<TABLE>
<CAPTION>
THIS DOCUMENT IS A COPY OF THE ANNUAL REPORT ON FORM 10K FILED ON APRIL 1, 1997
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------------------
For the Fiscal Year Ended December 31, 1996 Commission File No. 33-72114
33-77444
CINEMARK MEXICO (USA), INC.
CINEMARK DE MEXICO, S.A. DE C.V.
(Exact Name of registrants as Specified in its Charter)
<S> <C> <C>
Texas 75-2493459
Mexico N/A
(State or Other Jurisdiction (I.R.S. Employer
of incorporation or Organization) Identification No.)
7502 Greenville Avenue
Suite 800
Dallas, Texas 75231-3830
(Address of principal executive offices) (Zip Code)
<FN>
Registrant's Telephone Number, including area code: (214)696-1644
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)
</FN>
</TABLE>
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have 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 registrants' 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 27, 1997, 4,109,299 shares of Common Stock of Cinemark Mexico
(USA), Inc. (including options to acquire 835 shares of common stock exercisable
within 60 days of such date) and 21,728,663 shares of Common Stock of Cinemark
de Mexico, S.A. de C.V. were issued and outstanding.
<PAGE>
<TABLE>
<CAPTION>
Index
Page
<S> <C>
PART I ......................................................................................................... 1
Item 1: Business..................................................................................... 1
(a) General Development of Business........................................................ 2
(b) Financial Information About Industry Segments.......................................... 2
(c) Narrative Description of Business...................................................... 7
Item 2: Properties................................................................................... 7
Item 3: Legal Proceedings............................................................................ 7
Item 4: Submission of Matters to a Vote of Security Holders.......................................... 7
PART II......................................................................................................... 7
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters........................ 7
Item 6: Selected Financial Information............................................................... 7
Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operation...................................................................... 9
Item 8: Financial Statements and Supplementary Data.................................................. 14
Item 9: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................................................... 14
PART III........................................................................................................ 14
Item 10: Directors and Executive Officers of the Registrant........................................... 14
Item 11: Executive Compensation....................................................................... 16
Item 12: Security Ownership of Certain Beneficial Owners and Management............................... 17
Item 13: Certain Relationships and Related Transactions............................................... 21
PART IV..........................................................................................................23
Item 14: Exhibits, Financial Statement Schedules and Reports on 8-K.......................................23
(a) Documents filed as part of this report.............................................................23
(b) Reports on Form 8-K................................................................................23
(c) Exhibits..........................................................................................E-1
(d) Financial Statement Schedule......................................................................S-1
</TABLE>
<PAGE>
PART I
Item 1: Business.
(a) General Development of Business.
General
Cinemark Mexico (USA), Inc., a Texas corporation ("Cinemark Mexico" or the
"Company"), is an indirect subsidiary of Cinemark USA, Inc., a Texas corporation
("Cinemark USA"). Cinemark USA is the fourth largest motion picture exhibitor in
the United States in terms of number of screens operated. The Company, which was
organized to own and operate movie theatres in Mexico through one or more
subsidiaries, has constructed state-of- the-art multiplex theatres comparable to
new theatres developed by Cinemark USA in the United States. The Company
currently operates 11 theatres (114 screens). The Company's revenues have
increased from $6.6 million in 1994 to $22.4 million in 1996. At March 27, 1997,
the Company had one theatre (15 screens) under construction and two theatres (20
screens) under commitment with executed leases. Mexico is beginning the recovery
from the depression resulting from the collapse of the peso beginning in
December 1994. Cinemark Mexico's debt and some theatre leases are denominated in
U.S. dollars while their revenues are collected in Mexican pesos. As such, the
devaluation and resulting depression has significantly impacted and will
continue to effect the short term profitability of the theatres. Additionally,
there is a lack of available capital in the Mexican financial market as a result
of the significant rise in interest rates resulting in the reduced availability
of developer financing for future projects. Such events have caused a reduction
in the rate of expansion initially anticipated by Cinemark Mexico. Cinemark
Mexico will continue to evaluate the market for appropriate locations to develop
state-of-the-art multiplex theatres. See "Peso Devaluation," "Properties" and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operation." The Company's operations are being conducted by Cinemark de Mexico,
S.A. de C.V. ("Cinemark de Mexico"), a Mexican corporation which is 99.99% owned
by the Company.
The Company was formed on July 28, 1993 as a subsidiary of Cinemark
International, Inc. (f/k/a Cinemark II, Inc.), a Texas corporation ("Cinemark
International") and wholly owned unrestricted subsidiary of Cinemark USA. As of
March 27, 1997, Cinemark International and New Wave Investments AVV, an
unaffiliated Aruba corporation owned by Mexican citizens ("New Wave") own 95.6%
(95.1% on a fully diluted basis) and 4.4%, respectively, of the common stock of
Cinemark Mexico. Additionally, warrants to purchase 22,222 shares of Common
Stock of the Company are issued and outstanding. See "Exchange Offer."
Exchange Offer
As of September 30, 1996, the Company had outstanding (i) $22.4 million
aggregate principal amount of 12% Series A, Series B and Series C Subordinated
Promissory Notes due 2003 (the "Cinemark Mexico Notes") and (ii) warrants to
purchase 379,073 shares of common stock of the Company (the "Warrants"). On
September 30, 1996, the Company completed an Exchange Offer and Consent
Solicitation (the "Exchange Offer") pursuant to which the Company and the
holders of all of the Cinemark Mexico Notes exchanged all of the Cinemark Mexico
Notes for a new issuance of promissory notes of the same series, and
substantially all of the holders of Warrants exchanged Warrants for a new 12%
Series D Senior Subordinated Note (collectively, the "New Mexico Notes"). The
form and terms of the New Mexico Notes are identical in all material respects to
the Cinemark Mexico Notes except that interest on the New Mexico Notes may, on
each interest payment date from February 1, 1997 through and including February
1, 2000, be paid at the option of the Company in cash or through the issuance of
additional notes of the same series (the "Additional Notes"). If the Company
elects to pay accrued interest in Additional Notes in lieu of cash, interest
during the relevant interest period shall accrue at the rate of 13% per annum.
The The Series A and Series D New Mexico Notes are entitled to certain
registration rights agreements and the Series B and Series C New Mexico Notes
are registered under the Securities Act of 1933, as amended. Holders of
- 1 -
<PAGE>
Warrants to purchase 22,222 shares of Common Stock of the Company elected not to
participate in the Exchange Offer. The purpose of the Exchange Offer was to
exchange New Securities for all outstanding Cinemark Mexico Notes in order to
improve the Company's and Cinemark de Mexico's financial and operating
flexibility. The Company exercised its option to pay Additional Notes for the
interest period ended February 1, 1997.
In connection with the Exchange Offer, the Company obtained the consent of
the holders of the Cinemark Mexico Notes to amend the Indenture. The Company
executed that certain Third Supplemental Indenture dated September 30, 1996 (the
"Third Supplemental Indenture"), which among other things, (i) provided for the
issuance of the New Mexico Notes and the Additional Notes and (ii) amended
certain restrictions relating to financial ratios with which the Company must
comply.
Simultaneously with the completion of the Exchange Offer, Cinemark
International acquired an additional 2,661,450 shares of Common Stock of the
Company for $10.0 million. On January 9, 1997, New Wave also acquired an
additional 64,032 shares of common stock of Cinemark Mexico for $240,591.
Senior Secured Credit Facility
On December 4, 1995, Cinemark International, Cinemark Mexico and Cinemark
de Mexico entered into that certain Senior Secured Credit Facility (the "Mexico
Senior Credit Facility") which provides for loans by Cinemark International to
Cinemark Mexico of up to $10.0 million in the aggregate at an interest rate of
12% per annum. The loans are payable as follows: (i) all accrued and unpaid
interest shall be payable on the first anniversary of the initial loan and
quarterly thereafter on January 15, April 15, July 15 and October 15 and (ii) on
December 31, 2001, all unpaid principal, accrued, unpaid interest and fees on
the loan shall be paid. Borrowing under the Mexico Senior Credit Facility is
secured by a pledge of all of the assets of Cinemark Mexico.
Simultaneously with the closing of the Exchange Offer, Cinemark
International and the Company agreed to amend the terms of the Mexico Senior
Credit Facility. The amendment provides that if Cinemark Mexico exercises its
options to pay accrued and unpaid interest on the New Mexico Notes through the
issuance of Additional Notes, Cinemark International will add accrued and unpaid
interest on the indebtedness under the Mexico Senior Credit Facility to
principal at the next two consecutive interest payment dates.
(b) Financial Information About Industry Segments.
The Company and its operations in conjunction with Cinemark USA, Inc. 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
At March 27, 1997, the Company operated 11 theatres (114 screens), had one
theatre (15 screens) under construction and two theatres (20 screens) under
commitment with executed leases. The Company's theatres are all modern
facilities equipped with state-of-the-art projection and sound equipment.
The Company's revenues are generated primarily from box office receipts and
concession sales. Additional revenues are generated by electronic video games
installed in video arcades located off the lobbies in the Company's theatres.
The Company relies principally upon newspaper display advertisement
(substantially paid for by distributors) and newspaper directory film schedules
(generally paid for by the Company) to inform its patrons of film titles and
exhibition times. The Company also exhibits in its theatres previews of coming
attractions and films presently playing on the other screens operated by the
Company in the same theatre and market area.
- 2 -
<PAGE>
The film distributors generally release during the summer and holiday
sessions those films which they anticipate will be most successful.
Consequently, the Company has historically generated higher revenues during such
periods.
The Company's strategy is to enter into leases with terms of 15 to 20 years
plus renewal options for the development of theatre facilities instead of
purchasing them due to the lower capital requirements for developing a leasehold
theatre. A typical leasehold theatre requires a capital outlay of approximately
$100,000 to $200,000 per screen, representing the costs of equipment and
interior finishout, whereas, the development of a fee owned or ground lease
theatre is estimated to range between $4.0 million and $10.0 million, per
theatre. The Company attempts to obtain lease terms that are typically
built-to-suit construction obligations of the landlord with Cinemark de Mexico
being responsible for theatre equipment. However, due to inability of landlords
to obtain financing in Mexico, many landlords have requested Cinemark de Mexico
to contribute to the cost of construction and recapture such contributions (with
interest) through rent abatements. Management has in the past and may in the
future make, such contributions to construction in markets it deems appropriate.
The Company will also consider a desirable location on a fee or ground lease
basis if there is no developer willing to construct the theatre on the site on
terms acceptable to the Company. In such events, the Company may consider
alternative financing sources allowed under the Indenture governing the Notes
(the "Indenture"), such as additional borrowings, sales of equity or entering
into joint ventures.
Theatre Operations
Cinemark USA manages all of the Company's theatres pursuant to the Cinemark
Management Agreements. The Company's theatres are operated as Cinemark USA
theatres and are staffed primarily with Mexican nationals who report to the
Cinemark USA regional and home office personnel. Cinemark USA provides all
"corporate" operating functions, including film booking and accounting, in the
same manner as such functions are performed by Cinemark USA personnel for
Cinemark USA owned or leased theatres. Cinemark de Mexico pays all development,
operating and maintenance expenses of its theatres. Management of Cinemark USA
will make all major decisions regarding the operations of the Company's
theatres. See "Certain Relationships and Related Transactions-Agreements with
Cinemark USA."
The Company believes that Cinemark USA operates its theatres with high
standards and the Cinemark Management Agreements will require Cinemark USA to
operate the Company's theatres with the same high standards. To maintain this
consistency, the Company hires Mexican nationals with college degrees for
management positions and trains them in theatres currently operating in Mexico
and in Cinemark USA's Rio Grande Valley theatres, which employ many bilingual
managers and employees. These managers learn Cinemark USA's operating
philosophies and are given the responsibility to instill a customer service
focus in their employees. The Company also uses Cinemark USA's training programs
including "Cinemark Customer Service University" which is designed to empower
each employee to fulfill customer needs and be problem solvers. Management of
the Company's operations is coordinated through Cinemark USA's senior management
personnel based in Dallas, Texas. Film bookings, purchasing concession items and
equipment, landlords relations, construction oversight and accounting services
are supervised from Cinemark USA's corporate offices in Dallas. Each of the
departments has bilingual employees and experience in dealing with Hispanic
markets. Additionally, Cinemark de Mexico operates an office in Mexico City
which is currently used for development and real estate coordination.
The Company has established its ticket admission structure to provide
affordable entertainment to a broad base of the Mexican population. Currently,
the ticket price charged in Mexican theatres ranges between US$1.25 (10 new
pesos) to US$3.35 (27 new pesos), compared to an average ticket price of
approximately $4.35 in the U.S. In addition, the Company will provide senior
citizen discounts, family discounts and bargain days designed to increase volume
for the theatres at non-peak times.
- 3 -
<PAGE>
The Company will continue to build multiplex theatres ranging from 8 to 15
screens per location as the Company locates suitable development opportunities).
Multiplex theatres enable the Company to present a variety of films appealing to
several segments of the movie-going public residing within the market area of a
particular theatre complex, while serving patrons from common support facilities
(such as box office, concession areas, restrooms and lobby). This strategy
enhances attendance, utilization of theatre capacity and operating efficiencies
(relating to theatre staffing, performance scheduling and space and equipment
utilization). Staggered scheduling of movie starting times minimizes staffing
requirements for auditorium entry and exit and box office and concession
services while reducing congestion throughout the theatre. Multiplex theatres
also provide increased flexibility in determining the length of time that a film
will run and the size of auditorium in which it is shown.
Business Strategy
Using Cinemark USA's management expertise and experience in operating
border theatres, together with Cinemark USA's multiplex theatre format, the
Company has been organized to bring to the Mexican public state- of-the-art
multiplex theatres designed to create an exciting atmosphere for theatre
patrons. These theatres will be built based on the Company's market research and
Mexican census data, in middle and upper income neighborhoods, which the Company
believes, based on industry standards, are under screened, and will be designed
to provide reasonably priced family entertainment.
Some of the factors the Company considers in determining whether to develop
a theatre are the market's population and general standards of living. The
Company generally builds theatres in Mexico's new regional malls and power
centers (large outdoor malls with one or more anchor tenants) that are being
developed in Mexico's suburban markets. These suburban malls and power centers
are located near Mexico's middle and upper income neighborhoods. The ability of
the Company to continue to identify desirable locations in such areas is
dependent upon the continued development of the new malls and power centers,
which has been significantly curtailed due to the current economic instability
in Mexico.
The theatres opened by the Company and those under construction are
state-of-the-art multiplex theatres with between 8 and 15 screens and include
Cinemark USA's distinctive design of bright colors, neon, plush high-backed
rocking chairs with cupholder armrests, multiple large concession stands and an
overall fun, family atmosphere. Many facilities will also include game rooms
located in separate areas off of the lobby offering the latest video arcade
equipment in an environment of lights, musical sound and high technology. High
quality, modern sound systems and projection equipment will be incorporated with
the theatres. These new theatres make the movie-going experience a fun,
enjoyable experience that compares favorably to other forms of entertainment for
the price. In May 1995, the Company opened its premiere theatre in Mexico at the
National Center for the Arts in Mexico City. The Company funded the construction
of the complex which includes twelve auditoriums, three concession stands and a
coffee bar. In 1997, the Company plans to open its first all stadium
entertainment complex in Mexico, a 15 screen theatre in Mexico City.
The majority of theatre equipment and finish out materials used in the
Company's theatres is imported from the United States. As a result of the
Mexican peso devaluation, these costs have dramatically increased. The Company
is currently reviewing alternative manufacturing sources in Mexico that could
provide the Company with comparable equipment at more reasonable costs. However,
it is unlikely that the Company will be able to locate a replacement supplier
for most of its imports.
The Company may also consider entering into joint venture agreements with
third parties for the acquisition and development of theatres.
- 4 -
<PAGE>
Film Licensing
Licensing of films for exhibition in Mexico is coordinated through Cinemark
USA's international film bookers based in Dallas. One of Cinemark USA's head
film bookers is in charge of international bookings. This individual has over 20
years of experience in the industry and has longstanding relationships with all
of the major distributors of American film product.
As in the U.S., the Company licenses films from all of the major
distributors and is not dependent on any one studio for motion picture product.
Cinemark USA enjoys strong relationships with the major U.S. film distributors.
U.S. film product is distributed in Mexico through the American distributors'
offices or their agents' office in Mexico City. Paramount, Universal and MGM are
distributed by the worldwide organization of United International Pictures. 20th
Century Fox and Warner Brothers distribute their own film product through branch
offices. Columbia and Tri-Star have a joint office and distribute their own and
Walt Disney's film product. There are numerous companies that distribute
independent film product, Mexican film product and international film product.
Prior to signing a lease, the Company confirms with the Mexican and U.S. film
distributors the ability to get new film product for the identified location.
In the U.S., distributors typically establish geographic zones and offer
each available film to all theatres in a zone. These film zones generally range
in size from three to 30 miles, depending primarily upon population density. The
film is generally licensed to only one theatre in each zone, either on an
allocation or bidding process. Under an allocation process, the distributor
will, within each film zone in which there are competing exhibitors, rotate
which exhibitor is offered a film. Historically, in Mexico, the distributors
chose a group to which they would release their films and entered into exclusive
arrangements with the exhibitor, without regard to the location of the theatres.
Before multiplexing was introduced in the United Kingdom, distributors generally
had similar exclusive relationships. As multiplexing took hold in the United
Kingdom, these exclusive relationships were terminated because of the enhanced
revenue opportunities for the distributor. This same trend has developed in
Mexico over the last three years, with distributors moving away from exclusive
arrangements with exhibitors and allocating film based on locations and market
potential.
Optimally, a film will play so long as the weekly gross of box office
receipts reaches a specified minimum. Due to a lack of screens in Mexico, there
is usually a backlog of films and many times the release of new films will cause
existing films that are still producing strong box office sales to be replaced
to make room for a new film release. As a result, the Company believes that many
films in Mexico do not reach their maximum potential for either the exhibitors
or the distributors. Also, due to a lack of quality theatres and available
playtime, the distributors are not always able to release their films
simultaneously throughout Mexico. However, with the addition of the Company's
new multiplexes as well as that of competitors, the gap between release dates of
American movies in the U.S. and in Mexico has narrowed from two to six months
down to a week to three months. The Company believes that this gap will close as
the number of multiplex screens increases, permitting exhibitors to move still
successful films to other auditoriums to make room for new releases. For these
reasons, multiplexing should increase revenue opportunities for distributors.
Prior to negotiating for a film license, Cinemark USA's international
booking personnel, in consultation with Cinemark Mexico's President, evaluate
the prospects for upcoming films. The criteria considered for each film include
cast, director, plot, performance of similar films, estimated film rental costs
and the film's performance in the U.S. market. Successful licensing depends
greatly upon the knowledge of the tastes of residents in markets served by each
theatre and insight into the trends in those tastes, as well as the availability
of commercially popular motion pictures.
In Mexico, the film rental system is based on the gross receipts formula
with a percentage, in most cases, of 40% for the first week and 35% for the
balance. The film rental for anticipated blockbuster films begins at 50% for the
first two weeks, then declines to 35% for the remainder of the run.
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<PAGE>
Concessions
Concession sales are the second largest source of revenue for the Company
after box office sales. The concessions menu are geared to local tastes and
include freshly popped popcorn, fountain soft drinks with ice, U.S. and Mexican
candy and hot dogs. The Company's strategy emphasizes prominent and appealing
concession counters designed for rapid service and efficiency. The larger
multiplex theatres will have two or three refreshment stands to make it easier
for larger numbers of patrons to access counters. The Company focuses on
maximizing per capita concession sales through optimizing product mix,
introducing new products, "cross selling" and "upselling." The food distribution
network in Mexico is extremely fragmented, typically only providing for local
distribution. As a result, the Company's theatres are required to hold inventory
levels sufficient to supply the theatre for up to six weeks compared to one week
for Cinemark USA's theatres in the U.S. The Company is established relationships
with Mexican concession vendors for the sourcing of concession inventory.
Competition
The theatre industry in Mexico is highly fragmented, with a large number of
"mom and pop" operators. Since the Company's entry into the market, three
significant competitors have arisen. The Ramirez theatre circuit, which
currently operates over 400 screens, Cinemex, which has built eight new
multiplexes in and around Mexico City, and United Artists, which has opened a
limited number of screens in Mexico.
The Company believes that the principal competitive factors with respect to
film licensing include licensing terms, the seating capacity, location and
prestige of an exhibitor's theatres, the quality of projection and sound
equipment at the theatres and the exhibitor's ability and willingness to promote
the films. The competition for patrons is dependent upon factors such as the
availability of popular films, the location of theatres, the comfort and quality
of theatres, and ticket prices.
It is anticipated that the Company's theatres will face competition from a
number of motion picture delivery systems, such as network, syndicated and pay
television, pay per view and home video cassette systems. The Company's theatres
will also face competition from other forms of entertainment competing for the
public's leisure time and disposable income.
Employees
At March 27, 1997, the Company and Cinemark de Mexico, through its wholly
owned subsidiaries Servicios Cinemark, S.A. de C.V. and Cinemark del Norte, S.A.
de C.V., had approximately 525 employees, all of whom are full time employees.
Cinemark Mexico's subsidiaries are party to collective bargaining agreements
with two unions of which approximately 460 employees are members. The Company
considers its relations with its employees to be satisfactory.
Regulation
On December 17, 1992, Mexico, the U.S. and Canada signed and ultimately
approved the North American Free Trade Agreement ("NAFTA"). NAFTA removes, over
a transition period which began in 1994, most customs duties imposed on goods
traded among the three countries; removes or limits many investment
restrictions; liberalizes trade in services; provides a specialized means for
settlement of, and remedies for, trade disputes arising under NAFTA; and results
in new laws and regulations to further these goals.
In December 1992, the Mexican congress passed the Federal Law of
Cinematography. Mexico's Secretary of the Interior has issued new regulations
under the Federal law relaxing the laws governing the operating of movie
theatres. Most notably, previously established price controls on admission
prices were lifted and replaced with a system that allows exhibitors to increase
pricing. The Federal law currently requires that Mexican films comprise 30% of
the number of film screenings at each theatre. The percentage gradually declines
to 10% in 1997.
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<PAGE>
There is no required minimum percentage after December 31, 1997. However, this
requirement has not been enforced due to the lack of Mexican film releases.
Currently, approximately 90% of the films shown in Mexico are U.S. films with
Spanish subtitles or dubbing, with approximately 10% of the films produced by
Mexican film makers. Notwithstanding laws requiring the exhibition of a minimum
amount of Mexican films, the percentage of U.S. films shown is expected to
increase as the number of screens increases, due to the lack of Mexican film
product. Each film that is made available to Mexico must be either subtitled or
dubbed into Spanish. The majority of the American films are subtitled. The
animated and family oriented films are dubbed.
Seasonality
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 expects to generate higher revenues during such
periods.
Item 2: Properties
As of March 27, 1997, Cinemark de Mexico operates 11 theatres (114
screens), one theatre (15 screens) is under construction and an additional two
theatres (20 screens) are under commitment with executed leases. Cinemark de
Mexico generally enters into leases with terms of 15 to 20 years for its theatre
sites. The leases generally provide for contingent rental based upon operating
results (subject to minimum annual rent). 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 with Cinemark de Mexico being responsible for providing the theatre
equipment. However, due to the inability of landlords to obtain financing in
Mexico, many landlords have requested Cinemark de Mexico to contribute to the
cost of construction and recapture such contribution (with interest) through
rent abatement. Management has in the past and may in the future make, such
contributions to construction in markets it deems appropriate.
Item 3: Legal Proceedings
From time to time, the Company may be involved in various legal proceedings
arising from the ordinary course of its business operations, such as personal
injury claims, employment matters and contractual disputes.
As of March 27, 1997, there are no such proceedings currently pending.
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 Registrants' Common Equity and Related Stockholder Matters.
There is no established public trading market for the Company's or Cinemark
de Mexico's common stock. As of March 27, 1997, there were two holders of record
of Cinemark Mexico's common stock and two holders of record of Cinemark de
Mexico's common stock. Neither company has paid dividends on its common stock
and does not expect to pay dividends on its respective common stock in the
foreseeable future. The Indenture contains restrictions on the Company's ability
to pay dividends on its common stock.
