bank shall transfer or grant any participating interest under which the
Participant shall have rights to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan Document, except to
the extent such amendment, consent or waiver would require unanimous consent of
the Banks as described in the first proviso to Section 10.1. In the case of any
such participation, the Participant shall be entitled to the benefit of
Sections 3.1, 3.3 and 10.5 as though it were also a Bank hereunder, and if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision contained in this
Agreement or any other Loan Document to the contrary, any Bank may assign all
or any portion of the Loans or Notes held by it to any Federal Reserve Bank or
the United States Treasury as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank, provided that any payment in respect of
such assigned Loans or Notes made by Borrower to or for the account of the
assigning or pledging Bank in accordance with the terms of this Agreement shall
satisfy Borrower's obligations hereunder in respect to such assigned Loans or
Notes to the extent of such payment. No such assignment shall release the
assigning Bank from its obligations hereunder.
10.9 Set-off. In addition to any rights and remedies of
the Banks provided by law, if an Event of Default exists, each Bank is
authorized at any time and from time to time, without prior notice to Borrower,
any such notice being waived by Borrower to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held by, and other indebtedness at
any time owing to, such Bank to or for the credit or the account of Borrower
against any and all Obligations owing to such Bank, now or hereafter existing,
irrespective of whether or not the Administrative Agent or such Bank shall have
made demand under this Agreement or any Loan Document and although such
Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify Borrower and the Administrative Agent after any such set-off and
application made by such Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application. The
rights of each Bank under this Section 10.9 are in addition to the other rights
and remedies (including other rights of set-off) which the Bank may have.
10.10 Notification of Addresses, Lending Offices, Etc. Each
Bank shall notify the Administrative Agent in writing of any changes in the
address to which notices to the Bank
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should be directed, of addresses of its Lending Offices, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Administrative Agent shall reasonably
request.
10.11 Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement in any number of separate
counterparts, each of which, when so executed, shall be deemed an original, and
all of said counterparts taken together shall be deemed to constitute but one
and the same instrument. A set of the copies of this Agreement signed by all
the parties shall be lodged with Borrower and the Administrative Agent.
10.12 Severability. The illegality or unenforceability of
any provision of this Agreement or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or enforceability
of the remaining provisions of this Agreement or any instrument or agreement
required hereunder.
10.13 No Third Parties Benefited. This Agreement is made
and entered into for the sole protection and legal benefit of Borrower, the
Banks and the Administrative Agent, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents. Neither the Administrative Agent
nor any Bank shall have any obligation to any Person not a party to this
Agreement or other Loan Documents.
10.14 Time. Time is of the essence as to each term or
provision of this Agreement and each of the other Loan Documents.
10.15 GOVERNING LAW AND JURISDICTION.
(a) THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT
THE ADMINISTRATIVE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT AND ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER, THE
ADMINISTRATIVE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF BORROWER,
THE ADMINISTRATIVE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY
DOCUMENT RELATED HERETO.
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BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF
ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
10.16 WAIVER OF JURY TRIAL. BORROWER, THE BANKS AND THE
ADMINISTRATIVE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. BORROWER, THE BANKS AND THE
ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.17 NOTICE OF CLAIMS; CLAIMS BAR. BORROWER HEREBY AGREES
THAT IT SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT
BELIEVES IT HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST THE ADMINISTRATIVE
AGENT OR ANY BANK, WHETHER SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER
OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR TO THE
LOANS (OR THE COLLATERAL THEREFOR), OR ANY ACT OR OMISSION TO ACT BY THE
ADMINISTRATIVE AGENT OR ANY BANK WITH RESPECT HERETO OR THERETO, AND THAT IF IT
SHALL FAIL TO GIVE SUCH PROMPT NOTICE TO THE ADMINISTRATIVE AGENT WITH REGARD
TO ANY SUCH CLAIM OR CAUSE OF ACTION, IT SHALL BE DEEMED TO HAVE WAIVED, AND
SHALL BE FOREVER BARRED FROM BRINGING OR ASSERTING SUCH CLAIM OR CAUSE OF
ACTION IN ANY SUIT, ACTION OR PROCEEDING IN ANY COURT OR BEFORE ANY
GOVERNMENTAL AGENCY.
10.18 Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement and understanding among
Borrower, the Banks and the Administrative Agent, and supersedes all prior or
contemporaneous Agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof, except for the fees
described in the term sheet referenced in Section 2.10.
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10.19 Interpretation. This Agreement is the result of
negotiations between and has been reviewed by counsel to the Administrative
Agent, Borrower and other parties, and is the product of all parties hereto.
Accordingly, this Agreement and the other Loan Documents shall not be construed
against the Banks or the Administrative Agent merely because of the
Administrative Agent's or Banks' involvement in the preparation of such
documents and agreements.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CINEMARK INTERNATIONAL, INC.
By: /s/ JEFF STEDMAN
--------------------------
Name: Jeff Stedman
------------------------
Title: Vice President
-----------------------
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
By: /s/ JANICE HAMMOND
--------------------------
Janice Hammond
Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as a Bank
By: /s/ JON VARNELL
--------------------------
Jon Varnell
Managing Director
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SCHEDULE 1.1
PROFORMA CASH FLOW FOR ANNUALIZED THEATRES
Proforma Cash Flow for Annualized Theatres shall be the sum of the
Proforma Cash Flow for each Annualized Theatre, calculated on an Annualized
Theatre by Annualized Theatre basis in accordance with the formula set forth
below::
<TABLE>
<S> <C> <C>
Proforma Cash Flow
for each Annualized
Theatre = Actual Full Quarter Cash Flow
-----------------------------
Annualization Factor
Actual Full
Quarter Cash Flow = Sum of actual Cash Flow from each Annualized Theatre for
each Included Quarter
Included Quarter = Each full quarter that such Annualized Theatre was in
operation during the measurement period
Annualization Factor = Sum of annualization factors set forth below for Included
Quarters:
</TABLE>
<TABLE>
<S> <C>
Quarter ending March 31 of each year 0.21
Quarter ending June 30 of each year 0.25
Quarter ending September 30 of each year 0.34
Quarter ending December 31 of each year 0.20
Total 100.00
</TABLE>
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<PAGE> 67
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- --------
<S> <C> <C>
Bank of America National
Trust and Savings
Association $ 25,000,000 100.00%
TOTAL $ 25,000,000 100.00%
</TABLE>
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SCHEDULE 5.13
CINEMARK MEXICO STOCK OPTIONS, ETC.
1. Shareholders' Agreement dated July 30, 1993 among Cinemark Mexico
(USA), Inc., Cinemark International, Inc. and New Wave Investments,
A.V.V.
2. Warrants to purchase an aggregate of 22,222 shares of common stock of
Cinemark Mexico (USA), Inc. and issued and outstanding and are
registered in the name of Everest Capital Fund, L.P. and Everest
Capital International, Ltd.
3. Cinemark Mexico (USA), Inc. established a Nonqualified Stock Option
Plan (the "Plan") under which the Chief Executive Officer of Cinemark
Mexico (USA), Inc., in his sole discretion, may grant employees of
Cinemark Mexico (USA), Inc. options to purchase up to an aggregate of
100,000 shares of Cinemark Mexico (USA), Inc.'s Common Stock. There
are outstanding options to purchase 11,676 shares of Cinemark Mexico
(USA), Inc.'s common stock.
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<PAGE> 69
SCHEDULED 7.1
EXISTING LIENS
Cinemark Mexico (USA), Inc. has granted a security interest in all of
Cinemark Mexico (USA), Inc.'s Accounts, Contract Rights, General Intangibles,
Trademarks and Trademark Licenses to secure the obligations of Cinemark Mexico
(USA), Inc. to Cinemark International, Inc. pursuant to the Senior Credit
Agreement dated December 4, 1997.
- 1 -
<PAGE> 70
SCHEDULE 10.2
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
BORROWER
CINEMARK INTERNATIONAL, INC.
Suite 800
7502 Greenville Avenue
Dallas, Texas 75231-3830
Attention: Jeffrey Stedman
Telephone: (214) 860-0785
Facsimile: (214) 696-3946
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
Notices of Borrowing and Notices of Conversion/Continuation:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard, Fifth Floor
Concord, California 94520
Attention: Clayton Choo
Telephone: (510) 675-8453
Facsimile: (510) 675-8500
-1-
<PAGE> 71
Other Notices:
Bank of America National Trust
and Savings Association
555 Flower Street, 10th Floor
Los Angeles, California 90071
Attention: Janice Hammond
Vice President
Agency Management-Los Angeles #20529
Telephone: (213) 228-9861
Facsimile: (213) 228-2299
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
Domestic and Offshore Lending Office:
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Notices (other than Borrowing notices and Notices of Conversion/Continuation):
Bank of America National Trust
and Savings Association
555 Flower Street, 10th Floor
Los Angeles, California 90071
Attention: Jeff Bailard
Associate
Credit Products #3283
Telephone: (213) 228-2891
Facsimile: (213) 228-2641
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<PAGE> 72
EXHIBIT A
FORM OF NOTICE OF BORROWING
TO: Bank of America National Trust
and Savings Association,
as Administrative Agent
Pursuant to Section 2.3 of that certain Credit Agreement dated as of
November 18, 1997 (as from time to time amended, extended, restated, modified
or supplemented, the "Credit Agreement;" capitalized terms used herein shall
have the meanings assigned to them in the Credit Agreement), among Cinemark
International, Inc. (the "Borrower"), the Banks named therein (the "Banks") and
Bank of America National Trust and Savings Association, as Administrative Agent
(the "Administrative Agent"), this represents the Borrower's request to borrow
on ___ from the Banks, according to their respective Pro Rata Share, $ as [Base
Rate] [Offshore Rate] Loans. [The initial Interest period for such Offshore
Rate is requested to be a __-month period]. The proceeds of such Loans are to be
deposited in the Borrower's account at the Administrative Agent.
The undersigned Responsible Officer hereby certifies that:
(a) the representations and warranties of the Borrower contained
in the Credit Agreement are true and correct in all material respects on and as
of the date hereof to the same extent as though made on and as of the date
hereof (except to the extent such representations and warranties relate to an
earlier date, in which case they were true and correct as of such date); and
(b) no Default or Event of Default has occurred and is continuing
under the Credit Agreement or will result from the proposed borrowing.
Dated:
------------------
CINEMARK INTERNATIONAL, INC.
By:
-----------------------
Name:
---------------------
Title:
--------------------
A - 1
FORM OF NOTICE OF BORROWING
<PAGE> 73
EXHIBIT B
FORM OF NOTICE OF CONVERSION/CONTINUATION
To: Bank of America National Trust
and Savings Association,
as Administrative Agent
1. Conversion Selection. Pursuant to Section 2.4 of that certain
Credit Agreement dated as of November 18, 1997 (as from time to time amended,
extended, restated, modified or supplemented, the "Credit Agreement;"
capitalized terms used herein shall have the meanings assigned to them in the
Credit Agreement), among Cinemark International, Inc. (the "Borrower"), the
Banks named therein (the "Banks") and Bank of America National Trust and
Savings Association, as Administrative Agent (the "Administrative Agent"), this
represents the Borrower's request to convert $__________ of existing [Base Rate]
[Offshore Rate] Loans on, 19__, to [Offshore Rate] [Base Rate] Loans, as
follows:
<TABLE>
<CAPTION>
Interest Period
(Offshore
Dollar Amount Rate Loans)
------------- ---------------
<S> <C>
$ ___________ _______ months
</TABLE>
2. Continuation Selection. (Offshore Rate Loans). Pursuant to
Section 2.4 of the Agreement, please continue $__________ of existing Offshore
Rate Loans, the final day of the current Interest Period of which is
__________, 19_____, as follows:
<TABLE>
<CAPTION>
Requested
Dollar Amount Interest Period
------------- ---------------
<S> <C>
$ ___________ _______ months
</TABLE>
CINEMARK INTERNATIONAL, INC.
By:
-----------------------
Name:
---------------------
Title:
--------------------
B - 1
FORM OF NOTICE OF CONVERSION/CONTINUATION
<PAGE> 74
EXHIBIT C
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of November _, 1997
is executed by CINEMARK INTERNATIONAL, INC., a Texas corporation (the
"Pledgor") for the benefit of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION as agent (in such capacity herein called the "Administrative
Agent") for itself and each Bank (as hereinafter defined) (the Administrative
Agent and each Bank in such capacities are referred to herein collectively as
the "Secured Parties").
RECITALS
A. Concurrently herewith, Pledgor, the banks signatories thereto
(such banks, and other banks from time to time signatory thereto and banks from
time to time purchasing a participation in a signatory bank's interest therein,
collectively, the "Banks" and individually a "Bank") and the Administrative
Agent are entering into a Credit Agreement dated as of November __, 1997 (as
amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement"), subject to and upon the condition, among others, that the
Pledgor executes this Agreement in favor of the Secured Parties.
B. It is a condition precedent to the making of the Loans by the
Banks under the Credit Agreement that the Pledgor shall have granted the
security interest contemplated by this Agreement and the Secured Parties are
relying on the undertakings of the Pledgor contained herein.
C. Terms defined and the rules of construction in the Credit
Agreement have, unless the context otherwise requires, the same meanings in
this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant of Security Interest.
(a) As security for the payment or performance when due (whether
at stated maturity, by acceleration or otherwise) of the Obligations to any
Secured Party, now existing or hereafter arising, the Pledgor hereby pledges,
assigns and transfers to the Administrative Agent for purposes of security and
for the equal benefit of the Secured Parties, and hereby grants to the
Administrative Agent for the equal benefit of the Secured Parties, a lien on,
and security interest in, all of the Pledgor's right, title and interest in, to
and under the following, whether now or hereafter existing and whether now
owned or hereafter acquired (collectively, the "Collateral"):
(i) all shares of Cinemark Mexico (USA), Inc., a Texas
corporation (the "Issuer") owned by Pledgor as set forth on Schedule 1
(collectively, the "Pledged Shares");
(ii) all additional shares of stock of the Issuer from
time to time acquired by the Pledgor in any manner;
C - 1
PLEDGE AGREEMENT
<PAGE> 75
(iii) the certificates representing the shares referred to
in paragraphs (i) and (ii) above; and
(iv) all dividends, cash, instruments and other property
or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the shares
referred to in paragraphs (i) and (ii) above (all of the foregoing
being the "Proceeds"); provided, however, that so long as no Event of
Default has occurred and is continuing, the Pledgor may receive free
and clear of any security interest under this Agreement any cash
dividends paid in respect of the Pledged Shares.
(b) All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of the Administrative
Agent pursuant hereto and shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed undated instruments of transfer or
assignment in blank, all in form and substance satisfactory to the
Administrative Agent. If an Event of Default has occurred and is continuing,
the Administrative Agent shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to register in its name or
any of its nominees any of all of the Collateral, subject only to the revocable
rights specified in Section 6(a). In addition, if an Event of Default has
occurred and is continuing, the Administrative Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
2. Security for Obligations. This Agreement secures, in accordance
with the provisions hereof, the payment of all of the Obligations to any Secured
Party under any Loan Document now existing or hereafter arising. The Collateral
shall secure the Obligations owing to the Secured Parties equally and ratably.
3. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The chief place of business and chief executive office of the
Pledgor and the office where the Pledgor keeps its records concerning the
Collateral (hereinafter, "Records") is located at the address for notices for
the Pledgor as provided in Section 19(g).
(b) The Pledged Shares owned by the Pledgor have been duly
authorized and validly issued and are fully paid and nonassessable.
(c) The Pledged Shares constitute approximately 95% of the issued
and outstanding shares of stock or equity interests of the Issuer as of the date
hereof. There are no existing options, warrants, shareholder agreements, calls
or commitments of any character whatsoever relating to any of the Pledged Shares
owned by the Pledgor except as listed on Schedule 3.
(d) No effective financing statement or other instrument similar
in effect covering all or any part of the Collateral owned by the Pledgor is on
file in any recording office, except as may have been filed pursuant to this
Agreement.
(e) The Pledgor is lawfully possessed of ownership of the
Collateral owned by the Pledgor which exists on the date hereof, and has full
power and lawful authority to grant the Liens in and on the Collateral
hereunder.
C-2
PLEDGE AGREEMENT
<PAGE> 76
(f) This Agreement creates in favor of the Administrative Agent,
for the equal of the Secured Parties, a valid and enforceable Lien on the
Pledged Shares owned by the Pledgor, subject to no Liens, securing the payment
and performance of the Obligations, and all filings and other actions necessary
to perfect such Lien with the priority described herein and in Section 5.13(c)
of the Credit Agreement have been duly made or taken.
(g) The Pledgor is duly organized and existing under the laws of
the state of its incorporation, and is properly licensed and in good standing
in, and where necessary to maintain its rights and privileges has complied with
the fictitious name statute of, every jurisdiction in which it is doing
business, except where the failure to be licensed or be in good standing or
comply with any such statute will not have a material adverse effect on the
ability of the Pledgor to perform its obligations hereunder or under any
instrument or agreement required hereunder.
(h) The execution, delivery and performance of this Agreement and
any instrument or agreement required hereunder are within the corporate power
of the Pledgor, have been duly authorized by, and are not in conflict with the
terms of any charter, by-laws, trust instrument or other organization papers,
as applicable, of, the Pledgor.
(i) No approval, consent, exemption or other action by, or notice
to or filing with, any governmental authority is necessary in connection with
the execution, delivery, performance or enforcement by the Pledgor of this
Agreement or any instrument or agreement required hereunder, except as may have
been obtained and certified copies of which have been delivered to
Administrative Agent.
(j)) There is no law, rule or regulation, nor is there any
judgment, decree or order of any court or governmental authority binding on the
Pledgor, which would be contravened by the execution, delivery, performance or
enforcement by the Pledgor of this Agreement or any instrument or agreement
required hereunder.
(k) This Agreement is a legal, valid and binding agreement of the
Pledgor, enforceable against the Pledgor in accordance with its terms, and any
instrument or agreement required hereunder, when executed and delivered, will
be similarly legal, valid, binding and enforceable, except where enforceability
thereof may be limited by applicable law relating to bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights generally or by
the application of general principles of equity.
