Form S-4
Cinemark, Inc.
Delaware
7832
01-0687923
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
3900 Dallas Parkway, Suite 500
Michael Cavalier, Vice President General Counsel
With a copy to:
Approximate date of commencement of proposed sale to the public: As soon as practicable on or after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
CALCULATION OF REGISTRATION FEE
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Proposed Maximum | Proposed Maximum | Amount of | ||||||
Title of Each Class of | Amount to be | Offering Price | Aggregate | Registration | ||||
Securities to be Registered | Registered | Per Unit | Offering Price | Fee(1) | ||||
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9 3/4% Senior Discount Notes due 2014.
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$577,173,000 | 100% | $577,173,000 | $73,128 | ||||
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(1) | Calculated pursuant to Rule 457 under the Securities Act of 1933, as amended |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not exchange these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
PROSPECTUS
Offer to Exchange
The exchange offer will expire at 5:00 p.m., New York City time, on , 2004, unless we extend the offer. We do not currently intend to extend the exchange offer.
| We are offering to exchange up to $577,173,000 aggregate principal amount at maturity of new 9 3/4% Senior Discount Notes due 2014, or exchange notes, which have been registered under the Securities Act of 1933, as amended, for an equal principal amount of our outstanding 9 3/4% Senior Discount Notes due 2014, or initial notes, issued in a private offering on March 31, 2004. | |
| We will exchange all initial notes that are validly tendered and not validly withdrawn prior to the closing of the exchange offer for an equal principal amount at maturity of exchange notes that have been registered. | |
| You may withdraw tenders of initial notes at any time prior to the expiration of the exchange offer. | |
| The terms of the exchange notes to be issued are identical in all material respects to the initial notes, except for transfer restrictions and registration rights that do not apply to the exchange notes, and different administrative terms. | |
| The exchange notes, together with any initial notes not exchanged in the exchange offer, will constitute a single class of debt securities under the indenture. | |
| The exchange of notes will not be a taxable exchange for United States federal income tax purposes. | |
| We will not receive any proceeds from the exchange offer. | |
| No public market exists for the initial notes. We do not intend to list the exchange notes on any securities exchange and, therefore, no active public market is anticipated. |
See Risk Factors beginning on page 16 for a discussion of factors that you should consider before tendering your initial notes.
Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of these exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for initial notes where such initial notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 12 months after the consummation of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See Plan of Distribution.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2004.
TABLE OF CONTENTS
You should rely only upon the information
contained and incorporated by reference in this document. We
have not authorized any other person to provide you with
different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not
making an offer to exchange these securities in any jurisdiction
where the offer or sale is not permitted. You should assume the
information appearing in this document is accurate only as of
the date on the front cover of this document. Our business,
financial condition, results of operations and prospects may
have changed since that date.
MARKET INFORMATION
Information regarding market share, market
position and industry data pertaining to our business contained
in this prospectus consists of estimates based on data and
reports compiled by industry professional organizations
(including the Motion Picture Association of America and the
National Association of Theatre Owners), analysts and our
knowledge of our revenues and markets.
We take responsibility for compiling and
extracting, but have not independently verified, market and
industry data provided by third parties, or by industry or
general publications, and take no further responsibility for
such data. Similarly, while we believe our internal estimates
are reliable, our estimates have not been verified by any
independent sources, and we cannot assure you as to their
accuracy.
AVAILABLE INFORMATION
Cinemark, Inc. has not been subject to the
informational requirements of the Exchange Act. However,
Cinemark USA, Inc., our subsidiary, files Exchange Act reports
with the SEC. Such reports should be available for inspection at
the public reference room at the SECs office located at
450 Fifth Street, N.W., Room 1024, Judiciary Plaza,
Washington, D.C. 20549, United States. Copies may be obtained by
mail, upon payment of the SECs customary charges, by
writing to its principal office at 450 Fifth Street, N.W.,
Room 1024, Judiciary Plaza, Washington, D.C. 20549, United
States. Further information on the operations of the SECs
public reference room in Washington, D.C. can be obtained by
calling the SEC at +1-800-732-0330. The SEC also maintains an
Internet website that contains reports and other information
about issuers who file reports with the SEC. The address of that
website is http://www.sec.gov.
You may request a copy of each of our filings at
the SEC, by writing or telephoning us at the following address,
telephone or facsimile number:
Under the terms of the indenture, we have agreed
that, whether or not we are required to do so by the rules and
regulations of the SEC, after the exchange offer is completed
and for so long as any of the notes remain outstanding, we will
furnish to the trustee and the holders of the notes and, upon
written request, to prospective investors, and file with the SEC
(unless the SEC will not accept such a filing), (i) all
quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if we were required to file such reports, including a
Managements Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to
the annual information only, a report thereon by our certified
independent accountants and (ii) all reports that would be
required to be filed with the SEC on Form 8-K if we were
required to file such reports, in each case within the time
period specified in the rules and regulations of the SEC. In
addition, for so long as any of the notes remain outstanding, we
have agreed to make available to any holder of the notes or
prospective purchaser of the notes, at their request, the
information required by Rule 144A(d)(4) under the
Securities Act.
This prospectus contains summaries of certain
agreements that we have entered into such as the indenture, the
exchange and registration rights agreement, and the agreements
described under Summary The
Transactions The Recapitalization,
Description of Certain Debt Instruments and
Certain Relationships and Related Party
Transactions. The descriptions contained in this
prospectus of these agreements do not purport to be complete and
are subject to, or qualified in their entirety by reference to,
the definitive agreements. Copies of the definitive agreements
will be made available without charge to you by making a written
or oral request to us. To obtain timely delivery of any of our
filings, agreements and other documents, you must make your
request to us no later than five business days before the
expiration of the exchange offer. The exchange offer will expire
at 5:00 pm, New York City time
on ,
2004 unless we decide to extend the expiration date.
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F-1
3900 Dallas Parkway
Suite 500
Plano, TX 75093
Tel: (972) 665-1000
Fax: (972) 665-1004
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus includes forward-looking
statements based on our current expectations, assumptions,
estimates and projections about our business and our industry.
Forward looking statements include statements concerning our
plans, objectives, goals, strategies, future events, future
revenues or performance, capital expenditures, financing needs
and other information that is not historical information. Many
of these statements appear, in particular, under headings
Summary, Risk Factors,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and
Business. They include statements relating to:
You can identify forward-looking statements by
the use of words such as may, should,
will, could, estimates,
predicts, potential,
continue, anticipates,
believes, plans, expects,
future and intends and similar
expressions. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other
factors, some of which are beyond our control and difficult to
predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements.
In evaluating these forward-looking statements, you should
carefully consider the risks and uncertainties described in
Risk Factors and elsewhere in this prospectus. These
forward-looking statements reflect our view only as of the date
of this prospectus. We do not undertake any obligation, other
than as required by law, to update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise. All forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements and risk factors
contained throughout this prospectus.
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future revenues, expenses and profitability;
the future development and expected growth of our
business;
projected capital expenditures;
attendance at movies generally, or in any of the
markets in which we operate;
the number or diversity of popular movies
released;
our ability to successfully license and exhibit
popular films;
competition from other exhibitors; and
determinations in lawsuits.
PROSPECTUS SUMMARY
This summary contains basic information about
us and the exchange offer. You should read this summary together
with the entire prospectus, including the more detailed
information in our consolidated financial statements and related
notes and schedules appearing elsewhere in this prospectus.
Except as otherwise indicated by the context, references in this
prospectus to we, our, the
issuer or Cinemark are to the combined
business of Cinemark, Inc. and all of its consolidated
subsidiaries, and references to North America are to the U.S.
and Canada. Unless otherwise specified, all operating data is as
of March 31, 2004. Unless otherwise specified, all
statement of operations data included in this prospectus
excludes the results of the Companys two United Kingdom
theatres from continuing operations as these theatres were
classified as held for sale at March 31, 2004.
Cinemark, Inc.
We are one of the leaders in the motion picture
exhibition industry, in terms of both revenues and number of
screens in operation. We were founded in 1987 by our Chairman
and Chief Executive Officer, Lee Roy Mitchell, and have grown
primarily through targeted worldwide new theatre development. As
of March 31, 2004 we operated 3,175 screens in
297 theatres. For the year ended December 31, 2003, we
had revenues of $950.9 million, operating income of
$135.6 million and net income of $44.6 million. For
the three months ended March 31, 2004, we had revenues of
$235.1 million, operating income of $32.8 million and
net income of $9.8 million.
Our geographic diversity within North America and
internationally has allowed us to maintain consistent revenue
growth. We have increased revenues by a compound annual growth
rate of 7.5% from the beginning of 1999 through 2003. We operate
2,323 screens in 200 theatres in North America. These theatres,
located in 33 states and one Canadian province, are
primarily in mid-sized U.S. markets, including suburbs of major
metropolitan areas. We believe these markets are less
competitive and generate high, stable margins. We also operate
852 screens in 97 theatres outside of North America,
primarily located in major Latin American metropolitan markets,
which we believe are generally underscreened and have
significant growth potential.
Competitive Strengths
We believe the following strengths allow us to
compete effectively:
Significant Cash Flow.
Our business strategy and disciplined
building program allowed us to generate $135.6 million of
operating income for the year ended December 31, 2003,
which we utilized to reduce our leverage. During the year ended
December 31, 2003, we reduced our long-term debt by
$47.7 million (including the net unamortized premium of
$13.6 million related to the senior subordinated notes of
Cinemark USA, Inc.) and increased our cash and cash equivalents
by $43.6 million. We generated $32.8 million of
operating income for the three months ended March 31, 2004.
Focused Philosophy Resulting in Strong
Financial Performance.
We focus on
negotiating favorable theatre facility economics, providing a
superior viewing experience and controlling theatre operating
costs. As a result of this philosophy, we generated
$44.6 million of net income for the year ended
December 31, 2003. We generated $9.8 million of net
income for the three months ended March 31, 2004.
Strong Management Team.
Led by Mr. Mitchell, our
management team has an average of approximately 20 years of
theatre operating experience and a proven track record of
superior performance. The team has successfully navigated us
through many industry cycles; between 1999 and 2001, we were one
of only two major motion picture exhibitors in the U.S. that did
not file for bankruptcy protection. Managements success
during this period is largely a result of its financial
discipline and focus on investment returns, as demonstrated by
its decision to decrease its building commitments earlier than
its competitors. Mr. Mitchell and the other members of our
existing management team retained their current positions after
the Recapitalization described in The
Transactions The Recapitalization.
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Selective Building in Less Competitive U.S.
Markets and Heavily Populated International Markets.
Modern Theatre Circuit.
We have built our modern theatre
circuit primarily through targeted worldwide new theatre
development, which we believe provides a preferred destination
for moviegoers in our markets. Since 1996, we have built 1,989
screens, or 63% of our total screen count. Our ratio of screens
to theatres is one of the highest in the industry: 11.6 to 1 in
North America and 8.8 to 1 internationally. Approximately 68% of
our North American first run screens and 78% of our
international screens feature stadium seating.
Our Strategy
We believe our operating philosophy provides us
with a competitive advantage. We intend to continue to focus on
the following key components of our business plan.
Focus on Less Competitive U.S. Markets and
Target Profitable, High Growth International Markets.
We will continue to seek growth
opportunities in underserved, mid-sized U.S. markets and major
international metropolitan areas by building or acquiring modern
theatres that meet our strategic, financial and demographic
criteria.
Maximize Profitability Through Continued Focus
on Operational Excellence.
We will
continue to focus on executing our operating philosophy. We
believe that our successful track record of executing this
philosophy is evidenced by the fact that we successfully
navigated through the significant industry downturn between 1999
and 2001, during which period at least twelve exhibitors filed
for bankruptcy protection.
Pursue Additional Revenue Opportunities.
We will continue to pursue additional
growth opportunities by developing and expanding ancillary
revenue streams such as advertising. We are able to offer
advertisers national, regional or local coverage in a variety of
formats to reach our patrons, which numbered approximately
173 million during the year ended December 31, 2003.
We are also exploring additional revenue sources such as digital
video monitor advertising, third party branding, and the use of
theatres for non-film events. We have used theatres during
non-peak hours for simulcast concerts, pay-per-view sporting
events, corporate meetings and cultural events.
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Our Industry
The U.S. motion picture exhibition industry has
enjoyed revenue growth at a compound annual growth rate of 6.3%
from 1993 to 2003, according to the Motion Picture Association
of America. In 2002, single year U.S. motion picture box office
revenues exceeded the $9.0 billion mark for the first time
in history, reaching a total of $9.52 billion, a 13.2%
increase from 2001, according to the Motion Picture Association
of America. The 2003 box office, while down 0.3% from 2002, was
the second highest in history and again exceeded the
$9.0 billion mark with a total of $9.49 billion. The
strong U.S. box office performance was primarily driven by an
increase in attendance which increased nearly 27% between 1993
and 2003. Factors contributing to the continued success of the
industry include a strong movie slate, the improvement of
theatre circuits resulting from the creation of the modern
multiplex format and the screen rationalization of 2000 and
2001. Three films released in 2003 grossed over
$300 million, three other films grossed over
$200 million and an additional 23 films grossed over
$100 million in the U.S.
The international motion picture exhibition
industry has also grown significantly over the past several
years. Global box office revenues increased 28% from
$15.9 billion in 2000 to $20.3 billion in 2003
according to the Motion Picture Association of America. This
growth is a result of the increasing acceptance of moviegoing as
a popular form of entertainment throughout the world, ticket
price increases and new theatre construction. According to
Informa Media Group, Latin America is the fastest growing region
in the world in terms of box office revenues.
Drivers of Continued Industry
Success
We believe the following market trends will drive
the continued growth and strength of our industry:
Increased Investment in Film Production and
Marketing.
Theatrical exhibition is
the primary distribution channel for new motion picture
releases. The success of a theatrical release, which
brands a film, is one of the major factors in
determining its success in downstream distribution
channels, such as home video, DVD and network, syndicated and
pay-per-view television. The growing importance of downstream
distribution channels has enabled studios to increase production
and marketing expenditures. Production and marketing costs per
new film in the U.S. have increased by compound annual growth
rates of 7.9% and 10.7%, respectively, from 1993 to 2003,
according to the Motion Picture Association of America. This has
led to an increase in blockbuster features, which
attract larger audiences to theatres.
Increased Importance of International Markets
for Ensuring Box Office Success.
International markets are becoming an
increasingly important component of the overall box office
revenues generated by Hollywood films. For example, markets
outside of North America accounted for greater than 60% of the
global box office revenues for
The Last Samurai, The Matrix
Revolutions, Finding Nemo
and
Lord of the Rings: The
Return of the King.
With the continued growth of the
international motion picture exhibition industry, the relative
contribution of markets outside North America should become even
more significant.
Favorable Attendance Trends.
Increased movie going frequency and
attendance from key demographic groups have benefited the
industry. According to the Motion Picture Association of
America, annual admissions per capita in the U.S. increased from
4.5x to 5.4x, between 1991 and 2003. Additionally, the
U.S. teenage segment, defined as 12-17 year olds,
represented 18% of admissions in 2003, up from 14% in 1997.
Reduced Seasonality of Revenues.
The seasonality of motion picture
exhibition has become less pronounced in recent years. Studios
have begun to release films more evenly throughout the year, and
hit films have emerged during traditionally weaker periods. This
benefits exhibitors by allowing them to more effectively manage
their operations.
Convenient and Affordable Form of Out-of-Home
Entertainment.
Movie going continues
to be one of the most convenient and affordable forms of
out-of-home entertainment, with an average ticket price in the
U.S. of $6.03 in 2003. Average prices for other forms of
out-of-home entertainment in the U.S., including
3
Additional Information
On May 16, 2002, Cinemark, Inc. was formed
as the Delaware holding company of Cinemark USA, Inc. Our
corporate headquarters is located at 3900 Dallas Parkway,
Suite 500, Plano, Texas 75093. Our telephone number is
(972) 665-1000. Our web site address is
www.cinemark.com.
The information on our web site does
not constitute part of this prospectus.
The Transactions
The Recapitalization
On March 12, 2004, Popcorn Merger Corp., a
Delaware corporation and newly formed subsidiary of Madison
Dearborn Partners, LLC, entered into an agreement and plan of
merger with Cinemark, Inc., or the merger agreement,
pursuant to which Popcorn Merger Corp. merged with and into
Cinemark, Inc. with Cinemark, Inc. continuing as the surviving
corporation. The effective date of the merger was April 2,
2004. Simultaneously with the merger, an affiliate of Madison
Dearborn Partners, LLC, which we refer to as the equity
sponsor, purchased shares of common stock of Cinemark,
Inc. for approximately $518.3 million in cash. Lee Roy
Mitchell and The Mitchell Special Trust, whom we refer to as the
Mitchell investors, and certain members of our
management, whom we refer to as the management
investors, which were stockholders of Cinemark, Inc. and
others, received cash consideration in the merger pursuant to
the merger agreement. In addition, the Mitchell investors and
the management investors retained a portion of their holdings of
shares of Cinemark, Inc. After the closing of the
recapitalization and the related financing transactions
described below, all of the capital stock of Cinemark, Inc. is
owned by the equity sponsor, the Mitchell investors and the
management investors. The equity sponsor is the controlling
stockholder, with approximately 83% of our capital stock, and is
initially entitled to elect 10 of the 12 members to our Board of
Directors. We refer to the transactions consummated under the
merger agreement as the Recapitalization.
The Related Financing Transactions
Concurrently with the closing of the
Recapitalization, we entered into the following financing
transactions, which we refer to, together with the
Recapitalization and the offering of the initial notes, as the
Transactions:
4
Sources and Uses of Funds
The following table illustrates the sources and
uses of funds relating to the Transactions, assuming the
Transactions had occurred on March 31, 2004.
5
Corporate Structure
The following chart illustrates our corporate
structure and principal indebtedness assuming that the
Transactions had occurred as of March 31, 2004:
6
Equity Sponsor
Madison Dearborn Partners, LLC, or Madison
Dearborn, is a leading private equity firm based in
Chicago, Illinois. Madison Dearborn, through limited
partnerships of which it is the general partner, has
approximately $8 billion of capital under management. Madison
Dearborn focuses on investments in several specific industry
sectors, including basic industries, communications, consumer,
financial services and health care. Madison Dearborns
objective is to invest in companies with strong competitive
characteristics that it believes have the potential for
significant long-term equity appreciation. To achieve this
objective, Madison Dearborn seeks to partner with outstanding
management teams who have a solid understanding of their
businesses and track records of building shareholder value.
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The Exchange Offer
8
9
10
Summary Description of Exchange
Notes
The terms of the exchange notes are identical in
all material respects to those of the initial notes, except for
transfer restrictions and registration rights that do not apply
to the exchange notes. The exchange notes will evidence the same
debt as the initial notes, and the same indenture will govern
the exchange notes as the initial notes. The summary below
describes the principal terms of the exchange notes. Certain of
the terms and conditions described below are subject to
important limitations and exceptions. The Description of
Exchange Notes section of this prospectus contains a more
detailed description of the terms and conditions of the exchange
notes.
11
For a discussion of certain risks that should be
considered in connection with an investment in the exchange
notes, see Risk Factors beginning on page 16.
12
Summary Consolidated Financial and Operating
Information
The following table provides our summary
historical and unaudited pro forma condensed consolidated
financial data as of and for the periods ended at the dates
indicated below. Our historical financial data for each of the
years ended December 31, 2001, 2002 and 2003 is derived
from our consolidated audited financial statements appearing
elsewhere in this prospectus. Our historical financial data for
the three months ended March 31, 2003 and 2004 is derived
from our unaudited interim financial statements which, in the
opinion of management, contain all adjustments necessary for a
fair presentation of this information. The historical financial
data for the three months ended March 31, 2004 is not
necessarily indicative of the results expected for the full
year. Certain reclassifications have been made to the 2001, 2002
and 2003 financial statements to conform to the 2004
presentation. Our unaudited pro forma statement of operations
data and other financial data for the year ended
December 31, 2003 and for three months ended March 31,
2004 give effect to the Transactions as if they had been
consummated on January 1, 2003. Our unaudited pro forma
balance sheet data as of March 31, 2004 gives effect to the
Transactions as if they had been consummated on March 31,
2004. For the pro forma financial statements and a more detailed
discussion of the pro forma adjustments, see Unaudited Pro
Forma Condensed Consolidated Financial Information.
The unaudited pro forma consolidated financial
information should not be considered indicative of actual
results that would have been achieved had the Transactions been
consummated on the date or for the periods indicated and do not
purport to indicate consolidated balance sheet data or statement
of operations data or other financial data as of any future date
or for any future period.
You should read the summary historical and
unaudited pro forma condensed consolidated financial data set
forth below in conjunction with the information contained in
The Transactions, Selected
Historical Consolidated Financial Information,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and with our
consolidated financial statements and related notes thereto
appearing elsewhere in this prospectus.
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14
15
RISK FACTORS
Before you invest in the exchange notes, you
should understand the high degree of risk involved. You should
consider carefully the following risks and other information in
this prospectus, including our financial statements and related
notes and schedules, before you decide to exchange the initial
notes for any of the exchange notes. The following risks and
uncertainties are not the only ones we face. If any of the
following risks actually occur, our business, financial
condition and operating results could be adversely affected. As
a result, the trading price of our exchange notes could decline,
perhaps significantly, and our ability to pay principal and
interest on the exchange notes could be adversely
affected.
Risks Related to the Exchange Notes and this
Exchange Offer
If you do not exchange your initial notes for
exchange notes pursuant to the exchange offer, you will continue
to be subject to the restrictions on transfer of your initial
notes, as set forth in the legend on your initial notes. The
restrictions on transfer of your initial notes arise because we
sold the initial notes in private offerings. In general, the
initial notes may not be offered or sold, unless registered
under the Securities Act or pursuant to an exemption from, or in
a transaction not subject to, such requirements. We do not
intend to register the initial notes under the Securities Act.
After completion of the exchange offer, holders
of initial notes who do not tender their initial notes in the
exchange offer will no longer be entitled to any exchange or
registration rights under the registration rights agreement,
except under limited circumstances.
If you exchange your initial notes in the
exchange offer for the purpose of participating in a
distribution of the exchange notes, you may be deemed to have
received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction. To the extent the initial notes are tendered and
accepted in the exchange offer, the trading market, if any, for
the initial notes would be adversely affected. See The
Exchange Offer.
Cinemark, Inc. is a holding company with no
business operations or assets other than the capital stock of
CNMK Holding, Inc., which itself is a holding company with no
operations or assets of its own other than the capital stock of
Cinemark USA, Inc. Operations are conducted through Cinemark
USA, Inc. and its subsidiaries. Consequently, we will be
dependent on loans, dividends and other payments from Cinemark
USA, Inc. and its subsidiaries to make payments of principal and
interest on the exchange notes. However, our subsidiaries are
separate and distinct legal entities, and they will have no
obligation, contingent or otherwise, to pay the amounts due
under the exchange notes or to make any funds available to pay
those amounts, whether by dividend, distribution, loan or other
payments. You will not have any direct claim on the cash flows
or assets of our subsidiaries.
The ability of our subsidiaries to make dividends
and other payments to us will depend on their cash flows and
earnings which, in turn, will be affected by all of the factors
discussed in these Risk Factors. The ability of our
subsidiaries to make distributions to us may be restricted by,
among other things, applicable laws and regulations and by the
terms of agreements into which they enter. If we are unable to
obtain funds from our subsidiaries as a result of restrictions
under their debt or other agreements, applicable laws and
regulations or otherwise, we may not be able to pay interest or
principal on the exchange notes when due. The terms of the
amended senior credit facility significantly restrict Cinemark
USA, Inc. from paying dividends and otherwise transferring
assets to CNMK Holding, Inc. and Cinemark, Inc., except for
taxes and ordinary course corporate operating expenses and
accounting services. The terms of the indenture governing the 9%
senior subordinated notes significantly restrict Cinemark USA,
Inc. and its other subsidiaries from paying dividends and
otherwise transferring assets to us. The terms of the agreements
governing indebtedness of our other subsidiaries also restrict
such subsidiaries from paying dividends or
16
We currently anticipate that, in order to pay the
principal amount at maturity of the exchange notes or to
repurchase the exchange notes upon a change of control as
defined in the indenture governing the exchange notes, we will
be required to adopt one or more alternatives, such as
refinancing all of our indebtedness, selling our equity
securities or the equity securities or assets of Cinemark USA,
Inc. or seeking capital contributions or loans from our
affiliates. None of our affiliates is required to make any
capital contributions, loans or other payments to us with
respect to our obligations on the exchange notes. There can be
no assurance that any of the foregoing actions could be effected
on satisfactory terms, if at all, or that any of the foregoing
actions would enable us to refinance our indebtedness or pay the
principal amount of the exchange notes or that any of such
actions would be permitted by the terms of any debt instruments
of us or our subsidiaries then in effect.
Generally, claims of creditors of a subsidiary,
including trade creditors, will have priority with respect to
the assets and earnings of the subsidiary over the claims of
creditors of its parent company. Your rights under the exchange
notes offered hereby, therefore, will be structurally
subordinated to those of the creditors of our subsidiaries. In
the event of bankruptcy or insolvency, you may receive less,
ratably, than holders of debt and other liabilities of our
subsidiaries, including, in all likelihood, the claims of the
holders of Cinemark USA, Inc.s 9% senior subordinated
notes and the lenders under the amended senior credit facility.
As of March 31, 2004, after giving effect to the
Transactions, our subsidiaries would have had
$802.9 million of indebtedness and other liabilities,
including trade payables, and the exchange notes would have been
effectively subordinated to such indebtedness and other
liabilities.
In addition, holders of the secured debt of
Cinemark, Inc. will have claims that are prior to your claims as
a holder of the exchange notes, to the extent of the value of
the assets securing that debt. We guaranteed the obligations of
Cinemark USA, Inc. under its amended senior credit facility and
secured our guarantee with substantially all of our assets,
including the stock of CNMK Holding, Inc. In addition, the
amended senior credit facility is secured, subject to certain
exceptions, by mortgages on a large percentage of the assets of
Cinemark USA, Inc. and its subsidiaries. If we become insolvent
or are liquidated, or if payment under the amended senior credit
facility is not made, the lenders would be entitled to exercise
the remedies available to a secured lender. Accordingly, these
lenders have a secured claim against the mortgaged assets of
Cinemark USA, Inc. and have priority with respect to those
assets over any other claim for payment, including any claim of
Cinemark, Inc. for amounts invested in Cinemark USA, Inc. In
such event, it is possible that there would be no assets
remaining after payment to these lenders from which claims to
the holders of the exchange notes could be satisfied.
We have significant debt service obligations. For
the year ended December 31, 2003, our facility lease
expense and interest expense were $119.5 million and
$51.9 million, respectively. As of March 31, 2004,
assuming the Transactions had occurred as of that date, our
total debt would have been $1,001.0 million. For the year
ended December 31, 2003 and the three months ended
March 31, 2004, assuming the Transactions had occurred as
of January 1, 2003, our ratio of earnings to fixed charges
would have been 1.3x and 1.4x, respectively. Additionally, we
would have had $100.0 million available under the amended
senior credit facility, subject to our compliance with
maintenance covenants and other conditions. You should read the
discussions under the headings Capitalization and
Unaudited Pro Forma Condensed Consolidated Financial
Information for further information about our substantial
indebtedness.
17
Our substantial lease and debt obligations pose
risk to you by:
Subject to the restrictions contained in our
indebtedness agreements, we expect to incur additional
indebtedness from time to time to finance acquisitions, capital
expenditures, working capital requirements and other general
business purposes. In addition, we may need to refinance all or
a portion of our indebtedness, including the exchange notes, on
or before maturity. However, we may not be able to refinance all
or any of our indebtedness, including the exchange notes, on
commercially reasonable terms or at all.
Our subsidiaries ability to make scheduled
payments on or to refinance their debt obligations depends on
our subsidiaries financial condition and operating
performance, which is subject to prevailing economic and
competitive conditions and to certain financial, business and
other factors beyond their or our control. We cannot assure you
that our subsidiaries will maintain a level of cash flows from
operating activities sufficient to permit them to pay the
principal, premium, if any, and interest on their indebtedness.
If our subsidiaries cash flows and capital resources are
insufficient to fund their debt service obligations, our
subsidiaries may be forced to reduce or delay capital
expenditures, sell assets, seek additional capital or
restructure or refinance their indebtedness. These alternative
measures may not be successful and may not permit our
subsidiaries to meet their scheduled debt service obligations.
In the absence of such operating results and resources, they
could face substantial liquidity problems and might be required
to dispose of material assets or operations to meet their debt
service and other obligations. The amended senior credit
facility, the indenture governing Cinemark USA, Inc.s 9%
senior subordinated notes and the indenture governing the
exchange notes offered hereby significantly restrict our
subsidiaries ability to dispose of assets and use the
proceeds from the disposition. Our subsidiaries may not be able
to consummate those dispositions or to obtain the proceeds which
could be realized from them and these proceeds may not be
adequate to meet any debt service obligations then due.
If our subsidiaries are unable to generate
sufficient cash flow and are otherwise unable to obtain funds
necessary to meet required payments of principal, premium, if
any, and interest on their indebtedness, or if they otherwise
fail to comply with the various covenants, including financial
and operating covenants, in the instruments governing their
indebtedness, we or they would be in default under the terms of
such indebtedness. In the event of such default, the holders of
such indebtedness could elect to declare all the funds borrowed
thereunder to be due and payable, together with accrued and
unpaid interest, the lenders under the amended senior credit
facility could elect to terminate their commitments thereunder,
cease making further loans and institute foreclosure proceedings
against our assets, and we could be forced into bankruptcy or
liquidation. Any of the foregoing could prevent us from paying
principal, premium, if any, and interest on the exchange notes
and substantially decrease the market value of the exchange
notes.
18
We and our subsidiaries may be able to incur
substantial additional indebtedness in the future. The terms of
the indenture governing the exchange notes offered hereby and
the indenture governing Cinemark USA, Inc.s 9% senior
subordinated notes do not fully prohibit us or our subsidiaries
from incurring additional debt. Cinemark USA, Inc.s
amended senior credit facility provides commitments of up to
$360.0 million, $100.0 million of which is available
for future borrowings. All of those borrowings would be secured,
and as a result, would be effectively senior to the exchange
notes and further, because they represent debt of one of our
subsidiaries, the borrowings would be structurally senior to the
exchange notes. If we incur any additional indebtedness that
ranks equally with the notes, the holders of that debt will be
entitled to share ratably with the holders of the exchange notes
in any proceeds distributed in connection with any insolvency,
liquidation, reorganization, dissolution or other winding-up of
us. This may have the effect of reducing the amount of proceeds
paid to you. If new debt is added to our current debt levels,
the related risks that we and our subsidiaries now face could
intensify.
The exchange notes indenture, the indenture
governing Cinemark USA, Inc.s 9% senior subordinated notes
and the amended senior credit facility contain financial and
other restricted covenants that limit our ability to engage in
activities that may be in our long-term best interests. For
example, these covenants significantly restrict our ability to:
These covenants are subject to a number of
important exceptions and qualifications. These restrictions
could affect our ability to operate our business and may limit
our ability to take advantage of potential business
opportunities. In addition, the amended senior credit facility
requires Cinemark USA, Inc. to comply with certain financial
covenants. You should read the discussions under the headings
Description of Certain Debt Instruments Amended
Senior Credit Facility and Description of Certain
Debt Instruments 9% Senior Subordinated Notes for
further information about these covenants. Events beyond our
control can affect Cinemark USA, Inc.s ability to comply
with these covenants. Its failure to comply with these covenants
could result in an event of default which, if not cured or
waived, could result in the acceleration of all of our debts. If
an event of default occurs, we cannot assure you that we would
have sufficient assets to repay all of our obligations.
Under the federal bankruptcy laws and comparable
provisions of state fraudulent conveyance laws, a court could
void obligations under the exchange notes, subordinate those
obligations to more junior obligations or require holders of the
exchange notes to repay any payments made under the exchange
notes if an unpaid creditor or representative of creditors, such
as a trustee in bankruptcy or our company as a debtor-
19
(1) fair consideration or reasonably
equivalent value was not received in exchange for the
obligation; and
(2) at the time the obligation was incurred,
the obligor:
The measure of insolvency for these purposes will
depend upon the law of the jurisdiction being applied.
Generally, however, an obligor will be considered insolvent for
these purposes if:
Moreover, regardless of solvency, a court could
void an incurrence of indebtedness, including under the amended
senior credit facility or the exchange notes if it is determined
that the transaction was made with the intent to hinder, delay
or defraud our creditors.
On the basis of historical financial information,
recent operating history and other factors, we believe that,
after the Recapitalization, the Transactions and the use of
proceeds therefrom, we are not insolvent, do not have
unreasonably small capital for the business in which we are
engaged and have not incurred debts beyond our ability to pay
our debts as they mature. However, we cannot assure you as to
what standard a court would apply in making these determinations
or that a court would agree with our conclusions in this regard.
Upon the occurrence of specific kinds of change
of control events, we will be required to offer to repurchase
all the exchange notes, and Cinemark USA, Inc. will be required
to offer to purchase all the 9% senior subordinated notes that
are outstanding, at 101% of their principal amount. We may not
be able to repurchase the exchange notes upon a change of
control because we or our subsidiaries may not have sufficient
funds. Our failure to repurchase the exchange notes or Cinemark
USA, Inc.s failure to repurchase the 9% senior
subordinated notes upon a change of control would cause a
default under the respective indentures. Cinemark USA,
Inc.s amended senior credit facility also provides that a
change of control (as defined therein) will be a default that
permits lenders to accelerate the maturity of borrowings under
the amended senior credit facility. We may enter into debt
agreements containing similar provisions in the future.
The exchange notes will be a new issue of debt
securities of the same class as the initial notes and will
generally be freely transferrable. However, we do not intend to
have the exchange notes listed on a national securities
exchange, although we expect that the exchange notes will be
eligible for trading in PORTAL. In addition, although the
initial purchasers of the initial notes have advised us that
they currently intend to make
20
The initial notes were issued at a substantial
discount from their principal amount at maturity. Although cash
interest will not accrue on the exchange notes prior to
March 15, 2009, and there will be no periodic payments of
cash interest on the exchange notes prior to September 15,
2009, original issue discount (the excess of the stated
redemption price at maturity over the issue price of the notes)
will accrete from the issue date of the initial notes.
Consequently, purchasers of the exchange notes generally will be
required to include amounts in gross income for U.S. federal
income tax purposes in advance of their receipt of the cash
payments to which the income is attributable. See
Important Federal Income Tax Considerations.
Risks Related to Our Business and
Industry
Our business is dependent both upon the
availability of suitable motion pictures for exhibition in our
theatres and the performance of such pictures in our markets.
Poor performance of films or disruption in the production of
motion pictures by, or a reduction in the marketing efforts of,
the major studios and/or independent producers could have a
material adverse effect on our business.
We rely on the film distributors for the motion
pictures shown in our theatres. The film distribution business
is highly concentrated, with ten major film distributors
accounting for approximately 92% of U.S. box office revenues and
49 of the top 50 grossing films during 2003. Numerous antitrust
cases and consent decrees resulting from these cases impact the
distribution of motion pictures. The consent decrees bind
certain major film distributors to license films to exhibitors
on a theatre-by-theatre and film-by-film basis. Consequently, we
cannot guarantee a supply of films by entering into long-term
arrangements with major distributors. We are therefore required
to negotiate licenses for each film and for each theatre. We
cannot assure you that we will be able to negotiate favorable
licensing terms for all first-run film. A deterioration in our
relationship with any of the ten major film distributors could
adversely affect our ability to negotiate film licenses and our
ability to obtain commercially successful films and, therefore
could adversely affect our business and operating results.
Since 1999, several major theatre exhibition
companies, including Regal Cinemas, Loews Cineplex Entertainment
and United Artists filed for bankruptcy. One significant cause
of those bankruptcies was the emphasis by theatre circuits on
the development of large multiplexes in recent years. The
strategy of aggressively building multiplexes was adopted
throughout the industry which generated significant competition
and resulted in an oversupply of screens in the North American
exhibition industry.
21
Outside of North America, we operate 97 theatres
with 852 screens in Mexico, Argentina, Brazil, Chile, Ecuador,
Peru, Honduras, El Salvador, Nicaragua, Costa Rica, Panama,
Colombia and the United Kingdom, with Mexico and Brazil
representing approximately 7% and 8% of 2003 revenues,
respectively. We will continue to investigate opportunities in
these and other foreign markets. Governmental regulation of the
motion picture industry in foreign markets differs from those in
the United States. Regulations affecting price controls or
admission prices, quota systems requiring the exhibition of
films produced in the subject country and restrictions on
ownership of land may adversely affect our international
operations in foreign markets. Our international operations are
subject to certain political, economic and other uncertainties
not encountered by our domestic operations. We also face the
additional risks of currency fluctuations, hard currency
shortages and controls of foreign currency exchange. We do not
actively hedge against foreign currency exchange risk.
Our theatres must comply with Title III of the
Americans with Disabilities Act of 1990, or the ADA,
and analogous state and local laws. Compliance with the ADA
requires among other things that public facilities
reasonably accommodate individuals with disabilities
and that new construction or alterations made to
commercial facilities conform to accessibility
guidelines unless structurally impracticable for new
construction or technically infeasible for alterations. If we
fail to comply with the ADA, remedies could include imposition
of injunctive relief, fines, awards for damages to private
litigants and additional capital expenditures to remedy
non-compliance. Imposition of significant fines, damage awards
or capital expenditures to cure non-compliance could adversely
affect our business and operating results.
We have been involved in significant litigation
in which it is claimed that many of our theatres do not comply
with the ADA. Currently, we are the subject of lawsuits brought
by the Department of Justice, or the DOJ, in
Cleveland, Ohio and by private plaintiffs in one case in Texas.
In each of these cases it is alleged that the wheelchair seating
positions do not comply with the ADA, or in the Texas cases,
with the Texas Accessibility Standards. The plaintiffs in the
DOJ litigation and Mission, Texas litigation have argued that
the theatres must provide wheelchair seating locations with
viewing angles to the screen that are at the median or better
than all seats in the stadium style sections of the auditorium.
If we lose the DOJ litigation, our business and results of
operations may be materially and adversely affected.
To date, there have been three divergent opinions
published by federal circuit courts addressing whether
wheelchair seating locations in stadium-style movie theatres
must comply with an alleged viewing angle
requirement purportedly interpreted from the lines of
sight comparable clause of Section 4.33.3 of the ADA
Accessibility Guidelines.
On April 6, 2000, the Fifth Circuit Court of
Appeals issued its decision in
Lara v. Cinemark,
in which
it rejected an interpretation by the DOJ that
Section 4.33.3 imposes a viewing angle
requirement, and held that wheelchair seating locations in the
sloped-floor areas of stadium-style movie theatres that provide
unobstructed views of the movie screen comply with the
lines of sight comparable language of
Section 4.33.3 as a matter of law. On August 13, 2003,
the Ninth Circuit Court of Appeals issued its divided
22
The motion picture industry is competitive. We
compete against local, national and international exhibitors. We
compete for both patrons and licensing of motion pictures. Some
of our competitors have substantially greater resources and may
have lower costs. The principal competitive factors with respect
to film licensing include licensing terms, number of seats and
screens available for a particular picture, revenue potential
and the location and condition of an exhibitors theatres.
The competition for patrons is dependent upon
such factors as the availability of popular motion pictures, the
location and number of theatres and screens in a market, the
comfort and quality of the theatres and pricing. Many of our
competitors have sought to increase the number of screens that
they operate. The multiplex building programs by many of our
competitors during the second half of the 1990s were aggressive,
according to some industry analysts. Most of the building was
financed primarily with debt resulting in increased operating
and financial leverage. The significant increase in multiplexes
rendered many of the older theatre facilities obsolete more
rapidly than expected. Many of the landlords have been unwilling
to make rent concessions or terminate the leases for
underperforming theatres. Several of our competitors filed for
bankruptcy protection and have used the bankruptcy proceedings
to reject the leases for underperforming theatres. As a result,
some of our competitors may have a lower cost structure.
We face competition for patrons from a number of
alternative motion picture distribution channels, such as home
video, pay-per-view, cable, DVD and syndicated and broadcast
television. We also compete with other forms of entertainment
competing for our patrons leisure time and disposable
income such as concerts, amusement parks and sporting events.
Alternative film distribution channels and competing forms of
entertainment could have a material adverse effect on our
business and results of operations.
We intend to continue to pursue additional
revenue streams such as advertising and the use of theatres for
non-film events. Our ability to achieve our business objectives
may depend in part on our success in generating these revenue
streams. We cannot assure you that we will be able to
effectively generate these additional revenues and our inability
to do so may have an adverse effect on our financial performance.
Our results of operations vary from period to
period based upon the quantity and quality of the motion
pictures that we show in our theatres. The major film
distributors generally release during the summer and
23
If a digital cinema roll-out progresses rapidly,
we may not have adequate resources to finance the conversion
costs. Digital cinema is in an experimental stage in our
industry. There are multiple parties vying for the position of
being the primary generator of the digital projector roll-out.
However, there are significant obstacles to such a roll-out plan
including:
Even if the technical issues surrounding digital
cinema are resolved, business arrangements for the financing of
the digital projector roll-out will require significant
discussions. Further, we cannot assure you that financing
arrangements to fund our portion of the digital cinema roll-out
can be obtained on terms we deem acceptable.
We have greatly expanded our operations over the
last decade through new theatre construction and selective
theatre acquisitions. We will continue to pursue a strategy of
expansion that will involve the development of new theatres,
including international markets, and may involve acquisitions of
existing theatres and theatre circuits. Acquisitions generally
would be made to provide initial entry into a new market or to
strengthen our position in an existing market. We may not be
able to develop or acquire suitable theatres in the future;
therefore, we cannot assure you that our expansion strategy will
result in improvements to our business, financial condition or
profitability. There is significant competition for potential
site locations and existing theatre and theatre circuit
acquisition opportunities. As a result of such competition, we
may not be able to acquire attractive site locations or existing
theatres or theatre circuits on terms we consider acceptable.
Further, our expansion programs may require financing in
addition to our existing borrowing capacity and internally
generated funds that we would use for such purpose. We cannot
assure you that financing will be available to us on acceptable
terms.
Our current and future performance depends to a
significant degree upon the continued contributions of our
senior management team and other key personnel. The loss or
unavailability to us of any member of our senior management team
or a key employee could significantly harm us. We cannot assure
you that we would be able to locate or employ qualified
replacements on acceptable terms for senior management or key
employees if their services are no longer available.
We review long-lived assets for impairment on a
quarterly basis or whenever events or changes in circumstances
indicate the carrying amount of the assets may not be fully
recoverable.
We consider actual theatre level cash flow,
future years budgeted theatre level cash flow, theatre property
and equipment values, goodwill values, the age of a recently
built theatre, competitive theatres in the marketplace, the
sharing of a market with our other theatres, changes in foreign
currency exchange rates, the impact of recent ticket price
changes and other factors in our assessment of impairment of
individual theatre assets. Assets are evaluated on an individual
theatre basis or a group of theatres that share the same
marketplace, which we believe is the lowest applicable level for
which there are identifiable cash flows. The evaluation is based
on the estimated undiscounted cash flows from continuing use
through the remainder of the theatres useful life. The
remainder of the useful life correlates with the available
remaining lease period
24
We also test goodwill and other intangible assets
for impairment at least annually in accordance with Statement of
Financial Accounting Standards No. 142, which we adopted on
January 1, 2002. The adoption of this accounting
pronouncement resulted in a $3.4 million write-down of
goodwill and other intangible assets to fair value on
January 1, 2002 (recorded as a cumulative effect of a
change in accounting principle).
In recent years, in the U.S., our
competitors strategy of aggressively building multiplexes
generated significant competition and rendered many older
theatres obsolete more rapidly than expected. In addition,
certain of the international markets served by us experienced
adverse economic conditions and currency devaluations. Due to
these factors, we recorded asset impairment charges, including
goodwill impairment charges, of $20.7 million,
$3.9 million and $5.0 million for 2001, 2002 and 2003,
respectively. For the three months ended March 31, 2004 we
recorded asset impairment charges of $1.0 million. We
cannot assure you that additional impairment charges will not be
required in the future, and such charges may have a material
adverse effect on our financial condition and results of
operations.
Madison Dearborn and its affiliates own
approximately 83% of our outstanding voting capital stock.
Pursuant to a stockholders agreement among us, an affiliate of
Madison Dearborn, the Mitchell investors and the management
investors, Madison Dearborn and its affiliates have the right to
appoint up to ten of our twelve directors.
Madison Dearborn and its affiliates, by virtue of
their stock ownership and board rights, have the ability to
control the outcome of all matters presented for approval to our
stockholders. Such concentration of ownership may have the
effect of preventing a change in control. Because a limited
number of people control us, transactions could be difficult or
impossible to complete without the support of these persons. It
is possible that these persons will exercise control over us in
a manner that is adverse to your interests as a holder of the
exchange notes. See Principal Stockholders and
Certain Relationships and Related Party Transactions.
USE OF PROCEEDS
We will not receive any cash proceeds from the
issuance of the exchange notes offered hereby. In consideration
for issuing the exchange notes as contemplated in this
prospectus, we will receive in exchange, initial notes in like
principal amount, the terms of which are the same in all
material respects as the form and terms of the exchange notes
except that the exchange notes have been registered under the
Securities Act and will not contain terms restricting the
transfer thereof or providing for registration rights. The
initial notes surrendered in exchange for the exchange notes
will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the exchange notes will not increase
our indebtedness.
We received gross proceeds of approximately
$360.0 million from the issuance of the initial notes. We
used the net proceeds from the offering of the initial notes
together with the borrowings under the amended senior credit
facility, existing cash and the proceeds from the cash equity
investment to pay the consideration for the Recapitalization,
refinance the former senior credit facility, fund the purchase
of the 8 1/2% senior subordinated notes pursuant to the
tender offer and pay related fees and expenses. Refer to
Prospectus Summary Sources and Uses of
Funds. For a discussion of the terms of the former senior
credit facility or the 8 1/2% senior subordinated notes see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Historical
Financings.
25
THE EXCHANGE OFFER
This section of the prospectus describes the
proposed exchange offer. While we believe that the description
covers the material terms of the exchange offer, this summary
may not contain all of the information that is important to you.
You should carefully read this entire document and the other
documents referred to herein for a more complete understanding
of the exchange offer.
Purpose of the Exchange Offer
In connection with the issuance of the initial
notes, we entered into an exchange and registration rights
agreement that provides for the exchange offer. A copy of the
exchange and registration rights agreement relating to the
initial notes is filed as an exhibit to the registration
statement of which this prospectus is a part. Under the exchange
and registration rights agreement relating to the initial notes
we agreed that we would, subject to certain exceptions:
For each initial note tendered to us pursuant to
the exchange offer, we will issue to the holder of such initial
note an exchange note having a principal amount equal to that of
the surrendered initial note.
Under existing SEC interpretations, the exchange
notes will be freely transferable by holders other than our
affiliates after the exchange offer without further registration
under the Securities Act if the holder of the exchange notes
represents to us in the exchange offer that it is acquiring the
exchange notes in the ordinary course of its business, that it
has no arrangement or understanding with any person to
participate in the distribution of the exchange notes and that
it is not an affiliate of ours, as such terms are interpreted by
the SEC; provided, however, that broker-dealers receiving the
exchange notes in the exchange offer will have a prospectus
delivery requirement with respect to resales of such exchange
notes. The SEC has taken the position that such participating
broker-dealers may fulfill their prospectus delivery
requirements with respect to the exchange notes (other than a
resale of an unsold allotment from the original sale of the
initial notes) with the prospectus contained in this
registration statement. Each broker-dealer that receives the
exchange notes for its own account in exchange for the initial
notes, where such initial notes were acquired by such
broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes.
See Plan of Distribution.
A holder of initial notes (other than certain
specified holders) who wishes to exchange the initial notes for
the exchange notes in the exchange offer will be required to
represent that any exchange notes to be received by it will be
acquired in the ordinary course of its business and that at the
time of the commencement of the exchange offer it has no
arrangement or understanding with any person to participate in
the distribution (within the meaning of the Securities Act) of
the exchange notes and that it is not an affiliate
of ours, as defined in Rule 405 of the Securities Act, or
if it is an affiliate, that it will comply with the registration
and prospectus delivery requirements of the Securities Act to
the extent applicable.
26
In the event that:
then, we will, subject to certain exceptions,
We will, in the event a shelf registration
statement is filed, among other things, provide to each holder
for whom such shelf registration statement was filed copies of
the prospectus which is a part of the shelf registration
statement, notify each such holder when the shelf registration
statement has become effective and take certain other actions as
are required to permit unrestricted resales of the initial notes
or the exchange notes, as the case may be. A holder selling such
initial notes or exchange notes pursuant to the shelf
registration statement generally would be required to be named
as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions
of the registration rights agreement that are applicable to such
holder (including certain indemnification obligations).
We will pay additional cash interest on the
applicable initial notes and exchange notes, subject to certain
exceptions:
27
The rate of any such additional interest will be
0.50% per annum. The amount of additional interest will increase
by an additional 0.50% per annum with respect to each subsequent
90-day period relating to such registration default until cured
up to a maximum of 1.0% per annum. We will pay any such
additional interest on regular interest payment dates. Such
additional interest will be in addition to any other interest
payable from time to time with respect to the initial notes and
the exchange notes. The accrual of additional interest will
cease upon the cure of all registration defaults.
All references in the indenture, in any context,
to any interest or other amount payable on or with respect to
the initial notes or the exchange notes shall be deemed to
include any additional interest pursuant to the registration
rights agreements relating to the initial notes.
If we effect the exchange offer, we will be
entitled to close the exchange offer 30 days after the
commencement thereof provided that we have accepted all initial
notes theretofore validly tendered in accordance with the terms
of the exchange offer.
Background of the Exchange Offer
We issued $577,173,000 aggregate principal amount
at maturity of 9 3/4% senior discount notes due 2014 on
March 31, 2004, the initial notes. The terms of
the exchange notes and the initial notes will be identical in
all material respects, except for transfer restrictions and
registration rights that will not apply to the exchange notes.
The exchange notes will accrete in value until
March 15, 2009, at which time the exchange notes will have
an aggregate principal amount of $577,173,000. Thereafter, cash
interest will be payable on the exchange notes on March 15
and September 15 of each year, beginning on
September 15, 2009. The exchange notes will mature on
March 15, 2014.
In order to exchange your initial notes for the
exchange notes containing no transfer restrictions in the
exchange offer, you will be required to make the following
representations:
Upon the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal, we
will accept for exchange any initial notes properly tendered and
not validly withdrawn in the exchange offer, and the exchange
agent will deliver the exchange notes promptly after the
expiration date of the exchange offer. We expressly reserve the
right to delay acceptance of any of the tendered initial notes
or terminate the exchange offer and not accept for exchange any
tendered initial notes not already accepted if any conditions
set forth under Conditions to the Exchange
Offer have not been satisfied or waived by us or do not
comply, in whole or in part, with any applicable law.
If you tender your initial notes, you will not be
required to pay brokerage commissions or fees or, subject to the
instructions in the letter of transmittal, transfer taxes with
respect to the exchange of the initial notes.
28
Expiration Date; Extensions; Termination;
Amendments
The exchange offer will expire at 5:00 p.m., New
York City time,
on ,
2004, unless we extend it. We expressly reserve the right to
extend the exchange offer on a daily basis or for such period or
periods as we may determine in our sole discretion from time to
time by giving oral, confirmed in writing, or written notice to
the exchange agent and by making a public announcement by press
release to the Dow Jones News Service prior to 9:00 a.m., New
York City time, on the first business day following the
previously scheduled expiration date. During any extension of
the exchange offer, all initial notes previously tendered, not
validly withdrawn and not accepted for exchange will remain
subject to the exchange offer and may be accepted for exchange
by us.
To the extent we are legally permitted to do so,
we expressly reserve the absolute right, in our sole discretion,
but are not required, to:
Any waiver or amendment to the exchange offer
will apply to all initial notes tendered, regardless of when or
in what order the initial notes were tendered. If we make a
material change in the terms of the exchange offer or if we
waive a material condition of the exchange offer, we will
disseminate additional exchange offer materials, and we will
extend the exchange offer to the extent required by law.
We expressly reserve the right, in our sole
discretion, to terminate the exchange offer if any of the
conditions set forth under Conditions of the
Exchange Offer exist. Any such termination will be
followed promptly by a public announcement. In the event we
terminate the exchange offer, we will give immediate notice to
the exchange agent, and all initial notes previously tendered
and not accepted for exchange will be returned promptly to the
tendering holders.
In the event that the exchange offer is withdrawn
or otherwise not completed, the exchange notes will not be given
to holders of initial notes who have validly tendered their
initial notes. We will return any initial notes that have been
tendered for exchange but that are not exchanged for any reason
to their holder without cost to the holder, or, in the case of
the initial notes tendered by book-entry transfer into the
exchange agents account at a book-entry transfer facility
under the procedure set forth under Procedures
for Tendering Initial Notes Book-Entry
Transfer, such initial notes will be credited to the
account maintained at such book-entry transfer facility from
which such initial notes were delivered, unless otherwise
requested by such holder under Special
Delivery Instructions in the letter of transmittal,
promptly following the exchange date or the termination of the
exchange offer.
Resale of the Exchange Notes
Based on interpretations of the SEC set forth in
no-action letters issued to third parties, we believe that the
exchange notes issued under the exchange offer in exchange for
the initial notes may be offered for resale, resold and
otherwise transferred by you without compliance with the
registration and prospectus delivery provisions of the
Securities Act, if:
If you tender initial notes in the exchange offer
with the intention of participating in any manner in a
distribution of the exchange notes:
29
Unless an exemption from registration is
otherwise available, any security holder intending to distribute
the exchange notes should be covered by an effective
registration statement under the Securities Act containing the
selling security holders information required by
Item 507 of Regulation S-K. This prospectus may be
used for an offer to resell, a resale or other re-transfer of
the exchange notes only as specifically set forth in the section
captioned Plan of Distribution. Only broker-dealers
that acquired the exchange notes as a result of market-making
activities or other trading activities may participate in the
exchange offer. Each broker-dealer that receives the exchange
notes for its own account in exchange for initial notes, where
such initial notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. Please read the section
captioned Plan of Distribution for more details
regarding the transfer of the exchange notes.
Acceptance of Initial Notes for
Exchange
We will accept for exchange initial notes validly
tendered pursuant to the exchange offer, or defectively
tendered, if such defect has been waived by us, after the later
of:
Except as specified above, we will not accept
initial notes for exchange subsequent to the expiration date of
the exchange offer. Tenders of initial notes will be accepted
only in aggregate principal amounts at maturity equal to $1,000
or integral multiples thereof.
We expressly reserve the right, in our sole
discretion, to:
In all cases, the exchange notes will be issued
only after timely receipt by the exchange agent of certificates
representing initial notes, or confirmation of book-entry
transfer, a properly completed and duly executed letter of
transmittal, or a manually signed facsimile thereof, and any
other required documents. For purposes of the exchange offer, we
will be deemed to have accepted for exchange validly tendered
initial notes, or defectively tendered initial notes with
respect to which we have waived such defect, if, as and when we
give oral, confirmed in writing, or written notice to the
exchange agent. Promptly after the expiration date, we will
deposit the exchange notes with the exchange agent, who will act
as agent for the tendering holders for the purpose of receiving
the exchange notes and transmitting them to the holders. The
exchange agent will deliver the exchange notes to holders of
initial notes accepted for exchange after the exchange agent
receives the exchange notes.
If, for any reason, we delay acceptance for
exchange of validly tendered initial notes or we are unable to
accept for exchange validly tendered initial notes, then the
exchange agent may, nevertheless, on its behalf, retain tendered
initial notes, without prejudice to our rights described in this
prospectus under the captions Expiration Date;
Extensions; Termination; Amendments,
Conditions of the Exchange Offer and
Withdrawal of Tenders, subject to
Rule 14e-1 under the Securities Exchange Act of 1934, which
requires that an offer or pay the consideration offered or
return the securities deposited by or on behalf of the holders
thereof promptly after the termination or withdrawal of a tender
offer.
30
If any tendered initial notes are not accepted
for exchange for any reason, or if certificates are submitted
evidencing more initial notes than those that are tendered,
certificates evidencing initial notes that are not exchanged
will be returned, without expense, to the tendering holder, or,
in the case of the initial notes tendered by book-entry transfer
into the exchange agents account at a book-entry transfer
facility under the procedure set forth under
Procedures for Tendering Initial Notes
Book-Entry Transfer, such initial notes will be credited
to the account maintained at such book-entry transfer facility
from which such initial notes were delivered, unless otherwise
requested by such holder under Special
Delivery Instructions in the letter of transmittal,
promptly following the exchange date or the termination of the
exchange offer.
Tendering holders of initial notes exchanged in
the exchange offer will not be obligated to pay brokerage
commissions or transfer taxes with respect to the exchange of
their initial notes other than as described under the caption
Transfer Taxes or as set forth in the
letter of transmittal. We will pay all other charges and
expenses in connection with the exchange offer.
Procedures for Tendering Initial
Notes
Any beneficial owner whose initial notes are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee or held through a book-entry
transfer facility and who wishes to tender initial notes should
contact such registered holder promptly and instruct such
registered holder to tender initial notes on such beneficial
owners behalf.
Tender of
Initial Notes Held Through The Depository Trust
Company
The exchange agent and The Depository Trust
Company, or DTC, have confirmed that the exchange offer is
eligible for the DTC automated tender offer program.
Accordingly, DTC participants may electronically transmit their
acceptance of the exchange offer by causing DTC to transfer
initial notes to the exchange agent in accordance with
DTCs automated tender offer program procedures for
transfer. DTC will then send an agents message to the
exchange agent.
The term agents message means a
message transmitted by DTC and received by the exchange agent
that forms part of the book-entry confirmation. The agents
message states that DTC has received an express acknowledgment
from the participant in DTC tendering initial notes that are the
subject of that book-entry confirmation, that the participant
has received and agrees to be bound by the terms of the letter
of transmittal, and that we may enforce such agreement against
such participant. In the case of an agents message
relating to guaranteed delivery, the term means a message
transmitted by DTC and received by the exchange agent, which
states that DTC has received an express acknowledgment from the
participant in DTC tendering initial notes that they have
received and agree to be bound by the notice of guaranteed
delivery.
Tender of
Initial Notes Held in Physical Form
For a holder to validly tender initial notes held
in physical form:
Letters of transmittal and initial notes
should be sent only to the exchange agent, and not to us or to
any book-entry transfer facility.
31
The method of delivery of initial notes,
letters of transmittal and all other required documents to the
exchange agent is at the election and risk of the holder
tendering initial notes. Delivery of such documents will be
deemed made only when actually received by the exchange agent.
If such delivery is by mail, we suggest that the holder use
properly insured, registered mail with return receipt requested,
and that the mailing be made sufficiently in advance of the
expiration date of the exchange offer to permit delivery to the
exchange agent prior to such date. No alternative, conditional
or contingent tenders of initial notes will be
accepted.
Signature
Guarantees
A signature on a letter of transmittal or a
notice of withdrawal must be guaranteed by an eligible
institution. Eligible institutions include banks, brokers,
dealers, municipal securities dealers, municipal securities
brokers, government securities dealers, government securities
brokers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and
savings associations. The signature need not be guaranteed by an
eligible institution if the initial notes are tendered:
If the letter of transmittal is signed by a
person other than the registered holder of any initial notes,
the initial notes must be endorsed or accompanied by a properly
completed bond power. The bond power must be signed by the
registered holder as the registered holders name appears
on the initial notes and an eligible institution must guarantee
the signature on the bond power.
If the letter of transmittal or any initial notes
or bond powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative
capacity, these persons should so indicate when signing. Unless
we waive this requirement, they should also submit evidence
satisfactory to us of their authority to deliver the letter of
transmittal.
Book-Entry
Transfer
The exchange agent will seek to establish a new
account or utilize an existing account with respect to the
initial notes at DTC promptly after the date of this prospectus.
Any financial institution that is a participant in the
book-entry transfer facility system and whose name appears on a
security position listing it as the owner of the initial notes
may make book-entry delivery of initial notes by causing the
book-entry transfer facility to transfer such initial notes into
the exchange agents account.
However, although delivery
of initial notes may be effected through book-entry transfer
into the exchange agents account at a book-entry transfer
facility, a properly completed and validly executed letter of
transmittal, or a manually signed facsimile thereof, must be
received by the exchange agent at its address set forth in this
prospectus on or prior to the expiration date of the exchange
offer, or else the guaranteed delivery procedures described
below must be complied with.
The confirmation of a
book-entry transfer of initial notes into the exchange
agents account at a book-entry transfer facility is
referred to in this prospectus as a book-entry
confirmation. Delivery of documents to the book-entry
transfer facility in accordance with that book-entry transfer
facilitys procedures does not constitute delivery to the
exchange agent.
Guaranteed
Delivery
If you wish to tender your initial notes and:
32
you may tender your initial notes if:
Other
Matters
Exchange notes will be issued in exchange for
initial notes accepted for exchange only after timely receipt by
the exchange agent of:
All questions as to the form of all documents and
the validity, including time of receipt, and acceptance of all
tenders of initial notes will be determined by us, in our sole
discretion, the determination of which shall be final and
binding. Alternative, conditional or contingent tenders of
initial notes will not be considered valid. We reserve the
absolute right to reject any or all tenders of initial notes
that are not in proper form or the acceptance of which, in our
opinion, would be unlawful. We also reserve the right to waive
any defects, irregularities or conditions of tender as to any
particular initial notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in
the letter of transmittal, will be final and binding on all
parties.
Unless waived by us, any defect or irregularity
in connection with tenders of initial notes must be cured within
the time that we determine. Tenders of initial notes will not be
deemed to have been made until all defects and irregularities
have been waived by us or cured. Neither us, the exchange agent,
nor any other person will be under any duty to give notice of
any defects or irregularities in tenders of initial notes, or
will incur any liability to holders for failure to give any such
notice.
33
By signing or agreeing to be bound by the letter
of transmittal, you will represent to us that, among other
things:
Withdrawal of Tenders
Except as otherwise provided in this prospectus,
you may withdraw your tender of initial notes at any time prior
to the expiration date of the exchange offer.
For a withdrawal to be effective:
Any notice of withdrawal must:
If certificates for the initial notes have been
delivered or otherwise identified to the exchange agent, then,
prior to the release of those certificates, the withdrawing
holder must also submit:
If the initial notes have been tendered pursuant
to the procedure for book-entry transfer described above, any
notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn initial notes
and otherwise comply with the procedures of DTC.
We will determine all questions as to the
validity, form and eligibility, including time of receipt, of
notices of withdrawal, and our determination shall be final and
binding on all parties. We will deem any initial notes so
withdrawn not to have been validly tendered for exchange for
purposes of the exchange offer.
We will return any initial notes that have been
tendered for exchange but that are not exchanged for any reason
to their holder without cost to the holder. In the case of
initial notes tendered by book-entry transfer into the exchange
agents account at DTC, according to the procedures
described above, those initial notes will be credited to an
account maintained with DTC for the initial notes. This return
or crediting will take place as soon as practicable after
withdrawal, rejection of tender or termination of the exchange
offer. You may re-tender properly withdrawn initial notes by
following one of the procedures described under
34
Conditions to the Exchange Offer
Despite any other term of the exchange offer, we
will not be required to accept for exchange any initial notes
and we may terminate or amend the exchange offer as provided in
this prospectus before accepting any initial notes for exchange
if in our reasonable judgment:
We will not be obligated to accept for exchange
the initial notes of any holder that has not made to us:
We expressly reserve the right, at any time or at
various times, to extend the period of time during which the
exchange offer is open. Consequently, we may delay acceptance of
any initial notes by giving oral or written notice of an
extension to their holders. During an extension, all initial
notes previously tendered will remain subject to the exchange
offer, and we may accept them for exchange. We will return any
initial notes that we do not accept for exchange for any reason
without expense to their tendering holder as promptly as
practicable after the expiration or termination of the exchange
offer.
We expressly reserve the right to amend or
terminate the exchange offer and to reject for exchange any
initial notes not previously accepted for exchange, upon the
occurrence of any of the conditions of the exchange offer
specified above. By public announcement we will give oral or
written notice of any extension, amendment, non-acceptance or
termination to the holders of the initial notes as promptly as
practicable. If we amend the exchange offer in a manner that we
consider material, we will disclose the amendment in the manner
required by applicable law.
These conditions are solely for our benefit and
we may assert them regardless of the circumstances that may give
rise to them or waive them in whole or in part at any time or at
various times in our sole discretion. If we fail at any time to
exercise any of the foregoing rights, this failure will not
constitute a waiver of that right. Each of these rights will be
deemed an ongoing right that we may assert at any time or at
various times.
We will not accept for exchange any initial notes
tendered, and will not issue the exchange notes in exchange for
any initial notes, if at any time a stop order is threatened or
in effect with respect to the registration statement of which
this prospectus constitutes a part or the qualification of the
indenture under the Trust Indenture Act of 1939.
35
Transfer Taxes
We will pay all transfer taxes, if any,
applicable to the transfer and exchange of initial notes
pursuant to the exchange offer. The tendering holder, however,
will be required to pay any transfer taxes, whether imposed on
the record holder or any other person, if:
Consequences of Failure to Exchange
If you do not exchange your initial notes for the
exchange notes in the exchange offer, you will remain subject to
restrictions on transfer of the initial notes:
In general, you may not offer or sell the initial
notes unless they are registered under the Securities Act, or if
the offer or sale is exempt from registration under the
Securities Act and applicable state securities laws. Except as
required by the registration rights agreements relating to the
initial notes, we do not intend to register resales of the
initial notes under the Securities Act. Based on interpretations
of the SEC, you may offer for resale, resell or otherwise
transfer the exchange notes issued in the exchange offer without
compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that:
If you tender initial notes in the exchange offer
for the purpose of participating in a distribution of the
exchange notes:
36
Exchange Agent
The Bank of New York Trust Company, N.A. has been
appointed as exchange agent for the exchange offer. You should
direct questions and requests for assistance, requests for
additional copies of this prospectus, the letter of transmittal
or any other documents to the exchange agent. You should send
certificates for initial notes, letters of transmittal and any
other required documents to the exchange agent addressed as
follows:
Delivery of the letter of transmittal to an
address other than as shown above or transmission via facsimile
other than as set forth above does not constitute a valid
delivery of the letter of transmittal.
Other
Participation in the exchange offer is voluntary,
and you should carefully consider whether to exchange the
initial notes for the exchange notes. We urge you to consult
your financial and tax advisors in making your own decision on
what action to take.
We may in the future seek to acquire untendered
initial notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise,
on terms that may differ from the terms of the exchange offer.
We have no present plans to acquire any initial notes that are
not tendered in the exchange offer or to file a registration
statement to permit resales of any untendered initial notes.
37
CAPITALIZATION
The following table presents our capitalization
as of March 31, 2004. Our capitalization is presented:
You should read this table in conjunction with
Summary The Transactions,
Unaudited Pro Forma Condensed Consolidated Financial
Information, Managements Discussion and
Analysis of Financial Condition and Results of Operations
and the consolidated financial statements and related notes that
are included in this prospectus.
38
39
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
On March 12, 2004, Popcorn Merger Corp., a
Delaware company and newly formed subsidiary of Madison
Dearborn, entered into a merger agreement with Cinemark, Inc.,
pursuant to which Popcorn Merger Corp. merged on April 2,
2004 with and into Cinemark, Inc. with Cinemark, Inc. continuing
as the surviving corporation. Simultaneously with the merger,
the equity sponsor purchased shares of common stock of Cinemark,
Inc. Lee Roy Mitchell, the Mitchell Special Trust and certain
members of our management which were stockholders of Cinemark,
Inc., among others, received cash consideration in the merger
pursuant to the merger agreement. In addition, after the merger
the Mitchell investors and the management investors retained a
portion of their holdings of shares of Cinemark, Inc. After the
closing of the Recapitalization and the related financing
transactions, all of the capital stock of Cinemark, Inc. is
owned by the equity sponsor, the Mitchell investors and the
management investors. The equity sponsor is our controlling
stockholder.
We derived the following unaudited pro forma
condensed consolidated data by applying pro forma adjustments to
our historical consolidated financial statements included
elsewhere in this offering memorandum. The unaudited pro forma
condensed consolidated income statement data for the year ended
December 31, 2003 and for the three months ended
March 31, 2004 give effect to the Transactions, including
the offering of the notes and the application of the proceeds,
as if they had occurred on January 1, 2003. The unaudited
pro forma condensed consolidated balance sheet data gives effect
to the Transactions, including the offering of the notes and the
application of the proceeds, as if they had occurred on
March 31, 2004. We describe the assumptions underlying the
pro forma adjustments in the accompanying notes, which should be
read in conjunction with these unaudited pro forma condensed
consolidated financial statements.
The pro forma adjustments related to the
Recapitalization are based on actual adjustments made upon the
closing date of the Recapitalization.
Unaudited pro forma condensed consolidated
financial information gives effect to:
The unaudited pro forma condensed consolidated
financial information should not be considered indicative of
actual results that would have been achieved had the
Transactions been consummated on the date or for the periods
indicated and do not purport to indicate consolidated balance
sheet data or income statement data or other financial data as
of any future date or for any future period.
The unaudited pro forma condensed consolidated
financial statements should be read in conjunction with the
information contained in Selected Historical Consolidated
Financial Information, Managements Discussion
and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and
accompanying notes appearing elsewhere in this offering
memorandum.
40
CINEMARK, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
(1) See notes to the Unaudited Pro Forma
Condensed Consolidated Financial Information
41
CINEMARK, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
INCOME STATEMENT
(1) See notes to the Unaudited Pro Forma
Condensed Consolidated Financial Information
42
CINEMARK, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
INCOME STATEMENT
(1) See notes to the Unaudited Pro Forma
Condensed Consolidated Financial Information
43
CINEMARK, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
(a) Reflects the sources and uses of funds
in connection with the Recapitalization as summarized below.
44
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED
(e) Represents change in interest expense
arising from:
(f) Represents change in amortization of
debt issue costs:
45
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND
OPERATING DATA
The following tables set forth our selected
consolidated financial and operating data as of and for the
periods indicated. Our historical financial data for each of the
years ended December 31, 2003 is derived from our
consolidated audited financial statements. Our historical
financial data for the three months ended March 31, 2003
and 2004 is derived from our unaudited interim financial
statements which, in the opinion of management, contain all
adjustments necessary for a fair presentation of this
information. The historical financial data for the three months
ended March 31, 2004 is not necessarily indicative of the
results expected for the full year. Certain reclassifications
have been made to the 1999, 2000, 2001, 2002 and 2003 financial
statements to conform to the 2004 presentation. You should read
the selected consolidated financial and operating data set forth
below in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations and
with our consolidated financial statements and unaudited interim
financial statements and related notes appearing elsewhere in
this prospectus.
46
47
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
The following discussion and analysis should
be read in conjunction with our consolidated financial
statements and related notes and schedules included elsewhere in
this prospectus.
Revenues and Expenses
We generate revenues primarily from box office
receipts and concession sales with additional revenues from
screen advertising sales and other ancillary revenue streams,
such as vendor marketing programs, pay phones, ATM machines and
electronic video games located in some of our theatres. Our
revenues are affected by changes in attendance and average
admissions and concession revenues per patron. Attendance is
primarily affected by the quality and quantity of films released
by motion picture studios. Film releases during the first
quarter of 2004 included the blockbuster
The Passion of the
Christ,
which exceeded $300 million in U.S. box office
receipts. Films released and scheduled for release during the
remainder of 2004 include highly anticipated sequels such as
Shrek 2
,
Harry Potter and the Prisoner of Azkaban
and
Spider-Man 2
as well as other anticipated
blockbusters such as
Van Helsing
and
The Day After
Tomorrow
.
Film rental costs are variable in nature and
fluctuate with our admissions revenues. Film rental costs as a
percentage of revenues are generally higher for periods in which
successful films are released. Film rental costs can also vary
based on the length of a films run. Generally, a film that
runs for a longer period results in lower film rental costs as a
percentage of revenues. Film rental rules are negotiated on a
film-by-film and theatre-by-theatre basis. Advertising costs
borne by us, which are expensed as incurred, are primarily fixed
at the theatre level as daily movie directories placed in
newspapers represent the largest component of advertising costs.
The monthly cost of these ads is based on, among other things,
the size of the directory and the frequency and size of the
newspapers circulation. The internet is quickly becoming
the primary way to check movie times, replacing the traditional
newspaper advertisements. Over time, the internet may allow us
to reduce our advertising costs associated with newspaper
directory advertisements.
Concession supplies expense is variable in nature
and fluctuates with our concession revenues. We purchase
concession supplies to replace units sold. We negotiate prices
for concession supplies directly with concession vendors and
manufacturers to obtain bulk rates.
Although salaries and wages include a fixed cost
component (i.e. the minimum staffing costs to operate a theatre
facility during non-peak periods), salaries and wages move in
relation to revenues as theatre staffing is adjusted to handle
changes in attendance.
Facility lease expense is primarily a fixed cost
at the theatre level as our facility leases generally require a
fixed monthly minimum rent payment. Certain leases are also
subject to additional percentage rent if a target annual revenue
level is achieved. Facility lease expense as a percentage of
revenues is also affected by the number of leased versus fee
owned facilities.
Utilities and other costs include certain costs
that are fixed such as property taxes, certain costs which are
variable such as liability insurance, and certain costs that
possess both fixed and variable components such as utilities,
repairs and maintenance and security services.
Critical Accounting Policies
We prepare our consolidated financial statements
in conformity with accounting principles generally accepted in
the U.S. As such, we are required to make certain estimates,
judgments and assumptions that we believe are reasonable based
upon the information available. These estimates, judgments and
assumptions affect the reported amounts of assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the periods
presented. The significant accounting policies which we
48
Revenue and
Expense Recognition
Revenues are recognized when admissions and
concession sales are received at the box office and screen
advertising is shown at the theatres. We record proceeds from
the sale of gift cards and other advanced sale-type certificates
in current liabilities and recognize admissions and concession
revenue when a holder redeems a gift card or other advanced
sale-type certificate. We recognize unredeemed gift cards and
other advanced sale-type certificates as other revenue only
after such a period of time indicates, based on our historical
experience, the likelihood of redemption is remote.
Film rental costs are accrued based on the
applicable box office receipts and either the mutually agreed
upon firm terms or estimates of the final settlement depending
on the film licensing arrangement. Estimates are made based on
the expected success of a film over the length of its run. The
success of a film can typically be determined a few weeks after
a film is released when initial box office performance of the
film is known. Accordingly, final settlements typically
approximate estimates since box office receipts are known at the
time the estimate is made and the expected success of a film
over the length of its run can typically be estimated early in
the films run. The final film settlement amount is
negotiated at the conclusion of the films run based upon
how a film actually performs. If actual settlements are higher
than those estimated, additional film rental costs are recorded
at that time. When participating in co-operative advertising, we
share the total advertising costs to promote a film with the
film distributor on a negotiated basis and our advertising
expenses are presented net of the portion of advertising costs
reimbursed to us. We recognize advertising costs and any sharing
arrangements with film distributors in the same accounting
period. Advertising costs borne by us are expensed as incurred.
Asset
Impairment Loss
We review long-lived assets for impairment on a
quarterly basis or whenever events or changes in circumstances
indicate the carrying amount of the assets may not be fully
recoverable. We assess many factors including the following to
determine whether to impair individual theatre assets:
Assets are evaluated for impairment on an
individual theatre basis or a group of theatres that share the
same marketplace, which we believe is the lowest applicable
level for which there are identifiable cash flows. The
evaluation is based on the estimated undiscounted cash flows
from continuing use through the remainder of the theatres
useful life. The remainder of the useful life correlates with
the available remaining lease period for leased properties and a
period of twenty years for fee owned properties. If the
estimated undiscounted cash flows are not sufficient to recover
an assets carrying amount, we then compare the
49
Income
Taxes
We use an asset and liability approach to
financial accounting and reporting for income taxes. Deferred
income taxes are provided when tax laws and financial accounting
standards differ with respect to the amount of income for a year
and the bases of assets and liabilities. A valuation allowance
is recorded to reduce the carrying amount of deferred tax assets
unless it is more likely than not that such assets will be
realized. Income taxes are provided on unremitted earnings from
foreign subsidiaries unless such earnings are expected to be
indefinitely reinvested. Income taxes have also been provided
for potential tax assessments and the related tax accruals are
in the condensed consolidated balance sheets. To the extent tax
accruals differ from actual payments or assessments, the
accruals will be adjusted.
50
Results of Operations
Set forth below is a summary of operating
revenues and expenses, certain income statement items expressed
as a percentage of revenues, average screen count and revenues
per average screen for the three most recent years ended
December 31, 2001, 2002 and 2003 and for the three months
ended March 31, 2003 and 2004.
51
Comparison of
Three Months Ended March 31, 2004 and March 31,
2003
Revenues.
Revenues
for the three month period ended March 31, 2004 increased
to $235.1 million from $202.5 million for the three
month period ended March 31, 2003, representing a 16.1%
increase. Attendance increased 10.9% from 38.0 million
patrons for the first quarter of 2003 to 42.1 million
patrons for the first quarter of 2004. The increase in
attendance and revenues for the first quarter of 2004 is
primarily due to quality film product, including the first
quarter release of the blockbuster
The Passion of the
Christ,
which has exceeded the $300 million level in
U.S. box office receipts. Our average ticket price was $3.55 for
the first quarter of 2004 compared to $3.36 for the first
quarter of 2003, an increase of 5.7%. Concession revenues per
patron was $1.74 for the first quarter of 2004 compared to $1.68
for the first quarter of 2003, an increase of 3.4%. Revenues per
screen increased 12.1% to $75,417 for the first quarter of 2004
from $67,295 for the first quarter of 2003.
Cost of Operations.
Cost of operations, as a percentage of
revenues, decreased to 73.6% for the first quarter of 2004 from
75.3% for the first quarter of 2003. The decrease, as a
percentage of revenues, was primarily due to the 16.1% increase
in revenues and our ability to effectively control our theatre
operating costs, many of which are primarily fixed in nature,
such as salaries and wages, facility lease expense and utilities
and other costs.
Film rentals and advertising costs increased to
52.8% of admissions revenues for the first quarter of 2004 from
52.4% for the first quarter of 2003, primarily related to
stronger film product during the first quarter of 2004.
Concession supplies increased to 16.5% of concession revenues
for the first quarter of 2004 from 15.3% for the first quarter
of 2003, primarily related to increased costs on certain
concession products.
Salaries and wages increased to
$24.3 million for the first quarter of 2004 from
$22.3 million for the first quarter of 2003 due to the
increase in attendance. Facility lease expense increased to
$31.1 million for the first quarter of 2004 from
$28.5 million for the first quarter of 2003 primarily due
to new theatre openings and increased percentage rent expense.
Utilities and other costs increased to $26.6 million for
the first quarter of 2004 from $25.1 million for the first
quarter of 2003 primarily due to increased utility rates in
certain regions in which we operate.
General and Administrative Expenses.
General and administrative expenses
increased to $11.9 million for the first quarter of 2004
from $9.4 million for the first quarter of 2003. The
increase was due to a $1.2 million increase in corporate
salaries and benefits including incentive bonus expense, a $0.8
million increase in international overhead expenses, a
$0.3 million increase in professional fees and a
$0.2 million increase in credit card and bank service
charges.
Depreciation and Amortization.
Depreciation and amortization expense
was $16.9 million for the first quarter of 2004 compared to
$16.0 million for the first quarter of 2003. The increase
is primarily due to an increase in our asset base since the
first quarter of 2003 due to new theatre development.
Asset Impairment Loss.
During the first quarter of 2004, we
wrote down the long-lived assets of one theatre located in the
U.S. to estimated fair value, which resulted in an asset
impairment charge of $1.0 million.
Interest Expense.
Interest costs incurred, which
includes amortization of debt issue costs, was
$12.6 million for the first quarter of 2004 compared to
$13.9 million for the first quarter of 2003.
Loss on Early Retirement of Debt.
During the first quarter of 2003, we
recorded a loss on early retirement of debt of $1.6 million
which represented the write-off of unamortized debt issue costs
associated with the retirement of certain debt agreements,
including our then existing credit facility.
Income Taxes.
Income
tax expense of $7.9 million was recorded for the first
quarter of 2004 compared to income tax expense of
$3.9 million recorded for the first quarter of 2003. Our
effective tax rate for the first quarter of 2004 was 40.8%
compared to 40.7% for the first quarter of 2003.
Loss from Discontinued Operations.
We recorded a loss from discontinued
operations, net of income tax benefit, of $1.8 million
during the first quarter of 2004 and $0.3 million during
the first quarter of 2003.
52
Comparison of
Years Ended December 31, 2003 and December 31,
2002
Revenues.
Revenues
for 2003 increased 1.6% to $950.9 million from
$935.9 million in 2002. The increase in revenues is
attributable to a 0.6% increase in attendance and a 2.4%
increase in concession revenues per patron. Attendance for 2003
was 173.1 million compared to 172.1 million for 2002.
Concession revenues per patron were $1.74 for 2003 compared to
$1.70 for 2002. The increase in concession revenues per patron
is primarily a result of the successful implementation of a
domestic concession price increase during the fourth quarter of
2002. Average ticket prices for 2003 were consistent with 2002.
Revenues per average screen increased 0.6% to $314,178 for 2003
from $312,183 for 2002.
Cost of Operations.
Cost of operations, as a percentage of
revenues, increased to 73.8% in 2003 from 73.4% in 2002. Film
rentals and advertising increased to 54.4% of admissions
revenues for 2003 from 53.9% for 2002. The increase is due to
increased film rental costs and promotional activities during
2003. Facility lease expense increased to 12.6% of revenues for
2003 from 12.4% for 2002. Utilities and other costs increased to
11.7% of revenues for 2003 from 11.0% for 2002, primarily due to
increased utility costs, insurance and repairs and maintenance
expense. Concession supplies decreased to 16.5% of concession
revenues for 2003 from 17.3% for 2002, primarily as a result of
the successful implementation of a domestic concession price
increase during the fourth quarter of 2002. Salaries and wages
decreased to 10.2% of revenues for 2003 from 10.3% for 2002.
General and Administrative Expenses.
General and administrative expenses,
as a percentage of revenues, decreased to 4.7% in 2003 from 5.1%
in 2002. General and administrative expenses decreased to
$44.3 million for 2003 from $48.0 million for 2002.
The decrease is primarily related to the write-off of
$3.1 million of legal, accounting and other professional
fees and costs in 2002, associated with our proposed initial
public offering which was subsequently postponed due to
unfavorable market conditions.
Depreciation and Amortization.
Depreciation and amortization
decreased to $65.1 million in 2003 from $66.6 million
in 2002. Depreciation and amortization as a percentage of
revenues decreased to 6.8% in 2003 from 7.1% in 2002.
Asset Impairment Loss.
We recorded asset impairment charges
on assets held and used of $5.0 million in 2003 and
$3.9 million in 2002, as follows:
Gain/loss on Sale of Assets and Other.
We recorded a gain on sale of assets
and other of $1.2 million in 2003 compared to a loss on
sale of assets and other of $0.5 million in 2002.
Interest Expense.
Interest costs incurred, including
amortization of debt issue cost, decreased 6.2% to
$54.2 million in 2003 from $57.8 million in 2002. The
decrease in interest costs incurred during 2003 was primarily
due to a decrease in average debt outstanding during the year
under our long-term debt facilities.
53
Foreign Currency Exchange Loss.
We recorded a foreign currency
exchange loss of $0.2 million in 2003 compared to a foreign
currency exchange loss of $5.1 million in 2002. The loss
recorded during 2002 was due to the translation of Cinemark
Brasil S.A.s assets and liabilities denominated in other
than local currency and the devaluation of the real during 2002.
Loss on Early Retirement of Debt.
We recorded a loss on early retirement
of debt of $7.5 million during 2003 that included a
$1.6 million loss resulting from the write-off of
unamortized debt issue costs associated with the retirement of
our then existing credit facility and the Cinema Properties
Facility that occurred during the first quarter of 2003, a
$5.6 million loss resulting from the write-off of
unamortized debt issue costs, unamortized bond premiums/
discounts and tender offer repurchase costs associated with the
tender offer to repurchase and subsequent retirement of
approximately $233 million principal amount of outstanding
9 5/8% Senior Subordinated Notes due 2008, or the
9 5/8% senior subordinated notes, that occurred during the
second quarter of 2003 and a $0.3 million loss resulting
from the write-off of unamortized debt issue costs, unamortized
bond premiums/discounts and other fees associated with the
redemption of the remaining $42 million principal amount of
the 9 5/8% senior subordinated notes that occurred during
the third quarter of 2003.
Income Taxes.
Income
tax expense of $25.2 million was recorded in 2003 compared
to income tax expense of $29.2 million in 2002. Our
effective tax rate for 2003 was 34.6% as compared to 41.9% in
2002. The change in the effective tax rate is primarily due to a
decrease in foreign losses not offset by a valuation allowance.
Loss from Discontinued
Operations.
We recorded a loss from
discontinued operations, net of taxes, of $2.9 million for
2003 and $1.7 million for 2002, both of which represent the
results of operations for our two United Kingdom theatres for
the respective periods. Included in the loss recorded in 2003 is
an asset impairment loss of $2.5 million recorded to write
down one of these theatres to estimated fair value.
Comparison of
Years Ended December 31, 2002 and December 31,
2001
Revenues.
Revenues
in 2002 increased to $935.9 million from
$853.7 million in 2001, a 9.6% increase. The increase in
revenues is primarily attributable to an 11.8% increase in
attendance resulting from stronger film product in 2002.
Revenues per average screen increased 8.0% to $312,183 for 2002
from $288,961 for 2001.
Cost of Operations.
Cost of operations, as a percentage of
revenues, decreased to 73.4% in 2002 from 75.8% in 2001. The
decrease is primarily related to the 9.6% increase in revenues
and our ability to effectively control our theatre operating
costs (some of which are of a fixed nature). The decrease as a
percentage of revenues resulted from a decrease in facility
lease expense as a percentage of revenues to 12.4% in 2002 from
13.4% in 2001, a decrease in utilities and other costs as a
percentage of revenues to 11.0% in 2002 from 11.9% in 2001, a
decrease in salaries and wages as a percentage of revenues to
10.3% in 2002 from 10.6% in 2001, a decrease in concession
supplies as a percentage of concession revenues to 17.3% in 2002
from 17.4% in 2001, partially offset by an increase in film
rentals and advertising as a percentage of admissions revenues
to 53.9% in 2002 from 53.7% in 2001 as a result of stronger film
product in 2002.
General and Administrative Expenses.
General and administrative expenses,
as a percentage of revenues, increased to 5.1% in 2002 from 5.0%
in 2001. General and administrative expenses increased to
$48.0 million for 2002 from $42.6 million for 2001.
The increase is primarily related to the write-off of
$3.1 million of legal, accounting and other professional
fees and costs associated with our proposed initial public
offering which was subsequently postponed due to unfavorable
market conditions.
Depreciation and Amortization.
Depreciation and amortization
decreased to $66.6 million in 2002 from $73.1 million
in 2001. Depreciation and amortization as a percentage of
revenues decreased to 7.1% in 2002 from 8.6% in 2001. The
decrease is partially related to the January 1, 2002
adoption of Statement of Financial Accounting Standards
(SFAS) No. 142 which required that goodwill and
other intangible assets with indefinite useful lives no longer
be amortized. The decrease is also related to a reduction in the
54
Asset Impairment Loss.
We recorded asset impairment charges
on assets held and used of $3.9 million in 2002 and
$20.7 million in 2001, as follows:
Loss on Sale of Assets and Other.
We recorded a loss on sale of assets
and other of $0.5 million in 2002 and $12.4 million in
2001. Included in loss on sale of assets and other in 2001 is a
charge of $7.2 million to write down one property to be
disposed of in the U.S. to fair value and a charge of $1.5
million to write down one property to be disposed of in
Argentina to fair value.
Interest Expense.
Interest costs incurred, including
amortization of debt issue cost, decreased 18.5% to
$57.8 million in 2002 from $70.9 million in 2001. The
decrease in interest costs incurred during 2002 was due
principally to a decrease in average debt outstanding under our
then existing credit facility and the lower interest rates on
our variable rate debt facilities.
Income Taxes (Benefit).
Income tax expense of
$29.2 million was recorded in 2002 as compared to an income
tax benefit of $14.1 million in 2001. Our effective tax
rate for 2002 was 41.9% as compared to 80.3% in 2001. The change
in the effective tax rate is mainly due to the recognition of
the Mexico deferred tax asset in 2001.
Loss from Discontinued
Operations.
We recorded a loss from
discontinued operations, net of taxes, of $1.7 million for
2002 and $0.6 million for 2001, both of which represent the
results of operations for our United Kingdom theatres for the
respective periods.
Liquidity and Capital Resources
Operating
Activities.
We primarily collect our
revenues in cash, mainly through box office receipts and the
sale of concession supplies. We are expanding the number of
theatres that provide the patron a choice of using a credit
card, in place of cash, which we convert to cash in
approximately three to four days. Because our revenues are
received in cash prior to the payment of related expenses, we
have an operating float and historically have not
required traditional working capital financing. We typically
operate with a negative working capital position for our ongoing
theatre operations throughout the year, primarily because of the
lack of significant inventory and accounts receivable. Cash
provided by (used for) operating activities, as reflected in the
consolidated statement of cash flows, amounted to
$87.1 million, $150.1 million and $135.5 million
in 2001, 2002 and 2003, respectively, and $10.0 million and
($15.6) million for the three months ended March 31,
2004 and March 31, 2003, respectively. The increase in cash
provided by operating activities in 2004 is primarily due to the
timing of payment of accounts payable and accrued expenses.
Investing
Activities.
Our investing activities
have been principally related to the development and acquisition
of additional theatres. New theatre openings and acquisitions
historically have been financed with internally generated cash
and by debt financing, including borrowings under our senior
secured credit facility. Cash used for investing activities, as
reflected in the consolidated statements of cash flows, amounted
to $33.8 million, $34.7 million and $47.2 million
in 2001, 2002 and 2003, respectively, and $16.2 million and
$7.1 million for the three months ended March 31, 2004
and March 31, 2003, respectively.
55
We are continuing to expand our U.S. theatre
circuit. We opened three new theatres with 33 screens during the
three month period ended March 31, 2004. At March 31,
2004, we had signed commitments to open nine new theatres with
108 screens and add four screens to two existing theatres by the
end of 2004 and signed commitments to open six new theatres with
63 screens thereafter. We estimate the remaining capital
expenditures for the development of these 175 screens will be
approximately $55 million. Actual expenditures for
continued theatre development and acquisitions are subject to
change based upon the availability of attractive opportunities.
We are continuing to expand our international
theatre circuit. At March 31, 2004, we had signed
commitments to open five new theatres with 35 screens in
international markets by the end of 2004 and signed commitments
to open five new theatres with 44 screens in international
markets thereafter. We estimate the remaining capital
expenditures for the development of these 79 screens in
international markets will be approximately $42 million.
Actual expenditures for continued theatre development and
acquisitions are subject to change based upon the availability
of attractive opportunities.
We plan to fund capital expenditures for our
continued development from cash flow from operations, borrowings
under our senior secured credit facility, subordinated note
borrowings, proceeds from sale leaseback transactions and/or
sales of excess real estate. Additionally, we may from time to
time, subject to compliance with our debt instruments, purchase
on the open market or call our debt securities depending upon
the availability and prices of such securities.
Financing
Activities.
Cash provided by (used
for) financing activities, as reflected in the consolidated
statement of cash flows, amounted to ($21.5) million,
($96.1) million and ($45.7) million in 2001, 2002 and
2003, respectively and $347.1 million and $1.5 million
for the three month period ended March 31, 2004 and
March 31, 2003, respectively. The increase in cash provided
by financing activities in 2004 is a result of the issuance of
9 3/4% senior discount notes on March 31, 2004, which
resulted in gross proceeds to us in the amount of $360,000,115.
As of March 31, 2004, our long-term debt
obligations, capital lease obligations, future minimum lease
obligations under non-cancelable operating leases, outstanding
letters of credit, obligations under employment agreements and
purchase obligations for each period indicated are summarized as
follows:
As of March 31, 2004, we were in full
compliance with all agreements governing our outstanding debt.
Historical Financings
Senior
Subordinated Notes
As of March 31, 2004, Cinemark USA, Inc. had
outstanding two issues of senior subordinated notes, which we
refer to collectively as the senior subordinated
notes: (1) $105.0 million principal amount of
the 8 1/2% senior subordinated notes and
(2) $360.0 million principal amount of the 9% senior
subordinated notes.
56
The senior subordinated notes are general,
unsecured obligations and are subordinated in right of payment
to the former senior credit facility or other senior
indebtedness. The senior subordinated notes are guaranteed by
certain of Cinemark USA, Inc.s domestic subsidiaries on a
senior subordinated basis. The guarantees are subordinated to
the senior debt of the subsidiary guarantors and rank
pari
passu
with the senior subordinated debt of the subsidiary
guarantors. The senior subordinated notes are effectively
subordinated to the indebtedness and other liabilities of
Cinemark USA, Inc.s non-guarantor subsidiaries.
The indentures governing the senior subordinated
notes contain covenants that limit, among other things,
dividends, transactions with affiliates, investments, sale of
assets, mergers, repurchases of our capital stock, liens and
additional indebtedness. Upon a change of control, Cinemark USA,
Inc. would be required to make an offer to repurchase the senior
subordinated notes at a price equal to 101% of the principal
amount outstanding plus accrued and unpaid interest through the
date of repurchase. The indentures governing the senior
subordinated notes allow Cinemark USA, Inc. to incur additional
indebtedness if it satisfies the coverage ratio specified in
each indenture, after giving effect to the incurrence of the
additional indebtedness, and in certain other circumstances.
In connection with the Transactions, on
March 16, 2004, Cinemark USA, Inc. commenced a tender offer
for the $105.0 million aggregate principal amount
outstanding of the 8 1/2% senior subordinated notes. On
April 2, 2003, Cinemark USA, Inc. purchased approximately
$94.1 million aggregate principal amount of the 8 1/2%
senior subordinated notes which were tendered prior to the
consent date as set forth in the tender offer and executed a
supplemental indenture removing substantially all of the
covenants contained in the indenture governing the 8 1/2%
senior subordinated notes. Additionally, on April 14, 2004,
Cinemark USA, Inc. purchased $50,000 aggregate principal amount
of the 8 1/2% senior subordinated Notes which were tendered
after the consent date but prior to the expiration date pursuant
to the tender offer. As of the date of this prospectus, Cinemark
USA, Inc. has outstanding $10.8 million in aggregate
principal amount of 8 1/2% senior subordinated notes.
Cinemark USA, Inc. has, in accordance with the terms of the
indenture, made a change of control offer following the closing
of the Transactions to repurchase the 9% senior subordinated
notes at a purchase price equal to 101% of the principal amount
of the 9% senior subordinated notes tendered. Approximately
$17.8 million in principal amount of the 9% senior
subordinated notes were tendered and not withdrawn in the change
of control offer which expired on May 26, 2004. Payment of
the change of control offer price was made on June 1, 2004.
As of the date of this prospectus, Cinemark USA, Inc. has
outstanding $342.2 million in aggregate principal amount of
9% senior subordinated notes. See Financings
After the Transactions.
Former Senior
Credit Facility
On February 14, 2003, Cinemark USA, Inc.
entered into the former senior credit facility consisting of a
$75.0 million five-year revolving credit line and a
$125.0 million term loan with Lehman Commercial Paper Inc.
for itself and as administrative agent for a syndicate of
lenders. The former senior credit facility provided for
incremental term loans of up to $100.0 million. The net
proceeds from the former senior credit facility were used to
repay, in full, the then existing revolving credit facility and
the Cinema Properties Facility. The revolving credit line had a
maturity date of February 14, 2008.
On August 15, 2003, Cinemark USA, Inc.
amended the former senior credit facility to provide a
$165.0 million term loan expiring on March 31, 2008.
As amended, the former senior credit facility provided for
incremental term loans of up to $60.0 million. The net
proceeds of the $165.0 million term loan and additional
borrowings under the $75.0 million five-year revolving
credit line were used to (i) repay $124.7 million of
term loans outstanding under the former senior credit facility
and (ii) redeem on September 18, 2003 the remaining
$42.0 million principal amount of Cinemark USA, Inc.s
then outstanding 9 5/8% senior subordinated notes.
57
Under the amended term loan, principal payments
of $412,500 are due each calendar quarter through March 31,
2007 and increase to $39,703,125 each calendar quarter from
June 30, 2007 to maturity at March 31, 2008.
The amended term loan beared interest, at
Cinemark USA, Inc.s option, at: (A) the base
rate equal to the higher of (i) the prime lending
rate as set forth on British Banking Association Telerate
page 5 and (ii) the federal funds effective rate from
time to time in effect plus 0.50% plus a margin ranging from
1.25% per annum to 1.50% per annum or (B) the
eurodollar rate plus a margin ranging from 2.25% per annum
to 2.50% per annum. In each case the applicable margin is
based upon Cinemark USA, Inc. achieving certain ratios of debt
to consolidated EBITDA (as defined in the former senior credit
facility).
Borrowings under the revolving line of credit
beared interest, at Cinemark USA, Inc.s option, at:
(A) the base rate plus a margin ranging from 1.25% per
annum to 2.00% per annum or (B) the eurodollar rate
plus a margin ranging from 2.25% per annum to
3.00% per annum. In each case the applicable margin is
based upon Cinemark USA, Inc. achieving certain ratios of debt
to consolidated EBITDA (as defined in the former senior credit
facility).
The former senior credit facility was guaranteed
by certain subsidiaries of Cinemark USA, Inc. and by Cinemark,
Inc. and CNMK Holding, Inc. and was secured by mortgages on
certain fee and leasehold properties and security interests on
substantially all of our personal and intangible property,
including without limitation, pledges of all of the capital
stock of CNMK Holding, Inc., Cinemark USA, Inc. and certain
domestic subsidiaries and 65% of the voting stock of certain of
Cinemark USA, Inc.s foreign subsidiaries. Under the former
senior credit facility, Cinemark USA, Inc. was required to
maintain specified levels of fixed charge coverage and set
limitations on its leverage ratios. The former senior credit
facility limited Cinemark USA, Inc.s ability to pay
dividends and its ability to incur additional indebtedness and
liens and, following the issuance of certain types of
indebtedness or the disposition of assets, subject to certain
exceptions, it would be required to apply certain of the
proceeds to repay amounts outstanding under the former senior
credit facility. The former senior credit facility also
contained certain other covenants and restrictions customary in
credit agreements of this kind.
At March 31, 2004, there was approximately
$163.8 million outstanding under the term loan and no
outstanding revolver borrowings. Approximately
$74.9 million was available for borrowing under the
revolving credit line, giving effect to a $0.1 million
letter of credit outstanding. The effective interest rate on
outstanding borrowings under the former senior credit facility
at March 31, 2004 was 5.5% per annum. In connection with
the Transactions, on April 2, 2004, the former senior
credit facility was amended and restated by the amended senior
credit facility, the proceeds of which were used to refinance
the former senior credit facility. See
Financings After the Transactions.
Cinemark USA
Revolving Credit Facility
In February 1998, Cinemark USA, Inc. entered into
a reducing revolving credit facility, or the revolving
credit facility, with a group of banks for which Bank of
America, N.A. acted as administrative agent. Cinemark USA, Inc.
prepaid a portion of the indebtedness outstanding under the
revolving credit facility on February 11, 2003 with the net
proceeds of the original issuance of the 9% senior subordinated
notes. The revolving credit facility was repaid in full on
February 14, 2003 from the net proceeds of the former
senior credit facility.
Cinemark
Mexico Revolving Credit Facility
In November 1998, Cinemark Mexico (USA), Inc.
executed a credit agreement with Bank of America National Trust
and Savings Association, or the Cinemark Mexico Credit
Agreement. On January 15, 2003, the Cinemark Mexico
Credit Agreement was paid in full.
Cinema
Properties Credit Facility
In December 2000, Cinema Properties, Inc., a
wholly owned subsidiary that was not subject to restrictions
imposed by the former senior credit facility or the indentures
governing the senior subordinated
58
Cinemark
Investments Revolving Credit Facility
In September 1998, Cinemark Investments
Corporation borrowed $20 million under the Cinemark
Investments Credit Agreement, the proceeds of which were used to
purchase fixed rate notes issued by Cinemark Brasil S.A. In
September 2001, Cinemark Investments Corporation repaid the
$20 million Cinemark Investments Credit Agreement at
maturity.
Cinemark
Brasil Notes Payable
As of March 31, 2004, Cinemark Brasil S.A.
had four main types of funding sources executed with local and
international banks. These include:
These sources are secured by a variety of
instruments, including comfort letters from Cinemark
International, L.L.C. promissory notes for up to 130% of the
value, a revenue reserve account and equipment collateral. As of
March 31, 2004, an aggregate of US$3.6 million was
outstanding and the effective interest rate on such borrowings
was 12.7% per annum.
Cinemark
Chile Note Payable
On March 26, 2002, Cinemark Chile S.A.
entered into a Debt Acknowledgment, Rescheduling and Joint
Guarantee and Co-Debt Agreement with Scotiabank Sud Americano
and three local banks. Under this agreement, Cinemark Chile S.A.
borrowed the U.S. dollar equivalent of approximately
$10.6 million in Chilean pesos (adjusted for inflation
pursuant to the Unidades de Fomento). Cinemark Chile S.A. is
required to make 24 equal quarterly installments of
principal plus accrued and unpaid interest, commencing
March 27, 2002. The indebtedness is secured by a first
priority commercial pledge of the shares of Cinemark Chile S.A.,
a chattel mortgage over Cinemark Chiles personal property
and by guarantees issued by Cinemark International, L.L.C. and
Chile Films S.A., whose owners are shareholders of Cinemark
Chile S.A. The agreement requires Cinemark Chile S.A. to
maintain certain financial ratios and contains other restrictive
59
Cinemark
Brasil Equity Financing
During 2001, Cinemark Brasil S.A. received
additional capital from its Brazilian shareholders in an
aggregate amount equal to the approximate U.S. dollar equivalent
in Brazilian reais of $11.0 million in exchange for shares
of common stock of Cinemark Brasil S.A. The contributions were
made in July in the aggregate amount of $5.0 million and in
November in the aggregate amount of $6.0 million. The
additional capital was used to fund development in Brazil and to
reduce Cinemark Brasil S.A.s outstanding indebtedness.
After giving effect to the additional issuance of common stock,
Cinemark Internationals ownership interest was diluted to
approximately 53%.
As a result of the Recapitalization, we have
provided notice to our Brazilian partners (i) that our then
existing stockholders will no longer own more than 25% of our
common stock and (ii) that Lee Roy Mitchell has sold
certain of his shares of our common stock for cash. The
Brazilian partners have exercised their option to cause us or
one of our designees to purchase shares of common stock of
Cinemark Brazil S.A. owned by the Brazilian partners. The
purchase price shall be determined through an appraisal process
conducted by up to three approved investment banks. We and the
Brazilian partners have each received appraisals from investment
banks and are currently negotiating the price per share for the
common stock of Cinemark Brasil S.A. If we are unable to agree
upon a price on or prior to June 18, 2004, a third
investment bank will be retained to determine the price per
share of the common stock of Cinemark Brasil S.A. We are unable
to predict at this time what the purchase price will be. We
expect that the purchase will be financed through additional
borrowings by Cinemark USA, Inc. or with available cash.
Financings After the Transactions
We intend to fund our ongoing operations through
cash generated by operations and availability under the amended
senior credit facility.
Amended
Senior Credit Facility
In connection with the Transactions, Cinemark
USA, Inc., as borrower, Cinemark, Inc., as parent and a
guarantor and CNMK Holding, Inc., as a guarantor, entered into
an amended and restated senior secured credit facility with
Lehman Commercial Paper Inc., as administrative agent, Goldman
Sachs Credit Partners L.P., as syndication agent, and Lehman
Brothers Inc. and Goldman Sachs Credit Partners L.P., acting as
joint lead arrangers and joint bookrunners, Deutsche Bank
Securities Inc., The Bank of New York, General Electric Capital
Corporation and CIBC Inc., as co-documentation agents, and a
syndicate of banks, financial institutions and other
institutional lenders. The amended senior credit facility
consists of a seven year $260.0 million term loan and a six
and one-half year $100.0 million revolving credit facility
(which was undrawn on the date of the closing of the
Recapitalization). The term loan was made in a single drawing of
$260.0 million on the closing date of the Transactions, or
the closing date. The net proceeds of the term loan
were used to refinance Cinemark USA, Inc.s former senior
credit facility and to fund a portion of the purchase of
Cinemark USA, Inc.s 8 1/2% senior subordinated notes
pursuant to the tender offer.
Principal payments of the term loan equal to
0.25% of the original principal amount of the initial term loan
are due each calendar quarter beginning on June 30, 2004
through March 31, 2010 and increase to 23.50% each calendar
quarter from June 30, 2010 to maturity at March 31,
2011.
The term loan bears interest, at Cinemark USA,
Inc.s option, at: (A) a base rate equal
to the higher of (i) the prime lending rate as set forth on
the British Banking Association Telerate page 5 or
(ii) the federal funds effective rate from time to time
plus 0.50%, plus a margin of 1.25% per annum, or (B) a
eurodollar rate equal to the rate at which
eurodollar deposits are offered in the interbank eurodollar
market for terms of one, two, three or six, or (if available to
all lenders in their sole discretion) nine or twelve months, as
selected by us, plus a margin of 2.25% per annum. After the
completion of two full fiscal quarters after the closing date,
the margin under the term loans applicable to base rate loans
ranges from 1.00% per annum to
60
Borrowings under the revolving credit line bear
interest, at Cinemark USA, Inc.s option, at: (A) a
base rate equal to the higher of (i) the prime
lending rate as set forth on the British Banking Association
Telerate page 5 or (ii) the federal funds effective
rate from time to time plus 0.50%, plus a margin of 1.50% per
annum, or (B) a eurodollar rate equal to the
rate at which eurodollar deposits are offered in the interbank
eurodollar market for terms of one, two, three or six, or (if
available to all lenders in their sole discretion) nine or
twelve months, as selected by us, plus a margin of 2.50% per
annum. After the completion of two full fiscal quarters after
the closing date, the margin under the revolving credit line
applicable to base rate loans ranges from 1.00% per annum to
1.50% per annum and the margin applicable to eurodollar rate
loans ranges from 2.00% per annum to 2.50% per annum, and will
be adjusted based upon our achieving performance targets to be
agreed upon, if no default or event of default under the amended
senior credit facility has occurred or is continuing.
The obligations of Cinemark USA, Inc. under the
amended senior credit facility are guaranteed by Cinemark, Inc.,
CNMK Holding, Inc. and certain of Cinemark USA, Inc.s
subsidiaries and are secured by mortgages on certain fee and
leasehold properties and a security interest in substantially
all of our personal and intangible property, including without
limitation, pledges of all of the capital stock of certain
domestic subsidiaries and 65% of the voting stock of certain of
our foreign subsidiaries. Under the amended senior credit
facility, Cinemark USA, Inc. is required to maintain specified
levels of interest coverage and set limitations on its leverage
ratios. We are limited in our ability to pay dividends and in
our ability to incur additional indebtedness and liens and,
following the issuance of certain types of indebtedness or the
disposition of assets, subject to certain exceptions, we are
required to apply certain of the proceeds to repay amounts
outstanding under the amended senior credit facility. The
amended senior credit facility also contains certain other
covenants and restrictions customary in credit agreements of
this kind.
Tender Offer
for 8 1/2% Senior Subordinated Notes
On March 31, 2004, Cinemark USA, Inc. had
outstanding $105.0 million in 8 1/2% senior
subordinated notes due 2008. On March 16, 2004, Cinemark
USA, Inc. initiated a tender offer for the 8 1/2% senior
subordinated notes and a consent solicitation to remove
substantially all restrictive covenants in the indenture
governing those notes. The 8 1/2% senior subordinated notes
are currently redeemable at our option at 104.25% of the
principal amount thereof, and at declining amounts after
August 1, 2004, plus accrued and unpaid interest thereon to
the date of redemption. On March 25, 2004, a supplemental
indenture removing substantially all of the covenants was
executed, which became effective on April 2, 2004, the date
the Recapitalization was consummated. Upon closing of the
Recapitalization, Cinemark USA, Inc. purchased approximately
$94.1 million aggregate principal amount of 8 1/2%
senior subordinated notes which were tendered prior to the
consent date as set forth in the tender offer. On April 14,
2004, Cinemark USA, Inc. purchased an additional $50,000
aggregate principal amount of 8 1/2% senior subordinated
notes which were tendered after the consent date but prior to
the expiration date pursuant to the tender offer. After the
expiration of the tender offer, Cinemark USA, Inc. had
outstanding $10.8 million principal amount of 8 1/2%
senior subordinated notes.
Change of
Control Offer for 9% Senior Subordinated Notes
In accordance with the terms of the indenture
governing the 9% senior subordinated notes, on April 6,
2004, Cinemark USA, Inc. made a change of control offer
following the closing of the Transactions to repurchase the 9%
senior subordinated notes at a purchase price of 101% of the
aggregate principal amount, plus accrued and unpaid interest, if
any, to the date of purchase. Approximately $17.8 million
in aggregate principal amount of the 9% senior subordinated
notes were tendered and not withdrawn in the change of control
offer, which expired on May 26, 2004. Payment of the change
of control offer price was made with available cash by Cinemark
USA, Inc. on June 1, 2004. After the expiration of the
tender offer, Cinemark USA, Inc. had outstanding
$342.2 million principal amount of 9% senior subordinated
notes.
61
Issuance of
the Initial Notes
We have $577,173,000 in aggregate principal
amount at maturity of initial notes outstanding. The indenture
governing the notes, among other things: (1) restricts our
ability and the ability of our subsidiaries to incur additional
indebtedness, issue shares of preferred stock, incur liens, pay
dividends or make certain other restricted payments and enter
into certain transactions with affiliates; (2) prohibits
certain restrictions on the ability of certain of our
subsidiaries to pay dividends or make certain payments to us;
and (3) places restrictions on our ability and the ability
of our subsidiaries to merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of our assets. The indenture
relating to the initial notes and the amended senior credit
facility also contain various covenants that limit our
discretion in the operation of our business.
As of March 31, 2004, our long-term debt
obligations, capital lease obligations, future minimum lease
obligations under non-cancelable operating leases and purchase
obligations, on a pro forma basis after giving effect to the
Transactions, would have been as follows:
For more information, see Description of
Certain Debt Instruments Amended Senior Credit
Facility, Description of Exchange Notes and
Risk Factors Restrictive covenants in our and
our subsidiaries debt agreements may adversely affect
us.
New Accounting Pronouncements
In January 2003, the Financial Accounting
Standards Board (FASB) issued Interpretation
No. 46 (FIN 46), Consolidation of
Variable Interest Entities an Interpretation of
ARB No. 51. FIN 46 addresses consolidation by
business enterprises of variable interest entities. FIN 46
requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of
loss from the variable interest entitys activities or
entitled to receive a majority of the entitys residual
returns or both. The Company adopted FIN 46 on January 1,
2004. The adoption of FIN 46 did not have a material impact on
its condensed consolidated financial statements.
Quantitative and Qualitative Disclosures About
Market Risk
We have exposure to financial market risks,
including changes in interest rates, foreign currency exchange
rates and other relevant market prices.
Interest Rate
Risk
An increase or decrease in interest rates would
affect interest costs relating to our variable rate debt
facilities. Our subsidiaries are currently parties to such
variable rate debt facilities. As of March 31, 2004, we had
an aggregate of $177.6 million of variable rate debt
outstanding under these facilities. At March 31,
62
The tables below provide information about our
fixed rate and variable rate long-term debt agreements as of
March 31, 2004 and December 31, 2003.
The table below provides information about our
fixed rate and variable rate long-term debt agreements as of
March 31, 2004 on a pro forma basis after giving effect to
the Transactions.
In December 2000, Cinema Properties, Inc., one of
our then-existing wholly-owned subsidiaries, entered into the
Cinema Properties Facility. As a part of the Cinema Properties
Facility, to hedge against future changes in interest rates,
Cinema Properties, Inc. purchased an Interest Rate Cap
Agreement, with a notional amount equal to $77 million, a
five-year term and a strike rate equal to the excess of three
month LIBOR over the strike price of 6.58%, from Lehman Brothers
Derivative Products Inc. At December 31, 2002, the Interest
Rate Cap Agreement was recorded at its fair value of
$0.1 million. During the year ended December 31, 2003,
the Interest Rate Cap Agreement was written down to $0. We do
not have any additional derivative financial instruments in
place as of March 31, 2004 that would have a material
effect on our financial position, results of operations and cash
flows.
Foreign
Currency Exchange Rate Risk
We are also exposed to market risk arising from
changes in foreign currency exchange rates as a result of our
international operations. Generally accepted accounting
principles in the U.S. require that our subsidiaries use the
currency of the primary economic environment in which they
operate as their functional currency. If our subsidiaries
operate in a highly inflationary economy, generally accepted
accounting
63
The accumulated other comprehensive loss account
in stockholders equity of $86,538,823 and $86,544,422 at
March 31, 2004 and December 31, 2003, respectively,
primarily relates to the cumulative foreign currency adjustments
from translating the financial statements of Cinemark Argentina,
S.A., Cinemark Brasil S.A. and Cinemark de Mexico, S.A. de C.V.
into U.S. dollars.
In 2002, 2003 and 2004 all foreign countries
where we have operations, including Argentina, Brazil and Mexico
were deemed non-highly inflationary. Thus, any fluctuation in
the currency results in a cumulative foreign currency
translation adjustment to the accumulated other comprehensive
loss account recorded as an increase in, or reduction of,
stockholders equity.
At December 31, 2003, the exchange rate for
the Argentine peso was 2.94 pesos to the U.S. dollar (the
exchange rate was 3.4 pesos to the U.S. dollar at
December 31, 2002). As a result, the effect of translating
the 2003 Argentine financial statements into U.S. dollars is
reflected as a cumulative foreign currency translation
adjustment to the accumulated other comprehensive loss account
as an increase in stockholders equity of approximately
$2 million. On March 31, 2004, the exchange rate for
the Argentine peso was 2.86 pesos to the U.S. dollar. As a
result, the effect of translating the March 31, 2004
Argentine financial statements into U.S. dollars resulted in a
cumulative foreign currency translation adjustment to the
accumulated other comprehensive loss account as an increase in
stockholders equity of approximately $0.4 million. At
March 31, 2004, the total assets of our Argentine
subsidiaries were approximately U.S. $16 million.
On December 31, 2003, the exchange rate for
the Brazilian real was 2.89 reais to the U.S. dollar
(the exchange rate was 3.5 reais to the U.S. dollar at
December 31, 2002). As a result, the effect of translating
the 2003 Brazilian financial statements into U.S. dollars
is reflected as a cumulative foreign currency translation
adjustment to the accumulated other comprehensive loss account
as an increase in stockholders equity of approximately
$4 million. On March 31, 2004, the exchange rate for
the Brazilian real was 2.91 reais to the U.S. dollar. As a
result, the effect of translating the March 31, 2004
Brazilian financial statements into U.S. dollars resulted
in a cumulative foreign currency translation adjustment to the
accumulated other comprehensive loss account as a reduction in
stockholders equity of approximately $0.1 million. At
March 31, 2004, the total assets of our Brazilian
subsidiaries were approximately U.S. $62 million.
On December 31, 2003, the exchange rate for
the Mexican peso was 11.20 pesos to the U.S. dollar (the
exchange rate was 10.4 pesos to the U.S. dollar at
December 31, 2002). As a result, the effect of translating
the 2003 Mexican financial statements into U.S. dollars is
reflected as a cumulative foreign currency translation
adjustment to the accumulated other comprehensive loss account
as a reduction of stockholders equity of approximately
$6 million. On March 31, 2004, the exchange rate for
the Mexican peso was 11.21 pesos to the U.S. dollar.
As a result, the effect of translating the March 31, 2004
Mexican financial statements into U.S. dollars resulted in
a cumulative foreign currency translation adjustment to the
accumulated other comprehensive loss account as a reduction of
stockholders equity of approximately $0.1 million. At
March 31, 2004, the total assets of our Mexican
subsidiaries were approximately U.S. $85 million.
64
BUSINESS
Cinemark, Inc.
We are one of the leaders in the motion picture
exhibition industry, in terms of both revenues and number of
screens in operation. We were founded in 1987 by our Chairman
and Chief Executive Officer, Lee Roy Mitchell, and have grown
primarily through targeted worldwide new theatre development. As
of March 31, 2004, we operated 3,175 screens in 297
theatres. For the year ended December 31, 2003, we had
revenues of $950.9 million, operating income of
$135.6 million and net income of $44.6 million. For
the three months ended March 31, 2004, we had revenues of
$235.1 million, operating income of $32.8 million and
net income of $9.8 million.
Our geographic diversity within North America and
internationally has allowed us to maintain consistent revenue
growth. We have increased revenues by a compound annual growth
rate of 7.5% from the beginning of 1999 through 2003. We operate
2,323 screens in 200 theatres in North America. These theatres,
located in 33 states and one Canadian province, are primarily in
mid-sized markets, including suburbs of major metropolitan
areas. We believe these markets are less competitive and
generate high, stable margins. We also operate 852 screens in 97
theatres outside of North America, primarily located in major
Latin American metropolitan markets, which we believe are
generally underscreened and have significant growth potential.
Motion Picture Industry Overview
Domestic
Markets
The U.S. motion picture exhibition industry has
enjoyed revenue growth at a compound annual growth rate of 6.3%
from 1993 to 2003, according to the Motion Picture Association
of America. In 2002, single year U.S. motion picture box office
revenues exceeded the $9.0 billion mark for the first time
in history, reaching a total of $9.52 billion, a 13.2%
increase from 2001, according to the Motion Picture Association
of America. The 2003 box office, while down 0.3% from 2002, was
the second highest in history and again exceeded the
$9.0 billion mark with a total of $9.49 billion. The
strong U.S. box office performance was primarily driven by an
increase in attendance which increased nearly 27% between 1993
and 2003. Factors contributing to the continued success of the
industry include a strong movie slate, the improvement of
theatre circuits resulting from the creation of the modern
multiplex format and the screen rationalization of 2000 and
2001. Three films released in 2003 grossed over
$300 million, three other films grossed over
$200 million and an additional 23 films grossed over
$100 million in the U.S.
The following table represents the results of a
survey by Motion Picture Association of America Worldwide Market
Research outlining the historical trends in U.S. theatre
attendance, average ticket prices and box office sales for the
last ten years.
65
International
Markets
The international motion picture exhibition
industry has also grown significantly over the past several
years. Global box office revenues increased 28% from
$15.9 billion in 2000 to $20.3 billion in 2003
according to the Motion Picture Association of America. This
growth is a result of the increasing acceptance of movie going
as a popular form of entertainment throughout the world, ticket
price increases and new theatre construction. According to
Informa Media Group, Latin America is the fastest growing region
in the world in terms of box office revenues.
Growth in Latin America is expected to be fueled
by a combination of continued development of modern theatres,
attractive demographics (i.e., a significant teenage
population), strong product from Hollywood and the emergence of
a local film industry. In many Latin American countries the
local film industry had been dormant because of the lack of
sufficient theatres to screen the film product. The development
of new modern multiplex theatres has awakened the local film
industry and, in Mexico and Brazil, local film product is now
playing a significant role in driving attendance growth.
We believe many international markets for motion
picture exhibition have historically been underserved due to
antiquated or run-down theatres, among other things, and that
international markets, especially those in Latin America, will
continue to experience growth as additional modern stadium
seating theatres are introduced.
Recent
History
In recent years, the U.S. exhibition industry has
felt the impact of rapid overbuilding by the largest industry
players, high levels of overall capital expenditures and high
leverage. As a result of the financial burden imposed on theatre
operators by these three factors, the industry entered a period
of significant industry rationalization. Many industry players
had already begun the rationalization process in 2000 by closing
hundreds of smaller, less profitable theatres. The pace of
theatre closings increased during 2001 as a number of companies
took advantage of the protections provided by the bankruptcy
process to reject long-term leases on many underperforming
theatres. The overall reduction in the numbers of theatres and
screens in operation has improved industry profitability.
According to the Motion Picture Association of America, the
total number of screens in the U.S. reached an all-time high of
37,396 in 2000, and then declined in both 2001 and 2002. There
were 35,786 screens at the end of 2003. In addition to closing
hundreds of theatres, the largest players in the industry have
dramatically scaled back new theatre builds, resulting in
significant decreases in capital expenditures.
Significant capital expenditures by major
industry players during the latter half of the 1990s has
resulted in a higher quality theatre base. Current circuits are
comprised of a significant number of modern multiplex theatres,
which generally include 10 or more screens, digital sound and
stadium seating. We believe these improved facilities, which
have been well received by patrons, will benefit the industry
both by stimulating demand and by limiting the need for future
capital expenditures.
Drivers of Continued Industry
Success
We believe the following market trends will drive
the continued growth and strength of our industry:
Increased Investment in Film Production and
Marketing.
Theatrical exhibition is
the primary distribution channel for new motion picture
releases. The success of a theatrical release, which
brands a film, is one of the major factors in
determining its success in downstream distribution
channels, such as home video, DVD and network, syndicated and
pay-per-view television. The growing importance of downstream
distribution channels has enabled studios to increase production
and marketing expenditures. Production and marketing costs per
new film in the U.S. have increased by compound annual growth
rates of 7.9% and 10.7%, respectively, from 1993 to 2003,
according to the Motion Picture Association of America. This has
led to an increase in blockbuster features, which
attract larger audiences to theatres.
Increased Importance of International Markets
for Ensuring Box Office Success.
International markets are becoming an
increasingly important component of the overall box office
revenues generated by
66
Favorable Attendance Trends.
Increased movie going frequency and
attendance from key demographic groups have benefited the
industry. According to the Motion Picture Association of
America, annual admissions per capita in the U.S. increased from
4.5x to 5.4x, between 1991 and 2003. Additionally, the U.S.
teenage segment, defined as 12 17 year olds,
represented 18% of admissions in 2003, up from 14% in 1997.
Reduced Seasonality of Revenues.
Historically, industry revenues have
been highly seasonal, coinciding with the timing of film
releases by the major distributors. The most marketable motion
pictures were generally released during the summer, extending
from Memorial Day to Labor Day, and during the holiday season,
extending from Thanksgiving through year-end. However, the
seasonality of motion picture exhibition has become less
pronounced in recent years. Studios have begun to release films
more evenly throughout the year, and hit films have emerged
during traditionally weaker periods. This benefits exhibitors by
allowing them to more effectively manage their operations.
Convenient and Affordable Form of Out-of-Home
Entertainment.
Movie going continues
to be one of the most convenient and affordable forms of
out-of-home entertainment, with an average ticket price in the
U.S. of $6.03 in 2003. Average prices for other forms of
out-of-home entertainment in the U.S., including sporting
events, theme parks, musical concerts and plays, ranged from
approximately $18.00 to $62.00 per ticket in 2002.
Increasing Ancillary Revenue.
Advertising revenues represent a
small, but growing portion of revenues for motion picture
exhibitors. The Arbitron Cinema Advertising Study,
which was released in 2003, measured consumer awareness of
on-screen advertising in the U.S., and indicated that 86% of all
cinema audiences (representing 40% of the U.S. population)
remembered on-screen ads a month after seeing them. The
proliferation in broadcast and cable channels, as well as new
recording devices that allow people to skip television
commercials, has eroded broadcast medias advertising
reach. As a result, captive and attentive cinema audiences are
becoming more attractive to advertisers. The Cinema Advertising
Council reports that cinema advertising sales in the U.S.
increased by an estimated 20% to approximately $300 million
in 2003, making it one of the fastest growing mediums in the
advertising industry.