Item 6: Selected Financial Information
The following table sets forth selected financial information of the
Company and its subsidiaries for the periods and at the dates indicated. This
information should be read in conjunction with Management's Discussion
- 7 -
<PAGE>
and Analysis of financial Condition and Results of Operations and the Company's
Consolidated Financial Statements included elsewhere in this report.
<TABLE>
<CAPTION>
Year Ended December 31,
(In thousands, except theatres and screens)
1996 1995 1994 1993 1992
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenue (1) $22,376 $ 12,265 $ 6,594 $ N/A $ N/A
Depreciation and amortization 1,746 720 355 N/A N/A
Operating income (loss) 610 (687) (1,089) (572) (104)
Interest expense(2) 4,136 2,805 2,794 1,111 N/A
Net loss (2,799) (2,955) (2,821) (908) (104)
Ratio of earnings to
fixed charges (3) -- -- -- -- --
Operating Data:
Theatres owned at period end 11 9 4
Screens owned at period end 114 92 42
Total attendance 8,675 4,210 1,407
Cash flow from (used for):
Operations 409 1,268 (3,538)
Investing activities (8,983) (14,101) (16,431)
Financing activities 18,083 4,127 6,830
Balance Sheet Date (at period
end):
Cash and temporary investments $10,363 $ 1,423 $ 10,927 $ 24,565 $ 342
Theatre properties and equip - net 26,439 18,401 8,111 758 34
Total assets 43,133 25,192 28,205 26,566 609
Total long-term liabilities 36,963 23,272 20,467 18,352 N/A
Shareholders equity (deficiency) 2,396 (5,010) 3,761 5,988 471
<FN>
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(1) The Company began operations in April of 1994. Prior to that time, the
Company was in the development stage and did not generate any revenues.
Results of operations include Cinemark de Mexico for the period from
inception, September 10, 1992, to December 31, 1992, and Cinemark Mexico
(USA) and its subsidiaries for calendar years 1993 through 1996. See Note
1 to the Consolidated Financial Statements.
(2) Interest expense includes amortization of deferred debt issue costs and discount. See Consolidated
Statements of Operations.
(3) For the purpose of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income (loss) before income taxes and fixed charges
and (ii) fixed charges consist of interest expense, capitalized interest,
amortization of debt issue costs and debt discount and the portion of
rental expense which is deemed to be representative of the interest
factor. The period ended December 31, 1992 is not applicable as no fixed
charges were incurred. Earnings were insufficient to cover fixed charges
by $1.2 million for calendar year 1993, $3.6 million for calendar year
1994, $2.9 million for calendar year 1995 and $2.6 million for calendar
year 1996.
</FN>
</TABLE>
- 8 -
<PAGE>
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operation
Overview
The following is an analysis of the financial condition and results of
operations of Cinemark Mexico (USA) and its subsidiary, Cinemark de Mexico, for
calendar years 1994, 1995 and 1996. This analysis should be read in conjunction
with the Consolidated Financial Statements and including the notes thereto
appearing elsewhere in this report.
The Company's and Cinemark de Mexico's revenues are generated primarily
from box office receipts and concession sales. Additional revenues are generated
by electronic video games installed in video arcades located off the lobbies in
the theatres. Cinemark de Mexico opened its first theatre in April of 1994 and
opened three additional theatres during the year. Prior to April of 1994, the
companies had been in the development stage, since inception, and had not
generated any revenues. All operations are conducted by the subsidiary, Cinemark
de Mexico. As of March 27, 1997, Cinemark de Mexico operates eleven theatres
(114 screens), one theatre (15 screens) is under construction and an additional
two theatres (20 screens) are under commitment with executed leases.
- 9 -
<PAGE>
Results of Operations
Set forth below is a summary of operating revenues and expenses, certain
income statement items expressed as percentages of revenue, average screen count
and revenues per average screen count for the three most recent fiscal years
ended December 31, 1996.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating data (in thousands):
Revenues
Admissions $ 14,425 $ 7,992 $ 4,229
Concessions 7,734 4,156 2,097
Other 217 117 268
--- --- ---
Total revenues $ 22,376 $ 12,265 $ 6,594
======== ========= -------
Operating data as a percentage of total
revenues (1):
Revenues 1996 1995 1994
---- ---- ----
Admissions 64.4% 65.1% 64.1%
Concessions 34.6 33.9 31.8
Other 1.0 1.0 4.1
--- --- ---
Total revenues 100.0 100.0 100.0
Cost of operations 80.6 83.8 86.7
General and administrative expenses 8.9 15.9 24.4
Depreciation and amortization 7.8 5.9 5.3
Operating income (loss) 2.7 (5.6) (16.5)
Interest expense 18.5 22.9 42.4
Income before income taxes (11.7) (22.6) (54.1)
Net loss (12.5) (24.1) (42.8)
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
Average screen count 107 57 22
=== == ==
(month end average)
Revenues per average screen count $ 209,126 $215,169 $299,735
========= ======== ========
<FN>
- -------------------
(1) All costs are expressed as a percentage of total revenues, except film
rentals, which are expressed as a percentage of admissions revenues, and
concession supplies, which are expressed as a percentage of concessions
revenues.
</FN>
</TABLE>
Comparison of Years Ended December 31, 1996 and December 31, 1995
Revenues. Revenues increased 82.4% in 1996 to $22.4 million from $12.3 million
in 1995. The increase is primarily attributable to an increase in attendance as
a result of the first full year of operation of 50 screens opened in 1995 and
the addition of 22 screens in spring of 1996. On a dollar equivalent basis, the
revenues were negatively impacted by the devaluation of the Mexican peso that
began in late December 1994. Although the peso only declined 2.2% from the
beginning to the end of the year in 1996 compared to the dollar, the average
exchange rate deteriorated from N$6.44 pesos per $1 in 1995 to N$7.59 per $1 in
1996 ( a 15.2% decline). On a peso denominated basis, average per screen
revenues increased 14.5% in 1996 over 1995, however, as a result of the
devaluation, on a dollar denominated basis average per screen revenues decreased
2.8%.
- 10 -
<PAGE>
Cost of Operations. Cost of operations, as a percentage of revenues, decreased
to 80.6% in 1996 from 83.8% in 1995. The decrease resulted from a reduction as a
percentage of revenues in facility leases (12.5% in 1996 from 15.1% in 1995) and
utility and other costs (15.0 in 1996 from 16.3% in 1995). The decreases were
partially offset by increases in film costs as a percentage of revenues (43.1%
in 1996 from 42.5% in 1995) and concession costs (34.2% in 1996 from 32.3% in
1995).
General and Administrative Expenses. Cinemark de Mexico conducts its real estate
and administrative operations from its Mexico City office. General and
administrative expenses incurred during 1996 decreased as a percentage of
revenues to 8.9% from 15.9% in 1995. In absolute terms, general and
administrative expenses remained relatively flat in 1996 increasing 2.0% to 2.0
million in 1996 from $1.9 million in 1995. The increase in general and
administrative expenses is attributable to an increase in the management fee,
resulting from the increase in total revenues during 1996 paid to Cinemark USA
(5% of revenues). The increase was offset by a decrease in costs incurred by the
Mexico City office for travel expenses, legal fees and consulting fees.
Depreciation and Amortization. Depreciation and amortization expenses as a
percentage of revenues increased 142.2% to $1.7 million in 1996 from $.7 million
in 1995. The increase reflects the investment in new theatre property and
equipment made during 1996 of $9.7 million, a 50% increase over 1995.
Interest Expense. Interest costs incurred, including amortization of debt issue
cost and debt discount, increased to $4.1 million in 1996 from $3.0 million
(including the capitalization of $.2 million of interest to fee properties under
construction) in 1995, a 39.2% increase. The increase in interest costs incurred
for 1996 is the result of borrowings under the Company's senior secured credit
facility and the issuance of additional notes in exchange for outstanding
warrants and in payment of accrued interest (see "Liquidity and Capital
Resources").
Income Taxes. The Company has provided income taxes under FASB 109. The Company
will file a consolidated U.S. federal income tax return with Cinemark USA.
Income tax expense has been recorded primarily related to the income
attributable to Cinemark Mexico (USA). The tax benefit of the loss generated by
Cinemark de Mexico, which files a separate tax return in Mexico, has been fully
reserved and will be realized in future periods as Cinemark de Mexico begins
generating a profit form operations.
Inflation and Foreign Currency. The Company has invested approximately $40.5
million in Cinemark de Mexico to fund the initial development operations. Due to
the devaluation of the Mexican currency, pesos, that began in December 1994, the
Company has recognized an $11.1 million unrealized cumulative translation loss
adjustment in equity at December 31, 1996. The cumulative unrealized translation
loss increased $.6 million in 1996 as a result of the devaluation of the Mexican
peso from N$7.68 per $1 at the end of 1995 to N$7.86 at the end of the year. The
Company's debt and certain of its current theatre lease rent is denominated in
U.S. dollars while revenues are in Mexican pesos. Additionally, almost all of
the equipment and interior finish materials of the Company's new theatres have
been imported from the U.S. As a result of the devaluation, certain costs of the
Company (principally equipment, interest and lease expenses) have almost doubled
in relation to the Company's revenues. The Company plans to raise prices over
time in an attempt to compensate for the devaluation. Currently, however,
management does not believe that it can raise prices sufficiently to offset the
devaluation without dramatically reducing patronage and concession consumption.
The devaluation has significantly impacted the Mexican economy and will affect
the short term profitability of the theatres. Additionally, the lack of
available capital in the Mexican market as a result of a significant rise in the
interest rates has reduced the availability of developer financing on future
projects resulting in a reduction in the rate of expansion initially anticipated
by the Company. In 1997, generally accepted accounting principles will require
that the dollar be used as the functional currency of the Company's foreign
subsidiary for U.S. reporting purposes. Thus, devaluations in the peso during
1997 that affect the Company's investment will be charged to exchange loss
rather than to the cumulative adjustment account. The exchange rate at March 27,
1997 had increased slightly to approximately N$8.0.
Comparison of Years Ended December 31, 1995 and December 31, 1994
Revenues. Revenues in 1995 increased to $12.3 million from $6.6 million in 1994,
an 86.0% increase. The increase is primarily attributable to an increase in
attendance of 199% resulting from the first full year of operation of 42 screens
opened in 1994 and the addition of 50 screens in 1995. On a dollar equivalent
basis, revenues were negatively impacted
- 11 -
<PAGE>
by the devaluation of the Mexican peso that began in late December 1994, with
the average exchange rate deteriorating in 1995 to N$6.44 pesos per $1 from
N$3.39 per $1 in 1994 ( a 90.0% decline). On a peso denominated basis, average
per screen revenues increased 36.4% in 1995 over 1994, however, as a result of
the devaluation, on a dollar denominated basis average per screen revenues
decreased 28.2% to $215,169 in 1995 from $299,755 in 1994.
Cost of Operations. Cost of operations, as a percentage of revenues, decreased
to 83.8% in 1995 from 86.7% in 1994. The decrease resulted from a reduction in
concession costs as a percentage of concession revenues (to 32.3% in 1995 from
34.1% in 1994), and a decrease as a percentage of total revenues in payroll
costs (to 11.4% in 1995 from 15.1% in 1994), advertising costs (to 2.4% in 1995
from 4.1% in 1994) and utility and other costs (to 16.3% in 1995 from 19.4% in
1994) all of which reflect increased efficiencies associated with the first full
year of operations. The decreases were partially offset by increases in film
costs as a percentage of admission revenues (to 42.5% in 1995 from 39.3% in
1994) and an increase in facility leases as a percentage of total revenue (15.1%
in 1995 from 12.1% in 1994) resulting from certain of the Company's leases
obligations being denominated in U.S. dollars.
General and Administrative Expense. General and administrative expenses
increased in 1995 to $1.9 million from $1.6 million in 1994. These costs were
primarily related to the identification of theatre sites and negotiation of
leases including salaries and wages (including payroll taxes and benefits),
legal fees, and a management fee equal to 5% of revenues for services performed
by Cinemark USA, Inc.
Depreciation and Amortization. Depreciation and amortization expenses as a
percentage of revenues remained relatively constant at 5.3%. Depreciation and
amortization increased 102.8% to $.7 million in 1995 from $.35 million in 1994.
The increase is a result of the addition of $12.0 million in theatre property
and equipment during 1995. The 126.9% increase in assets is not fully reflected
in depreciation expense as a result of many of the additions occurring at the
end of 1995.
Interest Expense. Interest costs incurred, including amortization of debt issue
cost and debt discount, increased 4.8% during 1995 to $3.0 million (including
the capitalization of $.2 million of interest to fee properties under
construction, versus $2.8 million of interest costs in 1994. The increase in
interest costs incurred for 1995 is the result of the issuance of an additional
$2.0 million of 12% Senior Subordinated Notes on May 6, 1994.
Income Taxes. The Company has provided income taxes under FASB 109. The Company
will file a consolidated U.S. federal income tax return with Cinemark USA. An
income tax expense has been recorded primarily related to the income taxes
withheld on interest paid by Cinemark de Mexico to the Company. The tax benefit
of the loss generated by Cinemark de Mexico has been fully reserved and will be
realized in future periods as Cinemark de Mexico begins generating a profit from
operations.
Inflation and Foreign Currency. The Mexican currency has experienced a
significant devaluation since December 1994. As a result of the devaluation,
certain costs of the Company's unrestricted Mexican subsidiary, Cinemark Mexico,
have almost doubled in relation to Cinemark Mexico's revenues. Cinemark Mexico's
debt and certain of Cinemark Mexico's theatre lease rents are denominated in
U.S. dollars while the revenues are in Mexican pesos. Additionally, almost all
of the equipment and interior finish material of Cinemark Mexico's theatres have
been imported from the U.S. As a result of the devaluation, Cinemark Mexico has
recognized a $10.5 million unrealized translation loss adjustment in equity. The
devaluation has significantly and adversely affected the Mexican economy and
will affect the short term profitability of the theatres. Additionally, there is
a lack of available capital in the Mexican financial market as a result of the
significant rise in interest rates resulting in the reduced availability of
developer financing for future projects. Such events have caused delays in
Cinemark Mexico's current projects and a reduction in the rate of expansion
initially anticipated by Cinemark Mexico.
The cumulative unrealized translation loss increased $6.1 million in 1995 as a
result of the continued devaluation of the Mexican peso from N$5.0 per $1 at the
end of 1994 to N$7.68 at the end of the year. As of March 22, 1996, the Peso
remained relatively unchanged from year end at an exchange rate of N$7.6 per $1.
Liquidity and Capital Resources
Cinemark de Mexico's revenues are collected in cash, primarily through box
office admissions and the sale of concession items.
- 12 -
<PAGE>
The Company's strategy is to enter into leases with terms of 15 to 20 years
plus renewal options for the development of theatre facilities instead of
purchasing them due to the lower capital requirements for developing a leasehold
theatre. A typical leasehold theatre requires a capital outlay of approximately
$100,000 to $200,000 per screen, representing the costs of equipment and
interior finishout, whereas, the development of a fee owned or ground lease
theatre is estimated to range between $4.0 million and $10.0 million, per
theatre. The Company attempts to obtain lease terms that are typically
built-to-suit construction obligations with Cinemark de Mexico being responsible
for theatre equipment. However, due to inability of landlords to obtain
financing in Mexico, many landlords have requested Cinemark de Mexico to
contribute to the cost of construction and recapture such contributions (with
interest) through rent abatements. Management has in the past and may in the
future make, such contributions to construction in markets it deems appropriate.
The Company will also consider a desirable location on a fee or ground lease
basis if there is no developer willing to construct the theatre on the site on
terms acceptable to the Company. In such events, the Company may consider
alternative financing sources allowed under the Indenture governing the Notes
(the "Indenture"), such as additional borrowings, sales of equity or entering
into joint ventures.
On August 3, 1993, the Company issued $20.4 million of 12% Senior
Subordinated Notes due 2003 (the "Old Notes") with detachable warrants (the
"Warrants"). The Old Notes were bearing interest at 12% per annum payable
semi-annually on August 1 and February 1 of each year commencing February 1,
1994. The Company was required to make a sinking fund payment of $6.7 million on
each of August 1, 2001 and August 1, 2002, which amounts were to be utilized on
such respective dates to retire a like face amount of the outstanding Old Notes.
On May 6, 1994, the Company issued, at a discount of $55.00 per $1,000
note, an additional $2.0 million of 12% Senior Subordinated Notes due 2003 with
the terms governed by the Indenture from the initial offering of Senior
Subordinated Notes.
On September 30, 1996, the Company exchanged new notes (New Notes) in
exchange for the Cinemark Mexico Old Notes (which included the $2 million issued
in May of 1994). The New Notes are Senior Subordinated Notes due 2003 with an
annual stated interest rate of 12% payable semiannually on February 1 and August
1. The Company has the ability to issue additional notes, subject to the same
terms as the New Notes, in payment of interest due on any of the semiannual
interest payment dates through February 1, 2000. If the Company elects to
exercise this option, the interest rate for the applicable semiannual period for
which the additional bonds are issued is accruable at 13% rather than 12%. The
election is at the discretion of the Company and applies to all outstanding
bonds for the relevant semiannual interest period. The Indenture governing the
New Notes is the same as the old Indenture with certain modifications. The
Indenture requires Cinemark Mexico to maintain a Cash Flow Coverage Ratio (as
defined in the new Indenture) of 2.0 to 1.0 beginning after December 31, 1999.
Sinking fund payments as previously described are required under the new
Indenture. The Company exercised its option to issue additional notes for the
interest payment due on the New Notes on February 1, 1997.
As part of the exchange agreement the note holders agreed to receive
additional notes in payment of the accrued interest due on the Old Notes for the
period February 1 1996 through the date of the exchange. The interest for this
period was paid at the rate of 13% per annum ($2.0 million of New Notes were
issued). Additionally, the Company repurchased the majority of its outstanding
warrants (94.1%) for the issuance of $1.3 million of additional New Notes. Also,
Cinemark International contributed an additional $10 million of equity to
Cinemark Mexico pursuant to the exchange. On January 9, 1997, New Wave
Investment also acquired an additional 64,032 shares of common stock of the
Company for $.3 million.
The exchange created a net benefit of $.8 million, including tax
benefits, from the retirement of the warrants, which was reduced by the charge
off of the unamortized debt discount associated with the Old Notes. This net
benefit was credited to additional paid in capital.
The indenture for the Old and New Notes allows for the incurrence of
$10.0 million of senior debt. On December 4, 1995, the Company entered into the
Mexico Senior Credit Facility allowing for the borrowing of $10 million of
senior secured debt from Cinemark international to fund Cinemark de Mexico's
capital needs for theatre construction. The Mexico Senior Credit Facility
permits the Company to relend to Cinemark de Mexico any funds borrowed to
finance construction of uncompleted locations, the acquisition and installation
of furniture, fixtures and equipment of such
- 13 -
<PAGE>
locations and for general corporate purposes and working capital. At of December
31, 1996, the Company had borrowed fully drawn the $10.0 million available under
the Mexico Senior Credit Facility.
At March 27, 1997, Cinemark de Mexico was operating eleven theatres (114
screens), had one theatre (15 screens) under construction and two theatres (20
screens) under commitment with executed leases. The construction of these
theatres will require additional capital expenditures by the Company of
approximately $16.0 million, which will be funded with cash currently available.
Funding beyond these sources required to construct these and additional theatres
is subject to Cinemark de Mexico achieving sufficient levels of cash flow from
operations or raising additional equity.
Item 8: Financial Statements
The financial statements 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 with Accountants 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 60 Vice Chairman of the Board; Chief Executive Officer; Director
Tandy Mitchell 46 Chairman of the Board; Secretary; Director
Alan W. Stock 36 President; Chief Operating Officer; Director
Jeffrey J. Stedman 34 Vice President; Treasurer; Chief Financial Officer; Assistant Secretary
Margaret E. Richards 38 Vice President-Real Estate; Assistant Secretary
Guillermo (William) Jenkins 65 Director
Heriberto Guerra, Jr. 47 Director
</TABLE>
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.
Cinemark International and New Wave have agreed to vote all shares of common
stock of the Company owned by them for the election of Mr. Jenkins to the Board
of Directors of the Company. See "Certain Relationships and Related
Transactions-Shareholders Agreement." The executive officers of the Company are
elected by the Board of Directors to serve at the discretion of the Board.
Directors of the Company receive no compensation from the Company for
serving as directors. However, directors are reimbursed for expenses actually
incurred for each Board meeting which they attend. The Company's executive
officers are employees of Cinemark USA and receive no compensation from the
Company for their services as officers, although they may receive options under
the Company's Stock Option Plan.
The directors and executive officers of the Company have held their current
positions with the Company since its inception in July 1993 with the exception
of Mr. Jenkins. Mr. Jenkins has been a director of the Company since August
1993. 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, other than Mr. Higgins.
Lee Roy Mitchell has served as Chairman of the Board of Cinemark USA since
March 1996, as Director and Chief Executive Officer of Cinemark USA since its
inception in 1987 and Vice Chairman of the Board of Directors of Cinemark USA
from March 1993 to March 1996. Mr. Mitchell was President of Cinemark USA from
its inception in
- 14 -
<PAGE>
1987 until March 1993. From 1985 to 1987, Mr. Mitchell served as President and
Chief Executive Officer of a predecessor of Cinemark USA. 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 35 years.
Tandy Mitchell has served as Vice Chairman of the Board of Cinemark USA
since March 1996, as Director of Cinemark USA since April 1992, as Executive
Vice President of Cinemark USA since October 1989 and as Secretary of Cinemark
USA since its inception in 1987. Mrs. Mitchell was General Manager of the
theatre division of a predecessor of Cinemark USA 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 Cinemark USA since March 1993, a
Director of Cinemark USA since April 1992 and as Chief Operating Officer of
Cinemark USA since March 1992. Mr. Stock was Vice President of Cinemark USA from
October 1989 to March 1993 and was General Manager of Cinemark USA from its
inception in 1987 to March 1992. Mr. Stock was employed by the theatre division
of a predecessor of Cinemark USA from January 1986 to December 1987 as Director
of Operations. From 1981 to 1985, he was employed by Consolidated Theatres, most
recently as District Manager.
Jeffrey J. Stedman was elected Director of Cinemark USA in March 1996 and
has served as Vice President, Treasurer and Chief Financial Officer of Cinemark
USA since April 1993. From December 1989 to April 1993, Mr. Stedman was Director
of Finance of Cinemark USA. Prior to joining Cinemark USA in December 1989, Mr.
Stedman was a Manager in the tax department of Deloitte & Touche, where he was
employed from December 1984 to December 1989. Mr. Stedman is a certified public
accountant.
Margaret E. Richards has served as a Vice President and Assistant Secretary
of Cinemark USA since October 1989 and as Vice President-Real Estate of Cinemark
USA since March 1994. Ms. Richards has been Director of Leasing of Cinemark USA
since its inception in 1987 and was employed by the theatre division of a
predecessor of Cinemark USA in its real estate section from August 1986 to
December 1987.
Guillermo (William) A. Jenkins is Chairman of the Board of Confraco S.A. de
C.V., a construction company in Mexico. He serves on the Board of Directors of
the Mary Street Jenkins Foundation, founded by his father, who was in the past a
major exhibitor in the movie industry in Mexico. He also was a founder and Chief
Executive Officer of a leading insurance company in the Mexican market.
Heriberto Guerra, Jr. has served as Director of Cinemark since December
1993 and as Director of the Company since February 1996. 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 Inc. and Play by Play Toys
and Novelties.
- 15 -
<PAGE>
Directors and Executive Officers of Cinemark de Mexico
The directors and executive officers of Cinemark de Mexico are as follows:
Name Age Position
Ken Higgins 46 Chairman of the Board; President
Lee Roy Mitchell 59 Vice Chairman of the Board
Tandy Mitchell 46 Director
Alan W. Stock 36 Director
Jeffrey J. Stedman 34 Director
The directors of Cinemark de Mexico are elected each year by the
shareholders to serve for a one-year term and until their successors are elected
and qualified. The president of Cinemark de Mexico is elected by the Board of
Directors to serve at the discretion of the Board. Directors of Cinemark de
Mexico receive no compensation from Cinemark de Mexico for serving as directors.