(l) There is no action, suit or proceeding pending against, or to
the knowledge of the Pledgor, threatened against or affecting the Pledgor,
before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity or enforceability of this
Agreement.
(m) The execution, delivery and performance by the Pledgor of this
Agreement do not and would not be expected to conflict with or result in any
breach or contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which the Pledgor is a party.
C - 3
PLEDGE AGREEMENT
<PAGE> 77
4. Further Assurances, Supplements.
(a) The Pledgor agrees that from time to time, at the expense of
such Person, it will promptly execute and deliver all further instruments and
documents, and take all further action that may be necessary or desirable, or
that the Administrative Agent may reasonably request, in order to perfect the
Liens granted or purported to be granted hereby or to enable the Administrative
Agent to exercise and enforce its rights and remedies hereunder. Without
limiting the generality of the foregoing, the Pledgor will execute and deliver
to Administrative Agent such financing or continuation statements, or
amendments thereto, and such other instruments, endorsements or notices, as may
be necessary or desirable, or as the Administrative Agent may reasonably
request, in order to perfect and preserve the Liens granted or purported to be
granted hereby.
(b) The Pledgor hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of the
Pledgor where permitted by law.
(c) The Pledgor shall pay all filing, registration and recording
fees or refiling, registration and re-recording fees, and all expenses,
incident to its execution and acknowledgement of this Agreement, any agreement
supplemental hereto and any instruments of further assurance, and all federal,
state, county and municipal stamp taxes and other taxes, duties, imposts,
assessments and charges arising out of or in connection with its execution and
delivery of this Agreement, any agreement supplemental hereto and any
instruments of further assurance.
(d) The Pledgor shall warrant and defend title to the Collateral
against the claims and demands of all Persons (other than the Secured Parties
or any Person claiming by or through any Secured Party) whomsoever.
(e) The Pledgor shall, upon obtaining any additional shares of the
Issuer or any other securities constituting Collateral, promptly deliver to the
Administrative Agent a duly executed Pledge Agreement Supplement in
substantially the form of Schedule 2 hereto (a "Pledge Agreement Supplement")
identifying the additional shares which are being pledged. The Pledgor hereby
authorizes the Administrative Agent to attach each Pledge Agreement Supplement
to this Agreement and agrees that all shares listed on any Pledge Agreement
Supplement delivered to the Administrative Agent shall for all purposes
hereunder constitute Collateral. Upon any person pledging shares hereunder,
such person shall be deemed a Pledgor hereunder.
5. Covenants of Pledgor.
(a) The Pledgor shall pay, before any fine, penalty, interest or
cost attaches thereto, all taxes, assessments and other governmental or
non-governmental charges or levies now or hereafter assessed or levied against
its Pledged Shares or upon the Liens provided for herein as well as pay, or
cause to be paid, all claims for labor, materials or supplies which, if unpaid,
might by law become a Lien (other than a Permitted Lien) thereon, and will
retain copies of, and, upon request, permit the Administrative Agent or any
other Secured Party to examine, receipts showing payment of any of the
foregoing; provided, that Pledgor shall not be required to pay any such tax,
assessment, charge or levy, the validity of which is being contested in good
faith by appropriate proceedings.
C - 4
PLEDGE AGREEMENT
<PAGE> 78
(b) The Pledgor shall give the Administrative Agent at least 30
days prior written notice before it changes the location of its chief executive
office or the office where it keeps the Records and shall at the expense of the
Pledgor execute and deliver such instruments and documents as required to
maintain a prior perfected security interest and as reasonably requested by the
Administrative Agent. The Pledgor will hold and preserve all Records and will,
upon reasonable request by the Administrative Agent or any Secured party at any
time during normal business hours, permit the Administrative Agent or any
Secured Party to inspect and make abstracts from such Records.
(c) The Pledgor shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral.
(d) The Pledgor shall not create or suffer to exist any Lien upon
or with respect to any of the Collateral except for the security interest
created by this Agreement or the Credit Agreement, and will defend the right,
title and interest of the Administrative Agent in and to the Pledgor's rights
to the Collateral against the claims and demands of all Persons whatsoever.
(e) The Pledgor will, upon becoming aware of such event, notify
the Administrative Agent promptly, in reasonable detail, (i) of any material
claim made or asserted against the Collateral by any Person; (ii) of any event
which could reasonably be expected to have a material adverse effect on the
value of the Collateral; (iii) of any event which could reasonably be expected
to have a material adverse effect on the ability of the Administrative Agent to
dispose of the Collateral or the rights and remedies of the Administrative
Agent; and (iv) of the occurrence of any other event which would have a
material adverse effect on the Collateral or on the security interest created
hereunder.
(f) The Pledgor agrees that it will use its best efforts to cause
the Issuer not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares.
6. Voting Rights, Dividends, Etc.
(a) So long as no Event of Default shall have occurred and be
continuing (and, in the case of paragraph (i) below, so long as written notice
has not been given by the Administrative Agent to the Pledgor):
(i) the Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or any Loan Documents;
(ii) the Pledgor shall be entitled to receive and retain
free and clear of any security interest under this Agreement any and
all dividends paid in respect of the Collateral, other than any and
all:
(A) instruments and other property received,
receivable or otherwise distributed in exchange for, any
Collateral,
C - 5
PLEDGE AGREEMENT
<PAGE> 79
(B) dividends and other distributions paid or
payable in cash in respect of any Collateral in connection with
a partial or total liquidation or dissolution of, in connection
with a reduction of capital, capital surplus or
paid-in-surplus, and
(C) cash paid, payable or otherwise distributed
in redemption of, or in exchange for, any Collateral all of
which shall be, and all of which shall be forthwith delivered
to the Administrative Agent to hold as, Collateral and shall,
if received by the Pledgor, be received in trust for the
benefit of the Administrative Agent, be segregated from the
other property or funds of the Pledgor, and be forthwith
delivered to the Administrative Agent as Collateral in the same
form as so received (with any necessary endorsement).
(iii) The Administrative Agent shall execute and deliver
(or cause to be executed and delivered) to the Pledgor all such proxies
and other instruments as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to exercise the voting and other
rights which it is entitled to exercise pursuant to paragraph (i) above
and to receive the dividends which it is authorized to receive and
retain pursuant to paragraph (ii) above.
(b) If an Event of Default has occurred and is continuing:
(i) All rights of the Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a)(i) above shall cease upon written
notice thereof from the Administrative Agent, and all such rights shall
thereupon become vested in the Administrative Agent who shall thereupon
have the sole right to exercise such voting and other consensual
rights.
(ii) All rights of the Pledgor to receive the dividends
which it would otherwise be authorized to receive and retain pursuant
to Section 6(a)(ii) above shall cease, and all such rights shall
thereupon become vested in the Administrative Agent who shall
thereupon have the sole right to receive and hold as Collateral such
dividends.
(iii) All dividends which are received by the Pledgor
contrary to the provisions of Section 6(a)(ii) shall be received in
trust for the benefit of the Administrative Agent, shall be segregated
from other funds of the Pledgor and shall be forthwith paid over to
the Administrative Agent as Collateral in the same form as so received
(with any necessary endorsement).
(c) In order to permit the Administrative Agent to exercise the
voting and other fights which it may be entitled to exercise pursuant to
Section 6(a)(i) above, and to receive all dividends and distributions which it
may be entitled to receive under Section 6(a)(ii) above, the Pledgor shall, if
necessary, upon written notice from the Administrative Agent, from time to time
during the continuance of an Event of Default execute and deliver to the
Administrative Agent appropriate dividend payment orders and other instruments
as the Administrative Agent may reasonably request.
7. Administrative Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Administrative Agent the Pledgor's
attorney-in-fact (which appointment
C - 6
PLEDGE AGREEMENT
<PAGE> 80
as attorney-in-fact shall be coupled with an interest), with full authority to
act in the place and stead of the Pledgor and in the name of the Pledgor or
otherwise, from time to time if an Event of Default has occurred and is
continuing or to the extent contemplated by Section 8 hereof in the
Administrative Agent's discretion to take any action and to execute any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
ask, demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in connection with the
Collateral, to receive, indorse and collect any drafts or other instruments,
documents and chattel paper in connection therewith, and to file any claims or
take any action or institute any proceedings which the Administrative Agent may
deem to be necessary or desirable for the collection thereof or to enforce
compliance with the terms and conditions of the Assigned Agreements or this
Agreement. Notwithstanding the foregoing, the Administrative Agent shall not be
obligated to exercise any right or duty as attorney-in-fact, and shall have no
duties to the Assignor in connection therewith.
8. Administrative Agent May Perform.
(a) If the Pledgor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent may, as provided for by
the terms of this Agreement, itself perform or comply, or otherwise cause
performance or compliance, with such Agreement. The reasonable expenses of the
Administrative Agent incurred in connection with such performance or compliance
shall be payable by the Pledgor to the Administrative Agent and shall
constitute Obligations secured hereby; provided, that the payment to the
Administrative Agent shall be made solely through the application of proceeds
in accordance with Section 9(a) hereof. The Administrative Agent agrees to
notify the Pledgor promptly after incurring any expenses pursuant to this
Section 8; provided, however, that the failure to provide such notice shall not
affect the Administrative Agent's right to reimbursement from the Pledgor.
(b) The Administrative Agent shall use reasonable care with
respect to the Collateral in its possession or under its control. Except as set
forth in the preceding sentence, the Administrative Agent shall not have any
duty as to any Collateral in its possession or control or in the possession or
control of any agent or nominee of it or as to any income thereon or as to the
preservation of rights against parties or any other rights pertaining thereto.
9. Rights and Remedies.
(a) If (i) an Event of Default shall have occurred and be
continuing and (ii) any of the Obligations shall have been declared to be, or
shall have become, due and payable, then, in addition to any other rights and
remedies provided for herein or which may otherwise be available, the
Administrative Agent may, without any further demand, advertisement or notice
(except as expressly provided for below in this Section 9(a)), exercise all the
rights and remedies of a secured party under the Uniform Commercial Code of the
State of New York (the "UCC") (whether or not the UCC applies to the affected
Collateral), and in addition: (i) may apply the moneys, if any, then held by it
as part of the Collateral, for the following purposes and in the following
order:
C - 7
PLEDGE AGREEMENT
<PAGE> 81
(1) first, to the payment of (A) all costs and expenses
relating to the sale of the Collateral and collection of amounts owing
hereunder, including reasonable attorneys' fees and disbursements and
the just compensation of the Administrative Agent for services
rendered in connection therewith or in connection with any proceeding
to sell if a sale is not completed, and (B) all charges, expenses and
advances incurred or made by the Administrative Agent in order to
protect the Lien of this Agreement or the security afforded hereby,
together with interest at the rate specified in Section 2.10(c) of the
Credit Agreement;
(2) second, to the payment in full of all of the
Obligations owed to the Secured Parties hereunder or under any Loan
Document (to be paid to the Secured Parties in accordance with the
aggregate outstanding amounts of such Obligations owed to each Secured
Party); and
(3) third, the balance, if any, shall be paid to the
Pledge or to such other Person as shall be lawfully entitled to
receive such surplus (as determined by a court of competent
jurisdiction, if such procedure is available under applicable law);
and (ii) if there shall be no such moneys or the moneys so applied shall be
insufficient to satisfy in full all Obligations, may sell the Collateral, or
any part thereof, as hereinafter provided in this Section 9(a) and otherwise to
the fullest extent permitted by law. The Collateral may be sold in one or more
sales, at public or private sale, conducted by any officer or agent of, or
auctioneer or attorney for, the Administrative Agent, at the Administrative
Agent's place of business or elsewhere, for cash, upon credit or for other
property, for immediate or future delivery, and at such price or prices and on
such terms as the Administrative Agent shall deem appropriate. The
Administrative Agent or any other Secured Party may be the purchaser of any or
all of the Collateral so sold at a public sale and, to the extent permitted by
law, at a private sale and thereafter hold the same, absolutely free from any
right or claim of whatsoever kind, and, the obligations of the Pledgor to such
purchaser may be applied as a credit against the purchase price. The
Administrative Agent, may, in its sole discretion (in the case of Collateral
consisting of securities) or if commercially reasonable (in the case of all
other Collateral), at any such sale restrict the prospective bidders or
purchasers as to their number, nature of business and investment intention.
Upon any public or private sale the Administrative Agent shall have the right
to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser (including the Administrative Agent or any other Secured
Party) at any such sale shall hold the Collateral so sold, absolutely free from
any claim or right of whatsoever kind, including any equity or right of
redemption, of the Pledgor, and the Pledgor hereby specifically waives, to the
full extent it may lawfully do so, all rights of redemption, stay or appraisal
which it has or may have under any rule of law or statute now existing or
hereafter adopted. The Administrative Agent shall give the Pledgor at least ten
days' notice (which the Pledgor agrees is reasonable notification within the
meaning of Section 9-504(3) of the UCC) of any such public or private sale. Any
public sale shall be held at such time or times within ordinary business hours
as the Administrative Agent shall fix in the notice of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in separate
parcels. The Administrative Agent shall not be obligated to make any sale
pursuant to any such notice. The Administrative Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
such sale, and any such sale may be
C-8
PLEDGE AGREEMENT
<PAGE> 82
made at any time or place to which the same may be so adjourned without further
notice or publication. In case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the full selling price is paid by the purchaser
thereof, but neither the Administrative Agent nor any other Secured Party shall
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold, and, in case of any such failure, such Collateral
may again be sold pursuant to the provisions hereof
(b) Instead of exercising the power of sale provided in Section
9(a) hereof, the Administrative Agent may proceed by a suit or suits at law or
in equity to foreclose the security interest under this Agreement and sell the
Collateral or any portion thereof under a judgment or decree of a court or
courts of competent jurisdiction.
(c) The Administrative Agent as attorney-in-fact pursuant to
Section 7 hereof may, in the name and stead of the Pledgor, make and execute
all conveyances, assignments and transfers of the Collateral sold pursuant to
Section 9(a) or Section 9(b) hereof, and the Pledgor hereby ratifies and
confirms all that the Administrative Agent, as said attorney-in-fact, shall do
by virtue hereof. Nevertheless, the Pledgor shall, if so requested by the
Administrative Agent, ratify and confirm any sale or sales by executing and
delivering to the Administrative Agent, or to such purchaser or purchasers, all
such instruments as may, in the reasonable judgment of the Administrative
Agent, be advisable for the purpose.
(d) The receipt by the Administrative Agent of the purchase money
paid at any sale made by it shall be a sufficient discharge therefor to any
purchaser of the Collateral, or any portion thereof, sold as aforesaid; and no
such purchaser (or the representatives or assigns of such purchaser), after
paying such purchase money and receiving such receipt, shall be bound to see to
the application of such purchase money or any part thereof or in any manner
whatsoever be answerable for any loss, misapplication or nonapplication of any
such purchase money, or any part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
(e) The Administrative Agent shall incur no liability as a result
of the sale of the Collateral, or any part thereof, at any private sale
conducted in a commercially reasonable manner. The Pledgor hereby waives, to
the full extent permitted by applicable law, any claims against the
Administrative Agent and/or any Secured Party arising by reason of the fact
that the price at which the Collateral, or any part thereof, may have been sold
at a private sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even if
the Administrative Agent accepts the first offer received which the
Administrative Agent in good faith deems to be commercially reasonable under
the circumstances and does not offer the Collateral to more than one offeree.
To the fullest extent permitted by law, the Pledgor shall have the burden of
proving that any such sale of the Collateral was conducted in a commercially
unreasonable manner.
(f) Each and every right and remedy of the Administrative Agent
shall, to the extent permitted by law, be cumulative and shall be in addition
to any other remedy given hereunder or under the Credit Agreement or now or
hereafter existing at law or in equity or by statute.
C - 9
PLEDGE AGREEMENT
<PAGE> 83
(g) The Administrative Agent may participate in any
recapitalization, reclassification, reorganization, consolidation, redemption,
stock split, merger, or liquidation of the Issuer, and in connection therewith
deposit or surrender control of the Collateral, accept money or other property
in exchange for the Collateral, and take such action as deemed proper by the
Administrative Agent in connection therewith, and any other money or property
received in exchange for the Collateral shall be applied to satisfy the
Obligations or held by the Administrative Agent thereafter as Collateral
pursuant to the provisions hereof.
10. Sales of Pledged Shares.
(a) If, at any time during the continuance of an Event of Default,
the Administrative Agent in its sole discretion determines that in connection
with any actual or contemplated exercise of its rights to sell the whole or any
part of the Collateral hereunder, it is necessary or advisable to effect a
public registration of all or part of the Collateral pursuant to the Securities
Act of 1933, as from time to time amended (or any similar statute then in
effect) (the "Securities Act"), the Pledgor shall:
(i) prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement with respect to the
Collateral and use its reasonable best efforts to cause such
registration statement to become and remain effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of the
Collateral covered by such registration statement whenever the
Administrative Agent shall desire to sell or otherwise dispose of the
Collateral;
(iii) furnish to the Administrative Agent such numbers of
copies of a prospectus and a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents
as the Administrative Agent may request in order to facilitate the
public sale or other disposition of the Collateral by the
Administrative Agent;
(iv) use its reasonable best efforts to register or
qualify the Collateral covered by such registration statement under
such other securities or blue sky laws of such jurisdictions within
the United States of America as the Administrative Agent shall
request, and do such other reasonable acts and things as may be
required of it to enable the Administrative Agent to consummate the
public sale or other disposition in such jurisdictions of the
Collateral by the Administrative Agent;
(v) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable
an earnings statement which shall satisfy the provisions of the
Securities Act; and
C - 10
PLEDGE AGREEMENT
<PAGE> 84
(vi) do or cause to be done all such other acts as may be
necessary to make such sale of the Collateral or any part thereof
valid and binding and in compliance with applicable law.