Competitive Strengths
We believe the following strengths allow us to
compete effectively:
Significant Cash Flow.
Our business strategy and disciplined
building program allowed us to generate $135.6 million of
operating income for the year ended December 31, 2003,
which we utilized to reduce our leverage. During the year ended
December 31, 2003, we reduced our long-term debt by
$47.7 million (including the net unamortized premium of
$13.6 million related to the senior subordinated notes of
Cinemark USA, Inc.) and increased our cash and cash equivalents
by $43.6 million. We generated $32.8 million of
operating income for the three months ended March 31, 2004.
Focused Philosophy Resulting in Strong
Financial Performance.
We focus on
negotiating favorable theatre facility economics, providing a
superior viewing experience and controlling theatre operating
costs. As a result of this philosophy, we generated
$44.6 million of net income for the year ended
December 31, 2003. We generated $9.8 million of net
income for the three months ended March 31, 2004.
Strong Management Team.
Led by Mr. Mitchell, our
management team has an average of approximately 20 years of
theatre operating experience and a proven track record of
superior performance. The team has successfully navigated us
through many industry cycles; between 1999 and 2001, we were one
of only two major motion picture exhibitors in the U.S. that did
not file for bankruptcy protection. Managements success
during this period is largely a result of its financial
discipline and focus on investment returns, as demonstrated by
its decision to decrease its building commitments earlier than
its competitors.
67
Selective Building in Less Competitive U.S.
Markets and Heavily Populated International Markets.
Modern Theatre Circuit.
We have built our modern theatre
circuit primarily through targeted worldwide new theatre
development, which we believe provides a preferred destination
for moviegoers in our markets. Since 1996, we have built
1,989 screens, or 63% of our total screen count. Our ratio
of screens to theatres is one of the highest in the industry:
11.6 to 1 in North America and 8.8 to 1 internationally.
Approximately 68% of our North American first run screens and
78% of our international screens feature stadium seating.
Our Strategy
We believe our operating philosophy provides us
with a competitive advantage. We intend to continue to focus on
the following key components of our business plan.
Focus on Less Competitive U.S. Markets and
Target Profitable, High Growth International Markets.
We will continue to seek growth
opportunities in underserved, mid-sized U.S. markets and major
international metropolitan areas by building or acquiring modern
theatres that meet our strategic, financial and demographic
criteria.
Maximize Profitability Through Continued Focus
on Operational Excellence.
We will
continue to focus on executing our operating philosophy. We
believe that our successful track record of executing this
philosophy is evidenced by the fact that we successfully
navigated through the significant industry downturn between 1999
and 2001, during which period at least twelve exhibitors filed
for bankruptcy protection.
Pursue Additional Revenue Opportunities.
We will continue to pursue additional
growth opportunities by developing and expanding ancillary
revenue streams such as advertising. We are able to offer
advertisers national, regional or local coverage in a variety of
formats to reach our patrons, which numbered approximately
173 million during the year ended December 31, 2003.
We are also exploring additional revenue sources such as digital
video monitor advertising, third party branding, and the use of
theatres for non-film events. We have used theatres during
non-peak hours for simulcast concerts, pay-per-view sporting
events, corporate meetings and cultural events.
Our International Operations
We have been successfully introducing
American-style modern multiplex theatres to underserved
international markets since 1993. Our activities in
international markets have been primarily directed toward Latin
America, where we have successfully established a significant
presence in most of the major cities in
68
We believe that Latin America is one of the
fastest growing international markets in terms of box office
revenues. Penetration of movie screens per capita in Latin
American markets is substantially lower than in the U.S. and
European markets. Our geographic diversity throughout Latin
America has allowed us to maintain consistent revenue and
operating margin growth notwithstanding currency fluctuations
that may affect any particular market.
We will continue to consider selective
opportunities for development of modern multiplex theatres in
underserved international markets, emphasizing Latin America,
funded primarily with cash flow generated in those countries. We
are able to mitigate exposure to currency fluctuations by using
local currencies to fund substantially all aspects of our
operations, including rent expense.
69
Theatre Operations
As of March 31, 2004, we operated 3,175
screens in 297 theatres located in 33 states and 14 foreign
countries. We operated 2,753 screens in 246 first run theatres
and 422 screens in 51 discount theatres. The following tables
summarize the geographic locations of our theatre circuit as of
March 31, 2004.
North
American Theatres
70
International
Theatres
Corporate Operations
We maintain a corporate office in Plano, Texas
that provides oversight for our domestic and international
theatres. Domestic operations includes theatre operations
support, film licensing and settlements, human resources, legal,
finance and accounting, operational audit, theatre maintenance
and construction, internet and information systems, real estate
and marketing. Our North American operations are divided into
ten regions, each of which is headed by a region leader.
International operations function relatively
autonomously. International personnel in the corporate office
include the International President and directors/vice
presidents in charge of film licensing, marketing, concessions,
operations, construction, real estate, legal, loss prevention,
management information systems and accounting. We have eight
regional offices in Latin America responsible for the local
management of operations in twelve individual countries. Each
regional office is headed by a general manager and includes
personnel in film licensing, marketing, operations and
accounting. We employ three super-regional chief
financial officers in Brazil, Chile and Mexico. The regional
offices are staffed with nationals from the region to overcome
cultural and operational barriers. Training is conducted at the
corporate office to establish consistent standards throughout
our international operations.
Film
Licensing
In North America, films are typically licensed
from film distributors that are owned by major film production
companies or from independent film distributors that distribute
films for smaller production companies. For new release films,
film distributors typically establish geographic zones and offer
each available film to one theatre in each zone. The size of a
film zone is generally determined by the population density,
demographics and box office potential of a particular market or
region. A film zone can range from a radius of three to five
miles in major metropolitan and suburban areas to up to fifteen
miles in small towns. We currently operate theatres in 144 first
run film zones in North America. New film releases are licensed
at the discretion of the film distributors. As the sole
exhibitor in approximately 85% of the first run film zones in
which we operate, we have maximum access to film product, which
allows us to select those pictures that we believe will be the
most successful in our markets from those offered to us by
distributors. We usually license films on an allocation basis in
film zones where we face competition. Films are released to
discount theatres once the attendance levels substantially drop
off at the first run theatres. For discount films, film
distributors generally establish availability on a
market-by-market basis after the completion of exhibition at
first run theatres and permit each theatre within a market to
exhibit such films without regard to film zones.
71
Unlike our North American operations,
distributors in our international markets do not allocate film
to a single theatre in a geographic film zone. Rather,
competitive theatres can play the same films at the same time as
other theatres. Our theatre personnel focus on providing
excellent customer service, and we provide a modern facility
with the most up-to-date sound systems, comfortable stadium
style seating and other amenities typical of modern
American-style multiplexes which we believe gives us a
competitive advantage in markets where there are competing
theatres. Of the 97 theatres we operate outside of North
America, approximately 90% of those theatres have no direct
competition.
In North America, our film rental licenses
typically state that rental fees are based on either mutually
agreed upon firm terms established prior to the opening of the
picture or on a mutually agreed upon settlement at the
conclusion of the picture run. Under a firm terms formula, we
pay the distributor a specified percentage of box office
receipts, which reflects either a mutually agreed upon aggregate
rate for the life of the film or rates that decline over the
term of the run. Firm term film rental fees that decline over
the term of the run generally start at 60% or 70% of box office
admissions, gradually declining to as low as 30% over a period
of four to seven weeks. The settlement process allows for
negotiation of film rental fees upon the conclusion of the film
run based upon how the film performs. In international markets,
film rental percentages are generally lower than in North
American markets and gradually decline over a period of several
weeks.
We also operate discount theatres in North
America, with admissions ranging from $0.50 to $2 per ticket, to
serve an alternative market of patrons that extends the life of
a film past the first run screening. By serving this alternative
market of patrons in our discount theatres, we have been able to
increase the number of potential customers beyond traditional
first run moviegoers. Our discount theatres offer many of the
same amenities as our first run theatres, including wall-to-wall
screens, comfortable seating with cup holder armrests, digital
sound and multiple concession stands. Discount film rental
percentages typically begin at 35% of box office receipts and
often decline to 30% after the first week.
Film rental costs are accrued based on the
applicable box office receipts and either the mutually agreed
upon firm terms or estimates of the final settlement depending
upon the film licensing arrangement. Estimates are based on the
expected success of a film over the length of its run. The
success of a film can typically be determined a few weeks after
a film is released when initial box office performance of the
film is known. Accordingly, final settlements typically
approximate estimates since box office receipts are known at the
time the estimate is made and the expected success of a film
over the length of its run can typically be estimated early in
the films run. The final film settlement amount is
negotiated at the conclusion of the films run based upon
how a film actually performs. If actual settlements are higher
than those estimated, additional film rental costs are recorded
at that time.
Concessions
Concession sales are our second largest revenue
source, representing approximately 32% of total revenues for
2003. Concession sales have a much higher margin than admissions
sales. We have devoted considerable management effort to
increase concession sales and improve operating margins. These
efforts include implementation of the following strategies:
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Marketing
In order to attract customers, we rely on
newspaper display advertisements, substantially paid for by film
distributors, newspaper directory film schedules, generally paid
for by the exhibitor, and internet advertising which has emerged
as a strong media source to inform patrons of film titles and
show times. Radio and television advertising spots, generally
paid for by film distributors, are used to promote certain
motion pictures and special events. We also exhibit previews of
coming attractions and films presently playing on the other
screens which we operate in the same theatre or market.
Our marketing department also focuses on
maximizing revenue generating opportunities, which include the
following:
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Online
Sales
We have successfully used the internet to provide
patrons access to movie times, the ability to buy tickets and
print their tickets at home and purchase gift cards and other
advanced sale-type certificates. The internet is quickly
becoming the primary way to check movie times, replacing the
traditional newspaper advertisements. In addition, many
newspapers also add an internet component to their advertising
and add movie showtimes to their internet offerings. Over time,
the internet will allow us to reduce our advertising costs
associated with newspaper directory advertisements. Patrons may
purchase advance tickets from approximately 95 of our North
American theatres (approximately 1,300 screens), and print
tickets at home for eleven theatres by simply accessing our
corporate website at www.cinemark.com.
Our internet initiatives help improve customer
satisfaction, as customers who purchase tickets over the
internet are often able to bypass lines at the box office by
printing their tickets at home or picking up their tickets at
kiosks in the theatre lobby. We were the first major exhibitor
to introduce this technology and also the first major exhibitor
to make showtimes available for patrons through wireless
handheld devices.
Management
Information Systems
We developed our own proprietary point of sale
management information system (the system) to
further enhance our ability to maximize revenues, control costs
and efficiently manage operations. The system provides corporate
management with real-time admissions and concession revenue
reports that allow managers to make real-time adjustments to
movie schedules, extend runs or increase the number of screens
on which successful movies are being played and substitute films
when gross receipts cease to meet expectations. Real-time
seating and box office information is available to box office
personnel, allowing theatre management to avoid overselling a
particular film and providing faster and more accurate responses
to customer inquiries regarding showings and available seating.
The system also tracks concession sales and provides in-theatre
inventory reports, leading to better inventory management and
control. The system also has multiple language capabilities,
numerous ticket pricing options, integrates internet ticket
sales and has the ability to process credit cards. The system
also supports barcode scanners, pole displays, touch screens,
credit card readers and other equipment specific to individual
country requirements.
Competition
We are one of the leading motion picture
exhibitors in terms of both revenues and the number of screens
in operation. We compete against local, national and
international exhibitors.
We are the sole exhibitor in approximately 85% of
the first run film zones in which our first run North American
theatres operate. In film zones where there is no direct
competition, we select those pictures we believe will be the
most successful from among those offered to us by distributors.
Where there is competition, we usually license films based on an
allocation process. We currently operate in 144 first run film
zones in North America. Of the 97 theatres we operate outside of
North America, approximately 90% of those theatres have no
direct competition. The principal competitive factors with
respect to film licensing are:
The competition for customers is dependent upon
factors such as the availability of popular films, the location
of theatres, the comfort and quality of theatres and ticket
prices. Our admission prices at first run and discount theatres
are competitive with admission prices of competing theatres.
We also face competition from a number of other
motion picture exhibition delivery systems, such as home video,
DVD, and network, syndicated and pay-per-view television. We do
not believe that these
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Seasonality
Our revenues have historically been seasonal,
coinciding with the timing of releases of motion pictures by the
major distributors. Generally, the most successful motion
pictures have been released during the summer, extending from
Memorial Day to Labor Day, and during the holiday season,
extending from Thanksgiving through year-end. The unexpected
emergence of a hit film during other periods can alter this
seasonality trend. The timing of such film releases can have a
significant effect on our results of operations, and the results
of one quarter are not necessarily indicative of results for the
next quarter or for the same period in the following year. The
seasonality of the release of successful films, however, has
become less pronounced in recent years with the release of major
motion pictures occurring more evenly throughout the year.
Employees
We have approximately 8,500 employees in North
America, approximately 10% of whom are full time employees and
90% of whom are part time employees. We have approximately 4,200
employees outside of North America. Approximately 20 North
American employees are represented by unions under collective
bargaining agreements. Some of our international operations
utilize union labor. We regard our relations with our employees
as satisfactory.
Regulations
The distribution of motion pictures is largely
regulated by federal and state antitrust laws and has been the
subject of numerous antitrust cases. We have not been a party to
any of such cases, but the manner in which we can license films
from certain major film distributors is subject to consent
decrees resulting from these cases. Consent decrees bind certain
major film distributors and require the films of such
distributors to be offered and licensed to exhibitors, including
us, on a theatre-by-theatre and film-by-film basis.
Consequently, exhibitors cannot assure themselves of a supply of
films by entering long-term arrangements with major
distributors, but must negotiate for licenses on a film-by-film
and theatre-by-theatre basis.
We are subject to various general regulations
applicable to our operations including the Americans with
Disabilities Act, or the ADA. We develop new
theatres to be accessible to the disabled and we believe we are
in substantial compliance with current regulations relating to
accommodating the disabled. Although we believe that our
theatres comply with the ADA, we are, or have been, a party to
lawsuits which claim that our handicapped seating arrangements
do not comply with the ADA or that we are required to provide
captioning for patrons who are deaf or are severely hearing
impaired. See Legal Proceedings.
Our theatre operations are also subject to
federal, state and local laws governing such matters as wages,
working conditions, citizenship, health and sanitation
requirements and licensing.
Financial Information About Geographic
Areas
We operate in a single business segment as a
motion picture exhibitor. We are a multinational corporation
with consolidated operations, as of March 31, 2004, in the
U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru,
Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Colombia
and the United Kingdom. See Note 17 of the Notes to our
Consolidated Financial Statements for information on our
revenues and theatre properties and equipment in the U.S. and
Canada, Mexico, Brazil and other foreign countries.
75
Properties
North
America
As of March 31, 2004, we operated 167
theatres, with 1,835 screens, pursuant to leases and own the
land and building for 33 theatres, with 488 screens, in North
America. During the three months ended March 31, 2004, we
opened three new theatres with 33 screens. Our leases are
generally entered into on a long term basis with terms generally
ranging from 15 to 25 years. The exercise of available
renewal options can generally extend our leases by another 5 to
20 years. As of March 31, 2004, approximately 8% of
our theatre leases in North America, covering 92 screens, have
remaining terms, including optional renewal periods, of less
than five years and approximately 76% of our theatre leases in
North America, covering 1,545 screens, have remaining terms,
including optional renewal periods, of more than 15 years.
The leases generally provide for a fixed monthly minimum rent
payment, with certain leases also subject to additional
percentage rent if a target annual revenue level is achieved. We
lease an office building in Plano, Texas for our corporate
office. See Note 16 of our Notes to Consolidated Financial
Statements for information with respect to our lease
commitments. We periodically review the profitability of each of
our North American theatres, particularly those whose lease
terms are about to expire, to determine whether to continue its
operations.
International
As of March 31, 2004, we operated 97
theatres, with 852 screens, outside of North America, all of
which are leased pursuant to ground or building leases. The
leases generally provide for contingent rental based upon
operating results (some of which are subject to an annual
minimum). Generally, these leases will include renewal options
for various periods at stipulated rates. We attempt to obtain
lease terms that provide for build-to-suit construction
obligations of the landlord. No international theatre leases
have remaining terms, including optional renewal periods, of
less than five years, and approximately 75% of our international
theatre leases, covering 638 screens, have remaining terms,
including optional renewal periods, of more than 15 years. We
periodically review the profitability of each of our
international theatres, particularly those whose lease terms are
about to expire, to determine whether to continue its operations.
Legal Proceedings
DOJ
Litigation
In March 1999, the Department of Justice, or the
DOJ, filed suit in the U.S. District Court, Northern
District of Ohio, Eastern Division, against Cinemark USA, Inc.
alleging certain violations of the ADA relating to wheelchair
seating arrangements and seeking remedial action. An order
granting summary judgment to Cinemark USA, Inc. was issued in
November 2001. The Department of Justice appealed the district
courts ruling with the Sixth Circuit Court of Appeals. On
November 7, 2003, the Sixth Circuit Court of Appeals
reversed the summary judgment and sent the case back to the
district court for further review without deciding whether
wheelchair seating at Cinemark USA, Inc. theatres comply with
the ADA. The Sixth Circuit Court of Appeals also stated that if
the district court found that the theatres did not comply with
the ADA, any remedial action should be prospective only. If
Cinemark USA, Inc. loses this litigation, our financial
position, results of operations and cash flows may be materially
and adversely affected. We are unable to predict the outcome of
this litigation or the range of potential loss, however,
management believes that based upon current precedent our
potential liability with respect to such proceeding is not
material in the aggregate to our financial position, results of
operations and cash flows. Accordingly, we have not established
a reserve for loss in connection with this proceeding.
To date, there have been three divergent opinions
published by federal circuit courts addressing whether
wheelchair seating locations in stadium-style movie theatres
must comply with an alleged viewing angle
requirement purportedly interpreted from the lines of
sight comparable clause of Section 4.33.3 of the ADA
Accessibility Guidelines.
On April 6, 2000, the Fifth Circuit Court of
Appeals issued its decision in
Lara v. Cinemark,
in which
it rejected an interpretation by the United States Department of
Justice that Section 4.33.3 imposes a viewing
angle requirement, and held that wheelchair seating
locations in the sloped-floor areas of stadium-style
76
Mission,
Texas Litigation
In July 2001, Sonia Rivera-Garcia and Valley
Association for Independent Living filed suit in the 93rd
Judicial District Court of Hidalgo County, Texas alleging
certain violations of the Human Resources Code, the Texas
Architectural Barriers Act, the Texas Accessibility Standards
and the Deceptive Trade Practices Act relating to accessibility
of movie theatres for patrons using wheelchairs at one theatre
in the Mission, Texas market. The plaintiffs are seeking
remedial action and unspecified damages. Cinemark USA, Inc.
filed an answer denying the allegations and are vigorously
defending this suit and have filed motions to dismiss this case
based upon the favorable results we had on a similar case in
Austin, Texas. We are unable to predict the outcome of this
litigation or the range of potential loss, however, management
believes that based upon current precedent our potential
liability with respect to such proceeding is not material in the
aggregate to our financial position, results of operations and
cash flows. Accordingly, we have not established a reserve for
loss in connection with this proceeding.
Houston,
Texas Litigation
In May 2002, Robert Todd on behalf of Robert
Preston Todd, his minor child and all individuals who are
deaf or are severely hearing impaired brought this case in
the United States District Court for the Southern District of
Texas, Houston Division against several movie theatre operators,
including AMC Entertainment, Inc., Regal Entertainment, Inc.,
Cinemark USA, Inc. and Century Theaters as well as eight movie
production companies. The lawsuit alleges violation of
Title III of the ADA and the First Amendment to the
Constitution of the United States. Plaintiffs sought unspecified
injunctive relief, unspecified declaratory relief, unspecified
monetary damages (both actual and punitive) and unspecified
attorneys fees. Cinemark USA, Inc. denied any violation of
law and have vigorously defended against all claims. On
March 7, 2003, the federal district judge presiding over
the case granted summary judgment to the defendants on the
alleged First Amendment violations. On August 5, 2003, the
federal district judge presiding over the case granted summary
judgment to the defendants on the alleged ADA violations. The
plaintiffs appealed the August 5, 2003 decision but have
since withdrawn the appeal. Accordingly, the district
courts summary judgment in Cinemark USA, Inc.s favor
is final.
From time to time, we are involved in other
various legal proceedings arising from the ordinary course of
our business operations, such as personal injury claims,
employment matters and contractual disputes, most of which are
covered by insurance. We believe our potential liability with
respect to proceedings currently pending is not material,
individually or in the aggregate, to our financial position,
results of operations and cash flows.
77
MANAGEMENT
Executive Officers and Directors
Set forth below is certain information concerning
individuals that serve as our executive officers and directors
after the Recapitalization. In addition, we expect to identify
at least 7 additional individuals to serve as our directors.
The following is a brief description of the
business experience of our directors and executive officers for
at least the past five years:
Lee Roy Mitchell
has
served as Chairman of the Board since March 1996 and as Chief
Executive Officer and a Director since our inception in 1987.
Mr. Mitchell was Vice Chairman of the Board of Directors
from March 1993 to March 1996 and was President from our
inception in 1987 until March 1993. From 1985 to 1987,
Mr. Mitchell served as President and Chief Executive
Officer of a predecessor corporation. Since March 1999,
Mr. Mitchell has served as a director of Texas Capital
Bancshares, Inc., a bank holding company. 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 nearly 46 years.
Mr. Mitchell is the husband of Tandy Mitchell. After the
consummation of the Recapitalization, Mr. Mitchell
continued as Chairman of the Board of Directors.
Tandy Mitchell
has
served as Vice Chairman of the Board since March 1996, as a
Director since April 1992, as Executive Vice President since
October 1989, as Secretary from 1987 to December 2003 and as
Assistant Secretary since December 2003. Mrs. Mitchell was
General Manager of the theatre division of Texas Cinema
Corporation from 1985 to 1987. From 1978 to 1985,
Mrs. Mitchell was employed by Southwest Cinemas
Corporation, a motion picture exhibitor, most recently as
Director of Operations. Mrs. Mitchell is the wife of Lee
Roy Mitchell and sister of Walter Hebert, III. Upon the
consummation of the Recapitalization, Mrs. Mitchell
resigned from the Board of Directors.
Alan Stock
has
served as President since March 1993, as a Director since April
1992 and as Chief Operating Officer since March 1992.
Mr. Stock was Senior Vice President from October 1989 to
March 1993.
78
Robert Copple
has
served as Senior Vice President, Treasurer and Chief Financial
Officer since August 2000 and as a Director since September
2001. Mr. Copple was acting Chief Financial Officer from
March 2000 to August 2000. From August 1997 to March 2000,
Mr. Copple was President of PBA Development, Inc., an
investment management and venture capital company. From June
1993 to July 1997, Mr. Copple was Director of Finance for
the Company. Prior to joining our company, Mr. Copple was a
Senior Manager with Deloitte & Touche, LLP where he was
employed from 1982 to 1993. Upon consummation of the
Recapitalization, Mr. Copple resigned from the Board of
Directors.
Tim Warner
has
served as Senior Vice President since May 2002 and has served as
President of Cinemark International, L.L.C. since April 1996.
From 1990 to 1996, Mr. Warner served as Chairman/ CEO of
the National Association of Theatre Owners of California and
General Chairman of NATO/ Showest. Mr. Warner has served on
the Board of Directors of the National Association of Theatre
Owners since 1982. He has been active in the theatre industry
for over 35 years.
Robert Carmony
has
served as Senior Vice President Operations since
July 1997, as Vice President Operations since March
1996 and as Director of Operations since June 1988. Prior to
joining our company, Mr. Carmony was owner of O.C.
Enterprises, a software development firm, from 1986 to 1988.
Prior to forming his own software company, Mr. Carmony
worked for Plitt-Cineplex Odeon theatres from 1985 to 1986.
Margaret Richards
has served as Vice
President Real Estate since March 1994 and as a Vice
President and Assistant Secretary since October 1989.
Ms. Richards has been Director of Leasing since our
inception in 1987 and was employed by the theatre division of
Texas Cinema Corporation in its real estate department from
August 1986 to December 1987.
John Lundin
has
served as Vice President Film Licensing since
September 2000, as Head Film Buyer from September 1997 to
September 2000 and was a film buyer from September 1994 to
September 1997. Prior to joining our company, Mr. Lundin
was Vice President General Sales Manager of Cannon
Pictures. He has also held the positions of Vice
President Assistant General Sales Manager for
Columbia Pictures and Head Film Buyer for Litchfield Theatres.
Mr. Lundin has nearly 30 years of experience in the
motion picture exhibition business.
Walter Hebert, III
has served as Vice
President Purchasing since July 1997 and was the
Director of Purchasing from October 1996 until July 1997. From
December 1995 until October 1996, Mr. Hebert was the
President of 2 Day Video, Inc., a 21-store video chain that
was our subsidiary. Prior to joining our company,
Mr. Hebert worked for Dillards Department Stores from
1973 to 1993, serving as a Divisional Merchandise Manager in the
Arkansas Division from 1981 until 1993. Mr. Hebert is the
brother of Tandy Mitchell.
Don Harton
has
served as Vice President Construction since July
1997. From August 1996 to July 1997, Mr. Harton was
Director of Construction. Prior to joining our company in August
1996, Mr. Harton was an architect with Urban Architecture,
where he was employed from October 1983 until July 1996.
Michael Cavalier
has
served as Vice President General Counsel since July
1999, as Assistant Secretary from December 2002 to December 2003
and as Secretary since December 2003. From July 1997 to July
1999, Mr. Cavalier was General Counsel of our company and
from July 1993 to July 1997 was Associate General Counsel. Prior
to joining our company in July 1993, Mr. Cavalier was an
associate attorney at the Dallas office of Akin Gump Strauss
Hauer & Feld LLP.
Terrell Falk
has
served as Vice President Marketing and
Communications since April 2001. From March 1998 to April 2001,
Ms. Falk was Director of Large Format Theatres, overseeing
the marketing and operations of our companys IMAX
theatres. From March 1995 until joining our company, she was Vice
79
Tom Owens
has served
as Vice President Development since December 2003
and as Director of Real Estate since April 2002. From 1998 to
April 2002, Mr. Owens was President of NRE, a company he
founded that specialized in the development and financing of
motion picture theatres. From 1996 to 1998, Mr. Owens
served as President of Silver Cinemas International, Inc., a
motion picture exhibitor. In May 2000, Silver Cinemas
International, Inc., filed for bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code. From 1989
to 1996, Mr. Owens served as our Vice President
Development.
Benjamin D. Chereskin
has been a Director since the
consummation of the Recapitalization. Mr. Chereskin is a
Managing Director of Madison Dearborn Partners, LLC and
co-founded the firm in 1993. Before that, Mr. Chereskin was
with First Chicago Venture Capital for nine years.
Mr. Chereskin also serves on the Board of Directors of
Cornerstone Brands, Inc., Tuesday Morning Corporation, NWL
Holdings, Inc., Family Christian Stores, Inc. and Carrols
Holdings Corp.
James N.
Perry, Jr.
, has been a Director
since the consummation of the Recapitalization. Mr. Perry
is a Managing Director of Madison Dearborn Partners, LLC and
co-founded the firm in 1993. Before that, Mr. Perry was
with First Chicago Venture Capital for eight years.
Mr. Perry currently serves on the Board of Directors of
Nextel Partners, Inc., XM Satellite Radio Holdings Inc.,
Cbeyond Communications, LLC, Madison River Telephone Company,
Focal Communications, Allegiance Telecom and Band-X.
Robin P. Selati
has
been a Director since the consummation of the Recapitalization.
Mr. Selati is a Managing Director of Madison Dearborn
Partners, LLC and has been employed by the firm since 1993.
Before that, Mr. Selati was with Alex Brown & Sons
Incorporated, an investment bank, as a Financial Analyst in the
consumer/ retailing investment banking group. Mr. Selati
currently serves on the Board of Directors of Tuesday Morning
Corporation, Peter Piper, Inc., NWL Holdings, Inc., Carrols
Holdings Corporation, Family Christian Stores, Inc., Ruths
Chris Steak House, Inc and Beverages & More, Inc.
Vahe A. Dombalagian
has been a Director since the
consummation of the Recapitalization. Mr. Dombalagian is a
Vice President of Madison Dearborn Partners, LLC and has been
employed by the firm since July 2001. Before that,
Mr. Dombalagian was an Associate with Texas Pacific Group,
a private equity firm, from August 1997 to August 1999.
Mr. Dombalagian currently serves on the Board of Directors
of Outsourcing Solutions Inc.
Board Composition
Except as described in this prospectus, there are
no arrangements or understandings between any member of the
Board of Directors or executive officer and any other person
pursuant to which that person was elected or appointed to his or
her position.
Our Board of Directors has the power to appoint
officers. Each officer will hold office for the term determined
by our Board of Directors and until such persons successor
is chosen and qualified or until such persons death,
resignation or removal.
Committees of the Board of Directors
Our Board of Directors has established an audit
committee and a compensation committee. Mr. Dombalagian is
serving as the initial chairman of the audit committee, and
Mr. Chereskin is serving as the initial chairman of the
compensation committee. The audit committee will recommend the
annual appointment of auditors with whom the audit committee
will review the scope of audit and non-audit assignments and
related fees, accounting principles we will use in financial
reporting, internal auditing procedures and the adequacy of our
internal control procedures. The compensation committee will
review and approve the compensation and benefits for our
executive officers, administer our employee benefit plans,
80
Compensation of Directors After the
Recapitalization
To the extent any future directors are not
employees of our company, such directors may receive fees. All
of the directors will be reimbursed for out-of-pocket expenses
related to their service as directors.
Executive Compensation
The following Summary Compensation Table sets
forth the compensation earned for each of the past three years
by our Chief Executive Officer and our four most highly
compensated executive officers:
Summary Compensation Table
81
82
Options/Stock Appreciation Right
Grants
There were no stock options or Stock Appreciation
Right (SAR) grants to the named executive officers
during the fiscal year ended December 31, 2003.
The following table sets forth information
concerning option exercises during the 2003 fiscal year and
option holdings as of the end of the 2003 fiscal year with
respect to the named executive officers. No SARs were
outstanding at the end of the 2003 fiscal year.
Aggregated Options/SAR Exercised in Last
Fiscal Year and FY-End Option/SAR Values
Employment Agreements
On March 12, 2004, we entered into new
employment agreements with certain executives which became
effective upon the consummation of the Recapitalization. In
addition, in connection with the consummation of the
Recapitalization, we paid a one-time special bonus in the amount
of $2.4 million to Lee Roy Mitchell and in the amount of
$50,000 to each of Alan Stock, Tim Warner and Robert Copple. Set
forth below is a summary of the new agreements.
Lee Roy
Mitchell
We entered into an employment agreement with Lee
Roy Mitchell pursuant to which Mr. Mitchell serves as our
Chief Executive Officer. The employment agreement became
effective upon the consummation of the Recapitalization. The
initial term of the employment agreement is three years, subject
to an automatic extension for a one-year period, unless the
employment agreement is terminated. Mr. Mitchell receives a
base salary of $716,625 per year, which is subject to
annual review for increase (but not decrease) each year by our
Board of Directors or committee or delegate thereof. In
addition, Mr. Mitchell is eligible to receive an annual
cash incentive bonus upon our meeting certain performance
targets established by the board or the compensation committee
for the fiscal year. Mr. Mitchell is also entitled to
additional fringe benefits including life insurance benefits of
not less than $5 million, disability benefits of not less
than 66% of base salary, a luxury automobile and a membership at
a country club.
The employment agreement provides for severance
payments upon termination of employment, the amount and nature
of which depends upon the reason for the termination of
employment. If Mr. Mitchell resigns for good reason or is
terminated by us without cause (as defined in the agreement),
Mr. Mitchell will receive: accrued compensation (which
includes base salary and a pro rata bonus) through the date of
83
In the event Mr. Mitchells employment
is terminated due to his death or disability, Mr. Mitchell
or his estate will receive: accrued compensation (which includes
base salary and a pro rata bonus) through the date of
termination; any previously vested stock options and accrued
benefits, such as retirement benefits, in accordance with the
terms of the plan or agreement pursuant to which such options or
benefits were granted; his annual base salary as in effect at
the time of termination for a period of six months following
such termination; a lump sum payment equal to an additional six
months of base salary payable six months after the date of
termination; and any benefits payable to Mr. Mitchell and
or his beneficiaries in accordance with the terms of any
applicable benefit plan.
In the event Mr. Mitchells employment
is terminated by us for cause or under a voluntary termination
(as defined in the agreement), Mr. Mitchell will receive:
accrued base salary through the date of termination; and any
previously vested rights under a stock option or similar
incentive compensation plan in accordance with the terms of such
plan.
Mr. Mitchell will also be entitled, for a
period of five years, to tax preparation assistance upon
termination of his employment for any reason other than for
cause or under a voluntary termination. The employment agreement
contains various covenants, including covenants related to
confidentiality, non-competition, other than certain permitted
activities (as defined therein) and non-solicitation.
We entered into executive employment agreements
with each of Tandy Mitchell, Alan Stock, Robert Copple, Timothy
Warner, Robert Carmony, John Lundin and Michael Cavalier
pursuant to which Mrs. Mitchell and Messrs. Stock,
Copple, Warner, Carmony, Lundin and Cavalier serve,
respectively, as our Executive Vice President, President and
Chief Operating Officer, Senior Vice President and Chief
Financial Officer, Senior Vice President, Senior Vice President
of Operations, Vice President of Film Licensing and Vice
President and General Counsel. The employment agreements became
effective upon the consummation of the Recapitalization. The
initial term of each employment agreement is three years,
subject to automatic extensions for a one-year period at the end
of each year of the term, unless the agreement is terminated.
Pursuant to the employment agreements, each of these individuals
receives a base salary, which is subject to annual review for
increase (but not decrease) each year by our board of directors
or committee or delegate thereof. In addition, each of these
executives is eligible to receive an annual cash incentive bonus
upon our meeting certain performance targets established by the
board or the compensation committee for the fiscal year.
Our Board of Directors will adopt a stock option
plan and grant each executive stock options to acquire such
number of shares as set forth in that executives
employment agreement. The executives stock options vest
and become exercisable twenty percent per year on a daily pro
rata basis and shall be fully vested and exercisable five years
after the date of the grant, as long as the executive remains
continuously employed by us. Upon consummation of a sale of our
company, the executives stock options will accelerate and
become fully vested.
The employment agreement with each executive
provides for severance payments on substantially the same terms
as the employment agreement for Mr. Mitchell, except that
if the executive resigns for good reason or is terminated by us
without cause (as defined in the agreements) prior to the first
anniversary of the
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Each executive will also be entitled to office
space and support services for a period of not more than three
months following the date of any termination except for
termination for cause. The employment agreements contain various
covenants, including covenants related to confidentiality,
non-competition and non-solicitation.
Each of Lee Roy Mitchell, Tandy Mitchell, Alan
Stock, Robert Copple, Timothy Warner, Robert Carmony, John
Lundin, Michael Cavalier and certain trusts, in his, her or its
capacity as a seller of our common stock, have entered into
non-competition, non-solicitation and non-disclosure agreements
with us. These agreements became effective upon the consummation
of the Recapitalization. Pursuant to the agreements, each
executive agreed not to compete with us for a period of two
years, and each executive agreed not to solicit our customers or
hire our employees, or disparage us, for a period of three
years. The obligation not to compete will terminate prior to the
two year period if we effect a sale of our company (as defined
in the agreements). In addition, each executive agreed not to
disclose our confidential information for a period of three
years.
401(k) Plan
We sponsor a defined contribution savings plan,
or 401(k) Plan, whereby certain employees may elect to
contribute, in whole percentages between 1% and 50% of such
employees compensation, provided no employees
elective contribution shall exceed the amount permitted under
Section 402(g) of the Internal Revenue Code of 1986, as
amended ($12,000 in 2003). We may make an annual discretionary
matching contribution. For plan years prior to 2002, our
discretionary matching contribution is subject to vesting and
forfeiture. Our discretionary matching contributions vest to
individual accounts at the rate of 20% per year beginning
two years from the date of employment. Employees are fully
vested in the discretionary matching contributions after six
years of employment. For plan years beginning in 2002, our
discretionary matching contributions immediately vest.
As part of the Recapitalization, all of the
outstanding options to purchase our Class A common stock
pursuant to director options and the Long Term Incentive Plan
immediately vested (to the extent not vested), were exercised
and received the merger consideration as set forth in the merger
agreement. The Long Term Incentive Plan was terminated upon the
consummation of the Recapitalization.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with
respect to the beneficial ownership of our capital stock
immediately upon the consummation of the Recapitalization by:
Beneficial ownership has been determined in
accordance with the applicable rules and regulations promulgated
under the Exchange Act. The numbers presented in the table below
are subject to change based on the price payable with respect to
the shares of common stock in connection with the
Recapitalization. Upon the consummation of the Recapitalization,
our outstanding securities consist of 27,674,916 shares of
Class A common stock.
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CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Following the Transactions
In connection with the Recapitalization, we
entered into the merger agreement, a stock purchase agreement, a
stockholders agreement and a registration agreement with the
equity sponsor, the Mitchell investors and the management
investors. A brief summary of the principal terms of these
agreements is set forth below.
On March 12, 2004, Popcorn Merger Corp., a
Delaware corporation and newly formed subsidiary of Madison
Dearborn entered into the merger agreement with Cinemark, Inc.,
pursuant to which on April 2, 2004 Popcorn Merger Corp.
merged with and into Cinemark, Inc. with Cinemark, Inc.
continuing as the surviving corporation. Pursuant to a stock
purchase agreement entered into between Cinemark, Inc. and the
equity sponsor on March 12, 2004, the equity sponsor,
simultaneously with the completion of the merger, purchased
shares of common stock of Cinemark, Inc. for approximately
$518.3 million in cash. The Mitchell investors and certain
members of our management which were stockholders of Cinemark,
Inc. and, among others, received cash consideration in the
merger pursuant to the merger agreement. In addition, the
Mitchell investors and the management investors retained a
portion of their holdings of shares of Cinemark, Inc. All of the
capital stock of Cinemark, Inc. is owned by the equity sponsor,
the Mitchell investors and the management investors.
Each of the merger agreement and the stock
purchase agreement contained customary representations and
warranties and customary covenants of the parties thereto.
Neither the merger agreement nor the stock purchase agreement
provided for indemnification for losses relating to specified
events, circumstances and matters.
On March 12, 2004, Madison Dearborn Capital
Partners IV, L.P., an affiliate of Madison Dearborn
Partners, LLC, or the equity sponsor, the Mitchell
investors and the management investors entered into a
stockholders agreement with us. The stockholders agreement
became effective on April 2, 2004 upon the consummation of
the Recapitalization. Future holders of our common stock,
including any permitted co-investor introduced to us by the
equity sponsor that acquires a portion of the common stock which
the equity sponsor has agreed to purchase, or a
co-investor, may also be required to become parties
to the agreement. We refer to the equity sponsor, the
co-investors, if any, the Mitchell investors, the management
investors and their permitted transferees collectively as the
Stockholders.
Voting.
The
Stockholders will vote any voting securities over which they
have control and will take all other reasonably necessary or
desirable actions to elect and continue in office, members of
our Board of Directors consisting of twelve members, initially
composed of two persons designated by the Mitchell investors and
ten persons designated by the equity sponsor. The equity sponsor
has the right to assign to a co-investor, if any, the right to
designate one of the ten directors the equity sponsor is
entitled to designate.
Transfer restrictions.
Stockholders may not transfer shares,
other than in an exempt transfer, which includes transfers to
affiliates, transfers to family members in the case of a natural
person, transfers in connection with certain sales of our
company approved by our board or by the equity sponsor,
transfers by the equity sponsor to any co-investors and
transfers by the management investors to us. Any such
affiliates, family members or co-investors to which the
Stockholders transfer our shares will agree in writing to be
bound by the provisions of the stockholders agreement.
Rights of first refusal.
We and the equity sponsor are granted
certain rights of first refusal in connection with certain sales
of our shares by any of the Mitchell investors, the management
investors, the co-investors, if any, or their permitted assigns.
We are granted certain rights of refusal in connection with
certain transfers of our shares by the equity sponsor to any of
our competitors.
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Participation rights.
Pursuant to the stockholders
agreement, the co-investors, the Mitchell investors and the
management investors are granted certain tag-along
rights, which entitle them to participate in certain sales by
the equity sponsor of the shares of our common stock held by the
equity sponsor.
Sale of Cinemark, Inc.
Subject to certain exceptions, if our
Board of Directors or the equity sponsor approves a sale of our
company, each of the Stockholders will vote for and consent to
the approved sale and will take all necessary and desirable
actions in connection with the consummation of the approved sale
as reasonably requested by the board or by the equity sponsor.
Holdback agreement.
No management investor or his
permitted transferee shall sell any of our equity securities or
any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and the
180-day period beginning on the effective date of any
underwritten demand registration or any underwritten piggyback
registration pursuant to the equity registration agreement.
Preemptive rights.
If we propose to issue any additional
shares of our common stock or of any other capital stock or
equity securities, or any securities convertible into or
exchangeable or exercisable for shares of our stock, subject to
certain exceptions, we will offer to each Stockholder a portion
of the number or amount of such securities proposed to be sold
in any such transaction.
Anti-takeover measures.
Prior to the commencement of an
initial public offering of our shares, the equity sponsor will
request that our Board of Directors adopt reasonable and
customary anti-takeover measures, except to the extent that our
Board of Directors determines in the observance of its fiduciary
duties that any such measures are not in the best interests of
our stockholders, or the underwriters managing the initial
public offering advise us that any such measures will adversely
affect such offering or offering price.
Approval of certain transactions.
So long as the Mitchell investors and
their permitted transferees own at least 10% of our outstanding
common stock, they will possess approval rights over certain
significant transactions that may be pursued by us.
On March 12, 2004, we entered into a
registration agreement with the equity sponsor and the Mitchell
investors. The registration agreement became effective on
April 2, 2004 upon the consummation of the Recapitalization.
Demand registrations.
Under the registration agreement, the
holders of at least a majority of the registrable securities
held by the MDCP investors have the right at any time, subject
to certain conditions, to require us to register any or all of
their common stock under the Securities Act on a registration
statement on Form S-1 or any similar long-form registration
at our expense. The holders of a majority of the registrable
securities held by the Mitchell investors have the right, upon
the first to occur of (1) the third anniversary of the
closing of the Recapitalization, (2) 180 days after
the completion of an initial public offering of our common stock
and (3) our achievement of certain financial targets as set
forth therein for any two consecutive fiscal years prior to the
end of 2008, subject to certain conditions, to require us to
register any or all of their common stock on a registration
statement on Form S-1 or any similar long-form registration
at our expense. The holders of a majority of the registrable
securities held by the co-investors, if any, have the right, at
any time after 180 days after the completion of an initial
public offering of our common stock, subject to certain
conditions, to require us to register at a certain minimum price
any or all of their common stock on a registration statement on
Form S-1 or any similar long-form registration at our
expense. In addition, the holders of a majority of the
registrable securities held by the MDCP investors, the Mitchell
investors and the co-investors, each as a separate group, have
the right any time after an initial public offering, subject to
conditions, to require us to register any or all of their common
stock on a registration statement on Form S-3 or any
similar short-form registration, if available. We refer to each
of these types of registrations as demand
registrations.
We are not required, however, to effect any
registration within 180 days of the effective date of a
previous demand registration or a previous registration in which
holders of the registrable securities were given piggyback
rights. In addition, we may postpone for up to 180 days the
filing or the effectiveness of a
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Piggyback registrations.
All holders of registrable securities
are entitled to request the inclusion of their securities in any
registration statement at our expense whenever we propose to
register any offering of our equity securities (other than
pursuant to a demand registration). The registration form to be
used may be used for the registration of such registrable
securities.
Holdback agreement.
Each holder of registrable securities
has agreed not to effect any public sale or distribution of our
equity securities or any securities convertible into or
exchangeable or exercisable for such securities, during the
seven days prior to and the 180-day period beginning on the
effective date of any underwritten demand registration or any
underwritten piggyback registration (except as part of that
registration or if the underwriters otherwise agree). We have
agreed not to, and have agreed to cause any 5% holder of our
common stock to agree not to, effect any public sale or
distribution of our equity securities or any securities
convertible into or exchangeable or exercisable for such
securities, during the same time period.
In connection with all registrations pursuant to
the registration agreement, we have agreed to indemnify the
holders of registrable common stock against liabilities relating
to the registration, including liabilities under the Securities
Act.
Madison Dearborn or an affiliate received a fee
of approximately $12.5 million at the closing of the
Recapitalization plus out-of-pocket expenses incurred in
connection with the Transactions. We will reimburse Madison
Dearborn for all future expenses incurred in connection with its
investment in us.
On March 12, 2004, we entered into an
amended and restated profit participation agreement with Alan
Stock, our President, which became effective on April 2,
2004 upon the consummation of the Recapitalization and amends a
profit participation agreement with Mr. Stock in effect
since May 2002. Under this agreement, Mr. Stock will
receive a profit interest in two recently built theatres after
we have recovered our capital investment in these theatres plus
our borrowing costs. Operating losses and disposition losses for
any year are allocated 100% to us, and operating profits and
disposition profits for these theatres for any fiscal year are
allocated first to us to the extent of total operating losses
and losses from any disposition of these theatres. Thereafter,
net cash from operations from these theatres or from any
disposition of these theatres is paid first to us until such
payments equal our investment in these theatres, plus interest,
and then 51% to us and 49% to Mr. Stock. During the three
months ended March 31, 2004, we recorded approximately
$50,000 in profit sharing expense payable to Mr. Stock,
which is included in general and administrative expenses and
other current liabilities on our condensed consolidated
financial statements. In the event that Mr. Stocks
employment is terminated without cause, net cash from operations
and from disposition of the theatres will be distributed
according to this formula without first allowing us to recoup
our investment plus interest thereon. Upon consummation of an
initial public offering, we will have the option to purchase
Mr. Stocks interest in the theatres for a price equal
to the greater of (i) a stated price reduced by any
payments received during the term and (ii) 49% of adjusted
theatre level cash flow multiplied by seven. We do not intend to
enter into similar arrangements with our executive officers in
the future.
Prior to the Transactions
We manage one theatre with 12 screens for Laredo
Theatre, Ltd. Lone Star Theatres, Inc. owns 25% of the limited
partnership interests in Laredo Theatre, Ltd. We are the sole
general partner and own the remaining limited partnership
interests. Lone Star Theatres, Inc. is owned 100% by
Mr. David Roberts, who
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During 2003, we managed one theatre with four
screens for Mitchell Theatres, Inc., which was 100% owned by
members of Lee Roy Mitchells family. Under the agreement,
management fees were paid to us by Mitchell Theatres, Inc. at a
rate of 5% of theatre revenues. We recorded $32,144 of
management fee revenues from Mitchell Theatres during 2003. On
December 31, 2003, we purchased all of the issued and
outstanding capital stock of Mitchell Theatres, Inc. for
approximately $0.7 million, which included the assumption
of approximately $0.2 million in outstanding debt that was
immediately paid off at the time of purchase. See Note 3 to
our consolidated financial statements for a description of the
acquisition.
We lease one theatre with 7 screens from Plitt
Plaza joint venture. Plitt Plaza joint venture is indirectly
owned by Lee Roy Mitchell. The lease expired in July 2003 but
was extended with similar terms through December 2003. We
recorded $267,334 of facility lease expense payable to Plitt
Plaza joint venture during 2003. We signed a new month-to-month
lease effective January 1, 2004 under which the annual rent
will be approximately $118,000 plus certain taxes, maintenance
expenses and insurance. We recorded $30,024 of facility lease
expense payable to Plitt Plaza joint venture during the three
month period ended March 31, 2004.
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DESCRIPTION OF EXCHANGE NOTES
You can find the definitions of certain terms
used in this description under the subheading
Certain Definitions. In this
description, the word Company refers only to
Cinemark, Inc. and not to any of its subsidiaries.
The Company issued the initial notes, and will
issue the exchange notes, under the indenture dated
March 31, 2004 between itself and The Bank of New York
Trust Company, N.A., as trustee. The terms of the initial notes
and the exchange notes offered hereby include those stated in
the indenture and those made part of the indenture by reference
to the Trust Indenture Act of 1939, as amended (the
Trust Indenture Act
). The aggregate principal
amount at maturity of notes issuable under the indenture is
unlimited, although the issuance of exchange notes in this
offering will be limited to an aggregate principal amount at
maturity of $577,173,000. We may issue an unlimited principal
amount of additional notes having identical terms and conditions
as the initial notes, subject to our compliance with the
covenants contained in the indenture. Any additional notes will
be part of the same issue as the initial notes and will vote on
all matters with the holders of the notes. The form of exchange
notes will be identical in all material respects to that of the
initial notes except that the exchange notes have been
registered under the Securities Act and, therefore, will not
bear legends restricting their transfer and the registration
rights will not apply to the exchange notes. The exchange notes
will not represent new indebtedness of the Company. Any
provision of the indenture which requires action by or approval
of a specified percentage of holders of the outstanding notes
shall require the approval of the holders of such percentage of
outstanding initial notes and exchange notes, in the aggregate.
Upon the effectiveness of an exchange offer registration
statement or shelf registration statements, as the case may be,
filed under the Securities Act with respect to the exchange
notes, the indenture will be subject to and governed by the
Trust Indenture Act.
The following description is a summary of the
material provisions of the indenture. It does not restate the
indenture in its entirety. We urge you to read the indenture
because it, and not this description, defines your rights as
holders of the exchange notes. Certain defined terms used in
this description but not defined below under
Certain Definitions have the meanings
assigned to them in the indenture.
The registered Holder of an exchange note will be
treated as the owner of it for all purposes. Only registered
Holders will have rights under the indenture.
Brief Description of the Notes
The notes:
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Holding Company Structure
The Company is a holding company and does not
have any material assets or operations other than ownership of
the Capital Stock of CNMK Holding, Inc., which in turn is also a
holding company and does not have any material assets or
operations other than ownership of the Capital Stock of Cinemark
USA, Inc. All of the Companys operations are conducted
through Cinemark USA, Inc. and its Subsidiaries. The claims of
creditors of the Company, including the claims of Holders of
notes, are structurally subordinated to all existing and future
third-party indebtedness and liabilities, including trade
payables, of the Companys Subsidiaries. At March 31,
2004, on a pro forma basis after giving effect to the
Transactions, the Company would have had total Senior Debt
(excluding the Companys guarantee of the Credit Agreement)
of approximately $360.0 million and no subordinated
Indebtedness. As of March 31, 2004, on the same basis, the
Companys Subsidiaries would have had $802.9 million
of Indebtedness and other liabilities, including trade payables,
and the notes would have been effectively subordinated to such
Indebtedness and other liabilities. Subject to certain
significant limitations, the Company and its Subsidiaries may
incur other Indebtedness in the future, including secured
Indebtedness. Moreover, the indenture does not impose any
limitation on the incurrence by the Company and its Restricted
Subsidiaries of liabilities that are not considered Indebtedness
under the indenture.
As of the date of the indenture, all of the
Companys Subsidiaries are Restricted
Subsidiaries. However, under the circumstances described
below under the subheading Certain
Covenants Designation of Restricted and Unrestricted
Subsidiaries, the Company is permitted to designate
certain of its Subsidiaries as Unrestricted
Subsidiaries. The Companys Unrestricted Subsidiaries
will not be subject to many of the restrictive covenants in the
indenture.
Principal, Maturity and Interest
The Company issued initial notes in the aggregate
principal amount at maturity of $577,173,000. The Company may
issue additional notes from time to time. Any offering of
additional notes is subject to the covenant described below
under the caption Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock. The notes and any additional notes
subsequently issued under the indenture will be treated as a
single class for all purposes under the indenture, including,
without limitation, waivers, amendments, redemptions and offers
to purchase. The Company will issue notes in denominations of
$1,000 aggregate principal amount at maturity and integral
multiples thereof. The notes will mature on March 15, 2014.
The initial notes were issued at a substantial
discount from their principal amount at maturity. See
Important Federal Income Tax Considerations
Consequences to U.S. Holders Original Issue
Discount. Until March 15, 2009, no interest will
accrue, but the Accreted Value will accrete (representing the
amortization of original issue discount) between the date of
original issuance and March 15, 2009, on a semiannual bond
equivalent basis using a 360-day year comprised of twelve 30-day
months such that the Accreted Value shall be equal to the full
principal amount at maturity of the notes on March 15, 2009
(the
Full Accretion Date
). The initial
Accreted Value per $1,000 in principal amount at maturity of
notes was $623.73 (representing the original price at which
initial notes were issued).
Beginning on March 15, 2009, interest on the
notes will accrue at the rate of 9 3/4% per annum and will
be payable in U.S. dollars semiannually in arrears on
March 15 and September 15, commencing on
September 15, 2009, to Holders of record on the immediately
preceding March 1 or September 1, respectively. Holders of
record on such record dates will become irrevocably entitled to
receive accrued interest in respect of the interest period
during which such record date occurs as of the close of business
on such record date, unless such interest is not paid on that
interest record date. Interest on the notes will accrue from the
most recent date to which interest has been paid or, if no
interest has been paid, from the Full Accretion Date. Interest
will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
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Methods of Receiving Payments on the
Notes
If a Holder has given wire transfer instructions
to the Company, the Company will pay all principal, interest and
premium and Additional Interest, if any, on that Holders
notes in accordance with those instructions. All other payments
on notes will be made at the office or agency of the paying
agent and registrar within the City and State of New York unless
the Company elects to make interest payments by check mailed to
the Holders at their address set forth in the register of
Holders.
Paying Agent and Registrar for the
Notes
The trustee will initially act as paying agent
and registrar. The Company may change the paying agent or
registrar without prior notice to the Holders of the notes, and
the Company or any of its Subsidiaries may act as paying agent
or registrar.
Transfer and Exchange
A Holder may transfer or exchange notes in
accordance with the indenture. The registrar and the trustee may
require a Holder to furnish appropriate endorsements and
transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer. The
Company is not required to transfer or exchange any note
selected for redemption. Also, the Company is not required to
transfer or exchange any note for a period of 15 days before a
selection of notes to be redeemed.
Optional Redemption
At any time prior to March 15, 2007, the
Company may on any one or more occasions redeem up to 35% of the
aggregate principal amount at maturity of notes issued under the
indenture (including any additional notes) at a redemption price
of 109.750% of the Accreted Value thereof on the redemption
date, plus accrued and unpaid Additional Interest, if any, to
the redemption date, with the net cash proceeds of one or more
Equity Offerings by the Company,
provided
that:
Except pursuant to the preceding paragraph, the
notes will not be redeemable at the Companys option prior
to March 15, 2009.
On and after March 15, 2009, the Company may
redeem all or a part of the notes upon not less than 30 nor more
than 60 days notice except that a redemption notice
may be mailed more than 60 days prior to a redemption if
the notice is issued in connection with a defeasance of the
notes or a satisfaction and discharge of the indenture, at the
redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Additional
Interest, if any, on the notes redeemed, to the applicable
redemption date, if redeemed during the twelve-month period
beginning on March 15 of the years indicated below:
If the redemption date is on or after an interest
payment record date and on or before the related interest
payment date, the accrued and unpaid interest and Additional
Interest, if any, will be paid to the Holder in whose name the
note is registered at the close of business on such record date,
and no additional interest or
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Selection and Notice
If less than all of the notes are to be redeemed
at any time, the trustee will select notes for redemption as
follows:
No notes of $1,000 in aggregate principal amount
at maturity or less can be redeemed in part. Except as otherwise
specified, notices of redemption will be mailed by first class
mail at least 30 but not more than 60 days before the
redemption date to each Holder of notes to be redeemed at its
registered address, except that redemption notices may be mailed
more than 60 days prior to a redemption date if the notice
is issued in connection with a defeasance of the notes or a
satisfaction and discharge of the indenture. Notices of
redemption may not be conditional.
If any note is to be redeemed in part only, the
notice of redemption that relates to that note will state the
portion of the principal amount at maturity of that note that is
to be redeemed. A new note in principal amount at maturity equal
to the unredeemed portion of the original note will be issued in
the name of the Holder of notes upon cancellation of the
original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date,
Accreted Value will cease to accrete and interest and Additional
Interest, if any, will cease to accrue on notes or portions of
them called for redemption.
Mandatory Redemption
The Company is not required to make mandatory
redemption or sinking fund payments with respect to the notes.
Repurchase at the Option of Holders
If a Change of Control occurs, the Company will
be required to make an offer (a
Change of Control
Offer
) to each Holder of notes to repurchase all or
any part (equal to $1,000 in principal amount at maturity or an
integral multiple thereof) of that Holders notes on the
terms set forth in the indenture. In the Change of Control
Offer, the Company will offer a payment in cash (the
Change of Control Payment
) equal to 101% of
the Accreted Value of the notes repurchased plus accrued and
unpaid interest and Additional Interest, if any, on the notes
repurchased to the date of purchase (a
Change of
Control Payment Date
). Within thirty days following
any Change of Control, the Company will mail a notice to each
Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase
notes on the Change of Control Payment Date specified in the
notice, which date will be no earlier than 30 days and no
later than 60 days from the date such notice is mailed,
pursuant to the procedures required by the indenture and
described in such notice.
On the Change of Control Payment Date, the
Company will, to the extent lawful:
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The paying agent will promptly mail to each
Holder of notes properly tendered the Change of Control Payment
for such notes, and the trustee will promptly authenticate and
mail (or cause to be transferred by book entry) to each Holder a
new note equal in principal amount at maturity to any
unpurchased portion of the notes surrendered, if any;
provided
that each new note will be in a principal amount
at maturity of $1,000 or an integral multiple thereof.
If the Change of Control Payment Date is on or
after an interest payment record date and on or before the
related interest payment date, any accrued and unpaid interest
and Additional Interest, if any, will be paid to the Holder in
whose name a note is registered at the close of business on such
record date, and no other interest or Additional Interest, if
any, will be payable to Holders who tender pursuant to the
Change of Control Offer.
The provisions described above that require the
Company to make a Change of Control Offer following a Change of
Control will be applicable whether or not any other provisions
of the indenture are applicable. Except as described above with
respect to a Change of Control, the indenture does not contain
provisions that permit the Holders of the notes to require that
the Company repurchase or redeem the notes in the event of a
takeover, recapitalization or similar transaction.
The Company will not be required to make a Change
of Control Offer upon a Change of Control if a third party makes
the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by the
Company and purchases all notes properly tendered and not
withdrawn under the Change of Control Offer or if an irrevocable
notice of redemption has been given pursuant to the indenture in
accordance with the provisions set forth under the caption
Optional Redemption.
The definition of Change of Control includes a
phrase relating to the direct or indirect sale, lease, transfer,
conveyance or other disposition of all or substantially
all of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole. Although there is a
limited body of case law interpreting the phrase
substantially all, there is no precise established
definition of the phrase under applicable law. Accordingly, in
certain circumstances there may be a degree of uncertainty as to
whether a particular transaction would involve a disposition of
all or substantially all of the property or assets
of a Person. As a result, it may be unclear as to whether a
Change of Control has occurred and whether a Holder of notes may
require the Company to make a Change of Control Offer.
The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with each repurchase of
notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict
with the Change of Control provisions of the indenture, the
Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its
obligations under the Change of Control provisions of the
indenture by virtue of such conflict.
The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless:
95
Within 395 days after the receipt of any Net
Proceeds from an Asset Sale, the Company or such Restricted
Subsidiary may apply those Net Proceeds at its option to:
Pending the final application of any Net
Proceeds, the Company may temporarily reduce revolving credit
borrowings or otherwise invest the Net Proceeds in any manner
that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the preceding paragraph will
constitute Excess Proceeds. When the aggregate
amount of Excess Proceeds exceeds $15 million, the Company
will make an offer (an
Asset Sale Offer
) to
all Holders of notes and all holders of other Indebtedness that
is
pari passu
with the notes containing provisions
similar to those set forth in the indenture with respect to
offers to purchase or redeem with the proceeds of sales of
assets to purchase the maximum Accreted Value of notes and the
maximum principal amount of such other
pari passu
Indebtedness that may be purchased out of the Excess Proceeds.
The offer price in any Asset Sale Offer will be equal to 100% of
the Accreted Value thereof plus accrued and unpaid interest and
Additional Interest, if any, to the date of purchase, and will
be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use those
Excess Proceeds for any purpose not otherwise prohibited by the
96
If the Asset Sale purchase date is on or after an
interest payment record date and on or before the related
interest payment date, any accrued and unpaid interest and
Additional Interest, if any, will be paid to the Holder in whose
name a note is registered at the close of business on such
record date, and no interest or Additional Interest, if any,
will be payable to holders who tender notes pursuant to the
Asset Sale Offer.
The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent those laws and
regulations are applicable in connection with each repurchase of
notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the Asset Sale provisions of the indenture, the Company will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the
Asset Sale provisions of the indenture by virtue of such
conflict.
The Credit Agreement effectively prohibits, and
future agreements relating to Indebtedness of the Company and
its Subsidiaries may prohibit, the Company from purchasing any
notes and also provides that certain change of control or asset
sale events with respect to the Company would constitute a
default under these agreements. In the event a Change of Control
or Asset Sale occurs at a time when the Company is prohibited
from purchasing notes, the Company could seek the consent of the
lenders for the purchase of notes or could attempt to refinance
any borrowings that contain such prohibition. If the Company
does not obtain such a consent or repay such borrowings, the
Company will remain prohibited from purchasing notes. In such
case, the Companys failure to purchase tendered notes
would constitute an Event of Default under the indenture which
could result in a cross-default under the Credit Agreement or
such other Indebtedness. Additionally, the occurrence of certain
of the events that constitute a Change of Control may give
holders of the Existing Notes the right to require Cinemark USA,
Inc. to repurchase the Existing Notes. Moreover, the exercise by
the Holders of their right to require the Company to repurchase
the notes could cause a default under the Existing Notes and
future agreements relating to Indebtedness of the Company and
its Subsidiaries, even if the Change of Control itself does not,
due to the financial effect of such repurchase on the Company
and its Subsidiaries. In the event that a Change of Control
occurs at a time when the Companys Subsidiaries are
prohibited from making funds available to the Company so that
the Company can purchase the notes, the Company or any of its
Subsidiaries may seek the consent of its lenders to purchase the
notes or may attempt to refinance any borrowing that contains
such prohibition. If such a consent or refinancing is not
obtained, the Companys Subsidiaries will remain prohibited
from making such funds available to the Company so that it can
purchase the notes. Finally, the Companys ability to pay
cash to the Holders upon a repurchase may be limited by the
Companys then existing financial resources. There can be
no assurance that sufficient funds will be available when
necessary to make any required repurchases.
Notwithstanding anything to the contrary
contained in the indenture, the Company or any of its Restricted
Subsidiaries may engage in transactions in which theatre
properties will be transferred in exchange for one or more other
theatre properties;
provided
that if the fair market
value of the theatre properties to be transferred by the Company
or such Restricted Subsidiary, plus the fair market value of any
other consideration paid or credited by the Company or such
Restricted Subsidiary (the
Transaction Value
)
exceeds $2 million, such transaction shall require approval of
the Board of Directors of the Company. In addition, each such
transaction shall be valued at an amount equal to all
consideration received by the Company or such Restricted
Subsidiary in such transaction other than the theatre properties
received pursuant to such exchange
(Other
Consideration)
for purposes of determining whether an
Asset Sale has occurred. If the Other Consideration is of an
amount and character such that such transaction constituted an
Asset Sale, then the paragraphs above of this Asset
Sales covenant shall be applicable to any Net Proceeds of
such Other Consideration.
97
Certain Covenants
The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly:
unless, at the time of and after giving effect to
such Restricted Payment:
98
The preceding provisions will not prohibit:
99
The amount of all Restricted Payments (other than
cash) will be the fair market value on the date of the
Restricted Payment of the asset(s) or securities proposed to be
transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any assets or securities that
are required to be valued by this covenant will be determined by
the Board of Directors of the Company whose resolution with
respect thereto will be delivered to the trustee. Not later than
30 days after the date of making any Restricted Payment,
the Company will deliver to the trustee an officers
certificate stating that such Restricted Payment is permitted
and setting forth the basis upon which the calculations required
by this Restricted Payments covenant were computed.
The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to
(collectively, incur) any Indebtedness (including
Acquired Debt), and the Company will not issue any Disqualified
Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock;
provided, however,
that, if no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof, the
Company and any of its Restricted Subsidiaries may incur
Indebtedness (including Acquired Debt) or the Company may issue
Disqualified Stock if the Fixed Charge Coverage Ratio for the
Companys most recently ended four full fiscal quarters for
which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred or Disqualified Stock
had been issued, as the case may be, at the beginning of such
four-quarter period.
The first paragraph of this covenant will not
prohibit:
100
101
Neither the Company nor any Restricted Subsidiary
will incur any Indebtedness under the preceding paragraph if the
proceeds thereof are used, directly or indirectly, to refinance
any Indebtedness subordinated to the notes or any Subsidiary
Guarantee unless such Indebtedness will be subordinated to the
notes or such Subsidiary Guarantee to at least the same extent
as such subordinated Indebtedness. No Restricted Subsidiary of
the Company that is not a Guarantor may incur any Indebtedness
if the proceeds are used to refinance Indebtedness of the
Company (other than a refinancing of all the notes).
For purposes of determining compliance with this
Incurrence of Indebtedness and Issuance of Preferred
Stock covenant, in the event that an item of proposed
Indebtedness (including Acquired Debt) meets the criteria of
more than one of the categories described in clauses
(1) through (14) above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, the Company
will be permitted to classify or (later classify or reclassify
in whole or in part in its sole discretion) such item of
Indebtedness in any manner that complies with this covenant.
Notwithstanding any other provision of this covenant, the
maximum amount of Indebtedness that the Company or any
Restricted Subsidiary may incur pursuant to this covenant shall
not be deemed to be exceeded solely as a result of fluctuations
in the exchange rate of currencies.
The Company will not and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or
otherwise cause or suffer to exist or become effective any Lien
of any kind securing Indebtedness, Attributable Debt or trade
payables (other than Permitted Liens) upon any of their property
or assets, now owned or hereafter acquired, unless all payments
due under the indenture and the notes are secured (i), in
the case of Liens securing Indebtedness that is pari passu in
right of payment to the notes or any Subsidiary Guarantee, on an
equal and ratable basis with the obligations so secured until
such time as such obligations are no longer secured by a Lien
and (ii), in the case of Liens securing Indebtedness that is
expressly subordinate or junior in right of payment to the notes
or any Subsidiary Guarantee, on a senior basis to the
obligations so secured with the same relative priority as the
notes or such Subsidiary Guarantee, as the case may be, will
have to that subordinate or junior Indebtedness until such time
as such obligations are no longer secured by a Lien.
102
The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create
or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted
Subsidiary to:
However, the preceding restrictions will not
apply to encumbrances or restrictions existing under or by
reason of:
103
The Company may not, directly or indirectly:
(1) consolidate or merge with or into another Person
(whether or not the Company is the surviving corporation); or
(2) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the
Company and its Restricted Subsidiaries, taken as a whole, in
one or more related transactions, to another Person; unless:
104
In addition, the Company may not, directly or
indirectly, lease all or substantially all of its properties or
assets, in one or more related transactions, to any other Person.
For purposes of this covenant, the sale,
assignment, transfer, conveyance, disposition or lease of all or
substantially all of the properties and assets of one or more
Subsidiaries of the Company, which properties and assets, if
held by the Company instead of such Subsidiaries, would
constitute all or substantially all of the properties and assets
of the Company on a consolidated basis, shall be deemed to be
the transfer of all or substantially all of the properties and
assets of the Company.
Notwithstanding the preceding clause (4),
any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company.
A Guarantor may not sell or otherwise dispose of
all or substantially all of its assets to, or consolidate with
or merge with or into (whether or not such Guarantor is the
surviving Person), another Person, other than the Company or
another Guarantor, unless:
The Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an Affiliate
Transaction), unless:
The following items will not be deemed to be
Affiliate Transactions and, therefore, will not be subject to
the provisions of the prior paragraph:
105
The Board of Directors of the Company may
designate any Restricted Subsidiary to be an Unrestricted
Subsidiary if that designation would not cause a Default;
provided
that in no event will CNMK Holding, Inc. or
Cinemark USA, Inc. be designated as or owned by an Unrestricted
Subsidiary. If a Restricted Subsidiary is designated as an
Unrestricted Subsidiary, the aggregate fair market value of all
outstanding Investments owned by the Company and its Restricted
Subsidiaries in the Subsidiary properly designated will be
deemed to be an Investment made as of the time of the
designation and will reduce the amount available for Restricted
Payments under the first paragraph of the covenant described
above under the caption Restricted Payments
or Permitted Investments, as determined by the Company. That
designation will only be permitted if the Investment would be
permitted at that time and if the Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The Board of Directors of the Company may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a Default.
The Company will cause each Restricted Subsidiary
that Guarantees any Indebtedness of the Company to execute and
deliver to the trustee a supplemental indenture pursuant to
which such Restricted Subsidiary
106
A Subsidiary Guarantee of a Guarantor will be
automatically released upon:
The Company will not, and will not permit any
Restricted Subsidiary to, engage in any business other than
Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration to or for the benefit of any Holder of
notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or
the notes unless such consideration is offered to be paid and is
paid to all Holders of the notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Reports
Whether or not required by the Commission, so
long as any notes are outstanding, the Company will furnish to
the Holders of notes, within the time periods specified in the
Commissions rules and regulations:
If the Company has designated any of its
Subsidiaries as Unrestricted Subsidiaries, then the quarterly
and annual financial information required by the preceding
paragraph will include an unaudited consolidating balance sheet
and related statements of income and cash flows for the Company
and its Subsidiaries, separately identifying the
(a) Company and the Restricted Subsidiaries and
(b) the Unrestricted Subsidiaries,
107
In addition, following the consummation of the
exchange offer contemplated by the registration rights
agreement, whether or not required by the Commission, the
Company will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the
Commission for public availability within the time periods
specified in the Commissions rules and regulations (unless
the Commission will not accept such a filing) and make such
information available to securities analysts and prospective
investors upon request. In addition, the Company has agreed
that, for so long as any notes remain outstanding, it will
furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under
the Securities Act.
Events of Default and Remedies
Each of the following is an Event of Default:
108
In the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the
Company, any Subsidiary that is a Significant Subsidiary or any
group of Subsidiaries that taken together would constitute a
Significant Subsidiary, all outstanding notes will become due
and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or
the Holders of at least 25% in principal amount at maturity of
the then outstanding notes may declare all the notes to be due
and payable immediately. Upon any such declaration, the
principal of (or, if prior to the Full Accretion Date, the
Accreted Value of), premium, if any, and accrued and unpaid
interest, if any, and Additional Interest, if any, shall become
due and payable immediately.
Holders of the notes may not enforce the
indenture or the notes except as provided in the indenture.
Subject to certain limitations, Holders of a majority in
aggregate principal amount at maturity of the then outstanding
notes may direct the trustee in its exercise of any trust or
power. The trustee may withhold from Holders of the notes notice
of any continuing Default or Event of Default if it determines
that withholding notice is in their interest, except a Default
or Event of Default relating to the payment of principal of, or
interest or premium or Additional Interest, if any, on the notes.
The Holders of a majority in aggregate principal
amount at maturity of the notes then outstanding by notice to
the trustee may on behalf of the Holders of all of the notes
waive any existing Default or Event of Default and its
consequences under the indenture except a continuing Default or
Event of Default in the payment of principal of, or interest or
premium or Additional Interest, if any, on the notes.
In the case of any Event of Default occurring by
reason of any willful action or inaction taken or not taken by
or on behalf of the Company with the intention of avoiding
payment of the premium that the Company would have had to pay if
the Company then had elected to redeem the notes pursuant to the
optional redemption provisions of the indenture, an equivalent
premium will also become and be immediately due and payable to
the extent permitted by law upon the acceleration of the notes.
If an Event of Default occurs prior to March 15, 2009, by
reason of any willful action (or inaction) taken (or not taken)
by or on behalf of the Company with the intention of avoiding
the prohibition on redemption of the notes prior to that date,
then the premium specified in the indenture with respect to the
first year that the notes may be redeemed at the Companys
option will also become immediately due and payable to the
extent permitted by law upon the acceleration of the notes.
Notwithstanding the foregoing, if an Event of
Default specified in clause (6) above shall have occurred
and be continuing, such Event of Default and any consequential
acceleration shall be automatically rescinded if (i) the
Indebtedness that is the subject of such Event of Default has
been repaid, or (ii) if the default relating to such
Indebtedness is waived or cured and if such Indebtedness has
been accelerated, then the holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness.
The Company is required to deliver to the trustee
annually a statement regarding compliance with the indenture.
Upon becoming aware of any Default or Event of Default, the
Company is required to deliver to the trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Directors, Officers,
Employees and Stockholders
No director, officer, employee, incorporator or
stockholder of the Company or any Guarantor, as such, will have
any liability for any obligations of the Company under the
notes, the indenture, the Subsidiary Guarantees or registration
rights agreement or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of
notes by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration
for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
109
Legal Defeasance and Covenant
Defeasance
The Company may, at its option and at any time,
elect to have all of its obligations discharged with respect to
the outstanding notes and all obligations of the Guarantors
discharged with respect to their Subsidiary Guarantees
(Legal Defeasance) except for:
In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company and
the Guarantors released with respect to certain covenants that
are described in the indenture (Covenant Defeasance)
and thereafter any omission to comply with those covenants will
not constitute a Default or Event of Default with respect to the
notes. In the event Covenant Defeasance occurs, certain events
(not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under
Events of Default and Remedies will no longer
constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or
Covenant Defeasance:
110
Amendment, Supplement and Waiver
Except as provided in the next two succeeding
paragraphs, the indenture or the notes may be amended or
supplemented with the consent of the Holders of at least a
majority in principal amount at maturity of the notes then
outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer
for, notes), and any existing default or compliance with any
provision of the indenture or the notes may be waived with the
consent of the Holders of a majority in principal amount at
maturity of the then outstanding notes (including, without
limitation, consents obtained in connection with a purchase of,
or tender offer or exchange offer for, notes).
Without the consent of each Holder affected, an
amendment or waiver may not (with respect to any notes held by a
non-consenting Holder):
111
Notwithstanding the preceding paragraph, without
the consent of any Holder of notes, the Company and the trustee
may amend or supplement the indenture or the notes to:
Satisfaction and Discharge
The indenture will be discharged and will cease
to be of further effect as to all notes issued thereunder, when:
In addition, the Company must deliver an
officers certificate and an opinion of counsel to the
trustee stating that all conditions precedent to satisfaction
and discharge have been satisfied.
112
Concerning the Trustee
If the trustee becomes a creditor of the Company,
the indenture limits its right to obtain payment of claims in
certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The trustee
will be permitted to engage in other transactions; however, if
it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount at
maturity of the then outstanding notes will have the right to
direct the time, method and place of conducting any proceeding
for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event
of Default occurs and is continuing, the trustee will be
required, in the exercise of its power, to use the degree of
care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the
request of any Holder of notes, unless such Holder has offered
to the trustee security and indemnity satisfactory to it against
any loss, liability or expense.
Additional Information
Anyone who receives this prospectus may obtain a
copy of the indenture without charge by writing to Cinemark,
Inc., 3900 Dallas Parkway, Suite 500, Plano, Texas 75093,
Attention: Chief Financial Officer.
Book-Entry, Delivery and Form
We will issue the exchange notes in the form of
one or more global notes (the
Global Exchange
Note
). The Global Exchange Note will be deposited
with, or on behalf of, The Depository Trust Company (the
DTC
) and registered in the name of the DTC or
its nominee. Except as set forth below, the Global Exchange Note
may be transferred, in whole and not in part, and only to the
DTC or another nominee of the DTC. You may hold your beneficial
interests in the Global Exchange Note directly through the DTC
if you have an account with the DTC or indirectly through
organizations that have accounts with the DTC.
The DTC has advised the Company as follows: the
DTC is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve
System, a clearing corporation within the meaning of
the New York Uniform Commercial Code, and a clearing
agency registered pursuant to the provisions of
Section 17A of the Exchange Act. The DTC was created to
hold securities of institutions that have accounts with the DTC
(participants) and to facilitate the clearance and
settlement of securities transactions among its participants in
such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. The DTCs
participants include securities brokers and dealers (which may
include the initial purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to
the DTCs book-entry system is also available to others
such as banks, brokers, dealers and trust companies
(collectively, the indirect participants) that clear
through or maintain a custodial relationship with a participant,
whether directly or indirectly.
The Company expects that pursuant to procedures
established by the DTC, upon the deposit of the Global Exchange
Note with the DTC, the DTC will credit, on its book-entry
registration and transfer system, the principal amount of notes
represented by such Global Exchange Note to the accounts of
participants. The accounts to be credited shall be designated by
the initial purchasers. Ownership of beneficial interests in the
Global Exchange Note will be limited to participants or persons
that may hold interests through participants. Ownership of
beneficial interests in the Global Exchange Note will be shown
on, and the transfer of those ownership interests will be
effected only through, records maintained by the DTC (with
respect to participants interests), the participants and
the indirect participants (with respect to the owners of
beneficial interests in the Global Exchange Note other than
participants). The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair
the ability to transfer or pledge beneficial interests in the
Global Exchange Note.
113
So long as the DTC, or its nominee, is the
registered holder and owner of the Global Exchange Note, the DTC
or such nominee, as the case may be, will be considered the sole
legal owner and holder of any related notes evidenced by the
Global Exchange Note for all purposes of such notes and the
indenture. Except as set forth below, as an owner of a
beneficial interest in the Global Exchange Note, you will not be
entitled to have the notes represented by the Global Exchange
Note registered in your name, will not receive or be entitled to
receive physical delivery of certificated notes and will not be
considered to be the owner or holder of any notes under the
Global Exchange Note. We understand that under existing industry
practice, in the event an owner of a beneficial interest in the
Global Exchange Note desires to take any action that the DTC, as
the holder of the Global Exchange Note, is entitled to take, the
DTC would authorize the participants to take such action, and
the participants would authorize beneficial owners owning
through such participants to take such action or would otherwise
act upon the instructions of beneficial owners owning through
them.
We will make payments of principal of, premium,
if any, and interest on notes represented by the Global Exchange
Note registered in the name of and held by the DTC or its
nominee to the DTC or its nominee, as the case may be, as the
registered owner and holder of the Global Exchange Note.
We expect that the DTC or its nominee, upon
receipt of any payment of principal of, premium, if any, or
interest on the Global Exchange Note will credit
participants accounts with payments in amounts
proportionate to their respective beneficial interests in the
principal amount of the Global Exchange Note as shown on the
records of the DTC or its nominee. We also expect that payments
by participants or indirect participants to owners of beneficial
interests in the Global Exchange Note held through such
participants or indirect participants will be governed by
standing instructions and customary practices and will be the
responsibility of such participants or indirect participants. We
will not have any responsibility or liability for any aspect of
the records relating to, or payments made on account of,
beneficial ownership interests in the Global Exchange Note for
any exchange note or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests or
for any other aspect of the relationship between the DTC and its
participants or indirect participants or the relationship
between such participants or indirect participants and the
owners of beneficial interests in the Global Exchange Note
owning through such participants.
Although the DTC has agreed to the foregoing
procedures in order to facilitate transfers of interests in the
Global Exchange Note among participants of the DTC, it is under
no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility or
liability for the performance by the DTC or its participants or
indirect participants of their respective obligations under the
rules and procedures governing their operations.
Certificated Notes
Subject to certain conditions, the exchange notes
represented by the Global Exchange Note are exchangeable for
certificated notes in definitive form of like tenor in
denominations of $1,000 aggregate principal amount at maturity
and integral multiples thereof if:
Any exchange notes that are exchangeable as
described above are exchangeable for certificated notes issuable
in authorized denominations and registered in such names as the
DTC shall direct. Subject to the foregoing, the Global Exchange
Note is not exchangeable, except for a Global Exchange Note of
the same aggregate denomination to be registered in the name of
the DTC or its nominee. In addition, such certificates
114
Same-Day Payment
The indenture requires us to make payments in
respect of notes (including principal, premium and interest) by
wire transfer of immediately available funds to the U.S. dollar
accounts with banks in the U.S. specified by the Holders thereof
or, if no such account is specified, by mailing a check to each
such Holders registered address.
Registered Exchange Offer; Registration
Rights
Upon the closing of the offering of the initial
notes, we, entered into exchange and registration rights
agreements relating to the initial notes, which provide for this
exchange offer. A copy of the registration rights agreement
relating to the initial notes is filed as an exhibit to the
registration statement of which this prospectus is a part.
Please read the section captioned The Exchange Offer
for more details regarding the terms of the registration rights
agreements relating to the initial notes and the exchange offer.
Certain Definitions
Set forth below are certain defined terms used in
the indenture. Reference is made to the indenture for a full
disclosure of all such terms, as well as any other capitalized
terms used herein for which no definition is provided.
Accreted Value
means, as of any date of
determination, the sum of (a) the initial Accreted Value
(which is $623.73 per $1,000 in principal amount at maturity of
notes) and (b) the portion of the excess of the principal
amount at maturity of each note over such initial Accreted Value
which shall have been amortized through such date, such amount
to be so amortized on a daily basis and compounded semiannually
on each March 15 and September 15 at the rate of
9 3/4% per annum from the date of original issuance of the
notes through the date of determination computed on the basis of
a 360-day year of twelve 30-day months. The Accreted Value of
any note on or after the Full Accretion Date shall be equal to
100% of its stated principal amount at maturity.
Acquired Debt
means, with respect to any specified
Person:
Affiliate
of any specified Person means any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person. For purposes of this definition, control, as
used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise. For
purposes of this definition, the terms controlling,
controlled by and under common control
with have corresponding meanings.
Asset Sale
means:
115
Notwithstanding the preceding, the following
items will not be deemed to be Asset Sales:
Notwithstanding any provision of the indenture to
the contrary, the expiration or non-renewal or any lease of
theatre properties or equipment at the normal expiration date
thereof without payment to the Company or any of its Restricted
Subsidiaries of consideration therefor shall not constitute an
Asset Sale.
Attributable Debt
in respect of a sale and leaseback
transaction means, at the time of determination, the present
value of the obligation of the lessee for net rental payments
during the remaining term of the lease included in such sale and
leaseback transaction including any period for which such lease
has been extended or may, at the option of the lessor, be
extended. Such present value shall be calculated using a
discount rate equal to the rate of interest implicit in such
transaction, determined in accordance with GAAP.
Beneficial Owner
has the meaning assigned to such term
in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that in calculating the beneficial ownership of any
particular person (as that term is used in
Section 13(d)(3) of the Exchange Act), such
person will be deemed to have beneficial ownership
of all securities that such person has the right to
acquire by conversion or exercise of other securities, whether
such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition. The terms
Beneficially Owns and Beneficially Owned
have corresponding meanings.
Board of Directors
means:
116
Business Day
means each day that is not a Saturday,
Sunday or other day on which banking institutions in New York,
New York are authorized or required by law to close.
Capital Lease Obligation
means, at the time any determination
is to be made, the amount of the liability in respect of a
capital lease that would at that time be required to be
capitalized on a balance sheet in accordance with GAAP.
Capital Stock
means:
Cash Equivalents
means:
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Change of Control
means the occurrence of any of the
following:
Commission
means Securities and Exchange
Commission.
Consolidated Cash Flow
means, with respect to any specified
Person for any period, the Consolidated Net Income of such
Person for such period
plus
:
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in each case, on a consolidated basis and
determined in accordance with GAAP.
Notwithstanding the preceding sentence, clauses
(1) through (9) relating to amounts of a Restricted
Subsidiary of a Person will be added to (or subtracted from)
Consolidated Net Income to compute Consolidated Cash Flow of
such Person only to the extent (and in the same proportion) that
the net income (loss) of such Restricted Subsidiary was
included in calculating the Consolidated Net Income of such
Person.
Consolidated Net Income
means, with respect to any specified
Person for any period, the aggregate of the Net Income of such
Person and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP,
provided, however,
in the case of the Company and its
Restricted Subsidiaries, (i) Consolidated Net Income shall
include only those management fees actually received by the
Company and its Restricted Subsidiaries from its Unrestricted
Subsidiaries, (ii) accrued but unpaid compensation expenses
related to any stock appreciation or stock option plans shall
not be deducted until such time as such expenses result in a
cash expenditure and (iii) compensation expenses related to tax
payment plans implemented by the Company from time to time in
connection with the exercise and/or repurchase of stock options
shall not be deducted from Net Income to the extent of the
related tax benefits arising therefrom;
provided, further,
that:
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Continuing Directors
means, as of any date of
determination, any member of the Board of Directors of the
Company who:
Credit Agreement
means that certain Amended and
Restated Credit Agreement, to be dated as of the
Recapitalization Date, by and among Cinemark USA, Inc., as
borrower, the Company, CNMK Holding, Inc. and the subsidiary
guarantors named therein, Lehman Commercial Paper Inc., as
administrative agent, Goldman Sachs Credit Partners L.P., as
syndication agent, Lehman Commercial Paper Inc. and Goldman
Sachs Credit Partners L.P., as joint lead arrangers and joint
bookrunners, Deutsche Bank Securities Inc., The Bank of New
York, General Electric Capital Corporation and CIBC Inc., as
co-documentation agents, and the lenders parties thereto from
time to time, providing for up to $260.0 million of term
loan borrowings and $100.0 million of revolving credit
borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed,
refunded, replaced or refinanced from time to time.
Credit Facilities
means, one or more debt facilities
(including, without limitation, the Credit Agreement),
commercial paper facilities or indentures, in each case with
banks or other institutional lenders or investors providing for
revolving credit loans, term loans, debt securities, receivables
financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit and
any agreement or agreements governing Indebtedness incurred to
refinance, replace, restructure or refund such agreements in
whole or in part from time to time (whether with the original
agent and lenders or other agents and lenders or otherwise).
Default
means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
Disqualified Stock
means any Capital Stock that, by its
terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case at
the option of the holder of the Capital Stock), or upon the
happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder of the Capital Stock, in
whole or in part, on or prior to the date that is 91 days
after the date on which the notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders of the Capital
Stock have the right to require the Company to repurchase such
Capital Stock upon the occurrence of a change of control or an
asset sale will not constitute Disqualified Stock if the terms
of such Capital Stock provide that the Company may not
repurchase or redeem any such Capital Stock pursuant to
120
Domestic Subsidiary
means any Restricted Subsidiary of the
Company that was formed under the laws of the United States or
any state of the United States or the District of Columbia or
that guarantees or otherwise provides direct credit support for
any Indebtedness of the Company.
Equity Interests
means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding
any debt security that is convertible into, or exchangeable for,
Capital Stock).
Equity Offering
means any public (other than pursuant
to a Form S-8 or any other form relating to securities
issuable under any employee benefit plan of the Company) or
private sale of Capital Stock (other than Disqualified Stock)
made for cash on a primary basis by the Company after the
Recapitalization Date.
Exchange Act
means the Securities Exchange Act of
1934, as amended.
Exchange Notes
means the notes issued in the Exchange
Offer pursuant to the indenture.
Excluded Contribution
means the net cash proceeds received
by the Company after the Recapitalization Date from
(a) contributions to its common equity capital and
(b) the sale (other than to a Subsidiary of the Company or
pursuant to any management equity plan or stock option plan or
any other management or employee benefit plan or agreement of
the Company or any of its Subsidiaries) of Capital Stock (other
than Disqualified Stock) of the Company, in each case designated
within 60 days of the receipt of such net cash proceeds as
Excluded Contributions pursuant to an Officers
Certificate, the cash proceeds of which are excluded from the
calculation set forth in clause 3(b) of the first paragraph
of the covenant described above under the heading
Certain Covenants Restricted
Payments.
Existing Credit Agreement
means that certain Credit Agreement,
dated as of February 14, 2003, by and among Cinemark USA,
Inc., as borrower, the Company, CNMK Holding, Inc. and the
subsidiary guarantors named therein, Lehman Commercial Paper
Inc., as administrative agent, and the lenders parties thereto
from time to time, including any related notes, guarantees,
collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
Existing Notes
means (i) the $360.0 million
aggregate principal amount of 9% Senior Subordinated Notes due
2013 and (ii) the $105.0 million aggregate principal
amount of 8.5% Series B Senior Subordinated Notes due 2008
(the 2008 Notes), in each case issued by Cinemark
USA, Inc. and guaranteed by certain Subsidiaries of Cinemark
USA, Inc.
Existing Indebtedness
means up to $480.5 million in
aggregate principal amount of Indebtedness of the Company and
its Restricted Subsidiaries (other than Indebtedness under the
existing Credit Agreement) in existence on the date of the
indenture, until such amounts are repaid.
Fixed Charges
means, with respect to any specified
Person for any period, the sum, without duplication, of:
121
Fixed Charge Coverage Ratio
means with respect to any specified
Person for any period, the ratio of the Consolidated Cash Flow
of such Person for such period to the Fixed Charges of such
Person for such period. In the event that the specified Person
or any of its Subsidiaries incurs, assumes, Guarantees, repays,
repurchases or redeems any Indebtedness (other than ordinary
working capital borrowings) or issues, repurchases or redeems
preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated and on
or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the
Calculation Date), then the Fixed Charge Coverage
Ratio will be calculated giving pro forma effect to such
incurrence, assumption, Guarantee, repayment, repurchase or
redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds
therefrom as if the same had occurred at the beginning of the
applicable four-quarter reference period.
In addition, for purposes of calculating the
Fixed Charge Coverage Ratio:
Foreign Restricted Subsidiary
means any Restricted Subsidiary of the
Company that is not organized under the laws of the United
States, any state thereof or the District of Columbia.
Full Accretion Date
means March 15, 2009.
GAAP
means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in
effect on the date of the indenture.
Government Securities
means securities that are
(i) direct obligations of the United States of America for
the timely payment of which its full faith and credit is pledged
or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States
of America, the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United
States of
122
Guarantee
means a guarantee other than by
endorsement of negotiable instruments for collection in the
ordinary course of business and other than leases entered in the
ordinary course of business, direct or indirect, in any manner
including, without limitation, by way of a pledge of assets or
through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
Guarantor
means any Person that Guarantees the
notes;
provided
that upon the release or discharge of
such Person from its Subsidiary Guarantee in accordance with the
provisions of the indenture, such Person shall cease to be a
Guarantor.
Hedging Obligations
means, with respect to any specified
Person, the obligations of such Person incurred in the normal
course of business and consistent with past practices and not
for speculative purposes under:
Holder
means, for so long as the notes are
represented by Global Notes, the bearer thereof which shall
initially be the Global Note Holder and, in the event that
Certificated Notes are issued, the Person in whose name the
notes are registered.
Indebtedness
means, with respect to any specified
Person, any indebtedness of such Person, whether or not
contingent:
123
The amount of any Indebtedness outstanding as of
any date will be:
Investments
means, with respect to any Person, all
direct or indirect investments by such Person in other Persons
(including Affiliates) in the forms of loans (including
Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances
to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the
Company, the Company will be deemed to have made an Investment
on the date of any such sale or disposition in an amount equal
to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above
under the caption Certain
Covenants Restricted Payments. The acquisition
by the Company or any Subsidiary of the Company of a Person that
holds an Investment in a third Person will be deemed to be an
Investment made by the Company or such Subsidiary in such third
Person in an amount equal to the fair market value of the
Investment held by the acquired Person in such third Person on
the date of any such acquisition in an amount determined as
provided in the final paragraph of the covenant described above
under the caption Certain
Covenants Restricted Payments.
Lien
means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof and any filing of or agreement to
give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction.
Net Income
means, with respect to any specified
Person, the net income (loss) of such Person, determined in
accordance with GAAP and before any reduction in respect of
preferred stock dividends, excluding, however, any gain or loss
(net of related costs, fees, expenses and with any related
provision for taxes on such gain or loss) realized in connection
with: (a) any Asset Sale (without giving effect to the
$5.0 million threshold contained in clause (1) of the
second paragraph of the definition thereof) or (b) the
disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries.
Net Proceeds
means the aggregate cash proceeds
received by the Company or any of its Restricted Subsidiaries in
respect of any Asset Sale (including, without limitation, any
cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of (i) the
direct costs relating to such Asset Sale, including, without
limitation, legal, accounting and investment banking fees, and
sales commissions, and any relocation expenses incurred as a
result of the Asset Sale, (ii) taxes paid or payable as a
result of the Asset Sale, in each case, after taking into
account any available tax credits or deductions and
124
Non-Recourse Debt
means Indebtedness:
Obligations
means any principal, premium and
Additional Interest, if any, interest (including interest
accruing on or after the filing of any petition in bankruptcy or
for reorganization, whether or not a claim for post-filing
interest is allowed in such proceeding), penalties, fees,
charges, expenses, indemnifications, reimbursement obligations,
damages, guarantees and other liabilities or amounts payable
under the documentation governing any Indebtedness or in respect
thereto.
Permitted Business
means the lines of business conducted
by the Company and its Restricted Subsidiaries on the date of
the indenture and any business incidental or reasonably related
thereto or which is a reasonable extension thereof as determined
in good faith by the Board of Directors of the Company and set
forth in an officers certificate delivered to the trustee.
Permitted Capitalized Leases
means obligations of the Company or
any Restricted Subsidiary of the Company up to $50 million
in the aggregate at any one time outstanding that are classified
as Capital Lease Obligations under GAAP due to the
application of Emerging Issues Task Force Regulation 97-10
or similar pronouncements and, except for such regulation or
pronouncement, such obligation would not constitute Capital
Lease Obligations.
Permitted Holders
means (a) Madison Dearborn
Partners, LLC and Related Parties and (b) Permitted
Mitchell Holders.
Permitted Investments
means:
125
Permitted Liens
means:
126
127
Permitted Mitchell Holders
means (a) Lee Roy Mitchell or
Tandy Mitchell, or any descendant of Lee Roy Mitchell or the
spouse of any such descendant, the estate of Lee Roy Mitchell,
Tandy Mitchell, any descendant of Lee Roy Mitchell or the spouse
of any such descendant or any trust or other arrangement for the
benefit of Lee Roy Mitchell, Tandy Mitchell, any descendant of
Lee Roy Mitchell or the spouse of any such descendant
(collectively, the
Mitchell Family
) and
(b) any group which includes any member or members of the
Mitchell Family if a majority of the Capital Stock of the
Company held by such group is beneficially owned (including the
power to vote such Capital Stock of the Company) by such member
or members of the Mitchell Family or by one or more affiliates
at least 80% of the equity interests of which are owned by such
member or members of the Mitchell Family.
Permitted Refinancing Indebtedness
means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company or any of
its Subsidiaries (other than intercompany Indebtedness);
provided
that:
Person
means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
128
Pro Forma Cost Savings
means, with respect to any period, the
reduction in costs and related adjustments that occurred during
the four-quarter reference period or after the end of the
four-quarter period and on or prior to the Calculation Date that
were (i) directly attributable to an acquisition or Asset
Sale and calculated on a basis that is consistent with
Regulation S-X under the Securities Act as in effect and
applied as of the date of the indenture or
(ii) implemented, or for which the steps necessary for
implementation have been taken by the Company and are reasonably
expected to occur, with respect to the Company or the business
that was the subject of any such acquisition or Asset Sale
within six months before or after the date of the acquisition or
Asset Sale and that are supportable and quantifiable by the
underlying accounting records of such business, as if, in the
case of each of clause (i) and (ii), all such reductions in
costs and related adjustments had been effected as of the
beginning of such period.
Qualified Proceeds
means any of the following or any
combination of the following: (i) cash, (ii) Cash
Equivalents, (iii) assets that are used or useful in a
Permitted Business and (iv) the Capital Stock of any Person
engaged in a Permitted Business that becomes a Restricted
Subsidiary of the Company as a result of the acquisition of such
Capital Stock by the Company or any Restricted Subsidiary of the
Company.
Recapitalization
has the meaning ascribed thereto in
this offering memorandum under the heading
Summary The Transactions.
Recapitalization Date
means the date on which the
Recapitalization is consummated.
Related Party
means:
Restricted Investment
means an Investment other than a
Permitted Investment.
Restricted Subsidiary
of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
Securities Act
means the Securities Act of 1933, as
amended.
Senior Debt
means:
Notwithstanding anything to the contrary in the
preceding, Senior Debt will not include:
129
Significant Subsidiary
means any Subsidiary that would be a
significant subsidiary as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to
the Securities Act and the Exchange Act, as such Regulation is
in effect on the date hereof.
Stated Maturity
means, with respect to any installment
of interest or principal on any series of Indebtedness, the date
on which the payment of interest or principal was scheduled to
be paid in the original documentation governing such
Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
Stockholders Agreement
has the meaning ascribed thereto in
this offering memorandum under the heading Certain
Relationships and Related Party Transactions
Stockholders Agreement.
Subsidiary
means, with respect to any specified
Person:
Subsidiary Guarantee
means, individually, any Guarantee of
payment of the notes and exchange notes issued in a registered
exchange offer pursuant to the registration rights agreement by
a Guarantor pursuant to the terms of the indenture and any
supplemental indenture thereto, and, collectively, all such
Guarantees. Each such Subsidiary Guarantee will be in the form
prescribed by the indenture.
Transactions
has the meaning ascribed thereto in
this offering memorandum under the heading
Summary The Transactions.
Unrestricted Subsidiary
means any Subsidiary of the Company
(other than CNMK Holding, Inc., Cinemark USA, Inc. or any
successor to any of them) that is designated by the Board of
Directors of the Company as an Unrestricted Subsidiary pursuant
to a Board Resolution, but only to the extent that such
Subsidiary:
Any designation of a Subsidiary of the Company as
an Unrestricted Subsidiary will be evidenced to the trustee by
filing with the trustee a certified copy of the Board Resolution
giving effect to such designation and an officers
certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenants
described above under the captions Certain
Covenants Restricted Payments and
Certain Covenants Designation of
Restricted and Unrestricted Subsidiaries. If, at any
130
Voting Stock
of any Person as of any date means the
Capital Stock of such Person that is at the time entitled to
vote in the election of the Board of Directors of such Person.
Weighted Average Life to Maturity
means, when applied to any
Indebtedness at any date, the number of years obtained by
dividing:
131
DESCRIPTION OF CERTAIN DEBT
INSTRUMENTS
Amended Senior Credit Facility
In connection with the Transactions, Cinemark
USA, Inc., as borrower, Cinemark, Inc., as parent and a
guarantor, and CNMK Holding, Inc., as a guarantor, entered into
an amended and restated senior credit facility with Lehman
Commercial Paper Inc., as administrative agent, Goldman Sachs
Credit Partners L.P., as syndication agent, and Lehman Brothers
Inc. and Goldman Sachs Credit Partners L.P., acting as joint
lead arrangers and joint bookrunners, Deutsche Bank Securities
Inc., The Bank of New York, General Electric Capital Corporation
and CIBC Inc., as co-documentation agents, and a syndicate of
banks, financial institutions and other institutional lenders.
The initial notes are, and the exchange notes offered by this
prospectus will be, structurally subordinated to the amended
senior credit facility and effectively subordinated to our
guarantee under the amended senior credit facility to the extent
of the value of our pledge thereunder of all of the stock of
CNMK Holding, Inc. Set forth below is a summary of the material
terms of the amended senior credit facility.
The amended senior credit facility provides for
aggregate borrowings by Cinemark USA, Inc. of up to
$360.0 million. The amended senior credit facility provides
for:
The term loan was made in a single drawing of
$260.0 million on the closing date of the Transactions. The
net proceeds of the term loan were used to refinance Cinemark
USA, Inc.s former senior credit facility and to fund in
part the purchase of Cinemark USA, Inc.s 8 1/2%
senior subordinated notes pursuant to the tender offer.
The obligations of Cinemark USA, Inc. under the
amended senior credit facility is guaranteed by us, CNMK
Holding, Inc. and certain of Cinemark USA, Inc.s
subsidiaries and is secured by mortgages on certain fee and
leasehold properties and security interest in substantially all
of our personal and intangible property, including without
limitation, pledges of all of the capital stock of CNMK Holding,
Inc., Cinemark USA, Inc. and certain of Cinemark USA,
Inc.s domestic subsidiaries and 65% of the voting stock of
certain of Cinemark USA, Inc.s foreign subsidiaries.
The term loan bears interest, at our option, at:
(A) a base rate equal to the higher of
(i) the prime lending rate as set forth on the British
Banking Association Telerate page 5 or (ii) the federal
funds effective rate from time to time plus 0.50%, plus a margin
of 1.25% per annum, or (B) a eurodollar rate
equal to the rate at which eurodollar deposits are offered in
the interbank eurodollar market for terms of one, two, three or
six, or (if available to all lenders in their sole discretion)
nine or twelve months, as selected by us, plus a margin of 2.25%
per annum. After the completion of two full fiscal quarters
after the closing date, the margin under the term loans
applicable to base rate loans ranges from 1.00% per annum to
1.25% per annum and the margin applicable to eurodollar rate
loans ranges from 2.00% per annum to 2.25% per annum, and will
be adjusted based upon our achieving agreed upon performance
targets, if no default or event of default under the amended
senior credit facility has occurred or is continuing.
Borrowings under the revolving credit line bear
interest, at our option, at: (A) a base rate
equal to the higher of (i) the prime lending rate as set
forth on the British Banking Association Telerate page 5 or
(ii) the
132
Base rate loans are subject to quarterly interest
payments. Eurodollar loans are subject to interest payments on
the last day of each relevant interest period and, in the case
of any interest period longer than three months, on each
successive date three months after the first day of such
interest period.
Cinemark USA, Inc. is also required to pay a
commitment fee calculated at the rate of one half percent
(0.50%) per annum on the average daily unused portion of the
revolving credit facility, payable quarterly in arrears.
Principal payments of the term loan equal to
0.25% of the original principal amount of the term loan are due
each calendar quarter beginning on June 30, 2004 through
March 31, 2010 and increase to 23.50% each calendar quarter
from June 30, 2010 to maturity at March 31, 2011.
Voluntary prepayments of principal outstanding
under the amended senior credit facility is permitted. In
addition, Cinemark USA, Inc. is required to prepay amounts
outstanding under the amended senior credit facility in an
amount equal to:
The amended senior credit facility requires
Cinemark USA, Inc. to meet certain financial tests, including a
maximum total leverage ratio, a maximum senior leverage ratio, a
minimum interest coverage ratio and maximum capital
expenditures. In addition, the amended senior credit facility
contains certain covenants which, among other things, limit:
133
Events of
Default
The amended senior credit facility contains
customary events of default, including, without limitation:
8 1/2% Senior Subordinated
Notes
On December 31, 2003, Cinemark USA, Inc. had
outstanding $105 million in 8 1/2% senior subordinated
notes due 2008. On March 16, 2004, Cinemark USA, Inc.
initiated a tender offer for the 8 1/2% senior subordinated
notes and a consent solicitation to remove substantially all
restrictive covenants in the indenture governing those notes.
The 8 1/2% senior subordinated notes are currently
redeemable at Cinemark USA, Inc.s option at 104.25% of the
principal amount thereof, and in declining amounts after
August 1, 2004, plus accrued and unpaid interest thereon to
the date of redemption. On March 25, 2004, a supplemental
indenture removing substantially all of the covenants was
executed, which became effective on April 2, 2004, the date
the Recapitalization was consummated. Upon the closing of the
Recapitalization, Cinemark USA, Inc. purchased approximately
$94.1 million aggregate principal amount of 8 1/2%
senior subordinated notes which were tendered prior to the
consent date as set forth in the tender offer. On April 13,
2004, Cinemark USA, Inc. purchased an additional $50,000
aggregate principal amount of 8 1/2% senior subordinated
notes which were tendered after the consent date but prior to
the expiration date pursuant to the tender offer.
9% Senior Subordinated Notes
On March 31, 2004, Cinemark USA, Inc. had
outstanding $360 million in 9% senior subordinated notes.
Interest on the 9% senior subordinated notes is payable
semi-annually on February 1 and August 1 of each
134
The 9% senior subordinated notes are general
unsecured obligations subordinated in right of payment to the
senior indebtedness of Cinemark USA, Inc., including the amended
senior credit facility. The 9% senior subordinated notes are
guaranteed by certain of Cinemark USA, Inc.s subsidiaries
on a senior subordinated basis. Generally, if Cinemark USA, Inc.
is in default under the amended senior credit facility and other
senior indebtedness, it would not be allowed to make payments on
the 9% senior subordinated notes until the defaults have been
cured or waived. If it fails to make any payments when due or
within the applicable grace period, it would be in default under
the indenture governing the 9% senior subordinated notes. As of
March 31, 2004, Cinemark USA, Inc. and its subsidiaries
were in full compliance with all agreements governing
outstanding debt. The indenture governing the 9% senior
subordinated notes allows Cinemark USA, Inc. to incur additional
indebtedness if it satisfies the coverage ratio specified in the
indenture after giving effect to the incurrence of the
additional indebtedness, and in certain other circumstances.
Upon a change of control, Cinemark USA, Inc. is
required to make an offer to repurchase the 9% senior
subordinated notes at a price equal to 101% of the principal
amount outstanding plus accrued and unpaid interest through the
date of repurchase. In accordance with the terms of the
indenture governing the 9% senior subordinated notes, Cinemark
USA, Inc. made a change of control offer following the closing
of the Transactions to repurchase the 9% senior subordinated
notes at a purchase price of 101% of the aggregate principal
amount, plus accrued and unpaid interest, if any, to the date of
purchase. Approximately $17.8 million in aggregate
principal amount of the 9% senior subordinated notes had been
tendered and not withdrawn in the change of control offer, which
expired on May 26, 2004. Payment of the change of control
purchase price was made with available cash by Cinemark USA,
Inc. on June 1, 2004.
The 9% senior subordinated notes are not
redeemable at Cinemark USA, Inc.s option prior to
February 1, 2008. Thereafter, the 9% senior subordinated
notes will be redeemable, at Cinemark USA, Inc.s option,
in whole or in part, upon not less than 30 nor more than 60
calendar days prior notice to each holder of 9% senior
subordinated notes to be redeemed, at the redemption prices
(expressed as percentages of the principal amount) set forth
below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve month
period beginning on February 1 of the years indicated below:
Notwithstanding the foregoing, prior to
February 1, 2006, Cinemark USA, Inc. may redeem up to
35% of the aggregate principal amount of the 9% senior
subordinated notes originally outstanding at a redemption price
of 109.000% of the principal amount thereof, plus accrued and
unpaid interest thereon to the redemption date, with the net
proceeds of one or more equity offerings of us or of Cinemark
USA, Inc., provided that at least 65% of the aggregate principal
amount of the 9% senior subordinated notes (excluding the 9%
senior subordinated notes issued after the initial issuance
date) originally issued remains outstanding immediately after
the occurrence of such redemption. Such unredeemed 9% senior
subordinated notes may be redeemed pursuant to the optional
redemption procedure described in the immediately preceding
paragraph. The notice of redemption shall be given not later
than 30 days, and such redemption shall not occur more than
90 days, after the date of the closing of any such equity
offering.
Covenants and provisions contained in the
indenture governing the 9% senior subordinated notes restrict,
among other things, Cinemark USA, Inc.s or certain of its
subsidiaries ability, with certain exceptions, (i) to
make certain investments, (ii) to make certain other
restricted payments, (iii) to incur additional indebtedness
unless certain financial tests are met, (iv) to create or
incur any additional liens on any assets, (v) to encumber
or restrict dividends or payments to us, (vi) to enter into
certain transactions with affiliates and (vii) to sell
assets of the business.
135
Events of default under the indenture governing
the 9% senior subordinated notes include (i) any failure by
Cinemark USA, Inc. to pay principal, premium or redemption or
repurchase payment, when due, or to pay interest when due, which
failure to pay interest remains unremedied for 30 days
after the due date, (ii) breach of certain other covenants
and agreements in the indenture governing the 9% senior
subordinated notes, (iii) a default under any of Cinemark
USA, Inc.s other indebtedness or indebtedness of certain
of its subsidiaries in an amount exceeding $5 million,
which default is either a payment default or which default has
become the basis for the acceleration of such indebtedness,
(iv) certain acts of bankruptcy, insolvency or dissolution,
(v) final non-appealable judgments for payment of money
which in the aggregate exceed $5 million rendered against
Cinemark USA, Inc. or any of its significant subsidiaries and
(vi) failure of any guarantee to be in full force and
effect.
Other Subsidiary Debt
As of March 31, 2004, Cinemark Brasil S.A.
had four main types of funding sources executed with local and
international banks. These include:
These sources are secured by a variety of
instruments, including comfort letters from Cinemark
International, L.L.C. promissory notes for up to 130% of the
value, a revenue reserve account and equipment collateral. As of
March 31, 2004, an aggregate of US$3.6 million was
outstanding and the effective interest rate on such borrowings
was 12.7% per annum.
Cinemark
Chile Note Payable
On March 26, 2002, Cinemark Chile S.A.
entered into a Debt Acknowledgment, Rescheduling and Joint
Guarantee and Co-Debt Agreement with Scotiabank Sud Americano
and three local banks. Under this agreement, Cinemark Chile S.A.
borrowed the U.S. dollar equivalent of approximately
$10.6 million in Chilean pesos (adjusted for inflation
pursuant to the Unidades de Fomento). Cinemark Chile S.A. is
required to make 24 equal quarterly installments of principal
plus accrued and unpaid interest, commencing March 27,
2002. The indebtedness is secured by a first priority commercial
pledge of the shares of Cinemark Chile S.A., a chattel mortgage
over Cinemark Chiles personal property and by guarantees
issued by Cinemark International, L.L.C. and Chile Films S.A.,
whose owners are shareholders of Cinemark Chile S.A. The
agreement requires Cinemark Chile S.A. to maintain certain
financial ratios and contains other restrictive
136
137
IMPORTANT FEDERAL INCOME TAX
CONSIDERATIONS
The following summary discusses the material U.S.
federal income and, to the limited extent set forth under the
caption Consequences to Non-U.S. Holders, estate tax
considerations relating to exchanging for, owning and disposing
of the exchange notes. Except where noted, this summary deals
only with exchange notes held as capital assets within the
meaning of the Internal Revenue Code of 1986, as amended (the
Code) and is applicable only to initial beneficial
owners of exchange notes. Additionally, this summary does not
deal with special situations. For example, this summary does not
address:
The discussion below is based upon the provisions
of the Code and Treasury regulations, rulings and judicial
decisions as of the date hereof. Those authorities may be
changed, perhaps retroactively, so as to result in U.S. federal
income tax consequences different from those discussed below.
If a partnership or other pass-through entity
holds the exchange notes, the tax treatment of a partner in or
owner of the partnership or pass-through entity will generally
depend upon the status of the partner or owner and the
activities of the entity. If you are a partner or owner of a
partnership or other pass-through entity holding exchange notes,
you should consult your tax advisor.
For purposes of the discussion below, a
U.S. holder is a beneficial owner of an exchange
note that is for U.S. federal income tax purposes:
In addition, for purposes of this discussion, a
Non-U.S. holder is a beneficial owner of a note that
is an individual, corporation (or other entity taxable as a
corporation), estate or trust that is not a U.S. holder.
If you are considering exchanging for exchange
notes, you should consult your own tax advisors concerning the
U.S. federal income and estate tax consequences to you and any
consequences arising under the laws of any state, local, foreign
or other taxing jurisdiction.
138
Consequences to U.S. Holders
Original
Issue Discount
The initial notes were issued with OID in an
amount equal to the excess of the stated redemption price
at maturity of the initial notes over their issue
price. For purposes of the foregoing, the general rule is
that the stated redemption price at maturity of a debt
instrument is the sum of all payments provided by the debt
instrument other than payments of qualified stated
interest. None of the payments on the exchange notes will
constitute qualified stated interest. The issue
price of the notes is the first price at which a
substantial amount of the initial notes were sold for cash
(excluding sales to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriter, placement
agent or wholesaler). You should be aware that a U.S. holder
generally must include OID in gross income in advance of the
receipt of cash attributable to that income. However, a U.S.
holder generally will not be required to include separately in
income cash payments received on the notes, even if denominated
as interest.
The amount of OID includible in income for a
taxable year by a U.S. holder will generally equal the sum of
the daily portions of the total OID on the note for
each day during the taxable year (or portion of the taxable
year) on which such holder held the note. Generally, the daily
portion of the OID is determined by allocating to each day in
any accrual period a ratable portion of the OID allocable to
such accrual period. The amount of OID allocable to an accrual
period will generally be the product of the adjusted issue
price of a note at the beginning of such accrual period
and its yield to maturity. The adjusted issue
price of a note at the beginning of an accrual period will
equal the issue price plus the amount of OID previously
includible in the gross income of any U.S. holder, less any
payments made on such note on or before the first day of the
accrual period. The yield to maturity of a note will
be computed on the basis of a constant annual interest rate and
compounded at the end of each accrual period. An accrual period
may be of any length and may vary in length over the term of the
note, provided that each accrual period is no longer than one
year and each scheduled payment of principal or interest occurs
either on the final day or the first day of an accrual period.
In certain circumstances (see Description
of Exchange Notes Optional Redemption, and
Description of Exchange Notes Change of
Control), we may be obligated to pay amounts in excess of
stated interest or principal on the notes. According to Treasury
regulations, the possibility that any such payments in excess of
stated interest or principal will be made will not affect the
amount or timing of OID a U.S. holder recognizes if there is
only a remote chance as of the date the notes were issued that
such payments will be made. We believe that the likelihood that
we will be obligated to make any such payments is remote.
Therefore, we do not intend to treat the potential payment of
these amounts as part of the yield to maturity of the exchange
notes. Our determination that these contingencies are remote is
binding on a U.S. holder unless such holder discloses its
contrary position in the manner required by applicable Treasury
regulations. Our determination is not, however, binding on the
Internal Revenue Service (the IRS) and if the IRS
were to challenge this determination, a U.S. holder might be
required to include in its gross income an amount of OID in
excess of that described above, and might be required to treat
income realized on the taxable disposition of an exchange note
before the resolution of the contingencies as ordinary income
rather than capital gain. In the event a contingency occurs, it
would affect the amount and timing of the income recognized by a
U.S. holder. If any such amounts are in fact paid, U.S. holders
will be required to recognize such amounts as income.
Sale or Other
Taxable Disposition of Exchange Notes
Unless a non-recognition provision applies, a
U.S. holder generally will recognize gain or loss upon the sale,
exchange, retirement or other taxable disposition of an exchange
note in an amount equal to the difference between the amount
realized upon the sale, exchange, retirement or other
disposition and such holders adjusted tax basis in the
note. A U.S. holders adjusted tax basis in an exchange
note generally will be equal to the amount paid by such holder
for the note (including the amount paid for initial notes
exchanged therefor), increased by the amount of OID previously
included in income and decreased by the amount of any cash
payments on the exchange note (including on any initial notes
exchanged therefor).
139
Exchange
Offer
The exchange of initial notes for otherwise
identical debt securities registered under the Securities Act
pursuant to this exchange offer will generally not constitute a
taxable exchange for U.S. federal income tax purposes. As a
result, (1) a U.S. holder will not recognize a taxable gain
or loss as a result of exchanging such holders initial
notes for exchange notes; (2) the holding period of the
exchange notes will include the holding period of the initial
notes exchanged therefor; and (3) the adjusted tax basis of
the exchange notes will be the same as the adjusted tax basis of
the initial notes exchanged therefor immediately before the
exchange.
Consequences to Non-U.S. Holders
For purposes of the discussion below, interest
(including OID) and any gain on the sale, exchange or retirement
(including a redemption) of an exchange note will be considered
to be U.S. trade or business income if such income
or gain is (1) effectively connected with the Non-U.S.
holders conduct of a U.S. trade or business and
(2) in the case of a treaty resident, described in
clause (1) above and attributable to a U.S. permanent
establishment (or, in the case of an individual, a fixed base)
maintained by the Non-U.S. holder in the United States.
Payment of
Interest and OID
Subject to the discussion below concerning backup
withholding, generally, interest (including OID) paid on an
exchange note will not be subject to U.S. federal income or
withholding tax if such interest is not U.S. trade or business
income and is portfolio interest. Generally,
interest (including OID) on the exchange notes will qualify as
portfolio interest and will be eligible for the portfolio
interest exemption if the Non-U.S. holder (1) does not
actually or constructively own 10% or more of the total combined
voting power of all of our classes of stock entitled to vote,
(2) is not a controlled foreign corporation
with respect to which we are a related person, as
such terms are defined in the Code and (3) provides the
required certifications, under penalties of perjury, that the
beneficial owner of the notes is not a U.S. person on a properly
completed and executed IRS Form W-8BEN prior to the payment.
The gross amounts of interest (including OID)
that do not qualify for the portfolio interest exemption and
that are not U.S. trade or business income will be subject to
U.S. withholding tax at a rate of 30% unless a treaty applies to
reduce or eliminate withholding. U.S. trade or business income
will be taxed on a net basis at regular graduated U.S. federal
income tax rates rather than the 30% gross rate. In the case of
a Non-U.S. holder that is a corporation, such U.S. trade or
business income also may be subject to the branch profits tax.
To claim an exemption from withholding in the case of U.S. trade
or business income, or to claim the benefits of a treaty, a
Non-U.S. holder must provide a properly completed and executed
IRS Form W-8ECI (in the case of U.S. trade or business
income) or IRS Form W-8BEN (in the case of a treaty), or
any successor form as the IRS designates, as applicable, prior
to the payment of interest (including OID). These forms must be
periodically updated. If the notes are traded on an established
financial market, a Non-U.S. holder who is claiming the benefits
of a treaty will not be required to obtain and to provide a U.S.
taxpayer identification number on the IRS Form W-8BEN. In
certain circumstances, in lieu of providing an IRS
Form W-8BEN, the Non-U.S. holder may provide certain
documentary evidence issued by foreign governmental authorities
to prove residence in a foreign country in order to claim treaty
benefits.
Special procedures relating to U.S. withholding
taxes are provided under applicable Treasury regulations for
payments through qualified intermediaries or certain financial
institutions that hold customers securities in the
ordinary course of their trade or business.
140
Sale,
Exchange or Retirement of Exchange Notes
Except as described below and subject to the
discussion below on backup withholding, gain realized by a
Non-U.S. holder on the sale, exchange or retirement (including a
redemption) of an exchange note generally will not be subject to
U.S. federal income or withholding tax unless (1) such gain
constitutes U.S. trade or business income, which will be taxed
as discussed above (including, if applicable, at tax rates for
capital gain); or (2) the Non-U.S. holder is an individual
who holds the exchange note as a capital asset and is present in
the United States for 183 days or more in the taxable year
of the disposition and certain other conditions are met.
Federal
Estate Tax
Any exchange notes held (or treated as held) by
an individual who is a Non-U.S. holder at the time of his or her
death will not be subject to U.S. federal estate tax, provided
that the individual does not actually or constructively own 10%
or more of the total voting power of all of our classes of stock
entitled to vote and income on the exchange notes was not U.S.
trade or business income.
Information Reporting and Backup
Withholding
U.S.
Holders
In general, information reporting requirements
will apply to certain payments of principal and interest
(including OID) paid on exchange notes and the proceeds of sale
of an exchange note made to you, unless you are an exempt
recipient (such as a corporation). Backup withholding tax at a
rate equal to 28% will apply to such payments if you fail to
provide a taxpayer identification number or certification of
foreign or other exempt status or fail to report in full
dividend and interest income.
Backup withholding is not an additional tax. Any
amounts withheld under the backup withholding rules will be
allowed as a refund or a credit against your U.S. federal income
tax liability provided the required information is furnished to
the IRS.
Non-U.S.
Holders
We must report annually to the IRS and to each
Non-U.S. holder any interest (including OID) that is paid to the
Non-U.S. holder. Copies of these information returns also may be
made available to the tax authorities of the country in which
the Non-U.S. holder resides under the provisions of various
treaties or agreements for the exchange of information. Non-U.S.
holders other than corporations may be subject to backup
withholding and additional information reporting. Backup
withholding will not apply to payments of interest (including
OID) on the exchange notes to a Non-U.S. holder if the Non-U.S.
holder properly certifies that it is not a U.S. person or
otherwise establishes an exemption. However, such certification
or exemption is not effective if we or our paying agent has
actual knowledge, or reason to know, that such holder is a U.S.
person or that the conditions of another exemption relied upon
by the Non-U.S. holder are not, in fact, satisfied.
The payment of the gross proceeds from the sale,
exchange or retirement (including a redemption) of the notes to
or through the U.S. office of any broker, U.S. or foreign, will
be subject to information reporting and possible backup
withholding unless the Non-U.S. holder certifies as to its
non-U.S. status under penalties of perjury or otherwise
establishes an exemption, provided that the broker does not have
actual knowledge, or reason to know, that the Non-U.S. holder is
a U.S. person or that the conditions of any other exemption are
not, in fact, satisfied. The payment of the gross proceeds from
the sale, exchange or retirement (including a redemption) of the
exchange notes to or through a non-U.S. office of a non-U.S.
broker will not be subject to information reporting or backup
withholding unless the non-U.S. broker has certain types of
relationships with the United States, or a U.S. related
person. In the case of the payment of the gross proceeds
from the sale, exchange or retirement (including a redemption)
of the exchange notes to or through a non-U.S. office of a
broker that is either a U.S. person or a U.S. related person,
the Treasury regulations require information reporting (but not
backup withholding) on the payment unless the broker has
documentary evidence in its
141
Backup withholding is not an additional tax. Any
amounts withheld under the backup withholding rules from a
payment to a Non-U.S. holder will be allowed as a refund or
credit against such Non-U.S. holders federal income tax
liability, provided that the required information is provided to
the IRS.
THE PRECEDING DISCUSSION OF THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP
AND DISPOSITION OF THE NOTES IS FOR GENERAL INFORMATION ONLY AND
IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT
HIS, HER OR ITS OWN TAX ADVISOR AS TO PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING FOR, HOLDING AND DISPOSING OF
EXCHANGE NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN
APPLICABLE LAW.
142
PLAN OF DISTRIBUTION
Based on interpretations of the SEC set forth in
no-action letters issued to third parties, we believe that the
exchange notes issued under the exchange offer in exchange for
initial notes may be offered for resale, resold and otherwise
transferred by you without compliance with the registration and
prospectus delivery provisions of the Securities Act, if:
If you tender initial notes in the exchange offer
with the intention of participating in any manner in a
distribution of the exchange notes:
Each broker-dealer that receives exchange notes
for its own account pursuant to the exchange offer must
acknowledge that it will deliver a prospectus in connection with
any resale of the initial notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a
broker dealer in connection with resales of exchange notes
received in exchange for initial notes where such initial notes
were acquired as a result of market-marking activities or other
trading activities. We have agreed that, for a period of
12 months after the effective date of this prospectus, we
will make this prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of
the exchange notes by broker-dealers. Exchange notes received by
broker-dealers for their own accounts pursuant to the exchange
offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange notes or a
combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions
or concessions from any such broker-dealer and/or the purchasers
of any such exchange notes. Any broker-dealer that resells
exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such exchange notes may be
deemed to be an underwriter within the meaning of
the Securities Act and any profit on any such resale of exchange
notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the
Securities Act.
For a period of twelve months after the effective
date of this prospectus, we will promptly send additional copies
of this prospectus and any amendment to this prospectus to any
broker-dealer that requests such documents in the Letter of
Transmittal. We have agreed, in connection with the exchange
offer, to indemnify the holders of initial notes against certain
liabilities, including liabilities under the Securities Act.