However, directors are reimbursed for expenses actually incurred for each Board
meeting which they attend. Cinemark de Mexico's executive officers are employees
of Cinemark USA and receive no compensation from Cinemark de Mexico for their
services as officers.
The directors and executive officers of Cinemark de Mexico have held their
current positions with the Company since its inception in September 1992 with
the exception of Mr. Higgins and Mr. Stedman. See "Directors and Executive
Officers of the Registrant" for a description of the business experience of the
executive officers and directors of Cinemark de Mexico for the past five years.
Mr. Stedman has been a Director of Cinemark de Mexico since November 1993.
Ken D. Higgins has served as President of the Company since April 4, 1994.
From 1987 to April 4, 1994, Mr. Higgins was the head film buyer for Cinemark
USA. Prior to joining Cinemark USA, Mr. Higgins was employed by Santikos
Theatres, a San Antonio based theatre circuit, where he began as a theatre
manager and rose to Vice President of Film/Advertising/Marketing.
Item 11: Executive Compensation
Executive officers of the Company and Cinemark de Mexico are employees of
Cinemark USA with the exception of Mr. Jenkins and receive no compensation from
the Company or Cinemark de Mexico for their services as officers.
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
100,000 shares of the Company's Common Stock. The Chief Executive Officer of the
Company has the ability to set the exercise price and term of the options. All
options vest at the rate of one-fifth per year, commencing on the second
anniversary of the date of grant and subject to acceleration by the Chief
Executive Officer of the Company. In the event of a public offering of the
Company's stock, a sale of all or substantially all of the Company's assets,
certain mergers, consolidations, liquidation, or other reorganizations involving
the Company's capital structure or certain changes of control, each option will
become exercisable in full prior to such public offering, sale of assets, or
reorganization or upon the occurrence of the change of control, as applicable.
An employee's options are forfeited if the employee is terminated for cause.
Upon termination of an employee's employment with the Company, 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. If an employee has any exercisable options at the time of
termination of the employee's employment with the Company, the Company has the
option to repurchase such exercisable options in the same manner as shares of
capital stock of the Company acquired pursuant to the Plan at the same formula
price less the exercise price of the options. As of March 27, 1997, there are
outstanding options to purchase 11,676 shares of the Company's common stock. In
1996, 7,500 options were granted to executive officers of the Company.
- 16 -
<PAGE>
Item 12: Security Ownership of Certain Beneficial Owners and Management
The following table and the accompanying footnotes set forth, as of March
27, 1997, 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 the
Company's outstanding common stock, (ii) each director of the Company and
Cinemark de Mexico and (iii) all officers and directors of the Company as a
group:
<TABLE>
<CAPTION>
Number
of Percent
Names and Addresses (1) Shares of Shares
<S> <C> <C>
Cinemark International, Inc.(2) 3,926,118 95.6%
7502 Greenville Avenue, Suite 800
Dallas, Texas 75231
New Wave Corporation, A.V.V. 182,346 4.4%
c/o Mees Pierson Trust (Aruba) N.V.
P.O. Box 3889
Curacao, Netherlands Antilles
Lee Roy Mitchell(3) 3,926,118 95.6%
Tandy Mitchell(4) -- --
Alan W. Stock -- --
Jeffrey J. Stedman -- --
Guillermo (William) Jenkins(5) 182,346 4.4%
Heriberto Guerra -- --
Margaret E. Richards -- --
Directors and Officers as a Group (7 persons) 4,108,464 100.0%
<FN>
(1) Unless otherwise indicated, the Company believes the beneficial owner has
both sole voting and investment powers over such shares.
(2) Cinemark International is a wholly owned subsidiary of Cinemark USA. See the table on page 19 of this report
for a listing of the beneficial ownership of Cinemark USA's common stock.
(3) The Company is a subsidiary of Cinemark International. Cinemark International is a wholly owned subsidiary of
Cinemark USA. Mr. Mitchell, a director of Cinemark USA, Cinemark International and the Company, is the
majority shareholder of Cinemark USA. As a result, Mr. Mitchell may be deemed to beneficially own the
3,926,118 of the common stock owned by Cinemark International. Mr. Mitchell disclaims beneficial ownership
of the common stock of the Company owned by Cinemark International.
(4) Excludes any shares owned by Mr. Mitchell that Mrs. Mitchell may be deemed to own as a result of community
property laws.
(5) Mr. Jenkins may be deemed to beneficially own shares of common stock of the Company owned by New Wave
Corporation, A.V.V. Mr. Jenkins disclaims beneficial ownership of the common stock of the Company owned by
New Wave.
</FN>
</TABLE>
The following table and the accompanying footnotes set forth, as of March
27, 1997, the beneficial ownership of Cinemark de Mexico's common stock by (i)
each person who is known to Cinemark de Mexico to own beneficially more than 5%
of Cinemark de Mexico's outstanding common stock, (ii) each director of the
Company and Cinemark de Mexico and (iii) all officers and directors of the
Company and Cinemark de Mexico as a group:
- 17 -
<PAGE>
<TABLE>
<CAPTION>
Number
of Percent
Series B Shares of Shares
Name and Addresses(1) Class I Class II
- --------------------- ------- --------
<S> <C> <C> <C>
Cinemark Mexico (USA), Inc.(2) 49,999 21,678,663 99.9%
7502 Greenville Avenue, Suite 800
Dallas, Texas 75231
Lee Roy Mitchell(3) 50,000 21,678,663 100.0%
Tandy Mitchell(4) -- --
Ken Higgins -- --
Alan W. Stock -- --
Jeffrey J. Stedman -- --
Directors and Officers as 50,000 21,678,663 100.0%
a Group (8 persons)
<FN>
(1) Unless otherwise indicated, the Company believes the beneficial owner has
both sole voting and investment powers over such shares.
(2) Cinemark Mexico (USA) is an indirect subsidiary of Cinemark USA. See the
tables on pages 18 and 20 of this report for a listing of the beneficial
ownership of Cinemark Mexico (USA)'s and Cinemark USA's common stock,
respectively.
(3) Cinemark de Mexico is a subsidiary of Cinemark Mexico (USA). Cinemark
Mexico (USA) is a subsidiary of Cinemark International. Cinemark
International is a wholly owned subsidiary of Cinemark USA. Mr. Mitchell, a
director of Cinemark USA, Cinemark International, Cinemark Mexico (USA) and
Cinemark de Mexico, is the majority shareholder of Cinemark USA. As a
result, Mr. Mitchell may be deemed to beneficially own the 49,999 shares of
Class I Series B common stock and the 21,678,663 shares of Class II Series
B common stock owned by Cinemark Mexico (USA), Inc. Mr. Mitchell disclaims
beneficial ownership of the common stock of Cinemark de Mexico owned by
Cinemark Mexico (USA).
(4) Excludes any shares of Cinemark de Mexico owned by Mr. Mitchell that Mrs.
Mitchell may be deemed to own as a result of community property laws.
</FN>
</TABLE>
- 18 -
<PAGE>
The following table and the accompanying footnotes set forth, as of March
27, 1997, the beneficial ownership of Cinemark USA'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>
Lee Roy Mitchell(3) Class A Common Stock 1,500 100.0%
7502 Greenville Ave. 42.6%
Suite 800 Class B Common Stock 77,687 42.1%
Dallas, TX 75231
Cypress Merchant Class A Common Stock -- --
Banking Partners, L.P. 42.2%
65 East 55th St. Class B Common Stock 78,469 42.5%
New York, NY 10022
Cypress Pictures Ltd. Class A Common Stock --
c/o W.S. Walker Co. 2.2% *2.2%
Second Floor Class B Common Stock 4,079 ____
Caledonian House
Mary St., P.O. Box 265
George Town, Grand
Cayman
Cayman Islands
The Mitchell Special Class A Common Stock -- --
Trust 7.9%
7502 Greenville Ave. Class B Common Stock 14,667 8%
Suite 800
Dallas, TX 75231
Tandy Mitchell(4) Class A Common Stock -- --
--
Class B Common Stock -- --
Alan W. Stock(5) Class A Common Stock -- --
*
Class B Common Stock 2,137 *
Jeffrey J. Stedman(6) Class A Common Stock -- --
*
Class B Common Stock 380 *
Gary R. Gibbs(7) Class A Common Stock -- --
*
Class B Common Stock 600 *
- 19 -
<PAGE>
Margaret E. Richards(8) Class A Common Stock -- --
*
Class B Common Stock 534 *
W. Bryce Anderson Class A Common Stock -- --
--
Class B Common Stock -- --
Sheldon I. Stein Class A Common Stock -- --
--
Class B Common Stock -- --
Heriberto Guerra, Jr. Class A Common Stock -- --
--
Class B Common Stock -- --
James A. Stern Class A Common Stock -- --
--
Class B Common Stock -- --
James L. Singleton Class A Common Stock -- --
--
Class B Common Stock -- --
Directors and Officers as Class A Common Stock 1,500 100.0%
a Group (13 persons) (9) 43.9%
Class B Common Stock 81,778 43.3%
<FN>
- --------------------
* 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 27, 1997, 1,500 shares of Class A Common Stock and 184,589
shares of Class B Common Stock were issued and outstanding. Includes 6,645
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, 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 305 shares of Class B Common Stock issuable upon the exercise of
options that may be exercised within 60 days of the date of this Report.
(7) Includes 510 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 453 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.
(9) Includes 3,525 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.
</FN>
</TABLE>
- 20 -
<PAGE>
Item 13: Certain Relationships and Related Transactions
Warrant Registration Rights Agreement
Pursuant to the Registration Rights Agreement, the Company granted Cinemark
International and New Wave certain demand and incidental registration rights
with respect to the shares of common stock of the Company owned by them.
Pursuant to the Warrant Registration Rights Agreement, the Company granted the
purchasers of the Warrants certain demand registration rights with respect to
the Warrants and incidental registration rights with respect to the shares of
common stock issuable upon exercise of the Warrants. In addition, the Company
agreed to use its reasonable best efforts to cause a registration statement for
the public distribution of the shares of common stock issuable upon exercise of
the Warrants and the shares of common stock owned by Cinemark International and
New Wave to become effective (i) upon certain events of default under the
Indenture, (ii) a payment default under Senior Debt, or (iii) if the Company is
prohibited by law or agreement from repurchasing the warrants as required by the
Warrant Certificate. The Company may suspend its efforts to have the
registration statement declared effective if any Event of Default under the
Indenture or default in the payment of Senior Debt (as defined in the Indenture)
is cured.
Pursuant to the Warrant Registration Rights Agreement, the Company also
agreed, jointly and severally, to indemnify Cinemark International, New Wave,
each holder of Warrants, each holder of shares of common stock issuable upon
exercise of the Warrants, each Person who participates as an underwriter and any
person who controls any of the foregoing against certain losses, claims,
damages, judgments and expenses arising under the federal securities laws. In
addition, Cinemark International, New Wave, each holder of Warrants, and each
holder of shares of common stock issuable upon exercise of the Warrants agreed,
severally, but not jointly, to indemnify the Company, each underwriter and the
other selling holders of warrants and shares of common stock against certain
losses, claims, damages, judgments and expenses arising under the securities
laws with respect to written information furnished to the Company by such
person.
Shareholders Agreement
The Company, Cinemark International and New Wave are parties to a
Shareholders Agreement dated July 30, 1993 (the "Shareholders Agreement").
Pursuant to the terms of the Shareholders Agreement, New Wave granted the
Company, Cinemark International and their affiliates (the "Cinemark Group") (i)
an option to purchase at their appraised value all of the common stock of the
Company owned by New Wave in the event of an involuntary transfer of such shares
by New Wave; (ii) a right of first refusal to purchase some or all of the shares
of common stock of the Company owned by New Wave which New Wave desires
voluntarily to transfer to any person other than Roberto Jenkins ("Jenkins") and
members of his family group; and (iii) an option to purchase at the appraised
value all of the shares of common stock of the Company owned by New Wave in the
event that Jenkins and his family group own, directly or indirectly, less than
75% of the equity of New Wave or otherwise no longer control New Wave. Jenkins'
"family group" means Jenkins' parents, brothers and sisters, father-in-law and
mother-in-law, spouse and descendants (whether natural or adopted) and any trust
solely for the benefit of Jenkins and/or Jenkins' spouse and/or descendants. In
addition, New Wave agreed to raise no objection to the sale of the Company to an
independent third party, if such sale is approved by the Board of Directors and
a majority of the Company's shareholders. In addition, if such sale of the
Company is structured as a sale of stock, New Wave agreed to sell all of its
shares of common stock on the terms and conditions approved by the Board of
Directors and a majority of the Company's shareholders.
Prior to the consummation of the first public offering of shares of common
stock of the Company: (i) Cinemark International and New Wave will vote all
shares of common stock owned by them for the election of William Jenkins to the
Board of Directors of the Company; (ii) the Company will not, and will not
permit any subsidiary of the Company to, directly or indirectly, enter into any
transaction not in the ordinary course of its business (excluding transactions
between the Company and its subsidiaries or between subsidiaries of the Company)
with any affiliate, unless a majority of the Board of Directors of the Company
determines in its good faith judgment that the transaction is on terms no less
favorable to the Company or such subsidiary than those that could be obtained in
a comparable arm's length transaction with an entity that is not an affiliate
and (iii) the parties to the Shareholders Agreement will not take any action to
amend the Company's Articles of Incorporation to eliminate or restrict the
preemptive rights of the Company's shareholders; except that the shareholders of
the Company will not have any preemptive rights with respect to any shares of
common stock to be issued pursuant to the Warrants. Cinemark International and
New Wave agreed that, in connection with the first public offering of shares of
common stock of the Company, they would upon the request of the Company take all
- 21 -
<PAGE>
such actions as may be required to amend the Articles of Incorporation of the
Company to deny shareholders the preemptive right to acquire additional or
treasury shares of the Company.
The Shareholders Agreement will terminate upon the first to occur of the
following: (i) the merger or consolidation of the Company with or into any other
corporation, or the merger into the Company of any other corporation, where the
holders of the Company's voting securities (on a fully-diluted basis)
immediately prior to the merger or consolidation own less than a majority of the
ordinary voting power to elect directors of the new surviving company (on a
fully-diluted basis) immediately subsequent to such merger or consolidation; and
(ii) a sale of all, or substantially all, of the Company's assets or capital
stock in any transaction or series of related transactions.
Series D Registration Rights Agreement
Pursuant to the Series D Registration Rights Agreement, the Company granted
to holders of the Company's 12% Series D Senior Subordinated PIK Notes ("Series
D Notes") certain demand and incidental registration rights with respect to the
Series D Notes owned by them. In addition, the Company agreed to use its
reasonable best efforts to cause a registration statement for a public
distribution of Series D Notes to become effective (i) upon certain defaults
under the Indenture or (ii) a payment default under Senior Debt. The Company may
suspend its efforts to have the registration statement declared effective if any
Event of Default under the Indenture or default in the payment of Senior Debt is
cured.
Pursuant to the Series D Registration Rights Agreement, the Company also
agreed, jointly and severally, to indemnify each holder of Series D Notes, each
person who participates as an underwriter and any person who controls any of the
foregoing against certain losses, claims damages, judgment and expenses arising
under the federal securities laws. In addition, each holder of Series D Notes
agreed, severally, but not jointly, to indemnify the Company, each underwriter
and the other selling holders of warrants and shares of common stock against
certain losses, claims, damages, judgments and expenses arising under the
securities laws with respect to written information furnished to the Company by
such person.
Agreements with Cinemark USA
Cinemark Management Agreements
The Company and Cinemark de Mexico have each entered into (and each future
subsidiary of the Company, immediately upon its formation or acquisition, will
enter into) a Cinemark Management Agreement pursuant to the terms of which
Cinemark USA will operate all theatres of the managed corporation as Cinemark
theatres for a period of 10 years in consideration for an annual management fee
equal to the sum of (i) 5.0% of the revenues of the managed corporation up to
$50.0 million in revenues and (ii) 3.0% of the revenues of the managed
corporation over $50.0 million in revenues. The Company's theatres will be
operated as Cinemark USA theatres and will be staffed primarily with Mexican
nationals who will report to the Cinemark USA regional and home office
personnel. Cinemark USA will provide all "corporate" operating functions,
including film booking and accounting, in the same manner as such functions are
performed by Cinemark USA personnel for Cinemark USA owned or leased theatres.
The managed corporation will pay all development, operating and maintenance
expenses of its theatres. Management of Cinemark USA will make all major
decisions regarding the operations of the managed corporation's theatres,
including whether to develop a new theatre or to acquire an existing theatre or
theatre circuit through Cinemark USA or the Company or one of its Subsidiaries
after evaluating the specific site, whether Cinemark USA, the Company or one of
its Subsidiaries currently has a theatre in the particular film market, the
sources of funding available and other relevant factors. However, the Cinemark
Management Agreements will provide that Cinemark USA and the managed corporation
may not own, lease or manage any theatre that is (i) within 20 miles of any
theatre owned, leased or managed by the other if neither of such theatres is
located in a city having a population of greater than 50,000 at the time of the
proposed transaction or (ii) within 10 miles of any theatre owned, leased or
managed by the other if either of such theatres is located in a city having a
population greater than 50,000 at the time of the proposed transaction, unless
in either case a majority of the Board of Directors of Cinemark USA including a
majority of the independent directors of Cinemark USA, determines that such
action is in the best interests of Cinemark USA. A theatre is deemed to be
located in each city whose boundaries fall within a radius of 10 miles from the
theatre. The Company believes that the Cinemark Management Agreements are on
terms as favorable as would be available from unaffiliated third parties. See
"Cinemark USA Indenture." The Company paid $777,713 in management fees to
Cinemark USA in 1996.
- 22 -
<PAGE>
Tax Sharing Agreements
The Company and Cinemark USA will file a consolidated federal income tax
return and have entered into a tax sharing agreement providing for their sharing
of the federal income tax burdens of the consolidated group. In general, the
Company will pay to Cinemark USA the amount of federal income tax it would owe
as if it were filing a separate return and will receive payments from Cinemark
USA to the extent tax attributes (such as net operating losses and foreign tax
credits) are used to offset the consolidated income or the tax liability of
Cinemark USA. The tax sharing agreement will similarly apply with respect to any
combined tax returns for state or local taxes. In addition, the Cinemark USA
Indenture requires Cinemark USA to cause each future subsidiary of the Company,
immediately upon its formation or acquisition, to enter into an appropriate tax
sharing arrangement with Cinemark USA. See "Cinemark USA Indenture."
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.
Cinemark USA Indenture
The Cinemark USA Indenture requires Cinemark USA to cause Cinemark
International and its subsidiaries on a consolidated basis to be engaged
principally in the acquisition, construction and operation of indoor motion
picture theatres and other activities incidental thereto.
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
page 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 page S-1 are filed as a part of this report.
3. The exhibits listed in the accompanying Index beginning on page E-1 are
filed as a part of this report.
(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:
None
(c) Exhibits
See the accompanying Index beginning on page E-1.
(d) Financial Statement Schedules
See the accompanying Index beginning on page S-1.
- 23 -
<PAGE>
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, each of the registrants has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 27, 1997 CINEMARK MEXICO (USA), INC.
By: /s/ Alan W. Stock
Alan W. Stock, President
CINEMARK de MEXICO, S.A. de C.V.
By: /s/ Ken Higgins
Ken Higgins, 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
registrants and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC.
Name Title Date
<S> <C> <C>
/s/ Lee Roy Mitchell Vice Chairman of the Board of Directors; Chief March 27, 1997
- -------------------------------------- -
Lee Roy Mitchell Executive Officer; Director
/s/ Alan W. Stock Director March 27, 1997
- -------------------------------------- --
Alan W. Stock
/s/ Tandy Mitchell Director March 27, 1997
- --------------------------------------
Tandy Mitchell
/s/ Jeffrey J. Stedman Vice President and Treasurer (Chief Financial and March 27, 1997
- -------------------------------------- -
Jeffrey J. Stedman Accounting Officer)
_________________________ Director March ___, 1997
Guillermo (William) Jenkins
_________________________ Director March ___, 1997
Heriberto Guerra, Jr.
- 24 -
<PAGE>
CINEMARK DE MEXICO, S.A. de C.V.
Name Title Date
/s/ Ken Higgins President; Chairman of the Board of Directors March 27, 1997
- --------------------------------------
Ken Higgins (Principal Executive Officer)
/s/ Lee Roy Mitchell Director March 27, 1997
- -------------------------------------- --
Lee Roy Mitchell
/s/ Tandy Mitchell Director March 27, 1997
- -------------------------------------- --
Tandy Mitchell
/s/ Alan W. Stock Director March 27, 1997
------------------------------------- ---
Alan W. Stock
/s/ Jeffrey J. Stedman Director (Principal Financial and Accounting Officer) March 27, 1997
- -------------------------------------- -
Jeffrey J. Stedman
</TABLE>
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 Registrants'
shareholders. An annual report and proxy material may be sent to the
Registrants' shareholders subsequent to the filing of this Form 10-K. The
Registrants shall furnish to the Securities and Exchange Commission copies of
any annual report or proxy material that is sent to the Registrants'
shareholders.
- 25 -
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
(ITEMS 8 AND 14 OF FORM 10-K) AND SUPPLEMENTAL SCHEDULES
- --------------------------------------------------------------------------------------------------------------------
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES:
Consolidated Balance Sheets, December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the
Years Ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
SUPPLEMENTAL SCHEDULES:
Schedule
A Consolidating Balance Sheet Information, December 31, 1996 S-1
B Consolidating Statement of Operations Information for the
Year Ended December 31, 1996 S-2
C Consolidating Statement of Cash Flows Information for the
Year Ended December 31, 1996 S-3
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Cinemark Mexico (USA), Inc.:
We have audited the accompanying consolidated balance sheets of Cinemark Mexico
(USA), Inc. and subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Cinemark Mexico (USA), Inc. and
subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles.
