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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 COMMISSION FILE NOS. 33-47040
333-11895
333-45417
CINEMARK USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 75-2206284
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3900 DALLAS PARKWAY
SUITE 500
PLANO, TEXAS 75093
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's Telephone Number, including area code: (972) 665-1000
Securities Registered pursuant to Section 12(b) of the Act:
NONE
(TITLE OF CLASS)
Securities Registered pursuant to Section 12(g) of the Act:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[X] [ ________ ]
As of March 30, 1999, 1,500 shares of Class A Common Stock and 183,482
shares of Class B Common Stock (including options to acquire 6,620 shares of
Class B Common Stock exercisable within 60 days of such date) were outstanding.
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INDEX
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Page
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<S> <C> <C> <C>
PART I..........................................................................................................1
Item 1: Business.........................................................................................1
(a) General Development of Business.............................................................1
(b) Financial Information About Industry Segments...............................................2
(c) Narrative Description of Business...........................................................2
Item 2: Properties.......................................................................................12
Item 3: Legal Proceedings................................................................................13
Item 4: Submission of Matters to a Vote of Security Holders..............................................14
PART II.........................................................................................................14
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters............................14
Item 6: Selected Financial Data..........................................................................14
Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operation.............18
Item 7A: Quantitative and Qualitative Disclosures About Market Risk ......................................27
Item 8: Financial Statements and Supplementary Data......................................................28
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............28
PART III........................................................................................................28
Item 10: Directors and Executive Officers of the Registrant...............................................28
Item 11: Executive Compensation.......................................................................... 32
Item 12: Security Ownership of Certain Beneficial Owners and Management.................................. 36
Item 13: Certain Relationships and Related Transactions.................................................. 39
PART IV........................................................................................................ 41
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................ 41
(a) Documents filed as part of this Report..................................................... 41
(b) Reports on Form 8-K........................................................................ 41
(c) Exhibits................................................................................... 41
(d) Financial Statement Schedules.............................................................. 42
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PART I
Item 1: Business.
(a) General Development of Business.
CONTINUED EXPANSION
The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. At March 30, 1999, the Company
operated 2,377 screens in 233 theatres located in 31 states, Canada, Chile,
Mexico, Brazil, Argentina, Peru, El Salvador, Ecuador, Costa Rica and Honduras
consisting of 2,016 screens in 187 "first run" theatres and 361 screens in 46
"discount" theatres. Of the Company's 2,377 screens, 1,869 (or 79%) 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 96% of the
Company's screens located in theatres of six or more screens. The Company
believes that its ratio of screens to theatres ( 10.2 to 1 at March 30, 1999) is
the second highest of the ten 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 fiscal year ended December 31, 1998, the Company has
increased consolidated revenues approximately 193% from $194.7 million to $571.2
million and has increased EBITDA (as defined herein) approximately 244% from
$32.1 million to $110.3 million.
The Company maintains its principal executive offices at 3900 Dallas
Parkway, Suite 500, Plano, Texas 75093. Its telephone number at such address is
(972) 665-1000.
FOREIGN DEVELOPMENTS
In 1998, the Company opened, through its subsidiaries, 26 theatres (255
screens) outside of the U.S. At March 30, 1999, the Company operated 56 theatres
(504 screens) in Chile, Mexico, Brazil, Argentina, Peru, Ecuador, El Salvador,
Costa Rica and Honduras. Additionally, the Company operates two discount
theatres (24 screens) in Alberta, Canada. All of the theatres operated outside
of the United States (other than Canada) are "first run" theatres which the
Company believes are among the most modern in the international market. The
Company's ratio of screens to theatres in these international markets is nine to
one at March 30, 1999.
In August 1998, the Company formed Cinemark Investments Corporation for the
purpose of financing its Brazilian operations by investing in foreign fixed rate
notes issued by Cinemark Brasil S.A., an indirect Brazilian subsidiary of the
Company. In September 1998, Cinemark Investments Corporation executed a credit
agreement with Bank of America that provides Cinemark Investments Corporation up
to $20 million, in the aggregate, under a revolving line of credit facility (the
"Cinemark Investments Credit Agreement"). The Cinemark Investments Credit
Agreement is secured by an assignment of certain fixed rate notes issued by
Cinemark Brasil S.A. to Cinemark Investments Corporation and an unconditional
guarantee by the Company. Pursuant to the terms of the Cinemark Investments
Credit Agreement, funds borrowed bear interest at a rate per annum equal to the
Offshore Rate or the Base Rate (both defined in the Cinemark Investments Credit
Agreement) as the case may be. As of March 30, 1999, Cinemark Investments
Corporation had borrowed $20 million under the Cinemark Investments Credit
Agreement, the proceeds of which were used to purchase fixed rate notes issued
by Cinemark Brasil S.A. bearing interest at 13.25%. The average effective
interest rate on such borrowings as of March 30, 1999 is 7.1% per annum.
In September 1998, Cinemark International entered into a joint venture
agreement with Core Pacific Ltd. to develop state-of-the-art multiplex theatres
in Taiwan, Republic of China. The joint venture will conduct its business
through Cinemark-Core Pacific Ltd. which is 50.1% owned by Cinemark
International and 49.9% owned
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by Core Pacific Ltd. Cinemark-Core Pacific Ltd. expects to open or begin
construction on four theatres (32 screens) during 2000.
In November 1998, Cinemark Mexico (USA), Inc. ("Cinemark Mexico") executed
a credit agreement with Bank of America National Trust and Savings Association
for itself and as Administrative Agent (the "Cinemark Mexico Credit Agreement").
The Cinemark Mexico Credit Agreement is a revolving credit facility and provides
for a loan to Cinemark Mexico of up to $30 million in the aggregate. The
Cinemark Mexico Credit Agreement is secured by a pledge of 65% of the stock of
Cinemark de Mexico S.A. de C.V. and an unconditional guaranty by the Company.
Pursuant to the terms of the Cinemark Mexico Credit Agreement, funds borrowed
bear interest at a rate per annum equal to the Offshore Rate or the Base Rate
(as defined in the Cinemark Mexico Credit Agreement), as the case may be, plus
the Applicable Margin (both defined in the Cinemark Mexico Credit Agreement).
Cinemark Mexico borrowed $30 million under the Cinemark Mexico Credit Agreement,
the proceeds of which were used to repay an intercompany loan of Cinemark Mexico
from Cinemark International. Cinemark International used the proceeds of such
repayment to repay all outstanding indebtedness under its then existing credit
facility with Bank of America National Trust and Savings. The effective interest
rate on such borrowings as of March 30, 1999 is 6.2% per annum.
In December 1998, Cinemark International entered into a joint venture
agreement with Casa Editorial El Tiempo S.A., Tempora S.A. and Prodiscos S.A. to
develop state-of-the-art multiplex theatres in Colombia. The joint venture will
conduct its business through Cinemark Colombia S.A. which is owned 50.1% by
Cinemark International and the remaining 49.9% is collectively owned by Casa
Editorial El Tiempo S.A., Tempora S.A. and Prodiscos S.A. Cinemark Colombia S.A.
expects to begin construction on four theatres (53 screens) during 2000.
During most of 1998, Cinemark International indirectly owned 50% of
Cinemark Chile S.A., owned 50% of Cinemark Investments Argentina S.A. and
directly owned 50% of Cinemark del Peru S.A. The remaining ownership of these
entities was owned by Conate S.A. and affiliates (the "Chilean Partners"). In
November 1998, Cinemark International acquired the remaining 50% of Cinemark
Investments Argentina S.A. held by the Chilean Partners for an aggregate
purchase price of $6.8 million. The Company acquired the remaining 50% of
Cinemark del Peru S.A. held by the Chilean Partners for an aggregate purchase
price of $5.5 million. The 50% interest in Cinemark del Peru S.A. held by
Cinemark International was transferred to the Company in January 1999. In
December 1998, the Company purchased 45% of Cinemark Chile owned by the Chilean
Partners for an aggregate purchase price of $7.6 million.
(b) Financial Information About Industry Segments.
The Company is a unitary business as described above and as a result does
not break out its business into industry segments.
(c) Narrative Description of Business.
GENERAL
THE COMPANY
The Company is the fifth largest motion picture exhibitor in North America
in terms of the number of screens in operation. In 1998, the Company opened an
aggregate of 46 theatres (554 screens) in the United States and internationally
and acquired six theatres (80) screens in the United States, including three
theatres (37 screens) that were managed by the Company acquired from affiliates.
At March 30, 1999, the Company operated 2,377 screens
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in 233 theatres located in 31 states, Canada, Chile, Mexico, Brazil, Argentina,
Peru, El Salvador, Ecuador, Costa Rica and Honduras consisting of 2,016 screens
in 187 "first run" theatres and 361 screens in 46 "discount" theatres. Of the
Company's 2,377 screens, 1,859 (or 79%) 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 96% of the Company's screens located in
theatres of six or more screens. The Company believes that its ratio of screens
to theatres (10.2 to 1 at March 30, 1999) is the second highest of the ten
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
fiscal year ended December 31, 1998, the Company has increased consolidated
revenues approximately 193% from $194.7 million to $571.2 million and has
increased EBITDA (as defined herein) approximately 244% from $32.1 million to
$110.3 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 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 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
As of May 1, 1998, the theatre exhibition industry in the U.S. is comprised
of approximately 531 exhibitors, approximately 142 of which operate more than
ten screens. As of May 1, 1998, the 5 largest exhibitors (in terms of number of
screens) operated approximately 37% of the total screens.
U.S. box office sales of approximately $6.9 billion in 1998 was the sixth
consecutive record year for the industry. Additionally, overall attendance has
achieved record levels in each of the last three years, growing at a 3.5%
compounded annual rate. The Company believes the primary reason for the record
years is the increased investment in production and marketing of films as well
as the rescreening of America that is currently underway. 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 nine years.
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U.S. Box
Attendance Average Office Sales
Year (Millions) Ticket Price (Millions)
<S> <C> <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
1997 1,388 $4.587 $6.366
1998 1,481 $4.690 $6.949
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Theatrical exhibition is the primary distribution channel for new motion
picture releases. The Company believes 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 the
emergence of new motion picture distribution channels has not adversely affected
attendance at theatres and 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 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 259% since 1985 to
$21.2 billion in 1997. 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, Independence Day,
Titanic and Armageddon, which utilize the latest advances in computer technology
to enhance production quality and special effects. The Company believes 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. In 1998,
total international box office receipts were $6.8 billion, representing a 10.2%
compound annual growth rate since 1994. The Company believes many international
markets for theatrical exhibition have historically been underserved due to
antiquated and/or run-down theatres, and international markets will continue to
experience rapid growth as additional multiplex theatres are introduced.
In addition, the Company believes certain demographic trends favor the
theatre exhibition industry. Information obtained from the U.S. Bureau of Census
indicates 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 9.2% through the
year 2005. Furthermore, according to MPAA, the number of patrons over 40 years
old as a percentage of the total movie
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audience has more than doubled from approximately 14% in 1986 to approximately
33% in 1997. The Company believes 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, As Good as it Gets and Patch Adams.
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 it is unique among major theatre exhibitors in the development
and execution of the following domestic and international new build business
strategy:
Continue to build in underserved markets. The Company intends to continue to
build modern multiplex facilities in underserved mid-sized markets as well as
megaplex entertainment facilities in major metropolitan areas. In such markets
the Company frequently will be the sole or leading exhibitor in terms of first
run screens operated within a film zone. 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. The Company intends to
continue to expand its construction of larger "megaplex" entertainment centers
in major metropolitan areas which are typically 50,000 square-feet or larger
complexes having 14 or more screens with screens up to 75 feet in the largest
auditoriums and also feature stadium seating, digital sound, restaurant and
coffee bar and a large video arcade. The Company currently operates 49 megaplex
entertainment centers (797 screens).
Continue to maintain 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
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 March 30, 1999, approximately 16% of
the Company's screens were housed in 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 the
same economic factors giving rise to the multiplex rescreening trend in the U.S.
are similarly applicable to international markets. The Company believes 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 and Costa Rica.
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OPERATIONS
The Company's corporate office, which employed approximately 248 individuals
as of March 30, 1999, 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 domestic 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 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 and has
created an innovative training program to address significant training issues.
The training program, appropriately named "Mecca of Innovative Training or
"MIT", focuses on operational issues inherent in running multiplex theatres.
Training is held at the Company's training center in Dallas, Texas. Week long
courses are attended by up to twenty theatre managers focusing on maintaining
current established standards for uniformity and consistency in the Company's
operations as well as providing a brainstorming platform for participants to
increase future performance. The Company has developed three courses that both
its domestic and international managers attend as they advance with the Company.
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 has traditionally designed 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. In 1998, the Company
commenced a new branding campaign featuring a new Cinemark logo and theatre
design. New art deco graphic treatments and colors have been applied to the
Cinemark name and theatres. Richly hued reds and gold have replaced the
traditional bright colors; reminiscent of the golden age of Hollywood.
Additionally, 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 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 50,000 square
feet, feature 14 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 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 majority
of the films produced
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in 1997 and 1998 had digital soundtracks available as an alternative to the
standard stereo soundtrack. More than 90% 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 122 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.
The Company licenses films through its booking office located at the
Company's corporate headquarters in Plano, Texas. All of the major motion
picture studios and distributors also maintain offices in the Dallas, Texas
metropolitan area. 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 33.6% of total revenues for 1998. The Company has devoted
considerable management effort to increasing concession sales and improving
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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 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 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. The Company has also developed
an internet web page to inform patrons of film titles and show times of all of
its domestic theatres and a majority of its international theatres. 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.
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<PAGE> 11
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.
The Company is developing a "Next Generation" version of its current POS
system based upon a Windows platform. This enhanced system will have multiple
language capabilities, unlimited ticket pricing options, and the ability to
process credit cards. The Windows platform permits the addition of barcode
scanners, pole displays, touch screens, credit card readers and other equipment
specific to individual country requirements. Cinemark anticipates initial
deployment of this system during 1999.
INTERNATIONAL
The motion picture exhibition business has become increasingly global and
rising box office receipts from international markets indicate some
international markets are poised for rapid growth. The Company believes 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. As of March 30, 1999, the Company,
through its affiliates, operates 56 first-run theatres (504 screens) in Mexico,
Chile, Brazil, Argentina, Peru, Ecuador, El Salvador, Costa Rica and Honduras,
with an aggregate of 15 theatres (136 screens) scheduled to open during the
remainder of 1999. Additionally, the Company, through its affiliates operates
two discount theatres (24 screens) in Alberta, Canada.
Mexico
The Company, through its subsidiary Cinemark Mexico (USA), Inc. ("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, S.A. de C.V.. Cinemark
Mexico currently operates 18 theatres (177 screens) and plans to open three
theatres (26 screens) during 1999. 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.
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<PAGE> 12
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 was 50% owned by Inversiones Cinemark, S.A., a
subsidiary of Cinemark International, and 50% owned by Conate II S.A., an
affiliate of Conate ("Conate II"). Cinemark Chile, which is based in Santiago,
Chile, currently operates ten theatres (83 screens), plans to open one theatre
(6 screens) in 1999.
In November 1998, Conate II transferred 95% of its interest in Cinemark
Chile S.A. to Worldwide Invest Inc., a British Virgin Island company. In
December 1998, the Company purchased all of the capital stock of Worldwide
Invest Inc. As of March 30, 1999, the Company indirectly owns approximately 98%
of Cinemark Chile, S.A.
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).
In November 1998, Cinemark International acquired 50% of Cinemark
Investments Argentina S.A. from Chilean individuals who acquired such interests
from Conate. After giving effect to this transaction, Cinemark International
owns 100% of Cinemark Investments Argentina S.A. Cinemark Argentina S.A.
currently operates five theatres (44 screens) and plans to open one theatre (10
screens) in 1999.
In December 1997, the Company formed a wholly-owned Argentine subsidiary,
Cinemark Rio de la Plata Associates S.R.L. ("Cinemark Associates"). Cinemark
Associates currently operates two theatres (15 screens) and plans to open two
theatres (20 screens) in 1999.
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 Brasil
S.A., which is approximately 60% indirectly owned by Cinemark International and
approximately 40% owned by Brazilian strategic partners. Cinemark Brasil S.A.
currently operates 13 theatres (126 screens) and plans to open four theatres (40
screens) in 1999.
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 currently operates two
theatres (16 screens) and plans to add three additional screens to an existing
facility during 1999.
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<PAGE> 13
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 was 50% owned by Cinemark International and 50% owned by Conate. In
November 1998, the Company purchased the capital stock in Cinemark del Peru S.A.
owned by Conate. Additionally, in January 1999, Cinemark International completed
a distribution to the Company of the capital stock it owns in Cinemark del Peru
S.A. After giving effect to these transactions, the Company will own 100% of
Cinemark del Peru, S.A. Cinemark del Peru, S.A. currently operates one theatre
(12 screens) and plans to open two theatres (17 screens) in 1999.
Central America
In January 1997, Cinemark International owns a 50.1% interest in a joint
venture 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. The Central America
joint venture currently operates three theatres (17 screens) in El Salvador, one
theatre (eight screens) in Costa Rica and one theatre (six screens) in Honduras.
The Central American joint venture plans to open two theatres (14 screens) in
1999.
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. The Company, through
its wholly owned subsidiary Cinemark Theatres Canada, plans to open one theatre
(12 screens) in 1999.
Taiwan
In September 1998, Cinemark International entered into a joint venture
agreement with Core Pacific Ltd. to develop state-of-the-art multiplex theatres
in Taiwan, Republic of China. The joint venture will conduct its business
through Cinemark-Core Pacific Ltd. which is 50.1% owned by Cinemark
International and 49.9% owned by Core Pacific Ltd. Cinemark-Core Pacific Ltd.
expects to begin construction on four theatres (32 screens) during 2000.
Colombia
In December 1998, Cinemark International entered into a joint venture
agreement with Casa Editorial El Tiempo S.A., Tempora S.A. and Prodiscos S.A. to
develop state-of-the-art multiplex theatres in Colombia. The joint venture will
conduct its business through Cinemark Colombia S.A. which is owned 50.1% by
Cinemark International, and the remaining 49.9% is collectively owned by Casa
Editorial El Tiempo S.A., Tempora S.A. and Prodiscos S.A. Cinemark Colombia S.A.
expects to begin construction on one theatre (10 screens) during 1999.
United Kingdom
In September 1998, the Company incorporated Cinemark Theatres U.K. Ltd., an
English company, to develop state-of-the-art multiplex theatres in the United
Kingdom. Cinemark Theatres U.K. Ltd. is a wholly-owned subsidiary of the
Company. Cinemark Theatres U.K. Ltd. expects to begin construction one theatre
(10 screens) in 1999.
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<PAGE> 14
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 may have substantially greater
financial resources than the Company.
In film zones where the Company has little or no direct competition
(approximately 73% 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 122 first run film zones in the U.S. The Company believes no
individual film zone is material to the Company. See "-- Operations -- Film
Licensing." The Company believes 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 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.
EMPLOYEES
As of March 30, 1999, the Company had approximately 8,000 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 eight unions of which approximately 21 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 it is in substantial
compliance where readily achievable with current regulations relating to
accommodating the disabled.
Item 2: Properties.
Of the 1,849 screens operated by the Company in the U.S. at March 30, 1999,
29 theatres (395 screens) were owned and 146 theatres (1,454 screens) are leased
pursuant to building leases 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 4% of the Company's theatre leases (covering 28 screens)
have remaining terms (including optional renewal periods) of less than five
years and approximately 67% of the Company's theatre leases (covering 1,246
screens) have remaining optional terms (including optional 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.
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<PAGE> 15
The Company owns an office building in Plano, Texas for its corporate office.
See note 8 of the Company's Notes to the Consolidated Financial Statements for
information with respect to the Company's lease commitments.
The Company periodically reviews the profitability of each of its theatres,
particularly those whose lease terms are about to expire, to determine whether
to continue its operations. The Company closed seven theatres (25 screens) in
1998, generally as a result of unfavorable or unavailable lease renewals or
individual theatre performance. The closings of these theatres did not have a
material effect on the Company's results of operations or financial position.
The Company also sold one theatre (10 screens).
As of March 30, 1999, the Company operated 58 theatres (528 screens) outside
of the U.S. Of the 58 theatres operated outside of the U.S., 57 theatres (516
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.
Item 3: Legal Proceedings.
Austin Litigation
On July 25, 1997, David Witte, Rona Schnall and Laura Brown filed suit in
District Court No. 345 of Travis County, Texas against the Company alleging
certain violations of the ADA relating to the accessibility of a certain theatre
to patrons using wheelchairs. Although the Company cannot predict the outcome of
such litigation, management believes the Company's potential liability with
respect to such proceeding is not material in the aggregate to the Company's
financial position, results of operation and cash flows.
El Paso Litigation
On December 10, 1997, Jose G. Lara, E.J. Lozano, Alfredo Juarez, G. Tim
Hervey, Earl L. Harbeck, Volar Center for Independent Living, Luis Enrique Chew,
Desert Adapt and Myra Murillo (the "Lara Case") filed suit in the United States
District Court, Western District of Texas, El Paso Division, against the Company
alleging certain violations of the Americans with Disabilities Act of 1990 (the
"ADA"). In August 1998, the judge presiding over the case granted plaintiffs
motion for summary judgment ruling that the Company's stadium theatre design is
in violation of the ADA. The Company is appealing this ruling. Although the
Company cannot predict the outcome of the appeal, management believes the
Company's potential liability with respect to such proceeding is not material in
the aggregate to the Company's financial position, results of operation and cash
flows.
In addition to the Lara Case, disabled persons have filed suits in Federal
court in Austin, Houston, Beaumont and Mission, Texas alleging certain
violations of the ADA identical to those contained in the Lara Case. The Company
has filed an answer denying the allegations and claims contained in each of the
suits. Although the Company cannot predict the outcome of such litigation,
management believes the Company's potential liability with respect to such
proceeding is not material in the aggregate to the Company's financial position,
results of operation and cash flows. The Federal courts in Mission, Houston and
Austin have granted stays in their respective cases pending the outcome of the
appeal in the Lara Case. A motion to stay the proceedings in Beaumont is
pending.
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<PAGE> 16
DOJ Litigation
In January 1999, the Company filed suit in the United States District Court,
Northern District of Texas, Dallas Division, against the Department of Justice
("DOJ") alleging that the DOJ, through its Amicus Curiae brief filed in the Lara
Case failed to abide by the requirements of the Administrative Procedures Act
(the "APA") in promulgating a new rule of law governing wheelchair accessibility
in movie theatres. The Company is seeking a declaratory judgment declaring,
among other things, the seating configurations within its stadium seating
facilities comply with the ADA and that the DOJ has failed to provide proper
notice and comment, as required by the APA, before establishing new standards
for compliance. As of March 30, 1999, the DOJ has not filed an answer in this
case. The Company is unable to predict the outcome of this litigation.
In March 1999, the DOJ filed suit in the United States District Court,
Northern District of Ohio, Eastern Division, against the Company alleging
violations of the ADA relating to patrons using wheelchairs. The Company's
answer to this litigation is not yet due. The Company is unable to predict the
outcome of this litigation.
Brazil
Cinemark Brasil S.A., as well as most other exhibitors in Brazil, is in
litigation with ECAD over the issue of royalties for the synchronized sound
tracks that accompany motion pictures. ECAD is a private civil association of
authors, made up of different associations throughout Brazil, initially created
to protect authors and collect royalties on their behalf related to public use
of their compositions. Specifically, ECAD purports to have the authority to
collect 2.5% of the gross box office revenue as "royalties" for the use of the
sound track in motion pictures. Cinemark Brasil and other exhibitors have
disputed ECAD's authority and right to collect such royalties, and litigation
has ensued. On March 5, 1999, the 18th Civil Court of Appeals of Rio de Janeiro
ruled in favor of Cinemark Brasil S.A. finding that ECAD did not prove its
authority to collect "royalties" for the use of sound tracks in motion pictures.
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
its potential liability with respect to proceedings currently pending is not
material in the aggregate to the Company's consolidated financial position,
results of operations and cash flows.
Item 4: Submission of Matters to a Vote of Security Holders.
There have not been any matters submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this report through the
solicitation of proxies or otherwise.
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder
Matters.
There is no established public trading market for the Company's Common
Stock. As of March 30, 1999, there were 14 holders of record of the Company's
Common Stock. The Company has not paid dividends on its Common Stock and does
not expect to pay dividends on its Common Stock in the foreseeable future. The
Subordinated Notes Indentures and the Credit Facility contain restrictions on
the Company's ability to pay dividends on its Common Stock.
Item 6: Selected Financial 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, 1998. This information should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of
14
<PAGE> 17
Operations and the Company's Consolidated Financial Statements, including the
notes thereto, included elsewhere in this report.
15
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(In thousands, except theatres, per share, screen and ratio data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (CONSOLIDATED):
Revenues $ 283,077 $ 298,559 $ 341,731 $ 434,598 $ 571,219
Theatre operating costs 218,748 227,719 262,138 322,462 433,259
General and administrative expenses 17,095 19,555 23,486 27,598 32,947
Depreciation and amortization 15,121 15,925 19,417 25,373 37,197
Asset Impairment Loss (1)(PE) -- -- 2,382 2,214 9,950
Operating income 32,113 35,361 34,308 56,952 57,866
Interest expense(2) 18,917 19,374 20,376 33,487 43,014
Income before extraordinary items 7,006 13,155 14,616 15,019 11,009
Net income(3) 7,006 13,155 5,230 14,705 11,009
Diluted earnings per share:
Before extraordinary items 43.21 80.32 79.93 80.45 59.02
Net income 43.21 80.32 28.60 78.77 59.02
Shares outstanding 154 154 180 178 178
OTHER FINANCIAL DATA (CONSOLIDATED):
Cash flow from (used for)
Operations $ 32,665 $ 36,090 $ 58,754 $ 61,577 $ 64,077
Investing activities (62,876) (80,268) (177,423) (229,302) (248,143)
Financing activities 13,273 32,031 119,690 185,424 178,000
Theatre level cash flow(4) 64,329 70,840 79,593 112,136 137,960
EBITDA(5) 50,851 55,708 62,579 88,485 110,275
Ratio of earnings to fixed charges(6) 1.46x 1.69x 1.65x 1.49x 1.38x
OPERATING DATA:
United States
Theatres owned (at period end)(7) 154 150 158 155 173
Screens owned (at period end)(7) 1,121 1,155 1,339 1,437 1,813
Total attendance 63,401 61,006 63,774 74,592 85,693
Outside United States
Theatres owned (at period end)(8) 4 9 11 18 38
Screens owned (at period end)(8) 42 92 114 187 367
Total attendance 1,407 4,210 8,675 11,668 20,875
BALANCE SHEET DATA (CONSOLIDATED):
Cash and temporary cash investments $ 31,056 $ 13,925 $ 14,383 $ 32,120 $ 25,992
Theatre properties and equipment-net 155,798 224,482 377,421 548,942 750,503
Total assets 217,185 267,747 432,905 661,597 882,673
Total long-term debt, including
current portion 167,374 198,145 297,206 463,501 631,649
Shareholders' equity (deficiency) 2,732 11,345 57,363 69,982 75,800
</TABLE>
- -------------------
(1) On 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." Subsequently, the Company has
recorded asset impairment charges of $2.4 million, $2.2 million and $9.9
million in 1996, 1997 and 1998, respectively, pursuant to Statement of
Financial Accounting Standards No. 121 (FASB 121). The asset impairment
losses recorded in 1996 and 1997 have been reclassified from depreciation
and amortization in these statements to coincide with the 1998 presentation.
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<PAGE> 19
(2) Includes amortization of debt issue cost and debt discount and excludes
capitalized interest of $0.6 million, $1.7 million, $3.9 million, $2.2
million and $4.4 million in 1994, 1995, 1996, 1997 and 1998, respectively.
(3) In 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 associated with the Senior Notes repurchased.
(4) 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.
(5) 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) 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. Other definitions of
EBITDA may not be comparable with this calculation.
(6) 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 and debt discount and the portion of rental expense which is
deemed to be representative of the interest factor.
(7) The data as of period end 1994, 1995, 1996, 1997 and 1998 exclude three
theatres (33 screens), four theatres (54 screens), five theatres (64
screens), five theatres (64 screens), and one theatre (10 screens),
respectively, operated by the Company pursuant to management agreements.
(8) The data as of period end 1994, 1995, 1996, 1997 and 1998 excludes two
theatres (18 screens), three theatres (25 screens), four theatres (37
screens), eleven theatres (94 screens) and 16 theatres (132 screens),
respectively, operated through affiliates of the Company in Canada, Chile,
Argentina, Peru, El Salvador, Costa Rica and Japan.
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<PAGE> 20
Item 7: 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 report.
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 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 acquisition 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 pay phones,
ATM charges, screen advertising and electronic video games installed in video
arcades located in some of the Company's theatres.
Film rentals and advertising, concession supplies and salaries and
wages vary directly with changes in revenues. These expenses have historically
represented approximately 70% 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. 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
which help drive revenues. 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. As a result of the
two sale leaseback transactions which occurred in the first and fourth quarters
of 1998, the addition of a larger proportion of leased properties has resulted
in an increase in facility lease expense as a percentage of revenues in 1998.
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, 1996, 1997 and 1998 are not directly comparable due to the
effects of new theatre openings, acquired theatres and the impact of the debt
service associated with certain financings undertaken. Theatre closings have had
no significant effect on the operations of the Company. See notes 1 and 3 of the
Company's Notes to the Consolidated Financial Statements.
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<PAGE> 21
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.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING DATA (In millions)
Revenues
Admissions $ 211.6 $ 274.8 $ 363.2
Concessions 116.9 149.2 192.1
Other 13.2 10.6 15.9
------------ ------------ ------------
Total revenues $ 341.7 $ 434.6 $ 571.2
============ ============ ============
Cost of operations
Film rentals and advertising $ 112.6 $ 148.7 $ 197.2
Concession supplies 18.4 22.5 30.4
Salaries and wages 46.9 56.0 69.4
Facility leases 34.4 38.7 61.3
Utilities and other 49.8 56.6 75.0
------------ ------------ ------------
Total cost of operations $ 262.1 $ 322.5 $ 433.3
============ ============ ============
OPERATING DATA AS A PERCENTAGE OF TOTAL
REVENUES(1):
Revenues
Admissions 61.9% 63.2% 63.6%
Concessions 34.2 34.4 33.6
Other 3.9 2.4 2.8
------------ ------------ ------------
Total revenues 100.0 100.0 100.0
Cost of operations
Film rentals and advertising(1) 53.2 54.1 54.3
Concession supplies(1) 15.8 15.1 15.8
Salaries and wages 13.7 12.9 12.1
Facility leases 10.1 8.9 10.7
Utilities and other 14.6 13.0 13.1
Total cost of operations 76.7 74.2 75.8
General and administrative expenses 6.9 6.4 5.8
Depreciation and amortization(2) 5.7 5.8 6.5
Asset impairment loss(2) 0.7 0.5 1.7
Operating income 10.0 13.1 10.1
Interest expense(3) 6.0 7.7 7.5
Income before income taxes and
Extraordinary items 7.9 5.9 3.9
Net income 1.5 3.4 1.9
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Average screen count (month end average) 1,322 1,523 1,879
============ ============ ============
Revenues per average screen count $ 258,495 $ 285,357 $ 303,991
============ ============ ============
</TABLE>
(1) All costs are expressed as a percentage of total revenues, except film
rentals and advertising, which are expressed as a percentage of admissions
revenues, and concession supplies, which are expressed as a percentage of
concessions revenues.
19
<PAGE> 22
(2) On 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." Subsequently, the Company has
recorded asset impairment charges of $2.4 million, $2.2 million and $9.9
million in 1996, 1997 and 1998, respectively, pursuant to Statement of
Financial Accounting Standards No. 121 (FASB 121). The asset impairment
losses recorded in 1996 and 1997 have been reclassified from depreciation
and amortization in these statements to coincide with the 1998 presentation.
(3) Includes amortization of debt issue cost and debt discount and excludes
capitalized interest of $3.9 million, $2.2 million and $4.4 million in 1996,
1997 and 1998, respectively.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Revenues. Revenues in 1998 increased to $571.2 million from $434.6 million,
a 31.4% increase. The increase in revenues is primarily attributable to a 29.3%
increase in attendance as the result of the first full year of operations of 181
screens opened in 1997 and the net addition of 585 screens in 1998. Revenues
were also positively affected by an increase in admission and concession
revenues per patron of 1.3%. Revenues per average screen increased 6.5% to
$303,991 for 1998 period from $285,357 for 1997.
Cost of Operations. Cost of operations, as a percentage of revenues,
increased to 75.8% in 1998 from 74.2% in 1997. The increase as a percentage of
revenues resulted from an increase in concession supplies as a percentage of
concession revenues to 15.8% in 1998 from 15.1% in 1997 and an increase in
facility leases as a percentage of revenues to 10.7% in 1998 from 8.9% in 1997
partially as a result of the two sale leaseback transactions which occurred in
the first and fourth quarters of 1998. These increases were partially offset by
a decrease in salaries and wages as a percentage of revenues to 12.1% in 1998
from 12.9% in 1997.
General and Administrative Expenses. General and administrative expenses, as
a percentage of revenues, decreased to 5.8% in 1998 from 6.4% in 1997. The
decrease is primarily attributable to the 31.4% increase in revenues from screen
additions and increases in admissions and concessions per patron. The absolute
level of general and administrative expenses increased to $32.9 million for 1998
from $27.6 million for 1997. The increase in general and administrative expenses
is attributed to costs (primarily salaries and wages) associated with the
Company's expansion program.
Depreciation and Amortization. Depreciation and amortization increased $11.8
million in 1998 to $37.2 million from $25.4 million in 1997, an increase of
46.5%. The increase is a result of the net addition of $223.0 million in theatre
property and equipment during 1998, a 30.0% increase over 1997. 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.
Asset Impairment Loss. The Company recorded asset impairment charges of $9.9
million in 1998 and $2.2 million in 1997 pursuant to Statement of Financial
Accounting Standards No. 121 (FASB 121). In accordance with FASB 121, the
Company wrote down the assets of certain theatres to their fair value.
Interest Expense. Interest costs incurred, including amortization of debt
issue cost and debt discount, increased 33.1% to $47.4 million (including the
capitalization of $4.4 million of interest to properties under construction)
from $35.6 million in 1997 (including the capitalization of $2.2 million of
interest to properties under construction). The increase in interest costs
incurred during 1998 was due principally to an increase in average debt
outstanding resulting from borrowings under the Company's Credit Facility and
the issuance of the additional Senior Subordinated Indenture in the first
quarter of 1998.
20
<PAGE> 23
Net Income. Net income before extraordinary items of $11.0 million for 1998
and $15.0 million for 1997 included the losses of foreign subsidiary operations
of $3.0 million (net of minority interest) and $2.3 million (net of minority
interest), respectively.
Income Taxes. Income taxes increased to $11.5 million in 1998 compared to
$10.7 million in 1997, a 7.5% increase. The Company's effective tax rate for
1998 increased to 51.0% from 41.5% in 1997. The Company's income taxes and
effective tax rates for 1998 increased over 1997 due to certain foreign
subsidiaries generating income for the first time, resulting in the calculation
of a foreign tax liability with the excess undistributed earnings being taxed at
United States rates plus local foreign country withholding rates.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
Revenues. Revenues in 1997 increased to $434.6 million from $341.7
million, a 27.2% increase. The increase in revenues is primarily attributable to
a 16.4% increase in attendance as the result of the first full year of
operations of 237 screens opened in 1996 and the net addition of 181 screens in
1997. Revenues were also positively affected by an increase in admission and
concession revenues per patron of 7.2%. Revenues per average screen increased
10.4% to $285,357 for 1997 period from $258,495 for 1996.
Cost of Operations. Cost of operations, as a percentage of revenues,
decreased to 74.2% in 1997 from 76.7% in 1996. The decrease as a percentage of
revenues resulted from a decrease in concession supplies as a percentage of
concession revenues to 15.1% in 1997 from 15.8% in 1996, a decrease in salaries
and wages as a percentage of revenues to 12.9% in 1997 from 13.7% in 1996, a
decrease in facility leases as a percentage of revenues to 8.9% in 1997 from
10.1% in 1996 and a decrease in utilities and other as a percentage of revenues
to 13.0% in 1997 from 14.6% in 1996 which was partially offset by an increase in
film rentals and advertising as a percentage of admission revenues to 54.1% in
1997 from 53.2% in 1996.
General and Administrative Expenses. General and administrative
expenses, as a percentage of revenues, decreased to 6.4% in 1997 from 6.9% in
1996. The decrease is primarily attributable to the 27.2% increase in revenues
from screen additions and increases in admissions and concessions per patron.
The absolute level of general and administrative expenses increased to $27.6
million for 1997 from $23.5 million for 1996. The increase in general and
administrative expenses is attributed to costs (primarily salaries and wages)
associated with the Company's expansion program.
Depreciation and Amortization. Depreciation and amortization increased
$6.0 million in 1997 to $25.4 million from $19.4 million in 1996. The increase
is a result of the net addition of $171.5 million in theatre property and
equipment during 1997, a 45.5% increase over 1996. 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.
Asset Impairment Loss. The Company recorded asset impairment charges of
$2.2 million in 1997 and $2.4 million in 1996 pursuant to Statement of Financial
Standards No. 121 (FASB 121). In accordance with FASB 121, the Company wrote
down the assets of certain theatres to their fair value.
Interest Expense. Interest costs incurred, including amortization of
debt issue cost and debt discount, increased 46.6% to $35.6 million (including
the capitalization of $2.2 million of interest to properties under construction)
from $24.3 million in 1996 (including the capitalization of $3.9 million of
interest to properties under construction). The increase in interest costs
incurred during 1997 was due principally to an increase in average debt
outstanding resulting from borrowings under the Company's Credit Facility and
the issuance of the initial two Senior Subordinated Indentures in the third
quarter of 1996 and second quarter of 1997, respectively.
21
<PAGE> 24
Other Gains and Losses. Other gains and losses for 1996 of $11.1
million is attributable to a gain from the settlement of litigation and the sale
of 2 Day Video, Inc., an 82% subsidiary of the Company.
Extraordinary Items. In the third quarter of 1996, the Company issued
$200 million aggregate principle of 9-5/8 Senior Subordinated 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 at a price of
$1,098.33 per $1,000 principle amount. As a result, 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 cost associated
with the Senior Notes repurchased. The remaining loss is attributable to the
refinancing of the Company's bank line of credit during 1996.
Net Income. Net income before extraordinary items of $15.0 million for
1997 and $14.6 million for 1996 included the capitalized losses of foreign
subsidiary operations of $2.3 million (net of minority interest)and $2.8 million
(net of minority interest), respectively.
Income Taxes. Income taxes decreased to $10.7 million in 1997 compared
to $12.3 million in 1996, a 13% decrease, resulting primarily from the decrease
in income before taxes and permanent differences associated with the sale of
certain assets in 1996. The Company's effective rate for 1997 decreased to 41.5%
from 45.8% in 1996. The effective rates reflect a reduction in overall foreign
losses which are fully reserved and a reduction in other permanent differences,
primarily goodwill.
INFLATION AND FOREIGN CURRENCY
The vast majority of the equipment and certain operating supplies and
construction interior finish items that the Company's international subsidiaries
use in their operations are imported from the U.S., whereas, principally all the
revenues and operating expenses of the Company's international subsidiaries are
transacted in the country's local currency.
Currency fluctuations result in the Company's reporting exchange gain
or losses or cumulative unrealized translation adjustments relating to its
international subsidiaries depending on the inflationary environment of the
country in which the Company operates. Generally accepted accounting principles
require that the U.S. dollar be used as the functional currency for the
Company's subsidiaries that operate in highly inflationary economies. In 1998,
two of the countries where the Company operates (Mexico and Ecuador) were deemed
highly inflationary. In 1998, the Company recorded an exchange gain of $.8
million during 1998 related to the Mexican peso and Ecuadorian sucre currency
fluctuations.
In 1998, the remaining countries where the Company operates were not
deemed highly inflationary. As a result, any fluctuation in the currency results
in a cumulative unrealized translation adjustment recorded in shareholders'
equity. In 1998, the Brazilian currency (the Real) devalued 8.3% against the
U.S. dollar to 1.21 Reais to the U.S. dollar. As a result of the devaluation,
Cinemark Brasil S.A. has recognized a $4.4 million cumulative unrealized
currency translation adjustment in shareholders' equity as of December 31, 1998.
In January 1999, the Brazilian government allowed the Real to float against the
U.S. dollar instead of maintaining a pre-established trading ban. In connection
with this decision, the Real has devalued significantly against the U.S. dollar
to approximately 1.7 Reais to the U.S. dollar as of March 30, 1999. At the
current exchange rate, Cinemark Brasil S.A. will record a cumulative unrealized
currency translation adjustment as a reduction to shareholders' equity of
approximately $18.0 million in the first quarter of 1999.
22
<PAGE> 25
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 $64.1 million in 1998 compared to $61.6 million in 1997 and
$58.8 million in 1996.
The Company's theatres are typically equipped with modern projection
and sound equipment, with approximately 81% of the screens operated by the
Company having been built during the 1990's. 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 $248.1 million,
$229.3 million and $177.4 million in 1998, 1997 and 1996, 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
$178.0 million, $185.4 million and $119.7 million in 1998, 1997 and 1996,
respectively. During 1998, the Company opened in the U.S. 27 theatres (419
screens) and added an aggregate of four screens to one existing theatre. In
addition, in the U.S., as of March 30, 1999, the Company opened three theatres
(39 screens) and has approximately 16 theatres (285 screens) under construction
or scheduled to begin construction and be completed by the end of 1999. Certain
of these theatres will be megaplexes which may cost in excess of $15 million per
theatre. The Company also plans to open approximately 300 screens in the U.S. in
1999 and 250 screens in 2000. The Company currently estimates that its capital
expenditures for the development of these approximately 550 screens in the U.S.
in 1999 and 2000 will be approximately $290 million. As of March 30, 1999, the
Company had expended approximately $95 million toward the development of these
screens. The Company plans to fund capital expenditures for its development from
cash flow from operations, sale and leaseback transactions and borrowings under
the Credit Facility. Actual expenditures for theatre development and
acquisitions during 1999 and 2000 are subject to change based upon the
availability of attractive opportunities for expansion of the Company's theatre
circuit.
On August 15, 1996, the Company issued $200 million principal amount of
Series B Senior Subordinated Notes which bear interest at a rate of 9-5/8% per
annum (the "Series B Notes"), 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 million 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 June 26, 1997, the Company issued $75 million principal amount of
Series D Notes due 2008 which bear interest at a rate of 9-5/8% per annum (the
"Series D Notes"), 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) were approximately $77.1 million. The proceeds of the Series D
Notes were applied to reduce the Company's indebtedness under the Credit
Facility.
23
<PAGE> 26
In January 1998, the Company issued $105 million aggregate principal
amount of 8-1/2% Series A Senior Subordinated Notes due 2008 (the "Series A
Notes") pursuant to Rule 144A (the "Offering"). The net proceeds of the Offering
were used by the Company to reduce the Company's indebtedness under the then
existing credit facility. The Company exchanged the Series A Notes on March 17,
1998 for 8-1/2% Series B Senior Subordinated Notes (the "8-1/2% Series B Notes")
which have been registered under the Securities Act of 1933, as amended.
In February 1998, the Company replaced its existing credit facility
with a reducing, revolving credit agreement ("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 $350.0 million in the aggregate. The Credit Facility is a reducing,
revolving credit facility; therefore, at the end of each quarter during the
calendar year 2001, 2002, 2003, 2004 and 2005, the aggregate commitment is
reduced in the amount of $8,750,000, $11,812,500, $13,125,000, $12,031,000 and
$6,562,500, 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 Margin (as defined in the Credit Facility). As
of March 30, 1999, the Company had borrowed $249.5 million under the Credit
Facility with the average interest rate on such borrowings being 6.5% per annum.
In February 1998, the Company completed a sale leaseback transaction
(the "Sale Leaseback") pursuant to which the Company sold the land, buildings
and site improvements of 12 theatre properties to special purpose entities for
an aggregate purchase price equal to approximately $131.5 million.
Simultaneously with the sale, the Company entered into operating leases for such
properties for a base term equal to approximately 20 years at a fixed aggregate
monthly rental payment of $1.1 million or $13.4 million annually.
In October 1998, the Company completed another sale leaseback
transaction (the "Second Sale Leaseback") pursuant to which the Company sold the
land, buildings and site improvements of one theatre property to a special
purpose entity for an aggregate purchase price equal to approximately $13.9
million. Simultaneously with the sale, the Company entered into an operating
lease for the property for a base term equal to approximately 20 years at a
fixed monthly rental payment of $119,000 or $1.4 million annually.
In 1992, the Company formed Cinemark International to develop and
acquire theatres in international markets. As of March 30, 1999, Cinemark
International, through its affiliates, operated 56 theatres (504 screens)
principally in Latin America. The following table summarizes the Company's and
Cinemark International's holdings in each international market, the number of
theatres and screens in such market as of March 30, 1999 and the number of
theatres and screens under construction in 1999.
24
<PAGE> 27
<TABLE>
<CAPTION>
Year of Operating 1999 Planned Openings
Country Formation Ownership% Theatres/Screens Theatres/Screens
- ------- --------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C>
Mexico(1) 1992 95% 18 theatres (177 screens) 3 theatres (26 screens)
Chile(1) 1992 98% 10 theatres (83 screens) 1 theatre (6 screens)
Argentina 1995 50% 5 theatres (44 screens) 1 theatre (10 screens)
Argentina 1997 100% 2 theatres (15 screens) 2 theatres (20 screens)
Brazil 1996 60% 13 theatres (126 screens) 4 theatres (40 screens)
Ecuador 1996 60% 2 theatres (16 screens) existing theatre (3 screens)
Peru(1) 1996 100% 1 theatre (12 screens) 2 theatres (17 screens)
Central America 1997 51% 5 theatres (31 screens) 2 theatres (14 screens)
Colombia 1998 51% N/A
Taiwan 1998 51% N/A N/A
United Kingdom 1998 100% N/A
Total 56 theatres (504 screens) 15 theatres (136 screens)
</TABLE>
- -------------------
1. In the fourth quarter of 1998, Cinemark International assigned its
interests in Mexico, Chile and Peru to the Company. The Company has
designated these operating companies Restricted Subsidiaries (as such
term is defined in the Company's debt agreements).
2. The operating company in the United Kingdom is a wholly-owned
unrestricted subsidiary of the Company.
During most of 1998, Cinemark International indirectly owned 50% of
Cinemark Chile S.A., owned 50% of Cinemark Investments Argentina S.A. and
directly owned 50% of Cinemark del Peru S.A. The remaining ownership of these
entities was owned by Conate S.A. and affiliates (the "Chilean Partners"). In
November 1998, Cinemark International acquired the remaining 50% of Cinemark
Investments Argentina S.A. held by the Chilean Partners for an aggregate
purchase price of $6.8 million. The Company acquired the remaining 50% of
Cinemark del Peru S.A. held by the Chilean Partners for an aggregate purchase
price of $5.5 million. The 50% interest in Cinemark del Peru S.A. held by
Cinemark International was transferred to the Company in January 1999. In
December 1998, the Company purchased 45% of Cinemark Chile owned by the Chilean
Partners for an aggregate purchase price of $7.6 million.
The Company, through Cinemark International and its affiliates, plans
to invest up to an additional $100 million in international ventures,
principally in Latin America, over the next 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 November 1997, Cinemark International executed a credit agreement
(the "Cinemark International Credit Agreement") with a bank. As amended in
December 1997, the Cinemark International Credit Agreement was a revolving
credit facility and provided for a loan to Cinemark International of up to $30
million in the aggregate. The Cinemark International Credit Agreement was
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 bore interest at a rate per annum
equal to a defined floating rate, adjusted in accordance with certain financial
ratios.
In August 1998, the Company formed Cinemark Investments Corporation for
the purpose of financing its Brazilian operations by investing in foreign fixed
rate notes issued by Cinemark Brasil S.A., an indirect
25
<PAGE> 28
Brazilian subsidiary of the Company. In September 1998, Cinemark Investments
Corporation executed a credit agreement with Bank of America that provides
Cinemark Investments Corporation up to $20 million in the aggregate under a
revolving line of credit facility (the "Cinemark Investments Credit Agreement").
The Cinemark Investments Credit Agreement is secured by an assignment of certain
fixed rate notes issued by Cinemark Brasil S.A. to Cinemark Investments
Corporation and an unconditional guaranty by the Company. Pursuant to the terms
of the Cinemark Investments Credit Agreement, funds borrowed bear interest at a
rate per annum equal to the Offshore Rate or the Base Rate (both defined in the
Cinemark Investments Credit Agreement) as the case may be. As of March 30, 1999,
Cinemark Investments Corporation had borrowed $20 million under the Cinemark
Investments Credit Agreement, the proceeds of which were used to purchase fixed
rate notes issued by Cinemark Brasil S.A. bearing interest at 13.25%. The
effective interest rate on such borrowings as of March 30, 1999 is 7.1% per
annum.
In September 1998, the Company incorporated Cinemark Theatres U.K. Ltd., an
English company, to develop state-of-the-art multiplex theatres in the United
Kingdom. Cinemark Theatres U.K. Ltd. is a wholly-owned subsidiary of the
Company. Cinemark Theatres U.K. Ltd. expects to begin construction on 1 theatre
(10 screens) in 1999.
In September 1998, Cinemark International entered into a joint venture
agreement with Core Pacific Ltd. to develop state-of-the-art multiplex theatres
in Taiwan, Republic of China. The joint venture will conduct its business
through Cinemark-Core Pacific Ltd. which is 50.1% owned by Cinemark
International and 49.9% owned by Core Pacific Ltd. Cinemark-Core Pacific Ltd.
expects to begin construction on four theatres (32 screens) during 2000.