By acceptance of the exchange offer, each
broker-dealer that receives exchange notes pursuant to the
exchange offer hereby agrees to notify us prior to using the
prospectus in connection with the sale or transfer of initial
notes, and acknowledges and agrees that, upon receipt of notice
from us of the happening of any event which makes any statement
in the prospectus untrue in any material respect or which
requires the making of any changes in the prospectus in order to
make the statements therein not misleading (which notice we
agree to deliver promptly to such broker-dealer), such
broker-dealer will suspend use of the
143
LEGAL MATTERS
Certain matters related to the exchange offer
will be passed upon for us by Akin Gump Strauss Hauer & Feld
LLP.
EXPERTS
The consolidated financial statements as of
December 31, 2003 and 2002, and for each of the three years
in the period ended December 31, 2003, included in this
prospectus have been audited by Deloitte & Touche LLP,
Independent Registered Public Accounting Firm, as stated in
their report appearing herein (which report expresses an
unqualified opinion and includes an explanatory paragraph
relating to the adoption of a new accounting principle), and
have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
144
CINEMARK, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors
We have audited the accompanying consolidated
balance sheets of Cinemark, Inc. and subsidiaries as of
December 31, 2002 and 2003, and the related consolidated
statements of operations, stockholders equity and
comprehensive income (loss), and cash flows for each of the
three years in the period ended December 31, 2003. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with
standards of the Public Company Accounting Oversight Board
(United States). 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, Inc. and subsidiaries as of
December 31, 2002 and 2003, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2003, in conformity with
accounting principles generally accepted in the United States of
America.
As discussed in Note 1 to the consolidated
financial statements, the Company adopted Statement of Financial
Accounting Standards No. 142 Goodwill and Other
Intangible Assets which changed its method of accounting
for goodwill and indefinite-lived intangibles in 2002.
Dallas, Texas
F-2
CINEMARK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of
the consolidated financial statements.
F-3
CINEMARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
The accompanying notes are an integral part of
the consolidated financial statements.
F-4
CINEMARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY AND COMPREHENSIVE INCOME (LOSS)
The accompanying notes are an integral part of
the consolidated financial statements.
F-5
CINEMARK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
SUPPLEMENTAL INFORMATION (see Note 13)
The accompanying notes are an integral part of
the consolidated financial statements.
F-6
CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
1. Summary of
Significant Accounting Policies
Organization
On May 16, 2002, Cinemark, Inc. was formed as the Delaware
holding company of Cinemark USA, Inc. Under a share exchange
agreement dated May 17, 2002, and after giving effect to a
reverse stock split, each outstanding share and option to
purchase shares of Cinemark USA, Inc.s common stock was
exchanged for 220 shares and options to purchase shares of
Cinemark, Inc.s common stock. The accompanying financial
statements have been revised to reflect the historical financial
data of Cinemark USA, Inc. as though it were the financial data
of Cinemark, Inc. All share and per share, amounts have been
adjusted to retroactively reflect the share exchange and reverse
stock split for all periods presented.
Business
Cinemark, Inc. and subsidiaries (the Company) is one
of the leaders in the motion picture exhibition industry that
owns or leases and operates motion picture theatres in the
United States (U.S.), Canada, Mexico, Argentina,
Brazil, Chile, Ecuador, Peru, Honduras, El Salvador, Nicaragua,
Costa Rica, Panama, Colombia and the United Kingdom. The Company
also manages additional theatres in the U.S. and provides
management services for one theatre in Taiwan at
December 31, 2003.
Principles of
Consolidation
The
consolidated financial statements include the accounts of
Cinemark, Inc. and subsidiaries. Majority-owned subsidiaries
that the Company has control of are consolidated while those
subsidiaries of which the Company owns between 20% and 50% and
does not control are accounted for as affiliates under the
equity method. The results of these subsidiaries and affiliates
are included in the financial statements effective with their
formation or from their dates of acquisition. Significant
intercompany balances and transactions are eliminated in
consolidation. Certain reclassifications have been made to the
2001 and 2002 financial statements to conform to the 2003
presentation.
Cash and Cash
Equivalents
Cash and cash
equivalents consist of operating funds held in financial
institutions, petty cash held by the theatres and highly liquid
investments with remaining maturities of three months or less
when purchased.
Inventories
Concession and theatre supplies inventories are stated at the
lower of cost (first-in, first-out method) or market.
Theatre Properties and
Equipment
Theatre
properties and equipment are stated at cost less accumulated
depreciation and amortization. Property additions include the
capitalization of $215,704, $0 and $233,582 of interest incurred
during the development and construction of theatres in 2001,
2002 and 2003, respectively. Depreciation is provided using the
straight-line method over the estimated useful lives of the
assets as follows: buildings 40 years; theatre
furniture and equipment 5 to 15 years.
Amortization of leasehold interests and improvements is provided
using the straight-line method over the lesser of the lease
period or the estimated useful lives of the leasehold interests
and improvements. The Company evaluates theatre properties and
equipment for impairment in conjunction with the preparation of
its quarterly consolidated financial statements or whenever
events or changes in circumstances indicate the carrying amount
of the assets may not be fully recoverable. When estimated
undiscounted cash flows will not be sufficient to recover an
assets carrying amount, an impairment review is performed
in which the Company compares the carrying value of the asset
with its fair value, which is determined based on estimated cash
flows. When estimated fair value is determined to be lower than
the carrying value of the asset, the asset is written down to
its estimated fair value.
Goodwill and Other Intangible
Assets
The excess of cost
over the fair values of the net assets of theatre businesses
acquired, less accumulated amortization, goodwill impairment
charges and cumulative foreign currency translation adjustments,
is recorded as goodwill. For financial reporting purposes
through December 31, 2001, goodwill was amortized primarily
over 10 to 20 year periods, which approximated the
remaining lease terms of the businesses acquired. In accordance
with Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other
Intangible Assets, beginning January 1, 2002,
goodwill is no longer being amortized, but instead is being
tested for impairment at least annually or whenever events
F-7
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
or changes in circumstances indicate the carrying
value may not be recoverable. Factors considered include
significant underperformance relative to historical or projected
business and significant negative industry or economic trends.
Goodwill impairment is evaluated using a two-step approach
requiring the Company to compute the fair value of a reporting
unit and compare it with its carrying value, including goodwill.
If the carrying value of the reporting unit exceeds its fair
value, a second step would be performed to measure the potential
goodwill impairment. The Company performed its annual goodwill
impairment evaluation as of December 31, 2003. Intangible
assets consist of capitalized licensing fees, which are
amortized using the straight-line method over fifteen years, and
other intangible assets, which, if of a definite-lived nature,
are amortized over the terms of the underlying agreements. In
accordance with SFAS No. 142, intangible assets with
indefinite lives are no longer being amortized, but instead are
being tested for impairment at least annually or whenever events
or changes in circumstances indicate the carrying value may not
be recoverable. The Company performed its annual impairment
evaluation of indefinite-lived intangible assets as of
December 31, 2003.
Deferred Charges and
Other
Deferred charges and
other consists of debt issue costs, foreign advanced rents,
construction advances and other deposits, equipment to be placed
in service and other assets. Debt issue costs are amortized
using the straight-line method over the primary financing terms
of the related debt agreement. Foreign advanced rents represent
advance rental payments for long-term foreign leases. These
payments are recognized to facility lease expense generally over
10 to 20 years as leased facilities are utilized.
Deferred Lease
Expenses
Certain of the
Companys leases provide for escalating rent payments
throughout the lease term. Deferred lease expense is recognized
to account for lease expense on a straight-line basis, where
lease payments are not made on such basis.
Deferred
Revenues
Advances
collected on long-term screen advertising and concession
contracts are recorded as deferred revenues. In accordance with
the terms of the agreements, the advances collected on screen
advertising contracts are recognized as other revenues during
the period in which the revenue is earned based primarily on the
Companys attendance counts or screenings, which may differ
from the period in which the advances are collected. In
accordance with the terms of the agreements, the advances
collected on concession contracts are recognized as a reduction
in concession supplies expense during the period in which earned
which may differ from the period in which the advances are
collected.
Revenue and Expense
Recognition
Revenues are
recognized when admissions and concession sales are received at
the box office and screen advertising is shown at the theatres.
The Company records proceeds from the sale of gift cards and
other advanced sale-type certificates in current liabilities and
recognizes admissions and concession revenue when a holder
redeems the card or certificate. The Company recognizes
unredeemed gift cards and other advanced sale-type certificates
as revenue only after such a period of time indicates, based on
historical experience, the likelihood of redemption is remote.
Film rental costs are accrued based on the applicable box office
receipts and either the mutually agreed upon firm terms or
estimates of the final settlement depending on the film
licensing arrangement. Estimates are based on the expected
success of a film over the length of its run. The success of a
film can typically be determined a few weeks after a film is
released when initial box office performance of the film is
known. Accordingly, final settlements typically approximate
estimates since box office receipts are known at the time the
estimate is made and the expected success of a film over the
length of its run can typically be estimated early in the
films run. The final film settlement amount is negotiated
at the conclusion of the films run based upon how a film
actually performs. If actual settlements are higher than those
estimated, additional film rental costs are recorded at that
time. When participating in co-operative advertising, the
Company shares the total advertising costs to promote a film
with the film distributor as negotiated and the Companys
advertising expenses are presented net of the portion of
advertising costs reimbursed to the Company, which equaled
$443,383 and $18,995 for the years ended December 31, 2001
and 2002, respectively. The Company did not receive any such
reimbursements
F-8
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
during the year ended December 31, 2003. The
Company recognizes advertising costs and any sharing
arrangements with film distributors in the same accounting
period. Advertising costs borne by the Company are expensed as
incurred. Advertising expenses for the years ended
December 31, 2001, 2002 and 2003 totaled $14,622,336,
$14,044,540, and $14,495,105, respectively.
Stock Option
Accounting
The Company
applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for the Companys
stock option plans. Had compensation costs for the
Companys stock option plans been determined based on the
fair value at the date of grant for awards under the plans,
consistent with SFAS No. 123, Accounting for
Stock-Based Compensation and SFAS No. 148,
Accounting for Stock-Based Compensation Transition and
Disclosure, the Companys net income (loss) and
earnings (loss) per share would have been reduced to the
pro-forma amounts indicated below:
The weighted average fair value per share of
stock options granted in 2001 was $10.01 (all of which had
exercise prices less than market value at the date of grant). No
stock options were granted in 2002. The weighted average fair
value per share of stock options granted in 2003 was $12.76 (all
of which had an exercise price equal to the market value at the
date of grant). The following assumptions were used in the
calculation of fair value: dividend yield of 0 percent; an
expected life of 6.5 years; expected volatility of
approximately 39 percent; and risk-free interest rates of
5.09 percent in 2001 and 3.29 percent in 2003.
Income
Taxes
The Company uses an
asset and liability approach to financial accounting and
reporting for income taxes. Deferred income taxes are provided
when tax laws and financial accounting standards differ with
respect to the amount of income for a year and the bases of
assets and liabilities. A valuation allowance is recorded to
reduce the carrying amount of deferred tax assets unless it is
more likely than not that such assets will be realized. Income
taxes are provided on unremitted earnings from foreign
subsidiaries unless such earnings are expected to be
indefinitely reinvested. Income taxes have also been provided
for potential tax assessments and the related tax accruals are
in the consolidated balance sheets. To the extent tax accruals
differ from actual payments or assessments, the accruals will be
adjusted.
Use of
Estimates
The preparation
of financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates, judgments and assumptions that
affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the periods presented. Actual
results could differ from those estimates.
F-9
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Derivative
Instruments
The Company
adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities and its related
amendments in its fiscal year beginning January 1, 2001.
SFAS No. 133 establishes accounting and reporting standards
for derivative instruments that require every derivative to be
recorded on the balance sheet as an asset or liability measured
at its fair value. The statement also defines the accounting for
the change in the fair value of derivatives depending on their
intended use. The Companys derivative activity is not
material to its financial position or results of operations for
the periods presented.
Foreign Currency
Translations
The assets
and liabilities of the Companys foreign subsidiaries are
translated into U.S. dollars at current exchange rates as of the
balance sheet date, and revenues and expenses are translated at
average monthly exchange rates. The resulting translation
adjustments are recorded as a separate component of
stockholders equity.
Fair Values of Financial
Instruments
Fair values of
financial instruments are estimated by the Company using
available market information and other valuation methods. Values
are based on available market quotes or estimates using a
discounted cash flow approach based on the interest rates
currently available for similar instruments. The fair values of
financial instruments for which estimated fair value amounts are
not specifically presented are estimated to approximate the
related recorded values.
2. New Accounting
Pronouncements
In January 2003, the Financial Accounting
Standards Board (FASB) issued Interpretation
No. 46, Consolidation of Variable Interest
Entities (FIN 46), which requires that
all primary beneficiaries of Variable Interest Entities
(VIE) consolidate that entity. FIN 46 is
effective immediately for VIEs created after January 31,
2003 and to VIEs in which an enterprise obtains an interest
after that date. It applies in the first fiscal year or interim
period beginning after June 15, 2003 to VIEs in which an
enterprise holds a variable interest it acquired prior to
February 1, 2003. In December 2003, the FASB published a
revision to FIN 46 (FIN 46R) to clarify
some of the provisions of the interpretation and to defer the
effective date of implementation for certain entities. Under the
guidance of FIN 46R, entities that do not have interests in
structures that are commonly referred to as special purpose
entities are required to apply the provisions of the
interpretation in financial statements for periods ending after
March 15, 2004. The Company does not have interests in
special purpose entities and will apply the provisions of FIN
46R with its first quarter 2004 consolidated financial
statements. The Company believes the adoption of FIN 46R
will not have a material impact on the consolidated financial
statements.
In April 2003, the FASB issued SFAS No. 149,
Amendment of SFAS No. 133 on Derivative Instruments
and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and
for hedging activities under SFAS No. 133. Adoption of SFAS
No. 149 did not have a material impact on the
Companys consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. SFAS
No. 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics
of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of these
instruments were previously classified as temporary equity. This
statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise effective at the
beginning of the first interim period beginning after
June 15, 2003. Adoption of SFAS No. 150 did not have a
material impact on the Companys consolidated financial
statements.
F-10
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
3. Acquisitions
During 2003, the Company accounted for its 50%
investment in Interstate Theatres, L.L.C. under the equity
method of accounting. On December 31, 2003, the Company
purchased the remaining 50% interest in Interstate Theatres,
L.L.C, which owns 80% of Interstate Theatres II, L.L.C. The
Company accounted for the purchase as a step acquisition. The
total purchase price of $1,500,000 was allocated to theatre
properties and equipment ($404,083), working capital ($65,515),
and goodwill ($1,030,402). The Companys consolidated
balance sheet at December 31, 2003 reflects the assets and
liabilities of Interstate Theatres, L.L.C. and its subsidiary.
Beginning January 1, 2004, results of operations for
Interstate Theatres, L.L.C. and its subsidiary will be included
in the consolidated results of operations for the Company.
On December 31, 2003, the Company purchased
Mitchell Theatres, Inc., which was 100% owned by members of Lee
Roy Mitchells family (a related party to the Company). The
total purchase price of $681,034 included the assumption of
$156,000 in outstanding debt, which was immediately paid off at
the time of purchase. The Companys consolidated balance
sheet at December 31, 2003 reflects the assets and
liabilities of Mitchell Theatres, Inc., which consisted of a
working capital deficit of $137,511 and theatre property and
equipment of $818,545. Beginning January 1, 2004, results
of operations for Mitchell Theatres, Inc. will be included in
the consolidated results of operations for the Company.
4. Earnings
(Loss) Per Share
Earnings (loss) per share are computed using
the weighted average number of shares of Class A and
Class B common stock outstanding during each period. The
following table sets forth the computation of basic and diluted
earnings (loss) per share:
Basic income (loss) per share is computed by
dividing the income (loss) by the weighted average number
of shares of all classes of common stock outstanding during the
period. Diluted income (loss) per share is computed by
dividing the income (loss) by the weighted average number
of shares of all classes of common stock outstanding and
potential issuable common stock outstanding using the treasury
stock method.
F-11
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The effect of the options to purchase common
stock is excluded from the computation of diluted income
(loss) per share if their effect is antidilutive. At
December 31, 2001, options to purchase 2,338,600 shares of
common stock (calculated on a weighted average for the year
basis) have been excluded from the diluted income
(loss) per share calculation, as their effect would have
been antidilutive. See Note 12 for additional disclosures
regarding the Companys capital stock and related stock
option plans.
5. Goodwill and
Other Intangible Assets
The Company adopted SFAS No. 142,
Goodwill and Other Intangible Assets, effective
January 1, 2002 and as such, the Companys goodwill
and other intangible assets that have been deemed to have
indefinite lives are no longer being amortized, but instead are
being tested for impairment at least annually or whenever events
or changes in circumstances indicate the carrying value may not
be recoverable. As of January 1, 2002, the Company
performed the required transitional impairment tests of goodwill
and other intangible assets with indefinite useful lives, and as
a result, recorded impairment charges of $3,325,611 and $64,168,
respectively. These charges are reflected as a cumulative effect
of a change in accounting principle in the consolidated
statement of operations for the year ended December 31,
2002.
The following table shows the impact of SFAS
No. 142, had it been applied as of January 1, 2001, on
reported net loss and loss per share for the year ended
December 31, 2001.
The Companys goodwill is as follows:
F-12
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Intangible assets at December 31 consisted
of the following:
Aggregate amortization expense of $656,674 for
the year ended December 31, 2003 consisted of $526,763 of
amortization of intangible assets and $129,911 of amortization
of other assets. Estimated aggregate future amortization expense
for intangible assets is as follows:
6. Long-Lived
Assets
In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, the Company reviews long-lived assets for
impairment on a quarterly basis or whenever events or changes in
circumstances indicate the carrying amount of the assets may not
be fully recoverable.
The Company considers actual theatre level cash
flow, future years budgeted theatre level cash flow, theatre
property and equipment values, goodwill values, the age of a
recently built theatre, competitive theatres in the marketplace,
the sharing of a market with other Company theatres, changes in
foreign currency exchange rates, the impact of recent ticket
price changes and other factors in its assessment of impairment
of individual theatre assets. Assets are evaluated on an
individual theatre basis or a group of theatres that share the
same marketplace, which the Company believes is the lowest
applicable level for which there are identifiable cash flows.
The evaluation is based on the estimated undiscounted cash flows
from continuing use through the remainder of the theatres
useful life. The remainder of the useful life correlates with
the available remaining lease period for leased properties and a
period of twenty years for fee owned properties. If the
estimated undiscounted cash flows are not sufficient to recover
an assets carrying amount, an impairment review is
performed in which the Company compares the carrying value of
the asset with its fair value, which is determined based on
estimated cash flows. When estimated fair value is determined to
be lower than the carrying value of the asset, the asset is
written down to its estimated fair value.
F-13
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys asset impairment losses are
summarized in the following table:
7. Deferred
Charges and Other
Deferred charges and other at December 31
consisted of the following:
During 2003, the Company was involved in
long-term debt refinancing that resulted in the early retirement
of its then existing Credit Facility, the Cinema Properties
Facility, and $275 million principal amount of senior
subordinated notes. The Company recorded a loss on early
retirement of debt of $7,540,269 which included the write-off of
$4,262,540 of debt issue costs, net of accumulated amortization.
As part of the long-term debt refinancing, the Company entered
into a new senior secured credit facility and issued $360
million principal amount of new senior subordinated notes. The
Company capitalized $15,622,495 of new debt issue costs related
to these new financing agreements during 2003.
F-14
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
8. Long-Term
Debt
Long-term debt at December 31 consisted of
the following:
New Senior
Subordinated Notes Issuance and Retirement of Outstanding Senior
Subordinated Notes
On February 11, 2003, the Company issued
$150 million principal amount of 9% Senior Subordinated
Notes due 2013, which are referred to elsewhere herein as the
original 9% notes. On May 7, 2003, the Company
issued an additional $210 million of 9% Senior Subordinated
Notes due 2013, which are referred to elsewhere herein as the
new 9% notes. The original 9% notes and the new 9%
notes constitute a single class of debt securities under the
indenture and are together referred to herein as the
existing 9% notes. In July 2003, the Company
completed an offer to exchange $360 million principal
amount of 9% senior subordinated notes due 2013 (also referred
to herein as the existing 9% notes), which were
registered under the Securities Act of 1933, as amended, for a
like principal amount of the existing 9% notes. Interest is
payable on February 1 and August 1 of each year,
beginning August 1, 2003. The existing 9% notes mature on
February 1, 2013. The net proceeds of $145.9 million
from the issuance of the original 9% notes were used to repay a
portion of the Companys then existing Credit Facility. The
net proceeds of $226.7 million from the issuance of the new
9% notes, which included a premium of $15.2 million, and
additional borrowings under the Companys senior secured
credit facility were utilized to fund the purchase on
May 16, 2003 of approximately $233 million principal
amount of outstanding 9 5/8% Senior Subordinated Notes
tendered as of midnight on May 15, 2003 pursuant to a
tender offer announced on April 18, 2003.
On September 18, 2003, the Company redeemed
the remaining $42 million principal amount of outstanding
9 5/8% Senior Subordinated Notes utilizing the net proceeds
of its senior secured credit facility term loan that was amended
on August 18, 2003, along with additional borrowings under
the $75 million five-year revolving credit line.
The Company may redeem all or part of the
existing 9% notes on or after February 1, 2008. Prior to
February 1, 2006, the Company may redeem up to 35% of the
aggregate principal amount of the existing 9% notes from the
proceeds of certain equity offerings.
F-15
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Senior
Subordinated Notes
As of December 31, 2003, the Company had
outstanding two issues of senior subordinated notes:
(1) $105 million principal amount of 8 1/2%
Series B Senior Subordinated Notes due 2008; and
(2) $360 million principal amount of 9% Senior
Subordinated Notes due 2013. Interest on each issue is payable
on February 1 and August 1 of each year.
The indentures governing the senior subordinated
notes contain covenants that limit, among other things,
dividends, transactions with affiliates, investments, sale of
assets, mergers, repurchases of the Companys capital
stock, liens and additional indebtedness. Upon a change of
control, the Company would be required to make an offer to
repurchase the senior subordinated notes at a price equal to
101% of the principal amount outstanding plus accrued and unpaid
interest through the date of repurchase. The indentures
governing the senior subordinated notes allow us to incur
additional indebtedness if the Company satisfies the coverage
ratio specified in each indenture, after giving effect to the
incurrence of the additional indebtedness, and in certain other
circumstances.
The senior subordinated notes are general,
unsecured obligations and are subordinated in right of payment
to the senior secured credit facility or other senior
indebtedness. The notes are guaranteed by certain of the
Companys domestic subsidiaries. The guarantees are
subordinated to the senior debt of the subsidiary guarantors and
rank
pari passu
with the senior subordinated debt of the
Companys guarantor subsidiaries. The notes are effectively
subordinated to the indebtedness and other liabilities of the
Companys non-guarantor subsidiaries. The senior
subordinated notes are guaranteed by certain of the
Companys domestic subsidiaries on a senior subordinated
basis.
New Senior
Secured Credit Facility
On February 14, 2003, the Company entered
into a new senior secured credit facility consisting of a
$75 million five-year revolving credit line and a
$125 million term loan with Lehman Commercial Paper, Inc.
for itself and as administrative agent for a syndicate of
lenders. The senior secured credit facility provides for
incremental term loans of up to $100 million. The net
proceeds from the senior secured credit facility were used to
repay, in full, the then existing Credit Facility and the Cinema
Properties Facility. The term loan matures on March 31,
2008, but will be extended to March 31, 2009, if on or
prior to May 31, 2007 the maturity of the Companys
existing senior subordinated notes are extended beyond
September 30, 2009.
On August 18, 2003, the Company amended its
senior secured credit facility to provide a $165 million
term loan expiring on March 31, 2008 subject to the
extensions noted above as permitted by the senior secured credit
facility. The amended senior secured credit facility provides
for incremental term loans of up to $60 million. The net
proceeds of the $165 million term loan and additional
borrowings under the $75 million five-year revolving credit
line were used to (i) repay $124.7 million of term
loans outstanding under the Companys senior secured credit
facility and (ii) redeem on September 18, 2003 the
remaining $42 million principal amount of the
Companys outstanding 9 5/8% Senior Subordinated
Notes due 2008.
Under the amended term loan, principal payments
of $412,500 are due each calendar quarter through March 31,
2007 and increase to $39,703,125 each calendar quarter from
June 30, 2007 to maturity at March 31, 2008. The
amended term loan bears interest, at the Companys option,
at: (A) the base rate plus a margin of 1.50% or
(B) the eurodollar rate plus a margin of 2.50%. The margin
applicable to base rate loans ranges from 1.25% per annum
to 1.50% per annum and the margin applicable to eurodollar
rate loans ranges from 2.25% per annum to 2.50% per
annum based upon the Company achieving certain ratios of debt to
consolidated EBITDA (as defined in the senior secured credit
facility).
Borrowings under the revolving credit line bear
interest, at the Companys option, at: (A) a margin of
2.00% per annum plus a base rate equal to the
higher of (i) the prime lending rate as set forth on the
British Banking Association Telerate page 5 or
(ii) the federal funds effective rate from time to time plus
F-16
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
0.50%, or (B) a eurodollar rate
equal to the rate at which eurodollar deposits are offered in
the interbank eurodollar market for terms of one, two, three or
six, or (if available to all lenders in their sole discretion)
nine or twelve months, as selected by the Company, plus a margin
of 3.00% per annum. The margin applicable to base rate
loans ranges from 1.25% per annum to 2.00% per annum
and the margin applicable to eurodollar rate loans ranges from
2.25% per annum to 3.00% per annum based upon the
Company achieving certain ratios of debt to consolidated EBITDA
(as defined in the senior secured credit facility).
The senior secured credit facility is guaranteed
by the guarantors of the senior subordinated notes and is
secured by mortgages on certain fee and leasehold properties and
security interests on certain personal and intangible property,
including without limitation, pledges of all of the capital
stock of certain domestic subsidiaries and 65% of the voting
stock of certain of the Companys foreign subsidiaries.
Under the senior secured credit facility, the Company is
required to maintain specified levels of fixed charge coverage
and set limitations on its leverage ratios. The Company is
limited in its ability to pay dividends and in its ability to
incur additional indebtedness and liens and, following the
issuance of certain types of indebtedness or the disposition of
assets, subject to certain exceptions, the Company would be
required to apply certain of the proceeds to repay amounts
outstanding under the senior secured credit facility. The senior
secured credit facility also contains certain other covenants
and restrictions customary in credit agreements of this kind.
At December 31, 2003, there was $164,175,000
outstanding under the term loan and no outstanding revolver
borrowings. The Company had $74,931,443 available for borrowing
under the revolving credit line, giving effect to a $68,557
letter of credit outstanding. The effective interest rate on
outstanding borrowings under the senior secured credit facility
at December 31, 2003 was 3.7% per annum.
Cinemark USA
Revolving Credit Facility
In February 1998, the Company entered into a
reducing revolving credit facility (the Credit
Facility) with a group of banks for which Bank of America,
N.A. acted as administrative agent. The Credit Facility provided
for an initial commitment of $350 million which was
automatically reduced each quarter by 2.5%, 3.75%, 5.0%, 6.25%
and 6.25% of the aggregate $350 million in 2001, 2002,
2003, 2004 and 2005, respectively, until maturity in 2006. As of
December 31, 2002, the aggregate commitment available to
the Company was $262.5 million. The Company prepaid a
portion of the indebtedness outstanding under the Credit
Facility on February 11, 2003 with the net proceeds of the
issuance of the original 9% notes. The Credit Facility was
repaid in full on February 14, 2003 from the net proceeds
of the Companys new senior secured credit facility.
Cinemark
Mexico Revolving Credit Facility
In November 1998, Cinemark Mexico (USA), Inc.
executed a credit agreement with Bank of America National Trust
and Savings Association (the Cinemark Mexico Credit
Agreement). The Cinemark Mexico Credit Agreement was a
revolving credit facility and provided for a loan to Cinemark
Mexico of up to $30 million in the aggregate. Cinemark
Mexico was required to make principal payments of
$0.5 million in each of the third and fourth quarters of
2001, $1.5 million per quarter in 2002 with the remaining
principal outstanding of $23 million due in January 2003.
On January 15, 2003, the Cinemark Mexico Credit Agreement
was paid in full.
Cinema
Properties Credit Facility
In December 2000, Cinema Properties, Inc., a
wholly owned subsidiary that was not subject to restrictions
imposed by the Credit Facility or the indentures governing the
Senior Subordinated Notes, borrowed $77 million under a
3-year term loan from Lehman Brothers Bank, FSB (the
Cinema Properties Facility), which was originally
scheduled to mature on December 31, 2003. In 2002, the
Cinema Properties Facility was amended, which among other
things, extended the maturity date one year to December 31,
2004
F-17
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and eliminated the lenders discretionary
right to require Cinema Properties, Inc. to make
$1.5 million principal payments in the third and fourth
quarters of 2002. The $77 million Cinema Properties
Facility was repaid in full on February 14, 2003 from the
net proceeds of the Companys new senior secured credit
facility. Simultaneously, with such repayment, Cinema
Properties, Inc. and its shareholders were merged with and into
the Company.
Cinemark
Brasil Notes Payable
Cinemark Brasil S.A. currently has three main
types of funding sources executed with local and international
banks. These include:
These sources are secured by a variety of
instruments, including comfort letters from Cinemark
International, L.L.C., promissory notes for up to 130% of the
value, a revenue reserve account and equipment collateral. A
fourth funding source (import financing executed with Banco ABC
Brasil) was paid in full during the second quarter of 2003. As
of December 31, 2003, an aggregate of $3,457,264 was
outstanding and the effective interest rate on such borrowings
was 14.3% per annum.
Cinemark
Chile Notes Payable
On March 26, 2002, Cinemark Chile S.A.
entered into a Debt Acknowledgment, Rescheduling and Joint
Guarantee and Co-Debt Agreement with Scotiabank Sud Americano
and three local banks. Under this agreement, Cinemark Chile S.A.
borrowed the U.S. dollar equivalent of approximately
$10.6 million in Chilean pesos (adjusted for inflation
pursuant to the Unidades de Fomento). Cinemark Chile S.A. is
required to make 24 equal quarterly installments of
principal plus accrued and unpaid interest, commencing
March 27, 2002. The indebtedness is secured by a first
priority commercial pledge of the shares of Cinemark Chile S.A.,
a chattel mortgage over Cinemark Chiles personal property
and by guarantees issued by Cinemark International, L.L.C. and
Chile Films S.A., whose owners are shareholders of Cinemark
Chile S.A. The agreement requires Cinemark Chile S.A. to
maintain certain financial ratios and contains other restrictive
covenants typical for agreements of this type such as a
limitation on dividends. Funds borrowed under this agreement
bear interest at the 90 day TAB Banking rate (360 day
TAB Banking rate with respect to one of the four banks) as
published by the Association of Banks and Financial Institutions
Act plus 2%. As of December 31, 2003, $8,066,837 was
outstanding and the effective interest rate on such borrowings
was 6.4% per annum.
F-18
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys long-term debt at
December 31, 2003 matures as follows:
The estimated fair value of the Companys
long-term debt of $658.4 million at December 31, 2003
was approximately $653.5 million. Such amounts do not
include prepayment penalties which would be incurred upon the
early extinguishment of certain debt issues.
As of December 31, 2003, the Company was in
full compliance with all agreements governing its outstanding
debt.
Debt issue costs of $15,952,916, net of
accumulated amortization of $2,068,842, related to the Senior
Subordinated Notes, the Senior Secured Credit Facility and other
debt agreements, are included in deferred charges and other on
the consolidated balance sheet at December 31, 2003.
The accumulated other comprehensive loss account
in stockholders equity of $89,793,460 and $86,544,422 at
December 31, 2002 and 2003, respectively, primarily relates
to the cumulative foreign currency adjustments from translating
the financial statements of Cinemark Argentina, S.A., Cinemark
Brasil S.A. and Cinemark de Mexico, S.A. de C.V. into
U.S. dollars.
In 2002 and 2003, all foreign countries where the
Company has operations, including Argentina, Brazil and Mexico
were deemed non-highly inflationary. Thus, any fluctuation in
the currency results in a cumulative foreign currency
translation adjustment to the accumulated other comprehensive
loss account recorded as an increase in, or reduction of,
stockholders equity.
On December 31, 2003, the exchange rate for
the Argentine peso was 2.9 pesos to the U.S. dollar
(the exchange rate was 3.4 pesos to the U.S. dollar at
December 31, 2002). As a result, the effect of translating
the 2003 Argentine financial statements into U.S. dollars
is reflected as a cumulative foreign currency translation
adjustment to the accumulated other comprehensive loss account
as an increase in stockholders equity of $1,950,360. At
December 31, 2003, the total assets of the Companys
Argentine subsidiaries were U.S. $15,812,163.
On December 31, 2003, the exchange rate for
the Brazilian real was 2.9 reais to the U.S. dollar
(the exchange rate was 3.5 reais to the U.S. dollar at
December 31, 2002). As a result, the effect of translating
the 2003 Brazilian financial statements into U.S. dollars
is reflected as a cumulative foreign currency translation
adjustment to the accumulated other comprehensive loss account
as an increase in stockholders equity of $4,064,477. At
December 31, 2003, the total assets of the Companys
Brazilian subsidiaries were U.S. $60,027,230.
On December 31, 2003, the exchange rate for
the Mexican peso was 11.2 pesos to the U.S. dollar
(the exchange rate was 10.4 pesos to the U.S. dollar
at December 31, 2002). As a result, the effect of
translating the 2003 Mexican financial statements into
U.S. dollars is reflected as a cumulative foreign currency
translation adjustment to the accumulated other comprehensive
loss account as a reduction of stockholders
F-19
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
equity of $6,237,782. At December 31, 2003,
the total assets of the Companys Mexican subsidiaries were
U.S. $85,537,546.
The Company had the following investments in and
advances to affiliates at December 31:
In January 2004, the Companys 50%
investment in Entertainment Amusement Enterprises, Inc. was sold
for $1,500,000. The Company received proceeds of $1,250,000 in
cash and a three-year $250,000 note, resulting in a gain of
$468,463 recognized in January 2004.
Minority ownership interests in subsidiaries of
the Company are as follows at December 31:
Common and Preferred
Stocks
Class A and
Class B common stockholders are entitled to vote together
as a class on all matters submitted to a vote of the
Companys stockholders, except that the holders of
Class A common stock are entitled to one vote for each
share held and the holders of Class B common stock are
entitled to ten votes for each share held. Other than these
voting rights, the holders of Class A common stock and
Class B common stock have identical rights and privileges
in every respect. Each share of Class B common stock is
convertible into one share of Class A common stock at the
option of the holder or automatically upon a transfer of the
holders Class B common stock, other than to certain
transferees. The Companys common stockholders do not have
cumulative voting rights. Subject to the rights of holders of
any then outstanding shares of the Companys preferred
stock, the Companys common stockholders are entitled to
any dividends that may be declared by the Board of Directors.
Holders of the Companys common stock are entitled to share
ratably in the Companys net assets upon the Companys
dissolution or liquidation
F-20
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
after payment or provision for all liabilities
and any preferential liquidation rights of the Companys
preferred stock then outstanding. The Companys common
stockholders have no preemptive rights to purchase shares of the
Companys stock. The shares of the Companys common
stock are not subject to any redemption provisions and, other
than the Class B common stock, are not convertible into any
other shares of the Companys capital stock. The rights,
preferences and privileges of holders of the Companys
common stock will be subject to those of the holders of any
shares of the Companys preferred stock the Company may
issue in the future.
The Company has 50,000,000 shares of
preferred stock, $0.001 par value, authorized with no
shares issued or outstanding. The rights and preferences of
preferred stock will be determined by the Board of Directors at
the time of issuance.
The Companys ability to pay dividends is
effectively limited by its status as a holding company and the
terms of its indentures and senior secured credit facility,
which also significantly restrict the ability of certain of the
Companys subsidiaries to pay dividends directly or
indirectly to the Company. Furthermore, certain of the
Companys foreign subsidiaries currently have a deficit in
retained earnings which prevents the Company from declaring and
paying dividends from those subsidiaries.
Employee Stock Option
Plan
Under terms of the
Companys Employee Stock Option Plan, nonqualified options
to purchase up to 2,350,700 shares of the Companys
Class A common stock may be granted to key employees. All
options vest and are exercisable over a period of five years
from the date of grant and expire ten years from the date of
grant.
A summary of the Companys Employee Stock
Option Plan activity and related information for the years ended
December 31, 2001, 2002 and 2003 is as follows:
The Company believes that the market value of a
share of Class A common stock on the date of grant for the
56,760 shares granted in October 2001 exceeded the option
price by approximately $1.50 per share. As a result, the
Company accrued $84,882 as unearned compensation at that time.
These options were immediately vested and exercised, which
resulted in compensation expense of $84,882. In October 2001,
all remaining unvested options under this Plan were vested,
resulting in approximately $185,000 of additional compensation
expense. As of December 31, 2002 and 2003, no shares were
available for issuance under the Companys Employee Stock
Option Plan and there were no outstanding options to purchase
shares of stock under this Plan, as all outstanding options were
either exercised or forfeited in 2001.
Independent Director Stock
Options
The Company has
granted the unaffiliated directors of the Company options to
purchase up to an aggregate of 176,000 shares of the
Companys Class A common stock at an exercise price of
$0.0045 per share (the Director Options). The
options vest five years from the date of grant and expire ten
years from the date of grant. A directors options are
forfeited if the director resigns or is removed from the Board
of Directors of the Company.
F-21
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the Companys Independent
Directors Stock Option activity and related information for the
years ended December 31, 2001, 2002 and 2003 is as follows:
The weighted average remaining contractual life
of the 44,000 options outstanding at December 31, 2003 is
five years.
Long Term Incentive
Plan
In November 1998, the
Board of Directors approved a Long Term Incentive Plan (the
Long Term Incentive Plan) under which the
Compensation Committee, in its sole discretion, may grant
employees incentive stock options, non-qualified stock options,
stock appreciation rights, restricted stock awards, performance
units, performance shares or phantom stock up to an aggregate of
2,154,680 shares of the Companys Class A common
stock. The Compensation Committee has the discretion to set the
exercise price and the term (up to ten years) of the options.
All awards under the Long Term Incentive Plan vest at the rate
of one-fifth of the total award per year beginning one year from
the date of grant, subject to acceleration by the Compensation
Committee. An employees award under the Long Term
Incentive Plan is forfeited if the employee is terminated for
cause. Upon termination of the employees employment with
the Company, the Company has the option to repurchase the award
at the fair market value of the shares of Class A common
stock vested under such award as determined in accordance with
the Long Term Incentive Plan provided that no public market
exists for any class of common stock of the Company. The Long
Term Incentive Plan options that have been issued expire ten
years from the date of grant.
A summary of the Companys Long Term
Incentive Plan activity and related information for the years
ended December 31, 2001, 2002 and 2003 is as follows:
The weighted average remaining contractual life
of the 1,251,500 options outstanding at December 31, 2003
is approximately six years.
F-22
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company believed the market value of a share
of Class A common stock on the date of grant for the
335,500 options granted in December 2001 did not exceed the
option price of $1.50 per share and therefore no unearned
compensation was recorded. In connection with the proposed
initial public offering of the Companys Class A
common stock and Staff Accounting Bulletin Topic 4.D., the
Company revised the market value per share for the 335,500
options granted in December 2001 to $11.45 per share which
exceeded the option price of $1.50 per share by
$9.95 per share. As a result, the Company accrued
$3,338,225 as unearned compensation and began amortizing this
noncash expense in January 2002 at a rate of $667,645 per
year over the five year vesting period of the options granted.
The Company believed the market value of a share of Class A
common stock on the date of grant for the 63,500 options granted
in October 2003 did not exceed the option price of
$12.76 per share and therefore no unearned compensation was
recorded.
For all stock options, the excess of the
estimated fair market value of the stock at the dates of grant
over the exercise price is accounted for as additional
paid-in-capital and as unearned compensation, to be amortized to
operations over the vesting period. As a result of the above
grants, unearned compensation of $3,423,107 was recorded for
stock options granted during 2001. Compensation expense recorded
in the Companys statements of operations under these stock
option plans was $1,010,655, $1,103,155, and $1,079,826 in 2001,
2002 and 2003, respectively.
The following is provided as supplemental
information to the consolidated statements of cash flows:
F-23
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income (loss) before income taxes below includes
the loss from discontinued operations of $558,660, $1,650,894
and $2,938,859 for 2001, 2002 and 2003, respectively and the
cumulative effect of a change in accounting principle in 2002 of
$(3,389,779) and consisted of the following:
A reconciliation between income tax expense
(benefit) and taxes computed by applying the applicable
statutory federal income tax rate to income (loss) before income
taxes follows:
F-24
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tax effects of significant temporary
differences and tax loss and tax credit carryforwards comprising
the net long-term deferred income tax (asset) liability at
December 31, 2002 and 2003 consisted of the following:
In 2001, the Company recorded $2,763,338 of
income tax benefit as a cumulative foreign currency translation
adjustment to the accumulated other comprehensive loss account
as a reduction of stockholders equity.
In 2001, management concluded the operations of
Mexico would continue to be profitable for the Company.
Accordingly, the Company released the valuation allowance
associated with the Mexican deferred tax assets. These revisions
resulted in a 2001 benefit to income taxes of $10,339,018.
The Companys AMT credit carryforward may be
carried forward indefinitely. The foreign net operating losses
began expiring in 2002; however, some losses may be carried
forward indefinitely. The federal net operating loss was
utilized in 2002; however, the state losses remaining will
expire in 2004 through 2020.
Management continues to reinvest the
undistributed earnings of its foreign subsidiaries. Accordingly,
deferred U.S. federal and state income taxes are not
provided on the undistributed earnings of these foreign
subsidiaries. The cumulative amount of undistributed earnings of
these foreign subsidiaries on which the Company has not
recognized income taxes is approximately $34 million.
The Companys valuation allowance increased
from $11,767,330 at December 31, 2002 to $13,017,347 at
December 31, 2003. This change was primarily due to
additional foreign tax losses not recognized in the current
period, as it is more likely than not that such deferred tax
assets will not be realized.
F-25
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company is routinely under audit in various
jurisdictions and is currently under examination in Mexico. The
Company believes that it is adequately reserved for the probable
outcome of this exam.
15. (Gain) Loss
on Sale of Assets and Other
The Company recorded a (gain) loss on sale
of assets and other in the amount of $12,407,696, $469,961 and
$(1,201,850) in 2001, 2002 and 2003, respectively. The loss
recorded in 2001 included a charge of $7,217,975 to write down
one property to be disposed of in the U.S. to fair value and a
charge of $1,471,947 to write down one property to be disposed
of in Argentina to fair value.
16. Commitments
and Contingencies
Leases The Company conducts a
significant part of its theatre operations in leased premises
under noncancelable operating leases with terms generally
ranging from 15 to 25 years. In addition to the minimum
annual lease payments, some of these leases provide for
contingent rentals based on operating results and most require
the payment of taxes, insurance and other costs applicable to
the property. Generally, these leases include renewal options
for various periods at stipulated rates. Some leases also
provide for escalating rent payments throughout the lease term.
Deferred lease expenses of $24,837,457 and $27,652,702 at
December 31, 2002 and 2003, respectively, have been
provided to account for lease expenses on a straight-line basis,
where lease payments are not made on such basis. Rent expense
for the years ended December 31, is as follows:
In February 1998, the Company completed a sale
leaseback transaction with affiliates of Primus Capital, L.L.C.
(the Sale Leaseback). Pursuant to the Sale
Leaseback, the Company sold the land, buildings and site
improvements of twelve theatre properties to third party special
purpose entities formed by Primus Capital, L.L.C. for an
aggregate purchase price equal to approximately
$131.5 million resulting in a gain on disposal of the
properties of $3,790,759. In October 1998, the Company completed
a second sale leaseback transaction with affiliates of Primus
Capital, L.L.C. (the Second Sale Leaseback).
Pursuant to the Second Sale Leaseback, the Company sold the
land, building and site improvements of one theatre property to
a third party special purpose entity for an aggregate purchase
price equal to approximately $13.9 million resulting in a
gain on disposal of the property of $700,000. In December 1999,
the Company completed a third sale leaseback transaction (the
Third Sale Leaseback) pursuant to which the Company
sold the land, building and site improvements of its corporate
office to a third party special purpose entity for an aggregate
purchase price equal to approximately $20.3 million
resulting in a gain on disposal of the property of $1,470,000.
The Company deferred the gains of $5,960,759 from all three sale
leaseback transactions and is recognizing them evenly over the
lives of the leases (ranging from 10 to 20 years). As of
December 31, 2003, $1,954,059 of the deferred gain has been
recognized leaving an aggregate deferred gain of $4,006,700
remaining to be amortized. Future minimum payments under these
leases are due as follows: $16,175,438 in 2004, $16,175,438 in
2005, $16,175,438 in 2006, $16,290,684 in 2007, $16,290,684 in
2008 and $139,299,316 thereafter.
F-26
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future minimum payments under noncancelable
capital leases (recorded in accrued other current liabilities)
and operating leases (including leases under the aforementioned
sale leaseback transactions) with initial or remaining terms in
excess of one year at December 31, 2003, are due as follows:
Employment Agreements
In June 2002, the Company entered into
executive employment agreements with each of Lee Roy Mitchell,
Alan W. Stock, Tim Warner, Robert Copple and Robert
Carmony, pursuant to which Messrs. Mitchell, Stock, Warner,
Copple and Carmony serve respectively as Chairman and Chief
Executive Officer, President and Chief Operating Officer, Senior
Vice President and President of Cinemark International, L.L.C.,
Senior Vice President and Chief Financial Officer and Senior
Vice President Operations. These agreements, other
than Mr. Mitchells employment agreement, were amended
to modify the provisions relating to transactions resulting in a
change of control. The initial term of each employment agreement
is three years, subject to automatic extensions for a one year
period at the end of each year of the term, unless the agreement
is terminated. Pursuant to the employment agreements, each of
these individuals receives a base salary, which is subject to
annual review for increase (but not decrease) each fiscal year
by the board of directors. Base salaries for 2003 were as
follows: Lee Roy Mitchell $682,500, Alan W.
Stock $403,891, Tim Warner $327,525,
Robert Copple $294,919 and Robert
Carmony $284,313. In addition, each of these
executives is eligible to receive an annual incentive cash bonus
ranging from 20% to 60% of base salary (or up to 150% in the
case of Mr. Mitchell) upon the Company meeting certain
financial performance goals established by the board of
directors for the fiscal year. Mr. Mitchell is also
entitled to additional fringe benefits including life insurance
benefits of not less than $5 million, disability benefits
of not less than 66% of base salary, a luxury automobile and
membership at a country club.
In the event of a change of control, each named
executive, other than Mr. Mitchell, will be entitled to receive,
as additional benefits, a cash payment equal to the sum of:
(1) his respective accrued compensation (which includes
base salary and a pro rata bonus) and benefits, (2) base
salary for the balance of the term, (3) an amount equal to
the most recent annual bonus received by such executive
multiplied by the number of years remaining on his term, and
(4) the value of his employee benefits for the balance of
his term. In addition, each named executives equity-based
or performance-based awards will become fully vested and
exercisable upon the change of control in accordance with the
terms of the applicable plan or agreement.
The employment agreement with each named
executive also provides for severance payments upon termination
of employment, the amount and nature of which depends upon the
reason for the termination of employment. For example, if such
executive resigns for good reason (which, in the case of
Mr. Mitchell, includes failure to be elected to serve as
chairman) or is terminated by the Company without cause (as
defined in the agreement), the executive will receive his
respective accrued compensation (which includes base salary and
a pro rata bonus) and benefits and an amount determined by
multiplying his annual base salary and the most recent annual
bonus by the number of years remaining on his term. Each such
executives equity-based or performance based awards will
become fully vested or exercisable upon such termination or
resignation. Each named executive will also have an option to
receive the one-year value, and in the case of
Mr. Mitchell, the five-year value of his employee benefits.
Alternatively, these executives may
F-27
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
choose to continue to participate in the company
benefit plans and programs on the same terms as other similarly
situated active employees for a one year period, and in the case
of Mr. Mitchell, for a five year period from the date of
such resignation or termination. Mr. Mitchell will also be
entitled, for a period of five years, to office space and
related expenses upon his resignation for good reason or
termination without cause and to tax preparation assistance upon
termination of his employment for any reason.
In June 2002, the Company also entered into an
executive employment agreement with Tandy Mitchell, a director
and the wife of Lee Roy Mitchell, pursuant to which
Mrs. Mitchell serves as Executive Vice President.
Mrs. Mitchells employment agreement was amended to
modify the provisions relating to transactions resulting in a
change of control. The employment agreement with
Mrs. Mitchell provides for a base salary of $250,000 per
year upon substantially the same terms, including without
limitation, bonus, change of control and severance provisions,
as the employment agreements with the named executives listed
above, other than Mr. Mitchell, except: Mrs. Mitchell
is entitled to life insurance benefits of not less than
$1 million during the term of her employment, a luxury
automobile and tax preparation assistance for a period of five
years upon termination of her employment for any reason.
Retirement Savings Plan
The Company has a 401(k) profit
sharing plan for the benefit of all employees and makes
contributions as determined annually by the Board of Directors.
Contribution payments of $823,133 and $1,152,212 were made in
2002 (for plan year 2001) and 2003 (for plan year 2002),
respectively. A liability of $1,107,351 has been recorded at
December 31, 2003 for contribution payments to be made in
2004 (for plan year 2003).
Letters of Credit and Collateral
The Company had outstanding letters of
credit of $448,888 and $68,557 in connection with property and
liability insurance coverage at December 31, 2002 and 2003,
respectively.
Litigation and Litigation
Settlements
In March 1999,
the Department of Justice filed suit in the U.S. District Court,
Northern District of Ohio, Eastern Division, against the Company
alleging certain violations of the Americans with Disabilities
Act of 1990 (the ADA) relating to the Companys
wheelchair seating arrangements and seeking remedial action. An
order granting summary judgment to the Company was issued in
November 2001. The Department of Justice appealed the district
courts ruling with the Sixth Circuit Court of Appeals. On
November 7, 2003, the Sixth Circuit Court of Appeals
reversed the summary judgment and sent the case back to the
district court for further review without deciding whether
wheelchair seating at the Companys theatres comply with
the ADA. The Sixth Circuit Court of Appeals also stated that if
the district court found that the theatres did not comply with
the ADA, any remedial action should be prospective only. If the
Company loses this litigation, the Companys financial
position, results of operations and cash flows may be materially
and adversely affected. The Company is unable to predict the
outcome of this litigation or the range of potential loss,
however, management believes that based upon current precedent
the Companys potential liability with respect to such
proceeding is not material in the aggregate to the
Companys financial position, results of operations and
cash flows. Accordingly, the Company has not established a
reserve for loss in connection with this proceeding.
To date, there have been three divergent opinions
published by federal circuit courts addressing whether
wheelchair seating locations in stadium-style movie theatres
must comply with an alleged viewing angle
requirement purportedly interpreted from the lines of
sight comparable clause of Section 4.33.3 of the ADA
Accessibility Guidelines.
On April 6, 2000, the Fifth Circuit Court of
Appeals issued its decision in
Lara v. Cinemark,
in
which it rejected an interpretation by the United States
Department of Justice that Section 4.33.3 imposes a
viewing angle requirement, and held that wheelchair
seating locations in the sloped-floor areas of stadium-style
movie theatres that provide unobstructed views of the movie
screen comply with the lines of sight comparable
language of Section 4.33.3 as a matter of law.
Lara v. Cinemark USA, Inc.
, 207 F.3d 783,
F-28
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
788-89 (5th Cir. 2000). On August 13, 2003,
the Ninth Circuit Court of Appeals issued its divided decision
in
Stewmon v. Regal,
in which the majority deferred
to an interpretation by the DOJ that Section 4.33.3 imposes
a viewing angle requirement, and held that
wheelchair seating locations in the sloped-floor areas of
stadium-style movie theatres did not provide comparable
viewing angles of the movie screen and thus were
unlawful.
Stewmon v. Regal Cinemas, Inc.
, 339 F.3d
1126, 1133 (9th Cir. 2003). On November 6, 2003, the Sixth
Circuit Court of Appeals issued its opinion in
United
States v. Cinemark,
in which it deferred in part to an
interpretation by the DOJ that compliance with
Section 4.33.3 includes a consideration of the quality of
the viewing angle of the movie screen, but remanded
the case to the district court to determine liability and
remedies issues with dicta suggesting that any remedy should be
given prospective application only.
United States of
America v. Cinemark USA, Inc
., 348 F.3d 569, 579,
582-83 (6th Cir. 2003). These decisions have created three-way
circuit conflicts on issues concerning interpreting federal
accessibility law, deferring to the DOJs purported
interpretations of federal accessibility law, and whether
federal courts should retroactively apply such interpretations
after construction of the subject facilities. Due to the circuit
conflicts, the Company and Regal Cinemas have each filed
petitions for writs of certiorari with the United States Supreme
Court. Those petitions for certiorari are currently pending. The
Company is unable to predict whether the United States Supreme
Court will grant its petition for certiorari.
In August 2001, David Wittie, Rona Schnall, Ron
Cranston, Jennifer McPhail, Peggy Garaffa and ADAPT of Texas
filed suit in the 201st Judicial District Court of Travis
County, Texas alleging certain violations of the Human Resources
Code, the Texas Architectural Barriers Act, the Texas
Accessibility Standards and the Deceptive Trade Practices Act
relating to accessibility of movie theatres for patrons using
wheelchairs at two theatres located in the Austin, Texas market.
The plaintiffs were seeking remedial action and unspecified
damages. On February 20, 2003, a jury determined that the
Companys theatres located in the Austin, Texas market
complied with the Human Resources Code, the Texas Architectural
Barriers Act and the Texas Accessibility Standards. The judge
granted summary judgment to the Company with respect to the
Deceptive Trade Practices Act. The plaintiffs failed to timely
appeal the verdict. Accordingly, the jury verdict is final.
In July 2001, Sonia Rivera-Garcia and Valley
Association for Independent Living filed suit in the 93rd
Judicial District Court of Hidalgo County, Texas alleging
certain violations of the Human Resources Code, the Texas
Architectural Barriers Act, the Texas Accessibility Standards
and the Deceptive Trade Practices Act relating to accessibility
of movie theatres for patrons using wheelchairs at one theatre
in the Mission, Texas market which claims are similar to those
raised in the
Wittie
case in the preceding paragraph. The
plaintiffs are seeking remedial action and unspecified damages.
The Company has filed an answer denying the allegations and is
vigorously defending this suit and has, as a result of the
Wittie
litigation, filed motions to dismiss this case.
The Company is unable to predict the outcome of this litigation
or the range of potential loss, however, management believes
that based upon current precedent the Companys potential
liability with respect to such proceeding is not material in the
aggregate to the Companys financial position, results of
operations and cash flows. Accordingly, the Company has not
established a reserve for loss in connection with this
proceeding.
In May 2002, Robert Todd on behalf of Robert
Preston Todd, his minor child and all individuals who are
deaf or are severely hearing impaired brought this case in
the United States District Court for the Southern District of
Texas, Houston Division against several movie theatre operators,
including AMC Entertainment, Inc., Regal Entertainment, Inc.,
the Company and Century Theaters as well as eight movie
production companies. The lawsuit alleges violation of Title III
of the ADA and the First Amendment to the Constitution of the
United States. Plaintiffs seek unspecified injunctive relief,
unspecified declaratory relief, unspecified monetary damages
(both actual and punitive) and unspecified attorneys fees.
The Company has denied any violation of law and has vigorously
defended against all claims. On March 7, 2003, the federal
district judge presiding over the case granted summary judgment
to the defendants on the alleged First Amendment violations. On
August 5, 2003, the federal district judge presiding over
the case granted
F-29
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
summary judgment to the defendants on the alleged
ADA violations. The plaintiffs appealed the August 5, 2003
decision but have since withdrawn the appeal. Accordingly, the
district courts summary judgment in the Companys
favor is final.
From time to time, the Company is involved in
other various legal proceedings arising from the ordinary course
of its business operations, such as personal injury claims,
employment matters and contractual disputes, most of which are
covered by insurance. The Company believes its potential
liability with respect to proceedings currently pending is not
material, individually or in the aggregate, to the
Companys financial position, results of operations and
cash flows.
The Company operates in a single business segment
as a motion picture exhibitor. The Company is a multinational
corporation with consolidated operations in the U.S., Canada,
Mexico, Argentina, Brazil, Chile, Ecuador, Peru, Honduras, El
Salvador, Nicaragua, Costa Rica, Panama, Colombia and the United
Kingdom as of December 31, 2003. Revenues in the U.S. and
Canada, Mexico, Brazil and other foreign countries for the years
ended December 31 are as follows:
Theatre properties and equipment, net of
accumulated depreciation and amortization, in the U.S. and
Canada, Mexico, Brazil and other foreign countries as of
December 31 are as follows:
F-30
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In addition to transactions discussed in other
notes to the consolidated financial statements, the following
transactions with related companies are included in the
Companys consolidated financial statements:
The Company manages one theatre for Laredo
Theatre, Ltd (Laredo). Lone Star Theatres, Inc. owns
25% of the limited partnership interests in Laredo. The Company
is the sole general partner and owns the remaining limited
partnership interests. Lone Star Theatres, Inc. is owned 100% by
Mr. David Roberts, who is Lee Roy Mitchells
son-in-law. Under the agreement, management fees are paid by
Laredo to the Company at a rate of 5% of theatre revenues in
each year up to $50,000,000 and 3% of theatre revenues in each
year in excess of $50,000,000. The Company recorded $223,886 of
management fee revenues and received dividends of $675,000 from
Laredo in 2003. Laredo distributed dividends of $225,000 to Lone
Star Theatres in 2003 in accordance with the terms of the
limited partnership agreement. All such amounts are included in
the Companys consolidated financial statements with the
intercompany amounts eliminated in consolidation.
The Company managed one theatre for Mitchell
Theatres, Inc., which was 100% owned by members of Lee Roy
Mitchells family. Under the agreement, management fees
were paid by Mitchell Theatres, Inc. to the Company at a rate of
5% of theatre revenues. The Company recorded $32,144 of
management fee revenues from Mitchell Theatres, Inc. in 2003. On
December 31, 2003, the Company purchased all of the issued
and outstanding capital stock of Mitchell Theatres, Inc. for
$681,034, which included the assumption of $156,000 in
outstanding debt that was immediately paid off at the time of
purchase. See Note 3 to the consolidated financial
statements for a description of the acquisition.
The Company leases one theatre from Plitt Plaza
joint venture. Plitt Plaza joint venture is indirectly owned by
Lee Roy Mitchell. The lease expired in July 2003 but was
extended with similar terms through December 2003. The Company
recorded $267,334 of facility lease expense payable to Plitt
Plaza joint venture during 2003. The Company signed a new
month-to-month lease effective January 1, 2004, under which
the annual rent will be approximately $118,000 plus certain
taxes, maintenance expenses and insurance.
The Company entered into a profit participation
agreement dated May 17, 2002 with its President, Alan
Stock, pursuant to which Mr. Stock receives a profit
interest in two recently built theatres after the Company has
recovered its capital investment in these theatres plus its
borrowing costs. Under this agreement, operating losses and
disposition losses for any year are allocated 100% to the
Company. Operating profits and disposition profits for these
theatres for any fiscal year are allocated first to the Company
to the extent of total operating losses and losses from any
disposition of these theatres. Thereafter, net cash from
operations from these theatres or from any disposition of these
theatres is paid first to the Company until such payments equal
the Companys investment in these theatres, plus interest,
and then 51% to the Company and 49% to Mr. Stock. In the
event that Mr. Stocks employment is terminated
without cause, profits will be distributed according to this
formula without first allowing the Company to recoup its
investment plus interest thereon. No amounts have been paid to
Mr. Stock to date pursuant to the profit participation
agreement. The Company expects to begin distributing a portion
of the profits of these theatres to Mr. Stock in fiscal
year 2004. Upon
F-31
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
consummation of an initial public offering, the
Company will have the option to purchase Mr. Stocks
interest in the theatres for a price equal to the fair market
value of the profit interest, as determined by an independent
appraiser. The Company does not intend to enter into similar
arrangements with its executive officers in the future.
In 2002, $3,080,511 of legal, accounting and
other professional fees and costs were incurred as a result of
the Companys proposed initial public offering. The
proposed initial public offering was subsequently postponed due
to unfavorable market conditions. Although the Companys
S-1 Registration Statement remains filed with the Securities and
Exchange Commission, these legal, accounting and other
professional fees and costs were written off during the fourth
quarter of 2002 since the proposed initial public offering was
not consummated.
The Companys valuation allowance for
deferred tax assets for the years ended December 31, 2001,
2002 and 2003 is as follows:
The Company recorded a loss on early retirement
of debt of $7,540,269 during the year ended December 31,
2003, which included (i) $1,645,759 of unamortized debt
issue costs associated with the retirement of the Companys
then existing Credit Facility and the Cinema Properties Facility
that occurred during the first quarter of 2003;
(ii) $5,612,377 of unamortized debt issue costs,
unamortized bond premiums/discounts and tender offer repurchase
costs associated with the tender offer to repurchase and
subsequent retirement of approximately $233 million
principal amount of outstanding 9 5/8% Senior Subordinated
Notes that occurred during the second quarter of 2003; and
(iii) $282,133 of unamortized debt issue costs, unamortized
bond premiums/discounts and other fees associated with the
redemption of the remaining $42 million principal amount of
the Companys 9 5/8% Senior Subordinated Notes that
occurred during the third quarter of 2003. The loss on early
retirement of debt is recorded as other income (expense) on
the consolidated statement of operations for the year ended
December 31, 2003.
F-32
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Recapitalization
On March 12, 2004, the Company entered into an agreement
and plan of merger with a Delaware corporation and newly formed
subsidiary of Madison Dearborn Partners, LLC
(Madison). The transaction was completed on
April 2, 2004, at which time the newly formed subsidiary of
Madison was merged with and into the Company, with the Company
continuing as the surviving corporation. Simultaneously, an
affiliate of Madison purchased shares of the Companys
common stock for approximately $518.3 million in cash and
became the Companys controlling stockholder, owning
approximately 83% of the Companys capital stock. Lee Roy
Mitchell, the Companys Chief Executive Officer, and the
Mitchell Special Trust collectively retained approximately 16%
ownership of the Companys capital stock and certain
members of management own the remaining 1%. As part of the
transaction, the Company paid change of control fees and other
management compensation expenses of approximately
$15 million, which will be recorded in April 2004. Based on
the terms of the transaction, including Mr. Mitchells
ownership retention, the transaction will be accounted for as a
recapitalization, which results in the Company retaining its
historical book value.
On March 31, 2004, the Company issued
$577,173,000 principal amount at maturity of 9 3/4% senior
discount notes due 2014. The gross proceeds at issuance of
$360,000,115 were used to fund in part the Recapitalization.
Interest on the notes accretes until March 15, 2009 up to
the aggregate principal amount of $577,173,000. Beginning
March 15, 2009, interest on the notes will accrue at a rate
of 9 3/4% per annum and will be payable semiannually in
arrears on March 15 and September 15, commencing on
September 15, 2009. Due to the holding company status of
the Company, payments of principal and interest under the notes
will be dependent on loans, dividends and other payments
received from the Companys subsidiaries. The
Companys subsidiaries have no obligation, contingent or
otherwise, to pay the amounts due under the 9 3/4% senior
discount notes or to make funds available to pay those amounts.
The 9 3/4% senior discount notes are general unsecured
senior obligations that are effectively subordinated to
indebtedness and other liabilities of the Companys
subsidiaries. Upon a change of control, the Company would be
required to make an offer to repurchase all or any part of the
9 3/4% senior discount notes at a price equal to 101% of
the accreted value of the notes plus accrued and unpaid
interest, if any, through the date of purchase.
Upon consummation of the Recapitalization on
April 2, 2004, all of the Companys outstanding stock
options immediately vested and the majority were repurchased,
resulting in compensation expense of approximately
$16 million, which will be recorded in April 2004.
As a result of the Recapitalization, the Company
provided notice to its Brazilian partners (i) that its then
existing stockholders will no longer own more than 25% of the
Companys common stock and (ii) that Lee Roy Mitchell
has sold certain of his shares of the Companys common
stock for cash. The Brazilian partners have exercised their
option to cause the Company or one of its designees to purchase
shares of common stock of Cinemark Brazil S.A. owned by the
Brazilian partners. The purchase price shall be determined
through an appraisal process conducted by up to three approved
investment banks. The Company and the Brazilian partners have
each received appraisals from investment banks and are currently
negotiating the price per share for the common stock of Cinemark
Brasil S.A. If the Company and the Brazilian partners are unable
to agree upon a price on or prior to June 18, 2004, a third
investment bank will be retained to determine the price per
share of the common stock of Cinemark Brasil S.A. The Company is
unable to predict what the purchase price will be. The Company
expects that the purchase will be financed through additional
borrowings by Cinemark USA, Inc. or with available cash.
Refinancing of Certain Long-Term
Debt
On March 16,
2004, the Company initiated a tender offer for its outstanding
$105 million principal amount 8 1/2% senior
subordinated notes due 2008 and a consent solicitation to remove
substantially all restrictive covenants in the indenture
governing those notes. On March 25, 2004, a supplemental
indenture removing substantially all of the covenants was
executed and became effective on the date of the
Recapitalization. Additionally, on the date of the
Recapitalization, the Company amended its senior secured credit
facility to provide for a $260 million seven year term loan
and a
F-33
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$100 million six and one-half year revolving
credit line, which was left undrawn. The net proceeds from the
amended senior secured credit facility were used to repay the
term loan under the Companys existing senior secured
credit facility of approximately $163.8 million and to
redeem the approximately $94.2 million principal amount of
the Companys outstanding $105 million principal
amount of 8 1/2% senior subordinated notes that were
tendered pursuant to the tender offer. The tender offer was made
at 104.5% of the principal amount of the notes tendered on or
prior to the consent date and at 101.5% of the principal amount
of the notes tendered subsequent to the consent date but prior
to the expiration date. The premium fees paid, the unamortized
bond discount related to the tendered notes and other related
fees will be recorded by the Company as a loss on early
retirement of debt of approximately $5 million in April
2004.
Under the amended term loan, principal payments
of $650,000 are due each calendar quarter through March 31,
2010 and increase to $61,100,000 each calendar quarter from
June 30, 2010 to maturity at March 31, 2011. The
amended term loan bears interest, at the Companys option,
at: (A) the base rate equal to the higher of (i) the
prime lending rate as set forth on the British Banking
Association Telerate page 5 or (ii) the federal funds
effective rate from time to time plus 0.50%, plus a margin of
1.25% per annum, or (B) a eurodollar rate plus
a margin of 2.25% per annum. After the completion of two fiscal
quarters after the closing date, the margin under the term loan
applicable to base rate loans ranges from 1.00% per annum to
1.25% per annum and the margin applicable to eurodollar rate
loans ranges from 2.00% per annum to 2.25% per annum, and will
be adjusted based upon the Company achieving certain performance
targets.
Borrowings under the amended revolving credit
line bear interest, at the Companys option, at: (A) a
base rate equal to the higher of (i) the prime lending rate
as set forth on the British Banking Association Telerate page 5
or (ii) the federal funds effective rate from time to time
plus 0.50%, plus a margin of 1.50% per annum, or (B) a
eurodollar rate plus a margin of 2.50% per annum.
After the completion of two fiscal quarters after the closing
date, the margin under the revolving credit line applicable to
base rate loans ranges from 1.00% per annum to 1.50% per annum
and the margin applicable to eurodollar rate loans ranges from
2.00% per annum to 2.50% per annum, and will be adjusted based
upon the Company achieving certain performance targets. The
Company will also be required to pay a commitment fee calculated
at the rate of 0.50% per annum on the average daily unused
portion of the amended revolving credit line, payable quarterly
in arrears.
On April 6, 2004, as a result of the
consummation of the Recapitalization and in accordance with the
terms of the indenture governing the Companys 9% senior
subordinated notes due 2013, the Company made a change of
control offer to purchase the 9% senior subordinated notes at a
purchase price of 101% of the aggregate principal amount, plus
accrued and unpaid interest, if any, at the date of purchase.
Approximately $17.8 million in principal amount of the 9%
senior subordinated notes were tendered and not withdrawn in the
change of control offer, which expired on May 26, 2004.
Payment of the change of control price was made with available
cash by Cinemark USA, Inc. on June 1, 2004.
Assets Held for
Sale
As of March 31,
2004, the Companys two United Kingdom theatres met the
criteria of assets held for sale in accordance with SFAS
No. 144,
Accounting for Impairment or Disposal of
Long-Lived Assets,
thus, the results of operations and
the related disclosures reflect the classification of the United
Kingdom theatres as discontinued operations for all periods
presented.
F-34
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amounts reported as discontinued operations in
the Companys consolidated statements of operations include
the following components:
Amounts related to the United Kingdom theatres
included in the Companys consolidated balance sheets are
as follows:
On April 30, 2004, the Company sold the
United Kingdom theatres for approximately $2.9 million. The
divestiture resulted in a pre-tax loss of approximately
$1.8 million.
F-35
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CINEMARK, INC. AND SUBSIDIARIES
The accompanying notes are an integral part of
the condensed consolidated financial statements.
F-36
CINEMARK, INC. AND SUBSIDIARIES
The accompanying notes are an integral part of
the condensed consolidated financial statements.
F-37
CINEMARK, INC. AND SUBSIDIARIES
The accompanying notes are an integral part of
the condensed consolidated financial statements.
F-38
CINEMARK, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Cinemark, Inc. and its subsidiaries (the
Company) is one of the leaders in the motion picture
exhibition industry in terms of both revenues and the number of
screens in operation, with theatres in the United States
(U.S.), Canada, Mexico, Argentina, Brazil, Chile,
Ecuador, Peru, Honduras, El Salvador, Nicaragua, Costa Rica,
Panama, Colombia and the United Kingdom. The Company also
manages additional theatres in the U.S. and Taiwan at
March 31, 2004.
On May 16, 2002, Cinemark, Inc. was formed
as the Delaware holding company of Cinemark USA, Inc., at which
time the outstanding common stock and outstanding stock options
of Cinemark USA, Inc. were exchanged for common stock and stock
options of the Company (the Share Exchange).
The condensed consolidated financial statements
have been prepared by the Company, without audit, according to
the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, these interim
financial statements reflect all adjustments necessary to state
fairly the financial position and results of operations as of,
and for, the periods indicated. The condensed consolidated
financial statements include the accounts of Cinemark, Inc. and
its subsidiaries. Majority-owned subsidiaries that the Company
controls are consolidated while those subsidiaries of which the
Company owns between 20% and 50% and does not control are
accounted for as affiliates under the equity method. Those
subsidiaries of which the Company owns less than 20% are
accounted for as affiliates under the cost method. The results
of these subsidiaries and affiliates are included in the
condensed consolidated financial statements effective with their
formation or from their dates of acquisition. Significant
intercompany balances and transactions are eliminated in
consolidation. Certain reclassifications have been made to the
2003 financial statements to conform to the 2004 presentation.
These condensed consolidated financial statements
should be read in conjunction with the audited annual
consolidated financial statements and the notes thereto for the
year ended December 31, 2003, included in the Annual Report
filed March 17, 2004 on Form 10-K by the
Companys subsidiary, Cinemark USA, Inc., under the
Securities Exchange Act of 1934. Operating results for the three
month period ended March 31, 2004 are not necessarily
indicative of the results to be achieved for the full year.
Recapitalization
On March 12, 2004, the Company
entered into an agreement and plan of merger with a Delaware
corporation and newly formed subsidiary of Madison Dearborn
Partners, LLC (Madison). The transaction was
completed on April 2, 2004, at which time the newly formed
subsidiary of Madison was merged with and into the Company, with
the Company continuing as the surviving corporation.
Simultaneously, an affiliate of Madison purchased shares of the
Companys common stock for approximately
$518.3 million in cash and became the Companys
controlling stockholder, owning approximately 83% of the
Companys capital stock. Lee Roy Mitchell, the
Companys Chief Executive Officer, and the Mitchell Special
Trust collectively retained approximately 16% ownership of the
Companys capital stock and certain members of management
own the remaining 1%. As part of the transaction, the Company
paid change of control fees and other management compensation
expenses of approximately $15 million, which will be
recorded in April 2004. Based on the terms of the transaction,
including Mr. Mitchells ownership retention, the
transaction will be accounted for as a recapitalization, which
results in the Company retaining its historical book value.
On March 31, 2004, the Company issued
$577,173,000 aggregate principal amount at maturity of
9 3/4% senior discount notes due 2014. The gross proceeds
at issuance of $360,000,115 were used to fund in part the
Recapitalization. Interest on the notes accretes until
March 15, 2009 up to the aggregate principal amount of
$577,173,000. Beginning March 15, 2009, interest on the
notes will accrue at a rate of 9 3/4% per annum and will be
payable semiannually in arrears on March 15 and
September 15, commencing on September 15, 2009.
F-39
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Due to the holding company status of the Company,
payments of principal and interest under the notes will be
dependent on loans, dividends and other payments received from
the Companys subsidiaries. The Companys subsidiaries
have no obligation, contingent or otherwise, to pay the amounts
due under the 9 3/4% senior discount notes or to make funds
available to pay those amounts. The 9 3/4% senior discount
notes are general unsecured senior obligations that are
effectively subordinated to indebtedness and other liabilities
of the Companys subsidiaries. Upon a change of control,
the Company would be required to make an offer to repurchase all
or any part of the 9 3/4% senior discount notes at a price
equal to 101% of the accreted value of the notes plus accrued
and unpaid interest, if any, through the date of purchase.
Upon consummation of the Recapitalization on
April 2, 2004, all of the Companys outstanding stock
options immediately vested and the majority were repurchased,
resulting in compensation expense of approximately
$16 million, which will be recorded in April 2004.
As a result of the Recapitalization, the Company
provided notice to its Brazilian partners (i) that its then
existing stockholders will no longer own more than 25% of the
Companys common stock and (ii) that Lee Roy Mitchell
has sold certain of his shares of the Companys common
stock for cash. The Brazilian partners have exercised their
option to cause the Company or one of its designees to purchase
shares of common stock of Cinemark Brasil S.A. owned by the
Brazilian partners. The purchase price shall be determined
through an appraisal process conducted by up to three approved
investment banks. The Company and the Brazilian partners have
each received appraisals from investment banks and are currently
negotiating the price per share for the common stock of Cinemark
Brasil S.A. If the Company and the Brazilian partners are unable
to agree upon a price on or prior to June 18, 2004, a third
investment bank will be retained to determine the price per
share of the common stock of Cinemark Brasil S.A. The Company is
unable to predict at this time what the purchase price will be.
The Company expects that the purchase will be financed through
additional borrowings by Cinemark USA, Inc. or with available
cash.
The Company capitalized approximately
$10.5 million of debt issue costs related to the issuance
of the 9 3/4% senior discount notes. The debt issue costs
are included in deferred charges and other assets on the
Companys condensed consolidated balance sheet at
March 31, 2004.
Refinancing of Certain Long-Term
Debt
On March 16,
2004, the Company initiated a tender offer for its outstanding
$105 million principal amount 8 1/2% senior
subordinated notes due 2008 and a consent solicitation to remove
substantially all restrictive covenants in the indenture
governing those notes. On March 25, 2004, a supplemental
indenture removing substantially all of the covenants was
executed and became effective on the date of the
Recapitalization. Additionally, on the date of the
Recapitalization, the Company amended its senior secured credit
facility to provide for a $260 million seven year term loan
and a $100 million six and one-half year revolving credit
line, which was left undrawn. The net proceeds from the amended
senior secured credit facility were used to repay the term loan
under the Companys existing senior secured credit facility
of approximately $163.8 million and to redeem the
approximately $94.2 million principal amount of the
Companys outstanding $105 million principal amount of
8 1/2% senior subordinated notes that were tendered
pursuant to the tender offer. The tender offer was made at
104.5% of the principal amount of the notes tendered on or prior
to the consent date and at 101.5% of the principal amount of the
notes tendered subsequent to the consent date but prior to the
expiration date. The premium fees paid, the unamortized bond
discount related to the tendered notes and other related fees
will be recorded by the Company as a loss on early retirement of
debt of approximately $5 million in April 2004.
Under the amended term loan, principal payments
of $650,000 are due each calendar quarter through March 31,
2010 and increase to $61,100,000 each calendar quarter from
June 30, 2010 to maturity at March 31, 2011. The
amended term loan bears interest, at the Companys option,
at: (A) the base rate equal to the higher of (i) the
prime lending rate as set forth on the British Banking
Association Telerate page 5 or (ii) the federal funds
effective rate from time to time plus 0.50%, plus a margin of
1.25% per annum, or (B) a eurodollar rate plus
a margin of 2.25% per annum. After the completion of two fiscal
quarters after
F-40
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the closing date, the margin under the term loan
applicable to base rate loans ranges from 1.00% per annum to
1.25% per annum and the margin applicable to eurodollar rate
loans ranges from 2.00% per annum to 2.25% per annum, and will
be adjusted based upon the Company achieving certain performance
targets.
Borrowings under the amended revolving credit
line bear interest, at the Companys option, at: (A) a
base rate equal to the higher of (i) the prime lending rate
as set forth on the British Banking Association Telerate
page 5 or (ii) the federal funds effective rate from
time to time plus 0.50%, plus a margin of 1.50% per annum, or
(B) a eurodollar rate plus a margin of 2.50%
per annum. After the completion of two fiscal quarters after the
closing date, the margin under the revolving credit line
applicable to base rate loans ranges from 1.00% per annum to
1.50% per annum and the margin applicable to eurodollar rate
loans ranges from 2.00% per annum to 2.50% per annum, and will
be adjusted based upon the Company achieving certain performance
targets. The Company will also be required to pay a commitment
fee calculated at the rate of 0.50% per annum on the average
daily unused portion of the amended revolving credit line,
payable quarterly in arrears.
On April 6, 2004, as a result of the
consummation of the Recapitalization and in accordance with the
terms of the indenture governing the Companys 9% senior
subordinated notes due 2013, the Company made a change of
control offer to purchase the 9% senior subordinated notes at a
purchase price of 101% of the aggregate principal amount, plus
accrued and unpaid interest, if any, at the date of purchase.
Approximately $17.8 million in principal amount of the 9%
senior subordinated notes were tendered and not withdrawn in the
change of control offer, which expired on May 26, 2004.
Payment of the change of control offer price was paid with
available cash by Cinemark USA, Inc. on June 1, 2004.
During 2003, the Company accounted for its 50%
investment in Interstate Theatres, L.L.C. under the equity
method of accounting. On December 31, 2003, the Company
purchased the remaining 50% interest in Interstate Theatres,
L.L.C, which owns 80% of Interstate Theatres II, L.L.C. The
Company accounted for the purchase as a step acquisition. The
total purchase price of $1,500,000 was allocated to theatre
properties and equipment ($404,083), working capital ($65,515)
and goodwill ($1,030,402). The Companys condensed
consolidated balance sheet at December 31, 2003 reflects
the assets and liabilities of Interstate Theatres, L.L.C. and
its subsidiary. Results of operations for Interstate Theatres,
L.L.C. and its subsidiary are included in the Companys
condensed consolidated statement of operations for the three
month period ended March 31, 2004.
On December 31, 2003, the Company purchased
Mitchell Theatres, Inc., which was 100% owned by members of Lee
Roy Mitchells family (a related party to the Company). The
total purchase price of $681,034 included the assumption of
$156,000 in outstanding debt, which was immediately paid off at
the time of purchase. The Companys condensed consolidated
balance sheet at December 31, 2003 reflects the assets and
liabilities of Mitchell Theatres, Inc., which consisted of a
working capital deficit of $137,511 and theatre property and
equipment of $818,545. Results of operations for Mitchell
Theatres, Inc. are included in the Companys condensed
consolidated statement of operations for the three month period
ended March 31, 2004.
In January 2004, the Company sold its 50%
investment in Entertainment Amusement Enterprises, Inc. for
$1,500,000. The Company received proceeds of $1,250,000 in cash
and a three-year $250,000 note, resulting in a gain of $468,463.
The note receivable is included in deferred charges and other
assets on the Companys condensed consolidated balance
sheet. The gain is included in gain on sale of assets and other
on the Companys condensed consolidated statement of
operations.
F-41
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of March 31, 2004, the Companys two
United Kingdom theatres met the criteria of assets held for sale
in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144,
Accounting for
Impairment or Disposal of Long-Lived Assets,
thus, the
results of operations of the United Kingdom theatres have been
classified as discontinued operations for all periods presented.
Amounts reported as discontinued operations in
the Companys condensed consolidated statements of
operations include the following components:
Amounts related to the United Kingdom theatres
included in the Companys condensed consolidated balance
sheets are as follows:
On April 30, 2004, the Company sold the
United Kingdom theatres for approximately $2.9 million. The
divestiture resulted in a pre-tax loss of approximately
$1.8 million.
F-42
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Basic earnings per share is computed by dividing
income by the weighted average number of shares of common stock
of all classes outstanding during the period. Diluted earnings
per share is computed by dividing income by the weighted average
number of shares of common stock and potentially dilutive common
stock outstanding determined under the treasury stock method.
The following table sets forth the computation of basic and
diluted earnings per share:
The Company applies Accounting Principles Board
Opinion No. 25 and related interpretations in accounting
for stock option plans. Had compensation costs been determined
based on the fair value at the date of grant for awards under
the plans, consistent with the method of SFAS No. 123,
Accounting for Stock-Based Compensation and SFAS
No. 148, Accounting for Stock-Based Compensation
Transition and Disclosure, the Companys net income
and earnings per share would have been reduced to the pro-forma
amounts indicated below:
No stock options were granted during the three
month periods ended March 31, 2004 or 2003. Upon
consummation of the Recapitalization on April 2, 2004, all
of the Companys outstanding stock options
F-43
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
immediately vested and the majority were
repurchased, resulting in compensation expense of approximately
$16 million, which will be recorded in April 2004.
No additional goodwill was recorded during the
three month period ended March 31, 2004. The Company
recorded foreign currency translation adjustments to goodwill
for the three month period ended March 31, 2004, which
resulted in a net decrease to goodwill of $106,557.
Intangible assets consisted of the following:
Aggregate amortization expense of $159,903 for
the three month period ended March 31, 2004 consisted of
$131,920 of amortization of intangible assets and $27,983 of
amortization of other assets. Estimated aggregate future
amortization expense for intangible assets is as follows:
In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, the Company reviews long-lived assets for
impairment on a quarterly basis or whenever events or changes in
circumstances indicate the carrying amount of the assets may not
be fully recoverable.
The Company considers actual theatre level cash
flow, future years budgeted theatre level cash flow, theatre
property and equipment values, goodwill values, the age of a
recently built theatre, competitive theatres in the marketplace,
the sharing of a market with other Company theatres, changes in
foreign currency exchange rates, the impact of recent ticket
price changes, available lease renewal options and other factors
in its assessment of impairment of individual theatre assets.
Assets are evaluated for impairment on an individual theatre
basis or a group of theatres that share the same marketplace,
which the Company believes is the lowest applicable level for
which there are identifiable cash flows. The evaluation is based
on the estimated undiscounted cash flows from continuing use
through the remainder of the theatres useful life. The
remainder of the useful life correlates with the available
remaining lease period for leased properties and a period of
twenty years for fee owned properties. If the estimated
undiscounted cash flows are not sufficient to recover an
assets carrying amount, the Company then compares the
carrying value of the asset with its fair value,
F-44
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
which is determined based on estimated
undiscounted cash flows. When estimated fair value is determined
to be lower than the carrying value of the asset, the asset is
written down to its estimated fair value. During the three month
period ended March 31, 2004, the Company recorded an asset
impairment charge of $1.0 million to write-down one theatre
in the United States to its estimated fair value.
The accumulated other comprehensive loss account
in stockholders equity of $86,538,823 and $86,544,422 at
March 31, 2004 and December 31, 2003, respectively,
primarily relates to the cumulative foreign currency adjustments
from translating the financial statements of Cinemark Argentina,
S.A., Cinemark Brasil S.A. and Cinemark de Mexico, S.A. de C.V.
into U.S. dollars.
In 2003 and 2004, all foreign countries where the
Company has operations, including Argentina, Brazil and Mexico
were deemed non-highly inflationary. Thus, any fluctuation in
the currency results in a cumulative foreign currency
translation adjustment to the accumulated other comprehensive
loss account recorded as an increase in, or reduction of,
stockholders equity.
On March 31, 2004, the exchange rate for the
Argentine peso was 2.86 pesos to the U.S. dollar (the exchange
rate was 2.94 pesos to the U.S. dollar at December 31,
2003). As a result, the effect of translating the March 31,
2004 Argentine financial statements into U.S. dollars is
reflected as a cumulative foreign currency translation
adjustment to the accumulated other comprehensive loss account
as an increase in stockholders equity of $391,306. At
March 31, 2004, the total assets of the Companys
Argentine subsidiaries were U.S. $16,429,320.
On March 31, 2004, the exchange rate for the
Brazilian real was 2.91 reais to the U.S. dollar (the exchange
rate was 2.89 reais to the U.S. dollar at December 31,
2003). As a result, the effect of translating the March 31,
2004 Brazilian financial statements into U.S. dollars is
reflected as a cumulative foreign currency translation
adjustment to the accumulated other comprehensive loss account
as a reduction of stockholders equity of $143,375. At
March 31, 2004, the total assets of the Companys
Brazilian subsidiaries were U.S. $61,760,243.
On March 31, 2004, the exchange rate for the
Mexican peso was 11.21 pesos to the U.S. dollar (the exchange
rate was 11.20 pesos to the U.S. dollar at December 31,
2003). As a result, the effect of translating the March 31,
2004 Mexican financial statements into U.S. dollars is reflected
as a cumulative foreign currency translation adjustment to the
accumulated other comprehensive loss account as a reduction of
stockholders equity of $102,672. At March 31, 2004,
the total assets of the Companys Mexican subsidiaries were
U.S. $85,456,418.
SFAS No. 130, Reporting Comprehensive
Income, establishes standards for the reporting and
display of comprehensive income and its components in the
financial statements. The Companys comprehensive income
was as follows:
F-45
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is provided as supplemental
information to the condensed consolidated statements of cash
flows:
On March 31, 2004, the Company issued
$577,173,000 principal amount at maturity of 9 3/4% senior
discount notes due 2014, the gross proceeds of which were
$360,000,115. At March 31, 2004, the proceeds are included
in cash and cash equivalents on the Companys condensed
consolidated balance sheet. On April 2, 2004, these
proceeds were used to fund in part the Recapitalization.
The Company operates in one business segment as a
motion picture exhibitor. The Company has operations in the
U.S., Canada, Mexico, Argentina, Brazil, Chile, Ecuador, Peru,
Honduras, El Salvador, Nicaragua, Costa Rica, Panama, Colombia
and the United Kingdom, which are reflected in the condensed
consolidated financial statements. Below is a breakdown of
select financial information by geographic area:
In January 2003, the Financial Accounting
Standards Board (FASB) issued Interpretation
No. 46 (FIN 46), Consolidation of
Variable Interest Entities an Interpretation of ARB
No. 51. FIN 46 addresses consolidation by
business enterprises of variable interest entities. FIN 46
requires a variable interest
F-46
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the
variable interest entitys activities or entitled to
receive a majority of the entitys residual returns or
both. The Company adopted FIN 46 on January 1, 2004.
The adoption of FIN 46 did not have a material impact on
its condensed consolidated financial statements.
The Company manages one theatre for Laredo
Theatre, Ltd (Laredo). The Company is the sole
general partner and owns 75% of the limited partnership
interests of Laredo. Lone Star Theatres, Inc. owns the remaining
25% of the limited partnership interests in Laredo and is 100%
owned by Mr. David Roberts, Lee Roy Mitchells
son-in-law. Under the agreement, management fees are paid by
Laredo to the Company at a rate of 5% of annual theatre revenues
up to $50,000,000 and 3% of annual theatre revenues in excess of
$50,000,000. The Company recorded $39,991 of management fee
revenues and received $150,000 of distributions from Laredo
during the three month period ended March 31, 2004. All
such amounts are included in the Companys condensed
consolidated financial statements with the intercompany amounts
eliminated in consolidation.
The Company leases one theatre from Plitt Plaza
Joint Venture (Plitt Plaza). Plitt Plaza is
indirectly owned by Lee Roy Mitchell. Annual rent is
approximately $118,000 plus certain taxes, maintenance expenses
and insurance. The Company recorded $30,024 of facility lease
expense payable to Plitt Plaza during the three month period
ended March 31, 2004.
The Company entered into an amended and restated
profit participation agreement on March 12, 2004 with its
President, Alan Stock, which became effective upon consummation
of the Recapitalization and amends a profit participation
agreement with Mr. Stock in effect since May 2002. Under
the agreement, Mr. Stock receives a profit interest in two
theatres once the Company has recovered its capital investment
in these theatres plus its borrowing costs. Under this
agreement, operating losses and disposition losses for any year
are allocated 100% to the Company. Operating profits and
disposition profits for these theatres for any fiscal year are
allocated first to the Company to the extent of total operating
losses and losses from any disposition of these theatres.
Thereafter, net cash from operations from these theatres or from
any disposition of these theatres is paid first to the Company
until such payments equal the Companys investment in these
theatres, plus interest, and then 51% to the Company and 49% to
Mr. Stock. No amounts have been paid to Mr. Stock to
date pursuant to the profit participation agreement. During the
three month period ended March 31, 2004, the Company
recorded approximately $50,000 in profit sharing expense payable
to Mr. Stock, which is included in general and
administrative expense and other current liabilities on the
Companys condensed consolidated financial statements. In
the event that Mr. Stocks employment is terminated
without cause, profits will be distributed according to this
formula without first allowing the Company to recoup its
investment plus interest thereon. Upon consummation of an
initial public offering of the Companys common stock, the
Company will have the option to purchase Mr. Stocks
interest in the theatres for a price equal to the greater of
(i) stated price reduced by any payments received during
the term and (ii) 49% of adjusted theatre level cash flow
multiplied by seven. The Company does not intend to enter into
similar arrangements with its executive officers in the future.
DOJ Litigation
In March 1999, the Department of
Justice (DOJ) filed suit in the U.S. District Court,
Northern District of Ohio, Eastern Division, against the Company
alleging certain violations of the Americans with Disabilities
Act of 1990 (the ADA) relating to the Companys
wheelchair seating arrangements and seeking remedial action. An
order granting summary judgment to the Company was issued in
November 2001. The Department of Justice appealed the district
courts ruling with the Sixth Circuit Court of Appeals. On
November 7, 2003, the Sixth Circuit Court of Appeals
reversed the summary judgment and sent the case back to the
district court for further review without deciding whether
wheelchair seating at the
F-47
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Companys theatres comply with the ADA. The
Sixth Circuit Court of Appeals also stated that if the district
court found that the theatres did not comply with the ADA, any
remedial action should be prospective only. If the Company loses
this litigation, the Companys financial position, results
of operations and cash flows may be materially and adversely
affected. The Company is unable to predict the outcome of this
litigation or the range of potential loss, however, management
believes that based upon current precedent the Companys
potential liability with respect to such proceeding is not
material in the aggregate to the Companys financial
position, results of operations and cash flows. Accordingly, the
Company has not established a reserve for loss in connection
with this proceeding.
To date, there have been three divergent opinions
published by federal circuit courts addressing whether
wheelchair seating locations in stadium-style movie theatres
must comply with an alleged viewing angle
requirement purportedly interpreted from the lines of
sight comparable clause of Section 4.33.3 of the ADA
Accessibility Guidelines.
On April 6, 2000, the Fifth Circuit Court of
Appeals issued its decision in
Lara v. Cinemark,
in which
it rejected an interpretation by the United States Department of
Justice that Section 4.33.3 imposes a viewing
angle requirement, and held that wheelchair seating
locations in the sloped-floor areas of stadium-style movie
theatres that provide unobstructed views of the movie screen
comply with the lines of sight comparable language
of Section 4.33.3 as a matter of law.
Lara v. Cinemark USA,
Inc.
, 207 F.3d 783, 788-89 (5th Cir. 2000). On
August 13, 2003, the Ninth Circuit Court of Appeals issued
its divided decision in
Stewmon v. Regal,
in which the
majority deferred to an interpretation by the DOJ that
Section 4.33.3 imposes a viewing angle
requirement, and held that wheelchair seating locations in the
sloped-floor areas of stadium-style movie theatres did not
provide comparable viewing angles of the movie
screen and thus were unlawful.
Stewmon v. Regal Cinemas,
Inc.
, 339 F.3d 1126, 1133 (9th Cir. 2003). On
November 6, 2003, the Sixth Circuit Court of Appeals issued
its opinion in
United States v. Cinemark,
in which it
deferred in part to an interpretation by the DOJ that compliance
with Section 4.33.3 includes a consideration of the quality
of the viewing angle of the movie screen, but
remanded the case to the district court to determine liability
and remedies issues with dicta suggesting that any remedy should
be given prospective application only.
United States of
America v. Cinemark USA, Inc
., 348 F.3d 569, 579, 582-83
(6th Cir. 2003). These decisions have created three-way circuit
conflicts on issues concerning interpreting federal
accessibility law, deferring to the DOJs purported
interpretations of federal accessibility law, and whether
federal courts should retroactively apply such interpretations
after construction of the subject facilities. Due to the circuit
conflicts, the Company and Regal Cinemas have each filed
petitions for writs of certiorari with the United States Supreme
Court. Those petitions for certiorari are currently pending. The
Company is unable to predict whether the United States Supreme
Court will grant its petition for certiorari.
Mission, Texas Litigation
In July 2001, Sonia Rivera-Garcia and
Valley Association for Independent Living filed suit in the 93rd
Judicial District Court of Hidalgo County, Texas alleging
certain violations of the Human Resources Code, the Texas
Architectural Barriers Act, the Texas Accessibility Standards
and the Deceptive Trade Practices Act relating to accessibility
of movie theatres for patrons using wheelchairs at one theatre
in the Mission, Texas market. The plaintiffs are seeking
remedial action and unspecified damages. The Company has filed
an answer denying the allegations and is vigorously defending
this suit. The Company is unable to predict the outcome of this
litigation or the range of potential loss, however, management
believes that based upon current precedent the Companys
potential liability with respect to such proceeding is not
material in the aggregate to the Companys financial
position, results of operations and cash flows. Accordingly, the
Company has not established a reserve for loss in connection
with this proceeding.
From time to time, the Company is involved in
other various legal proceedings arising from the ordinary course
of its business operations, such as personal injury claims,
employment matters and contractual disputes, most of which are
covered by insurance. The Company believes its potential
liability with respect to proceedings currently pending is not
material, individually or in the aggregate, to the
Companys financial position, results of operations and
cash flows.
F-48
$577,173,000
Cinemark, Inc.
9 3/4% Senior Discount Notes
PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 20.
Indemnification of Directors and Officers
Section 145 of the Delaware General
Corporation Law permits a corporation, under specified
circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorneys fees),
judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit
or proceeding brought by third parties by reason of the fact
that they were or are directors, officers, employees or agents
of the corporation, if such directors, officers, employees or
agents acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful.
In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses
actually and reasonably incurred by directors, officers,
employees or agents in connection with the defense or settlement
of an action or suit, and only with respect to a matter as to
which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification
shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in
which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or
agents are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
Section 102(b)(7) of the Delaware General
Corporation Law provides that a certificate of incorporation may
contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the
liability of a director
(1) for any breach of the directors
duty of loyalty to the corporation or its stockholders,
(2) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law,
(3) under Section 174 (relating to
liability for unauthorized acquisitions or redemptions of, or
dividends on, capital stock) of the Delaware General Corporation
Law, or
(4) for any transaction from which the
director derived an improper personal benefit.
Our certificate of incorporation provides that we
shall, to the fullest extent permitted by Delaware General
Corporation Law, indemnify all persons whom it may indemnify
under Delaware law and contains provisions permitted by
Section 102(b)(7) of the Delaware General Corporation Law.
Our certificate of incorporation and bylaws
provide that:
We have obtained an insurance policy providing
for indemnification of officers and directors and certain other
persons against liabilities and expenses incurred by any of them
in certain stated proceedings and conditions. We have entered
into separate indemnification agreements with each of our
directors which may require us, among other things, to indemnify
such directors against certain liabilities that may arise by
reason of their status or service as directors to the maximum
extent permitted under applicable law.
II-1
The indemnification provisions in our certificate
of incorporation and bylaws and the Indemnity Agreements entered
into between us and each of our directors and officers may be
sufficiently broad to permit indemnification of our directors
and officers for liabilities arising under the Securities Act.
Pursuant to the Registration Agreement, we have
agreed to indemnify each of Lee Roy Mitchell, The Mitchell
Special Trust and Madison Dearborn Capital Partners IV, LP and
each of their directors, officers, partners (general and
limited, and their directors, officers, affiliates and
controlling persons), members, agents and controlling persons to
the extent permitted by law against any losses, claims, damages,
liabilities or expenses to which such person may become subject
under the Securities Act of 1933 (or state securities or
blue-sky laws, common law or otherwise) that arise out of
(i) any untrue or alleged untrue statement of material fact
or any omission or alleged omission of a material fact required
to be contained in a registration statement, prospectus,
application or other documentation to be filed with the
Securities and Exchange Commission or (ii) any violation or
alleged violation by us of the Securities Act or any other
similar federal or state securities laws or any rule or
regulation promulgated thereunder applicable to us.
II-2
II-3
II-4
(a) The undersigned registrant hereby
undertakes:
provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) do not apply if the registration statement is on
Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed with or furnished to the Commission by the registrant
pursuant to Section 13 or 15(d) of the Exchange Act that
are incorporated by reference in the registration statement.
(b) The undersigned registrant hereby
undertakes to respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The undersigned registrant hereby
undertakes to supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration
statement to be signed on their behalf by the undersigned,
thereunto duly authorized, in the city of Plano, State of Texas
on June 8, 2004.
POWER OF ATTORNEY
Each person whose signature appears below
constitutes and appoints Lee Roy Mitchell and Robert Copple with
the power to act without the other, his true and lawful
attorneys-in-fact and agents, with full power of substitution
and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign on his behalf individually and in
each capacity stated below any or all amendments or
post-effective amendments to this registration statement, and to
file the same, with all exhibits and other documents relating
thereto, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or either of them,
or their substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this registration statement has been
signed by the following persons in the capacities indicated.
II-6
EXHIBIT INDEX
Less Competitive U.S. Markets:
We have historically built modern
theatres in mid-sized U.S. markets, including suburbs of major
metropolitan areas, which we believe were underserved. We
believe our targeting of these markets, together with the high
quality of our theatre circuit, has protected us from the
negative financial impact of overbuilding and reduces the risk
of competition from new entrants. As the sole exhibitor in
approximately 85% of the first run film zones in which we
operate, we have maximum access to film product. This enables us
to select the films that we believe will deliver the highest
returns in those markets.
Heavily Populated, High Growth International
Markets:
We have directed our
activities in international markets primarily toward Latin
America due to the growth potential in these under-screened
markets. We have successfully established a significant presence
in most of the major cities in Latin America with theatres in
nine of the ten largest metropolitan areas. We have strategic
alliances with local partners in many countries, which help us
obtain additional market insight. We generally fund our
operating and capital expenditures in local currencies, thereby
matching our expenses with revenues. We have also geographically
diversified our international portfolio in an effort to balance
risk and become one of the predominant Pan American motion
picture exhibition companies.
the gross proceeds from the sale of the initial
notes, the net proceeds of which were used to fund in part the
purchase of our common stock in connection with the
Recapitalization;
the closing of Cinemark USA, Inc.s amended
and restated senior secured credit facility, consisting of a
$260.0 million term loan and a $100.0 million
revolving credit facility, which we refer to collectively as the
amended senior credit facility;
the repayment of all outstanding amounts under
Cinemark USA, Inc.s former senior secured credit facility,
or the former senior credit facility, from a portion
of the proceeds of the amended senior credit facility; and
the settlement of a tender offer and consent
solicitation, or the tender offer, initiated by
Cinemark USA, Inc. on March 16, 2004 for the
$105.0 million aggregate principal amount outstanding of
its 8 1/2% Series B Senior Subordinated Notes due
2008, or the 8 1/2% senior subordinated notes.
Cinemark USA, Inc. redeemed approximately $94.2 million
aggregate principal amount of the 8 1/2% senior
subordinated notes that were tendered in the tender offer.
the settlement of a change of control offer
initiated by Cinemark USA, Inc. on April 6, 2004 for the
$360 million aggregate principal amount outstanding of its
9% Senior Subordinated Notes due 2013, or the 9% senior
subordinated notes. Cinemark USA, Inc. repurchased
approximately $17.8 million aggregate principal amount of
the 9% senior subordinated notes that were tendered and not
withdrawn in the change of control offer, which expired on
May 26, 2004.
Sources
(dollars in millions)
$
260.0
360.0
367.1
35.3
518.3
$
1,540.7
$
840.7
163.8
94.2
17.8
367.1
57.1
$
1,540.7
(1)
The amended senior credit facility consists of an
amortizing seven-year term loan facility in aggregate principal
amount of $260.0 million, and a six-and-a-half-year
revolving credit facility in aggregate principal amount of
$100.0 million, which was undrawn on the date of the
closing of the Recapitalization. The effective interest rate on
outstanding borrowings under the amended senior credit facility
at the date of the Recapitalization was 5.3% per annum.
(2)
Consists of $360.0 million in aggregate
principal amount of 9% senior subordinated notes due 2013 of
Cinemark USA, Inc., or the 9% senior subordinated
notes, $10.8 million in aggregate principal amount of
8.5% senior subordinated notes due 2008 of Cinemark USA, Inc.,
$3.6 million of borrowings of Cinemark Brasil S.A.,
$7.2 million of borrowings of Cinemark Chile S.A. and
$3.3 million of other long-term debt of our subsidiaries.
In accordance with the terms of the indenture governing the 9%
senior subordinated notes, Cinemark USA, Inc. made a change of
control offer following the closing of the Transactions to
repurchase the 9% senior subordinated notes at a purchase price
of 101% of the aggregate principal amount, plus accrued and
unpaid interest, if any, to the date of purchase. Approximately
$17.8 million in aggregate principal amount of the 9%
senior subordinated notes were tendered and not withdrawn in the
change of control offer, which expired on May 26, 2004.
Payment of the change of control offer price was made with
available cash by Cinemark USA, Inc. on June 1, 2004.
(3)
Excludes rollover equity of the Mitchell
investors and the management investors of $106.7 million.
(4)
The amount shown excludes the proceeds relating
to the exercise of stock options in an aggregate amount of
$8.1 million.
(5)
The former senior credit facility consisted of a
$75.0 million revolving credit facility and a
$165.0 million term loan. The effective interest rate on
outstanding borrowings under the former senior credit facility
at March 31, 2004 was 5.5% per annum.
(6)
Cinemark USA, Inc. redeemed approximately
$94.2 million aggregate principal amount of the 8 1/2%
senior subordinated notes that were tendered in the tender offer.
(7)
Consists of fees and expenses related to the
Transactions, including accrued interest, tender premiums and
fees, legal, accounting and consulting fees, commissions related
to the notes and fees payable to an affiliate of the equity
sponsor at closing.
(1)
The amended senior credit facility consists of an
amortizing seven-year term loan facility in aggregate principal
amount of $260.0 million, and a six-and-a-half-year
revolving credit facility in aggregate principal amount of
$100.0 million, which was undrawn on the date of the
closing of the Recapitalization. The effective interest rate on
outstanding borrowings under the amended senior credit facility
at the date of the Recapitalization was 5.3% per annum.
(2)
In accordance with the terms of the indenture
governing the 9% senior subordinated notes, Cinemark USA, Inc.
made a change of control offer following the closing of the
Transactions to repurchase the 9% senior subordinated notes at a
purchase price of 101% of the aggregate principal amount, plus
accrued and unpaid interest, if any, to the date of purchase.
Approximately $17.8 million aggregate principal amount of
the 9% senior subordinated notes were tendered and not withdrawn
in the change of control offer, which expired on May 26,
2004. Payment of the change of control offer price was made with
available cash by Cinemark USA, Inc. on June 1, 2004.
(3)
Amount includes $3.6 million of borrowings
of Cinemark Brasil S.A., $7.2 million of borrowings of
Cinemark Chile S.A. and $3.3 million of other long-term
debt of our subsidiaries as of March 31, 2004.
Registration Rights Agreement
We issued the initial notes on March 31,
2004 to Lehman Brothers Inc., Goldman, Sachs & Co.,
Deutsche Bank Securities Inc., CIBC World Markets Corp. and BNY
Capital Markets, Inc. These initial purchasers placed the
initial notes with qualified institutional buyers and non-U.S.
persons in transactions exempt from the registration
requirements of the Securities Act and applicable state
securities laws. In connection with these private placements, we
entered into an exchange and registration rights agreement with
the initial purchasers, which provide, among other things, for
this exchange offer.
The Exchange Offer
We are offering exchange notes in exchange for an
equal principal amount of initial notes. As of the date of this
prospectus, there is $577,173,000 aggregate principal amount at
maturity of initial notes outstanding. Initial notes may be
tendered only in integral multiples of $1,000. You may exchange
your initial notes only by following the procedures described
elsewhere in this prospectus under The Exchange
Offer Procedures for Tendering.
Resale of Exchange Notes
Based upon interpretive letters written by the
Securities and Exchange Commission, we believe that the exchange
notes issued in the exchange offer may be offered for resale,
resold or otherwise transferred by you without compliance with
the registration and prospectus delivery provisions of the
Securities Act, provided that:
You are acquiring the exchange notes
in the ordinary course of your business;
You are not participating, do not
intend to participate and have no arrangement or understanding
with any person to participate, in the distribution of the
exchange notes; and
You are not our
affiliate, as that term is defined for the purposes
of Rule 144A under the Securities Act.
If any of the foregoing are not true and you
transfer any exchange note without registering the exchange note
and delivering a prospectus meeting the requirements of the
Securities Act, or without an exemption from registration of
your exchange notes from such requirements, you may incur
liability under the Securities Act. We do not assume or
indemnify you against such liability.
Each broker-dealer that receives exchange notes
for its own account in exchange for initial notes that were
acquired by such broker-dealer as a result of market-making or
other trading activities must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in
connection with any resale of the exchange notes. A
broker-dealer may use this prospectus for an offer to resell, a
resale or any other retransfer of the exchange notes.
Consequences of Failure to Exchange Initial
Notes
Initial notes that are not tendered or that are
tendered but not accepted, will, following the completion of the
exchange offer, continue to be subject to existing restrictions
upon transfer of the initial notes. The trading market for
initial notes not exchanged in the exchange offer may be
significantly more limited than at present. Therefore, if your
initial notes are not tendered and accepted in the exchange
offer, it may become more difficult for you to sell or transfer
your unexchanged initial notes. Furthermore, you will no longer
be able to compel us to register the initial notes under the
Securities Act. In addition, you will not be able to offer or
sell the initial notes unless they are registered under the
Securities Act (and we will have no obligation to register them,
except for some limited exceptions), or unless you offer or sell
them under an exemption from the requirements of, or a
transaction not subject to, the Securities Act.
Expiration of the Exchange Offer
The exchange offer will expire at 5:00 p.m.,
New York City time,
on ,
2004 unless we decide to extend the expiration date.
Conditions to the Exchange Offer
The exchange offer is not subject to any
condition other than certain customary conditions, which we may,
but are not required to, waive. We currently anticipate that
each of the conditions will be satisfied and that we will not
need to waive any conditions. We reserve the right to terminate
or amend the exchange offer at any time before the expiration
date if any such condition occurs. For additional information
regarding the conditions to the exchange offer, see The
Exchange Offer Conditions to the Exchange
Offer.
Procedures for Tendering Initial
Notes
If you wish to accept the exchange offer, you
must complete, sign and date the letter of transmittal, or a
facsimile of the letter of transmittal, and transmit it together
with all other documents required by the letter of transmittal
(including the initial notes to be exchanged) to The Bank of New
York Trust Company, N.A., as exchange agent, at the address set
forth on the cover page of the letter of transmittal. In the
alternative, you can tender your initial notes by following the
procedures for book-entry transfer, as described in this
prospectus. For more information on accepting the exchange offer
and tendering your initial notes, see The Exchange
Offer Procedures for Tendering and
Book-Entry Transfer.
Guaranteed Delivery Procedures
If you wish to tender your initial notes and you
cannot get your required documents to the exchange agent by the
expiration date, you may tender your initial notes according to
the guaranteed delivery procedure under the heading The
Exchange Offer Guaranteed Delivery Procedures.
Special Procedure for Beneficial
Holders
If you are a beneficial holder whose initial
notes are registered in the name of a broker, dealer, commercial
bank, trust company, or other nominee and you wish to tender
your initial notes in the exchange offer, you should contact the
registered holder promptly
and instruct the registered holder to tender your
initial notes on your behalf. If you are a beneficial holder and
you wish to tender your initial notes on your own behalf, you
must, prior to delivering the letter of transmittal and your
initial notes to the exchange agent, either make appropriate
arrangements to register ownership of your initial notes in your
own name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take
considerable time.
Withdrawal Rights
You may withdraw the tender of your initial notes
at any time prior to 5:00 p.m., New York City time, on the
expiration date. To withdraw, you must send a written or
facsimile transmission of your notice of withdrawal to the
exchange agent at its address set forth in this prospectus under
The Exchange Offer Withdrawal of Tenders
by 5:00 p.m., New York City time, on the expiration date.
Acceptance of Initial Notes and Delivery of
Exchange Notes
Subject to certain conditions, we will accept all
initial notes that are properly tendered in the exchange offer
and not withdrawn prior to 5:00 p.m., New York City time,
on the expiration date. We will deliver the exchange notes
promptly after the expiration date.
United States Federal Income Tax
Considerations
We believe that the exchange of initial notes for
exchange notes generally will not be a taxable exchange for
federal income tax purposes, but you should consult your tax
adviser about the tax consequences of this exchange. See
Certain Federal Income Tax Consequences.
Exchange Agent
The Bank of New York Trust Company, N.A., the
trustee under the indenture for the initial notes, is serving as
exchange agent in connection with the exchange offer. The
mailing address of the exchange agent is The Bank of New York
Trust Company, N.A., 101 Barclay Street 7 East, New
York, NY 10286, Attention: Kin Lau.
Fees and Expenses
We will bear all expenses related to consummating
the exchange offer and complying with the exchange and
registration rights agreement.
Use of Proceeds
We will not receive any cash proceeds from the
issuance of the exchange notes. We received gross proceeds of
approximately $360.0 million from the sale of the initial
notes. We used the net proceeds from the sale of the initial
notes to fund in part the purchase of our common stock in
connection with the Recapitalization.
Issuer
Cinemark, Inc.
Notes Offered
$577,173,000 in aggregate principal amount at
maturity of 9 3/4% Senior Discount Notes due 2014 which
have been registered under the Securities Act of 1933.
Maturity Date
March 15, 2014
Yield and Interest Payment Dates
Interest will accrete at a rate of 9 3/4%
per annum, to an aggregate principal amount at maturity of
$577,173,000 until March 15, 2009. Cash interest will not
accrue on the exchange notes prior to March 15, 2009.
Thereafter, cash interest will accrue on the exchange notes and
will be payable on March 15 and September 15 of each
year, beginning on September 15, 2009.
Ranking
The exchange notes will be our unsecured senior
obligations. Accordingly, they will rank:
equal in right of payment to our
existing and future senior indebtedness;
senior in right of payment to any of
our future subordinated indebtedness;
effectively junior to our secured
indebtedness up to the value of the collateral securing that
indebtedness;
effectively junior to our
indebtedness that has been guaranteed by subsidiaries with
respect to the assets and earnings of those subsidiaries; and
effectively junior to all existing
and future indebtedness and other liabilities, including trade
payables, of all of our subsidiaries with respect to the assets
and earnings of those subsidiaries.
As of March 31, 2004, after giving effect to
the Transactions, we (excluding our subsidiaries) would have had
total senior indebtedness of approximately $360.0 million
(excluding our guarantee of the amended senior credit facility)
and no subordinated indebtedness. As of March 31, 2004, on
the same basis, our subsidiaries would have had
$802.9 million of indebtedness and other liabilities,
including trade payables, and the exchange notes would have been
effectively subordinated to such indebtedness and other
liabilities.
Optional Redemption
On or after March 15, 2009, we may redeem
some or all of the exchange notes at the redemption prices set
forth under Description of Exchange Notes
Optional Redemption.
At any time prior to March 15, 2007, we may
redeem up to 35% of the exchange notes with the proceeds of
certain equity offerings at the redemption prices set forth
under Description of Exchange Notes Optional
Redemption.
Mandatory Offer to Repurchase
If we experience specific kinds of changes in
control, we must offer to repurchase the exchange notes at the
redemption prices set forth under Description of Exchange
Notes Repurchase at the Option of Holders.
Covenants
The exchange notes will be issued under an
indenture among us and The Bank of New York Trust Company, N.A.,
as trustee. The indenture, among other things, restricts our
ability and the ability of our restricted subsidiaries, as
defined in the indenture, to:
make investments;
incur or guarantee additional
indebtedness;
pay dividends or make other
distributions on capital stock or redeem or repurchase capital
stock;
create liens;
incur dividend or other payment
restrictions affecting subsidiaries;
sell assets;
merge or consolidate with other
entities;
enter into transactions with
affiliates; and
engage in certain business activities.
These covenants are subject to a number of
important exceptions and qualifications.
Pro Forma
Pro Forma
Three Months
Three Months
Year Ended December 31,
Year Ended
Ended March 31,
Ended
December 31,
March 31,
2001
2002
2003
2003(4)
2003
2004
2004(4)
(Unaudited)
(In thousands, except for ratios)
$
853,658
$
935,854
$
950,872
$
950,872
$
202,473
$
235,112
$
235,112
531,967
570,947
582,574
582,574
124,062
141,982
141,982
114,737
115,588
119,517
119,517
28,451
31,088
31,088
42,597
47,953
44,285
44,285
9,443
11,869
11,869
73,079
66,583
65,085
65,085
15,996
16,889
16,889
20,723
3,869
5,049
5,049
1,000
1,000
12,408
470
(1,202
)
(1,202
)
(616
)
(513
)
(513
)
795,511
805,410
815,308
815,308
177,336
202,315
202,315
58,147
130,444
135,564
135,564
25,137
32,797
32,797
70,931
57,793
54,163
85,365
13,879
12,562
20,459
(3,462
)
40,516
47,589
27,183
5,765
11,535
6,860
(559
)
(1,651
)
(2,939
)
(315
)
(1,763
)
$
(4,021
)
$
35,476
$
44,650
$
5,450
$
9,772
Pro Forma
Three
Pro Forma
Three Months
Months
Year Ended December 31,
Year Ended
Ended March 31,
Ended
December 31,
March 31,
2001
2002
2003
2003
2003
2004
2004(4)
(Unaudited)
(In thousands, except for ratios)
$
87,117
$
150,119
$
135,522
$
(15,649
)
$
10,004
(33,799
)
(34,750
)
(47,151
)
(7,116
)
(16,210
)
(21,508
)
(96,140
)
(45,738
)
1,545
347,079
40,352
38,032
51,002
8,603
17,850
1.7
x
1.8
x
1.3
x
1.4
x
1.9
x
1.4
x
Pro Forma
Year Ended December 31,
As of
as of
March 31,
March 31,
2001
2002
2003
2004
2004(4)
(Unaudited)
(In thousands)
$
50,199
$
63,719
$
107,322
$
448,150
$
52,897
866,406
791,731
775,880
773,285
773,285
996,544
916,814
960,736
1,309,883
927,576
780,956
692,587
658,431
1,016,297
1,001,008
25,337
27,664
76,947
86,869
(253,242
)
Three Months
Ended
Year Ended December 31,
March 31,
2001
2002
2003
2003
2004
(Unaudited)
(In thousands, except theatres and screen data)
188
188
189
186
200
2,217
2,215
2,244
2,206
2,323
100,022
111,959
112,581
24,264
26,323
88
92
97
92
97
783
816
852
818
852
53,853
60,109
60,553
13,727
15,791
276
280
286
278
297
3,000
3,031
3,096
3,024
3,175
153,875
172,068
173,134
37,991
42,114
(1)
Statement of operations data and attendance data
exclude the results of our two United Kingdom theatres for all
periods presented, as these theatres were classified as held for
sale at March 31, 2004. The results of operations for these
two theatres are presented as discontinued operations.
(2)
Interest expense includes amortization of debt
issue cost and excludes capitalized interest for all periods
presented.
(3)
In 2002, a cumulative effect of a change in
accounting principle charge of $3.4 million (net of tax
benefit) was recorded as a transitional impairment adjustment in
connection with the adoption of Statement of Financial
Accounting Standards No. 142 requiring that goodwill and
other intangible assets with indefinite useful lives no longer
be amortized, but instead be tested for impairment at least
annually.
(4)
As adjusted to give effect to the Transactions.
(5)
For the purposes of calculating the ratio of
earnings to fixed charges, earnings consist of income
(loss) before taxes and cumulative effect of an accounting
change plus fixed charges excluding capitalized interest. Fixed
charges consist of interest expense, capitalized interest,
amortization of debt issue cost and debt discount and that
portion of rental expense which we believe to be representative
of the interest factor. For the year ended December 31,
2001, earnings were insufficient to cover fixed charges by
$17.9 million.
(6)
The data excludes certain theatres operated by us
in North America pursuant to management agreements that are not
part of our consolidated operations.
(7)
The data excludes certain theatres operated
internationally through our affiliates that are not part of our
consolidated operations.
(8)
The data for 2003 excludes theatres, screens and
attendance for the eight theatres with 46 screens in the United
States we acquired on December 31, 2003, because the
results of operations for these theatres are not included in our
2003 consolidated results of operations.
Your failure to participate in the exchange
offer will have adverse consequences.
We are the sole obligor of the exchange
notes, and our subsidiaries do not guarantee our obligations
under the exchange notes and do not have any obligation with
respect to the exchange notes.
The exchange notes are structurally
subordinated to all of the debt and liabilities of our
subsidiaries, and will be effectively subordinated to any of our
secured debt.
Our substantial lease and debt obligations
could impair our liquidity and financial
condition.
making it more difficult for us to satisfy our
obligations;
requiring us to dedicate a substantial portion of
our cash flow to payments on our lease and debt obligations,
thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, acquisitions and other
corporate requirements;
impeding us from obtaining additional financing
in the future for working capital, capital expenditures,
acquisitions and general corporate purposes;
subjecting us to the risk of increased
sensitivity to interest rate increases on our indebtedness with
variable interest rates, including our borrowings under the
amended senior credit facility; and
making us more vulnerable to a downturn in our
business and competitive pressures and limiting our flexibility
to plan for, or react to, changes in our business.
Our subsidiaries may not be able to
generate sufficient cash to service all of their indebtedness
and may be forced to take other actions to satisfy their
obligations under such indebtedness, which may not be
successful.
If our subsidiaries default on their
obligations to pay their indebtedness, we may not be able to
make payments on the exchange notes.
Despite our current leverage, we may still
be able to incur substantially more debt. This could further
exacerbate the risks that we and our subsidiaries
face.
Restrictive covenants in our and our
subsidiaries debt agreements may adversely affect
us.
borrow money;
pay dividends or make other distributions;
make other restricted payments and investments;
create liens;
incur dividend or other payment restrictions
affecting subsidiaries;
sell assets;
merge or consolidate with other entities;
engage in certain business activities; and
enter into transactions with affiliates.
Under fraudulent conveyance laws, a court
could void obligations under the exchange notes.
was insolvent;
was rendered insolvent by reason of the
obligation;
was engaged in a business or transaction for
which its remaining assets constituted unreasonably small
capital; or
intended to incur, or believed that it would
incur, debts beyond its ability to pay them as the debts matured.
the sum of its debts, including contingent
liabilities, was greater than the salable value of all of its
assets at a fair valuation;
the present fair salable value of its assets was
less than the amount that would be required to pay its probable
liability on its existing debts, including contingent
liabilities, as they become absolute and mature; or
it could not pay its debts as they become due.
We may not be permitted or have the ability
to purchase the exchange notes upon a change of control as
required by the indenture.
An active trading market may not develop
for the exchange notes, and securities laws will restrict your
ability to transfer the exchange notes.
You will be required to pay U.S. federal
income tax on accrual of original issue discount on the exchange
notes even if we do not pay cash interest.
Poor motion picture production or
performance could have a material adverse effect on our
business.
A deterioration in relationships with film
distributors could adversely affect our ability to obtain
commercially successful films.
The oversupply of screens in the motion
picture exhibition industry and other factors may adversely
affect the performance of some of our theatres.
Our foreign operations are subject to
adverse regulations and currency exchange risk, which may have a
material adverse effect on our business.
If we do not comply with the Americans with
Disabilities Act of 1990, we could be subject to further
litigation.
We face intense competition for patrons,
film licensing and theatre locations, which may affect our
business.
An increase in the use of alternative film
distribution channels and other competing forms of entertainment
may drive down movie theatre attendance and limit ticket
prices.
We may not be able to generate additional
revenue opportunities.
Our results of operations vary from period
to period based upon the quantity and quality of the motion
pictures that we show in our theatres.
We are subject to uncertainties related to
digital cinema, including potentially high costs of re-equipping
theatres.
quality of image:
many industry leaders feel that the
quality of the digital image does not yet surpass the quality of
the traditional 35mm image, even though consumers have tended to
respond favorably to test screenings; and
costs:
electronic
projectors will require substantial investment in re-equipping
theatres.
We are subject to uncertainties relating to
future expansion plans, including our ability to identify
suitable acquisition candidates or site locations.
We depend on key personnel for our current
and future performance.
We are subject to impairment losses due to
potential declines in valuations.
The interests of our controlling
stockholders may conflict with your interests.
within 90 days after the issue date of the
initial notes, use our reasonable best efforts to file a
registration statement with the Securities Exchange Commission,
or the SEC, with respect to a registered offer to exchange such
initial notes for the exchange notes having terms substantially
identical in all material respects to the initial notes (except
that the exchange notes will not contain terms with respect to
transfer restrictions and will have different administrative
terms);
use our reasonable best efforts to cause the
registration statement to be declared effective under the
Securities Act within 180 days after the issue date of the
initial notes;
within 30 days following the declaration of
the effectiveness of the registration statement, issue the
exchange notes in exchange for surrender of the initial notes;
and
if obligated to file a shelf registration
statement, use our reasonable best efforts to file the shelf
registration statement with the SEC within 30 days after
such filing obligation arises (and in any event within
210 days after the issue date of the initial notes) and to
cause the shelf registration statement to be declared effective
by the SEC within 180 days after such obligation arises.
(1) we are not required to file an exchange
offer registration statement or consummate the exchange offer
because the exchange offer is not permitted by applicable law or
SEC policy; or
(2) any holder of the initial notes or
exchange notes notifies us on or prior to the 20th business day
following the consummation of the exchange offer that
(a) such holder is prohibited by a change in
applicable law or SEC policy from participating in the exchange
offer,
(b) such holder may not resell the exchange
notes to be acquired by it in the exchange offer to the public
without delivering a prospectus and that the prospectus
contained in the exchange offer registration statement is not
appropriate or available for such resales by such holder, or
(c) such holder is a broker-dealer and owns
initial notes directly from us,
(1) use our reasonable best efforts to file
a shelf registration statement with the SEC covering resales of
the initial notes or the exchange notes, as the case may be, on
or prior to the date (which we call the shelf filing date) which
is the 30th day after the date on which the obligation to file
the shelf registration statement arises (and in any event on or
prior to the date which is the 180th day after the date we
issued the initial notes);
(2) use our reasonable best efforts to cause
the shelf registration statement to be declared effective under
the Securities Act on or prior to the 180th day after the
obligation to file the shelf registration statement arises; and
(3) use our best efforts to keep the shelf
registration statement effective until the earliest of
(A) the date on which all initial notes or exchange of
notes registered thereunder are disposed of in accordance
therewith or (B) two years from the date we issued the
initial notes registered thereunder.