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
DELOITTE & TOUCHE LLP
Dallas, Texas
March 10, 1997
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- -------------------------------------------------------------------------- --------------------- -------------------
ASSETS 1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,362,911 $ 1,423,029
Inventories 109,055 64,811
Value added tax refunds and other receivables 2,186,814 957,257
Prepaid expenses and other 644,250 51,156
--------------------- -------------------
Total current assets 13,303,030 2,496,253
THEATRE PROPERTIES AND EQUIPMENT:
Leasehold interests and improvements 14,561,039 8,897,581
Theatre furniture and equipment 13,281,678 9,266,792
Theatres under construction 1,025,670 997,428
--------------------- -------------------
Total theatre properties and equipment 28,868,387 19,161,801
Less accumulated depreciation 2,429,362 760,463
--------------------- -------------------
Theatre property and equipment - net 26,439,025 18,401,338
OTHER ASSETS (Notes 3 and 4) 3,391,289 4,294,337
--------------------- -------------------
TOTAL $ 43,133,344 $ 25,191,968
===================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,802,727 $ 1,750,543
Accrued interest expense 771,327 1,120,000
Accounts payable - affiliates (primarily due to Cinemark International, Inc.) 635,089
--------------------- -------------------
Total current liabilities 3,574,054 3,505,632
LONG-TERM LIABILITIES:
12% senior subordinated notes, due 2003 (Note 5) 25,710,900 20,549,249
Senior secured credit notes - Cinemark International, Inc. (Note 5) 10,919,761 2,520,548
Deferred lease expense (Note 7) 332,042 201,915
--------------------- -------------------
Total long-term liabilities 36,962,703 23,271,712
COMMITMENTS (Note 7)
COMMON STOCK WARRANTS (Note 6) 200,729 3,424,132
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $.001 par value, 100,000,000 authorized, 4,044,432 and
1,382,982 issued and outstanding, respectively 4,044 1,383
Additional paid-in capital 23,146,551 12,350,824
Unearned compensation - stock options (37,658) (12,922)
Accumulated deficit (9,586,624) (6,787,389)
Cumulative foreign currency translation adjustment (11,130,455) (10,561,404)
--------------------- -------------------
Total shareholders' equity (deficit) 2,395,858 (5,009,508)
--------------------- -------------------
TOTAL $ 43,133,344 $ 25,191,968
===================== ===================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
F - 3
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -------------------------------------------------- ------------------ ------------------ ------------------
1996 1995 1994
<S> <C> <C> <C>
REVENUES:
Admissions $ 14,424,686 $ 7,992,034 $ 4,228,507
Concessions 7,733,918 4,156,273 2,097,214
Other 217,881 116,309 268,455
------------------ ------------------ ------------------
Total 22,376,485 12,264,616 6,594,176
COSTS AND EXPENSES:
Cost of operations:
Film rentals 6,226,352 3,396,803 1,660,615
Concession supplies 2,648,914 1,341,311 714,987
Salaries and wages 2,560,231 1,395,043 996,685
Facility leases 2,802,205 1,846,925 794,877
Advertising 432,372 299,347 268,615
Utilities and other 3,363,521 2,002,808 1,280,879
------------------ ------------------ ------------------
Total 18,033,595 10,282,237 5,716,658
General and administrative expenses 1,986,955 1,948,556 1,611,127
Depreciation 1,745,830 720,705 355,295
------------------ ------------------ ------------------
Total 21,766,380 12,951,498 7,683,080
OPERATING INCOME (LOSS) 610,105 (686,882) (1,088,904)
OTHER INCOME (EXPENSE):
Interest expense (3,894,758) (2,541,449) (2,550,165)
Amortization of debt issue cost (102,268) (99,242) (101,271)
Amortization of debt discount (139,205) (164,468) (143,063)
Interest income 768,887 773,714 528,995
Foreign currency exchange gain (loss) 131,297 (55,098) (210,414)
------------------ ------------------ ------------------
Total (3,236,047) (2,086,543) (2,475,918)
------------------ ------------------ ------------------
LOSS BEFORE INCOME TAXES (Note 8) (2,625,942) (2,773,425) (3,564,822)
INCOME TAX EXPENSE (BENEFIT) 173,293 181,305 (744,000)
------------------ ------------------ ------------------
NET LOSS $ (2,799,235) $ (2,954,730) $ (2,820,822)
================== ================== ==================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
F - 4
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
YEARS ENDED DECEMBER 31, 1996, 1995
- --------------------------------------------------- ------- ------------- ----------- ------------ ------------ -----------
Common Stock Additional Unearned Cumulative
-------------------
Shares Paid-In Compensa Accumulat Translation
Issued Amount Capital Stock Deficit Adjustment Total
Options
----------- ------- ------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1994 773,338 $ 773 $ 6,999,227 - $(1,011,837) - $ 5,988,163
Net loss (2,820,822) (2,820,822)
Issuance of common stock 574,851 575 4,999,425 5,000,000
Unearned compensation from stock
options granted 183,292 (183,292)
Foreign currency translation adjustment (4,406,407) (4,406,407)
----------- ------- ------------- ----------- ------------ ------------ -----------
BALANCE DECEMBER 31, 1994 1,348,189 1,348 12,181,944 (183,292) (3,832,659) (4,406,407) 3,760,934
Net loss (2,954,730) (2,954,730)
Issuance of common stock (Note 6) 34,793 35 302,590 302,625
Amortization of unearned compensation 36,660 36,660
Cancellation of stock options (133,710) 133,710 -
Foreign currency translation adjustment (6,154,997) (6,154,997)
----------- ------- ------------- ----------- ------------ ------------ -----------
BALANCE DECEMBER 31, 1995 1,382,982 1,383 12,350,824 (12,922) (6,787,389) (10,561,404) (5,009,508)
Net loss (2,799,235) (2,799,235)
Issuance of common stock 2,661,450 2,661 9,997,339 10,000,000
Unearned compensation from
stock options granted 28,180 (28,180)
Amortization of unearned compensation 3,444 3,444
Net effect of exchange of Subordinated
conversion of Warrants to
Subordinated
Notes, including tax benefit 770,208 770,208
Foreign currency translation adjustment (569,051) (569,051)
----------- ------- ------------- ----------- ------------ ------------ -----------
BALANCE DECEMBER 31, 1996 $ 4,044,432 $ 4,044 $ 23,146,551 $ (37,658) $(9,586,624) $(11,130,455)$ 2,395,858
=========== ======= ============= =========== ============ ============ ===========
</TABLE>
F - 5
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (2,799,235) $ (2,954,730) $ (2,820,822)
Noncash items in net loss:
Depreciation 1,745,830 720,705 241,042
Amortization 102,268 99,242 101,272
Deferred lease expenses 130,127 119,338 82,577
Amortization of debt discount 139,205 164,468 143,063
Debt issued for accrued interest 2,885,734 20,548
Amortized compensation - stock options 3,444 36,660
Cash from (used for) operating working capital:
Inventories (44,244) (20,906) (43,905)
Value added tax refunds and other receivables (1,229,557) 330,320 (817,320)
Prepaid expenses and other (593,094) 1,123,779 (1,174,935)
Accounts payable and accrued expenses 1,052,184 993,812 717,401
Accrued interest expense (348,673) 100,000
Accounts payable - affiliates (635,089) 635,089 (66,661)
------------------ ----------------- -----------------
Net cash from (used for) operations 408,700 1,268,325 (3,538,288)
INVESTING ACTIVITIES:
Additions to theatre properties (9,783,517) (16,367,568) (11,502,478)
Decrease (increase) in temporary cash investments 3,724,905 (3,724,905)
Decrease (increase) in other assets 800,820 (1,458,228) 1,203,748
------------------ ----------------- -----------------
Net cash used for investing activities (8,982,697) (14,100,891) (16,431,131)
FINANCING ACTIVITIES:
Issuance of senior subordinated notes 1,890,000
Borrowing under senior secured credit agreement 7,500,000 2,500,000
Payments on senior secured credit agreement (15,021)
Issuance of common stock and capital contributions 10,000,000 302,625 5,000,000
Issuance of common stock warrants 1,324,132
Increase in deferred debt issue costs (60,377)
Tax benefit from debt exchage 597,751
------------------ ----------------- -----------------
Net cash from financing activities 18,082,730 4,126,757 6,829,623
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (569,051) (798,305) (498,394)
------------------ ----------------- -----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,939,882 (9,504,114) (13,638,190)
CASH AND CASH EQUIVALENTS:
Beginning of period 1,423,029 10,927,143 24,565,333
------------------ ----------------- -----------------
End of period $ 10,362,911 $ 1,423,029 $10,927,143
================== ================= =================
<FN>
SUPPLEMENTAL INFORMATION (Note 10)
See notes to consolidated financial statements.
</FN>
</TABLE>
F - 6
<PAGE>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Cinemark Mexico (USA), Inc. (the "Company"), a Texas corporation,
was formed on July 28, 1993, as a subsidiary of Cinemark International, Inc.,
(f/k/a Cinemark II, Inc.) a Texas Corporation ("Cinemark International"), which
is wholly owned by Cinemark USA, Inc. ("Cinemark USA"). The Company was
established to serve as a holding company to facilitate investments in Mexico.
The Company's operations are conducted by Cinemark de Mexico S.A. de C.V.
("Cinemark de Mexico"), which was formed on September 10, 1992, as a 99.99%
owned subsidiary of Cinemark International (which subsequently contributed
Cinemark de Mexico's stock to the Company, Note 6), to own or lease and operate
movie theatres in Mexico. From inception to April 13, 1994, the Company had been
in the development stage. At December 31, 1996, Cinemark de Mexico has eleven
theatres (114 screens) in operation.
Consolidated Financial Statements include the accounts of the Company and its
subsidiary, Cinemark de Mexico, collectively referred to as the Companies, as
though the Company was the initial owner of all of the stock of Cinemark de
Mexico (owned by Cinemark International) for the period prior to the
contribution of such stock to the Company. Significant intercompany balances and
transactions have been eliminated in the consolidation.
Basis of Presentation - The consolidated financial statements are prepared in
U.S. dollars under generally accepted accounting principles in the United
States. In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and revenues and expenses
for the period. Actual results could differ significantly from those estimates.
The estimate most susceptible to significant change is the evaluation of the
effect of the Mexican economy on the recoverability of the Company's assets.
Although some variability is inherent in this estimate, management believes the
amounts provided are adequate.
Revenues are recognized when admissions and concessions sales are received at
the theatres. Film rental costs are accrued based on the applicable box office
receipts and the terms of the film licenses.
Cash and Cash Equivalents consist of operating funds held in financial
institutions, petty cash held by the theatres and highly liquid investments with
original maturities of three months or less when purchased.
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. At December 31, 1995, property additions include $167,099 of
capitalized interest, incurred during development and construction. There was no
capitalized interest included in property additions for
<PAGE>
1996. Depreciation is provided using the straight-line method over the estimated
useful lives of the assets as follows: buildings and leasehold interests, 18 to
40 years; theatre furniture and equipment, 5 to 15 years. On January 1, 1996,
the Company adopted Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets
to be Disposed Of. The adoption of SFAS No. 121 did not have a material effect
on the consolidated financial statements.
Deferred Debt Issue Costs are amortized using the straight-line method over the
primary financing term ending August 1, 2003.
Fair Value of Financial Instruments - It is the belief of management that it is
not practicable for the Company to estimate the fair value of the Company's
long-term debt, based on the lack of available market quotes and the lack of
comparable financial instruments (see Note 5 for the carrying amount of
long-term debt, the expected maturities and effective interest rates). The fair
value of other financial instruments approximates the related recorded value at
December 31, 1996.
Reclassifications have been make to certain 1994 and 1995 amounts to conform to
1996 presentation.
2. FOREIGN CURRENCY TRANSLATION
Cumulative foreign currency translation adjustment in shareholder's equity of
$11,130,455 and $10,561,404, respectively, at December 31, 1996 and 1995,
reflects the unrealized adjustments resulting from translating the financial
statements of Cinemark de Mexico, the Company's consolidated foreign subsidiary.
The functional currency of the foreign subsidiary is the peso. Accordingly,
assets and liabilities of the foreign subsidiary are translated to U.S. dollars
at year-end exchange rates. Income and expense items are translated at the
average rates prevailing during the year. Changes in exchange rates which affect
cash flows and the related payables are recognized as realized transaction gains
and losses in the determination of net income.
In 1997, the Company will be required to utilize the U.S. dollar as the
functional currency for Cinemark de Mexico for U.S. reporting purposes due to
Mexico's highly inflationary economy. Thus devaluations in the peso during 1997
that will effect the Company's investment will be charged to exchange loss
rather than to the cumulative adjustment account.
Intercompany borrowing from the Company to Cinemark de Mexico of $39,708,140 and
$29,562,584 at December 31, 1996 and 1995, respectively, is considered a
long-term investment. Accordingly, the related foreign currency translation
adjustment of $822,276 and $7,567,351 for 1996 and 1995, respectively, are
eliminated from the statement of operations in consolidation.
<PAGE>
3. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets at December 31 consist of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Debt issue cost 1,047,985 1,022,420
Less accumulated amortization 341,647 239,379
------- -------
Net 706,338 783,041
Equipment deposits and prepaid rent 2,684,951 1,877,656
--------- ---------
Total 3,391,289 2,660,697
========= =========
</TABLE>
4. THEATRE DEVELOPMENT ADVANCE
Theater development advance of $1,633,680 at December 31, 1995, represents an
advance made pursuant to a lease agreement with a developer of one of the
Company's theatre properties for the construction of the theatre. The Company is
recapturing the theatre advance (prepaid rent) through monthly rent abatement.
5. LONG-TERM DEBT
Senior Subordinated Notes - In 1993, Cinemark Mexico issued $20,400,000 of 12%
Senior Subordinated Notes due 2003 (the "Subordinated Notes"), with detachable
warrants (the "Warrants") (Note 6). Cinemark de Mexico guarantees the notes on a
senior subordinated basis. The Subordinated Notes were issued at a discount of
$102.94 per $1,000 note, totaling $2,100,000, and bear interest at 12% per annum
payable semiannually on August 1 and February 1. In 1994, Cinemark Mexico issued
an additional $2,000,000 of Subordinated Notes governed by the indenture from
the initial offering at a discount of $55 per $1,000 note, totaling $110,000.
The entire $22,400,000 in Subordinated Notes and $1,971,500 of accrued interest
were exchanged in September 1996 for new senior subordinated notes (the "New
Mexican Notes") with form and terms identical in all material respects to the
previous notes except that interest on the New Mexican Notes may be paid through
the issuance of additional notes of the same series at the option of the Company
through and including February 1, 2000. If the Company elects to pay accrued
interest in the form of additional notes, interest will accrue at 13% during
that period. In connection with the exchange, Warrants for 356,851 shares of
common stock were exchanged for $1,339,400 in New Mexican Notes. As a result of
the exchange and retirement of the Warrants, a net benefit of $.8 million,
including tax benefit, was credited to additional paid in capital.
The indenture for the New Mexican Notes requires a sinking fund payment of
$6,667,000 on each of August 1, 2001, and August 1, 2002, which amounts are to
be utilized on such respective dates to retire a like face amount of the
outstanding New Mexican Notes. The indenture governing all the New Mexican Notes
restricts the ability of the Company and Cinemark de Mexico to, among other
things, pay dividends; make investments; incur additional indebtedness; redeem
stock; use proceeds of asset disposals; create liens; engage in transactions
with affiliates; and to merge, consolidate or
<PAGE>
sell all or substantially all the assets of the companies.
Senior Secured Credit Notes - In 1995, the Company entered into a $10,000,000
senior secured credit agreement ("Credit Agreement") with Cinemark
International. The notes bear interest at 12%, payable on the first anniversary
date and quarterly thereafter on January 15, 1997 through the majority date of
December 31, 2001, when all accrued and unpaid interest and all principal are
due. The Company is required to maintain certain restrictive covenants, and all
borrowings are collateralized by certain assets of the Company. Simultaneously
with the debt exchange of the Subordinated Notes, Cinemark International and the
Company amended the terms of the Credit Agreement wherein if the Company issues
additional Senior Subordinated Notes for accrued and unpaid interest on the New
Mexican Notes, Cinemark International will add accrued and unpaid interest to
principal relating to the Credit Agreement at the next two consecutive interest
payment dates at a rate of 13% per annum.
6. CAPITAL STOCK
Common Stock - In December 1994, Cinemark International contributed an
additional $5,000,000 in exchange for 574,851 shares of the Company's common
stock. In June 1995, the Company issued an additional 34,793 shares of common
stock for $302,625 to New Wave. In connection with the debt exchange (Note 5),
the Company issued Cinemark International an additional 2,661,450 shares of
common stock for $10,000,000. At December 31, 1996, Cinemark International owns
97.1% (96.5% on a fully diluted basis) of the common stock, and New Wave owns
2.9% of the Company's common stock, and the total number of shares of common
stock, issued and outstanding, is 4,044,432. On January 9, 1997, New Wave
acquired an additional 64,032 shares of common stock for $240,591.
Common Stock Warrants - In connection with the issuance of the Subordinated
Notes (Note 5), the Company issued Warrants at fair value for $2,100,000, which
were exercisable into 226,662 shares of the Company's common stock. In August
1995, Cinemark Mexico issued additional Warrants at fair value for $1,324,132,
which were exercisable into 152,411 shares which when aggregated with the
previously purchased Warrants converted to 20% of the ownership on a fully
diluted basis at December 31, 1995, of the Company's common stock. In September
1996, 356,851 Warrants were exchanged for $1,339,400 in New Mexican Notes
resulting in a remaining balance of $200,729 for 22,222 Warrants outstanding
(Note 5). The remaining Warrants are exercisable at $.001 per share subject to
the following terms and expire on August 1, 2003. At any time after January 31,
1998, the Company may redeem the Warrants in whole or in part at their appraised
value. If the Warrants have not been redeemed by August 1, 1998, the Company
must offer to purchase one-third of the Warrants on each July 31, 1998, 1999 and
2000, utilizing the appraised value on such dates. At December 31, 1996, the
Company has reserved 22,222 shares of common stock for the potential conversion
of the Warrants.
Stock Option Plan - The Company has a nonqualified stock option plan (the
"Plan") under which
<PAGE>
key employees may be granted options to purchase up to 100,000 shares of the
Company's common stock. The exercise price and terms of the options are
discretionary and determined when the options are granted. In 1994, the Company
granted options to purchase 16,704 shares of common stock at an exercise price
of $.10 per share to certain employees resulting in unearned compensation of
$183,292. In 1995, the Company canceled 12,528 options granted under this Plan.
In 1996, 7,500 additional options to purchase shares under the same terms were
issued, resulting in unearned compensation of $28,180. The outstanding options
vest over a six year period from the date of grant and expire ten years from the
date of grant. Compensation expense under the Plan was $3,444 and $36,660 in
1996 and 1995, respectively. At December 31, 1996, 835 of the 11,676 options
outstanding were exercisable.
The Company applies APB Opinion 25 and related interpretations in accounting for
its stock option plan. 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.
7. LEASE COMMITMENTS
The Company conducts a significant part of its theatre operations in leased
premises under noncancelable operating leases with terms of 5 to 30 years. Most
of these leases provide for contingent rentals based on operating results
(subject to minimum annual rents). 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 expense of
$130,127 and $119,338 at December 31, 1996 and 1995, respectively, has 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 and 1995, totaled $2,802,205 and $1,846,925, respectively.
Future minimum payments under noncancelable operating leases with initial or
remaining terms in excess of one year at December 31, 1996, are due as follows:
1997 $ 2,676,660
1998 2,676,660
1999 2,710,993
2000 2,773,894
2001 2,827,041
Thereafter 30,594,802
------------
Total $ 44,260,050
=================
After December 31, 1996, the Company had one theatre (15 screens) under
construction and two theatres (20 screens) under commitment with executed
leases. The three leases require future minimum lease payments by Cinemark de
Mexico estimated to be $8 million payable over 15- 20 years. The completion of
the three theatres currently to be constructed will require an estimated $16
million as of December 31, 1996.
<PAGE>
8. INCOME TAXES
The Company files a consolidated U.S. federal income tax return with Cinemark
USA. The Company and Cinemark USA have entered into a tax sharing agreement.
Pursuant to the agreement, the Company will pay to Cinemark USA the amount of
federal income tax it would owe as if it were filing a separate return and will
receive payments from Cinemark USA to the extent the Company's tax attributes
are used to offset the consolidated group's income. An income tax expense of
$173,293 and $181,305 for 1996 and 1995, respectively, has been recorded. The
1996 income tax expense reflects income earned by Cinemark Mexico (USA), and the
1995 expense is primarily related to the income taxes withheld on interest paid
by Cinemark de Mexico to the Company. Based on the Company's separate loss
(without Cinemark de Mexico), a tax benefit of $744,000 was recorded in 1994
equal to the benefit of the loss available to the Cinemark USA consolidated
group.
Cinemark de Mexico files a tax return in Mexico but is not required to file a
consolidated or separate U.S. income tax return. The losses incurred can be
utilized only to offset any future income which would otherwise be includable in
the income of the Company as a result of Cinemark de Mexico being a controlled
foreign corporation. The tax benefits for the net operating loss carryforward of
approximately $2.7 million at December 31, 1996, have been fully reserved and
will not be recognized as deferred tax assets until realization is more likely
than not.
Through December 31, 1996, the Companies had no significant temporary
differences between tax return and financial reporting.
9. AGREEMENTS WITH CINEMARK USA, INC.
Cinemark USA has entered into a senior note indenture which requires Cinemark
USA and its direct and indirect subsidiaries (including the Company) to engage
principally in the acquisition, construction and operation of indoor motion
picture theatres and other activities incidental thereto and provides Cinemark
USA the right to elect a majority of the board of directors of its subsidiaries.
The indenture of Cinemark USA restricts its subsidiaries, including the Company,
to purchasing or retiring their stock and paying dividends on a pro rata basis
only. All proceeds from the issuance of additional capital stock of the Company
or other Cinemark USA subsidiaries are required to be invested in their
respective operations.
The Company has entered into management agreements with Cinemark USA. Under
these agreements, Cinemark USA will operate all theatres of the managed
corporations as Cinemark theatres for a period of ten years. Cinemark receives
an annual management fee equal to 5.0% of the respective managed corporations'
revenues up to $50,000,000 and 3.0% of the revenues over $50,000,000. The
management agreements restrict the Company and Cinemark USA from owning, leasing
or managing any theatre that is within a specified distance of either entity's
theatres.
The Cinemark USA senior note indenture requires each subsidiary of the Company
to enter into similar agreements. During 1996 and 1995, the Company paid fees
relating to the management agreements of $777,713 and $578,399, respectively.