In November 1998, Cinemark Mexico executed a credit agreement with Bank of
America National Trust and Savings Association for itself and as Administrative
Agent (the "Cinemark Mexico Credit Agreement"). The Cinemark Mexico Credit
Agreement is a revolving credit facility and provides for a loan to Cinemark
Mexico of up to $30 million in the aggregate. The Cinemark Mexico Credit
Agreement is secured by a pledge of 65% of the stock of Cinemark de Mexico S.A.
de C.V. and an unconditional guaranty by the Company. Pursuant to the terms of
the Cinemark Mexico Credit Agreement, funds borrowed bear interest at a rate per
annum equal to the Offshore Rate (as defined in the Cinemark Mexico Credit
Agreement) or the Base Rate (as defined in the Cinemark Mexico Credit
Agreement), as the case may be, plus the Applicable Margin (as defined in the
Cinemark Mexico Credit Agreement). Cinemark Mexico borrowed $30 million under
the Cinemark Mexico Credit Agreement, the proceeds of which were used to repay
an intercompany loan of Cinemark Mexico from Cinemark International. Cinemark
International used the proceeds of such repayment to repay all outstanding
indebtedness under its then existing credit facility with Bank of America
National Trust and Savings. The effective interest rate on such borrowings as of
March 30, 1999 is 6.2% per annum.
In December 1998, Cinemark International entered into a joint venture
agreement with Casa Editorial El Tiempo S.A., Tempora S.A. and Prodiscos S.A. to
develop state-of-the-art multiplex theatres in Colombia. The joint venture will
conduct its business through Cinemark Colombia S.A. which is owned 50.1% by
Cinemark International, and the remaining 49.9% is collectively owned by Casa
Editorial El Tiempo S.A., Tempora S.A. and Prodiscos S.A. Cinemark Colombia S.A.
expects to begin construction on one theatre (10 screens) during 1999.
Year 2000 Compliance
The Company recognizes that the arrival of the Year 2000 poses a unique
worldwide challenge to the ability of all systems to recognize the date change
from December 31, 1999 to January 1, 2000, and like other companies, has been
assessing and updating its computer applications and business processes to
ensure their continued functionality.
The Year 2000 compliance effort is underway across the Company and is
following a process of assessment, modification and testing. At the present
time, the necessary modifications to the day-to-day operating
26
<PAGE> 29
and reporting systems for all theatres have been successfully completed to
ensure Year 2000 compliance. With respect to the financial reporting and
operational databases associated with the U.S. corporate office and the various
international corporate offices, the necessary modifications to ensure Year 2000
compliance are expected to be completed by June 30, 1999. The costs to modify
the existing systems to ensure Year 2000 compliance are expected to be less than
$100,000 at the completion of the project.
Since the core business of the Company centers around the collection of
cash at the theatre box office, an unanticipated Year 2000 computer failure
should not have an adverse impact on the Company's ability to continue with
day-to-day operations. The impact from a system failure from a practical
standpoint should only affect the financial reporting and operational analysis
that is presently performed at the corporate office.
In the most reasonably likely worst case scenario, the Company could
return to a manual system of recording daily admissions revenues from a
day-to-day operating standpoint.
The Company operates a large number of geographically dispersed
theatres and has a large supplier base and believes that this will mitigate any
adverse impact. The Company has initiated formal communications with its
significant suppliers, customers and critical business partners to determine the
extent to which the Company may be vulnerable in the event that those parties
fail to properly remediate their own Year 2000 issues. The Company has taken
steps to monitor the progress made by those parties and intends to test critical
system interfaces as the Year 2000 approaches. The Company will develop
appropriate contingency plans in the event that a significant exposure is
identified relative to the dependencies on third-party systems. While the
Company is not presently aware of any such significant exposure, there can be no
guarantee that the systems of third-parties on which the Company relies will be
converted in a timely manner or that a failure to properly convert by another
company would not have a material adverse effect on the Company.
The Company is in the process of formulating its contingency plan for
the Year 2000 compliance issue and anticipates to complete its plan during the
second quarter of 1999.
The Company purchased a new Year 2000 compliant financial reporting and
distribution system that was made operational on January 4, 1999. The decision
to purchase this new system at a cost of more than $1 million was made by
management in order to effectively handle the increasing financial reporting and
analysis needs of the Company in the years to come as the Company continues at
its rapid growth rate.
New Accounting Pronouncements
Statement of Position (SOP) 98-5 issued in April 1998 requires costs of
start-up activities and organization costs to be expensed as incurred. SOP 98-5
is effective for financial statements for fiscal years beginning after December
15, 1998. The Company will adopt SOP 98-5 during the first quarter of 1999 and
does not expect the adoption of SOP 98-5 will have a material impact on the
Company's operations.
Other Issues
The Company intends that this report be governed by the "safe harbor"
provision of the Private Securities Litigation Reform Act of 1995 (the "PSLR
Act") with respect to statements that may be deemed to be forward-looking
statements under the PSLR Act. Such forward-looking statements may include, but
are not limited to, the Company and any of its subsidiaries' long-term theatre
strategy. Actual results could differ materially from those indicated by such
forward-looking statements due to a number of factors.
Item 7A: Quantitative and Qualitative Disclosures About Market Risk.
The Company has limited exposure to financial market risks, including
changes in interest rates and other relevant market prices. The Company does not
have any derivative financial instruments in place as of December 31, 1998.
An increase or decrease in interest rates would affect interest costs
relating to the Company's variable rate credit facilities. The Company and/or
its subsidiaries are currently parties to three such credit facilities. At
December 31, 1998, there was an aggregate of approximately $241 million of
variable rate debt outstanding under these facilities. The facilities are priced
with a variable rate based on LIBOR or a base rate, plus, in each case, an
applicable margin. The Company has no interest rate swaps or other hedging
facilities relating to these credit
27
<PAGE> 30
facilities. These facilities represent approximately 38% of the Company's
outstanding long-term debt. Changes in interest rate do not have a direct impact
on interest expense relating to the remaining fixed rate debt facilities.
The Company is exposed to market risk arising from changes in foreign
currency exchange rates as a result of its international operations. See Item 7
- - "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations - Inflation and Foreign Currency," which
information is incorporated herein by reference.
Item 8: Financial Statements and Supplementary Data.
The financial statements and supplementary data are listed on the Index
at F-1. Such financial statements and supplementary data are included herein
beginning on page F-3.
Item 9: Changes in and Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10: Directors and Executive Officers of the Registrant.
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Lee Roy Mitchell* 62 Chairman of the Board; Chief Executive Officer; Director
Tandy Mitchell 48 Vice Chairman of the Board; Executive Vice President;
Secretary; Director
Alan W. Stock+ 38 President; Chief Operating Officer; Director
Jeffrey J. Stedman 36 Senior Vice President; Treasurer; Chief Financial Officer; Assistant
Secretary; Director
Rob Carmony 41 Senior Vice President-Director of Operations
Margaret E. Richards 40 Vice President-Real Estate; Assistant Secretary
Jerry Brand 53 Vice President-Film Licensing
Walter Hebert 53 Vice President-Purchasing
Don Harton 41 Vice President-Construction
Randy Hester 46 Vice President-Marketing
Philip Wood 35 Vice President
W. Bryce Anderson*+ 56 Director
Heriberto Guerra, Jr.+ 49 Director
James A. Stern 48 Director
James L. Singleton+ 43 Director
Denny Rydberg 53 Director
</TABLE>
- --------------------------
* Member Audit Committee
+ Member Compensation Committee
28
<PAGE> 31
The Shareholders' Agreement (as defined herein) contains a voting agreement
pursuant to which Mr. Mitchell agreed to vote his share of common stock of the
Company to elect designees of Cypress Advisors L.P. ("CALP") to the Board of
Directors of the Company. As of March 30, 1999, 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.
The directors of the Company are elected each year by the shareholders to
serve for a one-year term and 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 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 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.
He worked as a Systems Analyst for Electronic Data Systems (EDS) from 1984 to
1985.
29
<PAGE> 32
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.
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
July 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. 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.
30
<PAGE> 33
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.
31
<PAGE> 34
Item 11: 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> <C>
Lee Roy Mitchell, Chairman of the Board 1998 $356,511 $1,643,489 - $118,040(B)
and Chief Executive Officer 1997 324,101 1,675,910 - 120,794(C)
1996 294,632 1,703,357 - 120,794(C)
Alan Stock, President and Chief Operating 1998 $285,000 $121,239(I) 300 7,500(D)
Officer 1997 252,484 75,000 - 7,125(D)
1996 192,500 83,739 - 921,623(E)
Jeffrey J. Stedman, Senior Vice President, 1998 $200,000 $85,080(I) 300 $7,500(D)
Treasurer and Chief Financial Officer 1997 175,000 57,500 - 7,125(D)
1996 125,000 102,160 - 221,311(F)
Tim Warner, President - 1998 $230,000 $97,842(I) 300 7,500(D)
Cinemark International (G) 1997 200,000 60,000 200 7,125(D)
1996 106,731 29,423 400 - (D)
Jerry Brand, Vice President-Film Licensing(H) 1998 $200,000 $63,800(I) 150 $7,500(D)
1997 187,250 $42,131 - 7,125(D)
1996 149,616 31,827 200
</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) savings plan and $17,246 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 the Company's annual contribution to the Company's 401(k)
savings plan.
(E) 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.
(F) 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
$88,896 reimbursement for estimated tax obligations incurred upon
exercise of stock options.
(G) Mr. Warner joined the Company in April 1996 as President - Cinemark
International.
(H) Mr. Brand joined the Company as Vice President-Film Licensing in March
1996.
(I) Bonuses were earned in 1998, but were paid in February 1999.
32
<PAGE> 35
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
Percent of total
options/
Options/ SARs granted Exercise or
SARs to employees in base price Expiration Grant date
Name Granted (#) fiscal year ($/Sh) date present
value
<S> <C> <C> <C> <C> <C>
Lee Roy Mitchell - - n/a n/a n/a
Alan Stock 300 5% $1,674 12/12/08 $2,100
Jeffrey J. Stedman 300 5% $1,674 12/12/08 $2,100
Tim Warner 300 5% $1,674 12/12/08 $2,100
Jerry Brand 150 2.5% $1,674 12/12/08 $2,100
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-The-Money
Name Shares Acquired on Value Realized ($) Options/SARs at Options/SARs at
Exercise (#) FY-End (#) FY-End ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Lee Roy Mitchell -- -- -- --
Alan Stock -- -- 1817/300 (A)
Jeffrey J. Stedman -- -- 405/320 (A)
Tim Warner _ -- 296/604 (A)
Jerry Brand -- -- 80/270 (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.
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
33
<PAGE> 36
amended ($10,000 in 1998). A discretionary matching contribution is made by the
Company annually ($.8 million in the aggregate in 1998) to individual accounts.
The Company's matching contribution is subject to vesting and forfeiture. The
Company's contributions vest to individual accounts at the rate of twenty
percent (20%) per year beginning two years from the date of employment. After an
employee has worked for seven 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 1998 base salary was $356,511 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, which together with base salary may not exceed $2 million, which
bonus was approximately $1.6 million for the year ended December 31, 1998, (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 $3.3 million 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 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 1998 base salary was $159,440 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 $1.0 million 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 Securities Exchange Act of
1934, as amended) 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
34
<PAGE> 37
by applicable law or contractual obligation imposed upon Mr. Mitchell by the
Shareholders' Agreement). See "Certain Transactions--Cypress Investment."
STOCK OPTIONS
Employee Stock Option Plan
The Company has established 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 March 30, 1999, there were outstanding under the Plan options to
purchase 7,121 shares of the Company's Class B Common Stock.
During 1998, the Company granted additional options under the Plan to
purchase 470 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 $1,800. As a result,
the Company accrued $.8 million for unearned compensation and will amortize this
noncash expense at a rate of $169,200 per year during the five year vesting
period for the options granted.
In July 1998, the Company repurchased options to purchase 454 shares of
Class B Common Stock issued to a retiring employee. The aggregate purchase price
for such options was approximately $.8 million.
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 15, 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 and to reduce the exercise price of the Director Options
from $833.34 per share to $1.00 per share. The Director Options vested on June
1, 1997. The options expire ten years from the date of grant. In December 1998,
the Company granted an unaffiliated director of the Company options to purchase
200 shares of the Company's Class B Common Stock at an exercise price of $1.00
per share. The options vest five years from the date of grant and expire ten
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 $2,099. As a result, the Company accrued $419,800 for unearned
compensation and will amortize the non-cash expense at a rate of $83,960 per
year during the five year vesting period for the options granted. A director's
options are forfeited if the director resigns or is removed from the Board of
Directors of the Company. As of March 30, 1999, there were outstanding options
to purchase 800 shares of the Company's Class B Common Stock issued to directors
of the Company.
35
<PAGE> 38
Long Term Incentive Plan
In November 1998, the Board approved a Long Term Incentive Plan (the "1998
Plan") under which the Compensation Committee, in its sole discretion, may grant
employees incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock awards performance units, performance
shares or phantom stock up to an aggregate of 9,794 shares of the Company's
Class B Common Stock. The Compensation Committee has the discretion to set the
exercise price and the term (up to ten years) of the options. All awards under
the 1998 Plan vest at the rate of one-fifth of the total award per year
beginning one year from the date of grant, subject to acceleration by the
Compensation Committee. An employee's award under the 1998 Plan is forfeited if
the employee is terminated for cause. Upon termination of the employee's
employment with the Company, the Company has the option to repurchase the award
at the fair market value of the shares of Class B Common Stock vested under such
award provided that no public market exists for any class of common stock of the
Company. During 1998, the Company granted under the 1998 Plan options to
purchase an aggregate of 5,450 shares of Class B Common Stock with an exercise
price of $1,674. 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
$426. As a result, the Company accrued $2.2 million for unearned compensation
and will amortize the noncash expense at a rate of $464,340 per year during the
five year vesting period for the options granted. In January 1999, the Company
granted options to purchase an additional 40 shares with an exercise price of
$1,674. As a result, the Company accrued $17,040 for unearned compensation and
will amortize the non-cash expense at a rate of $3,408 per year during the five
year vesting period for the options granted. As of March 30, 1999, there were
outstanding under the 1998 Plan options to purchase 5,490 shares of the
Company's Class B Common Stock.
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.
Item 12: Security Ownership of Certain Beneficial Owners and Management.
The following table and the accompanying footnotes set forth, as of March
30, 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 officers and directors 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%
3900 Dallas Parkway 24.7%
Suite 500 Class B Common Stock 44,187 24.1%
Plano, TX 75093
CGI Equities, Ltd. Class A Common Stock - -- 18.1%
3900 Dallas Parkway
Suite 500 Class B Common Stock 33,500 18.3%
Plano, TX 75093
</TABLE>
36
<PAGE> 39
<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>
Cypress Merchant Class A Common Stock -- --
Banking Partners, L.P. 42.5%
65 East 55th St. Class B Common Stock 78,469 42.8%
New York, NY 10022
Cypress Pictures Ltd. Class A Common Stock -- --
c/o W.S. Walker Co. 2.2%
Second Floor Class B Common Stock 4,079 2.2%
Caledonian House
Mary St., P.O. Box 265
George Town, Grand
Cayman
Cayman Islands
The Mitchell Special Class A Common Stock -- --
Trust 7.9%
3900 Dallas Parkway Class B Common Stock 14,667 8%
Suite 500
Plano, TX 75093
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 405 * *
Tim Warner(7) Class A Common Stock - -
Class B Common Stock 296 * *
Jerry Brand (8) Class A Common Stock -- -
Class B Common Stock 80 * *
W. Bryce Anderson Class A Common Stock -- --
--
Class B Common Stock 200 --
Heriberto Guerra, Jr. Class A Common Stock -- --
--
Class B Common Stock 200 --
</TABLE>
37
<PAGE> 40
<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>
James A. Stern Class A Common Stock -- --
--
Class B Common Stock -- --
James L. Singleton Class A Common Stock -- --
--
Class B Common Stock -- --
Denny Rydberg Class A Common Stock -- --
--
Class B Common Stock -- --
Directors and Officers as Class A Common Stock 1,500 100.0%
a Group (16 persons) (9) 27%
Class B Common Stock 48,419 26.4%
</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 March 30, 1999, 1,500 shares of Class A Common Stock and 183,482
shares of Class B Common Stock were issued and outstanding. Includes 6,620
shares of Class B Common Stock issuable upon the exercise of options that
may be exercised within 60 days of the date of this Report.
(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 and 33,500 shares of
Class B Common Stock owned for the benefit of Mr. Mitchell's descendants 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 Report.
(6) Includes 405 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this Report.
(7) Includes 296 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this Report.
(8) Includes 80 shares of the Class B Common Stock issuable upon the exercise
of options that may be exercised within 60 days of the date of this Report.
(9) Includes 4,232 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this Report.
Does not include 15,937 shares of Class B Common Stock held in trust for
the benefit of certain of Mr. Mitchell's grandchildren and 33,500 shares of
Class B Common Stock owned for the benefit of Mr. Mitchell's descendants,
as to which Mr. Mitchell disclaims beneficial ownership. Mr. Mitchell is
the co-trustee of such trusts.
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
38
<PAGE> 41
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."
Item 13: Certain Relationships and Related Transactions.
Movie Theatre Investors
The Company managed three theatres (37 screens) for Movie Theatre
Investors, Ltd. Mr. Mitchell was the sole shareholder of one of the general
partners of Movie Theatre Investors. In addition, Mr. Mitchell owned 10.1%, Mrs.
Mitchell and affiliates owned 7.4% and the Company owned 1.1% of the limited
partnership interests in Movie Theatre Investors. The Company received $29,360
in management fees from Movie Theatre Investors from operations in January and
February 1998. See "Business - Management Agreements." In February 1998, the
Company acquired these three theatres from Movie Theatre Investors, Ltd. for an
aggregate purchase price of $19 million.
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
recorded $153,381 in management fees from Laredo in 1998.
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
39
<PAGE> 42
Partners II. Cinemark Partners I, Inc. owns 1% of the limited partnership
interests in Cinemark Partners II and the Company owns 50% of the limited
partnership interests in Cinemark Partners II. On January 5, 1998, the Company
purchased approximately 31% of the limited partnership interests in Cinemark
Partners II for $3 million from the existing partners. Prior to such
acquisition, Mr. Mitchell owned 10.1% of the limited partnership interests in
Cinemark Partners II. Additionally, the Company purchased an additional 77.1
units for an aggregate purchase price of $3.7 million. After consummating such
transactions, the Company owns approximately 51% of Cinemark Partners II. The
Company received $233,730 in management fees from Cinemark Partners II in 1998.
Cinemark Alberta
The Company manages two discount theatres (24 screens) for Cinemark
Alberta. Cinemark Holdings Canada, Inc., a wholly owned subsidiary of Cinemark
International, runs 50% of Cinemark Alberta. The Company received $118,633 in
management fees from Cinemark Alberta in 1998.
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 Cinemas, Inc. is 100% owned by Mr. Mitchell's brother.
In February 1998, the Company acquired from Mid States Development, L.L.C.
certain land and theatre improvements located in Amarillo, Texas for an
aggregate purchase price equal to approximately $10.6 million. The Company also
acquired as part of the same transaction theatre equipment, furniture and
fixtures located at such theatre for an aggregate purchase price of $2.6
million. Mr. Mitchell's brother is a controlling member in Mid States
Development, L.L.C. and is the sole shareholder of Starplex Cinemas, Inc.
SHAREHOLDERS' AGREEMENT
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) ten 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.
40
<PAGE> 43
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. The
Company is currently pursuing plans to create such a holding company.
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.
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this Report.
1. The financial statements listed in the accompanying Index beginning on
F-1 are filed as a part of this report.
2. The financial statement schedules and related data listed in the
accompanying Index beginning on S-1 are filed as a part of this report.
3. The exhibits listed in the accompanying Index beginning on E-1 are filed
as a part of this report, which exhibits are bound separately.
(b) Reports on Form 8-K.
The following reports on Form 8-K have been filed during the last quarter
of the period covered by this Report:
1. None.
(c) Exhibits.
See the accompanying Index beginning on page E-1, which exhibits are bound
separately.
41
<PAGE> 44
(d) Financial Statement Schedules.
See the accompanying Index beginning on page F-1.
42
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 30, 1999 CINEMARK USA, INC.
BY: /s/ Alan W. Stock
----------------------------
Alan W. Stock, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Lee Roy Mitchell Chairman of the Board of Directors March 30, 1999
------------------------------------ and Chief Executive Officer
Lee Roy Mitchell
/s/ Tandy Mitchell Director March 30, 1999
Tandy Mitchell
/s/ Alan W. Stock Director March 30, 1999
------------------------------------
Alan W. Stock
/s/ Jeffrey J. Stedman Director; Vice President and Treasurer March 30, 1999
------------------------------------ (Chief Financial and Accounting
Jeffrey J. Stedman Officer)
/s/ W. Bryce Anderson Director March 30, 1999
------------------------------------
W. Bryce Anderson
/s/ Heriberto Guerra Director March 30, 1999
------------------------------------
Heriberto Guerra
/s/ James A. Stern Director March 30, 1999
------------------------------------
James A. Stern
/s/ James L. Singleton Director March 30, 1999
------------------------------------
James L. Singleton
/s/ Denny Rydberg Director March 30, 1999
------------------------------------
Denny Rydberg
</TABLE>
43
<PAGE> 46
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants which Have Not Registered Securities Pursuant to
Section 12 of the Act.
No annual report or proxy material has been sent to the Company's
shareholders. An annual report and proxy material may be sent to the Company's
shareholders subsequent to the filing of this Form 10-K. The Company shall
furnish to the Securities and Exchange Commission copies of any annual report or
proxy material that is sent to the Company's shareholders.
44
<PAGE> 47
CINEMARK USA, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
(ITEMS 8 AND 14 OF FORM 10-K) AND SUPPLEMENTAL SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT OF DELOITTE & TOUCHE LLP...................................... F-2A
INDEPENDENT AUDITORS' REPORT OF ERNST & YOUNG.............................................. F-2B
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES:...............................................
Consolidated Balance Sheets, December 31, 1997 and 1998.................................... F-3
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1997 and 1998.................................................. F-5
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the
Years Ended December 31, 1996, 1997 and 1998...................................... F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998.................................................. F-7
Notes to Consolidated Financial Statements................................................. F-8
SUPPLEMENTAL SCHEDULES REQUIRED BY THE INDENTURES
FOR THE SENIOR SUBORDINATED NOTES:
Schedule
A. Consolidating Balance Sheet Information, December 31, 1998........................ S-1
B. Consolidating Statement of Operations Information for the Year Ended
December 31, 1998............................................................... S-2
C. Consolidating Statement of Cash Flows Information for the Year Ended
December 31, 1998............................................................... S-3
</TABLE>
F-1
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Cinemark USA, Inc. and Subsidiaries
Plano, TX
We have audited the accompanying consolidated balance sheets of Cinemark USA,
Inc. and subsidiaries as of December 31, 1997 and 1998, and the related
consolidated statements of income, shareholders' equity and comprehensive
income, and cash flows for each of the three years in the period ended December
31, 1998. 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 did not audit the financial statements of a
consolidated subsidiary in Brazil as of December 31, 1998, and for the year then
ended, which statements reflect total assets constituting 7% of consolidated
total assets as of December 31, 1998 and total revenues constituting 5% of
consolidated total revenues for the year then ended. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for this subsidiary
audited by other auditors, is based solely on the report of such other auditors.
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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Cinemark USA, Inc. and subsidiaries as of December 31,
1997 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
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 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.
/S/ Deloitte & Touche LLP
Dallas, Texas
March 26, 1999
F-2A
<PAGE> 49
REPORT OF INDEPENDENT AUDITORS
To The Shareholders of
CINEMARK BRASIL S.A.
Sao Paulo, Brazil
1. We have audited the accompanying balance sheets of Cinemark Brasil S.A. as
of December 31, 1998 and 1997, and the related statements of operations,
shareholders' equity and changes in financial position for the years then
ended, prepared in conformity with accounting principles generally accepted
in Brazil. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion based on
these financial statements.
2. Our audits were conducted in accordance with generally accepted auditing
standards in Brazil and included: a) the planning of our work, taking into
consideration the materiality of balances, the volume of transactions and
the accounting and internal control systems of the Company; b) the
examination on a test basis of documentary evidence and accounting records
supporting the amounts and disclosures in the financial statements; and c)
an assessment of the accounting practices used and significant estimates
made by management as well as an evaluation of the overall financial
statement presentation.
3. In our report of independent auditors as of July 31, 1998 relating to the
financial statements for the year ended December 31, 1997 referred to
above, we presented a qualified opinion in connection with the inventories
account. In 1998, the Company reviewed the inventory valuation criteria,
adjusting the inventory initial balances directly against shareholders'
equity. As for the December 31, 1998 balances, the inventory valuation was
adequately recorded.
4. In our opinion, except for the issue mentioned in the third paragraph, the
financial statements referred to above present fairly, in all material
respects, the financial position of Cinemark Brasil S.A. at December 31,
1998 and 1997, and the results of its operations, changes in its
shareholders' equity and changes in its financial position for the years
then ended, in conformity with accounting principles generally accepted in
Brazil.
ERNST & YOUNG
Auditores Independentes S.C.
CRC2SP015199/O-6
/s/ LUIZ CARLOS NANNIM
Luiz Carlos Nannim
Accountant CRC1SP171638/O-7
Campinas, Brazil
March 26, 1999
F-2B
<PAGE> 50
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1997 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 31,788,380 $ 25,645,868
Temporary cash investments 331,156 345,985
Inventories 2,234,231 3,591,705
Co-op advertising and other receivables 13,138,112 12,414,288
Prepaid expenses and other 8,115,825 23,679,097
------------ ------------
Total current assets 55,607,704 65,676,943
THEATRE PROPERTIES AND EQUIPMENT:
Land 45,933,669 63,150,938
Buildings 209,117,345 230,092,564
Leasehold interests and improvements 101,918,512 128,781,996
Theatre furniture and equipment 211,928,488 413,797,934
Theatres under construction 75,294,931 53,230,545
------------ ------------
Total 644,192,945 889,053,977
Less accumulated depreciation and amortization 95,251,013 138,550,648
------------ ------------
Theatre properties and equipment - net 548,941,932 750,503,329
OTHER ASSETS:
Certificates of deposit (Note 8) 1,525,852 3,710,111
Investments in and advances to affiliates (Note 11) 34,129,399 29,811,533
Intangible assets - net (Note 3) 4,413,301 13,495,195
Deferred charges and other - net (Notes 4 and 5) 16,978,652 19,475,523
------------ ------------
Total other assets 57,047,204 66,492,362
------------ ------------
TOTAL $661,596,840 $882,672,634
============ ============
</TABLE>
(Continued)
F-3
<PAGE> 51
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1998
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt (Note 5) $ 30,730 $ 337,895
Accounts payable 27,382,918 28,295,844
Accrued film rentals 15,206,349 18,811,968
Accrued interest 12,672,981 17,147,519
Accrued payroll 3,998,856 6,814,731
Accrued property taxes and other liabilities 17,745,339 24,228,395
------------ ------------
Total current liabilities 77,037,173 95,636,352
LONG-TERM LIABILITIES
Long-term debt, less current portion (Note 5) 463,470,009 631,310,726
Deferred lease expenses 13,064,630 14,006,106
Deferred gain on sale leaseback (Note 8) -- 6,803,542
Theatre development advance, less current portion 373,562 --
Deferred income taxes (Note 9) 10,937,029 16,114,342
------------ ------------
Total long-term liabilities 487,845,230 668,234,716
COMMITMENTS AND CONTINGENCIES (Note 8)
MINORITY INTERESTS IN SUBSIDIARIES (Note 7) 26,732,561 43,001,950
SHAREHOLDERS' EQUITY
Class A common stock, $.01 par value: 10,000,000 shares
authorized, 1,500 shares issued and outstanding 15 15
Class B common stock, no par value: 1,000,000 shares
authorized, 234,013 and 234,073 shares issued, respectively 49,537,547 49,537,607
Additional paid-in-capital 10,201,882 13,773,691
Unearned compensation - stock options (1,534,791) (4,221,326)
Retained earnings 47,096,688 58,105,217
Treasury stock, 57,211 Class B shares at cost (24,198,890) (24,198,890)
Other accumulated comprehensive income (11,120,575) (17,196,698)
------------ ------------
Total shareholders' equity 69,981,876 75,799,616
------------ ------------
TOTAL $661,596,840 $882,672,634
============ ============
</TABLE>
See notes to consolidated financial statements (Concluded)
F - 4
<PAGE> 52
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
REVENUES
Admissions $211,581,569 $274,800,669 $363,206,268
Concessions 116,943,658 149,243,137 192,104,307
Other (Note 10) 13,205,703 10,554,519 15,908,337
------------ ------------ ------------
Total 341,730,930 434,598,325 571,218,912
COSTS AND EXPENSES:
Cost of operations (Note 10):
Film rentals and advertising 112,657,139 148,674,251 197,218,829
Concession supplies 18,431,926 22,472,659 30,377,832
Salaries and wages 46,868,814 56,003,650 69,375,351
Facility leases 34,406,046 38,735,067 61,281,370
Utilities and other 49,774,114 56,576,786 75,005,283
------------ ------------ ------------
Total cost of operations 262,138,039 322,462,413 433,258,665
General and administrative expenses 23,486,530 27,598,119 32,947,380
Depreciation and amortization 19,416,675 25,372,823 37,197,161
Asset impairment loss (Note 1) 2,381,998 2,213,696 9,950,088
------------ ------------ ------------
Total 307,423,242 377,647,051 513,353,294
OPERATING INCOME 34,307,688 56,951,274 57,865,618
OTHER INCOME (EXPENSE)
Interest expense (19,551,655) (32,703,303) (42,083,479)
Amortization of debt issue cost and discount (824,743) (783,972) (930,101)
Interest income 1,393,441 1,171,516 2,818,246
Gain (loss) on sale of assets and other (Notes 2, 3 and 8) 11,130,996 (246,772) 3,056,554
Equity in income of affiliates (Note 11) 362,443 954,847 (190,330)
Minority interests in (income) loss of subsidiaries (Note 7) 144,291 346,423 1,940,476
------------ ------------ ------------
Total (7,345,227) (31,261,261) (35,388,634)
------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS 26,962,461 25,690,013 22,476,984
INCOME TAXES (Note 9) 12,346,451 10,671,089 11,468,455
------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEMS 14,616,010 15,018,924 11,008,529
EXTRAORDINARY ITEMS (Note 5):
Losses on early extinguishment of debt, net of income tax
benefit of $6,057,922, $256,768 and $0, respectively (9,386,111) (313,827) --
------------ ------------ ------------
NET INCOME $ 5,229,899 $ 14,705,097 $ 11,008,529
============ ============ ============
EARNINGS PER SHARE: (Note 1)
Before extraordinary item:
Basic $ 84.00 $ 84.13 $ 61.74
============ ============ ============
Diluted $ 79.93 $ 80.45 $ 59.02
============ ============ ============
Net Income:
Basic $ 30.06 $ 82.37 $ 61.74
============ ============ ============
Diluted $ 28.60 $ 78.77 $ 59.02
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
F - 5
<PAGE> 53
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock
---------------- ----------------- Additional Unearned
Shares Shares Paid-in Compensation
Issued Amount Issued Amount Capital Stock Options
<S> <C> <C> <C> <C> <C> <C>
BALANCE January 1, 1996 3,000 $ 30 205,570 $10,967,419 $6,604,037 $(2,848,738)
Net income
Issuance of common stock to Cypress (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
Senior Notes and conversion of warrants to
Senior Notes, including tax benefit 770,208
Foreign currency translation adjustment
Purchase of treasury stock, 174 Class B shares,
at cost
----- ---- ------- ----------- ----------- -----------
BALANCE December 31, 1996 1,500 15 233,176 49,536,710 9,182,880 (2,434,717)
Net income
Unearned compensation from stock options granted 1,073,296 (1,073,296)
Unearned compensation from stock options forfeited (74,386) 61,988
Amortization of unearned compensation 1,911,234
Stock options exercised, including tax benefit 837 837 20,092
Foreign currency translation adjustment
Purchase of treasury stock, 2,246 Class B shares,
at cost
----- ---- ------- ----------- ----------- -----------
BALANCE December 31, 1997 1,500 15 234,013 49,537,547 10,201,882 (1,534,791)
Net income
Unearned compensation from stock options granted 3,587,500 (3,587,500)
Unearned compensation from stock options forfeited (49,590) 37,193
Amortization of unearned compensation 863,772
Stock options exercised, including tax benefit 60 60 33,899
Foreign currency translation adjustment
----- ---- ------- ----------- ----------- -----------
BALANCE December 31, 1998 1,500 $ 15 234,073 $49,537,607 $13,773,691 $(4,221,326)
===== ==== ======= =========== =========== ===========
<CAPTION>
Other
Accumulated
Retained Treasury Comprehensive Comprehensive
Earnings Stock Income Total Income
<S> <C> <C> <C> <C> <C>
BALANCE January 1, 1996 $27,161,692 $ (20,000,000) $ (10,539,398) $ 11,345,042
Net income 5,229,899 5,229,899 $ 5,229,899
Issuance of common stock to Cypress 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 --
Senior Notes and conversion of warrants to --
Senior Notes, including tax benefit 770,208
Foreign currency translation adjustment (590,053) (590,053) (590,053)
Purchase of treasury stock, 174 Class B shares, --
at cost (184,416) (184,416)
----------- ------------- ------------- ------------ -----------
BALANCE December 31, 1996 32,391,591 (20,184,416) (11,129,451) 57,362,612 $ 4,639,846
===========
Net income 14,705,097 14,705,097 14,705,097
Unearned compensation from stock options granted --
Unearned compensation from stock options forfeited (12,398)
Amortization of unearned compensation 1,911,234
Stock options exercised, including tax benefit (737) 20,192
Foreign currency translation adjustment 8,876 8,876 8,876
Purchase of treasury stock, 2,246 Class B shares, --
at cost (4,013,737) (4,013,737)
----------- ------------- ------------- ------------ -----------
BALANCE December 31, 1997 47,096,688 (24,198,890) (11,120,575) 69,981,876 $14,713,973
===========
Net income 11,008,529 11,008,529 11,008,529
Unearned compensation from stock options granted --
Unearned compensation from stock options forfeited (12,397)
Amortization of unearned compensation 863,772
Stock options exercised, including tax benefit 33,959
Foreign currency translation adjustment (6,076,123) (6,076,123) (6,076,123)
----------- ------------- ------------- ------------ -----------
BALANCE December 31, 1998 $58,105,217 $ (24,198,890) $ (17,196,698) $ 75,799,616 $ 4,932,406
=========== ============= ============= ============ ===========
</TABLE>
See notes to consolidated financial statements.
F - 6
<PAGE> 54
CINEMARK USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 5,229,899 $ 14,705,097 $ 11,008,529
Loss on early extinguishment of debt 15,444,033 607,033 --
Noncash items in net income:
Depreciation 16,251,709 24,241,903 35,798,680
Amortization - intangibles and other assets 3,819,462 2,573,587 2,162,415
Loss on impairment of assets 2,381,998 2,213,696 9,950,088
Amortization of gain on sale leaseback -- -- (271,458)
Deferred lease expenses 2,199,854 1,484,001 1,341,476
Deferred income tax expense 1,630,398 5,010,420 5,177,313
Debt issued for accrued interest 2,006,371 2,850,100 --
Amortization of debt discount and premium 170,247 (27,004) (36,840)
Amortized compensation - stock options 1,324,856 1,898,836 851,375
(Gain) loss on sale of assets (7,760,774) 558,254 (2,266,320)
Equity in income of affiliates (362,443) (954,847) 190,330
Minority interests in income (loss) of subsidiaries (144,291) (346,423) (1,940,476)
Cash provided by (used for) operating working capital:
Inventories (234,743) (937,908) (1,357,474)
Co-op advertising and other receivables (3,902,355) (4,506,650) 723,824
Prepaid expenses and other (2,493,331) (5,476,834) (15,563,272)
Accounts payable 12,111,884 2,551,682 912,926
Accrued liabilities 12,729,888 15,132,006 17,396,088
Income taxes payable (1,648,629) -- --
------------- ------------- -------------
Net cash provided by operating activities 58,754,033 61,576,949 64,077,204
INVESTING ACTIVITIES:
Additions to Theatre properties and equipment (177,953,281) (200,272,497) (387,905,629)
Sale of Theatre properties and equipment 10,427,303 1,737,632 152,215,795
Decrease (increase) in certificates of deposit 297,102 -- (2,184,259)
Increase in investments in and advances to affiliates (1,715,364) (27,124,560) 4,127,536
Increase in other assets (8,478,376) (3,643,028) (14,396,545)
------------- ------------- -------------
Net cash used for investing activities (177,422,616) (229,302,453) (248,143,102)
FINANCING ACTIVITIES:
Issuance of Senior Subordinated Notes 199,106,000 77,250,000 103,950,000
Retirement of Senior Subordinated Notes (28,561,000) --
Retirement of Senior Notes (123,370,000) (1,630,000) --
Repurchase premium on retired Senior Notes (12,371,954) -- --
Increase in long-term debt 97,510,000 194,065,000 315,888,000
Reductions of long-term debt (77,530,536) (77,648,980) (259,691,753)
Payment on notes payable to related parties (2,086,513) -- --
Decrease in Theatre development advance (356,046) (396,095) (390,562)
Minority investment in subsidiaries, net (677,889) 26,338,402 18,209,865
Issuance of common stock to Cypress 38,567,063 -- --
Common stock issued for options exercised 900,013 20,192 33,959
Purchase of treasury stock -- (4,013,737) --
------------- ------------- -------------
Net cash provided by financing activities 119,690,138 185,423,782 177,999,509
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (590,053) 8,876 (76,123)
------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 431,502 17,707,154 (6,142,512)
CASH AND CASH EQUIVALENTS:
Beginning of period 13,649,724 14,081,226 31,788,380
------------- ------------- -------------
End of period $ 14,081,226 $ 31,788,380 $ 25,645,868
============= ============= =============
SUPPLEMENTAL INFORMATION (Note 12)
</TABLE>
See notes to consolidated financial statements.
F - 7
<PAGE> 55
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Business - Cinemark USA, Inc. and its subsidiaries (the Company) own or
lease and operate motion picture theatres in 31 states, Mexico, Brazil,
Argentina, Peru and Ecuador, at December 31, 1998. The following summarizes
theatre transactions during 1996, 1997 and 1998.
<TABLE>
<CAPTION>
Theatres Screens
<S> <C> <C>
Active at January 1, 1996 159 1,247
Openings/Acquisitions 17 237
Closings/Sales (7) (31)
---------- ----------
Active at December 31, 1996 169 1,453
Openings/Acquisitions 19 249
Closings/Sales (14) (68)
---------- ----------
Active at December 31, 1997 174 1,634
Openings/Acquisitions 46 593
Closings/Sales (12) (63)
---------- ----------
Active at December 31, 1998 208 2,164
========== ==========
</TABLE>
At December 31, 1998, the Company also manages two theatres (24
screens) for Cinemark Theatres Alberta, Inc., a Canadian corporation, a related
party (Notes 10 and 11).
Consolidated Financial Statements include the accounts of Cinemark
USA, Inc. and all of its wholly owned and majority-owned domestic and foreign
subsidiaries, which includes Cinemark International, L.L.C. (f/k/a Cinemark II,
Inc.). Majority-owned subsidiaries are consolidated; 50% owned and greater than
20% owned businesses are accounted for as affiliates under the equity method
except for one 50% owned foreign subsidiary which the Company effectively
controls and thus consolidates (Notes 3 and 11). The results 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 consolidated 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.
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 estimates of the final settlement pursuant to 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
remaining 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.
F-8
<PAGE> 56
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
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 $2,152,816 and
$4,397,643 of interest incurred during the development and construction of
theatres capitalized in 1997 and 1998, 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. The Company determined that impairment
charges of $2,381,998, $2,213,696 and $9,950,088 were required for certain
theatres in 1996, 1997 and 1998, respectively. The impairment charges were
recognized in the third, third and fourth quarters of 1996, 1997 and 1998,
respectively. For purposes of this calculation, fair value of operating theatres
was determined based on cash flows.
Intangible Assets represent primarily the excess of cost over the fair
values of the net assets of theatre businesses acquired, less accumulated
amortization ($821,382 and $1,466,882 at December 31, 1997 and 1998,
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
June 2008 for debt issue costs and over the six year term of the noncompete
agreement. Statement of Position (SOP) 98-5 issued in April 1998 requires costs
of start-up activities and organization costs to be expensed as incurred. SOP
98-5 is effective for financial statements for fiscal years beginning after
December 15, 1998. The Company will adopt SOP 98-5 during the first quarter of
1999 and does not expect the adoption of SOP 98-5 will have a material impact on
the Company's operations.
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 and Class B common stock outstanding during each period.
Earnings per common and common share equivalent share are computed as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net Income (in thousands) $ 5,230 $ 14,705 $ 11,009
======== ======== ========
Basic:
Weighted average common shares outstanding 173,996 178,524 178,325
======== ======== ========
Earnings per common share $ 30.06 $ 82.37 $ 61.74
======== ======== ========
Diluted:
Weighted average common shares outstanding 173,996 178,524 178,325
Common equivalent shares for stock options 8,870 8,167 8,213
-------- -------- --------
Weighted average shares outstanding 182,866 186,691 186,538
======== ======== ========
Earnings per common and common equivalent share $ 28.60 $ 78.77 $ 59.02
======== ======== ========
</TABLE>
F-9
<PAGE> 57
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 is estimated to approximate the related recorded
value.
Comprehensive income is presented in the consolidated statement of
shareholders' equity and comprehensive income for 1996, 1997 and 1998,
respectively, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 130, "Reporting Comprehensive Income" which the company adopted in
1998.
2. FOREIGN CURRENCY TRANSLATION
The other accumulated comprehensive income in shareholders' equity of
$11,120,575 and $17,196,698 at December 31, 1997 and 1998, respectively,
primarily relates to the unrealized adjustments from translating the financial
statements of Cinemark Brasil, S.A. and Cinemark de Mexico.
Prior to 1997, the functional currency of Cinemark de Mexico was the
peso. In 1997 and 1998 the Company was required to utilize the U.S. dollar as
the functional currency of Cinemark de Mexico for U.S. reporting purposes due to
the highly inflationary economy of Mexico. Thus, devaluations in the peso during
1997 and 1998 that affected the Company's investment were charged to exchange
gain or loss rather than to the other accumulated comprehensive income account.
An exchange gain (loss) of ($96,514) and $567,206 has been recognized in 1997
and 1998, respectively, and is included in gain (loss) on sale of assets and
other. At December 31, 1998, the total assets of Cinemark de Mexico were
approximately $60 million.
Prior to 1998, the functional currency of Cinemark del Ecuador S.A. was
the sucre. In 1998 the Company was required to utilize the U.S. dollar as the
functional currency of Cinemark del Ecuador S.A. for U.S. reporting purposes due
to the highly inflationary economy of Ecuador. Thus devaluations in the sucre
during 1998 that affected the Company's investment were charged to exchange gain
or loss rather than to the other accumulated comprehensive income account. An
exchange gain of $223,028 was recognized in 1998, and is included in gain (loss)
on sale of assets and other. At December 31, 1998, the total assets of Cinemark
del Ecuador S.A. were approximately $5 million.
In January 1998, the economy of Brazil became non-highly inflationary
and the functional currency of Cinemark Brasil, S.A. changed from the U.S.
dollar to the Real. Accordingly, assets and liabilities of Cinemark Brasil, S.A.
are translated to U.S. dollars at year-end exchange rates (consistent with all
other non-highly inflationary consolidated foreign subsidiaries). Income and
expense items are translated at the average rates prevailing during the year. As
a result of the devaluation of the real during 1998, the Company recorded a
cumulative foreign currency translation adjustment resulting in a reduction of
shareholder's equity of $4.4 million. At December 31, 1998, the total assets of
Cinemark Brasil, S.A. were approximately $68 million.
F-10
<PAGE> 58
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
3. ACQUISITIONS AND INVESTMENTS IN SUBSIDIARIES ACTIVITY
Cinemark USA, Inc. has made the following direct investments in its
subsidiaries in 1996, 1997 and 1998, respectively.
<TABLE>
<CAPTION>
( in millions) Partners II Leaseco Argentine Peruvian Mexican
Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary
------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
January 1, 1996 Capital contributed $ -- $ -- $ -- $ -- $ --
1996 Capital contribution -- -- -- -- --
1997 Capital contribution -- -- -- -- --
1998 Capital contribution $ 5.5 $12.7 $13.1 $ 1.5 --
1998 Ownership transfer from Cinemark -- -- -- -- $21.0
International L.L.C
===== ===== ===== ===== =====
Cumulative Capital contributed $ 5.5 $12.7 $13.1 $ 1.5 $21.0
===== ===== ===== ===== =====
Ownership % as of December 31, 1998 51% 100% 100% 50% 95.6%
===== ===== ===== ===== =====
</TABLE>
Approximately $3.3 million of goodwill was recorded as part of the 1998
investment in the Peruvian subsidiary as the 50% ownership interest was acquired
from the Cinemark International, L.L.C. joint venture partners at a cost in
excess of the fair value of the net assets acquired. The Peruvian subsidiary was
jointly owned by Cinemark International, L.L.C. and Cinemark USA, Inc. at
December 31, 1998. The 50% interest held by Cinemark International, L.L.C. was
transferred to Cinemark USA, Inc. in January 1999.
In 1996, the Company sold its entire interest in 2 Day Video (Class A
Common Stock) for $9,439,466 and a receivable of $633,288, resulting in a gain
of $7 million.
In 1998, Cinemark USA, Inc. acquired three theatres from Movie Theatres
Investors (former affiliate entity) for an aggregate purchase price of $19
million resulting in the recording of $1.9 million of goodwill resulting from
the purchase price being in excess of the fair value of the net assets acquired.
Cinemark International, L.L.C. (a wholly-owned subsidiary of
Cinemark USA, Inc.) has made the following direct investments in its
subsidiaries in 1996, 1997 and 1998, respectively.
<TABLE>
<CAPTION>
( in millions) Central
Mexican Brazilian Argentine Peruvian Ecuadorian American
Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
January 1, 1996 Capital contributed $ 11.0 $ -- $ -- $ -- $ -- $ --
1996 Capital contribution 10.0 1.2 0.6 0.1 -- --
1997 Capital contribution -- 24.8 3.9 1.4 1.3 --
1998 Capital contribution -- -- 5.5 -- 0.8 2.5
1998 Ownership transfer to Cinemark (21.0) -- -- -- -- --
USA, Inc.
------ ----- ----- ---- ---- ----
Cumulative Capital contributed $ 0.0 $26.0 $10.0 $1.5 $2.1 $2.5
====== ===== ===== ==== ==== ====
Ownership % as of December 31, 1998 0% 60% 50% 50% 60% 50%
====== ===== ===== ==== ==== ====
</TABLE>
F-11
<PAGE> 59
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
Approximately $2.4 million of goodwill was recorded as part of the 1998
investment in the Argentine subsidiary as a 25% ownership interest was acquired
from the Cinemark International, L.L.C. joint venture partners at a cost in
excess of the fair value of the net assets acquired.
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets at December 31 consist of the following:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Debt issue costs $ 9,347,303 $ 7,667,147
Noncompete agreements 758,145 72,043
----------- -----------
Total 10,105,448 7,739,190
----------- -----------
Less accumulated amortization 4,073,242 1,691,085
Net 6,032,206 6,048,105
----------- -----------
Equipment, lease and other deposits 1,159,370 978,487
Construction advances and other 9,787,076 12,448,931
----------- -----------
Total $16,978,652 $19,475,523
=========== ===========
</TABLE>
5. LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Series B Senior Subordinated Notes due 2008,
discussed below $199,211,542 $199,286,042
Series D Senior Subordinated Notes due 2008,
discussed below 77,148,496 76,945,489
Series B Senior Subordinated Notes due 2008,
discussed below 104,041,667
Cinemark USA, Inc. Revolving credit line
of $350,000,000, discussed below 155,000,000 191,000,000
Cinemark International, L.L.C., Revolving credit line
of $30,000,000, discussed below 30,000,000
Cinemark Mexico (USA), Revolving credit line
of $30,000,000, discussed below 30,000,000
Cinemark Investments Corporation, Revolving credit line
of $20,000,000, discussed below 20,000,000
Other long-term debt 2,140,701 10,375,423
------------ ------------
Total long-term debt 463,500,739 631,648,621
Less current portion 30,730 337,895
------------ ------------
Long-term debt, less current portion $463,470,009 $631,310,726
============ ============
</TABLE>
F-12
<PAGE> 60
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
Senior Subordinated Notes - In August 1996, the Company issued $200
million principal amount of Series B Senior Subordinated Notes due 2008 (the
"1996 Subordinated Notes"). The 1996 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 1996 Subordinated Notes require the Company to restrict the
payment of dividends, payment of subordinated debt prior to maturity and
issuance of preferred stock and other indebtedness; and contain other
restrictive covenants. The 1996 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 Notes are
due August 1, 2008. The 1996 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 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 Company utilized the proceeds from the $200 million issuance of
Senior Subordinated Notes, to repurchase $123,370,000 of Senior Notes at
$1,098.33 per $1,000.00 principal amount. 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. In June 1997, the Company redeemed the
remaining $1,630,000 of Senior Notes at a premium of $1,060 per $1,000 principal
amount, resulting in an extraordinary loss of $53,789, net of related tax
benefit.
In June 1997, the Company issued $75 million principal amount of Series
D Senior Subordinated Notes due 2008 ("1997 Subordinated Notes"). The 1997
Subordinated Notes are substantially identical in all material respects to the
1996 Subordinated Notes, including rate of interest. The 1997 Subordinated Notes
were issued at 103.0% of the principal face amount (a premium of $30.00 per
$1,000 principal amount). The net proceeds to the Company from the issuance of
the Subordinated Notes (net of fees and expenses) were approximately $77.1
million. The proceeds from the Subordinated Notes were used to reduce the
Company's indebtedness under the then Credit Facility.
In January 1998, the Company issued $105 million principal amount of
Series A Senior Subordinated Notes due 2008 ("1998 Subordinated Notes"). The
1998 Subordinated Notes are substantially identical in all material respects to
the 1996 and 1997 Subordinated Notes, except for a lower 8-1/2% interest rate.