(1) if we fail to file the registration
statement of which this prospectus forms a part with the SEC on
or prior to the 90th day after the issue date of the initial
notes;
(2) if the registration statement of which
this prospectus forms a part is not declared effective by the
SEC on or prior to the 180th day after the issue date of the
initial notes;
(3) if the exchange offer is not consummated
on or before the 30th business day after the registration
statement of which this prospectus forms a part is declared
effective;
(4) if obligated to file the shelf
registration statement, we fail to file the shelf registration
statement with the SEC on or prior to the shelf filing date;
(5) if obligated to file a shelf
registration statement, the shelf registration statement is not
declared effective on or prior to the 180th day after the shelf
filing date; or
(6) after the registration statement of
which this prospectus forms a part or the shelf registration
statement, as the case may be, is declared effective, such
registration statement thereafter ceases to be effective or
usable for its intended purpose without being succeeded within
two business days by a post effective amendment to such
registration statement that cures such failure and that is
immediately declared effective; from and including the date on
which any such default shall occur to, but excluding, the date
on which all such defaults have been cured.
the exchange notes will be acquired in the
ordinary course of your business;
you have no arrangements with any person to
participate in the distribution of the exchange notes; and
you are not our affiliate as defined
in Rule 405 of the Securities Act, or if you are an
affiliate of ours, you will comply with the applicable
registration and prospectus delivery requirements of the
Securities Act.
waive any condition of the exchange offer; and
amend any terms of the exchange offer.
you are not an affiliate of ours
within the meaning of Rule 405 under the Securities Act;
you are acquiring the exchange notes in the
ordinary course of your business; and
you do not intend to participate in the
distribution of the exchange notes.
you cannot rely on those interpretations of the
SEC; and
you must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, and the
secondary resale transaction must be covered
by an effective registration statement containing
the selling security holder information required by
Item 507 or 508, as applicable, of Regulation S-K under the
Securities Act.
the expiration date of the exchange offer; and
the satisfaction or waiver of the conditions
specified below under Conditions of the
Exchange Offer.
delay acceptance for exchange of initial notes
tendered under the exchange offer, subject to Rule 14e-1
under the Exchange Act, which requires that an offeror pay the
consideration offered or return the securities deposited by or
on behalf of the holders promptly after the termination or
withdrawal of a tender offer; or
terminate the exchange offer and not accept for
exchange any initial notes, if any of the conditions set forth
below under Conditions of the Exchange
Offer have not been satisfied or waived by us or in order
to comply in whole or in part with any applicable law.
the exchange agent must receive at its address
set forth in this prospectus a properly completed and validly
executed letter of transmittal, or a manually signed facsimile
thereof, together with any signature guarantees and any other
documents required by the instructions to the letter of
transmittal; and
the exchange agent must receive certificates for
tendered initial notes at such address, or such initial notes
must be transferred pursuant to the procedures for book-entry
transfer described above. A confirmation of such book-entry
transfer must be received by the exchange agent prior to the
expiration date of the exchange offer. A holder who desires to
tender initial notes and who cannot comply with the procedures
set forth herein for tender on a timely basis or whose initial
notes are not immediately available must comply with the
procedures for guaranteed delivery set forth below.
by a registered holder who has not completed the
box entitled Special Issuance Instructions or
Special Delivery Instructions on the letter of
transmittal; or
for the account of an eligible institution.
certificates representing your initial notes are
not lost but are not immediately available;
time will not permit your letter of transmittal,
certificates representing your initial notes and all other
required documents to reach the exchange agent on or prior to
the expiration date of the exchange offer; or
the procedures for book-entry transfer cannot be
completed on or prior to the expiration date of the exchange
offer;
your tender is made by or through an eligible
institution; and
on or prior to the expiration date of the
exchange offer, the exchange agent has received from the
eligible institution a properly completed and validly executed
notice of guaranteed delivery, by manually signed facsimile
transmission, mail or hand delivery, in substantially the form
provided with this prospectus:
setting forth your name and address, the
registered number(s) of your initial notes and the principal
amount of the initial notes tendered;
stating that the tender is being made by
guaranteed delivery;
guaranteeing that, within three New York Stock
Exchange trading days after the date of the notice of guaranteed
delivery, the letter of transmittal or facsimile thereof,
properly completed and validly executed, together with
certificates representing the initial notes, or a book-entry
confirmation, and any other documents required by the letter of
transmittal and the instructions thereto, will be deposited by
the eligible institution with the exchange agent; and
the exchange agent receives the properly
completed and validly executed letter of transmittal or
facsimile thereof with any required signature guarantees,
together with certificates for all initial notes in proper form
for transfer, or a book-entry confirmation, and any other
required documents, within three New York Stock Exchange trading
days after the date of the notice of guaranteed delivery.
certificates for, or a timely book-entry
confirmation with respect to, your initial notes;
a properly completed and duly executed letter of
transmittal or facsimile thereof with any required signature
guarantees, or, in the case of a book-entry transfer, an
agents message; and
any other documents required by the letter of
transmittal.
any exchange notes that you receive will be
acquired in the ordinary course of your business;
you have no arrangement or understanding with any
person or entity to participate in the distribution of the
exchange notes;
if you are not a broker-dealer, that you are not
engaged in and do not intend to engage in the distribution of
the exchange notes;
if you are a broker-dealer that will receive the
exchange notes for your own account in exchange for initial
notes that were acquired as a result of market-making activities
or other trading activities, that you will deliver a prospectus,
as required by law, in connection with any resale of the
exchange notes; and
you are not an affiliate of ours, as
defined in Rule 405 of the Securities Act, or, if you are
an affiliate, you will comply with any applicable registration
and prospectus delivery requirements of the Securities Act.
the exchange agent must receive a written notice
of withdrawal at the address set forth below under
Exchange Agent; or
you must comply with the appropriate procedures
of DTCs automated tender offer program system.
specify the name of the person who tendered the
initial notes to be withdrawn; and
identify the initial notes to be withdrawn,
including the principal amount of the initial notes to be
withdrawn.
the serial numbers of the particular certificates
to be withdrawn; and
a signed notice of withdrawal with signatures
guaranteed by an eligible institution, unless the withdrawing
holder is an eligible institution.
the exchange notes to be received will not be
tradable by the holder without restriction under the Securities
Act and the Exchange Act and without material restrictions under
the blue sky or securities laws of substantially all of the
states of the United States;
the exchange offer, or the making of any exchange
by a holder of initial notes, would violate applicable law or
any applicable interpretation of the staff of the SEC; or
any action or proceeding has been instituted or
threatened in any court or by or before any governmental agency
with respect to the exchange offer that would reasonably be
expected to impair our ability to proceed with the exchange
offer.
the representations described under the captions
Procedures for Tendering Initial Notes
and Plan of Distribution; and
any other representations that may be reasonably
necessary under applicable SEC rules, regulations or
interpretations to make available to us an appropriate form for
registration of the exchange notes under the Securities Act.
delivery of the exchange notes, or certificates
for initial notes for principal amounts not exchanged, are to be
made to any person other than the record holder of the initial
notes tendered;
tendered certificates for initial notes are
recorded in the name of any person other than the person signing
any letter of transmittal; or
a transfer tax is imposed for any reason other
than the transfer and exchange of initial notes under the
exchange offer.
as set forth in the legend printed on the initial
notes as a consequence of the issuance of the initial notes
pursuant to the exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and
applicable state securities laws; and
as otherwise set forth in the offering memorandum
distributed in connection with the private offering of each of
the initial notes.
you are not an affiliate within the
meaning of Rule 405 under the Securities Act;
you acquired the exchange notes in the ordinary
course of your business; and
you have no arrangement or understanding with
respect to the distribution of the exchange notes to be acquired
in the exchange offer.
you cannot rely on the applicable interpretations
of the SEC; and
you must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of
Regulation S-K under the Securities Act.
By Hand or Overnight Delivery
Facsimile Transmission
Trust Company, N.A.
Corporate Trust Operations
Reorganization Unit
101 Barclay Street 7 East
New York, NY 10286
Attn: Kin Lau
The Bank of New York
Trust Company, N.A.
(Eligible Institutions Only)
Corporate Trust Operations
Reorganization Unit
101 Barclay Street 7 East
New York, NY 10286
Attn: Kin Lau
(212) 298-1915
Attn: Kin Lau
Confirm by Telephone
(212) 815-3750
on an actual basis; and
on a pro forma basis to give effect to the
Transactions.
As of March 31, 2004
Actual
Pro Forma
(Unaudited)
(In thousands)
$
448,150
$
52,897
$
163,762
$
260,000
104,567
10,790
373,817
356,067
14,055
14,055
360,096
360,096
1,016,297
1,001,008
34,434
34,434
41
28
40,369
597,069
134,593
(763,800
)
(86,539
)
(86,539
)
(1,595
)
86,869
(253,242
)
$
1,137,600
$
782,200
(1)
As of March 31, 2004, on an actual basis
$74.9 million was available under Cinemark USA, Inc.s
former senior credit facility, subject to compliance with the
terms thereof. The former senior credit facility consisted of a
$75.0 million revolving credit facility that expired in
February 2008 and a $165.0 million term loan that matured
in March 2008. The effective interest rate on outstanding
borrowings under the former senior credit facility at
March 31, 2004 was 5.5% per annum.
In connection with the Transactions, the former
senior credit facility was refinanced by the amended senior
credit facility. The amended senior credit facility consists of
an amortizing seven-year term loan facility in aggregate
principal amount of $260.0 million, and a
six-and-a-half-year revolving credit facility in aggregate
principal amount of $100.0 million, which was undrawn on
the date of the closing of the Recapitalization.
(2)
The amount shown on an actual basis is net of an
unamortized debt discount of approximately $0.4 million
associated with the issuance of the 8 1/2% senior
subordinated notes. In connection with the Transactions,
Cinemark USA, Inc. redeemed approximately $94.2 million
aggregate principal amount of 8 1/2% senior subordinated
notes that were tendered in the tender offer and concurrently
therewith approximately $0.4 million of related unamortized
bond discount was written off.
(3)
The amount shown includes an unamortized premium
of approximately $13.8 million associated with the issuance
of the 9% senior subordinated notes. In accordance with the
terms of the indenture governing the 9% senior subordinated
notes, Cinemark USA, Inc. made a change of control offer
following the closing of the Transactions to repurchase the 9%
senior subordinated notes at a purchase price of 101% of the
aggregate principal amount, plus accrued and unpaid interest, if
any, to the date of purchase.
Approximately $17.8 million in aggregate
principal amount of the 9% senior subordinated notes were
tendered and not withdrawn in the change of control offer, which
expired on May 26, 2004. Payment of the change of control
offer price was made with available cash by Cinemark USA, Inc.
on June 1, 2004.
(4)
Consists of $3.6 million of borrowings of
Cinemark Brasil S.A., $7.2 million of borrowings of
Cinemark Chile S.A. and $3.3 million of other
long-term debt of our subsidiaries.
(5)
Pro forma total capitalization is less than
actual total capitalization by $355.4 million as a result
of the adjustments set forth in Unaudited Pro Forma
Condensed Consolidated Financial Information.
the Recapitalization;
the offering of the initial notes, the repurchase
of the approximately $94.2 million aggregate principal
amount of 8 1/2% senior subordinated notes in the tender
offer, the repurchase of approximately $17.8 million
aggregate principal amount of 9% senior subordinated notes
tendered and not withdrawn in the change of control offer,
$260.0 million of borrowings under the amended senior
credit facility and the repayment of all outstanding amounts
under the former senior credit facility; and
the fees and expenses associated with the
Transactions.
Historical
Adjustments(1)
Pro Forma
(In thousands)
ASSETS
$
448,150
$
(350,314
)(a)
$
52,897
(44,939
)(b)
13,671
13,671
10,361
150
(b)
10,511
773,285
773,285
11,977
11,977
7,744
7,744
44,695
12,796
(b)
57,491
$
1,309,883
$
(382,307
)
$
927,576
LIABILITIES AND STOCKHOLDERS EQUITY
(DEFICIENCY)
41,228
(10,480
)(g)
30,748
24,737
24,737
6,931
(1,408
)(g)
5,523
9,535
9,535
9,691
9,691
27,726
27,726
1,016,297
260,000
(b)
1,001,008
(163,763
)(b)
(94,165
)(b)
389
(b)
(17,750
)(b)
15,092
(15,019
)(d)
73
27,716
27,716
9,627
9,627
1,188,580
(42,196
)
1,146,384
34,434
34,434
41
(13
)(c)
28
40,369
556,700
(c)
597,069
134,593
(898,393
)(c)
(763,800
)
(86,539
)
(86,539
)
(1,595
)
1,595
(c)
86,869
(340,111
)
(253,242
)
$
1,309,883
$
(382,307
)
$
927,576
Historical
Adjustments(1)
Pro Forma
(In thousands, except per share amounts)
$
235,112
$
$
235,112
78,972
78,972
12,113
12,113
24,317
24,317
31,088
31,088
26,580
26,580
173,070
173,070
11,869
11,869
16,889
16,889
1,000
1,000
(513
)
(513
)
202,315
202,315
32,797
32,797
(12,562
)
(7,378
)(e)
(20,459
)
(519
)(f)
(752
)
(752
)
(13,314
)
(7,897
)
(21,211
)
19,483
(7,897
)
11,586
7,948
(3,222
)(d)
4,726
$
11,535
$
(4,675
)
$
6,860
$
0.28
$
0.25
$
0.28
$
0.25
Historical
Adjustments(1)
Pro Forma
(In thousands, except per share amounts)
$
950,872
$
$
950,872
324,902
324,902
49,640
49,640
97,240
97,240
119,517
119,517
110,792
110,792
702,091
702,091
44,285
44,285
65,085
65,085
5,049
5,049
(1,202
)
(1,202
)
815,308
815,308
135,564
135,564
(54,163
)
(29,896
)(e)
(85,365
)
(1,306
)(f)
(7,540
)
(7,540
)
(1,106
)
(1,106
)
(62,809
)
(31,202
)
(94,011
)
72,755
(31,202
)
41,553
25,166
(10,796
)(d)
14,370
$
47,589
$
(20,406
)
$
27,183
$
1.10
$
0.98
$
1.09
$
0.98
Sources of Funds:
$
518,245
350,314
$
868,559
Uses of Funds:
$
840,655
27,904
$
868,559
(1)
Consists of cash provided by the issuance of the
9 3/4% senior discount notes on March 31, 2004, which
resulted in gross proceeds of $360,000.
(2)
Includes $11,363 of withholding taxes.
(3)
Represents transaction fees associated with the
Recapitalization that were recorded as a reduction to additional
paid-in-capital.
(b)
Reflects the sources and uses of the proceeds
from the financing transactions in connection with the
Recapitalization as summarized below.
Sources of Funds:
$
260,000
44,939
$
304,939
Uses of Funds:
$
163,763
94,165
17,750
29,261
$
304,939
(1)
Represents borrowings by Cinemark USA, Inc. under
the amended senior credit facility.
(2)
Consists of a portion of the cash received upon
the issuance of the 9 3/4% senior discount notes on
March 31, 2004 together with available cash of $35,253.
(3)
Represents repurchase of $94,165 aggregate
principal amount of the 8 1/2% senior subordinated notes
pursuant to the tender offer (which includes $389 of unamortized
bond discount).
(4)
Represents repurchase of $17,750 aggregate
principal amount of the 9% senior subordinated notes pursuant to
the change of control offer.
(5)
Represents debt issue fees in conjunction with
the issuance of the senior discount notes and the amended senior
credit facility, of which $12,946 were capitalized, and certain
premiums and fees associated with the tender offer.
(c)
Records the impact on equity as a result of the
Transactions. Common stock, additional paid-in-capital and
retained earnings reflects the constructive retirement of all
outstanding common stock and the subsequent reissuance of common
stock to the equity sponsor and management investors. Retained
earnings has been adjusted by $21,792 related to the
Transactions that will be recognized in our 2004 Consolidated
Statement of Operations but are not reflected in the unaudited
pro forma condensed statement of income due to the non-recurring
nature of the transaction costs.
(d)
Adjusts income taxes on a pro forma basis to
reflect our effective tax rate of 34.6% for the year ended
December 31, 2003 and 40.8% for the three months ended
March 31, 2004.
Three Months
Year Ended
Ended
December 31, 2003
March 31, 2004
$
8,710
$
2,178
35,100
8,679
(5,910
)
(1,478
)
(8,004
)
(2,001
)
$
29,896
$
7,378
$
1,036
$
259
1,589
397
(1,319
)
(137
)
$
1,306
$
519
(g)
Represents debt issue costs and interest accrued
as of March 31, 2004 that were paid upon the consummation
of the Recapitalization.
Three Months
Ended
Year Ended December 31,
March 31,
1999
2000
2001
2002
2003
2003
2004
(In thousands, except for ratios)
(Unaudited)
Statement of Operations Data
(Consolidated)(1):
$
712,604
$
786,264
$
853,658
$
935,854
$
950,872
$
202,473
$
235,112
463,673
504,519
531,967
570,947
582,574
124,062
141,982
89,808
108,489
114,737
115,588
119,517
28,451
31,088
34,833
39,013
42,597
47,953
44,285
9,443
11,869
53,269
66,111
73,079
66,583
65,085
15,996
16,889
3,720
3,872
20,723
3,869
5,049
1,000
2,420
912
12,408
470
(1,202
)
(616
)
(513
)
647,723
722,916
795,511
805,410
815,308
177,336
202,315
64,881
63,348
58,147
130,444
135,564
25,137
32,797
59,867
74,037
70,931
57,793
54,163
13,879
12,562
4,004
(10,423
)
(3,462
)
40,516
47,589
5,765
11,535
(559
)
(1,651
)
(2,939
)
(315
)
(1,763
)
$
1,035
$
(10,423
)
$
(4,021
)
$
35,476
$
44,650
$
5,450
$
9,772
Other Financial Data
(Consolidated)(1):
$
92,102
$
54,796
$
87,117
$
150,119
$
135,522
$
(15,649
)
$
10,004
(223,044
)
(94,886
)
(33,799
)
(34,750
)
(47,151
)
(7,116
)
(16,210
)
114,927
51,280
(21,508
)
(96,140
)
(45,738
)
1,545
347,079
248,371
113,081
40,352
38,032
51,002
(8,603
)
(17,850
)
1.0x
1.7x
1.8x
1.4x
1.9x
As of December 31,
As of March 31,
1999
2000
2001
2002
2003
2003
2004
(In thousands)
(Unaudited)
Balance Sheet Data (Consolidated):
$
8,872
$
19,840
$
50,199
$
63,719
$
107,322
$
42,652
$
448,150
933,959
950,135
866,406
791,731
775,880
784,294
773,285
1,041,861
1,060,576
996,544
916,814
960,736
898,929
1,309,883
778,413
810,323
780,956
692,587
658,431
704,099
1,016,297
63,851
48,910
25,337
27,664
76,947
34,335
86,869
Three Months
Ended
As of December 31,
March 31,
1999
2000
2001
2002
2003
2003
2004
Operating Data(1):
185
190
188
188
189
186
200
2,102
2,217
2,217
2,215
2,244
2,206
2,323
90,996
92,425
100,022
111,959
112,581
24,264
26,323
69
80
88
92
97
92
97
606
695
783
816
852
818
852
39,938
46,152
53,853
60,109
60,553
13,727
15,791
254
270
276
280
286
278
297
2,708
2,912
3,000
3,031
3,096
3,024
3,175
130,934
138,577
153,875
172,068
173,134
37,991
42,114
(1)
Statement of operations data and attendance data
exclude the results of our United Kingdom theatres for all
periods presented, as these theatres were classified as held for
sale at March 31, 2004. The results of operations for these
two theatres are presented as discontinued operations.
(2)
Includes amortization of debt issue cost and
excludes capitalized interest for all periods presented.
(3)
In 1999, a cumulative effect of a change in
accounting principle charge of $3.0 million (net of tax
benefit) was recorded in connection with the adoption of
Statement of Position (SOP) 98-5 requiring start-up activities
and organization costs to be expensed as incurred. In 2002, a
cumulative effect of a change in accounting principle charge of
$3.4 million (net of tax benefit) was recorded as a
transitional impairment adjustment in connection with the
adoption of Statement of Financial Accounting Standards
No. 142 requiring that goodwill and other intangible assets
with indefinite useful lives no longer be amortized but instead
be tested for impairment at least annually.
(4)
For the purposes of calculating the ratio of
earnings to fixed charges, earnings consist of income
(loss) before taxes and cumulative effect of an accounting
change plus fixed charges excluding capitalized interest. Fixed
charges consist of interest expense, capitalized interest,
amortization of debt issue cost and that portion of rental
expense which we believe to be representative of the interest
factor. For the years ended December 31, 2000 and 2001,
earnings were insufficient to cover fixed charges by $10.4
million and $17.9 million, respectively.
(5)
The data excludes certain theatres operated by us
in North America pursuant to management agreements that are not
part of our consolidated operations.
(6)
The data excludes certain theatres operated
internationally through our affiliates that are not part of our
consolidated operations.
(7)
The data for 2003 excludes theatres, screens and
attendance for the eight theatres and 46 screens acquired in the
United States on December 31, 2003, because the results of
operations for these theatres are not included in our 2003
consolidated results of operations.
actual theatre level cash flow;
future years budgeted theatre level cash flow;
theatre property and equipment values;
goodwill values;
the age of a recently built theatre;
competitive theatres in the marketplace;
the sharing of a market with our other theatres;
changes in foreign currency exchange rates;
the impact of recent ticket price changes;
available lease renewal options; and
other factors considered relevant in our
assessment of impairment of individual theatre assets.
Three Months Ended
Year Ended December 31,
March 31,
2001
2002
2003
2003
2004
(Unaudited)
$
548.9
$
595.3
$
597.5
$
127.7
$
149.7
257.6
291.8
300.6
63.9
73.3
47.2
48.8
52.8
10.9
12.1
$
853.7
$
935.9
$
950.9
$
202.5
$
235.1
$
295.0
$
320.7
$
324.9
$
66.9
$
79.0
44.9
50.4
49.6
9.8
12.1
90.8
96.7
97.2
22.3
24.3
114.7
115.6
119.5
28.5
31.1
101.3
103.2
110.8
25.0
26.6
$
646.7
$
686.6
$
702.0
$
152.5
$
173.1
64.3
%
63.6
%
62.8
%
63.1
%
63.7
%
30.2
31.2
31.6
31.6
31.2
%
5.5
5.2
5.6
5.3
5.1
%
100.0
100.0
100.0
100.0
100.0
%
53.7
53.9
54.4
52.4
52.8
17.4
17.3
16.5
15.3
16.5
10.6
10.3
10.2
11.0
10.3
13.4
12.4
12.6
14.1
13.2
11.9
11.0
11.7
12.3
11.3
75.8
73.4
73.8
75.3
73.6
2,954
2,998
3,027
3,009
3,118
$
288,961
$
312,183
$
314,178
$
67,295
$
75,417
(1)
Certain reclassifications have been made to the
2001, 2002 and 2003 financial statements to conform to the 2004
presentation.
(2)
All costs are expressed as a percentage of total
revenues, except film rentals and advertising, which are
expressed as a percentage of admissions revenues, and concession
supplies, which are expressed as a percentage of concession
revenues.
Years Ended
December 31,
2003
2002
$
1.2
$
3.0
1.8
0.7
1.3
0.1
0.8
$
5.0
$
3.9
Years Ended
December 31,
2002
2001
$
1.8
$
19.0
1.7
1.3
0.8
$
3.9
$
20.7
Payments Due by Period
Less Than
1 3
4 5
After 5
Contractual Obligations
Total
1 Year
Years
Years
Years
(In millions)
$
1,233.4
$
6.6
$
10.5
$
265.3
$
951.0
1,467.7
106.8
219.4
214.3
927.2
0.1
0.1
8.4
2.8
5.6
101.3
51.1
49.9
0.3
$
2,810.9
$
167.4
$
285.4
$
479.9
$
1,878.2
(1)
Includes the 9 3/4% senior discount notes in
the aggregate principal amount at maturity of
$577.2 million.
(2)
Includes estimated capital expenditures
associated with the construction of new theatres that we expect
to expend as of March 31, 2004.
(1) BNDES (Banco Nacional de Desenvolvimento
Econômico e Social (the Brazilian National Development
Bank)) credit line in the U.S. dollar equivalent in Brazilian
reais of US$3.8 million executed in October 1999 with a
maturity date of September 2004. Interest accrues at a BNDES
basket rate, which is a multiple currency rate based on the rate
at which the bank borrows, plus a spread amounting to 14.5%. At
March 31, 2004, approximately US$1.0 million was
outstanding under this credit line;
(2) BNDES credit line in the U.S. dollar
equivalent in Brazilian reais of US$1.9 million executed in
November 2001 with a maturity date of October 2006. Interest
accrues at a BNDES basket rate plus a spread amounting to 13.8%.
At March 31, 2004, approximately US$1.3 million was
outstanding under this credit line;
(3) Project developer financing executed
with two engineering companies in September 2000 in the amount
of US$1.8 million with a maturity date of September 2005.
Interest accrues at a rate of TJLP+5% (Taxa de Juros de Longo
Prazo (a long term interest rate published by the Brazilian
government)). At March 31, 2004, approximately
US$0.6 million was outstanding under this financing
arrangement;
(4) Project developer financing executed
with a mall developer in February 2004 in the amount of
$0.7 million with a maturity date of February 2009.
Interest accrues at a rate of TJLP+5.5% (Taxa de Juros de Longo
Prazo (a long-term interest rate published by the Brazilian
government)). At March 31, 2004, there was approximately
US$0.7 million outstanding under this financing arrangement.
Payments Due by Period As Adjusted
Less Than
1 3
4 5
After 5
Contractual Obligations
Total
1 Year
Years
Years
Years
(In millions)
$
1,218.1
$
7.6
$
12.4
$
17.9
$
1,180.2
1,467.7
106.8
219.4
214.3
927.2
0.1
0.1
8.4
2.8
5.6
101.3
51.1
49.9
0.3
$
2,795.6
$
168.4
$
287.3
$
232.5
$
2,107.4
(1)
Includes the 9 3/4% senior discount notes in
the aggregate principal amount at maturity of
$577.2 million.
(2)
Includes estimated capital expenditures
associated with the construction of new theatres to which we
were committed as of March 31, 2004.
Expected Maturity Date As of March 31, 2004
Average
Mar. 31,
Mar. 31,
Mar. 31,
Mar. 31,
Mar. 31,
Fair
Interest
2005
2006
2007
2008
2009
Thereafter
Total
Value
Rate
(In millions)
$
0.1
$
0.1
$
$
$
104.6
$
951.0
$
1,055.8
$
830.8
9.4
%
6.5
6.0
4.4
160.6
0.1
177.6
177.4
4.5
%
$
6.6
$
6.1
$
4.4
$
160.6
$
104.7
$
951.0
$
1,233.4
$
1,008.2
Expected Maturity Date As of December 31, 2003
Average
Dec. 31,
Dec. 31,
Dec. 31,
Dec. 31,
Dec. 31,
Fair
Interest
2004
2005
2006
2007
2008
Thereafter
Total
Value
Rate
(In millions)
$
0.1
$
$
0.1
$
$
104.5
$
374.2
$
478.9
$
474.4
8.9
%
6.6
6.9
4.4
121.8
39.8
179.5
179.2
4.1
%
$
6.7
$
6.9
$
4.5
$
121.8
$
144.3
$
374.2
$
658.4
$
653.6
Expected Maturity Date As of March 31, 2004 Pro Forma
Average
Mar. 31,
Mar. 31,
Mar. 31,
Mar. 31,
Mar. 31,
Fair
Interest
2005
2006
2007
2008
2009
Thereafter
Total
Value
Rate
(In millions)
$
0.1
$
0.1
$
$
$
10.8
$
933.2
$
944.2
$
715.7
9.5
%
7.5
7.0
5.3
4.4
2.7
247.0
273.9
271.8
4.6
%
$
7.6
$
7.1
$
5.3
$
4.4
$
13.5
$
1,180.2
$
1,218.1
$
987.5
(1)
Amount due at maturity for the notes offered
hereby includes original issue discount that will accrete but
not be paid in cash during years 1 through 5, in accordance with
the terms of the notes, which is approximately
$217.2 million.
U.S.
% Change
Average
% Change
U.S. Box
% Change
Year
Attendance
Since 1994
Ticket Price
Since 1994
Office Sales
Since 1994
(In millions)
(In millions)
1,292
$
4.18
$
5,396
1,263
(2.2
)%
$
4.35
4.1
%
$
5,494
1.8
%
1,339
3.6
%
$
4.42
5.7
%
$
5,912
9.6
%
1,388
7.4
%
$
4.59
9.8
%
$
6,366
18.0
%
1,481
14.6
%
$
4.69
12.2
%
$
6,949
28.8
%
1,465
13.4
%
$
5.08
21.5
%
$
7,448
38.0
%
1,421
10.0
%
$
5.39
28.9
%
$
7,661
42.0
%
1,487
15.1
%
$
5.66
35.4
%
$
8,413
55.9
%
1,639
26.9
%
$
5.81
39.0
%
$
9,520
76.4
%
1,574
21.8
%
$
6.03
44.3
%
$
9,489
75.9
%
Less Competitive U.S. Markets:
We have historically built modern
theatres in mid-sized U.S. markets, including suburbs of major
metropolitan areas, which we believe were underserved. We
believe our targeting of these markets, together with the high
quality of our theatre circuit, has protected us from the
negative financial impact of overbuilding and reduces the risk
of competition from new entrants. As the sole exhibitor in
approximately 85% of the first run film zones in which we
operate, we have maximum access to film product. This enables us
to select the films that we believe will deliver the highest
returns in those markets.
Heavily Populated, High Growth International
Markets:
We have directed our
activities in international markets primarily toward Latin
America due to the growth potential in these under-screened
markets. We have successfully established a significant presence
in most of the major cities in Latin America with theatres in
nine of the ten largest metropolitan areas. We have strategic
alliances with local partners in many countries, which help us
obtain additional market insight. We generally fund our
operating and capital expenditures in local currencies, thereby
matching our expenses with revenues. We have also geographically
diversified our international portfolio in an effort to balance
risk and become one of the predominant Pan American motion
picture exhibition companies.
State
Total Theatres
Total Screens
64
809
20
202
20
183
10
123
9
88
7
75
5
73
6
72
4
54
4
52
4
50
6
50
3
48
3
43
4
41
3
41
2
36
3
30
2
27
2
27
1
20
3
19
1
16
2
16
2
14
1
14
1
14
1
14
1
12
1
10
1
8
1
8
2
22
199
2,311
1
12
200
2,323
Country
Total Theatres
Total Screens
30
272
27
264
12
95
8
73
9
59
3
30
4
26
2
17
2
16
97
852
(1)
Includes Honduras, El Salvador, Nicaragua, Costa
Rica and Panama.
(2)
Theatres sold subsequent to March 31, 2004.
Optimization of product mix.
Concession products are primarily
comprised of various sizes of popcorn, soft drinks and candy.
Different varieties and flavors of candy and soft drinks are
offered at theatres based on preferences in that particular
geographic region. Specially priced combo-meals have
been implemented for all patrons as well as movie
meals targeted toward children and senior citizens. We
periodically introduce new concession products designed to
generate additional concession sales.
Staff training.
Employees are continually trained in
suggestive-selling and upselling
techniques. This training occurs through situational
role-playing conducted at our Customer Satisfaction
University as well as continued on-the-job training.
Individual theatre managers receive additional compensation
based on concession sales at their theatres and are therefore
motivated to maximize concession sales.
Theatre design.
Our
theatres are designed to optimize efficiencies at the concession
stands, which include multiple service stations to facilitate
serving more customers quicker. We strategically place large
concession stands within theatres to heighten visibility, reduce
the length of concession lines, and improve traffic flow around
the concession stands.
Cost control.
We
negotiate prices for concession supplies directly with
concession vendors and manufacturers to obtain bulk rates.
Concession supplies are distributed through a national
distribution network. The concession distributor supplies and
distributes inventory to the theatres, which place volume orders
directly with the vendors to replenish stock. The concession
distributor is paid a percentage fee for this service. We
believe that utilizing a concession distributor is more cost
effective than operating a concession warehousing network.
Advertising.
We
believe the advertising industry recognizes the value of
in-theatre advertising as an important medium due to the
demographics of theatre patrons. The Arbitron Cinema
Advertising Study, which was released in 2003, measured
consumer awareness of on-screen advertising in the U.S., and
indicated that 86% of all cinema audiences (representing 40% of
the U.S. population) remembered on-screen ads a month after
seeing them. In order to effectively realize and manage this
opportunity, we entered into advertising contracts for rolling
stock and screen slide advertising. We deliver advertising
through lights-up on-screen slide advertising in the
auditoriums, audio ads paired with music played throughout the
theatre and rolling stock advertisements. We also advertise on
digital lobby monitors located in concessions stands and game
rooms. We are also exploring additional revenue sources such as
digital video monitor advertising, third party branding, and the
use of theatres for non- film events. We are able to offer
advertisers national, regional or local coverage in a variety of
formats to reach our patrons, which numbered approximately
173 million during the year ended December 31, 2003.
We currently carry advertising for several large advertisers. We
also generate ancillary revenue from imaging in the
lobby, including mini-billboards and displays, and distributing
coupons and samples to patrons passing through the theatre
complex.
Sales.
We have a
sales department that oversees the development and
implementation of a comprehensive theatre rental and group sales
effort. This department is responsible for increasing theatre
rental income during periods when the theatre is normally closed
and maximizing group film bookings to specialized groups such as
schools, daycare centers and churches. During 2003, our group
sales bookings for schools increased 48% over 2002. We believe
the large lobbies, comfortable seating, big screen and sound
capabilities make our theatres an attractive venue to hold
corporate events, private parties, private screenings and team
building meetings and can generate additional revenues. Our
theatres have been used for simulcast concerts, pay-per-view
sporting events, corporate meetings and cultural events. We
believe the trend to use theatre auditoriums for non-film events
during non-peak times will increase, which will add revenue and
attract new audiences to our theatres while not significantly
increasing costs. In addition, targeted efforts to sell niche
films to particular groups will also increase overall revenues.
capacity and location of an exhibitors
theatre;
theatre comfort;
quality of projection and sound equipment;
level of customer service; and
licensing terms.
Name
Age
Position
67
Chairman of the Board; Chief Executive Officer;
Director
53
Executive Vice President; Assistant Secretary
44
President; Chief Operating Officer
45
Senior Vice President; Treasurer; Chief Financial
Officer; Assistant Secretary
59
Senior Vice President; President of Cinemark
International, L.L.C.
46
Senior Vice President Operations
45
Vice President Real Estate; Assistant
Secretary
55
Vice President Film Licensing
58
Vice President Purchasing
47
Vice President Construction
37
Vice President General Counsel;
Secretary
53
Vice President Marketing and
Communications
47
Vice President Development
45
Director
43
Director
38
Director
30
Director
Long-Term
Compensation
Awards
Annual Compensation
Securities
Underlying
All Other
Name and Principal Position
Year
Salary(1)
Bonus
Options/SARs
Compensation(2)
2003
$
682,500
$
652,740
(3)
$
132,020
(6)
Chairman of the Board and
2002
572,870
975,000
(4)
124,309
(7)
Chief Executive Officer
2001
474,516
1,525,484
(5)
223,285
(8)
2003
403,891
98,826
(3)
10,500
(9)
President and Chief Operating Officer
2002
384,658
230,795
(4)
9,750
(9)
2001
366,341
198,899
(5)
267,308
(10)
2003
327,525
80,140
(3)
10,500
(9)
Senior Vice President, President
2002
311,929
187,157
(4)
9,750
(9)
Cinemark International
2001
297,075
161,291
(5)
336,445
(11)
2003
294,919
72,162
(3)
10,500
(9)
Senior Vice President and
2002
280,875
168,525
(4)
9,750
(9)
Chief Financial Officer
2001
267,500
145,235
(5)
154,000
(12)
138,274
(13)
2003
284,313
69,567
(3)
9,035
(9)
Senior Vice President Operations
2002
270,775
162,465
(4)
9,750
(9)
2001
257,881
140,012
(5)
225,827
(14)
(1)
Amounts shown include cash and non-cash
compensation earned and received by executive officers as well
as amounts earned but deferred at the election of those officers.
(2)
All other compensation relating to stock or stock
options gives effect to the share exchange agreement dated
May 17, 2002, and a subsequent reverse stock split,
pursuant to which each outstanding share, and each outstanding
option to purchase shares of common stock of Cinemark USA, Inc.
was exchanged for 220 shares and options to purchase shares
of our common stock.
(3)
Bonuses were earned in 2003 but were paid in 2004.
(4)
Bonuses were earned in 2002 but were paid in 2003.
(5)
Bonuses were earned in 2001 but were paid in 2002.
(6)
Represents a $10,500 annual contribution to our
401(k) savings plan, $22,665 representing the value of the use
of a company vehicle for one year and $98,855 of life insurance
premiums paid by us for the benefit of Mr. Mitchell.
(7)
Represents a $2,800 annual contribution to our
401(k) savings plan, $22,665 representing the value of the use
of a company vehicle for one year and $98,844 of life insurance
premiums paid by us for the benefit of Mr. Mitchell.
(8)
Represents a $1,950 annual contribution to our
401(k) savings plan, $15,940 representing the value of the use
of a company vehicle for one year, $98,844 for 2001 life
insurance premiums and $106,551 for
2000 life insurance premiums and interest on such
premiums paid in 2001 by us for the benefit of Mr. Mitchell.
(9)
Represents an annual contribution to our 401(k)
savings plan.
(10)
Represents a $4,590 annual contribution to our
401(k) savings plan, $156,194 of compensation relating to the
value of stock options exercised for 104,500 shares of our
Class A common stock over the $0.0045 per share
exercise price and a $106,524 reimbursement for estimated tax
obligations incurred upon the exercise of such stock options.
(11)
Represents a $4,590 annual contribution to our
401(k) savings plan, $197,298 of compensation relating to the
value of stock options exercised for 132,000 shares of our
Class A common stock over the $0.0045 per share
exercise price and a $134,557 reimbursement for estimated tax
obligations incurred upon the exercise of such stock options.
(12)
In October 2001 we granted Mr. Copple
options to purchase an aggregate of 250 shares of
Class B common stock of Cinemark USA, Inc. under the
Cinemark Employee Stock Option Plan at an exercise price of
$1.00 per share. On the date of grant, the Class B
common stock of Cinemark USA, Inc. had a market value of
$330 per share. These options were immediately vested and
such options were exercised by Mr. Copple. In December
2001, Cinemark USA, Inc. granted Mr. Copple options to
purchase 450 shares of its Class B common stock
at an exercise price of $330 per share. We believed that on
the date of grant, the Class B common stock had a market
value of $330 per share. Under the share exchange agreement
dated May 17, 2002, and after giving effect to a subsequent
reverse stock split, each outstanding share and each outstanding
option to purchase shares of Class B common stock of
Cinemark USA, Inc. was exchanged for 220 shares, and
options to purchase shares, of our Class A common stock.
Additionally, in connection with the proposed initial public
offering of our Class A common stock in 2002 and Staff
Accounting Bulletin Topic 4.D., we revised the market value
of a share of our Class A common stock as of December 2001
to $11.45 per share, which exceeded the option price of
$1.50 per share by $9.95 per share. These options vest
20% per year for five years.
(13)
Represents $82,208 of compensation relating to
the value of stock options exercised for 55,000 shares of
our Class A common stock over the $0.0045 per share
exercise price and a $56,066 reimbursement for estimated tax
obligations incurred upon the exercise of such stock options.
(14)
Represents a $4,590 annual contribution to our
401(k) savings plan, $131,532 of compensation relating to the
value of stock options exercised for 88,000 shares of our
Class A common stock over the $0.0045 per share
exercise price and an $89,705 reimbursement for estimated tax
obligations incurred upon the exercise of such stock options.
Number of Securities
Value of Unexercised
Underlying Unexercised
In-the-Money
Shares
Options/SARs at
Options/SARs at
Acquired on
Value
December 31, 2003 (#)
December 31, 2003 ($)
Name
Exercise(#)
Realized($)
Exercisable/Unexercisable(1)
Exercisable/Unexercisable(2)
/66,000
/66,000
59,400/39,600
/66,000
(1)
The options give effect to the share exchange
agreement dated May 17, 2002, and a subsequent reverse
stock split, pursuant to which shares and options to purchase
shares of Class B common stock of Cinemark USA, Inc. were
exchanged for 220 shares and options to purchase shares of
our Class A common stock. As a result of the
Recapitalization, the outstanding options were purchased for the
merger consideration and cancelled. Mr. Copple exercised
options to purchase 74,272 shares of common stock, and the
remaining options were purchased for the merger consideration.
(2)
We have the right to call the shares issued or
issuable upon exercise of the options for terminating employees.
The call price is equal to the fair market value of the common
stock.
Tandy Mitchell, Alan Stock, Robert Copple,
Timothy Warner, Robert Carmony, John Lundin and Michael
Cavalier
Non-Competition, Non-Solicitation and
Non-Disclosure Agreement
Independent Director Stock Options and Long
Term Incentive Plan
each person or entity known to us to beneficially
hold five percent or more of our common stock;
each of our directors;
each of our named executive officers; and
all of our executive officers and directors as a
group.
Common
Percent of
Name of Beneficial Owner
Stock
Class
22,947,820
82.9
%
2,169,713
7.8
%
4,427,986
16.0
%
83,526
*
82,892
*
74,272
*
22,947,820
82.9
%
22,947,820
82.9
%
22,947,820
82.9
%
27,674,916
100.0
%
*
Less than 1.0%
(1)
The address of Madison Dearborn Capital
Partners IV, L.P. is Three First National Plaza,
Suite 3800, 70 West Madison Street, Chicago, Illinois 60602.
(2)
The address of The Mitchell Special Trust is 3900
Dallas Parkway, Suite 500, Plano, Texas 75093.
(3)
Includes 2,169,713 shares held by the Mitchell
Special Trust. Mr. Mitchell is the co-trustee of the
Mitchell Special Trust. Mr. Mitchell disclaims beneficial
ownership of all shares held by the Mitchell Special Trust.
Mr. Mitchells address is c/o Cinemark, Inc., 3900
Dallas Parkway, Suite 500, Plano, Texas 75093.
(4)
Messrs. Chereskin, Perry and Selati are
Managing Directors of Madison Dearborn Partners, LLC, which is
the General Partner of Madison Dearborn Partners IV, L.P.,
which is the General Partner of Madison Dearborn Capital
Partners IV, L.P., and they may therefore be deemed to
share beneficial ownership of the shares owned by Madison
Dearborn Capital Partners IV, L.P. Messrs. Chereskin,
Perry and Selati expressly disclaim beneficial ownership of the
shares owned by Madison Dearborn Capital Partners IV, L.P.
The address of Messrs. Chereskin, Perry and Selati is
c/o Madison Dearborn Partners, LLC, Three First National
Plaza, Suite 3800, 70 West Madison Street, Chicago,
Illinois 60602.
Merger Agreement and Stock Purchase
Agreement
Stockholders Agreement
Equity Registration Agreement
Transaction Fees
Amended and Restated Profit
Participation
Certain Agreements
are general senior unsecured obligations of the
Company;
are limited to an aggregate principal amount at
maturity of $577,173,000, subject to our ability to issue
additional notes;
mature on March 15, 2014;
rank equal in right of payment with any existing
and future Senior Debt of the Company, including the guarantee
by the Company of the Credit Agreement;
are effectively subordinated to Indebtedness and
other liabilities, including trade payables, of the
Companys Subsidiaries, including Indebtedness of Cinemark
USA, Inc. and its Subsidiaries under the Credit Agreement and
the Existing Notes;
rank effectively junior in right of payment to
any secured Indebtedness of the Company to the extent of the
value of the collateral securing that Indebtedness, including
the guarantee by the Company of the Credit Agreement which is
secured by a pledge of the Capital Stock of CNMK Holding, Inc.;
rank senior in right of payment to all future
subordinated Indebtedness of the Company; and
are eligible for trading in PORTAL.
(1) at least 65% of the aggregate principal
amount at maturity of notes issued under the indenture
(including any additional notes) remains outstanding immediately
after the occurrence of such redemption (excluding notes held by
the Company or any of its Subsidiaries); and
(2) the redemption occurs within
90 days of the date of the closing of such Equity Offering.
Year
Percentage
104.875
%
103.250
%
101.625
%
100.000
%
(1) if the notes are listed on any national
securities exchange, in compliance with the requirements of the
principal national securities exchange on which the notes are
listed; or
(2) if the notes are not listed on any
national securities exchange, on a pro rata basis, by lot or by
such method as the trustee deems fair and appropriate.
Change of Control
(1) accept for payment all notes or portions
of notes properly tendered pursuant to the Change of Control
Offer;
(2) deposit with the paying agent an amount
equal to the Change of Control Payment in respect of all notes
or portions of notes properly tendered; and
(3) deliver or cause to be delivered to the
trustee the notes properly accepted together with an
officers certificate stating the aggregate Accreted Value
of notes or portions of notes being purchased by the Company.
Asset Sales
(1) the Company (or the Restricted
Subsidiary, as the case may be) receives consideration at least
equal to the fair market value of the assets or Equity Interests
issued or sold or otherwise disposed of (such fair market value
to be determined in good faith by the Company on the date of
contractually agreeing to such Asset Sale);
(2) in the event the fair market value of
such Asset Sale exceeds $10.0 million but is less than
$25.0 million, the fair market value is determined by the
Companys Chief Financial Officer and in the event the fair
market value of such Asset Sale equals or exceeds
$25.0 million, the fair market value is determined by the
Companys Board of Directors and evidenced by a resolution
of the Board of Directors of the Company and, in each case, such
determination is set forth in an officers certificate
delivered to the trustee; and
(3) at least 75% of the consideration
received in the Asset Sale by the Company or such Restricted
Subsidiary is in the form of cash or Cash Equivalents. For
purposes of this provision, each of the following will be deemed
to be cash:
(a) the amount of any liabilities, as shown
on the Companys or such Restricted Subsidiarys most
recent balance sheet, of the Company or such Restricted
Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the notes or any
Subsidiary Guarantee) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement or by
operation of law that releases the Company or such Restricted
Subsidiary from further liability; and
(b) any securities, notes or other
obligations received by the Company or any such Restricted
Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash within
180 days of the closing of the related Asset Sale, to the
extent of the cash received in that conversion.
(1) repay Senior Debt and, if the Senior
Debt repaid is revolving credit Indebtedness, to correspondingly
reduce commitments with respect thereto; provided, unless such
Senior Debt being repaid consists of borrowings under the Credit
Agreement or Guarantees of borrowings under the Credit
Agreement, that the notes are reduced or repurchased on a pro
rata basis with the Net Proceeds from the Asset Sale;
(2) reduce or repurchase Indebtedness of
Cinemark USA, Inc. or any Restricted Subsidiary of Cinemark USA,
Inc. and, if the Indebtedness repaid is revolving credit
Indebtedness, to correspondingly reduce commitments with respect
thereto;
(3) acquire all or substantially all of the
assets of, or a majority of the Voting Stock of, another
Permitted Business (or a division or unit thereof);
(4) make a capital expenditure or commit
pursuant to a binding agreement to make a capital expenditure
within 24 months of such Asset Sale relating to an asset
used or useful in a Permitted Business; or
(5) acquire other long-term assets that are
used or useful in a Permitted Business.
Restricted Payments
(1) declare or pay any dividend or make any
other payment or distribution on account of the Companys
or any of its Restricted Subsidiaries Equity Interests
(including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its
Restricted Subsidiaries) or to the direct or indirect holders of
the Companys or any of its Restricted Subsidiaries
Equity Interests in their capacity as such (other than dividends
or distributions payable (a) in Equity Interests (other
than Disqualified Stock) of the Company or (b) to the
Company or a Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or
retire for value (including, without limitation, in connection
with any merger or consolidation involving the Company) any
Equity Interests of the Company or any direct or indirect parent
of the Company;
(3) make any payment on or with respect to,
or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness (other than any Indebtedness held by the
Company or a Guarantor) that is subordinated to the notes or the
Subsidiary Guarantees, if any, except a payment of interest or
principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such
payments and other actions set forth in these clauses (1)
through (4) above being collectively referred to as
Restricted Payments
),
(1) no Default or Event of Default has
occurred and is continuing or would occur as a consequence of
such Restricted Payment; and
(2) the Company would, at the time of such
Restricted Payment and after giving pro forma effect thereto as
if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock; and
(3) such Restricted Payment, together with
the aggregate amount of all other Restricted Payments made by
the Company and its Restricted Subsidiaries since the date of
the indenture (excluding Restricted Payments permitted by
clauses (2), (3), (4), (6), (10) and (11) of the next
succeeding paragraph), is less than the sum, without
duplication, of:
(a) 50% of the Consolidated Net Income of
the Company for the period (taken as one accounting period) from
February 11, 2003 to the end of the Companys most
recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit),
plus
(b) 100% of the fair market value of the
Qualified Proceeds received by the Company after the
Recapitalization Date as a contribution to its equity capital or
from the issue or sale of Equity Interests of the Company (other
than Excluded Contributions and Disqualified Stock) or from the
issue or sale of convertible or exchangeable Disqualified Stock
or convertible or exchangeable debt securities of the Company
that have been converted into or exchanged for such Equity
Interests (other than Equity Interests (or Disqualified Stock or
debt securities) sold to a Subsidiary of the Company or an
employee stock ownership plan, option plan or similar trust to
the extent such sale to an employee stock ownership plan or
similar trust is financed by loans from or guaranteed by the
Company or any Restricted Subsidiary unless such loans have been
repaid with cash on or prior to the date of determination),
plus
(c) to the extent that any Restricted
Investment that was made after the date of the indenture is sold
for cash or otherwise liquidated or repaid for cash, the cash
return of capital and other transfers of assets with respect to
such Restricted Investment (less the cost of disposition, if
any);
provided, however,
that no amount will be included
under this clause (c) to the extent it is already included
in Consolidated Net Income,
plus
(d) to the extent that any Unrestricted
Subsidiary of the Company is redesignated as a Restricted
Subsidiary after the date of the indenture, the lesser of
(i) the fair market value of the Companys Investment
in such Subsidiary as of the date of such redesignation or
(ii) such fair market value as of the date on which such
Subsidiary was originally designated as an Unrestricted
Subsidiary.
(1) the payment of any dividend or
distribution within 60 days after the date of declaration
thereof, if at the date of declaration the dividend or
distribution payment would have complied with the provisions of
the indenture;
(2) the redemption, repurchase, retirement,
defeasance or other acquisition of any subordinated Indebtedness
of the Company or of any Equity Interests of the Company in
exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of the
Company) of, Equity Interests of the Company (other than
Disqualified Stock and other than Equity Interests issued or
sold to an employee stock ownership plan or similar trust to the
extent such sale to an employee stock ownership plan or similar
trust is financed by loans from or guaranteed by the Company or
any Restricted Subsidiary unless such loans have been repaid
with cash on or prior to the date of determination);
provided
that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition will be excluded from clause (3)
(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase
or other acquisition of Indebtedness subordinated to the notes
or any Subsidiary Guarantee with the net cash proceeds from an
incurrence of, or in exchange for, Permitted Refinancing
Indebtedness;
(4) the declaration and payment of any
dividend or distribution by a Restricted Subsidiary of the
Company to the holders of its Capital Stock on a pro rata basis;
(5) so long as no Default or Event of
Default shall have occurred and be continuing or would be caused
thereby, the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by any current or
former member of the Companys (or any of its Restricted
Subsidiaries) management pursuant to any management equity
subscription agreement, stock option agreement, stock plan or
similar agreement other than any such agreement or plan with
Madison Dearborn Partners, LLC or its Affiliates (other than
Persons who are officers, directors or employees of the
Company);
provided
that the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests
may not exceed $3.0 million in any twelve-month period
(with unused amounts in any twelve-month period being carried
over to succeeding twelve-month periods subject to a maximum
carry-over amount of $6.0 million);
(6) any payments made in connection with the
consummation of the Transactions on substantially the terms
described in this prospectus;
(7) the repurchase of Equity Interests of
the Company deemed to occur upon the exercise of stock options
to the extent such Equity Interests represent a portion of the
exercise price of such stock options;
(8) so long as no Default has occurred and
is continuing or would be caused thereby, repurchases of
Indebtedness that is subordinated to the notes or a Subsidiary
Guarantee at a purchase price not greater than (i) 101% of
the principal amount of such subordinated Indebtedness in the
event of a Change of Control or (ii) 100% of the principal
amount of such subordinated Indebtedness in the event
of an Asset Sale, in connection with any change
of control offer or asset sale offer required by the terms
thereof, but only if:
(a) in the case of a Change of Control, the
Company has first complied with and fully satisfied its
obligations under the provisions described under
Repurchase at the Option of
Holders Change of Control; or
(b) in the case of an Asset Sale, the
Company has complied with and fully satisfied its obligations in
accordance with the covenant under the heading,
Repurchase at the Option of
Holders Asset Sales;
(9) the repurchase, redemption or other
acquisition for value of Capital Stock of the Company or any
direct or indirect parent of the Company representing fractional
shares of such Capital Stock in connection with a merger,
consolidation, amalgamation or other combination involving the
Company or any direct or indirect parent of the Company;
(10) Investments that are made with Excluded
Contributions; and
(11) so long as no Default or Event of
Default shall have occurred and be continuing or would be caused
thereby, other Restricted Payments in an aggregate amount since
the date of the indenture not to exceed $15.0 million.
Incurrence of Indebtedness and Issuance of
Preferred Stock
(1) the incurrence by the Company or any of
its Restricted Subsidiaries of additional Indebtedness and
letters of credit under one or more Credit Facilities in an
aggregate principal amount at any one time outstanding under
this clause (1) (with letters of credit being deemed to
have a principal amount equal to the maximum potential liability
of the Company and its Subsidiaries thereunder) not to exceed
$370 million less the sum of all permanent principal
payments with respect to such Indebtedness in accordance with
the covenant described under Repurchase at the
Option of Holders Asset Sales;
(2) the incurrence by the Company and its
Restricted Subsidiaries of (a) Existing Indebtedness (other
than the 2008 Notes) and (b) the 2008 Notes;
(3) the incurrence by the Company of
Indebtedness represented by the notes (other than additional
notes) and the Exchange Notes issued in exchange therefor and
any Subsidiary Guarantees of the foregoing;
(4) the incurrence by the Company, Cinemark
USA, Inc. or any of its Restricted Subsidiaries of Indebtedness
in respect of Permitted Capitalized Leases;
(5) the incurrence by the Company or any of
its Restricted Subsidiaries of Permitted Refinancing
Indebtedness in exchange for, or the net proceeds of which are
used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the indenture
to be incurred under the first paragraph of this covenant or
clauses (2)(a), (3), (4) or (5) of this paragraph;
(6) the incurrence by the Company or any of
its Restricted Subsidiaries of intercompany Indebtedness between
or among the Company and any of its Restricted Subsidiaries;
provided, however,
that:
(a) if the Company or any Guarantor is the
obligor on such Indebtedness, such Indebtedness must be
expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the notes, in the case of the
Company, or the Subsidiary Guarantee, in the case of a
Guarantor; and
(b) (i) any subsequent issuance or
transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary of the Company and (ii) any sale or
other transfer of any such Indebtedness to a Person that is
neither the Company or a Restricted Subsidiary of the Company
will be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Subsidiary, as the case
may be, that was not permitted by this clause (6);
(7) the incurrence by the Company, Cinemark
USA, Inc. or any of its Restricted Subsidiaries of Hedging
Obligations;
(8) the Guarantee by the Company or a
Restricted Subsidiary of the Company of Indebtedness of the
Company or a Restricted Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant;
provided
that in the event such Indebtedness that is
being guaranteed is (a)
pari passu
with the notes or a
Subsidiary Guarantee, as the case may be, then the related
Guarantee shall rank equally in right of payment to the notes or
Subsidiary Guarantee, as the case may be, or
(b) subordinated to the notes or a Subsidiary Guarantee, as
the case may be, then the related Guarantee shall be
subordinated in right of payment to the notes or such Subsidiary
Guarantee, as the case may be;
(9) the accrual of interest, the accretion
or amortization of original issue discount, the payment of
interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the
same class of Disqualified Stock will not be deemed to be an
incurrence of Indebtedness or an issuance of Disqualified Stock
for purposes of this covenant;
provided,
in each such
case, that the amount thereof is included in Fixed Charges of
the Company as accrued;
(10) Indebtedness arising from agreements of
the Company or a Restricted Subsidiary providing for
indemnification, adjustment of purchase price, earn-out or other
similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a
Restricted Subsidiary, other than Guarantees of Indebtedness
incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary for the purpose of
financing such acquisition;
provided
that the maximum
aggregate liability in respect of all such Indebtedness shall at
no time exceed the gross proceeds actually received by the
Company and its Restricted Subsidiaries in connection with such
disposition;
(11) Indebtedness supported by one or more
letters of credit incurred under a Credit Facility in accordance
with and pursuant to clause (1);
provided
the amount
of Indebtedness permitted to be incurred under this clause
(11) relating to any such letter of credit shall not exceed
the amount of the
letter of credit provided for therein;
provided, further,
upon any reduction, cancellation or
termination of the applicable letter of credit, there shall be
deemed to be an incurrence of Indebtedness under the indenture
equal to the excess of the amount of such Indebtedness
outstanding immediately after such reduction, cancellation or
termination over the remaining stated amount, if any, of such
letter of credit or the stated amount of any letter of credit
issued in replacement of such letter of credit;
(12) Indebtedness arising from the honoring
by a bank or other financial institution of a check, draft or
similar instrument inadvertently drawn against insufficient
funds in the ordinary course of business;
provided, however,
that such Indebtedness is extinguished within ten business
days of incurrence;
(13) Indebtedness represented by property,
liability and workers compensation insurance, performance
bonds (which may be in the form of letters of credit) for
construction contracts let by the Company and its Restricted
Subsidiaries in the ordinary course of business (
provided
that to the extent that such performance bonds secure
Indebtedness, such Indebtedness is otherwise permitted under
this covenant), surety bonds and appeal bonds (which, in each
case, may be in the form of letters of credit) required in the
ordinary course of business or in connection with the
enforcement of rights or claims of the Company or any Restricted
Subsidiary of the Company or in connection with judgments that
do not result in a Default or an Event of Default; and
(14) the incurrence by the Company or any of
its Restricted Subsidiaries of additional Indebtedness in an
aggregate principal amount (or accreted value, as applicable) at
any time outstanding not to exceed $25.0 million.
Liens
Dividend and Other Payment Restrictions
Affecting Subsidiaries
(1) pay dividends or make any other
distributions on its Capital Stock to the Company or any of its
Restricted Subsidiaries, or with respect to any other interest
or participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of its Restricted
Subsidiaries;
(2) make loans or advances to the Company or
any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets
to the Company or any of its Restricted Subsidiaries.
(1) agreements governing Existing
Indebtedness and Credit Facilities as in effect on the date of
the indenture and the Credit Agreement as in effect on the
Recapitalization Date and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings of those agreements,
provided
that the amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in
those agreements on the date of the indenture or the date of the
Recapitalization, as applicable;
(2) the indenture and the notes (including
the Exchange Notes);
(3) applicable law, rule, regulation or
order;
(4) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness or Capital
Stock was incurred in connection with or in contemplation of
such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the
Person, so acquired,
provided
that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of
the indenture to be incurred;
(5) customary non-assignment provisions in
leases, licenses and conveyances entered into in the ordinary
course of business and consistent with past practices;
(6) purchase money obligations for property
acquired in the ordinary course of business that impose
restrictions on that property of the nature described in clause
(3) of the preceding paragraph;
(7) any agreement for the sale or other
disposition of a Restricted Subsidiary that restricts
distributions by that Restricted Subsidiary pending its sale or
other disposition;
(8) Permitted Refinancing Indebtedness,
provided
that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are
no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise
permitted to be incurred under the provisions of the covenant
described above under the caption Liens that
limit the right of the debtor to dispose of the assets subject
to such Liens;
(10) provisions with respect to the
disposition or distribution of assets or property in joint
venture agreements, stockholder agreements, asset sale
agreements, stock sale agreements and other similar agreements
entered into in the ordinary course of business;
(11) other Indebtedness of Cinemark USA,
Inc. or any of its Restricted Subsidiaries permitted to be
incurred pursuant to an agreement entered into subsequent to the
date of the indenture in accordance with the covenant described
under the caption Incurrence of Indebtedness and
Issuance of Preferred Stock provided that the provisions
relating to such encumbrance or restriction contained in such
Indebtedness are no less favorable to the
Company, taken as a whole, as determined by the Board of
Directors of the Company in good faith than the provisions
contained in the Credit Agreement and in the indentures
governing the Existing Notes as in effect on the
Recapitalization Date and the date of the indenture,
respectively;
(12) the issuance of preferred stock by a
Restricted Subsidiary or the payment of dividends thereon in
accordance with the terms thereof, provided that issuance of
such preferred stock is permitted pursuant to the covenant
described under the caption Incurrence of
Indebtedness and Issuance of Preferred Stock and the terms
of such preferred stock do not expressly restrict the ability of
a Restricted Subsidiary to pay dividends or make any other
distributions on its Capital Stock (other than requirements to
pay dividends or liquidation preferences on such preferred stock
prior to paying any dividends or making any other distributions
on such other Capital Stock);
(13) encumbrances or restrictions contained
in any Indebtedness incurred by a Foreign Restricted Subsidiary
pursuant to the first paragraph (in an amount not to exceed in
aggregate at any one time outstanding $50.0 million of
Indebtedness) of and clauses (4) and (14) of the
second paragraph of the covenant described under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock; provided that such encumbrance or
restriction shall only apply to such Foreign Restricted
Subsidiary;
(14) supermajority voting requirements
existing under corporate charters, bylaws, stockholders
agreements and similar documents and agreements; and
(15) restrictions on cash or other deposits
or net worth imposed by customers under contracts entered into
in the ordinary course of business.
Merger, Consolidation or Sale of
Assets
(1) either: (a) the Company is the
surviving corporation; or (b) the Person formed by or
surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, conveyance
or other disposition has been made is a corporation, limited
liability company or partnership organized or existing under the
laws of the United States, any state of the United States or the
District of Columbia; provided that if the Person is a
partnership or limited liability company, a corporation wholly
owned by such Person organized or existing under the laws of the
United States, any state of the United States or the District of
Columbia that does not and will not have any material assets or
operations shall promptly thereafter become a co-issuer of the
notes pursuant to a supplemental indenture;
(2) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, conveyance or
other disposition has been made assumes all the obligations of
the Company under the notes, the indenture and the registration
rights agreement pursuant to agreements reasonably satisfactory
to the trustee;
(3) immediately after such transaction no
Default or Event of Default exists; and
(4) the Company or the Person formed by or
surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer,
conveyance or other disposition has been made will, on the date
of such transaction after giving pro forma effect thereto and
any related financing transactions as if the same had occurred
at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the
caption Incurrence of Indebtedness and Issuance of
Preferred Stock.
(1) immediately after giving effect to that
transaction, no Default or Event of Default exists; and
(2) either:
(a) the Person acquiring the property in any
such sale or disposition or the Person formed by or surviving
any such consolidation or merger assumes all the obligations of
that Guarantor under the indenture, its Subsidiary Guarantee and
the registration rights agreement pursuant to agreements
reasonably satisfactory to the trustee; or
(b) such sale or other disposition complies
with the provisions of the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales and Future
Guarantors.
Transactions with Affiliates
(1) the Affiliate Transaction is on terms
that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Restricted
Subsidiary with a Person who is not an Affiliate; and
(2) the Company delivers to the trustee:
(a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $2.0 million, a
resolution of the Board of Directors of the Company set forth in
an officers certificate certifying that such Affiliate
Transaction complies with this covenant and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors of the Company; and
(b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $15.0 million, a
written opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national
standing.
(1) any employment, consulting or similar
agreement or other compensation arrangement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary
course of business of the Company or such Restricted Subsidiary
excluding any such agreement or arrangement with Madison
Dearborn Partners, LLC, or its Affiliates or Persons who are
officers, directors, employees or consultants
of Madison Dearborn Partners, LLC, or its
Affiliates (other than Persons who are officers, directors or
employees of the Company);
(2) transactions between or among the
Company and/or its Restricted Subsidiaries;
(3) transactions with a Person that is an
Affiliate of the Company solely because the Company owns an
Equity Interest in, or controls, such Person;
(4) reasonable fees and expenses and
compensation paid to, and indemnity provided on behalf of,
officers, directors or employees of the Company or any
Subsidiary as determined in good faith by the Board of Directors
of the Company or senior management;
(5) sales of Equity Interests (other than
Disqualified Stock) to Affiliates of the Company;
(6) Restricted Payments that are permitted
by the provisions of the indenture described above under the
caption Restricted Payments;
(7) transactions effected in connection with
the Transactions, including the payment of all fees and
expenses, which are described in this offering memorandum under
the caption Certain Relationships and Related
Transactions;
(8) transactions pursuant to any contract or
agreement described under the caption Certain
Relationships and Related Transactions, as in effect on
the date of the indenture, in each case as amended, modified or
replaced from time to time so long as the amended, modified or
new agreements, taken as a whole, are no less favorable to the
Company and its Restricted Subsidiaries than those in effect on
the date of the indenture;
(9) so long as no Default or Event of
Default shall have occurred and be continuing, the payment of
customary annual fees and related expenses to Madison Dearborn
Partners, LLC and its Affiliates;
provided
that such fees
shall not, in the aggregate, exceed $1.0 million (plus out
of pocket expenses) in any twelve-month period commencing after
the date of the indenture; and
(10) so long as no Default or Event of
Default shall have occurred and be continuing, the payment of
customary transaction, management, consulting and advisory fees
and related expenses to Madison Dearborn Partners, LLC and its
Affiliates made pursuant to financial advisory, financing,
underwriting or replacement agreements or in respect of other
investment banking entities, including, without limitation, in
connection with acquisitions or divestitures, in each case,
which payments are (a) reasonably related to the services
performed and (b) approved by a majority of the members of
the Board of Directors of the Company not affiliated with
Madison Dearborn Partners, LLC.
Designation of Restricted and Unrestricted
Subsidiaries
Future Guarantors
(1) (a) the sale, disposition or other
transfer (including through merger or consolidation) of
(x) the Capital Stock of such Guarantor following which
such Guarantor is no longer a Subsidiary of the Company or
(y) all or substantially all the assets of the applicable
Guarantor, in each case, to a Person that is not a Subsidiary of
the Company if such sale, disposition or other transfer is made
in compliance with the indenture;
(b) the release or discharge of the
Guarantee by such Restricted Subsidiary of Indebtedness of the
Company which resulted in the obligation to Guarantee the notes;
(2) the release of such Guarantor from its
Guarantees, if any, of, and all pledges and security, if any,
granted in connection with all Indebtedness of the Company;
(3) the designation by the Company of any
Restricted Subsidiary that is a Guarantor as an Unrestricted
Subsidiary in accordance with the applicable provisions of the
indenture; and
(4) the discharge of the notes in accordance
with the legal defeasance provisions of the indenture.
Business Activities
Payments for Consent
(1) all quarterly and annual financial
information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were
required to file such Forms, including a Managements
Discussion and Analysis of Financial Condition and Results of
Operations and, with respect to the annual information
only, a report on the annual financial statements by the
Companys certified independent accountants; and
(2) all current reports that would be
required to be filed with the Commission on Form 8-K if the
Company were required to file such reports.
(1) default for 30 days in the payment
when due of interest on, or Additional Interest with respect to,
the notes;
(2) default in payment when due of the
principal of, or premium, if any, on, the notes;
(3) failure by the Company or any of its
Restricted Subsidiaries to comply with the provisions described
under the caption Certain Covenants Merger,
Consolidation or Sale of Assets;
(4) failure by the Company or any of its
Restricted Subsidiaries for 30 day after notice to comply with
the provisions described under the captions
Repurchase at the Option of Holders Asset
Sales or Repurchase at the Option of Holders
Change of Control;
(5) failure by the Company or any of its
Restricted Subsidiaries for 60 days after notice to comply with
any of the other agreements in the indenture;
(6) default under any mortgage, indenture or
instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the date of the indenture, if
that default:
(a) is caused by a failure to pay principal
on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a
Payment Default
); or
(b) results in the acceleration of such
Indebtedness prior to its express maturity,
and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated,
aggregates $10.0 million or more;
(7) failure by the Company or any of its
Subsidiaries to pay final judgments aggregating in excess of
$10.0 million (net of any amount with respect to which a
reputable and solvent insurance company has acknowledged
liability in writing), which judgments are not paid, discharged
or stayed for a period of 60 days;
(8) except as permitted by the indenture,
any Subsidiary Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee; and
(9) certain events of bankruptcy or
insolvency described in the indenture with respect to the
Company or any of its Restricted Subsidiaries that are
individually or collectively a Significant Subsidiary.
(1) the rights of Holders of outstanding
notes to receive payments in respect of the principal of, or
interest or premium and Additional Interest, if any, on such
notes when such payments are due from the trust referred to
below;
(2) the Companys obligations with
respect to the notes concerning issuing temporary notes,
registration of notes, mutilated, destroyed, lost or stolen
notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and
immunities of the trustee, and the Companys and the
Guarantors obligations in connection therewith; and
(4) the Legal Defeasance provisions of the
indenture.
(1) the Company must irrevocably deposit
with the trustee, in trust, for the benefit of the Holders of
the notes, cash in U.S. dollars, non-callable Government
Securities, or a combination of cash in U.S. dollars and
non-callable Government Securities, in amounts as will be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, or
interest and premium and Additional Interest, if any, on the
outstanding notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must
specify whether the notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, the
Company has delivered to the trustee an opinion of counsel
reasonably acceptable to the trustee confirming that
(a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or
(b) since the date of the indenture, there has been a
change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion of counsel
will confirm that, the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the
Company has delivered to the trustee an opinion of counsel
reasonably acceptable to the trustee confirming that the Holders
of the outstanding notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default has
occurred and is continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit);
(5) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or
constitute a default under any material agreement or instrument
(other than the indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company must have delivered to the
trustee an opinion of counsel to the effect that, assuming that
no intervening bankruptcy of the Company between the date of the
deposit and the 91st day following the deposit will occur and
that no holder of notes is an insider of the Company under
applicable bankruptcy law, no trust funds will be subject to the
effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors rights generally;
(7) the Company must deliver to the trustee
an officers certificate stating that the deposit was not
made by the Company with the intent of preferring the Holders of
notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(8) the Company must deliver to the trustee
an officers certificate and an opinion of counsel, each
stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
(1) reduce the principal amount at maturity
of notes whose Holders must consent to an amendment, supplement
or waiver;
(2) reduce the principal or Accreted Value
of or change the fixed maturity of any note or alter the
provisions with respect to the redemption of the notes (other
than provisions relating to the covenants described above under
the caption Repurchase at the Option of
Holders);
(3) reduce the rate of or change the time
for payment of interest on any note;
(4) waive a Default or Event of Default in
the payment of principal of, or interest or premium, or
Additional Interest, if any, on the notes (except a rescission
of acceleration of the notes by the Holders of at least a
majority in aggregate principal amount at maturity of the notes
and a waiver of the payment default that resulted from such
acceleration);
(5) make any note payable in currency other
than that stated in the notes;
(6) make any change in the provisions of the
indenture relating to waivers of past Defaults or the rights of
Holders of notes to receive payments of principal of, or
interest or premium or Additional Interest, if any, on the notes;
(7) waive a redemption payment with respect
to any note (other than a payment required by one of the
covenants described above under the caption
Repurchase at the Option of Holders);
(8) release any Guarantor from any of its
obligations under its Subsidiary Guarantee or the indenture,
except in accordance with the terms of the indenture; or
(9) make any change in the preceding
amendment and waiver provisions.
(1) cure any ambiguity, defect or
inconsistency;
(2) provide for uncertificated notes in
addition to or in place of certificated notes (provided that the
uncertificated notes are issued in registered form for purposes
of Section 163(f) of the Code, or in a manner such that the
uncertificated notes are described in Section 163(f)(2)(B)
of the Code);
(3) provide for the assumption of the
Companys obligations to Holders of notes in the case of a
merger or consolidation or sale of all or substantially all of
the Companys assets;
(4) make any change that would provide any
additional rights or benefits to the Holders of notes or that
does not adversely affect the legal rights under the indenture
of any such Holder;
(5) provide for the issuance of additional
notes in accordance with the provisions set forth in the
indenture on the date of the indenture;
(6) add Subsidiary Guarantees with respect
to the notes; or
(7) comply with requirements of the
Commission in order to effect or maintain the qualification of
the indenture under the Trust Indenture Act.
(1) either:
(a) all notes that have been authenticated,
except lost, stolen or destroyed notes that have been replaced
or paid and notes for whose payment money has been deposited in
trust and thereafter repaid to the Company, have been delivered
to the trustee for cancellation; or
(b) all notes that have not been delivered
to the trustee for cancellation have become due and payable or
will become due and payable within one year or are to be called
for redemption within one year and the Company or any Guarantor
has irrevocably deposited or caused to be deposited with the
trustee as trust funds in trust solely for the benefit of the
Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination of cash in U.S. dollars and
non-callable Government Securities, in amounts as will be
sufficient without consideration of any reinvestment of
interest, to pay and discharge the entire indebtedness on the
notes not delivered to the trustee for cancellation for
principal, premium and Additional Interest, if any, and accrued
interest to the date of maturity or redemption;
(2) no Default or Event of Default has
occurred and is continuing on the date of the deposit or will
occur as a result of the deposit and the deposit will not result
in a breach or violation of, or constitute a default under, any
other instrument to which the Company or any Guarantor is a
party or by which the Company or any Guarantor is bound;
(3) the Company or any Guarantor has paid or
caused to be paid all sums payable by it under the indenture; and
(4) the Company has delivered irrevocable
instructions to the trustee under the indenture to apply the
deposited money toward the payment of the notes at maturity or
the redemption date, as the case may be.
(1) the DTC notifies us that it is unwilling
or unable to continue as depository for the Global Exchange Note
or the DTC ceases to be a clearing agency registered under the
Exchange Act and, in either case, we are unable to locate a
qualified successor within 90 days;
(2) we in our discretion at any time
determine not to have all the exchange notes represented by the
Global Exchange Note; or
(3) a default entitling the Holders of the
notes to accelerate the maturity thereof has occurred and is
continuing.
(1) Indebtedness of any other Person
existing at the time such other Person is merged with or into or
becomes a Subsidiary of such specified Person, whether or not
such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or
becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
(1) the direct or indirect sale, lease,
conveyance or other disposition or series of related sales,
leases, conveyances or other dispositions that are part of a
common plan, of any property or assets (including Equity
Interests of a Subsidiary) by the Company or any of its
Restricted Subsidiaries;
provided
that the sale,
conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken
as a whole will be governed by the provisions of the indenture
described above under the caption Repurchase
at the Option of Holders Change of
Control and/or the provisions described
above under the caption Certain
Covenants Merger, Consolidation or Sale of
Assets and not by the provisions of the Asset Sale
covenant; and
(2) the issuance of Equity Interests in any
of the Companys Restricted Subsidiaries or the sale of
Equity Interests in any of its Subsidiaries.
(1) any single transaction or series of
related transactions that involves assets or Equity Interests
having a fair market value of less than $5.0 million;
(2) a transfer of assets between or among
the Company and its Restricted Subsidiaries;
(3) an issuance, sale, transfer or other
disposition of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary;
(4) the sale or lease of equipment,
inventory, accounts receivable or other assets in the ordinary
course of business;
(5) the sale or other disposition of cash or
Cash Equivalents;
(6) exchanges of theatre properties that
comply with the requirements described in the final paragraph
under Repurchase at the Option of
Holders Asset Sales,
provided
that
payment of any Other Consideration (as defined therein) shall,
to the extent provided therein, be treated as an Asset Sale;
(7) a disposition by the Company or any
Restricted Subsidiary of the Company to the extent such
disposition constitutes a Permitted Capitalized Lease;
(8) any sale of Equity Interests in, or
Indebtedness or other securities of, an Unrestricted Subsidiary;
and
(9) a Restricted Payment or Permitted
Investment that is permitted by the covenant described above
under the caption Certain
Covenants Restricted Payments.
(1) with respect to a corporation, the board
of directors of the corporation;
(2) with respect to a partnership, the board
of directors of the general partner of the partnership; and
(3) with respect to any other Person, the
board or committee of such Person serving a similar function.
(1) in the case of a corporation, corporate
stock;
(2) in the case of an association or
business entity, any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate
stock;
(3) in the case of a partnership or limited
liability company, partnership or membership interests (whether
general or limited); and
(4) any other interest or participation that
confers on a Person the right to receive a share of the profits
and losses of, or distributions of assets of, the issuing Person.
(1) United States dollars or in the case of
any Foreign Restricted Subsidiary, such local currencies held by
it from time to time in the ordinary course of business;
(2) securities issued or directly and fully
guaranteed or insured by the United States government or any
agency or instrumentality of the United States government
(
provided
that the full faith and credit of the United
States is pledged in support of those securities) having
maturities of not more than twelve months from the date of
acquisition;
(3) certificates of deposit and eurodollar
time deposits with maturities of twelve months or less from the
date of acquisition, bankers acceptances with maturities
not exceeding twelve months and overnight bank deposits, in each
case, with any lender party to the Credit Agreement or with any
domestic commercial bank having capital and surplus in excess of
$100.0 million and a Thomson Bank Watch Rating of
B or better;
(4) repurchase obligations with a term of
not more than seven days for underlying securities of the types
described in clauses (2) and (3) above entered into
with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the rating of at
least P-1 from Moodys Investors Service, Inc.
or A-1 from Standard & Poors Rating
Services and in each case maturing within twelve months after
the date of acquisition;
(6) with respect to any Foreign Subsidiary
having its principal operations in Mexico only,
(i)
Certificados de la Tesoreria de la Federacion
(Cetes), Bonos de Desarrollo del Gobierno Federal (Bondes) or
Bonos Adjustables del Gobierno Federal (Adjustabonos)
, in
each case, issued by the Mexican government; and (ii) any
other instruments issued or guaranteed by Mexico and denominated
and payable in pesos;
provided,
that, in each case, such
investments under this clause (6) are made in the ordinary
course of business for cash management purposes;
(7) demand or time deposit accounts used in
the ordinary course of business with overseas branches of
commercial banks incorporated under the laws of the United
States of America, any state thereof, the District of Columbia,
Canada or any province or territory thereof,
provided
that such commercial bank has, at the time of the
Companys or such Restricted Subsidiarys Investment
therein, (1) capital, surplus and undivided profits (as of
the date of such institutions most recently published
financial statements) in excess of $100 million and
(2) the long-term unsecured debt obligations (other than
such obligations rated on the basis of the credit of a Person
other than such institution) of such institution, at the time of
the Companys or any Restricted Subsidiarys
Investment therein, are rated in the highest rating category of
both Moodys Investors Service, Inc. and
Standard & Poors Rating Services;
(8) obligations (including, but not limited
to demand or time deposits, bankers acceptances and
certificates of deposit) issued or guaranteed by a depository
institution or trust company incorporated under the laws of the
United States of America, any state thereof, the District of
Columbia, Canada or any province or territory thereof,
provided
that (A) such instrument has a final
maturity not more than one year from the date of purchase
thereof by the Company or any Restricted Subsidiary of the
Company and (B) such depository institution or trust
company has at the time of the Companys or such Restricted
Subsidiarys Investment therein or contractual commitment
providing for such Investment, (x) capital, surplus and
undivided profits (as of the date of such institutions
most recently published financial statements) in excess of
$100 million and (y) the long-term unsecured debt
obligations (other than such obligations rated on the basis of
the credit of a Person other than such institution) of such
institution, at the time of the Companys or such
Restricted Subsidiarys Investment therein or contractual
commitment providing for such Investment, are rated in the
highest rating category of both Standard & Poors
Rating Services and Moodys Investors Service, Inc.;
(9) in the case of any Foreign Subsidiary,
demand or time deposit accounts used in the ordinary course of
business with reputable commercial banks located in the
jurisdiction of organization of such Foreign Subsidiary; and
(10) money market funds at least 95% of the
assets of which constitute Cash Equivalents of the kinds
described in clauses (1) through (5) of this
definition.
(1) the direct or indirect sale, lease,
transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related
transactions, of all or substantially all of the properties or
assets of the Company and its Restricted Subsidiaries taken as a
whole to any person (as that term is used in
Section 13(d)(3) of the Exchange Act) other than a
Permitted Holder;
(2) the adoption of a plan relating to the
liquidation or dissolution of the Company;
(3) the consummation of any transaction
(including, without limitation, any merger or consolidation) the
result of which is that any person (as defined
above) other than a Permitted Holder becomes the Beneficial
Owner, directly or indirectly, of more than 50% of the Voting
Stock of the Company, measured by voting power rather than
number of shares; or
(4) the first day on which a majority of the
members of the Board of Directors of the Company are not
Continuing Directors.
(1) any increase in deferred lease expense;
plus
(2) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such
period;
plus
(3) Fixed Charges to the extent such amounts
are included in the calculation of Consolidated Net Income;
plus
(4) depreciation, non-cash asset impairment
losses, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash
expenses, including foreign exchange losses not included in
operating income, (excluding (other than foreign advance rents
paid at the inception of the lease) any such non-cash expense to
the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its
Subsidiaries for such period;
plus
(5) the Net Income of any Person and its
Restricted Subsidiaries shall be calculated without deducting
the income attributable to, or adding the losses attributable
to, the minority equity interests of third parties in any
non-wholly-owned Restricted Subsidiary;
plus
(6) the amount of management, consulting and
advisory fees and related expenses paid to Madison Dearborn
Partners, LLC or one of its Affiliates (or any accruals relating
to such fees and related expenses) during such period, provided
that such amount shall not exceed $1.0 million in any
twelve-month period;
plus
(7) any reasonable expenses and charges
related to any Equity Offering, Permitted Investment,
acquisition, recapitalization, Asset Sale or Indebtedness
permitted to be incurred under the indenture (in each case,
whether or not successful);
minus
(8) non-cash items increasing such
Consolidated Net Income for such period (including foreign
exchange gains not included in operating income), other than
(i) the accrual of revenue or amortization of prepaid cash
income in the ordinary course of business and (ii) the
reversal of an accrual or cash reserve that was excluded
pursuant to paragraph (4) above in any prior period;
minus
(9) any decrease in deferred lease expense,
(1) the Net Income of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the
amount of dividends or distributions paid in cash to the
specified Person or a Restricted Subsidiary of the Person;
(2) solely for the purpose of determining
the amount available for Restricted Payments under
clause 3(a) of the first paragraph of the covenant set
forth under the caption Restricted
Payments, the Net Income of any Restricted Subsidiary will
be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders (other than
(A) with respect to restrictions applicable to Cinemark
USA, Inc. and permitted by the covenant set forth under the
caption Certain Covenants Dividend
and Other Payment Restrictions Affecting Subsidiaries or
(B) to the extent of the amount of dividends or
distributions that have actually been paid in the calculation
period);
(3) the cumulative effect of a change in
accounting principles will be excluded;
(4) any non-cash goodwill or other
intangible asset impairment charges incurred subsequent to the
date of the indenture resulting from the application of SFAS
No. 142 (or similar pronouncements) shall be excluded;
(5) any net after-tax income or loss from
discontinued operations, net after-tax gains or losses on
disposal of discontinued operations and losses arising from
lease dispositions shall be excluded; and
(6) items classified as extraordinary or
nonrecurring gains and losses (less all fees and expenses
related thereto) or expenses (including, without limitation,
severance, relocation, other restructuring costs and expenses
arising from the Transactions), and the related tax effects
according to GAAP, shall be excluded; provided that with respect
to each extraordinary or nonrecurring item, the Company shall
have delivered an Officers Certificate to the trustee
specifying and quantifying such item and stating that such item
is extraordinary or non-recurring.
(1) was a member of such Board of Directors
on the date of the indenture;
(2) was nominated for election or elected to
such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time
of such nomination or election; or
(3) was nominated for election pursuant to
the provisions of the Stockholders Agreement as in effect on the
Recapitalization Date.
(1) the consolidated interest expense of
such Person and its Restricted Subsidiaries for such period,
whether paid or accrued, including, without limitation,
amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations (but
excluding any interest expense attributable to Permitted
Capitalized Leases) imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers
acceptance financings, and net of the effect of all payments
made or received pursuant to Hedging Obligations (excluding the
amortization or write-off of debt issuance costs incurred in
connection with or prior to the Transactions);
plus
(2) the consolidated interest of such Person
and its Restricted Subsidiaries that was capitalized during such
period;
plus
(3) any interest expense on Indebtedness of
another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such
Person or one of its Restricted Subsidiaries, whether or not
such Guarantee or Lien is called upon;
plus
(4) the product of (a) all dividends
paid (whether or not in cash) on any series of preferred stock
of such Person or any of its Restricted Subsidiaries, other than
dividends on Equity Interests payable (X) solely in Equity
Interests of the Company (other than Disqualified Stock) or
(Y) to the Company or a Restricted Subsidiary of the
Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current
combined effective federal, state and local statutory tax rate
of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
(1) acquisitions that have been made by the
specified Person or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any
related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on
or prior to the Calculation Date will be given pro forma effect
as if they had occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference
period will be calculated on a pro forma basis (giving effect to
any Pro Forma Cost Savings);
(2) the Consolidated Cash Flow attributable
to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the
Calculation Date, will be deemed to have occurred on the first
day of the four-quarter reference period and will be excluded;
and
(3) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the
Calculation Date, will be deemed to have occurred on the first
day of the four-quarter reference period and will be excluded,
but only to the extent that the obligations giving rise to such
Fixed Charges will not be obligations of the specified Person or
any of its Restricted Subsidiaries following the Calculation
Date.
(1) interest rate swap agreements (whether
from fixed to floating or from floating to fixed), interest rate
cap agreements and interest rate collar agreements entered into
with one or more financial institutions and designed to protect
the Person entering into the agreement against fluctuations in
interest rates with respect to Indebtedness incurred and not for
purposes of speculation;
(2) foreign exchange contracts and currency
protection agreements entered into with one or more financial
institutions and designed to protect the Person entering into
the agreement against fluctuations in currency exchange rates
with respect to Indebtedness incurred and not for purposes of
speculation;
(3) any commodity futures contract,
commodity option or other similar agreement or arrangement
designed to protect against fluctuations in the price of
commodities used by that Person at the time; and
(4) other agreements or arrangements
designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or
similar instruments or letters of credit (or reimbursement
agreements in respect thereof);
(3) in respect of bankers acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and
unpaid of the purchase price of any property, except any such
balance that constitutes an accrued expense or trade payable;
(6) all obligations of such Person with
respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary, any
preferred stock (but excluding, in each case, any accrued
dividends); or
(7) representing the net amount owing under
any Hedging Obligations, if and to the extent any of the
preceding items (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of
the specified Person prepared in accordance with GAAP. In
addition, the term Indebtedness includes all
Indebtedness of others secured by a Lien on any asset of the
specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included,
the Guarantee by the specified Person of any indebtedness of any
other Person.
(1) the accreted value of the Indebtedness,
in the case of any Indebtedness issued with original issue
discount; and
(2) the principal amount of the
Indebtedness, together with any interest on the Indebtedness
that is more than 30 days past due, in the case of any
other Indebtedness.
(1) as to which neither the Company nor any
of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument
that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender, other than such Liens permitted by
clause (9) of the definition of Permitted Liens;
(2) no default with respect to which
(including any rights that the holders of the Indebtedness may
have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any
holder of any other Indebtedness (other than the notes) of the
Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment of the
Indebtedness to be accelerated or payable prior to its stated
maturity; and
(3) as to which the lenders have been
notified in writing that they will not have any recourse to the
stock or assets of the Company or any of its Restricted
Subsidiaries.
(1) any Investment in the Company or in a
Restricted Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any
Subsidiary of the Company in a Person, if as a result of such
Investment:
(a) such Person becomes a Restricted
Subsidiary of the Company; or
(b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company;
(4) receivables owing to the Company or any
Restricted Subsidiary created or acquired in the ordinary course
of business and payable or dischargeable in accordance with
customary trade terms;
provided, however
, that such trade
terms may include such concessionary trade terms as the Company
or any such Restricted Subsidiary deems reasonable under the
circumstances;
(5) workers compensation, utility,
lease and similar deposits and prepaid expenses in the ordinary
course of business and endorsements of negotiable instruments
and documents in the ordinary course of business;
(6) loans or advances to employees (other
than executive officers) made in the ordinary course of business
consistent with past practices of the Company or such Restricted
Subsidiary;
(7) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described
above under the caption Repurchase at the
Option of Holders Asset Sales;
(8) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company;
(9) any Investments received in compromise
of obligations of trade creditors or customers that were
incurred in the ordinary course of business, including pursuant
to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of any trade creditor or customer;
(10) Hedging Obligations;
(11) refundable construction advances made
with respect to the construction of properties of a nature or
type that are used in a business similar or related to the
business of the Company or its Restricted Subsidiaries in the
ordinary course of business;
(12) advances or extensions of credit on
terms customary in the industry in the form of accounts or other
receivables incurred, or pre-paid film rentals, and loans and
advances made in settlement of such accounts receivable, all in
the ordinary course of business;
(13) other Investments in any Person having
an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent
changes in value), when taken together with all other
Investments made pursuant to this clause (13) that are at
the time outstanding, not to exceed $15.0 million;
(14) Investments existing on the date of the
indenture;
(15) Guarantees issued in accordance with
the covenant set forth under the caption
Incurrence of Indebtedness and Issuance of
Preferred Stock; and
(16) advances, loans or extensions of credit
to suppliers and vendors in the ordinary course of business.
(1) Liens securing the Credit Facilities
that are permitted to be incurred;
(2) Liens in favor of the Company or any
Restricted Subsidiary of the Company;
(3) Liens on property of a Person existing
at the time such Person is merged with or into or consolidated
with the Company or any Restricted Subsidiary of the Company;
provided
that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend
to any assets other than those of the Person merged into or
consolidated with the Company or the Restricted Subsidiary;
(4) Liens on property existing at the time
of acquisition of the property by the Company or any Restricted
Subsidiary of the Company,
provided
that such Liens were
in existence prior to the
contemplation of such acquisition and do not
extent to any assets other than those of the Person merged into
or consolidated with the Company or the Subsidiary;
(5) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a like nature incurred in the ordinary
course of business;
(6) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (4) of the
second paragraph of the covenant entitled
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock covering only
the assets, accessions, improvements and proceeds acquired with
such Indebtedness;
(7) Liens existing on the date of the
indenture;
(8) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate
proceedings promptly instituted,
provided
that any
reserve or other appropriate provision as is required in
conformity with GAAP has been made therefor;
(9) Liens on the Capital Stock and assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries;
(10) Easements, rights-of-way, restrictions,
minor defects or irregularities in title and other similar
encumbrances which, in the aggregate, do not materially detract
from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the
Company or such Restricted Subsidiary;
(11) Leases or subleases granted to others
that do not materially interfere with the ordinary course of
business of the Company and its Restricted Subsidiaries, taken
as a whole;
(12) Landlords, carriers,
warehousemens, mechanics, materialmens,
repairmens or the like Liens arising by contract or
statute in the ordinary course of business and with respect to
amounts which are not yet delinquent or are being contested in
good faith by appropriate proceedings;
(13) Pledges or deposits made in the
ordinary course of business (A) in connection with leases,
performance bonds and similar obligations, or (B) in
connection with workers compensation, unemployment
insurance and other social security legislation;
(14) Liens encumbering property or assets
under construction arising from progress or partial payments by
a customer of the Company or its Restricted Subsidiaries
relating to such property or assets;
(15) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods;
(16) Liens arising out of conditional sale,
title retention, consignment or similar arrangements for the
sale of goods entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of the Company and its
Restricted Subsidiaries;
(17) Liens on or sales of receivables;
(18) the rights of film distributors under
film licensing contracts entered into by the Company or any
Restricted Subsidiary in the ordinary course of business on a
basis customary in the movie exhibition industry;
(19) any attachment or judgment Lien that
does not constitute an Event of Default;
(20) Liens in favor of the trustee for its
own benefit and for the benefit of the holders of the notes;
(21) Liens (including extensions and
renewals thereof) upon real or personal property acquired after
the date of the indenture;
provided
that (a) such
Lien is created solely for the purpose of securing Indebtedness
incurred, in accordance with the covenant set forth under the
caption Incurrence of Indebtedness and
Issuance of Preferred Stock, (1) to finance the cost
(including the cost of
improvement or construction) of the item of
property or assets subject thereto and such Lien is created
prior to, at the time of or within six months after the later of
the acquisition, the completion of construction or the
commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the
principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall
not extend to or cover any property or assets other than such
item of property or assets and any accessions, proceeds and
improvements on such item;
(22) Liens incurred or deposits made to
secure the performance of tenders, bids, leases, statutory or
regulatory obligations, bankers acceptances, surety and
appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature
incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money);
(23) Liens encumbering deposits securing
Indebtedness under Hedging Obligations;
(24) Liens arising from filing Uniform
Commercial Code financing statements with respect to leases;
(25) Liens incurred in the ordinary course
of business of the Company or any Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at
any one time outstanding; and
(26) Liens securing the obligations under
the Escrow Agreement.
(1) the principal amount (or accreted value,
if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount (or accreted value, if
applicable) of the Indebtedness extended, refinanced, renewed,
replaced, defeased or refunded (plus all accrued interest on the
Indebtedness and the amount of all expenses and premiums
incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness
has a final maturity date later than or equal to the final
maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the notes, such Permitted
Refinancing Indebtedness has a final maturity date later than
the final maturity date of, and is subordinated in right of
payment to, the notes on terms at least as favorable to the
Holders of notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by
the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
(1) any investment fund or other entity
controlled by or under common control with, Madison Dearborn
Partners, LLC or the principals that control Madison Dearborn
Partners, LLC; or
(2) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding an 80% or more controlling
interest of which consist of any one or more of Madison Dearborn
Partners, LLC and/or such other Persons referred to in the
immediately preceding clause (1).
(1) all Indebtedness of the Company
outstanding under the notes, whether outstanding on the date of
the indenture or thereafter incurred;
(2) any other Indebtedness incurred by the
Company, unless the instrument under which such Indebtedness is
incurred expressly provides that it is subordinated in right of
payment to the notes; and
(3) all Obligations with respect to the
items listed in the preceding clauses (1) and (2)
(including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest
is an allowed claim under applicable law).
(1) any liability for federal, state, local
or other taxes owed or owing by the Company;
(2) any Indebtedness of the Company to any
of its Subsidiaries;
(3) any trade payables of the Company; or
(4) the portion of any Indebtedness that is
incurred in violation of the indenture (but only to the extent
so incurred).
(1) any corporation, association or other
business entity of which more than 50% of the total voting power
of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of
directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole
general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only
general partners of which are that Person or one or more
Subsidiaries of that Person (or any combination thereof).
(1) has no Indebtedness other than
Non-Recourse Debt;
(2) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less
favorable to the Company or such Restricted Subsidiary than
those that might be obtained at the time from Persons who are
not Affiliates of the Company;
(3) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve
such Persons financial condition or to cause such Person
to achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries;
(5) either alone or in the aggregate with
all other Unrestricted Subsidiaries, does not operate, directly
or indirectly, all or substantially all of the business of the
Company and its Subsidiaries.
(1) the sum of the products obtained by
multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in
respect of the Indebtedness, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by
(2) the then outstanding principal amount of
such Indebtedness.
a seven-year term loan facility in an aggregate
principal amount equal to $260.0 million;
a six and one-half year revolving credit facility
of up to $100.0 million in revolving credit loans and
letters of credit;
a $15.0 million subfacility under the
revolving credit facility for letters of credit which may be
increased to $25.0 million; and
a $25.0 million peso subfacility under the
revolving credit facility.
Guarantee and Collateral
Interest and Fees
Repayments; Prepayments
100% of the net cash proceeds of any incurrence
of additional debt (excluding certain permitted debt) by us,
CNMK Holding, Inc., Cinemark USA, Inc. or certain of its
restricted subsidiaries subject, in certain cases, to a step
down upon the achievement of agreed upon performance targets;
100% of the net cash proceeds from any sale or
other disposition by us, CNMK Holding, Inc., Cinemark USA, Inc.
or any of its restricted subsidiaries of any assets (excluding
sales from inventory in the ordinary course of business and
certain other dispositions) subject to certain reinvestment
options; and
100% of the principal, interest and other amounts
outstanding, under the amended senior credit facility if any of
Cinemark USA, Inc.s 8 1/2% senior subordinated notes
are outstanding as of April 30, 2008.
Certain Covenants
indebtedness and guarantee obligations;
liens;
mergers, consolidations, liquidations and
dissolutions;
asset sales;
dividends and other payments in respect of
capital stock;
investments;
prepayments of other indebtedness;
transactions with affiliates;
sale and leaseback transactions;
changes in fiscal year;
changes in lines of business;
our activities and the activities of CNMK
Holding, Inc.;
new leases;
negative pledges;
hedge agreements; and
other matters customarily restricted in such
agreements.
payment defaults;
breaches of representations and warranties;
noncompliance with covenants;
cross-defaults to certain other material
agreements or indebtedness in excess of specified amounts;
certain bankruptcy events;
events that would result in our liability under
the Employee Retirement Income Security Act of 1974 in excess of
a specified amount;
judgments in excess of specified amounts;
failure of subordinated debt to be subordinated
to the amended senior credit facility;
failure of any guarantee or security document
supporting the amended senior credit facility to be in full
force and effect; and
change of control, as such term is defined in the
amended senior credit facility.
Year
Percentage
104.500%
103.000%
101.500%
100.000%
Cinemark Brasil Notes Payable
(1) BNDES (Banco Nacional de Desenvolvimento
Econômico e Social (the Brazilian National Development
Bank)) credit line in the U.S. dollar equivalent in Brazilian
reais of US$3.8 million executed in October 1999 with a
maturity date of September 2004. Interest accrues at a BNDES
basket rate, which is a multiple currency rate based on the rate
at which the bank borrows, plus a spread amounting to 14.5%. At
March 31, 2004, approximately US$1.0 million was
outstanding under the credit line;
(2) BNDES credit line in the U.S. dollar
equivalent in Brazilian reais of US$1.9 million executed in
November 2001 with a maturity date of October 2006. Interest
accrues at a BNDES basket rate plus a spread amounting to 13.8%.
At March 31, 2004, approximately US$1.3 million was
outstanding under this credit line;
(3) Project developer financing executed
with two engineering companies in September 2000 in the amount
of US$1.8 million with a maturity date of September 2005.
Interest accrues at a rate of TJLP+5% (Taxa de Juros de Longo
Prazo (a long term interest rate published by the Brazilian
government)). At March 31, 2004, approximately
US$0.6 million was outstanding under this financing
arrangement;
(4) Project developer financing executed
with a mall developer in February 2004 in the amount of
$0.7 million with a maturity date of February 2009.
Interest accrues at a rate of TJLP+5.5% (Taxa de Juros de Longo
Prazo (a long-term interest rate published by the Brazilian
government)). At March 31, 2004, there was approximately
US$0.7 million outstanding under this financing arrangement.
tax consequences to holders who may be subject to
special tax treatment, such as dealers in securities or
currencies, brokers, financial institutions or financial
service entities, tax-exempt entities, traders in
securities that elect to use a mark-to-market method of
accounting for their securities holdings, regulated investment
companies, real estate investment trusts, insurance companies,
retirement plans, U.S. expatriates or former long-term residents
of the United States, partnerships or other pass-through
entities or investors in partnerships or pass-through entities;
tax consequences to persons holding exchange
notes as part of a hedging, integrated, constructive sale or
conversion transaction or straddle;
tax consequences to U.S. holders (as defined
below) of exchange notes whose functional currency
is not the U.S. dollar;
tax consequences to Non-U.S. holders (as defined
below) of exchange notes who are controlled foreign
corporations, foreign personal holding companies or passive
foreign investment companies;
alternative minimum tax consequences, if any; or
any state, local or foreign tax consequences.
an individual that is a citizen or resident of
the United States;
a corporation or other entity taxable as a
corporation, created or organized in or under the laws of the
United States or any political subdivision of the United States;
an estate the income of which is subject to U.S.
federal income taxation regardless of its source; or
a trust if (1) it is subject to the primary
supervision of a court within the United States and one or more
U.S. persons have the authority to control all substantial
decisions of the trust or (2) it has a valid election in
effect under applicable Treasury regulations to be treated as a
U.S. person.
you are not an affiliate of ours
within the meaning of Rule 405 under the Securities Act;
you are acquiring the exchange notes in the
ordinary course of your business; and
you do not intend to participate in the
distribution of the exchange notes.
you cannot rely on those interpretations of the
SEC; and
you must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, and the
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of
Regulation S-K under the Securities Act.
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-36
F-37
F-38
F-39
/s/ Deloitte & Touche LLP
2002
2003
ASSETS
$
63,718,515
$
107,321,510
3,688,915
4,323,687
12,441,849
15,440,439
715,931
4,094,135
5,476,066
84,659,345
132,561,702
60,655,789
58,962,924
310,049,621
323,156,916
455,577,935
485,206,467
342,421,132
364,337,716
8,804,504
6,233,088
1,177,508,981
1,237,897,111
385,778,478
462,017,053
791,730,503
775,880,058
10,751,844
12,083,095
7,949,496
7,865,294
3,040,940
2,334,145
18,681,800
30,011,763
40,424,080
52,294,297
$
916,813,928
$
960,736,057
LIABILITIES AND STOCKHOLDERS
EQUITY
$
30,190,449
$
6,744,842
28,771,072
37,373,428
5,317,839
26,029,698
27,337,817
15,849,066
17,939,898
14,375,226
12,954,499
15,221,517
15,188,282
24,092,153
24,956,025
154,529,181
147,812,630
662,396,388
651,686,139
11,170,128
13,033,013
24,837,457
27,652,702
4,372,620
4,006,700
5,129,370
5,665,863
707,905,963
702,044,417
26,714,929
33,932,183
19,563
19,665
20,949
20,949
40,349,858
40,369,474
(3,104,958
)
(1,740,255
)
80,171,903
124,821,416
(89,793,460
)
(86,544,422
)
27,663,855
76,946,827
$
916,813,928
$
960,736,057
2001
2002
2003
$
548,920,177
$
595,286,841
$
597,547,930
257,603,165
291,807,230
300,568,065
47,135,126
48,759,804
52,756,165
853,658,468
935,853,875
950,872,160
295,018,941
320,741,903
324,901,748
44,924,307
50,356,355
49,640,261
90,808,558
96,682,317
97,240,383
114,736,525
115,587,807
119,516,682
101,217,063
103,167,023
110,791,539
646,705,394
686,535,405
702,090,613
42,596,407
47,952,485
44,285,360
73,078,417
66,583,237
65,085,532
20,723,274
3,869,331
5,049,199
12,407,696
469,961
(1,201,850
)
795,511,188
805,410,419
815,308,854
58,147,280
130,443,456
135,563,306
(68,368,292
)
(55,428,317
)
(51,852,977
)
(2,562,328
)
(2,364,680
)
(2,310,372
)
1,492,492
2,318,172
2,035,338
(1,976,979
)
(5,120,336
)
(195,670
)
(7,540,269
)
(4,471,983
)
426,936
465,035
162,573
(598,923
)
(3,410,018
)
(75,724,517
)
(60,767,148
)
(62,808,933
)
(17,577,237
)
69,676,308
72,754,373
(14,114,629
)
29,160,031
25,166,001
(3,462,608
)
40,516,277
47,588,372
(558,660
)
(1,650,894
)
(2,938,859
)
(4,021,268
)
38,865,383
44,649,513
(3,389,779
)
$
(4,021,268
)
$
35,475,604
$
44,649,513
$
(0.09
)
$
1.00
$
1.17
(0.01
)
(0.04
)
(0.07
)
(0.10
)
0.96
1.10
(0.08
)
$
(0.10
)
$
0.88
$
1.10
$
(0.09
)
$
1.00
$
1.17
(0.01
)
(0.04
)
(0.08
)
$
(0.10
)
$
0.96
$
1.09
(0.09
)
$
(0.10
)
$
0.87
$
1.09
Class A Common Stock
Class B Common Stock
Accumulated
Additional
Unearned
Other
Shares
Shares
Paid-in
Compensation
Retained
Treasury
Comprehensive
Comprehensive
Issued
Amount
Issued
Amount
Capital
Stock Options
Earnings
Stock
Loss
Total
Income (Loss)
18,438,860
$
18,439
20,949,280
$
20,949
$
38,464,668
$
(1,956,944
)
$
48,717,567
$
$
(36,354,842
)
$
48,909,837
(4,021,268
)
(4,021,268
)
$
(4,021,268
)
3,423,107
(3,423,107
)
(143,392
)
143,392
1,010,655
1,010,655
1,124,420
1,124
(1,376,634
)
(1,375,510
)
(19,186,458
)
(19,186,458
)
(19,186,458
)
19,563,280
$
19,563
20,949,280
$
20,949
$
40,367,749
$
(4,226,004
)
$
44,696,299
$
$
(55,541,300
)
$
25,337,256
$
(23,207,726
)
35,475,604
35,475,604
35,475,604
(17,891
)
17,891
1,103,155
1,103,155
(34,252,160
)
(34,252,160
)
(34,252,160
)
19,563,280
$
19,563
20,949,280
$
20,949
$
40,349,858
$
(3,104,958
)
$
80,171,903
$
$
(89,793,460
)
$
27,663,855
$
1,223,444
44,649,513
44,649,513
44,649,513
1,079,826
1,079,826
(284,877
)
284,877
101,200
102
304,493
304,595
3,249,038
3,249,038
3,249,038
19,664,480
$
19,665
20,949,280
$
20,949
$
40,369,474
$
(1,740,255
)
$
124,821,416
$
$
(86,544,422
)
$
76,946,827
$
47,898,551
2001
2002
2003
$
(4,021,268
)
$
35,475,604
$
44,649,513
70,978,308
65,822,005
64,428,858
309,606
656,458
2,100,109
761,232
656,674
465,429
2,345,095
1,796,405
1,805,684
1,010,655
1,103,155
1,079,826
2,387,828
2,364,680
2,310,372
(365,921
)
(365,920
)
(365,920
)
(28,508
)
(28,507
)
(972,306
)
(8,319,348
)
(4,852,905
)
(2,622,904
)
20,723,274
3,869,331
5,049,199
2,500,000
12,407,696
469,961
(661,384
)
7,540,269
2,357,141
2,005,069
2,740,580
(18,547,884
)
14,886,334
1,862,885
4,471,983
(426,936
)
(465,035
)
(162,573
)
598,923
3,410,018
(1,380,621
)
203,742
3,389,779
412,923
(366,883
)
(634,772
)
(2,803,624
)
(1,392,201
)
(2,998,590
)
344,837
(847,306
)
(1,381,931
)
4,746,176
6,463,964
(9,848,778
)
(1,671,098
)
1,191,191
405,082
2,670,834
(2,338,589
)
8,602,356
(4,419,739
)
19,350,008
(1,695,914
)
1,391,446
158,063
3,234,062
23,927
722,863
6,033,770
87,117,077
150,118,926
135,521,814
(40,351,680
)
(38,031,643
)
(51,002,145
)
6,867,953
2,639,965
3,084,531
(379,373
)
(3,314
)
63,693
641,808
770,062
(33,799,407
)
(34,749,870
)
(47,150,866
)
5,111
100,853
375,225,000
(275,000,000
)
93,236,439
61,748,082
403,516,357
(122,574,508
)
(148,650,617
)
(537,764,968
)
(15,622,495
)
11,429,373
454,931
4,573,551
(3,604,665
)
(9,692,587
)
(766,315
)
(21,508,250
)
(96,140,191
)
(45,738,017
)
(1,450,191
)
(5,709,573
)
970,064
30,359,229
13,519,292
43,602,995
19,839,994
50,199,223
63,718,515
$
50,199,223
$
63,718,515
$
107,321,510
Years Ended December 31,
2001
2002
2003
$
(4,021,268
)
$
35,475,604
$
44,649,513
1,010,655
1,103,155
1,079,826
(1,339,747
)
(1,363,626
)
(1,426,625
)
$
(4,350,360
)
$
35,215,133
$
44,302,714
$
(0.10
)
$
0.88
$
1.10
$
(0.11
)
$
0.87
$
1.09
$
(0.10
)
$
0.87
$
1.09
$
(0.11
)
$
0.87
$
1.09
Years Ended December 31,
2001
2002
2003
$
(3,462,608
)
$
40,516,277
$
47,588,372
39,496,820
40,512,560
40,516,078
$
(0.09
)
$
1.00
$
1.17
39,496,820
40,512,560
40,516,078
112,611
278,835
39,496,820
40,625,171
40,794,913
$
(0.09
)
$
1.00
$
1.17
Basic/Diluted
Net Loss
Loss per Share
$
(4,021,268
)
$
(0.10
)
1,701,786
0.04
33,528
0.00
$
(2,285,954
)
$
(0.06
)
U.S.
Argentina
Chile
Peru
Total
$
5,308,738
$
4,269,110
$
2,931,106
$
2,616,000
$
15,124,954
(27,226
)
(3,298,385
)
(3,325,611
)
(558,398
)
(558,398
)
(204,330
)
(231,155
)
(53,616
)
(489,101
)
5,281,512
207,997
2,699,951
2,562,384
10,751,844
1,030,402
1,030,402
(196,235
)
(62,820
)
(259,055
)
30,829
490,213
38,862
559,904
$
6,311,914
$
238,826
$
2,993,929
$
2,538,426
$
12,083,095
2002
2003
$
9,000,000
$
9,000,000
442,561
(1,066,667
)
(1,593,430
)
7,933,333
7,849,131
16,163
16,163
$
7,949,496
$
7,865,294
$
526,972
526,972
526,972
526,972
526,972
5,214,271
$
7,849,131
Years Ended December 31,
Theatre Properties and Equipment
2001
2002
2003
$
(16,310,524
)
$
(1,576,781
)
$
(820,493
)
(2,700,000
)
(242,380
)
(2,200,000
)
(1,712,750
)
(1,268,394
)
(529,300
)
(223,378
)
(1,240,351
)
(20,723,274
)
(3,310,933
)
(4,790,144
)
(558,398
)
(259,055
)
$
(20,723,274
)
$
(3,869,331
)
$
(5,049,199
)
2002
2003
$
12,792,545
$
15,952,916
(7,948,096
)
(2,068,842
)
4,844,449
13,884,074
8,606,655
6,797,228
1,433,774
1,507,297
2,578,177
3,089,228
1,218,745
4,733,936
$
18,681,800
$
30,011,763
2002
2003
$
$
374,208,262
275,717,500
104,441,667
104,541,667
164,175,000
189,000,000
23,000,000
77,000,000
8,007,269
3,457,264
8,422,414
8,066,837
6,997,987
3,981,951
692,586,837
658,430,981
30,190,449
6,744,842
$
662,396,388
$
651,686,139
(1) BNDES (Banco Nacional de Desenvolvimento
Econômico e Social (the Brazilian National Development
Bank)) credit line in the U.S. dollar equivalent in
Brazilian reais of US$3.8 million executed in October 1999
with a term of 5 years (with a nine month grace period) and
accruing interest at a BNDES basket rate, which is a multiple
currency rate based on the rate at which the bank borrows, plus
a spread amounting to 14.5%;
(2) BNDES credit line in the
U.S. dollar equivalent in Brazilian reais of
US$1.9 million executed in November 2001 with a term of
5 years (with a one year grace period) and accruing
interest at a BNDES basket rate plus a spread amounting to
13.8%; and
(3) Project developer financing executed
with two engineering companies in September 2000 in the amount
of US$1.8 million with a term of 5 years (with a nine
month grace period) and accruing interest at a rate of TJLP+5%
(Taxa de Juros de Longo Prazo (a long term interest rate
published by the Brazilian government)).
$
6,744,842
6,934,548
4,445,326
121,853,212
144,244,791
374,208,262
$
658,430,981
9.
Foreign Currency Translation
10.
Investments in and Advances to
Affiliates
2002
2003
$
1,039,371
$
1,031,537
326,995
265,015
233,219
218,928
171,000
171,000
337,984
337,984
932,371
309,681
$
3,040,940
$
2,334,145
11.
Minority Interests in Subsidiaries
2002
2003
$
13,214,372
$
17,995,060
6,764,400
7,653,855
2,576,878
2,989,475
1,618,295
1,788,474
1,099,261
935,171
1,141,948
1,391,224
830,416
299,775
348,508
$
26,714,929
$
33,932,183
12.
Capital Stock
2001
2002
2003
Weighted
Weighted
Weighted
Average
Average
Average
Exercise
Exercise
Exercise
Shares
Price
Shares
Price
Shares
Price
1,350,360
$
0.0045
$
$
56,760
$
0.0045
$
$
(326,700
)
$
0.0045
$
$
(1,080,420
)
$
0.0045
$
$
$
$
$
$
$
$
2001
2002
2003
Weighted
Weighted
Weighted
Average
Average
Average
Exercise
Exercise
Exercise
Shares
Price
Shares
Price
Shares
Price
176,000
$
0.0045
132,000
$
0.0045
132,000
$
0.0045
$
$
$
$
$
$
(44,000
)
$
0.0045
$
(88,000
)
$
0.0045
132,000
$
0.0045
132,000
$
0.0045
44,000
$
0.0045
88,000
$
0.0045
88,000
$
0.0045
44,000
$
0.0045
2001
2002
2003
Weighted
Weighted
Weighted
Average
Average
Average
Exercise
Exercise
Exercise
Shares
Price
Shares
Price
Shares
Price
1,059,300
$
7.61
1,279,300
$
6.01
1,248,500
$
5.97
335,500
$
1.50
$
63,500
$
12.76
(115,500
)
$
7.61
(30,800
)
$
7.61
(47,300
)
$
1.93
$
$
(13,200
)
$
7.61
1,279,300
$
6.01
1,248,500
$
5.97
1,251,500
$
6.45
570,020
$
7.61
797,500
$
7.10
1,013,100
$
6.91
13.
Supplemental Cash Flow Information
2001
2002
2003
$
71,359,828
$
54,097,745
$
50,992,168
$
3,287,018
$
14,639,084
$
17,330,386
14.
Income Taxes
2001
2002
2003
$
(19,205,463
)
$
56,586,571
$
65,671,971
1,069,566
8,049,064
4,143,543
$
(18,135,897
)
$
64,635,635
$
69,815,514
$
(2,958,614
)
$
9,427,272
$
16,393,609
4,568,671
3,990,008
5,885,184
59,860
856,417
1,024,323
1,669,917
14,273,697
23,303,116
(2,638,940
)
13,912,188
2,898,323
(11,298,230
)
206,780
(1,053,368
)
(1,847,376
)
767,366
17,930
(15,784,546
)
14,886,334
1,862,885
$
(14,114,629
)
$
29,160,031
$
25,166,001
2001
2002
2003
$
(6,347,564
)
$
22,657,969
$
24,470,421
375,616
1,317,122
(20,294
)
(10,581,544
)
(1,090,408
)
11,549
(1,787,517
)
1,623,784
677,464
2,963,052
5,224,793
1,250,017
1,812,838
469,375
883,313
(549,510
)
(1,042,604
)
(2,106,469
)
$
(14,114,629
)
$
29,160,031
$
25,166,001
2002
2003
$
32,155,727
$
31,937,196
736,797
2,632,883
32,892,524
34,570,079
8,991,749
9,768,255
7,137,383
7,975,368
2,265,782
2,125,817
1,003,261
13,466,457
14,158,469
413,521
2,411,179
211,573
(1,884,675
)
33,489,726
34,554,413
(597,202
)
15,666
11,767,330
13,017,347
$
11,170,128
$
13,033,013
(7,183,009
)
(8,236,376
)
18,353,137
21,269,389
$
11,170,128
$
13,033,013
2001
2002
2003
$
97,521,034
$
98,054,510
$
102,130,019
17,215,491
17,533,297
17,386,663
114,736,525
115,587,807
119,516,682
1,400,166
1,346,540
1,401,065
$
116,136,691
$
116,934,347
$
120,917,747
Capital
Leases
Operating Leases
Totals
$
$
105,890,318
$
105,890,318
110,712,607
110,712,607
110,022,237
110,022,237
109,300,917
109,300,917
106,506,589
106,506,589
931,382,275
931,382,275
$
$
1,473,814,943
$
1,473,814,943
17.
Financial Information About Geographic
Areas
Revenues
2001
2002
2003
$
644,095,881
$
727,918,466
$
743,843,186
77,266,984
84,376,090
70,246,112
62,188,321
65,195,568
74,853,097
71,101,287
59,312,008
63,475,171
(994,005
)
(948,257
)
(1,545,406
)
$
853,658,468
$
935,853,875
$
950,872,160
Theatre Properties and Equipment, Net
2002
2003
$
633,896,654
$
616,729,729
67,990,885
61,893,971
37,892,202
44,903,308
51,950,762
52,353,050
$
791,730,503
$
775,880,058
(1)
Revenues for all periods do not include results
of the United Kingdom theatres, as these theatres were
classified as held for sale at March 31, 2004.
(2)
Amounts include $6,955,440 and $4,520,104 for the
United Kingdom theatres as of December 31, 2002 and 2003,
respectively.
18.
Other Related Party Transactions
2001
2002
2003
$
272,341
$
272,175
$
267,334
2,558,693
2,752,460
2,726,700
163,068
256,007
395,153
50,714
58,263
32,317
19.
Initial Public Offering Fees and
Costs
20.
Valuation and Qualifying Accounts
Valuation Allowance for
Deferred Tax Assets
$
6,249,351
5,596,219
(24,081
)
11,821,489
596,209
(650,368
)
$
11,767,330
2,876,165
(1,626,148
)
$
13,017,347
21.
Loss on Early Retirement of Debt
22.
Subsequent Events
For the Year Ended December 31,
2001
2002
2003
$
$
2,129,520
$
4,327,824
1,006,836
1,878,259
274,978
512,482
3,411,334
6,718,565
1,079,405
1,862,841
321,968
364,571
603,983
1,042,641
715,020
1,395,316
1,663,602
799,161
4,383,978
5,464,530
93,231
368,644
495,970
465,429
309,606
656,458
2,500,000
540,466
558,660
(5,062,228
)
9,657,424
(558,660
)
(1,650,894
)
(2,938,859
)
$
(558,660
)
$
(1,650,894
)
$
(2,938,859
)
December 31,
December 31,
2002
2003
$
1,871,961
$
1,262,892
6,955,440
4,520,104
(3,073,684
)
(1,336,145
)
March 31,
December 31,
2004
2003
(Unaudited)
ASSETS
$
448,149,548
$
107,321,510
4,105,071
4,323,687
13,670,872
15,440,439
6,255,808
5,476,066
472,181,299
132,561,702
1,252,215,612
1,237,897,111
(478,930,561
)
(462,017,053
)
773,285,051
775,880,058
11,976,538
12,083,095
7,744,278
7,865,294
1,665,717
2,334,145
43,030,291
30,011,763
64,416,824
52,294,297
$
1,309,883,174
$
960,736,057
LIABILITIES AND STOCKHOLDERS
EQUITY
$
6,572,689
$
6,744,842
5,199,494
5,317,839
114,650,145
135,749,949
126,422,328
147,812,630
171,244,352
172,936,210
838,479,517
478,749,929
27,715,952
27,652,702
3,915,220
4,006,700
15,091,585
13,033,013
5,711,300
5,665,863
1,062,157,926
702,044,417
34,433,721
33,932,183
19,665
19,665
20,949
20,949
40,369,474
40,369,474
(1,595,234
)
(1,740,255
)
134,593,168
124,821,416
(86,538,823
)
(86,544,422
)
86,869,199
76,946,827
$
1,309,883,174
$
960,736,057
Three Months Ended March 31,
2004
2003
$
149,687,946
$
127,711,567
73,273,870
63,939,446
12,150,273
10,822,134
235,112,089
202,473,147
78,972,387
66,877,565
12,113,197
9,786,686
24,316,846
22,324,839
31,088,145
28,450,585
26,579,739
25,073,403
173,070,314
152,513,078
11,868,988
9,443,235
16,888,907
15,995,714
1,000,000
(513,134
)
(616,429
)
202,315,075
177,335,598
32,797,014
25,137,549
(11,971,846
)
(13,295,608
)
(589,986
)
(583,620
)
493,763
658,629
169,826
16,131
(1,645,759
)
37,058
196,356
(1,452,328
)
(770,205
)
(13,313,513
)
(15,424,076
)
19,483,501
9,713,473
7,948,524
3,948,671
11,534,977
5,764,802
(1,763,225
)
(315,130
)
$
9,771,752
$
5,449,672
$
0.28
$
0.14
(0.04
)
(0.01
)
$
0.24
$
0.13
$
0.28
$
0.14
(0.04
)
(0.01
)
$
0.24
$
0.13
Three Months Ended March 31,
2004
2003
$
9,771,752
$
5,449,672
16,729,004
15,841,076
58,878
141,200
159,903
154,638
497,056
423,607
145,021
274,297
589,986
583,620
(91,480
)
(91,480
)
(366,053
)
(7,127
)
(55,000
)
(1,168,226
)
1,000,000
1,800,000
(513,134
)
(616,429
)
1,645,759
63,250
379,502
2,058,572
3,820,017
(37,058
)
(196,356
)
1,452,328
770,205
218,616
(517
)
1,769,567
1,064,933
(779,742
)
(431,308
)
(3,255,280
)
(2,227,076
)
(453,551
)
319,451
(20,740,716
)
(40,518,400
)
100,437
(27,842
)
(118,345
)
(1,232,133
)
10,004,011
(15,648,917
)
(17,850,452
)
(8,603,416
)
262,509
1,490,574
1,250,000
(3,314
)
127,500
(16,210,443
)
(7,116,156
)
360,000,115
150,000,000
95,526
691,741
226,004,596
(2,266,727
)
(364,361,185
)
(10,490,778
)
(10,712,267
)
171,129
894,354
(1,121,919
)
(280,821
)
347,079,087
1,544,677
(44,617
)
154,072
340,828,038
(21,066,324
)
107,321,510
63,718,515
$
448,149,548
$
42,652,191
1.
The Company and Basis of
Presentation
2.
Recapitalization of the Company and
Refinancing of Certain Long-Term Debt
3.
Acquisitions and Divestitures
4.
Assets Held for Sale
Three Months Ended
March 31,
2004
2003
$
1,175,796
$
969,570
490,525
433,794
187,506
125,248
1,853,827
1,528,612
462,275
371,642
138,477
126,888
300,284
284,910
435,078
363,545
335,851
405,724
1,671,965
1,552,709
277,459
149,833
58,878
141,200
1,800,000
3,808,302
1,843,742
(1,954,475
)
(315,130
)
191,250
$
(1,763,225
)
$
(315,130
)
March 31,
December 31,
2004
2003
$
832,360
$
1,262,892
2,782,654
4,520,104
(854,290
)
(1,336,145
)
5.
Earnings Per Share
Three Months Ended
March 31,
2004
2003
$
11,534,977
$
5,764,802
40,613,760
40,512,560
$
0.28
$
0.14
40,613,760
40,512,560
526,574
207,804
41,140,334
40,720,364
$
0.28
$
0.14
6.