<PAGE>
10. SUPPLEMENTAL CASH FLOW INFORMATION
The following is provded as supplemental information to the consolidated
statment of cash flows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest paid $ 1,344,000 $ 2,708,548
============== ============== =============
Noncash investing and financing activities:
Retirement of Cinemark Mexico senior
subordinated notes and issuance of
new senior subordinated notes (Note5) $ 22,400,000
Issuance of Cinemark Mexico senior
subordinated notes for redeemed
warrants (Notes 5 and 6) 1,339,400
Net effect of exchange of Cinemark Mexico
senior subordinated notes and
conversion of warrants to senior
subordinated notes on additional paid-in
capital (Notes 5 and 6) 172,456
<FN>
******
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
SUPPLEMENTAL SCHEDULE A
CONSOLIDATING STATEMENT OF BALANCE SHEET INFORMATION
YEAR ENDED DECEMBER 31, 1996
- ---------------------------------------------------------------------------------
- ---------------------------------------------- ---------------- ----------------
Cinemark Cinemark
ASSETS Mexico (USA) de Mexico Eliminations Consolidated
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,673,582 $ 1,689,329 $ - $ 10,362,911
Inventories 109,055 109,055
Value-added tax refunds and other receivables 140,751 2,046,063 2,186,814
Prepaid expenses and other 254,955 389,295 644,250
---------------- ---------------- ------------- ------------------
Total current assets 9,069,288 4,233,742 13,303,030
THEATRE PROPERTIES AND EQUIPMENT - NET 26,439,025 26,439,025
OTHER ASSETS:
Deferred charges and other - net 706,337 2,684,952 3,391,289
Investment in subsidiary (9,451,590) 9,451,590 0
Intercompany advances 39,708,140 (39,708,140) 0
---------------- ---------------- ------------- ------------------
Total other assets 30,962,887 2,684,952 (30,256,550) 3,391,289
---------------- ---------------- ------------- ------------------
TOTAL $ 40,032,175 $ 33,357,719 $(30,256,550) $ 43,133,344
================ ================ ============= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 33,600 $ 2,769,127 $ - $ 2,802,727
Accrued interest expense 771,327 771,327
---------------- ---------------- ------------- ------------------
Total current liabilities 804,927 2,769,127 3,574,054
LONG-TERM LIABILITIES:
12% senior subordinated notes, due 2003 25,710,900 25,710,900
Intercompany advances 39,708,140 (39,708,140)
Senior secured notes 10,919,761 10,919,761
Deferred lease expense 332,042 332,042
---------------- ---------------- ------------- ------------------
Total long-term liabilities 36,630,661 40,040,182 (39,708,140) 36,962,703
COMMON STOCK WARRANTS 200,729 200,729
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock 4,044 4,044
Additional paid-in capital 23,146,551 9,500,000 (9,500,000) 23,146,551
Unearned compensation - stock options (37,658) (37,658)
Accumulated deficit (9,586,624) (19,624,038) 19,624,038 (9,586,624)
Cumulative foreign currency translation
adjustment (11,130,455) 672,448 (672,448) (11,130,455)
---------------- ---------------- ------------- ------------------
Total shareholders' equity 2,395,858 (9,451,590) 9,451,590 2,395,858
---------------- ---------------- ------------- ------------------
TOTAL $ 40,032,175 $ 33,357,719 $(30,256,550) $ 43,133,344
================ ================ ============= ==================
</TABLE>
S - 1
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
SUPPLEMENTAL SCHEDULE B
CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1996
- ----------------------------------------------- --------------- ---------------- ------------- ---------------
Cinemark Cinemark
Mexico (USA) de Mexico Eliminations Consolidated
<S> <C> <C> <C> <C>
REVENUES:
Admissions $ - $ 14,424,686 $ - $ 14,424,686
Concessions 7,733,918 7,733,918
Other 217,881 217,881
--------------- ---------------- ------------- ---------------
Total 22,376,485 22,376,485
COSTS AND EXPENSES:
Cost of operations:
Film rentals 6,226,352 6,226,352
Concession supplies 2,648,914 2,648,914
Salaries and wages 2,560,231 2,560,231
Facility leases 2,802,205 2,802,205
Advertising 432,372 432,372
Utilities and other 3,363,521 3,363,521
--------------- ---------------- ------------- ---------------
Total 18,033,595 18,033,595
General and administrative expenses 26,121 1,960,834 1,986,955
Depreciation 1,745,830 1,745,830
--------------- ---------------- ------------- ---------------
Total 26,121 21,740,259 21,766,380
--------------- ---------------- ------------- ---------------
OPERATING INCOME (LOSS) (26,121) 636,226 610,105
OTHER INCOME (EXPENSE):
Interest expense (3,882,441) (4,568,748) 4,556,431 (3,894,758)
Amortization of debt issue cost (102,268) (102,268)
Amortization of debt discount (139,205) (139,205)
Interest income 4,645,157 669,381 (4,545,651) 768,887
Foreign currency exchange gain (loss):
Other 163,936 (32,639) 131,297
Intercompany borrowing (822,276) 822,276
Equity in loss of affiliates (3,121,064) 3,121,064
--------------- ---------------- ------------- ---------------
Total (2,599,821) (4,557,707) 3,921,481 (3,236,047)
--------------- ---------------- ------------- ---------------
LOSS BEFORE INCOME TAXES (2,625,942) (3,921,481) 3,921,481 (2,625,942)
INCOME TAXES 173,293 173,293
--------------- ---------------- ------------- ---------------
NET LOSS $ (2,799,235) $ (3,921,481) $ 3,921,481 $ (2,799,235)
=============== ================ ============= ===============
</TABLE>
S - 2
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
SUPPLEMENTAL SCHEDULE C
CONSOLIDATING STATEMENT OF CASH FLOW
YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------- ---------------------------------- ---------------- ----------------
Cinemark Cinemark
Mexico (USA) de Mexico Eliminations Consolidated
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (2,799,235) $ (3,921,481) $ 3,921,481 $ (2,799,235)
Noncash items in net loss:
Depreciation 1,745,830 1,745,830
Amortization 102,268 102,268
Deferred lease expenses 130,127 130,127
Amortization of debt discount 139,205 139,205
Debt issued for accrued interest 2,885,734 2,885,734
Amortized compensation - stock options 3,444 3,444
Equity in loss of subsidiary 3,921,481 (3,921,481)
Cash from (used for) operating working capital:
Inventories (44,244) (44,244)
Other current assets (395,706) (1,426,945) (1,822,651)
Accounts payable and other accrued expenses (4,900) 1,057,084 1,052,184
Accrued interest expense (348,673) (348,673)
Accounts payable - affiliates (635,089) (635,089)
---------------- ---------------- ---------------- ----------------
Net cash from (used for) operations 3,503,618 (3,094,718) 408,900
INVESTING ACTIVITIES:
Additions to theatre properties (9,783,517) (9,783,517)
Decrease (increase) in other assets (2,525,564) 826,384 2,500,000 800,820
Intercompany advances (10,145,556) 10,145,556 0
---------------- ---------------- ---------------- ----------------
Net cash used for investing activities (12,671,120) (8,957,133) 12,645,556 (8,982,697)
FINANCING ACTIVITIES:
Capital contributions 10,000,000 2,500,000 (2,500,000) 10,000,000
Borrowings under senior secured credit agreement 7,500,000 7,500,000
Payments on senior secured credit agreement (15,021) (15,021)
Intercompany advances 10,145,556 (10,145,556)
Tax benefit from debt exchange 597,751 597,751
---------------- ---------------- ---------------- ----------------
Net cash from financing activities 18,082,730 12,645,556 (12,645,556) 18,082,730
FOREIGN CURRENCY TRANSLATION (800,417) 231,366 (569,051)
---------------- ---------------- ---------------- ----------------
INCREASE IN CASH AND CASH EQUIVALENTS 8,114,811 825,071 8,939,882
Beginning of period 558,771 864,258 1,423,029
---------------- ---------------- ---------------- ----------------
End of period $ 8,673,582 $ 1,689,329 $ - $ 10,362,911
================ ================ ================ ================
</TABLE>
S - 3
<PAGE>
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR
CINEMARK MEXICO (USA), INC.
CINEMARK DE MEXICO, S.A. DE C.V.
FOR FISCAL YEAR ENDED
DECEMBER 31, 1996
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description Page No.
<S> <C> <C>
3.1 Articles of Incorporation of Cinemark Mexico (USA), Inc. (the Exhibit 3.1 to the
"Company"). Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
3.2 Bylaws of the Company Exhibit 3.2 to the
Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
3.3 Bylaws of Cinemark de Mexico, S.A. de C.V. ("Cinemark de Exhibit 3.3 to the
Mexico") Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
4.1 Indenture, dated as of July 30, 1993, among the Company, Exhibit 4.1 to the
Cinemark de Mexico, as Guarantor, and United States Trust Company's
Company of New York, as trustee (the "Trustee"), related to Registration
$22,400,000 principal amount of 12% Series A Senior Statement (33-
Subordinated Notes due 2003 and 12% Series B Senior 72114) on Form
Subordinated Notes. S-4 filed on
November 24,
1994
4.2 Purchase Agreement, dated as of July 30, 1993, among the Exhibit 4.2 to the
Company, Cinemark de Mexico and each of the purchasers of Company's
the Old Notes named on the signature pages thereof (the Registration
"Purchasers"). Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
E-2
<PAGE>
4.3 Registration Rights Agreement, dated as of July 30, 1993, among Exhibit 4.3 to the
the Company, Cinemark de Mexico and the Purchasers of the Company's
Old Notes. Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
4.4(a) First Supplemental Indenture dated May 2, 1994 among the Exhibit 4.7 to the
Company, Cinemark de Mexico and the Trustee. Company's
Annual Report
(33-72114) on
Form 10-K filed
on March 27,
1995
4.4(b) Second Supplemental Indenture dated August 30, 1995 among Exhibit 4.4(b) to
the Company, Cinemark de Mexico and the Trustee the Company's
Annual Report
(33-72114) on
Form 10-K filed
on March 31,
1996
4.4(c) Third Supplemental Indenture dated September 30, 1996 among Page _____
the Company, Cinemark de Mexico and the Trustee
4.5(a) Purchase Agreement dated May 6, 1994 among the Company, Exhibit 4.5 to the
Cinemark de Mexico and each of the purchasers of the Series C Company's
Notes named on the signature pages thereto. Annual Report
(33-72114) on
Form 10-K filed
on March 27,
1995
4.5(b) Purchase Agreement dated August 30, 1995 among the Exhibit 4.5(b) to
Company, Cinemark de Mexico and each of the purchasers the Company's
named on the signature pages thereto Annual Report
(33-72114) on
Form 10-K filed
on March 31,
1996
10.1 Warrant Registration Rights Agreement, dated as of July 30, Exhibit 10.1 to
1993, among the Company, Cinemark International, Inc. the Company's
("Cinemark International"), New Wave Investments A.V.V. Registration
("New Wave") and the purchasers of the warrants named on the Statement (33-
signature pages thereof. 72114) on Form
S-4 filed on
November 24,
1994
E-3
<PAGE>
10.2 Warrant Certificates. Exhibit 10.2 to
the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
10.3 Shareholder Agreement, dated July 30, 1993, among the Exhibit 10.3 to
Company, Cinemark International and New Wave. the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
10.4(a) Subscription Agreement, dated as of July 30, 1993, between the Exhibit 10.4 to
Company and Cinemark International the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
10.4(b) Subscription Agreement dated as of December 31, 1994 between Exhibit 10.4(a) to
the Company and Cinemark International Company's
Annual Report
(33-72114) on
Form 10-K filed
on March 27,
1995
10.4(c) Subscription Agreement dated as of September 30, 1996 between Page _____
the Company and Cinemark International
10.5(a) Subscription Agreement, dated as of July 30, 1993, between the Exhibit 10.5 to
Company and New Wave. the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
E-4
<PAGE>
10.5(b) Subscription Agreement, dated as of January 10, 1995, between Exhibit 10.5(b) to
the Company and New Wave the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
March 31, 1996
10.5(c) Subscription Agreement dated as of January 9, 1997 between the Page _____
Company and New Wave
10.6 Indenture, dated as of June 10, 1992, between Cinemark USA, Exhibit 10.6 to
Inc. ("Cinemark USA") and NationsBank of Texas, N.A., as the Company's
trustee, relating to Cinemark USA's 12% Senior Notes due June Registration
1, 2002. Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
10.7 Management Agreement, dated as of July 28, 1993, between Exhibit 10.7 to
Cinemark USA and the Company. the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
10.8 Management Agreement, dated as of September 10, 1992, Exhibit 10.8 to
between Cinemark USA and Cinemark de Mexico. the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
10.9 Cinemark Mexico (USA), Inc. Nonqualified Stock Option Plan. Exhibit 10.9 to
the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
10.10 Tax Sharing Agreement dated as of July 28, 1993, between Exhibit 10.10 to
Cinemark USA and the Company. the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
November 24,
1994
E-5
<PAGE>
10.11(a) Senior Secured Credit Agreement dated as of December 4, 1995 Exhibit 10.11(a)
among the Company, Cinemark de Mexico and Cinemark to the Company's
International. Registration
Statement (33-
72114) on Form
S-4 filed on
March 31, 1996
10.11(b) Note of Cinemark Mexico dated December 4, 1996 payable to Exhibit 10.11(b)
Cinemark International in a principal amount of up to $10.0 to the Company's
million Registration
Statement (33-
72114) on Form
S-4 filed on
March 31, 1996
10.11(c) Note of Cinemark de Mexico dated February 14, 1996 payable to Exhibit 10.11(c)
Cinemark Mexico in the principal amount of $3,650,000 to the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
March 31, 1996
10.11(d) Note of Cinemark de Mexico dated February 27, 1996 payable to Exhibit 10.11(d)
Cinemark Mexico in the principal amount of $450,000 to the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
March 31, 1996
10.11(e) Note of Cinemark de Mexico dated March 22, 1996 payable to Exhibit 10.11(e)
Cinemark Mexico in the principal amount of $1,000,000 to the Company's
Registration
Statement (33-
72114) on Form
S-4 filed on
March 31, 1996
10.11(f) First Amendment to Senior Credit Facility dated September 30, Page ____
1996 among Cinemark International, the Company and
Cinemark de Mexico
10.12 Series D Registration Rights Agreement dated September 30, Page ____
1996 between the Company and the holders of Series D Notes
12 Computation of Ratio of Earnings to Fixed Charges. Page ______
21 Subsidiaries of the Company. Page ______
</TABLE>
E-6
<PAGE>
EXHIBIT 4.4(c)
<PAGE>
==============================================================================
CINEMARK MEXICO (USA), INC.
Issuer,
CINEMARK DE MEXICO, S.A. de C.V.
Guarantor
AND
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
--------------------------------
THIRD SUPPLEMENTAL INDENTURE
Dated as of September 30, 1996
--------------------------------
12% Senior Subordinated PIK Notes
due 2003
==============================================================================
<PAGE>
THIRD SUPPLEMENTAL INDENTURE
THIS THIRD SUPPLEMENTAL INDENTURE (the "Third Supplemental Indenture"),
dated as of September 30, 1996, among Cinemark Mexico (USA), Inc., a Texas
corporation (the "Issuer"), Cinemark de Mexico, S.A. de C.V., a Mexican
corporation (the "Guarantor"), and United States Trust Company of New York, as
Trustee (the "Trustee").
RECITALS
A. Issuer, Guarantor and the Trustee executed an indenture, dated as of
July 30, 1993 (the "Original Indenture"), relating to the Issuer's 12% Senior
Subordinated Notes due 2003 (the "Securities"), which was amended by (i) the
First Supplemental Indenture dated as of May 2, 1994 (the "First Supplemental
Indenture") and (ii) the Second Supplemental Indenture dated as of August 30,
1995 (the "Second Supplemental Indenture") (the original Indenture as amended by
the First Supplemental Indenture and the Second Supplemental Indenture is
hereinafter referred to as the "Indenture").
B. Issuer and Guarantor, with the consent of holders of more than 50%
of the aggregate principal amount of the Securities outstanding, exclusive of
any Securities owned by Issuer, Guarantor or their respective affiliates, desire
to amend and/or restate certain Sections of the Indenture in connection with the
creation of a new Series D of the Securities and the increase of the maximum
original principal amount of Securities that may be issued, authenticated and
delivered under the Indenture.
C. The holders of all of the aggregate principal amount of the
Securities outstanding, exclusive of the Securities owned, if any, by Issuer,
Guarantor or their respective affiliates, desire to exchange (the "Exchange")
their respective Securities for new promissory notes (the "Exchange Notes"). The
Exchange Notes shall contain provisions permitting the Issuer to elect, for the
period through and including February 1, 2000, to pay all accrued and unpaid
interest on each interest payment date by issuing additional notes of the same
series (the "Additional Securities") in an aggregate principal amount equal to
the interest that would have been payable during such period assuming the
principal on the applicable Securities accrued interest for such period at an
interest rate equal to 13% per annum.
D. Issuer and Guarantor, with the consent of holders of all of the
aggregate principal amount of the Securities now outstanding, exclusive of any
Securities owned by Issuer, Guarantor and their respective affiliates, desire to
amend and/or restate certain Sections of the Indenture in connection with the
Exchange.
E. All conditions precedent provided for in the Indenture relating to
this Third Supplemental Indenture have been complied with. Capitalized items
used herein shall have the meanings assigned to them in the Indenture unless
otherwise defined herein.
NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH,
- 1 -
<PAGE>
that for and in consideration of the premises and of the covenants contained
herein, the Issuer and Guarantor hereby covenant and agree with the Trustee, for
the equal benefit of all the present and future holders of the Securities
without preference, priority or distinction of any of the Securities over any of
the others by reason of priority in time of issuance, negotiation or maturity
thereof, or otherwise, and for the benefit of the Trustee and its successors and
assigns, as follows:
ARTICLE I
AMENDMENTS TO INDENTURE
1.1 Amendment to Recitals. The first paragraph of THE RECITALS OF THE
COMPANY is hereby amended and restated in its entirety as follows:
The Company has duly authorized the creation of an issue of up
to $39,272,900 aggregate original principal amount of its (a) 12%
Series A Senior Subordinated Notes due 2003 (the "Series A
Securities"), (b) 12% Senior Subordinated Notes due 2003 (the "Series B
Securities"), 12% Series C Senior Subordinated Notes due 2003 (the
"Series C Securities"), (d) 12% Series D Senior Subordinated Notes due
2003 (the "Series D Securities" and, collectively with the Series A
Securities, the Series B Securities and the Series C Securities, the
"Securities") of substantially the tenor and amount hereinafter set
forth, and to provide therefor the Company has duly authorized the
execution and delivery of this Indenture.
1.2 Amendments to Section 1.1
(a) Definition of "Accreted Value". The definition of
"Accreted Value" in Section 1.1 of the Indenture is hereby amended and rested in
its entirety to read as follows:
"Accreted Value" as of any date from and after
September 30, 1996, shall mean the aggregate principal amount of any
Securities Outstanding.
(b) Definitions. The following definitions are hereby added
after the definition of "Additional Interest" in Section 1.1 of the Indenture.
"Additional Securities" means the Additional Series A
Securities, the Additional Series B Securities, the Additional Series C
Securities or the Additional Series D Securities, as applicable.
"Additional Series A Securities" means the additional
Series A Securities issued on an Interest Payment Date in lieu of making a cash
interest payment on the Series A Securities pursuant to Section 2.2.
"Additional Series B Securities" means the additional
Series B Securities issued on an Interest Payment Date in lieu of making a cash
interest payment on the Series B Securities pursuant to Section 2.2.
<PAGE>
"Additional Series C Securities" means the additional
Series C Securities issued on an Interest Payment Date in lieu of making a cash
interest payment on the Series C Securities pursuant to Section 2.2.
"Additional Series D Securities" means the additional
Series D Securities
issued on an Interest Payment Date in lieu of making a cash interest payment on
the Series D Securities pursuant to Section 2.2.
(c) Definition of "Credit Agreement". The first sentence of
the definition of Credit Agreement shall be amended and restated to read as
follows:
"Credit Agreement" means any credit agreement or agreements
which the Company or any Subsidiary shall enter into which provide
credit facilities to the Company or such Subsidiary and their
Subsidiaries in an aggregate original principal amount not to exceed
$10,000,000, plus any accrued interest (including accrued interest
added to such principal amount outstanding), penalties, reimbursements
or indemnity accounts, fees accruing thereon, and interest accruing on
or after the filing of any petition in bankruptcy or for reorganization
relating to the Company or such Subsidiary, whether or not such claim
for post-election interest is allowed in such proceeding."
(d) Definition of "Fractional Additional Securities". The
following is hereby added after the definition of "Expiration Date" in Section
1.1 of the Indenture:
"Fractional Additional Securities" means Additional
Securities the principal amount of which would be less than $100.00.
(e) Definition of "Securities". The definition of "Securities"
in Section 1.1 of the Indenture is hereby amended and restated in its entirety
as follows:
"Securities" means the Series A Securities, the
Series B Securities, the Series C Securities and the Series D
Securities designated as such in the first paragraph of the RECITALS OF
THE COMPANY, including the Additional Securities issued with respect to
each series of such Securities.
(f) Definition of "Series D Securities". The following is
hereby added after the definition of "Series C Securities" in Section 1.1 of the
Indenture.
"Series D Securities" means the Series D Securities
designated as such in the first paragraph of the RECITALS OF THE COMPANY.
1.3 Amendment to Section 2.2.
<PAGE>
(a) The following is hereby added after the sixth paragraph of
Section 2.2 of the Indenture:
"If Series D Securities, then insert 12% Series D Senior
Subordinated PIK Notes due 2003.
(b) The seventh paragraph of Section 2.2 of the Indenture is
hereby amended and restated in its entirety as follows:
"Cinemark Mexico (USA), Inc., a corporation duly organized and
existing under the laws of Texas (herein called the "Company", which
term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
______________________________, or registered assigns, the principal of
this Security in an amount equal to the sum of $__________ Dollars on
August 1, 2003, and to pay interest on the unpaid principal amount from
the most recent date to which interest has been paid or, if no interest
has been paid, from the date of the original issuance hereof, at the
rate of 12% per annum until the principal hereof is paid or made
available for payment and at the rate of 12% per annum on any overdue
principal and premium and on any overdue installment of interest (but
not to exceed the maximum rate permitted by applicable law) until paid
as specified on the reverse hereof. The Company shall pay interest
semi-annually on August 1 and February 1 of each year, commencing
February 1, 1997 or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). On any
Interest Payment Date through and including February 1, 2000, the
Company may, at its option, by giving the Holder of such Security and
the Trustee notice of its election not less than 5 days nor more than
45 days prior to the record date for the related Interest Payment Date,
pay interest on the Security either in cash (at the rate specified
above) or through the issuance of Additional Securities in an aggregate
principal amount equal to the amount of interest that would have been
payable if such Security had accrued interest during the relevant
interest period at the rate of 13% per annum. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the July 15th or January 15th (whether or not
a Business Day), as the case may be, next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful manner
not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said
Indenture. On each such Interest Payment Date when the Company elects
to issue Additional Securities, the Trustee shall, upon the Company's
order, authenticate and deliver Additional Securities for original
<PAGE>
issuance to the Holder of this Security on the relevant record date, as
shown by the records of the Security Register, in the aggregate
principal amount required to pay such interest; provided, however, that
in lieu of the issuance of any Additional Securities as set forth
above, the Company shall pay the holder of a Fractional Additional
Security an amount in cash equal to the Fractional Additional Security.
Any Additional Securities so issued shall be dated the applicable
Interest Payment Date, shall bear interest from and after such date,
shall mature on August 1, 2003 and shall be governed by, and subject to
the terms, provisions and conditions of, such Indenture and shall have
the same rights and benefits as this Security."
1.4 Amendment to Section 2.3. (a) The first paragraph of Section 2.3 of
the Indenture is hereby amended and restated in its entirety as
follows:
This Security is one of a duly authorized issue of Securities
of the Company designated as its [If Series A Securities, then insert
-- 12% Series A Senior Subordinated PIK Notes due 2003 (the "Series A
Securities") issued under an Indenture, dated as of July 30, 1993, as
amended (herein called the "Indenture"), between the Company and the
United States Trust Company of New York, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the
Indenture), together with the 12% Series B Senior Subordinated PIK
Notes due 2003 of the Company (the "Series B Securities"), the 12%
Series C Senior Subordinated PIK Notes due 2003 (the "Series C
Securities") and the 12% Series D Senior Subordinated PIK Notes due
2003 (the "Series D Securities", and collectively with the Series A
Securities, the Series B Securities and the Series C Securities, the
"Securities").] [If Series B Securities, then insert -- 12%Series B
Senior Subordinated PIK Notes due 2003 (the "Series B Securities")
issued under an Indenture, dated as of July 30, 1993, as amended
(hereinafter called the "Indenture"), between the Company and the
United States Trust Company of New York, as Trustee (herein called the
"Trustee"), which term includes any trustee under the Indenture),
together with the 12% Series A Senior Subordinated PIK Notes due 2003
of the Company (the "Series A Securities"), the 12% Series C Senior
Subordinated PIK Note due 2003 of the Company (the "Series C
Securities"), and the 12% Series D Senior Subordinated PIK Notes due
2003 of the Company (the "Series D Securities", and collectively with
the Series A Securities, Series B Securities and Series C Securities,
the "Securities").] [If Series C Securities, then insert -- 12% Series
C Senior Subordinated PIK Notes due 2003 (the "Series C Securities")
issued under an Indenture, dated as of July 30, 1993, as amended
(herein called the "Indenture"), between the Company and the United
States Trust Company of New York, as Trustee (herein called the
"Trustee", which term includes any successor trustee under the
Indenture), together with the 12% Series A Senior Subordinated PIK
Notes due 2003 of the Company (the "Series A Securities"), the 12%
Series B Senior Subordinated PIK Notes due 2003 of the Company (the
"Series B Securities") and the 12% Series D Senior Subordinated PIK
Notes due 2003 (the "Series D Securities", and collectively with the
Series A Securities, the Series B Securities and the Series C
Securities, the "Securities").] [If Series D Securities, then insert --
12% Series D Senior Subordinated PIK Notes due 2003 (the "Series D
Securities") issued under an Indenture, dated as of July 30, 1993, as
amended (herein called the "Indenture"), between
<PAGE>
the Company and the United States Trust Company of New York, as Trustee
(herein called the "Trustee", which term includes any successor or
trustee under the Indenture), together with the 12% Series A Senior
Subordinated PIK Notes due 2003 of the Company (the "Series A
Securities"), the 12% Series B Senior Subordinated PIK Notes due 2003
of the Company (the "Series B Securities") and the 12% Series C Senior
Subordinated PIK Notes due 2003 of the Company (the "Series C
Securities", and collectively with the Series A Securities, the Series
B Securities and the Series D Securities, the "Securities").] The
Securities are limited in aggregate original principal amount of up to
$39,272,900. Reference is hereby made to the Indenture and all
indentures supplemental thereto for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the
Company, the Trustee, the holders of the Senior Debt and the Holders of
the Securities and of the terms upon which the Securities are, and are
to be, authenticated and delivered.
(b) The last sentence of the seventh paragraph of Section 2.3
of the Indenture is hereby amended and restated in its entirety as follows:
Each of the Series A Securities, the Series B
Securities, the Series C Securities and the Series D Securities shall rank pari
passu.
(c) The tenth paragraph of Section 2.3 of the Indenture is
hereby amended and restated in its entirety as follows:
Unless the context otherwise requires, the Series A
Securities, the Series B Securities, the Series C Securities and the
Series D Securities shall constitute one series for all purposes under
the Indenture, including without limitation, amendments, waivers,
approvals, redemptions and Offers to Purchase (except, in the case of
redemptions and Offers to Purchase, for any differences required as a
result of the Series C Securities and the Series D Securities having a
different Accreted Value from the Series A Securities and the Series B
Securities).