The 1998 Subordinated Notes were issued at 99.0% of the principal face amount (a
discount of $10.00 per $1,000 principal amount) for an aggregate discount of
$1,050,000. The net proceeds to the Company from the issuance of the
Subordinated Notes (net of discount, fees and expenses) were approximately
$103.8 million. The proceeds from the Subordinated Notes were used to reduce the
Company's indebtedness under the then Credit Facility. The Company exchanged the
1998 Subordinated Notes in March 1998 for 8 1/2% Series B Senior Subordinated
Notes which are substantially identical in all material respects to the 1998
Subordinated Notes.
Reducing, Revolving Credit Facility - In February 1998, 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
Credit Facility provides for loans to the Company of up to $350 million in the
aggregate.
The Credit Facility is a reducing revolving credit facility, with
commitments automatically reduced each calendar quarter by $8,750,000,
$11,812,500, $13,125,000, $12,031,000 and $6,562,500 in calendar year 2001,
2002, 2003, 2004 and 2005, 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. Pursuant to the terms of the
F-13
<PAGE> 61
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
Credit Facility, funds borrowed 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 Margin (as
defined in the Credit Facility). As of December 31, 1998, the Company had
borrowed $191 million under the Credit Facility. The effective interest rate on
such borrowings as of December 31, 1998 is 6.5% per annum.
Revolving Credit Facility, Cinemark International, L.L.C. - In November
1997, Cinemark International, L.L.C. executed a credit agreement (the "Cinemark
International Credit Agreement") with a bank. As amended in December 1997, the
Cinemark International Credit Agreement was a revolving credit facility and
provided for a loan to Cinemark International of up to $30 million in the
aggregate. The Cinemark International Credit Agreement was secured by a pledge
of substantially all of the stock of Cinemark Mexico and an unconditional
guaranty by Cinemark Mexico.
Revolving Credit Facility, Cinemark Mexico (USA) - In November 1998,
Cinemark Mexico (USA), Inc. ("Cinemark Mexico") executed a credit agreement with
a bank for itself and as Administrative Agent (the "Cinemark Mexico Credit
Agreement"). The Cinemark Mexico Credit Agreement is a revolving credit facility
and provides for a loan to Cinemark Mexico of up to $30 million in the
aggregate. The Cinemark Mexico Credit Agreement is secured by a pledge of 65% of
the stock of Cinemark de Mexico S.A. de C.V. and an unconditional guaranty of
the Company. Pursuant to the terms of the Cinemark Mexico Credit Agreement,
funds borrowed bear interest at a rate per annum equal to the Offshore Rate (as
defined in the Cinemark Mexico Credit Agreement) or the Base Rate (as defined in
the Cinemark Mexico Credit Agreement), as the case may be, plus the Applicable
Margin (as defined in the Cinemark Mexico Credit Agreement). As of December 31,
1998, Cinemark Mexico borrowed $30 million under the Cinemark Mexico Credit
Agreement, the proceeds of which were used to repay an intercompany loan of
Cinemark Mexico from Cinemark International L.L.C. Cinemark International L.L.C.
used the proceeds of such repayment to repay the aforementioned outstanding
indebtedness under its then existing credit facility. The effective interest
rate on such borrowings as of December 31, 1998 is 6.2% per annum.
Revolving Credit Facility, Cinemark Investments Corporation - In
September 1998, Cinemark Investments Corporation executed a credit agreement
with a bank that provides Cinemark Investments Corporation up to $20 million in
the aggregate under a revolving line of credit facility (the "Cinemark
Investments Credit Agreement"). The Cinemark Investments Credit Agreement is
secured by an assignment of certain fixed rate notes issued by Cinemark Brasil
S.A. to Cinemark Investments Corporation and an unconditional guaranty by the
Company. Pursuant to the terms of the Cinemark Investments Credit Agreement,
funds borrowed bear interest at a rate per annum equal to the Offshore Rate or
the Base Rate (both defined in the Cinemark Investments Credit Agreement) as the
case may be. As of December 31, 1998, Cinemark Investments Corporation had
borrowed $20 million under the Cinemark Investments Credit Agreement, the
proceeds of which were used to purchase fixed rate notes issued by Cinemark
Brasil, S.A. bearing interest at 13.25%. The effective interest rate on such
borrowings as of December 31, 1998 is 7.1% per annum.
Long-term debt at December 31, 1998, matures as follows: $337,895 in
1999; $276,717 in 2000; $276,717 in 2001; $276,717 in 2002; $276,717 in 2003;
and $630,203,858 thereafter.
The estimated fair value of the Company's long-term debt of $631.6
million at December 31, 1998, was approximately $638 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 $9,347,303 and $7,667,147, net
of accumulated amortization of $3,374,238 and $1,665,278 related to the
Subordinated Notes, the Credit Facility, the Cinemark Mexico Credit Agreement
and the Cinemark Investments Credit Agreement, are
F-14
<PAGE> 62
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
included in deferred charges at December 31, 1997 and 1998, respectively. The
1997 period includes extraordinary losses recognized in connection with the
write-offs of debt issue costs relating to the Company's prior bank lines of
credit, repurchase of Senior Notes and repurchase of New Mexican Notes.
6. 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 shares 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.
The Company has 1,000,000 shares of preferred stock, $1.00 par value,
authorized with none issued or outstanding. The rights and preferences of
preferred stock will be determined by the board of directors at the time of
issuance.
The Company repurchased 174 and 2,246 shares of Class B common stock as
treasury stock in 1996 and 1997, respectively.
Employee Stock Option Plan - Under terms of the Company's stock option
plan, nonqualified options to purchase up to 10,685 shares of the Company's
Class B common stock may be granted to key employees. The total options granted
in 1996, 1997 and 1998 were 600, 260 and 470 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 the date of grant. The Company believes that the market value of
a share of Class B Common Stock on the date of grant for the 470 shares granted
in January 1998 exceeded the option price by approximately $1,800. As a result,
the Company accrued $846,000 for unearned compensation and will amortize this
noncash expense at a rate of $169,200 per year during the five year vesting
period for the options granted. In 1996, 2,213 vested options were exercised
and an additional 430 options were forfeited. In 1997, 837 vested options were
exercised and 100 options were forfeited. In 1998, 60 vested options were
exercised and 40 options were forfeited and later reissued. In addition, the
Company repurchased options to purchase 454 shares of Class B Common Stock held
by a retiring employee in July 1998. The aggregate purchase price for such
options was approximately $817,000 which is included in salaries and wages
expense. At December 31, 1998, 6,449 options to purchase the Company's Class B
Common Stock were exercisable at an exercise price of $1.00 per share out of a
total of 7,121 outstanding under the Plan.
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
F-15
<PAGE> 63
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
Stock at an exercise price of $833.34 per share (the "Director Options"). In
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 and expire ten
years from the date of grant. Compensation expense of $414,000 was immediately
recognized in 1995, with unearned compensation expense of $276,000 recognized
over the remaining vesting period of 15 months. In December 1998, the Company
granted an unaffiliated director of the Company options to purchase 200 shares
of the Company's Class B common stock at an exercise price of $1.00 per share.
The options vest five years from the date of grant and expire ten 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 for the 200 shares granted in December 1998
exceeded the option price by approximately $2,099. As a result, the Company
accrued $419,800 for unearned compensation and will amortize this noncash
expense at a rate of $83,960 per year during the five year vesting period for
the options granted. A director's options are forfeited if the director resigns
or is removed from the Board of Directors of the Company. At December 31, 1998,
600 options were exerciseable at an exercise price of $1.00 per share out of a
total of 800 outstanding under the Plan.
Long Term Incentive Plan - In November 1998, the Board approved a Long
Term Incentive Plan (the "1998 Plan") under which the Compensation Committee, in
its sole discretion, may grant employees incentive stock options, non-qualified
stock options, stock appreciation rights, restricted stock awards performance
units, performance shares or phantom stock up to an aggregate of 9,794 shares of
the Company's Class B Common Stock. The Compensation Committee has the
discretion to set the exercise price and the term (up to ten years) of the
options. All awards under the 1998 Plan vest at the rate of one-fifth of the
total award per year beginning one year from the date of grant, subject to
acceleration by the Compensation Committee. An employee's award under the 1998
Plan is forfeited if the employee is terminated for cause. Upon termination of
the employee's employment with the Company, the Company has the option to
repurchase the award at the fair market value of the shares of Class B Common
Stock vested under such award provided that no public market exists for any
class of common stock of the Company. During 1998, the Company granted under the
1998 Plan options to purchase an aggregate of 5,450 shares of Class B Common
Stock with an exercise price of $1,674. 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 $426. As a result, the Company accrued $2,321,700
for unearned compensation and will amortize the noncash expense at a rate of
$464,340 per year during the five year vesting period for the options granted.
At December 31, 1998, none of the options were exerciseable. In January 1999, an
additional 40 shares of Class B Common Stock were granted under the Long-Term
Incentive Plan.
The excess of the estimated fair market value of the stock at the dates
of the grant over the exercise price of the various 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 $1,127,117, $1,073,296 and $3,587,500 was recorded in 1996, 1997
and 1998, respectively. Compensation expense under these stock option plans was
$1,324,856, $1,898,836, and $851,375 in 1996, 1997 and 1998, respectively.
The Company applies APB Opinion 25 and related interpretations in
accounting for the Company's stock option plans, 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 exercise price of the options.
F-16
<PAGE> 64
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
7. 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>
1997 1998
----------- -----------
<S> <C> <C>
Cinemark Mexico - 4.40% interest $ 616,480 $ 334,836
Laredo Theatres, Ltd. - 25% interest (owned by a
relative of the majority shareholder) 406,932 512,831
Cinemark Brasil, S.A. - 40% interest 24,866,366 22,938,600
Cinemark del Ecuador, S.A. - 40% interest 842,783 1,025,358
Cinemark Partners II - 49% interest 5,608,436
Cinemark Argentina, S.A. - 50% interest 10,428,570
Cinemark Equity Holdings Corp. (Central America)
-49.9% interest 2,153,319
----------- -----------
Total $26,732,561 $43,001,950
=========== ===========
</TABLE>
8. 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 $13,064,630 and
$14,006,106 at December 31, 1997 and 1998, 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, 1996, 1997
and 1998, totaled $34,841,041, $39,190,388, and $61,713,480, respectively.
In February 1998, the Company completed a sale leaseback transaction
with affiliates of Primus Capital L.L.C. (the "Sale Leaseback"). Pursuant to the
Sale Leaseback, the Company sold the land, buildings and site improvements of
twelve theatre properties to special purpose entities formed by Primus Capital
L.L.C. for an aggregate purchase price equal to approximately $131.5 million
resulting in a gain on disposal of the properties of $6,375,000. In October
1998, the Company completed a second sale leaseback transaction with affiliates
of Primus Capital L.L.C. (the "Second Sale Leaseback"). Pursuant to the Second
Sale Leaseback, the Company sold the land, buildings and site improvement of one
theatre property to a special purpose entity for an aggregate purchase price
equal to approximately $13.9 million resulting in a gain on disposal of the
property of $700,000. The Company deferred the entire gain from both sale
leaseback transactions and is recognizing it evenly over the twenty year lives
of the leases. As of December 31, 1998, $271,458 of the deferred gain has been
recognized leaving an aggregate deferred gain of $6,803,542. Future minimum
payments under these leases are due as follows: $14,808,947 in 1999, $14,808,947
in 2000, $14,808,947 in 2001, $14,808,947 in 2002, $14,808,947 in 2003 and
$210,747,494 thereafter.
In December 1998, the Company entered into a five year lease for office
furniture that was classified as a capital lease. As of December 31, 1998,
$1,074,478 was recorded as property, plant and equipment, $1,074,478 as a
capital lease liability and $8,954 as accumulated depreciation, respectively.
The future interest payments total $162,824 at a 5.9% interest rate.
F-17
<PAGE> 65
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
Future minimum payments under noncancelable capital leases and
operating leases with initial or remaining terms in excess of one year at
December 31, 1998, are due as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases Totals
----------- -------------- --------------
<S> <C> <C> <C>
1999........................ $ 247,431 $ 66,826,052 $ 67,073,483
2000........................ 247,431 73,471,844 73,719,275
2001........................ 247,431 73,555,377 73,802,808
2002........................ 247,431 73,259,905 73,507,336
2003........................ 247,431 72,862,494 73,109,925
Thereafter................. -- 924,145,616 924,145,616
----------- -------------- --------------
Total........................ $ 1,237,155 $1,284,121,288 $1,285,358,443
=========== ============== ==============
</TABLE>
Employment Agreements - As of December 31, 1998, the Company has
employment agreements with certain principal officers and a shareholder
providing for total minimum future annual payments as follows:
<TABLE>
<S> <C>
1999............................................. $ 567,546
2000............................................. 624,301
2001............................................. 686,731
------------
Total............................................ $ 1,878,578
============
</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 contributions as determined annually
by the Board of Directors. Contributions of $613,213, $744,913, and $828,890
were made in 1996, 1997 and 1998, respectively.
Letters of Credit and Collateral - At December 31, 1998, the Company
has outstanding letters of credit of $2,053,512 in connection with uniform
purchases, property and liability insurance coverage and certain lease matters.
Certificates of deposit of $2,053,512 are pledged as collateral on the letters
of credit. The remaining certificates of deposit of $1,656,599 are held as
investments by foreign subsidiaries and are not pledged as collateral.
Litigation and Litigation Settlements - The Company currently is a
defendant in certain litigation proceedings alleging certain violations of the
Americans with Disabilities Act of 1990 relating to the accessibility of certain
theatre seating to patrons using wheelchairs. In August 1998, the judge
presiding over one of these cases granted plaintiffs motion for summary
judgement ruling the Company's stadium theatre design is in violation of the
ADA. The Company is appealing this ruling. Although the Company cannot predict
the outcome of the appeal or the outcome of the other cases, management believes
that the Company's potential liability with respect to such proceedings is not
material in the aggregate to the Company's financial position, results of
operations and cash flows.
F-18
<PAGE> 66
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
The Company's Brazilian subsidiary is in litigation with ECAD over the
issue of royalties for the synchronized sound tracks that accompany motion
pictures. ECAD is a private civil association of authors, made up of different
associations throughout Brazil, initially created to protect authors and collect
royalties on their behalf related to public use of their compositions.
Specifically, ECAD purports to have the authority to collect 2.5% of the gross
box office revenue as "royalties" for the use of the sound track in motion
pictures. Cinemark Brasil has disputed ECAD's authority and right to collect
such royalties, and litigation has ensued. In March 1999, the district court in
Rio de Janeiro ruled in favor of Cinemark Brasil, S.A. finding that ECAD did not
prove its authority to collect "royalties" for the use of sound tracks in motion
pictures.
From time to time, the Company is involved in other legal proceedings
arising from the ordinary course of its business operations, such as personal
injury claims, employment matters and contractual disputes. The Company also
believes that its potential liability with respect to other proceedings
currently pending is not material in the aggregate to the Company's consolidated
financial position, results of operations and cash flows.
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.
9. INCOME TAXES
Income tax expense below includes benefits from the extraordinary
losses on early extinguishment of debt in 1996 and 1997 of $6,057,922 and
$256,768, respectively, and consists of the following:
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Income before income taxes and extraordinary items:
United States $ 29,811,192 $ 24,531,038 $ 22,182,145
Foreign (2,848,731) 1,158,975 294,839
------------ ------------ ------------
Total 26,962,461 25,690,013 22,476,984
============ ============ ============
Current:
Federal $ 3,909,114 $ 3,451,118 $ 4,310,000
Foreign income taxes 1,081,501 969,688
State 749,017 871,282 1,011,454
----------- ------------ -----------
Total current expense 4,658,131 5,403,901 6,291,142
Deferred:
Temporary differences
Federal 1,475,670 4,418,329 4,221,438
Foreign 656,442
State 154,728 592,091 299,433
----------- ----------- -----------
Total deferred expense 1,630,398 5,010,420 5,177,313
=========== =========== ===========
Income tax expense $ 6,288,529 $10,414,321 $11,468,455
=========== =========== ===========
</TABLE>
F-19
<PAGE> 67
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>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Computed normal tax expense $ 4,031,450 $ 8,851,079 $ 7,866,944
Goodwill amortization, not deductible for tax
purposes 363,044 209,907 108,052
Foreign inflation Adjustments - Depreciation,
exchange gain/loss, interest (517,815)
State and local income taxes, net of federal
income tax benefit 501,887 773,078 947,428
Federal tax on undistributed foreign earnings 1,686,078
Foreign withholding tax on undistributed foreign
earnings 242,347
Foreign subsidiaries losses (recognized)/not
recognized for tax purposes 997,056 (374,232) 460,463
Foreign tax rate differential 469,054 37,235
Foreign tax on equity earnings 236,759
Federal tax on undistributed foreign equity
earnings 231,217
Jobs tax credits (59,728) (29,635)
Other - net 395,092 545,163 199,382
------------ ------------ ------------
$ 6,288,529 $ 10,414,321 $ 11,468,455
============ ============ ============
</TABLE>
The tax effects of significant temporary differences and carryforwards
comprising the net long-term deferred income tax liability at December 31, 1997
and 1998, consist of the following:
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Deferred liabilities:
Accelerated tax depreciation $ 21,235,479 $ 28,056,276
Basis difference of assets acquired 50,623 86,997
Tax on Foreign Subsidiary Undistributed Earnings 0 2,159,642
Other 1,016,064 3,100,967
------------ ------------
Total 22,302,166 33,403,882
Deferred assets:
Deferred lease expense 4,881,461 5,335,385
Section 263(a) inventory adjustment 1,724,941 2,121,718
Amortization of unearned compensation 1,643,395 1,956,570
Self-insurance accruals 1,273,477 643,040
Asset Impairment loss 1,145,829 5,048,751
Sale/Leaseback gain 1,446,181
Tax operating loss carryforward for foreign subsidiaries 2,526,322 3,137,927
Valuation allowance - operating loss carryforward (2,526,322) (3,137,927)
Other expenses, not currently deductible for tax purposes 696,034 737,895
------------ ------------
Total 11,365,137 17,289,540
============ ============
Net long-term deferred income tax liability $ 10,937,029 $ 16,114,342
============ ============
</TABLE>
F-20
<PAGE> 68
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
The Company's income tax returns for 1994 and 1995 were examined by the
Internal Revenue Service (IRS). The IRS has proposed an increase in tax of
$166,819.
10. OTHER RELATED PARTY TRANSACTIONS
In addition to transactions discussed in other notes to the financial
statements, the following transactions with related companies are included in
the Company's financial statements:
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Facility lease expense - theatre and equipment leases
with shareholder affiliates $ 306,238 $ 293,504 $ 272,135
Video game machine income - a subsidiary of an affiliate 1,745,731 1,961,032 2,529,156
Management fees for property and theatre management 413,900 501,974 148,263
Rental revenue-theatre lease with shareholder affiliate 250,000
</TABLE>
In 1996 and 1997, the majority shareholder and certain employees of the
Company owned a minority portion of Cinemark Partners II, Ltd. The Company
leases a theatre facility to a relative of the Company's majority shareholder.
11. INVESTMENTS IN AND ADVANCES TO AFFILIATES
The Company has the following investments in and advances to affiliates
at December 31:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Cinemark Chile, S.A. - investment, at equity $ 5,977,596 $18,591,757
Cinemark Theatres Alberta, Inc. - investment, at equity 1,883,200 1,290,483
Cinemark Argentina, S.A 8,403,799
Central American affiliates 8,218,695
Cinemark del Peru, S.A 1,551,376
Cinemark del Peru, S.A.:
Note receivable, 8% interest, due Sept. 1999 1,500,000
Cinemark Partners II, Ltd.:
Note receivable, 9.25% interest, due 2002 1,600,000
Shochiku Cinemark Theatres 6,535,948
Cinemark El Salvador, S.A. de C.V. 1,240,542
Cinemark Costa Rica, S.A. 1,466,401
Other 3,970,537 1,710,598
----------- -----------
Total $34,129,399 $29,811,533
=========== ===========
</TABLE>
F-21
<PAGE> 69
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
12. SUPPLEMENTAL CASH FLOW INFORMATION
The following is provided as supplemental information to the
consolidated statement of cash flows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Interest paid $17,928,251 $27,721,091 $41,556,819
=========== =========== ===========
Income taxes paid $ 4,974,320 $10,978,902 $ 7,715,397
=========== =========== ===========
Noncash investing and financing activities:
Retirement of Cinemark Mexico senior subordinated notes and
issuance of new senior subordinated notes 22,400,000
Issuance of Cinemark Mexico senior subordinated notes for
redeemed warrants 1,339,400
Issuance of note receivable in sale of subsidiaries 1,033,288
Canceled note receivable due from subsidiaries 747,606
Issued note payable in sale of land 365,000
</TABLE>
13. REPORTING SEGMENTS
The Company operates in a single industry as a motion picture
exhibitor. The Company is a multinational corporation with consolidated
operations in the United States, Mexico, Brazil, Argentina, Peru and Ecuador.
Revenues and long-lived assets in the United States and other countries for the
years ended December 31 are as follows:
<TABLE>
<CAPTION>
Other
Foreign
United States Mexico Brazil Countries Eliminations Consolidated
------------- ------ ------ --------- ------------ ------------
1998
<S> <C> <C> <C> <C> <C> <C>
Total revenues $492,061,342 $45,338,437 $30,034,637 $ 7,045,885 $(3,261,389) $571,218,912
============ =========== =========== =========== =========== ============
Long-lived assets, net $650,344,302 $50,152,403 $63,636,903 $52,862,083 --- $816,995,691
============ =========== =========== =========== =========== ============
1997
Total revenues $398,599,698 $34,669,056 $ 2,238,796 $ 812,499 $(1,721,724) $434,598,325
============ =========== =========== =========== =========== ============
Long-lived assets, net $505,774,675 $38,752,113 $25,075,039 $24,663,178 --- $594,265,005
============ =========== =========== =========== =========== ============
</TABLE>
F-22
<PAGE> 70
CINEMARK USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
14. SUBSEQUENT EVENTS
In January 1999, the Brazilian government allowed its currency (the
"Real") to float against the U.S. dollar instead of maintaining a
pre-established trading ban. In connection with this decision, the Real has
devalued significantly against the U.S. dollar to approximately 1.7 Reais to the
U.S. dollar as of March 30, 1999. As a result of the devaluation, a cumulative
foreign currency translation adjustment of approximately $18 million will be
recorded as a reduction to shareholders' equity in the first quarter of 1999.
F-23
<PAGE> 71
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE A
CONSOLIDATING BALANCE SHEET INFORMATION
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
ASSETS GROUP GROUP ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 17,325,917 $ 8,319,951 $ 25,645,868
Temporary cash investments 345,985 -- 345,985
Inventories 3,096,835 494,870 3,591,705
Other current assets 24,730,468 11,207,562 155,355 36,093,385
------------ ------------ ------------- ------------
Total current assets 45,499,205 20,022,383 155,355 65,676,943
THEATRE PROPERTIES AND EQUIPMENT: 666,388,189 84,115,140 750,503,329
OTHER ASSETS:
Certificates of deposit (Note 8) 2,244,854 1,465,257 3,710,111
Investments in and advances to affiliates (Note 11) 79,612,799 42,873,011 (92,674,277) 29,811,533
Intangible assets - net (Note 3) 11,116,283 2,378,912 13,495,195
Deferred charges and other - net (Notes 4 and 5) 18,463,502 1,012,021 19,475,523
------------ ------------ ------------- ------------
Total other assets 111,437,438 47,729,201 (92,674,277) 66,492,362
------------ ------------ ------------- ------------
TOTAL $823,324,832 $151,866,724 $ (92,518,922) $882,672,634
============ ============ ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 337,895 $ -- $ 337,895
Accounts payable, accrued expenses and other --
current liabilities 88,729,215 6,629,506 (60,264) 95,298,457
------------ ------------ ------------- ------------
Total current liabilities 89,067,110 6,629,506 (60,264) 95,636,352
LONG-TERM LIABILITIES
Long-term debt, less current portion 609,842,075 22,137,783 (669,132) 631,310,726
Deferred lease expenses 14,006,106 -- 14,006,106
Other long-term liabilities 6,803,542 6,803,542
Deferred income taxes 15,750,101 208,886 155,355 16,114,342
------------ ------------ ------------- ------------
Total long-term liabilities 646,401,824 22,346,669 (513,777) 668,234,716
COMMITMENTS AND CONTINGENCIES --
MINORITY INTERESTS IN SUBSIDIARIES 6,613,103 36,388,847 43,001,950
SHAREHOLDERS' EQUITY
Common Stock 49,537,622 1,000 (1,000) 49,537,622
Additional paid-in-capital 13,773,691 91,974,880 (91,974,880) 13,773,691
Unearned compensation - stock options (4,221,326) (4,221,326)
Retained earnings (deficit) 59,103,319 (1,029,101) 30,999 58,105,217
Treasury stock (24,198,890) (24,198,890)
Other accumulated comprehensive income (12,751,621) (4,445,077) (17,196,698)
------------ ------------ ------------- ------------
Total shareholders' equity 81,242,795 86,501,702 (91,944,881) 75,799,616
------------ ------------ ------------- ------------
TOTAL $823,324,832 $151,866,724 $ (92,518,922) $882,672,634
============ ============ ============= ============
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the Indenture
for the Senior Subordinated Notes.
S - 1
<PAGE> 72
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE B
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
GROUP GROUP ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
REVENUES $ 535,541,329 $ 35,928,609 $ (251,026) $ 571,218,912
COSTS AND EXPENSES:
Cost of operations 401,974,233 31,535,458 (251,026) 433,258,665
General and administrative expenses 27,587,187 5,360,193 32,947,380
Depreciation and amortization 32,605,834 4,591,327 37,197,161
Asset impairment loss 9,950,088 -- 9,950,088
------------- ------------ ---------- -------------
Total 472,117,342 41,486,978 (251,026) 513,353,294
OPERATING INCOME (LOSS) 63,423,987 (5,558,369) -- 57,865,618
OTHER INCOME (EXPENSE):
Interest expense (43,341,796) (2,876,126) 4,134,443 (42,083,479)
Amortization of debt issue cost and discount (857,416) (72,685) (930,101)
Interest income 1,599,010 5,353,679 (4,134,443) 2,818,246
Gain (loss) on sales of assets and other 3,157,577 (132,022) 30,999 3,056,554
Equity in income of affiliates 360,054 (550,384) (190,330)
Minority interests in (income) loss of subsidiaries (321,075) 2,261,551 1,940,476
------------- ------------ ---------- -------------
Total (39,403,646) 3,984,013 30,999 (35,388,634)
------------- ------------ ---------- -------------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS 24,020,341 (1,574,356) 30,999 22,476,984
INCOME TAXES 11,041,156 427,299 -- 11,468,455
------------- ------------ ---------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS 12,979,185 (2,001,655) 30,999 11,008,529
EXTRAORDINARY ITEMS --
------------- ------------ ---------- -------------
NET INCOME (LOSS) $ 12,979,185 $ (2,001,655) $ 30,999 $ 11,008,529
============= ============ ========== =============
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the Indenture
for the Senior Subordinated Notes.
S - 2
<PAGE> 73
CINEMARK USA, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE C
CONSOLIDATING STATEMENT OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RESTRICTED UNRESTRICTED
GROUP GROUP ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 12,979,185 $ (2,001,655) $ 30,999 $11,008,529
Loss on early extinguishment of debt
Noncash items in net income:
Depreciation 31,690,542 4,108,138 35,798,680
Amortization - intangibles and other assets 1,606,541 555,874 2,162,415
Loss on impairment of assets 9,950,088 9,950,088
Amortization of gain on sale leaseback (271,458) -- -- (271,458)
Deferred lease expenses 941,476 400,000 1,341,476
Deferred income tax expense 5,177,313 -- -- 5,177,313
Amortization of debt discount and premium (36,840) (36,840)
Amortized compensation - stock options 851,375 -- -- 851,375
(Gain) loss on sale of assets (2,590,371) 355,050 (30,999) (2,266,320)
Equity in income of affiliates (360,054) 550,384 -- 190,330
Minority interests in income (loss) of subsidiaries 321,075 (2,261,551) -- (1,940,476)
Cash provided by (used for) operating working capital 2,401,671 (289,579) -- 2,112,092
------------ ------------ -------- -----------
Net cash provided by operating activities 62,660,543 1,416,661 -- 64,077,204
INVESTING ACTIVITIES
Additions to Theatre properties and equipment (327,067,322) (60,838,307) (387,905,629)
Sale of Theatre properties and equipment 152,215,795 152,215,795
Decrease (increase) in certificates of deposit (719,002) (1,465,257) -- (2,184,259)
Increase in other assets, investments in and advances
to affiliates (18,665,349) 8,396,340 (10,269,009)
------------ ------------ -------- -----------
Net cash used for investing activities (194,235,878) (53,907,224) (248,143,102)
FINANCING ACTIVITIES
Issuance of Senior Subordinated Notes 103,950,000 103,950,000
Increase in long-term debt 295,000,000 20,888,000 315,888,000
Reductions of long-term debt (259,241,536) (450,217) (259,691,753)
Decrease in Theatre development advance (390,562) (390,562)
Minority investment in subsidiaries, net 6,206,171 12,003,694 18,209,865
Common stock issued for options exercised 33,959 33,959
------------ ------------ -------- -----------
Net cash provided by financing activities 145,558,032 32,441,477 -- 177,999,509
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (76,123) (76,123)
------------ ------------ -------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13,982,697 (20,125,209) -- (6,142,512)
CASH AND CASH EQUIVALENTS:
Beginning of period 3,343,220 28,445,160 31,788,380
------------ ------------ -------- -----------
End of period $ 17,325,917 $ 8,319,951 $ -- $25,645,868
============ ============ ======== ===========
</TABLE>
Note: "Restricted Group" and "Unrestricted Group" are defined in the Indenture
for the Senior Subordinated Notes.
S - 3
<PAGE> 74
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR
CINEMARK USA, INC.
FOR FISCAL YEAR ENDED
DECEMBER 31, 1998
<PAGE> 75
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
3.1(a) Amended and Restated Articles of Incorporation of the Company Exhibit 3.1(a) to the
filed with the Texas Secretary of State on June 3, 1992 Company's 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 on June Exhibit 3.1(b) to the
27, 1988 merging Gulf Drive-In Theatres, Inc. and Cinemark of Company's
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 dated Exhibit 3.1(d) to the
October 27, 1989 merging Premiere Cinemas Corp. into the Company's
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 dated Exhibit 3.1(e) to the
October 27, 1989 merging Tri-State Entertainment Incorporated into Company's
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 on Exhibit 3.1(f) to the
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
3.1(f) Articles of Merger filed with the Texas Secretary of State on Exhibit 3.1(f) to the
December 27, 1990 merging Cinema 4, Inc. into the Company Company's Annual
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
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
3.2(b) Amendment to Bylaws of the Company dated March 12, 1996 Exhibit 3.2(b) to the
Company's Annual
Report (file 33-47040)
on Form 10-K filed
March 26, 1997
10.1(a) Indenture for Series B Notes, with form of Series B Note attached. Exhibit 4.1 to the
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 U.S. Trust Exhibit 4.1 to the
Company of Texas, N.A. governing the Notes, with a form of Series Company's
C Note attached Registration Statement
(file 333-32949) on
Form S-4 filed August
6, 1997
10.2 Indenture dated January 14, 1998 between the Company and U.S. Exhibit 4.1 to the
Trust Company of Texas, N.A. governing the Notes, with a form of Company's
Series A Note attached Registration Statement
(file 333-45417) on
Form S-4 filed
February 2, 1998
10.3(a) Management Agreement between the Company and Cinemark II, Exhibit 10.6(c) to the
Inc. ("Cinemark II") dated as of June 10, 1992. Company's Annual
Report (file 33-47040)
on Form 10-K filed
March 31, 1993.
10.3(b) Management Agreement, dated as of July 28, 1993, between the Exhibit 10.7 to
Company and Cinemark Mexico (USA). Cinemark Mexico
(USA)'s Registration
Statement (file 33-
72114) on Form S-4
filed on November 24,
1994.
10.3(c) Management Agreement, dated as of September 10, 1992, between Exhibit 10.8 to
the Company and Cinemark de Mexico. Cinemark Mexico
(USA)'s Registration
Statement (file
33-72114) on Form
S-4 filed on
November 24, 1994.
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
10.3(d) Management Agreement dated December 10, 1993 between Exhibit 10.14(b) to the
Laredo Joint Venture and the Company. Company's Annual
Report (file
33-47040) on
form 10-K
filed March
31, 1994.
10.3(e) Management Agreement dated September 1, 1994 between Exhibit 10.4(i) to the
Cinemark Partners II, Ltd. and the Company. Company's Annual
Report (file
33-47040) on
Form 10-K
filed March
29, 1995.
10.4(a) Employment Agreement dated as of October 17, 1991 between the Exhibit 10.11(a) to the
Company and Lee Roy Mitchell. Company's
Registration Statement
(file 33-47040) on
Form S-1 filed on
April 9, 1992.
10.4(b) First Amendment to Employment Agreement dated as of April 7, Exhibit 10.11(b) to the
1992 between the Company and Lee Roy Mitchell. Company's
Registration
Statement (file
33-47040) on
Form S-1
filed on
April 9, 1992.
10.4(c) Employment Agreement dated as of October 17, 1991 between the Exhibit 10.11(c) to the
Company and Tandy Mitchell. Company's
Registration Statement
(file 33-47040) on
Form S-1 filed on
April 9, 1992.
10.4(d) First Amendment to Employment Agreement dated as of April 7, Exhibit 10.11(d) to the
1992 between the Company and Tandy Mitchell. Company's
Registration Statement
(file 33-47040)
on Form S-1 filed
on April 9, 1992.
10.4(e) Second Amendment to Employment Agreement between the Exhibit 10.11(e) to the
Company and Lee Roy Mitchell dated as of June 10, 1992. Company's Annual
Report (file
33-47040) on
Form 10-K
filed March
31, 1993.
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
10.5(a) 1991 Nonqualified Stock Option Plan of Cinemark USA, Inc. Exhibit 10.14 to the
Company's
Registration Statement
(file 33-47040) on
Form S-1 filed on
April 9, 1992.
10.5(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.
10.6(a) License Agreement dated December 10, 1993 between Laredo Joint Exhibit 10.14(c) to the
Venture and the Company. Company's Annual
Report (file 33-47040)
on Form 10-K filed
March 31, 1994
10.6(b) License Agreement dated September 1, 1994 between Cinemark Exhibit 10.10(c) to the
Partners II, Ltd. and the Company. Company's Annual
Report (file
33-47040) on
Form 10-K
filed March
29, 1995.
10.7(a) Tax Sharing Agreement between the Company and Cinemark II Exhibit 10.22 to the
dated as of June 10, 1992. Company's Annual
Report (file
33-47040) on
Form 10-K filed
March 31, 1993.
10.7(b) Tax Sharing Agreement dated as of July 28, 1993, between the Exhibit 10.10 to
Company and Cinemark Mexico (USA). Cinemark Mexico
(USA)'s Registration
Statement (33-72114)
on Form
S-4 filed
on November
24, 1994.
10.8(a) Indemnification Agreement between the Company and Lee Roy Exhibit 10.23(a) to the
Mitchell dated as of July 13, 1992. Company's Annual
Report (file
33-47040) on
Form 10-K
filed March
31, 1993.
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
10.8(b) Indemnification Agreement between the Company and Tandy Exhibit 10.23(b) to the
Mitchell dated as of July 13, 1992. Company's Annual
Report (file
33-47040) on
Form 10-K
filed March
31, 1993.
10.8(c) Indemnification Agreement between the Company and Alan W. Exhibit 10.23(d) to the
Stock dated as of July 13, 1992. Company's Annual
Report (file
33-47040) on
Form 10-K filed
March 31, 1993.
10.8(d) Indemnification Agreement between the Company and W. Bryce Exhibit 10.23(f) to the
Anderson dated as of July 13, 1992. Company's Annual
Report (file
33-47040) on
Form 10-K
filed March
31, 1993.
10.8(e) Indemnification Agreement between the Company and Sheldon I. Exhibit 10.23(g) to the
Stein dated as of July 13, 1992. Company's Annual
Report (file
33-47040)
on Form 10-K
filed March
31, 1993.
10.8(f) Indemnification Agreement between the Company and Heriberto Exhibit 10.13(f) to the
Guerra dated as of December 3, 1993 Company's
Registration Statement
(file 333-11895) on
Form S-4 filed
September 13, 1996
10.9(a) Second Amended and Restated Credit Agreement dated as of Exhibit 10.9(a) to the
February 12, 1998 among the Banks and the Agent. Company's Annual
Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(b) Pledge Agreement dated as of February 12, 1998 executed by the Exhibit 10.9(b) to the
pledgors listed on the signature page thereto for the benefit of the Company's Annual
Agent and the Banks. Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
10.9(c) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(c) to the
principal amount of $50,000,000 payable to the order of Bank of Company's Annual
America National Trust and Savings Association Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(d) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(d) to the
principal amount of $50,000,000 payable to the order of Company's Annual
NationsBank of Texas, N.A. Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(e) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(e) to the
principal amount of $30,000,000 payable to the order of Company's Annual
BankBoston, N.A. Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(f) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(f) to the
principal amount of $30,000,000 payable to the order of Fleet Bank, Company's Annual
N.A. Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(g) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(g) to the
principal amount of $15,000,000 payable to the order of The Fuji Company's Annual
Bank, Limited Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(h) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(h) to the
principal amount of $15,000,000 payable to the order of Bank of Company's Annual
New York Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
10.9(i) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(i) to the
principal amount of $30,000,000 payable to the order of CIBC, Inc. Company's Annual
Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(j) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(j) to the
principal amount of $30,000,000 payable to the order of Bank of Company's Annual
Nova Scotia Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(k) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(k) to the
principal amount of $25,000,000 payable to the order of Comerica Company's Annual
Bank-Texas Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(l) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(l) to the
principal amount of $15,000,000 payable to the order of First Company's Annual
Hawaiian Bank Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(m) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(m) to the
principal amount of $15,000,000 payable to the order of Bank of Company's Annual
Montreal Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(n) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(n) to the
principal amount of $15,000,000 payable to the order of PNC Bank Company's Annual
Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
10.9(o) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(o) to the
principal amount of $15,000,000 payable to the order of Sumitoto Company's Annual
Bank, Limited Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(p) Note of the Company dated as of February 12, 1998 in the original Exhibit 10.9(p) to the
principal amount of $15,000,000 payable to the order of Union Bank Company's Annual
of California, N.A. Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(q) First Amendment to Second Amended and Restated Credit Exhibit 10.9(q) to the
Agreement dated as of February 12, 1998 among the Banks and the Company's Annual
Agent Report (file
333-45417, 333-11895
and 33-47040) on
Form 10K filed
March 27, 1998
10.9(r) Second Amendment to Second Amended and Restated Credit Page ______
Agreement dated as of February 12, 1998 among the Banks and the
Agent
10.9(s) Intercompany Subordination Agreement dated November 16, 1998 Page ______
10.9(t) Third Amendment to Second Amended and Restated Credit Page ______
Agreement dated as of February 12, 1998 among the Banks and the
Agent
10.10(a) Letter Agreements with directors of the Company regarding stock Exhibit 10.15 to the
options. Company's Annual
Report (file 33-47040)
on Form 10-K filed
March 31, 1993.
10.10(b) Letter Agreements with directors of the Company amending stock Exhibit 10.15(c) to the
options Company's
Registration Statement
(file 333-11895) on
Form S-4 filed
September 13, 1996
10.10(c) Letter Agreement with directors of the Company regarding stock Page ______
options
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION BY
NUMBER DESCRIPTION REFERENCE TO
- ------ ----------- ------------
<S> <C> <C>
10.11(a) Credit Agreement dated November 16, 1998 between Cinemark Page ______
Mexico (USA), Inc., Bank of America National Trust and Savings
Association, as Administrative Agent, and the Financial Institutions
party thereto
10.11(b) Guaranty of Cinemark Mexico (USA) by Cinemark USA, Inc. Page ______
10.11(c) Intercompany Subordination Agreement dated November 16, 1998 Page ______
10.12 Senior Secured Credit Agreement dated December 4, 1995 among Exhibit 10.18 to the
Cinemark II, Cinemark Mexico (USA) and Cinemark de Mexico Company's Annual
Report (file 33-47040)
on Form 10-K filed
April 1, 1996
10.13(a) Credit Agreement dated September 11, 1998 between Cinemark Page ______
Investments Corporation, Bank of America National Trust and
Savings Association, as Administrative Agent, NationsBank, N.A.,
as Syndication Agent, and the other financial institutions party
thereto
10.13(b) Cinemark Investments Corporation FRN Pledge Agreement dated Page ______
September 11, 1998
10.13(c) Guaranty of Cinemark Investments Corporation by Cinemark USA Page ______
10.14 Shareholders' Agreement dated March 12, 1996 among the Exhibit 10.19(b) to the
Company, Mr. Mitchell, Cypress Merchant Banking Partners L.P., Company's Annual
Cypress Pictures Ltd. and Mr. Mitchell and Mr. Don Hart as Co- Report (file 33-47040)
Trustees of certain trusts signatory thereto on Form 10-K filed
April 1, 1996
12 Calculation of Earnings to Fixed Charges. Page ______
21 Subsidiaries of the Registrant Page ______
27 Financial Data Schedule (for SEC use only) Page ______
</TABLE>
<PAGE> 1
EXHIBIT 10.9(r)
SECOND AMENDMENT AND WAIVER TO SECOND AMENDED AND RESTATED
REDUCING REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT AND WAIVER TO SECOND AMENDED AND RESTATED
REDUCING REVOLVING CREDIT AGREEMENT (this "Second Amendment") is made and dated
as of November 16, 1998 by and among CINEMARK USA, INC., a Texas
corporation (the "Company"), the several financial institutions party hereto
(the "Banks"), Bank of America National Trust and Savings Association, as agent
for the Banks (in such capacity, the "Administrative Agent"), NationsBank, N.A.
as Syndication Agent and BankBoston, N.A., The Bank of Nova Scotia, CIBC Inc.
and Fleet Bank, as Co-Agents, and amends that certain Second Amended and
Restated Reducing Revolving Credit Agreement dated as of February 12, 1998 among
the Company, the Banks, the Administrative Agent, the Syndication Agent and the
Co-Agents as amended by a First Amendment to Second Amended and Restated
Reducing Revolving Credit Agreement dated as of August 31, 1998 (as so amended,
the "Agreement).
RECITALS
A. Concurrently herewith, Cinemark Mexico (USA) Inc., a Delaware
corporation ("Cinemark Mexico (USA)"), intends to enter into a credit agreement
dated as of even date herewith providing for a revolving credit facility of
$30,000,000 (as amended from time to time, the "Cinemark Mexico (USA) Credit
Agreement"). The proceeds of the initial Loans thereunder will be used to pay
off outstandings under the Cinemark International Credit Agreement which will
thereupon be terminated. The obligations of Cinemark Mexico (USA) under the
Cinemark Mexico (USA) Credit Agreement will be guarantied by the Company.
B. In connection with the foregoing, the Board of Directors of the
Company intends to designate Cinemark Mexico (USA) and all of its Subsidiaries,
now Unrestricted Subsidiaries of Cinemark International, as Restricted
Subsidiaries under the Agreement, and to transfer the stock of Cinemark Mexico
(USA) to the Company, making Cinemark Mexico (USA) a direct Subsidiary of the
Company.
C. In addition, the Company contemplates designating Cinemark del Peru
S.A. ("Cinemark Peru"), Inversionnes Chile S.A. ("Inversionnes Chile") and
Cinemark Chile S.A. ("Cinemark Chile"), a Subsidiary of Inversionnes Chile, and
now Unrestricted Subsidiaries of Cinemark International, as Restricted
Subsidiaries under the Agreement and transferring the stock of Cinemark Peru,
Inversionnes Chile and Cinemark Chile to the Company or a Restricted Subsidiary.
D. The Company has requested that it be permitted to enter into up to
$100,000,000 in sale-leaseback transactions.
E. The Company has also requested that the Administrative Agent and the
Banks waive any Default or Event of Default arising by reason of a
sale-leaseback of theatres in Austin, Texas not exceeding $14,000,000 which was
closed on or about October 9, 1998.
- 1 -
Cinemark USA Second Amendment
<PAGE> 2
F. By this Second Amendment, the Banks and the Administrative Agent
desire to amend and waive the Agreement to the extent necessary to permit the
foregoing transactions, all 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. The Agreement shall be amended as
follows:
2.1 The following new definitions are inserted in Section 1.1 of the
Agreement (Defined Terms) as follows:
"'Cinemark Chile' means Cinemark Chile S.A. a Chilean
corporation."
"'Cinemark de Mexico' means Cinemark de Mexico S.A. de C.V., a
Mexican variable capital corporation."
"'Cinemark Mexico (USA)' means Cinemark Mexico (USA) Inc., a
Delaware corporation."
"'Cinemark Mexico (USA) Credit Agreement' means that certain
Credit Agreement dated as of November 16, 1998, among Cinemark Mexico
(USA), the banks named therein, Bank of America National Trust and
Savings Association, as administrative agent thereunder, as
supplemented, modified, amended, restated, renewed or extended from
time to time."
"'Cinemark Mexico (USA) Guaranty' means that certain
Continuing Guaranty dated as of November 16, 1998, attached as Exhibit
G hereto, executed by the Company in favor of the banks and the
administrative agent party to the Cinemark Mexico (USA) Credit
Agreement, as supplemented, modified, amended, restated, renewed or
extended from time to time."
"'Cinemark Peru' means Cinemark del Peru S.A. a Peruvian
corporation."
"'Domestic Material Restricted Subsidiary' means any Domestic
Restricted Subsidiary which is a Material Restricted Subsidiary."
"'Domestic Restricted Subsidiary' means any Restricted
Subsidiary owning any assets that is incorporated or otherwise
organized under the laws of any state or district of the United States
of America, or that is qualified to do business, or are otherwise doing
business, in the United States of America."
- 2 -
Cinemark USA Second Amendment
<PAGE> 3
"'Foreign Material Restricted Subsidiary' means any Foreign
Restricted Subsidiary which is a Material Restricted Subsidiary."
"'Foreign Material Restricted Subsidiary Pledge Agreement'
means the Foreign Material Restricted Subsidiary Pledge Agreement
substantially in the form of Exhibit C-3, as amended, supplemented,
modified, renewed and replaced from time to time."
"'Foreign Restricted Subsidiary' means any Restricted
Subsidiary (a) that is incorporated or otherwise organized under the
laws of any foreign country or subdivision thereof, or which is not
qualified to do business, or is not otherwise doing business, in the
United States of America and (b) the capital stock of which is at least
90% beneficially owned, directly or indirectly, by the Company."
"'Intercompany Subordinated Indebtedness' means any
Indebtedness of the Company or its Subsidiaries owing to the Company or
any other of its Subsidiaries."
"'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."
"'Inversionnes Chile' means Inversionnes Chile S.A. a Chilean
corporation."
2.2 The definition of "Annualized Cash Flow" in Section 1.1 of the
Agreement is amended and restated in its entirety as follows:
"'Annualized Cash Flow' means, for any period, for the Company
and its Restricted Subsidiaries, Cash Flow for such period plus (a)
Proforma Cash Flow for Annualized Theatres less (b) Cash Flow from
Annualized Theatres; provided, however, that if during the period for
which Annualized Cash Flow is being determined, the Company or any of
its Restricted Subsidiaries 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 made any
Dispositions of assets, the Cash Flow of the Company and its Restricted
Subsidiaries shall be calculated on a pro forma basis as if such
acquisition or Disposition had occurred at the beginning of such
period; provided, further, that if the Cash Flow of Foreign Restricted
Subsidiaries exceeds 30% of the Annualized Cash Flow of the Company and
its Restricted Subsidiaries on a consolidated basis, such excess over
30% shall be excluded from the determination of Annualized Cash Flow;
provided, further, that when a Subsidiary is designated as a Restricted
Subsidiary in accordance with the definition thereof, Annualized Cash
Flow shall thereafter be calculated as if such designation had been
made at the beginning of the applicable measurement period."
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Cinemark USA Second Amendment
<PAGE> 4
2.3 The definition of "Cash Equivalent" in Section 1.1 of the
Agreement is amended and restated in its entirety as follows:
"'Cash Equivalents' 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 Borrower, the
remaining term to maturity or interest rate adjustment is not more than
two years;
"(b) (i) demand and time deposits and certificates of deposit
or acceptances with a maturity of 180 days or less of (i) any financial
institution organized in the United States that is a member of the
Federal Reserve System having combined capital and surplus and
undivided profits of not less than $100,000,000, (ii) 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 having combined capital and surplus and
undivided profits in excess of $100,000,000, or (iii) any commercial
bank organized under the laws of any other country that is a member of
the Organization for Economic Cooperation and Development ("OECD") and
has total assets in excess of $100,000,000, or (ii) deposits available
for withdrawal or distribution with any commercial bank not meeting the
qualifications specified in clause (b)(i) above but which is organized
under the laws of (a) any country that is a member of the OECD and has
total assets in excess of $100,000,000 or (b) any other country in
which the Company or any Restricted Subsidiary maintains an office or
is engaged in business, provided that, in either case (A) all such
deposits are required to be made in such accounts in the ordinary
course of business, (B) such deposits do not at any one time exceed
$1,000,000 in the aggregate and (C) no funds so deposited remain on
deposits in such bank for more than 30 days;
"(c) commercial paper issued by any corporation, if such
commercial paper has, at the time of Borrower's Investment therein or
contractual commitment providing for such Investment, credit ratings of
at least A-1 by Standard & Poor's Rating Group ("S&P") and P-1 by
Moody's Investor Service, Inc. ("Moody's");
"(d) money market mutual or similar funds having assets in
excess of $100,000,000;
"(e) readily marketable debt obligations issued by any
corporation, if at the time of the Borrower's or its Restricted
Subsidiaries' 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; and
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Cinemark USA Second Amendment
<PAGE> 5
"(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.
"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 Borrower or its Restricted Subsidiaries with the consent
of the Majority Banks, 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."
2.4 The definition of "Excluded Dispositions" in Section 1.1 of
the Agreement is amended by deleting "and" at the end of subsection (g);
deleting the period at the end of subsection (h) and inserting "; and" in lieu
thereof, and inserting the following new subsections immediately following
subsection (h) as follows:
"(i) Sale-leaseback transactions relating to theatres in
Austin Texas completed on or about October 9, 1998 not exceeding
$14,000,000 in aggregate amount; and
"(j) additional sale-leaseback transactions not exceeding
$100,000,000 in aggregate amount since the Closing Date."