(b) The Pledgor recognizes that, by reason of the aforementioned
requirements and certain prohibitions contained in the Securities Act and
applicable state securities laws, the Administrative Agent may, at its option,
elect not to require the Pledgor to register all or any part of the Collateral
and may therefore be compelled, with respect to any sale of all or any part of
the Collateral, to limit purchasers to those who will agree, among other
things, to acquire such securities for their own account, for investment, and
not with a view to the distribution or resale thereof. The Pledgor acknowledges
and agrees that any such sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale without such
restrictions and, notwithstanding such circumstances, agrees that any such sale
conducted in good faith shall be deemed to have been made in a commercially
reasonable manner. The Administrative Agent shall be under no obligation to
delay the sale of any of the Pledged Shares for the period of time necessary to
permit the Pledgor to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if the Pledgor
would agree to do so.
(c) If the Administrative Agent determines to exercise its right
to sell any or all of the Collateral, upon written request, the Pledgor shall
and shall cause, each of its Subsidiaries to, from time to time, furnish to the
Administrative Agent all such information as the Administrative Agent may
request in order to determine the number of shares and other instruments
included in the Collateral which may be sold by the Administrative Agent as
exempt transactions under the Securities Act and rules of the SEC thereunder,
as the same are from time to time in effect.
11. Continuing Assignment and Security Interest, Transfer of
Notes. This Agreement shall create a continuing assignment of and security
interest in the Collateral and shall (a) remain in full force and effect until
payment in full of the Obligations and all other amounts owing to each Secured
Party under any Loan Documents and the termination or expiration of the
Commitments, (b) be binding upon the Pledgor, its successors and assigns and
(c) inure, together with the rights and remedies of the Administrative Agent
hereunder, to the benefit of the Administrative Agent and the Secured Parties
and their respective successors, transferees and assigns. Without limiting the
generality of the foregoing, any Bank may assign or otherwise transfer its
rights and obligations under any Loan Document to any other Person or entity,
and such other Person or entity shall thereupon become vested with all the
benefits in respect thereof granted to such Bank herein or otherwise, all as
provided in, and to the extent set forth in, the Loan Documents. The Pledgor
may not assign or transfer any of its lights or obligations under this
Agreement without the prior written consent of the Administrative Agent. Upon
the payment in full of the Obligations and termination of the commitments
(exclusive of future, contingent or unliquidated amounts arising under
indemnity agreements), the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to the Pledgor. Upon any such
termination, the Administrative Agent will, at the Pledgor's expense, execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
12. No Notices, etc. No Secured Party shall be under any duty or
obligation whatsoever (a) to make or give any presentments, demands for
performances, notices of
C - 11
PLEDGE AGREEMENT
<PAGE> 85
nonperformance, protests, notices of protest or notices of dishonor in
connection with any Obligations or evidences of Obligations held by Secured
Parties as Collateral, or in connection with any Obligation or evidences of
Obligations which constitute in whole or in part the Obligations secured
hereunder, or (b) to give the Pledgor notice of, or to exercise any
subscription rights or privileges, any rights or privileges to exchange,
convert or redeem or any other rights or privileges relating to or affecting
any Collateral held by Secured Parties.
13. Delivery of Collateral. The Secured Parties may at any time
cause the Administrative Agent to deliver the Collateral or any part thereof to
the Pledgor and the receipt of the Pledgor shall be a complete and full
acquittance for the Collateral so delivered, and Secured Parties shall
thereafter be discharged from any liability or responsibility therefor.
14. Attorneys Fees.
(a) The Pledgor agrees to pay to each Secured Party the amount of
any and all expenses, including expenses incurred by the Administrative Agent,
and the reasonable fees and expenses of its counsel (including, without
limitation, the allocated cost of in-house counsel) and of any experts, which
such Secured Party may incur in connection with (i) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Collateral; (ii) the exercise or enforcement of any of the rights of any
Secured Party hereunder; or (iii) the failure by the Pledgor to perform or
observe any of the provisions hereof, provided that the payment of such sums
shall be made to the Secured Parties solely through the application of proceeds
in accordance with Section 9(a) hereof
(b) The Pledgor agrees to indemnify and hold each Secured Party
harmless from and against any taxes, liabilities, claims and damages, including
attorney's fees and disbursements (including, without limitation, the allocated
cost of in-house counsel), and other expenses incurred or arising by reason of
the taking or the failure to take action by any Secured Party in respect of any
transaction effected under this Agreement or in connection with the Lien
provided for herein, including, without limitation, any taxes payable with
respect to the Collateral or in connection with any transaction contemplated by
this Agreement and any and all costs, losses, liabilities, claims, damages or
expenses incurred by any Secured Party arising out of any investigation,
litigation or other proceeding related to this Agreement or any transaction
contemplated hereby (all the foregoing, collectively, the "Indemnified
Liabilities"), except for the gross negligence and willful misconduct of such
Secured Party, provided, that such indemnification shall be made to the
Secured Parties solely through the application of proceeds in accordance with
Section 9(a) hereof. The Pledgor shall have the right to undertake, conduct and
control through counsel of its own choosing (which counsel shall be acceptable
to the Secured Parties acting reasonably) and at the sole expense of the
Pledgor, the conduct and settlement of any Indemnified Liabilities, and the
Secured Parties shall cooperate with the Pledgor in connection therewith;
provided that the Pledgor shall permit the Secured Parties to participate in
such conduct and settlement through counsel chosen by the Secured Parties, but
the fees and expenses of such counsel shall be borne by the Secured Parties.
Notwithstanding the foregoing, the Secured Parties shall have the right to
employ their own counsel, and the reasonable fees and expenses of such counsel
shall be at the Pledgor's cost and expense if the interests of the Pledgor and
the Secured Parties become adverse in any such claim or course of action;
provided, however, the Pledgor, in such event, shall only be liable for the
reasonable
C - 12
PLEDGE AGREEMENT
<PAGE> 86
legal expenses of one counsel for all of such Secured Parties. The Pledgor
shall not be liable for any settlement of any claim or action effected without
its prior written consent, such consent not to be unreasonably withheld. All
amounts owing under this Section 14(b) shall be paid within 30 days after
demand.
(c) The obligations of the Pledgor under this Section 14 shall
survive the termination of this Agreement.
15. Miscellaneous.
(a) Headings used in this Agreement are for convenience of
reference only and do not constitute part of this Agreement for any purpose.
(b) No failure on the part of the Administrative Agent or any of
its agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Administrative Agent
or any of its agents of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.
(c) If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be liberally construed in favor of the Administrative Agent and the
Banks in order to carry out the intentions of the parties hereto as nearly as
may be possible and the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
(d) The Administrative Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
(e) The agreements of the parties hereto are solely for the
benefit of the Secured Parties, and no Person (other than the parties hereto
and the Secured Parties) shall have any rights hereunder.
(f) No amendment or waiver of any provision of this Agreement nor
consent to any departure by the Pledgor herefrom shall in any event be
effective unless the same shall be in writing and signed by the Administrative
Agent, the Pledgor, and then such waiver or consent shall be effective only in
the specific instance and for the specified purpose for which given.
(g) All notices, requests, demands, waivers or other
communications to or upon the respective parties hereto shall be in writing
delivered in person, by mail postage prepaid, by nationally recognized
overnight courier or by telecopy and shall be deemed to have been duly given or
made when received, if mailed or delivered by courier, or when personally
delivered or transmitted by telecopy, addressed to the party to which such
notice, request, demand, waiver or other communication is required or permitted
to be given or made hereunder at, if to the Pledgor, the address for the
Borrower set forth in Schedule 10.2 to the Credit Agreement and if to the
Administrative Agent, the address set forth for the Administrative Agent in the
Credit
C - 13
PLEDGE AGREEMENT
<PAGE> 87
Agreement, or such other address of which such party shall have notified in
writing the party giving such notice.
16. Governing Law; Terms. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, AND EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, ARE GOVERNED BY THE LAW OF ANY JURISDICTION OTHER THAN
THE STATE OF NEW YORK. TERMS USED IN ARTICLE 9 OF THE UCC ARE USED HEREIN AS
THEREIN DEFINED.
17. Waiver of Jury Trial. EACH PARTY HERETO WAIVES THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH PARTY HERETO AGREES THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION
HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
C - 14
PLEDGE AGREEMENT
<PAGE> 88
IN WITNESS WHEREOF, the parties hereto, by their officers duly
authorized, have caused this Agreement to be duly executed and delivered as of
the day and year first above written.
CINEMARK INTERNATIONAL, INC.
By:
-----------------------
Name:
---------------------
Title:
--------------------
Agreed to:
BANK OF AMERICA NATIONAL TRUST
and SAVINGS ASSOCIATION,
as Administrative Agent
By:
---------------------------
Janice Hammond
Vice President
C - 15
PLEDGE AGREEMENT
<PAGE> 89
SCHEDULE 1
TO
PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement dated
as of November , 1997 made by Cinemark International, Inc. to Bank of America
National Trust and Savings Association, as Administrative Agent
Stock of Cinemark Mexico (USA), Inc.
<TABLE>
<CAPTION>
Class Stock Percentage Number
of Certificate of Par of
Stock No(s). Ownership Value Shares
- ----- ----------- ---------- ----- ------
<S> <C> <C> <C> <C>
</TABLE>
C - 1
PLEDGE AGREEMENT
<PAGE> 90
SCHEDULE 2
TO
PLEDGE AGREEMENT
PLEDGE AGREEMENT SUPPLEMENT
This Pledge Agreement Supplement, dated as of _______________, is
delivered pursuant to Section 4 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Agreement Supplement may be attached
to the Pledge Agreement, dated as of November, 1997 (the "Pledge Agreement",
the terms defined therein and not otherwise defined herein being used as
therein defined), made by Cinemark International, Inc. to Bank of America
National Trust and Savings Association as Administrative Agent for its benefit
and the benefit of the Secured Parties and that the shares listed on this
Pledge Agreement Supplement shall be and become part of the Collateral referred
to in the Pledge Agreement and shall secure all Obligations.
The undersigned agrees that the securities listed below shall for all
purposes constitute Collateral and shall be subject to the security interest
created by the Pledge Agreement.
The undersigned hereby certifies that the representations and
warranties set forth in Section 3 of the Pledge Agreement are true and correct
as to the Collateral listed herein on and as of the date hereof.
CINEMARK INTERNATIONAL, INC.
By:
-----------------------
Name:
---------------------
Title:
--------------------
<TABLE>
<CAPTION>
Class Stock Percentage Number
of Certificate of Par of
Stock No(s). Ownership Value Shares
- ----- ----------- --------- ----- ------
<S> <C> <C> <C> <C>
</TABLE>
C - 1
PLEDGE AGREEMENT
<PAGE> 91
SCHEDULE 3
TO
PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement dated as of
November, 1997 made by Cinemark International, Inc. to Bank of America National
Trust and Savings Association, as Administrative Agent
Existing options, warrants, shareholder
agreements, calls or commitments
NONE
C - 1
PLEDGE AGREEMENT
<PAGE> 92
EXHIBIT D
NOTICE OF ASSIGNMENT AND ACCEPTANCE
___________, 19
TO: Bank of America National Trust
and Savings Association, as Administrative Agent
Reference is made to the Credit Agreement dated as of November
18, 1997 (as from time to time amended, extended, restated, modified
or supplemented, the "Credit Agreement;" capitalized terms used herein
shall have the meanings assigned to them in the Credit Agreement)
among Cinemark International, Inc., the Banks party thereto and Bank
of America National Trust and Savings Association, as Administrative
Agent (the "Administrative Agent") for said Banks.
1. We hereby give you notice of, and request your consent to,
the assignment by (the "Assignor") to ________ (the "Assignee") of __%
of the right, title and interest of the Assignor in and to the Credit
Agreement, including without limitation the right, title and interest
of the Assignor in and to the Commitment of the Assignor, and all
outstanding Loans made by the Assignor. Before giving effect to such
assignment:
(a) the aggregate amount of the Assignor's Commitment is
$____; and
(b) the aggregate principal amount of its outstanding
Loans is $____.
2. The Assignee hereby represents and warrants that it has
complied with the requirements of Section 10.8(a) of the Credit
Agreement in connection with this assignment.
3. The Assignee agrees that, upon receiving your consent to
such assignment and from and after _____, the Assignee will be bound
by the terms of the Credit Agreement, with respect to the interest in
the Credit Agreement assigned to it as specified above, as fully and
to the same extent as if the Assignee were the Bank originally holding
such interest in the Credit Agreement.
4. The following administrative details apply to the Assignee:
(a) Offshore Lending Office:
Assignee name:
--------------------------
Address:
--------------------------------
Attention:
------------------------------
Telephone:( )
------------------------------
Telecopier:( )
-----------------------------
D - 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
<PAGE> 93
(b) Domestic Lending Office:
Assignee name:
--------------------------
Address:
--------------------------------
----------------------------------------
Attention:
------------------------------
Telephone:( )
------------------------------
Telecopier:( )
-----------------------------
(c) Notice Address:
Assignee name:
--------------------------
Address:
--------------------------------
----------------------------------------
Attention:
------------------------------
Telephone:( )
------------------------------
Telecopier:( )
-----------------------------
Payment Instructions: Account No.:
Account No.:
----------------------------
Attention:
------------------------------
----------------------------------------
Reference:
------------------------------
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[Name of Assignor]
By:
-----------------------------
Title:
--------------------------
[Name of Assignee]
By:
-----------------------------
Title:
--------------------------
D-2
NOTICE OF ASSIGNMENT AND ACCEPTANCE
<PAGE> 94
We hereby consent to the
foregoing assignment.
CINEMARK INTERNATIONAL, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
D-3
NOTICE OF ASSIGNMENT AND ACCEPTANCE
<PAGE> 95
EXHIBIT E
PROMISSORY NOTE
$_____ November 18, 1997
FOR VALUE RECEIVED, the undersigned CINEMARK INTERNATIONAL,
INC. (the "Borrower") promises to pay to the order of _____ (the
"Bank") on the Maturity Date the principal amount of $_____ or, if
less, the unpaid principal amount of Loans owing to the Bank pursuant
to that certain Credit Agreement dated as of November 18, 1997, 1996,
among the Borrower, the Banks which are from time to time parties
thereto and Bank of America National Trust and Savings Association, as
Administrative Agent (in such capacity, the "Administrative Agent")
(as amended, restated, extended or otherwise modified from time to
time, the "Credit Agreement").
The Borrower also promises to pay interest on the unpaid
principal amount hereof until maturity (whether by acceleration or
otherwise), and also to pay interest after maturity on amounts not
paid when due and until paid in full, at the rates per annum and on
the dates specified in the Credit Agreement.
This Note is one of the Notes referred to in the Credit
Agreement, to which reference is made for a statement of the terms and
conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Loans evidenced by this
Note and on which such Loans may be declared to be immediately due and
payable.
All payments of principal and interest in respect of this Note
shall be made in lawful money of the United States of America in same
day funds at the office of Bank of America National Trust and Savings
Association, ABA No. 121-000-358, for credit to: BANCONTROL Account
No.____, Reference: Cinemark International, Inc., or at such other
place as shall be designated in writing for such purpose in accordance
with the terms of the Credit Agreement.
The principal amount, interest periods, the interest rates
applicable, maturity and each payment of interest and principal of the
Loans shall be recorded and endorsed on the grid attached to this
Note; provided, however, that the failure by the Bank to make any such
recordation or endorsement shall not limit or otherwise affect the
obligations of the Borrower hereunder or under the Credit Agreement,
nor the validity of any payment made by the Borrower. In any event,
the Bank's records shall be conclusive evidence, absent manifest
error, of any Loan, interest periods, rates of interests, maturities
and payments thereunder.
This Note is one of the notes described in the Credit
Agreement and the Bank, or any holder hereof, is entitled to all the
rights, including acceleration rights, remedies, security, benefits
and privileges provided for in the Credit Agreement. Terms not defined
herein have the meanings assigned to them in the Credit Agreement.
E - 1
PROMISSORY NOTE
<PAGE> 96
The Borrower hereby promises to pay all reasonable
out-of-pocket expenses and reasonable attorneys' fees (including any
allocated fees and costs of in-house legal staff) incurred in the
collection or enforcement of this Note.
The Borrower hereby waives notice of default, presentment,
demand for payment, protest and any notice of nonpayment or dishonor.
THIS NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed and delivered by its duly authorized officer, as of the day
and year first above written.
CINEMARK INTERNATIONAL, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
E-2
PROMISSORY NOTE
<PAGE> 97
LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
<TABLE>
<CAPTION>
DATE AMOUNT RATE
OF OF OF AMOUNT PRINCIPAL INTEREST NOTATION
TYPE LOAN INTEREST DUE REPAID PAID BY
================================================================================
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 98
EXHIBIT F
CINEMARK MEXICO GUARANTY
TO: Bank of America National Trust
as Administrative Agent (the
"Administrative Agent")
PRELIMINARY STATEMENTS:
A. Reference is made to the Credit Agreement dated as of November 18,
1997 (as from time to time amended, extended, restated, modified or
supplemented, the "Credit Agreement;" capitalized terms used herein shall have
the meanings assigned to them in the Credit Agreement) among Cinemark
International, Inc. (the "Borrower"), the banks from time to time party thereto
(the "Banks") and Bank of America National Trust and Savings Association, as
Administrative Agent (the "Administrative Agent") for said Banks.
B. Cinemark Mexico (USA), Inc., a Texas corporation ("Guarantor") is a
Wholly Owned Subsidiary of the Borrower and has derived, and expects to
continuing deriving, direct and indirect benefits from extensions of credit
made to the Borrower, and now desires to guaranty the Obligations.