(d) The fourteenth paragraph of Section 2.3 of the Indenture
is hereby amended and restated in its entirety as follows:
"The Securities shall be issued only in registered
form without coupons and only in denominations of $1,000 and any
integral multiple thereof; provided, however, the Series D Securities
and the Additional Securities may be issued in denominations of $100
and any integral multiple thereof."
1.5 Amendment to Section 3.1. (a) The first paragraph of Section 3.1 of
the Indenture is hereby amended and restated in its entirety as follows:
The aggregate original principal amount of Securities
(including Additional Securities) which may be authenticated and
delivered under this Indenture is limited to $39,272,900.00 (the Series
A Securities are limited to an aggregate original principal
<PAGE>
amount, (including Additional Series A Securities) of $662,600.00, the
Series B Securities are limited to an aggregate original principal
amount (including Additional Series B Securities) of $33,129,100.00,
the Series C Securities are limited to an aggregate original principal
amount (including Additional Series C Securities) of $3,313,000.00 and
the Series D Securities are limited to an aggregate original principal
amount (including Additional Series D Securities) of $2,168,200.00),
except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Sections 3.4, 3.5, 3.6, 9.6 or 11.8 or in connection with
an Offer to Purchase pursuant to Sections 10.11, 10.13 and 10.18.
Subject to such exceptions (i) the maximum aggregate original principal
amount of Securities which may be authenticated and delivered under
this Indenture other than as Additional Securities shall be limited to
$23,822,800.00 (consisting of $400,000 of Series A Securities,
$20,000,000 of Series B Securities, $2,000,000 of Series C Securities
and $1,422,800.00 of Series D Securities), and (ii) the maximum
aggregate original principal amount of Additional Securities which may
be authenticated and delivered under this indenture is limited to
$15,450,100.00 (consisting of $262,600.00 of Additional Series A
Securities, $13,129,100.00 of Additional Series B Securities,
$1,313,000.00 of Additional Series C Securities, and $745,400.00 of
Additional Series D Securities).
(b) The third paragraph of Section 3.1 of the Indenture is
hereby deleted.
(c) The fourth paragraph of Section 3.1 is hereby amended and
restated in its entirety as follows:
The Series A Securities shall be known and designated
as the "12% Series A Senior Subordinated PIK Notes due 2003" of the
Company, the Series B Securities shall be known and designated as the
"12% Series B Senior Subordinated PIK Notes due 2003" of the Company,
the Series C Securities shall be known and designated as the "12%
Series C Senior Subordinated PIK Notes due 2003" of the Company and the
Series D Securities shall be known and designated as the "12% Series D
Senior Subordinated PIK Notes due 2003" of the Company. The Stated
Maturity of the Securities shall be August 1, 2003. The Securities
shall bear interest on the unpaid principal amount of such Securities
at the rate of 12% per annum, payable semi-annually on August 1 and
February 1, commencing February 1, 1997 in the case of the Series A
Securities, the Series B Securities, the Series C Securities, and the
Series D Securities, until the principal thereof is paid or made
available for payment; provided, however, on any Interest Payment Date
through and including February 1, 2000, the Company may, at its option,
by giving the holder of this Security and the Trustee notice of its
election not less than 5 days nor more than 45 days prior to the record
date for the related Interest Payment Date, pay interest on the
Security, in lieu of payment of interest on the Security in cash,
through the issuance of Additional Securities, in an aggregate
principal amount equal to the amount of the interest that would have
been payable if such Note had accrued interest during the relevant
interest period at the rate of 13% per annum. Additional Securities may
only be issued in lieu of payment of interest in cash on Securities.
Additional Securities issued in lieu of payment of interest in cash on
Series A Securities shall constitute additional Series A Securities;
Additional
<PAGE>
Securities issued in lieu of payment of interest in cash on Series B
Securities shall constitute additional Series B Securities; Additional
Securities issued in lieu of payment of interest in cash on Series C
Securities shall constitute additional Series C Securities; and
Additional Securities issued in lieu of payment of interest in cash on
Series D Securities shall constitute additional Series D Securities.
(d) The eighth paragraph of Section 3.1 of the Indenture is
hereby amended and restated in its entirety as follows:
The Securities shall be subordinated in right of
payment to Senior Debt as provided in Article XII and the Series A
Securities, the Series B Securities, the Series C Securities and the
Series D Securities shall rank pari passu.
(e) The tenth paragraph of Section 3.1 of the Indenture is
hereby amended and restated in its entirety as follows:
Unless the context otherwise requires, the Series A
Securities, the Series B Securities, the Series C Securities and the
Series D Securities (including all Additional Securities constituting
Securities of each such series) shall constitute one series for all
purposes under the Indenture, including without limitation, amendments,
waivers, approvals, redemptions and Offers to Purchase (except, in the
case of redemptions and Offers to Purchase, for any differences
required as a result of the Series C Securities and the Series D
Securities having a different Accreted Value from the Series A
Securities and the Series B Securities).
1.6 Amendment to Section 3.2. Section 3.2 is hereby amended and
restated in its entirety to read as follows:
"The Securities shall be issued only in registered
form without coupons and only in denominations of $1,000 and any
integral multiple thereof; provided, however, the Series D Securities
and the Additional Securities may be issued in denominations of $100
and any integral multiple thereof."
1.7 Amendment to Section 3.5. The last sentence of the first paragraph
of Section 3.5 of the Indenture is hereby amended and restated in its entirety
as follows:
Such Security Register shall distinguish between Series A
Securities, Series B Securities, Series C Securities and Series D
Securities.
1.8 Amendment to Section 10.8(b). Section 10.8(b) is hereby amended and
restated to read in its entirety as follows:
Limitation on Consolidated Debt.
(b) After September 30, 1996, the Company and its
Subsidiaries may
<PAGE>
Incur Debt, if, at the date of and giving effect to the
incurrence of such Debt, the Pro Forma Cash Flow Coverage
Ratio is equal to or greater than 2.0 to 1.0. Notwithstanding
the foregoing sentence, the Company or any Subsidiary may
Incur Permitted Debt without regard to the foregoing
limitation.
1.9 Amendment to Section 10.13. The first paragraph of Section 10.13 is
hereby amended and restated in its entirety to read as follows:
"At the end of any two consecutive fiscal quarters during the
periods after December 31, 1999, the Cash Flow Coverage of the
Company for such two fiscal quarters then ending shall equal
or exceed a ratio of 2.0 to 1.0.
1.10 Amendment to Section 11.1. The last paragraph of Section 11.1 of
the Indenture is hereby amended and restated in its entirety as follows:
Subject to Section 3.1, the Series A Securities, the Series B
Securities, the Series C Securities and the Series D Securities shall
be treated as one class for all purposes under this Indenture,
including, without limitation, redemptions hereunder.
ARTICLE II
Previously Authenticated Notes
To the extent that Series A Securities, Series B Securities and Series
C Securities have been authenticated by the Trustee prior to the date of this
Third Supplemental Indenture, such Securities shall continue to be valid and
binding obligations of the Company notwithstanding the fact that such Securities
do not contain the revised language provided for in Section 1.4 of this Third
Supplemental Indenture. After the date of this Third Supplemental Indenture if
any previously authenticated Securities are presented to the Trustee for
transfer or exchange, any new Series A Securities, Series B Securities or Series
C Securities authenticated by the Trustee as a result of such transfer or
exchange may be in the form prescribed by the Original Indenture; provided that
such Securities contain a legend substantially similar to the following:
Pursuant to the terms of a Third Supplemental Indenture among the
Company, the Guarantor and the Trustee, an additional Series D has been
authorized, which Series D Securities shall rank pari passu with the
Series A Securities, the Series B Securities and the Series C
Securities. Generally, all four series of Securities shall constitute
one series for all purposes under the Indenture, including without
limitation, amendments, waivers, approvals, redemptions and Offers to
Purchase. A copy of the Third Supplemental Indenture is available upon
request from the Company.
ARTICLE III
Miscellaneous Provisions
<PAGE>
3.1 Counterparts. This Third Supplemental Indenture may be executed in
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
3.2 Severability. In the event that any provision in this Third
Supplemental Indenture shall be held to be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
3.3 Headings. The article and section headings are for convenience only
and shall not affect the construction hereof.
3.4 Successors and Assigns. Any covenants and agreements in this Third
Supplemental Indenture by Issuer shall bind its successors and assigns, whether
so expressed or not.
3.5 GOVERNING LAW. THIS THIRD SUPPLEMENTAL INDENTURE SHALL BE GOVERNED
BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED IN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
3.6 Effect of Third Supplemental Indenture. Except as amended by this
Third Supplemental Indenture, the terms and provisions of the Indenture shall
remain in full force and effect.
3.7 Trustee. The Trustee accepts the modifications of the Trust
effected by this Third Supplemental Indenture, but only upon the terms and
conditions set forth in the Indenture. Without limiting the generality of the
foregoing, the Trustee assumes no responsibility for the correctness of the
recitals herein contained, which shall be taken as the statements of Issuer, and
the Trustee shall not be responsible or accountable in any way whatsoever for or
with respect to the validity or execution or sufficiency of this Third
Supplemental Indenture and the Trustee makes no representation with respect
thereto.
[SIGNATURES ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be executed by their duly authorized representative as
of the date hereof.
<TABLE>
<S> <C>
ATTEST: CINEMARK MEXICO (USA), INC.
_______________________________ By:______________________________________
Printed Name:____________________________
Title:____________________________________
ATTEST: CINEMARK DE MEXICO, S.A. de C.V.
_______________________________ By:______________________________________
Printed Name:____________________________
Title:____________________________________
ATTEST: UNITED STATES TRUST COMPANY OF
NEW YORK
_______________________________ By:______________________________________
Printed Name:____________________________
Title:____________________________________
</TABLE>
<PAGE>
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned Notary Public in and for said State
and County, on this day personally appeared
________________________________________________,
______________________________________ of Cinemark Mexico (USA), Inc., known to
me to be the person and officer whose name is subscribed to the foregoing
instrument, and acknowledged to me that the same was the act of the said
Cinemark Mexico (USA), Inc., and that he executed the same as the act of such
corporation for the purposes and consideration therein expressed and in the
capacity therein stated.
----------------------------------------
Notary Public, State of Texas
Printed Name:____________________________
My Commission Expires:
- ---------------------------
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned Notary Public in and for said State
and County, on this day personally appeared
________________________________________________,
______________________________________ of Cinemark de Mexico, S.A. de C.V.,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument, and acknowledged to me that the same was the act of the
said Cinemark de Mexico, S.A. de C.V., and that he executed the same as the act
of such corporation for the purposes and consideration therein expressed and in
the capacity therein stated.
----------------------------------------
Notary Public, State of Texas
Printed Name:____________________________
My Commission Expires:
- ---------------------------
<PAGE>
EXHIBIT 10.4(c)
<PAGE>
SUBSCRIPTION AGREEMENT
September 30, 1996
Cinemark Mexico (USA), Inc.
7502 Greenville Avenue
Suite 800-LB9
Dallas, Texas 75231
Attention: Lee Roy Mitchell, Vice Chairman
Re: Subscription for Common Stock of Cinemark Mexico (USA), Inc.
1. Subscription. Subject to the terms and conditions hereof, the
undersigned (the "Subscriber") hereby irrevocably subscribes for and agrees to
purchase 2,661,450 shares (the "Shares") of the common stock, par value $.001
per share (the "Common Stock"), of Cinemark Mexico (USA), Inc., a Texas
corporation (the "Company"), for which the Subscriber agrees to pay a total
purchase price of $10,000,000 in cash (the "Purchase Price"). Unless otherwise
specifically noted, "dollars" or "$" shall mean United States dollars.
2. Conditions to the Subscription. The Subscriber understands and
agrees that this subscription is made subject to the following terms and
conditions.
(a) The Company reserves the absolute right to reject any or all
tenders of the Purchase Price that are not in proper form or the acceptance of
which would, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the right to waive any irregularities or conditions of tender as
to all or any part of the Purchase Price.
(b) This subscription will terminate on October 31, 1996 unless
accepted by the Company before such date. The Subscriber agrees to close the
transaction contemplated by this subscription agreement (the "Closing") on
September 30, 1996 or on such other date on or before October 31, 1996 specified
by the Company (the "Closing Date"). Upon acceptance of this subscription by the
Company, the Company will deliver to the Subscriber a copy of this subscription
agreement duly executed by the Company.
3. Payment for the Shares. Upon acceptance of this subscription by the
Company, the Subscriber shall be irrevocably and unconditionally obligated to
pay to the Company the full amount of the Purchase Price set forth above.
<PAGE>
4. Representations and Warranties of the Subscriber. The Subscriber
understands that this subscription is being conducted pursuant to exemptions
from registration provided for in the Securities Act of 1933, as amended (the
"Securities Act"), and state securities laws, that it is entering into this
subscription agreement without being furnished any offering literature or
prospectus, that this transaction has not been approved or disapproved by the
Texas State Securities Board or the United States Securities and Exchange
Commission or by any administrative agency charged with the administration of
the securities laws of any state because of the nature of and the small number
of persons solicited and the private aspects of the offering, that all
documents, records and books pertaining to this investment have been made
available to the undersigned and his representatives, including his attorney
and/or his accountant, and that the books and records of the Company will be
available upon reasonable notice for inspection by investors during reasonable
business hours at its principal place of business, and the Subscriber hereby
represents and warrants as follows:
(a) The Subscriber confirms that (i) it is duly organized, validly
existing and in good standing under the laws of the State of Texas; (ii) it has
the corporate power and authority to execute, deliver and perform this
subscription agreement; (iii) it is able (A) to bear the economic risk of its
investment, (B) to hold the Shares for an indefinite period of time; and (C) to
afford a complete loss of its investment, and (iv) it is currently a shareholder
of the Company.
(b) The Subscriber confirms that it is an "accredited investor" as
defined in Rule 501 under the Securities Act of 1933.
(c) The Subscriber confirms that, in making this subscription it has
relied solely upon independent investigations made by its representative(s),
including counsel and other advisors and that it and such representatives and
advisors have been given the opportunity to ask questions of, and to receive
answers from, persons acting on behalf of the Company concerning the terms and
conditions of this subscription.
(d) The Subscriber accepts this subscription and the Shares issued
hereunder solely for its own personal account, for investment purposes only, and
the Shares are not being accepted with a view to or for the resale,
distribution, subdivision or fractionalization thereof; the undersigned has no
contract, undertaking, understanding, agreement or arrangement, formal or
informal, with any person to sell, transfer or pledge to any person the Shares;
the undersigned has no present plans to enter into any such contract,
undertaking, agreement or arrangement; and the undersigned understands the legal
consequences of the foregoing representations and warranties to mean that it
must bear the economic risk of the investment for an indefinite period of time
because the Shares have not been registered under the Securities Act and,
therefore, cannot be sold unless they are subsequently registered under the
Securities Act (which the Company is not obligated to do) or an exemption form
such registration is available.
(e) The Subscriber understands that no federal or state agency has
passed on or made any recommendation or endorsement of the Common Stock and that
the Company is relying on the truth and accuracy of the representations,
declarations and warranties herein made by the
<PAGE>
Subscriber in offering the Common Stock without having first registered the same
under the Securities Act.
(f) The Subscriber confirms that it has been advised to consult with
its own attorney regarding legal matters concerning the Company and to consult
with independent tax advisors regarding the tax consequences of investing in the
Company.
(g) The Subscriber has not authorized any broker, dealer, agent or
finder to act on his behalf nor does the Subscriber have any knowledge of any
broker, dealer, agent or finder purporting to act on its behalf with respect to
this transaction.
(h) The Subscriber consents to the placement of a legend on the Shares
and any other document evidencing its acceptance of the subscription, which
legend shall be in form substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE
ACT OR UNLESS COUNSEL TO THE COMPANY SHALL HAVE RENDERED AN OPINION
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
(i) The Subscriber represents and warrants that it has full legal
right, power and authority to enter into this subscription agreement and to
purchase the Shares.
5. Representations and Warranties of the Company. The Company
represents and warrants to the Subscriber as of the date of the Company's
acceptance hereof as follows:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Texas and has the corporate power and
authority to own, lease and operate its property and to carry on its business as
proposed to be conducted. The Company has delivered to the Subscriber, or made
available for Subscriber's inspection, true, complete and correct copies of its
Articles of Incorporation and its By-laws, in full force and effect as of the
date of the Company's acceptance hereof, which will not be further amended prior
to the Closing Date. The Company is duly qualified to do business and is in good
standing in all jurisdictions where the nature of its business or the ownership
or leasing of property by it requires such qualification.
(b) Neither the execution and delivery of this subscription agreement,
nor the offering, issuance and sale of the Shares, nor the fulfillment of or
compliance with the terms and provisions of this subscription agreement and the
Common Stock will conflict with, or result in a breach of the terms, conditions
or provisions of, or constitute a default under, or result in any violation of,
or require any consent, approval or other action by any court or administrative
or governmental body or any other person pursuant to, the Articles of
Incorporation or By-laws of the Company, any award of any arbitrator or any
agreement (including any agreement with shareholders),
<PAGE>
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company is subject. The Company is not a party to, or otherwise subject to
any provision contained in, any instrument evidencing indebtedness of the
Company, any agreement relating thereto or any other contract or agreement
(including its Articles of Incorporation) which restricts or otherwise limits
the issuance and sale of the Shares.
6. Transferability. The Subscriber agrees not to transfer or assign
this subscription agreement, or any interest herein, and further agrees that the
assignment and transfer of the Shares acquired pursuant to this subscription
shall be made only in accordance with all applicable laws and shall be
restricted by the Shareholders' Agreement.
7. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the undersigned at the address set
forth below or to the Company at the address set forth above.
(b) THIS SUBSCRIPTION AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS.
(c) This subscription agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties hereto.
8. Effect of Representations, Warranties and Acknowledgments. The
representations, warranties and acknowledgments of Paragraphs 4 and 5 are true
and accurate as of the date of this subscription agreement and shall be true and
accurate as of the date of delivery of the Shares. Each party hereto
acknowledges that the other party is relying upon such representations,
warranties and acknowledgments in the sale and delivery of the Shares.
<PAGE>
9. Fees and Expenses. Each party hereto shall be responsible for all
fees and expenses incurred by such party in connection with the preparation,
execution, delivery and performance of this subscription agreement.
Cinemark International, Inc.
By: _____________________________________
Name: __________________________________
Title: ___________________________________
Address for Notices:
Cinemark International, Inc.
7502 Greenville Ave.
Suite 800, LB-9
Dallas, Texas 75231
This subscription agreement is hereby accepted as of September 30, 1996.
CINEMARK MEXICO (USA), INC.
By: _____________________________________
Name: __________________________________
Title: ___________________________________
<PAGE>
EXHIBIT 10.5(c)
<PAGE>
SUBSCRIPTION AGREEMENT
January 9, 1997
Cinemark Mexico (USA), Inc.
7502 Greenville Avenue
Suite 800-LB9
Dallas, Texas 75231
Attention: Lee Roy Mitchell, Vice Chairman
Re: Subscription for Common Stock of Cinemark Mexico (USA), Inc.
1. Subscription. Subject to the terms and conditions hereof, the
undersigned (the "Subscriber") hereby irrevocably subscribes for and agrees to
purchase 64,032 shares (the "Shares") of the common stock, par value $.001 per
share (the "Common Stock"), of Cinemark Mexico (USA), Inc., a Texas corporation
(the "Company"), for which the Subscriber agrees to pay a total purchase price
of $240,591 in cash (the "Purchase Price"). Unless otherwise specifically noted,
"dollars" or "$" shall mean United States dollars.
2. Conditions to the Subscription. The Subscriber understands and
agrees that this subscription is made subject to the following terms and
conditions.
(a) The Company reserves the absolute right to reject any or all
tenders of the Purchase Price that are not in proper form or the acceptance of
which would, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the right to waive any irregularities or conditions of tender as
to all or any part of the Purchase Price.
(b) This subscription will terminate on January 31, 1997 unless
accepted by the Company before such date. Upon acceptance of this subscription
by the Company, the Company will deliver to the Subscriber a copy of this
subscription agreement duly executed by the Company.
3. Payment for the Shares. Upon acceptance of this subscription by the
Company, the Subscriber shall be irrevocably and unconditionally obligated to
pay to the Company the full amount of the Purchase Price set forth above.
<PAGE>
4. Representations and Warranties of the Subscriber. The Subscriber
understands that this subscription is being conducted pursuant to exemptions
from registration provided for in the Securities Act of 1933, as amended (the
"Securities Act"), and state securities laws, that it is entering into this
subscription agreement without being furnished any offering literature or
prospectus, that this transaction has not been approved or disapproved by the
Texas State Securities Board or the United States Securities and Exchange
Commission or by any administrative agency charged with the administration of
the securities laws of any state because of the nature of and the small number
of persons solicited and the private aspects of the offering, that all
documents, records and books pertaining to this investment have been made
available to the undersigned and his representatives, including his attorney
and/or his accountant, and that the books and records of the Company will be
available upon reasonable notice for inspection by investors during reasonable
business hours at its principal place of business, and the Subscriber hereby
represents and warrants as follows:
(a) The Subscriber confirms that (i) it is duly organized, validly
existing and in good standing under the laws of the State of Texas; (ii) it has
the corporate power and authority to execute, deliver and perform this
subscription agreement; (iii) it is able (A) to bear the economic risk of its
investment, (B) to hold the Shares for an indefinite period of time; and (C) to
afford a complete loss of its investment, and (iv) it is currently a shareholder
of the Company.
(b) The Subscriber confirms that it is an "accredited investor" as
defined in Rule 501 under the Securities Act of 1933.
(c) The Subscriber confirms that, in making this subscription it has
relied solely upon independent investigations made by its representative(s),
including counsel and other advisors and that it and such representatives and
advisors have been given the opportunity to ask questions of, and to receive
answers from, persons acting on behalf of the Company concerning the terms and
conditions of this subscription.
(d) The Subscriber accepts this subscription and the Shares issued
hereunder solely for its own personal account, for investment purposes only, and
the Shares are not being accepted with a view to or for the resale,
distribution, subdivision or fractionalization thereof; the undersigned has no
contract, undertaking, understanding, agreement or arrangement, formal or
informal, with any person to sell, transfer or pledge to any person the Shares;
the undersigned has no present plans to enter into any such contract,
undertaking, agreement or arrangement; and the undersigned understands the legal
consequences of the foregoing representations and warranties to mean that it
must bear the economic risk of the investment for an indefinite period of time
because the Shares have not been registered under the Securities Act and,
therefore, cannot be sold unless they are subsequently registered under the
Securities Act (which the Company is not obligated to do) or an exemption form
such registration is available.
(e) The Subscriber understands that no federal or state agency has
passed on or made any recommendation or endorsement of the Common Stock and that
the Company is relying on the truth and accuracy of the representations,
declarations and warranties herein made by the
<PAGE>
Subscriber in offering the Common Stock without having first registered the same
under the Securities Act.
(f) The Subscriber confirms that it has been advised to consult with
its own attorney regarding legal matters concerning the Company and to consult
with independent tax advisors regarding the tax consequences of investing in the
Company.
(g) The Subscriber has not authorized any broker, dealer, agent or
finder to act on his behalf nor does the Subscriber have any knowledge of any
broker, dealer, agent or finder purporting to act on its behalf with respect to
this transaction.
(h) The Subscriber consents to the placement of a legend on the Shares
and any other document evidencing its acceptance of the subscription, which
legend shall be in form substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF WITHOUT REGISTRATION UNDER THE
ACT OR UNLESS COUNSEL TO THE COMPANY SHALL HAVE RENDERED AN OPINION
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
(i) The Subscriber represents and warrants that it has full legal
right, power and authority to enter into this subscription agreement and to
purchase the Shares.