Stock Option Accounting
Three Months Ended
March 31,
2004
2003
$
9,771,752
$
5,449,672
88,463
167,321
(162,402
)
(339,414
)
$
9,697,813
$
5,277,579
$
0.24
$
0.13
$
0.24
$
0.13
$
0.24
$
0.13
$
0.24
$
0.13
7.
Goodwill and Other Intangible Assets
March 31,
December 31,
2004
2003
$
9,000,000
$
9,000,000
453,465
442,561
(1,725,350
)
(1,593,430
)
7,728,115
7,849,131
16,163
16,163
$
7,744,278
$
7,865,294
$
395,760
527,680
527,680
527,680
527,680
5,221,635
$
7,728,115
8.
Asset Impairment
9.
Foreign Currency Translation
10.
Comprehensive Income
Three Months Ended
March 31,
2004
2003
$
9,771,752
$
5,449,672
5,599
845,679
$
9,777,351
$
6,295,351
11.
Supplemental Cash Flow Information
Three Months Ended
March 31,
2004
2003
$
23,307,417
$
21,162,524
$
5,069,595
$
1,396,057
12.
Financial Information About Geographic
Areas
Three Months Ended
March 31,
Revenues
2004
2003
$
177,049,934
$
157,593,144
21,774,510
15,074,834
17,800,772
15,672,170
18,889,403
14,623,582
(402,530
)
(490,583
)
$
235,112,089
$
202,473,147
March 31,
December 31,
Theatre Properties and Equipment, Net
2004
2003
$
619,289,873
$
616,729,729
60,108,908
61,893,971
44,984,139
44,903,308
48,902,131
52,353,050
$
773,285,051
$
775,880,058
(1)
Revenues for both periods do not include results
of the United Kingdom theatres, as these theatres were
classified as held for sale as of March 31, 2004.
(2)
Amounts include $2,782,654 and $4,520,104 for the
United Kingdom theatres at March 31, 2004 and
December 31, 2003, respectively.
13.
New Accounting Pronouncements
14.
Related Party Transactions
15.
Litigation
We are required to indemnify our directors and
officers, subject to very limited exceptions;
We may indemnify other employees and agents,
subject to very limited exceptions;
We are required to advance expenses, as incurred,
to our directors and officers in connection with a legal
proceeding, subject to very limited exceptions; and
We may advance expenses, as incurred, to our
employees and agents in connection with a legal proceeding.
Item 21.
Exhibits and Financial Statement
Schedules
Exhibit
Number
Description
1
.1*
Purchase Agreement dated March 29, 2004, by
and among Cinemark, Inc. and the initial purchasers named
therein.
2
.1*
Agreement and Plan of Merger dated March 12,
2004 by and between Cinemark, Inc. and Popcorn Merger Corp.
2
.2*
Stock Purchase Agreement dated as of
March 12, 2004 by and between Cinemark, Inc. and Madison
Dearborn Capital Partners IV, LP.
3
.1*
Second Amended and Restated Certificate of
Incorporation of Cinemark, Inc. filed with the Delaware
Secretary of State on April 2, 2004.
3
.2*
Amended and Restated Bylaws of Cinemark, Inc.
4
.1*
Exchange and Registration Rights Agreement dated
March 31, 2004 among Cinemark, Inc., certain subsidiary
guarantors party thereto and the initial purchasers named
therein.
4
.2(a)*
Indenture dated as of March 31, 2004 between
Cinemark, Inc. and The Bank of New York Trust Company, N.A.
governing the 9 3/4% senior discount notes issued
thereunder.
4
.2(b)*
Form of 9 3/4% senior discount note
(contained in the indenture listed as Exhibit 4.2(a) above).
4
.2(c)
Indenture dated January 14, 1998 between
Cinemark USA, Inc. and U.S. Trust Company of Texas, N.A.
governing the 8 1/2% senior subordinated notes issued
thereunder (incorporated by reference to Exhibit 4.1 to
Cinemark USA, Inc.s Registration Statement on
Form S-4 (File No. 333-45417) filed February 2,
1998).
4
.2(d)
First Supplemental Indenture dated as of
February 11, 2003 between Cinemark USA, Inc., the
subsidiary guarantors party thereto and The Bank of New York
Trust Company of Florida, N.A., as successor trustee to
U.S. Trust Company of Texas, N.A. (incorporated by
reference to Exhibit 4.2(g) to Cinemark USA, Inc.s
Registration Statement on Form S-4 (File
No. 333-104940) filed May 2, 2003).
4
.2(e)
Second Supplemental Indenture dated as of
March 25, 2004 between Cinemark USA, Inc. and The Bank of
New York Trust Company, N.A. (incorporated by reference to
Exhibit 10.16 to Cinemark USA, Inc.s Quarterly Report
on Form 10-Q (File No. 033-47040) filed May 14,
2004).
4
.2(f)
Indenture dated February 11, 2003 between
Cinemark USA, Inc. and The Bank of New York Trust Company of
Florida, N.A. governing the 9% senior subordinated notes
issued thereunder (incorporated by reference to
Exhibit 10.2(b) to Cinemark USA, Inc.s Annual Report
on Form 10-K (File No. 033-47040) filed March 19,
2003).
4
.2(g)
First Supplemental Indenture dated as of
May 7, 2003 between Cinemark USA, Inc., the subsidiary
guarantors party thereto and The Bank of New York Trust Company
of Florida, N.A. (incorporated by reference to
Exhibit 4.2(i) to Cinemark USA, Inc.s Registration
Statement on Form S-4 (File No. 333-104940) filed
May 28, 2003).
Exhibit
Number
Description
4
.2(l)
Form of 8 1/2% Note (contained in the
Indenture listed as Exhibit 4.2(c) above) (incorporated by
reference to Exhibit 4.1 to Cinemark USA, Inc.s
Registration Statement on Form S-4 (File
No. 333-45417) filed February 2, 1998).
4
.2(m)
Form of 9% Note (contained in the Indenture
listed as Exhibit 4.2(f) above) (incorporated by reference
to Exhibit 10.2(b) to Cinemark USA, Inc.s Annual
Report on Form 10-K (File 033-47040) filed March 19,
2003).
5
*
Opinion of Akin Gump Strauss Hauer &
Feld LLP.
10
.1(a)
Management Agreement, dated as of July 28,
1993, between Cinemark USA, Inc. and Cinemark Mexico (USA)
(incorporated by reference to Exhibit 10.1(a) to Cinemark,
Inc.s Registration Statement on Form S-1 (File
No. 333-88618) filed May 17, 2002).
10
.1(b)
Management Agreement, dated as of
September 10, 1992, between Cinemark USA, Inc. and Cinemark
de Mexico (incorporated by reference to Exhibit 10.8 to
Cinemark Mexico (USA)s Registration Statement on
Form S-4 (File No. 033-72114) filed on
November 24, 1994).
10
.1(c)
Management Agreement, dated December 10,
1993, between Laredo Theatre, Ltd. and Cinemark USA, Inc.
(incorporated by reference to Exhibit 10.14(b) to the
Companys Annual Report on form 10-K (File
No. 033-47040) filed March 31, 1994).
10
.1(d)*
First Amendment to Management Agreement of Laredo
Theatre, Ltd. effective as of December 10, 2003 between
CNMK Texas Properties, Ltd. (successor in interest to Cinemark
USA, Inc.) and Laredo Theatre, Ltd.
10
.1(e)
Management Agreement, dated September 1,
1994, between Cinemark Partners II, Ltd. and Cinemark USA,
Inc. (incorporated by reference to Exhibit 10.4(i) to the
Companys Annual Report on Form 10-K (File
No. 033-47040) filed March 29, 1995).
10
.1(f)*
First Amended to Management Agreement of Cinemark
Partners II, Ltd. dated as of January 5, 1998 by and
between Cinemark USA, Inc. and Cinemark Partners II, Ltd
10
.1(g)*
Management Services Agreement dated
April 10, 2003 between Greeley Partners L.P. and CNMK Texas
Properties, Ltd.
10
.2
Amended and Restated Agreement to Participate in
Profits and Losses, dated as of March 12, 2004, between
Cinemark USA, Inc. and Alan W. Stock (incorporated by reference
from Exhibit 10.2 to Cinemark USA, Inc.s Quarterly
Report on Form 10-Q (File No. 33-47040) filed
May 14, 2004).
10
.3(a)
License Agreement, dated December 10, 1993,
between Laredo Joint Venture and Cinemark USA, Inc.
(incorporated by reference to Exhibit 10.14(c) to Cinemark
USA, Inc.s Annual Report on Form 10-K (File
No. 033-47040) filed March 31, 1994).
10
.3(b)
License Agreement, dated September 1, 1994,
between Cinemark Partners II, Ltd. and Cinemark USA, Inc.
(incorporate by reference to Exhibit 10.10(c) to Cinemark
USA, Inc.s Annual Report on Form 10-K (File
No. 033-47040) filed March 29, 1995).
10
.4(a)
Tax Sharing Agreement, between Cinemark USA, Inc.
and Cinemark International, L.L.C. (f/k/a Cinemark II,
Inc.), dated as of June 10, 1992 (incorporated by reference
to Exhibit 10.22 to Cinemark USA, Inc.s Annual Report
on Form 10-K (File No. 033-47040) filed March 31,
1993).
10
.4(b)
Tax Sharing Agreement, dated as of July 28,
1993, between Cinemark USA, Inc. and Cinemark Mexico (USA)
(incorporated by reference to Exhibit 10.10 to Cinemark
Mexico (USA)s Registration Statement on Form S-4
(File No. 033-72114) filed on November 24, 1993).
10
.5
Form of Indemnification Agreement (incorporated
by reference to Exhibit 10.6 to the Companys
Registration Statement on Form S-1 (File
No. 333-88618) filed on May 17, 2002)
10
.6(a)
Employment Agreement, dated as of March 12,
2004, between Cinemark, Inc. and Lee Roy Mitchell (incorporated
by reference to Exhibit 10.14(a) to Cinemark USA,
Inc.s Quarterly Report on Form 10-Q (File
No. 33-47040) filed May 14, 2004).
10
.6(b)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Alan Stock (incorporated by
reference to Exhibit 10.14(b) to Cinemark USA, Inc.s
Quarterly Report on Form 10-Q (File No. 33-47040)
filed May 14, 2004).
Exhibit
Number
Description
10
.6(c)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Tim Warner (incorporated by
reference to Exhibit 10.14(c) to Cinemark USA, Inc.s
Quarterly Report on Form 10-Q (File No. 33-47040)
filed May 14, 2004).
10
.6(d)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Robert Copple (incorporated
by reference to Exhibit 10.14(d) to Cinemark USA,
Inc.s Quarterly Report on Form 10-Q (File
No. 33-47040) filed May 14, 2004).
10
.6(e)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Robert Carmony
(incorporated by reference to Exhibit 10.14(e) to Cinemark
USA, Inc.s Quarterly Report on Form 10-Q (File
No. 33-47040) filed May 14, 2004).
10
.6(f)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Tandy Mitchell
(incorporated by reference to Exhibit 10.14(f) to Cinemark
USA, Inc.s Quarterly Report on Form 10-Q (File
No. 33-47040) filed May 14, 2004).
10
.7
Amended and Restated Credit Agreement, dated
April 2, 2004, among Cinemark, Inc., CNMK Holdings, Inc.,
Cinemark USA, Inc., the several lenders from time to time
parties thereto, Lehman Brothers Inc. and Goldman Sachs Credit
Partners LP, as Joint Legal Arrangers, Goldman Sachs Credit
Partners LP, as Syndication Agent, Deutsche Bank Securities,
Inc., The Bank of New York, General Electric Capital Corporation
and CIBC Inc. as Documentation Agents and Lehman Commercial
Paper, Inc. as Administrative Agent (incorporated by reference
to Exhibit 10.15 to Cinemark USA, Inc.s Quarterly
Report on Form 10-Q (File No. 33-47040) filed
May 14, 2004).
10
.8
Amended and Restated Guaranty and Collateral
Agreement, dated April 2, 2004, among Cinemark, Inc., CNMK
Holdings, Inc., Cinemark USA, Inc. and certain of its
subsidiaries in favor of Lehman Commercial Paper, Inc., as
administrative agent (incorporated by reference to
Exhibit 10.16 to Cinemark USA, Inc.s Quarterly Report
on Form 10-Q (File No. 33-47040) filed May 14,
2004).
10
.9*
Cinemark, Inc. Stockholders Agreement dated as of
March 12, 2004 among Madison Dearborn Capital
Partners IV, L.P., each of the investors listed on the
Schedule of Mitchell Investors and each of the executives listed
on the Schedule of Executives.
10
.10*
Registration Agreement dated as of March 12,
2004 among the Company, Madison Dearborn Capital
Partners IV, L.P., Lee Roy Mitchell and The Mitchell
Special Trust.
12*
Calculation of Earnings to Fixed Charges.
21*
Subsidiaries of Cinemark, Inc.
23
.1*
Consent of Akin Gump Strauss Hauer &
Feld LLP (included in the opinion filed as Exhibit 5 to
this Registration Statement).
23
.2*
Consent of Deloitte & Touche, LLP.
24*
Power of Attorney (included on the signature page
of this Registration Statement).
25*
T-1 Statement of Eligibility and Qualifications
under the Trust Indenture Act of 1939 of The Bank of New York
Trust Company, N.A.
99
.1*
Form of Letter of Transmittal.
99
.2*
Form of Notice of Guaranteed Delivery.
99
.3*
Form of Notice to Investors.
99
.4*
Form of Notice to Brokers-Dealers.
*
filed herewith
Item 22.
Undertakings
(1) To file, during any period in which
offers or sales are being made, a post-effective amendment to
this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement; and
(iii) To include any material information
with respect to the plan of distribution not previously
disclosed in the registration statement or any material change
to such information in the registration statement;
(2) That, for the purpose of determining any
liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of
a post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
CINEMARK, INC.
By:
/s/ ALAN W. STOCK
Alan W. Stock,
President
Name
Title
Date
/s/ LEE ROY MITCHELL
Lee Roy Mitchell
Chairman of the Board of Directors; Chief
Executive Officer
June 8, 2004
/s/ ROBERT COPPLE
Robert Copple
Senior Vice President and Treasurer (Chief
Financial and Accounting Officer)
June 8, 2004
/s/ BENJAMIN D. CHERESKIN
Benjamin D. Chereskin
Director
June 8, 2004
/s/ JAMES N. PERRY, JR.
James N. Perry, Jr.
Director
June 8, 2004
/s/ ROBIN P. SELATI
Robin P. Selati
Director
June 8, 2004
/s/ VAHE A. DOMBALAGIAN
Vahe A. Dombalagian
Director
June 8, 2004
Exhibit
Number
Description
1
.1*
Purchase Agreement dated March 29, 2004, by
and among Cinemark, Inc. and the initial purchasers named
therein.
2
.1*
Agreement and Plan of Merger dated March 12,
2004 by and between Cinemark, Inc. and Popcorn Merger Corp.
2
.2*
Stock Purchase Agreement dated as of
March 12, 2004 by and between Cinemark, Inc. and Madison
Dearborn Capital Partners IV, LP.
3
.1*
Second Amended and Restated Certificate of
Incorporation of Cinemark, Inc. filed with the Delaware
Secretary of State on April 2, 2004.
3
.2*
Amended and Restated Bylaws of Cinemark, Inc.
4
.1*
Exchange and Registration Rights Agreement dated
March 31, 2004 among Cinemark, Inc., certain subsidiary
guarantors party thereto and the initial purchasers named
therein.
4
.2(a)*
Indenture dated as of March 31, 2004 between
Cinemark, Inc. and The Bank of New York Trust Company, N.A.
governing the 9 3/4% senior discount notes issued
thereunder.
4
.2(b)*
Form of 9 3/4% senior discount note
(contained in the indenture listed as Exhibit 4.2(a) above).
4
.2(c)
Indenture dated January 14, 1998 between
Cinemark USA, Inc. and U.S. Trust Company of Texas, N.A.
governing the 8 1/2% senior subordinated notes issued
thereunder (incorporated by reference to Exhibit 4.1 to
Cinemark USA, Inc.s Registration Statement on
Form S-4 (File No. 333-45417) filed February 2,
1998).
4
.2(d)
First Supplemental Indenture dated as of
February 11, 2003 between Cinemark USA, Inc., the
subsidiary guarantors party thereto and The Bank of New York
Trust Company of Florida, N.A., as successor trustee to
U.S. Trust Company of Texas, N.A. (incorporated by
reference to Exhibit 4.2(g) to Cinemark USA, Inc.s
Registration Statement on Form S-4 (File
No. 333-104940) filed May 2, 2003).
4
.2(e)
Second Supplemental Indenture dated as of
March 25, 2004 between Cinemark USA, Inc. and The Bank of
New York Trust Company, N.A. (incorporated by reference to
Exhibit 10.16 to Cinemark USA, Inc.s Quarterly Report
on Form 10-Q (File No. 033-47040) filed May 14,
2004).
4
.2(f)
Indenture dated February 11, 2003 between
Cinemark USA, Inc. and The Bank of New York Trust Company of
Florida, N.A. governing the 9% senior subordinated notes
issued thereunder (incorporated by reference to
Exhibit 10.2(b) to Cinemark USA, Inc.s Annual Report
on Form 10-K (File No. 033-47040) filed March 19,
2003).
4
.2(g)
First Supplemental Indenture dated as of
May 7, 2003 between Cinemark USA, Inc., the subsidiary
guarantors party thereto and The Bank of New York Trust Company
of Florida, N.A. (incorporated by reference to
Exhibit 4.2(i) to Cinemark USA, Inc.s Registration
Statement on Form S-4 (File No. 333-104940) filed
May 28, 2003).
4
.2(l)
Form of 8 1/2% Note (contained in the
Indenture listed as Exhibit 4.2(c) above) (incorporated by
reference to Exhibit 4.1 to Cinemark USA, Inc.s
Registration Statement on Form S-4 (File
No. 333-45417) filed February 2, 1998).
4
.2(m)
Form of 9% Note (contained in the Indenture
listed as Exhibit 4.2(f) above) (incorporated by reference
to Exhibit 10.2(b) to Cinemark USA, Inc.s Annual
Report on Form 10-K (File 033-47040) filed March 19,
2003).
5
*
Opinion of Akin Gump Strauss Hauer &
Feld LLP.
10
.1(a)
Management Agreement, dated as of July 28,
1993, between Cinemark USA, Inc. and Cinemark Mexico (USA)
(incorporated by reference to Exhibit 10.1(a) to Cinemark,
Inc.s Registration Statement on Form S-1 (File
No. 333-88618) filed May 17, 2002).
10
.1(b)
Management Agreement, dated as of
September 10, 1992, between Cinemark USA, Inc. and Cinemark
de Mexico (incorporated by reference to Exhibit 10.8 to
Cinemark Mexico (USA)s Registration Statement on
Form S-4 (File No. 033-72114) filed on
November 24, 1994).
10
.1(c)
Management Agreement, dated December 10,
1993, between Laredo Theatre, Ltd. and Cinemark USA, Inc.
(incorporated by reference to Exhibit 10.14(b) to the
Companys Annual Report on form 10-K (File
No. 033-47040) filed March 31, 1994).
Exhibit
Number
Description
10
.1(d)*
First Amendment to Management Agreement of Laredo
Theatre, Ltd. effective as of December 10, 2003 between
CNMK Texas Properties, Ltd. (successor in interest to Cinemark
USA, Inc.) and Laredo Theatre, Ltd.
10
.1(e)
Management Agreement, dated September 1,
1994, between Cinemark Partners II, Ltd. and Cinemark USA,
Inc. (incorporated by reference to Exhibit 10.4(i) to the
Companys Annual Report on Form 10-K (File
No. 033-47040) filed March 29, 1995).
10
.1(f)*
First Amended to Management Agreement of Cinemark
Partners II, Ltd. dated as of January 5, 1998 by and
between Cinemark USA, Inc. and Cinemark Partners II, Ltd
10
.1(g)*
Management Services Agreement dated
April 10, 2003 between Greeley Partners L.P. and CNMK Texas
Properties, Ltd.
10
.2
Amended and Restated Agreement to Participate in
Profits and Losses, dated as of March 12, 2004, between
Cinemark USA, Inc. and Alan W. Stock (incorporated by reference
from Exhibit 10.2 to Cinemark USA, Inc.s Quarterly
Report on Form 10-Q (File No. 33-47040) filed
May 14, 2004).
10
.3(a)
License Agreement, dated December 10, 1993,
between Laredo Joint Venture and Cinemark USA, Inc.
(incorporated by reference to Exhibit 10.14(c) to Cinemark
USA, Inc.s Annual Report on Form 10-K (File
No. 033-47040) filed March 31, 1994).
10
.3(b)
License Agreement, dated September 1, 1994,
between Cinemark Partners II, Ltd. and Cinemark USA, Inc.
(incorporate by reference to Exhibit 10.10(c) to Cinemark
USA, Inc.s Annual Report on Form 10-K (File
No. 033-47040) filed March 29, 1995).
10
.4(a)
Tax Sharing Agreement, between Cinemark USA, Inc.
and Cinemark International, L.L.C. (f/k/a Cinemark II,
Inc.), dated as of June 10, 1992 (incorporated by reference
to Exhibit 10.22 to Cinemark USA, Inc.s Annual Report
on Form 10-K (File No. 033-47040) filed March 31,
1993).
10
.4(b)
Tax Sharing Agreement, dated as of July 28,
1993, between Cinemark USA, Inc. and Cinemark Mexico (USA)
(incorporated by reference to Exhibit 10.10 to Cinemark
Mexico (USA)s Registration Statement on Form S-4
(File No. 033-72114) filed on November 24, 1993).
10
.5
Form of Indemnification Agreement (incorporated
by reference to Exhibit 10.6 to the Companys
Registration Statement on Form S-1 (File
No. 333-88618) filed on May 17, 2002)
10
.6(a)
Employment Agreement, dated as of March 12,
2004, between Cinemark, Inc. and Lee Roy Mitchell (incorporated
by reference to Exhibit 10.14(a) to Cinemark USA,
Inc.s Quarterly Report on Form 10-Q (File
No. 33-47040) filed May 14, 2004).
10
.6(b)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Alan Stock (incorporated by
reference to Exhibit 10.14(b) to Cinemark USA, Inc.s
Quarterly Report on Form 10-Q (File No. 33-47040)
filed May 14, 2004).
10
.6(c)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Tim Warner (incorporated by
reference to Exhibit 10.14(c) to Cinemark USA, Inc.s
Quarterly Report on Form 10-Q (File No. 33-47040)
filed May 14, 2004).
10
.6(d)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Robert Copple (incorporated
by reference to Exhibit 10.14(d) to Cinemark USA,
Inc.s Quarterly Report on Form 10-Q (File
No. 33-47040) filed May 14, 2004).
10
.6(e)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Robert Carmony
(incorporated by reference to Exhibit 10.14(e) to Cinemark
USA, Inc.s Quarterly Report on Form 10-Q (File
No. 33-47040) filed May 14, 2004).
10
.6(f)
Employment Agreement, dated as of March 12,
2004, between Cinemark USA, Inc. and Tandy Mitchell
(incorporated by reference to Exhibit 10.14(f) to Cinemark
USA, Inc.s Quarterly Report on Form 10-Q (File
No. 33-47040) filed May 14, 2004).
10
.7
Amended and Restated Credit Agreement, dated
April 2, 2004, among Cinemark, Inc., CNMK Holdings, Inc.,
Cinemark USA, Inc., the several lenders from time to time
parties thereto, Lehman Brothers Inc. and Goldman Sachs Credit
Partners LP, as Joint Legal Arrangers, Goldman Sachs Credit
Partners LP, as Syndication Agent, Deutsche Bank Securities,
Inc., The Bank of New York, General Electric Capital Corporation
and CIBC Inc. as Documentation Agents and Lehman Commercial
Paper, Inc. as Administrative Agent (incorporated by reference
to Exhibit 10.15 to Cinemark USA, Inc.s Quarterly
Report on Form 10-Q (File No. 33-47040) filed
May 14, 2004).
Exhibit
Number
Description
10
.8
Amended and Restated Guaranty and Collateral
Agreement, dated April 2, 2004, among Cinemark, Inc., CNMK
Holdings, Inc., Cinemark USA, Inc. and certain of its
subsidiaries in favor of Lehman Commercial Paper, Inc., as
administrative agent (incorporated by reference to
Exhibit 10.16 to Cinemark USA, Inc.s Quarterly Report
on Form 10-Q (File No. 33-47040) filed May 14,
2004).
10
.9*
Cinemark, Inc. Stockholders Agreement dated as of
March 12, 2004 among Madison Dearborn Capital
Partners IV, L.P., each of the investors listed on the
schedule of Mitchell Investors and each of the investors listed
on the Schedule of Executives.
10
.10*
Registration Agreement dated as of March 12,
2004 among the Company, Madison Dearborn Capital
Partners IV, L.P., Lee Roy Mitchell and The Mitchell
Special Trust.
12*
Calculation of Earnings to Fixed Charges.
21*
Subsidiaries of Cinemark, Inc.
23
.1*
Consent of Akin Gump Strauss Hauer &
Feld LLP (included in the opinion filed as Exhibit 5 to
this Registration Statement).
23
.2*
Consent of Deloitte & Touche, LLP.
24*
Power of Attorney (included on the signature page
of this Registration Statement)
25*
T-1 Statement of Eligibility and Qualifications
under the Trust Indenture Act of 1939 of The Bank of New York
Trust Company, N.A.
99
.1*
Form of Letter of Transmittal.
99
.2*
Form of Notice of Guaranteed Delivery.
99
.3*
Form of Notice to Investors.
99
.4*
Form of Notice to Brokers-Dealers.
*
filed herewith
EXHIBIT 1.1
EXECUTION COPY
$577,173,000
CINEMARK, INC.
9 3/4% SENIOR DISCOUNT NOTES DUE 2014
PURCHASE AGREEMENT
March 29, 2004
LEHMAN BROTHERS INC.
GOLDMAN, SACHS & CO.
DEUTSCHE BANK SECURITIES INC.
CIBC WORLD MARKETS CORP.
BNY CAPITAL MARKETS, INC.
c/o Lehman Brothers Inc.
745 Seventh Avenue
New York, New York 10019
-and-
c/o Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
Ladies and Gentlemen:
Cinemark, Inc., a Delaware corporation (the "COMPANY"), proposes, subject to the terms and conditions stated herein, to issue and sell $577,173,000 aggregate principal amount at maturity of its 9 3/4% Senior Discount Notes due 2014 (the "SECURITIES") to Lehman Brothers Inc. ("LEHMAN BROTHERS"), Goldman, Sachs & Co. ("GOLDMAN SACHS") and the other initial purchasers named in Schedule 1 hereto (collectively, the "INITIAL PURCHASERS"). The Securities will be issued pursuant to an indenture (the "INDENTURE") to be dated as of the Closing Date (as defined in Section 2(a)) between the Company and The Bank of New York Trust Company, N.A., as trustee (the "TRUSTEE").
The Securities are being issued and sold in connection with a recapitalization transaction pursuant to which: (i) Popcorn Merger Corp., a Delaware corporation and newly formed subsidiary of Madison Dearborn Partners, LLC ("MDP"), will merge with and into the Company with the Company continuing as the surviving corporation in accordance with the Agreement and Plan of Merger, dated as of March 12, 2004, between Popcorn Merger Corp. and the Company (the "MERGER AGREEMENT"); (ii) an affiliate of MDP will purchase shares of
common stock of the Company for approximately $518.3 million in cash, subject to
certain adjustments; (iii) Lee Roy Mitchell, the Mitchell Special Trust and
certain members of the Company's management will retain a portion of their
current holdings of shares of common stock of the Company; (iv) Cinemark USA,
Inc., a wholly owned indirect subsidiary of the Company, will repurchase its
$105,000,000 aggregate principal amount of 8 1/2% Series B Senior Subordinated
Notes due 2008; (v) Cinemark USA, Inc. will repay all amounts outstanding under
its Credit Agreement, dated as of February 14, 2003, as amended, with Lehman
Commercial Paper Inc., as administrative agent, and a syndicate of lenders and
(vi) Cinemark USA, Inc. will enter into an amended and restated credit facility,
consisting of a $260 million term loan and a $100 million revolving credit
facility, with Lehman Commercial Paper Inc., as administrative agent, Goldman,
Sachs Credit Partners L.P., as syndication agent, Lehman Brothers and Goldman,
Sachs Credit Partners L.P., as joint advisors, joint lead arrangers and joint
book-runners, and a syndicate of banks, financial institutions and other
institutional lenders. For purposes of this Agreement, the term
"RECAPITALIZATION" shall have the meaning set forth in the Offering Memorandum
(as defined in Section 1(a)); and the term "TRANSACTIONS" shall have the meaning
set forth in the Offering Memorandum.
On or prior to the Closing Date, the Company will execute an escrow agreement, in the form and substance to be agreed between the Company and the Initial Purchasers, which shall conform in all material respects with the description thereof included in the Offering Memorandum (the "ESCROW AGREEMENT"), and will direct the deposit in an escrow account (the "ESCROW ACCOUNT") with The Bank of New York, as escrow agent (the "ESCROW AGENT"), the gross proceeds of the offering of the Securities, together with an additional $4,290,000, such that the escrowed funds (the "ESCROWED FUNDS") are in an amount sufficient to redeem the Securities in cash at a redemption price equal to 100.0% of the accreted value of the Securities on May 14, 2004, in the event that the Recapitalization is not consummated on or prior to May 12, 2004 or if the Merger Agreement is terminated in accordance with its terms prior to such date. The Escrow Agreement shall provide that the Escrowed Funds shall only be released and paid out pursuant to the terms of the Escrow Agreement.
This is to confirm the agreement among the Company and the Initial Purchasers concerning the offer, issue and sale of the Securities.
The Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission (the "COMMISSION") thereunder (collectively, the "SECURITIES ACT"), in reliance upon an exemption therefrom.
Holders of the Securities (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of a Registration Rights Agreement, dated as of the Closing Date (the "REGISTRATION RIGHTS AGREEMENT"), the form of which is contained in Annex A hereof, pursuant to which the Company will agree, among other things, to use its reasonable best efforts to file with the Commission (i) a registration statement under the Securities Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") covering the issuance of a series of the Company's debt securities identical in all respects to the Securities except that such debt securities will not be subject to transfer restrictions under the Securities Act (the "EXCHANGE SECURITIES") and the offer to exchange such Exchange Securities for the Securities (the
"EXCHANGE OFFER") and (ii) under certain circumstances described therein, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION STATEMENT"; and, together with the Exchange Offer Registration Statement, the "REGISTRATION STATEMENTS"), and, in each case, to use its reasonable best efforts to cause the Registration Statements to be declared effective within the time periods specified therein.
This Agreement, the Indenture, the Registration Rights Agreement and the Escrow Agreement are referred to herein collectively as the "TRANSACTION DOCUMENTS".
SECTION 1. Representations, Warranties and Agreements of the Company . The Company represents and warrants to, and agree with, the Initial Purchasers that:
(a) The Company has prepared a preliminary offering memorandum dated March 19, 2004 (the "PRELIMINARY OFFERING MEMORANDUM") and will prepare an offering memorandum dated the date hereof (the "OFFERING MEMORANDUM") setting forth information concerning the Company, the Securities and the Registration Rights Agreement, in form and substance satisfactory to you. Copies of the Preliminary Offering memorandum have been, and copies of the Offering Memorandum will be, delivered by the Company to you. As used in this Agreement, "PRELIMINARY OFFERING MEMORANDUM" or "OFFERING MEMORANDUM" means the Preliminary Offering Memorandum or Offering Memorandum, as the case may be, as amended or supplemented, unless otherwise noted. Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, did not, and on the Closing Date the Offering Memorandum will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company by the Initial Purchasers specifically for inclusion therein.
(b) The Company and each of its subsidiaries (as defined in
Section 14) have been duly organized and are validly existing as corporations or
other business organizations, as applicable, in good standing under the laws of
their respective jurisdictions of incorporation or organization, as applicable,
are duly qualified to do business and are in good standing as foreign
corporations or other business organizations, as applicable, in each
jurisdiction in which their respective ownership or lease of property or the
conduct of their respective businesses requires such qualification, and have all
power and authority necessary to own or hold their respective properties and to
conduct the businesses in which they are engaged, except where the failure to so
qualify to be in good standing would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the consolidated
financial position, stockholders' equity, results of operations, business or
prospects of the Company and its subsidiaries taken as a whole or on the
performance by the Company of its obligations under this Agreement or the
Securities (a "MATERIAL ADVERSE EFFECT"); and none of the subsidiaries of the
Company, other than Cinemark USA, Inc., CNMK Holding, Inc., Cinemark Mexico
(USA), Inc., Cinemark Holdings Mexico S.A. de R.L. de C.V., Cinemark de Mexico
S.A. de C.V., CNMK Investments, Inc., CNMK Delaware Investments II, L.L.C., CNMK
Delaware Investment Properties, L.P., and
CNMK Texas Properties, Ltd., is a "SIGNIFICANT SUBSIDIARY," as such term is defined in Rule 405 under the Securities Act.
(c) As of the Closing Date, the Company will have the authorized capitalization as set forth in the Offering Memorandum, all of the issued shares of capital stock of the Company will have been duly authorized and validly issued and will be fully paid and non-assessable; and, as of the date hereof and the Closing Date, all of the issued shares of capital stock or membership interests, as applicable, of each subsidiary of the Company have been duly authorized and validly issued and are fully paid and non-assessable and, except as described in the Offering Memorandum and for directors' qualifying shares, are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims.
(d) The Company has all necessary power and authority to execute and deliver this Agreement and perform its obligations hereunder; this Agreement has been duly authorized, executed and delivered by the Company and the transactions contemplated hereby have been duly authorized by the Company; assuming due authorization, execution and delivery by the Initial Purchasers, this Agreement constitutes a legally valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing, and except with respect to the rights of indemnification and contribution hereunder, where enforcement hereof may be limited by federal or state securities laws or the policies underlying such laws; and this Agreement will conform in all material respects to the description thereof contained in the Offering Memorandum.
(e) The Company has all necessary power and authority to execute and deliver the Indenture and perform its obligations thereunder; the Indenture has been duly authorized by the Company and, upon the effectiveness of the Exchange Offer Registration Statement and the Shelf Registration Statement (if applicable), will be qualified under the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (collectively, the "TRUST INDENTURE ACT"); on the Closing Date, the Indenture will have been duly executed and delivered by the Company and, assuming due authorization, execution and delivery of the Indenture by the Trustee, the Indenture will constitute a legally valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Indenture will conform, when executed, in all material respects to the description thereof contained in the Offering Memorandum.
(f) The Company has all necessary power and authority to execute, issue and deliver the Securities and perform its obligations thereunder; the Securities have been duly authorized by the Company, and when the Securities are delivered to and paid for by the Initial Purchasers pursuant to this Agreement, assuming due authentication thereof by the Trustee, the Securities will be duly executed and delivered by the Company and will constitute legally valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Securities will conform, when issued, in all material respects to the description thereof contained in the Offering Memorandum.
(g) The Company has all necessary power and authority to engage in the Exchange Offer and to execute, issue and deliver the Exchange Securities and perform its obligations thereunder; the Exchange Securities have been duly authorized by the Company and, if and when duly executed, authenticated and issued in accordance with the terms of the Indenture and delivered in accordance with the Exchange Offer, assuming due authentication of the Exchange Securities by the Trustee, such Exchange Securities will constitute legally valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, subject to general principles of equity and to limitations on availability of equitable relief, including specific performance (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Exchange Securities will conform, when issued, in all material respects to the description thereof contained in the Offering Memorandum.
(h) The Company has all necessary power and authority to execute and deliver the Registration Rights Agreement and perform its obligations thereunder; the Registration Rights Agreement and the transactions contemplated thereby have been duly authorized by the Company and, when duly executed and delivered by the Company assuming due authorization, execution and delivery by the Initial Purchasers, the Registration Rights Agreement will constitute a legally valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, subject to general principles of equity and to limitations on availability of equitable relief, including specific performance (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing, and except with respect to the rights of indemnification and contribution thereunder, where enforcement thereof may be limited by federal or state securities laws or the policies underlying such laws; and the Registration Rights Agreement will conform, when executed and delivered, in all material respects to the description thereof contained in the Offering Memorandum.
(i) The Company has all necessary power and authority to execute and deliver the Escrow Agreement and perform its obligations thereunder; the Escrow Agreement and the transactions contemplated thereby have been duly authorized by the Company and, when duly executed and delivered by the Company assuming due authorization, execution and delivery by the Escrow Agent, the Escrow Agreement will constitute a legally valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights
generally, subject to general principles of equity and to limitations on availability of equitable relief, including specific performance (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Escrow Agreement will conform, when executed and delivered, in all material respects to the description thereof contained in the Offering Memorandum.
(j) The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which each is a party, the issuance and sale of the Securities, compliance by the Company with all provisions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, lease, pledge or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or bylaws of the Company or the charter or bylaws or any joint venture, partnership, limited liability company, shareholders' or other agreement or organizational document of any of the Company's subsidiaries, or (iii) result in any violation of any statute or any order, rule or regulation of any court or governmental agency or body (whether domestic or foreign) having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets except, in the case of clauses (i) and (iii), such conflicts, breaches or violations that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body (whether domestic or foreign) is required for the execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation of the transactions contemplated hereby and thereby, except (i) with respect to the transactions contemplated by the Registration Rights Agreement, as may be required under the Securities Act and the qualification of the Indenture under the Trust Indenture Act, (ii) as required by applicable state or foreign securities laws in connection with the purchase and resale of the Securities by the Initial Purchasers, and (iii) as have been made or obtained on or prior to the Closing Date.
(k) Except as described in the Offering Memorandum, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in any securities being registered pursuant to any registration statement filed by the Company under the Securities Act.
(l) Neither the Company nor any of its subsidiaries has sustained, since the date of the latest audited financial statements included in the Offering Memorandum, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree (whether domestic or foreign) otherwise than as set forth or contemplated in the Offering Memorandum except where such losses or interferences would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and, since such date, there has not been any material change in the capital stock or material increase in the long-term debt of the
Company or any of its subsidiaries or any adverse change, or any development involving a prospective adverse change, that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, otherwise than as set forth or contemplated in the Offering Memorandum.
(m) The consolidated financial statements (including the related notes) included in the Offering Memorandum present fairly in all material respects the financial position and results of operations of the Company and its subsidiaries, at the dates and for the periods indicated, and have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis throughout the periods involved; the pro forma information (including the related notes) included in the Offering Memorandum has been prepared in accordance with the Commission's rules and guidance with respect to pro forma financial information, and the assumptions underlying such pro forma information are, as of the dates of the Preliminary Offering Memorandum and the Offering Memorandum, reasonable for presenting the significant effects directly attributable to the Transactions and are set forth in the Offering Memorandum.
(n) Deloitte & Touche LLP, who have certified certain financial statements of the Company, whose report appears in the Offering Memorandum and who have delivered the initial letter referred to in Section 5(f) hereof, are independent public accountants as required by the Securities Act and the Rules and Regulations.
(o) The Company and each of its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except such as are described in the Offering Memorandum or such as could not, individually or in the aggregate, have a Material Adverse Effect; and, except as described in the Offering Memorandum, all assets held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases, except such as are described in the Offering Memorandum or such as could not, individually or in the aggregate, have a Material Adverse Effect.
(p) The Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks which the Company believes are adequate for the conduct of their respective businesses and the value of their respective properties.
(q) The Company and each of its subsidiaries own, possess or can acquire on reasonable terms adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights and licenses necessary for the conduct of their respective businesses and have no reason to believe that the conduct of their respective businesses will conflict with, and have not received any notice of any claim of conflict with, any such rights of others that, if determined adversely to the Company or any of its subsidiaries would reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect.
(r) Except as described in the Offering Memorandum, there are no legal or governmental proceedings (whether domestic or foreign) pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its
subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.
(s) There are no contracts or other documents which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 that has not been so described therein.
(t) No relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company on the other hand, which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 that has not been so described therein.
(u) No labor disturbance by the employees of the Company exists or, to the knowledge of the Company, is imminent, which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(v) The Company and members of its controlled group within the meaning of Sections 414 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "CODE") are in compliance in all respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), except where the failure to be in such compliance would not reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect; no "REPORTABLE EVENT" (as defined in ERISA) has occurred and is continuing with respect to any "PENSION PLAN" (as defined in ERISA) for which the Company and such members would have any liability; except for matters that would not reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect; the Company and such members have not incurred and do not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "PENSION PLAN" or (ii) Sections 412 or 4971 of the Code, and each "PENSION PLAN" for which the Company and such members would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.
(w) The Company has filed (or obtained extensions to file) all
federal, state, local and foreign income and franchise tax returns required to
be filed by it through the date hereof, except where the failure to so file
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and has paid all taxes due thereon, other than those
(i) currently payable without penalty or interest or (ii) being contested in
good faith and by appropriate proceedings and for which, in the case of both (i)
and (ii), adequate reserves have been established on the books and records of
the Company in accordance with generally accepted accounting principles in the
United States. No tax deficiency has been determined adversely to the Company or
any of its subsidiaries which has had (nor does the Company have any knowledge
of any tax deficiency which, if determined adversely to the Company or any of
its subsidiaries) or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(x) Since the date as of which information is given in the Offering Memorandum through the date hereof, and except as may otherwise be disclosed in the Offering Memorandum, the Company has not (i) issued or granted any securities (other than pursuant to the Company's employee benefit plans described in the Offering Memorandum), (ii) incurred any material liability or obligation, direct or contingent, other than liabilities and obligations which were incurred in the ordinary course of business, (iii) entered into any material transaction not in the ordinary course of business or (iv) declared or paid any dividend on its capital stock.
(y) The Company (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the recorded accountability for its assets is compared with existing assets at reasonable intervals.
(z) Neither the Company nor any of its subsidiaries (i) is in violation of (A), in the case of the Company, its charter or bylaws or (B) in the case of any of the Company's subsidiaries, its charter or bylaws or any of its joint venture, partnership, limited liability company, shareholders' or other agreement or organizational document as the case may be, except in the case of this clause (B), where such violation would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect, (ii) is in default in any respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease, pledge or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject or (iii) is in violation in any respect of any law, ordinance, governmental rule, regulation or court decree (whether domestic or foreign) to which it or its property or assets may be subject or has failed to obtain any material license, permit, certificate, franchise or other governmental authorization or permit (whether domestic or foreign) necessary to the ownership of its property or to the conduct of its business, except in the case of clauses (ii) and (iii), such defaults, events, violations or failures that in the aggregate would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and provided, however, that while the Company believes that it is in compliance with the provisions of the Americans with Disabilities Act of 1990, as disclosed in the Offering Memorandum, it is a party to legal proceedings alleging violations of that act.
(aa) Neither the Company nor any of its subsidiaries, nor to the best of the Company's knowledge, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, has used any corporate or organizational funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
(bb) There has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by the Company or any of its subsidiaries (or, to the knowledge of the Company, any of its predecessors in interest) at, upon or from any of the property now or previously owned or leased by the Company or its subsidiaries in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; there has been no spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by the Company or any of its subsidiaries or with respect to which the Company or any of its subsidiaries have knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and the terms "HAZARDOUS WASTES", "TOXIC WASTES", "HAZARDOUS SUBSTANCES" and "MEDICAL WASTES" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection.
(cc) The Company is not and, as of the Closing Date after giving effect to the Transactions, the issuance and sale of the Securities and the application of the net proceeds therefrom as described in the Offering Memorandum, will not be, an "INVESTMENT COMPANY" as defined in the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the "INVESTMENT COMPANY ACT").
(dd) The industry, statistical and market-related data included in the Offering Memorandum are derived from sources that the Company reasonably and in good faith believes to be accurate, reasonable and reliable, and such data agrees with the sources from which they were derived.
(ee) The Company has not taken, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company in connection with this transaction.
(ff) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 6 and their compliance with the agreements set forth therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by this Agreement, the Indenture, the Registration Rights Agreement and the Offering Memorandum, to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act.
(gg) No securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the Securities are listed on any national securities exchange registered under Section 6 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the "EXCHANGE ACT") or quoted on an automated inter-dealer quotation system.
(hh) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 6 hereto and their compliance with the agreements set forth therein, none of the Company or any of its Affiliates (as defined in Rule 501(b) of Regulation D, an "AFFILIATE"), has, directly or through an agent, engaged in any form of general solicitation or general advertising in connection with the offering of the Securities (as those terms are used in Regulation D) under the Securities Act or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and the Company has not entered and will not enter into any contractual arrangement with respect to the distribution of the Securities, except for this Agreement and the Registration Rights Agreement.
(ii) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 6 hereto and their compliance with the agreements set forth therein, none of the Company or any of its Affiliates has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) which is or will be integrated with the sale of the Securities in a manner that would require the registration under the Securities Act of the Securities.
(jj) None of the Company, its Affiliates nor any person acting on its or their behalf (other than the Initial Purchasers in connection with this Agreement) has engaged or will engage in any directed selling efforts (as that term is defined in Regulation S) with respect to the Securities and each of the Company and its Affiliates and any person acting on its or their behalf (other than the Initial Purchasers in connection with this Agreement) has complied and will comply with the offering restrictions requirement of Regulation S.
(kk) Immediately after the consummation of the Transactions and the other transactions contemplated by this agreement, (i) the fair value and present fair saleable value of the assets of the Company and its subsidiaries taken as a whole on a going concern basis will exceed the sum of their stated liabilities and identified contingent liabilities taken as a whole; and (ii) the Company on a consolidated basis is not, nor will be, after giving effect to the execution, delivery and performance of this Agreement, and the consummation of the Transactions and the other transactions contemplated hereby and thereby, (a) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, (b) unable to pay its debts (contingent or otherwise) as they mature or (c) otherwise insolvent.
SECTION 2. Purchase, Sale and Delivery of Securities. (a) On the basis of the representations and warranties contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell to each Initial Purchaser, and each Initial Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 62.373% of the principal amount at maturity of Securities set forth opposite that Initial Purchaser's name in Schedule I hereto.
Delivery of and payment for the Securities shall be made at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York, at 11:00 A.M., New York City time, on March 31, 2004, or such other date or place as shall be determined by agreement of the Initial Purchasers and the Company (such date and time of delivery and payment for the Securities being referred to herein as the "CLOSING DATE"). Delivery of the Securities by the Company shall be made to the Initial Purchasers against payment of the purchase price by the Initial Purchasers, subject to the deposit of such funds in the Escrow Account, together with an additional $4,290,000 provided by the Company, such that the Escrowed Funds are in an amount sufficient to redeem the Securities in cash at a redemption price equal to 100.0% of the accreted value of the Securities on May 14, 2004; and payment for the Securities by the Initial Purchasers shall be made against delivery to the Initial Purchasers of the Securities as set forth below and effected by wire transfer of immediately available funds to the Escrow Account. Unless the Securities are redeemed in accordance with the provisions of the Indenture and the Escrow Agreement, a portion of the Escrowed Funds equal to the Initial Purchasers' Commission (as defined below) will be released to the Initial Purchasers concurrently with the completion of the Recapitalization and in accordance with the Escrow Agreement. The Initial Purchasers' Commission with respect to the Securities shall equal 1.5593% of the aggregate principal amount at maturity of the Securities.
(b) The Company will deliver against payment of the purchase
price the Securities initially sold to (a) qualified institutional buyers
("QIBS"), as defined in Rule 144A under the Securities Act ("RULE 144A"), and
(b) persons other than U.S. persons as defined in Regulation S, in the form of
one or more permanent global certificates (the "GLOBAL SECURITIES"), registered
in the name of Cede & Co., as nominee for The Depository Trust Company ("DTC").
Beneficial interests in the Securities initially sold to QIBs will be shown on,
and transfers thereof will be effected only through, records maintained in
book-entry form by DTC and its participants. The Global Securities will be made
available, at the request of any Initial Purchaser, for checking at least 24
hours prior to the Closing Date.
(c) Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of each Initial Purchaser hereunder.
SECTION 3. Further Agreements of the Company. The Company agrees:
(a) To prepare the Offering Memorandum in a form approved by Lehman Brothers and Goldman Sachs.
(b) To advise the Initial Purchasers promptly of any proposal to amend or supplement the Offering Memorandum and not to effect any such amendment or supplement without the consent of the Initial Purchasers. If, at any time prior to completion of the resale of the Securities by the Initial Purchasers, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, to promptly notify the Initial
Purchasers and prepare, subject to the first sentence of this Section 3(b), such amendment or supplement as may be necessary to correct such untrue statement or omission.
(c) To furnish promptly to the Initial Purchasers and to Simpson Thacher & Bartlett LLP, counsel to the Initial Purchasers, copies of the Preliminary Offering Memorandum and the Offering Memorandum (and all amendments and supplements thereto), as soon as available and in such quantities as the Initial Purchasers reasonably request for internal use and for distribution to prospective purchasers; and to furnish to the Initial Purchasers on the date hereof one copy of the Offering Memorandum signed by duly authorized officers of the Company, one of which will include the independent auditors' reports therein manually signed by such independent auditors. The Company will pay the expenses of printing and distributing to the Initial Purchasers all such documents.
(d) For a period of two years following the Closing Date, to furnish to the Initial Purchasers, to the extent such information is not freely available on the Internet, copies of all materials furnished by the Company to its security holders.
(e) Promptly from time to time to take such action as Lehman Brothers and Goldman Sachs may reasonably request to qualify the Securities for the non-public offering and sale under the securities laws of such jurisdictions as Lehman Brothers and Goldman Sachs may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities; provided that in connection therewith the Company shall not be required to qualify as a foreign corporation, file a general consent to service of process in any jurisdiction, subject itself to taxation in respect of doing business in any jurisdiction in which it is otherwise not subject or register the Securities for public trading other than pursuant to the Registration Rights Agreement.
(f) For a period of 180 days from the date hereof, not to, directly or indirectly, announce an offering of, or file a registration statement with, the Commission relating to any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the offering and the Exchange Offer contemplated by this Agreement), or offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition or purchase by any person at any time in the future of) any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities and the Exchange Securities), or substantially similar securities or sell or grant options, warrants or rights with respect to any debt securities issued or guaranteed by the Company or any of its subsidiaries, in each case without the prior written consent of Lehman Brothers and Goldman Sachs.
(g) To use its best efforts to assist the Initial Purchasers in arranging to cause the Securities to be accepted to trade in the PORTAL market ("PORTAL") of the National Association of Securities Dealers, Inc. ("NASD").
(h) To apply the proceeds from the sale of the Securities as set forth under "Use of Proceeds" in the Offering Memorandum.
(i) Not to take, directly or indirectly, any action which is designed to stabilize or manipulate, or which constitutes or which might reasonably be expected to cause or result in stabilization or manipulation of, the price of any security of the Company or any of its subsidiaries in connection with the offering of the Securities.
(j) To use its best efforts to cause the Securities to be accepted for clearance and settlement through the facilities of DTC.
(k) To execute and deliver the Indenture and the Registration Rights Agreement in form and substance reasonably satisfactory to Lehman Brothers and Goldman Sachs.
(l) For so long as any of the Securities are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to provide to any holder of the Securities or to any prospective purchaser of the Securities designated by any holder, upon request of such holder or prospective purchaser, information required to be provided by Rule 144A(d)(4) of the Securities Act if, at the time of such request, the Company is not subject to the reporting requirements under Section 13 or 15(d) of the Exchange Act.
(m) To ensure that each of the Securities will bear, to the extent applicable, the legend contained in the Offering Memorandum under the caption "Notice to Investors" for the time period and upon the other terms stated therein, except after the Securities are resold pursuant to a registration statement effective under the Securities Act.
(n) Except following the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, not to, and will cause its Affiliates not to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act.
(o) Not to, and will cause its Affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Securities Act) in a transaction that could be integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Securities Act.
(p) None of the Company, the Affiliates of the Company nor any person acting on its or their behalf (other than the Initial Purchasers in connection with this Agreement) will engage in any directed selling efforts (as that term is defined in Regulation S) with respect to the Securities, and each of the Company, the Affiliates of the Company and each person acting on its or their behalf (other than the Initial Purchasers in connection with this Agreement) will comply with the offering restrictions of Regulation S.
SECTION 4. Expenses. (a) The Company agrees to pay: (a) the costs and expenses incident to the authorization, issuance, sale and delivery of the Securities and any stamp, duty, transfer or similar taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and any amendment or supplement to the Offering Memorandum, all as provided in this Agreement; (c) the costs of producing and distributing the Transaction Documents; (d) all
expenses and fees in connection with the application for inclusion of the
Securities in the PORTAL market; (e) the reasonable fees and expenses of
qualifying the Securities under the securities laws of the several jurisdictions
as provided in Section 3(e) and of preparing, printing and distributing a Blue
Sky Memorandum (including related fees and expenses of counsel to the Initial
Purchasers for preparation of a Blue Sky Memorandum) and the fees and expenses
relating to any NASD filings; (f) the costs and expenses of the Company relating
to investor presentations on any "ROAD SHOW" undertaken in connection with the
marketing of the offering of the Securities, including, without limitation,
expenses associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants; (g) all fees and expenses incurred in connection with any rating of
the Securities; (h) the fees and expenses (including fees and disbursements of
counsel, if applicable) of the Company, Deloitte & Touche LLP, the Trustee and
the costs and charges of any registrar, transfer agent or paying agent under the
Indenture; (i) the fees and expenses of the Escrow Agent; and (j) all other
costs and expenses incident to the performance of the obligations of the Company
under this Agreement; provided that, except as provided in this Section 4 and in
Section 10, the Initial Purchasers shall pay their own costs and expenses,
including the costs and expenses of their counsel relating to the preparation of
the Offering Memorandum and the offering of the Securities.
SECTION 5. Conditions of Initial Purchasers' Obligations. The respective obligations of the Initial Purchasers hereunder are subject to the accuracy, when made and on the Closing Date, of the representations and warranties of the Company contained herein, to the performance by the Company of its obligations hereunder, and to each of the following additional terms and conditions:
(a) No Initial Purchaser shall have discovered and disclosed to the Company prior to or on the Closing Date that the Offering Memorandum or any amendment or supplement thereto, in the opinion of Simpson Thacher & Bartlett LLP, counsel to the Initial Purchasers, contains an untrue statement of a fact which is material or omits to state any fact which is material and necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(b) All corporate proceedings and other legal matters incident to the authorization, form and validity of the Offering Memorandum, the Transaction Documents, the Securities and all other legal matters relating to this Agreement, the issuance and sale of the Securities and the other transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Initial Purchasers.
(c) Akin, Gump, Strauss, Hauer & Feld, LLP shall have furnished to the Initial Purchasers their written opinion, as counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date, in the form of Exhibit A hereto.
(d) Michael Cavalier shall have furnished to the Initial Purchasers his written opinion, as General Counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, to the effect that:
(i) The Company and each of its subsidiaries have been duly organized and are validly existing as corporations or other business organizations, as applicable, in good standing under the laws of their respective jurisdictions of incorporation or organization, as applicable, are duly qualified to do business and are in good standing as foreign corporations or other business organizations, as applicable, in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, except where failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and have all power and authority necessary to own or hold their respective properties and conduct the businesses in which they are engaged, except where such would not reasonably be expected to have a Material Adverse Effect.
(ii) To the best of such counsel's knowledge and other than as set forth in the Offering Memorandum, there are no legal or governmental proceedings (whether domestic or foreign) pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.
(iii) To the best of such counsel's knowledge, there are no contracts or other documents which would be required to be described in the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 that has not been so described therein.
(iv) The issue and sale of the Securities being delivered on the Closing Date by the Company pursuant to this Agreement, and the execution, delivery and compliance by the Company with all of the provisions of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, lease, pledge or other agreement or instrument known to such counsel to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or bylaws of the Company or the charter or bylaws or any joint venture, partnership, limited liability company, shareholders' or other agreement or organizational document of any of the Company's subsidiaries, or (iii) result in any violation of any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body (whether domestic or foreign) having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets except in the case of clauses (i) and (iii), such conflicts, breaches or violations that would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; and no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body (whether domestic or foreign) is required for the execution, delivery and performance of this Agreement or any of the other Transaction Documents by the Company or the consummation of the transactions contemplated hereby and thereby, except for (A) with respect to the transaction contemplated by the Registration Rights Agreement as may be required under the Securities Act and the qualification of the Indenture under the Trust Indenture Act, (B) such as may be required under any foreign securities laws or state securities or Blue Sky laws in connection with the purchase and distribution of the Securities by the Initial Purchasers, as to which such counsel expresses no opinion, and (C) such as have been made or obtained on or prior to the Closing Date.
(v) Except as described in the Offering Memorandum, to the best of such counsel's knowledge, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company or any of its subsidiaries to file a registration statement under the Securities Act with respect to any securities of the Company or any of its subsidiaries owned or to be owned by such person or to require the Company or any of its subsidiaries to include such securities in any securities being registered pursuant to any registration statement filed by the Company or any of its subsidiaries under the Securities Act.
(vi) The statements in the Offering Memorandum under the caption "Description of Certain Debt Instruments--Other Subsidiary Debt" insofar as they purport to constitute summaries of the terms of contracts and other documents, fairly present, in all material respects, the information purported to be included therein.
Such opinion shall also be to the effect that (x) such counsel has acted as counsel to the Company in connection with the preparation of the Offering Memorandum and (y) based on the foregoing, no facts have come to the attention of such counsel which leads him to believe that the Offering Memorandum (except for the financial statements and financial schedules and other financial and statistical data included therein, as to which such counsel need express no belief), as of its date or as of the Closing Date, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstance under which they were made, not misleading, and such counsel may make such assumptions, qualification, exceptions and limitations as are standard in such opinions or otherwise reasonably acceptable to counsel for the Initial Purchasers.
(e) The Initial Purchasers shall have received from Simpson Thacher & Bartlett LLP, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Securities, the Offering Memorandum and other related matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents and information as they may reasonably request to enable them to pass upon such matters.
(f) At the time of execution of this Agreement, the Initial Purchasers shall have received from Deloitte & Touche LLP a letter, in form and substance satisfactory to the Initial Purchasers, addressed to the Initial Purchasers and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "COMFORT LETTERS" to underwriters in connection with registered public offerings.
(g) With respect to the letter of Deloitte & Touche LLP referred
to in the preceding paragraph and delivered to the Initial Purchasers
concurrently with the execution of this Agreement (the "INITIAL LETTERS"), the
Company shall have furnished to the Initial Purchasers a letter (the "BRING-DOWN
LETTER") of such accountants, addressed to the Initial Purchasers and dated the
Closing Date (i) confirming that they are independent public accountants within
the meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down
letter (or, with respect to matters involving changes or developments since the
respective dates as of which specified financial information is given in the
Offering Memorandum, as of a date not more than five days prior to the date of
the bring-down letter), the conclusions and findings of such firm with respect
to the financial information and other matters covered by the initial letter and
(iii) confirming in all material respects the conclusions and findings set forth
in the initial letter.
(h) The Company shall have furnished to the Initial Purchasers a certificate, dated such Closing Date, of its Chairman of the Board, President or Chief Financial Officer stating that:
(i) The representations, warranties and agreements of the Company in Section 1 are true and correct as of the Closing Date (except to the extent any such representation and warranty expressly relates to an earlier date, in which case such representations and warranties were true and correct as of such earlier date); the Company has complied with all its agreements contained herein; and the conditions set forth in Sections 5(a), 5(k) and 5(l) have been fulfilled; and
(ii) They have carefully examined the Offering Memorandum and, in their opinion (A) as of the Closing Date, the Offering Memorandum did not include any untrue statement of a material fact and did not omit to state a material fact necessary to make the statements, in light of the circumstances in which they were made, not misleading, and (B) since the date hereof no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum.
(i) The Indenture (in form and substance reasonably satisfactory to the Initial Purchasers) shall have been duly executed and delivered by the Company and the Trustee, and
the Securities shall have been duly executed and delivered by the Company and duly authenticated by the Trustee.
(j) The Company and the Initial Purchasers shall have executed and delivered the Registration Rights Agreement, and the Registration Rights Agreement shall be in full force and effect.
(k) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Offering Memorandum (A) any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Memorandum or (B) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the consolidated financial position, stockholders' equity, results of operations, business or prospects of the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Offering Memorandum, the effect of which, in any such case described in clause (A) or (B), is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the offering or the delivery of the Securities being delivered on the Closing Date on the terms and in the manner contemplated in the Offering Memorandum.
(l) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the Company's debt
securities by any "NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION," as
that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities.
(m) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions, including without limitation as a result of terrorist activities after the date hereof, (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of Lehman Brothers and Goldman Sachs, impracticable or inadvisable to proceed with the offering or delivery of the Securities being delivered on the Closing Date on the terms and in the manner contemplated in the Offering Memorandum.
(n) The NASD shall have accepted the Securities for trading on PORTAL; provided that the failure of the Securities to be so listed shall not be due to any action taken or failure to act by the Initial Purchasers.
(o) The Initial Purchasers shall have received counterparts of the Escrow Agreement which shall have been executed and delivered by a duly authorized officer of each of the Company and the Escrow Agent and the Company shall have deposited $4,290,000 in the Escrow Account (in addition to the gross proceeds from the offering of the Securities deposited in the Escrow Account pursuant to Section 2 of this Agreement) in accordance with the provisions of the Escrow Agreement.
All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchasers. Lehman Brothers and Goldman Sachs may in their sole discretion waive on behalf of the Initial Purchasers compliance with any conditions to the obligations of the Initial Purchasers hereunder.
SECTION 6. Representation, Warranties and Agreements of Initial Purchasers.
(a) Each Initial Purchaser represents and warrants to, severally
and not jointly, and agrees with the Company that it (i) is a QIB, (ii) is
purchasing the Securities pursuant to a private sale exempt from registration
under the Securities Act without the intent to distribute the Securities in
violation of the Securities Act, (iii) will not solicit offers for, or offer or
sell, the Securities by means of any form of general solicitation or general
advertising or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act and (iv) will solicit offers for the
Securities only from, and will offer, sell or deliver the Securities, as part of
its initial offering, only to (A) persons whom it reasonably believe to be QIBs,
or, if any such person is buying for one or more institutional accounts for
which such person is acting as fiduciary or agent, only when such person has
represented to it that each such account is a QIB, to whom notice has been given
that such sale or delivery is being made in reliance on Rule 144A in
transactions under Rule 144A , and (B) in the case of offers outside the United
States, to persons other than U.S. persons (as defined in Regulation S) in
accordance with Rule 903 of Regulation S.
(b) Each Initial Purchaser agrees that in connection with the transactions described in subsection 6(a)(iii)(B) it has offered and sold the Securities, and will offer and sell the Securities, (i) as part of its distribution at any time and (ii) otherwise until one year after the later of the commencement of the offering and the Closing Date (the "RESTRICTED PERIOD"), only in accordance with Rule 903 of Regulation S. Accordingly, each Initial Purchaser represents and agrees that, severally and not jointly, with respect to the transactions described in subsection 6(a)(iii)(B), neither it, nor any of its Affiliates, nor any person acting on their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and that it has complied and will comply with the offering restrictions of Regulation S. It agrees that, at or prior to the confirmation of sale of the Securities pursuant to subsection 6(a)(iii)(B), it shall have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from the Initial Purchasers during the Restricted Period, a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of U.S. Persons (i) as part of their distribution at any time or (ii) otherwise until one year after the later of the commencement of the offering and the time of delivery of the Securities, except in either case in accordance with Regulation S or Rule 144A under the Securities Act. The terms used above have the meaning given to them by Regulation S."
(c) Each of the Initial Purchasers represents and agrees that:
(1) other than in connection with the offering of the Securities, it has not offered or sold and, during the period ending six months after Closing Date, it will not offer or sell any Securities to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business, or otherwise, in circumstances which have not resulted in and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 (as amended):
(2) it has complied and will comply with all applicable provisions of the Financial Services Act of 1986 (the "ACT") (and, after they come into force, all applicable provisions of the Financial Services and Markets Act 2000, the "FSMA") with respect to anything done by it in relation to the Securities in, from and otherwise involving the United Kingdom; and
(3) it has only issued or passed on and will only
issue or pass on in the United Kingdom before the repeal of
Section 57 of the Act, any document received by it in connection
with the issue, offer, and sale of the Securities to a person who
is of a kind described in Article 11(3) of the Act (Investment
Advertisements) (Exemption) Order of 1996 (as amended) or is a
person to whom such document may otherwise lawfully be issued or
passed on. After the repeal of Section 57 of the Act it will only
communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the FSMA) in connection with the issue or sale
of such Securities in circumstances in which Section 21(1) of the
FSMA does not apply to the Company.
(d) Each Initial Purchaser, severally and not jointly, represents, warrants and agrees with respect to offers and sales of Securities outside the United States that it understands that no action has been or will be taken in any jurisdiction by the Company that would permit a public offering of the Securities, or possession or distribution of either the Preliminary Offering Memorandum or the Offering Memorandum or any other offering or publicity material relating to the Securities, in any country or jurisdiction where action for that purpose is required; and such Initial Purchaser will comply with all applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers Securities or has in its possession or distributes either
the Preliminary Offering Memorandum or the Offering Memorandum or any such other material, in all cases at its own expense.
SECTION 7. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Initial
Purchaser, its officers and employees and each person, if any, who controls any
Initial Purchaser within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of Securities), to which that Initial
Purchaser, officer, employee or controlling person may become subject insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in any (A) Preliminary Offering Memorandum (excluding any amendment or
supplement thereto), or the Offering Memorandum or in any amendment or
supplement thereto, or (B) in any materials or information provided to investors
by, or with the approval of, the Company in connection with the marketing of the
offering of the Securities ("MARKETING MATERIALS"), including any road show or
investor presentations made to investors by the Company (whether in person or
electronically), (ii) the omission or alleged omission to state in any
Preliminary Offering Memorandum (excluding any amendment or supplement thereto)
or the Offering Memorandum, or in any amendment or supplement thereto, or in any
Marketing Materials, any material fact necessary to make the statements therein
not misleading, or (iii) any act or failure to act or any alleged act or failure
to act by any Initial Purchaser in connection with, or relating in any manner
to, the Securities or the offering contemplated hereby, and that is included as
part of or referred to in any loss, claim, damage, liability or action arising
out of or based upon matters covered by clause (i) or (ii) above (provided that
the Company shall not be liable under this clause (iii) to the extent that it is
determined in a final judgment by a court of competent jurisdiction that such
loss, claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Initial Purchaser
through its gross negligence or willful misconduct), and shall reimburse each
Initial Purchaser and each such officer, employee or controlling person promptly
upon demand for any legal or other expenses reasonably incurred by that Initial
Purchaser, officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action (i) arises out of, or is based
upon, any untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Offering Memorandum (excluding any amendment or
supplement thereto) or the Offering Memorandum, or in any such amendment or
supplement, in reliance upon and in conformity with written information
concerning such Initial Purchaser furnished to the Company through Lehman
Brothers and Goldman Sachs by or on behalf of any Initial Purchaser specifically
for inclusion therein which information consists solely of the information
specified in Section 7(e) or (ii) results solely from an untrue statement of
material fact contained in, or the omission of a material fact from, such
Preliminary Offering Memorandum (excluding any amendment or supplement thereto),
which untrue statement or omission was completely corrected in the Offering
Memorandum (as then amended or supplemented); provided further, however, that
the Company shall sustain the burden of proving that the Initial Purchasers sold
the Securities to the person alleging such loss, claim, damage, liability or
action without sending or giving, at or prior to the written
confirmation of such sale, a copy of the Offering Memorandum (as then amended or supplemented) if the Company had previously furnished sufficient quantities of copies thereof to the Initial Purchasers within a reasonable amount of time prior to such sale or such confirmation, and the Initial Purchasers failed to deliver the corrected Offering Memorandum, if required by law to have so delivered it and if delivered would have cured the defect giving rise to such loss, claim, damage, liability or action. The foregoing indemnity agreement is in addition to any liability that the Company may otherwise have to any Initial Purchaser or to any officer, employee or controlling person of that Initial Purchaser.
(b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company, its officers, employees, directors, and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Memorandum (excluding any amendment or supplement thereto) or the Offering Memorandum or in any amendment or supplement thereto, or (ii) the omission or alleged omission to state in any Preliminary Offering Memorandum (excluding any amendment or supplement thereto) or the Offering Memorandum, or in any amendment or supplement thereto, any material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser furnished to the Company through Lehman Brothers and Goldman Sachs by or on behalf of that Initial Purchaser specifically for inclusion therein, and shall reimburse the Company and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which any Initial Purchaser may otherwise have to the Company or any such director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 7.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by
the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the Initial Purchasers shall have the right to employ counsel to represent jointly the Initial Purchasers and their respective officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Initial Purchasers against the Company under this Section 7 if, in the reasonable judgment of such Initial Purchaser and their counsel, it is advisable for such Initial Purchaser and such officers, employees and controlling persons to be jointly represented by separate counsel, and in that event the fees and expenses of not more than one separate firm (in addition to any local counsel) shall be paid by the Company. No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final non-appealable judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7 shall
for any reason be unavailable or insufficient to hold harmless an indemnified
party under Section 7(a) or 7(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Initial Purchasers on the other
from the offering of the Securities or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Initial
Purchasers on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Initial Purchasers on the other
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities purchased under this
Agreement (before deducting expenses) received by the Company, on the one hand,
and the total discounts and commissions received by the Initial Purchasers with
respect to the Securities purchased under this Agreement, on the other hand,
bear to the total gross proceeds from the offering of the Securities under this
Agreement. The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Initial Purchasers, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company agrees with the Initial Purchasers that it
would not be just and equitable if contributions pursuant to this Section 7 were
to be determined by pro rata allocation (even if
the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 7(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7(d), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities resold by it in the initial placement of such Securities were offered to investors exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of any 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. The Initial Purchasers' obligations to contribute as provided in this Section 7(d) are several in proportion to their respective obligations and not joint.
(e) The Initial Purchasers severally confirm and the Company acknowledge that the statements in paragraphs numbers six and seven on the cover page of the Offering Memorandum and paragraphs numbers seven, eight and ten under the "Plan of Distribution" in the Offering Memorandum are correct and constitute the only information concerning such Initial Purchasers furnished in writing to the Company by or on behalf of the Initial Purchasers specifically for inclusion in the Offering Memorandum.
SECTION 8. Defaulting Initial Purchasers. If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the remaining non-defaulting Initial Purchasers shall be obligated to purchase the Securities which the defaulting Initial Purchaser agreed but failed to purchase on the Closing Date in the respective proportions which the principal amount of Securities set opposite the name of each remaining non-defaulting Initial Purchaser in Schedule 1 hereto bears to the aggregate principal amount of the Securities set opposite the names of all the remaining non-defaulting Initial Purchasers in Schedule 1 hereto; provided, however, that the remaining non-defaulting Initial Purchasers shall not be obligated to purchase any of the Securities on the Closing Date if the aggregate principal amount of the Securities which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase on such date exceeds 9.09% of the aggregate principal amount at maturity of the Securities to be purchased on the Closing Date, and any remaining non-defaulting Initial Purchaser shall not be obligated to purchase more than 110% of the aggregate principal amount at maturity of the Securities which it agreed to purchase on the Closing Date pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the remaining non-defaulting Initial Purchasers, or those other purchasers satisfactory to the Initial Purchasers who so agree, shall have the right, but shall not be obligated, to purchase, in such proportion as may be agreed upon among them, the aggregate principal amount of Securities to be purchased on the Closing Date. If the remaining Initial Purchasers or other purchasers satisfactory to the Initial Purchasers do not elect to purchase the shares which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase on the Closing Date, this Agreement shall terminate without liability on the part of any non-defaulting Initial Purchaser or the Company, except that the Company will continue to be liable for the payment of expenses to the extent set forth in Sections 4 and 10. As used in this Agreement, the term "INITIAL PURCHASER" includes, for all
purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule 1 hereto who, pursuant to this Section 8, purchases Securities which a defaulting Initial Purchaser agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company for damages caused by its default. If other purchasers are obligated or agree to purchase the Securities of a defaulting or withdrawing Initial Purchaser, either Lehman Brothers, Goldman Sachs or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement.
SECTION 9. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers by notice given to and received by the Company prior to delivery of and payment for the Securities if, prior to that time, any of the events described in Sections 5(k), 5(l) or 5(m), shall have occurred or if the Initial Purchasers shall decline to purchase the Securities for any reason permitted under this Agreement.
SECTION 10. Reimbursement of Initial Purchasers' Expense. If (a) the Company shall fail to tender the Securities for delivery to the Initial Purchasers by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of the Initial Purchasers' obligations hereunder required to be fulfilled by the Company (including, without limitation, with respect to the transactions) is not fulfilled or (b) the Initial Purchasers decline to purchase the Securities for any reason permitted under this Agreement (including the termination of this Agreement pursuant to Section 9), the Company agrees to reimburse the Initial Purchasers for all reasonable out-of-pocket expenses (including fees and disbursements of counsel) incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase of the Securities, and upon demand the Company agrees to pay the full amount thereof to the Initial Purchasers. If this Agreement is terminated pursuant to Section 9 by reason of the default of one or more Initial Purchasers, the Company shall not be obligated to reimburse any defaulting Initial Purchaser on account of any expenses.
SECTION 11. Notices, Etc. All statements, requests, notices and agreements hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by mail, telex or facsimile transmission to (i) Lehman Brothers Inc., 1285 Avenue of the Americas, 13th Floor, New York, New York 10019, Attention: Syndicate Registration Department (Fax: 212-526-0943), with a copy, in the case of any notice pursuant to Section 9(c), to the Director of Litigation, Office of the General Counsel, Lehman Brothers Inc., 399 Park Avenue, 10th Floor, New York, NY 10022 and (ii) Goldman, Sachs & Co., 85 Broad Street, New York, NY 10004, Attention: Registration Department (Fax: 212-357-5505), and a copy to Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017, Attention: D. Rhett Brandon, Esq. (Fax: 212-455-2502; Telephone: (212) 455-2000);
(b) if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Offering Memorandum, Attention: Michael Cavalier (Fax: 972-665-1004), with a copy to Akin, Gump, Strauss, Hauer & Feld, L.L.P., Attention: Terry M. Schpok, P.C., 1700 Pacific Avenue, Suite 4100, Dallas, Texas 75201;
provided, however, that any notice to an Initial Purchaser pursuant to Section 7(c) shall be delivered or sent by mail, telex or facsimile transmission to each Initial Purchaser, which address will be supplied to any other party hereto by Lehman Brothers Inc. upon request. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by Lehman Brothers Inc.
SECTION 12. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (A) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the officers and employees of the Initial Purchasers and the person or persons, if any, who control any Initial Purchaser within the meaning of Section 15 of the Securities Act and (B) the indemnity agreement of the Initial Purchasers contained in Section 7(b) of this Agreement shall be deemed to be for the benefit of directors of the Company, officers of the Company and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 12, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.
SECTION 13. Survival. The respective indemnities, representations, warranties and agreements of the Company and the Initial Purchasers contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any person controlling any of them.
SECTION 14. Definition of the Terms "BUSINESS DAY" and "SUBSIDIARY". For purposes of this Agreement, (a) "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday or Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close and (b) "SUBSIDIARY" has the meaning set forth in Rule 405 of the Rules and Regulations.
SECTION 15. Governing Law(a) . This Agreement shall be governed by and construed in accordance with the laws of New York.
SECTION 16. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument.
SECTION 17. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement among the Company and the Initial Purchasers, please indicate your acceptance in the space provided for that purpose below.
Very truly yours,
CINEMARK, INC.
By: /s/ Robert Copple ------------------------------ Name: Robert Copple Title: Senior Vice President, Treasurer And Chief Financial Officer |
Accepted:
LEHMAN BROTHERS INC.
GOLDMAN, SACHS & Co.
DEUTSCHE BANK SECURITIES INC.
CIBC WORLD MARKETS CORP.
BNY CAPITAL MARKETS, INC.
BY LEHMAN BROTHERS INC.
By: /s/ Stephen Delaney ------------------- Authorized Representative |
By Goldman, sachs & Co.
By: /s/ Goldman, Sachs & Co. ----------------------- Authorized Representative |
EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
CINEMARK, INC.
AND
POPCORN MERGER CORP.
DATED AS OF MARCH 12, 2004
TABLE OF CONTENTS
PAGE ARTICLE I. DEFINITIONS............................................................................................1 Section 1.1 Specific Definitions...................................................................1 Section 1.2 Other Terms...........................................................................10 Section 1.3 Other Definitional Provisions.........................................................10 ARTICLE II. THE MERGER...........................................................................................10 Section 2.1 The Merger............................................................................10 Section 2.2 The Closing...........................................................................10 Section 2.3 Effective Time........................................................................10 Section 2.4 Effect of the Merger..................................................................11 Section 2.5 Certificate of Incorporation; Bylaws..................................................11 Section 2.6 Directors and Officers................................................................11 ARTICLE III. PRECURSOR TRANSACTIONS; CONVERSION AND EXCHANGE OF SHARES...........................................11 Section 3.1 Precursor Transactions................................................................11 Section 3.2 Conversion of Shares; Stock Options...................................................12 Section 3.3 Dissenting Shares.....................................................................13 Section 3.4 Payment for Shares and Stock Options; Stock Transfer Books............................14 Section 3.5 Withholding...........................................................................15 Section 3.6 Calculation of Merger Consideration...................................................16 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF CINEMARK...........................................................16 Section 4.1 Organization and Authority............................................................16 Section 4.2 Capitalization of Cinemark............................................................17 Section 4.3 Subsidiaries..........................................................................18 Section 4.4 Financial Statements; Company Reports; Undisclosed Liabilities........................19 Section 4.5 Absence of Certain Changes or Events..................................................20 Section 4.6 Licenses..............................................................................21 Section 4.7 Litigation............................................................................21 Section 4.8 Compliance with Law...................................................................22 Section 4.9 Contracts.............................................................................22 Section 4.10 Consents and Approvals................................................................23 Section 4.11 Tax Matters...........................................................................24 Section 4.12 Employee Benefits.....................................................................25 Section 4.13 Brokers and Finders...................................................................26 Section 4.14 Intellectual Property.................................................................26 Section 4.15 Real Property.........................................................................27 Section 4.16 Labor Matters.........................................................................28 Section 4.17 Environmental Matters.................................................................28 Section 4.18 Insurance.............................................................................28 Section 4.19 Compliance with Foreign Corrupt Practices Act.........................................29 Section 4.20 Suppliers.............................................................................29 Section 4.21 Affiliated Transactions...............................................................29 |
Section 4.22 Expenses..............................................................................30 Section 4.23 Change of Control Payments............................................................30 Section 4.24 Indebtedness..........................................................................30 Section 4.25 Board Recommendation..................................................................30 Section 4.26 No Other Representations or Warranties................................................30 Section 4.27 Expiration of Representations and Warranties..........................................30 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................30 Section 5.1 Organization and Authority............................................................31 Section 5.2 Consents and Approvals................................................................31 Section 5.3 Brokers and Finders...................................................................31 Section 5.4 Litigation............................................................................31 Section 5.5 Investigation by Buyer................................................................31 Section 5.6 No Prior Activities...................................................................32 Section 5.7 No Industry Activity..................................................................32 Section 5.8 No Other Representations or Warranties................................................32 Section 5.9 Expiration of Representations and Warranties..........................................32 ARTICLE VI. CERTAIN COVENANTS AND AGREEMENTS OF CINEMARK and BUYER...............................................32 Section 6.1 Access to Premises and Information....................................................32 Section 6.2 Conduct of Business...................................................................33 Section 6.3 Registrations, Filings and Consents; Commercially Reasonable Efforts..................35 Section 6.4 [INTENTIONALLY OMITTED]...............................................................36 Section 6.5 [INTENTIONALLY OMITTED]...............................................................36 Section 6.6 Resignations/Directors................................................................37 Section 6.7 Actions with Respect to Financing.....................................................37 Section 6.8 Brazil Option Agreement...............................................................39 Section 6.9 Public Announcements..................................................................39 Section 6.10 Exclusivity...........................................................................39 Section 6.11 Notice of Developments................................................................40 Section 6.12 Information Statement.................................................................40 ARTICLE VII. CONDITIONS TO CLOSING...............................................................................40 Section 7.1 Conditions to Each Party's Obligation to Effect the Transaction.......................40 Section 7.2 Conditions to Obligations of Buyer....................................................41 Section 7.3 Conditions to Obligations of Cinemark.................................................43 ARTICLE VIII. TERMINATION........................................................................................44 Section 8.1 Termination...........................................................................44 Section 8.2 Effect of Termination.................................................................44 ARTICLE IX. MISCELLANEOUS........................................................................................45 Section 9.1 Amendment and Waiver..................................................................45 Section 9.2 Expenses..............................................................................45 Section 9.3 Assignment............................................................................45 Section 9.4 Entire Agreement......................................................................46 Section 9.5 Parties in Interest; No Third Party Beneficiaries.....................................46 |
Section 9.6 Schedules.............................................................................46 Section 9.7 Counterparts..........................................................................46 Section 9.8 Section Headings; Table of Contents...................................................46 Section 9.9 Notices...............................................................................46 Section 9.10 GOVERNING LAW.........................................................................47 Section 9.11 WAIVER OF JURY TRIAL..................................................................47 Section 9.12 Severability..........................................................................47 Section 9.13 Construction..........................................................................48 Section 9.14 Specific Performance..................................................................48 Section 9.15 Survival of Representations, Warranties and Covenants.................................48 |
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is dated as of March 12, 2004 and is by and between Cinemark, Inc., a Delaware corporation ("CINEMARK"), and Popcorn Merger Corp., a Delaware corporation ("BUYER").
RECITALS
WHEREAS, the Boards of Directors of Cinemark and Buyer and the holders possessing a majority of the voting power of all of the outstanding Cinemark Common Stock (as defined below) have approved the merger of Buyer with and into Cinemark (the "MERGER") upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the above premises, the mutual promises and covenants herein contained, and for other good and valuable consideration, the full receipt and sufficiency of which are hereby expressly acknowledged by the parties hereto, it is hereby agreed as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Specific Definitions. As used in this Agreement, the following terms shall have the meanings set forth or referenced below:
"8.5% INDENTURE" means that certain Indenture dated January 14, 1998 by and between Cinemark USA, Inc. and The Bank of New York Trust Company of Florida, N.A., as amended to the date hereof.
"8.5% SENIOR SUBORDINATED NOTES" means the 8.5% Senior Subordinated due 2008 issued by Cinemark USA, Inc. in the aggregate original principal amount of $105,000,000 pursuant to the 8.5% Indenture.
"ADA" shall mean the Americans with Disabilities Act of 1990 and the regulations promulgated thereunder, as amended from time to time.
"AFFILIATE" shall have the meaning given to such term in Rule 12b-2 of Regulation 12B under the Exchange Act.
"AFFILIATED PERSON" shall have the meaning set forth in Section 4.21.
"AGGREGATE CASH ON HAND" means the aggregate amount of Cash on Hand held by Cinemark and its Subsidiaries.
"AGREEMENT" means this Agreement and all Schedules and Exhibits hereto, as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.
"ALTERNATIVE TRANSACTION" means (other than the potential sale of Cinemark Theatres U.K., Ltd.) any (i) reorganization, dissolution, liquidation, refinancing or recapitalization of or
involving Cinemark or any of its Subsidiaries (other than the dissolution of
certain of the non-active Subsidiaries currently pending), (ii) merger,
consolidation, share exchange or acquisition of or involving Cinemark or any of
its Subsidiaries, (iii) sale of any material amount of assets of Cinemark or any
of its Subsidiaries, (iv) sale or issuance of capital stock or other equity
interests of Cinemark or any of its Subsidiaries, (v) similar transaction or
business combination involving Cinemark or any of its Subsidiaries or their
respective businesses or capital stock (or other equity interests) or assets or
(vi) other transaction the consummation of which would prevent, impede or delay
the consummation of the Transaction.
"AMENDED AND RESTATED BYLAWS" shall have the meaning set forth in
Section 2.5(b).
"AMENDED AND RESTATED CHARTER" shall have the meaning set forth in
Section 2.5(a).
"ANNUAL FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 4.4(a).
"AVAILABLE CASH ON HAND" means, as of the opening of business on the Closing Date, Aggregate Cash on Hand, less (i) the aggregate amount of checks, drafts and cash held by the individual theatres of Cinemark and its Subsidiaries, less (ii) checks, drafts and cash delivered to and held by armored cars or similar security services for the account of Cinemark or any of its Subsidiaries, less (iii) the aggregate amount of Cash on Hand held by: (A) Cinemark Partners II, Ltd., Laredo Theatre, Ltd. and Greeley, Ltd.; and (B) all of Cinemark's Subsidiaries organized outside of the United States.
"BALANCE SHEET DATE" means December 31, 2003.
"BENEFIT PLANS" shall have the meaning set forth in Section 4.12(a).
"BRAZILIAN PUT AGREEMENTS" means, collectively, (i) the Amended and Restated Shareholders' Agreement dated November 13, 2001 between Cinemark Empreendimentos e Participacoes Ltda., NN Participacoes Ltda., Venture II Equity Holdings Corporation, Inc. and Kristal Holdings Limited and (ii) the Option Agreement.
"BUSINESS DAY" means any day other than Saturday, Sunday or a day on which banks in the City of New York, New York are authorized or required by Law to close.
"BUYER MATERIAL ADVERSE EFFECT" means any change or effect that would materially adversely delay, impair or impact Buyer's ability to perform its obligations hereunder and to consummate the Transaction.
"BUYER REPRESENTATIVES" shall have the meaning set forth in Section 6.1(a).
"CASH ON HAND" means all cash and cash equivalents, as of the opening of business on the Closing Date, determined in accordance with GAAP. Cash on Hand shall (A) be calculated net of issued but uncleared checks and drafts, (B) include checks and drafts deposited for the account of Cinemark and its Subsidiaries and (C) include checks, drafts and cash delivered to and held by armored cars or similar security services for the account of Cinemark or any of its Subsidiaries.
"CERTIFICATES" shall have the meaning set forth in Section 3.4(b).
"CERTIFICATE OF MERGER" shall have the meaning set forth in Section 2.3.
"CINEMARK COMMON STOCK" means, collectively, Class A Common and Class B Common.
"CINEMARK MATERIAL ADVERSE EFFECT" means any change or effect that,
individually or together with any other change or effect, is, or is reasonably
likely to be, materially adverse to the business, condition (financial or
otherwise), assets, liabilities, properties or results of operations of Cinemark
and its Subsidiaries, taken as a whole, but shall exclude any change or effect
resulting primarily from, after the date hereof, (i) a general deterioration in
the United States or Latin American economy, (ii) changes in the motion picture
exhibition industry, unless such changes relate specifically to Cinemark and its
Subsidiaries, taken as a whole, (iii) changes in GAAP, which Cinemark would be
required to adopt under applicable authoritative accounting pronouncements or
(iv) any action taken upon the written request of Buyer.
"CINEMARK PAYABLE EXPENSES" means the aggregate amount of the out-of-pocket expenses of Cinemark and its Subsidiaries incurred by them or on their behalf in connection with or related to the authorization, preparation, negotiation, execution or performance of this Agreement and the Transaction, which expenses have been paid or are payable to (i) their investment bankers, including Goldman Sachs & Co. and Lehman Brothers, Inc. and their respective Affiliates, (ii) their accountants, including Deloitte & Touche LLP, and (iii) their legal counsel, including Akin Gump Strauss Hauer & Feld LLP; provided that "Cinemark Payable Expenses" shall not include (A) the expenses of such investment bankers to the extent that such expenses are incurred in connection with the Financing or the Tender Offer and (B) the fees of special Delaware counsel engaged to deliver the opinion referenced in Section 7.2(f).
"CINEMARK USA" shall have the meaning set forth in Section 4.4(a).
"CLASS A COMMON" shall have the meaning set forth in Section 3.1(a).
"CLASS B COMMON" shall have the meaning set forth in Section 3.1(a).
"CLOSING" means the closing of the Transaction.
"CLOSING DATE" shall have the meaning set forth in Section 2.2.
"COBRA" shall have the meaning set forth in Section 4.12(e).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY INTELLECTUAL PROPERTY RIGHTS" shall have the meaning set forth in Section 4.14(d).
"COMPANY LICENSES" shall have the meaning set forth in Section 4.6.
"COMPANY REPORTS" shall have the meaning set forth in Section 4.4(b).
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement dated December 18, 2003, between Cinemark and Madison Dearborn Partners, LLC.
"CONSENTS" means consents, approvals, authorizations, permits, clearances, exemptions, filings and notices.
"CONTINUING AMOUNT" means:
(i) with respect to Lee Roy Mitchell, Fifty-One Million Dollars ($51,000,000);
(ii) with respect to The Mitchell Special Trust, Forty-Nine Million Dollars ($49,000,000);
(iii) with respect to Alan Stock, One Million Eight Hundred Eighty-Six Thousand Three Hundred Twenty Dollars ($1,886,320);
(iv) with respect to Robert Copple, One Million Six Hundred Seventy-Seven Thousand Three Hundred Thirty-Seven Dollars ($1,677,337);
(v) with respect to Timothy Warner, One Million Eight Hundred Seventy-One Thousand Nine Hundred Ninety-Seven Dollars ($1,871,997); and
(vi) with respect to Michael Cavalier, One Million Three Hundred Nineteen Thousand Three Hundred Thirty-Three Dollars ($1,319,333).
"CONTINUING SHARES" means, with respect to each Continuing Stockholder, a number of shares of Class A Common equal to the quotient of (i) such Continuing Stockholder's Continuing Amount, divided by (ii) the Merger Consideration.
"CONTINUING STOCKHOLDERS" means, collectively, Lee Roy Mitchell, The Mitchell Special Trust, Alan Stock, Robert Copple, Timothy Warner and Michael Cavalier.
"CONTRACT" means, other than a Lease, any agreement, contract, license, note, mortgage, indenture, arrangement, promise, undertaking or other obligation (whether written or oral, and whether express or implied) that is intended to be legally binding.
"DGCL" means the Delaware General Corporation Law, as amended.
"DISSENTING SHARES" shall have the meaning set forth in Section 3.2.
"DISSENTING STOCKHOLDERS" shall have the meaning set forth in Section 3.2.
"EFFECTIVE TIME" means the time and date when the Merger shall become effective.
"EMPLOYEES" mean all active employees of Cinemark and its Subsidiaries as of the Closing Date.
"ENCUMBRANCES" mean a pledge, security interest, encumbrance, option, charge, claim, lien (statutory or otherwise), right of usufruct, mortgage, right of first refusal or any other
restriction or third party right, including restrictions on use, the right to vote or transfer equity interests, and the right to transfer, receive income or exercise any other attribute of ownership.
"ENVIRONMENTAL LAWS" means all foreign, provincial, federal, state and local laws, regulations, and requirements and all common law in effect on or prior to the Closing Date relating to pollution or protection of the environment, including laws relating to the release, use, treatment, storage, disposal, transport, or handling of Hazardous Materials all laws and regulations with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ERISA AFFILIATE" means each Person that together with Cinemark would be deemed a "single employer" employer within the meaning of Code Section 414.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder, in each case as amended from time to time.
"EXERCISED INCENTIVE STOCK OPTIONS" shall have the meaning set forth in
Section 3.1(d).
"EXPENSE ACKNOWLEDGEMENTS" shall have the meaning set forth on Section 7.2(l).
"EXPENSES" means all out-of-pocket expenses (including all filing fees, fees and expenses of counsel, accountants, investment bankers, financial advisors, lenders, experts, actuaries, consultants and other service providers to the party and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution or performance of this Agreement and the Transaction.
"FINANCING" shall have the meaning set forth in Section 7.2(i).
"FOREIGN BENEFIT PLAN" shall have the meaning set forth in Section 4.12(f).
"GAAP" means United States generally accepted accounting principles consistently applied.
"GOVERNMENT REGULATORY ENTITY" means any Governmental Entity with regulatory jurisdiction over any Consent required for the consummation of the Transaction, under the HSR Act or under Other Competition Laws.
"GOVERNMENTAL CONSENTS" shall have the meaning set forth in Section 7.1(a).
"GOVERNMENTAL ENTITY" means any supranational, national, federal, state, regional, provincial, local, municipal, administrative, judicial, legislative, executive, regulatory, police or taxing authority, or governmental or quasi-governmental authority of any nature, including any court, regulatory or administrative agency, commission, branch, bureau, department or body, or other governmental authority or instrumentality, whether domestic or foreign.
"HAZARDOUS MATERIALS" means all substances defined as Hazardous Substances under the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R.Section 300.5, or defined as such by, or regulated as such under, any Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
"INCENTIVE STOCK OPTIONS" shall have the meaning set forth in Section 3.1(b).
"INCOME TAX" means any Tax based upon, measured by, or calculated with respect to income, profits or capital (including any capital gains Tax, franchise Tax, capital Tax, minimum Tax and any Tax or items of Tax preference, but not including sales, use, real or personal property, gross receipts, employer, withholding, transfer or similar Taxes).
"INCOME TAX RETURN" means a Tax Return in respect of Income Taxes.
"INDEBTEDNESS" means with respect to any Person: (i) indebtedness for borrowed money; (ii) indebtedness evidenced by notes, bonds, debentures or similar instruments; (iii) all obligations of such Person as lessee under leases that have been recorded as capital leases in accordance with GAAP; (iv) the deferred purchase price of property or services incurred outside the Ordinary Course of Business; (v) conditional sale or other title retention agreements with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (vi) reimbursement obligations, whether contingent or matured, with respect to letters of credit, bankers' acceptances, surety bonds, other financial guarantees and interest rate protection agreements (without duplication of other indebtedness supported or guaranteed thereby); (vii) all Indebtedness of others referred to in clauses (i) through (vi) above guaranteed, without duplication, directly or indirectly in any manner by such Person. For purposes of clarification, "Indebtedness" shall not include accounts payable or accrued operating expenses of Cinemark or any of its Subsidiaries.
"INTELLECTUAL PROPERTY" means all of the rights arising from or in respect of the following: (i) patents; (ii) trademarks, service marks, trade names, corporate names, brand names, and Internet domain names; (iii) copyrights; (iv) trade secrets; (v) all technology, know-how, computer software programs and applications, tangible and intangible proprietary information or materials; and (vi) all applications and registrations relating to any of the foregoing clauses (i)-(v) above.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE", with respect to Cinemark, means the actual knowledge, following reasonable inquiry, of the Persons whose names are set forth on Schedule 1.1(a) hereto. The foregoing standard of reasonable inquiry, to the extent that it applies to making reasonable inquiry of other Persons, shall be limited to making reasonable inquiry of: (i) those Persons who report directly to any of the Persons identified on Schedule 1.1(a) (and in the case of Timothy Warner, including each of Cinemark's country managers and chief financial officers (or equivalents thereof) of each of Cinemark's Subsidiaries organized outside of the United States); and (ii) with respect to the representations and warranties contained in Sections 4.1, 4.4, 4.8,
4.9(c), 4.14(f), 4.15(b) and 4.17, in addition to the Persons described in clause (i) above, all third party service providers who possess material knowledge of the subject of inquiry.
"LAW" means any federal, state, local, domestic, supranational, national, regional, provincial, municipal constitution, treaty, statute or law, including rule of common law, ordinance, rule, regulation, code, enactment, proclamation, requirement, decree, directive or other statutory or legislative provision, of any Governmental Entity, as amended as of the relevant date, whether in the United States or a foreign jurisdiction.
"LEASE" means any lease, sublease, license, concession or other agreement (written or oral) pursuant to which Cinemark or any of its Subsidiaries holds any Leased Real Property.
"LEASED REAL PROPERTY" means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real property.
"LETTER OF TRANSMITTAL" shall have the meaning set forth in Section 3.4(b).
"MATERIAL CONTRACT" shall have the meaning set forth in Section 4.9(a).
"MERGER" shall have the meaning set forth in the Recitals above.
"MERGER CONSIDERATION" shall have the meaning set forth in Section 3.6(a).
"OPTION AGREEMENT" means that certain Voting and Option Agreement dated
November 13, 2001, by and among (i) Cinemark USA, Inc., (ii) Lee Roy Mitchell,
(iii) NN Participacoes Ltda., (iv) Venture II Equity Holdings Corporation, Inc.,
and (v) Kristal Holdings Limited.
"OPTION CONSIDERATION" shall have the meaning set forth in Section 3.2(c).
"ORDER" means any judicial or administrative judgment, decision, decree, order, settlement, injunction, writ, stipulation, determination, or award, in each case to the extent legally binding.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of Cinemark and its Subsidiaries, taken as a whole, consistent with past practice.
"OTHER COMPETITION LAWS" means all (i) non-U.S. Laws intended to prohibit, restrict or regulate actions having an anti-competitive effect or purposes, including competition, restraint of trade, anti-monopolization, merger control or anti-trust Laws together with (ii) any related Laws, including non-U.S. anti-takeover laws and laws regulating foreign investment in jurisdictions outside the United States.
"OWNED REAL PROPERTY" means all land, together with all buildings, structures, improvements and fixtures located thereon, and all easements and appurtenances thereto or any interest therein, owned by Cinemark or any of its Subsidiaries.
"PAYING AGENT" means The Bank of New York Trust Company, N.A. located in Dallas, Texas or such other bank or trust company located in Dallas, Texas designated by Cinemark and Buyer.
"PAYMENT FUND" shall have the meaning set forth in Section 3.4(a).
"PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes (and assessments and other governmental charges) not yet due and payable or due but not delinquent or being contested in good faith by appropriate proceedings and for which appropriate reserves or accruals have been established in accordance with GAAP to the extent required by GAAP; (ii) mechanics', workmen's, repairmen's, warehousemen's, landlord's, carriers' or other like Encumbrances (including Encumbrances created by operation of Law) incurred in the Ordinary Course of Business for sums not yet delinquent or being contested in good faith and which has not and would not, individually or in the aggregate, have a Cinemark Material Adverse Effect; (iii) Encumbrances in respect of easements, permits, licenses, rights-of-way, restrictive covenants, reservations or encroachments or irregularities in, and other similar exceptions to title and any conditions with respect to real property that would be disclosed by a current survey or title report or other public record and that do not materially detract from the value of and has not, and would not, have a material adverse effect on the use of the underlying asset; (iv) Encumbrances in respect of pledges or deposits under workers' compensation laws or similar legislation, unemployment insurance or other types of social security or to secure the performance of statutory obligations, surety and appeal bonds, bids, leases, government Contracts and similar obligations incurred in the Ordinary Course of Business; (v) municipal bylaws, development restrictions or regulations, facility cost sharing and servicing Contracts and zoning, building or planning restrictions or regulations; (vi) Encumbrances in respect of mortgages (fee and leasehold), deeds of trust, financing statements and other similar instruments or documents relating to real property leased or leasehold improvements, which Encumbrances are disclosed on Schedule 4.15; (vii) Encumbrances on the property of Cinemark or its Subsidiaries securing the performance of bids, trade contracts (other than for borrowed money), contingent obligations on surety and appeal bonds and other obligations of like nature incurred in the Ordinary Course of Business, provided that all Encumbrances securing delinquent performance or obligations have not and would not (even if enforced) reasonably be expected to have a Cinemark Material Adverse Effect; (viii) Encumbrances arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; (ix) any existing Encumbrances on the Real Property of Cinemark and its Subsidiaries on the date hereof as set forth on Schedule 4.15; (x) any Encumbrances now existing or hereafter arising under the Indentures governing the Senior Subordinated Indebtedness; (xi) any Encumbrances arising under the Senior Credit Facility, which Encumbrances are set forth on Schedule 4.15; (xii) any renewal of or substitution for any Encumbrance permitted by the foregoing; (xiii) Encumbrances arising in connection with this Agreement; and (xiv) solely with respect to the Leases, restrictions on transfer or assignment.
"PERSON" means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act), including any Governmental Entity.
"PURCHASE PRICE" shall have the meaning set forth in Section 3.6(a)(ii).
"REAL PROPERTY" means, collectively, all Leased Real Property and Owned Real Property.
"SECURITIES ACT" means the Securities Act of 1933, and the rules and regulations promulgated thereunder, in each case as amended from time to time.
"SENIOR CREDIT FACILITY" means the Credit Agreement, dated as of February 14, 2003, by and among Cinemark USA, Inc., certain Subsidiaries that are guarantors thereto, Lehman Brothers Inc., as Administrative Agent and the other lenders party thereto, as amended to the date hereof.
"SENIOR SUBORDINATED NOTES" means, collectively, (i) the 8.5% Senior Subordinated Notes and (ii) the 9% Senior Subordinated Notes due 2013 issued by Cinemark USA, Inc. in the aggregate original principal amount of $360,000,000 pursuant to that certain Indenture dated February 11, 2003 by and between Cinemark USA, Inc. and The Bank of New York Trust Company of Florida, N.A., as amended to the date hereof.
"STOCK OPTIONS" means, collectively, all options to acquire shares of Class A Common set forth on Schedule 4.2 attached hereto.
"STOCKHOLDERS" shall have the meaning set forth in Section 3.1.
"SUBSIDIARY" or "SUBSIDIARIES" means, as to any Person, any other Person (i) of which such Person or any other Subsidiary of such Person is a general partner, (ii) of which such Person, any one or more of its other Subsidiaries of such Person, or such Person and any one or more of its other Subsidiaries, directly or indirectly owns or controls securities or other equity interests representing more than fifty percent (50%) of the aggregate voting power, or (iii) of which such Person, any one or more of its other Subsidiaries of such Person, or such Person and any one or more its other Subsidiaries, possesses the right to elect more than fifty percent (50%) of the board of directors or Persons holding similar positions.
"SURVIVING CORPORATION" shall have the meaning set forth in Section 2.1.
"TAXES" means all federal, state, local or foreign Income Tax, gross receipts, windfall or excess profits, severance, property, production, sales, use, license, excise, franchise, employment, withholding, environmental, customs duty, capital stock, stamp, payroll, unemployment, disability, excise, production, estimated, value added, occupancy or other taxes, duties or assessments of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.
"TAX RETURNS" means all federal, state, local or foreign tax returns, tax reports, information statements, and declarations of estimated tax, including consolidated federal income tax returns of Cinemark and the Persons consolidated with Cinemark and any schedules attached to any amendments thereof and such returns, reports or declarations.
"TENDER OFFER" shall have the meaning set forth in Section 6.7(b).
"THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS" shall have the meaning set forth in Section 4.14(c).
"TRANSACTION" means the transactions contemplated by this Agreement.
Section 1.2 Other Terms. Other terms may be defined elsewhere in the text of this Agreement and, unless otherwise indicated, shall have such meaning indicated throughout this Agreement.
Section 1.3 Other Definitional Provisions.
(a) The words "hereof", "herein", and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.
(c) The term "including" shall mean "including, without limitation".
(d) The terms "dollars" and "$" shall mean United States Dollars.
ARTICLE II.
THE MERGER
Section 2.1 The Merger. At the Effective Time (as defined in Section 2.3 hereof), and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL, Buyer shall be merged with and into Cinemark, the separate corporate existence of Buyer shall cease, and Cinemark shall be the surviving corporation (sometimes called the "SURVIVING CORPORATION") and shall continue its corporate existence under the laws of the State of Delaware. The name of the Surviving Corporation shall continue to be "Cinemark, Inc."
Section 2.2 The Closing. Unless this Agreement shall have been
terminated and the Transaction shall have been abandoned pursuant to Article
VIII hereof, the Closing shall take place at the offices of Akin Gump Strauss
Hauer & Feld LLP, 1700 Pacific Avenue, Suite 3900, Dallas, Texas 75201, at 10:00
a.m., Central Standard Time, as soon as practicable (and in any event within
three (3) Business Days) after all of the conditions to the Closing set forth in
Article VII hereof are satisfied or waived (other than those that by their terms
cannot be satisfied prior to the Closing, but subject to the fulfillment or
waiver of such conditions at the Closing), or such other date, time and place as
shall be agreed upon by Cinemark and Buyer (the actual date referred to herein
as the "CLOSING DATE").
Section 2.3 Effective Time. Upon the terms and subject to the conditions of this Agreement, at the Closing, the parties hereto shall deliver to the Secretary of State of the State of Delaware a certificate of merger in the form attached hereto as Exhibit 2.3 (the "CERTIFICATE OF MERGER"), and shall make all other filings or recordings as may be required under the DGCL and any other applicable Law in order to effect the Merger. The Merger shall be effected by the filing
of the Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as the parties hereto may agree and as is provided in the Certificate of Merger.
Section 2.4 Effect of the Merger. At the Effective Time, the Surviving Corporation shall possess all of the rights, privileges, immunities, powers and franchises of each of Buyer and Cinemark; all of the property, real, personal and mixed, including subscription of shares, choses in action and every other asset of each of Buyer and Cinemark shall vest in the Surviving Corporation without further act or deed; and all other effects presumed in a merger including those set forth in Section 259 of the DGCL, shall result from the Merger.
Section 2.5 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Amended and Restated Certificate of Incorporation of Cinemark, as in effect immediately prior to the Effective Time, shall be amended and restated automatically in the form attached to the Certificate of Merger (the "AMENDED AND RESTATED CHARTER"), and the Amended and Restated Charter shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL and the Amended and Restated Charter.
(b) At the Effective Time, the bylaws of Cinemark, as in effect immediately prior to the Effective Time, shall be amended and restated automatically in the form of Exhibit 2.5 attached hereto (the "AMENDED AND RESTATED BYLAWS"), and the Amended and Restated Bylaws shall be the bylaws of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL, the Amended and Restated Charter and the Amended and Restated Bylaws.
Section 2.6 Directors and Officers. The directors of Buyer immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified. The officers of Cinemark immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified.
ARTICLE III.
PRECURSOR TRANSACTIONS; CONVERSION AND EXCHANGE OF SHARES
Section 3.1 Precursor Transactions. On the basis of the representations, warranties, covenants and other agreements, and subject to the satisfaction or waiver of the conditions, set forth herein, each of Cinemark and the stockholders of Cinemark (the "STOCKHOLDERS") and the holders of Stock Options named below shall consummate the following transactions immediately prior to the Effective Time:
(a) Each of the Stockholders holding shares of Cinemark's Class B common stock, par value $.001 per share (the "CLASS B COMMON"), shall convert all of its, his or her shares of Class B Common into the same number of shares of Cinemark's Class A common stock, par value $.001 per share (the "CLASS A COMMON"), pursuant to the terms
of Cinemark's Certificate of Incorporation in effect immediately prior to the Effective Time.
(b) Cinemark shall accelerate the vesting of all Stock Options held by Robert Copple and Michael Cavalier, which options were granted to them by Cinemark on December 31, 2001 (the "INCENTIVE STOCK OPTIONS") and which have not by their terms vested.
(c) Robert Copple shall exercise, by payment to Cinemark
of cash equal to the exercise price of, his Incentive Stock Options in
an amount necessary to acquire, and Cinemark shall issue upon such
exercise, a number of shares of Class A Common equal to the quotient of
(i) his Continuing Amount, divided by (ii) the Merger Consideration.
(d) Michael Cavalier shall exercise, by payment to
Cinemark of cash equal to the exercise price of, his Incentive Stock
Options in an amount necessary to acquire, and Cinemark shall issue
upon such exercise, a number of shares of Class A Common equal to the
quotient of (i) his Continuing Amount, divided by (ii) the Merger
Consideration. The Incentive Stock Options exercised pursuant to
Section 3.1(c) and this Section 3.1(d) shall be referred to herein as
the "EXERCISED INCENTIVE STOCK OPTIONS."
Section 3.2 Conversion of Shares; Stock Options. At the Effective Time, by virtue of the Merger and without any action on the part of Buyer, Cinemark or the holders of any of the following securities or the holders of any Stock Options:
(a) Each share of Class A Common issued and outstanding immediately prior to the Effective Time (other than shares owned, directly or indirectly, by Cinemark, the Continuing Shares and the Dissenting Shares with respect to which appraisal rights have been properly exercised under the DGCL) shall be converted into the right to receive the Merger Consideration, without any interest thereon, payable to the holder thereof upon surrender of the Certificate representing such share in accordance with Section 3.4.
(b) Each share of common stock, par value $.01 per share, of Buyer issued and outstanding immediately prior to the Effective Time shall be canceled and retired and shall cease to exist.
(c) Each of the Stock Options outstanding immediately prior to the Effective Time (which, for purposes of clarification, shall not include the Exercised Incentive Stock Options) which is surrendered in accordance with Section 3.4 by delivery of a duly executed Letter of Transmittal prior to the Effective Time shall become fully vested (to the extent not previously vested) and converted into and become the right to receive cash in an amount (the "OPTION CONSIDERATION") equal to the difference between (i) the number of shares then issuable upon exercise of such Stock Option multiplied by the Merger Consideration and (ii) the aggregate exercise price payable upon exercise of such Stock Option. Upon surrender by a holder of a Stock Option, and the receipt by such holder of the Option Consideration payable in respect of such Stock Option, such Stock Option shall be canceled. The surrender of a Stock Option to the Paying Agent under Section 3.4 in exchange for the Option Consideration shall be deemed a release of any
and all rights the holder thereof had or may have had in respect of such Stock Option. Each of the Stock Options which is not surrendered in accordance with Section 3.4 and which is not exercised prior to the fifth day prior to the Closing Date shall be cancelled immediately prior to the Effective Time pursuant to the exercise by Cinemark of its right to so cancel such Stock Options under the Cinemark, Inc. Long Term Incentive Plan. The Cinemark, Inc. Long Term Incentive Plan shall terminate as of the Effective Time, and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of Cinemark (other than the Option Agreement) shall be canceled as of the Effective Time.
(d) Each Continuing Share shall continue to remain issued and outstanding as one validly issued, fully paid and non-assessable share of Class A common stock, par value $.001 per share, of the Surviving Corporation. From and after the Effective Time, each outstanding certificate which represented Continuing Shares shall evidence ownership of and represent the same number of shares of the Surviving Corporation's Class A common stock, par value $.001 per share.
(e) Each share of Cinemark Common Stock and all other shares of capital stock of Cinemark that are owned by Cinemark (if any) shall be canceled and retired and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.
Section 3.3 Dissenting Shares. To the extent required by applicable provisions of the DGCL, shares of Class A Common that are issued and outstanding immediately prior to the Effective Time and are held by holders of Class A Common who (a) shall not have voted in favor of the Merger or consented thereto in writing, (b) shall have complied with all the provisions of the DGCL concerning the right of the holders of Class A Common to dissent from the Merger and (c) shall have demanded properly appraisal and payment of the fair value of their shares of Class A Common ("DISSENTING STOCKHOLDERS") shall not be converted into the right to receive the Merger Consideration but shall instead be converted into the right to receive such consideration as may be determined to be due such Dissenting Shareholders pursuant to the laws of the State of Delaware (such shares being the "DISSENTING SHARES"); provided, however, if any Dissenting Stockholder fails to establish and perfect his dissenter's rights as provided by applicable law, then such Dissenting Stockholder shall forfeit all dissenter's rights including the right to obtain payment of the fair value of the shares held by him, and such Dissenting Stockholder shall be entitled to receive, as of the Effective Time, only the Merger Consideration (without any interest thereon) for each share of Class A Common held by him, payable upon surrender of the certificate representing such share in accordance with Section 3.4, and such shares shall no longer be Dissenting Shares. The Surviving Corporation shall comply with all of the obligations pursuant to the DGCL of a surviving corporation after the effectiveness of a merger with respect to Dissenting Stockholders, and the Surviving Corporation shall direct all negotiations and proceedings with respect to demands for payment of fair value under Delaware law. Cinemark shall provide to Buyer: (i) prompt notice of any demands for appraisal received by Cinemark, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by Cinemark and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. Cinemark shall not, except with the prior
written consent of Buyer, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.
Section 3.4 Payment for Shares and Stock Options; Stock Transfer Books.
(a) At the Closing, Cinemark and Buyer shall enter
into a Payment Agent Agreement with the Paying Agent, in form and
substance reasonably acceptable to Cinemark and Buyer. Immediately
prior to the Effective Time, the Surviving Corporation shall deposit
in trust with the Paying Agent an amount in cash equal to the sum of
(i) the aggregate amount required for the conversion of the shares of
Class A Common at the Effective Time under Section 3.2(a), plus (ii)
the aggregate amount required for the cancellation of Stock Options
at the Effective Time under Section 3.2(c), less (iii) any
withholding required under the Code and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign
tax law as contemplated by Section 3.5 (such amount being the
"PAYMENT FUND"). The Paying Agent shall, pursuant to irrevocable
instructions, make the payments provided for in Sections 3.2(a) and
3.2(c) out of the Payment Fund, reduced by the amount of any
withholding made pursuant to Section 3.5 as directed by the
Surviving Corporation. Pending such payments, the Paying Agent
shall, as directed by the Surviving Corporation, invest the Payment
Fund in short term obligations of, or obligations fully guaranteed
by, the United States of America, or any agency of the United
States, in commercial paper obligations receiving the highest
investment grade rating from both Moody's Investors Services, Inc.
and Standard & Poor's Corporation, or in certificates of deposit,
bank repurchase agreements or banker's acceptances of commercial
banks with capital exceeding $1,000,000,000. Any earnings on the
investment of the Payment Fund shall be paid to the Surviving
Corporation as and when requested by the Surviving Corporation. If,
at any time after the Effective Time a Dissenting Stockholder
ceases to be a Dissenting Stockholder by virtue of failing to
perfect dissenter's rights, upon such occurrence, the Surviving
Corporation shall promptly deposit to the Payment Fund an amount
equal to the product of (x) the number of shares held by such
stockholder and (y) the Merger Consideration (without any interest
thereon), reduced by the amount of any withholding made pursuant to
Section 3.5.
(b) Prior to the Effective Time, the Paying Agent shall mail and otherwise make available to each record holder who held at the Effective Time an outstanding certificate or certificates that represented shares of Class A Common (other than Continuing Shares) (the "CERTIFICATES") or Stock Options (other than Exercised Incentive Stock Options) and who has not theretofore surrendered his, her or its Certificates or Stock Options for payment at the Closing in accordance with this Section 3.4 a letter of transmittal in the form of Exhibit 3.4(b) attached hereto (a "LETTER OF TRANSMITTAL") and instructions for his, her or its use in effecting the surrender of the Certificates and Stock Options for payment. Upon surrender to the Paying Agent of a Certificate or a Stock Option, together with a duly executed Letter of Transmittal and such other documents as the Paying Agent may reasonably require, the holder of such Certificate (other than a Certificate with respect to Continuing Shares) or Stock Option (other than Exercised Incentive Stock Options), as the case may be, shall be entitled to receive in exchange therefor cash in an amount equal to the product of the number of shares of Class A Common represented by such Certificate multiplied by the Merger Consideration or the
Option Consideration payable in respect of such Stock Option, as the
case may be, reduced by the amount of any withholding made pursuant to
Section 3.5, and such Certificate or Stock Option shall thereafter be
cancelled. No interest will be paid or accrue on either the Merger
Consideration or the Option Consideration payable upon the surrender of
the Certificates or Stock Options, respectively. If payment is to be
made to a Person other than the Person in whose name the surrendered
Certificate is registered, or the Person in whose name the surrendered
Stock Option was granted, the Certificate or the Stock Option, as the
case may be, must be properly endorsed or otherwise in proper form for
transfer and the Person requesting such payment must agree to pay any
applicable transfer or other taxes or establish to the satisfaction of
the Paying Agent and the Surviving Corporation that such tax has been
paid or is not applicable. The Paying Agent must pay the cash
attributable to a Certificate or Stock Option which has been lost or
destroyed upon receipt of satisfactory evidence of ownership of the
shares of Class A Common or Stock Option, respectively, and of
appropriate indemnification, in each case on terms satisfactory to
Buyer. After the Effective Time, until surrendered in accordance with
these provisions, each Certificate (other than Certificates
representing Dissenting Shares) shall represent only the right to
receive the Merger Consideration as set forth in this Agreement.
(c) After the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of the shares
of Cinemark Common Stock which were outstanding immediately prior to
the Effective Time (other than the Continuing Shares). Certificates
(other than Certificates with respect to the Continuing Shares)
presented to the Surviving Corporation after the Effective Time shall
be cancelled.
(d) Any portion of the Payment Fund that remains unclaimed by the stockholders of Cinemark for 90 days after the Effective Time shall be repaid to the Surviving Corporation upon demand, and any holder of Class A Common who has not complied with these provisions shall look as a general creditor only to the Surviving Corporation for payment of such holder's claims for the Merger Consideration. Notwithstanding the foregoing, neither the Surviving Corporation nor Buyer shall be liable to a holder of shares of Cinemark Common Stock for any amounts delivered to a public official pursuant to any applicable abandoned property, escheat or similar laws in accordance with applicable Law. All interest accrued in respect of the Payment Fund shall inure to the benefit of and be paid to the Surviving Corporation.
Section 3.5 Withholding. Notwithstanding anything herein to the contrary, each of Buyer and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Cinemark Common Stock and Stock Options such amounts as it reasonably believes it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign Tax law; provided that with respect to any such holder who does not submit a duly executed Certificate of Non-foreign Status (which will be an attachment to the Letter of Transmittal) together with a Letter of Transmittal, each of Buyer and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable to such holder an amount determined in accordance with Section 1445 of the Code (based upon the assumption that Cinemark is a United
States real property holding company (as defined in Section 897 of the Code)). To the extent that amounts are so withheld by Buyer or the Surviving Corporation, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holders of the Cinemark Common Stock and Stock Options in respect of which such deduction and withholding was made by Buyer or the Surviving Corporation, as the case may be.
Section 3.6 Calculation of Merger Consideration.
(a) For purposes hereof, the following terms shall have the meanings set forth below:
(i) "MERGER CONSIDERATION" means, with respect to each share of Cinemark Common Stock, an amount equal to the quotient of: (A) the Purchase Price, divided by (B) the aggregate number of shares of Cinemark Common Stock as of immediately prior to the Effective Time, on a fully diluted basis (including the Continuing Shares and the number of shares of Cinemark Common Stock issuable upon exercise of all outstanding Stock Options as of the Effective Time (for purposes of clarification, excluding the Exercised Incentive Stock Options)), without any interest thereon.
(ii) "PURCHASE PRICE" means an amount equal to Nine Hundred Fifty-Seven Million Dollars ($957,000,000), less the Cinemark Payable Expenses.
(b) On the basis of the good faith estimate of Cinemark
of the Cinemark Payable Expenses as of the Closing, the Merger
Consideration is estimated to be an amount equal to $22.54 as of the
date hereof. Exhibit 3.6 attached hereto shall set forth the following:
Cinemark's good faith estimate of the amount of Cinemark Payable
Expenses as of the Closing Date, together with a description, the
identity of the payee, and the estimated amount, of each such Cinemark
Payable Expense.
(c) As soon as practicable prior to the Closing Date, but in no event later than three (3) Business Days prior thereto, Cinemark and Buyer shall update the calculation set forth on Exhibit 3.6 based upon the Expense Acknowledgements in a manner consistent with the method set forth on Exhibit 3.6 on the date hereof and agree upon the Merger Consideration. The amount of the Merger Consideration as so agreed shall be deemed to be final and binding upon Buyer and Cinemark.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF CINEMARK
Except as otherwise set forth in the Schedules attached to this Agreement (subject to Section 9.6), Cinemark represents and warrants to Buyer that the statements set forth in this Article 4 are correct and complete.
Section 4.1 Organization and Authority. Cinemark is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full
corporate power and authority to own or lease its assets and to carry on the business in which it is engaged, and is duly qualified and licensed to do business and is in good standing, in each jurisdiction where the ownership or operation of its property and assets or the conduct of its business requires such qualification, except where the failure to be so qualified or in good standing has not had or would not reasonably be expected to have a Cinemark Material Adverse Effect or to prevent or materially delay or materially impair the Transaction. Cinemark has made available to Buyer correct and complete copies of the certificate of incorporation and bylaws of Cinemark. Cinemark has the legal capacity, power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. All actions or proceedings to be taken by or on the part of Cinemark to authorize and permit the execution and delivery by Cinemark of this Agreement and the instruments required to be executed and delivered by it pursuant hereto, the performance by Cinemark of its obligations hereunder and the consummation by Cinemark of the Transaction, including the approval of the foregoing by Cinemark's board of directors and its stockholders, have been duly and properly taken. This Agreement has been duly executed and delivered by Cinemark and constitutes the legal, valid and binding obligation of Cinemark, enforceable against Cinemark in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors' rights and to general equity principles. The execution, delivery and performance of this Agreement by Cinemark do not and shall not, and the consummation by Cinemark of the Transaction will not, constitute or result in (A) a breach or violation of, or a default under, the certificate of incorporation or bylaws or other organizational documents of Cinemark or any of its Subsidiaries, (B) a breach or violation of, or a default under, the acceleration of any obligations or the creation of any Encumbrance on the assets of Cinemark or any of its Subsidiaries (with or without notice, lapse of time or both) pursuant to, any Material Contract or Lease to which Cinemark or any of its Subsidiaries is a party, or give any party with rights thereunder the right to terminate, modify, accelerate, cancel or require any notice or otherwise change the existing rights or obligations of Cinemark or its Subsidiaries thereunder or (C) assuming compliance with the matters referred to in Section 4.10 (Consents and Approvals) and Section 5.2 (Consents and Approvals), to Cinemark's Knowledge, a violation by Cinemark or any of its Subsidiaries of any Law or Order, except, in the case of clause (B) or (C) above, for any breach, violation, default, acceleration or creation set forth on Schedule 4.1.
Section 4.2 Capitalization of Cinemark. The authorized, issued and outstanding capital stock of Cinemark, the name of the holders of record of such capital stock, and the number of shares of such capital stock held by such holders are set forth on Schedule 4.2. All of the issued and outstanding shares of capital stock of Cinemark have been duly authorized and validly issued, and are fully paid and nonassessable, were not issued in violation of any law or of any statutory or contractual preemptive rights of any stockholder and are held of record by the holders as set forth on Schedule 4.2. Except as set forth on Schedule 4.2, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, agreements, arrangements or commitments to issue or sell any shares of capital stock or other securities of Cinemark or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of Cinemark (now, in the future or upon the occurrence of any contingency), and no securities or obligations evidencing such rights are authorized, issued or outstanding. Schedule 4.2 sets forth the name of the holders of all of the outstanding Stock Options, the number of
shares of Cinemark Common Stock into which such Stock Options are exercisable for each such holder, and the exercise price of such Stock Options. Except as set forth on Schedule 4.2, there are no voting trusts, proxies or other agreements or understandings with respect to the voting of the capital stock of Cinemark. Cinemark does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of Cinemark on any matter. Except as set forth on Schedule 4.2, there are no agreements to register any securities or sales or resales thereof under the federal or state securities laws.
Section 4.3 Subsidiaries.
(a) Schedule 4.3 sets forth for each Subsidiary of Cinemark (i) its name and jurisdiction of formation and (ii) the amount and type of issued and outstanding shares or other equity interests (together with the names of the holders thereof, and the amount held by each such holder). Except as set forth on Schedule 4.3, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, put rights, agreements, arrangements or commitments to issue or sell any shares of capital stock or other equity interests of any Subsidiary of Cinemark or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of any Subsidiary of Cinemark (now, in the future or upon the occurrence of any contingency), and no securities or obligations evidencing such rights are authorized, issued or outstanding. Except as set forth on Schedule 4.3, there are no agreements to register any securities of any Subsidiary of Cinemark or sales or resales thereof under the federal or state securities laws.
(b) Each Subsidiary of Cinemark is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing (to the extent such concept is used in the relevant jurisdiction) under the Laws of the jurisdiction of its organization and has full corporate power and authority to own or lease its assets and to carry on the business in which it is engaged, and is duly qualified and licensed to do business and is in good standing (to the extent such concept is used in the relevant jurisdiction), in each jurisdiction where the ownership or operation of its property and assets or the conduct of its business requires such qualification or licensing, except where the failure to be so qualified or licensed and in good standing has not had or would not reasonably be expected to have a Cinemark Material Adverse Effect or to prevent or materially delay or materially impair the Transaction. Cinemark has made available to Buyer correct and complete copies of the respective organizational documents of its Subsidiaries.