2.5 The definition of "Loan Documents" in Section 1.1 of the
Agreement is amended by inserting "the Intercompany Subordination Agreement,"
after "any Notes,".
2.6 References to "Material Restricted Subsidiary" in the
definition of "Guarantor," and in the proviso to the definition of "Restricted
Subsidiary," in recitals B and C to Exhibit F (form of Guaranty) and in
Paragraph 21 of Exhibit F shall be deemed amended to be references to "Domestic
Material Restricted Subsidiary." The executed version of the Guaranty shall also
be deemed amended as aforesaid.
2.7 The definition of "Pledge Agreement" in Section 1.1 of the
Agreement is amended and restated in its entirety as follows:
"'Pledge Agreement' means, unless the context otherwise
requires, (a) the Mitchell Family Pledge Agreement prior to the
Recapitalization Date, and the Cinemark Theatres Holdings Pledge
Agreement thereafter, and (b) the Foreign Material Restricted
Subsidiary Pledge Agreement (collectively, the 'Pledge Agreements')."
2.8 Section 5.1(a) of the Agreement (Corporate Existence and
Power) is amended and restated in its entirety as follows:
"(a) is a corporation (with respect to the Company) or a
corporation or other limited liability entity (with respect to
Restricted Subsidiaries organized under the laws of
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<PAGE> 6
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;"
2.9 Section 5.13 of the Agreement (Capital Stock; Subsidiaries) is
amended by (a) inserting "under the Mitchell Family Pledge Agreement" after
"Pledged Collateral" in subsection (a)(ii), (b) inserting "under the Cinemark
Holdings Pledge Agreement" after "Pledged Collateral" in subsection (b)(i), and
(c) inserting a new subsection (d) as follows:
"(d) At all times the Pledged Collateral under the Foreign
Material Restricted Subsidiary Pledge Agreement constitutes at least
65% of the issued and outstanding capital stock of each Foreign
Material Restricted Subsidiary, and there are no options, warrants,
shareholder agreements, calls or commitments of any character
whatsoever relating to any of such Pledged Collateral except as
disclosed therein and consented to by the Majority Banks."
2.10 A new Section 5.23 is inserted in the Agreement after Section
5.22 as follows:
"5.23 YEAR 2000 COMPLIANCE. The Company has (a) initiated a
review and assessment of all areas within its and each of its
Restricted Subsidiaries' business and operations (including those
affected by suppliers and vendors) that could be adversely affected by
the "Year 2000 Problem" (that is, the risk that computer applications
used by the Company or any of its Restricted Subsidiaries (or its
suppliers and vendors) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. The Company
reasonably believes that all computer applications (including those of
its suppliers and vendors) that are material to its or any of its
Restricted Subsidiaries' business and operations will on a timely basis
be able to perform properly date-sensitive functions for all dates
before and after January 1, 2000 (that is, be "Year 2000 compliant),
except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect."
2.11 Section 6.2(a) of the Agreement (Certificates; Other
Information) is amended by changing the reference to Section 7.5(k) to Section
7.5(j).
2.12 Section 6.13 of the Agreement is amended and restated in its
entirety as follows:
"6.13 DOMESTIC MATERIAL RESTRICTED SUBSIDIARIES TO BE
GUARANTORS. The Company shall cause each Subsidiary which is a Domestic
Material Restricted Subsidiary or becomes a Domestic Material
Restricted Subsidiary after the Closing Date, determined as of the most
recent financial statements delivered pursuant to Section 6.1 from time
to time, to become a Guarantor under the Guaranty by executing and
delivering to the Administrative Agent (with sufficient copies for all
Banks) a supplement to the Guaranty in the form of Exhibit A thereto,
together with documents and opinions of the type
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<PAGE> 7
referred to in Sections 4.1(b), (c) and (e) with respect to such
Guarantor, all in form and substance reasonably satisfactory to the
Administrative Agent and its legal counsel. Once a Subsidiary has
executed and delivered a Guaranty, it shall remain a Guarantor so long
as it is a Restricted Subsidiary even if its assets or Cash Flow
calculated at any subsequent date would no longer qualify it as a
Domestic Material Restricted Subsidiary."
2.13 Section 6.14 of the Agreement (Further Assurances) is
renumbered as Section 6.16 and new Sections 6.14 and 6.15 is inserted in the
Agreement after Section 6.13 as follows:
"6.14 PLEDGE OF STOCK OF FOREIGN MATERIAL RESTRICTED
SUBSIDIARIES. The Company shall, and shall cause each Domestic
Restricted Subsidiary to, promptly pledge, or cause to be pledged, at
least 65% of the capital stock of any Subsidiary thereof which is a
Foreign Material Restricted Subsidiary or becomes a Foreign Material
Restricted Subsidiary after the Closing Date, determined as of the most
recent financial statements delivered pursuant to Section 6.1 from time
to time, by executing and delivering the Foreign Material Restricted
Subsidiary Pledge Agreement, or a supplement, instrument of joinder,
and/or equivalent thereto, together with, in the case of Subsidiaries
with certificated securities, certificates representing such stock,
accompanied by appropriate undated stock powers endorsed in blank (or
other means of perfection of a security interest in such securities
acceptable to the Administrative Agent), together with documents and
opinions of the type referred to in Sections 4.1(b) and (c) with
respect to such Pledgor, and any filings or additional actions
necessary or desirable, in the opinion of the Administrative Agent, to
perfect or maintain perfection in such collateral, all in form and
substance reasonably satisfactory to the Administrative Agent and its
legal counsel. The opinion of counsel shall confirm, among other
things, that (i) the Foreign Material Restricted Subsidiary Pledge
Agreement, or supplement and/or instrument of joinder thereto, is
effective to create, in favor of the Administrative Agent for the
benefit of itself and the Banks, a legal, valid and enforceable
security interest in all of the Collateral described therein; (ii) the
Lien of the Foreign Material Restricted Subsidiary Pledge Agreement or
supplement and/or instrument of joinder thereto constitutes a
perfected, first priority security interest in all right, title and
interest of the Pledgor(s) in the Collateral described therein, prior
and superior to all other Liens and interests except as disclosed
therein, (iii) the execution, delivery and performance of the Foreign
Material Restricted Subsidiary Pledge Agreement or supplement and/or
instrument of joinder thereto by such Subsidiary will not violate any
law, decree or judgment to which such Subsidiary is a party or by which
its assets are bound and (iv) except as may otherwise be required to
perfect any security interest, no government approvals, consents,
registrations or filings, are required by any Subsidiary. Once the
stock of a Subsidiary has been pledged, it shall remain pledged so long
as it is a Restricted Subsidiary even if its assets or Cash Flow
calculated at any subsequent date would no longer qualify it as a
Foreign Material Restricted Subsidiary.
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<PAGE> 8
"6.15 YEAR 2000 COMPLIANCE. The Company will promptly notify
the Administrative Agent in the event the Company discovers or
determines that any computer application (including those of its
suppliers and vendors) that is material to its or any of its Restricted
Subsidiaries' business and operations will not be Year 2000 compliant
on a timely basis, except to the extent that such failure could not
reasonably be expected to have a Material Adverse Effect."
2.14 Section 7.1 of the Agreement (Liens) is amended by deleting
"and" at the end of subsection (n); deleting the period at the end of subsection
(o) and inserting ";" in lieu thereof, and inserting the following new
subsections immediately following subsection (o) as follows:
"(p) Liens on assets of Cinemark Chile securing Indebtedness
of Cinemark Chile permitted by Section 7.5(m); and
"(q) Liens on assets of Cinemark de Mexico and Cinemark Mexico
(USA) securing Intercompany Subordinated Indebtedness owing to the
Company in an aggregate principal amount not exceeding $12,000,000."
2.15 Subsections (b) and (c) of Section 7.3 of the Agreement
(Consolidation and Mergers) are amended and restated in their entirety as
follows:
"(a) any Restricted Subsidiary of the Company may merge with
(i) the Company provided that the Company shall be the continuing or
surviving corporation, (ii) with any one or more Restricted
Subsidiaries of the Company, and (iii) with any joint ventures,
partnerships and other Persons so long as such joint ventures,
partnerships and other Persons will, as a result of making such
Investment and all other contemporaneous related transactions, become a
Restricted Subsidiary of the Company; provided that when any
Wholly-Owned Restricted Subsidiary is merging into another Restricted
Subsidiary, the Wholly-Owned Restricted Subsidiary shall be the
continuing or surviving Person; and
"(b) any Restricted Subsidiary of the Company may sell all or
substantially all of its assets (upon voluntary liquidation or
otherwise), to the Company or any of its Restricted Subsidiaries;
provided that when any Wholly-Owned Restricted Subsidiary is selling
all or substantially all of its assets to another Restricted
Subsidiary, the Restricted Subsidiary acquiring such assets shall be a
Wholly-Owned Restricted Subsidiary."
2.16 The following subsections of Section 7.4 of the Agreement
(Investments) are amended and restated in their entirety as follows:
"(j) to the extent permitted under the Senior Subordinated
Note Indentures, additional Investments in Cinemark International or
its Unrestricted Subsidiaries not exceeding an amount equal to (i)
$75,000,000 in the aggregate from the Closing Date plus (ii) any net
reduction in Investments made pursuant to this subsection (q) after the
Closing Date; provided that such additional Investments shall not
exceed $50,000,000 in
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the aggregate from the Closing Date through December 31, 1998; such
Investments to be valued at the time made;"
"(o) additional Investments in an amount equal to Restricted
Payments that could be made, but have not been made, under (i) Section
7.10(f) or Section 7.10(g) to the extent the capital stock, capital
contribution or other Investment described therein was issued or made
after the Closing Date, or (ii) Section 7.10(h)"
"(q) additional Investments in an aggregate amount not
exceeding an amount equal to (i) $10,000,000 in the aggregate from the
Closing Date plus (ii) any net reduction in Investments made pursuant
to this subsection (q) after the Closing Date."
2.17 Section 7.5 of the Agreement (Limitation on Indebtedness) is
amended by deleting "and" at the end of subsection (j), deleting the period at
the end of subsection (k) and inserting ";" in lieu thereof, and inserting
subsections (l) and (m) immediately following subsection (k) as follows:
"(l) obligations of Cinemark Mexico (USA) under the Cinemark
Mexico (USA) Credit Agreement and obligations and Contingent
Obligations of the Company arising under the Cinemark Mexico (USA)
Guaranty, not exceeding, in the aggregate, $30,000,000 for principal,
together with interest and other amounts described therein; and
"(m) obligations of Cinemark Chile not exceeding $25,000,000
in aggregate principal amount outstanding at any time."
2.18 Section 7.9(b) of the Agreement (Lease Obligations) is amended
and restated in its entirety as follows:
"(b) Operating Leases entered into or assumed by the Company
or any of its Restricted Subsidiaries after the Closing Date in the
ordinary course of business,
"(c) leases constituting Excluded Dispositions; and
"(d) Capital Leases of furniture, fixtures and equipment not
exceeding $2,500,000 in aggregate amount since the Closing Date."
2.19 Section 7.10(g) of the Agreement (Restricted Payments) is
amended by deleting ", or" at the end of subsection (ii), inserting ";" in lieu
thereof and amending and restating subsection (iii) in its entirety as follows:
"(iii) an amount equal to any net reduction in
Investments in other than Restricted Subsidiaries made after
the Closing Date resulting from payments of
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<PAGE> 10
principal of indebtedness owing to the Company or its
Restricted Subsidiaries, return of capital and other transfers
of assets related to such Investments; and
"(iv) an amount equal to the net reduction in
Investments in Unrestricted Subsidiaries made after the
Closing Date resulting from the designation of any
Unrestricted Subsidiary as a Restricted Subsidiary;"
2.20 Section 7.16 of the Agreement (Limitations on Payments) is
amended and restated in its entirety as follows::
"7.16 LIMITATIONS ON PAYMENTS. The Company 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 the Company except:
"(a) restrictions on Cinemark Chile upstreaming payments
contained in the terms and conditions of indebtedness of Cinemark Chile
permitted by Section 7.5(m), to the extent such payments would cause
Cinemark Chile to default under financial covenants contained therein;
and
"(b) immaterial amounts in the ordinary course of business."
2.21 Section 7.17 of the Agreement (Limitation on Negative Pledges)
is amended by deleting "and" at the end of subsection (a), deleting the period
at the end of subsection (b) and inserting ";" in lieu thereof, and inserting
the following new subsections immediately following subsection (b) as follows:
"(c) restrictions on assets of Cinemark Mexico (USA) and its
Subsidiaries contained in the Cinemark Mexico (USA) Credit Agreement;
"(d) restrictions on assets of Cinemark Chile in connection
with Indebtedness of Cinemark Chile permitted by Section 7.5(m); and
"(e) restrictions on assets of Cinemark de Mexico in
connection with Indebtedness of Cinemark de Mexico permitted by Section
7.1(q)."
2.22 Section 8.1 of the Agreement is amended by deleting the period
at the end of subsection (p) and inserting "; or" in lieu thereof, and inserting
a new subsection (q) immediately following subsection (p) as follows:
"(q) DEFAULT UNDER CINEMARK MEXICO (USA) CREDIT AGREEMENT. Any
Event of Default (as defined in the Cinemark Mexico (USA) Credit
Agreement) shall have occurred and is continuing beyond any applicable
grace period contained therein."
2.23 Schedule 5.13 to the Agreement (Subsidiaries) is amended and
restated in its entirety in the form attached hereto as Schedule 5.13 hereto.
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2.24 A new Exhibit C-3 (Form of Foreign Material Restricted
Subsidiary Pledge Agreement) is inserted in the Agreement in the form attached
hereto as Exhibit C-3 hereto.
2.25 Exhibit A to Exhibit F to the Agreement (Guaranty) is amended
and restated in its entirety in the form attached hereto as Exhibit A to Exhibit
F hereto.
2.26 A new Exhibit G (Cinemark Mexico (USA) Guaranty) is inserted
in the Agreement in the form attached hereto as Exhibit G hereto.
2.27 A new Exhibit H (Intercompany Subordination Agreement) is
inserted in the Agreement in the form attached hereto as Exhibit H hereto.
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 Second Amendment:
3.1 AUTHORIZATION. The execution, delivery and performance of this
Second Amendment have been duly authorized by all necessary corporate action by
the Company and this Second Amendment has been duly executed and delivered by
the Company.
3.2 BINDING OBLIGATION. This Second 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 by equitable principles relating to enforceability.
3.3 NO LEGAL OBSTACLE TO SECOND AMENDMENT. The execution, delivery
and performance of this Second 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
Second 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, 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.
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4. CONDITIONS, EFFECTIVENESS. The effectiveness of this Second
Amendment shall be subject to the compliance by the Company with its agreements
herein contained, and to the delivery of the following to the Administrative
Agent in form and substance satisfactory to the Administrative Agent:
4.1 AUTHORIZED SIGNATORIES. A certificate, signed by the Secretary
or an Assistant Secretary of the Company dated the date hereof, as to the
incumbency of the person or persons authorized to execute and deliver this
Second Amendment and any instrument or agreement required hereunder on behalf of
the Company.
4.2 CINEMARK MEXICO (USA) AS A DIRECT SUBSIDIARY OF COMPANY;
DESIGNATION OF CINEMARK MEXICO (USA) AND ITS SUBSIDIARIES AS RESTRICTED
SUBSIDIARIES. Evidence that (a) Cinemark Mexico (USA) is a direct Subsidiary of
the Company and (b) the Board of Directors of the Company has designated
Cinemark Mexico (USA) and its Subsidiaries as Restricted Subsidiaries, together
with a certificate of the type described in the definition of "Restricted
Subsidiaries" in Section 1.1 of the Agreement in connection with such
designations.
4.3 CINEMARK MEXICO (USA) AS A GUARANTOR; COMPLIANCE WITH SECTION
6.13. The Company shall have complied with Section 6.13 of the Agreement, as
amended hereby, with respect to Cinemark Mexico (USA) becoming a Guarantor,
together with evidence that Cinemark Mexico (USA) is a Domestic Material
Restricted Subsidiary.
4.4 INTERCOMPANY SUBORDINATION AGREEMENT. The Intercompany
Subordination Agreement, duly executed and delivered by the parties thereto.
4.5 OTHER EVIDENCE. Such other evidence with respect to the
Company or any other person as a Bank may reasonably request to establish the
consummation of the transactions contemplated hereby, the taking of all
corporate action in connection with this Second Amendment and the compliance
with the conditions set forth herein.
5. CONDITION SUBSEQUENT: PLEDGE OF AT LEAST 65% OF STOCK OF
CINEMARK DE MEXICO; COMPLIANCE WITH SECTION 6.14. Within 60 days of the
effectiveness of this Second Amendment, the Company shall have caused Cinemark
Mexico (USA) to have complied with Section 6.14 of the Agreement, as amended
hereby, with respect to pledging at least 65% of the Capital Stock of Cinemark
de Mexico. Failure to do so shall constitute an immediate Event of Default under
the Agreement.
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6. MISCELLANEOUS.
6.1 EFFECTIVENESS OF AGREEMENT. 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.
6.2 WAIVERS. The Administrative Agent and the Banks hereby waive
any Default or Event of Default arising by reason of a sale-leaseback of
theatres in Austin, Texas not exceeding $14,000,000 which was closed on or about
October 9, 1998. This Second 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.
6.3 COUNTERPARTS. This Second 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 Second Amendment shall
not become effective until the Company, the Administrative Agent and the
Majority Banks shall have signed a copy hereof, and each Guarantor and Pledgor
shall have consented hereto, whether the same or counterparts, and the same
shall have been delivered to the Administrative Agent.
6.4 JURISDICTION. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be
duly executed and delivered as of the date first written above.
CINEMARK USA, INC.
By
------------------------
Jeffrey J. Stedman
Chief Financial Officer
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<PAGE> 15
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
ADMINISTRATIVE AGENT
By
----------------------------
David Price
Vice President
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Cinemark USA Second Amendment
<PAGE> 16
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS ISSUING
BANK AND A BANK
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S-3
Cinemark USA Second Amendment
<PAGE> 17
NATIONSBANK, N.A.,
AS SYNDICATION AGENT AND A BANK
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 18
BANKBOSTON, NA.,
AS A CO-AGENT AND A BANK
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 19
THE BANK OF NOVA SCOTIA,
AS A CO-AGENT AND A BANK
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 20
CIBC INC., AS A CO-AGENT AND A BANK
By
---------------------------------
Name
------------------------------
Title
------------------------------
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<PAGE> 21
FLEET BANK, N.A.
AS A CO-AGENT AND A BANK
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 22
THE BANK OF NEW YORK
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 23
THE BANK OF MONTREAL
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 24
COMERICA BANK - TEXAS
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 25
FIRST HAWAIIAN BANK
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 26
THE FUJI BANK, LIMITED
By
-----------------------------
Name
---------------------------
Title
--------------------------
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<PAGE> 27
PNC BANK, NATIONAL ASSOCIATION
By
-----------------------------
Name
---------------------------
Title
--------------------------
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Cinemark USA Second Amendment
<PAGE> 28
THE SUMITOMO BANK, LIMITED
By
-----------------------------
Name
---------------------------
Title
--------------------------
By
-----------------------------
Name
---------------------------
Title
--------------------------
S-15
Cinemark USA Second Amendment
<PAGE> 29
UNION BANK OF CALIFORNIA, N.A.
By
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Name
---------------------------
Title
--------------------------
S-16
Cinemark USA Second Amendment
<PAGE> 30
CONSENT OF PLEDGORS AND GUARANTOR
Each of the undersigned (a) Pledgors, each party to the Second Amended
and Restated Mitchell Family Pledge Agreement dated as of February 12, 1998, and
(b) Guarantor, as guarantor under the Guaranty dated as of February 12, 1998,
hereby consents to the foregoing Second Amendment to Credit Agreement, and
represents and warrants to the Administrative Agent and the Banks that there is
no defense, counterclaim or offset of any type or nature under the Pledge
Agreement or the Guaranty, and that the same remain in full force and effect as
to it after giving effect hereto and thereto. By signing below, the undersigned
also agree that the Guaranty is amended as set forth in Section 2.3 of the
Second Amendment and that CGI Equities Ltd. (not CGI Investments LLC) is a party
to the Pledge Agreement and consented to the First Amendment to Second Amended
and Restated Credit Agreement. All terms used herein shall have the same
meanings as in the Credit Agreement referred to in the Second Amendment unless
otherwise defined herein.
PLEDGORS:
- ------------------------------- ------------------------------------------
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 TRUST
FOR CASSIE ANN ROBERTS FOR SKYLER KAYE MITCHELL
MITCHELL GRANDCHILDREN TRUST MITCHELL GRANDCHILDREN TRUST
FOR ASHLEY ANN LEE FOR LASEY MARIE LEE
By
--------------------------------
Trustee
By
--------------------------------
Trustee
CGI EQUITIES, LTD., GUARANTOR:
a Texas limited partnership
CINEMARK PROPERTIES, INC.,
GUARANTOR
By: CGI INVESTMENTS, LLC, a Texas
limited liability company, its general By:
partner ------------------------
Name:
By: ----------------------
-------------------------------- Title:
Name: ---------------------
------------------------------
Title: ,
-----------------------------
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Cinemark USA Second Amendment
<PAGE> 31
SCHEDULE 5.13
SUBSIDIARIES
ORGANIZATIONAL CHART SHOWING PRINCIPAL SUBSIDIARIES
[GRAPHIC OMITTED]
LIST OF SUBSIDIARIES
(to come)
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Cinemark USA Second Amendment
<PAGE> 32
EXHIBIT G
CINEMARK USA GUARANTY
(GUARANTY OF CINEMARK MEXICO (USA))
TO: Bank of America National Trust and Savings
Association, as Administrative Agent (the "Administrative Agent")
PRELIMINARY STATEMENTS:
A. Reference is made to that certain Credit Agreement dated as of
November 16, 1998 (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 Mexico
(USA), Inc., (the "Company"), the Banks party thereto and Bank of America
National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") for said Banks.
B. Guarantor is the ultimate shareholder of the Company and has
derived, and expects to continue deriving, direct and indirect benefits from
extensions of credit made to the Company, and now desires to guaranty the
Obligations.
C. It is a requirement of the Credit Agreement that Guarantor execute
and deliver this Guaranty.
NOW, THEREFORE, Guarantor agrees as follows:
1. For valuable consideration, the undersigned (the "Guarantor")
unconditionally, absolutely and irrevocably guarantees and promises to pay to
the Administrative Agent, or order, on demand, in lawful money of the United
States and in immediately available funds, any and all present or future
Obligations owing to the Banks, the Administrative Agent and the Syndication
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 Company, 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
allocated cost of inhouse counsel), costs, premiums, charges, or interest owed
by the Company to the Guarantied Parties, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, whether the
Company 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.
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2. This Guaranty is a continuing guaranty which relates to any
Obligations, including those which arise under successive transactions which
shall either cause the Company to incur new Obligations, continue the
Obligations from time to time, or renew them after they have been satisfied.
Guarantor agrees that nothing shall discharge or satisfy its obligations created
hereunder except for the full payment of the Obligations. Any payment by
Guarantor shall not reduce its maximum obligation hereunder.
3. 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 Company, or of
any other guarantor, and that a separate action or actions may be brought and
prosecuted against Guarantor, whether action is brought against the Company or
whether the Company is joined in any such action or actions. Guarantor agrees
that any releases which may be given by the Administrative Agent and the
Guarantied Parties to the Company or any other guarantor shall not release it
from this Guaranty.
4. The obligations of 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 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 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
Guarantor, any other guarantor of any of the Obligations of the Company 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;
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<PAGE> 34
(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, 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 Guarantor
from its undertakings hereunder and Guarantor hereby consents to each and all of
the foregoing actions, events and occurrences.
5. 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
Company 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 Guarantor may now or at any time hereafter have against the Company
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 Guarantor's
subrogation rights, rights to proceed against the Company for reimbursement, or
any other rights of Guarantor to proceed against the Company, against any other
guarantor, or against any other security, with Guarantor understanding that the
exercise by the Administrative Agent and/or the Guarantied Parties of certain
rights and remedies may offset or eliminate Guarantor's right of subrogation
against the Company, and that Guarantor may therefore incur partially or totally
non-reimbursable liability hereunder;
(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,
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<PAGE> 35
and notices of the existence, creation, or incurring of new or additional
indebtedness, and all other notices or formalities to which Guarantor may be
entitled; and
(f) without limiting the generality of the foregoing, Guarantor hereby
expressly waives any and all benefits of California Civil Code Sections 2809,
2810, 2819, 2825, 2839 and 2845 through 2850.
6. 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 Company or any other guarantor, if any, and shall not seek to assert
or enforce the same. Guarantor understands that the exercise by Administrative
Agent of certain rights and remedies contained in the Loan Documents may affect
or eliminate Guarantor's right of subrogation if any, against the Company and
that Guarantor may therefore incur a partially or totally non-reimbursable
liability hereunder; nevertheless, 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 Guarantor that the obligations
hereunder shall be absolute, independent and unconditional under any and all
circumstances.
7. Guarantor is presently informed of the financial condition of the
Company and of all other circumstances which a diligent inquiry would reveal and
which bear upon the risk of nonpayment of the Obligations. Guarantor hereby
covenants that it will continue to keep itself informed of the financial
condition of the Company, the status of other guarantors, if any, and of all
other circumstances which bear upon the risk of nonpayment. 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. Guarantor represents and warrants that:
(a) 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
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Cinemark USA Guaranty of Cinemark Mexico (USA)
<PAGE> 36
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 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 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 Guarantor is
a party or any order, injunction, writ or decree of any Governmental Authority
to which 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, Guarantor of the Guaranty, except for routine corporate
filings to maintain the corporate good standing of Guarantor.
(d) This Guaranty constitutes the legal, valid and binding obligations
of Guarantor, enforceable against 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 Guarantor, threatened against or affecting 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 Guarantor of this
Guaranty does not constitute, to the best knowledge of 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.
10. 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 Company.
11. This Guaranty shall be binding upon the successors and assigns of
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
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.
12. 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
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Cinemark USA Guaranty of Cinemark Mexico (USA)
<PAGE> 37
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.
13. 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 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).
14. 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. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
16. 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.
17. Terms not defined herein shall have the meanings assigned to them
in the Credit Agreement.
18. Any indebtedness of the Company now or hereafter held by Guarantor
is hereby subordinated to the indebtedness of the Company to the Administrative
Agent and the Guarantied Parties; and such indebtedness of the Company to
Guarantor if the Administrative Agent so requests shall be collected, enforced
and received by 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 Company to the Administrative Agent and the Guarantied
Parties but without reducing or affecting in any manner the liability of
Guarantor under the other provisions of this guaranty.
20. It is not necessary for the Guarantied Parties to inquire into the
powers of the Company or of the officers, directors or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
DATED AS OF:
-------------------------
CINEMARK USA, INC.
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<PAGE> 38
By
-----------------------------
Name
---------------------------
Title
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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
ADMINISTRATIVE AGENT
By
----------------------------
David Price
Vice President
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<PAGE> 39
EXHIBIT C-3 TO SECOND AMENDMENT
FORM OF FOREIGN MATERIAL RESTRICTED
SUBSIDIARY PLEDGE AGREEMENT
THIS FOREIGN MATERIAL RESTRICTED SUBSIDIARY PLEDGE AGREEMENT (this
"Agreement"), dated as of , is executed by the undersigned Pledgors
(collectively, 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) in its
capacity as a lender under the Credit Agreement referred to below and as a
counterparty under any Swap Contract (the Administrative Agent and each Bank in
such capacities are referred to herein collectively as the "Secured Parties").
RECITALS
A. Cinemark USA, Inc., a Delaware corporation (the "Company"), 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, together with any Bank or any Affiliate of
any Bank in its capacity as a counterparty under any Swap Contract,
collectively, the "Banks" and individually a "Bank"), the Administrative Agent,
NationsBank, N.A. as Syndication Agent, and BankBoston, N.A., The Bank of Nova
Scotia, CIBC Inc. and Fleet Bank, N.A., as Co-Agents, have entered into a Second
Amended and Restated Reducing Revolving Credit Agreement dated as of February
12, 1998 (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. From time to time a Bank, in its capacity as a counterparty, may
enter into one or more Swap Contracts with the Company, and the parties hereto
desire that the obligations of the Company under any such Swap Contracts be
secured hereby.
C. It is a condition precedent to the continuation of the Credit
Extensions 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.
D. Terms defined and the rules of construction in the Credit Agreement
have, unless the context otherwise requires, the same meanings in this
Agreement.
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Foreign Material Restricted Subsidiary Pledge Agreement
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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 each Subsidiary (each, a "Pledged
Subsidiary" and collectively, the "Pledged Subsidiaries ") as set forth
on Schedule 1 (collectively, the "Pledged Shares");
(ii) all additional shares of stock of the Pledged
Subsidiaries from time to time acquired by the Pledgor in any manner;
(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;
provided, however, that at no time shall the Pledged Shares be required to
constitute more than 65% of the total capital stock of any Pledged Subsidiary..
(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.
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Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 41
2. SECURITY FOR OBLIGATIONS. This Agreement secures, in accordance
with the provisions hereof, the payment by the Company of all of the Obligations
to any Secured Party under any Loan Document, including under any Swap Contract,
and all obligations of the Pledgor under this Agreement, in each case 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 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 18(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 at least 65% of the issued and
outstanding shares of stock or equity interests of the Pledged Subsidiaries 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.
(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
jurisdiction of its respective incorporation, and are properly licensed and in
good standing in, and where necessary to maintain their respective rights and
privileges has complied with the fictitious name statute of, every jurisdiction
in which they are 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
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Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 42
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.
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.
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Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 43
(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 any
Pledged Subsidiaries 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; provided, however
that not more than 65% of the capital stock of any Pledge Subsidiary shall be
required to be pledged hereunder. 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.
(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
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<PAGE> 44
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 any
Pledged Subsidiary not to issue any stock or other securities in addition to or
in substitution for the Pledged Shares except: (i) to the Pledgor, (ii) any
stock options issued to employees of such Pledged Subsidiary and any shares of
capital stock of such Pledged Subsidiary issuable upon the exercise of such
options, and (iii) shares of such Pledged Subsidiary to other stockholders of
such Pledged Subsidiary in an amount not exceeding such stockholders existing
ratable ownership interests therein.
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:
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(A) instruments and other property received, receivable or
otherwise distributed in exchange for, any Collateral,
(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
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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 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.
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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:
(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
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<PAGE> 48
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 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 Company hereby ratifies and
confirms all that the Administrative Agent, as said attorney-in-fact, shall do
by virtue hereof. Nevertheless, the Company and 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
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<PAGE> 49
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.
(g) The Administrative Agent may participate in any recapitalization,
reclassification, reorganization, consolidation, redemption, stock split,
merger, or liquidation of any Pledged Subsidiary 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
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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
(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
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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 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. PRIMARY OBLIGATION. The Pledgor acknowledges and agrees that it is
directly and primarily liable to the Secured Parties with respect to its
obligations under this Agreement, that its obligations under this Agreement are
independent of Company's obligations under the Credit Agreement, and that a
separate action or actions may be brought and prosecuted against the Pledgor to
enforce this Agreement, whether or not action is brought against the Pledgor or
whether or not the Pledgor is joined in any such action or actions. The Pledgor
acknowledges
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and agrees that any release which may be given by the Secured Parties to the
Pledgor shall not release the Pledgor from its obligations under this Agreement.
15. WAIVERS. The obligations of the Pledgor under this Agreement shall
not be affected, modified or impaired as a result of the occurrence from time to
time of any of the following, whether or not with notice to or the consent of
the Pledgor; (a) the compromise, settlement, change, modification, amendment
(whether material or otherwise) or partial termination of any or all of the
Obligations under any Loan Document; (b) the failure to give notice to the
Pledgor of the occurrence of any default under the terms and provisions of any
Loan Document; (c) the waiver of the payment, performance or observance of any
of Company's Obligations under any Loan Document; (d) the taking or omitting to
take any actions referred to in any Loan Document; (e) any failure, omission or
delay on the part of the Secured Parties to enforce, assert or exercise any
right, power or remedy conferred in this Agreement, any Loan Document or any
other indulgence or similar act on the part of the Secured Parties in compliance
with applicable law; or (f) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all of the
assets, marshalling or assets, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors or readjustment of, or other similar proceedings
which affect, Company or any of the assets of the Company, or any allegation of
invalidity or contest of the validity of this Agreement in any such proceeding.
The Pledgor waives any right to require any Secured Party to (a) proceed against
any person, (b) proceed against or exhaust any Collateral, (c) pursue any other
remedy in such Secured Party's power. The Pledgor hereby waives: (i) any and all
rights to require the Secured Parties to prosecute or to seek to enforce any
remedies against Company or any other party liable to the Secured Parties with
respect to Company's obligations under any Loan Document or to otherwise
mitigate the Pledgor's obligations under this Agreement; (ii) any right to
assert against the Secured Parties with respect to the Pledgor's obligations
under this Agreement any defense (legal or equitable), set-off, counterclaim, or
claim which Pledgor may now or at any time hereafter have against the Secured
Parties, Company or any other party liable to the Secured Parties in any way or
manner under any Loan Document; (iii) 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 (iv) all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of default in connection with any Loan Document, notice of acceptance of this
Agreement and notice of the existence, creation or incurring of new or
additional Obligations under any Loan Document, and all other notices or
formalities to which Pledgor may be entitled with respect to any Loan Document.
16. NO SUBROGATION. The Pledgor hereby agrees that unless and until all
Obligations (exclusive of future, contingent or unliquidated amounts arising
under indemnity agreements) have been paid in full to the Secured Parties, it
shall not have any rights of subrogation, reimbursement or contribution against
Company arising as a result of the performance of this Agreement, and shall not
seek to assert or enforce any such rights. The Pledgor acknowledges that the
exercise by the Secured Parties of certain rights and remedies contained in any
Loan
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<PAGE> 53
Document may affect or eliminate the Pledgor's right of subrogation, if any,
against Company arising as a result of its performance of this Agreement and
that the Pledgor may therefore incur a partially or totally nonreimbursable
liability hereunder, and the Pledgor hereby agrees that the Secured Parties may
in its sole discretion exercise any such right or remedy.
17. 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, 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.
(c) The obligations of the Pledgor under this Section 17 shall survive
the termination of this Agreement.
18. 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-3 -15 -
Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 54
(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 Company 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 Agreement, or such other address of
which such party shall have notified in writing the party giving such notice.
19. 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.
20. 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
- C-3 -16 -
Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 55
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.
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.
[PLEDGORS]
By
--------------------------------
Name
------------------------------
Title
-----------------------------
Agreed to:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT
By
-------------------------
David Price
Vice President
- C-3 -17 -
Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 56
SCHEDULE 1
TO FOREIGN MATERIAL RESTRICTED
SUBSIDIARY PLEDGE AGREEMENT
Attached to and forming a part of that certain Foreign Material
Restricted Subsidiary Pledge Agreement dated as of _______________ made by the
Pledgors party thereto to Bank of America National Trust and Savings
Association, as Administrative Agent.
<TABLE>
<CAPTION>
STOCK PLEDGOR'S TOTAL
PLEDGED CERTIFICATE PAR NO. OF PERCENTAGE OF
PLEDGOR SUBSIDIARY NO. VALUE SHARES OWNERSHIP
------- ---------- ----------- ----- ------ ---------------
<S> <C> <C> <C> <C> <C>
</TABLE>
- C-3 -1 -
Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 57
SCHEDULE 2
TO FOREIGN MATERIAL RESTRICTED
SUBSIDIARY PLEDGE AGREEMENT
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 Foreign
Material Restricted Subsidiary Pledge Agreement, dated as of (the "Pledge
Agreement", the terms defined therein and not otherwise defined herein being
used as therein defined), made by the Pledgor party thereto 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.
[PLEDGOR]
By
-------------------------------------
Name
-----------------------------------
Title
----------------------------------
<TABLE>
<CAPTION>
STOCK PLEDGOR'S TOTAL
PLEDGED CERTIFICATE PAR NO. OF PERCENTAGE OF
PLEDGOR SUBSIDIARY NO. VALUE SHARES OWNERSHIP
------- ---------- ----------- ----- ------ ---------------
<S> <C> <C> <C> <C> <C>
</TABLE>
- C-3 -1 -
Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 58
SCHEDULE 3
TO FOREIGN MATERIAL RESTRICTED
SUBSIDIARY PLEDGE AGREEMENT
Attached to and forming a part of that certain Foreign Material
Restricted Subsidiary Pledge Agreement dated as of _____________________ made by
the Pledgors party thereto to Bank of America National Trust and Savings
Association, as Administrative Agent
- C-3-1 -
Foreign Material Restricted Subsidiary Pledge Agreement
<PAGE> 59
EXHIBIT A TO EXHIBIT F (GUARANTY)
ADDITIONAL GUARANTORS
Dated: ______, ______
Reference is made to that certain Guaranty dated as of February 12,
1998 as amended or supplemented from time to time (the "Guaranty"), by and among
the Guarantors from time to time party thereto in favor of Bank of America
National Trust and Savings Association, as Administrative Agent for the
Guarantied Parties. Unless otherwise defined herein, capitalized terms used
herein have the respective meanings assigned to them in the Guaranty and the
Credit Agreement referred to therein.
_______________________ , a Domestic Material Restricted Subsidiary of
__________________________, ("Subsidiary") hereby agrees to become a Guarantor
under the Guaranty, and agrees to be bound by all the terms and conditions
applicable to a Guarantor thereunder as of the date hereof.
The undersigned Subsidiary hereby represents and warrants to the
matters set forth in Section 10 of the Guaranty as of the date hereof.
The undersigned existing Guarantors hereby consent to Subsidiary
becoming a party to the Guaranty. This supplement to the Guaranty is executed by
the parties hereto as of the date first written above.
NEW DOMESTIC MATERIAL RESTRICTED SUBSIDIARY
By
-----------------------------------------
Name
---------------------------------------
Title
--------------------------------------
EXISTING GUARANTORS
By
-----------------------------------------
Name
---------------------------------------
Title
--------------------------------------
ACKNOWLEDGED:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
ADMINISTRATIVE AGENT
By
--------------------------------
David Price
Vice President
- 1 -
Exhibit A To Exhibit F (Guaranty)
<PAGE> 60
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 certain Second Amended and Restated Reducing
Revolving Credit Agreement dated as of February 12, 1998 (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 USA, Inc. (the "Company"), the several
financial institutions party hereto (the "Banks"), Bank of America National
Trust and Savings Association, as agent for the Banks (in such capacity, the
"Administrative Agent"), NationsBank, N.A. as Syndication Agent and BankBoston,
N.A., The Bank of Nova Scotia, CIBC Inc. and Fleet Bank, as Co-Agents,. It is a
requirement of the Credit Agreement that the Subordinated Creditor enter into
this Subordination Agreement.
The Company and its Subsidiaries (each, a "Subordinated Obligor") are
or may become indebted or otherwise obligated to the Company and other of its
Subsidiaries (each, a "Subordinated Creditor"), and desire that the Banks
continue to extend financial accommodations to the Company. For the purpose of
inducing the Banks to grant, continue or renew such financial accommodations,
and in consideration thereof, each Subordinated Creditor agrees as follows:
1. Any and all claims of the Subordinated Creditor against any
Subordinated Obligor, 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, no Subordinated Obligor shall, directly
or indirectly, make any payment or distribution of assets with respect to the
Subordinated Debt, except as set forth in paragraph 10 hereof. With respect to
any Subordinated Debt which is permitted to be secured, the relevant
Subordinated Creditors agree to not foreclose or take any action with respect
to, or otherwise realize upon, such lien unless and until payment could
otherwise be made on such Subordinated Debt hereunder.
3. In case of (a) any assignment for the benefit of creditors by any
Subordinated Obligor, (b) any proceedings under any bankruptcy or other debtor
relief laws being instituted by or against any Subordinated Obligor, (c) the
appointment of any receiver for any Subordinated
H - 1
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 61
Obligor's business or assets, or (d) any dissolution or winding up of the
affairs of any Subordinated Obligor 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 any Subordinated Creditor under any Subordinated
Debt (whether or not from the proceeds of any security interest securing any
Subordinated Debt). With respect to any Subordinated Debt which is permitted to
be secured, until payment in full of the Obligations (including interest and
fees to the date of payment), any proceeds of such lien shall be applied to the
Obligations.
4. The Senior Creditor is hereby authorized by each Subordinated
Creditor to: (a) renew, compromise, extend, accelerate or otherwise change the
time of payment, or any other 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 the
Company or any guarantor of any indebtedness of the Company from liability, and
(f) make optional future advances to the Company, all without notice to any
Subordinated Creditor and without affecting the subordination provided by this
Agreement.
5. Each Subordinated Creditor acknowledges and agrees that it shall
have the sole responsibility for obtaining from any Subordinated Obligor such
information concerning any Subordinated Obligor'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 any Subordinated Creditor any information
relating to the business operations or financial condition of any Subordinated
Obligor.
6. On the written request of the Administrative Agent, each
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 SECOND AMENDED
AND RESTATED REDUCING REVOLVING CREDIT AGREEMENT DATED AS OF FEBRUARY
12, 1998 AMONG CINEMARK USA, 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 16, 1998 BETWEEN BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, AS ADMINISTRATIVE AGENT AND PROMISOR."
H - 2
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 62
7. In the event that any payment or any cash or noncash distribution is
made to any Subordinated Creditor in violation of the terms of this Agreement
(including receiving proceeds from realization upon any security interest
securing Subordinated Debt), such 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, each Subordinated Creditor shall be
jointly and severally liable for all losses and damages sustained by reason of
such breach.
9. Each 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 Subordinated
Obligor's property so long as any Obligations shall exist. This Agreement shall
be binding upon the heirs, successors and assigns of the Subordinated Creditors
and Subordinated Obligors.
10. Notwithstanding the provisions of Section 2, (a) a Subordinated
Obligor may make payments or prepayments to a Subordinated Creditor on
Subordinated Debt for its respective share of consolidated tax liability and
(b), so long as no Default or Event of Default has occurred, a Subordinated
Creditor may receive principal and noncash interest payments on the Subordinated
Debt; provided, 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
duly executed and delivered as of November 16, 1998.
THE SUBORDINATED CREDITORS LISTED ON
SCHEDULE A HERETO:
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
H - 3
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 63
ACCEPTANCE OF SUBORDINATION
AGREEMENT BY SUBORDINATED OBLIGORS
The undersigned being the Subordinated Obligors named in the foregoing
Subordination Agreement, hereby accept and consent thereto and agree to be bound
by all the provisions thereof, not to make any payment to or on behalf of the
Subordinated Creditors 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 16, 1998
THE SUBORDINATED OBLIGORS LISTED ON
SCHEDULE A HERETO:
By:
----------------------------------
Name:
---------------------------------
Title:
-------------------------------
H - 4
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 64
schedule a to intercompany subordination agreement
ALL SUBORDINATED CREDITORS
ALL SUBORDINATED OBLIGORS
H - 5
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 1
EXHIBIT 10.9(s)
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 certain Second Amended and Restated Reducing
Revolving Credit Agreement dated as of February 12, 1998 (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 USA, Inc. (the "Company"), the several
financial institutions party hereto (the "Banks"), Bank of America National
Trust and Savings Association, as agent for the Banks (in such capacity, the
"Administrative Agent"), NationsBank, N.A. as Syndication Agent and BankBoston,
N.A., The Bank of Nova Scotia, CIBC Inc. and Fleet Bank, as Co-Agents,. It is a
requirement of the Credit Agreement that the Subordinated Creditor enter into
this Subordination Agreement.
The Company and its Subsidiaries (each, a "Subordinated Obligor") are
or may become indebted or otherwise obligated to the Company and other of its
Subsidiaries (each, a "Subordinated Creditor"), and desire that the Banks
continue to extend financial accommodations to the Company. For the purpose of
inducing the Banks to grant, continue or renew such financial accommodations,
and in consideration thereof, each Subordinated Creditor agrees as follows:
1. Any and all claims of the Subordinated Creditor against any
Subordinated Obligor, 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, no Subordinated Obligor shall, directly
or indirectly, make any payment or distribution of assets with respect to the
Subordinated Debt, except as set forth in paragraph 10 hereof. With respect to
any Subordinated Debt which is permitted to be secured, the relevant
Subordinated Creditors agree to not foreclose or take any action with respect
to, or otherwise realize upon, such lien unless and until payment could
otherwise be made on such Subordinated Debt hereunder.
3. In case of (a) any assignment for the benefit of creditors by any
Subordinated Obligor, (b) any proceedings under any bankruptcy or other debtor
relief laws being instituted by or against any Subordinated Obligor, (c) the
appointment of any receiver for any Subordinated Obligor's business or assets,
or (d) any dissolution or winding up of the affairs of any
- 1 -
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 2
Subordinated Obligor 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 any Subordinated Creditor under any Subordinated Debt
(whether or not from the proceeds of any security interest securing any
Subordinated Debt). With respect to any Subordinated Debt which is permitted to
be secured, until payment in full of the Obligations (including interest and
fees to the date of payment), any proceeds of such lien shall be applied to the
Obligations.
4. The Senior Creditor is hereby authorized by each Subordinated
Creditor to: (a) renew, compromise, extend, accelerate or otherwise change the
time of payment, or any other 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 the
Company or any guarantor of any indebtedness of the Company from liability, and
(f) make optional future advances to the Company, all without notice to any
Subordinated Creditor and without affecting the subordination provided by this
Agreement.
5. Each Subordinated Creditor acknowledges and agrees that it shall
have the sole responsibility for obtaining from any Subordinated Obligor such
information concerning any Subordinated Obligor'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 any Subordinated Creditor any information
relating to the business operations or financial condition of any Subordinated
Obligor.
6. On the written request of the Administrative Agent, each
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 SECOND AMENDED
AND RESTATED REDUCING REVOLVING CREDIT AGREEMENT DATED AS OF FEBRUARY
12, 1998 AMONG CINEMARK USA, 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 16, 1998 BETWEEN BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, AS ADMINISTRATIVE AGENT AND PROMISOR."
7. In the event that any payment or any cash or noncash distribution is
made to any Subordinated Creditor in violation of the terms of this Agreement
(including receiving proceeds
- 2 -
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 3
from realization upon any security interest securing Subordinated Debt), such
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, each Subordinated Creditor shall be
jointly and severally liable for all losses and damages sustained by reason of
such breach.
9. Each 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 Subordinated
Obligor's property so long as any Obligations shall exist. This Agreement shall
be binding upon the heirs, successors and assigns of the Subordinated Creditors
and Subordinated Obligors.
10. Notwithstanding the provisions of Section 2, (a) a Subordinated
Obligor may make payments or prepayments to a Subordinated Creditor on
Subordinated Debt for its respective share of consolidated tax liability and
(b), so long as no Default or Event of Default has occurred, a Subordinated
Creditor may receive principal and noncash interest payments on the Subordinated
Debt; provided, 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
duly executed and delivered as of November 16, 1998.
THE SUBORDINATED CREDITORS LISTED ON
SCHEDULE A HERETO:
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
- 3 -
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 4
ACCEPTANCE OF SUBORDINATION
AGREEMENT BY SUBORDINATED OBLIGORS
The undersigned being the Subordinated Obligors named in the foregoing
Subordination Agreement, hereby accept and consent thereto and agree to be bound
by all the provisions thereof, not to make any payment to or on behalf of the
Subordinated Creditors 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 16, 1998
THE SUBORDINATED OBLIGORS LISTED ON
SCHEDULE A HERETO:
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
- 1 -
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 5
SCHEDULE A TO INTERCOMPANY SUBORDINATION AGREEMENT
ALL SUBORDINATED CREDITORS
ALL SUBORDINATED OBLIGORS
- 1 -
Cinemark (USA) Intercompany Subordination Agreement
<PAGE> 1
EXHIBIT 10.9(t)
THIRD AMENDMENT TO SECOND AMENDED AND RESTATED
REDUCING REVOLVING CREDIT AGREEMENT
THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED REDUCING REVOLVING
CREDIT AGREEMENT (this "Amendment") is made and dated as of February 24, 1999 by
and among CINEMARK USA, INC., a Texas corporation (the "Company"), the several
financial institutions party hereto (the "Banks"), Bank of America National
Trust and Savings Association, as agent for the Banks (in such capacity, the
"Administrative Agent"), NationsBank, N.A., as Syndication Agent and BankBoston,
N.A., The Bank of Nova Scotia, CIBC Inc. and Fleet Bank, as Co-Agents, and
amends that certain Second Amended and Restated Reducing Revolving Credit
Agreement dated as of February 12, 1998 among the Company, the Banks, the
Administrative Agent, the Syndication Agent and the Co-Agents as amended by a
First Amendment to Second Amended and Restated Reducing Revolving Credit
Agreement dated as of August 31, 1998 and a Second Amendment and Waiver to
Second Amended and Restated Reducing Revolving Credit Agreement dated as of
November 16, 1998 (as so amended, the "Agreement).
RECITAL
By this Amendment, the Company, the Banks and the Administrative Agent
desire to amend how the financial covenants in Sections 7.12 and 7.13 of the
Agreement are calculated and to make certain other modifications to the
Agreement, all on the terms provided 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.
2. AMENDMENTS TO AGREEMENT. The Agreement shall be amended as
follows:
2.1 The following new definitions are inserted in proper
alphabetical order in Section 1.1 of the Agreement (Defined Terms) as follows:
"'Annualized Monthly Cash Flow' means, for any period, for the
Company and its Restricted Subsidiaries, Cash Flow for such period plus
(a) Proforma Monthly Cash Flow for Monthly Annualized Theatres less (b)
Cash Flow from Monthly Annualized Theatres; provided, however, that if
during the period for which Annualized Monthly Cash Flow is being
determined, the Company or any of its Restricted Subsidiaries 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 the
Company and its Restricted Subsidiaries shall be calculated on a pro
forma basis as if such acquisition or disposition had occurred at the
beginning of such period."
- 1 -
Cinemark USA Third Amendment
<PAGE> 2
"'Monthly Annualized Theatres' means, for any period, newly
constructed theatres identified to the Administrative Agent that have
had more than one complete month of operation, but less than 12
complete months of operation (each, a 'Monthly Annualized Theatre')."