NOW, THEREFORE, the Guarantor agrees as follows:
1. For valuable consideration, the Guarantor unconditionally, absolutely
and irrevocably guarantees and promises to pay to the Administrative Agent, or
order, on demand made during the existence of an Event of Default, in lawful
money of the United States and in immediately available funds, any and all
present or future Obligations owing to the Banks and the Administrative Agent
(collectively, the "Guarantied Parties"). The term Obligations has the meaning
assigned to such term under the Credit Agreement and is used herein in its most
comprehensive sense and includes any and all advances, debts, obligations, and
liabilities of the Borrower, now, or hereafter made, incurred, or created,
whether voluntary or involuntarily, and however arising, including, without
limitation, any and all reasonable attorneys' fees (including the reasonable
allocated cost of inhouse counsel), costs, premiums, charges, or interest owed
by the Borrower to the Guarantied Parties, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, whether the
Borrower may be liable individually or jointly with others, whether recovery
upon such indebtedness may be or hereafter becomes barred by any statute of
limitations or whether such indebtedness may be or hereafter become otherwise
unenforceable.
2. This Guaranty is a continuing guaranty which relates to any
Obligations, including those which arise under successive transactions which
shall either cause the Borrower to incur new Obligations, continue the
Obligations from time to time, or renew them after they have been satisfied.
The Guarantor agrees that nothing shall discharge or satisfy its obligations
created hereunder except for the full payment of the Obligations. Any payment
by the Guarantor shall not reduce its obligations hereunder with respect to
guarantying all Obligations from time to time outstanding.
F1
CINEMARK MEXICO GUARANTY
<PAGE> 99
3. The Guarantor agrees that it is directly and primarily liable to the
Administrative Agent for the benefit of the Guarantied Parties, that its
obligations hereunder are independent of the Obligations of the Borrower, or of
any other guarantor, and that a separate action or actions may be brought and
prosecuted against the Guarantor, whether action is brought against the
Borrower or whether the Borrower is joined in any such action or actions. The
Guarantor agrees that any releases which may be given by the Administrative
Agent and the Guarantied Parties to the Borrower or any other guarantor shall
not release it from this Guaranty.
4. The obligations of the Guarantor under this Guaranty shall not be
affected, modified or impaired upon the occurrence from time to time of any of
the following, whether or not with notice to or the consent of the Guarantor:
(a) the compromise, settlement, change, modification, amendment (whether
material or otherwise) or partial termination of any or all of the Obligations;
(b) the failure to give notice to the Guarantor of the occurrence of any
Event of Default under the terms and provisions of the Credit Agreement;
(c) the waiver of the payment, performance or observance of any of the
Obligations;
(d) the taking or omitting to take any actions referred to in any Loan
Document or of any action under this Guaranty;
(e) any failure, omission or delay on the part of the Administrative
Agent and/or the Guarantied Parties to enforce, assert or exercise any right,
power or remedy conferred in this Guaranty, the Credit Agreement, any other
Loan Document or any other indulgence or similar act on the part of the
Administrative Agent and/or the Guarantied Parties in good faith and in
compliance with applicable law;
(f) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all of the assets, marshalling of assets,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors
or readjustment of, or other similar proceedings which affect the Guarantor,
any other guarantor of any of the Obligations of the Borrower or any of the
assets of any of them, or any allegation of invalidity or contest of the
validity of this Guaranty in any such proceeding;
(g) to the extent permitted by law, the release or discharge of any other
guarantors of the Obligations from the performance or observance of any
obligation, covenant or agreement contained in any guaranties of the
Obligations by operation of law; or
(h) the default or failure of any other guarantors of the Obligations
fully to perform any of their respective obligations set forth in any such
guaranties of the Obligations.
To the extent any of the foregoing refers to any actions which the
Administrative Agent or the Guarantied Parties may take, the Guarantor hereby
agrees that the Administrative Agent and/or the Guarantied Parties may take
such actions in such manner, upon such terms, and at such times as the
Administrative Agent or the Guarantied Parties, in their discretion, deem
advise, without, in any way or respect, impairing, affecting, reducing or
releasing the
F - 2
CINEMARK MEXICO GUARANTY
<PAGE> 100
Guarantor from its undertakings hereunder and the Guarantor hereby consents to
each and all of the foregoing actions, events and occurrences.
5. The Guarantor hereby waives:
(a) any and all rights to require the Administrative Agent or the
Guarantied Parties to prosecute or seek to enforce any remedies against the
Borrower or any other party liable to the Administrative Agent or the
Guarantied Parties on account of the Obligations;
(b) any right to assert against the Administrative Agent or the Guarantied
Parties any defense (legal or equitable), set-off, counterclaim, or claim which
the Guarantor may now or at any time hereafter have against the Borrower or any
other party liable to the Administrative Agent or the Guarantied Parties in any
way or manner under the Credit Agreement;
(c) all defenses, counterclaims and off-sets of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity or enforceability of any Loan Document and the security
interest granted pursuant thereto;
(d) any defense arising by reason of any claim or defense based upon an
election of remedies by the Administrative Agent or the Guarantied Parties
including, without limitation, any direction to proceed by judicial or
nonjudicial foreclosure or by deed in lieu thereof, which, in any manner
impairs, affects, reduces, releases, destroys or extinguishes the Guarantor's
subrogation rights, rights to proceed against the Borrower for reimbursement,
or any other rights of the Guarantor to proceed against the Borrower, against
any other guarantor, or against any other security, with the Guarantor
understanding that the exercise by the Administrative Agent and/or the
Guarantied Parties of certain rights and remedies may offset or eliminate the
Guarantor's right of subrogation against the Borrower, and that the Guarantor
may therefore incur partially or totally non-reimbursable liability hereunder;
and
(e) all presentments, demands for performance, notices of non-performance,
protests, notices of protest, notices of dishonor, notices of default, notice
of acceptance of this Guaranty, and notices of the existence, creation, or
incurring of new or additional indebtedness, and all other notices or
formalities to which the Guarantor may be entitled.
6. The Guarantor hereby agrees that unless and until all Obligations
have been paid to the Administrative Agent and the Guarantied Parties in full,
it shall not have any rights of subrogation, reimbursement or contribution as
against the Borrower or any other guarantor, if any, and shall not seek to
assert or enforce the same. The Guarantor understands that the exercise by
Administrative Agent of certain rights and remedies contained in the Loan
Documents may affect or eliminate the Guarantor's right of subrogation if any,
against the Borrower and that the Guarantor may therefore incur a partially or
totally non-reimbursable liability hereunder; nevertheless, the Guarantor
hereby authorizes and empowers the Administrative Agent and the Guarantied
Parties to exercise, in their sole discretion, any right and remedy, or any
combination thereof, which may then be available, since it is the intent and
purpose of the Guarantor that the obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
F - 3
CINEMARK MEXICO GUARANTY
<PAGE> 101
7. The Guarantor is presently informed of the financial condition of the
Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Obligations. The Guarantor
hereby covenants that it will continue to keep itself informed of the financial
condition of the Borrower, the status of other guarantors, if any, and of all
other circumstances which bear upon the risk of nonpayment. The Guarantor
hereby waives its right, if any, to require the Administrative Agent or the
Guarantied Parties to disclose to it any information which the Administrative
Agent or any Bank may now or hereafter acquire concerning such condition or
circumstances including, but not limited to, the release of any other guarantor.
8. The Administrative Agent and each Bank's books and records evidencing
the Obligations shall be admissible in any action or proceeding and shall be
binding upon the Guarantor for the purpose of establishing the terms set forth
therein and shall constitute prima facie proof thereof.
9. Notwithstanding anything to the contrary contained herein, the
Guarantor's liability pursuant to this Guaranty shall be limited to the greater
of: (a) the 'reasonably equivalent value,' received by the Guarantor or any of
its subsidiaries arising out of the Loan Documents (including, without
limitation, repayment of intercompany or third party debt of, investments made
in, and capital contributions, advances and loans made to, the Guarantor or any
of its subsidiaries, directly or indirectly, by Borrower or any other subsidiary
with, or as a direct or indirect result of obtaining, the proceeds of any credit
extended under the Loan Document(s) in exchange for or in connection with the
Guarantor's guaranty of the Obligations, and (b) 95% of the
excess of (i) a 'fair valuation' of the amount of the assets and other property
of the Guarantor and its subsidiaries taken as a whole as of the applicable date
of determination of the incurrence of the Guarantor's obligations hereunder over
ii) a 'fair valuation' of the Guarantor's and its subsidiaries' debts taken as a
whole as of such date, but excluding liabilities arising under this Guaranty and
excluding all liabilities owing by the Guarantor and its subsidiaries taken as a
whole to the Borrower or any other Subsidiary or otherwise subordinated to the
Guarantor's obligations hereunder, it being understood that a portion of such
indebtedness owing to Borrower shall be discharged on a dollar-for-dollar in an
amount equal to the amount paid by the Guarantor hereunder. The meaning of the
terms 'reasonably equivalent value' and 'fair valuation,' and the calculations
of assets and other property and debts, shall be determined in accordance with
the applicable federal and New York state laws in effect on the date hereof
governing the determination of the insolvency of a debtor and to further the
intent of all parties hereto to maximize the amount payable by the Guarantor
without rendering it insolvent or leaving, it with an unreasonably small amount
of capital in relation to its business, in either case, at the applicable date
for the determination of the incurrence of its obligations hereunder; provided,
however the Guarantor agrees, to the maximum extent permitted by law, that 'fair
valuation' of the Guarantor's and its subsidiaries' assets and other properties
means the fair market sales price as would be obtained in an arms-length
transaction between competent, informed and willing parties under no compulsion
to sell or buy or collections thereof obtained in the ordinary course of
business and 'fair valuation' of its debts means the amount, in light of the
applicable circumstances, at the time, for which the Guarantor or its
subsidiaries is liable for matured known liquidated liabilities or would
reasonably be expected to become liable on contingent or unliquidated
liabilities as they mature and taking into consideration the nature of any such
contingency and the probability that liability would be imposed.
F - 4
CINEMARK MEXICO GUARANTY
<PAGE> 102
10. The Guarantor represents and warrants for and with respect to itself
that:
(a) The Guarantor: (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation;
(ii) has the power and authority and all governmental licenses, authorizations,
consents and approvals to own its assets, carry on its business and execute,
deliver, and perform its obligations under, the Loan Documents; (iii) is duly
qualified as a foreign corporation, licensed and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property
or the conduct of its business requires such qualification; and (iv) is in
compliance with all Requirements of Law; except, in each case referred to in
clause (ii), (iii) or clause (iv), to the extent that the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by all necessary corporate action, and do
not and would not be expected to: (i) contravene the terms of any of the
Guarantor's articles of incorporation, bylaws or other organization
documents; (ii) conflict with or result in any breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Guarantor is a party or any order, injunction, writ or
decree of any Governmental Authority to which the Guarantor or its Property is
subject; or (iii) violate any Requirement of Law.
(c) No approval, consent, exemption, authorization, or other action by,
or notice to, or filing with, any Governmental Authority is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, the Guarantor of the Guaranty, except for routine
corporate filings to maintain the corporate good standing of the Guarantor.
(d) This Guaranty constitutes the legal, valid and binding obligations of
the Guarantor, enforceable against the Guarantor in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
(e) There is no action, suit or proceeding pending against, or to the
knowledge of the Guarantor, threatened against or affecting the Guarantor,
before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity or enforceability of this
Guaranty; and
(f) The execution, delivery and performance by the Guarantor of this
Guaranty does not constitute, to the best knowledge of the Guarantor, a
"fraudulent conveyance," "fraudulent obligation" or "fraudulent transfer"
within the meanings of the Uniform Fraudulent Conveyances Act or Uniform
Fraudulent Transfer Act, as enacted in any jurisdiction.
11. All notices and other communications hereunder shall be delivered, in
the manner and with the effect provided in the Credit Agreement and, in the
case of the Guarantor, in care of the Borrower.
12. This Guaranty shall be binding upon the successors and assigns of the
Guarantor and shall inure to the benefit of the Administrative Agent's and the
Guarantied Parties' successors and assigns. This Guaranty cannot be assigned by
the Guarantor without the prior written
F - 5
CINEMARK MEXICO GUARANTY
<PAGE> 103
consent of the Administrative Agent and the Guarantied Parties which shall be
in the Administrative Agent's and the Guarantied Parties' sole and absolute
discretion.
13. No failure or delay by the Administrative Agent or the Guarantied
Parties in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
14. The Guarantor shall pay (a) all reasonable out-of-pocket expenses of
the Administrative Agent and the Guarantied Parties, including reasonable fees
and disbursements of counsel (including the allocated cost of inhouse counsel
and staff) for the Administrative Agent, in connection with any waiver or
consent hereunder or any amendment hereof and (b) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and the Guarantied Parties,
including fees and disbursements of counsel (including the allocated cost of
inhouse counsel and staff), in connection with the enforcement of this Guaranty
(whether or not suit is brought).
15. No modification of this Guaranty shall be effective for any purpose
unless it is in writing and executed by an officer of the Administrative Agent
authorized to do so. This Guaranty merges all negotiations, stipulations and
provisions relating to the subject matter of this Guaranty which preceded or
may accompany the execution of this Guaranty.
15. (a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE ADMINISTRATIVE AGENT
AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF THE GUARANTOR AND THE ADMINISTRATIVE AGENT CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH OF THE GUARANTOR AND THE ADMINISTRATIVE AGENT IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
GUARANTY OR ANY DOCUMENT RELATED HERETO. THE GUARANTOR AND THE ADMINISTRATIVE
AGENT EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
16. WAIVER OF JURY TRIAL. THE GUARANTOR AND THE ADMINISTRATIVE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR
F - 6
CINEMARK MEXICO GUARANTY
<PAGE> 104
ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE PLEDGOR AND THE
ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS GUARANTY OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY AND THE OTHER LOAN DOCUMENTS.
17. NOTICE OF CLAIMS, CLAIMS BAR. THE GUARANTOR HEREBY AGREES THAT IT
SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT
HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST THE ADMINISTRATIVE AGENT OR ANY
BANK, WHETHER SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO
THIS GUARANTY, OR ANY ACT OR OMISSION TO ACT BY THE ADMINISTRATIVE AGENT OR ANY
BANK WITH RESPECT HERETO OR THERETO, AND THAT IF IT SHALL FAIL TO GIVE SUCH
PROMPT NOTICE TO THE ADMINISTRATIVE AGENT WITH REGARD TO ANY SUCH CLAIM OR
CAUSE OF ACTION, IT SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED
FROM BRINGING OR ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR
PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AGENCY.
18. This Guaranty may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
19. Any indebtedness of the Borrower now or hereafter held by Guarantor
is hereby subordinated to the indebtedness of the Borrower to the
Administrative Agent and the Guarantied Parties; and such indebtedness of the
Borrower to the Guarantor if the Administrative Agent so requests during the
existence of an Event of Default shall be collected, enforced and received by
the Guarantor as trustee for the Administrative Agent and the Guarantied
Parties and be paid over to the Administrative Agent on account of the
indebtedness of the Borrower to the Administrative Agent and the Guarantied
Parties but without reducing or affecting in any manner the liability of the
Guarantor under the other provisions of this guaranty.
DATED AS OF:
---------------
F - 7
CINEMARK MEXICO GUARANTY
<PAGE> 105
CINEMARK MEXICO (USA), INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
BANK OF AMERICA NATIONAL TRUST SAVINGS
ASSOCIATION, as Administrative Agent
By:
---------------------------------
Janice Hammond
Vice President
F - 8
CINEMARK MEXICO GUARANTY
<PAGE> 106
EXHIBIT G
FORM OF LETTER OF RESPONSIBILITY
TO: Bank of America National Trust
and Savings Association, as
Administrative Agent, and the Banks
from time to time party to the credit
facility hereinafter referred to
It is our understanding that you have extended/may extend a credit
facility in the amount of $25,000,000 to our subsidiary, Cinemark
International, Inc. (the "Borrower" This confirms that the credit was/will be
extended at our special request and that we have full knowledge of and agree
with the obligations being undertaken by the Borrower in connection with this
credit facility.
This will confirm that we own 100% of the Borrower's capital stock
outstanding and that as a result of this ownership we derive a benefit from
your extension of this credit. We agree to maintain a majority ownership of the
Borrower during the life of your credit.
We promise to take any appropriate action to compel the Borrower to honor
its obligations to your bank when due. This is not intended to represent a
guarantee of the indebtedness of the Borrower by Cinemark USA, Inc.
Sincerely,
CINEMARK USA, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
G - 1
LETTER OF RESPONSIBILITY
<PAGE> 107
EXHIBIT H
INTERCOMPANY SUBORDINATION AGREEMENT
TO: Bank of America National Trust
and Savings Association, as
Administrative Agent (the
"Administrative Agent")
Ladies and Gentlemen:
Reference is made to the Credit Agreement dated as of November 18, 1997
(as from time to time amended, extended, restated, modified or supplemented,
the "Credit Agreement;" capitalized terms used herein shall have the meanings
assigned to them in the Credit Agreement) among Cinemark International, Inc.
(the "Borrower"), the banks from time to time party thereto (the "Banks") and
Bank of America National Trust and Savings Association, as Administrative Agent
(the "Administrative Agent") for said Banks. It is a requirement of the Credit
Agreement that the Subordinated Creditor enter into this Subordination
Agreement.
Borrower is or may become indebted or otherwise obligated to Cinemark USA,
Inc. (the "Subordinated Creditor"), and desires that the Banks extend financial
accommodations to Borrower. For the purpose of inducing the Banks to grant,
continue or renew such financial accommodations, and in consideration thereof,
Subordinated Creditor agrees as follows:
1. Any and all claims of the Subordinated Creditor against Borrower, now
or hereafter existing, (the "Subordinated Debt"), are, and shall be at all
times, subject and subordinate to any and all Obligations owing to the
Administrative Agent and the Banks (collectively, the "Senior Creditor").
2. If any Default or Event of Default as defined in the Credit Agreement
(as herein defined) shall at any time occur and be continuing (each, a
"Default"), then at all times thereafter until such Default shall have been
cured, or such Default or the benefits of this sentence shall have been waived
in writing by the Administrative Agent, Borrower shall not, directly or
indirectly, make any payment or distribution of assets with respect to the
Subordinated Debt, except as set forth in paragraph 10 hereof.