(c) All of the issued and outstanding shares of capital stock or other equity interests of each Subsidiary of Cinemark have been duly authorized and validly issued, and, in the case of shares of capital stock, are fully paid and nonassessable, were not issued in violation of any law or of any statutory or contractual preemptive rights of any stockholder and are held of record by Cinemark or its Subsidiaries, and all such shares or other equity interests represented as being owned, directly or indirectly, by any Subsidiary or Cinemark are owned by it free and clear of any and all Encumbrances, except as set forth on Schedule 4.3.
(d) Except as set forth on Schedule 4.3, neither Cinemark nor any of its Subsidiaries controls directly or indirectly, or has any direct or indirect equity participation or ownership interest in, any corporation, partnership, trust or entity that is not a Subsidiary of Cinemark.
Section 4.4 Financial Statements; Company Reports; Undisclosed Liabilities.
(a) Audited Financial Statements. Cinemark has previously delivered to Buyer true and complete copies of the audited consolidated balance sheet of Cinemark USA, Inc., a Texas corporation ("CINEMARK USA"), and its Subsidiaries as of December 31, 2003 and December 31, 2002 and 2001 and the related statements of income and cash flows for each of the three fiscal years then ended, certified by Deloitte & Touche, L.L.P. (such financial statements being collectively called the "ANNUAL FINANCIAL STATEMENTS") and an audit report containing an unqualified opinion of Deloitte & Touche, L.L.P. The Annual Financial Statements were prepared in accordance with GAAP, applied on a consistent basis throughout the periods covered thereby. The Annual Financial Statements fairly present the financial position of Cinemark USA and its Subsidiaries as of the applicable period and the results of operations for the respective year then ended.
(b) Company Reports. All forms, reports and documents filed by Cinemark USA, with any applicable federal or state securities authorities, including the Securities and Exchange Commission, are collectively referred to herein as the "COMPANY REPORTS." The Company Reports, as amended through the date hereof, and all Company Reports filed after the date of this Agreement, (i) were or will be prepared in all material respects in accordance with the requirements of the Securities Act or the Exchange Act and (ii) did not at the time they were filed, or will not at the time they are filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the financial statements (including, in each case, any related notes thereto) contained in the Company Reports, as amended through the date hereof, any Company Reports filed since the date of this Agreement and prior to or on the Closing Date, complied in all material respects with the published rules and regulations of the Securities and Exchange Commission with respect thereto.
(c) No Undisclosed Liabilities. To the Knowledge of Cinemark, there are no material liabilities or material obligations of Cinemark or any of its Subsidiaries, whether accrued, absolute, unmatured, contingent or otherwise required by GAAP to be set forth on a balance sheet of Cinemark and its Subsidiaries or in the notes thereto except (i) those arising in the Ordinary Course of Business since the Balance Sheet Date, none of which relates to a breach of Contract or Lease, tort, infringement, violation of Law, any action, suit or proceeding, any writ, injunction, decree, order, judgment or litigation affecting the ownership, lease, occupancy or operation of any real property and (ii) liabilities which would not be required to be reflected on a balance sheet or the footnotes thereto prepared in accordance with GAAP.
(d) Assets and Liabilities of Cinemark and CNMK Holdings, Inc. Except as set forth on Schedule 4.4, since the date of its incorporation, neither Cinemark (for purposes of clarification, excluding any of its Subsidiaries) nor CNMK Holdings, Inc., a Delaware corporation, has (i) carried on any business or conducted any operations, (ii) any assets other than all of the outstanding capital stock of CNMK Holdings, Inc. and Cinemark USA, respectively, nor (iii) any liabilities or obligations of any kind, other than, in the case of Cinemark, the performance of its obligations hereunder.
(e) Past and Future Performance. EXCEPT AS SPECIFICALLY
SET FORTH IN THIS AGREEMENT, CINEMARK MAKES NO REPRESENTATIONS OR
WARRANTIES REGARDING PAST FINANCIAL PERFORMANCE OF CINEMARK, ITS
SUBSIDIARIES OR THE ASSETS OWNED OR USED BY CINEMARK OR AS TO ANY
FINANCIAL INFORMATION OR FINANCIAL OR BUSINESS PROJECTIONS MADE
AVAILABLE TO BUYER REGARDING CINEMARK, ITS SUBSIDIARIES OR THE ASSETS
OWNED OR USED BY CINEMARK OR ITS SUBSIDIARIES (OTHER THAN THAT SUCH
FINANCIAL INFORMATION OR FINANCIAL OR BUSINESS PROJECTIONS WERE
PREPARED IN GOOD FAITH AND WERE BASED UPON ASSUMPTIONS BELIEVED TO BE
REASONABLE AT THE TIME OF THEIR PREPARATION), AND CINEMARK MAKES NO
REPRESENTATIONS OR WARRANTIES REGARDING FUTURE FINANCIAL PERFORMANCE OF
CINEMARK, ITS SUBSIDIARIES OR THE ASSETS OWNED OR USED BY CINEMARK AND
ITS SUBSIDIARIES OR AS TO THE FINANCIAL INFORMATION OR FINANCIAL OR
BUSINESS PROJECTIONS MADE AVAILABLE TO BUYER REGARDING CINEMARK AND ITS
SUBSIDIARIES OR THE ASSETS USED OR OWNED BY CINEMARK OR ITS
SUBSIDIARIES (OTHER THAN THAT SUCH FINANCIAL INFORMATION OR FINANCIAL
OR BUSINESS PROJECTIONS WERE PREPARED IN GOOD FAITH AND WERE BASED UPON
ASSUMPTIONS BELIEVED TO BE REASONABLE AT THE TIME OF THEIR
PREPARATION).
Section 4.5 Absence of Certain Changes or Events>>.
(a) Since the Balance Sheet Date, (i) Cinemark and its
Subsidiaries have not suffered any damage, destruction or loss (whether
or not covered by insurance), other than such damages, destruction and
loss as do not have or would not individually or in the aggregate be
reasonably expected to have a Cinemark Material Adverse Effect; and
(ii) there has been no change in the condition, assets or business of
Cinemark or its Subsidiaries other than in the Ordinary Course of
Business, except such changes as do not have or would not individually
or in the aggregate be reasonably expected to have a Cinemark Material
Adverse Effect.
(b) Except as set forth on Schedule 4.5, since the Balance Sheet Date, Cinemark and its Subsidiaries have not: (i) other than in the Ordinary Course of Business, increased the compensation (including bonuses) payable on or after the date hereof, or to become payable on or after the date hereof, to any director or executive officer of Cinemark or any of its Subsidiaries; (ii) other than to or among Cinemark and its wholly-owned Subsidiaries, declared or paid any dividends, issued, purchased or
redeemed any shares of its capital stock or any convertible securities into or exchangeable for any of its respective capital stock, or made any other distributions to its shareholders; (iii) granted any options or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its respective capital stock; (iv) other than to or among Cinemark and its wholly-owned Subsidiaries, incurred assumed, or guaranteed any liabilities or Indebtedness of any kind other than Indebtedness that is incurred in the Ordinary Course of Business; (v) amended or authorized any amendment to the certificate of incorporation or bylaws of Cinemark or to any organizational documents of any of Cinemark's Subsidiaries; (vi) made any acquisitions of real property or other material personal property; (vii) other than to or among Cinemark and its wholly-owned Subsidiaries, made any capital investment in, any loan to, or any acquisition of the securities or assets, of any other Person either involving more than $500,000 or outside the Ordinary Course of Business; (viii) cancelled, waived, compromised or released any right or claim (or series of rights or claims) either involving more than $500,000 or outside the Ordinary Course of Business; (ix) granted or received any material license or sublicense under or with respect to any Intellectual Property; (x) made any change in employment terms for the directors, officers, and employees outside the Ordinary Course of Business; (xi) entered into any collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement other than in the Ordinary Course of Business; (xii) managed Cinemark's working capital outside the Ordinary Course of Business; (xiii) made any capital expenditures (or series of related capital expenditures) in excess of $500,000 or outside the Ordinary Course of Business; (xiv) disposed of any of their material assets; (xv) made any loan to, or entered into any other transaction with any of their directors, officers or employees outside the Ordinary Course of Business; (xvi) made or pledged to make any charitable or other capital contribution outside the Ordinary Course of Business; or (xvii) committed to do any of the foregoing.
Section 4.6 Licenses. Cinemark and its Subsidiaries hold all material permits, licenses, waivers, orders, approvals, concessions, registrations and other authorizations issued or provided by Governmental Entities under all Laws currently in effect, which are necessary for Cinemark and its Subsidiaries to own their assets or to operate their businesses as currently, and as currently proposed to be, conducted (the "COMPANY LICENSES"). All Company Licenses are in full force and effect and shall remain in full force and effect immediately following the Closing. There is not pending, nor to the Knowledge of Cinemark, threatened against Cinemark or any of its Subsidiaries, any application, action, petition, objection or other pleading, or any proceeding, with any Governmental Entity which questions or contests the validity of, or any rights of the holder under, or non-renewal or suspension of any Company License.
Section 4.7 Litigation. Neither Cinemark nor any of its Subsidiaries is subject to any outstanding material Order of any Governmental Entity. Except as disclosed on Schedule 4.7, there are no civil, criminal or administrative claims, actions, suits, demands, proceedings, hearings or investigations pending or, to the Knowledge of Cinemark, threatened against Cinemark or any of its Subsidiaries, at Law, in equity or otherwise, in, before, or by, any court or Governmental Entity, authority or arbitrator, in each case, involving an amount in excess of $100,000.
Section 4.8 Compliance with Law. To the Knowledge of Cinemark, except as disclosed on Schedule 4.8, during the last five years, each of Cinemark and its Subsidiaries has conducted its business in substantial compliance with all applicable Laws, and neither Cinemark nor any of its Subsidiaries has been subject during the last five years to any inspection, investigation, penalty, assessment, or audit by any Governmental Entity to any allegation that Cinemark or any of its Subsidiaries violated in any respect any regulations of any Governmental Entity or made a material false statement or omission to any such Governmental Entity, which inspection, investigation, penalty, assessment or audit resulted in any fine or penalty (or related fines or penalties) in excess of $100,000; provided, however, Cinemark makes no representation herein regarding compliance with the ADA regarding the design and construction of its theatres, other than that Cinemark and its Subsidiaries have made good faith efforts to comply with the ADA.
Section 4.9 Contracts.
(a) Schedule 4.9 contains a list of all written Contracts (referred to herein as a "MATERIAL CONTRACT") of the types described below that are currently in effect:
(1) all employment and consulting Contracts (other than those pursuant to which the base compensation to be paid by Cinemark and its Subsidiaries collectively to the offeree is less than $200,000 per year);
(2) all Contracts (or group of related Contracts) or options to sell, license (as licensor) or lease (as lessor) any property or asset of Cinemark or any of its Subsidiaries in excess of $100,000 per year;
(3) all Contracts (or group of related Contracts) pursuant to which Cinemark or any of its Subsidiaries (i) possesses or uses, or has agreed to acquire, license (as licensee) or lease (as lessee), any property or asset, and (ii) is required to make payments, accrue expenses or incur charges in excess of $500,000 per year;
(4) all Contracts (or group of related Contracts), plans or programs pursuant to which payments, or an acceleration of or increase in benefits, may be required upon or after a change of control of Cinemark or any of its Subsidiaries;
(5) all Contracts (or group of related Contracts) requiring capital expenditures by Cinemark or any of its Subsidiaries in excess of $500,000 per year;
(6) all Contracts which create a partnership or joint venture to which Cinemark or any of its Subsidiaries is a party;
(7) all Contracts (or group of related Contracts) of indemnification or similar commitment entered into in the five (5) year period prior to the date of this Agreement with respect to which the potential aggregate obligation is in excess of $500,000, including those that relate to Cinemark's or any of its Subsidiaries' indemnification obligations to its directors and officers;
(8) all Contracts that prohibit or restrict Cinemark or any of its Subsidiaries from competing anywhere in the world;
(9) all Contracts pursuant to which Cinemark or any of its Subsidiaries provides management services or consulting services to Persons not affiliated with Cinemark or any of its Subsidiaries with respect to theatres or other real property projects;
(10) all Contracts (other than Contracts between Cinemark and its Subsidiaries or between a Subsidiary of Cinemark and another Subsidiary of Cinemark) relating to borrowed money or other Indebtedness or the mortgaging or pledging or otherwise placing an Encumbrance on any asset which will continue to be an obligation of the Surviving Corporation or any of its Subsidiaries following the Closing;
(11) all on-screen advertising agreements to which Cinemark or any of its Subsidiaries is a party;
(12) any other Contracts to which Cinemark or any of its Subsidiaries is a party under which the consequences of a default or termination could have a Cinemark Material Adverse Effect; and
(13) any other Contracts required to be filed as "material contracts" by Cinemark USA with the Securities and Exchange Commission in connection with the Annual Report on Form 10-K of Cinemark USA of the year ended December 31, 2003.
(b) To the Knowledge of Cinemark, neither Cinemark nor any of its Subsidiaries is a party to any material oral Contracts.
(c) Cinemark has delivered or heretofore made available to Buyer a true, complete and correct copy of each of the written Material Contracts, and all amendments and supplements thereto and all waivers thereunder. Neither Cinemark, any of its Subsidiaries nor any other party is in default under, or in breach or violation of, nor has an event occurred that (with or without notice, lapse of time or both) would constitute a material default by Cinemark or any of its Subsidiaries under any Material Contract. Cinemark has no Knowledge of any anticipated material breach by any party to any of the Contracts required to be included on Schedule 4.9. Each of the Contracts required to be included in Schedule 4.9 is a legal, valid, and binding obligation of Cinemark or its Subsidiaries, and to the Knowledge of Cinemark, of the other parties thereto, enforceable against Cinemark or its Subsidiaries, and to the Knowledge of Cinemark, the other parties thereto in accordance with its terms, and is in full force and effect and will remain such immediately following the Closing.
Section 4.10 Consents and Approvals. Except for the Governmental Consents, no Consents are required to be made or obtained by Cinemark, its Subsidiaries or the stockholders of Cinemark with or from, as the case may be, any Governmental Entity, in connection with the execution and delivery of this Agreement by Cinemark and the consummation by Cinemark of
the Transaction. Neither Cinemark nor any of its Subsidiaries is subject to any Order which has had or would reasonably be expected to cause a Cinemark Material Adverse Effect or prevent or materially delay the consummation of the Transaction. No claim, legal action, suit, arbitration, governmental investigation, action, or other legal, judicial or administrative proceeding is pending, or to the Knowledge of Cinemark, threatened against Cinemark or any of its Subsidiaries which has had or would cause a Cinemark Material Adverse Effect or prevent or materially delay the Transaction.
Section 4.11 Tax Matters.
(a) Except as set forth on Schedule 4.11, (i) all Tax Returns that are required to be filed by or with respect to Cinemark and its Subsidiaries have been duly and timely filed or, where not so timely filed, are covered under an extension that has been obtained therefor, (ii) all Taxes, due and payable by Cinemark and its Subsidiaries (whether or not shown on, or required to be shown on, any Tax Return), have been paid in full or are being contested in good faith by appropriate proceedings, provided that appropriate reserves or accruals have been established in accordance with GAAP for all such Taxes being so contested, (iii) all deficiencies asserted or assessments with respect to all Taxes have been paid in full and (iv) there are no Encumbrances with respect to Taxes upon any of the assets of Cinemark or its Subsidiaries other than Permitted Encumbrances.
(b) Except as set forth on Schedule 4.11, there is no material dispute or claim concerning any Tax liability of Cinemark or any of its Subsidiaries (i) claimed or raised by any authority in writing or (ii) to the Knowledge of Cinemark, based upon personal contact with any agent of such authority. Neither Cinemark nor any of its Subsidiaries has any outstanding waivers of any statute of limitations in respect of material Taxes or agreed to any extension of time with respect to a material Tax assessment or deficiency.
(c) Except as set forth on Schedule 4.11, neither Cinemark nor any of its Subsidiaries is a party to any agreement, contract, arrangement, or plan that has resulted or could result, separately or in the aggregate, in the payment of any "excess parachute payment" within the meaning of Code Section 280G (or any corresponding provision of state, local, or foreign Tax law), including with respect to the Transaction.
(d) [INTENTIONALLY OMITTED]
(e) Except as set forth on Schedule 4.11(e), neither Cinemark nor any of its Subsidiaries is a party to or bound by any tax allocation or sharing agreement.
(f) Neither Cinemark nor any of its Subsidiaries (i) has been a member of an affiliated group filing a consolidated federal Income Tax Return (other than a group the common parent of which was Cinemark) or (ii) has any liability for the Taxes of any Person (other than Cinemark or any of its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor or by contract.
(g) Except as set forth on Schedule 4.11, neither Cinemark nor any of its Subsidiaries will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) "closing agreement" as described in Code Section 7121 (or any corresponding or similar provision of state, local, or foreign income Tax law) executed on or prior to the Closing Date; (iii) intercompany transactions described in treasury regulations under Code Section 1502 (or any corresponding or similar provisions of state, local or foreign income Tax law); (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date in excess of $250,000.
(h) In the two (2) years prior to the date hereof, neither Cinemark nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Code Section 355 or Code Section 361.
(i) Neither Cinemark nor any of its Subsidiaries has engaged in a "listed transaction" as defined in Treas. Reg. Section 1.6011-4(b)(2).
Section 4.12 Employee Benefits.
(a) Schedule 4.12 sets forth a complete and correct list of (i) all material "employee benefit plans," as defined in Section 3(3) of ERISA, (ii) all severance pay, vacation pay, awards, salary continuation, sick leave, deferred compensation, bonus or other incentive compensation, stock or other equity related award, restricted stock, stock purchase, stock option, phantom stock or similar arrangements, and (iii) all material employment, consulting, retirement, pension, superannuation, profit sharing, termination, severance, redundancy pay, thirteenth month or individual compensation agreements or arrangements, covering any employee, former employee, or the beneficiaries or dependents of any employee or former employee, in each case, as to which Cinemark or any Subsidiary has any continuing obligation or liability (contingent or otherwise) regardless of whether it is maintained under local law, voluntary, private, funded, unfunded, financed by the purchase of insurance, contributory or non-contributory (collectively, the "BENEFIT PLANS"). Each Benefit Plan that is maintained, sponsored or contributed to by Cinemark or any ERISA Affiliate for the benefit of their U.S. employees shall be referred to herein as a "U.S. Benefit Plan."
(b) Each U.S. Benefit Plan (and each related trust, insurance contract or fund) has been in all material respects maintained, funded and administered in accordance with the terms of such U.S. Benefit Plan and any applicable collective bargaining agreement and complies in form and in operation in all material respects with the applicable requirements of the Code, ERISA and other applicable Laws. Each U.S. Benefit Plan and its related trust intended to qualify under Sections 401 and 501(a) of the Code, respectively, so qualify and nothing has occurred with respect to the operation of any such plan which would cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code. None of the U.S. Benefit Plans has any material unfunded liabilities not reflected on the Balance Sheet.
(c) With respect to each U.S. Benefit Plan, true, correct and complete copies of the following documents (as applicable), have been made available to Buyer: (i) the most recent document constituting the U.S. Benefit Plan and all amendments thereto, and any related trust documents, (ii) the most recent summary plan description, and all related summaries of material modifications, (iii) the most recent annual report (Form 5500 series)) and (iii) the most recent IRS determination letter.
(d) Neither Cinemark nor any ERISA Affiliate maintains, sponsors, contributes to or has any liability or potential liability with respect to any "defined benefit plan" (as defined in Section 3(35) of ERISA) or, except as set forth on Schedule 4.12, any "multiemployer plan" (as defined in Section 3(37) of ERISA).
(e) Neither Cinemark nor any ERISA Affiliate has any liability or potential liability under any U.S. Benefit plan to provide life insurance or medical or health benefits after termination of employment to any Employee or former employee (or any dependents or beneficiaries thereof) other than as required by Part 6 of Subtitle I of ERISA or Section 4980B of the Code or any similar state law ("COBRA"). Cinemark and each ERISA Affiliate have complied in all material respects with the requirements of COBRA.
(f) Each Benefit Plan that is governed by Laws of any jurisdiction other than the United States (each a "FOREIGN BENEFIT PLAN") has been maintained, funded and administered in accordance with, and is in material compliance with, applicable Laws and the requirements of such Foreign Benefit Plan's governing documents and any applicable collective bargaining agreements. No Foreign Benefit Plan has any unfunded or under funded liabilities, taking into account all current, projected and contingent benefits payable under such plan to any Employee, former employee, dependent, or beneficiary, regardless of whether an amount less than such aggregate liability is reflected on the employer's financial statements. No condition exists that would prevent Cinemark or its Subsidiaries from terminating or amending any Foreign Benefit Plan, except as required by applicable Law.
Section 4.13 Brokers and Finders. Except as set forth on Schedule 4.13, neither Cinemark nor any of its Subsidiaries has employed any broker, finder, consultant or intermediary in connection with the Transaction who would be entitled to a broker's, finder's or similar fee or commission in connection therewith or upon the consummation thereof that would be payable by Cinemark or any of its Subsidiaries.
Section 4.14 Intellectual Property.
(a) Cinemark or its Subsidiaries own, are licensed under, or otherwise possess, in all material respects, the valid and enforceable right to use all Intellectual Property that is used in the business of Cinemark and its Subsidiaries as currently conducted and as currently proposed to be conducted.
(b) Schedule 4.14 sets forth all of Cinemark and its Subsidiaries' patents, patent applications, Internet domain names, registered servicemarks, trademarks, trade
names, corporate names (other than those set forth on Schedule 4.3), brand names and copyrights and applications for registration of servicemarks, trademarks, trade names, corporate names, brand names and copyrights.
(c) Neither Cinemark nor any of its Subsidiaries is, nor will they be as a result of the execution and delivery of this Agreement or the performance of its obligations hereunder, in material violation of any licenses, sublicenses and other agreements as to which Cinemark or any of its Subsidiaries is a party and pursuant to which Cinemark or any of its Subsidiaries is authorized to use any third-party Intellectual Property ("THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS").
(d) No material claims with respect to (A) the Intellectual Property owned or exclusively licensed by Cinemark or its Subsidiaries ("COMPANY INTELLECTUAL PROPERTY RIGHTS"); or (B) Third-Party Intellectual Property Rights are currently pending or, to the Knowledge of Cinemark, threatened by any Person against Cinemark or its Subsidiaries.
(e) Schedule 4.14 sets forth a list of all agreements under which Cinemark or any of its Subsidiaries has granted any rights of whatever nature to third parties of, to or under the Company Intellectual Property Rights. True, correct and complete copies of all such agreements have been delivered to Buyer.
(f) To the Knowledge of Cinemark, Cinemark or its applicable Subsidiary has the right to bring actions against any Person that is infringing, misappropriating or using without authorization any Company Intellectual Property Rights; and, as of the date hereof, no claim of infringement, misappropriation or any other unauthorized use of any of the Company Intellectual Property Rights by any third party, employee, consultant or former employee or consultant of Cinemark or any Subsidiary has been asserted.
Section 4.15 Real Property.
(a) Owned Real Property. Schedule 4.15 sets forth all of the Owned Real Property owned by Cinemark or any of its Subsidiaries. As to each parcel of Owned Real Property, and except as set forth in Schedule 4.15: (i) Cinemark or its Subsidiary has good, marketable and indefeasible title to the Owned Real Property free and clear of all Encumbrances, except Permitted Encumbrances, (ii) except as set forth on Schedule 4.15, neither Cinemark nor any of its Subsidiaries have leased or otherwise granted to any Person the right to use or occupy such Owned Real Property, (iii) there are no outstanding options, rights of first offer or refusal to purchase any of the Owned Real Property, and (iv) neither Cinemark nor any of its Subsidiaries are party to any agreement or option to purchase any real property intended to be used in their business.
(b) Leased Real Property. Schedule 4.15 sets forth all of the Leased Real Property leased by Cinemark or any of its Subsidiaries. As to each Lease, and except as set forth in Schedule 4.15: (i) such Lease is legal, valid, binding and enforceable against Cinemark or its applicable Subsidiary, and to the Knowledge of Cinemark, enforceable against third parties, in full force and effect, and duly registered where necessary under applicable Laws for the purposes of enforceability against third parties (including
purchasers of the underlying property and mortgagees); (ii) the
consummation of the Merger does not require the consent of any other
party to such Lease and will not result in a breach of or default under
such Lease; (iii) neither Cinemark nor any Subsidiary nor any other
party to the Lease is in breach or default under such Lease; (iv) no
security deposit or portion thereof deposited with respect to such
Lease has been applied in respect of a breach or default under such
Lease which has not been redeposited in full; (v) neither Cinemark nor
any Subsidiary has subleased, licensed or otherwise granted any Person
the right to occupy such Leased Real Property or any portion thereof;
(vi) there are no Encumbrances on the estate or interest created by
such Lease, except for liens for any existing financing that will be
released at Closing or Permitted Encumbrances.
Section 4.16 Labor Matters. Schedule 4.16 contains a complete and accurate list of (a) each collective bargaining agreement or other labor union contract to which Cinemark or any Subsidiary is a party to or has any obligation or liability, and (b) each works council, labor authority, employee group, or other third party that must be notified or consulted with under applicable Law with respect to the subject matter of this Agreement. Except as described on Schedule 4.16 and except as would not reasonably be expected to have a Cinemark Material Adverse Effect, (i) Cinemark and each of its Subsidiaries is in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours, (ii) there is no unfair labor practice complaint pending or, to Cinemark's Knowledge, threatened against Cinemark or any of its Subsidiaries, and (iii) there is no labor strike, dispute, slowdown or stoppage actually pending or threatened against Cinemark. Each of Cinemark and its Subsidiaries has, or will have as of the Closing, provided such notices and made such consultation and disclosures as are required by applicable Laws with respect to the subject matter of this Agreement.
Section 4.17 Environmental Matters. To Cinemark's Knowledge, Cinemark and its Subsidiaries are in material compliance with all applicable Environmental Laws. Neither Cinemark nor any of its Subsidiaries is subject to any existing, pending or, to Cinemark's Knowledge, threatened material proceedings under any Environmental Law. To Cinemark's Knowledge, Cinemark and its Subsidiaries have obtained all permits required under Environmental Laws and such permits are currently in full force and effect. To Cinemark's Knowledge, there have been no unauthorized or other releases of any Hazardous Materials at or from any property or facility owned or operated by Cinemark, any of its Subsidiaries or any of their respective predecessors that have or would give rise to a material liability or material obligation of Cinemark or its Subsidiaries. Neither Cinemark, any of its Subsidiaries nor any of their predecessors has treated, stored, disposed, arranged for or permitted the disposal of, transported or released any Hazardous Materials so as to give rise to a material liability or material obligation under Environmental Laws.
Section 4.18 Insurance. Schedule 4.18 contains a list and summary description of all material insurance policies maintained as of the date hereof by or on behalf of Cinemark or any of its Subsidiaries. Cinemark has delivered or made available to Buyer copies of all such policies, together with all riders and amendments thereto. Except as set forth on Schedule 4.18, neither Cinemark nor any of its Subsidiaries has received any reservation of rights letters from any of its insurers with respect to any insurance claims made during the last three (3) years. All such policies are in full force and effect and will remain in full force and effect after the
consummation of the Transaction. All premiums with respect to such policies are currently paid. Neither Cinemark nor any of its Subsidiaries (a) is currently in material breach or material default (including with respect to the payment of premiums or the giving of notices) with respect to its obligations under any such insurance policies, (b) has repudiated any provision of any such insurance policies in the last three (3) years or (c) has been denied insurance coverage in the last three (3) years. Except as set forth on Schedule 4.18, neither Cinemark nor any of its Subsidiaries has any self-insurance, deductible retention or co-insurance programs, and the reserves set forth on the balance sheet as of the date of the Balance Sheet Date are adequate to cover all anticipated liabilities with respect to any such self-insurance, deductible retention or co-insurance programs.
Section 4.19 Compliance with Foreign Corrupt Practices Act. Neither Cinemark, nor any of its Subsidiaries, nor, to the Knowledge of Cinemark, any of their respective directors, officers, agents or employees, has directly or indirectly paid, offered, given or promised to pay or authorized the payment of, any monies or other things of value to an officer or employee of any Governmental Entity; an officer or employee of a public international organization; any Person acting in an official capacity for or on behalf of any Governmental Entity or public international organization; any political party or official thereof; any candidate for political office; an employee, officer, director or shareholder of any commercial purchaser of Cinemark's or any Subsidiary's services; or any other Person, at the suggestion, request or direction or for the benefit of any of the above-described Persons, or engaged in acts or transactions otherwise in violation of the domestic anti-bribery legislation of any Governmental Entity, the Foreign Corrupt Practices Act of the United States, as amended from time to time and Cinemark's or any of its Subsidiaries' written policy on questionable or improper payments. Each of Cinemark and its Subsidiaries maintains a system of internal accounting controls adequate to ensure that it maintains no off-the books accounts and that such Selling Party 's assets are used only in accordance with its management directives.
Section 4.20 Suppliers. Neither Cinemark nor any of its Subsidiaries has received any written notice from any material supplier (including Coca-Cola, Inc. or any of its Affiliates) to the effect that, and Cinemark has no Knowledge that, such supplier will stop, materially decrease the rate of, or materially change the terms (whether related to payment, price or otherwise) with respect to, supplying materials, products or services to Cinemark or any of its Subsidiaries (whether as a result of the consummation of the Transaction or otherwise).
Section 4.21 Affiliated Transactions. Except as set forth on Schedule 4.21, no Affiliated Person is party to any Material Contract or any Leases with Cinemark or any of its Subsidiaries or has any interest in any material property, asset or right used by Cinemark or any of its Subsidiaries or necessary for their business or, since the Balance Sheet Date, has received any funds in excess of $50,000 from or on behalf of Cinemark or any of its Subsidiaries (other than compensation paid by Cinemark or any of its Subsidiaries to officers and other employees of Cinemark and its Subsidiaries in the Ordinary Course of Business). Schedule 4.21 describes all such services provided to or for the benefit of Cinemark or any of its Subsidiaries and the costs and expenses charged to Cinemark and its Subsidiaries in respect thereof. For purposes hereof, an "AFFILIATED PERSON" means: (a) any officer, director, stockholder or Affiliate (other than any of Cinemark's Subsidiaries) of Cinemark or any of its Subsidiaries, (b) any immediate
family member of any such officer, director or stockholder and (c) any Person in which any such officer, director, stockholder or Affiliate owns any beneficial interest.
Section 4.22 Expenses. Schedule 4.22 sets forth Cinemark's good faith
estimate of the amount of all Expenses of Cinemark and its Subsidiaries,
together with a description, and the identity of the payee, of each such Expense
(which, for purposes of clarification, shall not include any Expenses payable by
the Surviving Corporation on behalf of Buyer and its Affiliates pursuant to
Section 9.2).
Section 4.23 Change of Control Payments. Schedule 4.23 sets forth the amount of each payment due or to become due (whether or not automatically upon the occurrence of the Closing) under the Contracts to which Cinemark or any of its Subsidiaries is a party, other than under the Brazilian Put Agreements or as a result of any accelerated vesting of stock options under the Cinemark, Inc. Long Term Incentive Plan, upon the consummation of the Transaction, identifying each such Contract, the amount of such payments payable under such Contract, and the Person to whom such payments would be payable.
Section 4.24 Indebtedness. Except as set forth on Schedule 4.24, neither Cinemark nor any of its Subsidiaries has any outstanding Indebtedness (other than Indebtedness payable to Cinemark or any of its Subsidiaries), or is a party to any Contract providing for the creation, incurrence or assumption thereof. Schedule 4.24 sets forth the amount of the outstanding balance as of the date hereof of all such Indebtedness of Cinemark and its Subsidiaries, together with a description, and the amount, of each line item included in the calculation thereof.
Section 4.25 Board Recommendation. The Board of Directors of Cinemark, at a meeting duly called and held, has by the affirmative vote of all those directors present (who constituted 100% of the directors then in office) determined that this Agreement and the Transaction, including the Merger, are fair to and in the best interest of the stockholders of Cinemark and has approved the same.
Section 4.26 No Other Representations or Warranties. Except for the representations and warranties contained in this Article IV, neither Cinemark nor any other Person makes any other express or implied representation or warranty on behalf of Cinemark with respect to the Transaction, including as to the probable success or profitability of the ownership of Cinemark and its Subsidiaries.
Section 4.27 Expiration of Representations and Warranties. Except in the case of fraud, the representations and warranties of Cinemark contained herein shall expire and be terminated and extinguished immediately after the Closing, and thereafter neither Cinemark nor any other Person shall have any liability whatsoever with respect to any of such expired representation or warranty.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the schedules attached to this Agreement, Buyer represents and warrants to Cinemark as of the date hereof as follows:
Section 5.1 Organization and Authority. Buyer is duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
organization. Buyer has all requisite corporate power and authority, and has
taken all requisite corporate, shareholder or other action necessary in order to
execute, deliver and perform its obligations under this Agreement. This
Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar Laws of general applicability relating to or affecting creditors' rights
and to general equity principles. The execution, delivery and performance of
this Agreement by Buyer do not, and the consummation by Buyer of the Transaction
will not, constitute or result in (A) a breach or violation of, or a default
under, the constituent documents of Buyer, (B) a breach or violation of, or a
default under, the acceleration of any obligations or the creation of any
Encumbrance (other than in connection with Financing) on the assets of Buyer
(with or without notice, lapse of time or both) pursuant to, any Contracts
binding upon Buyer or (C) assuming compliance with the matters referred to in
Section 4.10 (Consents and Approvals) and Section 5.2 (Consents and Approvals),
a violation of any Law, except, in the case of clause (B) or (C) above, for any
breach, violation, default, acceleration or creation that would not reasonably
be likely to have a Buyer Material Adverse Effect.
Section 5.2 Consents and Approvals. Except for the Governmental Consents, no Consents are required to be made or obtained by Buyer with or from, as the case may be, any Governmental Entity, in connection with the execution and delivery of this Agreement by Buyer and the consummation by Buyer of the Transaction, except those filings, permits, authorizations, consents, approvals and/or notices for which the failure to make or obtain would not reasonably be likely to prevent, materially delay or materially impair the ability of Buyer to consummate the Transaction. Buyer not is subject to any Order which would prevent the consummation of the Transaction. No claim, legal action, suit, arbitration, governmental investigation, action, or other legal, judicial or administrative proceeding is pending, or to the knowledge of Buyer, threatened against Buyer which would prevent or delay the Transaction.
Section 5.3 Brokers and Finders. Other than Allen & Company LLC, Buyer has not employed any broker, finder, consultant or intermediary in connection with the Transaction who would be entitled to a broker's, finder's or similar fee or commission in connection therewith or upon the consummation thereof.
Section 5.4 Litigation. There are no civil, criminal or administrative claims, actions, suits, demands, proceedings or investigations pending or, to the knowledge of Buyer, threatened against Buyer, at law, in equity or otherwise, in, before, or by, any court, Governmental Entity, authority or arbitrator which would reasonably be expected to have a material adverse effect on the business or financial condition of Buyer or would reasonably be likely to have a Buyer Material Adverse Effect.
Section 5.5 Investigation by Buyer. Buyer (a) is represented by competent legal counsel, (b) has knowledge and experience in financial and business matters and (c) has the capability of evaluating the merits and risks of investing in Cinemark. Buyer acknowledges that neither Cinemark nor any other Person has made any representation or warranty, expressed or implied, as to the accuracy or completeness of any information regarding Cinemark that has been furnished or made available to Buyer and its representatives, except as expressly set forth in this
Agreement or the Schedules, and neither Cinemark, its stockholders nor their representatives nor any other Person shall have or be subject to any liability (other than for fraud) to Buyer resulting from the distribution to Buyer, or Buyer's use, of any such information with respect to Cinemark and its Subsidiaries and any information, documents or material made available to Buyer in management presentations or in any other form in expectation of the Transaction. Buyer acknowledges that it is a sophisticated purchaser of businesses and has been given sufficient access to all information with respect to Cinemark requested by Buyer and, in entering into this Agreement, has not relied upon any representations other than the representations and warranties of Cinemark set forth in Article IV. Buyer acknowledges that no other representations and warranties of Cinemark other than as are set forth in Article IV are required by Buyer to enter into this Agreement.
Section 5.6 No Prior Activities. Buyer has not incurred, nor prior to the Closing, will it incur any liabilities or obligations, except those incurred in connection with its organization and with the negotiation of this Agreement and the performance hereof, and the consummation of the Transaction, including the Merger and the Financing. Except as contemplated by this Agreement, including the Financing, Buyer has not engaged in any business activities of any type or kind whatsoever, or entered into any agreements or arrangements with any Person, or become subject to or bound by any obligation or undertaking. As of the date hereof, all of the issued and outstanding capital stock of Buyer are owned beneficially and of record by Buyer, free and clear of all Encumbrances (other than those created by this Agreement and the Transaction).
Section 5.7 No Industry Activity. Neither Buyer nor any Affiliate of Buyer is directly or indirectly engaged in the ownership or operation of movie theatres.
Section 5.8 No Other Representations or Warranties. Except for the representations and warranties contained in this Article V, neither Buyer nor any other Person makes any other express or implied representation or warranty on behalf of Buyer.
Section 5.9 Expiration of Representations and Warranties. Except in the case of fraud, the representations and warranties of Buyer contained herein shall expire and be terminated and extinguished immediately after the Closing, and thereafter Buyer shall have no liability whatsoever with respect to any such expired representation or warranty.
ARTICLE VI.
CERTAIN COVENANTS AND AGREEMENTS OF CINEMARK AND BUYER
Section 6.1 Access to Premises and Information.
(a) During the period commencing on the date hereof and ending on the earlier to occur of the termination of this Agreement and the Closing, subject to applicable Law, Cinemark shall, and shall cause its Subsidiaries and Cinemark's and its Subsidiaries' officers, directors, employees, agents representatives, accountants and counsel to: (i) permit Buyer and its counsel, accountants, consultants, financial advisors, agents and other representatives (including its financing sources and their counsel, accountants, and other representatives) (including Buyer, collectively, "BUYER
REPRESENTATIVES") to have reasonable access, upon reasonable advance notice, to (A) the premises of Cinemark and its Subsidiaries; (B) the books, Contracts, Leases and records of Cinemark and its Subsidiaries; and (C) the officers and directors of Cinemark and its Subsidiaries and other employees, agents, business relations, accountants and counsel of Cinemark or any of its Subsidiaries who have knowledge relating to Cinemark or any of its Subsidiaries or their businesses; and (ii) furnish to Buyer Representatives such information regarding the business of Cinemark and its Subsidiaries as Buyer may reasonably request, in each case to the extent that such access does not unreasonably interfere with the business or operations of Cinemark or any of its Subsidiaries; provided that Buyer Representatives comply with the confidentiality obligations contained herein and in the Confidentiality Agreement, and provided further that the foregoing shall not (I) require Cinemark to permit any inspection, or to disclose any information, that in its reasonable judgment would violate any of Cinemark's obligations with respect to confidentiality, provided that at the reasonable request of Buyer, Cinemark shall use commercially reasonable efforts to have any such obligations waived or (II) require any disclosure by Cinemark that would, as a result of such disclosure, have the effect of causing the waiver of any legal privilege.
(b) In addition to the confidentiality arrangements contained herein, all information provided or obtained in connection with the Transaction (including pursuant to clause (a) above) shall be held by Buyer in accordance with and subject to the terms of the Confidentiality Agreement. In the event of a conflict or inconsistency between the terms of this Agreement and the Confidentiality Agreement, the terms of this Agreement shall govern. If the Closing occurs, the parties hereto agree that the Confidentiality Agreement shall terminate and forthwith become null and void in all respects and cease to have any further force or effect.
Section 6.2 Conduct of Business. Except as otherwise expressly
contemplated by this Agreement, or as required by Law or Governmental Entity,
Cinemark covenants that until the earlier of the termination of this Agreement
and the Closing, it shall, and shall cause each of its Subsidiaries to, (i)
operate its business in the Ordinary Course of Business, (ii) continue, in a
manner consistent with the past practices, to maintain and preserve intact and
to keep available the services of its present officers and significant
employees, (iii) maintain its ordinary and customary relationships with its
suppliers, customers and others having business relationships with it with a
view toward preserving for Buyer the businesses of Cinemark and its
Subsidiaries, the assets used therein and the goodwill associated therewith,
(iv) operate its cash management in accordance with past practices, including
the payment of Indebtedness (subject to Section 6.2(b)), purchase of inventory,
provision of services, payment of payables and incurrence of and payment or
financing of capital expenditure, (v) maintain the material assets of Cinemark
and its Subsidiaries in good repair, order and condition (normal wear and tear
excepted) consistent with current needs, and (vi) pay all material Taxes as such
Taxes become due and payable in the Ordinary Course of Business, except Taxes
being contested in good faith by appropriate proceedings, provided that
appropriate reserves or accruals have been established in accordance with GAAP
for all such Taxes being so contested. Until the earlier of the termination of
this Agreement and the Closing, Cinemark shall not, and shall cause its
Subsidiaries not to, without the prior written approval of Buyer (which approval
will not be unreasonably withheld and with respect to which Buyer will use its
commercially reasonable efforts to respond to any request by
Cinemark for such approval within three Business Days of receiving such request) or as otherwise expressly contemplated by this Agreement, take any of the following actions with respect to Cinemark or any of its Subsidiaries:
(a) amend the certificate of incorporation or bylaws or other constituent or organizational document of Cinemark or of its Subsidiaries, or issue, sell, encumber, agree to issue, sell or encumber, redeem, purchase or, other than to or among Cinemark and its wholly-owned Subsidiaries, declare or pay dividends upon, any equity interests in Cinemark or any of its Subsidiaries except, in the case of dividends payable by Cinemark Brasil S.A., as required by existing organizational documents of such Subsidiaries or applicable Law;
(b) incur, assume, or guaranty any liabilities or Indebtedness of any kind;
(c) cancel any Indebtedness owed to Cinemark or its Subsidiaries or waive any material claims or rights pertaining to the business of Cinemark or any of its Subsidiaries;
(d) change in any material respect any tax elections or settle or compromise any material Tax liability;
(e) amend or terminate any Material Contract or any Lease or waive or assign any material right thereunder;
(f) dispose of any assets with a fair market value in excess of $500,000, other than the equity interests in, or assets of, Cinemark Theatres U.K., Ltd.;
(g) make any capital expenditure in excess of 120% of the amounts set forth on Schedule 6.2(h);
(h) except for changes as may be required under GAAP, which Cinemark would be required to adopt under authoritative accounting pronouncements applicable to Cinemark or its Subsidiaries, change in any material respect any accounting, financial reporting, inventory or credit allowance principle, practice, method or policy used by Cinemark or any of its Subsidiaries;
(i) compromise or settle any lawsuit or claim (including any lawsuit or claim involving as a party any Governmental Entity) if such settlement (i) involves aggregate payments by Cinemark or any of its Subsidiaries in respect of all such lawsuits or claims after the Closing (or forgiveness of amounts payable to Cinemark to or any of its Subsidiaries) in excess of $500,000 and which is not paid or covered by insurance or (ii) would reasonably be expected to have a Cinemark Material Adverse Effect;
(j) merge or consolidate with, or agree to merge or consolidate with, or purchase substantially all of the assets of, or otherwise acquire, any business, business organization or division thereof, or any other Person;
(k) fail to maintain in full force and effect insurance comparable in amount and scope of coverage to insurance now carried by it;
(l) except as required by any collective bargaining agreement or other labor union contract or Law, announce or institute any increase in the salary, commission or other compensation (including bonuses) rates payable or to become payable by Cinemark or any of its Subsidiaries to any employee of Cinemark or any of its Subsidiaries, or approve, adopt, amend or modify any Employee Plan or similar plan, agreement or arrangement, except pursuant to the terms of any contract or agreement to which Cinemark or any of its Subsidiaries is a party and which is listed on Schedule 4.12(a) attached hereto, or pursuant to existing policies and practices of Cinemark and its Subsidiaries;
(m) enter into any employment agreement with any of Cinemark's or its Subsidiaries' employees providing for annual remuneration in excess of $100,000;
(n) effect any recapitalization, reclassification, stock split or like change in the capitalization of Cinemark or any of its Subsidiaries; or
(o) commit to any of the foregoing.
Section 6.3 Registrations, Filings and Consents; Commercially Reasonable Efforts.
(a) Cinemark shall, and shall cause its Subsidiaries to, cooperate with Buyer, and Buyer shall cooperate with Cinemark and its Subsidiaries, and each such Person shall use all commercially reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things necessary, proper or advisable on such Person's part to consummate and make effective the Transaction as soon as reasonably practicable. In furtherance of the foregoing,
(i) Cinemark and Buyer shall, and Cinemark shall
cause its Subsidiaries to, use commercially reasonable efforts
to prepare and file as promptly as practicable all
documentation to effect all necessary applications, notices,
petitions, filings and other documents and to obtain as
promptly as reasonably practicable all Governmental Consents,
including requesting early termination with respect to the
filings made under the HSR Act. Cinemark and Buyer shall, and
Cinemark shall cause its Subsidiaries, to file, or cause to be
filed, as soon as practicable, and in any event within five
(5) days following the date hereof with respect to the HSR Act
filing, and within five (5) days prior to the required filing
date, with respect to all other documentation, filings and
other documents necessary to make or obtain, as the case may
be, the Governmental Consents. Subject to applicable Laws
relating to the exchange of information, Cinemark and Buyer
shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the
information relating to Cinemark or its Subsidiaries or Buyer,
as the case may be, that appear in any filing made with, or
written materials submitted to, any Governmental Entity in
connection with the Transaction. In exercising the foregoing
right, each of Buyer and
Cinemark shall, and Cinemark shall cause its Subsidiaries to, act reasonably and as promptly as reasonably practicable.
(ii) Cinemark shall, and shall cause its Subsidiaries to, use all commercially reasonable efforts to obtain as promptly as reasonably practicable all Consents required to be obtained from any third party (other than any Governmental Entity) to consummate the Transaction (including all requisite Consents under the Leases). Cinemark shall, and shall cause its Subsidiaries to, promptly provide all necessary notices to such third parties (with the Buyer first approving such notices before they are distributed), and Buyer shall cooperate and use all commercially reasonable efforts to assist Cinemark and its Subsidiaries in giving such notices and obtaining such Consents.
(iii) Cinemark and Buyer shall, and Cinemark shall cause its Subsidiaries to, use commercially reasonable efforts to prevent the entry, enactment or promulgation of any threatened or pending injunction or order that would adversely affect the ability of the parties hereto to consummate the Transaction, and to lift or rescind any injunction or order adversely affecting the ability of the parties hereto to consummate the transactions contemplated hereby.
(b) To the extent permissible under applicable Law and consistent with the instructions of any Governmental Regulatory Entity, Buyer and Cinemark each shall keep the other informed of the status of matters relating to completion of the Transaction, including promptly furnishing the other with copies of notices or other communications received by Buyer and Cinemark, as the case may be, from any third party and/or any Governmental Entity with respect to the Transaction.
(c) Each of Cinemark and Buyer agrees, and Cinemark shall cause its Subsidiaries, to provide promptly to any Government Regulatory Entity information and documents requested by any Government Regulatory Entity or necessary, proper or advisable to permit consummation of the Transaction, provided that information regarding any Affiliate of Buyer deemed to be confidential by such Affiliate shall be disclosed in the reasonable discretion of such Affiliate.
(d) The filing or process fees due or imposed under the HSR Act or any Other Competition Laws, as well as the fees and disbursements of any legal counsel or other advisor jointly retained by the parties in connection with any such filings, shall be borne by Buyer.
(e) Cinemark shall, and shall cause its Subsidiaries to, use all commercially reasonable efforts to cause the fulfillment of the conditions precedent contained in Section 7.2 and to consummate the Transaction on, and subject to, the terms and conditions set forth in this Agreement.
SECTION 6.4 [INTENTIONALLY OMITTED].
SECTION 6.5 [INTENTIONALLY OMITTED].
Section 6.6 Resignations/Directors.
(a) Cinemark shall deliver to Buyer the resignations of such persons as Buyer shall request from their position as directors or officers of each of Cinemark and its Subsidiaries effective as of the Effective Time.
(b) For a period of six years after the Closing Date, either Buyer or the Surviving Corporation shall maintain in effect Cinemark's current directors' and officers' liability insurance covering acts or omissions occurring prior to the Closing Date with respect to those Persons who are currently covered by Cinemark's directors' and officers' liability insurance policy on substantially the terms with respect to such coverage and amount as those of such policy in effect on the date of this Agreement, provided, however, that in no event will Buyer or the Surviving Corporation be required to expend, on an annual basis, as the cost of maintaining such coverage more than 200% of the amount currently expended by Cinemark to procure its existing insurance coverage. The amount currently expended by Cinemark to procure such insurance coverage is $127,500. Notwithstanding the foregoing, Buyer, if it so elects, may satisfy its obligations under this Section 6.6(b) at any time by procuring one or more so-called "tail" or "runoff" policies of directors' and officers' liability insurance that insure against the risks that would be insured against by the current insurance policy.
(c) To the extent permitted under applicable Law, Buyer shall cause the Surviving Corporation to, and the Surviving Corporation shall, include and maintain in effect in its certificate of incorporation and bylaws for a period of at least six years, the same provisions regarding elimination of liability, indemnification and advancement of expenses of officers, directors, employees and other persons contained in Cinemark's certificate of incorporation and by-laws as in effect on the date hereof.
Section 6.7 Actions with Respect to Financing.
(a) Senior Credit Facility and Senior Subordinated Notes. On the Closing Date, Cinemark shall cause Cinemark USA and its other Subsidiaries, as applicable, to amend and restate the terms of the Senior Credit Facility in such manner and form as requested by Buyer in its reasonable discretion. Buyer shall cause the Surviving Corporation to make the change of control purchase offer to the holders of the Senior Subordinated Notes to the extent required under the terms of the indentures governing the Senior Subordinated Notes.
(b) Tender Offer.
(i) As soon as reasonably practicable after the execution and delivery of this Agreement, Cinemark shall cause Cinemark USA to commence a tender offer (the "TENDER OFFER") pursuant to Rule 14e-1 of the Exchange Act for the 8.5% Senior Subordinated Notes. Cinemark shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to assist Buyer and the dealer manager in connection with the preparation of all filings, mailings or other submissions to be made in connection with the Tender Offer. Cinemark and Buyer shall mutually
agree upon the terms, conditions and structure of the Tender Offer, including the elimination of substantially all negative covenants in the 8.5% Indenture; provided that each party agrees not to unreasonably withhold its consent to such terms (including price), conditions and structures that are advised by the investment banking firm managing such tender to be customary for tenders of this type (as market conditions exist as of the date of this Agreement). Notwithstanding the foregoing, consent to terms, conditions and structures which are no less favorable to the holders of the 8.5% Senior Subordinated Notes than those recommended by such investment banking firm, shall not be withheld by a party, if the other party agrees to otherwise bear the cost of such term, condition or structure. The Tender Offer shall be consummated, and amounts payable to the holders of the 8.5% Senior Subordinated Notes shall be paid, only in the event that the Closing occurs. Buyer shall have the right to designate the investment banking firm that will manage the Tender Offer. Cinemark shall cause Cinemark USA to execute any supplemental indenture (and all documents related thereto) to give effect to the amendments approved pursuant to the Tender Offer.
(ii) If at any time prior to the Closing, any information relating to Cinemark or any of its Subsidiaries, or any of its Affiliates, officers, directors or employees is discovered by Buyer, Cinemark or any of its Subsidiaries and is of a type which should be set forth in an amendment or supplement to the documents filed or mailed in respect of the Tender Offer so that such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein not misleading, the party which discovers such information shall promptly notify the other parties hereto and, to the extent required by law, rules or regulations, an appropriate amendment or supplement describing such information shall promptly be prepared by Cinemark USA, and, if required, filed with the Securities and Exchange Commission and/or disseminated to the holders of the 8.5% Senior Subordinated Notes.
(c) From the date hereof until the Closing Date, Cinemark shall, and shall cause each of its Subsidiaries and its and their respective employees and representatives to use commercially reasonable efforts to, assist Buyer in obtaining the Financing and in connection therewith, shall, and shall cause each of its Subsidiaries to, use commercially reasonable efforts to: (i) promptly prepare and provide all financial and other information as Buyer or the lenders may reasonably request with respect to Cinemark, its Subsidiaries and the transactions contemplated hereby, including financial projections relating to the foregoing; (ii) assist in the preparation of an offering memorandum and "road show" and other marketing materials for use in connection with the offering of any securities constituting a portion of the Financing; (iii) make available to prospective lenders such senior management and advisors of Cinemark and its Subsidiaries as the lenders may reasonably request; (iv) make senior management of Cinemark and its Subsidiaries reasonably available to participate in "road show" meetings with prospective investors in connection with the offering of any securities constituting a portion of the Financing; (v) assist Buyer and the lenders in the preparation of one or more confidential information memoranda and other marketing materials to be used in connection with the syndication of each of such facilities; and (vi) assist Buyer in procuring any title insurance (including
owner's policies containing non-imputation endorsements), surveys, environmental assessments, landlord lien waivers and access agreements, Consents and estoppel certificates, and such other documents as may be required in connection with the Financing.
Section 6.8 Brazil Option Agreement. Following the Closing Date, Buyer shall cause the Surviving Corporation to comply with the applicable terms and provisions of the Option Agreement and shall cause one of its Subsidiaries to purchase the Liquidity Stock (as such term is defined in the Option Agreement) tendered pursuant to the terms of the Option Agreement. The Surviving Corporation shall indemnify and hold Lee Roy Mitchell harmless from and against all claims, losses, damages and liabilities, including reasonable legal and other expenses arising from any breach by the Surviving Corporation of the Option Agreement or this Section 6.8.
Section 6.9 Public Announcements. Prior to the Closing, Cinemark and Buyer agree that they shall not, and Cinemark shall cause its Subsidiaries not to, make any statement to the press, press release or other public announcement regarding this Agreement or the Transaction unless the text and time of the release of any such statement have been approved by the other party, except where such disclosure is required pursuant to applicable Law, including disclosures to the Securities and Exchange Commission regarding this Agreement (in which case such party will provide reasonable opportunity to the other party to review and consult with the other party regarding, any such public statements prior to disclosure). The parties shall issue a joint press release, mutually acceptable to Cinemark and Buyer, promptly upon execution of this Agreement. Thereafter, neither party to this Agreement will issue any press release or make any other public disclosures concerning the Transaction or the contents of this Agreement without the prior written consent of the other party. Notwithstanding the above, nothing in this Section 6.9 will preclude any party from making any disclosures required by Law or necessary and proper in conjunction with the filing of any tax return or other document required to be filed in connection with making or obtaining (as the case may) the Governmental Consents; provided, that the party required to make the release or statement shall allow the other party reasonable time to review and comment on such release or statement in advance of such issuance.
Section 6.10 Exclusivity. Until the earlier to occur of the termination of this Agreement and the consummation of the Closing, Cinemark shall not, and shall cause its Subsidiaries and its and its Subsidiaries' representatives (including their respective officers, directors, employees, agents, attorneys, accountants and financial advisors) not to: (a) solicit or initiate any proposal or offer from any Person relating to, or enter into or consummate any Alternative Transaction; or (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner, any effort or attempt by any Person to do or seek any of the foregoing. In addition, Cinemark shall, and shall cause its Subsidiaries and its and its Subsidiaries' representatives to (including their respective officers, directors, employees, agents, attorneys, accountants and financial advisors), cease all discussions with any Persons other than Buyer with respect to any Alternative Transaction, and Cinemark shall promptly notify Buyer if any Person makes any proposal, offer, inquiry, or contact with respect to a possible Alternative Transaction with Cinemark and will provide to Buyer the terms of any such proposal.
Section 6.11 Notice of Developments. Each of Cinemark and Buyer shall
promptly, and in any event within 48 hours, notify the other party in writing
(a) if any representation or warranty of Cinemark or Buyer, as the case may be,
set forth in this Agreement was untrue when made, (b) of any breach of any
covenant or obligation of Cinemark or Buyer, as the case may be, set forth in
this Agreement and (c) of any development occurring after the date of this
Agreement that would cause or constitute a breach of any of the representations
and warranties of Cinemark or Buyer, as the case may be, if such representation
or warranty had been made at the time of such development.
Section 6.12 Information Statement. Promptly after the date hereof, Cinemark shall commence the preparation of all disclosure documents required under all applicable Law to be sent to its stockholders related to the Merger, this Agreement or any of the agreements contemplated hereby and the Transaction (collectively, the "INFORMATION STATEMENT"). Cinemark covenants that at least one (1) of the disclosure documents comprising the Information Statement will contain all material information which is required to be included therein in accordance with applicable Law (including Treas. Reg. Section 1.280G-1, Q/A 7) and will conform in all material respects with the requirements of applicable Law and Cinemark's certificate of incorporation and bylaws. Cinemark covenants that the Information Statement (and all amendments and supplements thereto) will not, at the time published, sent or given to its stockholders, contain any untrue statement of a material fact or omit to state any fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If at any time prior to the Closing, any event with respect to Cinemark or any of its Subsidiaries shall occur which is required to be described in an amendment of or a supplement to the Information Statement, Cinemark shall so make the appropriate disclosure to its stockholders. Cinemark shall consult with Buyer, and obtain the prior written approval of the Buyer (which shall not be unreasonably withheld), with respect to the disclosures made in the Information Statement with respect to this Agreement or the Transaction, and the Information Statement which is to be sent to Cinemark's stockholders shall be in the form approved by Buyer (which approval shall not be unreasonably withheld). As soon as practicable following the date hereof (but in no event later than 10 days thereafter), Cinemark shall finalize the Information Statement for mailing to its stockholders pursuant to this Section 6.12.
ARTICLE VII.
CONDITIONS TO CLOSING
Section 7.1 Conditions to Each Party's Obligation to Effect the Transaction. The respective obligations of the parties to consummate the Transaction are subject to the satisfaction or waiver as of the Closing of each of the following conditions:
(a) The waiting period applicable to the consummation of the Merger contemplated hereby under the HSR Act shall have expired or been earlier terminated, and all filings to be made prior to the Effective Time with, and all consents, approvals, permits and authorizations to be obtained prior to the Effective Time from, Governmental Entities in connection with the execution and delivery of this Agreement and the
consummation of the Transaction, including Other Competition Laws, shall have been made or obtained (as the case may be). All of the foregoing filings, consents, approvals, permits and authorizations (collectively, the "GOVERNMENTAL CONSENTS") are set forth on Schedule 7.1(a) attached hereto.
(b) No court or Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Order that is in effect which enjoins or otherwise prohibits consummation of the Transaction.
(c) Each of Buyer and Cinemark shall have executed and delivered, or caused to have been executed and delivered, at the Closing all of the documents required to be executed and delivered pursuant to this Agreement.
Section 7.2 Conditions to Obligations of Buyer. The obligation of Buyer to consummate the Transaction is subject to the satisfaction (or waiver in writing by Buyer) in writing as of the Closing of each of the following conditions:
(a) All of Cinemark's representations and warranties made in this Agreement (including the Schedules attached hereto, and without giving effect to any disclosures made by Cinemark after the date hereof) shall have been true and correct as of the date hereof and shall be true and correct in all respects (determined without regard to any materiality or Cinemark Material Adverse Effect qualifier therein) as of the Closing Date as though made as of such date, except for such breaches of representations and warranties (determined as aforesaid) (other than the representations and warranties contained in Section 4.2) that, either individually or in the aggregate, have not or would not reasonably be expected to have a Cinemark Material Adverse Effect.
(b) The covenants and agreements of Cinemark to be performed on or prior to the Effective Time shall have been duly performed in all material respects (except for any covenants and agreements that are qualified by a standard of materiality, which covenants and agreements shall have been duly performed in all respects).
(c) No event which has had or would reasonably be expected to have a Cinemark Material Adverse Effect shall have occurred since the date of this Agreement.
(d) No court or Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Order, and no action or proceeding shall have been instituted or threatened prior to or on the Closing Date before any Governmental Entity pertaining to the Transaction, in each case, the result of which could prevent or make illegal the consummation of the Transaction.
(e) Cinemark shall have procured and delivered to Buyer all Consents by third parties required to be disclosed by Section 4.1, including written Consents of each of the Leases for which Consent is required under its terms, on terms and conditions reasonably satisfactory to Buyer.
(f) Cinemark shall have furnished Buyer with an opinion of Akin Gump Strauss Hauer & Feld LLP, counsel to Cinemark (which opinion shall state that the agent
and the lenders (including any initial purchasers) with respect to the Financing may rely on such opinion for purposes of providing or arranging for such debt financing), opining on the matters set forth on Exhibit 7.2(f) attached hereto, in form and substance reasonably acceptable to Buyer's counsel. Buyer shall have received an opinion of special Delaware counsel, in form and substance reasonably acceptable to Buyer's counsel, opining on the following matters: (i) all Delaware consents, approvals and filings have been made or obtained; and (ii) upon filing of the Certificate of Merger with the State of Delaware, the Merger will be effective.
(g) Each of the agreements set forth on Exhibit 7.2(g) attached hereto shall have been terminated after giving effect to the Closing, and evidence of such shall have been delivered to Buyer, in form and substance reasonably satisfactory to Buyer.
(h) The Stockholders Agreement, dated the date hereof, by and among Cinemark, the Continuing Stockholders and the other signatories thereto shall be in full force and effect as of the Closing.
(i) Cinemark shall have obtained on terms and conditions reasonably satisfactory to Buyer sufficient funds to consummate the Transaction (the "FINANCING").
(j) There shall have been no payments (including accelerated vesting of stock or options) that Cinemark or any of its Subsidiaries, Buyer or any of their Affiliates has made or is or may be required to make as a result of the Transaction that was, is, or will be an "excess parachute payment" within the meaning of Code Section 280G.
(k) Each of the Employment Agreements, dated the date hereof, between Cinemark and each of Lee Roy Mitchell, Tandy Mitchell, Alan Stock, Robert Copple, Timothy Warner, Michael Cavalier, Robert Carmony and John Lundin shall be in full force and effect as of the Closing.
(l) Buyer shall have received copies of written acknowledgements, in form and substance reasonably satisfactory to Buyer (collectively, the "EXPENSE ACKNOWLEDGEMENTS"), from each of the payees of the Expenses of Cinemark and its Subsidiaries (other than (i) the fees and expenses of their investment bankers or lenders to the extent that such fees or expenses are incurred in connection with the Financing or the Tender Offer and (ii) the fees of the special Delaware counsel engaged to deliver the opinion referenced in Section 7.2(f)) that such payee has been paid in full for all services rendered for, or on behalf of, Cinemark and its Subsidiaries related to the Transaction, and each of such acknowledgements shall be in full force and effect as of the Closing.
(m) Cinemark shall have delivered to Buyer a certificate of an
authorized officer of Cinemark in the form set forth on Exhibit 7.2(m),
dated the Closing Date, stating that each of the conditions specified
above in Sections 7.2(a) - (d), inclusive, Section 7.2(j), and Sections
7.2(p) - (r), inclusive, is satisfied in all respects.
(n) Each of the Non-competition, Non-solicitation and Non-disclosure Agreements, dated the date hereof, between Cinemark and each of Lee Roy Mitchell, Tandy Mitchell, Alan Stock, Robert Copple, Timothy Warner, Michael Cavalier, Robert
Carmony and John Lundin shall be in full force and effect as of the Closing. The Non-competition, Non-solicitation and Non-disclosure Agreement, dated the date hereof, among Cinemark, CGI Equities Ltd., The Mitchell Special Trust, Mitchell Grandchildren's Trust for Crystal Lee Roberts, Mitchell Grandchildren's Trust for Cassie Ann Roberts, Mitchell Grandchildren's Trust for Lacey Marie Lee, Mitchell Grandchildren's Trust for Ashley Ann Lee, Mitchell Grandchildren's Trust for Skyler Kaye Mitchell and The Mitchell Foundation shall be in full force and effect as of the Closing. The Non-solicitation and Non-disclosure Agreement, dated the date hereof, among Cinemark, Cypress Merchant Banking Partners L.P. and Cypress Pictures Ltd. shall be in full force and effect.
(o) Cinemark shall have delivered to Buyer a copy of the irrevocable written consent duly approving the Merger in accordance with the DGCL and Cinemark's certificate of incorporation and bylaws from the holders of not less than 91% of all of the outstanding shares of Cinemark Common Stock as of the date hereof.
(p) Aggregate Cash on Hand shall be an amount equal to not less than Seventy Million Dollars ($70,000,000), and Available Cash on Hand shall be an amount equal to not less than Twenty-Six Million Three Hundred Thousand Dollars ($26,300,000); provided that if the sale of Cinemark Theatres U.K., Ltd. has not occurred as of the Closing, Aggregate Cash on Hand shall be an amount equal to not less than Sixty-Six Million Five Hundred Thousand Dollars ($66,500,000). Cinemark shall have delivered to Buyer evidence reasonably satisfactory to Buyer of the foregoing.
(q) Neither Cinemark nor any of its Subsidiaries shall have incurred, assumed or guaranteed any Indebtedness of any kind after the date hereof. Cinemark shall have delivered to Buyer evidence reasonably satisfactory to Buyer of the foregoing.
(r) Each of the holders of the Stock Options that were granted after May 17, 2002 shall have surrendered his or her Stock Options for cancellation upon payment of the Option Consideration payable in respect thereof, and Cinemark shall have delivered to Buyer evidence reasonably satisfactory to Buyer of the foregoing.
(s) The execution and delivery of this Agreement and any other documents and instruments required to be executed and delivered by Cinemark pursuant to this Agreement, and the performance of its obligations hereunder and thereunder, shall have been duly authorized by all necessary corporate and shareholder action on the part of Cinemark, and Buyer shall have received copies of all resolutions pertaining to those authorizations, certified by the Secretary of Cinemark.
Section 7.3 Conditions to Obligations of Cinemark. The obligation of Cinemark to consummate the Transaction is subject to the satisfaction (or waiver in writing by Cinemark) as of the Closing of each of the following conditions:
(a) Buyer's representations and warranties made in this Agreement shall be true and correct in all respects (determined without regard to any materiality or Buyer Material Adverse Effect qualifier therein) as of the Closing Date as though made as of
such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date), and except for such breaches of representations and warranties (determined as aforesaid) that, in the aggregate, would not reasonably be expected to have a Buyer Material Adverse Effect, and Cinemark shall have received a certificate from an authorized officer of Buyer to such effect.
(b) The covenants and agreements of Buyer to be performed on or prior to the Closing shall have been duly performed in all material respects, and Cinemark shall have received a certificate to such effect dated the Closing Date and executed by a duly authorized officer of Buyer.
ARTICLE VIII.
TERMINATION
Section 8.1 Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Closing as follows:
(a) by mutual written agreement of the parties hereto; or
(b) by either Cinemark or Buyer if the Effective Time shall not have occurred on or prior to sixty (60) days after the date of this Agreement, unless extended by written agreement of the parties hereto; provided, however, that the right to terminate under this Section 8.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; or
(c) by either Buyer or Cinemark, by giving written notice of such termination to the other party, if any Order permanently enjoining or otherwise prohibiting consummation of the Transaction shall become final and non-appealable; or
(d) by Cinemark if any of the conditions set forth in Sections 7.1 or 7.3 shall have become incapable of fulfillment and shall not have been waived by Cinemark; provided, however, that the right to terminate this Agreement shall not be available to Cinemark if its breach of its obligations under this Agreement has been the cause of the impossibility of fulfillment of such condition; or
(e) by Buyer if any of the conditions set forth in Section 7.1 or 7.2 shall have become incapable of fulfillment and shall not have waived by Buyer; provided, however, that the right to terminate this Agreement shall not be available to Buyer if its breach of its obligations under this Agreement has been the cause of the impossibility of fulfillment of such condition.
Section 8.2 Effect of Termination. In the event of the termination of this Agreement in accordance with Section 8.1 hereof, this Agreement shall thereafter become void and have no effect, and no party hereto or its respective Affiliates or their directors, officers, employees, shareholders or agents shall have any liability to the other parties hereto or their respective Affiliates, directors, officers, employees, shareholders or agents except for the obligations of the
parties hereto contained in Section 6.9 (Public Announcements), this Section 8.2, Section 9.2 (Expenses), Section 9.9 (Notices), Section 9.10 (Governing Law) and Section 9.11 (Waiver of Jury Trial), and except that nothing herein will relieve any party from liability for a breach of this Agreement prior to such termination.
ARTICLE IX.
MISCELLANEOUS
Section 9.1 Amendment and Waiver. This Agreement may be amended, supplemented or otherwise modified only by a written instrument executed by each of the parties hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or agreements contained herein, and in any documents delivered or to be delivered pursuant to this Agreement and in connection with the Closing hereunder. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.
Section 9.2 Expenses. Except as otherwise expressly provided in this Agreement, (i) if the Closing occurs, the Surviving Corporation shall pay all of the Expenses of Cinemark and its Subsidiaries and Buyer, other than the Cinemark Payable Expenses (which shall be borne by the Stockholders as a reduction to the Purchase Price pursuant to Section 3.6(a)(ii)); and (ii) if the Closing does not occur, the parties hereto shall bear their own respective Expenses incurred in connection with this Agreement and the Transaction; provided, that all out-of-pocket expenses incurred by or on behalf of Madison Dearborn Capital Partners IV, L.P. or any of its Affiliates or Cinemark or any of its Subsidiaries in connection with (A) the delivery by special Delaware counsel of the opinion referenced in Section 7.2(f) and (B) the Financing (including the preparation and negotiation of any amendment and restatement of the Senior Credit Facility) and the Tender Offer payable to the investment banks and the lenders engaged by Cinemark or any of its Subsidiaries in connection with the Financing and the Tender Offer and their respective legal counsel shall be borne 50% by each of Buyer and Cinemark.
Section 9.3 Assignment. No party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other parties hereto, which consent will not unreasonably be withheld, and any attempted assignment, without such consent, shall be null and void; provided that Buyer shall have the right to assign all or any portion of their rights and obligations under this Agreement to (i) one or more wholly-owned subsidiaries of Buyer (including any subsidiary which may be organized subsequent to the date hereof), or (ii) to any lender providing financing to Buyer or the Surviving Corporation or any of their Affiliates, for collateral security purposes, and any such lender may exercise all of the rights and remedies of Buyer hereunder, provided that no such assignment shall in any manner limit or impair Buyer's obligations hereunder.
Section 9.4 Entire Agreement. This Agreement (including all Exhibits and Schedules hereto) and the Confidentiality Agreement referred to herein contain the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.
Section 9.5 Parties in Interest; No Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Except for the rights of officers and directors under Section 6.6 and the rights of Lee Roy Mitchell under Section 6.8, nothing in this Agreement, express or implied, is intended to confer upon any Person other than Buyer, Cinemark or their respective successors, any rights or remedies under or by reason of this Agreement.
Section 9.6 Schedules. The Schedules to this Agreement shall be arranged in sections corresponding to the numbered and lettered sections contained in Article 4, and any disclosure made with respect to any particular numbered or lettered section shall not be deemed disclosed with respect to any other numbered or lettered section unless the relevance of such disclosure to such other numbered or lettered section is reasonably identified in such disclosure. Nothing in the Schedules shall be deemed adequate to disclose an exception to a representation or warranty made herein unless the Schedules identify the exception with reasonable particularity and describes the relevant facts in reasonable detail. Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself).
Section 9.7 Counterparts. This Agreement and any amendments hereto may be executed in multiple counterparts, each of which shall be deemed to be an original by the parties executing such counterpart, but all of which shall be considered one and the same instrument.
Section 9.8 Section Headings; Table of Contents. The section headings and table of contents contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
Section 9.9 Notices. All notices or other communications hereunder shall be deemed to have been duly given and made if in writing and if served by personal delivery upon the party for whom it is intended, if delivered by registered or certified mail, return receipt requested, or by a national courier service, or if sent by facsimile (with confirmation thereof), to the person at the address set forth below, or such other address as may be designated in writing hereafter, in the same manner, by such person:
(a) if to Cinemark, to: Cinemark, Inc. 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 Facsimile: (972) 665-1004 Attention: Michael Cavalier
With copies to: Akin Gump Strauss Hauer & Feld LLP 1700 Pacific Ave., Suite 4100 Dallas, Texas 75201 Facsimile: (214) 969-4343 Attention: Terry M. Schpok, P.C.
(b) if to Buyer to: Popcorn Merger Corp.
c/o Madison Dearborn Capital Partners
Three First National Plaza, 38th Floor
Chicago, IL 60602
Tel.: (312) 895-1000
Fax: (312) 895-1056
Attention: Benjamin D. Chereskin
Robin P. Selati
With a copy to: Kirkland & Ellis LLP
200 E. Randolph Drive
Chicago, IL 60601
Tel.: (312) 861-2000
Fax: (312) 861-2200
Attention: Edward T. Swan, P.C.
Any notice given by mail shall be effective when received.
Section 9.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS.
Section 9.11 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THE AGREEMENT OR THE TRANSACTION, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY ACTION OR PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT OR THIS TRANSACTION SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
Section 9.12 Severability. The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof unless such invalidity or unenforceability, after taking into account the mitigation contemplated by the next sentence, deprives a party of a material benefit contemplated by this Agreement. If any provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid or unenforceable: (a) a suitable
and equitable provision shall be substituted therefor in order to carry out, as far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.
Section 9.13 Construction. This Agreement has been negotiated by the parties and their respective counsel in good faith and will be fairly interpreted in accordance with its terms and without any strict construction in favor of or against any party.
Section 9.14 Specific Performance. The parties agree that irreparable damage would occur in the event that the provisions of this Agreement were not performed in accordance with their specific terms. Accordingly, it is agreed that the parties shall be entitled to an injunction or injunctions to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity.
Section 9.15 Survival of Representations, Warranties and Covenants. Except in the case of fraud, the representations and warranties made in this Agreement shall expire and be terminated and extinguished immediately after the Closing, and thereafter none of Cinemark, Buyer, the Surviving Corporation nor any other Person shall have any liability whatsoever with respect to any of such expired representation or warranty. The covenants and agreements of the parties to this Agreement will survive in accordance with their terms.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been signed on behalf of each of the parties hereto as of the date first written above.
CINEMARK, INC.
By: /s/ Lee Roy Mitchell --------------------------------- Name: Lee Roy Mitchell Title: Chief Executive Officer |
POPCORN MERGER CORP.
By: /s/ Benjamin D. Chereskin ------------------------------------ Name: Benjamin D. Chereskin Title: President |
SOLELY WITH RESPECT TO ARTICLE III:
/s/ Lee Roy Mitchell --------------------------------------- Lee Roy Mitchell |
THE MITCHELL SPECIAL TRUST
By /s/ Lee Roy Mitchell ------------------------------------ Lee Roy Mitchell, Trustee By /s/ Gary Witherspoon ------------------------------------ Gary Witherspoon, Trustee /s/ Timothy Warner --------------------------------------- Timothy Warner /s/ Robert Copple --------------------------------------- Robert Copple /s/ Michael Cavalier --------------------------------------- Michael Cavalier /s/ Alan Stock --------------------------------------- Alan Stock |
EXHIBIT 2.2
EXECUTION COPY
CINEMARK, INC.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of March 12, 2004, among Cinemark, Inc., a Delaware corporation (the "COMPANY"), the Persons listed on the Schedule of Purchasers attached hereto (collectively referred to herein as the "PURCHASERS" and individually as a "PURCHASER"). Except as otherwise indicated herein, capitalized terms used herein are defined in Section 6 hereof.
The parties hereto agree as follows:
Section 1. Authorization and Closing.
(a) Authorization of the Securities. The Company shall authorize the issuance to the Purchasers shares of its Class A Common Stock, par value $.01 per share (the "CLASS A COMMON STOCK").
(b) Purchase of Securities. At the Closing (as defined in
Section 1(c) below), the Company shall sell to each Purchaser and, subject to
the terms and conditions set forth herein, each Purchaser shall purchase from
the Company the number of shares of Class A Common Stock set forth opposite such
Purchaser's name on the Schedule of Purchasers attached hereto at a price per
share equal to the Merger Consideration (as such term is defined in the Merger
Agreement).
(c) The Closing. The closing of the separate purchases and sales hereunder (the "CLOSING") shall take place at the offices of Akin Gump Strauss Hauer & Feld LLP in Dallas, Texas, contemporaneously with the closing of the merger (the "MERGER") under the Agreement and Plan of Merger, dated as of the date hereof, between the Company and Popcorn Merger Corp. (the "MERGER AGREEMENT"). At the Closing, the Company shall deliver to each Purchaser stock certificates evidencing the Class A Common Stock to be purchased by such Purchaser, each registered in such Purchaser's or its nominee's name, upon payment of the purchase price thereof by wire transfer of immediately available funds to such account as designated by the Company prior to the Closing, in the amount set forth opposite such Purchaser's name on the Schedule of Purchasers.
(d) Closing Fee. At the Closing, the Company shall pay Madison Dearborn Capital Partners IV, L.P. ("MDCP") a closing fee in the amount of $12,500,000 by wire transfer of immediately available funds to a bank account designated by MDCP to the Company.
Section 2. Conditions of Each Purchaser's Obligation at the Closing. The obligation of each Purchaser to purchase and pay for the Class A Common Stock at the Closing is subject to the satisfaction as of the Closing of the following conditions:
(a) Representations and Warranties; Covenants. The representations and warranties contained in Section 4 hereof shall be true and correct in all material respects at and as of the Closing as though then made, except to the extent of changes caused by the transactions
expressly contemplated herein, and the Company shall have performed in all material respects all of the covenants required to be performed by it hereunder prior to the Closing.
(b) Merger Agreement. The Merger Agreement shall be in full force and effect as of the Closing, and the closing contemplated by the Merger Agreement shall have been completed simultaneously in accordance with the terms of the Merger Agreement.
(c) Closing Documents. The Company shall have delivered to each Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing, stating that the conditions specified in Section 1 and Sections 2(a) and 2(b), inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the Company's board of directors authorizing the execution, delivery and performance of this Agreement, the Merger Agreement and the other agreements contemplated in connection therewith (collectively, the "TRANSACTION DOCUMENTS"), the issuance and sale of the Class A Common Stock, and the consummation of the transactions contemplated by this Agreement; and
(iii) certified copies of the Company's Certificate of Incorporation and Bylaws, each as in effect at the Closing.
(d) Waiver. Any condition specified in this Section 2 may be waived if consented to by each Purchaser.
Section 3. Transfer of Restricted Securities.
(a) Restricted Securities are transferable only pursuant to
(i) public offerings registered under the Securities Act, (ii) Rule 144 of the
Securities and Exchange Commission (or any similar rule or rules then in force)
if such rule is available, (iii) the applicable terms and conditions of the
Stockholders Agreement, and (iv) subject to the conditions specified below, any
other legally available means of transfer.
(b) In connection with the transfer of any Restricted Securities (other than a transfer described in Section 4(a)(i) or (ii) above), the holder thereof shall deliver written notice to the Company describing in reasonable detail the transfer or proposed transfer, together with an opinion of counsel which (to the Company's reasonable satisfaction) is knowledgeable in securities law matters to the effect that such transfer of Restricted Securities may be effected without registration of such Restricted Securities under the Securities Act. In addition, if the holder of the Restricted Securities delivers to the Company an opinion of counsel which (to the Company's reasonable satisfaction) is knowledgeable in securities law matters that no subsequent transfer of such Restricted Securities shall require registration under the Securities Act, the Company shall promptly upon such contemplated transfer deliver new certificates for such Restricted Securities which do not bear the Securities Act legend set forth in Section 7(f). If the Company is not required to deliver new certificates for such Restricted Securities not bearing such legend, the holder thereof shall not transfer the same until the prospective transferee
has confirmed to the Company in writing its agreement to be bound by the conditions contained in this Section 3 and Section 7(f).
Section 4. Representations and Warranties of the Company. As a material inducement to the Purchasers to enter into this Agreement and acquire shares of Class A Common Stock hereunder, the Company hereby represents and warrants that:
(a) Organization and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware and is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. The Company has all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on its businesses as now conducted and presently proposed to be conducted and to carry out the transactions contemplated by this Agreement.
(b) Capital Stock and Related Matters. As of the Closing after giving effect to the Merger, the authorized capital stock of the Company shall consist of 40,000,000 shares of Class A Common Stock, of which approximately 27,720,000 shares shall be issued and outstanding, and approximately 3,080,000 shares shall be reserved for issuance upon exercise of stock options under the stock option plan to be authorized by the Board. As of the Closing, the Company shall not have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock, nor shall it have outstanding any rights or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock, except for the employee stock options to be granted pursuant to the terms of the Executive Employment Agreements and the Brazilian Put Agreements. As of the Closing, the Company shall not be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock. As of the Closing, all of the outstanding shares of the Company's capital stock shall be validly issued, fully paid and nonassessable.
(c) Authorization; No Breach. The execution, delivery and performance of the Transaction Documents to which the Company is a party have been duly authorized by the Company. Each of the Transaction Documents to which the Company is a party constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms. The execution and delivery by the Company of each of the Transaction Documents to which the Company is a party, the offering, sale and issuance of the Class A Common Stock hereunder and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not (i) conflict with or result in a material breach or violation of, or (ii) require any material authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to, any material law, statute, rule or regulation to which the Company is subject or any material agreement, instrument, order, judgment or decree to which the Company is subject, except as disclosed in the Merger Agreement.
Section 5. Effective Date. This Agreement shall become effective automatically without any further actions by any of the parties hereto simultaneously with the closing of the Merger under the Merger Agreement. However, prior thereto, this Agreement shall terminate
and become null and void automatically without further actions by any of the parties hereto immediately upon the termination of the Merger Agreement pursuant to its terms.
Section 6. Definitions. For the purposes of this Agreement, the following terms have the meanings set forth below:
"AFFILIATE" means any Person which directly or indirectly controls, is controlled by or is under common control with another Person and Persons which have received distributions of securities from a partnership holding such securities or in the case of any Investor that is a trust, any beneficiary trust for the benefit of the beneficiary or successor trust.
"BOARD" means the Company's board of directors.
"CLASS A COMMON STOCK" has the meaning set forth in Section 1(a).
"CLOSING" has the meaning set forth in Section 1(c).
"EXECUTIVE EMPLOYMENT AGREEMENTS" means each of the Employment Agreements, dated as of the date hereof, between the Company and each of Alan Stock, Robert Copple, Timothy Warner and Michael Cavalier.
"MDCP" has the meaning set forth in Section 1(d).
"MERGER" has the meaning set forth in Section 1(c).
"MERGER AGREEMENT" has the meaning set forth in Section 1(c).
"PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, limited liability company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.
"RESTRICTED SECURITIES" means (i) the Class A Common Stock
issued hereunder and (ii) any securities issued with respect to the
Class A Common Stock referred to in clause (i) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to
any particular Restricted Securities, such securities shall cease to be
Restricted Securities when they have (i) been effectively registered
under the Securities Act and disposed of in accordance with the
registration statement covering them, (ii) become eligible for sale
pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act or been otherwise transferred and new certificates
for them not bearing the Securities Act legend set forth in Section
9(f) have been delivered by the Company in accordance with Section
4(b). Whenever any particular securities cease to be Restricted
Securities, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in Section
9(f).
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar federal law then in force.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or agency succeeding to the functions thereof.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of the date hereof among the Company, the Purchasers and other stockholders of the Company, as amended from time to time in accordance with its terms.
"SUBSIDIARY" means, with respect to any Person, any corporation, partnership, association, limited liability company, trust, joint venture, unincorporated organization, or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, joint stock company, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, limited liability company, joint stock company, association or other business entity if such Person or Persons shall be allocated a majority of partnership, limited liability company, joint stock company, association or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, limited liability company, joint stock company, association or other business entity.
"TRANSACTION DOCUMENTS" has the meaning set forth in Section 2(c)(ii).
Section 7. Investment Representations. As a material inducement to cause the Company to enter into this Agreement and to issue the Class A Common Stock to the Purchasers hereunder, each Purchaser for solely himself, herself or itself and not jointly and severally, hereby represents and warrants to the Company as follows:
(a) Illiquidity of Shares. Such Person understands that (i) the offering and sale of the Class A Common Stock is intended to be exempt from registration under the Securities Act pursuant to Section 4(2) and Regulation D of the Securities Act and (ii) there is no existing public or other market for the Class A Common Stock and there can be no assurance that such Person shall be able to sell or dispose of the Class A Common Stock.
(b) Investment Intent. The Restricted Securities to be acquired by such Person pursuant to this Agreement is being acquired for such Person's own account with the present intention of holding the Class A Common Stock for purposes of investment, and that such Person has no intention of selling the Class A Common Stock in a public distribution in
violation of the federal securities laws or any applicable state securities laws; provided that nothing contained herein shall prevent such Person and subsequent holders of Restricted Securities from transferring the Restricted Securities in compliance with Section 4.
(c) Investor Sophistication. Such Person has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of his, her, or its investment in the Class A Common Stock and is capable of bearing the economic risks of such investment for an indefinite period, including a complete loss of its investment in the Class A Common Stock.
(d) Access to Information. Such Person has had the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of the Class A Common Stock, this Agreement and all other agreements contemplated hereby. Such Person further acknowledges that the Company has made available to such Person or his, her, or its agents all documents and information relating to an investment in the Class A Common Stock requested by or on behalf of such Person.
(e) Accredited Investor Status. Such Person is an accredited investor within the meaning of Rule 501(a) of Regulation D under the Securities Act.
(f) Required Legend. Each certificate for Restricted Securities shall be imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON MARCH __ 2004, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK PURCHASE AGREEMENT, DATED AS OF MARCH __, 2004, BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
(g) Equity Financing. Madison Dearborn Capital Partners IV, L.P. ("MDCP") has sufficient equity financing to fund the purchase of securities contemplated herein on the terms and conditions contemplated by this Agreement and to consummate the transactions contemplated hereby.
Section 8. Miscellaneous.
(a) Expenses. The Company agrees to pay, and hold MDCP and its Affiliates harmless against liability for the payment of, its reasonable fees and expenses incurred in connection with the negotiation and execution of this Agreement and the Merger Agreement and the consummation of the transactions contemplated by this Agreement and the Merger
Agreement (including, without limitation, the fees and expenses of Kirkland & Ellis LLP, Baker & McKenzie, Ernst & Young LLP and Allen & Company LLC and the costs and expenses of forming Popcorn Merger Corp.), which shall be payable at the Closing.
(b) Consent to Amendments. Except as otherwise expressly provided herein, the provisions of this Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of a majority of the Class A Common Stock issued hereunder.
(c) Successors and Assigns. Except as otherwise expressly provided herein and except for transfers in violation of the terms and conditions of the Stockholders Agreement, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not. Notwithstanding anything to the contrary contained herein, prior to the Closing, MDCP may assign its rights hereunder to purchase shares of Class A Common Stock to any of its Affiliates or other co-investors (other than motion picture exhibitors or their Affiliates) so long as MDCP and its Affiliates acquire shares of Class A Common Stock hereunder with an aggregate purchase price of at least $350 million, and any such assignee of MDCP shall execute and deliver a counterpart of this Agreement and be bound hereby as a Purchaser hereunder and obtain the rights of a Purchaser hereunder.
(d) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or affect the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
(e) Entire Agreement. Except as otherwise expressly set forth herein, this Agreement embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
(f) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, anyone of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement.
(g) Descriptive Headings; Interpretation. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a Section of this Agreement. The use of the word "including" in this Agreement shall be by way of example rather than by limitation.
(h) Governing Law. All issues and questions concerning the construction, validity, interpretation, and enforceability of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
(i) No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any Person.
(j) Notices. All notices, demands or other communications to be given or delivered under or by reason of this Agreement shall be in writing and shall be either personally delivered, sent by telecopy (with hard copy to follow via regular mail), or mailed certified or registered mail (return receipt requested and postage prepaid) or sent to the recipient by reputable overnight courier service (charges prepaid). Notices shall be deemed to have been given hereunder when delivered personally, the day sent by telecopy, five business days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service. Such notices, demands, and other communications shall be sent to each Purchaser at the address indicated on the Schedule of Purchasers and to the Company at the address indicated below:
Cinemark, Inc.
3900 Dallas Parkway, Suite 500
Plano, Texas 75093
Attention: Michael D. Cavalier
Fax: (972) 665-1004
or to such other address or to the attention of such other Person as the recipient party has specified by prior written notice to the sending party.
* * * * *
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.
CINEMARK, INC.
By: /s/ Lee Roy Mitchell ------------------------------------ Its: Chief Executive Officer |
MADISON DEARBORN CAPITAL PARTNERS IV, L.P.
By: Madison Dearborn Partners IV, L.P.
Its: General Partner
By: Madison Dearborn Partners, LLC.
Its: General Partner
By: /s/ Benjamin Chereskin -------------------------------------- Its: Managing Director |
SCHEDULE OF PURCHASERS
Madison Dearborn Capital Partners IV, L.P. Total Shares of Class A Common Stock Purchased Three First National Plaza 70 West Madison Street, Suite 3800 A number of shares equal to $518,245,013 divided by the Chicago, IL 60602 Merger Consideration Attention: Benjamin D. Chereskin |
EXHIBIT 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CINEMARK, INC.
I.
The name of the corporation is Cinemark, Inc. (the "CORPORATION").
II.
The street address of the initial registered office of the Corporation is 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808, and the name of its initial registered agent at such address is Corporation Service Company.
III.
The purpose for which the Corporation is organized is the transaction of any or all lawful acts and activities for which corporations may be incorporated under the General Corporation Law of the State of Delaware.
IV.
SECTION 1. AUTHORIZED CAPITAL STOCK
The aggregate number of shares of capital stock that the Corporation shall have authority to issue is 45,000,000, of which (1) 5,000,000 shares shall be preferred stock, par value $0.001 per share; and (2) 40,000,000 shares shall be designated Class A common stock, par value $0.001 per share (the "COMMON STOCK").
SECTION 2. PREFERRED STOCK
The board of directors of the Corporation (the "BOARD OF DIRECTORS") may determine the powers, designations, preferences and relative, participating, optional or other special rights, including voting rights, and the qualifications, limitations or restrictions thereof, of each class of preferred stock and of each series within any such class and may increase or decrease the number of shares within each such class or series; provided, however, that the Board of Directors may not decrease the number of shares within a class or series to less than the number of shares within such class or series that are then issued and may not increase the number of shares within a series above the total number of authorized shares of the applicable class for which the powers, designations, preferences and rights have not otherwise been set forth herein.
SECTION 3. COMMON STOCK DISTRIBUTIONS
The holders of shares of Common Stock shall be entitled to receive such dividends or other distributions payable in cash, capital stock or otherwise, when, as and if declared by the Board of Directors at any time or from time to time, out of funds legally available for the payment thereof, and shall share equally on a per share basis in all such dividends or other distributions. The rights of the holders of Common Stock to receive such dividends or other distributions shall be subject to the rights of the holders of any preferred stock.
SECTION 4. COMMON STOCK VOTING RIGHTS
Except as required by applicable law, the holders of shares of Common Stock shall be entitled to one (1) vote for each share held on all matters submitted to a vote of the stockholders of the Corporation. Notwithstanding the foregoing, unless otherwise required by law, no holder of Common Stock, as such, shall be entitled to (i) vote on any amendment to this certificate (or on any amendment to a certificate of designations of any series of preferred stock) that only alters or changes the powers, preferences, rights or other terms of one or more outstanding series or class of preferred stock if the holders of such series or class of preferred stock are entitled to vote or consent, either separately or together with the holders of one or more other such series or classes of preferred stock, on such amendment pursuant to this certificate (or pursuant to a certificate of designations of any series of preferred stock) or pursuant to the Delaware General Corporation Law or (ii) vote on or consent to any matter submitted to a vote of any series of preferred stock in which the holders of such series of preferred stock, either separately or together with any other series of preferred stock, are entitled to vote pursuant to this certificate or a certificate of designations of a series of preferred stock, unless otherwise provided in such certificate of designations.
SECTION 5. LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and distribution in full of preferential amounts (if any) to be distributed to the holders of shares of preferred stock, the holders of shares of Common Stock shall be entitled to share equally, on a share for share basis, in the remaining net assets of the Corporation available for distribution to the stockholders of the Corporation. Neither the consolidation nor the merger of the Corporation with or into any other person, nor the sale, transfer or lease of all or substantially all of the assets of the Corporation shall itself be deemed to be a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 5.
V.
To the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or amendment of this Article by the stockholders of the Corporation or by changes in applicable law shall, to the extent permitted by applicable law, be prospective only,
and shall not adversely affect any limitation on the personal liability of any director of the Corporation at the time of such repeal or amendment.
VI.
The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding and any inquiry or investigation that could lead to such an action, suit or proceeding (whether or not by or in the right of the Corporation), by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another corporation, partnership, joint venture, sole proprietorship, trust, nonprofit entity employee benefit plan or other enterprise, against all judgments, penalties (including excise and similar taxes), fines, settlements and expenses (including attorneys' fees and court costs) actually and reasonably incurred by him in connection with such action, suit or proceeding to the fullest extent permitted by any applicable law, and such indemnity shall inure to the benefit of the heirs, executors and administrators of any such person so indemnified pursuant to this Article. The right to indemnification under this Article shall be a contract right and shall include, with respect to directors and officers, the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its disposition; provided, however, that, if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article or otherwise. The Corporation may, by action of the Board of Directors, indemnify employees and agents of the Corporation as provided in this Article VI and pay such expenses incurred by employees and agents of the Corporation upon such terms as the Board of Directors deems appropriate. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article shall not be deemed exclusive of any other right to which those seeking indemnification may be entitled under any law, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Any repeal or amendment of this Article by the stockholders of the Corporation or by changes in applicable law shall, to the extent permitted by applicable law, be prospective only, and not adversely affect the indemnification of any person who may be indemnified at the time of such repeal or amendment.
VII.
No contract or other transaction between the Corporation and any other entity and no other acts of the Corporation with relation to any other entity shall, in the absence of fraud, in any way be invalidated or otherwise affected by the fact that any one or more of the directors or officers of the Corporation are pecuniarily or otherwise interested in, or are directors or officers of, such other entity. Any director or officer of the Corporation individually, or any firm or association of which any director or officer may be a member, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation; provided
that the fact that he individually or as a member of such firm or association is
such a party or is so interested shall be disclosed in writing to the Board of
Directors or a majority of the members thereof as shall be present at any
meeting of the Board of Directors at which action upon any such contract or
transaction shall be taken; but any director of the Corporation who is also a
director or officer of such other entity or who is such a party or so interested
may be counted in determining the existence of a quorum at any meeting of the
Board of Directors which shall authorize any such contract or transaction and
may not vote thereat to authorize any such contract or transaction.
Notwithstanding the foregoing, any director of the Corporation may vote upon any
contract or any other transaction between the Corporation and any subsidiary or
affiliated entity without regard to the fact that he is also a director or
officer of such subsidiary or affiliated entity.
Any contract, transaction, act of the Corporation. or of the directors, which shall be ratified at any annual meeting of the stockholders of the Corporation, or at any special meeting of the stockholders of the Corporation, or at any special meeting called for such purpose, shall, insofar as permitted by law, be as valid and as binding as though ratified by every stockholder of the Corporation.
VIII.
In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the bylaws of the Corporation or to adopt new bylaws, subject to any limitations which may be contained in such bylaws. The affirmative vote of no less than a majority of all of the directors then elected to, and serving on, the Board of Directors shall be required to adopt, amend, alter or repeal the bylaws.
IX.
Meetings of stockholders may be held within or without the State of Delaware, as the bylaws of the Corporation may provide. The books of the Corporation may be kept outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of the Corporation. Election of directors need not be by written ballot unless the bylaws of the corporation so provide.
X.
No amendment or waiver of any provision of this certificate shall be effective without the prior vote (whether by meeting or by written consent) of the holders of a majority of the then outstanding Common Stock, voting as a single class.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Corporation has caused this Second Amended and Restated Certificate of Incorporation to be signed by Michael Cavalier, its Vice President - General Counsel and Secretary, this 2nd day of April, 2004.
CINEMARK, INC.
By: /s/ Michael Cavalier -------------------------------------- Michael Cavalier Vice President - General Counsel and Secretary |
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
CINEMARK, INC.
A Delaware corporation
(Adopted as of April 2, 2004)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in the State of Delaware shall be located at 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware 19808. The name of the corporation's registered agent at such address shall be Corporation Service Company. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. An annual meeting of the stockholders shall be held each year within one hundred twenty (120) days after the close of the immediately preceding fiscal year of the corporation for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place, if any, and/or the means of remote communication, of the annual meeting shall be determined by the board of directors of the corporation. No annual meeting of stockholders need be held if not required by the General Corporation Law of the State of Delaware.
Section 2. Special Meetings. Special meetings of stockholders may be called for any purpose and may be held at such time and place, within or without the State of Delaware, and/or by means of remote communication, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Such meetings may be called at any time by the board of directors or the chief executive officer and shall be called by the chief executive officer upon the written request of holders of shares entitled to cast not less than 10% of the votes at the meeting, such written request shall state the purpose or purposes of the meeting and shall be delivered to the chief executive officer. The date, time and place, if any, and/or remote communication, of any special meeting of stockholders shall be determined by the board of directors of the corporation. On such written request, the chief executive officer shall fix a date and time for such meeting within five days after receipt of a request for such meeting in such written request.
Section 3. Place of Meetings. The board of directors may designate any place, either within or without the State of Delaware, and/or by means of remote communication, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If
no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take any action at a meeting, written or printed notice stating the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. All such notices shall be delivered, either personally, by mail, or by a form of electronic transmission consented to by the stockholder to whom the notice is given, by or at the direction of the board of directors, the chief executive officer or the secretary, and if mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at his, her or its address as the same appears on the records of the corporation. If given by electronic transmission, such notice shall be deemed to be delivered (a) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (b) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (c) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (1) such posting and (2) the giving of such separate notice; and (3) if by any other form of electronic transmission, when directed to the stockholder. Any such consent shall be revocable by the stockholder by written notice to the corporation. Any such consent shall be deemed revoked if (1) the corporation is unable to deliver by electronic transmission two consecutive notices given by the corporation in accordance with such consent and (2) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer who has charge of the stock ledger of the corporation shall make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, and/or (ii) during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
Section 6. Quorum. The holders of a majority of the votes represented by the issued and outstanding shares of capital stock, entitled to vote thereon, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. When a specified item of business requires a vote by a class or series (if the corporation shall then have outstanding shares of more than one class or series) voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum (as to such class or series) for the transaction of such item of business. When a quorum is once present to commence a meeting of stockholders, it is not broken by the subsequent withdrawal of any stockholders or their proxies.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of the majority of votes represented by shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. Where a separate vote by class is required, the affirmative vote of the majority of shares of such class present in person or represented by proxy at the meeting shall be the act of such class.
Section 9. Voting Rights. Except as otherwise provided by the General Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. Any proxy is suspended when the person executing the proxy is present at a meeting of stockholders and elects to vote, except that when such proxy is coupled with an interest and the fact of the interest appears on the face of the
proxy, the agent named in the proxy shall have all voting and other rights referred to in the proxy, notwithstanding the presence of the person executing the proxy. At each meeting of the stockholders, and before any voting commences, all proxies filed at or before the meeting shall be submitted to and examined by the secretary or a person designated by the secretary, and no shares may be represented or voted under a proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Delaware, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested or by reputable overnight courier service. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days after the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used; provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.
Section 12. Action by Telegram, Cablegram or Other Electronic Transmission Consent A telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this section; provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information from which the corporation can determine (A) that the telegram, cablegram or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder or proxyholder and (B) the date on which such stockholder or proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram, cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper form and until such paper form shall be delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the board of directors of the corporation.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors which shall constitute the board shall be twelve, or such other number of directors as shall be established from time to time in accordance with the provisions of that certain Stockholders Agreement, dated as of March 12, 2004, among the corporation and certain of its stockholders (the "STOCKHOLDERS AGREEMENT"), or after the termination of the Stockholders Agreement by resolution of the board. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors in compliance with the provisions of the Stockholders Agreement. The directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article III. Each director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. Subject to the provisions of the Stockholders Agreement, any director or the entire board of directors may be removed at any time, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the corporation's certificate of incorporation, the provisions of this section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Any director may resign at any time upon notice given in writing or by electronic transmission to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled as provided in the Stockholders Agreement; provided that at any time the Stockholders Agreement is no longer in effect, such vacancies and newly created directorships shall be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board of directors shall be held without notice (other than notice under these bylaws) immediately after, and at the same place, if any, as the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place, if
any, as shall from time to time be determined by resolution of the board of directors and promptly communicated to all directors then in office. Special meetings of the board of directors may be called by or at the request of the chief executive officer or at least two of the directors on at least 24 hours notice to each director, either personally, by telephone, by mail, telegraph, and/or by electronic transmission. In like manner and on like notice, the chief executive officer must call a special meeting on the written request of at least two of the directors promptly after receipt of such request.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Except as otherwise required by the corporation's certificate of incorporation, each director shall be entitled to one vote.
Section 8. Committees. Subject to the provisions of the Stockholders Agreement, the board of directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these bylaws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation, except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
Section 9. Committee Rules. Each committee of the board of directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of a majority of the members of the committee then in
office shall be necessary to constitute a quorum. Subject to the provisions of
the Stockholders Agreement, in the event that a member and that member's
alternate, if alternates are designated by the board of directors as provided in
Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Executive Committee. Subject to the provisions of the Stockholders Agreement, the executive committee shall consist of not fewer than three members of the board of directors, as from time to time appointed by resolution of the board of directors, one of whom shall be the chief executive officer. The board of directors shall also designate a member of the executive committee, to be the chairman of the executive committee. The executive committee shall have, to the fullest extent permitted by law, but subject to any specific limitation imposed by the Stockholders Agreement, the certificate of incorporation, these bylaws or a resolution of the board of directors, all power and authority vested in or retained by the board of directors
(whether or not the executive committee is specifically mentioned in the statute, the provision of the certificate of incorporation or these bylaws, the resolution or any other instrument vesting or retaining any such power or authority), and the executive committee may exercise such power and authority in such manner as it shall deem for the best interest of the corporation in all cases in which specific directions shall not have been given by the board of directors.
Section 11. Audit Committee. Subject to the provisions of the Stockholders Agreement, the audit committee shall consist of not fewer than two members of the board of directors as shall from time to time be appointed by resolution of the board of directors. No member of the board of directors who is an officer or an employee of the corporation or any subsidiary of the corporation shall be eligible to serve on the audit committee. The audit committee shall review and, as it shall deem appropriate, recommend to the board internal accounting and financial controls for the corporation and accounting principles and auditing practices and procedures to be employed in the preparation and review of financial statements of the corporation. The audit committee shall make recommendations to the board concerning the engagement of independent public accountants to audit the annual financial statements of the corporation and the scope of the audit to be undertaken by such accountants.
Section 12. Compensation Committee. Subject to the provisions of the Stockholders Agreement, the compensation committee shall consist of not fewer than two members of the board of directors as from time to time shall be appointed by resolution of the board of directors. No member of the board of directors who is an officer or an employee of the corporation or any subsidiary of the corporation shall be eligible to serve on the compensation committee. The compensation committee shall review and, as it deems appropriate, recommend to the chief executive officer and the board of directors policies, practices and procedures relating to the compensation of managerial and executive-level employees and the establishment and administration of employee benefit plans. The compensation committee shall have and exercise all authority under any employee stock option plans of the corporation as the committee therein (unless the board of directors by resolution appoints any other committee to exercise such authority), and shall otherwise advise and consult with the officers of the corporation as may be requested regarding managerial personnel policies.
Section 13. Communications Equipment. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting.
Section 14. Waiver of Notice and Presumption of Assent. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting, except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered
mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.
Section 15. Action by Written Consent. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board, or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the board of directors and shall consist of a chairman of the board, a chief executive officer, a president, a chief operating officer, a chief financial officer, one or more vice-presidents, a secretary, a treasurer, and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation.
Section 6. Chairman of the Board. The chairman of the board shall preside at all meetings of the board of directors and at all meetings of the stockholders and shall have such other powers and perform such other duties as may be prescribed by the board of directors or provided in these bylaws.
Section 7. Chief Executive Officer. Subject to the powers of the board of directors, the chief executive officer shall be the corporation's chief policy making officer, shall have general charge of the business, affairs and property of the corporation and control over its officers, agents and employees and shall see that all orders and resolutions of the board of directors are carried into effect. Whenever the chairman of the board is unable to serve, by reason of sickness, absence, or otherwise, the chief executive officer shall have the powers and perform the duties of the chairman of the board. The chief executive officer shall have such other powers and perform such other duties as may be prescribed by the chairman of the board, the board of directors or these bylaws.
Section 8. President. The president of the corporation, subject to the powers of the board of directors and the chief executive officer, shall engage in the general and active management of the business of the corporation; and shall see that all orders and resolutions of the board of directors are carried into effect. The president may execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the chief executive officer or the board of directors or as may be provided in these bylaws.
Section 9. Chief Operating Officer. The chief operating officer of the corporation, subject to the powers of the board of directors and the chief executive officer, shall engage in the general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. The chief operating officer shall have such other powers and perform such other duties as may be prescribed by the chief executive officer or the board of directors or as may be provided in these bylaws.
Section 10. Chief Financial Officer. The chief financial officer of the corporation shall, under the direction of the chief executive officer, be responsible for all financial and accounting matters and for the direction of the offices of treasurer and controller. The chief financial officer shall have such other powers and perform such other duties as may be prescribed by the chief executive officer or the board of directors or as may be provided in these bylaws.
Section 11. Vice-presidents. The vice-president, or if there shall be more than one, the vice-presidents in the order determined by the board of directors shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice-presidents shall also perform such other duties and have such other powers as the chief executive officer, the board of directors or these bylaws may, from time to time, prescribe.
Section 12. Secretary and Assistant Secretaries. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the chief executive officer's supervision, the secretary shall give, or cause to be given, all notices required to be given by these bylaws or by law; shall have such powers and
perform such duties as the board of directors, the chief executive officer or these bylaws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chief executive officer or the secretary may, from time to time, prescribe.
Section 13. Treasurer and Assistant Treasurer. The treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the chief executive officer or these bylaws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the chief executive officer or treasurer may, from time to time, prescribe.
Section 14. Other Officers, Assistant Officers and Agents. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these bylaws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors.
Section 15. Absence or Disability of Officers. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "PROCEEDING"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding), and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article V shall be a contract right and, subject to Sections 2 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation provided for under
Section 1 of this Article V or advance of expenses provided for under Section 5
of this Article V shall be made promptly, and in any event within thirty (30)
days, upon the written request of the director or officer. If a determination by
the corporation that the director or officer is entitled to indemnification
pursuant to this Article V is required, and the corporation fails to respond
within sixty (60) days to a written request for indemnity, the corporation shall
be deemed to have approved the request. If the corporation wrongfully denies a
written request for indemnification or advancing of expenses, in whole or in
part, or if payment in full pursuant to such request is not properly made within
thirty (30) days, the right to indemnification or advances as granted by this
Article V shall be enforceable by the director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Delaware for
the corporation to indemnify the claimant for the amount claimed, but the burden
of such defense shall be on the corporation. Neither the failure of the
corporation (including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in
Section 1 of this Article V in defending a proceeding shall be paid by the
corporation in advance of such proceeding's final disposition, unless otherwise
determined by the board of directors in the specific case, upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified, and may be advanced expenses, to the extent authorized at any time or from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the chief executive officer, the president or a vice-president and the secretary
or an assistant secretary of the corporation, certifying the number of shares
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such chief executive officer, president,
vice-president, secretary, or assistant secretary may be facsimiles. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the corporation whether because of death, resignation or
otherwise before such certificate or certificates have been delivered by the
corporation, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the books of the
corporation. Shares of stock of the corporation shall only be transferred on the
books of the corporation by the holder of record thereof or by such holder's
attorney duly authorized in writing, upon surrender to the corporation of the
certificate or certificates for such shares endorsed by the appropriate person
or persons, with such evidence of the authenticity of such endorsement,
transfer, authorization, and other matters as the corporation may reasonably
require, and accompanied by all necessary stock transfer stamps. In that event,
it shall be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate or certificates, and record the
transaction on its books. The board of directors may appoint a bank or trust
company organized under the laws of the United States or any state thereof to
act as its transfer agent or registrar, or both in connection with the transfer
of any class or series of securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. The corporation shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.
Section 4. Loans. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. No loans shall be made by the corporation to its officers or directors, and no loans shall be made by the corporation secured by its shares. No loans shall be made or contracted on behalf of the corporation and no evidences of
indebtedness shall be issued in its name unless authorized by resolution of the board of directors. Such authority may be general or confined to specific instances.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in any other corporation held by the corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business.
Section 9. Section Headings. Section headings in these bylaws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of these bylaws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these bylaws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect.
ARTICLE VIII
AMENDMENTS
Subject to the provisions of the Stockholders Agreement, these bylaws may be amended, altered, or repealed and new bylaws adopted at any meeting of the board of directors by a majority vote. The fact that the power to adopt, amend, alter, or repeal the bylaws has been conferred upon the board of directors shall not divest the stockholders of the same powers.
EXHIBIT 4.1
EXECUTION VERSION
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Dated as of March 31, 2004
by and among
CINEMARK, INC.
and
LEHMAN BROTHERS INC.
GOLDMAN, SACHS & CO.
DEUTSCHE BANK SECURITIES INC.
CIBC WORLD MARKETS CORP.
BNY CAPITAL MARKETS, INC.
This Exchange and Registration Rights Agreement (this "Agreement") is made and entered into as of March 31, 2004 by and among Cinemark, Inc., a Delaware corporation ("Cinemark"), and Lehman Brothers Inc., Goldman, Sachs & Co., Deutsche Bank Securities Inc., CIBC World Markets Corp. and BNY Capital Markets, Inc. (the "Purchasers").
Pursuant to the Purchase Agreement, dated March 29, 2004 (the "Purchase Agreement"), among Cinemark, and the Purchasers, the Purchasers have agreed to purchase the aggregate principal amount of Cinemark's 9 3/4% Senior Discount Notes due 2014 (the "Notes") set forth on Schedule 1 thereto, as provided in the Purchase Agreement.
In order to induce the Purchasers to purchase the Notes, Cinemark has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Purchasers set forth in Section 5 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Additional Interest: As defined in Section 5 hereof.
Advice: As defined in Section 6(d) hereof.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day in the City of New York on which banks are authorized to close.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by Cinemark to the Trustee under the Indenture of the Exchange Notes in the same aggregate principal amount at maturity as the aggregate principal amount at maturity of the Notes that were validly tendered by Holders thereof pursuant to the Exchange Offer.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: Cinemark's 9 3/4% Senior Discount Notes due 2014 to be issued pursuant to the Indenture in the Exchange Offer.
Exchange Offer: The registration by Cinemark under the Act of the Exchange Notes pursuant to an Exchange Offer Registration Statement pursuant to which Cinemark offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Exchange Notes in an aggregate principal amount at maturity equal to the aggregate principal amount at maturity of the Transfer Restricted Securities validly tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Purchasers propose to sell the Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act, and outside the United States in reliance upon Regulation S under the Act.
Full Accretion Date: As defined in Section 5 hereof.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of March 31, 2004, between Cinemark and The Bank of New York Trust Company, N.A., as trustee (the "Trustee"), pursuant to which the Securities are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof.
NASD: National Association of Securities Dealers, Inc.
Notes: As defined in the preamble hereto.
Person: An individual, partnership, corporation, limited liability company, joint venture, association, trust or other organization whether or not a legal entity, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.
Purchaser: As defined in the preamble hereto.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of Cinemark relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein.
Securities: The Notes and the Exchange Notes.
Shelf Filing Deadline: As defined in Section 4(a)(x) hereof.
Shelf Registration: A registration effected by the filing of a Shelf Registration Statement pursuant to Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 as in effect on the date of the Indenture.
Transfer Restricted Securities: Each of the Securities, until the earliest to occur, with respect to a particular Security, of (a) the date on which such Security is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Security has been effectively registered under the Act and disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Security may be distributed to the public pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein) or (d) the date such Security ceases to be outstanding.
Underwritten Registration or Underwritten Offering: A registration in which securities of Cinemark are sold to an underwriter for reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The Securities entitled to the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (so long as the procedures set forth in
Section 6(a) below are being or have been complied with), Cinemark shall (i) use
its reasonable best efforts to cause to be filed with the Commission, not later
than 90 days after the Closing Date, the Exchange Offer Registration
Statement under the Act relating to the Exchange Notes and the Exchange Offer,
(ii) use its reasonable best efforts to cause such Exchange Offer Registration
Statement to be declared effective by the Commission at the earliest practicable
time, but not later than 180 days after the Closing Date, (iii) in connection
with the foregoing, file (A) all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) if applicable, a post-effective
amendment to such Exchange Offer Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings in connection with the
registration and qualification of the Exchange Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and use its best efforts to Consummate the
Exchange Offer. The Exchange Offer shall be on an appropriate form permitting
registration of the Exchange Notes to be offered in exchange for the Transfer
Restricted Securities and to permit resales of Securities held by Broker-Dealers
as contemplated by Section 3(c) below. If, after such Exchange Offer
Registration Statement initially is declared effective by the Commission, the
Exchange Offer or the issuance of Exchange Notes thereunder or the sale of
Transfer Restricted Securities pursuant thereto as contemplated by Section 3(c)
below is interfered with by any stop order, injunction or other order or
requirement of the Commission or any other governmental agency or court, such
Exchange Offer Registration Statement shall be deemed not to have become
effective for purposes of this Agreement during the period that such stop order,
injunction or other similar order or requirement shall remain in effect.
(b) Cinemark shall use its reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days. Cinemark shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Securities shall be included in the Exchange Offer Registration Statement. Unless the Exchange Offer shall not be permissible under applicable law or Commission policy, Cinemark shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but not later than 30 days thereafter.
(c) Cinemark shall indicate in a "Plan of Distribution" section contained in the Prospectus included in the Exchange Offer Registration Statement that any Broker-Dealer who holds Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from Cinemark), may exchange such Notes pursuant to the Exchange Offer; provided, however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any resales of the Exchange Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Securities held by any such Broker-Dealer except to the extent required by the Commission.
Cinemark shall use its reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Securities acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of twelve months from the date on which the Exchange Offer Registration Statement is declared effective.
Cinemark shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) Cinemark is not required to file an Exchange Offer Registration Statement or consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (so long as the procedures set forth in Section 6(a) below are being or have been complied with) or (ii) any Holder of Transfer Restricted Securities shall notify Cinemark on or prior to the 20th Business Day following the Consummation of the Exchange Offer that (A) such Holder is prohibited by a change in applicable law or Commission policy from participating in the Exchange Offer, (B) such Holder may not resell the Exchange Notes to be acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and owns Notes acquired directly from Cinemark or an affiliate of Cinemark, then Cinemark shall:
(x) use its reasonable best efforts to cause to be filed a
shelf registration statement pursuant to Rule 415 under the Act, which
may be an amendment to the Exchange Offer Registration Statement (in
either event, the "Shelf Registration Statement"), on or prior to the
30th day after the obligation to file such Shelf Registration Statement
arises (and in any event within 210 days after the Closing Date) (the
"Shelf Filing Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities, the Holders
of which shall have provided the information required pursuant to
Section 4(b) hereof; and
(y) use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 180th day after the obligation to file such Shelf Registration Statement arises.
Cinemark shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b)
and (c) hereof to the extent necessary to ensure that it is available for resales of Securities by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of two years following the Closing Date.
(b) Provision by Holders of Certain Information in Connection
with the Shelf Registration Statement. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to Cinemark in writing, within 20 Business Days after receipt of a
request therefor, such information as Cinemark may reasonably request specified
in Item 507 and Item 508 of Regulation S-K under the Act for use in connection
with any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. Each Holder as to which any Shelf Registration Statement is
being effected agrees to furnish promptly to Cinemark all information required
to be disclosed in order to make the information previously furnished to
Cinemark by such Holder not materially misleading. No Holder of Transfer
Restricted Securities shall be entitled to Additional Interest pursuant to
Section 5 hereof unless and until such Holder shall have used its best efforts
to provide all such reasonably requested information.
SECTION 5. ADDITIONAL INTEREST
If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 Business Days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded within two Business Days by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), Cinemark hereby agrees to pay additional cash interest ("Additional Interest") to each Holder of Transfer Restricted Securities. Such Additional Interest, with respect to the first 90-day period immediately following the occurrence of each such Registration Default, shall equal an increase in the annual interest rate on the Notes by 0.5%. The amount of Additional Interest will increase by an additional 0.5% per annum with respect to each subsequent 90-day period relating to each such Registration Default until all Registration Defaults have been cured, up to a maximum amount of Additional Interest for all Registration Defaults of 1.0% per annum. Cinemark shall notify the Trustee within one Business Day after (i) each and every Registration Default and (ii) the date the Registration Default has been so cured. Cinemark shall pay all accrued Additional Interest to Holders in New York, New York by wire transfer of immediately available funds or by federal funds check in the same manner as interest is paid under the Notes (assuming that the Notes have reached the Full Accretion Date (as defined in the Indenture)). Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of Additional Interest with respect to such Transfer Restricted Securities will cease.
All obligations of Cinemark set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange Offer, Cinemark shall comply with all of the provisions of Section 6(c) below, shall use its reasonable best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to Cinemark there is a question as to whether the Exchange Offer is permitted by applicable law, Cinemark hereby agrees to seek a no-action letter or other favorable decision from the Commission, including oral advice from the staff of the Commission, allowing Cinemark to Consummate an Exchange Offer for such Notes. Cinemark hereby agrees to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. In connection with the foregoing, Cinemark hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to Cinemark setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such matters.
(ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of Cinemark, prior to the Consummation thereof, a written representation to Cinemark (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of Cinemark, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange Notes in its ordinary course of business. Each Holder hereby acknowledges and agrees that any Broker-Dealer who acquired Notes directly from Cinemark or any affiliate of Cinemark and any such Holder intending to use the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including any no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Exchange Notes obtained by such Holder in exchange for Notes acquired by such Holders directly from Cinemark.
(iii) Prior to effectiveness of the Exchange Offer Registration Statement, Cinemark shall provide a supplemental letter to the Commission stating that Cinemark is registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above. The supplemental letter shall include a representation that Cinemark has not entered into any arrangement or understanding with any Person to distribute the Exchange Notes to be received in the Exchange Offer and that, to the best of Cinemark's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf Registration Statement, Cinemark shall comply with all the provisions of Section 6(c) below and shall use its reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof in accord with the provisions of Sections 4(a) and 6(c) hereto.
(c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Securities by Broker-Dealers), Cinemark shall:
(i) use its reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, Cinemark shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its reasonable best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as reasonably practicable thereafter;
(ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration
Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been exchanged or sold or until such Transfer Restricted Securities no longer constitute Transfer Restricted Securities or are no longer outstanding; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus;
(iii) advise promptly the underwriter(s), if any, and selling Holders and, if requested by such Persons, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes or (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, Cinemark shall use its reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest practicable time;
(iv) furnish to the Purchaser, each selling Holder named in any Registration Statement or Prospectus and each of the underwriter(s) in connection with each such sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus if requested by such person, which documents will be subject to the review of such Holders and underwriter(s) in connection with each such sale, if any, for a period of at least five Business Days, and Cinemark will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s) in connection with each such sale, if any, shall reasonably object within five Business Days after the receipt thereof. A selling Holder or underwriter, if any, shall be deemed to have
reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission or fails to comply with the applicable requirements of the Act;
(v) promptly provide copies prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, if requested by any selling Holders or the underwriter(s), if any, within five Business Days after receipt of notification thereof from Cinemark, of such document to the selling Holders and to the underwriter(s), if any; make Cinemark's representatives available for discussion of such document and other customary due diligence matters; and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of Cinemark and its subsidiaries, and cause Cinemark's officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s) in connection with each such sale, if any, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and such underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after Cinemark is notified of the matters to be included in such Prospectus supplement or post-effective amendment;
(viii) use its reasonable best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount at maturity of Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits if so requested by such person;
(x) deliver to each selling Holder and each of the underwriter(s) in connection with each such sale, if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; Cinemark hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto;
(xi) enter into such agreements (including an underwriting agreement), and make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be reasonably acceptable to Cinemark and reasonably requested by the Purchasers or by any Holder of Transfer Restricted Securities or any underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, Cinemark shall:
(A) furnish to each Purchaser, each selling Holder and each underwriter, in such substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, upon the effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (x) the President or any Vice President and (y) a principal financial or accounting officer of Cinemark, confirming, as of the date thereof, the matters set forth in paragraphs (h) and (k) of Section 5 of the Purchase Agreement and such other matters as such parties may reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for Cinemark, covering
the matters set forth in paragraphs (c) and (d) of
Section 5 of the Purchase Agreement and such other
matters as such parties may reasonably request, and
in any event including a statement to the effect that
such counsel has participated in conferences with
officers and other representatives of Cinemark,
representatives of the independent public accountants
for Cinemark, the Purchasers' representatives and the
Purchasers' counsel at which the contents of such
Registration Statement and the related Prospectus
were discussed, although such counsel has not
undertaken to investigate or independently verify and
does not assume any responsibility for, the accuracy,
completeness or fairness of such statements; and that
such counsel advises that, on the basis of the
foregoing (relying as to
materiality to a large extent upon facts provided to such counsel by officers and other representatives of Cinemark and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel makes no comment with respect to, assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial and statistical data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from Cinemark's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 5(f) of the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section;
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by Cinemark pursuant to this clause
(xi), if any; and
(D) if at any time the representations and warranties of Cinemark contemplated in clause (A)(1) above cease to be true and correct, Cinemark shall so advise the Purchasers and the underwriter(s), if any, and each Holder promptly and, if requested by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s), if any, may reasonably request and do any and all other acts or things necessary or advisable (including, without limitation, the imposition of such restrictions on offers or sales of the Securities as are referred to in Section 3(b) of this Agreement) to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that Cinemark shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, except as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Notes covered by the Shelf Registration Statement, Exchange Notes, having an aggregate principal amount equal to the aggregate principal amount at maturity of Notes surrendered to Cinemark by such Holder in exchange therefor or being sold by such Holder; such Exchange Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Exchange Notes, as the case may be; in return, the Notes held by such Holder shall be surrendered to Cinemark for cancellation;
(xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations (which denominations shall be of $1,000 and integral multiples thereof) and such names as the Holders or the underwriter(s), if any, may request at least two Business Days prior to any such sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use its reasonable best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities;
(xvi) if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement covering such Transfer Restricted
Securities and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use its reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities;
(xix) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to Holders, as soon as reasonably practicable, a consolidated earnings statement meeting the requirements of Rule 158 under the Act (which need not be audited) covering a twelve-month period (A) beginning at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, commencing with the first month of Cinemark's first fiscal quarter commencing after the effective date of the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate, with the Trustee and the Holders of Securities to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its reasonable best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner;
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15 of the Exchange Act; and
(xxii) use its reasonable best efforts to cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by Cinemark are then listed if requested by the Holders of a majority in aggregate principal amount at maturity of Notes covered by such Registration Statement or the managing underwriter(s), if any.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from Cinemark of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the
"Advice") by Cinemark that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by Cinemark, each Holder will
deliver to Cinemark (at Cinemark's expense) all copies, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Transfer Restricted Securities that was current at the time of receipt of such
notice. In the event Cinemark shall give any such notice, the time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling Holder
covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to Cinemark's performance of or
compliance with this Agreement will be borne by Cinemark, regardless of whether
a Registration Statement becomes effective, including without limitation: (i)
all registration and filing fees and expenses (including filings made by any
Purchaser or Holder with the NASD (and, if applicable, the reasonable fees and
expenses of any "qualified independent underwriter" and its counsel that may be
required by the rules and regulations of the NASD)); (ii) all fees and expenses
incurred in connection with compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Exchange Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for Cinemark, and in accordance with
Section 7(b) below, the Holders of Transfer Restricted Securities; (v) if
applicable, all application and filing fees in connection with listing
Securities on a national securities exchange or automated quotation system
pursuant to the requirements hereof; and (vi) all fees and disbursements of
independent certified public accountants of Cinemark (including the expenses of
any special audit and comfort letters required by or incident to such
performance).