"'Proforma Monthly Cash Flow for Monthly Annualized Theatres'
means, for any period, the sum of the Proforma Monthly Cash Flow for
each Monthly Annualized Theatre, calculated on a Monthly Annualized
Theatre by Monthly Annualized Theatre basis in accordance with the
formula set forth in Schedule 1.2."
2.2 Section 6.2(a) of the Agreement is amended by deleting "and"
at the end of clause (i) and inserting ";" in lieu thereof, inserting "; and" at
the end of clause (ii), and inserting the following new clause immediately
following clause (ii) as follows:
"(iii) showing in detail the calculations supporting determination
of the Applicable Amount in accordance with the definition thereof."
2.3 Section 7.5 of the Agreement (Limitation on Indebtedness) is
amended by deleting "and" at the end of subsection (l), deleting the period at
the end of subsection (m) and inserting "; and" in lieu thereof, and inserting a
new subsection (n) immediately following subsection (m) as follows:
"(n) other unsecured senior or subordinated
Indebtedness in an aggregate principal amount not exceeding
$200,000,000, in each case having terms and conditions that
are not more restrictive than the terms of the Loan Documents
and having no required principal repayments or prepayments
earlier than one year after the Maturity Date at the time such
indebtedness is incurred."
2.4 Section 7.12 of the Agreement is amended and restated in its
entirety as follows:
"7.12 INDEBTEDNESS TO ANNUALIZED MONTHLY CASH FLOW RATIOS.
"(a) The Company shall not permit as of the end
of any fiscal quarter its ratio of (a) Total Indebtedness to
(b) Annualized Monthly Cash Flow for the four fiscal quarters
ending on such date, to exceed the ratio set forth opposite
the respective period set forth below:
<TABLE>
<CAPTION>
Total Indebtedness to
Annualized Monthly Cash Flow
- ---------------------------------------------------
Maximum
Fiscal Quarters Ending Ratio
- ------------------------------------ --------------
<S> <C>
12/31/98 through 12/31/99 6.00 to 1
1/01/00 through 9/30/00 5.75 to 1
10/01/00 through 6/30/01 5.50 to 1
7/01/01 through 3/31/02 5.25 to 1
4/01/02 and thereafter 5.00 to 1
</TABLE>
- 2 -
Cinemark USA Third Amendment
<PAGE> 3
"(b) The Company shall not permit as of the end
of any fiscal quarter its ratio of (a) Senior Indebtedness to
(b) Annualized Monthly Cash Flow for the four fiscal quarters
ending on such date, to exceed the ratio set forth opposite
the respective period set forth below:
<TABLE>
<CAPTION>
Senior Indebtedness to
Annualized Monthly Cash Flow
- --------------------------------------------------
Maximum
Fiscal Quarters Ending Ratio
- ----------------------------------- --------------
<S> <C>
12/31/98 through 3/31/02 4.00 to 1
4/01/02 and thereafter 3.50 to 1"
</TABLE>
2.5 Section 7.13 of the Agreement (Debt Service Coverage Ratio)
is amended by deleting "Annualized Cash Flow" in clause (a) and inserting
"Annualized Monthly Cash Flow" in lieu thereof.
2.6 A new Schedule 1.2 to the Agreement is inserted in the
Agreement in the form of Schedule 1.2 hereto.
3. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Banks and Administrative Agent that, on and as of the date
hereof, and after giving effect to this Amendment:
3.1 AUTHORIZATION. The execution, delivery and performance of
this Amendment have been duly authorized by all necessary corporate action by
the Company and this Amendment has been duly executed and delivered by the
Company.
3.2 BINDING OBLIGATION. This 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 by equitable principles relating to enforceability.
3.3 NO LEGAL OBSTACLE TO AMENDMENT. The execution, delivery and
performance of this 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 Amendment, or the
transactions contemplated hereby.
- 3 -
Cinemark USA Third Amendment
<PAGE> 4
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, 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 Amendment
shall be subject to the compliance by the Company with its agreements herein
contained, and to the delivery of the following to the Administrative Agent in
form and substance satisfactory to the Administrative Agent:
4.1 AUTHORIZED SIGNATORIES. A certificate, signed by the
Secretary or an Assistant Secretary of the Company dated the date hereof, as to
the incumbency of the person or persons authorized to execute and deliver this
Amendment and any instrument or agreement required hereunder on behalf of the
Company.
4.2 AMENDMENT FEE. An amendment fee payable to the Administrative
Agent for the account of each Bank signing this Amendment equal to 10 basis
points of such Bank's Commitment.
4.3 THIRD PARTY CONSENTS. The written consent of each Pledgor,
Subordinated Creditor, Subordinated Obligor and Guarantor to the terms of this
Amendment. By signing below, the Borrower is also signing in its capacity as a
Subordinated Creditor.
4.4 OTHER EVIDENCE. Such other evidence with respect to the
Company or any other person as the Administrative Agent or any Bank may
reasonably request to establish the consummation of the transactions
contemplated hereby, the taking of all corporate action in connection with this
Amendment and the compliance with the conditions set forth herein.
5. MISCELLANEOUS.
5.1 PLEDGE OF STOCK OF CINEMARK DE MEXICO; COMPLIANCE WITH SECTION
6.14. The Banks and the Administrative Agent hereby agree that the Company shall
have until February 26, 1999 to comply with Section 6.14 of the Agreement as it
relates to the pledge of 65% of the capital stock of Cinemark de Mexico, and any
default under the Agreement arising from the Company's failure to so comply with
such Section earlier is hereby waived. The Banks and the Administrative Agent
also hereby approve the form of the Foreign Material Restricted Subsidiary
Pledge Agreement relating to the pledge of such stock, an English language
version of which form is attached hereto as Exhibit A (the official legal
version of such agreement is in Spanish).
5.2 EFFECTIVENESS OF AGREEMENT. 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.
- 4 -
Cinemark USA Third Amendment
<PAGE> 5
5.3 COUNTERPARTS. This 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 Amendment shall not become
effective until the Company, the Administrative Agent and the Majority Banks
shall have signed a copy hereof, whether the same or counterparts, and the same
shall have been delivered to the Administrative Agent and all conditions
precedent have been satisfied.
5.4 JURISDICTION. THIS 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 Amendment to be
duly executed and delivered as of the date first written above.
- 5 -
Cinemark USA Third Amendment
<PAGE> 6
CINEMARK USA, INC.
By
-------------------------------
Jeffrey J. Stedman
Chief Financial Officer
S - 1
Cinemark USA Third Amendment
<PAGE> 7
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT
By
-----------------------------
David Price
Vice President
S - 2
Cinemark USA Third Amendment
<PAGE> 8
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS ISSUING
BANK AND A BANK
By
-----------------------------
Matthew Koenig
Vice President
S - 3
Cinemark USA Third Amendment
<PAGE> 9
BANKBOSTON, NA.,
AS A CO-AGENT AND A BANK
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 4
Cinemark USA Third Amendment
<PAGE> 10
THE BANK OF NOVA SCOTIA,
AS A CO-AGENT AND A BANK
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 5
Cinemark USA Third Amendment
<PAGE> 11
CIBC INC., AS A CO-AGENT AND A BANK
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 6
Cinemark USA Third Amendment
<PAGE> 12
FLEET BANK, N.A.
AS A CO-AGENT AND A BANK
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 7
Cinemark USA Third Amendment
<PAGE> 13
THE BANK OF NEW YORK
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 8
Cinemark USA Third Amendment
<PAGE> 14
THE BANK OF MONTREAL
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 9
Cinemark USA Third Amendment
<PAGE> 15
COMERICA BANK - TEXAS
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 10
Cinemark USA Third Amendment
<PAGE> 16
FIRST HAWAIIAN BANK
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 11
Cinemark USA Third Amendment
<PAGE> 17
THE FUJI BANK, LIMITED
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 12
Cinemark USA Third Amendment
<PAGE> 18
PNC BANK, NATIONAL ASSOCIATION
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 13
Cinemark USA Third Amendment
<PAGE> 19
THE SUMITOMO BANK, LIMITED
By
---------------------------------
Name
-------------------------------
Title
------------------------------
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 14
Cinemark USA Third Amendment
<PAGE> 20
UNION BANK OF CALIFORNIA, N.A.
By
---------------------------------
Name
-------------------------------
Title
------------------------------
S - 15
Cinemark USA Third Amendment
<PAGE> 21
CONSENT OF pledgors, guarantorS
AND SUBORDINATED obligor
Each of the undersigned (a) Pledgors party to the Second Amended
and Restated Mitchell Family Pledge Agreement dated as of February 12, 1998, (b)
Guarantors under the Guaranty dated as of February 12, 1998, (c) Pledgor party
to the Foreign Material Restricted Subsidiary Pledge Agreement relating to the
pledge of the stock of Cinemark de Mexico, and (d) Subordinated Creditors party
to the Intercompany Subordination Agreement dated as of November 16, 1998,
hereby consents to the foregoing Third Amendment, and represents and warrants to
the Administrative Agent and the Banks that there is no defense, counterclaim or
offset of any type or nature under the respective guaranty, pledge agreement or
intercreditor agreement, and that the same remain in full force and effect as to
it after giving effect hereto and thereto. All terms used herein shall have the
same meanings as in the Credit Agreement referred to in the Third Amendment
unless otherwise defined herein.
PLEDGORS:
CGI EQUITIES, LTD., a Texas limited
partnership
- -----------------------------
Lee Roy Mitchell By: CGI INVESTMENTS, LLC, a Texas
limited liability company, its
general partner
- ------------------------------------------
Tandy Mitchell, Spouse Of Lee Roy Mitchell By:
-------------------------------
Robert Copple
Vice President
MITCHELL SPECIAL TRUST
MITCHELL GRANDCHILDREN TRUST
FOR CASSIE ANN ROBERTS
MITCHELL GRANDCHILDREN TRUST
FOR ASHLEY ANN LEE
MITCHELL GRANDCHILDREN TRUST
FOR CRYSTAL LEE ROBERTS
MITCHELL GRANDCHILDREN TRUST
FOR SKYLER KAYE MITCHELL
MITCHELL GRANDCHILDREN TRUST
FOR LASEY MARIE LEE
By
-------------------------------
Trustee
By
-------------------------------
Trustee
S - 1
Cinemark USA Third Amendment
<PAGE> 22
CINEMARK MEXICO (USA) INC.,
a Delaware corporation, as a Guarantor,
Pledgor and Subordinated Creditor
CINEMARK PROPERTIES, INC.
a Delaware corporation, as a Guarantor
By:
------------------------------------
Jeffrey J. Stedman
Vice President
S - 2
Cinemark USA Third Amendment
<PAGE> 23
SCHEDULE 1.2
PROFORMA CASH FLOW FOR MONTHLY ANNUALIZED THEATRES
Proforma Cash Flow for Monthly Annualized Theatres shall be the sum of the
Proforma Cash Flow for each Monthly Annualized Theatre, calculated on a Monthly
Annualized Theatre by Monthly Annualized Theatre basis in accordance with the
formula set forth below:
Proforma Cash Flow for each Actual Full Month Cash Flow
= ---------------------------
Monthly Annualized Theatre Annualization Factor
Where:
Actual Full Month Cash Flow means the sum of actual Cash Flow
from each Monthly Annualized Theatre for each Included Month.
Included Month means each full month that such Monthly
Annualized Theatre was in operation during the measurement period.
Annualization Factor means the sum of annualization factors
set forth below for Included Months:
<TABLE>
<CAPTION>
Month Percentage
- ----- ----------
<S> <C> <C>
January 9.64% 0.22%
February 5.20%
March 7.16%
------
April 4.76% 0.24%
May 7.78%
June 11.46%
------
July 18.83% 0.31%
August 10.16%
September 2.01%
------
October 2.02% 0.23%
November 10.23%
December 10.75%
======
Total 100.00%
</TABLE>
- 1 -
Cinemark USA Third Amendment
<PAGE> 1
EXHIBIT 10.10(c)
[CINEMARK USA, INC. LETTERHEAD]
December 14, 1998
Mr. Denny Rydberg
Young Life
420 N. Cascade
Colorado Springs, CO 80903-3325
RE: Stock Options
Dear Denny:
In consideration for your services as a director of Cinemark USA, Inc.
(the "Company"), the Company is pleased to grant to you options (the "Options")
to purchase 200 shares of the Class B Common Stock of the Company (the "Common
Stock") upon the terms set forth in this letter. The Options evidenced by this
letter are granted subject to the following terms and conditions:
1. Date of Grant. The "Date of Grant" for purposes of this letter
is the date set forth above.
2. Term of Options. Except as otherwise provided in this letter,
you may exercise all or part of the Options granted under this
letter at any time and from time to time during the period
commencing on December 13, 2003 and ending on the tenth
anniversary of the Date of Grant.
3. Exercise Price. The exercise price of the options is $1.00 per
share of Common Stock.
4. Manner of Exercise. Shares of Common Stock purchased upon
exercise of an Option shall at the time of purchase be paid
for in full. Options may be exercised from time to time by
written notice to the Company stating the full number of
shares with respect to which the Option is being exercised and
the time of delivery thereof, which shall be at least fifteen
days after the giving of such notice unless an earlier date
shall have been mutually agreed upon, accompanied by full
payment for the shares by certified or official bank check or
the equivalent thereof acceptable to the Company.
<PAGE> 2
Mr. Denny Rydberg
December 14, 1998
Page 2
At the time of delivery, the Company shall, without stock
transfer or issue to you (or other person entitled to exercise
the Option), deliver to you (or to such other person) at the
principal office of the Company, or such other place as shall
be mutually agreed upon, a certificate or certificates for
such shares, provided, however, that the time of delivery may
be postponed by the Company for such period as may be required
for it with reasonable diligence to comply with any
requirements of law, including making provision for the
deduction and withholding of amounts required to be deducted
and withheld under applicable local, state and federal income
tax laws (which provision may require additional payment by
you.). If the Common Stock issuable upon exercise is not
registered under the Securities Act of 1933 (the "Act"), then
the Company at the time of exercise will require in addition
that the registered owner deliver an investment representation
in form acceptable to the Company, and the Company will place
a legend on the certificate for such Common Stock restricting
the transfer of same. At no time shall the Company have any
obligation or duty to register under the Act the Common Stock
issuable upon exercise of the Options or securities into which
the Common Stock may be converted.
5. Non-Assignability of Option Rights. No Option shall be
assignable or transferable otherwise than by will or by the
laws of descent and distribution. During your lifetime, the
Option is exercisable only by you.
6. Termination as Director.
(a) Prior to December 13, 2003, if you no longer serve as
a director of the Company for any reasons, the
Options shall expire upon your resignation or removal
as a director of the Company.
(b) On or after December 13, 2003:
(i) In the event that you die while serving
as a director of the Company, or if you no longer
serve as a director of the Company as a result of
your disability, you, your estate or beneficiary
shall have the right to exercise the Options at any
time within six months from the date of your death or
resignation or removal due to disability, as the case
may be. For purposes of this letter, you shall be
considered disabled if the board of directors of the
Company determines in its sole discretion that you
are no longer able to adequately fulfill your
responsibilities as a director of the Company.
(ii) In the event that you resign as a
director of the Company for reasons other than your
disability or your requested resignation by the board
<PAGE> 3
Mr. Denny Rydberg
December 14, 1998
Page 3
of directors of the Company, you shall have the right
to exercise the Options at any time within three
months after your resignation.
(iii) In the event that the board of
directors requests your resignation or you are
removed as a director by action of the shareholders
of the Company, the Options shall terminate
immediately upon such removal and may not thereafter
be exercised.
7. Adjustment of Options on Recapitalization. The number of
shares covered by each outstanding Option and the exercise
price per share for each such Option shall be proportionately
adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from the
subdivision or consolidation of shares or the payment of a
stock dividend after the Date of Grant of the Options, or
other increase in such shares effected without receipt of
consideration by the Company, provided, however, that any
Options to purchase fractional shares resulting from any such
adjustment shall be eliminated.
8. Expiration of Options Upon Reorganization or Public Offering.
If (i) the Company shall at any time participate in a merger,
consolidation, liquidation, or other reorganization affecting
the capital structure of the Company and (A) the Company is
not the surviving entity or (B) the Company is the surviving
entity and the holders of Company Common Stock are required to
exchange their shares for property and/or securities or (ii)
the Company shall publicly offer shares of its stock, the
Company shall give you written notice of such fact on or
before fifteen (15) days before such reorganization or public
offering, and the Options shall be exercisable in full after
receipt of such notice and prior to such reorganization or
public offering. All Options not exercised prior to such
reorganization or public offering shall expire on the
occurrence of such reorganization or public offering. A sale
of all or substantially all the assets of the Company for a
consideration (apart from the assumption of obligations)
consisting primarily of securities shall be deemed a
reorganization of which the Company is not a surviving entity
for the foregoing purposes.
9. Dissolution of Company. In the event of the proposed
dissolution or liquidation of the Company, the Options granted
hereunder shall terminate as of a date to be fixed by the
board of directors, provided that not less than thirty (30)
days prior written notice of the date so fixed shall be given
to you, and you shall have the right, during the period of
thirty (30) days preceding such termination, to exercise the
Options.
10. Rights as a Shareholder. You shall have no rights as a
shareholder with respect to any shares of Common Stock of the
Company held under the Options until the date of issuance of
the stock certificates to you for such shares. Except as
provided in
<PAGE> 4
Mr. Denny Rydberg
December 14, 1998
Page 4
Section 7, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date of such
issuance.
11. Stock Restrictions. Shares of the Company's Common Stock
purchased upon exercise of the Options shall not be converted
into any other security of the Company or transferred,
pledged, assigned or encumbered except (i) in the event that a
class of common stock of the Company becomes publicly traded,
or (ii) as otherwise may be permitted in the sole discretion
of the board of directors of the Company. Such restrictions
shall apply to any other security into which shares of Common
Stock may be converted. Certificates evidencing shares of the
Company's Common Stock purchased upon the exercise of the
Options shall be endorsed with a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED EXCEPT PURSUANT TO THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER HEREOF. IN ADDITION, THESE SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY
BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT, APPLICABLE STATE
SECURITIES LAWS AND THE RULES AND REGULATIONS
THEREUNDER. BY ACCEPTANCE HEREOF, THE HOLDER OF THIS
CERTIFICATE REPRESENTS THAT SUCH HOLDER IS ACQUIRING
THESE SECURITIES FOR INVESTMENT.
12. Company's Right to Purchase Option Shares.
(i) In the event that no public market exists for any
class of common stock of the Company at any time prior to your
resignation or removal as a director of the Company for any
reason whatsoever, then the Company shall have the right,
exercisable within sixty (60) days after the later of (i) the
date of your resignation or removal as a director of the
Company or (ii) the date of the exercise by any person of the
Options pursuant to any provision of this letter, to purchase
any shares of Common Stock (or securities into which any
Common Stock has been converted) that were acquired pursuant
to the exercise of any Options under this letter ("Option
Shares"). To the extent that you hold exercisable Options at
the time of your resignation or removal as a director of the
Company, the Company may elect to purchase such exercisable
Options in the same manner as the Option Shares at a price
equal to the Formula Value Per Option Share (as hereinafter
defined) less the exercise price of such exercisable Options.
<PAGE> 5
Mr. Denny Rydberg
December 14, 1998
Page 5
(ii) The price for the purchase of the Option Shares
shall be equal to the product of (1) the Formula Value Per
Option Share and (ii) the number of Option Shares being
acquired. The Formula Value Per Option Share shall be
determined in accordance with the following rules and
definitions:
"Formula Value Per Option Share" on any date herein
specified shall mean the amount determined by the formula:
V = (6 x E) - D - M + C
-------------------
X + Y , where:
V = Formula Value Per Option Share
E = EBITDA for the trailing twelve (12) months
as of the month-end prior to your
resignation or removal
D = The outstanding balance of Funded Debt as of
such month-end
M = The value of any Minority Interest as
shown on the consolidated balance sheet of
the Company as of such month end.
C = Cash on the consolidated balance sheet of
the Company and its Subsidiaries as of such
month-end
X = The number of outstanding shares of all
classes of common stock of the Company
Y = The number of shares of common stock of
the Company then issuable under all
outstanding options, warrants or other
rights to acquire common stock or securities
convertible into common stock of the Company
"Cash" shall mean cash, cash equivalents, and
marketable securities.
"Debt" of the Company and its Subsidiaries shall mean
(a) all items of indebtedness or liability which in accordance
with generally accepted accounting principles would be
included in determining total consolidated liabilities as
shown on the liability side of the Company's balance sheet as
to the date as of which Debt is to be determined and (b)
indebtedness secured by any mortgage, pledge, lien or security
interest existing on property owned by the Company or its
Subsidiaries, whether or not the indebtedness secured thereby
shall have been assumed.
<PAGE> 6
Mr. Denny Rydberg
December 14, 1998
Page 6
Notwithstanding the foregoing, Debt shall not include any
indebtedness or liability of the Company or its Subsidiaries
under any capital equipment leases.
"Funded Debt" shall mean all Debt of the Company and
its Subsidiaries initially maturing by its terms more than one
year after, or which is renewable or extendable at the option
of the Company or any Subsidiary for a period ending one year
or more after the date as of which Funded Debt is being
determined, and shall include the current portion of such
Debt. Funded Debt shall not include deferred lease expenses.
"Subsidiary" shall mean any corporation at least a
majority of whose outstanding voting stock shall at the time
be owned by the Company or by one or more Subsidiaries and, to
the extent not otherwise included in the Company's financial
statements, any joint venture or partnership in which the
Company has a direct or indirect interest to the extent of
such interest.
"Minority Interest" shall mean the interest in any
Subsidiary held by parties other than the Company or its
Subsidiaries.
"EBITDA" shall mean the earnings of the Company and
its Subsidiaries before interest, income taxes, depreciation
and amortization as reported on the financial statements of
the Company and its Subsidiaries for the applicable period
during which EBITDA is determined.
(iii) To the extent that the Company has the right to
purchase Option Shares, the Company may exercise such right by
delivery (upon or within sixty days after your resignation or
removal as a director of the Company) of written notice to you
stating the full number of Option Shares that the Company has
elected to purchase, the purchase price per Option Share, and
the time of purchase (which time shall not be earlier than
five (5) days from the date of notice). At the time of
purchase, you shall deliver the certificate or certificates
representing his Option Shares to the Company at its offices
and shall execute any stock powers or other instruments as may
be necessary to transfer full ownership of the Option Shares
to the Company. At the time of purchase, the Company shall
issue its own check or promissory note to you in an amount
equal to the aggregate purchase price for the Option Shares
for which the Company has exercised its right to purchase,
less any amounts required to be withheld under applicable
laws. The purchase price (or any portion thereof) may be paid,
in the sole discretion of the Company, by delivery of a one
year promissory note bearing interest at the prime rate
reported in the Wall Street Journal with payment of principal
and interest subordinated to all senior credit facilities of
the Company. The maturity date of such promissory note may be
<PAGE> 7
Mr. Denny Rydberg
December 14, 1998
Page 7
extended, in the sole discretion of the Company, as required
to subordinate payment to any senior credit facility of the
Company. In the event of your death, the Company's right to
purchase and the manner of purchase shall apply with regard to
your estate or beneficiary.
13. Status of Options. Options granted pursuant to this letter
are not intended to qualify as Incentive Stock Options within
the meaning of Section 422A of the Internal Revenue Code of
1986 (the "Code"), and the terms of this letter and Options
granted hereunder shall be so construed; provided, however,
that nothing in this letter shall be interpreted as a
representation, guarantee or other undertaking on the part of
the Company that the Options granted pursuant to this letter
are not, or will not be, determined to be Incentive Stock
Options, within the meaning of Section 422A of the Code.
CINEMARK USA, INC.
By: /s/ LEE ROY MITCHELL
------------------------------
Lee Roy Mitchell
Chief Executive Officer
I hereby accept the Options granted under this letter and agree to hold
the Options pursuant to the terms of this letter.
/s/ DENNY RYDBERG
---------------------------------
Denny Rydberg
<PAGE> 1
EXHIBIT 10.11(a)
CREDIT AGREEMENT
Dated as of November 16, 1998
among
Cinemark Mexico (USA), Inc.,
as Borrower
Bank of America National Trust
and Savings Association,
as Administrative Agent
and
The Financial Institutions Party Hereto
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
SECTION 1. DEFINITIONS.........................................................................................1
1.01 DEFINED TERMS.........................................................................................1
1.02 OTHER INTERPRETIVE PROVISIONS........................................................................18
SECTION 2. THE CREDITS........................................................................................19
2.01 AMOUNTS AND TERMS OF COMMITMENTS.....................................................................19
2.02 LOAN ACCOUNTS AND NOTES..............................................................................19
2.03 PROCEDURE FOR BORROWING..............................................................................19
2.04 CONVERSION AND CONTINUATION ELECTIONS................................................................20
2.05 LIMITATION ON INTEREST PERIODS.......................................................................21
2.06 TERMINATION OR REDUCTION OF AGGREGATE COMMITMENT.....................................................21
2.07 OPTIONAL PREPAYMENTS.................................................................................22
2.08 MATURITY DATE........................................................................................22
2.09 INTEREST.............................................................................................22
2.10 FEES.................................................................................................24
2.11 COMPUTATION OF FEES AND INTEREST.....................................................................24
2.12 PAYMENTS BY BORROWER.................................................................................25
2.13 PAYMENTS BY THE BANKS TO THE ADMINISTRATIVE AGENT....................................................25
2.14 SHARING OF PAYMENTS, ETC.............................................................................26
2.15 CINEMARK USA GUARANTY................................................................................27
SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY.............................................................27
3.01 TAXES................................................................................................27
3.02 ILLEGALITY...........................................................................................29
3.03 INCREASED COSTS AND REDUCTION OF RETURN..............................................................29
3.04 FUNDING LOSSES.......................................................................................30
3.05 INABILITY TO DETERMINE RATES.........................................................................30
3.06 SURVIVAL.............................................................................................31
SECTION 4. CONDITIONS PRECEDENT...............................................................................31
4.01 CONDITIONS OF INITIAL LOANS..........................................................................31
4.02 CONDITIONS TO ALL BORROWINGS.........................................................................33
SECTION 5. REPRESENTATIONS AND WARRANTIES.....................................................................33
5.01 CORPORATE EXISTENCE AND POWER........................................................................33
5.02 CORPORATE AUTHORIZATION; NO CONTRAVENTION............................................................33
5.03 GOVERNMENTAL AUTHORIZATION...........................................................................34
5.04 BINDING EFFECT.......................................................................................34
5.05 LITIGATION...........................................................................................34
5.06 NO DEFAULT...........................................................................................34
5.07 ERISA................................................................................................34
5.08 USE OF PROCEEDS......................................................................................34
5.09 TITLE TO PROPERTIES..................................................................................34
5.10 TAXES................................................................................................35
5.11 FINANCIAL CONDITION..................................................................................35
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
5.12 ENVIRONMENTAL MATTERS................................................................................35
5.13 SUBSIDIARIES.........................................................................................36
5.14 REGULATED ENTITIES...................................................................................36
5.15 NO BURDENSOME RESTRICTIONS...........................................................................36
5.16 SOLVENCY.............................................................................................36
5.17 LABOR RELATIONS......................................................................................36
5.18 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC....................................................36
5.19 INSURANCE............................................................................................37
5.20 SWAP OBLIGATIONS.....................................................................................37
5.21 YEAR 2000 COMPLIANCE.................................................................................37
5.22 FULL DISCLOSURE......................................................................................37
SECTION 6. AFFIRMATIVE COVENANTS..............................................................................37
6.01 FINANCIAL STATEMENTS.................................................................................37
6.02 CERTIFICATES; OTHER INFORMATION......................................................................38
6.03 NOTICES..............................................................................................39
6.04 PRESERVATION OF CORPORATE EXISTENCE, ETC.............................................................40
6.05 MAINTENANCE OF PROPERTY..............................................................................41
6.06 INSURANCE............................................................................................41
6.07 PAYMENT OF OBLIGATIONS...............................................................................41
6.08 COMPLIANCE WITH LAWS.................................................................................41
6.09 INSPECTION OF PROPERTY AND BOOKS AND RECORDS.........................................................41
6.10 ENVIRONMENTAL LAWS...................................................................................41
6.11 USE OF PROCEEDS......................................................................................42
6.12 RECAPITALIZATION; CINEMARK HOLDINGS BECOMING A GUARANTOR.............................................42
6.13 YEAR 2000 COMPLIANCE.................................................................................42
6.14 FURTHER ASSURANCES...................................................................................42
SECTION 7. NEGATIVE COVENANTS.................................................................................42
7.01 LIMITATION ON LIENS..................................................................................43
7.02 DISPOSITION OF ASSETS................................................................................44
7.03 CONSOLIDATIONS AND MERGERS...........................................................................44
7.04 LIMITATION ON INVESTMENTS............................................................................44
7.05 LIMITATION ON INDEBTEDNESS...........................................................................45
7.06 TRANSACTIONS WITH AFFILIATES.........................................................................46
7.07 USE OF PROCEEDS......................................................................................46
7.08 NO ERISA PLANS.......................................................................................46
7.09 LEASE OBLIGATIONS....................................................................................46
7.10 RESTRICTED PAYMENTS..................................................................................46
7.11 LIMITATION ON MANAGEMENT FEES........................................................................47
7.12 BORROWER LEVERAGE RATIO..............................................................................47
7.13 FIXED CHARGE COVERAGE RATIO..........................................................................47
7.14 CHANGE IN BUSINESS...................................................................................47
7.15 ACCOUNTING CHANGES...................................................................................47
7.16 LIMITATIONS ON NEGATIVE PLEDGES......................................................................47
SECTION 8. EVENTS OF DEFAULT..................................................................................47
8.01 EVENT OF DEFAULT.....................................................................................47
8.02 REMEDIES.............................................................................................49
8.03 RIGHTS NOT EXCLUSIVE.................................................................................50
SECTION 9. THE ADMINISTRATIVE AGENT...........................................................................50
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
9.01 APPOINTMENT AND AUTHORIZATION........................................................................50
9.02 DELEGATION OF DUTIES.................................................................................50
9.03 LIABILITY OF ADMINISTRATIVE AGENT....................................................................50
9.04 RELIANCE BY ADMINISTRATIVE AGENT.....................................................................51
9.05 NOTICE OF DEFAULT....................................................................................51
9.06 CREDIT DECISION......................................................................................52
9.07 INDEMNIFICATION......................................................................................52
9.08 ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY..........................................................53
9.09 SUCCESSOR ADMINISTRATIVE AGENT.......................................................................53
SECTION 10. MISCELLANEOUS.....................................................................................54
10.01 AMENDMENTS AND WAIVERS. .............................................................................54
10.02 NOTICES. ............................................................................................54
10.03 NO WAIVER; CUMULATIVE REMEDIES. .....................................................................54
10.04 COSTS AND EXPENSES. .................................................................................54
10.05 GENERAL INDEMNITY. ..................................................................................55
10.06 MARSHALLING; PAYMENTS SET ASIDE. ....................................................................56
10.07 SUCCESSORS AND ASSIGNS. .............................................................................56
10.08 ASSIGNMENTS, PARTICIPATIONS, ETC. ...................................................................56
10.09 SET-OFF. ............................................................................................58
10.10 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. ....................................................58
10.11 COUNTERPARTS. .......................................................................................58
10.12 SEVERABILITY. .......................................................................................58
10.13 NO THIRD PARTIES BENEFITED. .........................................................................58
10.14 TIME. ...............................................................................................58
10.15 GOVERNING LAW AND JURISDICTION. .....................................................................58
10.16 WAIVER OF JURY TRIAL. ...............................................................................59
10.17 NOTICE OF CLAIMS; CLAIMS BAR. .......................................................................59
10.18 ENTIRE AGREEMENT. ...................................................................................60
10.19 INTERPRETATION. .....................................................................................60
10.20 TERMINATION OF CINEMARK INTERNATIONAL CREDIT AGREEMENT. .............................................60
</TABLE>
<PAGE> 5
EXHIBITS
Form of:
A Notice of Borrowing
B Notice of Conversion/Continuation
C Cinemark USA Guaranty
D Notice of Assignment and Acceptance
E Promissory Note
F Intercompany Subordination Agreement
SCHEDULES
1.01 Proforma Cash Flow for Annualized Theatres
2.01 Commitments
5.13 Subsidiaries
7.01 Existing Liens
7.05 Existing Indebtedness
10.02 Lending Offices
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of November 16, 1998 among
CINEMARK MEXICO (USA), INC., a Delaware corporation (the "Borrower"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks" and 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 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. DEFINED TERMS.
In addition to the terms defined elsewhere in this Agreement, the
following terms have the following meanings:
"Administrative Agent" means Bank of America, 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 Bank of America and any successor
Administrative Agent arising under Section 9.09, 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 $30,000,000, as such amount may be reduced from time to time
pursuant to this Agreement.
- 1 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 7
"Agreement" means this Credit Agreement, as amended, modified,
supplemented or waived from time to time in accordance with the terms hereof.
"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 made any Dispositions 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; provided, further, that if the
Cash Flow of Foreign Restricted Subsidiaries exceeds 30% of the Annualized Cash
Flow of Borrower and its Restricted Subsidiaries on a consolidated basis, such
excess over 30% shall be excluded from the determination of Annualized Cash
Flow; provided, further, that when a Subsidiary is designated as a Restricted
Subsidiary in accordance with the definition thereof, Annualized Cash Flow shall
thereafter be calculated as if such designation had been made at the beginning
of the applicable measurement 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").
"Applicable Amount" means the basis points per annum specified below
applicable to interest rates and the Commitment fee opposite the applicable
Borrower Leverage Ratio and, with respect to Offshore Rate Loans, below the
applicable Cinemark USA Senior Leverage Ratio, as set forth in the certificate
received by the Administrative Agent pursuant to Section 4.01(i) or the most
recent certificate received by the Administrative Agent pursuant to Section
6.02(a):
<TABLE>
<CAPTION>
Borrower Offshore Rate Loans Base Rate Commitment
Leverage Ratio Loans Fee
- --------------------------------------------------------------------------------------------------------
Cinemark USA Senior
Leverage Ratio:
- --------------------------------------------------------------------------------------------------------
< 1.75 2.50 < x < x>2.50
- -
1.75
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3.50 <= x < 3.75 175.00 187.50 200.00 50.00 37.50
3.00 <= x < 3.50 150.00 162.50 175.00 25.00 35.00
2.50 <= x < 3.00 125.00 137.50 150.00 0.00 32.50
2.00 <= x < 2.50 112.50 125.00 137.50 0.00 30.00
x < 2.00 100.00 112.50 125.00 0.00 27.50
</TABLE>
- 2 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 8
The Applicable Amount shall be in effect from the date the most recent
certificate delivered pursuant to Section 4.01(i) or 6.02(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 Amount 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 Amount
already in effect and (b) the Applicable Amount as set forth in such certificate
when received, retroactively applied to the Delinquent Period.
"Assignee" has the meaning specified in Section 10.08(a).
"Bank" has the meanings specified in the introductory clause hereto,
and any successors to, and permitted assigns of, any such Bank. Unless the
context otherwise clearly requires, "Bank" includes any such institution, or any
Affiliate of such institution, in its capacity as a counterparty under any Swap
Contract.
"Bank Affiliate" means a Person that is a Subsidiary of a Bank or of a
Person of which a Bank is a Subsidiary.
"Bank of America" means Bank of America National Trust and Savings
Association, a national banking association, and any successors thereto under
this Agreement.
"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 Bank of America as its "reference rate." It is a
rate set by Bank of America based upon various factors including Bank of
America'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 Bank of America 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.
"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 its Restricted
Subsidiaries on a consolidated basis (excluding Intercompany Subordinated
Indebtedness) to (b) the Annualized Cash Flow of Borrower and its Restricted
Subsidiaries on a consolidated 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.
- 3 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 9
"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").
"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 Equivalents" 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 Borrower, the remaining term to maturity or interest rate
adjustment is not more than two years;
(b) (i) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of (i) any financial institution
organized in the United States that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$100,000,000, (ii) 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 having combined capital
and surplus and undivided profits in excess of $100,000,000, or (iii) any
commercial bank organized under the laws of any other country that is a member
of the Organization for Economic Cooperation and Development ("OECD") and has
total assets in excess of $100,000,000, or (ii) deposits available for
withdrawal or distribution with any commercial bank not meeting the
qualifications specified in clause (b)(i) above but which is organized under the
laws of (a) any country that is a member of the OECD and has total assets in
excess of $100,000,000 or (b) any other country in which the Company or any
Restricted Subsidiary maintains an office or is engaged in business, provided
that, in either case (A) all such deposits are required to be made in such
accounts in the ordinary
- 4 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 10
course of business, (B) such deposits do not at any one time exceed $1,000,000
in the aggregate and (C) no funds so deposited remain on deposits in such bank
for more than 30 days;
(c) commercial paper issued by any corporation, if such commercial
paper has, at the time of Borrower's Investment therein or contractual
commitment providing for such Investment, credit ratings of at least A-1 by
Standard & Poor's Rating Group ("S&P") and P-1 by Moody's Investor Service, Inc.
("Moody's");
(d) money market mutual or similar funds having assets in excess of
$100,000,000;
(e) readily marketable debt obligations issued by any corporation, if
at the time of the Borrower's or its Restricted Subsidiaries' 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; and
(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.
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
Borrower or its Restricted Subsidiaries with the consent of the Majority Banks,
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.
"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) 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; provided, further,
that Cash Flow of any Restricted Subsidiary which is not a Wholly-Owned
Subsidiary shall be included in the calculation of Cash Flow only in an amount
equal to percentage of Borrower's ownership thereof; i.e. if such a Restricted
Subsidiary is 90% owned, only 90% of such Restricted Subsidiary's Cash Flow
shall be included.
- 5 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 11
"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 Cinemark USA failing to own at least
90% of the outstanding Capital Stock of Borrower.
"Cinemark Holdings" means Cinemark Theatres Holdings, Inc., a Delaware
corporation which may be formed as contemplated by the Recapitalization.
"Cinemark International" means Cinemark International LLC, a Texas
limited liability company.
"Cinemark International Credit Agreement" means that certain Credit
Agreement dated as of February 18, 1997, among Cinemark International, the banks
named therein, and Bank of America National Trust and Savings Association, as
administrative agent thereunder, as amended, modified, supplemented or waived
from time to time.
"Cinemark USA" means Cinemark USA, Inc. a Texas corporation.
"Cinemark USA Credit Agreement" means that certain Second Amended and
Restated Reducing Revolving Credit Agreement dated as of February 12, 1998, as
amended, modified, supplemented or waived from time to time, among Cinemark USA,
the banks named therein, Bank of America National Trust and Savings Association,
as administrative agent thereunder, NationsBank, N.A. as syndication agent, and
BankBoston, N.A., The Bank of Nova Scotia, CIBC Inc. and Fleet Bank, N.A., as
co-agents; provided, however, that that any amendment, modification, supplement
or waiver constituting a Prohibited Action shall not be deemed to amend, modify,
supplement or waive the Cinemark USA Credit Agreement for purposes of this
Credit Agreement; provided, further, that if the Cinemark USA Credit Agreement
is terminated or cancelled or otherwise ceases to be in full force and effect
for any reason, then, for purposes of this Agreement only: all references in
this Agreement to the Cinemark USA Credit Agreement shall be deemed references
to such agreement as in effect immediately before such termination, cancellation
or lack of effectiveness subject to the prior proviso and the Cinemark USA
Credit Agreement shall be deemed to remain in effect; and any step-downs
scheduled in any financial covenants set forth therein shall continue take place
as so scheduled as if the Cinemark USA Credit Agreement remain in effect.
"Cinemark USA Guaranty" means (a) a Continuing Guaranty substantially
in the form of Exhibit C and (b) from after the Recapitalization Date, a
continuing guaranty executed and delivered by Cinemark Holdings as contemplated
by Section 6.12, as each is amended, supplemented, modified, renewed and
replaced from time to time.
- 6 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 12
"Cinemark USA Senior Leverage Ratio" means the ratio of Senior
Indebtedness to Annualized Cash Flow (as such terms are defined in the Cinemark
USA Credit Agreement) as most recently calculated pursuant to the Cinemark USA
Credit Agreement and reported to the administrative agent thereunder pursuant to
Section 6.2(a) of the Cinemark USA Credit Agreement.
"Closing Date" means the date on which all conditions precedent set
forth in Section 4.01 are satisfied or waived by all Banks.
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Commitment" means, with respect to each Bank, has the meaning
specified in Section 2.01.
"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 $500,000 in the aggregate incurred in
the ordinary course of business by Restricted Subsidiaries, (B) costs and
expenses relating to shipments of furniture, fixtures and equipment to
Restricted Subsidiaries and (C) operating leases of Restricted Subsidiaries,
shall not be deemed to be Contingent Obligations.
"Contractual Obligations" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Controlled Group" means Borrower and all Persons (whether or not
incorporated) under common control or treated as a single employer with Borrower
pursuant to Section 414(b), (c), (m) or (o) of the Code.
- 7 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 13
"Conversion/Continuation Date" means any date on which Borrower elects
to convert a Base Rate Loan into an Offshore Rate Loan; continue an Offshore
Rate Loan as an Offshore Rate Loan; or convert an Offshore Rate Loan into a Base
Rate Loan.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"Disposition" means (a) the sale, lease, conveyance or other
disposition of Property, (b) the sale or transfer by Borrower or any Restricted
Subsidiary of any equity securities of any Restricted Subsidiary other than to
Borrower or a Restricted Subsidiary, and (c) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary.
"Dollars", "dollars" and "$" 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.
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 14
"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 8.01.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended from time to time, and regulations promulgated thereunder.
"Excluded Disposition" means any Disposition consisting of:
(a) a Disposition of inventory, or used, worn-out or surplus equipment,
all in the ordinary course of business;
(b) the Disposition of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) an exchange of theatre properties of similar aggregate value in the
ordinary course of business;
(d) a Disposition that is a Permitted Investment or a Restricted
Payment not prohibited by Section 7.10 (to the extent such Permitted Investment
may be deemed to constitute a Restricted Payment or a Disposition);
(e) the Disposition of all or substantially all of the assets of
Borrower (which is governed by Section 7.03); and
(f) Dispositions of Property or equity securities by a Restricted
Subsidiary to Borrower or a Wholly-Owned Restricted Subsidiary.
"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.
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 15
"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 a consolidated 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.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary (a)
that is incorporated or otherwise organized under the laws of any foreign
country or subdivision thereof, or which is not qualified to do business, or is
not otherwise doing business, in the United States of America and (b) the
capital stock of which is at least 90% beneficially owned, directly or
indirectly, by Borrower."
"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.
"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.
"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
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 16
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, 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 or its Restricted Subsidiaries owing to Cinemark USA and its Restricted
Subsidiaries.
"Intercompany Subordination Agreement" means the Intercompany
Subordination Agreement substantially in the form of Exhibit F, 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 a consolidated 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;
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 17
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/Continuation 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.
"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 (a) 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 and (b)
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of any Person and any securities
received in settlement thereof.
"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 10.02
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.
"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
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 18
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 2.04 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 Intercompany
Subordination Agreement, the Cinemark USA Guaranty, all exhibits hereto and
thereto, all documents delivered to the Administrative Agent or any Bank in
connection therewith and any Swap Contract between Borrower and any of the
Banks.
"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 51% of
the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Banks then having at least 51% of the
Commitments; provided, however, that Majority Banks must include at least two
Banks.
"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 any
Borrower Party to perform under any Loan Document and avoid any Event of
Default; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability of any Loan Document.
"Maturity Date" means the earlier to occur of: (a) June 30, 2001; 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 10.08(a).
"Notice of Borrowing" means a notice given by Borrower to the
Administrative Agent pursuant to Section 2.03, in substantially the form of
Exhibit A.
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 19
"Notice of Conversion/Continuation" means a notice given by Borrower to
the Administrative Agent pursuant to Section 2.04, 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, including without limitation, to any Bank
in its capacity as a counterparty under any Swap Contract, 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 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 Bank of America 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 Bank of America and
having a maturity comparable to such Interest Period would be
offered to major banks in the London interbank market at their
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 20
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 10.08(d).
"Permitted Investments" has the meaning specified in Section 7.04.
"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.
"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 1.01.
"Prohibited Action" means any amendment to the Cinemark USA Credit
Agreement or any waiver of any provision thereof (or any event of default that
would otherwise occur) which has not received the prior written consent of
either all Banks hereunder (listed in paragraph (a) below) or the Majority Banks
hereunder (listed in paragraph (b) below):
(a) amendments or waivers under the Cinemark USA Credit Agreement
requiring the consent of all Banks hereunder:
(a) amendments or waivers permitting the total principal
amount of credit extended thereunder to exceed $350,000,000;
(b) amendments or waivers modifying the calculation of the
Cinemark USA Senior Leverage Ratio or the definition of any of the
terms affecting such calculation as in effect on the Closing Date; or
(c) amendments or waivers changing the stated date of the
termination of the "Aggregate Commitment" under and as defined in the
Cinemark USA Credit Agreement to a date earlier than the Maturity Date;
or
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 21
(b) amendments or waivers under the Cinemark USA Credit Agreement
requiring the consent of the Majority Banks hereunder:
(x) amendments or waivers permitting the incurrence of
Indebtedness by Cinemark USA which is prohibited by Section 7.5 of the
Cinemark USA Credit Agreement as in effect on the Closing Date;
provided, however, that for purposes of this Agreement any amendments
to the Cinemark USA Credit Agreement that delays or resets the
step-downs in the maximum permitted Total Indebtedness to Annualized
Cash Flow Ratio set forth in Section 7.12 of the Cinemark USA Credit
Agreement shall be deemed consented to by the Majority Banks hereunder
so long as such delay or reset does not increase the maximum permitted
ratio above 6.00 to 1; or
(y) amendments or waivers modifying Section 7.11 of the
Cinemark USA Credit Agreement (prohibiting prepayment of certain senior
subordinated notes), as in effect at the Closing Date;
provided, however, that if a Bank hereunder has consented to any of the
foregoing actions in its capacity as a bank under the Cinemark USA Credit
Agreement, it shall be deemed to have consented to such action in its capacity
as a Bank hereunder for purposes of this Agreement.
"Property" or "Properties" means any estate or interest in any kind of
property or asset, whether real, personal or mixed, and whether tangible or
intangible.
"Pro Rata Share" means, as to any Bank at any time of determination,
the percentage equivalent of such Bank's Commitment divided by the Aggregate
Commitment.
"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; provided further, that if the Borrower or any Restricted
Subsidiary of the
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 22
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.
"Recapitalization" means the incorporation of Cinemark Holdings and
causing Cinemark Holdings to own 100% of the Capital Stock of Cinemark USA on
the terms and conditions of the material documents executed and to be executed
in connection with the Recapitalization.
"Recapitalization Date" means the date on which the Recapitalization
shall have been fully consummated in accordance with the terms and conditions of
the Recapitalization Agreements.
"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 Payment" means (a) the declaration or making of 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, (b) the purchase, redemption or
other acquisition for value of any shares of the Capital Stock of Borrower or
any Subsidiary (other than Wholly-Owned Subsidiaries of Borrower that are
Restricted Subsidiaries) or any warrants, rights or options to acquire such
shares, now or hereafter outstanding, (c) any Investment other than a Permitted
Investment, and (d) 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 Borrower or
any of its Subsidiaries not otherwise permitted by this Agreement or any Loan
Document to be so paid.
"Restricted Subsidiary" means the Subsidiaries of Borrower listed on
Schedule 5.13 hereto, 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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Cinemark Mexico (USA) Credit Agreement
<PAGE> 23
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, or (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 (a "50% Entity"). Borrower shall evidence any designation
pursuant to clause (c) of the immediately preceding sentence to the
Administrative 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.
"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-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.)
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 24
"Taxes" has the meaning specified in Section 3.01(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.
"Wholly-Owned Subsidiary" of any Person means any Subsidiary of such
Person the entire voting share capital of which, other than directors'
qualifying shares if required by applicable law, is owned by such Person (either
directly or indirectly through Wholly-Owned Subsidiaries).
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.
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<PAGE> 25
(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.
(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
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 2.01 under the heading "Commitment" (such amount as the same may be
reduced pursuant to Section 2.06 or as a result of one or more assignments
pursuant to Section 10.08, such Bank's "Commitment"); provided, 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 2.01, prepay pursuant to Section 2.07 and
reborrow pursuant to this Section 2.01.
2. LOAN ACCOUNTS AND NOTES.
(a) Subject to Section 2.02(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,
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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; provided, 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.
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. (California 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. (California 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 repaid 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.
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12332-16503, Reference: Cinemark Mexico (USA), Inc., no later than 11:00 a.m.
(California time) on the Borrowing Date. Upon satisfaction of the conditions set
forth in Section 4.02, 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 4.02 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.
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. (California time) (i)
three Business Days in advance of the Conversion/Continuation Date, if the Loans
are to be converted into or continued as Offshore Rate Loans; and (ii) one
Business Day prior to the Conversion/Continuation Date, if the Loans are to be
converted into Base Rate Loans, in each case specifying: (A) the proposed
Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted
or continued; (C) the nature of the proposed conversion or continuation; and (D)
if applicable, 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
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<PAGE> 28
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.
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.
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 2.06, 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.
7. OPTIONAL PREPAYMENTS. Subject to Section 3.04, 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, $250,000 or any multiple thereof in
excess thereof, and (ii) with respect to Base Rate Loans, $200,000 or any
integral multiple of $200,000 in excess thereof. Such notice of prepayment shall
specify the date and amount
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<PAGE> 29
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 3.04.
8. MATURITY DATE. All principal and accrued and unpaid interest on all
Loans shall be due on the Maturity Date.
9. INTEREST.
(a) Subject to Section 2.09(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 Amount.