3. In case of (a) any assignment for the benefit of creditors by
Borrower, (b) any proceedings under any bankruptcy or other debtor relief laws
being instituted by or against Borrower, (c) the appointment of any receiver
for Borrower's business or assets, or (d) any dissolution or winding up of the
affairs of Borrower, Borrower and any assignee, trustee in bankruptcy,
receiver, debtor in possession or other person or persons in charge, are hereby
directed to pay to the Administrative Agent the full amount of the Obligations
(including interest and fees to the date of payment) before making any payment
of principal or interest to the Subordinated Creditor under any Subordinated
Debt.
4. The Senior Creditor is hereby authorized by the Subordinated Creditor
to: (a) renew, compromise, extend, accelerate or otherwise change the time of
payment, or any other
H - 1
INTERCOMPANY SUBORDINATION AGREEMENT
<PAGE> 108
terms, of any existing or future Obligations or any part thereof, (b)
increase or decrease the rate of interest payable thereon, (c) exchange,
enforce, waive, release, or fail to perfect any security therefor, (d) apply
such security and direct the order or manner of sale thereof in such manner as
the Senior Creditor may at its discretion determine, (e) release Borrower or
any guarantor of any indebtedness of Borrower from liability, and (f) make
optional future advances to Borrower, all without notice to the Subordinated
Creditor and without affecting the subordination provided by this Agreement.
5. The Subordinated Creditor acknowledges and agrees that it shall have
the sole responsibility for obtaining from Borrower such information concerning
Borrower's financial condition or business operations as they may require, and
that Senior Creditor shall not have any duty at any time to disclose to the
Subordinated Creditor any information relating to the business operations or
financial condition of Borrower.
6. On the written request of the Administrative Agent, the Subordinated
Creditor shall mark any note or instrument evidencing any Subordinated Debt
with a conspicuous legend which reads substantially as follows:
"THIS [NOTE] IS SUBORDINATED TO CERTAIN PRESENT OR FUTURE
INDEBTEDNESS OWING FROM THE MAKER TO THE BANKS PARTY TO THE CREDIT
AGREEMENT DATED AS OF NOVEMBER 18, 1997 AMONG CINEMARK INTERNATIONAL,
INC., THE BANKS PARTY THERETO AND BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT, AS AMENDED FROM TIME TO
TIME, AND MAY BE ENFORCED ONLY IN ACCORDANCE WITH THAT CERTAIN
SUBORDINATION AGREEMENT DATED AS OF NOVEMBER 18, 1997 BETWEEN BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT
AND PROMISSORY."
7. In the event that any payment or any cash or noncash distribution is
made to the Subordinated Creditor in violation of the terms of this Agreement,
the Subordinated Creditor shall receive the same in trust for the benefit of
the Senior Creditor, and shall forthwith remit it to the Administrative Agent
in the form in which it was received, together with such endorsements or
documents as may be necessary to effectively negotiate or transfer the same to
the Administrative Agent.
8. For violation of this Agreement, the Subordinated Creditor shall be
liable for all losses and damages sustained by reason of such breach.
9. The Subordinated Creditor agrees not to sell, assign, transfer,
pledge, hypothecate, or encumber any Subordinated Debt except subject expressly
to this Agreement and not to take any lien or security on any of Borrower's
property so long as any Obligations shall exist. This Agreement shall be
binding upon the heirs, successors and assigns of the Subordinated Creditor and
Borrower.
H - 2
INTERCOMPANY SUBORDINATION AGREEMENT
<PAGE> 109
10. Notwithstanding the provisions of Section 2, (a) Borrower may make
payments to Cinemark USA on Subordinated Debt for its respective share of
consolidated tax liability and (b), so long as no Default or Event of Default
has occurred, Subordinated Creditor may receive principal and noncash interest
payments on the Subordinated Debt; provide, however, that such payments in the
case of subsection (a) does not cause a Default or Event of Default under any
Obligations.
11. This Agreement may be executed in any number of counterparts and all
of such counterparts taken together shall be deemed to constitute one and the
same instrument.
12. THIS AGREEMENT AND ANY INSTRUMENT OR AGREEMENT REQUIRED HEREUNDER,
SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duty executed and delivered as of November 18, 1997.
Subordinated Creditor:
CINEMARK USA, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
H - 3
INTERCOMPANY SUBORDINATION AGREEMENT
<PAGE> 110
ACCEPTANCE OF SUBORDINATION
AGREEMENT BY BORROWER
The undersigned being the Borrower named in the foregoing Subordination
Agreement, hereby accepts and consents thereto and agrees to be bound by all
the provisions thereof, not to make any payment to or on behalf of the
Subordinated Creditor in violation of such agreement and to recognize all
priorities and other rights granted thereby to the Senior Creditor, and its
successors and assigns, and to perform in accordance therewith.
Dated: November 18, 1997
CINEMARK INTERNATIONAL, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
H - 4
INTERCOMPANY SUBORDINATION AGREEMENT
<PAGE> 1
EXHIBIT 10.13(b)
FIRST AMENDMENT TO
CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT is made and dated as of
December 16, 1997 (this "First Amendment") among CINEMARK INTERNATIONAL INC., a
Texas corporation (the "Borrower"), the financial institutions (collectively,
the "Banks") party to the Credit Agreement referred to below, and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Administrative Agent (the
"Administrative Agent"), and amends that certain Credit Agreement dated as of
November 18, 1997, among the Borrower, the Banks and the Administrative Agent
(as so amended or modified from time to time, the "Agreement").
RECITAL
The Borrower has requested that the Banks and the Administrative
Agent increase the Aggregate Commitment to $30,000,000, and the Banks and the
Administrative Agent are willing to do so on the terms and conditions set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. TERMS. All terms used herein shall have the same meanings as in
the Agreement unless otherwise defined herein. All references to the Agreement
shall mean the Agreement as hereby amended.
2. AMENDMENTS TO AGREEMENT.
2.1 The definition of "Aggregate Commitment" is amended by deleting
"$25,000,000" and inserting "$30,000,000" in lieu thereof.
2.2 Schedule 2.1 is amended and restated in its entirety as set
forth on Schedule 2.1 hereto.
3. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to Banks and Administrative Agent that, on and as of the date hereof,
and after giving effect to this First Amendment:
3.1 AUTHORIZATION. The execution, delivery and performance of this
First Amendment have been duly authorized by all necessary corporate action by
the Borrower and this First Amendment has been duly executed and delivered by
the Borrower.
3.2 BINDING OBLIGATION. This First Amendment is the legal, valid
and binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
3.3 NO LEGAL OBSTACLE TO AGREEMENT. The execution, delivery and
performance of this First Amendment will not (a) contravene the terms of the
Borrower's certificate of
<PAGE> 2
incorporation, by-laws or other organization document; (b) conflict with or
result in any breach or contravention of the provisions of any contract to
which the Borrower is a party, or the violation of any law, judgment, decree or
governmental order, rule or regulation applicable to the Borrower, or result in
the creation under any agreement or instrument of any security interest, lien,
charge, or encumbrance upon any of the assets of the Borrower. No approval or
authorization of any governmental authority is required to permit the
execution, delivery or performance by the Borrower of this First Amendment, or
the transactions contemplated hereby.
3.4 INCORPORATION OF CERTAIN REPRESENTATIONS. The representations
and warranties of the Borrower set forth in Section 5 of the Agreement are true
and correct in all respects on and as of the date hereof as though made on and
as of the date hereof, except as to such representations made as of an earlier
specified date.
3.5 DEFAULT. No Default or Event of Default under the Agreement
has occurred and is continuing.
4. CONDITIONS, EFFECTIVENESS. The effectiveness of this First
Amendment shall be subject to the delivery of the following to the
Administrative Agent in form and substance satisfactory to the Administrative
Agent:
4.1 AMENDMENT FEE. The Administrative Agent shall have received
an amendment fee equal to 50 basis points ($25,000) of the amount by which the
Aggregate Commitment is increased hereby.
4.2 OTHER EVIDENCE. Such other evidence with respect to the
Borrower as the Administrative Agent or any Bank may reasonably request in
connection with this First Amendment and the compliance with the conditions set
forth herein.
5. MISCELLANEOUS.
5.1 EFFECTIVENESS OF THE AGREEMENT AND THE LOAN DOCUMENTS.
Except as hereby expressly amended, the Agreement and each other Loan Document
shall each remain in full force and effect, and are hereby ratified and
confirmed in all respects on and as of the date hereof.
5.2 WAIVERS. This First Amendment is specific in time and in
intent and does not constitute, nor should it be construed as, a waiver of any
other right, power or privilege under the Agreement, or under any agreement,
contract, indenture, document or instrument mentioned in the Agreement; nor
does it preclude any exercise thereof or the exercise of any other right, power
or privilege, nor shall any future waiver of any right, power, privilege or
default hereunder, or under the Agreement or any agreement, contract,
indenture, document or instrument mentioned in the Agreement, constitute a
waiver of any other default of the same or of any other term or provision.
5.3 COUNTERPARTS. This First Amendment may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. This First Amendment shall
not become effective until the Borrower, the Administrative Agent and the Banks
shall have signed a copy hereof, and Cinemark, USA, Inc.,
-2-
<PAGE> 3
and Cinemark Mexico (USA), Inc shall have consented hereto, whether the same or
counterparts, and the same shall have been delivered to the Administrative
Agent. Borrower, in its capacity as pledgor under the Pledge agreement, hereby
consents to this First Amendment.
5.4 JURISDICTION. This First Amendment shall be governed by and
construed under the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered as of the date first written above.
CINEMARK INTERNATIONAL, INC.
By: /s/ JEFF STEDMAN
------------------------------
Name: Jeff Stedman
----------------------------
Title: Vice President
---------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION AS ADMINISTRATIVE
AGENT
By: /s/ SHANNON T. WARD
------------------------------
Name: Shannon T. Ward
----------------------------
Title: Vice President
---------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS A BANK
By: /s/ ROBERT J. LAGACE
------------------------------
Name: Robert J. Lagace
----------------------------
Title: Managing Director
---------------------------
-3-
<PAGE> 4
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
---- ---------- --------
<S> <C> <C>
Bank of America National
Trust and Savings Association $30,000,000 100.00%
TOTAL $30,000,000 100.00%
</TABLE>
-1-
<PAGE> 5
CONSENT OF CINEMARK USA, INC.
AND CINEMARK MEXICO (USA), INC.
The undersigned (a) Cinemark, USA, Inc., as signatory of the Letter of
Responsibility and (b) Cinemark Mexico (USA), Inc. as guarantor under the
Cinemark Mexico Guaranty, hereby consent to the foregoing First Amendment dated
as of the date first written above to the Credit Agreement dated as of November
18, 1997, among Cinemark International, Inc., the Banks named therein and Bank
of America National Trust and Savings Association as Administrative Agent, and
represent and warrant to the Administrative Agent and the Banks that there is
no defense, counterclaim or offset of any type or nature under the Letter of
Responsibility, and that the same remain in full force and effect as to them
after giving effect hereto and thereto. All terms used herein shall have the
same meanings as in the Credit Agreement referred to above unless otherwise
defined herein.
CINEMARK USA, INC.
By: /s/ JEFF STEDMAN
-------------------------------
Name: Jeff Stedman
-----------------------------
Title: Vice President
----------------------------
CINEMARK MEXICO (USA), INC.
By: /s/ JEFF STEDMAN
------------------------------
Name: Jeff Stedman
----------------------------
Title: Vice President
----------------------------
-1-
<PAGE> 1
EXHIBIT 10.13(c)
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement"), dated as of December 18,1997
is executed by CINEMARK INTERNATIONAL, INC., a Texas corporation (the
"Pledgor") for the benefit of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION as agent (in such capacity herein called the "Administrative
Agent") for itself and each Bank (as hereinafter defined) (the Administrative
Agent and each Bank in such capacities are referred to herein collectively as
the "Secured Parties").
RECITALS
A. Concurrently herewith, Pledgor, the banks signatories thereto
(such banks, and other banks from time to time signatory thereto and banks from
time to time purchasing a participation in a signatory bank's interest therein,
collectively, the "Banks" and individually a "Bank") and the Administrative
Agent are entering into a Credit Agreement dated as of November 18, 1997 (as
amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement"), subject to and upon the condition, among others, that the
Pledgor executes this Agreement in favor of the Secured Parties.
B. It is a condition precedent to the making of the Loans by the
Banks under the Credit Agreement that the Pledgor shall have granted the
security interest contemplated by this Agreement and the Secured Parties are
relying on the undertakings of the Pledgor contained herein.
C. Terms defined and the rules of construction in the Credit
Agreement have, unless the context otherwise requires, the same meanings in
this Agreement.
NOW, THEREFORE the parties hereto agree as follows:
1. Grant of Security Interest.
(a) As security for the payment or performance when due (whether
at stated maturity, by acceleration or otherwise) of the Obligations to any
Secured Party, now existing or hereafter arising, the Pledgor hereby pledges,
assigns and transfers to the Administrative Agent for purposes of security and
for the equal benefit of the Secured Parties, and hereby grants to the
Administrative Agent for the equal benefit of the Secured Parties, a lien on,
and security interest in, all of the Pledgor's right, title and interest in, to
and under the following, whether now or hereafter existing and whether now
owned or hereafter acquired (collectively, the "Collateral"):
(i) all shares of Cinemark Mexico (USA), Inc., a Texas
corporation (the "Issuer") owned by Pledgor as set forth on Schedule 1
(collectively, the "Pledged Shares");
(ii) all additional shares of stock of the Issuer from
time to time acquired by the Pledgor in any manner;
- 1 -
PLEDGE AGREEMENT
<PAGE> 2
(iii) the certificates representing the shares referred to
in paragraphs (i) and (ii) above; and
(iv) all dividends, cash, instruments and other property
or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the shares
referred to in paragraphs (i) and (ii) above (all of the foregoing
being the "Proceeds"); provided, however, that so long as no Event of
Default has occurred and is continuing, the Pledgor may receive free
and clear of any security interest under this Agreement any cash
dividends paid in respect of the Pledged Shares.
(b) All certificates or instruments representing or evidencing the
Collateral shall be delivered to and held by or on behalf of the Administrative
Agent pursuant hereto and shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed undated instruments of transfer or
assignment in blank, all in form and substance satisfactory to the
Administrative Agent. If an Event of Default has occurred and is continuing,
the Administrative Agent shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to register in its name or
any of its nominees any or all of the Collateral, subject only to the revocable
rights specified in Section 6(a). In addition, if an Event of Default has
occurred and is continuing, the Administrative Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
2. Security for Obligations. This Agreement secures, in accordance
with the provisions hereof, the payment of all of the Obligations to any
Secured Party under any Loan Document now existing or hereafter arising. The
Collateral shall secure the Obligations owing to the Secured Parties equally
and ratably.
3. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The chief place of business and chief executive office of the
Pledgor and the office where the Pledgor keeps its records concerning the
Collateral (hereinafter, "Records") is located at the address for notices for
the Pledgor as provided in Section 19(g).
(b) The Pledged Shares owned by the Pledgor have been duly
authorized and validly issued and are fully paid and nonassessable.
(c) The Pledged Shares constitute approximately 95% of the issued
and outstanding shares of stock or equity interests of the Issuer as of the
date hereof. There are no existing options, warrants, shareholder agreements,
calls or commitments of any character whatsoever relating to any of the Pledged
Shares owned by the Pledgor except as listed on Schedule 3.
(d) No effective financing statement or other instrument similar
in effect covering all or any part of the Collateral owned by the Pledgor is on
file in any recording office, except as may have been filed pursuant to this
Agreement.
(e) The Pledgor is lawfully possessed of ownership of the
Collateral owned by the Pledgor which exists on the date hereof, and has full
power and lawful authority to grant the Liens in and on the Collateral
hereunder.
- 2 -
PLEDGE AGREEMENT
<PAGE> 3
(f) This Agreement creates in favor of the Administrative Agent,
for the equal benefit of the Secured Parties, a valid and enforceable Lien on
the Pledged Shares owned by the Pledgor, subject to no Liens, securing the
payment and performance of the Obligations, and all filings and other actions
necessary to perfect such Lien with the priority described herein and in
Section 5.13(c) of the Credit Agreement have been duly made or taken.
(g) The Pledgor is duly organized and existing under the laws of
the state of its incorporation, and is properly licensed and in good standing
in, and where necessary to maintain its rights and privileges has complied with
the fictitious name statute of, every jurisdiction in which it is doing
business, except where the failure to be licensed or be in good standing or
comply with any such statute will not have a material adverse effect on the
ability of the Pledgor to perform its obligations hereunder or under any
instrument or agreement required hereunder.
(h) The execution, delivery and performance of this Agreement and
any instrument or agreement required hereunder are within the corporate power
of the Pledgor, have been duly authorized by, and are not in conflict with the
terms of any charter, by-laws, trust instrument or other organization papers,
as applicable, of, the Pledgor.
(i) No approval, consent, exemption or other action by, or notice
to or filing with, any governmental authority is necessary in connection with
the execution, delivery, performance or enforcement by the Pledgor of this
Agreement or any instrument or agreement required hereunder, except as may have
been obtained and certified copies of which have been delivered to
Administrative Agent.
(j) There is no law, rule or regulation, nor is there any
judgment, decree or order of any court or governmental authority binding on the
Pledgor, which would be contravened by the execution, delivery, performance or
enforcement by the Pledgor of this Agreement or any instrument or agreement
required hereunder.
(k) This Agreement is a legal, valid and binding agreement of the
Pledgor, enforceable against the Pledgor in accordance with its terms, and any
instrument or agreement required hereunder, when executed and delivered, will
be similarly legal, valid, binding and enforceable, except where enforceability
thereof may be limited by applicable law relating to bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights generally or by
the application of general principles of equity.
(l) There is no action, suit or proceeding pending against, or to
the knowledge of the Pledgor, threatened against or affecting the Pledgor,
before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity or enforceability of this
Agreement.
(m) The execution, delivery and performance by the Pledgor of this
Agreement do not and would not be expected to conflict with or result in any
breach or contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which the Pledgor is a party.