Cinemark will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by Cinemark.
(b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), Cinemark will reimburse the Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, which shall be Simpson Thacher & Bartlett LLP or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) Cinemark agrees to indemnify and hold harmless, to the
fullest extent permitted by applicable law, each of the Holders, each person, if
any, who controls any Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of each Holder or any
controlling person, against any and all losses, liabilities, claims, damages and
expenses whatsoever (including but not limited to reasonable attorneys' fees and
any and all reasonable expenses whatsoever incurred in investigating, preparing
or defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation) (collectively, "Losses"), joint or several, to which they or any of
them may become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus, or in any supplement thereto or amendment thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that Cinemark will not be liable in any such case to the
extent, but only to the extent, that any such Loss arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to Cinemark by or on behalf of any Holders expressly for
use therein. This indemnity will be in addition to any liability which Cinemark
may otherwise have, including, under this Agreement.
(b) Each of the Holders agrees, severally and not jointly, to indemnify and hold harmless Cinemark, each person, if any, who controls Cinemark within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and the respective officers, directors, partners, employees, representatives and agents of Cinemark or any controlling person, against any and all Losses, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to Cinemark by or on behalf of such Holder expressly for use therein; provided, however, that in no case shall any Holder be liable or responsible for any amount in excess of the dollar amount of the proceeds received by such Holder upon the sale of the Securities giving rise to such indemnification obligation, unless such Losses are a result of the gross negligence or willful misconduct of such Holder. This indemnity will be in addition to any liability which any Holder may otherwise have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought, in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent that it has been prejudiced in any material respect by such failure or from any liability which it may otherwise have). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action and the indemnifying party has agreed in writing to pay the fees and expenses of such counsel, (ii) the indemnifying parties shall not have employed counsel to take charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have concluded, upon the advice of counsel, that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses of counsel shall be borne by the indemnifying parties; provided, however, that the indemnifying party under subsection (a) or (b) above, shall only be liable for the legal expenses of one counsel (in addition to any local counsel) for all indemnified parties in each jurisdiction in which any claim or action is brought. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in
which the indemnification provided for in this Section 8 is for any reason held
to be unavailable or is insufficient to hold harmless a party indemnified
hereunder, Cinemark, on the one hand, and each Holder, on the other hand, shall
contribute to the aggregate losses, claims, damages, liabilities and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by Cinemark, any contribution received by
Cinemark from persons, other than the Holders, who may also be liable for
contribution, including persons who control Cinemark within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act) to which Cinemark
and any Holder may be subject, in such proportion as is appropriate to reflect
the relative benefits received by Cinemark, on the one hand, and any such
Holder, on the other hand, or, if such allocation is not permitted by applicable
law or if indemnification is not available as a result of the indemnifying party
not having received notice as provided in this Section 8, in such proportion as
is appropriate to
reflect not only the relative benefits referred to above but also the relative
fault of Cinemark, on the one hand, and the Holders, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by Cinemark, on the one
hand, and any Holder, on the other hand, shall be deemed to be in the same
proportion as (x) the total proceeds from the offering of the Securities (net of
discounts and commissions but before deducting expenses) received by Cinemark
and (y) the total proceeds received by such Holder upon its sale of Securities
which would otherwise give rise to the indemnification obligation, respectively.
The relative fault of Cinemark, on the one hand, and of the Holders, on the
other hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Cinemark or
the Holders and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. Cinemark and
each Holder agree that it would not be just and equitable if contribution
pursuant to this Section 8 were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of this Section
8, (i) no Holder shall be required to contribute, in the aggregate, any amount
in excess of the dollar amount by which the proceeds received by such Holder
with respect to the sale of its Securities exceeds the amount of any damages
which such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 8, each person,
if any, who controls a Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of a Holder or any controlling
person shall have the same rights to contribution as such Holder, and each
person, if any, who controls Cinemark within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of Cinemark or any controlling
person shall have the same rights to contribution as Cinemark, subject in each
case to clauses (i) and (ii) of this Section 8(d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section 8,
notify such party or parties from whom contribution may be sought, but the
failure to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 8 or otherwise.
SECTION 9. RULE 144A
Cinemark hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to Cinemark (it being understood that Lehman Brothers and Goldman, Sachs & Co. are reasonably satisfactory); such investment bankers and manager or managers are referred to herein as the "underwriters".
SECTION 12. MISCELLANEOUS
(a) Remedies. Cinemark agrees that monetary damages (including the Additional Interest contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Cinemark will not, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with, and are not inconsistent with, the rights granted to the holders of Cinemark's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Securities. Cinemark will not take any action, or permit any change to occur, with respect to the Securities that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless Cinemark has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer or registered pursuant to the Shelf Registration and that does not affect directly
or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer or registered pursuant to the Shelf Registration, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered, as applicable.
(e) Notices. All notices and other communications provided for, or permitted hereunder, shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and
(ii) if to Cinemark:
Cinemark, Inc. 3900 Dallas Parkway Suite 500 Plano, Texas 75093 Phone No.: (972) 665-1000 Telecopier No.: (972) 665-1004 Attention: Michael Cavalier
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Phone No.: (214) 969-2800
Telecopier No.: (214) 969-4343
Attention: Terry M. Schpok, P.C.
All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Transaction Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by Cinemark with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
CINEMARK, INC.
By: /s/ Robert Copple ----------------------- Name: Robert Copple Title: Senior Vice President, Treasurer And Chief Financial Officer |
Accepted:
LEHMAN BROTHERS INC.
GOLDMAN, SACHS & CO.
DEUTSCHE BANK SECURITIES INC.
CIBC WORLD MARKETS CORP.
BNY CAPITAL MARKETS, INC.
BY LEHMAN BROTHERS INC.
By: /s/ John R. Miller --------------------------------- Authorized Representative |
BY GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co. --------------------------------- Authorized Representative |
Exhibit 4.2(a)
EXECUTION VERSION
CINEMARK, INC.
and
THE BANK OF NEW YORK TRUST COMPANY, N.A.
as Trustee
INDENTURE
Dated as of March 31, 2004
9-3/4% SENIOR DISCOUNT NOTES DUE 2014
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section ----------- ----------------- 310(a)(1).......................................................................... 7.10 (a)(2)......................................................................... 7.10 (a)(3)......................................................................... N.A. (a)(4)......................................................................... N.A. (a)(5)......................................................................... 7.10 (b)............................................................................ 7.10 (c)............................................................................ N.A. 311(a)............................................................................. 7.11 (b)............................................................................ 7.11 (c)............................................................................ N.A. 312(a)............................................................................. 2.05 (b)............................................................................ 11.03 (c)............................................................................ 11.03 313(a)............................................................................. 7.06 (b)(1)......................................................................... 10.03 (b)(2)......................................................................... 7.06, 7.07 (c)............................................................................ 7.06, 11.02 (d)............................................................................ 7.06 314(a)............................................................................. 4.03, 11.05 (b)............................................................................ N.A. (c)(1)......................................................................... N.A. (c)(2)......................................................................... N.A. (c)(3)......................................................................... N.A. (d)............................................................................ N.A. (e)............................................................................ 10.05 (f)............................................................................ NA 315(a)............................................................................. 7.01 (b)............................................................................ N.A. (c)............................................................................ 7.01 (d)............................................................................ 7.01 (e)............................................................................ 6.11 316(a)(last sentence).............................................................. 2.09 (a)(1)(A)...................................................................... 6.05 (a)(1)(B)...................................................................... 6.04 (a)(2)......................................................................... N.A. (b)............................................................................ 6.07 (c)............................................................................ 2.12 317(a)(1).......................................................................... 6.08 (a)(2)......................................................................... 6.09 (b)............................................................................ 2.04 318(a)............................................................................. N.A. (b)............................................................................ N.A. (c)............................................................................ 11.01 |
*This Cross-Reference Table is not part of the Indenture
TABLE OF CONTENTS
Page ---- ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE............................................................ 1 SECTION 1.01. Definitions................................................................ 1 SECTION 1.02. Other Definitions.......................................................... 25 SECTION 1.03. Incorporation by Reference of TIA.......................................... 25 SECTION 1.04. Rules of Construction...................................................... 26 ARTICLE 2. THE NOTES............................................................................................. 26 SECTION 2.01. Form and Dating............................................................ 26 SECTION 2.02. Execution and Authentication............................................... 27 SECTION 2.03. Registrar and Paying Agent................................................. 28 SECTION 2.04. Paying Agent to Hold Money in Trust........................................ 28 SECTION 2.05. Holder Lists............................................................... 29 SECTION 2.06. Transfer and Exchange...................................................... 29 SECTION 2.07. Replacement Notes.......................................................... 43 SECTION 2.08. Outstanding Notes.......................................................... 43 SECTION 2.09. Treasury Notes............................................................. 44 SECTION 2.10. Temporary Notes............................................................ 44 SECTION 2.11. Cancellation............................................................... 44 SECTION 2.12. Defaulted Interest......................................................... 44 SECTION 2.13. Issuance of Additional Notes............................................... 44 SECTION 2.14. One Class of Securities.................................................... 45 SECTION 2.15. CUSIP, ISIN or Other Similar Numbers....................................... 45 ARTICLE 3. REDEMPTION AND PREPAYMENT............................................................................. 45 SECTION 3.01. Notices to Trustee......................................................... 45 SECTION 3.02. Selection of Notes to Be Redeemed.......................................... 46 SECTION 3.03. Notice of Redemption....................................................... 46 SECTION 3.04. Effect of Notice of Redemption............................................. 47 SECTION 3.05. Deposit of Redemption Price................................................ 47 SECTION 3.06. Notes Redeemed in Part..................................................... 47 SECTION 3.07. Optional Redemption........................................................ 47 SECTION 3.08. Mandatory Special Redemption............................................... 48 ARTICLE 4. COVENANTS............................................................................................. 48 SECTION 4.01. Payment of Notes........................................................... 48 SECTION 4.02. Maintenance of Office or Agency............................................ 49 SECTION 4.03. Reports.................................................................... 49 SECTION 4.04. Compliance Certificate..................................................... 50 SECTION 4.05. Taxes...................................................................... 51 SECTION 4.06. Stay, Extension and Usury Laws............................................. 51 SECTION 4.07. Restricted Payments........................................................ 51 SECTION 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries............. 54 SECTION 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock................. 56 SECTION 4.10. Asset Sales................................................................ 58 |
Page ---- SECTION 4.11. Transactions with Affiliates............................................... 61 SECTION 4.12. Liens...................................................................... 63 SECTION 4.13. Business Activities........................................................ 63 SECTION 4.14. Corporate Existence........................................................ 63 SECTION 4.15. Offer to Repurchase upon Change of Control................................. 63 SECTION 4.16. Future Guarantors.......................................................... 65 SECTION 4.17. Designation of Restricted and Unrestricted Subsidiaries.................... 66 SECTION 4.18. Payments for Consent....................................................... 66 ARTICLE 5. SUCCESSORS............................................................................................ 66 SECTION 5.01. Merger, Consolidation or Sale of Assets.................................... 66 SECTION 5.02. Successor Corporation Substituted.......................................... 67 ARTICLE 6. DEFAULTS AND REMEDIES................................................................................. 68 SECTION 6.01. Events of Default.......................................................... 68 SECTION 6.02. Acceleration............................................................... 69 SECTION 6.03. Other Remedies............................................................. 70 SECTION 6.04. Waiver of Past Defaults.................................................... 70 SECTION 6.05. Control by Majority........................................................ 71 SECTION 6.06. Limitation on Suits........................................................ 71 SECTION 6.07. Rights of Holders of Notes to Receive Payment.............................. 71 SECTION 6.08. Collection Suit by Trustee................................................. 71 SECTION 6.09. Trustee May File Proofs of Claim........................................... 72 SECTION 6.10. Priorities................................................................. 72 SECTION 6.11. Undertaking for Costs...................................................... 72 ARTICLE 7. TRUSTEE............................................................................................... 73 SECTION 7.01. Duties of Trustee.......................................................... 73 SECTION 7.02. Rights of Trustee.......................................................... 74 SECTION 7.03. Individual Rights of Trustee............................................... 75 SECTION 7.04. Trustee's Disclaimer....................................................... 75 SECTION 7.05. Notice of Defaults......................................................... 75 SECTION 7.06. Reports by Trustee to Holders of the Notes................................. 76 SECTION 7.07. Compensation and Indemnity................................................. 76 SECTION 7.08. Replacement of Trustee..................................................... 77 SECTION 7.09. Successor Trustee by Merger, etc........................................... 77 SECTION 7.10. Eligibility; Disqualification.............................................. 77 SECTION 7.11. Preferential Collection of Claims Against the Company...................... 78 ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.............................................................. 78 SECTION 8.01. Option to Effect Legal Defeasance or Covenant Defeasance................... 78 SECTION 8.02. Legal Defeasance and Discharge............................................. 78 SECTION 8.03. Covenant Defeasance........................................................ 79 SECTION 8.04. Conditions to Legal or Covenant Defeasance................................. 79 SECTION 8.05. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions 80 SECTION 8.06. Repayment to the Company................................................... 81 SECTION 8.07. Reinstatement.............................................................. 81 |
Page ---- ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER...................................................................... 81 SECTION 9.01. Without Consent of Holders of Notes........................................ 81 SECTION 9.02. With Consent of Holders of Notes........................................... 82 SECTION 9.03. Compliance with Trust Indenture Act........................................ 83 SECTION 9.04. Revocation and Effect of Consents.......................................... 83 SECTION 9.05. Notice of Amendment; Notation on or Exchange of Notes...................... 83 SECTION 9.06. Trustee to Sign Amendments, etc............................................ 84 ARTICLE 10. SATISFACTION AND DISCHARGE........................................................................... 84 SECTION 10.01. Satisfaction and Discharge................................................. 84 SECTION 10.02. Deposited Cash and Government Securities................................... 85 SECTION 10.03. Repayment to Company....................................................... 85 SECTION 10.04. Reinstatement.............................................................. 85 ARTICLE 11. MISCELLANEOUS........................................................................................ 86 SECTION 11.01. Trust Indenture Act Controls............................................... 86 SECTION 11.02. Notices.................................................................... 86 SECTION 11.03. Communication by Holders of Notes with Other Holders of Notes.............. 87 SECTION 11.04. Certificate and Opinion as to Conditions Precedent......................... 87 SECTION 11.05. Statements Required in Certificate or Opinion.............................. 87 SECTION 11.06. Rules by Trustee and Agents................................................ 88 SECTION 11.07. No Personal Liability of Directors, Officers, Employees and Stockholders... 88 SECTION 11.08. Governing Law.............................................................. 88 SECTION 11.09. No Adverse Interpretation of Other Agreements.............................. 88 SECTION 11.10. Successors................................................................. 88 SECTION 11.11. Severability............................................................... 88 SECTION 11.12. Counterpart Originals...................................................... 88 SECTION 11.13. Table of Contents, Headings, etc........................................... 89 |
EXHIBITS
Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTORS |
INDENTURE dated as of March 31, 2004 between CINEMARK, INC., a Delaware corporation, and THE BANK OF NEW YORK TRUST COMPANY, N.A., a national banking corporation, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Initial Notes, any Additional Notes and the Exchange Notes (in each case as defined herein):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means one or more global notes in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall represent the aggregate principal amount of the Notes sold in reliance on Rule 144A.
"Accreted Value" means, as of any date of determination the sum of (a) the initial Accreted Value (which is $623.73 per $1,000 in principal amount at maturity of Notes) and (b) the portion of the excess of the principal amount at maturity of each Note over such initial Accreted Value which shall have been amortized through such date, such amount to be so amortized on a daily basis and compounded semiannually on each March 15 and September at the rate of 9-3/4% per annum from the date of original issuance of the Notes through the date of determination computed on the basis of a 360-day year of twelve 30-day months. The Accreted Value of any Note on or after the Full Accretion Date shall be equal to 100% of its stated principal amount at maturity.
"Acquired Debt" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other Person is merged with or into or becomes a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and
(ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.
"Acquisition Documents" has the meaning set forth in the Offering Memorandum.
"Additional Interest" shall have the meaning set forth in the Registration Rights Agreement.
"Additional Notes" means 9-3/4% Senior Discount Notes due 2014 of the Company issued under this Indenture after the Issue Date and having identical terms to the Initial Notes or the Exchange Notes.
"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms controlling," "controlled by and "under common control with" have corresponding meanings.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.
"Asset Sale" means:
(i) the direct or indirect sale, lease, conveyance or other disposition, or series of related sales, leases, conveyances or other dispositions that are part of a common plan, of any property or assets (including Equity Interests of a Subsidiary) by the Company or any of its Restricted Subsidiaries; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by the provisions of this Indenture described in Section 4.15 and/or the provisions of Section 5.01 and not by the provisions of Section 4.10; and
(ii) the issuance of Equity Interests in any of the Company's Restricted Subsidiaries or the sale of Equity Interests in any of its Subsidiaries.
Notwithstanding the preceding, the following items will not be deemed to be Asset Sales:
(i) any single transaction or series of related transactions that involves assets or Equity Interests having a fair market value of less than $5.0 million;
(ii) a transfer of assets between or among the Company and its Restricted Subsidiaries;
(iii) an issuance, sale, transfer or other disposition of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary;
(iv) the sale or lease of equipment, inventory, accounts receivable or other assets in the ordinary course of business;
(v) the sale or other disposition of cash or Cash Equivalents;
(vi) exchanges of theatre properties that comply with the requirements of the final paragraph of Section 4.10, provided that payment of any Other Consideration shall, to the extent provided therein, be treated as an Asset Sale;
(vii) a disposition by the Company or any Restricted Subsidiary of the Company to the extent such disposition constitutes a Permitted Capitalized Lease;
(viii) any sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary; and
(ix) a Restricted Payment or Permitted Investment that is permitted by Section 4.07.
Notwithstanding any provision of this Indenture to the contrary, the expiration or non-renewal of any lease of theatre properties or equipment at the normal expiration date thereof without payment to the Company or any of its Restricted Subsidiaries of consideration therefor shall not constitute an Asset Sale.
"Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal, state or foreign law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and "Beneficially Owned" have corresponding meanings.
"Board of Directors" means:
(i) with respect to a corporation, the board of directors of the corporation;
(ii) with respect to a partnership, the board of directors of the general partner of the partnership; and
(iii) with respect to any other Person, the board or committee of such Person serving a similar function.
"Broker-Dealer" means any broker or dealer registered under the Exchange Act.
"Business Day" means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York or in the location of the Corporate Trust Office of the Trustee are authorized or required by law to close.
"Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means:
(i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;
(iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and
(iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(i) United States dollars or in the case of any Foreign Restricted Subsidiary, such local currencies held by it from time to time in the ordinary course of business;
(ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than twelve months from the date of acquisition;
(iii) certificates of deposit and eurodollar time deposits with maturities of twelve months or less from the date of acquisition, bankers' acceptances with maturities not exceeding twelve months and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $100.0 million and a Thomson Bank Watch Rating of "B" or better;
(iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above;
(v) commercial paper having the rating of at least "P-1" from Moody's or "A-1" from S&P and in each case maturing within twelve months after the date of acquisition;
(vi) with respect to any Foreign Subsidiary having its principal operations in Mexico only, (1) Certificados de la Tesoreria de la Federacion (Cetes), Bonos de Desarrollo del Gobierno Federal (Bondes) or Bonos Adjustables del Gobierno Federal (Adjustabonos), in each case, issued by the Mexican government; and (2) any other instruments issued or guaranteed by Mexico and denominated and payable in pesos; provided, that, in each case, such investments under this clause (vi) are made in the ordinary course of business for cash management purposes;
(vii) demand or time deposit accounts used in the ordinary course of business with overseas branches of commercial banks incorporated under the laws of the United States of America, any state thereof, the District of Columbia, Canada or any province or territory thereof, provided that such commercial bank has, at the time of the Company's or such Restricted Subsidiary's Investment therein, (1) capital, surplus and undivided profits (as of the date of such institution's most recently published financial statements) in excess of $100 million and (2) the long-term unsecured debt obligations (other than such obligations rated on the basis of the credit of a Person other than such institution) of such institution, at the time of the Company's or any Restricted Subsidiary's Investment therein, are rated in the highest rating category of both Moody's and S&P;
(viii) obligations (including, but not limited to demand or time deposits, bankers' acceptances and certificates of deposit) issued or guaranteed by a depository institution or trust company incorporated under the laws of the United States of America, any state thereof, the District of Columbia, Canada or any province or territory thereof, provided that (A) such instrument has a final maturity not more than one year from the date of purchase thereof by the Company or any Restricted Subsidiary of the Company and (B) such depository institution or trust company has at the time of the Company's or such Restricted Subsidiary's Investment therein or contractual commitment providing for such Investment, (x) capital, surplus and undivided profits (as of the date of such institution's most recently published financial statements) in excess of $100 million and (y) the long-term unsecured debt obligations (other than such obligations rated on the basis of the credit of a Person other than such institution) of such institution, at the time of the Company's or such Restricted Subsidiary's Investment therein or
contractual commitment providing for such Investment, are rated in the highest rating category of both S&P and Moody's;
(ix) in the case of any Foreign Subsidiary, demand or time deposit accounts used in the ordinary course of business with reputable commercial banks located in the jurisdiction of organization of such Foreign Subsidiary; and
(x) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i) through
(v) of this definition.
"Change of Control" means the occurrence of any of the following:
(i) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder;
(ii) the adoption of a plan relating to the liquidation or dissolution of the Company;
(iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) other than a Permitted Holder becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; or
(iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors.
"Clearstream" means Clearstream Banking, societe anonyme.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any successor agency.
"Company" means Cinemark, Inc. until a successor shall have become such pursuant to the applicable provisions of this Indenture and thereafter "Company" shall mean such successor.
"Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus:
(i) any increase in deferred lease expense; plus
(ii) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period; plus
(iii) Fixed Charges to the extent such amounts are included in the calculation of Consolidated Net Income; plus
(iv) depreciation, non-cash asset impairment losses, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses, including foreign exchange losses not included in operating income, (excluding (other than foreign advance rents
paid at the inception of the lease) any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period; plus
(v) the Net Income of any Person and its Restricted Subsidiaries shall be calculated without deducting the income attributable to, or adding the losses attributable to, the minority equity interests of third parties in any non-wholly-owned Restricted Subsidiary; plus
(vi) the amount of management, consulting and advisory fees and related expenses paid to Madison Dearborn Partners, LLC or one of its Affiliates (or any accruals relating to such fees and related expenses) during such period, provided that such amount shall not exceed $1.0 million in any twelve-month period; plus
(vii) any reasonable expenses and charges related to any Equity Offering, Permitted Investment, acquisition, recapitalization, Asset Sale or Indebtedness permitted to be incurred under this Indenture (in each case, whether or not successful); minus
(viii) non-cash items increasing such Consolidated Net Income for such period (including foreign exchange gains not included in operating income), other than (1) the accrual of revenue or amortization of prepaid cash income in the ordinary course of business and (2) the reversal of an accrual or cash reserve that was excluded pursuant to paragraph (iv) above in any prior period; minus
(ix) any decrease in deferred lease expense,
in each case, on a consolidated basis and determined in accordance with
GAAP.
Notwithstanding the preceding sentence, clauses (i) through (ix) relating to amounts of a RestrictedSubsidiary of a Person will be added to (or subtracted from) Consolidated Net Income to compute Consolidated Cash Flow of such Person only to the extent (and in the same proportion) that the net income (loss) of such Restricted Subsidiary was included in calculating the Consolidated Net Income of such Person.
"Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP, provided, however, in the case of the Company and its Restricted Subsidiaries, (1) Consolidated Net Income shall include only those management fees actually received by the Company and its Restricted Subsidiaries from its Unrestricted Subsidiaries, (2) accrued but unpaid compensation expenses related to any stock appreciation or stock option plans shall not be deducted until such time as such expenses result in a cash expenditure and (3) compensation expenses related to tax payment plans implemented by the Company from time to time in connection with the exercise and/or repurchase of stock options shall not be deducted from Net Income to the extent of the related tax benefits arising therefrom; provided, further, that:
(i) the Net Income of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person;
(ii) solely for the purpose of determining the amount available for
Restricted Payments under clause (iii)(a) of the first paragraph of
Section 4.07, the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends
or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders (other than (A) with respect to restrictions applicable to Cinemark USA, Inc. and permitted by Section 4.08 or (B) to the extent of the amount of dividends or distributions that have actually been paid in the calculation period);
(iii) the cumulative effect of a change in accounting principles shall be excluded;
(iv) any non-cash goodwill or other intangible asset impairment charges incurred subsequent to the date of this Indenture resulting from the application of SFAS No. 142 (or similar pronouncements) shall be excluded;
(v) any net after-tax income or loss from discontinued operations, net after-tax gains or losses on disposal of discontinued operations and losses arising from lease dispositions shall be excluded; and
(vi) items classified as extraordinary or nonrecurring gains and losses (less all fees and expenses related thereto) or expenses (including, without limitation, severance, relocation, other restructuring costs and expenses arising from the Transactions), and the related tax effects according to GAAP, shall be excluded; provided that with respect to each extraordinary or nonrecurring item, the Company shall have delivered an Officers' Certificate to the Trustee specifying and quantifying such item and stating that such item is extraordinary or non-recurring.
"Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who:
(i) was a member of such Board of Directors on the Issue Date;
(ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election; or
(iii) was nominated for election pursuant to the provisions of the Stockholders Agreement as in effect on the Recapitalization Date.
"Corporate Trust Office of the Trustee" means the office of the Trustee in Dallas, Texas, at which at any particular time its corporate trust business shall be principally administered, which office at the date of the execution and delivery of this Indenture, as originally executed and delivered, is located at 600 North Pearl Street, Suite 420, Dallas, Texas 75201, Attention: Corporate Trust Division.
"Credit Agreement" means that certain Amended and Restated Credit Agreement, to be dated as of the Recapitalization Date, by and among Cinemark USA, Inc., as borrower, the Company, CNMK Holding, Inc. and the subsidiary guarantors named therein, Lehman Commercial Paper Inc., as administrative agent, Goldman Sachs Credit Partners L.P., as syndication agent, Lehman Commercial Paper Inc. and Goldman Sachs Credit Partners L.P., as joint lead arrangers and joint bookrunners, Deutsche Bank Securities Inc., The Bank of New York, General Electric Capital Corporation and CIBC Inc., as co-documentation agents, and the lenders parties thereto from time to time, providing for up to $260.0 million of term loan borrowings and $100.0 million of revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time.
"Credit Facilities" means, one or more debt facilities (including, without limitation, the Credit Agreement), commercial paper facilities or indentures, in each case with banks or other institutional lenders or investors providing for revolving credit loans, term loans, debt securities, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit and any agreement or agreements governing Indebtedness incurred to refinance, replace, restructure or refund such agreements in whole or in part from time to time (whether with the original agent and lenders or other agents and lenders or otherwise).
"Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07.
"Distribution Compliance Period" means the 40-day restricted period as defined in Regulation S.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company.
"Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any public (other than pursuant to a Form S-8 or any other form relating to securities issuable under any employee benefit plan of the Company) or private sale of Capital Stock (other than Disqualified Stock) made for cash on a primary basis by the Company after the Recapitalization Date.
"Escrow Agreement" means that certain Escrow and Security Agreement dated as of March 31, 2004 among the Company, as pledgor, the Trustee, as trustee and securities intermediary and escrow agent, and the Initial Purchasers.
"Euroclear" means Euroclear Bank S.A./N.V., as operator of the Euroclear system.
"Event of Default" has the meaning specified in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means any substantially identical issue of Notes (other than with respect to transfer restrictions) issued in an Exchange Offer for the Initial Notes or any Additional Notes.
"Exchange Offer" has the meaning set forth in the Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement.
"Exchange Securities" has the meaning set forth in the Registration Rights Agreement.
"Excluded Contribution" means the net cash proceeds received by the Company after the Recapitalization Date from (a) contributions to its common equity capital and (b) the sale (other than to a Subsidiary of the Company or pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Company or any of its Subsidiaries) of Capital Stock (other than Disqualified Stock) of the Company, in each case designated within 60 days of the receipt of such net cash proceeds as Excluded Contributions pursuant to an Officers' Certificate, the cash proceeds of which are excluded from the calculation set forth in clause iii(b) of the first paragraph of Section 4.07.
"Existing Credit Agreement" means that certain Credit Agreement, dated as of February 14, 2003, by and among Cinemark USA, Inc., as borrower, the Company, CNMK Holding, Inc. and the subsidiary guarantors named therein, Lehman Commercial Paper Inc., as administrative agent, and the lenders parties thereto from time to time, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time.
"Existing Indebtedness" means up to $480.5 million in aggregate principal amount of Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Existing Credit Agreement) in existence on the Issue Date, until such amounts are repaid.
"Existing Notes" means (i) the $360.0 million aggregate principal amount of 9% Senior Subordinated Notes due 2013 and (ii) the $105.0 million aggregate principal amount of 8.5% Series B Senior Subordinated Notes due 2008 (the "2008 Notes'"), in each case issued by Cinemark USA, Inc. and guaranteed by certain Subsidiaries of Cinemark USA, Inc.
"Fixed Charges" means, with respect to any specified Person for any period, the sum, without
duplication, of:
(i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations (but excluding any interest expense attributable to Permitted Capitalized Leases), imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations (excluding the amortization or write-off of debt issuance costs incurred in connection with or prior to the Transactions); plus
(ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus
(iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus
(iv) the product of (a) all dividends paid (whether or not in cash) on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable (X) solely in Equity Interests of the Company (other than Disqualified Stock) or (Y) to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined effective federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Subsidiaries incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(i) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated on a pro forma basis (giving effect to any Pro Forma Cost Savings);
(ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be deemed to have occurred on the first day of the four-quarter reference period and shall be excluded; and
(iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be deemed to have occurred on the first day of the four-quarter reference period and shall be
excluded, but only to the extent that the obligations giving rise to such Fixed Charges shall not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary of the Company that is not organized under the laws of the United States, any state thereof or the District of Columbia.
"Full Accretion Date" means March 15, 2009.
"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture.
"Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto issued in accordance with Sections 2.01 or 2.06 hereof.
"Government Securities" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a) (2) of the Securities Act), as custodian, with respect to any such Governmental Securities or a specific payment of principal of or interest on any such Governmental Securities held by such custodian for the account of the holder of such depository receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt.
"Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business and other than leases entered in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness.
"Guarantor" means any Person that Guarantees the Notes; provided that upon the release or discharge of such Person from its Subsidiary Guarantee in accordance with the provisions of this Indenture, such Person shall cease to be a Guarantor.
"Hedging Obligations" means, with respect to any specified Person, the obligations of such Person incurred in the normal course of business and consistent with past practices and not for speculative purposes under:
(i) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements entered into with one or
more financial institutions and designed to protect the Person or entity entering into the agreement against fluctuations in interest rates with respect to Indebtedness incurred and not for purposes of speculation;
(ii) foreign exchange contracts and currency protection agreements entered into with one or more financial institutions and designed to protect the Person or entity entering into the agreement against fluctuations in currency exchange rates with respect to Indebtedness incurred and not for purposes of speculation;
(iii) any commodity futures contract, commodity option or other similar agreement or arrangement designed to protect against fluctuations in the price of commodities used by that Person at the time; and
(iv) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates.
"Holder" means, for so long as the Notes are represented by Global Notes, the bearer thereof which shall initially be the Global Note Holder and, in the event that Definitive Notes are issued, the Person in whose name the Notes are registered.
"IAI Global Note" means a Global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount at maturity of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent:
(i) in respect of borrowed money;
(ii) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof);
(iii) in respect of banker's acceptances;
(iv) representing Capital Lease Obligations;
(v) representing the balance deferred and unpaid of the purchase price of any property, except any such balance that constitutes an accrued expense or trade payable;
(vi) all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary, any preferred stock (but excluding, in each case, any accrued dividends); or
(vii) representing the net amount owing under any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(i) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; and
(ii) the principal amount of the Indebtedness, together with any interest on the Indebtedness that is more than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to time.
"Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant.
"Initial Notes" means the 9-1/2% Senior Discount Notes due 2014 issued by the Company on the Issue Date.
"Initial Purchasers" means (i) with respect to the Initial Notes issued on the Issue Date, Lehman Brothers Inc., Goldman, Sachs & Co., Deutsche Bank Securities Inc., CIBC World Markets Corp. and BNY Capital Markets, Inc. and (2) with respect to each issuance of Additional Notes, the Persons purchasing such Additional Notes under the related purchase agreement.
"Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition in an amount equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of
Section 4.07. The acquisition by the Company or any Subsidiary of the Company of
a Person that holds an Investment in a third Person shall be deemed to be an
Investment made by the Company or such Subsidiary in such third Person in an
amount equal to the fair market value of the Investment held by the acquired
Person in such third Person on the date of any such acquisition in an amount
determined as provided in the final paragraph of Section 4.07.
"Issue Date" means the date on which the Notes are originally issued under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in The City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Moody's" means Moody's Investors Service, Inc. or any successor to the rating agency business thereof.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, any gain
or loss (net of related costs, fees, expenses and with any related provision for
taxes) on such gain or loss, realized in connection with: (a) any Asset Sale
(without giving effect to the $5.0 million threshold contained in clause (i) of
the second paragraph of the definition thereof) or (b) the disposition of any
securities by such Person or any of its Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Subsidiaries.
"Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (i) the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, (ii) taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, (iii) amounts required to be applied to the repayment of Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets that were the subject of such Asset Sale, (iv) any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP, (v) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries or joint ventures as a result of such Asset Sale, and (vi) appropriate amounts to be provided by the Company or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, as determined in conformity with GAAP.
"Non-Recourse Debt" means Indebtedness:
(i) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender, other than such Liens permitted by clause (ix) of
the definition of Permitted Liens;
(ii) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and
(iii) as to which the lenders have been notified in writing that they shall not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means The Bank of New York Trust Company, N.A., as custodian with respect to the Notes in global form, or any successor entity thereto.
"Notes" means the Initial Notes, the Exchange Notes and any Additional Notes issued under this Indenture.
"Obligations" means any principal, premium and Additional Interest, if any, interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, charges, expenses, indemnifications, reimbursement obligations, damages, guarantees and other liabilities or amounts payable under the documentation governing any Indebtedness or in respect thereto.
"Offering Memorandum" means the offering memorandum prepared by the Company and dated March 29, 2004.
"Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company, which meets the requirements of Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel, who is reasonably acceptable to the Trustee, which meets the requirements of Section 11.05 hereof. The counsel may be an employee of or counsel to the Company or any Subsidiary.
"Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Clearstream).
"Participating Broker-Dealer" means any broker-dealer that receives Exchange Notes for its own account in the Exchange Offer in exchange for Notes that were acquired by such broker-dealer as a result of market-making or other trading activities.
"Permitted Business" means the lines of business conducted by the Company and its Restricted Subsidiaries on the Issue Date and any business incidental or reasonably related thereto or which is a reasonable extension thereof as determined in good faith by the Board of Directors of the Company and set forth in an officer's certificate delivered to the Trustee.
"Permitted Capitalized Leases" means obligations of the Company or any Restricted Subsidiary of the Company up to $50 million in the aggregate at any one time outstanding that are classified as "Capital Lease Obligations" under GAAP due to the application of Emerging Issues Task Force Regulation 97-10 or similar pronouncements and, except for such regulation or pronouncement, such obligation would not constitute Capital Lease Obligations.
"Permitted Holders" means (a) Madison Dearborn Partners, LLC and Related Parties and (b) Permitted Mitchell Holders.
"Permitted Investments" means:
(i) any Investment in the Company or in a Restricted Subsidiary of the Company;
(ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company;
(iv) receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;
(v) workers' compensation, utility, lease and similar deposits and prepaid expenses in the ordinary course of business and endorsements of negotiable instruments and documents in the ordinary course of business;
(vi) loans or advances to employees (other than executive officers) made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary;
(vii) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10;
(viii) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company;
(ix) any Investments received in compromise of obligations of trade creditors or customers that were incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer;
(x) Hedging Obligations;
(xi) refundable construction advances made with respect to the construction of properties of a nature or type that are used in a business similar or related to the business of the Company or its Restricted Subsidiaries in the ordinary course of business;
(xii) advances or extensions of credit on terms customary in the industry in the form of accounts or other receivables incurred, or pre-paid film rentals, and loans and advances made in settlement of such accounts receivable, all in the ordinary course of business;
(xiii) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (xiii) that are at the time outstanding, not to exceed $15.0 million;
(xiv) Investments existing on the Issue Date;
(xv) Guarantees issued in accordance with Section 4.09; and
(xvi) advances, loans or extensions of credit to suppliers and vendors in the ordinary course of business.
"Permitted Liens" means:
(i) Liens securing the Credit Facilities that are permitted to be incurred;
(ii) Liens in favor of the Company or any Restricted Subsidiary of the Company;
(iii) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary;
(iv) Liens on property existing at the time of acquisition of the property by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Subsidiary;
(v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business;
(vi) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of the second paragraph of Section 4.09 covering only the assets, accessions, improvements and proceeds acquired with such Indebtedness;
(vii) Liens existing on the Issue Date;
(viii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted, provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;
(ix) Liens on the Capital Stock and assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries;
(x) Easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar encumbrances which, in the aggregate, do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Company or such Restricted Subsidiary;
(xi) Leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries, taken as a whole;
(xii) Landlords', carriers', warehousemen's, mechanics', materialmen's, repairmen's or the like Liens arising by contract or statute in the ordinary course of business and with respect to amounts which are not yet delinquent or are being contested in good faith by appropriate proceedings;
(xiii) Pledges or deposits made in the ordinary course of business (A) in connection with leases, performance bonds and similar obligations, or (B) in connection with workers' compensation, unemployment insurance and other social security legislation;
(xiv) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets;
(xv) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
(xvi) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Company and its Restricted Subsidiaries;
(xvii) Liens on or sales of receivables;
(xviii) the rights of film distributors under film licensing contracts entered into by the Company or any Restricted Subsidiary in the ordinary course of business on a basis customary in the movie exhibition industry;
(xix) any attachment or judgment Lien that does not constitute an Event of Default;
(xx) Liens in favor of the Trustee for its own benefit and for the benefit of the Holders of the Notes;
(xxi) Liens (including extensions and renewals thereof) upon real or personal property acquired after the Issue Date; provided that (a) such Lien is created solely for the purpose of securing Indebtedness incurred, in accordance with Section 4.09, (1) to finance the cost (including the cost of improvement or construction) of the item of property or assets subject thereto and such Lien is created prior to, at the time of or within six months after the later of the acquisition, the completion of construction or the commencement of full operation of such property or (2) to refinance any Indebtedness previously so secured, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such cost and (c) any such Lien shall not extend to or cover any property or assets other than such item of property or assets and any accessions, proceeds and improvements on such item;
(xxii) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, banker's acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money);
(xxiii) Liens encumbering deposits securing Indebtedness under Hedging Obligations;
(xxiv) Liens arising from filing Uniform Commercial Code financing statements with respect to leases;
(xxv) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding; and
(xxvi) Liens securing the obligations under the Escrow Agreement.
"Permitted Mitchell Holders" means (a) Lee Roy Mitchell or Tandy Mitchell,
or any descendant of Lee Roy Mitchell or the spouse of any such descendant, the
estate of Lee Roy Mitchell, Tandy Mitchell, any descendant of Lee Roy Mitchell
or the spouse of any such descendant or any trust or other arrangement for the
benefit of Lee Roy Mitchell, Tandy Mitchell, any descendant of Lee Roy Mitchell
or the spouse of any such descendant (collectively, the "Mitchell Family") and
(b) any group which includes any member or members of the Mitchell Family if a
majority of the Capital Stock of the Company held by such group is beneficially
owned (including the power to vote such Capital Stock of the Company) by such
member or members of the Mitchell Family or by one or more Affiliates at least
80% of the equity interests of which are owned by such member or members of the
Mitchell Family.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Subsidiaries (other than intercompany Indebtedness); provided that:
(i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest on the Indebtedness and the amount of all expenses and premiums incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final maturity date later than or equal to the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
(iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and
(iv) such Indebtedness is incurred either by the Company or by the Subsidiary that is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.
"Predecessor Note" of any particular Note means every previous Note evidencing all or a portion of the same Indebtedness as that evidenced by such particular Note; and any Note authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same Indebtedness as the lost, destroyed or stolen Note.
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.
"Pro Forma Cost Savings" means, with respect to any period, the reduction in costs and related adjustments that occurred during the four-quarter reference period or after the end of the four-quarter
period and on or prior to the Calculation Date that were (i) directly attributable to an acquisition or Asset Sale and calculated on a basis that is consistent with Regulation S-X under the Securities Act as in effect and applied as of the date of this Indenture or (ii) implemented, or for which the steps necessary for implementation have been taken by the Company and are reasonably expected to occur, with respect to the Company or the business that was the subject of any such acquisition or Asset Sale within six months before or after the date of the acquisition or Asset Sale and that are supportable and quantifiable by the underlying accounting records of such business, as if, in the case of each of clause (i) and (ii), all such reductions in costs and related adjustments had been effected as of the beginning of such period.
"Prospectus" means the prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Proceeds" means any of the following or any combination of the following: (i) cash, (ii) Cash Equivalents, (iii) assets that are used or useful in a Permitted Business and (iv) the Capital Stock of any Person engaged in a Permitted Business that becomes a Restricted Subsidiary of the Company as a result of the acquisition of such Capital Stock by the Company or any Restricted Subsidiary of the Company.
"Recapitalization" has the meaning set forth in the Offering Memorandum.
"Recapitalization Date" means the date on which the Recapitalization is consummated.
"Registration Rights Agreement" means (1) with respect to the Initial Notes issued on the Issue Date, the Registration Rights Agreement dated as of the date hereof among the Company and the Initial Purchasers and (2) with respect to each issuance of Additional Notes issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company and the Persons purchasing such Additional Notes under the related purchase agreement.
"Registration Statement" means any registration statement of the Company
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) that is filed pursuant to
the provisions of a Registration Rights Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a global Note in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount at maturity of the Notes initially sold in reliance on Regulation S.
"Regulation S Permanent Global Note" means a permanent global note bearing the Global Note Legend and the Private Placement Legend and deposited with, or on behalf of, and registered in the name of, the Depositary or its nominee, that shall equal the outstanding principal amount at maturity of the Regulation S Temporary Global Note upon expiration of the Distribution Compliance Period.
"Regulation S Temporary Global Note" means one or more global notes bearing the Global Note Legend, the Temporary Global Note Legend and the Private Placement Legend and deposited with, or on behalf of, and registered in the name of, the Depositary or its nominee that shall represent the aggregate principal amount at maturity of the Notes sold in reliance on Regulation S.
"Regulation S Temporary Global Note Legend" means the legend set forth in
Section 2.06(g)(iii), which is required to be placed on all Regulation S
Temporary Global Notes issued under this Indenture.
"Related Party" means:
(i) any investment fund or other entity controlled by or under common control with, Madison Dearborn Partners, LLC or the principals that control Madison Dearborn Partners, LLC; or
(ii) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more of Madison Dearborn Partners, LLC and/or such other Persons referred to in the immediately preceding clause (i).
"Responsible Officer" means when used with respect to the Trustee, the officer within the Corporate Trust Division of the Trustee (or any successor unit, department or division of the Trustee) located at the Corporate Trust Office of the Trustee, who has direct responsibility for the administration of this Indenture and, for the purposes of Section 7.01(c)(ii) and the second sentence of Section 7.05 shall also include any officer of the Trustee to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means:
(i) all Indebtedness of the Company outstanding under the Notes, whether outstanding on the date of this Indenture or thereafter incurred;
(ii) any other Indebtedness incurred by the Company, unless the instrument under which such Indebtedness is incurred expressly provides that it is subordinated in right of payment to the Notes; and
(iii) all Obligations with respect to the items listed in the preceding clauses (i) and (ii) (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law).
Notwithstanding anything to the contrary in the preceding, Senior Debt shall not include:
(i) any liability for federal, state, local or other taxes owed or owing by the Company;
(ii) any Indebtedness of the Company to any of its Subsidiaries;
(iii) any trade payables of the Company; or
(iv) the portion of any Indebtedness that is incurred in violation of this Indenture (but only to the extent so incurred).
"Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act and the Exchange Act, as such Regulation is in effect on the date hereof.
"S&P" means Standard & Poor's Ratings Group, or any successor to the rating agency business thereof.
"Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.
"Stockholders Agreement" means the Stockholders Agreement, dated as of March 12, 2004, among the Company, Madison Dearborn Capital Partners IV, L.P., each of the investors listed on the Schedule of Mitchell Investors attached thereto and each of the management investors listed on the Schedule of Executives attached thereto.
"Subsidiary" means, with respect to any specified Person:
(i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are that Person or one or more
Subsidiaries of that Person (or any combination thereof).
"Subsidiary Guarantee" means, individually, any Guarantee of payment of the Notes and Exchange Notes issued in a registered exchange offer pursuant to the Registration Rights Agreement by a Guarantor pursuant to the terms of this Indenture and any supplemental indenture hereto, and, collectively, all such Guarantees.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa 77bbbb) as in effect on the date on which this Indenture is qualified under the TIA.
"Transactions" has the meaning set forth in the Offering Memorandum.
"Transfer Restricted Securities" means each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Note has been disposed of in accordance with a Shelf Registration Statement, (c) the date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein) or (d) the date on which such Note is distributable to the public pursuant to Rule 144 under the Securities Act.
"Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a Global Note in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing Notes that do not bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company (other than CNMK Holding, Inc., Cinemark USA, Inc. or any successor to any of them) that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary:
(i) has no Indebtedness other than Non-Recourse Debt;
(ii) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;
(iii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results;
(iv) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries;
(v) either alone or in the aggregate with all other Unrestricted Subsidiaries, does not operate, directly or indirectly, all or substantially all of the business of the Company and its Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07 and Section 4.17. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Company shall be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (1) such Indebtedness is permitted under Section 4.09, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(k) under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing:
(i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that shall elapse between such date and the making of such payment; by
(ii) the then outstanding principal amount of such Indebtedness.
SECTION 1.02. OTHER DEFINITIONS.
Term Defined in Section "Affiliate Transaction"...................................................................... 4.11 "Asset Sale Offer"........................................................................... 4.10 "Authenticating Agent"....................................................................... 2.02 "Authentication Order" ...................................................................... 2.02 "Change of Control Offer".................................................................... 4.15 "Change of Control Payment".................................................................. 4.15 "Change of Control Payment Date"............................................................. 4.15 "Covenant Defeasance"........................................................................ 8.03 "Custodian".................................................................................. 6.01 "DTC"........................................................................................ 2.03 "Event of Default"........................................................................... 6.01 "Excess Proceeds"............................................................................ 4.10 "incur"...................................................................................... 4.09 "Legal Defeasance"........................................................................... 8.02 "Offer Amount"............................................................................... 3.10 "Other Consideration"........................................................................ 4.10 "Paying Agent"............................................................................... 2.03 "Payment Default"............................................................................ 6.01 "Purchase Date".............................................................................. 4.10 "Registrar".................................................................................. 2.03 "Restricted Payments"........................................................................ 4.07 "Special Redemption.......................................................................... 3.08 "Special Redemption Date".................................................................... 3.08 "Special Redemption Price"................................................................... 3.08 "Transaction Value".......................................................................... 4.10 |
SECTION 1.03. INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligors upon the Notes.
All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule under the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof," "hereunder" and other words of similar import refer to this Indenture (as amended or supplemented from time to time) and not to any particular Article, Section or other subdivision; and
(7) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the Commission from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General.
The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company and the Trustee shall approve the forms of the Notes and any notation, legend or endorsement on them. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 aggregate principal amount at maturity and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. Notes shall be dated the date of their authentication.
Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto).
(b) Global Notes.
Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount at maturity of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount at maturity of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount at maturity of outstanding Notes represented thereby shall be made by the Trustee, the Depositary or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall bear the Regulation S Temporary Global Note Legend and which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Distribution Compliance Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount at maturity of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Distribution Compliance Period pursuant to another exemption from registration under the Securities Act and who shall take delivery of a beneficial ownership interest in a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(b)(iii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Distribution Compliance Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount at maturity of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided.
(d) Euroclear and Clearstream Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Clearstream.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Notes for the Company by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee manually authenticates the Note. The signature of the Trustee on a Note shall be conclusive evidence that the Note has been duly and validly authenticated and issued under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company or by an Officer and an Assistant Treasurer or an
Assistant Secretary of the Company (the "Authentication Order"), authenticate
(i) on the Issue Date $577,173,000 in aggregate principal amount at maturity of
Notes, (ii) at any time and from time to time thereafter, Additional Notes
(subject to the provisions of Section 2.13) in an aggregate principal amount at
maturity specified in such Authentication Order and (iii) Exchange Notes issued
in exchange for a like principal amount at maturity of Initial Notes or
Additional Notes tendered pursuant to an Exchange Offer. Such Authentication
Order shall specify (i) the amount of the Notes to be authenticated, (ii) the
date on which the Notes are to be authenticated, (iii) whether the Notes are to
be Initial Notes, Exchange Notes or Additional Notes and (iv) whether such Notes
shall bear the Global Note Legend, the Original Issue Discount Legend, the
Regulation S Temporary Global Note Legend and/or the Private Placement Legend.
The Trustee may appoint an authenticating agent (the "Authenticating Agent") acceptable to the Company to authenticate Notes. An Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"). The Company shall cause each of the Registrar and the Paying Agent to maintain an office or agency in the Borough of Manhattan, The City of New York. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and Paying Agent. The Bank of New York Trust Company, N.A. shall act as Note Custodian with respect to the Global Notes in accordance with its agreement with DTC.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
By no later than 11:00 a.m. (New York City time) on the date on which any principal of or interest on any Notes is due and payable, the Company shall deposit with the Paying Agent a sum sufficient in immediately available funds to pay such principal or interest when due. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of or premium, if any, Additional Interest, if any, or interest on the Notes, and shall notify the Trustee in writing of any default by the Company in making any such payment. While any such default
continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by such Paying Agent. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary, (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or (iii) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of any of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07, 2.10 and 9.05 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 or 9.05 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a); however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend and any Applicable Procedures; provided, however, that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser or a "distributor" (as defined in Rule 902(d) of Regulation S)). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. Except as may be required by Applicable Procedures, no written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) if permitted under Section 2.06(a) hereof, (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (B)(1) above; provided that in no event shall Definitive Notes be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Registrar of any certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon notification from the Registrar that all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act have been satisfied, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests in a Restricted Global Note to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(ii) above and the Registrar and the Company receive the following:
(A) if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transferee shall take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note,
then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and
(C) if the transferee shall take delivery in the form of a beneficial interest in the IAI Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications and certificates and Opinion of Counsel required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if the exchange or transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with a Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal or is deemed to have made such certifications if delivery is made through the Applicable Procedures as may be required by the Registration Rights Agreement;
(B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar and the Company receive the following:
(1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar or the Company so requests or the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof or in accordance with a previously delivered Authentication
Order, the Trustee shall authenticate one or more Unrestricted Global Notes in
an aggregate principal amount equal to the aggregate principal amount of
beneficial interests transferred pursuant to subparagraph (B) or (D) above.
(v) Transfer or Exchange of Beneficial Interests in Unrestricted Global Notes for Beneficial Interests in Restricted Global Notes Prohibited. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, beneficial interests in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests in Global Notes for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. Subject to Section 2.06(a) hereof, if any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar and the Company of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and upon receipt of an
Authentication Order in accordance with Section 2.02 hereof or in
accordance with a previously delivered Authentication Order, the
Trustee shall authenticate and deliver to the Person designated in
the instructions a Definitive Note in the appropriate principal
amount. Any Restricted Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in
such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Restricted Definitive
Notes to the Persons in whose names such Notes are so registered.
Any Restricted Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may
not be exchanged for a Definitive Note or transferred to a Person
who takes delivery thereof in the form of a Definitive Note prior to
(x) the expiration of the Distribution Compliance Period and (y) the
receipt by the Registrar of any certificates required pursuant to
Rule 903(b)(3)(ii)(B) under the Securities Act, except in the case
of a transfer pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. Subject to Section 2.06(a) hereof, a holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal;
(B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar and the Company receive the following:
(1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted
Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar or the Company so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the clauses of this Section 2.06(c)(iii), the Company shall execute, and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount, and the Trustee shall cause the aggregate principal amount at maturity of the applicable Restricted Global Note to be reduced in a corresponding amount pursuant to Section 2.06(h) hereof.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. Subject to Section 2.06(a) hereof, if any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note, then, upon satisfaction of the applicable conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Unrestricted Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Unrestricted Definitive Notes to the Persons in whose names such Notes are so registered. Any Unrestricted Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(iv) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests in Global Notes.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar and the Company of the following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in item
(2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) through (D) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to either of the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, in the case of clause (C) above, the Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal;
(B) such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to an Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar and the Company receives the following:
(1) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Restricted Definitive Note proposes to transfer such Note to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar and the Company request or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel such Restricted Definitive Note and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.
(iv) Transfer or Exchange of Unrestricted Definitive Notes to Beneficial Interests in Restricted Global Notes Prohibited. An Unrestricted Definitive Note may not be exchanged for, or transferred to Persons who take delivery thereof in the form of, beneficial interests in a Restricted Global Note.
(v) Issuance of Unrestricted Global Notes. If any such
exchange or transfer from a Definitive Note to a beneficial interest
in an Unrestricted Global Note is effected pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted
Global Note has not yet been issued, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section
2.02 hereof or in accordance with a previously delivered
Authentication Order, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by such Holder's attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer shall be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;
(B) if the transfer shall be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and
(C) if the transfer shall be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to an Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, makes any and all certifications in the applicable Letter of Transmittal;
(B) any such transfer is effected pursuant to a Shelf Registration Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar and the Company receive the following:
(1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the clauses of Section 2.06(e)(ii), the Trustee shall cancel the prior Restricted Definitive Note and the Company shall execute, and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof or in accordance with a previously delivered Authentication Order, the Trustee shall authenticate and deliver to the Person designated in the instructions an Unrestricted Definitive Note in the appropriate principal amount.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of an Exchange Offer in accordance with a Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount at maturity equal to the principal amount at maturity of the beneficial interests in the applicable Restricted Global Notes tendered for acceptance by Persons that make any and all certifications in the applicable Letter of Transmittal or are deemed to have made such certifications if delivery is made through the Applicable Procedures as may be required by such Registration Rights Agreement and accepted for exchange in the Exchange Offer and (ii) Unrestricted Definitive Notes in an aggregate principal amount at maturity equal to the principal amount at maturity of the Restricted Definitive Notes tendered for acceptance by Persons who made the foregoing certifications and accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount at maturity of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Restricted Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
OTHER SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION"
PURSUANT TO RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144
(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION
THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF
(OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH
THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER
DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE
"RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A INSIDE THE
UNITED STATES, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT OR (E)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES
THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND; PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE
REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (I) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF
THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING
ON THE OTHER SIDE OF THE NOTE IS COMPLETED AND DELIVERED BY
THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
of this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A SUCCESSOR DEPOSITARY, OR ANY NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THE GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THE GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE"
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S
TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF
INTEREST HEREON."
(iv) Original Issue Discount Legend. Each Note shall bear a legend in substantially the following form:
"FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS NOTE, THE ISSUE PRICE IS $______, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $______ PER $1,000 PRINCIPAL AMOUNT AT MATURITY OF THIS NOTE, THE ISSUE DATE IS __________ AND THE YIELD TO MATURITY IS _____% PER ANNUM."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount at maturity of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order.
(ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.
(v) The Registrar shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection or (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.
(vi) The Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
(ix) The Trustee is hereby authorized and directed to enter into a letter of representations with the Depositary in the form provided by the Company and to act in accordance with such letter.
(x) Subject to compliance with any applicable additional requirements contained in this Article, when a Note is presented to the Registrar with a request to register a transfer thereof or to exchange such Note for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided, however, that every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by an assignment form and, if applicable, a transfer certificate, each in the form included in Exhibit A attached hereto and in form satisfactory to the Registrar and each duly executed by the Holder thereof or its attorney duly authorized in writing. To permit registration of transfers and exchanges, upon surrender of any Note for registration of transfer or exchange at an office or agency maintained for such purpose pursuant to Section 2.3, the Company shall execute, and the Trustee shall authenticate, Notes of a like aggregate principal amount at maturity at the Registrar's request.
(xi) Any Registrar appointed pursuant to Section 2.3 shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Notes upon transfer or exchange of Notes.
(xii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Participants or other beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.
(xiii) None of the Company, the Trustee or any Paying Agent shall have any responsibility or liability for any aspect of the records relating to, or payments made on account of or transfers of, beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.
(xiv) None of the Company, the Trustee or the Registrar shall have any liability for any acts or omissions of the Depositary, for any Depositary records of beneficial interests, for any transaction between the Depositary or any Participant and/or beneficial owners, for any transfers of beneficial interests in the Notes, or in respect of any transfers effected by the Depositary or by any Participant or any beneficial owner of any interest in any Notes held through any such Participant.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order or in accordance with a previously delivered Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any Authenticating Agent from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge for their expenses in replacing a Note.
Every replacement Note issued in accordance with this Section 2.07 is an additional obligation of the Company and any other obligor upon the Notes and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.
The Company and the Trustee may charge the Holder for their expenses in replacing a Note. In the event any such mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Company in its discretion may pay such Note instead of issuing a new Note in replacement thereof.
The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount at maturity of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Affiliate of the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall dispose canceled Notes in accordance with customary practices (subject to the record retention requirement of the Exchange Act). Certification of the disposal of all canceled Notes shall be delivered to the Company from time to time upon written request. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid.
SECTION 2.13. ISSUANCE OF ADDITIONAL NOTES.
The Company shall be entitled, subject to its compliance with Section 4.09, to issue Additional Notes under this Indenture which shall have identical terms as the Initial Notes issued on the Issue Date or
the Exchange Notes issued in exchange for the Initial Notes, other than with respect to the date of issuance and issue price, first payment of interest and rights under a related Registration Rights Agreement, if any.
With respect to any Additional Notes, the Company shall set forth in a resolution of the Board of Directors and an Officers' Certificate, a copy of each which shall be delivered to the Trustee, the following information:
(a) the aggregate principal amount at maturity of such Additional Notes to be authenticated and delivered pursuant to this Indenture;
(b) the issue price, the issue date and the CUSIP number and corresponding ISIN of such Additional Notes; and
(c) whether such Additional Notes shall be Transfer Restricted Securities and issued in the form of Initial Notes as set forth in Exhibit A to this Indenture or shall be issued in the form of Exchange Notes as set forth in Exhibit A to this Indenture.
SECTION 2.14. ONE CLASS OF SECURITIES.
The Initial Notes issued on the Issue Date, any Additional Notes and all Exchange Notes issued in exchange therefor shall be treated as a single class for all purposes under this Indenture.
SECTION 2.15. CUSIP, ISIN OR OTHER SIMILAR NUMBERS.
The Company in issuing the Notes may use "CUSIP," "ISIN" or other similar numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP," "ISIN" or other similar numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the "CUSIP," "ISIN" or other similar numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, the Company shall furnish to the Trustee, at
least 45 days but not more than 60 days (unless a shorter period is acceptable
to the Trustee) (or, in the case of a redemption pursuant to such Section 3.08,
by 11:00 a.m. Texas time (or such other time of day acceptable to the Trustee
which will permit it to give the notice referred to in the last paragraph of
Section 3.03) at least one Business Day prior to the Special Redemption Date)
before a redemption date, an Officers' Certificate setting forth (i) the clause
of this Indenture pursuant to which the redemption shall occur, (ii) the
redemption date, (iii) the Accreted Value of Notes to be redeemed and (iv) the
redemption price (expressed as a percentage or principal amount).
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee shall deem fair and appropriate; provided that no Notes of $1,000 in aggregate principal amount at maturity or less shall be redeemed in part. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount at maturity thereof to be redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption.
SECTIOPN 3.03. NOTICE OF REDEMPTION.
Except as provided in Section 3.08, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal amount at maturity of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount at maturity equal to the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment, original issue discount on Notes called for redemption ceases to accrete and interest on Notes called for redemption ceases to accrue, in each case, on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the CUSIP or ISIN number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date (unless a shorter period is acceptable to the Trustee), an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.
Notwithstanding the foregoing, in the event that the Notes will be redeemed pursuant to the Special Redemption as set forth in Section 3.08, the Trustee shall, at the Company's request and in the Company's name and expense, give notice of such redemption to each Holder in accordance with this Section at least one Business Day prior to the Special Redemption Date.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03 hereof or delivered in accordance with Section 3.08 hereof, Notes called for redemption shall become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
Prior to 11:00 a.m. New York City time on the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest and Additional Interest, if any, on all Notes to be redeemed on that date. Subject to applicable abandoned property laws, the Trustee or the Paying Agent shall promptly, upon request, return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest and Additional Interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, original issue discount shall cease to accrete and interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount at maturity to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) At any time prior to March 15, 2007, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount at maturity of Notes issued under this Indenture (including any Additional Notes) at a redemption price of 109.750% of the Accreted Value
thereof on the redemption date, plus accrued and unpaid Additional Interest, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings by the Company, provided that:
(i) at least 65% of the aggregate principal amount at maturity of Notes issued under this Indenture (including any Additional Notes) remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company or any of its Subsidiaries); and
(ii) the redemption occurs within 90 days of the date of the closing of such Equity Offering.
Except pursuant to the preceding paragraph, the Notes shall not be redeemable at the Company's option prior to March 15, 2009.
(b) On and after March 15, 2009, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice except that a redemption notice may be mailed more than 60 days prior to a redemption if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on of the years indicated below:
YEAR Percentage ---- ---------- 2009.............................................................. 104.875% 2010.............................................................. 103.250% 2011.............................................................. 101.625% 2012 and thereafter............................................... 100.000% |
SECTION 3.08. MANDATORY SPECIAL REDEMPTION.
Notwithstanding the foregoing, in the event that the Recapitalization is not consummated on or prior to May 12, 2004 or if the Merger Agreement is terminated prior to such time, the Company shall redeem (the "Special Redemption") the Notes, in whole but not in part, on or prior to May 14, 2004, at a redemption price (the "Special Redemption Price") in cash equal to 100.0% of the Accreted Value of the Notes on the Special Redemption Date. The "Special Redemption Date" means the earlier of the date specified by the Company in an Officers' Certificate delivered in accordance with the Escrow Agreement and May 14, 2004. The Trustee shall deliver to each Holder a written notice (specifying the information specified in Section 3.03) of the Special Redemption one Business Day prior to the Special Redemption Date.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of or premium, if any, Additional Interest, if any, or interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. Principal, premium, if any, interest and Additional Interest, if any, shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 11:00
a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal of or premium, if any, Additional Interest, if any, or interest on the Notes then due. The Company shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful.
The Company shall make all interest, premium, if any, Additional Interest, if any, and principal payments by wire transfer of immediately available funds to any Holder who shall have given written directions to the Company or the Paying Agent to make such payments by wire transfer pursuant to the wire transfer instructions supplied to the Company or the Paying Agent by such Holder on or prior to the applicable record date. All other payments on Notes will be made at the office or agency of the paying agent and registrar within the City and State of New York unless the Company elects to make interest payments by check mailed to the Holders at their address set forth in the register of Holders.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
The Company hereby designates the New York Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03.
SECTION 4.03. REPORTS.
Whether or not required by the Commission, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes, within the time periods specified in the Commission's rules and regulations:
(i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report on the annual financial statements by the Company's certified independent accountants; and
(ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports.
If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph shall include an unaudited consolidating balance sheet and related statements of income and cash flows for the Company and its Subsidiaries, separately identifying the (a) Company and the Restricted Subsidiaries and (b) the Unrestricted Subsidiaries of the Company, in all reports containing the consolidated financial statements (which in the case of annual reports shall be audited) of the Company.
In addition, following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, whether or not required by the Commission, the Company shall file a copy of all of the information and reports referred to in clauses (i) and (ii) above with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company has agreed that, for so long as any Notes remain outstanding, it shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
The Company also shall comply with the other provisions of TIA Section
314(a). Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely conclusively on Officers' Certificates). The Trustee shall have
no duty or responsibility to review such reports, information or documents.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto).
(b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(i) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) to the effect that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers'
Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent all material taxes, assessments, and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, except such as are contested in good faith and by appropriate proceedings or where the failure to pay or discharge the same would not have a material adverse effect on the ability of the Company to perform its obligations under the Notes or this Indenture.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders
of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable
(a) in Equity Interests (other than Disqualified Stock) of the Company or
(b) to the Company or a Restricted Subsidiary of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company;
(iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness (other than any Indebtedness held by the Company or a Guarantor) that is subordinated to the Notes or the Subsidiary Guarantees, if any, except a payment of interest or principal at the Stated Maturity thereof; or
(iv) make any Restricted Investment (all such payments and other actions set forth in these clauses (i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment;
(ii) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and
(iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (vi), (x) and (xi) of the next succeeding paragraph), is less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from February 11, 2003 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus
(b) 100% of the fair market value of the Qualified Proceeds received by the Company after the Recapitalization Date as a contribution to its equity capital or from the issue or sale of Equity Interests of the Company (other than Excluded Contributions and Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company or an employee stock ownership plan, option plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination), plus
(c) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the cash return of capital and other transfers of assets with respect to such Restricted Investment (less the cost of disposition, if any); provided, however, that no amount shall be included under this clause (c) to the extent it is already included in Consolidated Net Income, plus
(d) to the extent that any Unrestricted Subsidiary of the Company is redesignated as a Restricted Subsidiary after the Issue Date, the lesser of (1) the fair market value of the Company's Investment in such Subsidiary as of the date of such redesignation or (2) such fair market value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary.
The preceding provisions shall not prohibit:
(i) the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration the dividend or distribution payment would have complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock and other than Equity Interests issued or sold to an employee stock ownership plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust
to the extent such sale to an employee stock ownership plan or similar
trust is financed by loans from or guaranteed by the Company or any
Restricted Subsidiary unless such loans have been repaid with cash on or
prior to the date of determination); provided that the amount of any such
net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(iii) (b) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of Indebtedness subordinated to the Notes or any Subsidiary Guarantee with the net cash proceeds from an incurrence of, or in exchange for, Permitted Refinancing Indebtedness;
(iv) the declaration and payment of any dividend or distribution by a Restricted Subsidiary of the Company to the holders of its Capital Stock on a pro rata basis;
(v) so long as no Default or Event of Default shall have occurred and be continuing or would be caused thereby, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former member of the Company's (or any of its Restricted Subsidiaries') management pursuant to any management equity subscription agreement, stock option agreement, stock plan or similar agreement other than any such agreement or plan with Madison Dearborn Partners, LLC or its Affiliates (other than Persons who are officers, directors or employees of the Company); provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $3.0 million in any twelve-month period (with unused amounts in any twelve-month period being carried over to succeeding twelve-month periods subject to a maximum carry-over amount of $6.0 million);
(vi) any payments made in connection with the consummation of the Transactions on substantially the terms described in the Offering Memorandum;
(vii) the repurchase of Equity Interests of the Company deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of such stock options;
(viii) so long as no Default has occurred and is continuing or would be caused thereby, repurchases of Indebtedness that is subordinated to the Notes or a Subsidiary Guarantee at a purchase price not greater than (1) 101% of the principal amount of such subordinated Indebtedness in the event of a Change of Control or (2) 100% of the principal amount of such subordinated Indebtedness in the event of an Asset Sale, in connection with any change of control offer or asset sale offer required by the terms thereof, but only if:
(a) in the case of a Change of Control, the Company has first complied with and fully satisfied its obligations under Section 4.15; or
(b) in the case of an Asset Sale, the Company has complied with and fully satisfied its obligations in accordance with Section 4.10;
(ix) the repurchase, redemption or other acquisition for value of Capital Stock of the Company or any direct or indirect parent of the Company representing fractional shares of such Capital Stock in connection with a merger, consolidation, amalgamation or other combination involving the Company or any direct or indirect parent of the Company;
(x) Investments that are made with Excluded Contributions; and
(xi) so long as no Default or Event of Default shall have occurred and be continuing or would be caused thereby, other Restricted Payments in an aggregate amount since the date of this Indenture not to exceed $15.0 million.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
Section shall be determined by the Board of Directors of the Company whose
resolution with respect thereto shall be delivered to the Trustee. Not later
than 30 days after the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this Section were computed.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries;
(ii) make loans or advances to the Company or any of its Restricted Subsidiaries; or
(iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.
However, the preceding restrictions shall not apply to encumbrances or restrictions existing under or by reason of:
(i) agreements governing Existing Indebtedness and Credit Facilities as in effect on the Issue Date and the Credit Agreement as in effect on the Recapitalization Date and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of those agreements, provided that the amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture or the date of the Recapitalization, as applicable;
(ii) this Indenture and the Notes (including the Exchange Notes);
(iii) applicable law, rule, regulation or order;
(iv) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred;
(v) customary non-assignment provisions in leases, licenses and conveyances entered into in the ordinary course of business and consistent with past practices;
(vi) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on that property of the nature described in clause (iii) of the preceding paragraph;
(vii) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or other disposition;
(viii) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;
(ix) Liens securing Indebtedness otherwise permitted to be incurred under the provisions of Section 4.12 that limits the right of the debtor to dispose of the assets subject to such Liens;
(x) provisions with respect to the disposition or distribution of assets or property in joint venture agreements, stockholder agreements, asset sale agreements, stock sale agreements and other similar agreements entered into in the ordinary course of business;
(xi) other Indebtedness of Cinemark USA, Inc. or any of its
Restricted Subsidiaries permitted to be incurred pursuant to an agreement
entered into subsequent to the date of this Indenture in accordance with
Section 4.09, provided that the provisions relating to such encumbrance or
restriction contained in such Indebtedness are no less favorable to the
Company, taken as a whole, as determined by the Board of Directors of the
Company in good faith, than the provisions contained in the Credit
Agreement and in the indentures governing the Existing Notes, as in effect
on the Recapitalization Date and the Issue Date, respectively;
(xii) the issuance of preferred stock by a Restricted Subsidiary or
the payment of dividends thereon in accordance with the terms thereof,
provided that issuance of such preferred stock is permitted pursuant to
Section 4.09 and the terms of such preferred stock do not expressly
restrict the ability of a Restricted Subsidiary to pay dividends or make
any other distributions on its Capital Stock (other than requirements to
pay dividends or liquidation preferences on such preferred stock prior to
paying any dividends or making any other distributions on such other
Capital Stock);
(xiii) encumbrances or restrictions contained in any Indebtedness incurred by a Foreign Restricted Subsidiary pursuant to the first paragraph (in an amount not to exceed in aggregate at any one time outstanding $50.0 million of Indebtedness) of and clauses (iv) and (xiv) of the second paragraph of Section 4.09; provided that such encumbrance or restriction shall only apply to such Foreign Restricted Subsidiary;
(xiv) supermajority voting requirements existing under corporate charters, bylaws, stockholders agreements and similar documents and agreements; and
(xv) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that, if no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the Company and any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) or the Company may issue Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period.
The first paragraph of this Section 4.09 shall not prohibit:
(i) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness and letters of credit under one or more Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (i) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) not to exceed $370 million less the sum of all permanent principal payments with respect to such Indebtedness in accordance with Section 4.10;
(ii) the incurrence by the Company and its Restricted Subsidiaries of (a) Existing Indebtedness (other than the 2008 Notes) and (b) the 2008 Notes;
(iii) the incurrence by the Company of Indebtedness represented by the Notes (other than Additional Notes) and the Exchange Notes issued in exchange therefor and any Subsidiary Guarantees of the foregoing;
(iv) the incurrence by the Company, Cinemark USA, Inc. or any of its Restricted Subsidiaries of Indebtedness in respect of Permitted Capitalized Leases;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under the first paragraph of this Section or clauses (ii)(a), (iii), (iv) or (v) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that:
(a) if the Company or any Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Guarantor; and
(b) (1) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary of the Company and (2) any sale or other transfer of any such Indebtedness to a Person that is neither the Company or a Restricted Subsidiary of the Company shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Subsidiary, as the case may be, that was not permitted by this clause (vi);
(vii) the incurrence by the Company, Cinemark USA, Inc. or any of its Restricted Subsidiaries of Hedging Obligations;
(viii) the Guarantee by the Company or a Restricted Subsidiary of the Company of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section; provided that in the event such Indebtedness that is being guaranteed is (a) pari passu with the Notes or a Subsidiary Guarantee, as the case may be, then the related Guarantee shall rank equally in right of payment to the Notes or Subsidiary Guarantee, as the case may be, or (b) subordinated to the Notes or a Subsidiary Guarantee, as the case may be, then the related Guarantee shall be subordinated in right of payment to the Notes or such Subsidiary Guarantee, as the case may be;
(ix) the accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued;
(x) Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, earn-out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary, other than Guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition;
(xi) Indebtedness supported by one or more letters of credit
incurred under a Credit Facility in accordance with and pursuant to clause
(i); provided the amount of Indebtedness permitted to be incurred under
this clause (xi) relating to any such letter of credit shall not exceed
the amount of the letter of credit provided for therein; provided,
further, that, upon any reduction, cancellation or termination of the
applicable letter of credit, there shall be deemed to be an incurrence of
Indebtedness under this Indenture equal to the excess of the amount of
such Indebtedness outstanding immediately after such reduction,
cancellation or termination over the remaining stated amount, if any, of
such letter of credit or the stated amount of any letter of credit issued
in replacement of such letter of credit;
(xii) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within ten Business Days of incurrence;
(xiii) Indebtedness represented by property, liability and workers' compensation insurance, performance bonds (which may be in the form of letters of credit) for construction contracts let by the Company and its Restricted Subsidiaries in the ordinary course of business (provided that to the extent that such performance bonds secure Indebtedness, such Indebtedness
is otherwise permitted under this Section), surety bonds and appeal bonds (which, in each case, may be in the form of letters of credit) required in the ordinary course of business or in connection with the enforcement of rights or claims of the Company or any Restricted Subsidiary of the Company or in connection with judgments that do not result in a Default or an Event of Default; and
(xiv) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding not to exceed $25.0 million.
Neither the Company nor any Restricted Subsidiary shall incur any Indebtedness under the preceding paragraph if the proceeds thereof are used, directly or indirectly, to refinance any Indebtedness subordinated to the Notes or any Subsidiary Guarantee unless such Indebtedness shall be subordinated to the Notes or such Subsidiary Guarantee to at least the same extent as such subordinated Indebtedness. No Restricted Subsidiary of the Company that is not a Guarantor may incur any Indebtedness if the proceeds are used to refinance Indebtedness of the Company (other than a refinancing of all the Notes).
For purposes of determining compliance with this Section 4.09, in the
event that an item of proposed Indebtedness (including Acquired Debt) meets the
criteria of more than one of the categories described in clauses (i) through
(xiv) above, or is entitled to be incurred pursuant to the first paragraph of
this Section 4.09, the Company shall be permitted to classify (or later classify
or reclassify in whole or in part in its sole discretion) such item of
Indebtedness in any manner that complies with this Section 4.09. Notwithstanding
any other provision of this Section, the maximum amount of Indebtedness that the
Company or any Restricted Subsidiary may incur pursuant to this Section shall
not be deemed to be exceeded solely as a result of fluctuations in the exchange
rate of currencies.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:
(i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of (such fair market value to be determined in good faith by the Company on the date of contractually agreeing to such Asset Sale);
(ii) in the event the fair market value of such Asset Sale exceeds $10.0 million but is less than $25.0 million, the fair market value is determined by the Company's Chief Financial Officer and in the event the fair market value of such Asset Sale equals or exceeds $25.0 million, the fair market value is determined by the Company's Board of Directors and evidenced by a resolution of the Board of Directors of the Company and, in each case, such determination is set forth in an Officers' Certificate delivered to the Trustee; and
(iii) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following shall be deemed to be cash:
(a) the amount of any liabilities, as shown on the Company's or such Restricted Subsidiary's most recent balance sheet, of the Company or such Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by the
transferee of any such assets pursuant to a customary novation agreement or by operation of law that releases the Company or such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash within 180 days of the closing of the related Asset Sale, to the extent of the cash received in that conversion.
Within 395 days after the receipt of any Net Proceeds from an Asset Sale, the Company or such Restricted Subsidiary may apply those Net Proceeds at its option to:
(i) repay Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; provided, unless such Senior Debt being repaid consists of borrowings under the Credit Agreement or Guarantees of borrowings under the Credit Agreement, that the Notes are reduced or repurchased on a pro rata basis with the Net Proceeds from the Asset Sale;
(ii) reduce or repurchase Indebtedness of Cinemark USA, Inc. or any Restricted Subsidiary of Cinemark USA, Inc. and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto;
(iii) acquire all or substantially all of the assets of, or a majority of the Voting Stock of, another Permitted Business (or a division or unit thereof);
(iv) make a capital expenditure or commit pursuant to a binding agreement to make a capital expenditure within 24 months of such Asset Sale relating to an asset used or useful in a Permitted Business; or
(v) acquire other long-term assets that are used or useful in a Permitted Business.
Pending the final application of any Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $15 million, the Company shall make an offer (an "Asset Sale Offer") to all Holders of Notes and all Holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum Accreted Value of Notes and the maximum principal amount of such other pari passu Indebtedness that may be purchased out of the Excess Proceeds (the "Offer Amount"). The offer price in any Asset Sale Offer shall be equal to 100% of the Accreted Value thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate Accreted Value of Notes and the maximum principal amount of other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Notes and such other pari passu Indebtedness shall be purchased on a pro rata basis on the basis of the aggregate Accreted Value of Notes and the aggregate principal amount of the other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 4.10 and that such Asset Sale Offer shall remain open for 20 Business Days;
(b) the Offer Amount attributable to the Notes, the purchase price and the purchase date of the Asset Sale (the "Purchase Date");
(c) that any Note not tendered or accepted for payment shall continue to accrue interest and Additional Interest, if any;
(d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest, and Additional Interest, if any;
(e) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three Business Days before the Purchase Date;
(f) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;
(g) that, if the aggregate Accreted Value of Notes and aggregate principal amount of such other pari passu Indebtedness tendered by Holders exceeds the Offer Amount, the Company shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis on the basis of the aggregate Accreted Value of Notes and the aggregate principal amount of such other pari passu Indebtedness tendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 aggregate principal amount at maturity, or integral multiples thereof, shall be purchased); and
(h) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).
On or before the Asset Sale purchase date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes and such other pari passu Indebtedness or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes, and such other pari passu Indebtedness or portions thereof tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes, and such other pari passu Indebtedness or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 4.10. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount at maturity equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer promptly after Purchase Date.
If the Purchase Date is on or after an interest payment record date and on or before the related interest payment date, any accrued and unpaid interest and Additional Interest, if any, will be paid to the Holder in whose name a note is registered at the close of business on such record date, and no other interest or Additional Interest, if any, will be payable to Holders whose Notes are purchased pursuant to the Asset Sale Offer.
The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such conflict.
Notwithstanding anything to the contrary contained in this Indenture, the Company or any of its Restricted Subsidiaries may engage in transactions in which theatre properties shall be transferred in exchange for one or more other theatre properties; provided that if the fair market value of the theatre properties to be transferred by the Company or such Restricted Subsidiary, plus the fair market value of any other consideration paid or credited by the Company or such Restricted Subsidiary (the "Transaction Value") exceeds $2 million, such transaction shall require approval of the Board of Directors of the Company. In addition, each such transaction shall be valued at an amount equal to all consideration received by the Company or such Restricted Subsidiary in such transaction other than the theatre properties received pursuant to such exchange ("Other Consideration") for purposes of determining whether an Asset Sale has occurred. If the Other Consideration is of an amount and character such that such transaction constituted an Asset Sale, then the preceding paragraphs of this Section shall be applicable to any Net Proceeds of such Other Consideration.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(i) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with a Person who is not an Affiliate; and
(ii) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $2.0 million, a resolution of the Board of Directors of the Company set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of Directors of the Company; and
(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, a written opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of the prior paragraph:
(i) any employment, consulting or similar agreement or other compensation arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business of the Company or such Restricted Subsidiary excluding any such agreement or arrangement with Madison Dearborn Partners, LLC, or its Affiliates or Persons who are officers, directors, employees or consultants of Madison Dearborn Partners, LLC, or its Affiliates (other than Persons who are officers, directors or employees of the Company);
(ii) transactions between or among the Company and/or its Restricted Subsidiaries;
(iii) transactions with a Person that is an Affiliate of the Company solely because the Company owns an Equity Interest in, or controls, such Person;
(iv) reasonable fees and expenses and compensation paid to, and indemnity provided on behalf of, officers, directors or employees of the Company or any Subsidiary as determined in good faith by the Board of Directors of the Company or senior management;
(v) sales of Equity Interests (other than Disqualified Stock) to Affiliates of the Company;
(vi) Restricted Payments that are permitted by Section 4.07;
(vii) transactions effected in connection with the Transactions, including the payment of all fees and expenses, which are described in the Offering Memorandum under the caption "Certain Relationships and Related Transactions";
(viii) transactions pursuant to any contract or agreement which are described in the Offering Memorandum under the caption "Certain Relationships and Related Transactions," as in effect on the date of this Indenture, in each case as amended, modified or replaced from time to time so long as the amended, modified or new agreements, taken as a whole, are no less favorable to the Company and its Restricted Subsidiaries than those in effect on the date of this Indenture;
(ix) so long as no Default or Event of Default shall have occurred and be continuing, the payment of customary annual fees and related expenses to Madison Dearborn Partners, LLC and its Affiliates; provided that such fees shall not, in the aggregate, exceed $1.0 million (plus out of pocket expenses) in any twelve-month period commencing after the date of this Indenture; and
(x) so long as no Default or Event of Default shall have occurred and be continuing, the payment of customary transaction, management, consulting and advisory fees and related expenses to Madison Dearborn Partners, LLC and its Affiliates made pursuant to financial advisory, financing, underwriting or replacement agreements or in respect of other investment banking entities, including, without limitation, in connection with acquisitions or divestitures, in each case, which payments are (a) reasonably related to the services performed and (b) approved by a majority of the members of the Board of Directors of the Company not affiliated with Madison Dearborn Partners, LLC.
SECTION 4.12. LIENS.
The Company shall not and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind securing Indebtedness, Attributable Debt
or trade payables (other than Permitted Liens) upon any of their property or
assets, now owned or hereafter acquired, unless all payments due under this
Indenture and the Notes are secured (i), in the case of Liens securing
Indebtedness that is pari passu in right of payment to the Notes or any
Subsidiary Guarantee, on an equal and ratable basis with the obligations so
secured until such time as such obligations are no longer secured by a Lien and
(ii), in the case of Liens securing Indebtedness that is expressly subordinate
or junior in right of payment to the Notes or any Subsidiary Guarantee, on a
senior basis to the obligations so secured with the same relative priority as
the Notes or such Subsidiary Guarantee, as the case may be, shall have to that
subordinate or junior Indebtedness until such time as such obligations are no
longer secured by a Lien.
SECTION 4.13. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Subsidiaries taken as a whole.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Restricted Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) If a Change of Control occurs, the Company shall be required to make an offer (a "Change of Control Offer") to each Holder of Notes to repurchase all or any part (equal to $1,000 in principal amount at maturity or an integral multiple thereof) of that Holder's Notes on the terms set forth in this Indenture. In the Change of Control Offer, the Company shall offer a payment in cash (the "Change of Control Payment") equal to 101% of the Accreted Value of the Notes repurchased plus accrued and unpaid interest and Additional Interest, if any, on the Notes repurchased to the date of purchase (a "Change of Control Payment Date"). Within thirty days following any Change of Control, the Company shall mail a notice to each Holders stating: (i) that the Change of Control Offer is being made
pursuant to this Section 4.15 (and describing the transactions or transactions
that constitute the Change of Control) and that all Notes tendered shall be
accepted for payment; (ii) the purchase price and the purchase date, which shall
be no earlier than 30 days and no later than 60 days from the date such notice
is mailed (the "Change of Control Payment Date"); (iii) that any Note not
tendered shall continue to accrue interest and Additional Interest, if any; (iv)
that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest and Additional Interest, if any, after the Change
of Control Payment Date; (v) that Holders electing to have any Notes purchased
pursuant to a Change of Control Offer shall be required to surrender the Notes,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Notes completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change of
Control Payment Date; (vi) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment Date, a
facsimile transmission or letter setting forth the name of the Holder, the
principal amount at maturity of Notes delivered for purchase, and a statement
that such Holder is withdrawing his election to have the Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part shall be issued
new Notes equal in principal amount at maturity to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount at maturity or an integral multiple thereof.
On the Change of Control Payment Date, the Company shall, to the extent lawful:
(i) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and
(iii) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate Accreted Value of Notes or portions of Notes being purchased by the Company.
The Paying Agent shall promptly mail to each Holder of Notes validly tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount at maturity to any unpurchased portion of the Notes surrendered, if any; provided that each new Note shall be in a principal amount at maturity of $1,000 or an integral multiple thereof.
If the Change of Control Payment Date is on or after an interest payment record date and on or before the related interest payment date, any accrued and unpaid interest and Additional Interest, if any, will be paid to the Holder in whose name a note is registered at the close of business on such record date, and no other interest or Additional Interest, if any, will be payable to Holders who tender pursuant to the Change of Control Offer.
The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under the Change of Control Offer or if an irrevocable notice of redemption has been given pursuant to this Indenture in accordance with the provisions set forth in Section 3.07 for all outstanding notes.
The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control provisions of this Indenture by virtue of such conflict.
SECTION 4.16. FUTURE GUARANTORS.
The Company shall cause each Restricted Subsidiary that Guarantees any Indebtedness of the Company to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary shall guarantee payment of the Notes; provided that, if such Indebtedness is by its terms subordinated in right of payment to the Notes, any such Guarantee of such Restricted Subsidiary with respect to such Indebtedness shall be subordinated to such Guarantor's Subsidiary Guarantee substantially to the same extent as such Indebtedness is subordinated to the Notes; and provided further that (i) such Restricted Subsidiary waives and shall not in any manner whatsoever claim or take the benefit or advantage of, any rights or reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee of the Notes; and (ii) such Restricted Subsidiary shall deliver to the trustee an Opinion of Counsel to the effect that (A) such Subsidiary Guarantee has been duly executed and authorized and (B) such Subsidiary Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity. Each Subsidiary Guarantee shall be limited to an amount not to exceed the maximum amount that can be guaranteed by that Restricted Subsidiary without rendering the Subsidiary Guarantee, as it relates to such Restricted Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.
A Subsidiary Guarantee of a Guarantor shall be automatically released upon:
(i) (a) the sale, disposition or other transfer (including through merger or consolidation) of (x) the Capital Stock of such Guarantor following which such Guarantor is no longer a Subsidiary of the Company or (y) all or substantially all the assets of the applicable Guarantor, in each case, to a Person that is not a Subsidiary of the Company if such sale, disposition or other transfer is made in compliance with this Indenture;
(b) the release or discharge of the Guarantee by such Restricted Subsidiary of Indebtedness of the Company which resulted in the obligation to Guarantee the Notes; and
(ii) the release of such Guarantor from its Guarantees, if any, of, and all pledges and security, if any, granted in connection with all Indebtedness of the Company;
(iii) the designation by the Company of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary in accordance with the applicable provisions of this Indenture; and
(iv) the discharge of the Notes in accordance with the legal defeasance provisions of this Indenture.
SECTION 4.17. DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.
The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default; provided that in no event shall CNMK Holding, Inc. or Cinemark USA, Inc. be designated as or owned by an Unrestricted Subsidiary. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary properly designated shall be deemed to be an Investment made as of the time of the designation and shall reduce the amount available for Restricted Payments under the first paragraph of Section 4.07 or Permitted Investments, as determined by the Company. That designation shall only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors of the Company may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation would not cause a Default.
SECTION 4.18. PAYMENTS FOR CONSENT.
The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the n\Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION OR SALE OF ASSETS.
The Company may not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, in one or more related transactions, to another Person; unless:
(i) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is a corporation, limited liability company or partnership organized or existing under the laws of the United States, any state of the United States or the District of Columbia; provided that if the Person is a partnership or limited liability company, a corporation wholly owned by such Person organized or existing under the laws of the United States, any state of the United States or the District of Columbia that does not and shall not have any material assets or operations shall promptly thereafter become a co-issuer of the Notes pursuant to a supplemental indenture;
(ii) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition has been made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to a supplemental indenture executed and delivered to the Trustee in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default exists; and
(iv) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made shall, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09.
In addition, the Company may not, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person.
For purposes of this Section, the sale, assignment, transfer, conveyance, disposition or lease of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.
Notwithstanding the preceding clause (iv), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company and the Recapitalization may be consummated.
A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than the Company or another Guarantor, unless:
(i) immediately after giving effect to that transaction, no Default or Event of Default exists; and
(ii) either:
(a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger assumes all the obligations of that Guarantor under this Indenture, its Subsidiary Guarantee and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee; or
(b) such sale or other disposition complies with Section 4.10 and Section 4.16.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the Company shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, provided, however, that the predecessor company shall not be relieved from the obligation to pay the principal of and interest on the Notes (and its obligations to the Trustee pursuant to Section 7.07) except in the case of a sale or other disposition of all or substantially all of the properties
and assets of the Company and its Restricted Subsidiaries taken as a whole that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if::
(i) the Company defaults for 30 days in the payment when due of interest on, or Additional Interest with respect to, the Notes;
(ii) the Company defaults in payment when due of the principal of, or premium, if any, on the Notes;
(iii) the Company or any of its Restricted Subsidiaries fails to comply with any of the provisions of Section 5.01 hereof;
(iv) the Company or any of its Restricted Subsidiaries fails to comply with Section 4.10 or 4.15 for 30 days after notice to the Company by the Trustee;
(v) the Company or any of its Restricted Subsidiaries fails to observe or perform any of the other agreements in this Indenture for 60 days after notice to the Company by the Trustee;
(vi) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the Issue Date, if that default:
(a) is caused by a failure to pay principal on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its express maturity;
and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more;
(vii) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Subsidiaries and such judgment or judgments remain unpaid or undischarged for a period (during which execution shall not be effectively stayed) of 60 days; provided that the aggregate of all such undischarged judgments exceeds $10.0 million (net of any amount with respect to which a reputable and solvent insurance company has acknowledged liability in writing);
(viii) except as permitted by this Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee;
(ix) the Company or any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an involuntary case,
(c) consents to the appointment of a Custodian of it or for all or substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; or
(x) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:
(a) is for relief against the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary in an involuntary case;
(b) appoints a Custodian of the Company or any of its Significant Subsidiaries for all or substantially all of the property of the Company or any of Significant Subsidiaries; or
(c) orders the liquidation of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary; and
in each case the order or decree remains unstayed and in effect for 60 consecutive days.
The term "Custodian" means any receiver, trustee, assignee, liquidation, sequestrator or similar official under any Bankruptcy Law.
SECTION 6.02. ACCELERATION.
In the case of an Event of Default arising from clause (ix) or (x) of the first paragraph of Section 6.01, with respect to the Company, any Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or Holders of at least 25% in aggregate principal amount at maturity of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon any such declaration, the principal of (or, if prior to the Full Accretion Date, the Accreted Value of), premium, if any, and accrued and unpaid interest, if any, and Additional Interest, if any, shall become due and payable immediately.
In the case of any Event of Default occurring by reason of any willful action or inaction taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of this Indenture, an equivalent premium will also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to March 15, 2009, by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to that date, then the premium specified in this Indenture with respect to the first year that the Notes may be redeemed at the Company's option will also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Trustee has no duty or obligation to determine whether an Event of Default has occurred as a result of the events described above and shall have notice of such events only in accordance with Section 7.02(i) herein.
Notwithstanding the foregoing, if an Event of Default specified in clause
(vi) of the first paragraph of Section 6.01 shall have occurred and be
continuing, such Event of Default and any consequential acceleration shall be
automatically rescinded if (i) the Indebtedness that is the subject of such
Event of Default has been repaid, or (ii) if the default relating to such
Indebtedness is waived or cured and if such Indebtedness has been accelerated,
then the Holders thereof have rescinded their declaration of acceleration in
respect of such Indebtedness.
Any such declaration with respect to the Notes may be rescinded and annulled by the Holders of a majority in aggregate principal amount at maturity of the outstanding Securities by written notice to the Trustee if (i) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, (ii) all existing Events of Default have been cured or waived except nonpayment of principal of or interest on the Securities that has become due solely by such declaration of acceleration, (iii) to the extent the payment of such interest is lawful, interest (at the same rate specified in the Notes) on overdue installments of interest and overdue payments of principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of a Default or Event of Default of the type described in Section 6.01(ix) and (x) the Trustee has received an Officers' Certificate and Opinion of Counsel that such Default or Event of Default has been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of Accreted Value, premium on, Additional Interest, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Sections 2.07, 6.07 and 9.02 Holders of not less than a majority in aggregate principal amount at maturity of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Additional
Interest on, or interest on the Notes (including in connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount at maturity of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount at maturity of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of Accreted Value, premium and Additional Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of Accreted Value of, premium and Additional Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further
amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
After an Event of Default, any money or other property distributable in respect of the Company's obligations under this Indenture shall be paid in the following order:
First: to the Trustee (including any predecessor Trustee), its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for Accreted Value, premium and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for Accreted Value, premium and Additional Interest, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent jurisdiction shall direct in writing.
The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any
party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount at maturity of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) or (d) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c) and (e) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may, in the absence of bad faith on its part, conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel selected by it and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction.
(g) Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution.
(h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine, to the extent necessary and consistent with each inquiry or investigation, the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.
(i) The Trustee shall not be deemed to have notice, nor shall it be charged with knowledge, of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of such Default or Event of Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture.
(j) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the
Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.
(k) The Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles or officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.
(l) In no event shall the Trustee be responsible for liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
(m) The Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; terrorism; wars and other military disturbances; sabotage; epidemics; riots; interruptions; loss or malfunctions of utilities, computer (hardware or software) or communication services; accidents; labor disputes; acts of civil or military authority and governmental action.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes or any security for the payment of the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is actually known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium and Additional Interest, if any, or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15, 2005 following the Issue Date, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2) to the extent applicable. The Trustee shall also transmit by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the Commission and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange or any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon written request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the resignation or removal of the Trustee, the satisfaction and discharge of this Indenture and the termination of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the resignation or removal of the Trustee, the satisfaction and discharge of this Indenture and the termination of this Indenture.
In addition and without prejudice to its rights hereunder, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(ix) or (x) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount at maturity of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of Notes of at least 10% in principal amount at maturity of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another Person, the successor Person without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws
to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and (i) that has a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition, or (ii) that is a wholly-owned subsidiary of a bank or bank holding company which has a consolidated net worth in excess of $50 million.
This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b).
For purposes of Section 310(b)(1) of the TIA and to the extent permitted thereby, the Trustee shall not be deemed to have a conflicting interest arising from its capacity as trustee in respect of the (i) the Indenture, dated January 14, 1998, as amended, pursuant to which Cinemark USA, Inc.'s 8-1/2% Series B Senior Subordinated Notes due 2008 are outstanding and (ii) the Indenture, dated February 11, 2003, between Cinemark USA, Inc, and the Trustee, pursuant to which Cinemark USA, Inc.'s 9% Senior Subordinated Notes due 2013 are outstanding. Nothing herein shall prohibit the Trustee from making the application to the Commission referred to in the penultimate paragraph of Section 310(b) of the TIA.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creDITor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, elect to have either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, the Company shall be deemed to have been discharged from all of its obligations with respect to all outstanding Notes and this Indenture on the date the conditions set forth below are satisfied or the Guarantors shall be deemed to have been discharged with respect to their Subsidiary Guarantees (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same); provided that the following provisions which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Additional Interest, if any, on such Notes when such payments are due from the trust referred to in clause (b), (b) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust; (c) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's and the Guarantor's obligations in connection therewith and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from its obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 5.01(iv) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(iv) through 6.01(vi) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes:
(a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in United States dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, or interest and Additional Interest, if any, on the outstanding Notes on their Stated Maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes shall not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which shall be used to defease the Notes pursuant to this Article Eight concurrently with such incurrence);
(e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;
(f) the Company must have delivered to the Trustee an Opinion of Counsel to the effect that, assuming that no intervening bankruptcy of the Company between the date of the deposit and the 91st day following the deposit will occur and that no Holder of Notes is an insider of the Company under applicable bankruptcy law, no trust funds will be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and
(h) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal of or premium, if any, Additional Interest, if any, or interest, but such money need not be segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or premium, if any, Additional Interest, if any, or interest on the Notes and remaining unclaimed for two years after such principal, and premium, if any, Additional Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company has made any
payment of principal of, premium, if any, Additional Interest, if any, or
interest on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(b) of the Code);
(c) to provide for the assumption of the Company's obligations to the Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets;
(d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note;
(e) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture;
(f) to add Subsidiary Guarantees with respect to the Notes; or
(g) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of the Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including Sections 4.10 and 4.15 hereto) and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount at maturity of the Notes then outstanding voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of or premium, if any, Additional Interest, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount at maturity of the then outstanding Notes voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of the Board of Directors of the Company authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.
However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a nonconsenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;
(b) reduce the principal or Accreted Value of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to Sections 4.10 and 4.15 hereof);
(c) reduce the rate of or change the time for payment of interest on any Note;
(d) waive a Default or Event of Default in the payment of principal of, or interest or premium, or Additional Interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount at maturity of the Notes and a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in currency other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Additional Interest, if any, on the Notes;
(g) waive a redemption payment with respect to any Note (other than a payment required by Sections 4.10 or 4.15 hereof);
(h) release any Guarantor from any of its Obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture; or
(i) make any change in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.
SECTION 9.05. NOTICE OF AMENDMENT; NOTATION ON OR EXCHANGE OF NOTES.
After any amendment under this Article becomes effective, the Company shall mail to Holders of Notes a notice briefly describing such amendment. The failure to give such notice to all Holders of Notes, or any defect therein, shall not impair or affect the validity of an amendment under this Article.
The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee
shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article 9 if the amendment or supplement, in the sole discretion of the Trustee, does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until its Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 11.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.
ARTICLE 10.
SATISFACTION AND DISCHARGE
SECTION 10.01. SATISFACTION AND DISCHARGE
This Indenture shall be discharged and shall cease to be of further effect, except as to surviving rights of registration of transfer or exchange of the Notes, as to all Notes issued hereunder, when:
(a) either:
(i) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has previously been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or
(ii) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or will become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination of cash in U.S. dollars and noncallable Government Securities, in amounts as will be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Additional Interest, if any, and accrued interest to the date of maturity or redemption;
(b) no Default or Event of Default has occurred and is continuing on the date of the deposit or shall occur as a result of the deposit and the deposit shall not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;
(c) the Company or any Guarantor has paid or caused to be paid all other sums payable by it under this Indenture; and
(d) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to the satisfaction and discharge have been satisfied.
SECTION 10.02. DEPOSITED CASH AND GOVERNMENT SECURITIES.
Subject to Section 10.03 hereof, all cash and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 10.02, the "Trustee") pursuant to Section 10.01 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest and Additional Interest, if any, but such cash and securities need not be segregated from other funds except to the extent required by law.
SECTION 10.03. REPAYMENT TO COMPANY.
Any cash or non-callable Government Securities deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest or Additional Interest, if any, on, any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest or Additional Interest, if any, has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder shall thereafter, as an unsecured creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such cash and securities, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such cash and securities remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such cash and securities then remaining shall be repaid to the Company.
SECTION 10.04. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable Government Securities in accordance with Sections 10.01 and 10.02, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Sections 10.01 and 10.02 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Sections 10.01 and 10.02 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium on, if any, or interest or Additional Interest, if any, on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee shall be in writing (which may be a facsimile, receipt confirmed) and delivered in person or mailed by first class mail addressed as follows:
If to the Company:
Cinemark, Inc.
3900 Dallas Parkway
Suite 500
Plano, Texas 75093
Telephone No.: (972) 665-1000
Facsimile No.: (972) 665-1004
Attention: Chief Financial Officer
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201
Phone No.: (214) 969-2800
Telecopier No.: (214) 969-4343
Attention: Terry M. Schpok, P.C.
If to the Trustee:
The Bank of New York Trust Company, N.A.
600 North Pearl Street, Suite 420
Dallas, Texas 75201
Attention: Corporate Trust Division Re: Cinemark, Inc.
The Company or the Trustee, by notice to the other may designate additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be in writing and shall be deemed to have been duly given when received.
Any notice or communication to a Holder shall be mailed by first class mail to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.
If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of the signers, all conditions precedent (including any covenants compliance with which constitutes a condition precedent) provided for in this Indenture relating to the proposed action have been satisfied;
(b) an Opinion of Counsel (which shall include the statements set forth in Section 11.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent (including any covenants compliance with which constitutes a condition precedent) have been satisfied.
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such eligible and qualified Persons as to other matters, and any such Person may certify or given an opinion as to such matters in one or several documents;
Any certificate or opinion of an Officer of the Company may be based, insofar as it related to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such Officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating the information on which counsel is relying unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous; and
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:
(a) a statement that the person(s) making such certificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such person, he or she has or they have made such examination or investigation as is necessary to enable such person or persons to express an informed opinion as to whether or not such covenant or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such persons, such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, this Indenture, any Subsidiary Guarantees, or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
SECTION 11.08. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby to the extent permitted by applicable law.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
IN WITNESS WHEREOF, the parties hereto have executed this Indenture this March 31, 2004.
CINEMARK, INC.
By: /s/ Robert Copple --------------------------------------- Name: Robert Copple Title: Senior Vice President, Treasurer and Chief Financial Officer |
THE BANK OF NEW YORK TRUST COMPANY, N.A.,
as Trustee
By: /s/ Patrick T. Giordano --------------------------------------- Name: Patrick T. Giordano Title: Vice President |
EXHIBIT A
[Insert the Global Note Legend, if applicable, pursuant to the provisions of the Indenture]
[Insert the Private Placement Legend, if applicable, pursuant to the provisions of the Indenture]
[Insert the Regulation S Legend, if applicable, pursuant to the provisions of the Indenture]
[Insert the Original Issue Discount Legend, if applicable, pursuant to the provisions of the Indenture]
CUSIP No. __________
ISIN No. __________
[Face of Note]
9-3/4% Senior Discount Notes due 2014
No. Principal Amount at Maturity $____________
CINEMARK, INC.
Cinemark, Inc., a Delaware Corporation (the "Company"),
promises to pay to ______________, or registered assigns,
the principal sum of _____________ Dollars on March 15, 2014 [or such greater or lesser amount as may be indicated on Schedule A hereto]*.
Interest Payment Dates: March 15 and September 15, commencing September 15, 2009
Record Dates: March 1 and September 1
Additional provisions of this Note are set forth on the other side of this Note.
Dated:
CINEMARK, INC.
By: ______________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the [Global] * Notes referred
to in the within-mentioned Indenture:
THE BANK OF NEW YORK TRUST COMPANY, N.A.,
as Trustee
[FORM OF REVERSE OF NOTES]
9-3/4% Senior Discount Notes due 2014
Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.
1. Interest. Cinemark, Inc., a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at 9-3/4% per annum. Until March 15, 2009, no interest will accrue, but the Accreted Value will accrete (representing the amortization of original issue discount) between the date of original issuance and March 15, 2009, on a semiannual bond equivalent basis using a 360-day year comprised of twelve 30-day months such that the Accreted Value shall be equal to the full principal amount at maturity of the Notes on March 15, 2009 (the "Full Accretion Date"). The initial Accreted Value per $1,000 in principal amount at maturity of Notes will be $623.73. Beginning on March 15, 2009, interest on the Notes will accrue at the rate of 9-3/4% per annum and the Company will pay interest semi-annually in arrears on March 15 and September 15 of each year, commencing September 15, 2009 or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Full Accretion Date. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the March 1 or September 1 next preceding the Interest Payment Date (each, a "Record Date"), even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture. The Notes shall be payable as to principal or premium, if any, Additional Interest, if any, or interest at the office or agency of the Company maintained for such purpose within the City and State of New York, or, at the option of the Company, payment of interest and Additional Interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and provided that payment by wire transfer of immediately available funds shall be required with respect to principal of or premium, if any, Additional Interest, if any, or interest on the Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent prior to the applicable Record Date. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, The Bank of New York Trust Company, N.A., the Trustee under the Indenture, shall act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture, dated as of March 31, 2004 ("Indenture"), between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are obligations of the Company initially in the aggregate principal amount at maturity of $577,173,000. Subject to compliance with Section 2.13 of the Indenture, the Company is permitted to issue Additional Notes under the Indenture in an unlimited principal amount. Any such Additional Notes that are actually issued shall be treated as issued and outstanding Notes (and as the same class as the Initial Notes) for all purposes of the Indenture, unless the context clearly indicated otherwise.
5. Optional Redemption.
(a) At any time prior to March 15, 2007, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount at maturity of Notes issued under the Indenture (including any Additional Notes) at a redemption price of 109.750% of the Accreted Value thereof on the redemption date, plus accrued and unpaid Additional Interest, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings by the Company, provided that: (i) at least 65% of the aggregate principal amount at maturity of Notes issued under the Indenture (including any Additional Notes) remains outstanding immediately after the occurrence of such redemption (excluding Notes held by the Company or any of its Subsidiaries); and (ii) the redemption occurs within 90 days of the date of the closing of such Equity Offering.
(b) On and after March 15, 2009, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice except that a redemption notice may be mailed more than 60 days prior to a redemption if the notice is issued in connection with a defeasance of the notes or a satisfaction and discharge of the indenture, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, on the Notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on of the years indicated below:
YEAR Percentage ---- ---------- 2009.............................................................. 104.875% 2010.............................................................. 103.250% 2011.............................................................. 101.625% 2012 and thereafter............................................... 100.000% |
6. Special Mandatory Redemption. Notwithstanding the foregoing, in the event that the Recapitalization is not consummated on or prior to May 12, 2004 or if the Merger Agreement is terminated prior to such time, the Company shall redeem (the "Special Redemption") the Notes, in whole but not in part, on or prior to May 14, 2004, at a redemption price (the "Special Redemption Price") in cash equal to 100.0% of the Accreted Value of the Notes on the Special Redemption Date. The "Special Redemption Date" means the earlier of the date specified by the Company in an Officers' Certificate delivered in accordance with the Escrow Agreement and May 14, 2004. The Trustee shall deliver to each Holder a written notice (specifying the information specified in Section 3.03) of the Special Redemption one Business Day prior to the Special Redemption Date.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 in principal amount at maturity or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the Accreted Value thereof plus accrued and
unpaid interest and Additional Interest thereon, if any, to the date of repurchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $15 million, the Company shall commence an offer pursuant to Section 4.10 of the Indenture (an "Asset Sale Offer") to all Holders of Notes and all holders of such other Indebtedness of the Company that is pari passu with the Notes containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum Accreted Value of Notes and principal amount of such other pari passu Indebtedness that may be purchased out of the Excess Proceeds (the "Offer Amount"). The offer price in any Asset Sale Offer shall be equal to 100% of the Accreted Value thereof plus accrued and unpaid interest and Additional Interest, if any, thereon to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate Accreted Value of Notes and principal amount of other pari passu Indebtedness tendered in such Asset Sale Offer exceeds the amount of Excess Proceeds, the Notes and such other pari passu Indebtedness shall be purchased on a pro rata basis on the basis of the aggregate principal amount (or accreted value, as applicable) of Notes and other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Holders of Notes that are the subject of an offer to purchase shall receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes.
8. Notice of Redemption. Except as set forth in Section 3.08 of the Indenture, notice of redemption shall be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations larger than $1,000 aggregate principal amount at maturity may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed.
9. Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 aggregate principal amount at maturity and integral multiples thereof. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority of the aggregate principal amount at maturity of the then outstanding Notes voting as a single class, and any existing default or compliance with any provision of the Indenture or the Notes (other than a Default or Event of Default in the payment of the principal of or premium, if any, Additional Interest, if any, or interest on the Notes) or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority of the aggregate principal amount at maturity of the then
outstanding Notes voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, to add Subsidiary Guarantees with respect to the Notes, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies. Events of Default shall include: (i) default
for 30 days by the Company in the payment when due of interest, or Additional
Interest with respect to the Notes; (ii) default by the Company in payment when
due of the principal of, or premium, if any, on the Notes; (iii) failure by the
Company or any of its Restricted Subsidiaries to comply with any of the
provisions of Section 5.01 of the Indenture; (iv) failure by the Company or any
of its Restricted Subsidiaries to comply with any of the provisions of Section
4.10 or 4.15 of the Indenture for 30 days after notice to the Company by the
Trustee; (v) failure by the Company or any of its Restricted Subsidiaries to
observe or perform any of the other agreements in the Indenture or the Notes for
60 days after notice to the Company by the Trustee; (vi) a default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the Issue Date, if
that default (a) is caused by a failure to pay principal on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity, and, in each case, the
principal amount of any such Indebtedness, together with the principal amount of
any other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $10.0 million or more;
(vii) a final judgment or final judgments for the payment of money are entered
by a court or courts of competent jurisdiction against the Company or any of its
Subsidiaries and such judgment or judgments remain unpaid or undischarged for a
period of 60 days; provided that the aggregate of all such undischarged
judgments exceeds $10.0 million (net of any amount with respect to which a
reputable and solvent insurance company has acknowledged liability in writing);
(viii) except as permitted by the Indenture, any Subsidiary Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee and (ix) certain events of bankruptcy or insolvency
with respect to the Company or any of its Restricted Subsidiaries that are
individually or collectively a Significant Subsidiary. In the case of an Event
of Default arising from certain events of bankruptcy or insolvency, as specified
in clause (ix) above, with respect to the Company, any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding Notes
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount at maturity of the then outstanding
Notes may declare all the Notes to be due and payable immediately. Upon any such
declaration, the principal of (or, if prior to the Full Accretion Date, the
Accreted Value of), premium, if any, and accrued and unpaid interest, if any,
and Additional Interest, if any, shall become due and payable immediately.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
of the aggregate principal amount at maturity of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default, except a Default or Event of Default relating to the payment of principal of, or interest or premium or Additional Interest, if any, on the Notes.
13. Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, will have any liability for any obligations of the Company under the Notes, the Indenture, the Subsidiary Guarantee, the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated by the manual signature of the Trustee or an Authenticating Agent.
16. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= Note Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
17. Registration Rights Agreement. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of March 31, 2004, between the Company and the Initial Purchasers.
18. CUSIP, ISIN or Other Similar Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP, ISIN or other similar numbers to be printed on the Notes and the Trustee may use CUSIP, ISIN or other similar numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your signature guaranteed: (I) or (we) assign and transfer this Note to
Date: Your Name: --------------------- ----------------------------------------- (Print your name exactly as it appears on the face of this Note) |
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $ _____________
Date:______________ Your Signature: __________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No:______________________________ Signature Guarantee*: _____________________________ |
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount at Maturity of this Amount of decrease Amount of increase in Global Note Signature of in Principal Amount Principal Amount at following such authorized officer at Maturity of this Maturity of this decrease (or of Trustee or Date of Exchange Global Note Global Note increase) Note Custodian |
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Cinemark, Inc.
3900 Dallas Parkway
Suite 500
Plano, TX 75093
Bank of New York Trust Company, N.A.
600 North Pearl Street
Suite 420
Dallas, Texas 75201,
Attention: Corporate Trust Division
Re: 9-3/4% Senior Discount Notes due 2014
Reference is hereby made to the Indenture, dated as of March 31, 2004 (the "Indenture"), between Cinemark, Inc., as issuer (the "Company"), and The Bank of New York Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
__________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount at maturity of $ in such Note[s] or interests (the "Transfer"), to _____________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that:
1. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act.
2. [_] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S TEMPORARY GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Distribution Compliance Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act.
3. [_] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):
(a) [_] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;
or
(b) [_] such Transfer is being effected to the Company or a subsidiary thereof;
or
(c) [_] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.
or
(d) [_] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Notes and in the Indenture and the Securities Act.
4. [_] Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [_] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(b) [_] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [_] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company.
By: _____________________________ Name:
Title:
Dated: _________, __
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP _______); or
(ii) [_] Regulation S Global Note (CUSIP ______); or
(iii) [_] IAI Global Note (CUSIP _______); or
(b) [_] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [_] a beneficial interest in the:
(i) [_] 144A Global Note (CUSIP ); or
(ii) [_] Regulation S Global Note (CUSIP ); or
(iii) [_] IAI Global Note (CUSIP ); or
(iv) [_] Unrestricted Global Note (CUSIP ); or
(b) [_] a Restricted Definitive Note; or
(c) [_] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Cinemark, Inc.
3900 Dallas Parkway
Suite 500
Plano, TX 75093
Bank of New York Trust Company, N.A.
600 North Pearl Street
Suite 420
Dallas, Texas 75201,
Attention: Corporate Trust Division
Re: 9-3/4% Senior Discount Notes due 2014
(CUSIP _________)
Reference is hereby made to the Indenture, dated as of March 31, 2004 (the "Indenture"), between Cinemark, Inc., as issuer (the "Company") and The Bank of New York Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
________ , (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $______ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(b) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(c) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
(d) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
(a) [_] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act.
(b) [_] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] 144A Global Note, Regulation S Global Note, IAI Global Note, with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit of the Company.
By: ______________________ Name:
Title:
Dated: _________, ____
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Cinemark, Inc.
3900 Dallas Parkway
Suite 500
Plano, TX 75093
The Bank of New York Trust Company, N.A.
600 North Pearl Street, Suite 420
Dallas, Texas 75201
Attention: Corporate Trust Division
Re: Cinemark, Inc.
Re: 9-3/4% Senior Discount Notes due 2014
Reference is hereby made to the Indenture, dated as of March 31, 2004 (the "Indenture"), between Cinemark, Inc., as issuer (the "Company") and The Bank of New York Trust Company, N.A., as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $________ aggregate principal amount of:
(a) [_] a beneficial interest in a Global Note, or
(b) [_] a Definitive Note, we confirm that:
1. We understand that any subsequent transfer of the Senior Discount Notes or any interest therein is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Senior Discount Notes or any interest therein except in compliance with, such restrictions and conditions and the United States Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Senior Discount Notes have not been registered under the Securities Act, and that the Senior Discount Notes and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the Senior Discount Notes or any interest therein, we will do so only (A) to the Company or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (c) to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a signed letter substantially in the form of this letter and an Opinion of Counsel in form reasonably acceptable to the Company to the effect that such transfer is in compliance with the Securities Act, (D) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or (F) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing the Definitive Note or beneficial interest in a Global Note from us in a transaction meeting the requirements of clauses (A) through (E) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Senior Notes or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Senior Notes purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Senior Notes, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or its investment.
5. We are acquiring the Senior Discount Notes or beneficial interest therein purchased by us for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.
By: _____________________________ Name:
Title:
Dated: _________, ____
EXHIBIT 5
(AKIN GUMP STRAUSS HAUER & FELD LLP LOGO)
June 8, 2004
Cinemark, Inc.
3900 Dallas Parkway
Suite 500
Plano, Texas 75093
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Cinemark, Inc., a Delaware corporation (the "COMPANY"), in connection with the registration, pursuant to a registration statement on Form S-4 (as may be amended from time to time, the "REGISTRATION STATEMENT"), filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "ACT"), of (i) the proposed offer by the Company to exchange (the "EXCHANGE OFFER") up to $577,173,000 in aggregate principal amount at maturity of its 9 3/4% Senior Discount Notes due 2014 issued in a private offering on March 31, 2004 (the "INITIAL NOTES") for an equal principal amount of its 9 3/4% Senior Discount Notes due 2014 to be registered under the Act (the "EXCHANGE NOTES").
The Initial Notes have been, and the Exchange Notes will be, issued pursuant to that certain Indenture, dated as of March 31, 2004 (the "INDENTURE"), between the Company and The Bank of New York Trust Company, N.A., as trustee (the "TRUSTEE"). The Indenture and the Exchange Notes are referred to herein as the "TRANSACTION DOCUMENTS."
We have examined originals or certified copies of the corporate records of the Company and other certificates and documents of officials of the Company, public officials and others as we have deemed appropriate for purposes of this letter. We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to authentic original documents of all copies submitted to us as conformed and certified or reproduced copies.
We have assumed with respect to all parties to the Transaction Documents other than the Company (the "OTHER PARTIES") that: (i) each Other Party is a natural person or is an entity other than a natural person that had and has, as applicable, the corporate or other power and authority to execute and deliver the Transaction Documents and to consummate the transactions contemplated thereby, (ii) each Other Party has taken all necessary corporate or other action to authorize the execution and delivery by it of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby and (iii) each of the Transaction
1700 Pacific Avenue, Suite 4100 / Dallas, Texas 75201 / 214.969.2800 / fax: 214.969.4343 / www.akingump.com
(AKIN GUMP STRAUSS HAUER & FELD LLP LOGO)
Cinemark, Inc.
June 8, 2004
Documents has been duly executed and delivered by each Other Party that is a party thereto. In addition, we have assumed that the Indenture constitutes the legal, valid and binding obligation of all persons or entities that are parties thereto other than the Company, enforceable against such persons or entities in accordance with its terms.
Based upon the foregoing and subject to the assumptions, exceptions,
qualifications and limitations set forth hereinafter, we are of the opinion that
the Exchange Notes, when executed by the Company, authenticated by the Trustee
and delivered and exchanged for Initial Notes in accordance with the Indenture
and the Exchange Offer, (i) will be entitled to the benefits of the Indenture,
(ii) will have been duly authorized by all necessary corporate action on the
part of the Company and (iii) will be the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms.
The opinions and other matters in this letter are qualified in their entirety and subject to the following:
A. We express no opinion as to the laws of any jurisdiction other than the Included Laws. We have made no special investigation or review of any published constitutions, treaties, laws, rules or regulations or judicial or administrative decisions ("LAWS") other than a review of: (i) the Laws of the State of New York, (ii) the Delaware General Corporation Law and (iii) the federal securities Laws of the United States of America. For purposes of this opinion, the term "INCLUDED LAWS" means the items described in the preceding sentence that are, in our experience, normally applicable to transactions of the type contemplated in the Transaction Documents. The term "Included Laws" excludes: (a) Laws of any counties, cities, towns, municipalities and special political subdivisions and any agencies thereof; and (b) Laws relating to land use, zoning and building code issues, taxes, environmental issues, intellectual property issues, and antitrust issues.
B. This law firm is a registered limited liability partnership organized under the laws of the State of Texas.
C. The opinions expressed in this letter are subject to and qualified and limited by (i) applicable bankruptcy, insolvency, fraudulent transfer and conveyance, reorganization, moratorium and similar Laws affecting creditors' rights and remedies generally including court decisions interpreting such Laws; (ii) general
(AKIN GUMP STRAUSS HAUER & FELD LLP LOGO)
Cinemark, Inc.
June 8, 2004
principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity); (iii) the power of the courts to award damages in lieu of equitable remedies; (iv) securities Laws and public policy underlying such Laws with respect to rights to indemnification and contribution; and (v) limitations on the waiver of rights under any stay, extension or usury laws whenever enacted now or at any time hereinafter in force, that may affect the covenants or the performance of the Indenture.
D. We express no opinion as to (i) the actual jurisdiction whose laws will or should govern the Indenture or any issue thereunder, (ii) what law a court applying the conflict of laws rules of any jurisdiction would or should deem applicable, or (iii) whether the choice or conflict of laws rules of any particular jurisdiction will or should govern or be applied to the Indenture. We have assumed that all documents and agreements to which the Company is a party will be construed in accordance with the internal law of the jurisdiction specified by the parties therein.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the prospectus forming a part of the Registration Statement under the caption "Legal Matters." In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Act and the rules and regulations thereunder. We also consent to your filing copies of this opinion as an exhibit to the Registration Statement.
Sincerely,
/s/ Akin, Gump, Strauss, Hauer & Feld, L.L.P. AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. |
EXHIBIT 10.1(d)
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
OF LAREDO THEATRE, LTD.
This Amendment to Management Agreement (the "Amendment") is effective as of December 10, 2003 (the "Effective Date") by and between CNMK Texas Properties, Ltd., a Texas limited partnership as successor in interest to Cinemark USA, Inc. ("Manager"), and Laredo Theatre, Ltd., a Texas limited partnership ("Owner").
RECITALS:
A. Owner and Manager are parties to that certain Management Agreement effective as of December 10, 1993 (the "Original Agreement").
B. The parties hereto desire to amend the Original Agreement to extend its term in accordance with the provisions of this Amendment.
C. Unless otherwise defined herein, all capitalized terms used herein shall have the same meanings as in the Original Agreement unless otherwise defined herein.
NOW, THEREFORE, BE IT RESOLVED, that in consideration of the above premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Extension of Term. The parties hereto agree that Section 5(a) of the Original Agreement is hereby amended to renew and extend the term of the Original Agreement for a period of five (5) years from the Effective Date of this Amendment, which term will expire on December 10, 2008.
2. Ratification. Except as hereby expressly amended, the Original Agreement shall remain in full force and effect, and is hereby ratified and confirmed in all respects on and as of the date hereof.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
CNMK TEXAS PROPERTIES, LTD.
By: SUNNYMEAD CINEMA CORP.,
its General Partner
By: /s/ Michael Cavalier -------------------------------------------- Name: Michael Cavalier Title: Vice President-General Counsel |
LAREDO THEATRE, LTD.
By: CNMK TEXAS PROPERTIES, LTD.,
its General Partner
By: SUNNYMEAD CINEMA CORP.,
its General Partner
By: /s/ Michael Cavalier ----------------------------------- Name: Michael Cavalier Title: Vice President-General Counsel |
EXHIBIT 10.1(f)
FIRST AMENDMENT TO MANAGEMENT AGREEMENT
OF CINEMARK PARTNERS II, LTD.
This Amendment to Management Agreement (the "Amendment") is entered into as of January 5, 1998 by and between Cinemark USA, Inc., a Texas corporation ("Manager") and Cinemark Partners II, Ltd., a Texas limited partnership ("Owner").
RECITALS:
A. Owner and Manager are parties to that certain Management Agreement effective as of September 1, 1994 (the "Original Agreement").
B. The parties hereto desire to amend the Original Agreement in accordance with the terms of this Amendment.
C. Unless otherwise defined herein, all terms used herein shall have the same meanings as in the Original Agreement unless otherwise defined herein.
NOW, THEREFORE, BE IT RESOLVED, that in consideration of the above premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
1. Amendment to Section 4. Section 4 of the Original Agreement is hereby amended and restated in its entirety and shall hereinafter read as follows:
"4. Management Fee. The Owner shall pay Manager a management fee for providing management services for the Theatre, managing day-to-day operations of the Theatre and monitoring the business and operations of the Theatre on behalf of the Owner. The management fee shall be an amount equal to 3% of all Revenues (as such term is defined in the Management Agreement) of the Owner, as well as 3% of the Revenues from the Owner's 50% interest in the IMAX theatre, payable to Manager monthly for the Owner's preceding month's operations beginning January 1, 1998."
2. Ratification. Except as hereby expressly amended, the Original Agreement shall each remain in full force and effect, and is hereby ratified and confirmed in all respects on and as of the date hereof.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
CINEMARK USA, INC.