5. Representations and Warranties of the Company. The Company
represents and warrants to the Subscriber as of the date of the Company's
acceptance hereof as follows:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Texas and has the corporate power and
authority to own, lease and operate its property and to carry on its business as
proposed to be conducted. The Company has delivered to the Subscriber, or made
available for Subscriber's inspection, true, complete and correct copies of its
Articles of Incorporation and its By-laws, in full force and effect as of the
date of the Company's acceptance hereof, which will not be further amended prior
to the Closing Date. The Company is duly qualified to do business and is in good
standing in all jurisdictions where the nature of its business or the ownership
or leasing of property by it requires such qualification.
(b) Neither the execution and delivery of this subscription agreement,
nor the offering, issuance and sale of the Shares, nor the fulfillment of or
compliance with the terms and provisions of this subscription agreement and the
Common Stock will conflict with, or result in a breach of the terms, conditions
or provisions of, or constitute a default under, or result in any violation of,
or require any consent, approval or other action by any court or administrative
or governmental body or any other person pursuant to, the Articles of
Incorporation or By-laws of the Company, any award of any arbitrator or any
agreement (including any agreement with shareholders),
<PAGE>
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company is subject. The Company is not a party to, or otherwise subject to
any provision contained in, any instrument evidencing indebtedness of the
Company, any agreement relating thereto or any other contract or agreement
(including its Articles of Incorporation) which restricts or otherwise limits
the issuance and sale of the Shares.
6. Transferability. The Subscriber agrees not to transfer or assign
this subscription agreement, or any interest herein, and further agrees that the
assignment and transfer of the Shares acquired pursuant to this subscription
shall be made only in accordance with all applicable laws and shall be
restricted by the Shareholders' Agreement.
7. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the undersigned at the address set
forth below or to the Company at the address set forth above.
(b) THIS SUBSCRIPTION AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS.
(c) This subscription agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties hereto.
8. Effect of Representations, Warranties and Acknowledgments. The
representations, warranties and acknowledgments of Paragraphs 4 and 5 are true
and accurate as of the date of this subscription agreement and shall be true and
accurate as of the date of delivery of the Shares. Each party hereto
acknowledges that the other party is relying upon such representations,
warranties and acknowledgments in the sale and delivery of the Shares.
<PAGE>
9. Fees and Expenses. Each party hereto shall be responsible for all
fees and expenses incurred by such party in connection with the preparation,
execution, delivery and performance of this subscription agreement.
New Wave Investments A.V.V.
By: _____________________________________
Name: __________________________________
Title: ___________________________________
Address for Notices:
Cinemark International, Inc.
7502 Greenville Ave.
Suite 800, LB-9
Dallas, Texas 75231
This subscription agreement is hereby accepted as of January 9, 1997.
CINEMARK MEXICO (USA), INC.
By: _____________________________________
Name: __________________________________
Title: ___________________________________
L:\LEGAL\MDC\CMEXUSA\SUBSCRIP.NW
<PAGE>
EXHIBIT 10.11(f)
<PAGE>
FIRST AMENDMENT TO
SENIOR SECURED CREDIT AGREEMENT
This First Amendment to Senior Secured Credit Agreement (the
"Amendment") is made and dated as of September 30, 1996 among Cinemark
International, Inc. (f/k/a Cinemark II, Inc., the "Lender") and Cinemark Mexico
(USA), Inc. ("Borrower"), and amends that certain Senior Secured Credit
Agreement dated as of December 4, 1995 among the Lender and Borrower (as so
amended or modified from time to time, the "Agreement").
RECITALS
WHEREAS, the Borrower has requested that the Lender amend certain
provisions of the Agreement and the Lender is willing to do so on the terms and
conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
AGREEMENTS
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. Amendment to Definition. The definition of "Indenture" is hereby
amended and restated in its entirety to read as follows:
"Indenture" shall mean that certain Indenture dated July 30,
1993 among the Borrower, Cinemark de Mexico, as guarantor and
United States Trust Company of New York as trustee governing
the 12% Series A Senior Subordinated PIK Notes due 2003, the
12% Series B Senior Subordinated PIK Notes due 2003, 12%
Series C Senior Subordinated Notes due 2003 and the 12% Series
D Senior Subordinated PIK Notes due 2003.
3. Amendment to Section 2.1. The first sentence of Section 2.1 of the
Agreement is hereby deleted in its entirety and replaced with the following:
"Subject to the terms and conditions of this Agreement and in
reliance on the representations and warranties of Borrower set forth
herein, Lender may make senior loans (the "Loans") to Borrower from
time to time within one year after the Initial Loan (the "Funding
Termination Date") in an aggregate principal amount (excluding accrued
interest and Additional Principal as provided in 2.3(a)) not to exceed
an original principal amount
<PAGE>
of $10,000,000."
<PAGE>
4. Amendment to Section 2.3(a). Section 2.3(a) of the Agreement is
hereby amended and restated in its entirety to read as follows:
"(a) Interest. Each Loan shall bear interest from the date of
disbursement on the unpaid principal amount thereof until such amount
is paid (whether upon Maturity by Acceleration or otherwise) at a rate
per annum equal to 12%. On any interest payment date provided for in
Section 2.4(a) through and including October 15, 2000, the Borrower
may, at its option, by giving Lender notice of its election not less
than five days nor more than 45 days prior to an installment payment
date, pay accrued interest on the Loan either in cash (at the rate
specified above) or by adding the Additional Principal (as hereinafter
defined) to the principal amount outstanding on the Loans. For purposes
of this Section 2.3(a), "Additional Principal" shall be an amount equal
to the accrued interest on the outstanding principal of the Loans
determined using a rate of interest equal to 13% per annum for any
interest period in which the Borrower elects to add Additional
Principal to the outstanding principal of the Loans in lieu of making a
cash payment for accrued interest during such period."
5. Amendment to Section 5.15. Section 5.15 of the Agreement is hereby
amended and restated in its entirety to read as follows:
After September 30, 1996, the Borrower and its Subsidiaries
may incur indebtedness (other than indebtedness under this Agreement
and the Indenture), if, at the date of and giving effect to the
incurrence of such Debt, the Pro Forma Cash Flow Coverage Ratio is
equal to or greater than 2.0 to 1.0. Notwithstanding the foregoing
sentence, the Borrower or any of its Subsidiaries may Incur Permitted
Debt without regard to the foregoing limitation.
6. Amendment to Section 5.16. Section 5.16 of the Agreement is hereby
amended and restated in its entirety to read as follows:
At the end of any two consecutive fiscal quarters during the
periods after December 31, 1999, the Cash Flow Coverage of the Borrower
for such two fiscal quarters then ending shall equal or exceed a rate
of 2.0 to 1.0.
7. Representations and Warranties. Borrower represents and warrants to
Lender that, on and as of the date hereof, and after giving effect to this
Amendment:
7.1 Authorization. The execution, delivery and performance of
this Amendment have been duly authorized by all necessary corporation
action by the Borrower and this Amendment has been duly executed and
delivered by the Borrower.
7.2 Binding Obligation. This Amendment is the legal, valid and
binding obligation of Borrower, enforceable against the Borrower in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally, or by equitable principles
relating to enforceability.
<PAGE>
7.3 No Legal Obstacle to Credit Agreement. The execution,
delivery and performance of this Amendment will not (a) contravene the
terms of the Borrower's articles of incorporation, bylaws or other
organization document; (b) conflict with or result in any breach or
contravention of the provisions of any contract to which the Borrower
is a party, or the violation of any law, judgment, decree or
governmental order, rule or regulation applicable to Borrower, or
result in the creation under any agreement or instrument of any
security interest, lien, charge, or encumbrance upon any of the assets
of the Borrower. No approval or authorization of any governmental
authority is required to permit the execution, delivery or performance
by the Borrower of this Amendment, or the transactions contemplated
hereby.
7.4 Successors and Assigns. This Amendment shall be binding
upon and inure to the benefit of the respective successors and assigns
of the parties hereto. Section 2.3(a) of this Amendment shall also
insure to the benefit of U.S. Trust Company of New York, N.A.
7.5 Incorporation of Certain Representations. The
representations and warranties of the Borrower set forth in Article 4
of the Agreement are true and correct in all respects on and as of the
date hereof as though made on and as of the date hereof, except as to
such representations made as of an earlier specified date.
7.6 Default. No Default or Event of Default under the
Agreement has occurred and is continuing.
8. Miscellaneous.
8.1 Effectiveness of the Agreement. Except as hereby expressly
amended, the Agreement and each other document executed in connection
therewith shall each remain in full force and effect, and are hereby
ratified and confirmed in all respects on and as of the date hereof.
8.2 Waivers. This 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 mentioned in the
Agreement, constitute a waiver of any other default of the same or of
any other term or provision.
<PAGE>
8.3 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 Borrower and Lender shall have signed a
copy hereof, whether the same or counterparts, and the same shall have
been delivered to the Lender.
8.4 Jurisdiction. This Amendment shall be governed by and
construed under the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.
LENDER:
CINEMARK INTERNATIONAL, INC.
By:_____________________________________
Name:___________________________________
Title:____________________________________
BORROWER:
CINEMARK MEXICO (USA), INC.
By:_____________________________________
Name:___________________________________
Title:____________________________________
i:\legal\mdc\cred-amd.mex
<PAGE>
EXHIBIT 10.12
<PAGE>
SERIES D REGISTRATION RIGHTS AGREEMENT
Dated as of September 1996
by and among
CINEMARK MEXICO (USA), INC.
and
HOLDERS OF THE SERIES D NOTES LISTED ON THE SIGNATURE
PAGES HEREOF
3149454.05
<PAGE>
3149454.05
SERIES D REGISTRATION RIGHTS AGREEMENT
THIS SERIES D REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is made and entered into as of September , 1996, by and among Cinemark
Mexico (USA), Inc., a Texas corporation (the "Company"), and the
holders of Series D Notes (as defined herein) listed on the signature
pages hereof.
This Agreement is made pursuant to the Offer to Exchange and
Consent Solicitation (the "Exchange") by the Company, whereby the
Company has offered to exchange (i) with respect to each $1,000
principal amount of its 12% Series A Senior Subordinated Notes due 2003
outstanding in the aggregate principal amount of $400,000, $1,000
principal amount of its 12% Series A Senior Subordinated PIK Notes due
2003 proposed to be outstanding in an aggregate original principal
amount of $400,000, (ii) with respect to each $1,000 principal amount
of its 12% Series B Senior Subordinated Notes due 2003 outstanding in
the aggregate principal amount of $20,000,000, $1,000 original
principal amount of its 12% Series B Senior Subordinated PIK Notes due
2003 proposed to be outstanding in an aggregate original principal
amount of $20,000,000, (iii) with respect to each $1,000 principal
amount of its 12% Series C Senior Subordinated Notes due 2003
outstanding in the aggregate principal amount of $2,000,000, $1,000
principal amount of its 12% Series C Senior Subordinated PIK Notes due
2003 proposed to be outstanding in an aggregate original principal
amount of $2,000,000 and (iv) with respect to each issued and
outstanding warrant to purchase one share of the common stock of the
Company (the "Existing Warrants"), $3.757 original principal amount of
its 12% Series D Senior Subordinated PIK Notes due 2003 proposed to be
outstanding in an aggregate original principal amount of $1,424,177. In
order to induce the holders of the Existing Warrants to exchange such
Warrants for Series D Notes, the Company has agreed to provide such
holders with the registration and other rights set forth in this
Agreement. The execution of this Agreement is a condition to the
closing under the Exchange.
In consideration of the foregoing, the parties hereto agree as follows:
<PAGE>
1. Definitions.
As used in this Agreement, the following capitalized terms
shall have the meanings indicated below:
"Affiliate" shall have the meaning specified in the Indenture.
"Closing Date" shall have the meaning specified in the Exchange.
"Company" shall have the meaning specified in the preamble to
this Agreement and shall include the Company's successors.
"Default Demand Notice" shall have the meaning specified in Section
2(b) hereof.
"Demand Notice" shall have the meaning specified in
Section 2(a) hereof. "Demand Registration" means a registration
pursuant to Section 2 of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. ,, Exchange" shall have the meaning
specified in the preamble to this Agreement.
"Fifth Anniversary Date" shall mean the date which is five
years after the Closing Date.
Holder" shall mean any Person that owns any Series D Notes and such
of its
respective successors, assigns and transferees that acquire Series D
Notes directly or indirectly, from such Person in accordance with the
terms of the Exchange; and any holder of Series D Notes.
"Incidental Registration" shall have the meaning specified
in Section 3(a) of this Agreement.
"Incidental Registration Statement" shall have the meaning
specified in Section 3(a) of this Agreement.
"Indenture" means the Indenture dated as of July 30,
1993, among the Company,
<PAGE>
Cinemark de Mexico, S.A. de C.V. and the United States Trust Company
of New York, as Trustee, as amended, supplemented and modified to the
date hereof.
"Majority Holders" means the Holders of more than 50% of the
aggregate principal amount of Series D Notes outstanding.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, limited
liability company, trust, or unincorporated organization, or a
government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any Prospectus subject to completion,
and any such Prospectus as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of
the Series D Notes, and, in each case, by all other amendments and
supplements
3 148454.05 2
to such Prospectus, including post-effective amendments and all
materials incorporated by reference therein.
"Public Offering" means a public offering of 25% or more of
any series of debt securities of the Company.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with this Agreement, including without
limitation: (i) all SEC, stock exchange or NASD registration and filing
fees, including, if applicable, the fees and expenses of any "qualified
independent underwriter" (and its counsel) that is required to be
retained in accordance with the rules and regulations of the NASD, (ii)
all fees and expenses incurred in connection with compliance with state
securities or blue sky laws and compliance with the rules of the NASD
(including reasonable fees and disbursements of counsel in connection
with the NASD and Blue Sky qualification of the Series D Notes and the
preparation of a Blue Sky memorandum), (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus,
any amendments or supplements thereto, any under-writing agreements,
transmittal letters, securities sales agreements and other documents
relating to the perfon-nance of and compliance with this Agreement,
(iv) all
<PAGE>
fees and expenses incurred in connection with the listing, if any, of
the Series D Notes on any securities exchange or exchanges pursuant to
Section 6(n) hereof, (v) all rating agency fees, (vi) the fees and
disbursements of counsel for the Company and of the independent public
accountants of the Company and each of their respective Subsidiaries,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, (vii) the
reasonable fees and disbursements of one special counsel representing
the Holders (the "special counsel") that is reasonably acceptable to
the Company, (viii) the fees and expenses of the Trustee, and any
escrow agent or custodian, and (ix) any fees and disbursements of the
Underwriters customarily required to be paid by issuers or sellers of
securities and the reasonable fees and expenses of any special experts
retained by the Company in connection with any Registration Statement,
but excluding underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of Series D Notes by
a Holder. In connection with any Registration Statement hereunder, the
Company shall reimburse the Holders of the securities being registered
for the reasonable fees and disbursements of not more than one special
counsel chosen by the Majority Holders.
"Registration Statement" means any registration statement of
the Company on an appropriate form pursuant to the Securities Act which
covers the Series D Notes, and all amendments and supplements to any
such Registration Statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"SEC" means the Securities and Exchange Conu-nission.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
3149454.05 3
"Series D Notes" shall mean the 12% Series D Senior
Subordinated PIK Notes due 2003 issued by the Company.
"Transfer Restricted Securities" means the Series D Notes upon
original issuance thereof, and at all times subsequent thereto, until,
in the case of any such Series D Notes, the occurrence of any of the
following events: (i) a Registration Statement with respect to such
Series D Notes shall have been declared effective under the Securities
Act and such Series D Notes shall have been disposed of by the Holder
thereof pursuant to such Registration Statement; (ii) such Series D
Notes are distributed to the public pursuant to Rule 144 (or any
successor provisions) promulgated under the Securities Act; (iii) such
<PAGE>
Series D Notes shall have been otherwise transferred and new
certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company; or (iv) such Series D Notes
shall have ceased to be outstanding.
"Under-writer" shall have the meaning specified in Section 7(a) of this
Agreement.
"Underwritten Offering" means a sale of securities of the
Company to an Underwriter or Underwriters for reoffering to the public.
2. Demand Reizistration.
(a)
Upon the written request of the Holders of 25% of the
aggregate principal amount of Series D Notes then outstanding (the
"Demand Notice"), the Company shall file a Registration Statement under
the Securities Act for a public offering of the number of Series D
Notes specified in such Demand Notice and shall use its reasonable best
efforts to cause such registration to be declared effective within 120
days of the Company's receipt of the Demand Notice. From the date
hereof to the Fifth Anniversary Date, the Holders of the Series D Notes
shall have the right to cause one Registration Statement to be filed by
the Company under this Section 2(a).
(b) Upon the written request the Holders of 50% of the
aggregate principal amount of Series D Notes then outstanding
(the "Default Demand Notice") the Company shall file a
Registration Statement under the Securities Act for a public
distribution of the Series D Notes and shall use its
reasonable best efforts to cause such registration to be
declared effective within 120 days from the date of:
(i) an Event of Default under Sections 5.1(1), 5.1(2)
or 5.1(3) of the Indenture; or
(ii) a Senior Payment Default as defined in Section
12.3 of the Indenture.
The Company may suspend its efforts to have
such registration statement declared effective if any
such Event of Default or Senior Payment Default shall
have been cured.
3149454.05 4
<PAGE>
(c) Expenses. The Company agrees to pay all
Registration Expenses in connection with the
registration of the Series D Notes.
3. Incidental Reizistration.
(a) At any time after the date of original issuance
of the Series D Notes, if the Company proposes to
register any of its debt securities under the
Securities Act (other than pursuant to a registration
statement on Form S-4 or S-8 or any successor forms
or pursuant to an exchange offer), on any forms, the
Company will give written notice to each Holder at
least 30 days prior to the initial filing of such
registration statement with the SEC of its intent to
file such registration statement. Upon the written
request of any Holder made within 15 days after any
such notice is given (which request shall specify the
Series D Notes intended to be disposed of by such
Holder and the intended method of distribution
thereof), the Company will use its best efforts to
effect the registration (an "Incidental
Registration") under the Securities Act of all Series
D Notes which the Company has been so requested to
register by the Holders thereof; provided, however,
that if, at any time after giving written notice of
its intention to register any securities and prior to
the effective date of the Registration Statement
filed in connection with such Incidental Registration
(each an "Incidental Registration Statement"), the
Company shall determine for any reason not to
register or to delay registration of such securities,
the Company may, at its election, give written notice
of such determination to each Holder and, thereupon,
(A) in the case of a determination not to register,
the Company shall be relieved of its obligation to
register any Series D Notes under this Section 3(a)
in connection with such registration (but not from
its obligation to pay the Registration Expenses
incurred in connection therewith), and (B) in the
case of a determination to delay registering, the
Company shall be permitted to delay registering any
Series D Notes under this Section 3(a) during the
period that the registration of such other securities
is delayed. Subject to Section 60) of this Agreement,
the Company further agrees to supplement or amend an
Incidental Registration Statement if required by
applicable laws, rules or regulations or by the
instructions applicable to the registration form used
by the Company for such Incidental Registration
Statement. Each Holder shall be permitted to withdraw
all or any part of such Holder's Series D Notes from
an Incidental Registration at any time prior to the
effective date of the Incidental Registration
Statement by notifying the Company of such withdrawal
not later than two business days prior to such
effective date. Any holder of Series D Notes who
withdraws any such securities from an Incidental
Registration shall pay to the Company any incremental
expenses of such
<PAGE>
registration specifically attributable to such holder.
(i) Exl)enses. The Company agrees to pay all Registration
Expenses including the fees and expenses of one special counsel of the
Holders of such Series D Notes incurred in connection with one
registration of Series D Notes pursuant to this Section 3(a). The
Registration Expenses incurred in connection with each subsequent
Incidental Registration requested under this Section 3(a) shall be
allocated pro rata among all Persons, including the Company, on the
basis of the respective dollar
3148454.05 5
amounts of the securities then being registered on behalf of each
such Person. In connection with any Incidental Registration pursuant
to this section 3(a), each Holder shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the
sale or disposition of such Holder's Series D Notes pursuant to such
Incidental Registration.
(ii) Priority in Incidental Reizistrations. If a
registration pursuant to this Section 3(a) involves an Underwritten
Offering of the securities so being registered, whether or not for
sale for the account of the Company, which securities are to be
distributed on a firm commitment basis by or through one or more
underwriters of recognized standing pursuant to underwriting terms
appropriate for such transaction, and the sole or managing
Underwriter, as the case may be, of such Underwritten Offering shall
advise the Company, in writing (with a copy to each Holder requesting
such registration) @@hat, in its opinion, the amount of securities
requested to be included in such registration exceeds the amount
which can be sold in (or during the time of) such offering without
adversely affecting the distribution of the securities being offered,
then the amount of Series D Notes to be offered for the accounts of
the Holders thereof shall be reduced pro rata based upon the relative
aggregate amount of gross proceeds to be received by such Holders in
the offering to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount which the
Company is so advised can be sold in (or during the time of) such
offering.
(b)
Obligations of the Com@@n . Th ' e obligations of the Company
under this Section 3 shall be cumulative and shall be in addition to
the obligations of the Company under Section 2.
4. General Matters.
(a)
Effective Registration Statement. A Registration Statement
filed in accordance with the provisions of this Agreement will not be
deemed to have become effective unless it has been declared effective
by the SEC; provided, however, that if, after any such Registration
Statement has been declared effective, the offering of any Series D
Notes pursuant to such Registration
<PAGE>
Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or
authority or court, such Registration Statement will be deemed not to
have become effective; provided, further, if a Registration Statement
is declared effective by the SEC within 30 days of such stop order,
injunction or other order or requirement of the SEC or other
governmental agency or authority or court, such Registration-Statement
will be deemed to have become effective on the date it was declared
effective prior to such stop order, injunction or other order or
requirement.
(b)
Selection of Underwriters. If at any time or from time to time
after the occurrence of a Public Offering, Holders of Series D Notes
desire to sell Series D Notes in an underwritten public offering, the
managing Under-writer shall be selected by the Majority
3148454.05 6
Holders; provided that such Underwriter shall be reasonably
satisfactory to the Company.
5. Hold-Back Apreements.
(a)
Restrictions on Public Sale by Holders. Each Holder whose
Series D Notes are covered by a Registration Statement filed pursuant
to Section 2 or Section 3 hereof agrees not to effect any public sale
or distribution of any securities of the Company of the same or similar
class or classes as the securities included in the Registration
Statement or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144
or Rule 144A under the Securities Act, during the 15-day period prior
to, and during the 90-day period beginning on, the effective date of
such Registration Statement (except pursuant to such Registration
Statement) if and to the extent requested in writing (with reasonable
prior notice) by the Company, in the case of a public offering that is
not an Underwritten Offering, or by the sole or managing Underwriter,
in the case of an Underwritten Offering.
(b) Restrictions on Public Sale by the Company.
The Company agrees not to effect any public sale or
distribution of any securities which are the same as or substantially
similar to those Series D Notes being registered pursuant to a
Registration Statement filed pursuant to Sections 2 or 3 hereof,
including a sale pursuant to Regulation D under the Securities Act, or
any securities convertible into or exchangeable or exercisable for such
securities.during the 15-day period prior to, and during the 90-day
period beginning on, the effective date of such Registration Statement
(except pursuant to such Registration Statement or on Form S-4 or any
successor to such
<PAGE>
form).