- 3 -
PLEDGE AGREEMENT
<PAGE> 4
4. Further Assurances, Supplements.
(a) The Pledgor agrees that from time to time, at the expense of
such Person, it will promptly execute and deliver all further instruments and
documents, and take all further action that may be necessary or desirable, or
that the Administrative Agent may reasonably request, in order to perfect the
Liens granted or purported to be granted hereby or to enable the Administrative
Agent to exercise and enforce its rights and remedies hereunder. Without
limiting the generality of the foregoing, the Pledgor will execute and deliver
to Administrative Agent such financing or continuation statements, or
amendments thereto, and such other instruments, endorsements or notices, as may
be necessary or desirable, or as the Administrative Agent may reasonably
request, in order to perfect and preserve the Liens granted or purported to be
granted hereby.
(b) The Pledgor hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of the
Pledgor where permitted by law.
(c) The Pledgor shall pay all filing, registration and recording
fees or refiling, re-registration and re-recording fees, and all expenses,
incident to its execution and acknowledgement of this Agreement, any agreement
supplemental hereto and any instruments of further assurance, and all federal,
state, county and municipal stamp taxes and other taxes, duties, imposts,
assessments and charges arising out of or in connection with its execution and
delivery of this Agreement, any agreement supplemental hereto and any
instruments of further assurance.
(d) The Pledgor shall warrant and defend title to the Collateral
against the claims and demands of all Persons (other than the Secured Parties
or any Person claiming by or through any Secured Party) whomsoever.
(e) The Pledgor shall, upon obtaining any additional shares of the
Issuer or any other securities constituting Collateral, promptly deliver to the
Administrative Agent a duly executed Pledge Agreement Supplement in
substantially the form of Schedule 2 hereto (a "Pledge Agreement Supplement")
identifying the additional shares which are being pledged. The Pledgor hereby
authorizes the Administrative Agent to attach each Pledge Agreement Supplement
to this Agreement and agrees that all shares listed on any Pledge Agreement
Supplement delivered to the Administrative Agent shall for all purposes
hereunder constitute Collateral. Upon any person pledging shares hereunder,
such person shall be deemed a Pledgor hereunder.
5. Covenants of Pledgor.
(a) The Pledgor shall pay, before any fine, penalty, interest or
cost attaches thereto, all taxes, assessments and other governmental or
non-governmental charges or levies now or hereafter assessed or levied against
its Pledged Shares or upon the Liens provided for herein as well as pay, or
cause to be paid, all claims for labor, materials or supplies which, if unpaid,
might by law become a Lien (other than a Permitted Lien) thereon, and will
retain copies of, and, upon request, permit the Administrative Agent or any
other Secured Party to examine, receipts showing payment of any of the
foregoing; provided, that Pledgor shall not be required to pay any
- 4 -
PLEDGE AGREEMENT
<PAGE> 5
such tax, assessment, charge or levy, the validity of which is being contested
in good faith by appropriate proceedings.
(b) The Pledgor shall give the Administrative Agent at least 30
days' prior written notice before it changes the location of its chief
executive office or the office where it keeps the Records and shall at the
expense of the Pledgor execute and deliver such instruments and documents as
required to maintain a prior perfected security interest and as reasonably
requested by the Administrative Agent. The Pledgor will hold and preserve all
Records and will, upon reasonable request by the Administrative Agent or any
Secured party at any time during normal business hours, permit the
Administrative Agent or any Secured Party to inspect and make abstracts from
such Records.
(c) The Pledgor shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral.
(d) The Pledgor shall not create or suffer to exist any Lien upon
or with respect to any of the Collateral except for the security interest
created by this Agreement or the Credit Agreement, and will defend the right,
title and interest of the Administrative Agent in and to the Pledgor's rights
to the Collateral against the claims and demands of all Persons whatsoever.
(e) The Pledgor will, upon becoming aware of such event, notify
the Administrative Agent promptly, in reasonable detail, (i) of any material
claim made or asserted against the Collateral by any Person; (ii) of any event
which could reasonably be expected to have a material adverse effect on the
value of the Collateral; (iii) of any event which could reasonably be expected
to have a material adverse effect on the ability of the Administrative Agent to
dispose of the Collateral or the rights and remedies of the Administrative
Agent; and (iv) of the occurrence of any other event which would have a
material adverse effect on the Collateral or on the security interest created
hereunder.
(f) The Pledgor agrees that it will use its best efforts to cause
the Issuer not to issue any stock or other securities in addition to or in
substitution for the Pledged Shares.
6. Voting Rights, Dividends, Etc.
(a) So long as no Event of Default shall have occurred and be
continuing (and, in the case of paragraph (i) below, so long as written notice
has not been given by the Administrative Agent to the Pledgor):
(i) the Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or any Loan Documents;
(ii) the Pledgor shall be entitled to receive and retain
free and clear of any security interest under this Agreement any and
all dividends paid in respect of the Collateral, other than any and
all:
(A) instruments and other property received,
receivable or otherwise distributed in exchange for, any
Collateral,
- 5 -
PLEDGE AGREEMENT
<PAGE> 6
(B) dividends and other distributions paid or
payable in cash in respect of any Collateral in connection
with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or
paid-in-surplus, and
(C) cash paid, payable or otherwise distributed
in redemption of, or in exchange for, any Collateral all of
which shall be, and all of which shall be forthwith delivered
to the Administrative Agent to hold as, Collateral and shall,
if received by the Pledgor, be received in trust for the
benefit of the Administrative Agent, be segregated from the
other property or funds of the Pledgor, and be forthwith
delivered to the Administrative Agent as Collateral in the
same form as so received (with any necessary endorsement).
(iii) The Administrative Agent shall execute and deliver
(or cause to be executed and delivered) to the Pledgor, all such
proxies and other instruments as the Pledgor may reasonably request
for the purpose of enabling the Pledgor to exercise the voting and
other rights which it is entitled to exercise pursuant to paragraph
(i) above and to receive the dividends which it is authorized to
receive and retain pursuant to paragraph (ii) above.
(b) If an Event of Default has occurred and is continuing:
(i) All rights of the Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a)(i) above shall cease upon written
notice thereof from the Administrative Agent, and all such rights
shall thereupon become vested in the Administrative Agent who shall
thereupon have the sole right to exercise such voting and other
consensual rights.
(ii) All rights of the Pledgor to receive the dividends
which it would otherwise be authorized to receive and retain pursuant
to Section 6(a)(ii) above shall cease, and all such rights shall
thereupon become vested in the Administrative Agent who shall
thereupon have the sole right to receive and hold as Collateral such
dividends.
(iii) All dividends which are received by the Pledgor
contrary to the provisions of Section 6(a)(ii) shall be received in
trust for the benefit of the Administrative Agent, shall be segregated
from other funds of the Pledgor and shall be forthwith paid over to
the Administrative Agent as Collateral in the same form as so received
(with any necessary endorsement).
(c) In order to permit the Administrative Agent to exercise the
voting and other rights which it may be entitled to exercise pursuant to
Section 6(a)(i) above, and to receive all dividends and distributions which it
may be entitled to receive under Section 6(a)(ii) above, the Pledgor shall, if
necessary, upon written notice from the Administrative Agent, from time to time
during the continuance of an Event of Default execute and deliver to the
Administrative Agent appropriate dividend payment orders and other instruments
as the Administrative Agent may reasonably request.
7. Administrative Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Administrative Agent the Pledgor's
attorney-in-fact (which appointment
- 6 -
PLEDGE AGREEMENT
<PAGE> 7
as attorney-in-fact shall be coupled with an interest), with full authority to
act in the place and stead of the Pledgor and in the name of the Pledgor or
otherwise, from time to time if an Event of Default has occurred and is
continuing or to the extent contemplated by Section 8 hereof in the
Administrative Agent's discretion to take any action and to execute any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
ask, demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in connection with the
Collateral, to receive, endorse and collect any drafts or other instruments,
documents and chattel paper in connection therewith, and to file any claims or
take any action or institute any proceedings which the Administrative Agent may
deem to be necessary or desirable for the collection thereof or to enforce
compliance with the terms and conditions of the Assigned Agreements or this
Agreement. Notwithstanding the foregoing, the Administrative Agent shall not be
obligated to exercise any right or duty as attorney-in-fact, and shall have no
duties to the Assignor in connection therewith.
8. Administrative Agent May Perform
(a) If the Pledgor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent may, as provided for by
the terms of this Agreement, itself perform or comply, or otherwise cause
performance or compliance, with such Agreement. The reasonable expenses of the
Administrative Agent incurred in connection with such performance or compliance
shall be payable by the Pledgor to the Administrative Agent and shall
constitute Obligations secured hereby; provided, that the payment to the
Administrative Agent shall be made solely through the application of proceeds
in accordance with Section 9(a) hereof. The Administrative Agent agrees to
notify the Pledgor promptly after incurring any expenses pursuant to this
Section 8; provided, however, that the failure to provide such notice shall not
affect the Administrative Agent's right to reimbursement from the Pledgor.
(b) The Administrative Agent shall use reasonable care with
respect to the Collateral in its possession or under its control. Except as set
forth in the preceding sentence, the Administrative Agent shall not have any
duty as to any Collateral in its possession or control or in the possession or
control of any agent or nominee of it or as to any income thereon or as to the
preservation of rights against parties or any other rights pertaining thereto.
9. Rights and Remedies.
(a) If (i) an Event of Default shall have occurred and be
continuing and (ii) any of the Obligations shall have been declared to be, or
shall have become, due and payable, then, in addition to any other rights and
remedies provided for herein or which may otherwise be available, the
Administrative Agent may, without any further demand, advertisement or notice
(except as expressly provided for below in this Section 9(a)), exercise all the
rights and remedies of a secured party under the Uniform Commercial Code of the
State of New York (the "UCC") (whether or not the UCC applies to the affected
Collateral), and in addition: (i) may apply the moneys, if any, then held by it
as part of the Collateral, for the following purposes and in the following
order:
- 7 -
PLEDGE AGREEMENT
<PAGE> 8
(1) first, to the payment of (A) all costs and expenses
relating to the sale of the Collateral and collection of amounts owing
hereunder, including reasonable attorneys' fees and disbursements and
the just compensation of the Administrative Agent for services
rendered in connection therewith or in connection with any proceeding
to sell if a sale is not completed, and (B) all charges, expenses and
advances incurred or made by the Administrative Agent in order to
protect the Lien of this Agreement or the security afforded hereby,
together with interest at the rate specified in Section 2.10(c) of the
Credit Agreement;
(2) second, to the payment in full of all of the
Obligations owed to the Secured Parties hereunder or under any Loan
Document (to be paid to the Secured Parties in accordance with the
aggregate outstanding amounts of such Obligations owed to each Secured
Party); and
(3) third, the balance, if any, shall be paid to the
Pledgor or to such other Person as shall be lawfully entitled to
receive such surplus (as determined by a court of competent
jurisdiction, if such procedure is available under applicable law);
and (ii) if there shall be no such moneys or the moneys so applied shall be
insufficient to satisfy in full all Obligations, may sell the Collateral, or
any part thereof, as hereinafter provided in this Section 9(a) and otherwise to
the fullest extent permitted by law. The Collateral may be sold in one or more
sales, at public or private sale, conducted by any officer or agent of, or
auctioneer or attorney for, the Administrative Agent, at the Administrative
Agent's place of business or elsewhere, for cash, upon credit or for other
property, for immediate or future delivery, and at such price or prices and on
such terms as the Administrative Agent shall deem appropriate. The
Administrative Agent or any other Secured Party may be the purchaser of any or
all of the Collateral so sold at a public sale and, to the extent permitted by
law, at a private sale and thereafter hold the same, absolutely free from any
right or claim of whatsoever kind, and, the obligations of the Pledgor to such
purchaser may be applied as a credit against the purchase price. The
Administrative Agent, may, in its sole discretion (in the case of Collateral
consisting of securities) or if commercially reasonable (in the case of all
other Collateral), at any such sale restrict the prospective bidders or
purchasers as to their number, nature of business and investment intention.
Upon any public or private sale the Administrative Agent shall have the right
to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser (including the Administrative Agent or any other Secured
Party) at any such sale shall hold the Collateral so sold, absolutely free from
any claim or right of whatsoever kind, including any equity or right of
redemption, of the Pledgor, and the pledgor hereby specifically waives, to the
full extent it may lawfully do so, all rights of redemption, stay or appraisal
which it has or may have under any rule of law or statute now existing or
hereafter adopted. The Administrative Agent shall give the Pledgor at least ten
days' notice (which the Pledgor agrees is reasonable notification within the
meaning of Section 9-504(3) of the UCC) of any such public or private sale. Any
public sale shall be held at such time or times within ordinary business hours
as the Administrative Agent shall fix in the notice of such sale. At any such
sale the Collateral may be sold in one lot as an entirety or in separate
parcels. The Administrative Agent shall not be obligated to make any sale
pursuant to any such notice. The Administrative Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
such sale, and any such sale may be
- 8 -
PLEDGE AGREEMENT
<PAGE> 9
made at any time or place to which the same may be so adjourned without further
notice or publication. In case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the full selling price is paid by the purchaser
thereof, but neither the Administrative Agent nor any other Secured Party shall
incur any liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold, and, in case of any such failure, such Collateral
may again be sold pursuant to the provisions hereof
(b) Instead of exercising the power of sale provided in Section
9(a) hereof, the Administrative Agent may proceed by a suit or suits at law or
in equity to foreclose the security interest under this Agreement and sell the
Collateral or any portion thereof under a judgment or decree of a court or
courts of competent jurisdiction.
(c) The Administrative Agent as attorney-in-fact pursuant to
Section 7 hereof may, in the name and stead of the Pledgor, make and execute
all conveyances, assignments and transfers of the Collateral sold pursuant to
Section 9(a) or Section 9(b) hereof, and the Pledgor hereby ratifies and
confirms all that the Administrative Agent, as said attorney-in-fact, shall do
by virtue hereof. Nevertheless, the Pledgor shall, if so requested by the
Administrative Agent, ratify and confirm any sale or sales by executing and
delivering to the Administrative Agent, or to such purchaser or purchasers, all
such instruments as may, in the reasonable judgment of the Administrative
Agent, be advisable for the purpose.
(d) The receipt by the Administrative Agent of the purchase money
paid at any sale made by it shall be a sufficient discharge therefor to any
purchaser of the Collateral, or any portion thereof, sold as aforesaid; and no
such purchaser (or the representatives or assigns of such purchaser), after
paying such purchase money and receiving such receipt, shall be bound to see to
the application of such purchase money or any part thereof or in any manner
whatsoever be answerable for any loss, misapplication or nonapplication of any
such purchase money, or any part thereof, or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
(e) The Administrative Agent shall incur no liability as a result
of the sale of the Collateral, or any part thereof, at any private sale
conducted in a commercially reasonable manner. The Pledgor hereby waives, to
the full extent permitted by applicable law, any claims against the
Administrative Agent and/or any Secured Party arising by reason of the fact
that the price at which the Collateral, or any part thereof, may have been sold
at a private sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even if
the Administrative Agent accepts the first offer received which the
Administrative Agent in good faith deems to be commercially reasonable under
the circumstances and does not offer the Collateral to more than one offeree.
To the fullest extent permitted by law, the Pledgor shall have the burden of
proving that any such sale of the Collateral was conducted in a commercially
unreasonable manner.
(f) Each and every right and remedy of the Administrative Agent
shall, to the extent permitted by law, be cumulative and shall be in addition
to any other remedy given hereunder or under the Credit Agreement or now or
hereafter existing at law or in equity or by statute.
- 9 -
PLEDGE AGREEMENT
<PAGE> 10
(g) The Administrative Agent may participate in any
recapitalization, reclassification, reorganization, consolidation, redemption,
stock split, merger, or liquidation of the Issuer, and in connection therewith
deposit or surrender control of the Collateral, accept money or other property
in exchange for the Collateral, and take such action as deemed proper by the
Administrative Agent in connection therewith, and any other money or property
received in exchange for the collateral shall be applied to satisfy the
Obligations or held by the Administrative Agent thereafter as Collateral
pursuant to the provisions hereof.
10. Sales of Pledged Shares.
(a) If, at any time during the continuance of an Event of Default,
the Administrative Agent in its sole discretion determines that in connection
with any actual or contemplated exercise of its rights to sell the whole or any
part of the Collateral hereunder, it is necessary or advisable to effect a
public registration of all or part of the Collateral pursuant to the Securities
Act of 1933, as from time to time amended (or any similar statute then in
effect)(the "Securities Act"), the Pledgor shall:
(i) prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement with respect to the
Collateral and use its reasonable best efforts to cause such
registration statement to become and remain effective;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of the
Collateral covered by such registration statement whenever the
Administrative Agent shall desire to sell or otherwise dispose of the
Collateral;
(iii) furnish to the Administrative Agent such numbers of
copies of a prospectus and a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other documents
as the Administrative Agent may request in order to facilitate the
public sale or other disposition of the Collateral by the
Administrative Agent;
(iv) use its reasonable best efforts to register or
qualify the Collateral covered by such registration statement under
such other securities or blue sky laws of such jurisdictions within
the United States of America as the Administrative Agent shall
request, and do such other reasonable acts and things as may be
required of it to enable the Administrative Agent to consummate the
public sale or other disposition in such jurisdictions of the
Collateral by the Administrative Agent;
(v) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable
an earnings statement which shall satisfy the provisions of the
Securities Act; and
- 10 -
PLEDGE AGREEMENT
<PAGE> 11
(vi) do or cause to be done all such other acts as may be
necessary to make such sale of the Collateral or any part thereof
valid and binding and in compliance with applicable law.