(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 Section 2.07 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 2.09(d), during the continuation of any Event of
Default or after acceleration pursuant to Section 8.02, 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
Amount then in effect for such Loans and, in the case of Obligations not subject
to an Applicable Amount, at a rate per annum equal to the Base Rate plus the
Applicable Amount 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 Amount 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
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<PAGE> 30
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 2.09(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 loan transaction and this Agreement, and, to the extent controlling, laws
of the United States of America. It is intended that, in the event that,
notwithstanding the parties' express choice of New York law to be applicable to
this Agreement, if the laws of the State of Texas are included in determining
applicable law, Chapters 302 and 303 of the Texas Finance Code shall be included
in any such determination, and that, for the purpose of applying Chapters 302
and 303 of the Texas Finance Code to this Agreement, the highest lawful rate
shall be the "weekly ceiling" (as defined in Section 303.2 of the Texas Finance
Code). Any Bank may, from time to time, as to current and future balances,
implement any other ceiling under Chapter 303 of the Texas Finance Code by
notice to Borrower, if and to the extent, permitted by Chapter 303 of the Texas
Finance Code. Borrower expressly agrees that, pursuant to Section 346.004 of the
Texas Finance Code, Chapter 346 of the Texas Finance Code shall not apply to
this Agreement or to any Loan and neither this Agreement nor any Loan shall be
governed by or subject to the provision of Chapter 346 of the Texas Finance Code
in any manner whatsoever.
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<PAGE> 31
10. FEES.
(a) Arrangement Fee. Borrower shall pay to Bank of America and BankBoston,
N.A. an arrangement fee in an amount and at the time set forth in a letter
agreement among Borrower and such Banks.
(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 actual daily utilization
for that quarter as calculated by the Administrative Agent, at a rate per annum
specified for "Commitment Fee" in the definition of Applicable Amount 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, 1998, with the final payment to be made on the Maturity
Date; provided that, in connection with the termination or reduction of the
Aggregate Commitment pursuant to Section 2.06, the accrued commitment fee
calculated for the period ending on such date shall also be paid on the date of
the termination or reduction on the amount by which the Aggregate Commitment is
reduced. The commitment fees provided in this Section shall accrue at all times
after the above-mentioned commencement date, including at any time during which
one or more conditions in Section 4.02 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.
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 Bank of America'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 Amount or
Eurodollar Reserve Percentage shall become effective as of the opening of
business on the day on which such change in the Applicable Amount or Eurodollar
Reserve Percentage becomes effective. The Administrative Agent
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<PAGE> 32
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.
(c) Any change in the interest rate on a Loan resulting from a change in
the Applicable Amount or Eurodollar Reserve Percentage shall become effective as
of the opening of business on the day on which such change in the Applicable
Amount 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.
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. 12332-16503
Reference: Cinemark Mexico (USA), Inc.
not later than 11:00 A.M. (California 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
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<PAGE> 33
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.
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. (California time) (i) one Business Day prior to the date of any
proposed Borrowing of Offshore 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.
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
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<PAGE> 34
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 10.09) 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 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.
15. CINEMARK USA GUARANTY.
All Obligations shall be guarantied in accordance with the Cinemark USA
Guaranty.
SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY
1. TAXES.
(a) Subject to Section 3.01(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 3.01(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 3.01) paid by such Bank or the Administrative Agent
and any liability (including
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 35
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 3.01(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 3.01) 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 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 10.08 after the Closing Date, the
date upon which the Bank becomes a party hereto) deliver to the Administrative
Agent and 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 the Administrative Agent and 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 the Administrative Agent and Borrower through
the Administrative Agent two accurate and complete original signed
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 36
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 3.01(d) to any Bank for
the account of any Lending Office of such Bank or to indemnify any Bank pursuant
to Section 3.01(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 3.01(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 3.01(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 have delivered to Borrower a Form 1001 in respect of such Lending
Office pursuant to Section 3.01(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 3.01(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 3.01(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.
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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 3.04.
(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.
(d) Before giving any notice to the Administrative Agent pursuant to this
Section 3.02, 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. 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
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 38
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.
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 2.07; 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 3.04, each Offshore Rate
Loan 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.
5. INABILITY TO DETERMINE RATES.
If the Administrative Agent 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
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 39
in writing. Upon receipt of such notice, Borrower may revoke any Notice of
Borrowing or a 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.
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
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 in sufficient copies for each
Bank:
(a) Credit Agreement and Notes. This Agreement duly executed and delivered
by Borrower, the Administrative Agent and each of the Banks and, if requested by
any Bank pursuant to Section 2.02(b), the Note(s) for such Bank executed by
Borrower.
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the Board of
Directors or the executive committee of Borrower and Cinemark
USA approving and authorizing the execution, delivery and
performance by Borrower and Cinemark USA, 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 USA, respectively; and
(ii) certificate of the Secretary or Assistant
Secretary of Borrower and Cinemark USA, certifying the names
and true signatures of the officers of Borrower and Cinemark
USA, 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:
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<PAGE> 40
(i) The articles or certificate of incorporation of
Borrower 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 as of the Closing Date and the bylaws of
Borrower as in effect on the Closing Date, certified by the
Secretary or Assistant Secretary of Borrower as of the Closing
Date; and
(ii) A good standing certificate for Borrower 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) Cinemark USA Guaranty.
The Cinemark USA Guaranty, duly executed and delivered by Cinemark USA.
(e) Intercompany Subordination Agreement.
The Intercompany Subordination Agreement, duly executed and delivered
by the parties thereto.
(f) Legal Opinions.
An opinion of the general counsel of Borrower addressed to the
Administrative Agent and the Banks.
(g) 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 Bank of America'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.
(h) Payoff of Cinemark International Credit Agreement.
Evidence that all amounts owing under the Cinemark International Credit
Agreement are concurrently being paid in full.
(i) 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, 1997, no event or circumstance that could reasonably be
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 41
expected to result in a Material Adverse Effect; (ii) showing in detail the
calculations supporting such statement in respect of Sections 7.12 and 7.13 as
of September 30, 1998 and (iii) setting forth the Cinemark USA Senior Leverage
Ratio as of September 30, 1998 and the detailed calculations supporting such
ratios.
(j) Other Documents.
Such other approvals, opinions or documents as the Administrative Agent
or any Bank may request.
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) Notice of Borrowing. The Administrative Agent shall have received a
Notice of Borrowing;
(b) 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
(c) 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 4.02 are satisfied.
SECTION 5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to the Administrative Agent and each
Bank that:
1. CORPORATE EXISTENCE AND POWER.
Borrower and each of its Restricted Subsidiaries: (a) is a corporation
(with respect to Borrower) 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
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<PAGE> 42
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.
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.
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
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.
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. 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 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.
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<PAGE> 43
6. NO DEFAULT.
No Default or Event of Default exists or would result from the
incurring of any Obligations by any Borrower Party. 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.
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.
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 7.07.
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 7.01.
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.
11. FINANCIAL CONDITION.
(a) The consolidated financial statements of financial condition of
Borrower and its Restricted Subsidiaries dated December 31, 1997 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 Restricted Subsidiaries as of the date thereof and
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 44
results of operations for the period covered thereby; and (iii) show all
material indebtedness and other liabilities, direct or contingent of Borrower
and its consolidated Restricted 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, 1997, there has been no event which could
reasonably be expected to have a Material Adverse Effect.
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.
13. SUBSIDIARIES.
Schedule 5.13 lists all Subsidiaries of Borrower as of the Closing Date
and correctly sets forth, with respect to each Subsidiary, its name, its legal
form, the number of its outstanding shares or other ownership interests and the
holders thereof, the jurisdiction of
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<PAGE> 45
its organization or formation, and whether or not such Subsidiary is a
Restricted Subsidiary or an Unrestricted Subsidiary.
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.
15. NO BURDENSOME RESTRICTIONS.
Neither Borrower nor any of its Restricted Subsidiaries is a party to
or bound by any Contractual Obligation, or subject to any charter or corporate
restriction, or any Requirement of Law, which could reasonably be expected to
have a Material Adverse Effect.
16. SOLVENCY. Borrower is Solvent.
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.
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.
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<PAGE> 46
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.
20. SWAP OBLIGATIONS.
Neither Borrower nor any of its Restricted Subsidiaries has incurred
any outstanding obligations under any Swap Contracts.
21. YEAR 2000 COMPLIANCE.
Borrower has (a) initiated a review and assessment of all areas within
its and each of its Restricted Subsidiaries' business and operations (including
those affected by suppliers and vendors) that could be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by
Borrower or any of its Restricted Subsidiaries (or its suppliers and vendors)
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999), (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a timely
basis, and (iii) to date, implemented that plan in accordance with that
timetable. Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its Restricted Subsidiaries' business and operations will on a timely basis
be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 compliant), except to the extent
that a failure to do so could not reasonably be expected to have a Material
Adverse Effect.
22. 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:
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:
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(a) Cinemark USA and Borrower Year-End Financials.
As soon as available, but not later than 90 days after the end of each
Fiscal Year:
1 a copy of the audited consolidated balance sheet of Cinemark USA and
its consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated 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 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 the
Cinemark USA's or any consolidated Subsidiary's records; and
(ii) a copy of the unaudited balance sheet of Borrower and its
consolidated Restricted Subsidiaries as of the end of such
Fiscal Year and the related consolidated 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, the financial position
and the results of operations of Borrower and its consolidated
Restricted Subsidiaries as of such date.
(a) Cinemark USA and Borrower Quarterly Financials. As soon as available,
but not later than 45 days after the end of each of the first three Fiscal
Quarters of each year:
1 a copy of the unaudited consolidated balance sheet of Cinemark USA
and its Subsidiaries as of the end of such Fiscal Quarter and the related
consolidated statements of income, shareholders' equity and cash flows for the
period commencing on the first day and ending on the last day of such quarter,
setting forth in each case in comparative form the figures for the previous
Fiscal Quarter of the previous Fiscal Year 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 USA and its Subsidiaries; and
(ii) a copy of the unaudited consolidated balance sheet of
Borrower and its Restricted Subsidiaries as of the end of such
Fiscal Quarter and the related consolidated 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 setting forth in each case in comparative
form the figures for the previous Fiscal Quarter of the
previous Fiscal Year, and certified by an appropriate
Responsible Officer as fairly presenting, in accordance with
GAAP (subject to normal year end adjustments), the
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 48
financial position and the results of operations of Borrower
and its Restricted Subsidiaries.
1. 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 6.01(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, (ii)showing in detail the calculations supporting such
statement in respect of Sections 7.12 and 7.13 as of the date of such financial
statements; and (ii) setting forth the Cinemark USA Senior Leverage Ratio as of
the date of such financial statements and the detailed calculations supporting
such ratios;
(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.
2. 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 Cinemark USA or Borrower or any of its Restricted
Subsidiaries of which Borrower has knowledge 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
Cinemark USA or 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
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 49
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 Cinemark USA or 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;
(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 6.01(a);
(f) of any material change in accounting policies or financial reporting
practices by Cinemark USA or 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 Cinemark USA or 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 the affected Person
proposes to take with respect thereto and at what time. Each notice under
Section 6.03(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been breached or
violated.
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<PAGE> 50
3. 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 Restricted 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.
4. 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.
5. 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 adequate in
character and amount; including workers' compensation insurance, public
liability and property and casualty insurance.
6. 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.
7. 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
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<PAGE> 51
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.
8. 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.
9. 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
6.03(d), that could, individually or in the aggregate, result in liability in
excess of $2,500,000.
10. USE OF PROCEEDS.
Borrower shall use the proceeds of the Loans (a) to make a dividend to
Cinemark International and/or Cinemark USA in order for Cinemark International
or Cinemark USA to pay off amounts owing under the Cinemark International Credit
Agreement, (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.
11. RECAPITALIZATION; CINEMARK HOLDINGS BECOMING A GUARANTOR.
If and when Cinemark USA effects the Recapitalization, Borrower shall
cause Cinemark Holdings to become an additional guarantor of the obligations
hereunder by executing and delivering a counterpart or supplement to the
Cinemark USA Guaranty in
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<PAGE> 52
form and substance satisfactory to the Administrative Agent and the Majority
Banks, together with items of the type set forth in Sections 4.01(b), 4.01(c),
4.01(f) and 4.01(j) with respect to Cinemark Holdings and the Recapitalization,
each dated the Recapitalization Date. In addition, all conditions precedent set
forth in the Cinemark USA Credit Agreement shall be satisfied. Thereafter, all
references to Guarantor and the Cinemark USA Guaranty shall be deemed to mean
and included Cinemark Holdings and the guaranty it has executed and delivered.
12. YEAR 2000 COMPLIANCE.
Borrower will promptly notify the Administrative Agent in the event
Borrower discovers or determines that any computer application (including those
of its suppliers and vendors) that is material to its or any of its Restricted
Subsidiaries' business and operations will not be Year 2000 compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a Material Adverse Effect.
13. 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 1. 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:
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 existing on the property of the Borrower or its Restricted
Subsidiaries on the Closing Date and set forth on Schedule 7.01;
(b) any Lien created under any Loan Document;
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 53
(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 6.07;
(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;
(f) Liens 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) Liens on stock of Borrower's Restricted Subsidiaries from time to time
required under the Cinemark USA Credit Agreement; and
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 54
(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).
2. DISPOSITION OF ASSETS.
Neither Borrower nor any Restricted Subsidiary shall make any
Dispositions except for Excluded Dispositions; provided, however, that no
Disposition shall be for less than the fair market value of the Property or
equity securities being disposed of by Borrower or such Restricted Subsidiary.
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 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 with (i) Cinemark USA
or Borrower provided that Cinemark USA or Borrower, as the case may be, shall be
the continuing or surviving corporation, (ii) with any one or more Restricted
Subsidiaries of Cinemark USA or Borrower, and (iii) with any joint ventures,
partnerships and other Persons so long as such joint ventures, partnerships and
other Persons will, as a result of making such Investment and all other
contemporaneous related transactions, become a Restricted Subsidiary of Cinemark
USA or Borrower; provided that when any Wholly-Owned Restricted Subsidiary is
merging into another Restricted Subsidiary, the Wholly-Owned Restricted
Subsidiary shall be the continuing or surviving Person; and
(b) any Restricted Subsidiary of Borrower may sell all or substantially
all of its assets (upon voluntary liquidation or otherwise), to Cinemark USA,
Borrower or any of their Restricted Subsidiaries; provided that when any
Wholly-Owned Restricted Subsidiary is selling all or substantially all of its
assets to another Restricted Subsidiary, the Restricted Subsidiary acquiring
such assets shall be a Wholly-Owned Restricted Subsidiary.
4. LIMITATION ON INVESTMENTS.
Borrower shall not, and shall not suffer or permit any of its
Restricted Subsidiaries to, purchase, make or acquire any Investment in any
Person, except for the following ("Permitted Investments"):
(a) Investments in Cash Equivalents;
(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 55
(c) extensions of credit by Borrower to any of its Restricted Subsidiaries
or by any of its Restricted Subsidiaries to other Restricted Subsidiaries of
Borrower;
(d) Investments made solely with assets, the payment or application of
which is not restricted by Section 7.10;
(e) Investments by Restricted Subsidiaries in Borrower;
(f) Investments in the form of consideration for Property or equity
securities sold or otherwise disposed of in accordance with Section 7.02;
(g) bank accounts maintained in any commercial bank;
(h) 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 Borrower or its Restricted Subsidiaries in the ordinary
course of business;
(i) 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;
(j) Investments permitted as Restricted Payments under Section 7.10;
(k) Investments in (i) Restricted Subsidiaries or (ii) joint ventures,
partnerships and other Persons so long as such joint ventures, partnerships and
other Persons will, as a result of making such Investment and all other
contemporaneous related transactions, become a Restricted Subsidiary ; and
(l) Other Investments not exceeding $5,000,000 in the aggregate since the
Closing Date.
5. 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 existing on the Closing Date and set forth in Schedule
7.05,
(b) Indebtedness incurred pursuant to this Agreement;
(c) endorsements for collection or deposit in the ordinary course of
business as presently conducted;
(d) Intercompany Subordinated Indebtedness; and
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Cinemark Mexico (USA) Credit Agreement
<PAGE> 56
(e) Contingent Obligations relating to Borrower and/or its Restricted
Subsidiaries under one or more guaranties of Cinemark USA's obligations under
the Cinemark USA Credit Agreement.
6. 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 7.10 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. 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.
8. 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 under any Plan. Neither Borrower nor any of its ERISA Affiliates
shall become a member of any Controlled Group.
9. 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;
(c) leases constituting Excluded Dispositions; and
(d) guaranties of Operating Leases of any Restricted Subsidiary.
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10. RESTRICTED PAYMENTS.
Borrower shall not, and shall not suffer or permit any of its
Restricted Subsidiaries to, make any Restricted Payment, except:
(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 to (i)
Borrower, (ii) another Subsidiary of Borrower that is a Restricted Subsidiary,
or (iii) Cinemark USA;
(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; and
(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; provided that immediately prior to and
after giving effect to such repayment, no Default or Event of Default exists or
would result therefrom.
11. 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 Borrower may pay and accrue management fees to Cinemark USA in
an aggregate amount not exceeding 5% of Borrower's and its Restricted
Subsidiaries' 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.
12. BORROWER LEVERAGE RATIO.
Borrower shall not permit the Borrower Leverage Ratio to exceed the
3.75 to 1 at any time.
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.
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.
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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.
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 2. EVENTS OF DEFAULT
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 any Borrower Party made or deemed
made herein, in any Loan Document, or which is contained in any certificate,
document or financial or other statement by any Borrower Party or its
Responsible Officers, furnished at 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 7.02, 7.03, 7.10, 7.11, 7.12, 7.13 or 7.16; or
(d) Other Defaults.
(i) Borrower fails to perform or observe any other term or covenant
contained in Section 6.01, 6.02, 6.03, 6.09 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 (ii) any Borrower Party 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 (A) the date
upon which a Responsible Officer of Borrower knew or should have known of such
failure or (B) the date upon which written notice thereof is given to Borrower
by the Administrative Agent or any Bank; or
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(e) Cross-Defaults.
(i) Any Borrower Party or any of their respective 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.
Any Borrower Party or any of their respective 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 any
Borrower Party or by any of their respective Restricted Subsidiaries, or any
writ, 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
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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 any Borrower Party or any of their respective
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
any Borrower Party or any of their respective 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) 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
Administrative Agent or 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
(k) Adverse Change.
There shall occur a Material Adverse Effect; or
(l) Change in Control.
There shall occur a Change in Control Event.
(m) Event of Default Under Cinemark USA Credit Agreement.
An Event of Default shall occur and be continuing under the Cinemark
USA Credit Agreement.
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
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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 8.01 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.
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.
SECTION 3. THE ADMINISTRATIVE AGENT
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.
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
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Administrative Agent shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects with reasonable care.
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 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.
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 (or all the Banks if required by Section 10.01)
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 4.01 and 4.02, 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
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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.
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.
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
any Borrower Party or their respective 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 the Borrower
Parties and their respective 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 the Borrower Parties and their
respective Subsidiaries. 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
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business, prospects, operations, property, financial and other condition or
creditworthiness of any Borrower Party or their respective Subsidiaries which
may come into the possession of any of the Agent-Related Persons.
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 in 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
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.
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8. ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY.
Bank of America 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 any Borrower Party or their respective Subsidiaries and Affiliates
as though Bank of America were not the Administrative Agent hereunder and
without notice to or consent of the Banks. With respect to its Loans, Bank of
America 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 Bank of America in its individual
capacity.
9. SUCCESSOR ADMINISTRATIVE AGENT.
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 10.04 and 10.05 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.
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SECTION 4. MISCELLANEOUS
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; provided, 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 8.02(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 (including amending any financial covenant or component
thereof to the extent used in determining interest, any fee or other amount);
(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 10.01 or Section 2.15; (f) consent to any Prohibited Action or (g)
discharge any Borrower Party; 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.
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 10.02 hereto; if to any
Bank, to its Domestic Lending Office specified on Schedule 10.02 hereto; and if
to the Administrative Agent, to its address specified on Schedule 10.02 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.
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
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privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
4. COSTS AND EXPENSES.
Borrower shall, whether or not the transactions contemplated hereby
shall be consummated:
(a) reimburse Bank of America (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
Bank of America (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.
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 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
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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 10.05 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 10.05
shall be paid within 30 days after demand.
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.
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 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.
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
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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 $5,000,000 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 $3,500.
(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.
(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")
- 64 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 70
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 10.01. In the case of any
such participation, the Participant shall be entitled to the benefit of Sections
3.01, 3.03 and 10.05 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.
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 10.09 are in addition to
the other rights and remedies (including other rights of set-off) which the Bank
may have.
- 65 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 71
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 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.
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.
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.
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.
14. TIME.
Time is of the essence as to each term or provision of this Agreement
and each of the other Loan Documents.
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
- 66 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 72
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. 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.
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.
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 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
- 67 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 73
OF ACTION IN ANY SUIT, ACTION OR PROCEEDING IN ANY COURT OR BEFORE ANY
GOVERNMENTAL AGENCY.
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 subject to any letter referred to
in Section 2.10.
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.
20. TERMINATION OF CINEMARK INTERNATIONAL CREDIT AGREEMENT.
Upon payment in full of all amounts owing under the Cinemark
International Credit Agreement, such agreement shall be deemed cancelled and
terminated with no further liability on the party of any party thereunder.
- 68 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 74
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 MEXICO (USA), INC.
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By:
David Price
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By:
Name:
Title:
BANKBOSTON, N.A.
By:
Name:
Title:
CINEMARK INTERNATIONAL, INC. (for
purposes of Section 10.20 only)
By:
Name:
Title:
- 69 -
Cinemark Mexico (USA) Credit Agreement
<PAGE> 75
SCHEDULE 1.01
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> <C> <C>
Proforma Cash Flow for each Actual Full Quarter Cash Flow
Annualized Theatre = 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:
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>
- 1 -
<PAGE> 76
SCHEDULE 2.01
COMMITMENTS AND PRO RATA SHARES
<TABLE>
<CAPTION>
BANK COMMITMENT PRO RATA SHARE
- ------------------------------------------ ------------------------- --------------------------------
<S> <C> <C>
66.66666666%
Bank of America National Trust $20,000,000
and Savings Association
BankBoston, N.A. $10,000,000 33.33333334%
TOTAL $30,000,000 100.00000000%
</TABLE>
- 1 -
<PAGE> 77
SCHEDULE 5.13
SUBSIDIARIES
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
Name Legal Formation Shares Outstanding Status
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cinemark Corporation Texas corporation Cinemark USA, Inc. - 2,000 Restricted
- -------------------------------------------------------------------------------------------------------------------------
Sunnymead Cinema Corp. California corporation Cinemark USA, Inc. - 100 Restricted
- -------------------------------------------------------------------------------------------------------------------------
Cinemark Properties, Inc. Texas corporation Cinemark USA, Inc. - 100,000 Material restricted
- -------------------------------------------------------------------------------------------------------------------------
Cinemark Transportation, Inc. Texas corporation Cinemark USA, Inc. - 100,000 Restricted
- -------------------------------------------------------------------------------------------------------------------------
Trans Texas Cinema, Inc. Texas corporation Cinemark USA, Inc. - 100,000 Restricted
- -------------------------------------------------------------------------------------------------------------------------
Missouri City Central 6, Inc. Texas corporation Cinemark Corporation - 100 Restricted
- -------------------------------------------------------------------------------------------------------------------------
Cinemark International, L.L.C. Texas limited 100% of Membership Units Unrestricted
liability company
- -------------------------------------------------------------------------------------------------------------------------
ENT Holdings, Inc. Texas corporation Cinemark USA, Inc. - 100 Restricted
- -------------------------------------------------------------------------------------------------------------------------
Funtime Entertainment, Inc. Texas corporation ENT Holdings, Inc. - 8,000 Class A
ENT Holdings, Inc. - 2,000 Class B Restricted
- -------------------------------------------------------------------------------------------------------------------------
Funtime Pizza Three Corporation Texas corporation Funtime Entertainment, Inc. - 20,000 Restricted
- -------------------------------------------------------------------------------------------------------------------------
Funtime Pizza Four Corporation Texas corporation Funtime Entertainment, Inc. - 1,000 Restricted
- -------------------------------------------------------------------------------------------------------------------------
Cinemark Mexico (USA), Inc. Delaware corporation Cinemark USA, Inc. - 3,926,118
New Wave Corporation - 182,346 Restricted
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 78
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cinemark de Mexico, S.A. de C.V. Mexican corporation Cinemark Mexico (USA) - 49,999 Restricted
Class I Series B; 406,572,480
Class II Series B
Lee Roy Mitchell - 1 Class I Series B
- -----------------------------------------------------------------------------------------------------------------------
Inversiones Cinemark, S.A. Chilean corporation Cinemark USA, Inc. - 399,300 Restricted
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Leasing Company fka Texas corporation Cinemark USA, Inc. - 100 Restricted
Tinseltown Equities, Inc.
- -----------------------------------------------------------------------------------------------------------------------
Entertainment Amusement Texas corporation Cinemark USA, Inc. - 50,000 No designation
Enterprises, Inc. Philip R. Wood - 50,000
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Partners I, Inc. Texas corporation Cinemark USA - 100 Restricted
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Holdings Canada, Inc. Canadian corporation Canada Theatre Holdings, Inc. -1 Unrestricted
- -----------------------------------------------------------------------------------------------------------------------
Canada Theatre Holdings, Inc. Delaware corporation Cinemark International - ___ shares Unrestricted
- -----------------------------------------------------------------------------------------------------------------------
Laredo Theatre, Ltd. Texas limited Cinemark USA, Inc. - 75% Restricted
partnership Lone Star - 25%
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Brasil S.A. Brazilian corporation Cinemark Empreendimentos - 260,000 Unrestricted
NN Participacoes Ltda - 70,204
Venture II Equity Holdings Corp -
105,307
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Empreendimentos e. Brazilian corporation Cinemark International - 179,998 Unrestricted
Participacoes LTDA Lee Roy Mitchell - 2
- -----------------------------------------------------------------------------------------------------------------------
Servicios Cinemark, S.A. de C.V. Mexican corporation Cinemark USA, Inc. - 49,999 Restricted
Lee Roy Mitchell - 1
- -----------------------------------------------------------------------------------------------------------------------
Cinemark del Norte, S.A. de C.V. Mexican corporation Cinemark Mexico (USA) - 49,999 Restricted
Lee Roy Mitchell - 1
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 79
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cinemark Theatres Canada, Inc. Canadian corporation 1,000 - Cinemark USA, Inc. Restricted
- -----------------------------------------------------------------------------------------------------------------------
Cinemark del Ecuador S.A. Ecuadorian corporation Cinemark International, Inc. - 3,000 Unrestricted
Wright Soto & Associados Cia. Ltda -
180
Sidney Wright Duran Ballen - 500
Esteban Wright Vela - 100
Allan Wright Vela - 40
Cynthia Wright Vela - 40
Ricardo Wright Bilbao - 60
Lola Vela Valdivieso - 500
Walter Wright Duran Ballen - 90
Miguel Barra Castells - 90
Abelardo Pachano Bertero - 120
Andy Wright Ferri - 40
Ricardo Wright Castro - 70
Freddy Wright Castro - 70
Cayetano Jobes - 40
Fernando Vivero Logo - 60
- -----------------------------------------------------------------------------------------------------------------------
Cinemark del Peru S.A. Peruvian corporation Cinemark International - 1,000 Class A Restricted
Conate II S.A. - 1,000 Class B
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Rio de la Plata Argentinian company Cinemark Corp. - 99.9% Restricted
Associates S.R.L. Sunnymead Cinema Corp. - .1%
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Theatre Services, Inc Texas corporation Cinemark USA, Inc. - 1,000 Restricted
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Costa Rica, S.A. Costa Rican corporation Cinemark Equity Holdings Unrestricted
Corporation - 100%
- -----------------------------------------------------------------------------------------------------------------------
Cinemark El. Salvador, S.A. El Salvadorian Cinemark Equity Holdings Unrestricted
de C.V. corporation Corporation - 100%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 80
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cinemark Equity Holdings British Virgin Islands Cinemark International, Inc. - 50.1% Unrestricted
Corporation corporation Cines de Centroamerica - 49.9%
- -----------------------------------------------------------------------------------------------------------------------
Multiplex Properties, Inc. Delaware corporation Cinemark USA, Inc. - 100% Restricted
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Investments Corporation Delaware corporation Cinemark USA, Inc. - 100% Unrestricted
- -----------------------------------------------------------------------------------------------------------------------
Inmobilaria Cinemark S.A. de C.V. Mexican corporation Cinemark de Mexico S.A. de C.V. - Restricted
99.9%
Cinemark International - .1%
- -----------------------------------------------------------------------------------------------------------------------
Cinemark Chile S.A. Chilean corporation Inversiones Cinemark - 50% Restricted
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 81
SCHEDULE 7.01
EXISTING LIENS
-1-
<PAGE> 82
SCHEDULE 7.05
EXISTING INDEBTEDNESS
-1-
<PAGE> 83
SCHEDULE 10.02
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
BORROWER
CINEMARK MEXICO (USA), INC.
7502 Greenville Avenue, Suite 800
Dallas, Texas 75231-3830
Attention: Jeffrey Stedman
Chief Financial Officer
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
Other Notices:
Bank of America National Trust
and Savings Association
Agency Management #10831
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: David Price
Vice President
Telephone: (415) 436-3496
Facsimile: (415) 436-3425
- 1 -
<PAGE> 84
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 Requests for Extensions of Credit):
Bank of America National Trust
and Savings Association
555 Flower Street, 10th Floor
Los Angeles, California 90071
Attention: Jeff Bailard
Associate
Media and Entertainment #3283
Telephone: (213) 228-2891
Facsimile: (213) 228-2641
BANKBOSTON, N.A.
Domestic and Offshore Lending Office:
BankBoston, N.A.
Media & Communications
100 Federal Street MS 01-08-04
Boston, MA 02110
Attention: Matthew E. Murphy
Vice President
Telephone: (617) 434-7956
Facsimile: (617) 434-3401
- 2 -
<PAGE> 85
EXHIBIT A
FORM OF NOTICE OF BORROWING
TO: Bank of America National Trust and Savings
Association, as Administrative Agent
Pursuant to Section 2.03 of that certain Credit Agreement dated as of
November 16, 1998 (as from time to time amended, extended, restated, modified or
supplemented, the "Credit Agreement") among Cinemark Mexico (USA), Inc., (the
"Borrower"), the Banks party thereto and Bank of America National Trust and
Savings Association, as Administrative Agent (in such capacity, the
"Administrative Agent") for said Banks, 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 Borrower's account
at the Administrative Agent. capitalized terms used herein shall have the
meanings assigned to them in the Credit Agreement
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 MEXICO (USA), INC.
By
--------------------------------
Name
------------------------------
Title
------------------------------
A-1
Cinemark Mexico (USA) Of Borrowing
<PAGE> 86
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 2.04 of that certain
Credit Agreement dated as of November 16, 1998 (as from time to time amended,
extended, restated, modified or supplemented, the "Credit Agreement") among
Cinemark Mexico (USA), Inc., (the "Borrower"), the Banks party thereto and Bank
of America National Trust and Savings Association, as Administrative Agent (in
such capacity, the "Administrative Agent") for said Banks, this represents the
Borrower's request to convert $________________of existing [Base Rate] [Offshore
Rate] Loans on _______________, ______, to [Offshore Rate] [Base Rate] Loans, as
follows:
INTEREST PERIOD
DOLLAR AMOUNT (OFFSHORE RATE LOANS)
------------- ---------------------
$ months
----------------- -----------
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 __________, _________,
as follows:
INTEREST PERIOD
DOLLAR AMOUNT (OFFSHORE RATE LOANS)
------------- ---------------------
$ months
----------------- -----------
CINEMARK MEXICO (USA), INC.
By
------------------------------
Name
---------------------------
Title
- 1 -
Cinemark Mexico (USA) Notice of Conversion/Continuation
<PAGE> 87
EXHIBIT B
CINEMARK USA GUARANTY
(GUARANTY OF CINEMARK MEXICO (USA))
TO: Bank of America National Trust and Savings
Association, as Administrative Agent (the "Administrative Agent")
PRELIMINARY STATEMENTS:
A. Reference is made to that certain Credit Agreement dated as of
November 16, 1998 (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 Mexico
(USA), Inc., (the "Borrower"), the Banks party thereto and Bank of America
National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") for said Banks.
B. Guarantor is the ultimate shareholder of the Borrower and has
derived, and expects to continue deriving, direct and indirect benefits from
extensions of credit made to the Borrower, and now desires to guaranty the
Obligations.
C. It is a requirement of the Credit Agreement that Guarantor execute
and deliver this Guaranty.
NOW, THEREFORE, Guarantor agrees as follows:
1. For valuable consideration, the undersigned (the "Guarantor")
unconditionally, absolutely and irrevocably guarantees and promises to pay to
the Administrative Agent, or order, on demand, in lawful money of the United
States and in immediately available funds, any and all present or future
Obligations owing to the Banks, the Administrative Agent and the Syndication
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
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
C - 1
Cinemark Mexico (USA) Guaranty
<PAGE> 88
have been satisfied. Guarantor agrees that nothing shall discharge or satisfy
its obligations created hereunder except for the full payment of the
Obligations. Any payment by Guarantor shall not reduce its maximum obligation
hereunder.
3. 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 Guarantor, whether action is brought against the Borrower or
whether the Borrower is joined in any such action or actions. 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 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 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 Guarantor of the occurrence of any
Event of Default under the terms and provisions of the 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
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.
C - 2
Cinemark Mexico (USA) Guaranty
<PAGE> 89
To the extent any of the foregoing refers to any actions which the
Administrative Agent or the Guarantied Parties may take, 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 Guarantor
from its undertakings hereunder and Guarantor hereby consents to each and all of
the foregoing actions, events and occurrences.
5. 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 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 Guarantor's
subrogation rights, rights to proceed against the Borrower for reimbursement, or
any other rights of Guarantor to proceed against the Borrower, against any other
guarantor, or against any other security, with Guarantor understanding that the
exercise by the Administrative Agent and/or the Guarantied Parties of certain
rights and remedies may offset or eliminate Guarantor's right of subrogation
against the Borrower, and that Guarantor may therefore incur partially or
totally non- reimbursable liability hereunder;
(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 Guarantor may be entitled; and
(f) without limiting the generality of the foregoing, Guarantor hereby
expressly waives any and all benefits of California Civil Code Sections 2809,
2810, 2819, 2825, 2839 and 2845 through 2850.
6. 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
C - 3
Cinemark Mexico (USA) Guaranty
<PAGE> 90
any, and shall not seek to assert or enforce the same. Guarantor understands
that the exercise by Administrative Agent of certain rights and remedies
contained in the Loan Documents may affect or eliminate Guarantor's right of
subrogation if any, against the Borrower and that Guarantor may therefore incur
a partially or totally non-reimbursable liability hereunder; nevertheless,
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 Guarantor that the obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
7. 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. 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. 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. Guarantor represents and warrants that:
(a) 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 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 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 Guarantor is
a party or any order, injunction, writ or decree of any Governmental Authority
to which Guarantor or its Property is subject; or (iii) violate any Requirement
of Law.
C - 4
Cinemark Mexico (USA) Guaranty
<PAGE> 91
(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, Guarantor of the Guaranty, except for routine corporate
filings to maintain the corporate good standing of Guarantor.
(d) This Guaranty constitutes the legal, valid and binding obligations
of Guarantor, enforceable against 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 Guarantor, threatened against or affecting 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 Guarantor of this
Guaranty does not constitute, to the best knowledge of 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.
10. 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.
11. This Guaranty shall be binding upon the successors and assigns of
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
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.
12. 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.
13. 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 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).
14. 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
C - 5
Cinemark Mexico (USA) Guaranty
<PAGE> 92
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. This Guaranty and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the laws of
the State of California without reference to the principles of conflicts of laws
thereof.
16. 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.
17. Terms not defined herein shall have the meanings assigned to them
in the Credit Agreement.
18. 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
Guarantor if the Administrative Agent so requests shall be collected, enforced
and received by 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
Guarantor under the other provisions of this guaranty.
20. It is not necessary for the Guarantied Parties to inquire into the
powers of the Borrower or of the officers, directors or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
DATED AS OF:
--------------------------
CINEMARK USA, INC.
By
-------------------------------
Jeffrey Stedman
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
ADMINISTRATIVE AGENT
By
-------------------------------
David Price
Vice President
C - 6
Cinemark Mexico (USA) Guaranty
<PAGE> 93
EXHIBIT D
NOTICE OF ASSIGNMENT AND ACCEPTANCE
______ , 19
TO: Bank of America National Trust
and Savings Association, as Administrative Agent
Reference is made to that certain Credit Agreement dated as of November
16, 1998 among Cinemark Mexico (USA), Inc., a Delaware corporation (the
"Borrower"), the banks from time to time party thereto, and Bank of America
National Trust and Savings Association, as Administrative Agent and Issuing Bank
(the "Agreement;" the terms defined therein being used herein as therein
defined).
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
Cinemark Mexico (USA) Notice of Assignment and Acceptance
<PAGE> 94
(b) Domestic Lending Office:
Assignee name:
-----------------------------
Address:
-----------------------------------
-------------------------------------------
Attention:
---------------------------------
Telephone: ( )
--- --------------------------
Telecopier: ( )
--- --------------------------
(c) Notice Address:
Assignee name:
-----------------------------
Address:
-----------------------------------
-------------------------------------------
Attention:
---------------------------------
Telephone: ( )
--- --------------------------
Telecopier: ( )
--- --------------------------
(d) 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
Cinemark Mexico (USA) Notice of Assignment and Acceptance
<PAGE> 95
We hereby consent to the
foregoing assignment.
CINEMARK MEXICO (USA), INC.
By:
-----------------------------------
Title:
--------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT
By:
-----------------------------------
Vice President
D - 3
Cinemark Mexico (USA) Notice of Assignment and Acceptance
<PAGE> 96
EXHIBIT E
PROMISSORY NOTE
$ ___________ November 16, 1998
FOR VALUE RECEIVED, the undersigned CINEMARK MEXICO (USA), 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 16, 1998, 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. 12332-16503, Reference:
Cinemark Mexico (USA), 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
Cinemark Mexico (USA) Promissory Note
<PAGE> 97
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 MEXICO (USA), INC.
By:
-----------------------------------
Name:
--------------------------------
Title:
--------------------------------
E - 2
Cinemark Mexico (USA) Promissory Note
<PAGE> 98
LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
<TABLE>
<CAPTION>
TYPE INTEREST
OF DATE OF AMOUNT RATE OF AMOUNT PRINCIPAL INTEREST NOTATION
LOAN LOAN OF LOAN LOAN DUE REPAID PAID BY
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
E - 1
Cinemark Mexico (USA) Promissory Note
<PAGE> 99
EXHIBIT F
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 16, 1998
(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 Mexico (USA), 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 Creditors enter into this Subordination
Agreement.
Borrower and its Subsidiaries (each, a "Subordinated Obligor") are or
may become indebted or otherwise obligated to Cinemark USA, Inc. or its
Subsidiaries (each, a "Subordinated Creditor"), and desire 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, each Subordinated Creditor agrees as follows:
1. Any and all claims of the Subordinated Creditor against any
Subordinated 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"). Except as otherwise permitted under the Credit Agreement,
all Subordinated Debt is unsecured.
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, no Subordinated Borrower shall, directly
or indirectly, make any payment or distribution of assets with respect to the
Subordinated Debt, except as set forth in paragraph 10 hereof. With respect to
any Subordinated Debt which is permitted to be secured, the relevant
Subordinated Creditors agree to not foreclose or take any action with respect
to, or otherwise realize upon, such lien unless and until payment could
otherwise be made on such Subordinated Debt hereunder.
3. In case of (a) any assignment for the benefit of creditors by any
Subordinated Borrower, (b) any proceedings under any bankruptcy or other debtor
relief laws being instituted by or against any Subordinated Borrower, (c) the
appointment of any receiver for any Subordinated Borrower's business or assets,
or (d) any dissolution or winding up of the affairs of any Subordinated 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)
F - 1
Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 100
before making any payment of principal or interest to any Subordinated Creditor
under any Subordinated Debt (whether or not from the proceeds of any security
interest securing any Subordinated Debt). With respect to any Subordinated Debt
which is permitted to be secured, until payment in full of the Obligations
(including interest and fees to the date of payment), any proceeds of such lien
shall be applied to the Obligations.
4. The Senior Creditor is hereby authorized by each Subordinated
Creditor to: (a) renew, compromise, extend, accelerate or otherwise change the
time of payment, or any other 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 the
Borrower or any guarantor of any indebtedness of the Borrower from liability,
and (f) make optional future advances to the Borrower, all without notice to any
Subordinated Creditor and without affecting the subordination provided by this
Agreement.
5. Each Subordinated Creditor acknowledges and agrees that it shall
have the sole responsibility for obtaining from any Subordinated Borrower such
information concerning any Subordinated 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 any Subordinated Creditor any information
relating to the business operations or financial condition of any Subordinated
Borrower.
6. On the written request of the Administrative Agent, each
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 16, 1998 AMONG CINEMARK MEXICO (USA),
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 16, 1998 BETWEEN BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT
AND PROMISOR."
7. In the event that any payment or any cash or noncash distribution is
made to any Subordinated Creditor in violation of the terms of this Agreement
(including receiving proceeds from realization upon any security interest
securing Subordinated Debt), such 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.
F - 2
Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 101
8. For violation of this Agreement, each Subordinated Creditor shall be
jointly and severally liable for all losses and damages sustained by reason of
such breach.
9. Each 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 Subordinated
Borrower's property so long as any Obligations shall exist. This Agreement shall
be binding upon the heirs, successors and assigns of the Subordinated Creditors
and Subordinated Borrowers.
10. Notwithstanding the provisions of Section 2, (a) a Subordinated
Borrower may make payments to a Subordinated Creditor on Subordinated Debt for
its respective share of consolidated tax liability and (b), so long as no
Default or Event of Default has occurred, a Subordinated Creditor may receive
principal and noncash interest payments on the Subordinated Debt; provided,
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
duly executed and delivered as of November 16, 1998.
THE SUBORDINATED CREDITORS LISTED ON
SCHEDULE A HERETO:
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
F - 3
Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 102
ACCEPTANCE OF SUBORDINATION
AGREEMENT BY SUBORDINATED BORROWERS
The undersigned being the Subordinated Borrowers named in the foregoing
Subordination Agreement, hereby accept and consent thereto and agree to be bound
by all the provisions thereof, not to make any payment to or on behalf of the
Subordinated Creditors 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 16, 1998
THE SUBORDINATED OBLIGORS LISTED ON
SCHEDULE A HERETO:
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
F - 4
Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 103
exhibit a to intercompany subordination agreement
SUBORDINATED CREDITORS
SUBORDINATED BORROWERS
F - 5
Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 1
EXHIBIT 10.11(b)
CINEMARK USA GUARANTY
(GUARANTY OF CINEMARK MEXICO (USA))
TO: Bank of America National Trust and Savings
Association, as Administrative Agent (the "Administrative Agent")
PRELIMINARY STATEMENTS:
A. Reference is made to that certain Credit Agreement dated as of
November 16, 1998 (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 Mexico
(USA), Inc., (the "Borrower"), the Banks party thereto and Bank of America
National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") for said Banks.
B. Guarantor is the ultimate shareholder of the Borrower and has
derived, and expects to continue deriving, direct and indirect benefits from
extensions of credit made to the Borrower, and now desires to guaranty the
Obligations.
C. It is a requirement of the Credit Agreement that Guarantor execute
and deliver this Guaranty.
NOW, THEREFORE, Guarantor agrees as follows:
1. For valuable consideration, the undersigned (the "Guarantor")
unconditionally, absolutely and irrevocably guarantees and promises to pay to
the Administrative Agent, or order, on demand, in lawful money of the United
States and in immediately available funds, any and all present or future
Obligations owing to the Banks, the Administrative Agent and the Syndication
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
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.
Guarantor agrees that nothing shall discharge or satisfy its obligations
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Cinemark USA Guaranty of Cinemark Mexico (USA)
<PAGE> 2
created hereunder except for the full payment of the Obligations. Any payment by
Guarantor shall not reduce its maximum obligation hereunder.
3. 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 Guarantor, whether action is brought against the Borrower or
whether the Borrower is joined in any such action or actions. 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 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 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 Guarantor of the occurrence of any
Event of Default under the terms and provisions of the 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
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.
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Cinemark USA Guaranty of Cinemark Mexico (USA)
<PAGE> 3
To the extent any of the foregoing refers to any actions which the
Administrative Agent or the Guarantied Parties may take, 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 Guarantor
from its undertakings hereunder and Guarantor hereby consents to each and all of
the foregoing actions, events and occurrences.
5. 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 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 Guarantor's
subrogation rights, rights to proceed against the Borrower for reimbursement, or
any other rights of Guarantor to proceed against the Borrower, against any other
guarantor, or against any other security, with Guarantor understanding that the
exercise by the Administrative Agent and/or the Guarantied Parties of certain
rights and remedies may offset or eliminate Guarantor's right of subrogation
against the Borrower, and that Guarantor may therefore incur partially or
totally non-reimbursable liability hereunder;
(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 Guarantor may be entitled; and
(f) without limiting the generality of the foregoing, Guarantor hereby
expressly waives any and all benefits of California Civil Code Sections 2809,
2810, 2819, 2825, 2839 and 2845 through 2850.
6. 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
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Cinemark USA Guaranty of Cinemark Mexico (USA)
<PAGE> 4
any, and shall not seek to assert or enforce the same. Guarantor understands
that the exercise by Administrative Agent of certain rights and remedies
contained in the Loan Documents may affect or eliminate Guarantor's right of
subrogation if any, against the Borrower and that Guarantor may therefore incur
a partially or totally non-reimbursable liability hereunder; nevertheless,
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 Guarantor that the obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
7. 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. 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. 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. Guarantor represents and warrants that:
(a) 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 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 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 Guarantor is
a party or any order, injunction, writ or decree of any Governmental Authority
to which Guarantor or its Property is subject; or (iii) violate any Requirement
of Law.
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Cinemark USA Guaranty of Cinemark Mexico (USA)
<PAGE> 5
(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, Guarantor of the Guaranty, except for routine corporate
filings to maintain the corporate good standing of Guarantor.
(d) This Guaranty constitutes the legal, valid and binding obligations
of Guarantor, enforceable against 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 Guarantor, threatened against or affecting 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 Guarantor of this
Guaranty does not constitute, to the best knowledge of 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.
10. 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.
11. This Guaranty shall be binding upon the successors and assigns of
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
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.
12. 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.
13. 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 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).
14. 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
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Cinemark USA Guaranty of Cinemark Mexico (USA)
<PAGE> 6
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. This Guaranty and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the laws of
the State of California without reference to the principles of conflicts of laws
thereof.
16. 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.
17. Terms not defined herein shall have the meanings assigned to them
in the Credit Agreement.
18. 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
Guarantor if the Administrative Agent so requests shall be collected, enforced
and received by 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
Guarantor under the other provisions of this guaranty.
20. It is not necessary for the Guarantied Parties to inquire into the
powers of the Borrower or of the officers, directors or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
DATED AS OF:
----------------------------
CINEMARK USA, INC.
By
----------------------------
Jeffrey Stedman
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
ADMINISTRATIVE AGENT
By
-------------------------------
David Price
Vice President
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Cinemark USA Guaranty of Cinemark Mexico (USA)
<PAGE> 1
EXHIBIT 10.11(c)
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 16, 1998
(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 Mexico (USA), 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 Creditors enter into this Subordination
Agreement.
Borrower and its Subsidiaries (each, a "Subordinated Obligor") are or
may become indebted or otherwise obligated to Cinemark USA, Inc. or its
Subsidiaries (each, a "Subordinated Creditor"), and desire 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, each Subordinated Creditor agrees as follows:
1. Any and all claims of the Subordinated Creditor against any
Subordinated 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"). Except as otherwise permitted under the Credit Agreement,
all Subordinated Debt is unsecured.
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, no Subordinated Borrower shall, directly
or indirectly, make any payment or distribution of assets with respect to the
Subordinated Debt, except as set forth in paragraph 10 hereof. With respect to
any Subordinated Debt which is permitted to be secured, the relevant
Subordinated Creditors agree to not foreclose or take any action with respect
to, or otherwise realize upon, such lien unless and until payment could
otherwise be made on such Subordinated Debt hereunder.
3. In case of (a) any assignment for the benefit of creditors by any
Subordinated Borrower, (b) any proceedings under any bankruptcy or other debtor
relief laws being instituted by or against any Subordinated Borrower, (c) the
appointment of any receiver for any Subordinated Borrower's business or assets,
or (d) any dissolution or winding up of the affairs of any Subordinated 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)
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Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 2
before making any payment of principal or interest to any Subordinated Creditor
under any Subordinated Debt (whether or not from the proceeds of any security
interest securing any Subordinated Debt). With respect to any Subordinated Debt
which is permitted to be secured, until payment in full of the Obligations
(including interest and fees to the date of payment), any proceeds of such lien
shall be applied to the Obligations.
4. The Senior Creditor is hereby authorized by each Subordinated
Creditor to: (a) renew, compromise, extend, accelerate or otherwise change the
time of payment, or any other 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 the
Borrower or any guarantor of any indebtedness of the Borrower from liability,
and (f) make optional future advances to the Borrower, all without notice to any
Subordinated Creditor and without affecting the subordination provided by this
Agreement.
5. Each Subordinated Creditor acknowledges and agrees that it shall
have the sole responsibility for obtaining from any Subordinated Borrower such
information concerning any Subordinated 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 any Subordinated Creditor any information
relating to the business operations or financial condition of any Subordinated
Borrower.
6. On the written request of the Administrative Agent, each
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 16, 1998 AMONG CINEMARK MEXICO (USA),
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 16, 1998 BETWEEN BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS ADMINISTRATIVE AGENT
AND PROMISOR."
7. In the event that any payment or any cash or noncash distribution is
made to any Subordinated Creditor in violation of the terms of this Agreement
(including receiving proceeds from realization upon any security interest
securing Subordinated Debt), such 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.
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Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 3
8. For violation of this Agreement, each Subordinated Creditor shall be
jointly and severally liable for all losses and damages sustained by reason of
such breach.
9. Each 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 Subordinated
Borrower's property so long as any Obligations shall exist. This Agreement shall
be binding upon the heirs, successors and assigns of the Subordinated Creditors
and Subordinated Borrowers.
10. Notwithstanding the provisions of Section 2, (a) a Subordinated
Borrower may make payments to a Subordinated Creditor on Subordinated Debt for
its respective share of consolidated tax liability and (b), so long as no
Default or Event of Default has occurred, a Subordinated Creditor may receive
principal and noncash interest payments on the Subordinated Debt; provided,
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
duly executed and delivered as of November 16, 1998.