6. Registration Procedures.
Whenever any Series D Notes are to be registered pursuant to Sections 2
or 3 of this Agreement, the Company shall use its best efforts to
effect or cause to be effected such registration in a manner which will
permit the sale of such Series D Notes by the Holders thereof in
accordance with their intended method or methods of distribution, and
the Company shall (to the extent applicable), as expeditiously as
possible:
(a)
prepare and file a Registration Statement with the SEC and
cause each such Registration Statement to become and remain effective,
within the applicable time periods specified herein, which Registration
Statement (x) shall be on an appropriate registration form under the
Securities Act, selected by the Company and shall be reasonably
acceptable to the special counsel for the Holders, (y) shall be
available for the sale of the Series D Notes in accordance with the
intended method or methods of distribution by the selling Holders
thereof, and (z) shall comply as to form in all material respects with
the requirements of the applicable form under the Securities Act and
include all financial statements required by the SEC to be filed
therewith;
3148454.05 7
(b)
subject to Section 60) hereof, prepare and file with the SEC such
amendments and post-effective amendments to each such Registration Statement
as may be necessary to keep such Registration Statement effective for the
applicable time period hereunder; cause each related Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provision then in force) under
the Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations promulgated thereunder with respect
to the disposition of all securities covered by each Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the selling holders thereof;
(c)
furnish to each Holder and to each Under-writer of an Underwritten
offering of Series D Notes, if any, without charge, as many copies of each
Prospectus, including each Prospectus subject to completion, and any amendment
or supplement thereto and such other documents as
<PAGE>
such Holder or Underwriter may reasonably request, in order to facilitate the
public sale or other disposition of the Series D Notes; the Company consents
to the use of the Prospectus, including each Prospectus subject to completion,
by each Holder and each Underwriter of an Underwritten Offering of Series D
Notes, if any, in connection with the offering and sale of the Series D Notes
covered by such Prospectus or Prospectus subject to completion;
(d)
on or prior to the date on which such Registration Statement is
declared effective, use its best efforts and cooperate with each Holder of
Series D Notes covered by such Registration Statement, each Underwriter,.if
any, and their respective counsel to register or qualify the Series D Notes
under all applicable state securities or "blue sky" laws of such jurisdictions
as each such Underwriter, if any, or any such Holder shall reasonably request
in writing, keep each such registration or qualification effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts and things which may be reasonably necessary or advisable
to enable such Underwriter, if any, and such Holders to consummate the
disposition in each such jurisdiction of Series D Notes covered by such
Registration Statement;
(e)
notify each Holder of Series D Notes covered by such Registration
Statement, each Underwriter, if any, and their respective counsel, promptly
and confirm such notice in writing (i) when such Registration Statement has
become effective and when any post-effective amendments and supplements
thereto become effective or any supplement to the Prospectus or amendment to
the Prospectus shall have been filed, (ii) of the issuance by the SEC or any
state securities authority of any stop order suspending the effectiveness of
such Registration Statement or preventing or prohibiting the use of any
Prospectus (including any Prospectus subject to completion) or the initiation
of any proceedings for any such purpose, (iii) of the receipt of conunents
from the SEC with respect to such Registration Statement, (iv) if, between the
effective date of such Registration Statement and the closing of any sale of
securities covered thereby, the representations and warranties of the Company
contained in the underwriting agreement or other agreement contemplated by
Section 6(k) hereof, if any, relating to the offering cease to be true and
correct in all material respects,
314M54.05 8
(v)
if the Company receives any notification with respect to the suspension of the
qualification of the Series D Notes for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and (vi) of the happening of
any event during the period such Registration Statement is effective as a
result of which such Registration Statement or the related Prospectus contains
<PAGE>
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading or, in the Company's reasonable determination, a post-effective
amendment to such Registration Statement would be appropriate;
(f)
furnish counsel for the Holders of Series D Notes covered by such
Registration Statement and each Underwriter, if any, with copies of any
request by the SEC or any state securities authority for amendments,or
supplements to such Registration Statement or any Prospectus or for additional
information;
(g)
make every reasonable effort to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Series D Notes
for sale in any jurisdiction, and, if any such order is issued, to obtain
promptly the withdrawal of any such order;
(h)
upon request, furnish to the Underwriter or managing Underwriter of any
Underwritten Offering of Series D Notes, if any, without charge, with at least
one signed copy of each Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits; and furnish to each
Holder, without charge, at least one conforined copy of each Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, (but not including documents incorporated therein by
reference or exhibits thereto, unless requested);
(i)
cooperate with the selling Holders and the Underwriter or managing
Underwriter of an Underwritten Offering of Series D Notes, if any, to
facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Series D Notes to be sold; and issue
such Series D Notes to be sold in such denominations and registered in such
names as the selling Holders or the Underwriter or managing Underwriter of an
underwritten offering of Series D Notes, if any, may reasonably request at
least three business days prior to any sale of Series D Notes;
(0) upon the occurrence of any event contemplated by Section 6(e)(vi)
hereof, use its best
<PAGE>
efforts to prepare a supplement or post-effective amendment to a Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Series D Notes, such Registration Statement will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, not misleading and in the Company's reasonable determination a
post-effective
3148454.05 9
amendment to such Registration Statement is no longer appropriate;
(k)
enter into customary agreements (including underwriting agreements) and
take all other customary and appropriate actions in order to expedite or
facilitate the disposition of such Series D Notes and in such connection
whether or not an underwriting agreement is entered into and whether or not
the registration is an Underwritten offering:
(i) to the extent the Company is able, make such
representations and warranties to the Holders and the Underwriters, if
any, in form, substance and scope as are customarily made by issuers to
underwriters in similar primary underwritten offerings;
(ii) obtain opinions of counsel to the Company and updates
thereof, (which counsel and opinions (in fon-n, scope and substance)
shall be reasonably satisfactory to the managing Underwriters, if any,
and the special counsel for the Holders of the Series D Notes being
sold) addressed to each selling Holder and the Underwriters, if any,
covering the matters customarily covered in opinions requested in
similar sales of securities or underwritten offerings and such other
matters as may be reasonably requested by such Holders and
Underwriters;
(iii) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company and each of
its Subsidiaries addressed to the selling Holders of Series D Notes and
the Underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters to underwriters in connection with primary underwritten
offerings;
(iv) enter into a securities sales agreement with the Holders
relating to such registration and providing for, among other things,
the appointment of the Underwriter as agent for the selling Holders for
the purpose of soliciting purchases of Series D Notes,
<PAGE>
which agreement shall be customary in form, substance and scope and
shall contain customary representations, warranties and covenants;
(v) if an under-writing agreement is entered into, cause the
same to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and
procedures set forth in Section 7 hereof with respect to all parties to
be indemnified pursuant to said Section; and
(vi) deliver such other documents and certificates as may be
reasonably requested by the Majority Holders and the managing
Under-writers, if any.
The above shall be done at (i) the effectiveness of such Registration
Statement (and each post-effective amendment thereto) and (ii) each
closing under any underwriting or similar agreement as and to the
extent required thereunder;
3149454.05 1 0
(1)
make available for inspection by representatives of the
Holders of the Series D Notes and any Underwriters participating in any
disposition pursuant to a Registration Statement, and any special
counsel or accountant retained by such Holders or Underwriters, at the
off-ices where normally kept during normal business hours all financial
and other records, pertinent corporate documents and properties of the
Company, and cause the respective officers, directors and employees of
the Company to supply all information reasonably requested by any such
representative, Underwriter, special counsel or accountant in
connection with a Registration Statement; provided, however, that such
records, documents or information which the Company determines, in good
faith, to be confidential and notifies such representatives,
Underwriters, special counsel or accountants in writing are
confidential shall not be disclosed by the representatives,
Underwriters, special counsel or accountants unless (i) the disclosure
of such records, documents or information is necessary to avoid or
correct a misstatement or omission in a Registration Statement, (ii)
the release of such records, documents or information is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction, or (iii) such records, documents or information have been
generally made available to the public, other than as a result of a
disclosure or failure to safeguard by such person;
(m)
(i) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus, provide copies of such
document to the Holders, to the special counsel on behalf of the
Holders and to the Underwriter or Underwriters of an Underwritten
offering of Series D
<PAGE>
Notes, if any, make such changes in any such document prior to the
filing thereof as the special counsel to the Holders or the Underwriter
or Underwriters, may reasonably request and not file any such document
in a form to which the Holders, or any Underwriter shall reasonably
object, and make such of the representatives of the Company available
for discussion of such document as shall be reasonably requested by the
Holders, or any Underwriter;
(ii) a reasonable time prior to the filing of any document
which is to be incorporated by reference into a Registration Statement
or a Prospectus, provide copies of such document to special counsel for
the Holders, and make such changes in such document prior to the filing
thereof as such counsel or counsel for any Underwriter shall reasonably
request; and make such of the representatives of the Company as shall
be reasonably requested by such special counsel available for
discussion of such document;
(n)
use its best efforts to cause all Series D Notes to be listed
on any securities exchange on which similar debt securities issued by
the Company are then listed if requested by the Majority Holders, or if
requested by the Underwriter or Underwriters of an Underwritten
Offering of Series D Notes, if any;
3149454.05 1 1
(o) provide a CUSIP number for all Series D Notes, not later
than the effective date of a Registration Statement;
(p) use its 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 covering at
least 12 months which shall satisfy the provisions of Section II (a) of
the Securities Act and Rule 158 thereunder; and
(q) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any Underwriter (including any "qualified independent Underwriter"
that is required to be retained in accordance with the rules and
regulations of the NASD).
Each selling Holder of Series D Notes as to which any
registration is being effected pursuant to this Agreement agrees, as a
condition to the registration obligations of the Company provided
herein, to furnish to the Company such information regarding
<PAGE>
the proposed distribution by such Holder as the Company may from time
to time reasonably request in writing and shall provide a customary
power of attorney and custody agreement with respect to any
underwritten agreement.
Each Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
6(e)(vi) hereof, such Holder will forthwith discontinue disposition of
Series D Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 60) hereof, and, if so directed by the Company,
such Holder will deliver to the Company (at the expense of the
Company), all copies in its possession, other than permanent file
copies then in such Holder's possession, of the Prospectus covering
such Series D Notes cur-rent at the time of receipt of such notice. If
the Company shall give any such notice to suspend the disposition of
Series D Notes pursuant to a Registration Statement, the Company shall
extend the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days
in the period from and including the date of the giving of such notice
to and including the date when the Holders shall have received copies
of the supplemented or amended Prospectus necessary to resume such
dispositions.
7. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Person who participates as
an underwriter (any such Person being an "Underwriter"),
each Holder and each of their respective Affiliates
(including any director, employee or Person, if any, who
controls any Holder or Underwriter within the meaning of
Section 15 of the Securities Act) (each an "Indemnified
Party"):
(i) against any and all loss, claim, damage, liability and expense
whatsoever, as incurred, arising out of or based upon any untrue
statement or alleged untrue
3149454.05 12
statement of a material fact contained in any Registration Statement
(or any amendment thereto), or arising out of or based upon any
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of or based upon any untrue statement or alleged untrue
<PAGE>
statement of a material fact contained in any Prospectus or including
any Prospectus subject to completion (or any amendment or supplement
thereto), or arising out of or based upon any omission or alleged
omission of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to the provisions of Section 7(c) below, reasonable
fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body,
commenced or threatened, in each case whether or not a party, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any
such expense is not paid under subparagraph (i) or (11) above;
provided, however, that the Company shall not be liable in any such
case to any Indemnified Party to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
in a Prospectus subject to completion, if (A) such untrue statement or
alleged untrue statement, omission or alleged omission is corrected in
an amendment or supplement to such Prospectus; (B) the Company had
furnished such Indemnified Party with the number of copies of such
amended or supplemented Prospectus requested by such Indemnified Party
a reasonable period of time prior to such sale; and (C) thereafter such
Indemnified Party fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale by such Indemnified
Party of the Series D Notes to the Person asserting such loss, claim,
damage, liability or expense; and provided, further, that this
indemnity agreement does not apply to any Indemnified Party with
respect to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue
statement or omission contained in any Registration Statement (or any
amendment thereto) or Prospectus (or any amendment or supplement
thereto) made in reliance upon and in conformity with written
<PAGE>
3148454.05 13
information furnished to the Company by such Indemnified Party expressly for
use in such Registration Statement (or such amendment thereto) or such
Prospectus (or such amendment or supplement thereto).
(b)
Indemnification by Holders, Underwriters, Etc. (i) Each Holder
severally agrees to indemnify and hold hanniess the Company, each Underwriter
and the other selling Holders, and each of their respective Affiliates
(including any director, officer, employee or Person, if any, who controls the
Company, any Under-writer or any other selling Holder within the meaning of
Section 15 of the Securities Act), against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 7(a) hereof
(I)rovided, however, that any settlement of the type described in Section
7(a)(ii) is effected with the written consent of such Holder), as incurred,
but only with respect to untrue statements or omissions, or alleged untnie
statements or omissions, made in a Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written infon-nation furnished to the
Company by such selling Holder expressly for use in such Registration
Statement (or any amendment thereto) or such Prospectus (or any amendment or
supplement thereto); T)rovided, however, that an indemnifying Holder shall not
be required to provide indemnification in any amount in excess of the amount
by which (A) the total price at which the Series D Notes sold by such
indemnifying Holder and its affiliated indemnifying Holders and distributed to
the public were offered to the public exceeds (B) the amount of any damages
which such indemnifying Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(i) The Company shall be entitled to receive indemnities from
Underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in
writing by such Persons specifically for inclusion in any Prospectus or
Registration Statement.
(c) Conduct of Indemnification Proceedinp -,s. Each
indemnified party or parties under this Section 7 shall give
reasonably prompt notice to each indemnifying party or parties
of any action or proceeding conunenced against it or them in
respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party or parties shall
not relieve it or them from any liability which it or they may
have under this indemnity agreement, except to the extent that
the indemnifying party or par-ties have been prejudiced
materially by such failure. If the indemnifying party or
parties so elect, within a reasonable time after receipt of
such notice, the indemnifying party or parties may assume the
defense of such action or proceeding at such indemnifying
par-ty's or parties' expense with counsel chosen by the
indemnifying party or parties and approved by the indemnified
parties defendant in such action or proceeding, which approval
shall not be unreasonably withheld; provided, however, that if
such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such
indemnified party or parties to be represented by separate
counsel or that, upon
<PAGE>
advice of counsel, there may be legal defenses
3148454.05 1 4
available to them which are different from or in addition to those available
to the indemnifying party, then the indemnifying party or parties shall not be
entitled to assume such defense and the indemnified party or parties shall be
entitled to separate counsel at the indemnifying party's or par-ties' expense.
If an indemnifying party is not so entitled to assume the defense of such
action or does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, the indemnifying party
will pay the reasonable fees and expenses of one counsel for the indemnified
party or parties. In such event, however, no indemnifying party or parties
will be liable under this Section 7 for any settlement effected without the
written consent of such indemnifying party or parties (which shall not be
unreasonably withheld) unless a complete release of such indemnifying party or
parties is obtained as part of such settlement. If an indemnifying party is
entitled to assume, and promptly assumes, the defense of such action or
proceeding in accordance with this Section 7(c), such indemnifying party shall
not be liable for any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action or proceeding.
(d) Contribution.
(i) if the indemnification provided for in this Section 7 is
held to be unenforceable although applicable in accordance with its
terms in respect of any losses, claims, damages, liabilities or
expenses suffered by an indemnified party referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such los ' ses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and of the selling
Holders (including, in each case, that of their officers, directors,
employees and agents) on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and of the selling
Holders (including, in each case, that of their officers, directors,
employees and agents) on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company on the one hand, or
by or on behalf of the selling Holders, on the other, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
<PAGE>
subject to the limitations set forth in Section 7(c), any legal or
other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.
(ii) The Company and each Holder of Series D Notes agree that
it would not be just and equitable if contribution pursuant to this
Section 7(d) were determined by pro rata allocation or by any other
method of allocation which does not take account
3149454.05 15
of the equitable considerations refer-red to in paragraph (i) above.
Notwithstanding the provisions of this Section 7(d), in the case of
distributions to the public an indemnifying Holder shall not be
required to contribute any amount in excess of the amount by which the
total price at which the Series D Notes sold by such indemnifying
Holder or its affiliated indemnifying Holders and distributed to the
public were offered to the public exceeds the amount of any damages
which such indemnifying Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
8. Rule 144 and Rule 144A.
For so long as the Company is subject to the reporting requirements of
Section 13 or 15 of the Exchange Act, the Company covenants that it
will file the reports required to be filed by it under the Securities
Act and Section 13(a) or 15(e) of the Exchange Act and the rules and
regulations adopted by the SEC thereunder, that if it ceases to be so
required to file such reports, it will upon the request of any Holder
(i) make publicly available such information as is necessary to pen-nit
sales pursuant to Rule 144 under the Securities Act, (ii) deliver such
information to a prospective purchaser as is necessary to permit sales
pursuant to Rule 144A under the Securities Act and it will take such
further action as any Holder may reasonably request, and (iii) take
such further action that is reasonable in the circumstances, in each
case, to the extent required from time to time to enable such Holder to
sell its Series D Notes without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under
the Securities Act, as such Rule may be amended from time to time, (b)
Rule 144A under the Securities Act, as such Rule may be amended from
time to time, or (c) any similar rules or regulations hereafter adopted
by the SEC. Upon the request of any Holder, the Company will deliver
<PAGE>
to such Holder a written statement as to whether it has complied with
such requirements. Notwithstanding the foregoing, nothing in this
Section 8 shall be deemed to require the Company to register any
securities under the Exchange Act.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered
into nor will the Company on or after the date of this Agreement enter
into any agreement which is inconsistent with the rights granted to the
Holders in this Agreement or other-wise conflicts with the provisions
hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified
or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the
written consent of the Majority Holders; provided, however, that no
amendment, modification or supplement or waiver or consent to the
departure with respect to
3148454.05 16
the provisions of Section 7 hereof shall be effective as against any
Holder unless consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or any courier
guaranteeing overnight delivery (i) if to a Holder, at the most current
address given by such Holder to the Company by means of a notice given
in accordance with the provisions of this Section 9(d), which address
initially is, with respect to each Purchaser, the address set forth
next to such Purchaser's name on the signature pages of the Purchase
Agreement, with a copy to Ropes & Gray, One International Place,
Boston, Massachusetts 02110, Attention: Robert L. Nutt, Esq., or (ii)
if to the Company, at 7502 Greenville Avenue, Suite 800, Dallas, Texas
75231, Attention: Jeff Stedman and Michael D. Cavalier, notice of which
is given in accordance with the provisions of this Section 9(d), with
copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., Suite 4100, 1700
Pacific Avenue, Dallas, Texas 75201-4618, Attention: Terry M. Schpok,
P.C.
<PAGE>
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
(d) Successors and Assijzns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees
of each of the parties, including, without limitation and without the
need for an express assignment, subsequent Holders; provided, however,
that nothing herein shall be deemed to permit any assigrunent, transfer
or other disposition of Series D Notes except in accordance with the
terms of the Exchange. If any successor, assignee or transferee of any
Holder shall acquire Series D Notes, in any manner, whether by
operation of law or otherwise, such Series D Notes shall be held
subject to all of the terms of this Agreement, and by taking and
holding such Series D Notes, such Person shall be conclusively deemed
to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement and, if such acquisition was effected in
accordance with the terms and provisions of the Exchange, such Person
shall be entitled to receive the benefits hereof.
(e) Countemarts. This Agreement may be executed in any number
of counterparts, each of which, when so executed and delivered, shall
be deemed to be an original, but all of which counter-parts, taken
together, shall constitute one and the same instrument.
(f) Headinps. The heading in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
3148454.05 17
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF).
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held to be invalid, illegal or unen- forceable, the
validity, legality and enforceability of any such provisions in every
other
<PAGE>
respect and of the remaining provisions contained herein shall not be
affected or impaired thereby.
(i) Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if any party fails to perform
any of its obligations hereunder, and accordingly agree that each
party, in addition to any other remedy to which it may be entitled at
law or in equity, shall be entitled to compel specific performance of
the obligations of any other party under this Agreement in accordance
with the terms and conditions of this Agreement in any court of the
United States or any State thereof having jurisdiction.
(0) Consent to Jurisdiction and Service of Process. The
Company agrees that any legal suit, action or proceeding brought by any
party to enforce any rights under or with respect to this Agreement may
be instituted in any state or federal court in The City of New York, in
the State of New York, and waives to the fullest extent permitted by
law any objection which it may now or hereafter have to the laying of
venue of any such suit, action or proceeding and irrevocably submit to
the non-exclusive jurisdiction of any such court in any such suit,
action or proceeding. The Company hereby irrevocably designates and
appoints The CT Corporation System ("CT") as the Company's authorized
agent to receive and forward on its behalf service of any and all
process which may be served in any such suit, action or proceeding in
any such court and agrees that service of process upon CT (or any
successor) at its office at 1633 Broadway, New York, New York 10019,
and written notice of said service to the Company mailed or delivered
to The CT Corporation System, 1633 Broadway, New York, New York 10019,
shall be deemed in every respect effective service of process upon the
Company in any such suit, action or proceeding and shall be taken and
held to be valid personal service upon the Company. Said designation
and appointment shall be irrevocable. Nothing in this Section 9(k)
shall affect the right of any party hereto to serve process in any
manner permitted by law o'r limit the right of any party hereto to
bring proceedings against the Company in the courts of any jurisdiction
or jurisdictions. The Company further agrees to take any and all
action, including the execution and filing of any and all such
documents and instruments, as may be necessary to continue such
designation and appointment of CT in full force and effect so long as
this Agreement shall be outstanding.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
There are no restrictions, promises, warranties or under-takings other
than those set
3148454.05 18
for-th or referred to herein, with respect to the registration rights granted
by the Company with respect to the Securities sold pursuant to the Purchase
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(1) Attomey's Fees. As between the par-ties to this Agreement
(including successors and
<PAGE>
permitted assigns), in any action or proceeding brought to enforce any
provision of this Agreement or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorney' fees in addition to any other available remedy.
(m) Securities Held by Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Series D Notes is
required hereunder, Series D Notes held by Affiliates of the Company
other than any Holders that are deemed to be such Affiliates solely by
reason of their holdings of such Series D Notes) shall not be counted
in deten-nining whether such consent or approval was given by the
Holders of such required percentage.
3148454.05 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS TO FIXED CHARGES
1996 1995 1994
COMPUTATION OF EARNINGS:
<S> <C> <C> <C>
REGISTRANT'S PRETAX LOSS FROM:
OPERATIONS (2,625,942) (2,773,425) (3,564,822)
CAPITALIZED INTEREST 5,200 (166,076) (40,903)
TOTAL EARNINGS (2,620,742) (2,939,501) (3,605,725)
COMPUTATION OF FIXED CHARGES:
INTEREST EXPENSE 3,894,758 2,541,449 2,550,165
CAPITALIZED INTEREST 0 167,099 40,903
AMORTIZATION OF DEBT ISSUE 102,268 99,242 101,271
COSTS
AMORTIZATION OF DEBT DISCOUNT 139,205 164,468 143,063
INTEREST FACTOR IN RENTAL 934,068 615,642 264,959
EXPENSE (1/3 RENT EXPENSE)
TOTAL FIXED CHARGES 5,070,299 3,587,900 3,100,361
TOTAL EARNINGS AND FIXED 2,449,557 648,399 (505,364)
CHARGES
RATIO OF EARNINGS TO FIXED N/A N/A N/A
CHARGES
INSUFFICIENT EARNINGS TO COVER 2,620,742 2,939,501 3,605,725
FIXED CHARGES
<FN>
(continued)
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINEMARK MEXICO (USA), INC. AND
SUBSIDIARY
COMPUTATION OF EARNINGS TO FIXED CHARGES
FROM INCEPTION
(SEPTEMBER 10,
1992)
TO DECEMBER 31,
1993 1992
COMPUTATION OF EARNINGS:
<S> <C> <C>
REGISTRANT'S PRETAX LOSS
FROM
OPERATIONS (1,227,855) (103,982)
CAPITALIZED INTEREST
TOTAL EARNINGS (1,227,855) (103,982)
COMPUTATION OF FIXED CHARGES:
INTEREST EXPENSE 1,020,000
CAPITALIZED INTEREST
AMORTIZATION OF DEBT ISSUE 38,865
COSTS
AMORTIZATION OF DEBT 51,718
DISCOUNT
INTEREST FACTOR IN RENTAL
EXPENSE (1/3 RENT EXPENSE)
TOTAL FIXED CHARGES 1,110,583
TOTAL EARNINGS AND FIXED (117,272) (103,982)
CHARGES
RATIO OF EARNINGS TO FIXED N/A N/A
CHARGES
INSUFFICIENT EARNINGS TO COVER 1,227,855 N/A
FIXED CHARGES
<FN>
(Concluded)
</FN>
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
CINEMARK DE MEXICO S. A. DE C. V.
CINEMARK DEL NORTE S. A. DE C. V.
<PAGE>