(b) The Pledgor recognizes that, by reason of the aforementioned
requirements and certain prohibitions contained in the Securities Act and
applicable state securities laws, the Administrative Agent may, at its option,
elect not to require the Pledgor to register all or any part of the Collateral
and may therefore be compelled, with respect to any sale of all or any part of
the Collateral, to limit purchasers to those who will agree, among other
things, to acquire such securities for their own account, for investment, and
not with a view to the distribution or resale thereof. The Pledgor acknowledges
and agrees that any such sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale without such
restrictions and, notwithstanding such circumstances, agrees that any such sale
conducted in good faith shall be deemed to have been made in a commercially
reasonable manner. The Administrative Agent shall be under no obligation to
delay the sale of any of the Pledged Shares for the period of time necessary to
permit the Pledgor to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if the Pledgor
would agree to do so.
(c) If the Administrative Agent determines to exercise its right
to sell any or all of the Collateral, upon written request, the Pledgor shall
and shall cause, each of its Subsidiaries to, from time to time, furnish to the
Administrative Agent all such information as the Administrative Agent may
request in order to determine the number of shares and other instruments
included in the Collateral which may be sold by the Administrative Agent as
exempt transactions under the Securities Act and rules of the SEC thereunder,
as the same are from time to time in effect.
11. Continuing Assignment and Security Interest; Transfer of
Notes. This Agreement shall create a continuing assignment of and security
interest in the Collateral and shall (a) remain in full force and effect until
payment in full of the Obligations and all other amounts owing to each Secured
Party under any Loan Documents and the termination or expiration of the
Commitments, (b) be binding upon the Pledgor, its successors and assigns and
(c) inure, together with the rights and remedies of the Administrative Agent
hereunder, to the benefit of the Administrative Agent and the Secured Parties
and their respective successors, transferees and assigns. Without limiting the
generality of the foregoing, any Bank may assign or otherwise transfer its
rights and obligations under any Loan Document to any other Person or entity,
and such other Person or entity shall thereupon become vested with all the
benefits in respect thereof granted to such Bank herein or otherwise, all as
provided in, and to the extent set forth in, the Loan Documents. The Pledgor
may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the Administrative Agent. Upon
the payment in full of the Obligations and termination of the commitments
(exclusive of future, contingent or unliquidated amounts arising under
indemnity agreements), the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to the Pledgor. Upon any such
termination, the Administrative Agent will, at the Pledgor's expense, execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
12. No Notices, etc. No Secured Party shall be under any duty or
obligation whatsoever (a) to make or give any presentments, demands for
performances, notices of
- 11 -
PLEDGE AGREEMENT
<PAGE> 12
nonperformance, protests, notices of protest or notices of dishonor in
connection with any Obligations or evidences of Obligations held by Secured
Parties as Collateral, or in connection with any Obligation or evidences of
Obligations which constitute in whole or in part the Obligations secured
hereunder, or (b) to give the Pledgor notice of, or to exercise any
subscription rights or privileges, any rights or privileges to exchange,
convert or redeem or any other rights or privileges relating to or affecting
any Collateral held by Secured Parties.
13. Delivery of Collateral. The Secured Parties may at any time
cause the Administrative Agent to deliver the Collateral or any part thereof to
the Pledgor and the receipt of the Pledgor shall be a complete and full
acquittance for the Collateral so delivered, and Secured Parties shall
thereafter be discharged from any liability or responsibility therefor.
14. Attorneys Fees.
(a) The Pledgor agrees to pay to each Secured Party the amount of
any and all expenses, including expenses incurred by the Administrative Agent,
and the reasonable fees and expenses of its counsel (including, without
limitation, the allocated cost of in-house counsel) and of any experts, which
such Secured Party may incur in connection with (i) the custody or preservation
of, or the sale of, collection from, or other realization upon, any of the
Collateral; (ii) the exercise or enforcement of any of the rights of any
Secured Party hereunder; or (iii) the failure by the Pledgor to perform or
observe any of the provisions hereof, provided that the payment of such sums
shall be made to the Secured Parties solely through the application of proceeds
in accordance with Section 9(a) hereof.
(b) The Pledgor agrees to indemnify and hold each Secured Party
harmless from and against any taxes, liabilities, claims and damages, including
attorney's fees and disbursements (including, without limitation, the allocated
cost of in-house counsel), and other expenses incurred or arising by reason of
the taking or the failure to take action by any Secured Party in respect of any
transaction effected under this Agreement or in connection with the Lien
provided for herein, including, without limitation, any taxes payable with
respect to the Collateral or in connection with any transaction contemplated by
this Agreement and any and all costs, losses, liabilities, claims, damages or
expenses incurred by any Secured Party arising out of any investigation,
litigation or other proceeding related to this Agreement or any transaction
contemplated hereby (all the foregoing, collectively, the "Indemnified
Liabilities"), except for the gross negligence and willful misconduct of such
Secured Party; provided, that such indemnification shall be made to the Secured
Parties solely through the application of proceeds in accordance with Section
9(a) hereof. The Pledgor shall have the right to undertake, conduct and control
through counsel of its own choosing (which counsel shall be acceptable to the
Secured Parties acting reasonably) and at the sole expense of the Pledgor, the
conduct and settlement of any Indemnified Liabilities, and the Secured Parties
shall cooperate with the Pledgor in connection therewith; provided that the
Pledgor shall permit the Secured Parties to participate in such conduct and
settlement through counsel chosen by the Secured Parties, but the fees and
expenses of such counsel shall be borne by the Secured Parties. Notwithstanding
the foregoing, the Secured Parties shall have the right to employ their own
counsel, and the reasonable fees and expenses of such counsel shall be at the
Pledgor's cost and expense if the interests of the Pledgor and the Secured
Parties become adverse in any such claim or course of action; provide, however,
the Pledgor, in such event, shall only be liable for the reasonable
- 12 -
PLEDGE AGREEMENT
<PAGE> 13
legal expenses of one counsel for all of such Secured Parties. The Pledgor
shall not be liable for any settlement of any claim or action effected without
its prior written consent, such consent not to be unreasonably withheld. All
amounts owing under this Section 14(b) shall be paid within 30 days after
demand.
(c) The obligations of the Pledgor under this Section 14 shall
survive the termination of this Agreement.
15. Miscellaneous.
(a) Headings used in this Agreement are for convenience of
reference only and do not constitute part of this Agreement for any purpose.
(b) No failure on the part of the Administrative Agent or any of
its agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent
or any of its agents of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.
(c) If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be liberally construed in favor of the Administrative Agent and the
Banks in order to carry out the intentions of the parties hereto as nearly as
may be possible and the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
(d) The Administrative Agent may employ agents and
attorneys-in-fact in connection herewith and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith.
(e) The agreements of the parties hereto are solely for the benefit of
the Secured Parties, and no Person (other than the parties hereto and the
Secured Parties) shall have any rights hereunder.
(f) No amendment or waiver of any provision of this Agreement nor
consent to any departure by the Pledgor herefrom shall in any event be
effective unless the same shall be in writing and signed by the Administrative
Agent, the Pledgor, and then such waiver or consent shall be effective only in
the specific instance and for the specified purpose for which given.
(g) All notices, requests, demands, waivers or other
communications to or upon the respective parties hereto shall be in writing
delivered in person, by mail postage prepaid, by nationally recognized
overnight courier or by telecopy and shall be deemed to have been duly given or
made when received, if mailed or delivered by courier, or when personally
delivered or transmitted by telecopy, addressed to the party to which such
notice, request, demand, waiver or other communication is required or permitted
to be given or made hereunder at, if to the Pledgor, the address for the
Borrower set forth in Schedule 10.2 to the Credit Agreement and if to the
Administrative Agent, the address set forth for the Administrative Agent in the
Credit
- 13 -
PLEDGE AGREEMENT
<PAGE> 14
Agreement, or such other address of which such party shall have notified in
writing the party giving such notice.
16. Governing Law, Terms. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, AND EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, ARE GOVERNED BY THE LAW OF ANY JURISDICTION OTHER THAN
THE STATE OF NEW YORK. TERMS USED IN ARTICLE 9 OF THE UCC ARE USED HEREIN AS
THEREIN DEFINED.
17. Waiver of Jury Trial. EACH PARTY HERETO WAIVES THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY
ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH PARTY HERETO AGREES THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION
HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
- 14 -
PLEDGE AGREEMENT
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto, by their officers duly
authorized, have caused this Agreement to be duly executed and delivered as of
the day and year first above written.
CINEMARK INTERNATIONAL, INC.
By: /s/ JEFF STEDMAN
----------------------------
Name: Jeff Stedman
--------------------------
Title: Vice President
-------------------------
Agreed to:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By: /s/ JANICE HAMMOND
----------------------------
Janice Hammond
Vice President
- 15 -
PLEDGE AGREEMENT
<PAGE> 16
SCHEDULE 1
TO
PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement dated
as of December 18, 1997 made by Cinemark International, Inc. to Bank of America
National Trust and Savings Association, as Administrative Agent
Stock of Cinemark Mexico (USA), Inc.
<TABLE>
<CAPTION>
Class Stock Percentage Number
of Certificate of Par of
Stock No(s). Ownership Value Shares
- ----- ----------- ---------- ----- ------
<S> <C> <C> <C> <C>
</TABLE>
- 1 -
PLEDGE AGREEMENT
<PAGE> 17
SCHEDULE 2
TO
PLEDGE AGREEMENT
PLEDGE AGREEMENT SUPPLEMENT
This Pledge Agreement Supplement, dated as of _____________________,
is delivered pursuant to Section 4 of the Pledge Agreement referred to below.
The undersigned hereby agrees that this Pledge Agreement Supplement may be
attached to the Pledge Agreement, dated as of December 18, 1997 (the "Pledge
Agreement", the terms defined therein and not otherwise defined herein being
used as therein defined), made by Cinemark International, Inc. to Bank of
America National Trust and Savings Association as Administrative Agent for its
benefit and the benefit of the Secured Parties and that the shares listed on
this Pledge Agreement Supplement shall be and become part of the Collateral
referred to in the Pledge Agreement and shall secure all Obligations.
The undersigned agrees that the securities listed below shall for all
purposes constitute Collateral and shall be subject to the security interest
created by the Pledge Agreement.
The undersigned hereby certifies that the representations and
warranties set forth in Section 3 of the Pledge Agreement are true and correct
as to the Collateral listed herein on and as of the date hereof.
CINEMARK INTERNATIONAL, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
<TABLE>
<CAPTION>
Class Stock Percentage Number
of Certificate of Par of
Stock No(s). Ownership Value Shares
- ----- ----------- ---------- ----- ------
<S> <C> <C> <C> <C>
</TABLE>
- 1 -
PLEDGE AGREEMENT
<PAGE> 18
SCHEDULE 3
TO
PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement dated
as of December 18, 1997 made by Cinemark International, Inc. to Bank of America
National Trust and Savings Association, as Administrative Agent
Existing options, warrants, shareholder
agreements, calls or commitments
NONE
- 2 -
PLEDGE AGREEMENT
<PAGE> 1
EXHIBIT 10.13(d)
CINEMARK MEXICO GUARANTY
TO: Bank of America National Trust as
Administrative Agent (the "Administrative Agent")
PRELIMINARY STATEMENTS:
A. Reference is made to the Credit Agreement dated as of November
18, 1997 (as from time to time amended, extended, restated, modified or
supplemented, the "Credit Agreement;" capitalized terms used herein shall have
the meanings assigned to them in the Credit Agreement) among Cinemark
International, Inc. (the "Borrower"), the banks from time to time party thereto
(the "Banks") and Bank of America National Trust and Savings Association, as
Administrative Agent (the "Administrative Agent") for said Banks.
B. Cinemark Mexico (USA), Inc., a Texas corporation ("Guarantor")
is a Wholly-Owned Subsidiary of the Borrower and has derived, and expects to
continuing deriving, direct and indirect benefits from extensions of credit made
to the Borrower, and now desires to guaranty the Obligations.
NOW, THEREFORE, the Guarantor agrees as follows:
1. For valuable consideration, the Guarantor unconditionally,
absolutely and irrevocably guarantees and promises to pay to the Administrative
Agent, or order, on demand made during the existence of an Event of Default, in
lawful money of the United States and in immediately available funds, any and
all present or future Obligations owing to the Banks and the Administrative
Agent (collectively, the "Guarantied Parties"). The term Obligations has the
meaning assigned to such term under the Credit Agreement and is used herein in
its most comprehensive sense and includes any and all advances, debts,
obligations, and liabilities of the Borrower, now, or hereafter made, incurred,
or created, whether voluntary or involuntarily, and however arising, including,
without limitation, any and all reasonable attorneys' fees (including the
reasonable allocated cost of inhouse counsel), costs, premiums, charges, or
interest owed by the Borrower to the Guarantied Parties, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
whether the Borrower may be liable individually or jointly with others, whether
recovery upon such indebtedness may be or hereafter becomes barred by any
statute of limitations or whether such indebtedness may be or hereafter become
otherwise unenforceable.
2. This Guaranty is a continuing guaranty which relates to any
Obligations, including those which arise under successive transactions which
shall either cause the Borrower to incur new Obligations, continue the
Obligations from time to time, or renew them after they have been satisfied.
The Guarantor agrees that nothing shall discharge or satisfy its obligations
created hereunder except for the full payment of the Obligations.
-1-
CINEMARK MEXICO GUARANTY
<PAGE> 2
Any payment by the Guarantor shall not reduce its obligations hereunder with
respect to guarantying all Obligations from time to time outstanding.
3. The Guarantor agrees that it is directly and primarily liable to
the Administrative Agent for the benefit of the Guarantied Parties, that its
obligations hereunder are independent of the Obligations of the Borrower, or of
any other guarantor, and that a separate action or actions may be brought and
prosecuted against the Guarantor, whether action is brought against the
Borrower or whether the Borrower is joined in any such action or actions. The
Guarantor agrees that any releases which may be given by the Administrative
Agent and the Guarantied Parties to the Borrower or any other guarantor shall
not release it from this Guaranty.
4. The obligations of the Guarantor under this Guaranty shall not be
affected, modified or impaired upon the occurrence from time to time of any of
the following, whether or not with notice to or the consent of the Guarantor:
(a) the compromise, settlement, change, modification, amendment
(whether material or otherwise) or partial termination of any or all of the
Obligations;
(b) the failure to give notice to the Guarantor of the occurrence of
any Event of Default under the terms and provisions of the Credit Agreement;
(c) the waiver of the payment, performance or observance of any of
the Obligations;
(d) the taking or omitting to take any actions referred to in any
Loan Document or of any action under this Guaranty;
(e) any failure, omission or delay on the part of the Administrative
Agent and/or the Guarantied Parties to enforce, assert or exercise any right,
power or remedy conferred in this Guaranty, the Credit Agreement, any other
Loan Document or any other indulgence or similar act on the part of the
Administrative Agent and/or the Guarantied Parties in good faith and in
compliance with applicable law;
(f) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all of the assets, marshalling of
assets, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors or readjustment of, or other similar proceedings which affect the
Guarantor, any other guarantor of any of the Obligations of the Borrower or any
of the assets of any of them, or any allegation of invalidity or contest of the
validity of this Guaranty in any such proceeding;
(g) to the extent permitted by law, the release or discharge of any
other guarantors of the Obligations from the performance or observance of any
obligation, covenant or agreement contained in any guaranties of the
Obligations by operation of law; or
-2-
CINEMARK MEXICO GUARANTY
<PAGE> 3
(h) the default or failure of any other guarantors of the Obligations
fully to perform any of their respective obligations set forth in any such
guaranties of the Obligations.
To the extent any of the foregoing refers to any actions which the
Administrative Agent or the Guarantied Parties may take, the Guarantor hereby
agrees that the Administrative Agent and/or the Guarantied Parties may take
such actions in such manner, upon such terms, and at such times as the
Administrative Agent or the Guarantied Parties, in their discretion, deem
advisable, without, in any way or respect, impairing, affecting, reducing or
releasing the Guarantor from its undertakings hereunder and the Guarantor
hereby consents to each and all of the foregoing actions, events and
occurrences.
5. The Guarantor hereby waives:
(a) any and all rights to require the Administrative Agent or the
Guarantied Parties to prosecute or seek to enforce any remedies against the
Borrower or any other party liable to the Administrative Agent or the
Guarantied Parties on account of the Obligations;
(b) any right to assert against the Administrative Agent or the
Guarantied Parties any defense (legal or equitable), set-off, counterclaim, or
claim which the Guarantor may now or at any time hereafter have against the
Borrower or any other party liable to the Administrative Agent or the
Guarantied Parties in any way or manner under the Credit Agreement;
(c) all defenses, counterclaims and off-sets of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity or enforceability of any Loan Document and the security
interest granted pursuant thereto;
(d) any defense arising by reason of any claim or defense based upon
an election of remedies by the Administrative Agent or the Guarantied Parties
including, without limitation, any direction to proceed by judicial or
nonjudicial foreclosure or by deed in lieu thereof, which, in any manner
impairs, affects, reduces, releases, destroys or extinguishes the Guarantor's
subrogation rights, rights to proceed against the Borrower for reimbursement,
or any other rights of the Guarantor to proceed against the Borrower, against
any other guarantor, or against any other security, with the Guarantor
understanding that the exercise by the Administrative Agent and/or the
Guarantied Parties of certain rights and remedies may offset or eliminate the
Guarantor's right of subrogation against the Borrower, and that the Guarantor
may therefore incur partially or totally non-reimbursable liability hereunder;
and
(e) all presentments, demands for performance, notices of
non-performance, protests, notices of protest, notices of dishonor, notices of
default, notice of acceptance of this Guaranty, and notices of the existence,
creation, or incurring of new or additional indebtedness, and all other notices
or formalities to which the Guarantor may be entitled.