THE SUBORDINATED CREDITORS LISTED ON
SCHEDULE A HERETO:
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 4
ACCEPTANCE OF SUBORDINATION
AGREEMENT BY SUBORDINATED BORROWERS
The undersigned being the Subordinated Borrowers named in the foregoing
Subordination Agreement, hereby accept and consent thereto and agree to be bound
by all the provisions thereof, not to make any payment to or on behalf of the
Subordinated Creditors 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 16, 1998
THE SUBORDINATED OBLIGORS LISTED ON
SCHEDULE A HERETO:
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 5
EXHIBIT A TO INTERCOMPANY SUBORDINATION AGREEMENT
SUBORDINATED CREDITORS
SUBORDINATED BORROWERS
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Cinemark Mexico (USA) Intercompany Subordination Agreement
<PAGE> 1
EXHIBIT 10.13(a)
================================================================================
CREDIT AGREEMENT
Dated as of September 11, 1998
among
CINEMARK INVESTMENTS CORPORATION
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
NATIONSBANK, N.A.,
as Syndication Agent
and
THE OTHER FINANCIAL INSTITUTIONS
PARTY HERETO
Arranged by
BA Securities, Inc.
and
NationsBanc Montgomery Securities LLC
[LOGO]
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
SECTION 1. DEFINITIONS .................................................... 1
1.01 Defined Terms ................................................... 1
1.02 Other Interpretive Provisions ................................... 13
(a) Defined Terms ............................................ 13
(b) Certain Common Terms ..................................... 13
(c) Performance; Time ........................................ 13
(d) Contracts ................................................ 13
(e) Laws ..................................................... 13
(f) Captions ................................................. 14
(g) Independence of Provisions ............................... 14
(h) Accounting Principles .................................... 14
SECTION 2. THE CREDITS .................................................... 14
2.01 Amounts and Terms of Commitments ................................ 14
2.02 Loan Accounts and Notes ......................................... 14
2.03 Procedure for Borrowing ......................................... 15
2.04 Conversion and Continuation Elections ........................... 16
2.05 Limitation on Interest Periods .................................. 17
2.06 Voluntary Termination or Reduction of Commitments ............... 17
2.07 Optional Prepayments ............................................ 17
</TABLE>
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<PAGE> 3
2.08 Required Prepayments; Maturity Date ............................. 17
2.09 Interest ........................................................ 18
2.10 Fees ............................................................ 19
(a) Upfront Fee .............................................. 19
(b) Commitment Fee ........................................... 19
(c) Agency Fee ............................................... 20
2.11 Computation of Fees and Interest ................................ 20
2.12 Payments by the Company ......................................... 20
2.13 Payments by the Banks to the Administrative Agent ............... 21
2.14 Sharing of Payments, Etc ........................................ 22
2.15 Security and Cinemark USA Guaranty .............................. 22
SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY ......................... 23
3.01 Taxes ........................................................... 23
3.02 Illegality ...................................................... 25
3.03 Increased Costs and Reduction of Return ......................... 25
3.04 Funding Losses .................................................. 26
3.05 Inability to Determine Rates .................................... 26
3.06 Survival ........................................................ 27
SECTION 4. CONDITIONS PRECEDENT ........................................... 27
4.01 Conditions of Initial Loans ..................................... 27
(a) Credit Agreement and Notes ............................... 27
(b) Resolutions; Incumbency for Company and Cinemark USA ..... 27
(c) Articles of Incorporation; By-laws and Good Standing ..... 28
- ii -
<PAGE> 4
(d) Cinemark USA Guaranty .................................... 28
(e) FRN Pledge Agreement; Delivery of Pledged Collateral ..... 28
(f) Amendment to Cinemark USA Credit Agreement ............... 28
(g) Legal Opinions ........................................... 28
(h) Payment of Fees .......................................... 28
(i) Certificate .............................................. 29
(j) Other Documents .......................................... 29
4.02 Conditions to All Borrowings .................................... 29
(a) Notice of Borrowing ...................................... 29
(b) Continuation of Representations and Warranties ........... 29
(c) No Existing Default ...................................... 29
SECTION 5. REPRESENTATIONS AND WARRANTIES ................................. 30
5.01 Corporate Existence and Power ................................... 30
5.02 Corporate Authorization; No Contravention ....................... 30
5.03 Governmental Authorization ...................................... 30
5.04 Binding Effect .................................................. 30
5.05 Litigation ...................................................... 31
5.06 No Default ...................................................... 31
5.07 Use of Proceeds ................................................. 31
5.08 Regulated Entities .............................................. 31
5.09 Year 2000 ....................................................... 31
5.10 FRN Pledge Agreement ............................................ 32
5.11 Full Disclosure ................................................. 32
- iii -
<PAGE> 5
SECTION 6. AFFIRMATIVE COVENANTS .......................................... 32
6.01 Financial Statements; Compliance Certificate .................... 32
6.02 Notices ......................................................... 33
6.03 Preservation of Corporate Existence, Etc ........................ 34
6.04 Compliance with Laws ............................................ 34
6.05 Inspection of Property and Books and Records .................... 34
6.06 Use of Proceeds ................................................. 34
6.07 Further Assurances .............................................. 35
SECTION 7. NEGATIVE COVENANTS ............................................. 35
7.01 Limitation on Liens ............................................. 35
7.02 Disposition of Property ......................................... 36
7.03 Consolidations and Mergers ...................................... 36
7.04 Limitation on Investments ....................................... 37
7.05 Limitation on Indebtedness ...................................... 37
7.06 Transactions with Affiliates .................................... 37
7.07 Compliance with ERISA ........................................... 37
7.08 Lease Obligations ............................................... 37
7.09 Restricted Payments ............................................. 38
7.10 Change in Business .............................................. 38
7.11 Accounting Changes .............................................. 38
7.12 Limitation on Negative Pledges .................................. 38
SECTION 8. EVENTS OF DEFAULT .............................................. 38
8.01 Event of Default ................................................ 38
(a) Non-Payment .............................................. 38
- iv -
<PAGE> 6
(b) Representation or Warranty ............................... 38
(c) Other Defaults ........................................... 38
(d) Cross-Defaults ........................................... 39
(e) Insolvency; Voluntary Proceedings ........................ 39
(f) Involuntary Proceedings .................................. 39
(g) Loan Documents; Fixed Rate Notes ......................... 40
(h) Collateral ............................................... 40
(i) Material Adverse Change .................................. 40
(j) Prohibited Action of or Default Under Cinemark
USA Credit Agreement ................................... 40
8.02 Remedies ........................................................ 40
8.03 Rights Not Exclusive ............................................ 41
SECTION 9. THE Administrative Agent ....................................... 41
9.01 Appointment and Authorization ................................... 41
9.02 Delegation of Duties ............................................ 41
9.03 Liability of Agent .............................................. 41
9.04 Reliance by Administrative Agent ................................ 42
9.05 Notice of Default ............................................... 43
9.06 Credit Decision ................................................. 43
9.07 Indemnification ................................................. 43
9.08 Administrative Agent in Individual Capacity ..................... 44
9.09 Successor Administrative Agent .................................. 44
9.10 Collateral Matters .............................................. 45
9.11 Syndication Agent ............................................... 46
- v -
<PAGE> 7
SECTION 10. MISCELLANEOUS ................................................. 46
10.01 Amendments and Waivers .......................................... 46
10.02 Notices ......................................................... 46
10.03 No Waiver; Cumulative Remedies .................................. 47
10.04 Costs and Expenses .............................................. 47
10.05 General Indemnity ............................................... 47
10.06 Marshalling; Payments Set Aside ................................. 48
10.07 Successors and Assigns .......................................... 49
10.08 Assignments, Participations, Etc ................................ 49
10.09 Set-off ......................................................... 50
10.10 Notification of Addresses, Lending Offices, Etc ................. 51
10.11 Counterparts .................................................... 51
10.12 Severability .................................................... 51
10.13 No Third Parties Benefited ...................................... 51
10.14 Time ............................................................ 51
10.15 Governing Law and Jurisdiction .................................. 51
10.16 WAIVER OF JURY TRIAL ............................................ 52
10.17 NOTICE OF CLAIMS; CLAIMS BAR .................................... 52
10.18 Entire Agreement ................................................ 53
10.19 Interpretation .................................................. 53
- vi -
<PAGE> 8
EXHIBITS
Form of
A Notice of Borrowing
B Notice of Conversion/Continuation
C Notice of Assignment and Acceptance
D Note
E Cinemark USA Continuing Guaranty
F FRN Pledge Agreement
SCHEDULES
2.01 Commitments
10.02 Addresses for Domestic and Offshore Lending Offices and Notices
- vii -
<PAGE> 9
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of September 11, 1998 among
CINEMARK INVESTMENTS CORPORATION, a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks" and individually, a "Bank"), Bank of America National
Trust and Savings Association, as administrative agent for the Banks (in such
capacity, the "Administrative Agent"), and NationsBank, N.A., as syndication
agent for the Banks (in such capacity, the "Syndication Agent") (the
Administrative Agent and the Syndication Agent hereinafter referred to each as
an "Agent" and collectively as the "Agents").
RECITAL
The Banks desire to provide a credit facility to the Company on 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. DEFINED TERMS.
In addition to the terms defined elsewhere in this Agreement, the
following terms have the following meanings:
"Administrative Agent" means BofA, 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 the Company or of any Subsidiary of the Company.
"Agent-Related Persons" means the Administrative Agent, the Syndication
Agent and any successor agents arising under Section 9.09, together with their
Affiliates, and the officers, directors, employees, agents and attorneys-in-
fact of such Persons and Affiliates.
"Agents" means the Administrative Agent and the Syndication Agent
(each, an "Agent").
- 1 -
Cinemark Investments Credit Agreement
<PAGE> 10
"Aggregate Commitment" means the combined Commitments of the Banks in
the amount of Twenty Million Dollars ($20,000,000), 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.
"Applicable Amount" means, subject, with respect to Offshore Rate
Loans, to the exceptions immediately following the table below, the basis points
per annum specified below applicable to interest rates and the Commitment fee
opposite the applicable Cinemark USA Leverage Ratio, as set forth in the most
recent certificate received by the Administrative Agent pursuant to Section
4.01(i) or Section 6.01(c).
(a) So long as the Cinemark USA Senior Leverage Ratio is greater than
or equal to 2.50:
<TABLE>
<CAPTION>
=========================================================================================
IN BASIS POINTS PER ANNUM
- -----------------------------------------------------------------------------------------
CINEMARK USA LEVERAGE OFFSHORE RATE LOANS BASE RATE LOANS COMMITMENT FEE
RATIO
=========================================================================================
<S> <C> <C> <C>
x >= 5.50 250.00 125.00 42.50
- -----------------------------------------------------------------------------------------
4.75 <= x < 5.50 225.00 100.00 40.00
- -----------------------------------------------------------------------------------------
4.00 <= x < 4.75 200.00 75.00 37.50
- -----------------------------------------------------------------------------------------
3.50 <= x < 4.00 175.00 50.00 35.00
- -----------------------------------------------------------------------------------------
3.00 <= x < 3.50 150.00 25.00 32.50
- -----------------------------------------------------------------------------------------
2.50 <= x < 3.00 125.00 0.00 27.50
- -----------------------------------------------------------------------------------------
2.00 <= x < 2.50 112.50 0.00 25.00
- -----------------------------------------------------------------------------------------
x < 2.00 100.00 0.00 23.75
- -----------------------------------------------------------------------------------------
</TABLE>
(b) So long as the Cinemark USA Senior Leverage Ratio is less than
2.50, but greater than or equal to 1.75, each amount set forth above under the
heading "Offshore Rate Loans" shall be reduced by 12.50 basis points per annum,
and so long as the Cinemark USA Senior Leverage Ratio is less than 1.75, each
amount set forth above under the heading "Offshore Rate Loans" shall be reduced
by a total of 25 basis points per annum.
(c) So long as the CBSA Leverage Ratio is less than 4.00, but greater
than or equal to 2.50, each amount set forth above under the heading "Offshore
Rate Loans" shall be reduced by 12.50 basis points per annum, and so long as the
CBSA Leverage Ratio is less than 2.50, each amount set forth above under the
heading "Offshore Rate Loans" shall be reduced by 25 basis points per annum.
If both clause (b) and (c) are applicable, the reductions set forth
therein shall be additive.
- 2 -
Cinemark Investments Credit Agreement
<PAGE> 11
<TABLE>
<CAPTION>
=========================================================================================
IN BASIS POINTS PER ANNUM
CINEMARK USA LEVERAGE OFFSHORE RATE LOANS BASE RATE LOANS COMMITMENT FEE
RATIO
=========================================================================================
<S> <C> <C> <C>
x > 5.50 250.00 125.00 42.50
- -----------------------------------------------------------------------------------------
4.75 x < 5.50 225.00 100.00 40.00
- -----------------------------------------------------------------------------------------
4.00 x < 4.75 200.00 75.00 37.50
- -----------------------------------------------------------------------------------------
3.50 x < 4.00 175.00 50.00 35.00
- -----------------------------------------------------------------------------------------
3.00 x < 3.50 150.00 25.00 32.50
- -----------------------------------------------------------------------------------------
2.50 x < 3.00 125.00 0.00 27.50
- -----------------------------------------------------------------------------------------
2.00 x < 2.50 112.50 0.00 25.00
- -----------------------------------------------------------------------------------------
x < 2.00 100.00 0.00 23.75
- -----------------------------------------------------------------------------------------
</TABLE>
(b) So long as the Cinemark USA Senior Leverage Ratio is less than
2.50, but greater than or equal to 1.75, each amount set forth above under the
heading "Offshore Rate Loans" shall be reduced by 12.50 basis points per annum,
and so long as the Cinemark USA Senior Leverage Ratio is less than 1.75, each
amount set forth above under the heading "Offshore Rate Loans" shall be reduced
by a total of 25 basis points per annum.
(c) So long as the CBSA Leverage Ratio is less than 4.00, but greater
than or equal to 2.50, each amount set forth above under the heading "Offshore
Rate Loans" shall be reduced by 12.50 basis points per annum, and so long as the
CBSA Leverage Ratio is less than 2.50, each amount set forth above under the
heading "Offshore Rate Loans" shall be reduced by 25 basis points per annum.
If both clause (b) and (c) are applicable, the reductions set forth
therein shall be additive.
- 2 -
Cinemark Investments Credit Agreement
<PAGE> 12
The Applicable Amount shall be in effect from the date the most recent
certificate delivered pursuant to Section 4.01(i) or 6.01(c) is received by the
Administrative Agent to but excluding the date the next such certificate is
received; provided, however, that if the Company fails to timely deliver the
next such certificate, the Applicable Amount 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 Amount
already in effect and (b) the Applicable Amount as set forth in such certificate
when received, retroactively applied to the Delinquent Period.
"Assignee" has the meaning specified in Section 10.08(a).
"Bank" has the meanings specified in the introductory clause hereto,
and any successors to, and permitted assigns of, such Banks.
"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 (11
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.
"Borrowing" means a borrowing hereunder consisting of Loans made to the
Company 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.
- 3 -
Cinemark Investments Credit Agreement
<PAGE> 13
"Cash Equivalents" 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, 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 by a
depository institution or trust company incorporated under the laws of the
United States of America, any state thereof or the District of Columbia, Canada
or any province thereof, provided that (1) such instrument has a final maturity
not more than one year from the date of purchase thereof by the Company and (2)
such depository institution or trust company has, at the time of the Company'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 $100,000,000 and (y)
the long-term unsecured debt obligations (other than such obligations rated on
the basis of the credit of a person or entity other than such institution) of
such institution, at the time of the Company's Investment therein or contractual
commitment providing for such Investment, are rated in the highest rating
category of both Standard & Poor's Rating Group ("S&P") and Moody's Investor
Service, Inc. ("Moody's");
(c) commercial paper issued by any corporation, if such commercial
paper has, at the time of the Company'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
$100,000,000;
(e) readily marketable debt obligations issued by any corporation, if
at the time of the Company'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; and
(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 or the District of Columbia,
Canada or any province;
- 4 -
Cinemark Investments Credit Agreement
<PAGE> 14
provided that such commercial bank has, at the time of the Company'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
$100,000,000 and (2) the long-term unsecured debt obligations (other than such
obligations rated on the basis of the credit of a person or entity other than
such institution) of such institution, at the time of the Company's Investment
therein are rated in the highest rating category of both S&P and Moody's.
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 Majority Banks, 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.
"CBSA Leverage Ratio" means a ratio calculated based on the
consolidated financial statements of Cinemark Brasil delivered to the
Administrative Agent pursuant to Section 6.01(a) or (b) in the same manner as
the Cinemark USA Leverage Ratio calculated pursuant to the Cinemark USA Credit
Agreement, for the four fiscal quarters ending on the date of calculation.
"Cinemark Brasil" means Cinemark Brasil S.A., a Brazilian corporation.
"Cinemark USA" means Cinemark USA, Inc., a Texas corporation.
"Cinemark USA Credit Agreement" means that certain Second Amended and
Restated Reducing Revolving Credit Agreement dated as of February 12, 1998,
among Cinemark USA, the banks named therein, Bank of America National Trust and
Savings Association, as administrative agent, NationsBank, N.A. as syndication
agent, and BankBoston, N.A., The Bank of Nova Scotia, CIBC Inc. and Fleet Bank,
N.A., as co-agents, as amended, modified, supplemented or waived from time to
time; provided, however, that that any amendment, modification, supplement or
waiver constituting a Prohibited Action shall not be deemed to amend, modify,
supplement or waive the Cinemark USA Credit Agreement for purposes of this
Credit Agreement.
"Cinemark USA Leverage Ratio" means the ratio of Total Indebtedness to
Annualized Cash Flow (as such terms are defined in the Cinemark USA Credit
Agreement) as most recently calculated pursuant to the Cinemark USA Credit
Agreement and reported to the administrative agent thereunder pursuant to
Section 6.2(a) of the Cinemark USA Credit Agreement.
"Cinemark USA Senior Leverage Ratio" means the ratio of Senior
Indebtedness to Annualized Cash Flow (as such terms are defined in the Cinemark
USA Credit Agreement) as most recently calculated pursuant to the Cinemark USA
Credit Agreement and reported to the administrative agent thereunder pursuant to
Section 6.2(a) of the Cinemark USA Credit Agreement.
- 5 -
Cinemark Investments Credit Agreement
<PAGE> 15
"Closing Date" means the date on which all conditions precedent set
forth in Section 4.01 are satisfied or waived by all Banks.
"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 Company upon which a Lien now or
hereafter exists in favor of the Administrative Agent pursuant to the Collateral
Documents, by possession or otherwise.
"Collateral Documents" means, collectively, (a) the FRN 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 Secured Parties, 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 2.01.
"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 (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, or
(d) otherwise to assure or hold harmless the holder of any such primary
obligation against loss in respect thereof,. 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 if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof.
"Contractual Obligations" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage,
- 6 -
Cinemark Investments Credit Agreement
<PAGE> 16
deed of trust or other instrument, document or agreement to which such Person is
a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which the Company
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.
"Event of Default" means any of the events or circumstances specified
in Section 8.01.
"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.
"Fixed Rate Notes" means any evidences of indebtedness of Cinemark
Brasil at any time owned, held or acquired by the Company.
"FRN Pledge Agreement" means the Pledge Agreement in substantially the
form of Exhibit F hereto.
- 7 -
Cinemark Investments Credit Agreement
<PAGE> 17
"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.
"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.
"Guaranty" means the Cinemark USA Guaranty substantially in the form of
Exhibit E hereto, as amended, supplemented, modified, renewed or replaced from
time to time.
"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, receivership, dissolution, winding-up
or relief of debtors, or (b) any general
- 8 -
Cinemark Investments Credit Agreement
<PAGE> 18
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.
"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/Continuation 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 the
Company 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.
"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 (a) 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 and (b)
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of any Person and any securities
received in settlement thereof.
"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 10.02
hereto, or such other office
- 9 -
Cinemark Investments Credit Agreement
<PAGE> 19
or offices of the Bank as it may from time to time specify in writing to the
Company and the Administrative Agent.
"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 the Company 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 2.04 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, the Notes, the Collateral
Documents, the Guaranty and all exhibits thereto.
"Majority Banks" means at any time Banks then holding at least 51% of
the then aggregate unpaid principal amount of the Loans, or, if no such
principal amount is then outstanding, Banks then having at least 51% of the
Commitments provided, that Majority Banks must include at least two (2) Banks.
"Margin Stock" means "margin stock" as such term is defined in
Regulation 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 the Company; (b) a material impairment
of the ability of the Company to perform under any Loan Document and avoid any
Event of Default; (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 Secured Parties or to the Administrative
Agent for the benefit of the Secured Parties under the Collateral Documents.
"Maturity Date" means the earlier to occur of: (a) September 11, 2001,
(b) the date on which the "Aggregate Commitment" under and as defined in the
Cinemark USA Credit Agreement shall terminate or be terminated in accordance
with the provisions thereof and (c) the date on which the Aggregate Commitment
hereunder shall terminate in accordance with the provisions of this Agreement.
- 10 -
Cinemark Investments Credit Agreement
<PAGE> 20
"Note" means a promissory note of the Company payable to the order of a
Bank substantially in the form of Exhibit D hereto evidencing the aggregate
indebtedness of the Company to such Bank resulting from Loans made by such Bank.
"Notice of Assignment and Acceptance" has the meaning specified in
Section 10.08(a).
"Notice of Borrowing" means a notice given by the Company to the
Administrative Agent pursuant to Section 2.03, in substantially the form of
Exhibit A.
"Notice of Conversion/Continuation" means a notice given by the Company
to the Administrative Agent pursuant to Section 2.04, 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 the Company to any of
the Banks, the Agents, 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 Eurocurrency funding (currently referred to as "Eurocurrency Liabilities")
having a term equal to such Interest Period; and
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Cinemark Investments Credit Agreement
<PAGE> 21
"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.
"Participant" has the meaning specified in Section 10.08(d).
"Permitted Investments" has the meaning specified in Section 7.04.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Pledged Collateral" means the Collateral pledged pursuant to the FRN
Pledge Agreement.
"Prohibited Action" means any amendment to the Cinemark USA Credit
Agreement or any waiver of any provision thereof (or any event of default that
would otherwise occur) which has not received the prior written consent of all
Banks hereunder, that:
(a) permits the total principal amount of credit extended
thereunder to exceed $350,000,000;
(b) permits the incurrence of Indebtedness by Cinemark USA which
is prohibited by Section 7.5 of the Cinemark USA Credit Agreement as in
effect on the Closing Date;
(c) modifies the calculation of the Cinemark USA Leverage Ratio
or the Cinemark USA Senior Leverage Ratio or the definition of any of
the terms affecting such calculation as in effect on the Closing Date;
(d) modifies Section 7.11 of the Cinemark USA Credit Agreement
(prohibiting prepayment of certain senior subordinated notes), as in
effect at the Closing Date; or
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Cinemark Investments Credit Agreement
<PAGE> 22
(e) changes the stated date of the termination of the "Aggregate
Commitment" under and as defined in the Cinemark USA Credit Agreement
to a date earlier than the Maturity Date
"Property" or "Properties" means any estate or interest in any kind of
properties or assets, whether real, personal or mixed, and whether tangible or
intangible.
"Pro Rata Share" means, as to any Bank, the percentage equivalent of
such Bank's Commitment divided by the Aggregate Commitment.
"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 the Company, 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 the Company, or any other officer having substantially the same
authority and responsibility.
"Restricted Payment" means (a) the declaration or making of 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 the Company, (b) the purchase, redemption or other acquisition for
value of any shares of the capital stock of the Company or any warrants, rights
or options to acquire such shares, now or hereafter outstanding, (c) any
Investment other than a Permitted Investment, and (d) 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 not otherwise permitted by this Agreement or any
Loan Document to be so paid.
"Secured Parties" means the Agents, the Banks and each of them
(individually, a "Secured Party").
"SEC" means the Securities and Exchange Commission, or any successor
thereto.
"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, or (c) upon designation by the
Company, and until designation by the Company to the contrary, a Person, 50% or
more of whose
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Cinemark Investments Credit Agreement
<PAGE> 23
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 (c) of the immediately preceding sentence to the Administrative 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.
"Syndication Agent" means NationsBank, N.A.
"Taxes" has the meaning specified in Section 3.01(a).
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.
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Cinemark Investments Credit Agreement
<PAGE> 24
(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.
(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
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 2.01 under the heading "Commitment" (such amount as the same may be
reduced pursuant to Section 2.06 or 2.08 or as a result of one or more
assignments pursuant to Section 10.08, such Bank's "Commitment"); provided,
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, the Company may borrow under this Section 2.01, prepay
pursuant to Section 2.07 and reborrow pursuant to this Section 2.01.
2. LOAN ACCOUNTS AND NOTES.
(a) Subject to Section 2.02(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 the
Company and the interest and payments thereon and fees due hereunder. Any
failure so to record or any error in doing
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Cinemark Investments Credit Agreement
<PAGE> 25
so shall not, however, limit or otherwise affect the obligation of the Company
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 the Company with respect thereto. Each such Bank
is irrevocably authorized by the Company to endorse its Note(s) and each Bank's
record shall be conclusive absent manifest error; provided, 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 the
Company hereunder or under any such Note to such Bank.
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: (x) 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 $100,000 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 $50,000 in excess
thereof; (y) the requested Borrowing Date, which shall be a Business Day; (z)
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 or the Syndication
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:
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Cinemark Investments Credit Agreement
<PAGE> 26
BANCONTROL Account No. 12335-16417, Reference: Cinemark Investments, no later
than 11:00 a.m. (San Francisco time) on the Borrowing Date. Upon satisfaction of
the conditions set forth in Section 4.02, the Administrative Agent shall make
available to the Company 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 the Company as specified by the Company in writing.
If the conditions set forth in Section 4.02 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, the Company may not elect to have a Loan be made as an
Offshore Rate Loan.
4. CONVERSION AND CONTINUATION ELECTIONS.
(a) The Company 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 $100,000 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 $50,000 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 $100,000 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/Continuation Date, if the
Loans are to be converted into or continued as Offshore Rate Loans; and (ii)
one Business Day prior to the Conversion/Continuation Date, if the Loans are to
be converted into Base Rate Loans, in each case specifying: (A) the proposed
Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted
or continued; (C) the Loans to be converted or continued; and (D) if an Offshore
Rate Loan is requested, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to Offshore
Rate Loans, the Company has failed to select a new Interest Period to be
applicable thereto, or if any Event of Default shall then exist, the Company
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.
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Cinemark Investments Credit Agreement
<PAGE> 27
(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 the Company, 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, the Company may not elect to have a Loan converted into
or continued as an Offshore Rate Loan.
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.
6. VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS.
The Company 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 2.06, the Aggregate Commitment may not be increased. Any reduction of
the Aggregate Commitment shall be applied to each Bank's Commitment in
accordance with such Bank's Pro Rata Share. All accrued commitment fees to, but
not including the effective date of any termination of Commitments, shall be
paid on the effective date of such termination.
7. OPTIONAL PREPAYMENTS.
Subject to Section 3.04, the Company 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, $100,000 or any multiple thereof in excess thereof, and
(ii) with respect to Base Rate Loans, $50,000 or any multiple thereof 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 the Company, 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 the
Company, the Company 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
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Cinemark Investments Credit Agreement
<PAGE> 28
the case of Offshore Rate Loans to each such date on the amount prepaid and any
amounts required pursuant to Section 3.04.
8. REQUIRED PREPAYMENTS; MATURITY DATE.
(a) Promptly upon the receipt by the Company of any redemption payments
or repayments of the principal amount of any or all of the Fixed Rate Notes, and
regardless of whether or not such redemptions or repayments were voluntary or
mandatory, (i) the Company shall repay any Loans then outstanding in the amount
of such redemption payments or repayments received together with any accrued
interest on the principal amount being repaid, and (ii) the Aggregate Commitment
shall be permanently reduced by the principal amount of such payment. Any such
prepayments shall be applied first to any Base Rate Loans then outstanding, then
to any Offshore Rate Loans outstanding, and any prepayments of Offshore Rate
Loans shall be accompanied by any amounts required pursuant to Section 3.04
hereof. Any such prepayments and commitment reductions shall be applied to each
Bank in accordance with such Bank's Pro Rata Share.
(b) All principal and accrued and unpaid interest on all Loans shall be
due on the Maturity Date.
9. INTEREST.
(a) Subject to Section 2.09(c) and (d), each Loan shall bear interest on
the outstanding principal amount thereof from the date when made until it is
repaid at a rate per annum equal to the Offshore Rate or the Base Rate, as the
case may be, plus the Applicable Amount.
(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 Section 2.07 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 2.09(d), during the continuation of any Event of
Default or after acceleration pursuant to Section 8.02, the Company 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
Amount then in effect for such Loans and, in the case of Obligations not
subject to an Applicable Amount, at a rate per annum equal to the Base Rate
plus the Applicable Amount plus 2%; provided, however, that the principal
amount of any Base Rate Loan outstanding on or after the date of occurrence of
any Event of Default or acceleration 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 Amount plus 2%.
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Cinemark Investments Credit Agreement
<PAGE> 29
(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 the
Company 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 the Company. In
determining whether or not the interest paid or payable with respect to any
indebtedness of the Company to the Administrative Agent and the Banks, under
any specific contingency, exceeds the highest lawful rate, the Company 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 2.09(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 loan transaction and this Agreement, and, to the extent controlling, laws
of the United States of America. It is intended that, in the event that,
notwithstanding the parties' express choice of New York law to be applicable to
this Agreement, if the laws of the State of Texas are included in determining
applicable law, Chapters 302 and 303 of the Texas Finance Code shall be included
in any such determination, and that, for the purpose of applying Chapters 302
and 303 of the Texas Finance Code to this Agreement, the highest lawful rate
shall be the "weekly ceiling" (as defined in Section 303.2 of the Texas Finance
Code). Any Bank may, from time to time, as to current and future balances,
implement any other ceiling under Chapter 303 of the Texas Finance Code by
notice to the Company, if and to the extent, permitted by Chapter 303 of the
Texas Finance Code. The Company expressly agrees that, pursuant to Section
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Cinemark Investments Credit Agreement
<PAGE> 30
346.004 of the Texas Finance Code, Chapter 346 of the Texas Finance Code shall
not apply to this Agreement or to any Loan and neither this Agreement nor any
Loan shall be governed by or subject to the provision of Chapter 346 of the
Texas Finance Code in any manner whatsoever.
10. FEES.
(a) Upfront Fee.
The Company shall pay to the Administrative Agent and the Syndication
Agent an upfront fee in an amount as agreed upon in writing between the Company,
the Administrative Agent and the Syndication Agent. Such fee shall be paid on
the earlier of (a) the date the initial Loans are funded hereunder and (b)
September 18, 1998.
(b) Commitment Fee. The Company shall pay to the Administrative Agent for
the account of each Bank a commitment fee on the actual 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 actual daily utilization
for that quarter as calculated by the Administrative Agent, at a rate per annum
specified for the "Commitment Fee" in the definition of Applicable Amount.
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 September 30, 1998, with the final payment to be made on the
Maturity Date; provided that, in connection with the termination of Commitments
pursuant to Section 2.06, 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 any time during which one or
more conditions in Section 4 are not met.
(c) Agency Fee. The Company may pay to the Administrative Agent for the
Administrative Agent's own account an agency fee in the amount and at the times
as agreed from time to time upon in writing between the Company and the
Administrative Agent.
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.
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Cinemark Investments Credit Agreement
<PAGE> 31
(b) The Administrative Agent will, with reasonable promptness, notify the
Company and the Banks of each determination of an Offshore Rate; provided that
any failure to do so shall not relieve the Company 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
Amount or Eurodollar Reserve Percentage shall become effective as of the
opening of business on the day on which such change in the Applicable Amount or
Eurodollar Reserve Percentage becomes effective. The Administrative Agent will
with reasonable promptness notify the Company and the Banks of the effective
date and the amount of each such change, provided that any failure to do so
shall not relieve the Company of any liability hereunder or provide the basis
for any claim against the Administrative Agent.
(c) Any change in the interest rate on a Loan resulting from a change in
the Applicable Amount or Eurodollar Reserve Percentage shall become effective as
of the opening of business on the day on which such change in the Applicable
Amount or Eurodollar Reserve Percentage becomes effective. Each determination of
an interest rate by the Administrative Agent pursuant hereto shall be conclusive
and binding on the Company and the Banks in the absence of manifest error.
12. PAYMENTS BY THE COMPANY.
(a) All payments of principal, interest and fees hereunder shall be in
immediately available funds without deduction or setoff 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. 12335-16417
Reference: Cinemark Investments Corporation.
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 the Company 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 the
Company prior to the date on which any payment is due to the Banks hereunder
that the Company will not make such payment in full as and when required
hereunder, the Administrative
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Cinemark Investments Credit Agreement
<PAGE> 32
Agent may assume that the Company 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 the Company 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.
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 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 the
Company 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 the Company 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
the Company 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 the Company
of such failure to fund and, upon demand by the Administrative Agent, the
Company 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.
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Cinemark Investments Credit Agreement
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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. The
Company 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 10.09) with respect to such participation as fully as if such Bank
were the direct creditor of the Company in the amount of such participation. The
Administrative Agent will keep records (which shall be conclusive and binding in
the absence of 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.
15. SECURITY AND CINEMARK USA GUARANTY.
All obligations of the Company under this Agreement, any Notes and all
other Loan Documents shall be guarantied pursuant to the Guaranty and secured in
accordance with the FRN Pledge Agreement.
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Cinemark Investments Credit Agreement
<PAGE> 34
SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY
1. TAXES.
(a) Subject to Section 3.01(g), any and all payments by the Company to each
Bank or the Agents 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 Agents, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
each Bank's or each Agent's net income by the jurisdiction under the laws of
which such Bank or the Agents, 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, the Company 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 3.01(g), the Company shall indemnify and hold
harmless each Bank and each 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 3.01) paid by such Bank or such 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 such Agent has
timely notified the Company 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 Agent makes written demand therefor.
(d) If the Company 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
an Agent, then, subject to Section 3.01(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 3.01) such
Bank or such Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions been made; (ii) the Company shall
make such deductions, and (iii) the Company 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 the Company of Taxes or
Other Taxes, the Company shall furnish to the Administrative Agent the original
or a
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Cinemark Investments Credit Agreement
<PAGE> 35
certified copy of a receipt evidencing payment thereof, or other evidence of
payment 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 10.08 after the Closing Date, the
date upon which the Bank becomes a party hereto) deliver to the Company 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 the Company 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 the Company 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 the Company's or the Administrative Agent's
reasonable request to that effect, deliver to the Company 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) The Company will not be required to pay any additional amounts in
respect of United States Federal income tax pursuant to Section 3.01(d) to any
Bank for the account of any Lending Office of such Bank or to indemnify any
Bank pursuant to Section 3.01(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 3.01(f) in respect of such Lending Office; (ii) if
such Bank shall have delivered to the Company a Form 4224 in respect of such
Lending Office pursuant to Section 3.01(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 the Company 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 have delivered to the Company a Form
1001 in respect of such Lending Office pursuant to
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Cinemark Investments Credit Agreement
<PAGE> 36
Section 3.01(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 the Company 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, the Company requests any Bank to deliver any forms or
other documentation pursuant to Section 3.01(f)(iv), then the Company shall, on
demand of such Bank through the Administrative Agent, reimburse such Bank for
any costs and expenses (including expenses of outside legal counsel and the
allocated costs of in-house counsel) reasonably incurred by such Bank in the
preparation or delivery of such forms or other documentation.
(i) If the Company is required to pay additional amounts to any Bank
pursuant to Section 3.01(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 the Company which may thereafter accrue if such change in the
judgment of such Bank is not otherwise disadvantageous to such Bank.
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 the Company 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 the Company 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, the Company 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, the Company shall pay all interest accrued thereon, together with
any amounts required to be paid in connection therewith pursuant to Section
3.04.
(c) If the obligation of any Bank to make or maintain Offshore Rate Loans
has been terminated, the Company 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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Cinemark Investments Credit Agreement
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(d) Before giving any notice to the Administrative Agent pursuant to this
Section 3.02, 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. 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 the Company 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, the Company 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.
4. FUNDING LOSSES.
The Company 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 the Company to make any prepayment of
principal of any Offshore Rate Loan or to make any payment after any
acceleration thereof; (b) the failure of the Company to borrow or continue an
Offshore Rate Loan or convert a Base Rate Loan to an Offshore Rate Loan
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Cinemark Investments Credit Agreement
<PAGE> 38
after the Company has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/Continuation; (c) the failure of the Company to make
any prepayment of an Offshore Rate Loan after the Company has given a notice in
accordance with Section 2.07; 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 the Company to the Banks
under this Section 3.04, each Offshore Rate Loan 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.
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 the Company 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, the Company may
revoke any Notice of Borrowing or Notice of Conversion/ Continuation then
submitted by it. If the Company does not revoke such notice with respect to
Loans, the Banks shall make, convert or continue the Loans, as proposed by the
Company, in the amount specified in the applicable notice submitted by the
Company, but such Loans shall be made, converted or continued as Base Rate Loans
instead of Offshore Rate Loans.
6. SURVIVAL.
The agreements and obligations of the Company 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.
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Cinemark Investments Credit Agreement
<PAGE> 39
SECTION 4. CONDITIONS PRECEDENT
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 in sufficient copies for each Bank
and each Agent:
(a) Credit Agreement and Notes.
This Agreement executed by the Company, the Agents and each of the
Banks and, if requested by any Bank pursuant to Section 2.02(b), the Note(s) for
such Bank executed by the Company.
(b) Resolutions; Incumbency for Company and Cinemark USA.
(i) Copies of the resolutions of the Board of Directors or the
executive committee of the Company and Cinemark USA approving and
authorizing the execution, delivery and performance by such Person of
the Loan Documents to which it is a party and the Fixed Rate Notes, as
applicable, and authorizing the borrowing of the Loans, certified as of
the Closing Date by the Secretary or an Assistant Secretary of the
Company and Cinemark USA; and
(ii) A certificate of the Secretary or Assistant Secretary of the
Company and Cinemark USA certifying the names and true signatures of
the officers of the Company and Cinemark USA authorized to execute and
deliver the Loan Documents to which it is a party and the Fixed Rate
Notes, as applicable.
(c) Articles of Incorporation; By-laws and Good Standing.
Each of the following documents:
(i) The articles or certificate of incorporation of the Company as in
effect on the Closing Date, certified by the secretary of state of the
state of incorporation of the Company as of a recent date and by the
Secretary or Assistant Secretary of the Company as of the Closing Date
and the bylaws of the Company as in effect on the Closing Date,
certified by the Secretary or Assistant Secretary of the Company as of
the Closing Date; and
(ii) A good standing certificate for the Company from the secretary of
state or equivalent of its state of incorporation and each state where
the Company is qualified to do business as a foreign corporation as of
a recent date.
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Cinemark Investments Credit Agreement
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(d) Cinemark USA Guaranty.
The Guaranty, duly executed and delivered by Cinemark USA.
(e) FRN Pledge Agreement; Delivery of Pledged Collateral.
The FRN Pledge Agreement, duly executed by the Company, together with
(i) delivery to the Administrative Agent of all original Fixed Rate Notes duly
endorsed in blank to the Administrative Agent for the benefit of the Secured
Parties, (ii) appropriate evidence of Brazilian regulatory approval for Cinemark
Brasil to make payments on the Fixed Rate Notes in US Dollars to the paying
agent under Fixed Rate Notes and (iii) an acknowledgement signed by the Company
and the paying agent under the Fixed Rate Notes pursuant to which the paying
agent agrees to make all payments under the Fixed Rate Notes directly to the
Administrative Agent upon receipt of written instructions of the Administrative
Agent to do so.
(f) Amendment to Cinemark USA Credit Agreement.
Appropriate evidence that the First Amendment to Second Amended and
Restated Reducing Revolving Credit Agreement dated of even date herewith has
concurrently become effective.
(g) Legal Opinions.
An opinion of the general counsel of the Company addressed to the
Administrative Agent and the Banks, in form satisfactory to all Banks
addressing, among other items, the ability of, without the consent of any
Governmental Authority, (i) the Company to pledge the Fixed Rate Notes to the
Secured Parties, and (ii) the Company to cause all payments made pursuant to the
Fixed Rate Notes to be paid directly to the Administrative Agent upon the
occurrence of an Event of Default, all in accordance with the terms of the FRN
Pledge Agreement.
(h) Payment of Fees.
The Company 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 in-house 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 the Company 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,
the Company shall pay such fees, costs and expenses within 30 days of being
invoiced therefor.
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Cinemark Investments Credit Agreement
<PAGE> 41
(i) 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; and (B) no Default or Event of Default
exists or would result from the initial Loan; and (ii) showing in detail the
Cinemark USA Leverage Ratio, the Cinemark USA Senior Leverage Ratio and the CBSA
Leverage Ratio, all as of June 30, 1998.
(j) Other Documents.
Such other approvals, opinions or documents as the Administrative Agent
or any Bank may request.
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) Notice of Borrowing. The Administrative Agent shall have received a
Notice of Borrowing;
(b) Continuation of Representations and Warranties.
The representations and warranties made by the Company 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
(c) No Existing Default.
No Default or Event of Default shall exist or shall result from such
Borrowing.
Each Notice of Borrowing submitted by the Company hereunder shall
constitute a representation and warranty by the Company hereunder that, as of
the date of each such notice and as of each Borrowing Date, the conditions in
Section 4.02 are satisfied.
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Cinemark Investments Credit Agreement
<PAGE> 42
SECTION 5. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Agent and each Bank that:
1. CORPORATE EXISTENCE AND POWER.
The Company: (a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation; (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, 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.
2. CORPORATE AUTHORIZATION; NO CONTRAVENTION.
The execution, delivery and performance by the Company, of this
Agreement and any other Loan Document to which the Company 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 the Company'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 the Company is a party
or any order, injunction, writ or decree of any Governmental Authority to which
the Company or its Property is subject; or (c) violate any Requirement of Law.
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, the Company of the Agreement or any other Loan Document, except for (a)
such filings, recordations and registrations as contemplated by the FRN Pledge
Agreement in order to perfect, continue or enforce the security interests in the
Collateral thereunder, (b) routine corporate filings to maintain the corporate
good standing of the Company, and (c) as provided in Section 4.01(e)(ii) with
respect to the Fixed Rate Notes.
4. BINDING EFFECT.
This Agreement and each other Loan Document to which the Company is a
party constitute the legal, valid and binding obligations of the Company,
enforceable against such Person 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.
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Cinemark Investments Credit Agreement
<PAGE> 43
5. LITIGATION.
There are no actions, suits, proceedings, claims or disputes pending,
or to the knowledge of the Company, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against the
Company, or any of its 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 the Company,
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 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.
6. NO DEFAULT.
No Default or Event of Default exists or would result from the
incurring of any Obligations by the Company or the grant or perfection of the
Administrative Agent's Liens on the Collateral. The Company has not 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.
7. 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 6.06.
8. REGULATED ENTITIES.
None of the Company, any Person controlling the Company, 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.
9. YEAR 2000.
On the basis of a comprehensive review and assessment of the Company's
systems and equipment and inquiry made of Company's material suppliers, vendors
and customers, the Company reasonably believes that the "Year 2000 problem"
(that is, the inability of computers, as well as embedded microchips in
non-computing devices, to perform properly date-sensitive functions with respect
to certain dates prior to and after December 31, 1999), including costs of
remediation, will not result in a Material Adverse Effect. The Company has
developed feasible contingency plans adequately to ensure uninterrupted and
unimpaired business operation in the event of failure of its own or a third
party's systems or equipment due to the Year 2000 problem, including those of
vendors, customers, and suppliers, as well as a general failure of or
interruption in its communications and delivery infrastructure.
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Cinemark Investments Credit Agreement
<PAGE> 44
10. FRN PLEDGE AGREEMENT.
At all times the provisions of the FRN Pledge Agreement are, or will be
upon execution, effective to create, in favor of the Administrative Agent for
the benefit of the Secured Parties, a legal, valid and enforceable security
interest in all of the Collateral described therein; and all Fixed Rate Notes
have been delivered to the Administrative Agent or its nominee in accordance
with the terms thereof. The Lien of the FRN Pledge Agreement constitutes a
perfected, first priority security interest in all right, title and interest of
the Company in the Collateral described therein, prior and superior to all other
Liens and interests.
11. FULL DISCLOSURE.
None of the representations or warranties made by the Company 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 the Company 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.
6. AFFIRMATIVE COVENANTS
The Company 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:
1. FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATE.
The Company 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
Agent and 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 unaudited consolidated balance sheet of Cinemark
Brasil as at the end of such 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 year, and certified by a
Responsible Officer as fairly presenting, in accordance with GAAP, the
financial position and the results of operations of Cinemark Brasil, and (ii)
an annual operating budget for Cinemark Brasil;
(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 balance sheet of Cinemark Brasil as of the end of such quarter and
the related statements of income, shareholders' equity and cash flows for such
fiscal quarter and year-to-date, setting forth in each case in comparative form
the figures for the previous year, and certified by a Responsible Officer as
fairly presenting, in accordance with GAAP (subject to normal
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Cinemark Investments Credit Agreement
<PAGE> 45
year end adjustments), the financial position and the results of operations of
Cinemark Brasil,
(c) concurrently with delivery of the financial statements required
pursuant to subsections (a) and (b) above, a certificate showing the
calculations of the Cinemark USA Leverage Ratio, the Cinemark USA Senior
Leverage Ratio and the CBSA Leverage Ratio, all certified by a Responsible
Officer; and
(d) upon the request of the Administrative Agent, copies of Cinemark USA
financial statements as and when delivered pursuant to Section 6.1 of the
Cinemark USA Credit Agreement.
All financial information relating to Cinemark Brasil contained in
financial statements and other certificates delivered from time to time
hereunder shall be stated in U.S. Dollars using foreign exchange rates in effect
on the measurement date, as disclosed in such statements and certificates.
2. NOTICES.
The Company 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 the Company or Cinemark Brasil to which the Company
has knowledge which could result in a Material Adverse Effect; (ii) any
dispute, litigation, investigation, proceeding or suspension which may exist at
any time between the Company or Cinemark Brasil 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 the Company or Cinemark Brasil (i) in which the amount
of damages claimed is $2,500,000 (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) of any material change in accounting policies or financial reporting
practices by the Company or Cinemark Brasil; and
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Cinemark Investments Credit Agreement
<PAGE> 46
(e) promptly, such additional business, financial, corporate affairs and
other information as the Administrative Agent, at the written request of any
Bank, may from time to time reasonably request.
Each notice pursuant to this Section shall be accompanied by a written
statement by a Responsible Officer of the Company setting forth details of the
occurrence referred to therein, and stating what action the Company proposes to
take with respect thereto and at what time. Each notice under Section 6.02(a)
shall describe with particularity any and all clauses or provisions of this
Agreement or other Loan Document that have been breached or violated.
3. PRESERVATION OF CORPORATE EXISTENCE, ETC.
The Company shall, and shall cause Cinemark Brasil 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; (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.
4. COMPLIANCE WITH LAWS.
The Company shall, and shall cause Cinemark Brasil 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.
5. INSPECTION OF PROPERTY AND BOOKS AND RECORDS.
The Company shall, and shall cause Cinemark Brasil 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 the Company. The
Company shall 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 at such reasonable times during
normal business hours and as often as may be reasonably desired, upon reasonable
advance notice to the Company; 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 the Company at any time during normal business
hours and without advance notice.
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<PAGE> 47
6. USE OF PROCEEDS.
The Company shall use the proceeds of the Loans to make loans to
Cinemark Brasil evidenced by the Fixed Rate Notes. The Fixed Rate Notes shall be
payable in US Dollars, have maturities not exceeding eight years and shall not
be subordinated in right of payment to any other indebtedness of Cinemark
Brasil. The Company shall not use any portion of the Loans, directly or
indirectly, (w) to purchase or carry Margin Stock, (x) to repay or otherwise
refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (y) to extend credit for the purpose of purchasing or carrying any
Margin Stock, or (z) to acquire any security in any transaction that is subject
to Section 13 or 14 of the Exchange Act.
7. FURTHER ASSURANCES.
The Company 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
The Company 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:
1. LIMITATION ON LIENS.
The Company shall not, 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
(each a "Permitted Lien"):
(a) any Lien created under any Loan Document;
(b) Liens for taxes, fees, assessments or other governmental charges which
are not delinquent or remain payable without penalty unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company;
(c) 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 the Company;
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Cinemark Investments Credit Agreement
<PAGE> 48
(d) 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;
(e) Liens (other than Liens on the Collateral) on the Property of the
Company 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;
(f) 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;
(g) easements, rights-of-way, restrictions, minor defects or
irregularities in title 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 the Company;
(h) 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 the
Company in excess of those set forth by regulations promulgated by the Federal
Reserve Board, and (ii) such deposit account is not intended by the Company to
provide collateral to the depositary institution; and
(i) any renewal of or substitution for any Lien permitted by any of the
preceding subsections, provided that the indebtedness secured is not increased
nor the Lien extended to any additional assets (other than proceeds and
accessions).
2. DISPOSITION OF PROPERTY.
The Company shall not dispose of any of its Property except for not
less than fair market value and shall not dispose of the Fixed Rate Notes.
3. CONSOLIDATIONS AND MERGERS.
The Company shall not 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 substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary of the Company may merge with, or sell all or
substantially all of its assets (upon voluntary liquidation or otherwise) to,
the Company, provided that the Company shall be the continuing or surviving
corporation; and
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Cinemark Investments Credit Agreement
<PAGE> 49
(b) the Company may merge with, or sell all or substantially all of its
assets (upon voluntary liquidation or otherwise) to, Cinemark USA or a
"Restricted Subsidiary" (as defined in the Cinemark USA Credit Agreement) of
Cinemark USA provided Cinemark USA assumes the Obligations of the Company
concurrently therewith.
4. LIMITATION ON INVESTMENTS.
The Company shall not purchase, make or acquire any Investment in any
Person, except for the following ("Permitted Investments"):
(a) Investments in Cash Equivalents;
(b) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the ordinary
course of business;
(c) loans to Cinemark Brasil evidenced by the Fixed Rate Notes, in an
aggregate principal amount not exceeding $20,000,000;
(d) bank accounts maintained in any commercial bank; and
(e) other Investments not exceeding $500,000 in the aggregate outstanding
at any time from the Closing Date.