-3-
CINEMARK MEXICO GUARANTY
<PAGE> 4
6. The Guarantor hereby agrees that unless and until all Obligations
have been paid to the Administrative Agent and the Guarantied Parties in full,
it shall not have any rights of subrogation, reimbursement or contribution as
against the Borrower or any other guarantor, if any, and shall not seek to
assert or enforce the same. The Guarantor understands that the exercise by
Administrative Agent of certain rights and remedies contained in the Loan
Documents may affect or eliminate the Guarantor's right of subrogation if any,
against the Borrower and that the Guarantor may therefore incur a partially or
totally non-reimbursable liability hereunder; nevertheless, the Guarantor
hereby authorizes and empowers the Administrative Agent and the Guarantied
Parties to exercise, in their sole discretion, any right and remedy, or any
combination thereof, which may then be available, since it is the intent and
purpose of the Guarantor that the obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
7. The Guarantor is presently informed of the financial condition of
the Borrower and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Obligations. The
Guarantor hereby covenants that it will continue to keep itself informed of the
financial condition of the Borrower, the status of other guarantors, if any,
and of all other circumstances which bear upon the risk of nonpayment. The
Guarantor hereby waives its right, if any, to require the Administrative Agent
or the Guarantied Parties to disclose to it any information which the
Administrative Agent or any Bank may now or hereafter acquire concerning such
condition or circumstances including, but not limited to, the release of any
other guarantor.
8. The Administrative Agent and each Bank's books and records
evidencing the Obligations shall be admissible in any action or proceeding and
shall be binding upon the Guarantor for the purpose of establishing the terms
set forth therein and shall constitute prima facie proof thereof.
9. Notwithstanding anything to the contrary contained herein, the
Guarantor's liability pursuant to this Guaranty shall be limited to the greater
of: (a) the 'reasonably equivalent value,' received by the Guarantor or any of
its subsidiaries arising out of the Loan Documents (including, without
limitation, repayment of intercompany or third party debt of, investments made
in, and capital contributions, advances and loans made to, the Guarantor or any
of its subsidiaries, directly or indirectly, by Borrower or any other
subsidiary with, or as a direct or indirect result of obtaining, the proceeds
of any credit extended under the Loan Documents) in exchange for or in
connection with the Guarantor's guaranty of the Obligations, and (b) 95% of the
excess of (i) a 'fair valuation' of the amount of the assets and other property
of the Guarantor and its subsidiaries taken as a whole as of the applicable
date of determination of the incurrence of the Guarantor's obligations
hereunder over (ii) a 'fair valuation, of the Guarantor's and its subsidiaries'
debts taken as a whole as of such date, but excluding liabilities arising under
this Guaranty and excluding all liabilities owing by the Guarantor and its
subsidiaries taken as a whole to the Borrower or any other Subsidiary or
otherwise subordinated to the Guarantor's obligations hereunder, it being
understood that a portion of such indebtedness owing to Borrower shall be
discharged on a dollar-for-dollar basis in an amount equal to
-4-
CINEMARK MEXICO GUARANTY
<PAGE> 5
the amount paid by the Guarantor hereunder. The meaning of the terms
'reasonably equivalent value' and 'fair valuation,' and the calculations of
assets and other property and debts, shall be determined in accordance with the
applicable federal and New York state laws in effect on the date hereof
governing the determination of the insolvency of a debtor and to further the
intent of all parties hereto to maximize the amount payable by the Guarantor
without rendering it insolvent or leaving it with an unreasonably small amount
of capital in relation to its business, in either case, at the applicable date
for the determination of the incurrence of its obligations hereunder; provided,
however, the Guarantor agrees, to the maximum extent permitted by law, that
'fair valuation' of the Guarantor's and its subsidiaries' assets and other
properties means the fair market sales price as would be obtained in an
arms-length transaction between competent, informed and willing parties under
no compulsion to sell or buy or collections thereof obtained in the ordinary
course of business and 'fair valuation' of its debts means the amount, in light
of the applicable circumstances, at the time, for which the Guarantor or its
subsidiaries is liable for matured known liquidated liabilities or would
reasonably be expected to become liable on contingent or unliquidated
liabilities as they mature and taking into consideration the nature of any such
contingency and the probability that liability would be imposed.
10. The Guarantor represents and warrants for and with respect to
itself that:
(a) The Guarantor: (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; (ii) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and execute, deliver, and perform its obligations under, the Loan Documents;
(iii) is duly qualified as a foreign corporation, licensed and in good standing
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification; and (iv)
is in compliance with all Requirements of Law; except, in each case referred to
in clause (ii), (iii) or clause (iv), to the extent that the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by all necessary corporate action, and do
not and would not be expected to: (i) contravene the terms of any of the
Guarantor's articles of incorporation, bylaws or other organization documents;
(ii) conflict with or result in any breach or contravention of, or the creation
of any Lien under, any document evidencing any Contractual Obligation to which
the Guarantor is a party or any order, injunction, writ or decree of any
Governmental Authority to which the Guarantor or its Property is subject; or
(iii) violate any Requirement of Law.
(c) No approval, consent, exemption, authorization, or other action
by, or notice to, or filing with, any Governmental Authority is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, the Guarantor of the Guaranty, except for routine
corporate filings to maintain the corporate good standing of the Guarantor.
-5-
CINEMARK MEXICO GUARANTY
<PAGE> 6
(d) This Guaranty constitutes the legal, valid and binding
obligations of the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
(e) There is no action, suit or proceeding pending against, or to the
knowledge of the Guarantor, threatened against or affecting the Guarantor,
before any court or arbitrator or any governmental body, agency or official
which in any manner draws into question the validity or enforceability of this
Guaranty; and
(f) The execution, delivery and performance by the Guarantor of this
Guaranty does not constitute, to the best knowledge of the Guarantor, a
"fraudulent conveyance," "fraudulent obligation" or "fraudulent transfer"
within the meanings of the Uniform Fraudulent Conveyances Act or Uniform
Fraudulent Transfer Act, as enacted in any jurisdiction.
11. All notices and other communications hereunder shall be
delivered, in the manner and with the effect provided in the Credit Agreement
and, in the case of the Guarantor, in care of the Borrower.
12. This Guaranty shall be binding upon the successors and assigns of
the Guarantor and shall inure to the benefit of the Administrative Agent's and
the Guarantied Parties' successors and assigns. This Guaranty cannot be
assigned by the Guarantor without the prior written consent of the
Administrative Agent and the Guarantied Parties which shall be in the
Administrative Agent's and the Guarantied Parties' sole and absolute
discretion.
13. No failure or delay by the Administrative Agent or the Guarantied
Parties in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
14. The Guarantor shall pay (a) all reasonable out-of-pocket expenses
of the Administrative Agent and the Guarantied Parties, including reasonable
fees and disbursements of counsel (including the allocated cost of inhouse
counsel and staff) for the Administrative Agent, in connection with any waiver
or consent hereunder or any amendment hereof and (b) all reasonable
out-of-pocket expenses incurred by the Administrative Agent and the Guarantied
Parties, including fees and disbursements of counsel (including the allocated
cost of inhouse counsel and staff), in connection with the enforcement of this
Guaranty (whether or not suit is brought).
15. No modification of this Guaranty shall be effective for any
purpose unless it is in writing and executed by an officer of the
Administrative Agent authorized to do so. This Guaranty merges all
negotiations, stipulations and provisions relating to the
-6-
CINEMARK MEXICO GUARANTY
<PAGE> 7
subject matter of this Guaranty which preceded or may accompany the execution
of this Guaranty.
15. (a) THIS GUARANTY SHALL BE GOVERNED BY, AND, CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE
ADMINISTRATIVE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE GUARANTOR AND THE ADMINISTRATIVE AGENT CONSENTS,
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF THE GUARANTOR AND THE ADMINISTRATIVE AGENT IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
THIS GUARANTY OR ANY DOCUMENT RELATED HERETO. THE GUARANTOR AND THE
ADMINISTRATIVE AGENT EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
16. WAIVER OF JURY TRIAL. THE GUARANTOR AND THE ADMINISTRATIVE AGENT
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE PLEDGOR AND THE ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY AND THE
OTHER LOAN DOCUMENTS.
-7-
CINEMARK MEXICO GUARANTY
<PAGE> 8
17. NOTICE OF CLAIMS; CLAIMS BAR. THE GUARANTOR HEREBY AGREES THAT IT
SHALL GIVE PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT
HAS, OR MAY SEEK TO ASSERT OR ALLEGE AGAINST THE ADMINISTRATIVE AGENT OR ANY
BANK, WHETHER SUCH CLAIM IS BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO
THIS GUARANTY, OR ANY ACT OR OMISSION TO ACT BY THE ADMINISTRATIVE AGENT OR ANY
BANK WITH RESPECT HERETO OR THERETO, AND THAT IF IT SHALL FAIL TO GIVE SUCH
PROMPT NOTICE TO THE ADMINISTRATIVE AGENT WITH REGARD TO ANY SUCH CLAIM OR
CAUSE OF ACTION, IT SHALL BE DEEMED TO HAVE WAIVED, AND SHALL BE FOREVER BARRED
FROM BRINGING OR ASSERTING SUCH CLAIM OR CAUSE OF ACTION IN ANY SUIT, ACTION OR
PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AGENCY.
18. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
-8-
CINEMARK MEXICO GUARANTY
<PAGE> 9
19. Any indebtedness of the Borrower now or hereafter held by
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Administrative Agent and the Guarantied Parties; and such indebtedness of the
Borrower to the Guarantor if the Administrative Agent so requests during the
existence of an Event of Default shall be collected, enforced and received by
the Guarantor as trustee for the Administrative Agent and the Guarantied
Parties and be paid over to the Administrative Agent on account of the
indebtedness of the Borrower to the Administrative Agent and the Guarantied
Parties but without reducing or affecting in any manner the liability of the
Guarantor under the other provisions of this guaranty.
DATED AS OF: December 18,1997
CINEMARK MEXICO (USA), INC.
By: /s/ JEFF STEDMAN
------------------------
Name: Jeff Stedman
----------------------
Title: Vice President
---------------------
BANK OF AMERICA NATIONAL TRUST
SAVINGS ASSOCIATION, as Administrative
Agent
By: /s/ JANICE HAMMOND
------------------------
Janice Hammond
Vice President
-9-
CINEMARK MEXICO GUARANTY
<PAGE> 1
EXHIBIT 12
CINEMARK USA,INC. AND SUBSIDIARIES
$75M SERIES C 9 5/8% SENIOR SUB NOTES, DUE 2008
COMPUTATION OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
12 MOS ENDED 9 MOS ENDED 12 MOS. ENDED 9 MOS. ENDED 12 MOS ENDED
SEPT 30, 1997 SEPT 30, 1997 SEPT 30, 1997 SEPT 30, 1997 SEPT 31, 1996
<S> <C> <C> <C> <C> <C>
- ------------------------------------------ ------------- -------------- -------------- -------------- --------------
COMPUTATION OF EARNINGS
REGISTRANT'S PRETAX INCOME FROM
CONTINUING OPERATIONS 31,928,123 22,739,526 31,928,123 22,739,528 28,962,461
CAPITALIZED INTEREST (2,456,047) (1,268,643) (2,458,047) (1,256,643) (3,865,248)
---------- ---------- ---------- ---------- ----------
TOTAL EARNINGS 29,472,076 21,482,885 29,472,076 21,482,885 23,097,215
COMPUTATION 0F FIXED CHARGES
INTEREST EXPENSE 30,782,889 24,754,456 28,412,265 23,071,697 24,552,655
CAPITALIZED INTEREST 2,592,914 1,377,706 2,592,914 1,377,708 3,928,454
AMORTIZATION OF DEBT ISSUE COST & DEBT
DISCOUNT 853,920 583,362 853,920 583,362 824,743
AMORTIZATION OF NEW DEBT DISCOUNT
AMORTIZATION OF DEBT PREMIUM (95,455) (71,591) 0 (95,455)
INTEREST FACTOR ON RENT EXPENSE 12,426,051 9,434,211 12,425,051 9,434,211 8,477,842
---------- ---------- ---------- ---------- ----------
TOTAL FIXED CHARGES 46,659,320 36,078,146 44,384,140 34,467,176 37,688,239
TOTAL EARNINGS AND FIXED CHARGES 76,031,395 57,561,031 73,856,216 55,950,063 60,785,454
---------- ---------- ---------- ---------- ----------
RATIO OF EARNINGS TO FIXED CHARGES 1.63 1.60 1.66 1.62 1.61
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
9 MOS. ENDED 12 MOS. ENDED 12 MOS. ENDED 12 MOS. ENDED 12 MOS. ENDED
SEPT 30, 1996 DEC 31, 1996 DEC 31, 1995 DEC 31, 1994 DEC 31, 1993
<S> <C> <C> <C> <C> <C>
- ------------------------------------- -------------- ------------- ------------- ------------- -------------
COMPUTATION OF EARNINGS
REGISTRANT'S PRETAX INCOME FROM
CONTINUING OPERATIONS 17,773,866 26,962,461 23,256,537 14,073,947 15,890,531
CAPITALIZED INTEREST (2,665,842) (3,865,246) (1,726,155) (560,185) 5,425
---------- ---------- ---------- ---------- ----------
TOTAL EARNINGS 15,108,024 23,097,215 21,530,382 13,513,762 15,895,956
COMPUTATION 0F FIXED CHARGES
INTEREST EXPENSE 14,111,297 19,551,655 18,549,833 18,133,438 16,573,409
CAPITALIZED INTEREST 2,713,248 3,928,454 1,745,720 565,610
AMORTIZATION OF DEBT ISSUE COST & DEBT
DISCOUNT 554,185 824,743 824,014 783,515 528,724
AMORTIZATION OF NEW DEBT DISCOUNT
AMORTIZATION OF DEBT PREMIUM
INTEREST FACTOR ON RENT EXPENSE 8,477,842 11,468,682 10,291,069 9,866,567 9,089,838
---------- ---------- ---------- ---------- ----------
TOTAL FIXED CHARGES 25,858,572 35,773,534 31,410,636 29,349,130 26,191,971
TOTAL EARNINGS AND FIXED CHARGES 40,964,596 58,870,749 52,941,018 42,862,892 42,087,927
---------- ---------- ---------- ---------- ----------
RATIO OF EARNINGS TO FIXED CHARGES 1.58 1.65 1.69 1.46 1.61
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
12 MOS. ENDED
DEC 31, 1992
<S> <C>
- ------------------------------------- -------------
COMPUTATION OF EARNINGS
REGISTRANT'S PRETAX INCOME FROM
CONTINUING OPERATIONS 8,700,634
CAPITALIZED INTEREST 5,425
----------
TOTAL EARNINGS 8,706,059
COMPUTATION 0F FIXED CHARGES
INTEREST EXPENSE 11,888,863
CAPITALIZED INTEREST
AMORTIZATION OF DEBT ISSUE COST & DEBT 369,140
DISCOUNT
AMORTIZATION OF DEBT PREMIUM
INTEREST FACTOR ON RENT EXPENSE 7,922,237
----------
TOTAL FIXED CHARGES 20,180,240
TOTAL EARNINGS AND FIXED CHARGES 28,886,299
----------
RATIO OF EARNINGS TO FIXED CHARGES 1.43
==========
</TABLE>
<PAGE> 1
EXHIBIT 21
SCHEDULE 5(A)(IV)
Subsidiary
- ----------
Cinemark Corporation, a Texas corporation
Sunnymead Cinema Corp., a California corporation
Cinemark Properties, Inc., a Texas corporation
Cinemark Transportation, Inc., a Texas corporation
Trans Texas Cinema, Inc., a Texas corporation
Missouri City Central 6, Inc., a Texas corporation
Cinemark International, Inc., a Texas corporation
ENT Holdings, Inc., a Texas corporation
Funtime Entertainment, Inc., a Texas corporation
Funtime Pizza Three Corporation, a Texas corporation
Funtime Pizza Four Corporation, a Texas corporation
Cinemark Mexico (USA), Inc., a Texas corporation
Cinemark de Mexico, S.A. de C.V., a Mexican corporation
Inversiones Cinemark, S.A., a Chilean corporation
Tinseltown Equities, Inc., a Texas corporation
Entertainment Amusement Enterprises, Inc., a Texas corporation
Cinemark Partners I, Inc., a Texas corporation
Cinemark Holdings Canada, Inc., a Canadian corporation
Cinemark Alberta, Inc., a Canadian corporation
Laredo Theatre, Ltd., a Texas limited partnership
Cinemark Brasil S.A., a Brazilian corporation
Cinemark Empreendimentos e. Participacoes LTDA, a Brazilian corporation
Servicios Cinemark, S.A. de C.V., a Mexican corporation
Cinemark del Norte, S.A. de C.V., a Mexican corporation
Cinemark Theatres Canada, Inc., a Canadian corporation
Cinemark del Ecuador, an Ecuadorian corporation
Cinemark del Peru, a Peruvian corporation
Cinemark Rio de la Plata Associates S.R.L., an Argentinean corporation
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Cinemark USA, Inc. on
Form S-4 of our report dated March 10, 1997, (which report includes an
explanatory paragraph concerning the Company's change in 1996 in its method of
accounting for the impairment of long lived assets and long lived assets to be
disposed of to conform with Statement of Financial Accounting Standards No. 121)
appearing in the Prospectus, which is a part of this Registration Statement, and
to the reference to us under the heading "Experts" in such Prospectus.
Deloitte & Touche L.L.P.
January 30, 1998
Dallas, Texas
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM
S-4 FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,157,597
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,919,751
<CURRENT-ASSETS> 35,663,209
<PP&E> 573,455,738
<DEPRECIATION> 89,440,869
<TOTAL-ASSETS> 566,687,709
<CURRENT-LIABILITIES> 52,585,820
<BONDS> 304,953,165
0
0
<COMMON> 49,537,462
<OTHER-SE> 17,873,254
<TOTAL-LIABILITY-AND-EQUITY> 566,687,709
<SALES> 326,980,952
<TOTAL-REVENUES> 326,980,952
<CGS> 0
<TOTAL-COSTS> 282,542,032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,655,259
<INCOME-PRETAX> 22,739,528
<INCOME-TAX> 10,257,330
<INCOME-CONTINUING> 12,482,198
<DISCONTINUED> 0
<EXTRAORDINARY> (55,746)
<CHANGES> 0
<NET-INCOME> 12,426,452
<EPS-PRIMARY> 0
<EPS-DILUTED> 66.19
</TABLE>