5. LIMITATION ON INDEBTEDNESS.
The Company shall not 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; and
(b) endorsements for collection or deposit in the ordinary course of
business as presently conducted.
6. TRANSACTIONS WITH AFFILIATES.
The Company shall not enter into any transaction with any Affiliate of
the Company, except (a) as expressly permitted by this Agreement, or (b) unless
such transaction is on terms no less favorable to the Company than would be
obtained in a comparable arm's-length transaction with a Person not an Affiliate
of the Company.
7. COMPLIANCE WITH ERISA.
The Company shall not create or participate in any plan subject to the
Employee Retirement Income Security Act of 1974, as amended.
8. LEASE OBLIGATIONS.
The Company shall not create or suffer to exist any obligations for the
payment of rent for any Property under lease or agreement to lease, except for:
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<PAGE> 50
(a) leases of the Company in existence on the Closing Date and any renewal,
extension or refinancing thereof; and
(b) operating leases entered into or assumed by the Company after the
Closing Date in the ordinary course of business.
9. RESTRICTED PAYMENTS.
The Company shall not make any Restricted Payment, except that the
Company may 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.
10. CHANGE IN BUSINESS.
The Company shall not engage in any material line of business
substantially different from those lines of business carried on by it on the
date hereof.
11. ACCOUNTING CHANGES.
The Company shall not make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company.
12. LIMITATION ON NEGATIVE PLEDGES.
The Company shall not be a party to any agreement prohibiting, or amend
any agreement to prohibit, the creation or assumption of any Lien in favor of
the Administrative Agent and the Banks upon its properties or assets, whether
now owned or hereafter acquired.
SECTION 8. EVENTS OF DEFAULT
1. EVENT OF DEFAULT.
Any of the following shall constitute an "Event of Default":
(a) Non-Payment.
The Company 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 the Company made or deemed made
herein, in any Loan Document, or which is contained in any certificate, document
or financial or other statement by the Company or its Responsible Officers,
furnished at 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
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<PAGE> 51
(c) Other Defaults.
The Company fails to perform or observe any other term or covenant
contained in Section 6.01, 6.02 or 6.06 and such default shall continue
unremedied for a period of three days, or the Company 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 the Company knew or should have known of such failure
or (ii) the date upon which written notice thereof is given to the Company by
the Administrative Agent or any Bank; or
(d) Cross-Defaults.
The Company, Cinemark USA or any "Restricted Subsidiary" (as such term
is defined in the Cinemark USA Credit Agreement) (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
(e) Insolvency; Voluntary Proceedings.
The Company, Cinemark USA or Cinemark Brasil (i) 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
(f) Involuntary Proceedings.
(i) Any involuntary Insolvency Proceeding is commenced or filed against
the Company, Cinemark USA or Cinemark Brasil, or any writ, judgment, warrant of
attachment, execution or similar process, is issued or levied against a
substantial part of the Company's, Cinemark USA's or Cinemark Brasil's
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) the Company, Cinemark USA or Cinemark Brasil admits the material
allegations of a petition against it in any Insolvency
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Cinemark Investments Credit Agreement
<PAGE> 52
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; or (iii) the Company, Cinemark USA or
Cinemark Brasil 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;
(g) Loan Documents; Fixed Rate Notes.
Any Loan Document or Fixed Rate Note 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 the Company or Cinemark USA 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
(h) Collateral.
Any material provision of any Collateral Document shall for any reason
cease to be valid and binding on or enforceable against the Company or the
Company 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 the Company knew or should have known of such
cessation or (ii) the date upon which written notice thereof is given to the
Company by the Administrative Agent or any Bank; or
(i) Material Adverse Change.
There shall occur a Material Adverse Effect; or
(j) Prohibited Action of or Default Under Cinemark USA Credit Agreement.
There shall occur any Prohibited Action or Event of Default (as defined
in the Cinemark USA Credit Agreement).
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
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Cinemark Investments Credit Agreement
<PAGE> 53
immediately due and payable; without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company; 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 (e) or (f)
of Section 8.01 above (in the case of clause (i) of paragraph (f) 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.
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.
SECTION 9. THE ADMINISTRATIVE AGENT
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.
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.
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<PAGE> 54
3. LIABILITY OF 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 the Company or any
Subsidiary or Affiliate of the Company, 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 the Company 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 the Company or any of the Company's
Subsidiaries or Affiliates.
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 the Company), 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 (or all Banks if required by Section 10.01) 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 4.01 and 4.02, 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
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Cinemark Investments Credit Agreement
<PAGE> 55
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.
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 the
Company 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.
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
the Company 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 the
Company 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 the Company 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 the Company. 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 the Company which may come into the possession of any of the
Agent-Related Persons.
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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 the Company and without limiting
the obligation of the Company 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 the Company. 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
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.
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
the Company 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
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were not the Administrative Agent, and the terms "Bank" and "Banks" shall
include BofA in its individual capacity.
9. SUCCESSOR ADMINISTRATIVE AGENT.
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 the Company. 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 the Company, 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 10.04 and 10.05 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.
10. COLLATERAL MATTERS.
(a) The Administrative Agent is authorized on behalf of all Secured
Parties, without the necessity of any notice to or further consent from the
Secured Parties, to enter into the FRN Pledge Agreement and from time to time
to take any action with respect to any Collateral or the Collateral Documents
which may be necessary to perfect and maintain perfected the security interest
in and Liens upon the Collateral granted pursuant to the Collateral Documents.
(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 the
Company or any Subsidiary of the Company owned no interest at the time the Lien
was granted or at any time thereafter; (iv) constituting Property leased to the
Company or any Subsidiary of the Company 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 the Company or such
Subsidiary to be, renewed or extended;
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(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 required hereunder. 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 the Company or any of its Subsidiaries) that the
Company'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.
11. SYNDICATION AGENT.
The Bank identified on the facing page or signature pages of this
Agreement as the Syndication Agent shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing, such Bank shall
not have or be deemed to have any fiduciary relationship with any Bank. Each
Bank acknowledges that it has not relied, and will not rely, on such Bank so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.
SECTION 10. MISCELLANEOUS
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 the Company
therefrom, shall be effective unless the same shall be in writing and signed by
the Majority Banks, the Company 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; provided, however, that no such waiver,
amendment, or consent shall, unless in writing and signed by all the Banks, the
Company and acknowledged by the Administrative Agent, do any of the following:
(a) increase or extend the Commitment of any Bank 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;
(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;
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(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 10.01 or Section 2.15;
(f) consent to any Prohibited Action; or
(g) discharge Cinemark USA under the Guaranty, 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.
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 the Company to its address specified on Schedule 10.02 hereto; if to any
Bank, to its Domestic Lending Office specified on Schedule 10.02 hereto; and if
to the Administrative Agent, to its address specified on Schedule 10.02 hereto;
or, as to the Company 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 the Company 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.
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.
4. COSTS AND EXPENSES.
The Company shall, whether or not the transactions contemplated hereby
shall be consummated:
(a) reimburse the Agents 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
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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 Agents 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 Agents and to each of the
Banks; and
(c) reimburse the Agents 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.
5. GENERAL INDEMNITY.
The Company shall pay, indemnify, and hold each Bank, the Agents 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 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 the Company 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
the Company. The obligations in this Section 10.05 shall survive payment of all
other Obligations. The Company 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 the
Company, the conduct and settlement of any Indemnified Liabilities, and the
Indemnified Person shall cooperate with the Company in connection therewith;
provided that the Company 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
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Person shall have the right to employ its own counsel, and the reasonable fees
and expenses of such counsel shall be at the Company's costs and expense if the
interests of the Company and the Indemnified Person become adverse in any such
claim or course of action; provided, however, the Company, in such event, shall
only be liable for the reasonable legal expenses of one counsel for all of such
Indemnified Persons. The Company 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 10.05 shall be
paid within 30 days after demand.
6. MARSHALLING; PAYMENTS SET ASIDE.
Neither the Administrative Agent nor the Banks shall be under any
obligation to marshall any assets in favor of the Company or any other Person or
against or in payment of any or all of the Obligations. To the extent that the
Company 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.
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 that the Company 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.
8. ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) Any Bank may, with the prior written consent of the Company 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 the Company 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 $5,000,000 and multiples of $1,000,000 in excess thereof;
provided, however, that (i) the Company 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 the Company and the
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Administrative Agent by such Bank and the Assignee; (B) such Bank and its
Assignee shall have delivered to the Company and the Administrative Agent a
Notice of Assignment and Acceptance in the form of Exhibit C ("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 $3,500.
(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, the Company 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.
(d) Any Bank may at any time sell to one or more commercial banks or other
Persons not Affiliates of the Company (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) the Company 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 extend the Maturity Date, decrease any
interest or fee rate, increase any Commitment, reduce or delay any required
payment or release any collateral or guarantor. In the case of any such
participation, the Participant shall be entitled to the
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benefit of Sections 3.01, 3.03 and 10.05 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 the Company to or for the account of the
assigning or pledging Bank in accordance with the terms of this Agreement shall
satisfy the Company'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.
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 the Company, any such notice being waived
by the Company 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 the Company 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 the Company 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 10.09 are in addition to the other rights and remedies (including other
rights of set-off) which the Bank may have.
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 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.
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
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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 the Company and the
Administrative Agent.
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.
13. NO THIRD PARTIES BENEFITED.
This Agreement is made and entered into for the sole protection and
legal benefit of the Company, 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.
14. Time.
Time is of the essence as to each term or provision of this Agreement
and each of the other Loan Documents.
15. Governing Law and Jurisdiction.
(A) THIS AGREEMENT AND ANY NOTES 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 THE COMPANY, 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 THE COMPANY, 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. THE COMPANY, 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.
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16. WAIVER OF JURY TRIAL.
THE COMPANY, 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. THE
COMPANY, 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.
17. NOTICE OF CLAIMS; CLAIMS BAR.
THE COMPANY 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.
18. ENTIRE AGREEMENT.
This Agreement, together with the other Loan Documents, embodies the
entire agreement and understanding among the Company, 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 Section 2.10.
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19. INTERPRETATION.
This Agreement is the result of negotiations between and has been
reviewed by counsel to the Administrative Agent, the Company 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 INVESTMENTS
CORPORATION
By
----------------------------
Name
----------------------------
Title
------------------------
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
By
----------------------------
David Price
Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as a Bank
By
----------------------------
Name
----------------------------
Title
------------------------
NATIONSBANK, N.A., as Syndication
Agent and a Bank
By
----------------------------
Name
----------------------------
Title
------------------------
- 58 -
Cinemark Investments Credit Agreement
<PAGE> 68
EXHIBIT A
FORM OF NOTICE OF BORROWING
TO: Bank of America National Trust and Savings Association, as
Administrative Agent
Pursuant to Section 2.03 of that certain Credit Agreement dated as of
September 11, 1998 (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
Investments Corporation (the "Company"), the Banks party thereto and Bank of
America National Trust and Savings Association, as Administrative Agent (in such
capacity, the "Administrative Agent") for said Banks and NationsBank, N.A., as
Syndication Agent (in such capacity, the "Syndication Agent"), this represents
the Company'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 Company's account at the
Administrative Agent.
The undersigned Responsible Officer hereby certifies that:
(a) the representations and warranties of the Company 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 INVESTMENTS
CORPORATION
By
-----------------------------
Name
----------------------------
Title
---------------------------
A - 1
Notice of Borrowing
<PAGE> 69
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 2.04 of that certain
Credit Agreement dated as of September 11, 1998 (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 Investments Corporation (the "Company"), the
Banks party thereto and Bank of America National Trust and Savings Association,
as Administrative Agent (in such capacity, the "Administrative Agent") for said
Banks and NationsBank, N.A., as Syndication Agent (in such capacity, the
"Syndication Agent"), this represents the Company's request to convert
$________________of existing [Base Rate] [Offshore Rate] Loans on
_______________, ______, to [Offshore Rate] [Base Rate] Loans, as follows:
<TABLE>
<CAPTION>
INTEREST PERIOD
DOLLAR AMOUNT (OFFSHORE RATE LOANS)
------------- ---------------------
<S> <C>
$ months
------------- --------------
</TABLE>
2. Continuation Selection. (Offshore Rate Loans). Pursuant to Section
2.04 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 INVESTMENTS
CORPORATION
By
-----------------------------
Name
----------------------------
Title
---------------------------
B - 1
Notice of Conversion/Continuation
<PAGE> 70
EXHIBIT C
FORM OF NOTICE OF ASSIGNMENT AND ACCEPTANCE
TO: Bank of America National Trust and Savings Association, as
Administrative Agent
A. Reference is made to that certain Credit Agreement dated as of
September 11, 1998 (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 the Company,
the banks party thereto (the "Banks") and Bank of America National Trust and
Savings Association, as Administrative Agent (in such capacity, the
"Administrative Agent") for said Banks and NationsBank, N.A., as Syndication
Agent (in such capacity, the "Syndication Agent").
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 9.08(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: ( )
--- ------------------
<PAGE> 71
(b) Domestic Lending Office:
Assignee name:
---------------------
Address:
---------------------------
-----------------------------------
Attention:
-------------------------
Telephone: ( )
--- ------------------
Telecopier: ( )
--- ------------------
(c) Notice Address:
Assignee name:
---------------------
Address:
---------------------------
-----------------------------------
Attention:
-------------------------
Telephone: ( )
--- ------------------
Telecopier: ( )
--- ------------------
(d) Payment Instructions: Account No.:
Account No.
------------------------
Attention:
------------------------
Reference:
------------------------
<PAGE> 72
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:
---------------------------
We hereby consent to the
foregoing assignment.
CINEMARK INVESTMENTS CORPORATION
By
--------------------------------
Name
------------------------------
Title
------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS ADMINISTRATIVE AGENT
By
--------------------------------
Vice President
<PAGE> 73
EXHIBIT D
FORM OF NOTE
$ September 11, 1998
------------------
FOR VALUE RECEIVED, the undersigned CINEMARK INVESTMENTS CORPORATION
(the "Company") 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 September 11, 1998 (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 Investments Corporation, the Banks party
thereto and Bank of America National Trust and Savings Association, as
Administrative Agent (in such capacity, the "Administrative Agent") for said
Banks and NationsBank, N.A., as Syndication Agent (in such capacity, the
"Syndication Agent") (as amended, restated, extended or otherwise modified from
time to time, the "Credit Agreement").
The Company 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
Company 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.12335-6417, Reference:
Cinemark Investments Corporation, 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 Company hereunder or under the
Credit Agreement, nor the validity of any payment made by the Company. 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 to
which reference is made for a statement of terms and conditions on which the
Company is permitted and required to
<PAGE> 74
make prepayments and repayments of the principal of the Loans evidenced b this
Note. 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.
The Company hereby promises to pay all 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 Company 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 Company has caused this Note to be executed and
delivered by its duly authorized officer, as of the day and year first above
written.
CINEMARK INVESTMENTS
CORPORATION
By
-----------------------------
Name
----------------------------
Title
---------------------------
<PAGE> 75
LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
<TABLE>
<CAPTION>
Type of Principal Rate of Amount of Amount of
Date Loan Amount Interest Date Due Principal Paid Interest Paid Date of Repayment
---- ---- ------ -------- -------- -------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE> 76
EXHIBIT E
CINEMARK USA GUARANTY
(GUARANTY OF CINEMARK INVESTMENTS CORPORATION)
TO: Bank of America National Trust and Savings Association, as
Administrative Agent (the "Administrative Agent")
PRELIMINARY STATEMENTS:
A. Reference is made to that certain Credit Agreement dated as of
September 11, 1998 (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
Investments Corporation (the "Company"), the banks party thereto (the "Banks")
and Bank of America National Trust and Savings Association, as Administrative
Agent (in such capacity, the "Administrative Agent") for said Banks and
NationsBank, N.A., as Syndication Agent (in such capacity, the "Syndication
Agent").
B. Guarantor is a the sole shareholder of the Company and has derived,
and expects to continuing deriving, direct and indirect benefits from extensions
of credit made to the Company, and now desires to guaranty the Obligations.
C. It is a requirement of the Credit Agreement that Guarantor execute
and delivery this Guaranty.
NOW, THEREFORE, Guarantor agrees as follows:
1. For valuable consideration, the undersigned (the "Guarantor")
unconditionally, absolutely and irrevocably guarantees and promises to pay to
the Administrative Agent, or order, on demand, in lawful money of the United
States and in immediately available funds, any and all present or future
Obligations owing to the Banks, the Administrative Agent and the Syndication
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 Company, now, or hereafter made, incurred,
or created, whether voluntary or involuntarily, and however arising, including,
without limitation, any and all attorneys' fees (including the allocated cost of
inhouse counsel), costs, premiums, charges, or interest owed by the Company to
the Guarantied Parties, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, whether the Company 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.
E - 1
Cinemark USA Guaranty
<PAGE> 77
2. This Guaranty is a continuing guaranty which relates to any
Obligations, including those which arise under successive transactions which
shall either cause the Company to incur new Obligations, continue the
Obligations from time to time, or renew them after they have been satisfied.
Guarantor agrees that nothing shall discharge or satisfy its obligations created
hereunder except for the full payment of the Obligations. Any payment by
Guarantor shall not reduce its maximum obligation hereunder.
3. 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 Company, or of
any other guarantor, and that a separate action or actions may be brought and
prosecuted against Guarantor, whether action is brought against the Company or
whether the Company is joined in any such action or actions. Guarantor agrees
that any releases which may be given by the Administrative Agent and the
Guarantied Parties to the Company or any other guarantor shall not release it
from this Guaranty.
4. The obligations of 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 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 Guarantor of the occurrence of any
Event of Default under the terms and provisions of the 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
Guarantor, any other guarantor of any of the Obligations of the Company 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;
E - 2
Cinemark USA Guaranty
<PAGE> 78
(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, 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 Guarantor
from its undertakings hereunder and Guarantor hereby consents to each and all of
the foregoing actions, events and occurrences.
5. 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
Company 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 Guarantor may now or at any time hereafter have against the Company
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 Guarantor's
subrogation rights, rights to proceed against the Company for reimbursement, or
any other rights of Guarantor to proceed against the Company, against any other
guarantor, or against any other security, with Guarantor understanding that the
exercise by the Administrative Agent and/or the Guarantied Parties of certain
rights and remedies may offset or eliminate Guarantor's right of subrogation
against the Company, and that Guarantor may therefore incur partially or totally
non-reimbursable liability hereunder;
(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,
E - 3
Cinemark USA Guaranty
<PAGE> 79
and notices of the existence, creation, or incurring of new or additional
indebtedness, and all other notices or formalities to which Guarantor may be
entitled; and
(f) without limiting the generality of the foregoing, Guarantor hereby
expressly waives any and all benefits of California Civil Code Sections 2809,
2810, 2819, 2825, 2839 and 2845 through 2850.
6. 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 Company or any other guarantor, if any, and shall not seek to assert
or enforce the same. Guarantor understands that the exercise by Administrative
Agent of certain rights and remedies contained in the Loan Documents may affect
or eliminate Guarantor's right of subrogation if any, against the Company and
that Guarantor may therefore incur a partially or totally non-reimbursable
liability hereunder; nevertheless, 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 Guarantor that the obligations
hereunder shall be absolute, independent and unconditional under any and all
circumstances.
7. Guarantor is presently informed of the financial condition of the
Company and Cinemark Brasil and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Guarantor hereby covenants that it will continue to keep itself
informed of the financial condition of the Company and Cinemark Brasil, the
status of other guarantors, if any, and of all other circumstances which bear
upon the risk of nonpayment. 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. Guarantor represents and warrants that:
(a) 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
E - 4
Cinemark USA Guaranty
<PAGE> 80
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 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 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 Guarantor is
a party or any order, injunction, writ or decree of any Governmental Authority
to which 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, Guarantor of the Guaranty, except for routine corporate
filings to maintain the corporate good standing of Guarantor.
(d) This Guaranty constitutes the legal, valid and binding obligations
of Guarantor, enforceable against 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 Guarantor, threatened against or affecting 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 Guarantor of this
Guaranty does not constitute, to the best knowledge of 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.
10. 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 Company.
11. This Guaranty shall be binding upon the successors and assigns of
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
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.
12. 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
E - 5
Cinemark USA Guaranty
<PAGE> 81
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.
13. 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 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).
14. 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. This Guaranty and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the laws of
the State of California without reference to the principles of conflicts of laws
thereof.
16. 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.
17. Terms not defined herein shall have the meanings assigned to them
in the Credit Agreement.
18. Any indebtedness of the Company now or hereafter held by Guarantor
is hereby subordinated to the indebtedness of the Company to the Administrative
Agent and the Guarantied Parties; and such indebtedness of the Company to
Guarantor if the Administrative Agent so requests shall be collected, enforced
and received by 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 Company to the Administrative Agent and the Guarantied
Parties but without reducing or affecting in any manner the liability of
Guarantor under the other provisions of this guaranty.
E - 6
Cinemark USA Guaranty
<PAGE> 82
20. It is not necessary for the Guarantied Parties to inquire into the
powers of the Company or of the officers, directors or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
DATED AS OF:
------------------
CINEMARK USA, INC.
By
-----------------------------
Name
----------------------------
Title
---------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
ADMINISTRATIVE AGENT
By
---------------------------
David Price
Vice President
E - 7
Cinemark USA Guaranty
<PAGE> 83
EXHIBIT F
FRN PLEDGE AGREEMENT
THIS FRN PLEDGE AGREEMENT (this "Agreement"), dated as of September 11,
1998 is executed by CINEMARK INVESTMENTS CORPORATION, a Delaware corporation
(the "Company") for the benefit of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION as agent (in such capacity herein called the "Administrative Agent")
for itself, each Bank (as hereinafter defined) and NationsBank, N.A., as
Syndication Agent (the Administrative Agent, the Syndication Agent and each Bank
in such capacities are referred to herein collectively as the "Secured
Parties"). Terms not defined herein have the meanings assigned to them in the
Credit Agreement referred to below.
PRELIMINARY STATEMENTS:
A. Reference is made to that certain Credit Agreement dated as of
September 11, 1998 (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 the Company,
the banks party thereto (the "Banks") and Bank of America National Trust and
Savings Association, as Administrative Agent (in such capacity, the
"Administrative Agent") for said Banks and NationsBank, N.A., as Syndication
Agent (in such capacity, the "Syndication Agent").
B. It is a requirement of the Credit Agreement that Company execute and
delivery 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 Company 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 Company'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) any and all Fixed Rate Notes, together with any
collateral security therefor.
(ii) 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 Fixed
Rate Notes (all of the foregoing being the "Proceeds"); provided,
F - 1
FRN Pledge Agreement
<PAGE> 84
however, that so long as no Event of Default has occurred and is
continuing and subject to Section 2.08(a) of the Credit Agreement, the
Company may receive free and clear of any security interest under this
Agreement any payments made under the Fixed Rate Notes.
(b) 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 Company, 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 Company represents and warrants
as of the date hereof as follows:
(a) The chief place of business and chief executive office of the
Company and the office where the Company keeps its records concerning the
Collateral (hereinafter, "Records") is located at the address for notices for
the Company as provided in the Credit Agreement.
(b) The Company has delivered to the Collateral Agent all instruments,
documents, chattel paper and other items of Collateral in which a security
interest is or may be perfected by possession.
(c) Each contract right, item of chattel paper, instrument or any other
right to the payment of money constituting Collateral is genuine and enforceable
in accordance with its terms against Cinemark Brasil; any amount represented by
the Company to the Administrative Agent as owing by Cinemark Brasil is the
correct amount actually and unconditionally owing, free or any defense, set off
claim or counterclaim.
(d) No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral owned by the Company is on
file in any recording office, except as may have been filed pursuant to this
Agreement.
(e) The Company is lawfully possessed of ownership of the Collateral
owned by the Company which exists on the date hereof, and has full power and
lawful authority to grant the Liens in and on the Collateral hereunder.
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(f) This Agreement creates in favor of the Administrative Agent, for
the ratable benefit of the Secured Parties, a valid and enforceable first
priority Lien on the Collateral, subject to no Liens, securing the payment and
performance of the Obligations, and all filings and other actions necessary to
perfect such Lien have been duly made or taken.
(g) The Company 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
Company 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
Company, 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 Company.
(i) Except for Brazilian regulatory approval which has been obtained,
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 Company 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 Company,
which would be contravened by the execution, delivery, performance or
enforcement by the Company of this Agreement or any instrument or agreement
required hereunder.
(k) This Agreement is a legal, valid and binding agreement of the
Company, enforceable against the Company 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 Company, threatened against or affecting the Company, before
any court or arbitrator or any Governmental Authority which in any manner draws
into question the validity or enforceability of this Agreement.
(m) The execution, delivery and performance by the Company of this
Agreement do not and would not be expected to conflict with or result in any
breach or contravention of, or the
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creation of any Lien under, any document evidencing any Contractual Obligation
to which the Company is a party.
4. FURTHER ASSURANCES; SUPPLEMENTS.
(a) The Company 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 Company 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 Company 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 Company where
permitted by law.
(c) The Company 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 Company 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 Company shall, upon obtaining any Fixed Rate Notes or other
instruments constituting Collateral, promptly deliver the same to the
Administrative Agent and agrees that all such Fixed Rate Notes or other
instruments shall for all purposes hereunder constitute Collateral.
5. COVENANTS OF COMPANY.
(a) The Company 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
the Collateral or upon the Liens provided for herein, 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
Company 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.
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(b) The Company 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
Company 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 Company 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 (or at any time without notice following the
occurrence and during the continuance of any Event of Default), the
Administrative Agent may, permit the Administrative Agent or any Secured Party
to inspect and make abstracts from such Records.
(c) The Company shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral.
(d) The Company 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 Company's rights to the
Collateral against the claims and demands of all Persons whatsoever.
(e) The Company 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.
6. RECEIPT OF PAYMENTS, ETC.
1 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 Company): (i) the Company shall be
entitled to exercise any and all rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement or any
Loan Documents; and (ii) subject to Section 2.08(a) of the Credit Agreement, the
Company shall be entitled to receive and retain free and clear of any security
interest under this Agreement any and all payments made in respect of the
Collateral, other than any (A) instruments and other property received,
receivable or otherwise distributed in exchange for, any Collateral, and (B)
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 Company, be received in trust for the benefit of the
Administrative Agent, be segregated from the other property or funds of the
Company, and be forthwith delivered to the Administrative Agent as Collateral in
the same form as so received (with any necessary endorsement).
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(b) If an Event of Default has occurred and is continuing, in order to
permit the Administrative Agent to exercise all rights with respect to the
Collateral, and to receive all payments which it may be made under the
Collateral, the Company 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 payment
orders and other instruments as the Administrative Agent may reasonably request.
In addition, concurrently with the execution and delivery of this Agreement, the
Company shall sign, and shall arrange to have the paying agent under the Fixed
Rate Notes sign, an acknowledgement in form and substance satisfactory to the
Administrative Agent, pursuant to which paying agent agrees to make all payments
under the Fixed Rate Notes directly to the Administrative Agent upon receipt of
written instructions of the Administrative Agent to do so.
7. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. The Company hereby
irrevocably appoints the Administrative Agent the Company's attorney-in-fact
(which appointment as attorney-in-fact shall be coupled with an interest), with
full authority to act in the place and stead of the Company and in the name of
the Company 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 Collateral 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.
1 If the Company 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 Company 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 Company
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 Company.
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(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.
1 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:
(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 2.09(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 Company
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
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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
Company 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 Company, and the Company 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 Company at least ten days' notice
(which the Company 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 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 Company, make and execute all
conveyances, assignments and transfers of the Collateral sold pursuant to
Section 9(a) or Section 9(b) hereof, and the Company hereby ratifies and
confirms all that the Administrative Agent, as said attorney-in-fact, shall do
by virtue hereof. Nevertheless, the Company shall, if so requested by the
Administrative Agent, ratify and
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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 Company 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 Company 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.
(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. 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 Company, its successors and assigns and (c) inure, together
with the rights and remedies of the Administrative Agent hereunder, to the
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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 Company 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
Company. Upon any such termination, the Administrative Agent will, at the
Company's expense, execute and deliver to the Company such documents as the
Company shall reasonably request to evidence such termination.
11. 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 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 Company 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.
12. DELIVERY OF COLLATERAL. The Secured Parties may at any time cause
the Administrative Agent to deliver the Collateral or any part thereof to the
Company and the receipt of the Company 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.
13. ATTORNEYS FEES.
(a) The Company 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 Company 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 Company 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
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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. The Company 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 Company, the conduct and settlement of any Indemnified
Liabilities, and the Secured Parties shall cooperate with the Company in
connection therewith; provided that the Company 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 Company's cost and expense if the interests of the
Company and the Secured Parties become adverse in any such claim or course of
action; provided, however, the Company, in such event, shall only be liable for
the reasonable legal expenses of one counsel for all of such Secured Parties.
The Company 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 13(b) shall be paid within 30
days after demand.
(c) The obligations of the Company under this Section 13 shall survive
the termination of this Agreement.
14. 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
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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 Company herefrom shall in any event be effective
unless the same shall be in writing and signed by the Administrative Agent (with
the consent of the Majority Banks or all the Banks as required by Section 10.01
of the Credit Agreement) and the Company, 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 made in accordance with the
Credit Agreement.
15. 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.
16. 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
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HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
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 INVESTMENTS CORPORATION
By
-----------------------------
Name
----------------------------
Title
---------------------------
Agreed to:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By
-----------------------------
David Price
Vice President
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SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
BANK COMMITMENT PRO RATA SHARE
---- ---------- --------------
<S> <C> <C>
Bank of America National Trust and Savings Association $10,000,000 50%
NationsBank, N.A. $10,000,000 50%
TOTAL $20,000,000 100%
</TABLE>
- 1 -
<PAGE> 97
SCHEDULE 10.02
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
CINEMARK INVESTMENTS CORPORATION
CINEMARK INVESTMENTS CORPORATION.
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
Agency Administrative Services #5596
1850 Gateway Blvd., 5th Floor
Concord, California 94520
Attention: Clayton Choo
Telephone: (510) 675-8453
Facsimile: (510) 675-8500
Other Notices:
Bank of America National Trust
and Savings Association
Agency Management #10831
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attention: David Price
Vice President
Telephone: (415) 436-3496
Facsimile: (415) 436-3425
- 1 -
<PAGE> 98
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, 11th Floor
Los Angeles, California 90071
Attention: Jon Varnell
Managing Director
Credit Products #3283
Telephone: (213) 228-6181
Facsimile: (213) 228-2641
NATIONSBANK, N.A., AS A BANK AND AS SYNDICATION AGENT
Domestic and Offshore Lending Office and Notices:
NationsBank, N.A.
901 Main Street, 64th Floor
Dallas, Texas 75202
Attention: Charlie Brinley
Telephone: (214) 508-0950
Facsimile: (214) 508-9390
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<PAGE> 1
EXHIBIT 10.13(b)
FRN PLEDGE AGREEMENT
THIS FRN PLEDGE AGREEMENT (this "Agreement"), dated as of September 11,
1998 is executed by CINEMARK INVESTMENTS CORPORATION, a Delaware corporation
(the "Company") for the benefit of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION as agent (in such capacity herein called the "Administrative Agent")
for itself, each Bank (as hereinafter defined) and NationsBank, N.A., as
Syndication Agent (the Administrative Agent, the Syndication Agent and each Bank
in such capacities are referred to herein collectively as the "Secured
Parties"). Terms not defined herein have the meanings assigned to them in the
Credit Agreement referred to below.
PRELIMINARY STATEMENTS:
A. Reference is made to that certain Credit Agreement dated as of
September 11, 1998 (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 the Company,
the banks party thereto (the "Banks") and Bank of America National Trust and
Savings Association, as Administrative Agent (in such capacity, the
"Administrative Agent") for said Banks and NationsBank, N.A., as Syndication
Agent (in such capacity, the "Syndication Agent").
B. It is a requirement of the Credit Agreement that Company execute and
delivery 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 Company 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 Company'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) any and all Fixed Rate Notes, together with any
collateral security therefor.
(ii) 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 Fixed
Rate Notes (all of the foregoing being the "Proceeds"); provided,
however, that so long as no Event of Default has occurred and is
continuing and subject to Section 2.08(a) of the Credit Agreement, the
Company may receive free and clear of
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FRN Pledge Agreement
<PAGE> 2
any security interest under this Agreement any payments made under the
Fixed Rate Notes.
(b) 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 Company, 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 Company represents and warrants
as of the date hereof as follows:
(a) The chief place of business and chief executive office of the
Company and the office where the Company keeps its records concerning the
Collateral (hereinafter, "Records") is located at the address for notices for
the Company as provided in the Credit Agreement.
(b) The Company has delivered to the Collateral Agent all instruments,
documents, chattel paper and other items of Collateral in which a security
interest is or may be perfected by possession.
(c) Each contract right, item of chattel paper, instrument or any other
right to the payment of money constituting Collateral is genuine and enforceable
in accordance with its terms against Cinemark Brasil; any amount represented by
the Company to the Administrative Agent as owing by Cinemark Brasil is the
correct amount actually and unconditionally owing, free or any defense, set off
claim or counterclaim.
(d) No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral owned by the Company is on
file in any recording office, except as may have been filed pursuant to this
Agreement.
(e) The Company is lawfully possessed of ownership of the Collateral
owned by the Company which exists on the date hereof, and has full power and
lawful authority to grant the Liens in and on the Collateral hereunder.
(f) This Agreement creates in favor of the Administrative Agent, for
the ratable benefit of the Secured Parties, a valid and enforceable first
priority Lien on the Collateral, subject to no Liens, securing the payment and
performance of the Obligations, and all filings and other actions necessary to
perfect such Lien have been duly made or taken.
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FRN Pledge Agreement
<PAGE> 3
(g) The Company 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
Company 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
Company, 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 Company.
(i) Except for Brazilian regulatory approval which has been obtained,
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 Company 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 Company,
which would be contravened by the execution, delivery, performance or
enforcement by the Company of this Agreement or any instrument or agreement
required hereunder.
(k) This Agreement is a legal, valid and binding agreement of the
Company, enforceable against the Company 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 o equity.
(l) There is no action, suit or proceeding pending against, or to the
knowledge of the Company, threatened against or affecting the Company, before
any court or arbitrator or any Governmental Authority which in any manner draws
into question the validity or enforceability of this Agreement.
(m) The execution, delivery and performance by the Company 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 Company is a party.
4. FURTHER ASSURANCES; SUPPLEMENTS.
(a) The Company 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
- 3 -
FRN Pledge Agreement
<PAGE> 4
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 Company 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 Company 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 Company where
permitted by law.
(c) The Company 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 Company 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 Company shall, upon obtaining any Fixed Rate Notes or other
instruments constituting Collateral, promptly deliver the same to the
Administrative Agent and agrees that all such Fixed Rate Notes or other
instruments shall for all purposes hereunder constitute Collateral.
5. COVENANTS OF COMPANY.
(a) The Company 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
the Collateral or upon the Liens provided for herein, 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
Company shall not be required to pay any suc tax, assessment, charge or levy,
the validity of which is being contested in good faith by appropriate
proceedings.
(b) The Company 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
Company 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 Company 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 (or at any time without notice following the
occurrence and during the
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<PAGE> 5
continuance of any Event of Default), the Administrative Agent may, permit the
Administrative Agent or any Secured Party to inspect and make abstracts from
such Records.
(c) The Company shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral.
(d) The Company 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 Company's rights to the
Collateral against the claims and demands of all Persons whatsoever.
(e) The Company 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.
6. RECEIPT OF PAYMENTS, ETC.
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 Company): (i) the Company shall be
entitled to exercise any and all rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement or any
Loan Documents; and (ii) subject to Section 2.08(a) of the Credit Agreement, the
Company shall be entitled to receive and retain free and clear of any security
interest under this Agreement any and all payments made in respect of the
Collateral, other than any (A) instruments and other property received,
receivable or otherwise distributed in exchange for, any Collateral, and (B)
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 Company, be received in trust for the benefit of the
Administrative Agent, be segregated from the other property or funds of the
Company, and be forthwith delivered to the Administrative Agent as Collateral in
the same form as so received (with any necessary endorsement).
If an Event of Default has occurred and is continuing, in order to
permit the Administrative Agent to exercise all rights with respect to the
Collateral, and to receive all payments which it may be made under the
Collateral, the Company 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 payment
orders and other instruments as the Administrative Agen may reasonably request.
In addition, concurrently with the execution and delivery of this Agreement, the
Company shall sign, and shall arrange to have the paying agent under the Fixed
Rate Notes sign, an acknowledgement in form and
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<PAGE> 6
substance satisfactory to the Administrative Agent, pursuant to which paying
agent agrees to make all payments under the Fixed Rate Notes directly to the
Administrative Agent upon receipt of written instructions of the Administrative
Agent to do so.
7. ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT. The Company hereby
irrevocably appoints the Administrative Agent the Company's attorney-in-fact
(which appointment as attorney-in-fact shall be coupled with an interest), with
full authority to act in the place and stead of the Company and in the name of
the Company 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 Collateral 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.
If the Company 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 Company 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 Company
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 Company.
(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.
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
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FRN Pledge Agreement
<PAGE> 7
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:
(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 2.09(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 Company
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 Company 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,
<PAGE> 8
of the Company, and the Company 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
Company at least ten days' notice (which the Company 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
mak 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 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 th 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 Company, make and execute all
conveyances, assignments and transfers of the Collateral sold pursuant to
Section 9(a) or Section 9(b) hereof, and the Company hereby ratifies and
confirms all that the Administrative Agent, as said attorney-in-fact, shall do
by virtue hereof. Nevertheless, the Company shall, if so requested by the
Administrative Agent, ratify and confirm any sale or sale 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
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<PAGE> 9
manner. The Company 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 Company 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.
(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. 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 Company, 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 th extent
set forth in, the Loan Documents. The Company 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
Company. Upon any such termination, the Administrative Agent will, at the
Company's expense, execute and deliver to the Company such documents as the
Company shall reasonably request to evidence such termination.
11. 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 nonperformance, protests, notices of protest or notices
of dishonor in connection with any
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<PAGE> 10
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 Company 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.
12. DELIVERY OF COLLATERAL. The Secured Parties may at any time cause
the Administrative Agent to deliver the Collateral or any part thereof to the
Company and the receipt of the Company 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.
13. ATTORNEYS FEES.
(a) The Company 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 o any of the rights of any Secured Party hereunder;
or (iii) the failure by the Company 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 Company 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. The Company 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
Company, the conduct and settlement of any Indemnified Liabilities, and the
Secured Parties shall cooperate with the Company in connection therewith;
provided that the Company 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 Company's cost and expense if the interests of the Company and
the Secured Parties become adverse in any such claim or course of action;
provided, however, the Company, in such event, shall only be liable for the
reasonable legal expenses of one counsel for all of such Secured Parties. The
Company
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FRN Pledge Agreement
<PAGE> 11
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 13(b) shall be paid within 30 days after
demand.
(c) The obligations of the Company under this Section 13 shall survive
the termination of this Agreement.
14. 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 Company herefrom shall in any event be effective
unless the same shall be in writing and signed by the Administrative Agent (with
the consent of the Majority Banks or all the Banks as required by Section 10.01
of the Credit Agreement) and the Company, 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 made in accordance with the
Credit Agreement.
15. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
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FRN Pledge Agreement
<PAGE> 12
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.
16. 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.
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 INVESTMENTS CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Agreed to:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By:
-----------------------------
David Price
Vice President
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FRN Pledge Agreement
<PAGE> 1
EXHIBIT 10.13(c)
CINEMARK USA GUARANTY
(GUARANTY OF CINEMARK INVESTMENTS CORPORATION)
TO: Bank of America National Trust and Savings
Association, as Administrative Agent (the "Administrative Agent")
PRELIMINARY STATEMENTS:
A. Reference is made to that certain Credit Agreement dated as of
September 11, 1998 (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
Investments Corporation (the "Company"), the banks party thereto (the "Banks")
and Bank of America National Trust and Savings Association, as Administrative
Agent (in such capacity, the "Administrative Agent") for said Banks and
NationsBank, N.A., as Syndication Agent (in such capacity, the "Syndication
Agent").
B. Guarantor is a the sole shareholder of the Company and has derived,
and expects to continuing deriving, direct and indirect benefits from extensions
of credit made to the Company, and now desires to guaranty the Obligations.
C. It is a requirement of the Credit Agreement that Guarantor execute
and delivery this Guaranty.
NOW, THEREFORE, Guarantor agrees as follows:
1. For valuable consideration, the undersigned (the "Guarantor")
unconditionally, absolutely and irrevocably guarantees and promises to pay to
the Administrative Agent, or order, on demand, in lawful money of the United
States and in immediately available funds, any and all present or future
Obligations owing to the Banks, the Administrative Agent and the Syndication
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 Company, now, or hereafter made, incurred,
or created, whether voluntary or involuntarily, and however arising, including,
without limitation, any and all attorneys' fees (including the allocated cost of
inhouse counsel), costs, premiums, charges, or interest owed by the Company to
the Guarantied Parties, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, whether the Company 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 Company to incur new Obligations, continue the
Obligations from time to time, or renew them after they
- 1 -
Cinemark USA Guaranty
<PAGE> 2
have been satisfied. Guarantor agrees that nothing shall discharge or satisfy
its obligations created hereunder except for the full payment of the
Obligations. Any payment by Guarantor shall not reduce its maximum obligation
hereunder.
3. 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 Company, or of
any other guarantor, and that a separate action or actions may be brought and
prosecuted against Guarantor, whether action is brought against the Company or
whether the Company is joined in any such action or actions. Guarantor agrees
that any releases which may be given by the Administrative Agent and the
Guarantied Parties to the Company or any other guarantor shall not release it
from this Guaranty.
4. The obligations of 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 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 Guarantor of the occurrence of any
Event of Default under the terms and provisions of the 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
Guarantor, any other guarantor of any of the Obligations of the Company 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.
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Cinemark USA Guaranty
<PAGE> 3
To the extent any of the foregoing refers to any actions which the
Administrative Agent or the Guarantied Parties may take, 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 Guarantor
from its undertakings hereunder and Guarantor hereby consents to each and all of
the foregoing actions, events and occurrences.
5. 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
Company 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 Guarantor may now or at any time hereafter have against the Company
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 Guarantor's
subrogation rights, rights to proceed against the Company for reimbursement, or
any other rights of Guarantor to proceed against th Company, against any other
guarantor, or against any other security, with Guarantor understanding that the
exercise by the Administrative Agent and/or the Guarantied Parties of certain
rights and remedies may offset or eliminate Guarantor's right of subrogation
against the Company, and that Guarantor may therefore incur partially or totally
non-reimbursable liability hereunder;
(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 Guarantor may be entitled; and
(f) without limiting the generality of the foregoing, Guarantor hereby
expressly waives any and all benefits of California Civil Code Sections 2809,
2810, 2819, 2825, 2839 and 2845 through 2850.
6. 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 Company or any other guarantor, if
- 3 -
Cinemark USA Guaranty
<PAGE> 4
any, and shall not seek to assert or enforce the same. Guarantor understands
that the exercise by Administrative Agent of certain rights and remedies
contained in the Loan Documents may affect or eliminate Guarantor's right o
subrogation if any, against the Company and that Guarantor may therefore incur a
partially or totally non-reimbursable liability hereunder; nevertheless,
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 Guarantor that the obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
7. Guarantor is presently informed of the financial condition of the
Company and Cinemark Brasil and of all other circumstances which a diligent
inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Guarantor hereby covenants that it will continue to keep itself
informed of the financial condition of the Company and Cinemark Brasil, the
status of other guarantors, if any, and of all other circumstances which bear
upon the risk of nonpayment. 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. Guarantor represents and warrants that:
(a) 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 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 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 Guarantor is
a party or any order, injunction, writ or decree of any Governmental Authority
to which Guarantor or its Property is subject; or (iii) violate any Requirement
of Law.
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Cinemark USA Guaranty
<PAGE> 5
(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, Guarantor of the Guaranty, except for routine corporate
filings to maintain the corporate good standing of Guarantor.
(d) This Guaranty constitutes the legal, valid and binding obligations
of Guarantor, enforceable against 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 Guarantor, threatened against or affecting 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 Guarantor of this
Guaranty does not constitute, to the best knowledge of 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.
10. 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 Company.
11. This Guaranty shall be binding upon the successors and assigns of
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
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.
12. 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.
13. 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 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).
14. 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
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Cinemark USA Guaranty
<PAGE> 6
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. This Guaranty and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the laws of
the State of California without reference to the principles of conflicts of laws
thereof.
16. 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.
17. Terms not defined herein shall have the meanings assigned to them
in the Credit Agreement.
18. Any indebtedness of the Company now or hereafter held by Guarantor
is hereby subordinated to the indebtedness of the Company to the Administrative
Agent and the Guarantied Parties; and such indebtedness of the Company to
Guarantor if the Administrative Agent so requests shall be collected, enforced
and received by 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 Company to the Administrative Agent and the Guarantied
Parties but without reducing or affecting in any manner the liability of
Guarantor under the other provisions of this guaranty.
- 6 -
Cinemark USA Guaranty
<PAGE> 7
20. It is not necessary for the Guarantied Parties to inquire into the
powers of the Company or of the officers, directors or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
DATED AS OF:
CINEMARK USA, INC.
By
------------------------------------
Name
----------------------------------
Title
---------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, AS
ADMINISTRATIVE AGENT
By
-------------------------------
David Price
Vice President
- 7 -
Cinemark USA Guaranty
<PAGE> 1
EXHIBIT 12
CINEMARK USA, INC. AND SUBSIDIARIES
10K
COMPUTATION OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
12 Mos Ended 12 Mos Ended 12 Mos Ended 12 Mos Ended 12 Mos Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
COMPUTATION OF EARNINGS:
REGISTRANT'S PRETAX INCOME FROM
CONTINUING OPERATIONS 22,476,984 25,690,013 26,962,461 23,256,537 14,073,947
CAPITALIZED INTEREST (4,182,404) (1,991,397) (3,865,246) (1,726,155) (560,185)
---------- ---------- ---------- ---------- ----------
TOTAL EARNINGS 18,294,580 23,698,616 23,097,215 21,530,382 13,513,762
COMPUTATION OF FIXED CHARGES:
INTEREST EXPENSE 22,476,984 32,703,303 19,551,655 18,549,833 18,133,438
CAPITALIZED INTEREST 4,397,643 2,152,816 3,928,454 1,745,720 565,610
AMORTIZATION OF DEBT ISSUE COST & DEBT DISCOUNT 930,101 783,972 824,743 824,014 783,515
AMORTIZATION OF NEW DEBT DISCOUNT
INTEREST FACTOR ON RENT EXPENSE 20,427,123 12,911,689 11,468,682 10,291,069 9,866,567
---------- ---------- ---------- ---------- ----------
TOTAL FIXED CHARGES 48,231,851 48,551,780 35,773,534 31,410,636 29,349,130
TOTAL EARNINGS AND FIXED CHARGES 66,526,431 72,250,396 58,870,749 52,941,018 42,862,892
---------- ---------- ---------- ---------- ----------
RATIO OF EARNINGS TO FIXED CHARGES 1.38 1.49 1.65 1.69 1.46
========== ========== ========== ========== ==========
</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CINEMARK USA, INC.
Cinemark Corporation
Sunnymead Cinema Corp.
Cinemark Properties, Inc.
Cinemark Transportation, Inc.
Cinemark Investments Corporation
Multiplex Properties, Inc.
Multiplex Services, Inc.
Trans Texas Cinema, Inc.
Missouri City Central 6, Inc.
Brainerd Ltd.
Cinemark International, L.L.C.
Cinemark Mexico (USA), Inc.
Cinemark de Mexico, S.A. de C.V.
Inversiones Cinemark, S.A.
Inmobilaria Cinemark S.A. de C.V.
Worldwide Investment Inc./BVI
Cinemark Leasing Company fka Tinseltown Equities, Inc.
Premier Amusements, Inc.
Cinemark Partners I, Inc.
Cinemark Partners II, Ltd.
Cinemark Holdings Canada, Inc.
Canada Theatre Holdings, Inc.
Cinemark Ontario, Inc.
Cinemark Alberta, Inc.
Cinemark Equity Holdings Corporation/BVI
Cinemark Nicaragua y Cia, Ltda.
Cinemark Honduras S.R.L.
Cinemark-Core Pacific, Ltd. (Taiwan)
Cinemark Theatres U.K., Ltd.
Cinemark Investments Argentina, S.A.
Cinemark Argentina, S.A.
Laredo Joint Venture, Ltd.
Cinemark Brasil S.A.
Cinemark Empreendimentos e. Participacoes LTDA
Servicios Cinemark, S.A. de C.V.
Cinemark del Norte, S.A. de C.V.
Cinemark Chile S.A.
Cinemark Theatres Canada, Inc.
Cinemark del Ecuador S.A.
Cinemark del Peru S.A.
Cinemark Rio de la Plata Associates S.R.L.
Cinemark Theatre Services, Inc.
Cinemark Costa Rica, S.A.
Cinemark El Salvador, S.A. de C.V.
Cinemark Colombia S.A.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 25,991,853
<SECURITIES> 0
<RECEIVABLES> 12,414,288
<ALLOWANCES> 0
<INVENTORY> 3,591,705
<CURRENT-ASSETS> 65,676,943
<PP&E> 889,053,977
<DEPRECIATION> 138,550,648
<TOTAL-ASSETS> 882,672,634
<CURRENT-LIABILITIES> 95,636,352
<BONDS> 0
0
0
<COMMON> 49,537,622
<OTHER-SE> 26,261,994
<TOTAL-LIABILITY-AND-EQUITY> 882,672,634
<SALES> 571,218,912
<TOTAL-REVENUES> 571,218,912
<CGS> 30,377,832
<TOTAL-COSTS> 433,258,665
<OTHER-EXPENSES> 80,094,629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,013,580
<INCOME-PRETAX> 22,476,984
<INCOME-TAX> 11,468,455
<INCOME-CONTINUING> 11,008,529
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,008,529
<EPS-PRIMARY> 61.74
<EPS-DILUTED> 59.02
</TABLE>