By: /s/ Alan W. Stock -------------------------------------------- Name: Alan W. Stock Title: President |
CINEMARK PARTNERS II, LTD.
By: CINEMARK PARTNERS I, INC.
its General Partner
By: /s/ Alan W. Stock -------------------------------------------- Name: Alan W. Stock Title: President |
EXHIBIT 10.1(g)
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (the "Agreement") is dated April 10, 2003 (the "Effective Date") between Greeley Partners, L.P., a Texas limited partnership (the "Owner") and CNMK Texas Properties, Ltd., a Texas limited partnership (the "Operator" or "Cinemark").
BACKGROUND
A. Owner is engaged in the business of constructing, owning and operating a multiplex movie theatre located in Greeley, Colorado on real estate legally described on Exhibit "A" hereto (the "Theatre"). Operator has expertise in the construction, management and operation of movie theatres and related activities.
B. Owner desires to retain Operator to provide management services with respect to all aspects of constructing and operating the Theatre, and Operator is willing to provide such management services, upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Owner and Operator, intending to be legally bound, agree as follows:
ARTICLE I
TERM OF AGREEMENT
1.1 INITIAL PERIOD. This Agreement commences on the Effective Date and shall continue through and including the twentieth anniversary of the Effective Date (the "Initial Period").
1.2 ADDITIONAL PERIODS. This Agreement shall be extended at the option of either party hereto for one or more additional periods of five (5) years each (each an "Additional Period") unless both Owner and Operator have delivered written notice to the other at least 180 days but not more than 365 days prior to the end of the then Initial Period or Additional Period, as applicable, electing not to extend this Agreement for an Additional Period.
ARTICLE II
MANAGEMENT OF THEATRE
2.1 ENGAGEMENT OF OPERATOR. Subject to the terms and conditions of this Agreement, (a) Owner hereby engages Operator as its sole and exclusive agent for constructing and managing the Theatre during the Term, and (b) Operator hereby accepts such engagement and agrees to fulfill its duties hereunder and to construct, operate, manage, direct, maintain and supervise the Theatre during the Term in a good, businesslike manner and at a standard comparable to the first class theatres operated by Operator on its own behalf or for persons other than Owner.
2.2 SPECIFIC DUTIES OF OPERATOR. Operator shall have the sole responsibility and sole authority to make any and all decisions with respect to the day-to-day Theatre operations. Without limiting the generality of the foregoing, Operator shall have the following duties and authority, all at the expense of Owner (subject to Article 4):
(a) Operator shall determine and put into effect all policies with respect to performance at the Theatre, including, without limitation, showtimes, hours of operation, ticket prices and "goodwill" tickets.
(b) Operator shall consult with and keep Owner advised concerning all material aspects of Operator's activities with respect to the construction, management and operation of the Theatre.
(c) Operator shall employ and train, at Owner's expense, theatre managers, assistant managers, management trainees and other employees (collectively, the "Employees") sufficient to direct, supervise and staff the Theatre's operation. The Theatre Employees shall be paid by Owner. Operator shall determine the compensation, fringe benefits and employment duration of all Employees and the assignment of duties to be performed by such Employees, and shall negotiate and settle any labor disputes. Operator shall procure and maintain adequate workers' compensation insurance or other similar insurance as may be required by law, at Owner's expense, covering the Employees.
(d) Operator shall contract for and purchase on behalf of and in the name of Owner, all merchandise, materials, supplies and accessories to be used in connection with the operation and maintenance of the Theatre, including without limitation, concessions used in connection with the Theatre.
(e) Operator shall determine and put into effect all Theatre advertising and all business policies with respect to such advertising, including, without limitation, advertising slides, advertising allowances from distributors and settlement of such allowances;
(f) Operator shall remit when due to the proper governmental authorities all taxes on box office admissions that are not measured by net income and all sales taxes on other Theatre revenues on behalf of Owner. Operator shall also remit all other taxes payable with respect to the operation of the Theatre, including without limitation payroll taxes, and file such tax returns as are required with respect to such taxes. Operator shall timely provide to Owner copies of all such tax returns filed and give Owner access to all financial or other records concerning such taxes.
(g) Operator shall obtain and maintain, for itself or on behalf of and in the name of Owner, as the case may be, all licenses, permits and authorizations from any governmental authorities that are necessary for the operation of the Theatre in the manner required by this Agreement. Owner agrees to execute and deliver any and all applications and other documents and to otherwise cooperate to the fullest extent with Operator in applying for, obtaining and maintaining all such licenses, permits and authorizations. Operator shall at all times, and at its expense, remain qualified and licensed to do business and be in good standing in the State of Colorado.
(h) Operator shall have the right and duty on behalf of and in the name of Owner to contract for and purchase concessions and concession supplies for the Theatres and to set prices for and sell such concessions and concession supplies; to determine and put into effect advertising and all business policies with respect thereto; and to do and perform any and all things ordinarily required in the operation thereof, all without limitation or prejudice to the right and duty of Operator generally to supervise and manage the operations of such Theatre concessions.
(i) Operator shall maintain at the expense of Owner all insurance coverage customarily carried for comparable theatres in each jurisdiction where the Theatre is located, which shall include, but not be limited to, terms, conditions and provisions typically contained in the insurance policies covering the theatres Operator owns or leases. Each policy shall cover Owner or any mortgagee or beneficiary under any mortgage on the theatre as a named insured and shall waive any rights of subrogation against any named insured. All insurance policies shall include loss payment clauses in the term reasonably required by any mortgage or other agreement. Operator shall have the right to maintain such coverage pursuant to policies covering other properties of Operator, provided that the cost of such coverage is allocated to the Theatre in a manner reasonably acceptable to Owner and Operator.
(j) Operator shall immediately notify the Owner of any casualty, disaster, loss, damage or injury occurring at the Theatre whether covered by insurance or not. Operator shall not use the Theatre, or permit the same to be used, for any purpose which will make void or voidable any such insurance policies. Operator shall, upon request of Owner, assist Owner in any reasonable manner, as Owner may request, in the settlement of any claim under any such insurance policies.
(k) Operator shall manage the operations of the Theatre in substantialcompliance with all applicable laws, regulations and other requirements of all governmental and regulatory entities having jurisdiction over the Theatre (collectively, "Regulatory Requirements"). Operator shall not unreasonably refuse or delay compliance with any specific instructions of Owner that are reasonably necessary to cause the Theatre to comply with Regulatory Requirements. Owner shall cooperate with Operator in complying with Regulatory Requirements, including paying all direct costs of compliance, including, without limitation, the costs of third party consultants and reasonable attorneys' fees.
(l) Subject to Section 10.11 regarding Confidential Information, Operator shall keep, maintain and make available for inspection by any authorized representative of Owner upon its request, at the principal office of Operator and at reasonable times and intervals, sufficient records and other data and books of account reflecting accurately all cash receipts and disbursements and income and expenditures in the management and operation of the Theatre.
(m) To the extent Operator deems necessary in connection with this Agreement, Operator shall enter into contracts (after receiving approval from Owner in the case of each contract involving expenditures over $100,000.00 annually in the aggregate) on behalf of and in the name of Owner with architects, engineers, tradesmen and other independent contractors to perform services
with respect to the Theatre and supervise the administration, and monitor the performance, of all work to be performed and services to be rendered under all such contracts.
(n) On behalf of and in the name of Owner, Operator may enter into such service, maintenance and other contracts, or otherwise obtain or provide such service or maintenance as shall be necessary or appropriate for the operation and maintenance of the Theatre, including the equipment and systems located in or servicing such Theatre, contracts for utilities, elevator maintenance, telephone service, interior cleaning, window cleaning, landscape maintenance, rubbish removal, parking lot maintenance, fuel, heating and air conditioning maintenance, security and vermin and insect extermination.
(o) On behalf of Owner, Operator shall, subject to Owner approval in case of repairs involving expenditures in excess of the Replacement Reserve (as defined in Section 2.4(a) below), refurbish, remodel and renovate the Theatre, including all landscaping and parking fields, replace or supplement operating equipment and fixtures and make repairs, in each case as it deems necessary fromtime to time to preserve the Theatre as a first-class theatre. The items of furnishings, fixtures and equipment so replaced or added shall be and become, forthwith upon acquisition and installation and without further act or action, the property of Owner and part of the Theatre (except as may otherwise be provided by the applicable lease or state law). All such replacements and additions shall be purchased by Operator, on behalf of and in the name of Owner, at competitive prices, utilizing the funds in the Replacement Reserve. Any such expenditure in excess of the Replacement Reserve must be approved by Owner in advance. Emergency repairs immediately necessary for the preservation and safety of the Theatre as to avoid the suspension of services to the Theatre or danger of life or property may be made by the Operator without the approval of Owner.
(p) On behalf of and at the expense of Owner, Operator shall obtain the software for all necessary management information systems and the necessary computer hardware for such systems.
(q) Operator shall manage the Theatres in a manner that is consistent with and does not violate or cause a default under any leases, reciprocal easement agreements, covenants, common area maintenance agreements and other agreements to which Owner is a party affecting the Theatre (the "Realty Documents") or any covenants, easements or other restrictions on the use of the Theatre.
(r) Operator shall set programming times and location for the Theatre,subject to the terms of any film licenses restricting Operator's discretion with respect thereto.
(s) Operator shall receive, consider and handle the complaints of all guests and users of any of the services or facilities of the Theatre.
(t) Operator shall book and license or cause to be licensed on Owner's behalf, films and other attractions for exhibition in the Theatres, negotiating film rental payments to be made by Owner, select films to be exhibited, holding over existing films, book sneak previews and perform other duties associated with the buying, booking and licensing of films, including without
limitation, any cooperative advertising with film distributors' trailer placement. Operator shall book and pay film rental for the Theatre consistent with the manner Operator books and pays film rental for the other theatres it operates in the United States. Operator shall maintain a first run film policy unless Owner approves a change of the booking policy in writing.
(u) Operator shall render the necessary accounting and bookkeeping services generally required in the management of the affairs and operation of theatres.
(v) Operator shall provide each partner of Owner, via email or fax, with weekend box office and concession revenue figures no later than the end of business every Monday.
(w) Operator shall provide each partner of Owner the following film week bookings and schedules no later than the end of business each Tuesday.
2.3 PURCHASES FROM AFFILIATES. In its management of the Theatre, Operator may purchase necessary goods, necessary supplies and necessary services from or through Operator or any of its Affiliates so long as Affiliates are disclosed to each partner of Owner and such prices are competitive and comparable with the prices and terms of goods, supplies and services of like quality available from non-affiliated third parties in an arm's length transaction.
2.4 DUTIES OF THE OWNER. Owner shall consult with and cooperate with Operator, at Operator's request, in the management and operation of the Theatres and shall have the following specific duties:
(a) A reserve fund (the "Replacement Reserve") shall be created by
Owner for the purpose of refurbishing, remodeling and renovating the Theatre,
and replacing and supplementing the operating equipment and fixtures and making
repairs, all as described above in Section 2.2(o). Owner shall deposit into the
Replacement Reserve a sum of cash at least equal to one and one-half percent
(1.5%) of Gross Revenues (as defined below) from the Theatre for each month.
Such funds shall be deposited in a separate account in Owner's name. The monthly
deposits will be based on the Gross Revenues as shown on the Theatre's monthly
unaudited financial statements. Upon receipt of the annual audited financial
statements, Owner shall promptly deposit into the Replacement Reserve the amount
by which the aggregate monthly deposits for such year was less than one and
one-half percent (1.5%) of the annual Gross Revenues as shown on such annual
audited financial statements. If one and one-half percent (1.5%) of the annual
Gross Revenues shown on such audited financial statements are less than the
amount deposited for such year, Owner may reduce the amount of the next monthly
deposit(s) by the amount of such overpayment. Notwithstanding anything to the
contrary contained herein, at no time shall the balance in the Replacement
Reserve exceed $100,000.00. Any expenditure for the purposes described above in
Section 2.2(o) shall be paid out of the Replacement Reserve. Any such
expenditure in excess of the Replacement Reserve must be approved by Owner in
advance. The term "Gross Revenues" means the sum of all receipts from sales of
all items and services sold at or from the Theatre (for cash, credit, redeemed
gift certificate or discount tickets), as determined in accordance with
generally accepted accounting principles.
(b) To the extent performable only by Owner (and not Operator as agent of and on behalf of Owner), Owner shall use its best efforts to ensure compliance with all Regulatory Requirements and Realty Documents.
2.5 OPERATOR'S PERFORMANCE WAIVED. Notwithstanding anything contained in this Article II or elsewhere in this Agreement, Operator shall be excused from its obligation to operate the Theatre in conformity with the standards set out in Section 2.1 and, to the extent but only to the extent Operator is unable to do so, perform the duties set forth in Section 2.2:
(a) to the extent Operator shall be prevented from compliance with such standards or performance of such duties by events beyond Operator's reasonable control, for the duration of such events, provided Operator shall take all reasonable action to keep such period as short as possible;
(b) to the extent of any material breach by Owner of any provision hereof, which breach prevents Operator from operating the Theatre in accordance with such standards or performing such duties and is not cured within a reasonable period of time after written notice of such breach to Owner by Operator; and
(c) to the extent and whenever there is herein provided a limitation upon Operator's ability to expend funds because of Owner's failure to make such funds available, it being understood that in no event shall Operator be required to expend its own funds to operate, maintain, repair or refurbish the Theatre or to advance from its own funds to pay for any costs or other expenditures authorized pursuant to the terms of this Agreement. However, Operator shall bear and pay all of its own overhead, including the salaries of its own officers, supervisory, administrative or accounting personnel.
ARTICLE III
COSTS AND EXPENSES
3.1 BANK ACCOUNTS. All monies advanced to the Theatre by Owner and all Theatre revenues and all other funds of Owner with respect thereto shall be deposited in a bank account or bank accounts (the "Owner Accounts") designated by Owner, and Operator shall have unrestricted use of such funds as are reasonably required to be maintained in the Owner Accounts to reimburse Operator for any costs to be borne by Owner hereunder, to carry on the operation of the Theatres and to make payments, on a basis substantially the same as that of Operator in the conduct of its business, of the expenses incurred to carry on the operation of the Theatre. Appropriate backup relating to payments made to Operator for reimbursement of costs to be borne by Owner shall be sent to Owner within thirty (30) days of such payments. Owner acknowledges that the operation of the Theatre will require sufficient cash availability on an ongoing basis to enable the business to be properly conducted and that the Owner will maintain sufficient funds in the Owner Accounts for such purpose.
3.2 DISBURSEMENTS. Operator shall pay from the Owner Accounts, on behalf of Owner, the costs and expenses of operating the Theatre. Checks or other documents of withdrawal drawn
upon the Operating Accounts shall be signed by representatives of Owner or Operator, as agent for Owner.
3.3 ALLOCATION OF EXPENSES AND OVERHEAD COSTS. Operator shall have the right to utilize its employees and assets in connection with the operation of the Theatres as required under this Agreement. When doing so, Operator shall be reimbursed for any necessary and direct out-of-pocket costs for travel, meals and lodging while performing services for the Theatre in Greeley, Colorado. Such costs shall be allocated on a prorata basis if Operator's costs also covered work at Operator's other theatre(s) in Colorado.
ARTICLE IV
MANAGEMENT FEES AND REMITTANCE TO OPERATOR
Operator shall not receive a management fee for its services hereunder, but shall be reimbursed for any expenses incurred by it rendering its management services under this Agreement, including the salaries and benefits, consistent with operation policies and practices for other theatres owned or operated by Operator, of all on-site Employees, provided that none of the on-site Employees provide any services to any of Operator's other theatres. If there are employees who provide services to other theatres, any expenses incurred by such employees shall be shared on a prorata basis. However, Operator shall bear and pay all of its own overhead, including the salaries, benefits and bonuses of its own officers, supervisory, administrative or accounting personnel.
Nothwithstanding anything to the contrary above, if Metro Colorado Corporation or any affiliate of Metropolitan Theatres Corporation ("MTC") or entity owned or controlled by MTC, Bruce Corwin or David Corwin is no longer a limited partner of the Owner, Owner agrees to pay Operator an annual management fee (the "Management Fee") equal to (i) six percent (6%) of the aggregate Gross Revenues of the Theatre in each year. In such event, on or before the 30th day of each month, Owner shall pay Operator the portion of the Management Fee earned during the preceding month based upon the financial statements of Owner prepared by Operator. Within 30 days after the audited financial statements of Owner for the preceding fiscal year are delivered to Operator and Owner, the parties shall calculate the amount of the Management Fee for such fiscal year and any adjustments between the parties shall be made.
ARTICLE V
INTELLECTUAL PROPERTY
5.1 THEATRE BRANDING. During the term of this Agreement, the Theatre shall be operated, marketed and branded as a Cinemark Theatre. Owner acknowledges that Operator and its Affiliates own and use all registered names, logos, insignias, trademarks, trade dress and other intellectual property specified on Exhibit "A" and others used in the future (collectively, the "Cinemark Trademark Rights") in the operation of any Cinemark theatre, including the Theatre.
5.2 GRANT OF LICENSE. Operator hereby grants Owner during the term of this Agreement the conditional, limited and non-exclusive right, without royalties or other consideration, to use the
Cinemark Trademark Rights in connection with the operation of the Theatre in accordance with this Agreementand for no other purpose. Owner acknowledges and agrees that:
(a) The license granted to Owner hereunder shall not restrict Operator and its Affiliates' use of the Cinemark Trademark Rights in any manner, including without limitation, competing with the Theatre, Owner or its partners.
(b) Owner shall not, by virtue of the operation of the Theatre, acquire any right to any of the Cinemark Trademark Rights, and any goodwill derived from use of the Cinemark Trademark Rights in connection with the Theatre shall inure to the benefit of Operator and its Affiliates.
(c) The license to use the Cinemark Trademark Rights granted hereunder shall terminate upon termination of this Agreement, and Operator and its Affiliates shall be under no obligation to offer or extend such license for any purpose, upon termination due to sale of the Theatre or otherwise.
(d) Owner shall not contest or dispute Operator and its Affiliates' ownership of the Cinemark Trademark Rights.
(e) The Theatre shall use only labeling, packaging, advertising, promotional and other items using the Cinemark Trademark Rights that have been approved by Operator to ensure that Owner is maintaining appropriate quality standards regarding the use of the Cinemark Trademark Rights in a manner consistent with the quality standards of Operator and its Affiliates.
ARTICLE VI
TERMINATION
This Agreement may be terminated only in accordance with this Article.
6.1 TERMINATION FOR CAUSE BY OWNER. Owner may terminate this Agreement
for Cause in accordance with this Section 6.1. The term "Cause" shall mean that
(i) Operator has breached the terms of this Agreement by committing any act or
acts of bad faith, willful misconduct or gross negligence that have,
individually or in the aggregate, had a materially adverse effect on the
business or operations of Owner, taken as a whole; (ii) Operator has breached
this Agreement or failed to satisfy its obligations hereunder in any material
respect and such breach or default was within the power of the Operator to cure;
(iii) Owner sells, assigns or subleases the entire Theatre to an independent
third party or (iv) one of the partners of Owner buys the entire interest of the
other partner. At any time Owner determines that there is Cause, Owner may give
Operator written notice of Owner's intention to seek termination, specifying in
reasonable detail the Cause (a "Termination Notice"). If Operator fails to cure
such Cause with thirty (30) days of receipt of such Notice, Owner may pursue
arbitration pursuant to Section 10.1, and Owner agrees not to terminate this
Agreement unless and until there is a final arbitral award from the panel of
arbitrators entitling Owner to do so. However, if a longer period is actually
necessary in order to cure the Cause, Owner shall not pursue arbitration in
accordance with Section 10.1 to terminate this Agreement until the
earlier of (a) the cure of the Cause, in which case the termination notice shall be ineffective; or (b) Operator discontinues diligently pursuing a cure for the Cause.
6.2 Termination for Cause by Manager. By Manager, ten (10) days after
Owner's receipt of a written notice from Manager that a monetary default by
Owner has occurred, and thirty (30) days after Owner's receipt of a written
notice from Manager that a non-monetary default by Owner of any material
provision of this Agreement has occurred ("Owner Default"); provided, however,
if any non-monetary default by Owner cannot be cured within the foregoing thirty
(30) day period, it shall not terminate this Agreement and Owner shall have an
additional period to cure such default, if corrective action is instituted by
Owner within the original thirty (30) day period and diligently and, to the
extent practical, continuously pursued until the default is remedied. All claims
of Owner Default shall be stated with reasonable particularity and specify the
Section hereof believed to be breached.
6.3 TERMINATION IN CONNECTION WITH OTHER AGREEMENTS. This Agreement may be terminated in accordance with the provisions of the Limited Partnership Agreement of Greeley Partners, L.P.
6.4 EFFECT OF TERMINATION. If this Agreement is terminated for any reason, any amounts accrued but not yet paid to Operator hereunder shall be payable by Owner at the time of such termination, and the Operator shall deliver to the Owner the originals of all books, records, contracts and all other documents, certificates, permits or instruments relating to the Theatre. Additionally, upon the expiration or earlier termination of this Agreement, Operator shall have the right to remove all items using the Cinemark Trademark Rights, including without limitation, Operator's signage, except those items using the Cinemark Trademark Rights and the Confidential Information. Operator shall pay the cost to repair any damage to the Theatre inflicted upon removal of such items.
ARTICLE VII
SUCCESSORS AND ASSIGNS
7.1 ASSIGNMENT BY OPERATOR. Operator shall have the right to assign its rights and obligations under this Agreement, without the consent of Owner, to any wholly-owned subsidiary of Operator, provided such subsidiary is engaged primarily in the management of first-run motion picture theatres and is managing a majority of Operator's other theatres. Except as herein above provided, Operator shall not assign its rights and obligations under this Agreement without the approval of Owner, which may be withheld in Owner's sole and absolute discretion. After an assignment of this Agreement after receipt of approval for any assignment as provided for in the preceding sentence, Operator's liability hereunder shall terminate for any of its obligations after the date of such assignment. It is understood and agreed that any approval given by Owner to any assignment shall not be deemed a waiver of the covenant herein contained against assignment in any subsequent case.
7.2 ASSIGNMENT BY OWNER. Owner shall not assign its rights and obligations under this Agreement without the approval of Operator, which may be withheld in Operator's sole and absolute discretion. Upon an assignment of this Agreement after receipt of approval for any assignment as
provided for in thepreceding sentence, Owner's liability hereunder shall terminate for any of its obligations after the date of such assignment. It is understood and agreed that any approval given by Operator to any assignment shall not be deemed a waiver of the covenant herein contained against assignment in any subsequent case.
7.3 BINDING ON SUCCESSORS. Except as otherwise provided herein, the terms, provisions, covenants, undertakings, agreements, obligations and conditions of this Agreement shall be binding upon and shall inure to the benefit of the successors in interest and the permitted assigns of the parties hereto with the same effect as if mentioned in each instance where the party hereto is named or referred to and shall be appurtenant to and run with the Theatre and shall be binding on any subsequent owner of any interest in the Theatre.
ARTICLE VIII
GENERAL COVENANTS
8.1 RELEASE OF OPERATOR. Operator, its directors, agents, officers, employees and Affiliates, as agents of Owner, shall not be liable to Owner or to any other person or entity for any act or omission committed in the performance of this Agreement unless such act constitutes bad faith, gross negligence, fraud or willful and wanton misconduct. Notwithstanding any other provision of this Agreement, in no event shall Owner make any claims against Operator on account of any alleged errors of judgment made in good faith in the operation of the Theatre.
8.2 INDEMNIFICATION OF OPERATOR. Owner hereby agrees to defend,
indemnify and hold harmless Operator, its agents, directors, employees, officers
and Affiliates from and against any claim, liability, loss, damage, cost or
expense (including reasonable attorneys' fees) arising out of or incurred in
connection with (a) Operator's operation of the Theatre unless caused by the bad
faith, gross negligence, material misrepresentation, fraud or willful and wanton
misconduct of Operator, or (b) Owner's breach of this Agreement. It is the
express intention of the parties hereto that the indemnity provided for in this
Section is an indemnity by Owner to indemnify and protect Operator from the
consequences of Operator's ordinary (as opposed to gross) negligence, whether
that negligence is the sole or a concurring cause of any loss, injury, death or
damage. This Section 8.2 shall survive the termination or expiration of this
Agreement.
8.3 INDEMNIFICATION OF OWNER. Operator hereby agrees to defend, indemnify and hold harmless Owner, its agents, directors, employees, officers and Affiliates from and against any claim, liability, loss, damage, cost or expense (including reasonable attorneys' fees) arising out of or incurred in connection with (a) Operator's operation of the Theatre in a grossly negligent manner, or arising from Operator's bad faith, material misrepresentation, or fraudulent or willful and wanton misconduct, or (b) Operator's breach of this Agreement. This Section 8.3 shall survive the termination or expiration of this Agreement.
ARTICLE IX
NOTICES
All notices to be given hereunder shall be given in writing and shall be deemed given (i) when delivered by messenger with receipt obtained, (ii) when received if sent by overnight delivery service with receipt retained, (iii) when sent by telecopy if notice is also sent the same day by overnight delivery service, or (iv) by the United States mails (and, if mailed, shall be deemed received five (5) business days after the postmarked date thereof) with postage prepaid, registered or certified; and delivered or addressed to:
If to Owner: Greeley Partners, L.P. c/o Cinemark USA, Inc. 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 Attn: President With copy to: Metro Colorado Corporation c/o Metropolitan Theatres Corporation 8727 West 3rd Street Los Angeles, California 90048 Attn: David Corwin If to Operator: Cinemark USA, Inc. 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 Attn: President With copy to: Cinemark USA, Inc. 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 Attn: Vice President-General Counsel |
Either party hereto may change the address for notices hereunder by such party giving notice of such change to the other party hereto in the manner hereinabove provided.
ARTICLE X
MISCELLANEOUS
10.1 ARBITRATION. Any claim, dispute or other matter in question
between the parties hereto arising out of or relating to this Agreement, or the
breach thereof, shall be decided by arbitration in accordance with the rules of
the American Arbitration Association in effect on the date hereof before three
(3) arbitrators; one designated by each party and the third in accordance with
the Rules of the American Arbitration Association. Any such arbitration shall be
conducted in Dallas, Texas unless the parties mutually agree to another
location. The arbitrators shall be qualified by education, training or
experience as may be appropriate according to the nature of the claim, dispute
or other matter in question. The foregoing agreement to arbitrate and any other agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. The award rendered by the arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. To the extent permitted by law, by agreeing to engage in the arbitration provided for in this Section 10.1, the parties waive their right to appeal any decision made by the arbitrators. The demand for arbitration shall be made within a reasonable time after the claim, dispute or other matter in question has arisen; and in no event shall it be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. All costs and expenses (including reasonable attorneys' fees and costs) in connection with any such arbitration shall be borne in the manner which the arbitrators making the determination shall direct. Notwithstanding the provisions of this Section, either party may seek appropriate injunctive relief for any threatened breach.
10.2 SPECIFIC PERFORMANCE. The parties declare that it is impossible to measure in money the damages that will accrue to a party hereto by reason of a breach of this Agreement by a party hereto or a failure of a party hereto to otherwise perform any of the obligations under this Agreement. Therefore, if any party shall institute any action or proceeding to enforce the provisions hereof, any person against whom any such action or proceeding is brought hereby waives the claim or defense therein that such party has or had an adequate remedy at law, and such person shall not urge in any such action or proceeding the claim or defense that such remedy at law exists. Further, the parties hereto expressly agree that any non-breaching party shall have the right to injunctive relief for breach of any of the terms hereof, plus damages for such breach to the maximum extent permitted by law.
10.3 NO WAIVER. No failure by Operator or Owner to insist upon the strict performance of any covenant, agreement, terms or conditions of this Agreement, or to exercise any right or remedy consequent upon a breach thereof, shall constitute a waiver of any such breach of such covenant, agreement, term or condition. No waiver of any breach shall affect or alter this Agreement, but each and every covenant, agreement, term and condition of this Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach thereof.
10.4 FURTHER ASSURANCES. Each party hereto shall further execute and deliver all such other appropriate supplemental agreements and other instruments and take such other action as may be necessary to make this Agreement fully and legally effective, binding and enforceable as between the parties hereto and as against third parties, or as the other party may reasonably request.
10.5 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas.
10.6 PARTIAL INVALIDITY. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement and the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, as the case may be, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
10.7 ENTIRE AGREEMENT. This instrument, together with the exhibits hereto, shall constitute the entire agreement between the parties with respect to the management of the Theatre.
10.8 AMENDMENTS. Neither this Agreement nor any term or provision hereof may be changed, waived or discharged or terminated orally, except by an instrument in writing signed by the party against which the enforcement of the change, waiver, discharge or termination is sought.
10.9 CAPTIONS. The captions to the sections of this Agreement are for the convenience of reference only and in no way define, limit or describe the scope or intent of this Agreement or any party thereof, nor in any other way affect this Agreement or any part thereof.
10.10 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same Agreement.
10.11 CONFIDENTIAL INFORMATION. In performing its duties under this Agreement, Operator may use operating procedures and practices for the Theatre that are used in its other theatres similar to the Theatre. Owner and Operator recognize that in the ordinary course of performing this Agreement, it will be necessary, and each may exchange information on pricing, marketing, advertising, booking and employment practices with respect to the operation of the Theatre. Owner and Operator acknowledge that all of Operator's procedures and practices in the Theatre and in other theatres that Operator may own or operate, including without limitation, those procedures relating to pricing, marketing, advertising, booking and employment practices are proprietary and confidential (collectively, "Confidential Information"), are proprietary and confidential. Accordingly, neither Owner nor its representatives shall be entitled to see or inspect the Confidential Information, and to the extent such Confidential Information is provided by Operator, such information shall remain Operator's property and shall not be disclosed by Owner to any third party.
10.12 AUTHORITY, BINDING AGREEMENT. Each party to this Agreement represents and warrants that (i) it is a corporation (or limited liability company or limited partnership, as applicable) duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization, and in the case of the Operator, it is a qualified foreign corporation under the laws of Texas, (ii) it has the requisite power to execute, deliver and perform this Agreement, (iii) the execution, delivery and performance by it of this Agreement has been duly and validly authorized by all necessary corporate actions, and (iv) this Agreement constitutes the legal, valid and binding obligations of such party, enforceable against such party in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditor's rights generally.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written.
THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION
THAT IS BINDING ON THE PARTIES
CNMK TEXAS PROPERTIES, LTD.
a Texas limited partnership
By: SUNNYMEAD CINEMA CORP.,
its General Partner
By: /s/ Michael Cavalier ---------------------- Name: Michael Cavalier Title: Vice President- General Counsel |
GREELEY, LTD.
A Texas limited partnership
By: GREELEY HOLDINGS, INC.,
Its general partner
By: /s/ Alan W. Stock --------------------- Name: Alan W. Stock Title: President |
i:\legal\mdc\agmts\greeley-mgt-005.doc
EXHIBIT 10.9
CINEMARK, INC.
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "AGREEMENT") is made as of March 12, 2004, among Cinemark, Inc., a Delaware corporation (the "COMPANY"), Madison Dearborn Capital Partners IV, L.P., a Delaware limited partnership ("MDCP"), each of the investors listed on the Schedule of Mitchell Investors attached hereto (collectively, the "MITCHELL INVESTORS") and each of the executives listed on the Schedule of Executives attached hereto (collectively, the "EXECUTIVES"). MDCP, the Mitchell Investors and the Executives are collectively referred to herein as the "STOCKHOLDERS" and individually as a "STOCKHOLDER." Unless otherwise specified herein, all of the capitalized terms used herein are defined in paragraph 13 hereof.
WHEREAS, MDCP shall acquire shares of the Company's Class A Common Stock pursuant to the Stock Purchase Agreement between MDCP and the Company dated as of the date hereof (the "PURCHASE AGREEMENT"); and
WHEREAS, the Mitchell Investors and the Executives currently own shares of the capital stock of the Company and, in some cases, options to acquire shares of Class A Common Stock; and
WHEREAS, the Company is a party to the Merger Agreement with Popcorn Merger Corp., pursuant to which Popcorn Merger Corp will merge with and into the Company with the Company as the surviving corporation (the "MERGER"), and immediately following the effectiveness of the Merger, the Executives and certain of the Mitchell Investors will own shares of Class A Common Stock; and
WHEREAS, the Company and the Stockholders desire to enter into this Agreement for the purposes, among others, of (i) establishing the composition of the Company's Board of Directors (the "BOARD"), (ii) assuring continuity in the management and ownership of the Company, (iii) limiting the manner and terms by which the Stockholder Shares may be transferred and (iv) providing covenants for certain stockholders;
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Board of Directors.
(a) From and after the Closing and until the provisions of this paragraph 1 cease to be effective, each holder of Stockholder Shares shall vote all of such holder's Stockholder Shares which are voting shares and any other voting securities of the Company over which such holder has voting control and shall take all other reasonably necessary or desirable actions within such holder's control (whether in such holder's capacity as a stockholder, director, member of a Board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all reasonably
necessary or desirable actions within its control (including, without limitation, calling special Board and stockholder meetings), so that:
(i) the authorized number of directors on the Board shall be twelve;
(ii) the following individuals shall be elected to the Board:
(A) two representatives designated by the Mitchell Investors (determined by a vote of the Mitchell Investors owning a majority of the Stockholder Shares held by all Mitchell Investors) (the "MITCHELL DIRECTORS"), who shall be initially: Lee Roy Mitchell and one other individual to be designated by Lee Roy Mitchell; and
(B) ten representatives designated by MDCP, provided that MDCP shall have the right to assign to the Co-Investors the right to designate one of the ten representatives MDCP is entitled to designate hereunder and in the event that MDCP effects such an assignment, one representative designated by the Co-Investors (determined by a vote of the Co-Investors holding a majority of the Stockholder Shares held by all Co-Investors) shall be elected to the Board;
(iii) the removal from the Board of any director as a result of a breach of such director's fiduciary duties to the Company and its stockholders under applicable law shall be only by a vote of the holders of a majority of the Company's outstanding Class A Common Stock;
(iv) the removal from the Board of any director for any other reason shall be only upon the written request of the Person or Persons originally entitled to designate such director pursuant to this paragraph 1(a);
(v) in the event that any representative designated hereunder by any Stockholder ceases to serve as a director during his or her term in office, the resulting vacancy shall be filled by the Person or Persons originally entitled to designate such director pursuant to this paragraph 1(a);
(vi) Lee Roy Mitchell shall serve as the Chairman of the Board; provided that, if so requested by a majority of the members of the Board (excluding the Mitchell Directors), he shall resign as Chairman at such time as: (A) the right of the Mitchell Investors to designate any director terminates in accordance with paragraph 1(c)(i) or 1(c)(ii); or (B) pursuant to the Employment Agreement between Lee Roy Mitchell and the Company dated as of the date hereof (the "EMPLOYMENT AGREEMENT"), his employment is terminated by the Company for Cause (as defined in the Employment Agreement) or by Lee Roy Mitchell in a Voluntary Termination (as defined in the Employment Agreement), and in the event that Lee Roy Mitchell ceases to serve as the Chairman of the Board, the Chairman shall be elected by a majority of the members of the Board;
(vii) if any party fails to designate a director
to fill a vacancy on the Board pursuant to the terms of this paragraph
1(a), such vacant Board position shall remain open and unfilled until
such time as the party with the right to designate a director for such
a vacancy exercises such party's right to fill such position; and
(viii) notwithstanding the foregoing, in the event that a Person loses its rights to designate a director in accordance with paragraph 1(c) below, the director designated by such Person shall be removed at the request of a majority of the Board (excluding such director or directors) upon the occurrence of such event and the total authorized number of directors shall be reduced upon such action by a majority of the Board (excluding such director or directors) by the number of directors that such Person loses its rights to designate.
(b) The Company shall pay the reasonable out-of-pocket expenses incurred by each director in connection with attending the meetings of the Board and any committee thereof.
(c) Notwithstanding anything to the contrary contained herein,
(i) the number of Mitchell Directors shall be reduced by one upon the occurrence of each of the following events: (A) such time as the Mitchell Investors and their Permitted Transferees hold in the aggregate less than 10% of the outstanding shares of Class A Common Stock and (B) such time as the Mitchell Investors and their Permitted Transferees hold in the aggregate less than 5% of the outstanding shares of Class A Common Stock; and the rights of the Mitchell Investors under this paragraph 1 shall terminate automatically and cease to have any further force or effect upon the occurrence of the event described in clause (B) above;
(ii) the rights of the Mitchell Investors under this paragraph 1 shall terminate automatically and cease to have any further force or effect at such time as the Mitchell Investors and their Permitted Transferees hold, directly or indirectly, more than a 5% interest of any business (other than the Company) that owns, operates or manages theatres with more than 800 movie screens in the aggregate in the Western Hemisphere;
(iii) the rights, if any, of the Co-Investors under this paragraph 1 to designate a director shall terminate automatically and cease to have any further force or effect at such time as the Co-Investors and their Permitted Transferees hold in the aggregate less than 5% of the outstanding shares of Class A Common Stock, and the right to designate such director shall revert back to MDCP under paragraph 1(a)(ii)(B); and
(iv) the rights of MDCP under this paragraph 1 shall terminate automatically and cease to have any further force or effect at such time as MDCP and its Permitted Transferees hold in the aggregate less than 5% of the outstanding shares of Class A Common Stock; provided that MDCP may assign its right to designate (A) any number of directors that MDCP is entitled to designate hereunder to any Person or group of affiliated Persons who acquires more than 50% of the shares of Class A Common Stock held by MDCP, after giving effect to the last of the Transfers to the Co-Investors
contemplated by paragraph 3(b)(i)(D) below, and (B) one of the directors MDCP is entitled to designate hereunder to any Person or group of affiliated Persons who acquires less than 50% of the shares of Class A Common Stock held by MDCP, after giving effect to the last of the Transfers to the Co-Investors contemplated by paragraph 3(b)(i)(D) below and any assignment by MDCP to the Co-Investors of the right to designate one of the directors MDCP is entitled to designate hereunder pursuant to paragraph 1(a)(ii)(B) above.
(d) The provisions of this paragraph 1 shall terminate automatically and cease to have any further force or effect upon the consummation of a Sale of the Company.
2. Representations and Warranties; Voting Agreements.
(a) Each Stockholder represents and warrants that (i) as of the Closing, such Stockholder will be the record owner of the number of Stockholder Shares set forth opposite its name on the Schedules attached hereto, free and clear of all liens and encumbrances, (ii) this Agreement has been duly authorized, executed and delivered by such Stockholder and constitutes the valid and binding obligation of such Stockholder, enforceable in accordance with its terms, (iii) as of the Closing, such Stockholder has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with, conflicts with or violates any provision of this Agreement, (iv) as of the date hereof, the number of shares of common stock of the Company which such Stockholder owns of record and the number of shares of common stock of the Company issuable upon exercise of options owned by such Stockholder are set forth opposite such Stockholder's name on the schedules attached hereto, (v) except as set forth on such schedules, such Stockholder does not own any shares of capital stock issued by the Company or any of its Subsidiaries or any other securities or rights to acquire securities of the Company or any of its Subsidiaries, and (vi) such Stockholder is not entitled to receive any payments or other compensation from the Company or any of its Subsidiaries or any other party as a result of or in connection with the transactions contemplated by the Merger Agreement, except (to the extent applicable) pursuant to such Stockholder's Existing Employment Agreement and pursuant to the terms of the Sale Bonus Agreement. In addition, Lee Roy Mitchell and The Mitchell Special Trust represent and warrant that Lee Roy Mitchell is one of two trustees of such trust, and such trust is solely for the benefit of members of Lee Roy Mitchell's Family Group.
(b) From and after the Closing, no Stockholder shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with, conflicts with or violates any provision of this Agreement.
3. Restrictions on Transfer of Stockholder Shares.
(a) Transfer of Stockholder Shares. No holder of Stockholder Shares shall sell, transfer, assign or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law, but excluding by way of merger or consolidation) any interest in his Stockholder Shares (a "TRANSFER"), except pursuant to this Agreement. Any Transfer or attempted Transfer of any Stockholder Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner of such shares for any purpose.
(b) Exempt Transfers.
(i) Subject to the provisions in paragraph
3(b)(ii), the restrictions set forth in this paragraph 3 shall not apply to any
Transfer by a Stockholder with respect to any of the following Transfers (each
an "EXEMPT TRANSFER"):
(A) any Transfer of Stockholder Shares by a Stockholder who is not a natural person to such Stockholder's Affiliates, including, in the case of MDCP, any Transfer which constitutes an in-kind distribution to its partners (and, in connection with or following any such distribution, an in-kind distribution by the general partner of MDCP to its partners);
(B) in the case of a Stockholder who is a natural person, any Transfer by will or pursuant to the applicable laws of descent and distribution or Transfers to or among such holder's Affiliates, any members of such holder's Family Group or such Family Group member's Affiliates;
(C) any Transfer of Stockholder Shares in connection with an Approved Sale;
(D) any Transfer by MDCP of its Stockholder Shares to one or more Co-Investors (other than to a Competitor or such Competitor's Affiliates) during the first six months after the Closing, so long as immediately following the last to occur of such Transfers, MDCP and its Permitted Transferees hold in the aggregate shares of Class A Common Stock with an aggregate original cost of not less than $350 million; or
(E) any Transfer by the Executives of their Stockholder Shares to the Company or any of its Subsidiaries.
(ii) A transferee of Stockholder Shares pursuant to a Transfer described in paragraphs 3(b)(i)(A) and (B) above are referred to herein as a "PERMITTED TRANSFEREE." The restrictions contained in paragraph 3(a) shall continue to be applicable to the Stockholder Shares after any Transfer pursuant to paragraphs 3(b)(i)(A), (B) and (D), and such transferees of such Stockholder Shares shall agree in writing to be bound by the provisions of this Agreement affecting the Stockholder Shares so transferred. Notwithstanding the foregoing, no party hereto shall avoid the provisions of this Agreement by making one or more Transfers to one or more Permitted Transferees and then disposing of all or any portion of such party's interest in any such Permitted Transferee. Notwithstanding anything herein to the contrary, in no event shall any Stockholder Shares be pledged unless otherwise approved in writing by MDCP and the Mitchell Investors.
(c) First Refusal Rights upon Transfers by Stockholders other than MDCP.
(i) If any holder of Stockholder Shares (other
than MDCP or any of its Permitted Transferees) proposes to Transfer Stockholder
Shares (other than pursuant to an Exempt Transfer), then not less than 20 days
prior to the date on which such Transfer will occur (such 20-day period, the
"ELECTION PERIOD"), the transferring holder (the "TRANSFERRING STOCKHOLDER")
shall deliver a written notice (an "OFFER NOTICE") to the Company and MDCP. The
Offer Notice shall disclose in reasonable detail the number of Stockholder
Shares to be Transferred, the material terms and conditions of the Transfer and
the identity, background and ownership (if applicable) of the prospective
transferee(s), and the Offer Notice shall constitute a binding offer to sell
such Stockholder Shares in accordance with the provisions of this paragraph
3(c), first to the Company and then to MDCP, on the terms and conditions
contained in the Offer Notice.
(ii) Upon receipt of the Offer Notice, the Company may elect to purchase all (but not less than all) of the Stockholder Shares specified in the Offer Notice at the price and on the terms specified therein by delivering written notice (the "COMPANY ELECTION NOTICE") of such election to the Transferring Stockholder and MDCP as soon as practical, but in any event within ten days (the "COMPANY OFFER PERIOD") after the delivery of the Offer Notice to the Company and MDCP.
(iii) If and only if the Company has not elected to purchase all of the Stockholder Shares within the Company Offer Period, then MDCP may elect to purchase all (but not less than all) of the Stockholder Shares specified in the Offer Notice at the price and on the terms specified therein by delivering written notice (the "MDCP ELECTION NOTICE") of such election to the Transferring Stockholder within 20 days after delivery of the Offer Notice to the Company and MDCP.
(iv) If the Company and/or MDCP has elected to purchase Stockholder Shares from the Transferring Stockholder, the Transfer of such shares shall be consummated as soon as practical after the delivery of the Company Election Notice or the MDCP Election Notice, as applicable, to the Transferring Stockholder, but in any event within 45 days after the expiration of the Election Period.
(v) To the extent that the Company and MDCP have not elected to purchase all of the Stockholder Shares being offered, the Transferring Stockholder may, within 90 days after the expiration of the Election Period and subject to the provisions of this Agreement, Transfer such Stockholder Shares to the transferees identified in the Offer Notice at a price no less than the price per share specified in the Offer Notice and on other terms no more favorable to the transferees thereof than those offered to the Company and MDCP in the Offer Notice. Any Stockholder Shares not transferred within such 90-day period shall be reoffered to the Company and MDCP under this paragraph 3(c) prior to any subsequent Transfer.
(d) First Refusal Rights upon Transfers by MDCP to a Competitor.
(i) If MDCP proposes to Transfer its Stockholder Shares to a Competitor or such Competitor's Affiliates and such Transfer will not be effected in connection with a Sale of the Company, then not less than 20 days prior to the date on which such Transfer will occur (such 20-day period, the "COMPETITOR SALE ELECTION PERIOD"), such Person shall deliver a written notice (a "COMPETITOR SALE OFFER NOTICE") to the Company and the Mitchell Investors. The Competitor Sale Offer Notice shall disclose in reasonable detail the number of Stockholder Shares to be Transferred, the material terms and conditions of the Transfer and the identity, background and ownership (if applicable) of the Competitor, and the Competitor Sale Offer Notice shall constitute a binding offer to sell such Stockholder Shares in accordance with the provisions of this paragraph 3(d), first to the Company and then to the Mitchell Investors, on the terms and conditions contained in the Competitor Sale Offer Notice.
(ii) Upon receipt of the Competitor Sale Offer Notice, the Company may elect to purchase all (but not less than all) of the Stockholder Shares specified in the Competitor Sale Offer Notice at the price and on the terms specified therein by delivering written notice (the "COMPETITOR SALE ELECTION NOTICE") of such election to MDCP and the Mitchell Investors as soon as practical, but in any event within ten days (the "COMPETITOR SALE OFFER PERIOD") after the delivery of the Competitor Sale Offer Notice to the Company and MDCP.
(iii) If and only if the Company has not elected to purchase all of the Stockholder Shares within the Competitor Sale Offer Period, the Mitchell Investors may elect to purchase all (but not less than all) of the Stockholder Shares specified in the Competitor Sale Offer Notice at the price and on the terms specified therein by delivering written notice (the "MITCHELL ELECTION NOTICE") of such election to MDCP within 20 days after delivery of the Offer Notice to the Company and the Mitchell Investors.
(iv) If the Company and/or any of the Mitchell Investors has elected to purchase Stockholder Shares from MDCP, the Transfer of such shares shall be consummated as soon as practical after the delivery of the Competitor Sale Election Notice or the Mitchell Election Notice, as applicable, to MDCP, but in any event within 45 days after the expiration of the Competitor Sale Election Period.
(v) To the extent that the Company and the Mitchell Investors have not elected to purchase all of the Stockholder Shares being offered, MDCP may, within 90 days after the expiration of the Competitor Sale Election Period and subject to the provisions of this Agreement, Transfer such Stockholder Shares to the Competitor (or such Competitor's Affiliates) identified in the Competitor Sale Offer Notice at a price no less than the price per share specified in the Competitor Sale Offer Notice and on other terms no more favorable to the Competitor (or such Competitor's Affiliates) than those offered to the Company and the Mitchell Investors in the Competitor Sale Offer Notice. Any Stockholder Shares held by MDCP not transferred within such 90-day period shall be reoffered to the Company and the Mitchell Investors under this paragraph 3(d) prior to any subsequent Transfer to a Competitor.
(e) Participation Rights.
(i) If MDCP proposes to Transfer any of its Stockholder Shares (other than pursuant to an Exempt Transfer), then not less than 20 days prior to any such Transfer of Stockholder Shares (such 20-day period, the "MDCP SALE PERIOD"), MDCP shall deliver a written notice (the "MDCP SALE NOTICE") to the Company and all holders of Stockholder Shares other than MDCP (the "OTHER STOCKHOLDERS") specifying in reasonable detail the identity, background and ownership (if any) of the prospective transferee(s), the number of shares to be Transferred and the terms and conditions of the Transfer (which notice may be the same notice and given at the same time as the Offer Notice under paragraph 3(d)). Subject to paragraph 3(e)(iii), the Other Stockholders may elect to participate in the contemplated Transfer at the same price per share and on the same terms by delivering written notice (the "MDCP SALE ELECTION Notice") to MDCP within the MDCP Sale Period. If any of the Other Stockholders has elected to participate in such Transfer, then MDCP and such Other Stockholder shall be entitled to sell in the contemplated Transfer, at the same price and on the same terms, a number of Stockholder Shares equal to the product of (A) the quotient determined by dividing (x) the percentage of Stockholder Shares owned by such Person by (y) the aggregate percentage of Stockholder Shares owned by MDCP and the Other Stockholders participating in such sale, and (B) the number of Stockholder Shares to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 Stockholder Shares by MDCP, and if MDCP at such time owns 30% of all Stockholder Shares and if the Mitchell Investors owning 20% and Executives owning 10% of all Stockholder Shares elect to participate, then MDCP would be entitled to sell 50 shares (30% / 60% x 100 shares), the Mitchell Investors would be entitled to sell 33 shares (20% / 60% x 100 shares) and the Executives would be entitled to sell 17 shares (10% / 60% x 100 shares).
(ii) Any of the Other Stockholders may elect to sell in any Transfer contemplated under this paragraph 3(e) a number of Stockholder Shares less than such Other Stockholders are entitled to sell hereunder, in which case MDCP shall have the right to sell an additional number of Stockholder Shares in such Transfer equal to the number that such Other Stockholders are permitted to sell but have elected not to sell. MDCP shall use reasonable efforts to obtain the agreement of the prospective transferee(s) to the participation of the Other Stockholders in any contemplated Transfer, and MDCP shall not Transfer any of its Stockholder Shares to any prospective transferee if such prospective transferee declines to allow the participation of the Other Stockholders. Each holder Transferring Stockholder Shares pursuant to this paragraph 3(e) shall pay such holder's pro rata share (based on the number of Stockholder Shares to be sold) of the expenses incurred by the holders in connection with such Transfer and shall be obligated to join on a pro rata basis (based on the number of Stockholder Shares to be sold) in any indemnification or other obligations that MDCP agrees to provide in connection with such Transfer (other than any such obligations that relate specifically to a particular holder such as indemnification with respect to representations and warranties given by a holder regarding such holder's title to and ownership of Stockholder Shares); provided that no holder shall be obligated in connection with such Transfer to agree to indemnify or hold harmless the transferees
with respect to an amount in excess of the net consideration paid to such holder in connection with such Transfer.
(iii) Notwithstanding the foregoing, no Executive (or any of such Executive's Permitted Transferees) shall be entitled to participate under this paragraph 3(e) in any Transfer made by MDCP or any of its Permitted Transferees, unless such Transfer (together with any related Transfers) constitutes a Sale of the Company.
(f) Transfers to Competitors. No holder of Stockholder
Shares (other than MDCP and its Permitted Transferees, subject to paragraph
3(d)) shall Transfer any Stockholder Shares to any Competitor, except pursuant
to paragraph 3(e) or paragraph 4 hereof.
(g) Termination of Restrictions. The restrictions on the Transfer of Stockholder Shares set forth in this paragraph 3 shall continue with respect to each Stockholder Share until the date on which such Stockholder Share has been transferred in a Public Sale or in a Sale of the Company.
4. Sale of the Company.
(a) If the Board or MDCP approves a Sale of the Company and delivers written notice to the holders of Stockholders Shares invoking the provisions of this paragraph (any such sale, an "APPROVED SALE"), the holders of Stockholders Shares shall consent to, vote in favor of and raise no objections against the Approved Sale.
(b) If the Approved Sale is structured as (i) a merger or consolidation, each holder of Stockholder Shares shall vote its Stockholder Shares to approve such merger or consolidation, whether by written consent or at a stockholders meeting (as requested by the Board or MDCP, as the case may be), and waive all dissenter's rights, appraisal rights and similar rights in connection with such merger or consolidation, (ii) a sale of stock, each holder of Stockholder Shares shall agree to sell, and shall sell, all of its Stockholder Shares and rights to acquire Stockholder Shares on the terms and conditions so approved, or (iii) a sale of assets, each holder of Stockholder Shares shall vote its Stockholder Shares to approve such sale and any subsequent liquidation of the Company or other distribution of the proceeds therefrom, whether by written consent or at a stockholders meeting (as requested by the Board or MDCP, as the case may be).
(c) In furtherance of the foregoing, (i) each holder of Stockholder Shares shall take, with respect to such holder's Stockholder Shares, all necessary or desirable actions reasonably requested by the Board or MDCP, as the case may be, in connection with the consummation of the Approved Sale, including without limitation, voting to approve such transaction and executing the applicable purchase agreement, and (ii) each holder of Stockholder Shares shall make the same representations, warranties, indemnities and agreements as each other holder of Stockholder Shares, provided that (A) each holder of Stockholder Shares shall be obligated to make representations and warranties as to such Stockholder's title to and ownership of Stockholder Shares, authorization, execution and delivery of relevant documents by such Stockholder, enforceability of relevant agreements against such Stockholder and other matters
relating to such Stockholder, to enter into covenants in respect of a Transfer of such Stockholder's Stockholder Shares in connection with such Approved Sale and to enter into indemnification obligations with respect to the foregoing, in each case to the extent that each other Stockholder is similarly obligated, but no Stockholder shall be obligated to enter into indemnification obligations with respect to any of the foregoing in respect of any other Stockholder or such other Stockholder's Stockholder Shares and (B) in no event shall any Stockholder be liable in respect of any indemnity obligations pursuant to any Approved Sale in an aggregate amount in excess of the total consideration payable to such Stockholder in such Approved Sale.
(d) The obligations of the holders of Stockholder Shares with respect to an Approved Sale are subject to the satisfaction of the following conditions: (i) except as provided in the provisos in paragraphs 8(d)(iii) and 8(d)(iv) of this Agreement, upon the consummation of the Approved Sale, each holder of Stockholder Shares will receive the same form of consideration and the same portion of the aggregate consideration that such holder of Stockholder Shares would have received if such aggregate consideration had been distributed by the Company in complete liquidation pursuant to the rights and preferences set forth in the Company's Certificate of Incorporation as in effect immediately prior to such Approved Sale; (ii) except as provided in the provisos in paragraphs 8(d)(iii) and 8(d)(iv) of this Agreement, if any holder of a class of Stockholder Shares is given an option as to the form and amount of consideration to be received, each holder of such class of Stockholder Shares will be given the same option; and (iii) each holder of then currently exercisable rights to acquire shares of a class of Stockholder Shares will be given an opportunity to exercise such rights prior to the consummation of the Approved Sale and participate in such sale as holders of such class of Stockholder Shares; provided that the condition that each holder of Stockholder Shares receive, or is provided with the same option to receive, the same form of consideration as set forth in clause (i) and clause (ii) above shall be deemed satisfied even if certain holders of Stockholders Shares receive, to the exclusion of others, securities of the entity acquiring the Company in an Approved Sale, so long as each holder of Stockholder Shares receives the same amount of value, whether in cash or such securities, as of the closing of such Approved Sale with respect to such holder's Stockholder Shares.
(e) If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Stockholder Shares shall at the request of the Company, appoint a "purchaser representative" (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Stockholder Shares appoints a purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative. However, if any holder of Stockholder Shares declines to appoint the purchaser representative designated by the Company, such holder shall appoint another purchaser representative (reasonably acceptable to the Company), and such holder shall be responsible for the fees of the purchaser representative so appointed.
(f) Subject to paragraph 4(e), each holder of Stockholder Shares shall, to the extent requested by the Company, pay such holder's pro rata share of the expenses incurred by the holders in connection with an Approved Sale.
5. Holdback Agreement. No Executive or any of his Permitted Transferees shall effect any public sale or distribution of any Stockholder Shares or of any other capital stock or equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such stock or securities, during the seven days prior to and the 180 period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (as such terms are defined in the Registration Agreement dated as of the date hereof among MDCP, the Mitchell Investors and the Company) unless the underwriters managing the registration otherwise agree. The restrictions on the transfer of Stockholder Shares set forth in this paragraph 5 shall continue with respect to each Stockholder Share until the date on which such Stockholder Share has been transferred in a Public Sale.
6. Preemptive Rights.
(a) Except for issuances of equity securities or
securities or instruments containing equity-like features (i) in the form of
Class A Common Stock or options to acquire Class A Common Stock to employees,
directors or consultants of the Company or any of its Subsidiaries, (ii) upon
the conversion, recapitalization or reorganization of any securities of the
Company, (iii) as consideration for the acquisition of or investment in another
company or business (whether through a purchase of securities, a merger,
consolidation, purchase of assets or otherwise), including, without limitation,
joint ventures and strategic alliances, (iv) pursuant to a registered public
offering of Class A Common Stock under the Securities Act, (v) as additional
yield or return in respect of institutional indebtedness for borrowed money,
(vi) as a dividend or other distribution in respect of the Company's equity
securities or (vii) in connection with a stock split or similar event, if the
Company authorizes the issuance or sale of any shares of Class A Common Stock or
any other equity securities of the Company or any securities, options or other
rights to acquire any shares of Class A Common Stock or other equity securities
of the Company (any such securities or rights referred to herein as "ADDITIONAL
SECURITIES"), the Company shall first offer to sell to each holder of
Stockholder Shares (other than shares of Class A Common Stock issued or issuable
upon exercise of stock options (such shares referred to herein collectively as
"OPTION SHARES")) a portion of such Additional Securities equal to the quotient
determined by dividing (A) the number of shares of Class A Common Stock (other
than Option Shares) held by such holder by (B) the total number of shares of
Class A Common Stock outstanding on a fully-diluted basis (assuming exercise of
all outstanding rights to acquire shares of Class A Common Stock); provided that
such offer shall be made only to the holders of Stockholder Shares that are
"accredited investors" under Regulation D of the Securities Act, or the Company
otherwise consents to such holders' participation under this paragraph 6; and
provided further that, if such Additional Securities are being offered in
combination with other securities of the Company, the Persons exercising rights
pursuant to this paragraph 6 shall also be required to purchase the same strip
of securities on the same terms and conditions as being offered by the Company.
Holders of Stockholder Shares (other than Option Shares) shall be entitled to
purchase such Additional Securities at the same price and on the same terms as
such Additional Securities are to be offered to any other Persons. The purchase
price for all
Additional Securities so offered to the holders of Stockholder Shares hereunder shall be payable in cash.
(b) In order to exercise their purchase rights hereunder, each holder of Stockholder Shares (other than Option Shares) shall, within 10 days after receipt of written notice from the Company describing in reasonable detail the stock or securities being offered, the purchase price thereof, the payment terms and such holder's percentage allotment, deliver a written notice to the Company describing such holder's election hereunder.
(c) Upon the expiration of the offering period described above, the Company shall be entitled to sell such Additional Securities that the holders of Stockholder Shares have not elected to purchase during the 90 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to such holders. Any such Additional Securities offered or sold by the Company after such 90-day period shall be reoffered to the holders of Stockholder Shares (other than Option Shares) pursuant to the terms of this paragraph 6.
7. Anti-Takeover Measures. Prior to the commencement of the initial public offering of shares of the Company's Class A Common Stock registered under the Securities Act, MDCP shall request that the Board adopt reasonable and customary anti-takeover measures, except to the extent that (i) the Board in the observance of its fiduciary duties determines that any such measures are not in the best interests of the Company's stockholders or (ii) the Company's underwriters managing the public offering advise the Company that any such measures will adversely affect execution of such offering or the price to be obtained in such offering.
8. Covenants.
(a) Financial Statements and Other Information. The Company shall deliver to each Investor (so long as such Investor and its Permitted Transferees in the aggregate hold at least 5% of the Company's outstanding Class A Common Stock):
(i) within 30 days after the end of each monthly accounting period in each fiscal year, a consolidated statement of income of the Company and its Subsidiaries for such monthly period and for the period from the beginning of the fiscal year to the end of such month;
(ii) within the earlier of 90 days after the end of each fiscal year or upon filing an annual report on Form 10-K with the Securities and Exchange Commission, annual consolidated statements of income and cash flows of the Company and its Subsidiaries for such fiscal year, and a consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year, setting forth in each case comparisons to the preceding fiscal year, all prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by an audit opinion from an independent accounting firm of recognized national standing;
(iii) within 30 days after the beginning of each fiscal year, an annual budget prepared on a monthly basis for the Company and its Subsidiaries for such fiscal year (displaying anticipated statements of income and cash flows and balance sheets);
(iv) promptly after filing thereof, all regular and special reports filed by the Company or any of its Subsidiaries with the Securities and Exchange Commission or any exchange on which the Class A Common Stock is listed; and
(v) promptly upon release thereof, all public announcements made by the Company or any of its Subsidiaries.
(b) Inspection of Property. The Company shall permit any representatives designated by any Investor, upon reasonable notice during normal business hours and for a proper business purpose, to (i) visit and inspect any of the properties of the Company and its Subsidiaries and examine the corporate and financial records of the Company and its Subsidiaries, so long as such Investor and its Permitted Transferees owns any Class A Common Stock, and (ii) so long as such Investor and its Permitted Transferees in the aggregate own at least 5% of the Company's outstanding Class A Common Stock, discuss the affairs, finances and accounts of the Company with the officers of the Company.
(c) Current Public Information. At all times after the Company has filed a registration statement with the Securities and Exchange Commission pursuant to the requirements of either the Securities Act or the Securities Exchange Act with respect to its Class A Common Stock, the Company shall file all material reports required to be filed by it under the Securities Act and the Securities Exchange Act and the rules and regulations adopted by the Securities and Exchange Commission thereunder, all to the extent required to enable the Investors to sell shares of Class A Common Stock pursuant to Rule 144 adopted by the Securities and Exchange Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission.
(d) Restrictions. So long as the Mitchell Investors and their Permitted Transferees in the aggregate own at least 10% of the Company's outstanding Class A Common Stock, the Company shall not, without the prior written consent of the holders of a majority of the shares of Class A Common Stock held by all of the Mitchell Investors (which consent shall not be unreasonably withheld or delayed):
(i) declare or pay any dividends or make any distributions upon any shares of its capital stock, except for dividends declared and paid after the third anniversary of the date of this Agreement on a pro rata basis on the outstanding shares of Class A Common Stock;
(ii) redeem, purchase or otherwise acquire any shares of its capital stock, except for repurchases after the third anniversary of the date of this Agreement of Class A Common Stock made pursuant to an offer to all holders of Class A Common Stock on a pro rata basis and except for repurchases of Class A Common Stock from employees, directors and
consultants and former employees, directors and consultants of the Company and its Subsidiaries in connection with termination of employment pursuant to arrangements approved by the Board;
(iii) merge or consolidate with any Person, unless
(a) immediately following the consummation of such transaction, the stockholders
of the Company immediately prior to the consummation of such transaction
continue to own in the aggregate the outstanding capital stock of the surviving
entity possessing the voting power to elect a majority of the surviving entity's
board of directors or other governing body or (b) the consideration received by
the holders of the Class A Common Stock as a result of such transaction consists
solely of cash, cash equivalents, shares of capital stock of the surviving
entity which have been registered under the Securities Act in connection with
such transaction and/or shares of capital stock of the surviving entity which
have not been registered under the Securities Act, but which are of a class of
securities registered under the Securities Exchange Act and are entitled to
demand, S-3 and piggyback registration rights substantially similar as those
contained in the Registration Agreement (provided that if the consideration
received by the Investors in such transaction consists of cash or cash
equivalents and shares of capital stock issued by any Person engaged in the
motion picture exhibition industry other than the Company, the Mitchell
Investors shall be entitled to receive (at their election) 120% of the cash and
cash equivalents such Investors would have otherwise been entitled to receive on
a pro rata basis and the amount of securities such Mitchell Investors would have
been entitled to receive on a pro rata basis shall be correspondingly reduced);
(iv) sell all or substantially all of its assets, unless the consideration received by the holders of the Class A Common Stock as a result of such transaction consists solely of cash, cash equivalents, shares of capital stock which have been registered under the Securities Act in connection with such transaction and/or shares of capital stock which have not been registered under the Securities Act, but which are of a class of securities registered under the Securities Exchange Act and are entitled to demand, S-3 and piggyback registration rights substantially similar as those contained in the Registration Agreement (provided that if the consideration received by the Investors in such transaction consists of cash or cash equivalents and shares of capital stock issued by any Person engaged in the motion picture exhibition industry other than the Company, the Mitchell Investors shall be entitled to receive (at their election) 120% of the cash and cash equivalents such Mitchell Investors would have otherwise been entitled to receive on a pro rata basis and the amount of securities such Mitchell Investors would have been entitled to receive on a pro rata basis shall be correspondingly reduced);
(v) acquire (by merger, consolidation, or otherwise) any company that is not primarily engaged in the motion picture exhibition business or activities related to the current lines of businesses in which the Company or any of its Subsidiaries is engaged at the time of the consummation of the transactions contemplated by the Merger Agreement;
(vi) amend the Company's Certificate of Incorporation or the Company's bylaws if such amendment would have an adverse effect on the terms of the Class A Common Stock held by the Mitchell Investors which is different from the adverse effect on the other holders of Class A Common Stock;
(vii) issue or sell any shares of capital stock which are senior to the Class A Common Stock with respect to dividends, redemption or distributions in liquidation or which have voting rights different from the Class A Common Stock, unless such securities are issued or sold at no less than fair market value as determined by the Board in its reasonable judgment and the Investors have the right to participate in such offering under the provisions of paragraph 6 of this Agreement;
(viii) enter into, amend or modify any agreement, transaction, commitment or arrangement with MDCP or any of its Affiliates, except for the execution, delivery and performance of the Transaction Documents and the other agreements and arrangements contemplated by this Agreement or the Merger Agreement, except for any agreements, transactions, commitments and arrangements approved by a majority of the disinterested directors on the Board who are not affiliated with MDCP and except for the issuance of securities in which the Investors have the right to participate under paragraph 6 of this Agreement; or
(ix) incur, or permit any Subsidiary to incur, any indebtedness for borrowed money (other than borrowings under, or refinancings or replacements of, the loan facilities of the Company and its Subsidiaries existing as of the effectiveness of the Merger under the Merger Agreement) which would cause the Debt-to-EBITDA Ratio to exceed 5.25:1 prior to the first anniversary of the Closing hereunder, 5.0:1 during the period between the first and second anniversaries of such Closing hereunder and 4.75:1 thereafter, unless at the time of such incurrence the Company or any of its Subsidiaries has defaulted under any of its agreements creating indebtedness for borrowed money.
(e) Confidentiality. Each Investor shall not disclose to any Person (other than such Investor's employees, agents and advisors who have a need to know) and shall not use for any purpose other than monitoring such Investor's investment in the Company, and shall cause its employees, agents and advisors to maintain the confidentiality of, all of the information obtained pursuant to paragraphs 3(a) and (b) of this Agreement, unless (a) such information was or becomes publicly available through no fault of such Investor, its Affiliates or Permitted Transferees or their employees, agents or advisors or (b) the disclosure of such information is compelled by legal proceedings. In the event that any Investor is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand or similar process) to disclose any such information, such Investor will notify the Board promptly of the request or requirement so that the Company may seek an appropriate protective order or other appropriate relief or waive compliance with this provision. In the absence of a protective order or the Investor's receiving such waiver from the Company, the Investor will be permitted to disclose that portion (and only that portion) of the information that the Investor is legally compelled by the tribunal to disclose; provided, however, that the Investor shall use commercially reasonable efforts to obtain an order or other assurance that confidential treatment will be accorded to such portion of the information required to be disclosed as the Company shall designate.
(f) Termination. All of the provisions of paragraph 8(d) shall terminate and be of no further force or effect upon the effective date of an Initial Public Offering of the
Company's Class A Common Stock registered under the Securities Act. The provisions of paragraphs (a), (b) and (d) of this paragraph 8 are not transferable or assignable by any Investor to any subsequent holder of any Class A Common Stock purchased hereunder (except in the case of transfer to its Permitted Transferees or another Investor or an Affiliate of any Investor), and upon the transfer of any Investor's Class A Common Stock (except in the case of a transfer to its Permitted Transferees or another Investor or any Affiliate of an Investor), such provisions shall terminate with respect to such transferred shares. If at any time the Mitchell Investors own, directly or indirectly, more than a 5% interest in the aggregate of any business that owns, operates or manages theatres with more than an aggregate of 800 screens in the Western Hemisphere, the Mitchell Investors shall not be entitled to (i) receive any information under paragraph 8(a), except that if the Company is not a reporting company registered under the Securities Exchange Act, the Mitchell Investors shall continue to receive the Company's annual consolidated financial statements together with a letter from the Company's management describing material developments at the Company, (ii) exercise any rights under paragraph 8(b), except that the Mitchell Investors shall retain their statutory inspection rights under Delaware law, or (iii) after the fifth anniversary of the Merger, exercise any approval rights under paragraph 3(d)(x).
9. Reallocation of Sale Bonus Shares. For each Executive, a portion of the total number of shares of Class A Common Stock owned by such Executive immediately following the effectiveness of the Merger as specified below shall constitute "SALE BONUS SHARES" hereunder (including therewith all shares of capital stock of the Company issued or issuable with respect thereto by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization affecting the Class A Common Stock):
Sale Bonus Shares ----------------- Michael Cavalier $855,708 / the Merger Consideration Robert Copple $1,126,942 / the Merger Consideration Alan Stock $1,132,554 / the Merger Consideration Timothy Warner $1,260,749 / the Merger Consideration |
If prior to the third anniversary of the consummation of the Merger (the "THIRD ANNIVERSARY") any Executive's employment with the Company terminates as a result of Cause or Voluntary Termination (as such terms are defined in each such Executive's New Employment Agreement), all of such Executive's Sale Bonus Shares shall be automatically forfeited and the stock certificates representing such shares shall be immediately surrendered by Executive to the Company endorsed in blank or accompanied by an appropriate form of assignment. Upon receipt of such certificate(s), the Company shall promptly reissue the Sale Bonus Shares represented by such certificate(s) to the other Executives that at such time continue to hold Sale Bonus Shares on a pro rata basis in accordance with the number of Sale Bonus Shares owned by such Executives immediately prior to the termination of such other Executive's employment. Prior to
the Third Anniversary, the Sale Bonus Shares may not be transferred by any Executive (except to members of such Executive's Family Group), and during such period, the certificates evidencing such shares shall be imprinted with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE DESIGNATED AS "SALE BONUS SHARES" UNDER, AND ARE SUBJECT TO THE TERMS OF, THE STOCKHOLDERS AGREEMENT, DATED AS OF MARCH ____, 2004, AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS, AS AMENDED FROM TIME TO TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST. ANY PURPORTED TRANSFER OF THESE SECURITIES NOT IN ACCORDANCE WITH SUCH STOCKHOLDERS AGREEMENT SHALL BE INVALID AND THE COMPANY SHALL NOT RECORD SUCH TRANSFER ON ITS BOOKS."
Within 30 days following the effectiveness of the Merger, each Executive shall file a Section 83(b) election with the Internal Revenue Service with respect to such Executive's Sale Bonus Shares.
10. Legend. Each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the transfer of any Stockholder Shares (if such shares remain Stockholder Shares after such transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE STOCKHOLDERS AGREEMENT DATED AS OF MARCH 12, 2004, AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS, AS AMENDED AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH STOCKHOLDERS AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST. ANY PURPORTED TRANSFER OF THESE SECURITIES NOT IN ACCORDANCE WITH SUCH STOCKHOLDERS AGREEMENT SHALL BE INVALID AND THE COMPANY SHALL NOT RECORD SUCH TRANSFER ON ITS BOOKS."
The Company shall imprint such legend on certificates evidencing Stockholder Shares outstanding as of the date of the Closing, and the Stockholders shall surrender their stock certificates to the Company for such purpose. The legend set forth above shall be removed from
the certificates evidencing any shares which cease to be Stockholder Shares as provided in the definition of such term in paragraph 13 hereof.
11. Transferees Bound. Prior to Transferring any Stockholder Shares (other than in connection with a Public Sale or a Sale of the Company) to any Person, the transferring holder of Stockholder Shares shall cause the prospective transferee to be bound by this Agreement and to execute and deliver to the Company and the other Stockholders a counterpart of this Agreement.
12. Effective Date; Assumption upon Merger. This Agreement shall become effective automatically without any further action by any of the parties hereto immediately upon the issuance of the shares of Class A Common Stock under the Purchase Agreement. However, prior thereto, this Agreement shall terminate and become null and void automatically without any further action by any of the parties hereto immediately upon the termination of the Merger Agreement (as defined below) pursuant to its terms.
13. Definitions.
"ADDITIONAL SECURITIES" has the meaning set forth in paragraph 6(a).
"AFFILIATE" of any Person is any other Person controlled by, controlling or under common control with such Person and in the case of any Stockholder that is a partnership or limited liability company, any partner or member of such Stockholder (provided that the Company shall not be deemed to be an affiliate of any Stockholder) or in the case of any Stockholder that is a trust, any beneficiary, trust for the benefit of the beneficiary or successor trust.
"BOARD" has the meaning set forth in the preamble.
"CAPITAL LEASE OBLIGATIONS" shall mean the obligations of the Company or its Subsidiaries to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on the Company or its Subsidiaries' balance sheet under GAAP; and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP provided that Capital Lease obligations shall exclude the application of Emerging Issues Task Force Regulation 97-10 or similar pronouncement.
"CLASS A COMMON STOCK" means, the Company's Class A Common Stock, par value $0.001 per share.
"CLOSING" shall have the meaning assigned to such term in the Purchase Agreement.
"CO-INVESTOR" means any investor introduced to the Company by
MDCP (other than any Affiliate of MDCP) and who acquires a portion of the Class
A Common Stock which MDCP has agreed to acquire pursuant to the Purchase
Agreement and who execute and deliver a joinder agreement in the form of Exhibit
A.
"COMPANY" has the meaning set forth in the preamble.
"COMPANY ELECTION NOTICE" has the meaning set forth in paragraph 3(c)(ii).
"COMPANY OFFER PERIOD" has the meaning set forth in paragraph 3(c)(ii).
"COMPETITOR" means any Person that directly or indirectly owns, operates or manages theatres with an aggregate of more than 50 movie screens, each of which movie screens is used for the primary purpose of exhibiting commercially distributed full-length motion pictures movie theatres and any Affiliate of such Person.
"COMPETITOR SALE ELECTION NOTICE" has the meaning set forth in paragraph 3(d)(ii).
"COMPETITOR SALE ELECTION PERIOD" has the meaning set forth in paragraph 3(d)(i).
"COMPETITOR SALE OFFER PERIOD" has the meaning set forth in paragraph 3(d)(ii).
"COMPETITOR SALE OFFER NOTICE" has the meaning set forth in paragraph 3(d)(i).
"CONSOLIDATED EBITDA" shall mean for any period, without
duplication, Consolidated Net Income for such period plus, to the extent
reflected as a charge in the statement of such Consolidated Net Income for such
period, the sum of (a) income tax expense, (b) Consolidated Interest Expense,
amortization or write-off of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness,
(c) depreciation and amortization expense, (d) amortization of intangibles
(including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, net losses on sales of assets outside
of the ordinary course of business), (f) any minority interest deduction, and
(g) any other non-cash charges, and minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (a)
interest income (except to the extent deducted in determining Consolidated
Interest Expense), (b) any extraordinary, unusual or non-recurring income or
gains (including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, net gains on sales of
assets outside of the ordinary course of business), and (c) any other non-cash
income, all as determined on a consolidated basis; provided that for purposes of
calculating Consolidated EBITDA of the Company and its Subsidiaries for any
period:
(i) the Consolidated EBITDA of any Person acquired by the Company or its Subsidiaries during such period shall be included on a pro forma basis (including any items which are permitted to be added back to Consolidated Net Income under Regulation SX and any other identifiable cost savings resulting from any such acquisition as well as the incremental EBITDA associated with the annualized run-rate of theatres operated by the acquired Person for less than one year prior to the date of acquisition, excluding any theatres opened for less than six months) for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness
in connection therewith had occurred on the first day of such period and without giving effect to clause (a) of the proviso set forth in the definition of Consolidated Net Income) if the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at the end of the fiscal year preceding the acquisition of such Person and the related consolidated statements of income and stockholders' equity and of cash flows for the period in respect of which Consolidated EBITDA is to be calculated have been reported on without a qualification arising out of the scope of the audit by independent certified public accountants of nationally recognized standing or have been found reasonably acceptable by the Mitchell Investors; and
(ii) the Consolidated EBITDA of any Subsidiary disposed of by the Company or its Subsidiaries during such period shall be excluded for such period (assuming the consummation of such disposition and the repayment of any Indebtedness in connection therewith had occurred on the first day of such period).
"CONSOLIDATED INTEREST EXPENSE" shall mean for any period, total cash interest expense (including that attributable to Capital Lease Obligations) of the Company and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Company and its Subsidiaries (including, without limitation, all commissions, discounts and other fees and charges owed by the Company with respect to letters of credit and bankers' acceptance financing and net costs of the Company under Hedge Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP).
"CONSOLIDATED NET INCOME" shall mean for any period, the consolidated net income (or loss) of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided, that in calculating Consolidated Net Income of the Company and its Subsidiaries for any period, there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any of its Subsidiaries, and (b) the income (or deficit) of any Person (that is not a Subsidiary) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Company or such Subsidiary in the form of dividends or similar distributions or payment of principal or interest of inter-company Indebtedness.
"CONSOLIDATED TOTAL DEBT" shall mean at any date, the aggregate amount of all Indebtedness of the Company and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP, excluding inter-company Indebtedness.
"DEBT-TO-EBITDA RATIO" means as at the last day of any period of four consecutive fiscal quarters of the Company, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period.
"ELECTION PERIOD" has the meaning set forth in the preamble.
"EXECUTIVES" has the meaning set forth in the preamble.
"EXEMPT TRANSFER" has the meaning set forth in paragraph 3(b).
"EXISTING EMPLOYMENT AGREEMENTS" means the Employment Agreements between Cinemark, Inc. and each of Alan Stock, Timothy Warner, Robert Copple, Michael Cavalier, Lee Roy Mitchell, Tandy Mitchell, John Lundin and Robert Carmony, each dated as of June 19, 2002, and as amended on December 24, 2003.
"FAMILY GROUP" with respect to any Stockholder, means, such Stockholder's spouse and descendants (whether natural or adopted) and any trust that is and remains solely for the benefit of such Stockholder and/or such Stockholder's spouse and/or descendants.
"GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time.
"HEDGE AGREEMENTS" shall mean all interest rate or currency swaps, caps or collar agreements, foreign exchange agreements, commodity contracts or similar arrangements entered into by the Company or its Subsidiaries providing for protection against fluctuations in interest rates, currency exchange rates, commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies. For avoidance of doubt, Hedge Agreements shall include any interest rate swap or similar agreement that provides for the payment by the Company or any of its Subsidiaries of amounts based upon a floating rate in exchange for receipt by the Company or such Subsidiary of amounts based upon a fixed rate.
"INDEBTEDNESS" shall mean at any date, without duplication,
(a) all indebtedness of such Person for borrowed money, (b) all obligations of
the Company or its Subsidiaries for the deferred purchase price of Property or
services (other than trade payables incurred in the ordinary course of the
Company's or its Subsidiaries' business), (c) all obligations of the Company or
its Subsidiaries evidenced by notes, bonds, debentures or other similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to Property acquired by the
Company or its Subsidiaries (even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such Property, provided that, in such event, the amount
of such Indebtedness shall be deemed to be the value of the Property covered by
such agreement), and (e) all Capital Lease Obligations or Synthetic Lease
Obligations of the Company or its Subsidiaries. For purposes of clarification,
"Indebtedness" shall not include accounts payable or accrued operating expenses
of the Company or any of its Subsidiaries.
"INDEPENDENT THIRD PARTY" means any Person who, immediately prior to the contemplated transaction, does not own in excess of 5% of the Company's Class A Common Stock on a fully-diluted basis (a "5% Owner)", who is not controlling, controlled by or under common control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other Persons.
"INITIAL PUBLIC OFFERING" means an underwritten initial public offering of the Company's Class A Common Stock registered under the Securities Act resulting in the sale to the public of shares with an aggregate selling price of not less than $100 million.
"INVESTOR" means each of MDCP, the Co-Investors, the Mitchell Investors and their respective Permitted Transferees.
"MDCP" has the meaning set forth in the preamble.
"MDCP ELECTION NOTICE" has the meaning set forth in paragraph
3(c)(iii).
"MDCP SALE ELECTION NOTICE" has the meaning set forth in the paragraph 3(e).
"MDCP SALE NOTICE" has the meaning set forth in the paragraph 3(e).
"MDCP SALE PERIOD" has the meaning set forth in the paragraph 3(e).
"MERGER" has the meaning set forth in the preamble.
"MERGER AGREEMENT" means the Company is a party to the Agreement and Plan of Merger, dated as of the date hereof, between the Company and Popcorn Merger Corp. pursuant to which Popcorn Merger Corp. shall merge with and into the Company, with the Company continuing as the surviving corporation.
"MERGER CONSIDERATION" has the meaning set forth in the Merger Agreement.
"MITCHELL ELECTION NOTICE" has the meaning set forth in paragraph 3(d)(iii).
"MITCHELL DIRECTORS" has the meaning set forth in paragraph
1(a)(ii)(A).
"MITCHELL INVESTORS" has the meaning set forth in the preamble.
"MODIFICATION" has the meaning set forth in paragraph 15.
"NEW EMPLOYMENT AGREEMENTS" means the Employment Agreements, dated as of the date hereof, between the Company and each of Alan Stock, Timothy Warner, Robert Copple and Michael Cavalier.
"OFFER NOTICE" has the meaning set forth in paragraph 3(c).
"OPTION SHARES" has the meaning set forth in paragraph 6(a).
"OTHER STOCKHOLDERS" has the meaning set forth in paragraph 3(e)(i).
"PERMITTED TRANSFEREE" has the meaning set forth in paragraph 3(b).
"PERSON" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political subdivision thereof.
"PROPERTY" shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock.
"PUBLIC SALE" means any sale of Stockholder Shares to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker on a securities exchange or in the over-the-counter market pursuant to the provisions of Rule 144 adopted under the Securities Act.
"PURCHASE AGREEMENT" has the meaning set forth in the preamble.
"REGISTRATION AGREEMENT" means the Registration Agreement, dated as of the date hereof, among the Company, MDCP and the Mitchell Investors.
"SALE BONUS AGREEMENT" means the Sale Bonus Agreement dated as of the date hereof, among the Company, the Executives and certain other shareholders of the Company.
"SALE OF THE COMPANY" means the sale of the Company to an Independent Third Party or group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company or the surviving entity possessing the voting power under normal circumstances to elect a majority of the Company's or the surviving entity's board of directors or entitling such Person to exercise more than fifty percent (50%) of the total voting power of the shares of capital stock of the Company or the surviving entity entitled to vote (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all of the Company's assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to time.
"STOCKHOLDER SHARES" means (i) any Class A Common Stock owned by any Stockholder and (ii) any capital stock or other equity securities issued or issuable directly or indirectly with respect to the Class A Common Stock referred to in clause (i) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular shares constituting Stockholder Shares, such shares shall cease to be Stockholder Shares when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (y) sold to the public through a broker, dealer or market maker on a securities exchange or in the over-the-counter market pursuant to Rule 144 (or any similar provision then in force) under the Securities Act.
"STOCKHOLDERS" has the meaning set forth in the preamble.
"SUBSIDIARY" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity, a majority of the limited liability company, partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such limited liability company, partnership, association or other business entity.
"SYNTHETIC LEASE OBLIGATIONS" shall mean all monetary obligations of the Company or its Subsidiaries under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations which do not appear on the balance sheet of the Company or its Subsidiaries but which, upon the insolvency or bankruptcy of the Company or its Subsidiaries, would be characterized as the Indebtedness of the Company or its Subsidiaries (without regard to accounting treatment).
"TRANSFER" has the meaning set forth in paragraph 3(a).
"TRANSFERRING STOCKHOLDER" has the meaning set forth in paragraph 3(c).
14. Additional Parties; Joinder. The Company may permit any Person who acquires Class A Common Stock or rights to acquire Class A Common Stock after the date hereof (the "ACQUIRED COMMON") to become a party to this Agreement and to succeed to all of the rights and obligations of a "holder of Stockholder Shares" under this Agreement by obtaining an executed joinder to this Agreement from such Person in the form of Exhibit A attached hereto. Upon the execution and delivery of the joinder by such Person, such Person's Acquired Common shall be Stockholder Shares hereunder, and such Person shall be a "holder of Stockholder Shares" under this Agreement with respect to the Acquired Common. In particular, any Co-Investor purchasing Acquired Common shall execute and deliver to the Company a joinder to this Agreement, and such Co-Investor's Acquired Common shall be deemed Stockholder Shares hereunder.
15. Amendment and Waiver. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement (any such modification, amendment or waiver, referred to herein as a "MODIFICATION") shall be effective against the Company or any holder of Stockholder Shares unless such Modification is approved in writing by the Company and the holder or holders of a majority of the Stockholder Shares outstanding; provided that with respect to any Modification that adversely affects the rights hereunder of a particular group of holders of Stockholder Shares, each such group being the Mitchell Investors, the Co-Investors, the Executives and MDCP (in each case together with their respective Permitted Transferees), in any material respect different than the other groups of holders of Stockholder Shares, such Modification shall be effective against such particular group only if such Modification is approved in writing by the holder or holders of a majority of all of the Stockholder Shares held by such group. The failure of any party to enforce any of the provisions of this Agreement shall
in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.
16. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction or affect the validity, legality or enforceability of any provision in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
17. Entire Agreement. Except as otherwise expressly set forth herein, this Agreement embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
18. Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Stockholders and any subsequent holders of Stockholder Shares and the respective successors and assigns of each of them, so long as they hold Stockholder Shares; provided that the rights of the Mitchell Investors under paragraph 1 hereof may not be assigned to Persons other than Permitted Transferees without the prior written approval of MDCP.
19. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement.
20. Remedies. The Company, and the Stockholders shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that a breach of this Agreement would cause irreparable harm and money damages would not be an adequate remedy for any such breach and that, in addition to other rights and remedies hereunder, the Company, and the Stockholders shall be entitled to specific performance and/or injunctive or other equitable relief (without posting a bond or other security) from any court of law or equity of competent jurisdiction in order to enforce or prevent any violation of the provisions of this Agreement.
21. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or mailed first class mail (postage prepaid, return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the Company and MDCP at the addresses set forth below and to any other recipient at the address indicated on the schedules hereto and to any subsequent holder of Stockholder Shares subject to this Agreement at such address as indicated by the Company's records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
Notices shall be deemed to have been given hereunder when delivered personally, three days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service.
The Company's address is: Cinemark, Inc. 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 Facsimile: (972) 665-1004 Attention: Michael Cavalier MDCP's address is: Madison Dearborn Capital Partners IV, L.P. Three First National Plaza, Suite 3800 70 West Madison Street Chicago, IL 60602 Attn: Benjamin D. Chereskin |
22. Governing Law. All issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
23. Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or legal holiday in the state in which the Company's chief-executive office is located, the time period shall automatically be extended to the business day immediately following such Saturday, Sunday or legal holiday.
24. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
25. No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.
26. Mutual Waiver of Jury Trial. The parties hereto hereby irrevocably waive any and all rights to trial by jury in any legal proceeding arising out of or related to this Agreement. Any action or proceeding whatsoever between the parties hereto relating to this Agreement shall be tried in a court of competent jurisdiction by a judge sitting without a jury.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.
MADISON DEARBORN CAPITAL CINEMARK, INC. PARTNERS IV, L.P. By: Madison Dearborn Partners, LLC, its General Partner By: /s/ Lee Roy Mitchell By: Madison Dearborn Partners, Inc., ------------------------ Its: CEO its General Partner By: /s/ Benjamin D. Chereskin --------------------------------- Its: Managing Director /s/ Lee Roy Mitchell THE MITCHELL TRUST --------------------------------- Lee Roy Mitchell /s/ Alan W. Stock By: /s/ Lee Roy Mitchell --------------------------------- --------------------------------- Alan Stock Lee Roy Mitchell, Trustee /s/ Timothy Warner By: /s/ Gary D. Witherspoon --------------------------------- --------------------------------- Timothy Warner Gary D. Witherspoon, Trustee /s/ Robert Copple --------------------------------- Robert Copple /s/ Michael Cavalier --------------------------------- Michael Cavalier |
SCHEDULE OF MITCHELL INVESTORS
NAME AND ADDRESS NUMBER OF SHARES OF CINEMARK NUMBER OF STOCKHOLDER SHARES ---------------- CLASS B COMMON STOCK ---------------------------- ------------------------------- Lee Roy Mitchell 8,720,763 $51,000,000 / Merger Consideration 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 The Mitchell Special Trust 3,226,740 $49,000,000 / Merger Consideration 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 |
SCHEDULE OF EXECUTIVES
NUMBER OF NUMBER OF SHARES OF SHARES OF CINEMARK CLASS A CINEMARK CLASS COMMON STOCK SUBJECT NAME AND ADDRESS A COMMON STOCK TO STOCK OPTIONS NUMBER OF STOCKHOLDER SHARES ---------------- -------------- ---------------- ---------------------------- Alan Stock 94,050 66,000 $1,886,320 / Merger Consideration 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 Timothy Warner 132,000 66,000 $1,871,997 / Merger Consideration 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 Robert Copple 77,000 99,000 $1,677,337 / Merger Consideration 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 Michael Cavalier 38,060 110,000 $1,319,333 / Merger Consideration 3900 Dallas Parkway, Suite 500 Plano, Texas 75093 |
STOCKHOLDERS AGREEMENT
JOINDER
The undersigned is executing and delivering this Joinder pursuant to the Stockholders Agreement dated as of March 12, 2004 (as the same may hereafter be amended, the "STOCKHOLDERS AGREEMENT"), among Cinemark, Inc., a Delaware corporation (the "COMPANY"), and the other person named as parties therein.
By executing and delivering this Joinder to the Company, the
undersigned hereby agrees to become a party to, to be bound by, and to comply
with the provisions of the Stockholders Agreement as a holder of Stockholder
Shares in the same manner as if the undersigned were an original signatory to
the Stockholders Agreement, and the undersigned's ____ shares of Class A Common
Stock shall be included as Stockholder Shares under the Stockholders Agreement.
[THE UNDERSIGNED SHALL BE DESIGNATED AS A CO-INVESTOR/PERMITTED TRANSFEREE UNDER
THE STOCKHOLDERS AGREEMENT.]
Accordingly, the undersigned has executed and delivered this Joinder as of the ___ day of ____________, ______.
Agreed and Accepted as
of __________________.
CINEMARK, INC.
EXHIBIT 10.10
EXECUTION COPY
CINEMARK, INC.
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "AGREEMENT") is made as of March 12, 2004, among Cinemark, Inc., a Delaware corporation (the "COMPANY"), Madison Dearborn Capital Partners IV, L.P., a Delaware limited partnership ("MDCP"), and Lee Roy Mitchell and The Mitchell Special Trust (collectively, the "MITCHELL INVESTORS").
The Mitchell Investors currently own shares of the Company's Class B Common Stock, and MDCP is a party to a Stock Purchase Agreement of even date herewith (the "PURCHASE AGREEMENT") pursuant to which MDCP will purchase shares of the Company's Class A Common Stock. In order to induce MDCP (together with the Mitchell Investors, collectively, the "INVESTORS") to enter into the Purchase Agreement and to induce the Mitchell Investors to vote in favor of the merger between the Company and Popcorn Merger Corp. pursuant to the Merger Agreement, the Company has agreed to provide the Investors the registration rights set forth in this Agreement. This Agreement shall become effective upon the Closing under the Purchase Agreement. Unless otherwise provided in this Agreement, capitalized terms used herein shall have the meanings set forth in paragraph 10 hereof.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Demand Registrations.
(a) Requests for Registration. Subject to the terms and conditions of this Agreement, at any time the holders of a majority of the MDCP Registrable Securities may request registration under the Securities Act of all or any portion of their Registrable Securities on Form S-1 or any similar long-form registration ("LONG-FORM REGISTRATIONS"). Subject to the terms and conditions of this Agreement, at any time after the first to occur of (i) the third anniversary of the Closing under the Purchase Agreement, (ii) 180 days after the completion of the initial public offering of the Class A Common Stock registered under the Securities Act (the "IPO") , or (iii) the Company achieves or exceeds its annual EBITDA target as set forth in the Company's Five-Year Plan for any two consecutive fiscal years prior to the end of the Company's 2008 fiscal year, the holders of a majority of the Mitchell Registrable Securities may request registration under the Securities Act of all or any portion of their respective Registrable Securities on a Long-Form Registration; provided that in the case of the first Demand Registrations under clauses (i) and (iii) above, the registration offering price per share of Class A Common Stock must be at least twice the initial cost per share of the Class A Common Stock purchased by MDCP under the Purchase Agreement. Subject to the terms and conditions of this Agreement, at any time after 180 days after the completion of the initial public offering of the Class A Common Stock registered under the Securities Act, the holders of a majority of the Co-Investor Registrable Securities may request registration under the Securities Act of all or any of their Registrable Securities on a Long-Form Registration. In addition, subject to the terms and conditions of this Agreement, at any time after the IPO, the holders of a majority of the MDCP Registrable Securities, the holders of a majority of the Mitchell Registrable Securities and the
holders of a majority of the Co-Investor Registrable Securities, each as a separate group, may request registration under the Securities Act of all or any portion of their respective Registrable Securities on Form S-3 (including pursuant to Rule 415 under the Securities Act) or any similar short-form registration ("SHORT-FORM REGISTRATIONS") if available. All registrations requested pursuant to this paragraph 1(a) are referred to herein as "DEMAND REGISTRATIONS." Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered, the anticipated per share price range for such offering and the intended method of distribution. Within ten days after receipt of any such request, the Company shall give written notice of such requested registration to all other holders of Registrable Securities and, subject to the terms of paragraph 1(d) hereof, shall include in such registration (and in all related registrations and qualifications under state blue sky laws or in compliance with other registration requirements and in any related underwriting) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of the MDCP Registrable Securities shall be entitled to request four Long-Form Registrations, the holders of the Mitchell Registrable Securities shall be entitled to request two Long-Form Registrations, and the holders of the Co-Investor Registrable Securities shall be entitled to request one Long-Form Registration. The Company shall pay all Registration Expenses in connection with such Long-Form Registrations as provided in this Agreement; provided that the aggregate offering value of the Registrable Securities requested to be registered in connection with a Long-Form Registration which is the IPO must equal at least $100,000,000, and the aggregate offering value of the Registrable Securities requested to be registered in any other Long-Form Registration must equal at least $50,000,000. A registration shall not count as one of the permitted Long-Form Registrations with respect to a holder until it has become effective and maintained continuously effective for a period of at least three months or such shorter period when all Registrable Securities included therein have been sold in accordance therewith (unless such Long-Form Registration has not become effective due to the fault of the holders requesting such registration). All Long-Form Registrations shall be underwritten registrations.
(c) Short-Form Registrations. In addition to the Long-Form Registrations provided pursuant to paragraph 1(b), the holders of the MDCP Registrable Securities, the Mitchell Registrable Securities and the Co-Investor Registrable Securities, each as a separate group, shall be entitled to request an unlimited number of Short-Form Registrations in which the Company shall pay all Registration Expenses; provided that the aggregate offering value of the Registrable Securities requested to be registered in any Short-Form Registration must equal at least $20,000,000. Demand Registrations shall be Short-Form Registrations whenever the Company is permitted to use any applicable short form and if the managing underwriters (if any) agree to the use of a Short-Form Registration.
(d) Priority on Demand Registrations. The Company shall not include in any Demand Registration any securities which are not Registrable Securities without the prior written consent of the holders of a majority of the Registrable Securities included in such registration. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their reasonable opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the
number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability of the offering, the Company shall include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which in the reasonable opinion of such underwriters can be sold without adversely affecting the marketability of the offering, pro rata among the respective holders thereof on the basis of the amount of Registrable Securities owned by each such holder at such time; provided that the holders of Mitchell Registrable Securities shall be entitled to register up to 66-2/3% of the Registrable Securities included in the initial Long-Form Registration requested by such holders hereunder. Any Persons other than holders of Registrable Securities who participate in Demand Registrations which are not at the Company's expense must pay their share of the Registration Expenses as provided in paragraph 5 hereof.
(e) Restrictions on Demand Registrations. The Company shall not be obligated to effect any Demand Registration within 180 days after the effective date of a previous Demand Registration or Piggyback Registration hereunder. The Company may postpone the filing or the effectiveness of a registration statement for a period not to exceed 180 days for a Demand Registration if the Company's board of directors determines in its reasonable good faith judgment that such Demand Registration would reasonably be expected to have a material adverse effect on any proposal or plan by the Company or any of its Subsidiaries to engage in any acquisition or sale of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer, acquisition, recapitalization, reorganization or similar transaction or would require the disclosure of any material nonpublic information which would reasonably be expected to be detrimental to the Company and its Subsidiaries; provided that in such event, the holders of Registrable Securities initially requesting such Demand Registration shall be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration shall not count as one of the permitted Demand Registrations hereunder and the Company shall pay all Registration Expenses in connection with such registration and provided that the Company may not exercise its right to delay a Demand Registration more than once in any twelve-month period.
(f) Selection of Underwriters. The Company shall have the right to select the investment banker(s) and manager(s) to administer the offering in any Demand Registration.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration) and the registration form to be used may be used for the registration of Registrable Securities (a "PIGGYBACK REGISTRATION"), the Company shall give prompt written notice (in any event within five business days after its receipt of notice of any exercise of demand registration rights other than under this Agreement) to all holders of Registrable Securities of its intention to effect such a registration and, subject to the terms of paragraphs 2(c) and 2(d) hereof, shall include in such registration (and in all related registrations or qualifications under blue sky laws or in compliance with other registration requirements and in any related underwriting) all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of Registrable Securities shall be paid by the Company in all Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
reasonable opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of Registrable Securities owned by each such holder at such
time, and (iii) third, other securities requested to be included in such
registration.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their reasonable opinion the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company shall include in such registration (i) first, the securities requested
to be included therein by the holders requesting such registration and the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such securities on the basis of the number of Registrable
Securities and such other securities owned by each such holder at such time, and
(ii) second, other securities requested to be included in such registration.
(e) Selection of Underwriters. The Company shall have the right to select the investment banker(s) and manager(s) to administer the offering in any Piggyback Registration.
(f) Other Registrations. If the Company has previously filed a registration statement with respect to Registrable Securities pursuant to paragraph 1 or pursuant to this paragraph 2, and if such previous registration has not been withdrawn or abandoned, the Company shall not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least 180 days has elapsed from the effective date of such previous registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration), unless the underwriters managing the registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and during the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree, and (ii) shall cause each holder of at least 5% of its outstanding Class A Common Stock, or any securities convertible into or exchangeable or exercisable for Class A Common Stock, purchased from the Company at any time after the date of this Agreement (other than in a registered public offering) to agree not to effect any public sale or distribution (including sales pursuant to Rule 144) of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its commercially reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a registration statement, and all amendments and supplements thereto and related prospectuses as may be necessary to comply with applicable securities laws, with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective;
(b) notify each holder of Registrable Securities of the effectiveness of each registration statement filed hereunder and prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be required and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller;
(d) use its commercially reasonable efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed on the NASD automated quotation system and, if listed on the NASD automated quotation system, use its commercially reasonable efforts to secure designation of all such Registrable Securities covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to secure NASDAQ authorization for such Registrable Securities;
(g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement;
(h) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; and
(i) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all registration, qualification and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called "Registration Expenses"), shall be borne as provided in this Agreement, except that the Company shall, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any
liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration, the Company shall reimburse the holders of Registrable Securities included in such registration for the reasonable fees and disbursements (not exceeding $25,000 for each registration) of one counsel chosen by the holders of a majority of the Registrable Securities included in such registration and for the reasonable fees and disbursements (not exceeding $10,000 for each counsel) of each additional counsel retained by any holder or group of affiliated holders of Registrable Securities for the purpose of rendering a legal opinion on behalf of such holder in connection with any underwritten Demand Registration or Piggyback Registration.
(c) To the extent Registration Expenses are not required to be paid by the Company, each holder of securities included in any registration hereunder shall pay such holder's pro rata share of those Registration Expenses based upon the number of Registrable Securities of such holder included in such registration.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, actions, damages, liabilities and expenses caused by (i) any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any violation or alleged violation by the Company of the Securities Act or any other similar federal or state securities laws or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and to pay to each holder of Registrable Securities, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act), as incurred, any legal and any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall indemnify
the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify shall be individual, not joint and several, for each holder and shall be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person's right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without the indemnifying party's consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. In such instance, the conflicting indemnified parties shall have a right to retain one separate counsel, chosen by the holders of a majority of the Registrable Securities included in the registration, at the expense of the indemnifying party. No indemnifying party, in the defense of such claim or litigation, shall, except with the consent of each indemnified party, consent to the entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this paragraph 6 is held by a court of competent jurisdiction to be unavailable to an indemnified party or is otherwise unenforceable with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations; provided that the maximum amount of liability in respect of such contribution shall be limited, in the case of each seller of Registrable Securities, to an amount equal to the net proceeds actually received by such seller from the sale of Registrable Securities effected pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The parties hereto agree that it would not be just or
equitable if the contribution pursuant to this paragraph were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account such equitable considerations. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses referred to herein shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject
hereof. 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 is not guilty of such fraudulent misrepresentation.
(e) The indemnification and contribution provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities.
7. Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements (including pursuant to any over-allotment or "green shoe" options requested by the underwriters, provided that no holder of Registrable Securities shall be required to sell more than the number of Registrable Securities such holder has requested to include) and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.
8. Additional Parties; Joinder. The Company may permit any Person who acquires Class A Common Stock or rights to acquire Class A Common Stock after the date hereof (the "ACQUIRED COMMON") to become a party to this Agreement and to succeed to all of the rights and obligations of a "holder of Registrable Securities" under this Agreement by obtaining an executed joinder to this Agreement from such Person in the form of Exhibit A attached hereto, and upon the execution and delivery of the joinder by such Person, such Person shall for all purposes be a "holder of Registrable Securities" under this Agreement with respect to the Acquired Common. In particular, any Co-Investor purchasing Acquired Common shall execute and deliver to the Company a joinder to this Agreement, and such Co-Investor's Acquired Common shall for all purposes be Co-Investor Registrable Securities hereunder.
9. Effective Date. This Agreement shall become effective automatically without any further actions by any of the parties hereto immediately upon the issuance of the shares of Class A Common Stock to MDCP under the Purchase Agreement. However, prior thereto, this Agreement shall terminate and become null and void automatically without any further actions by any of the parties hereto immediately upon the termination of the Merger Agreement (as defined below) pursuant to its terms. The Company is a party to the Agreement and Plan of Merger (the "MERGER AGREEMENT"), dated as of the date hereof, with Popcorn Merger Corp.
pursuant to which Popcorn Merger Corp. shall merge with and into the Company with the Company continuing as the surviving corporation (the "MERGER").
10. Definitions.
(a) "CLASS A COMMON STOCK" means, the Company's Class A Common Stock, par value $0.001 per share.
(b) "CO-INVESTOR" means any investor (other than a movie theatre exhibitor or its Affiliate) introduced to the Company by MDCP (other than any Affiliate of MDCP) and who acquires a portion of the Class A Common Stock which MDCP has agreed to acquire pursuant to the Purchase Agreement.
(c) "CO-INVESTOR REGISTRABLE SECURITIES" means any
Registrable Securities held by any Co-Investor or any of its Affiliates.
(d) "FIVE-YEAR PLAN" means the Company's financial information and projections for fiscal years 2004 through 2008 attached hereto as Exhibit B.
(e) "MDCP REGISTRABLE SECURITIES" means any Registrable Securities held by MDCP or any of its Permitted Transferees.
(f) "MITCHELL REGISTRABLE SECURITIES" means any Registrable Securities held by any Mitchell Investor or any Permitted Transferee of a Mitchell Investor.
(g) "PERMITTED TRANSFEREE" has the meaning set forth in the Stockholder Agreement, dated as of the date hereof between the Company, MDCP and other stockholders of the Company.
(h) "REGISTRABLE SECURITIES" means (i) any shares of Class A Common Stock issued pursuant to the Purchase Agreement, (ii) any shares of Class A Common Stock held by the Mitchell Investors immediately after the effectiveness of the Merger, (iii) any common stock issued or issuable with respect to the securities referred to in clauses (i) and (ii) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iv) any other shares of Class A Common Stock held by Persons holding securities described in clauses (i) to (iii), inclusive, above. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when they have been distributed to the public pursuant to a offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 under the Securities Act (or any similar rule then in force) or repurchased by the Company or any Subsidiary. For purposes of this Agreement, a Person shall be deemed to be a holder of Registrable Securities, and the Registrable Securities shall be deemed to be in existence, whenever such Person has the right to acquire directly or indirectly such Registrable Securities (upon conversion or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected, and such Person shall be entitled to exercise the rights of a holder of Registrable Securities hereunder.
(i) Unless otherwise stated, other capitalized terms contained herein have the meanings set forth in the Purchase Agreement.
11. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement.
(b) Remedies. Any Person having rights under any provision of this Agreement shall be entitled to enforce such rights specifically, to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that, in addition to any other rights and remedies existing in its favor, any party shall be entitled to specific performance and/or other injunctive relief from any court of law or equity of competent jurisdiction in order to enforce or prevent violation of the provisions of this Agreement.
(c) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and the holders of a majority of the Registrable Securities; provided that any amendment or waiver that affects only the Mitchell Registrable Securities and not all Registrable Securities in the same manner, must also be approved by the holders of a majority of the Mitchell Registrable Securities. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms.
(d) Successors and Assigns. Except as otherwise provided herein, all covenants and agreements in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of purchasers or holders of Registrable Securities are also for the benefit of, and enforceable by, any subsequent holder of Registrable Securities; provided that if any holder of Registrable Securities which is a limited partnership or limited liability company distributes any Registrable Securities to its partners or members after the Company has effected a registered public offering of the Class A Common Stock under the Securities Act, such transferees of Registrable Securities shall no longer be subject to the provisions of paragraph 3(a) hereof.
(e) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.
(f) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement.
(g) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.
(h) Governing Law. All issues and questions concerning the construction, validity, interpretation and enforcement of this Agreement and the exhibits and schedules hereto shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
(i) Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable overnight courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to each Investor at the address indicated on the Schedule of Investors and to the Company at the address indicated below:
Cinemark, Inc.
3900 Dallas Parkway, Suite 500
Plano, Texas 75093
Telephone: (972) 665-1108
Facsimile: (972) 665-1004
Attention: Michael Cavalier
With a copy to:
Madison Dearborn Capital Partners IV, L.P.
Three First National Plaza, 38th Floor
Chicago, IL 60602
Telephone: (312) 895-1000
Facsimile: (312) 895-1056
Attention: Benjamin D.Chereskin
or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.
* * * * *
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
CINEMARK, INC.
By: /s/ Alan W. Stock --------------------------------------------- Its: President |
MADISON DEARBORN CAPITAL PARTNERS IV, L.P.
By: Madison Dearborn Partners IV, L.P.
Its: General Partner
By: Madison Dearborn Partners, LLC
Its: General Partner
By: /s/ Benjamin D. Chereskin --------------------------------------------- Name: Benjamin D. Chereskin Title: Managing Director /s/ Lee Roy Mitchell ------------------------------------------------------ Lee Roy Mitchell |
THE MITCHELL SPECIAL TRUST
By: /s/ Lee Roy Mitchell --------------------------------------------- Lee Roy Mitchell, Trustee By: /s/ Gary D. Witherspoon --------------------------------------------- Gary D. Witherspoon, Trustee |
SCHEDULE OF INVESTORS
Madison Dearborn Capital Partners IV, L.P.
Three First National Plaza
70 West Madison Street, Suite 3800
Chicago, IL 60602
Attn: Benjamin D. Chereskin
Lee Roy Mitchell
3900 Dallas Parkway, Suite 500
Plano, Texas 75093
The Mitchell Special Trust
3900 Dallas Parkway, Suite 500
Plano, Texas 75093
.
.
.
EXHIBIT 12
CALCULATION OF EARNINGS TO FIXED CHARGES
3 MOS ENDED 12 MOS ENDED 3 MOS ENDED 12 MOS ENDED Mar 31, 2004 Dec. 31, 2003 Mar 31, 2003 Dec. 31, 2002 --------------- --------------- --------------- --------------- COMPUTATION OF EARNINGS: PRETAX INCOME FROM CONTINUING OPERATIONS $ 19,483,501 $ 72,754,373 $ 9,713,473 $ 66,286,529 CAPITALIZED INTEREST 35,416 199,410 108,248 432,992 --------------- --------------- --------------- --------------- TOTAL EARNINGS 19,518,917 72,953,783 9,821,721 66,719,521 COMPUTATION OF FIXED CHARGES: INTEREST EXPENSE 11,971,846 51,852,977 13,295,608 55,428,317 CAPITALIZED INTEREST 72,832 233,582 0 0 AMORTIZATION OF DEBT ISSUE COST 589,986 2,310,372 583,620 2,364,680 INTEREST FACTOR ON RENT EXPENSE 9,228,625 36,231,505 8,699,767 34,955,902 --------------- --------------- --------------- --------------- TOTAL FIXED CHARGES 21,863,289 90,628,436 22,578,995 92,748,899 TOTAL EARNINGS AND FIXED CHARGES 41,382,206 163,582,219 32,400,716 159,468,420 --------------- --------------- --------------- --------------- RATIO OF EARNINGS TO FIXED CHARGES 1.89 1.80 1.43 1.72 =============== =============== =============== =============== 12 MOS ENDED 12 MOS ENDED 12 MOS ENDED Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 1999 --------------- --------------- --------------- COMPUTATION OF EARNINGS: PRETAX INCOME FROM CONTINUING OPERATIONS $ (17,577,237) $ (10,171,364) $ 7,711,789 CAPITALIZED INTEREST 217,288 (180,622) (3,987,319) --------------- --------------- --------------- TOTAL EARNINGS (17,359,949) (10,351,986) 3,724,470 COMPUTATION OF FIXED CHARGES: INTEREST EXPENSE 68,542,792 73,151,772 59,011,239 CAPITALIZED INTEREST 215,704 613,614 4,312,499 AMORTIZATION OF DEBT ISSUE COST 2,387,828 885,449 855,839 INTEREST FACTOR ON RENT EXPENSE 38,245,508 36,162,868 29,936,114 --------------- --------------- --------------- TOTAL FIXED CHARGES 109,391,832 110,813,703 94,115,691 TOTAL EARNINGS AND FIXED CHARGES 92,031,883 100,461,717 97,840,161 --------------- --------------- --------------- RATIO OF EARNINGS TO FIXED CHARGES -- -- 1.04 =============== =============== =============== |
For the years ended December 31, 2001 and 2000, earnings were insufficient to cover fixed charges by $17.9 million and $10.4 million, respectively.
EXHIBIT 21
SUBSIDIARIES OF CINEMARK, INC.
USA
CNMK Holding, Inc.
Cinemark USA, Inc.
Cinemark, L.L.C.
Sunnymead Cinema Corp.
Cinemark Properties, Inc.
Greeley Holdings, Inc.
Trans Texas Cinema, Inc.
Cinemark International, L.L.C.
Cinemark Mexico (USA), Inc.
Cinemark Leasing Company
Cinemark Partners I, Inc.
Cinemark Partners II, Ltd.
Cinemark Investments Corporation
Multiplex Properties, Inc.
Multiplex Services, Inc.
Interstate Theatre Holdings, Inc.
Greeley, Ltd.
Interstate Theatres, L.L.C.
Interstate Theatres II, L.L.C.
CNMK Brazil Investments, Inc.
CNMK Investments, Inc.
CNMK Delaware Investments I, L.L.C.
CNMK Delaware Investments II, L.L.C.
CNMK Delaware Investment Properties L.P.
CNMK Texas Properties, Ltd.
Brainerd Ltd.
Laredo Theatre, Ltd.
ARGENTINA
Cinemark Argentina S.A.
Prodecine S.A.
Bulnes 2215, S.A.
BRAZIL
Cinemark Brasil S.A.
Cinemark Empreendimentos e. Participacoes Ltda
CANADA
Cinemark Theatres Canada, Inc.
Cinemark Holdings Canada, Inc.
Canada Theatre Holdings, Inc.
CENTRAL AMERICA
Cinemark Panama S.A.
Cinemark Equity Holdings Corporation
Cinemark Costa Rica S.R.L.
Cinemark El Salvador, Ltda. de C.V.
Cinemark Nicaragua y Cia. Ltda.
Cinemark Honduras, S. de R.L.
Cine Food Services, S.A.
CHILE
Cinemark Chile S.A.
Inversiones Cinemark S.A.
Worldwide Invest Inc.
COLOMBIA
Cinemark Colombia S.A.
ECUADOR
Cinemark del Ecuador S.A.
GERMANY
Cinemark Germany GmbH
MEXICO
Cinemark Holdings Mexico S. de R.L. de C.V.
Cinemark de Mexico S.A. de C.V.
Servicios Cinemark S.A. de C.V.
Cinemark del Norte S.A. de C.V.
PERU
Cinemark del Peru S.R.L.
SPAIN
Cinemark Holdings Spain, S.L.
UNITED KINGDOM
Cinemark Theatres U.K. Limited
EXHIBIT 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement of Cinemark, Inc. on Form S-4 of our report dated March 12, 2004 (June 4, 2004 as it relates to Note 22), which expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of a new accounting principle appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Dallas, Texas
June 8, 2004
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2)....
THE BANK OF NEW YORK TRUST COMPANY, N.A.
(Formerly, The Bank of New York Trust Company of Florida, N.A.)
(Exact name of trustee as specified in its charter)
(State of incorporation if not a U.S. national bank)
59-2283428
(I.R.S. employer identification no.)
800 BRICKELL AVENUE
SUITE 300
MIAMI, FLORIDA 33131
(Address of principal executive offices) (Zip Code)
THE BANK OF NEW YORK TRUST COMPANY, N.A.
600 NORTH PEARL STREET, SUITE 420
DALLAS, TX 75201
(214) 880-8234
(Name, address and telephone number of agent for service)
CINEMARK, INC.
(Exact name of obligor as specified in its charter)
TEXAS 01-0687923 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) |
3900 DALLAS PARKWAY - SUITE 500
PLANO, TEXAS 75093
(972)-665-1000
(Address, zip code and telephone number of principal executive offices)
(9 3/4% SENIOR DISCOUNT NOTES SERIES DUE 2/1/2014)
Furnish the following information as to the trustee--
(a) Name and address of each examining or supervising authority to which it is subject.
COMPTROLLER OF THE CURRENCY
UNITED STATES DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20219
FEDERAL RESERVE BANK
ATLANTA, GEORGIA 30309
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
(b) Whether it is authorized to exercise corporate trust powers.
YES.
If the obligor is an affiliate of the trustee, describe each such affiliation.
NONE.
3-15 Not Applicable
Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d).
(1) A copy of the Articles of Association of the Bank of New York Trust Company of Florida, N.A. (Exhibit 1 to Form T-1 filed with Registration Statement No. 333-100717.)
(1.1) A copy of a letter from the Office of the Comptroller of the Currency confirming the change of the corporate title of the Trustee to the Bank of New York Trust Company, National Association.
(2) A copy of certificate of authority of the trustee to commence business.
(Exhibit 2 to Form T-1 filed with Registration Statement No. 333-100717.)
(3) A copy of the Authorization of the trustee to exercise corporate trust powers. (Exhibit 3 to Form T-1 filed with Registration Statement No. 333-100717.)
(4) A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-100717.)
(6) The consent of the Trustee required by Section 321(b) of the Act.
(7) A copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York Trust Company, N.A., a corporation organized and existing under the laws of the United States, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Dallas and the State of Texas, on the 24th day of May, 2004.
THE BANK OF NEW YORK TRUST COMPANY, N.A.
By: /s/ Patrick T Giordano ---------------------------------------- Patrick T Giordano, Agent |
EXHIBIT 6 TO FORM T-1
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, in connection with the issuance of Cinemark Inc. 9 3/4% Senior Discount Notes Series due 2/1/2014, The Bank of New York Trust Company, N.A. hereby consents that reports of examinations by Federal, State, Territorial or District Authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor.
THE BANK OF NEW YORK TRUST COMPANY, N.A.
By: /s/ Patrick T Giordano --------------------------------------- Patrick T Giordano, Agent |
EXHIBIT 1.1 TO FORM T-1 -------------------- [LOGO] RECEIVED MAR 11, 2004 THE BANK OF NEW YORK Trust Company, N.A. -------------------- ------------------------------------------------------------------------------- Comptroller of the Currency Administrator of National Banks ------------------------------------------------------------------------------- Licensing Operations Western District Office 1225 17th Street, Suite 300 Denver, CO 80202-5534 (720) 475-7650, FAX (720) 475-7691 March 10, 2004 Mr. Richard Jackson President The Bank of New York Trust Company, N.A. 800 Brickell Avenue, Suite 300 Miami, Florida 33131 |
MIAMI, FLORIDA
CAIS CONTROL NUMBER: 2004-WE-04-0005
Dear Mr. Jackson:
The Office of the Comptroller of the Currency (OCC) has received your letter dated February 3, 2004, concerning the title change and the appropriate amendment to the articles of association. We have updated our records to reflect that as of January 15, 2004, the title of The Bank of New York Trust Company of Florida, National Association, Miami, Florida, Charter Number 17871, changed to THE BANK OF NEW YORK TRUST COMPANY, NATIONAL ASSOCIATION.
As a result of the Garn-St Germain Depository Institutions Act of 1982, the OCC is no longer responsible for the approval of national bank name changes nor does it maintain official records on the use of alternate titles. The use of other titles or the retention of the rights to any previously used title is the responsibility of the bank's board of directors. Legal counsel should be consulted to determine whether or not the new title, or any previously used title, could be challenged by competing institutions under the provisions of federal or state law.
Sincerely,
/s/ Sherry R. Gorospe -------------------------- Sherry R. Gorospe Licensing Analyst |
EXHIBIT 7 TO FORM T-1
Consolidated Report of Condition
of THE BANK OF NEW YORK TRUST COMPANY, N.A.
of 800 Brickell Avenue, Suite 300, Miami, FL 33131
At the close of business December 31, 2003, published in accordance with Federal regulatory authority instructions.
Dollar Amounts in Thousands -------------- ASSETS ------ Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ....................... $ 9,741 Interest-bearing balances ..................... 3,301 Securities: Held-to-maturity securities ................... 0 Available-for-sale securities ................. 8,625 Federal funds sold and securities purchased under agreements to resell: Federal funds sold in domestic offices ........ 0 Securities purchased under agreements to resell ...................................... 0 Loans and lease financing receivables: Loans and leases held for sale ................ 0 Loans and leases, net of unearned income ...................... 0 LESS: Allowance for loan and lease losses ................................ 0 Loans and leases, net of unearned income and allowance and reserve ............ 0 Trading assets ......................................... 0 Premises and fixed assets (including capitalized leases) ........................... 1,191 Other real estate owned ................................ 0 Investments in unconsolidated subsidiaries and associated companies ..................................... 0 Customers' liability to this bank on acceptances outstanding .................... 0 Intangible assets Goodwill ......................................... 60,292 Other Intangible Assets .......................... 19,834 Other assets ........................................... 2,584 -------- Total assets ........................................... $105,568 ======== |
Dollar Amounts in Thousands -------------- LIABILITIES ----------- Deposits: In domestic offices .......................... $ 4,996 Noninterest-bearing .......................... 4,996 Interest-bearing ............................. 0 Federal funds purchased and securities sold under agreements to repurchased: Federal funds purchased in domestic offices .. 0 Securities sold under agreements to repurchase ................................. 0 Trading liabilities ................................... 0 Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases) ...................................... 6,000 Bank's liability on acceptances executed and outstanding ................... 0 Subordinated notes and debentures ..................... 0 Other liabilities ..................................... 2,866 -------- Total liabilities ..................................... 13,862 ======== Minority interest in consolidated subsidiaries ........ 0 EQUITY CAPITAL -------------- Common stock .......................................... 750 Surplus ............................................... 69,299 Retained earnings ..................................... 21,655 Accumulated other comprehensive income ....................................... 2 Other equity capital components ....................... 0 -------- Total equity capital .................................. 91,706 -------- Total liabilities and equity capital .................. $105,568 ======== |
I, Thomas J. Mastro, Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief.
Thomas J. Mastro ) Comptroller
We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct.
Richard G. Jackson ) Nicholas C. English ) Directors Karen B. Shupenko ) |
LETTER OF TRANSMITTAL
Cinemark, Inc.
Offer to Exchange its 9 3/4% Senior Discount Notes
due 2014
Pursuant to the Prospectus
dated ,
2004
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2004, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK TRUST COMPANY, N.A.
By Registered or Certified Mail:
The Bank of New York Trust Company, N.A. Corporate Trust Operations Reorganization Unit 101 Barclay Street, 7 East New York, New York 10286 Attn: Kin Lau |
By Hand or Overnight Delivery:
The Bank of New York Trust Company, N.A. Corporate Trust Operations Reorganization Unit 101 Barclay Street 7 East New York, New York 10286 Attn: Kin Lau |
Facsimile Transmissions:
(Eligible Institutions Only) (212) 298-1915 To Confirm by Telephone or for Information Call: Kin Lau (212) 815-3750 |
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed either if (a) certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth under The Exchange Offer Procedures for Tendering Initial Notes in the Prospectus and an Agents Message (as defined below) is not delivered. Certificates, or book-entry confirmation of a book-entry transfer of such Initial Notes into the Exchange Agents account at The Depository Trust Company (DTC), as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date. Tenders by book-entry transfer also may be made by delivering an Agents Message in lieu of this Letter of Transmittal. The term book-entry confirmation means a confirmation of a book-entry transfer of Initial Notes into the Exchange Agents account at DTC. The term Agents Message means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter of Transmittal and that Cinemark, Inc., a Delaware corporation (the Company), may enforce this Letter of Transmittal against such participant.
Holders (as defined below) of Initial Notes whose certificates (the Certificates) for such Initial Notes are not immediately available or who cannot deliver their Certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date (as defined in the Prospectus) or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Initial Notes according to the guaranteed delivery procedures set forth in The Exchange Offer Procedures for Tendering Initial Notes in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
ALL TENDERING HOLDERS COMPLETE THIS BOX:
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
o | Check here if tendered Initial Notes are being delivered by book-entry transfer made to the account maintained by the Exchange Agent with DTC and complete the following: |
Name of Tendering Institution
DTC Account Number
Transaction Code Number
o | Check here and enclose a photocopy of the notice of guaranteed delivery if tendered Initial Notes are being delivered pursuant to a notice of guaranteed delivery previously sent to the Exchange Agent and complete the following (see Instruction 1): |
Name(s) of Registered Holder(s)
Window Ticket Number (if any)
Date of Execution of Notice of Guaranteed Delivery
Name of Institution that Guaranteed Delivery
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
DTC Account Number
Transaction Code Number
o | Check here if tendered by book-entry transfer and non-exchanged Initial Notes are to be returned by crediting the DTC account number set forth above. |
o | Check here if you are a broker-dealer and wish to receive 10 additional copies of the Prospectus and 10 copies of any amendments or supplements thereto. |
Name:
Address:
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The undersigned hereby tenders to Cinemark, Inc., a Delaware corporation (the Company), the above described principal amount of the Companys 9 3/4% Senior Discount Notes due 2014, $577,173,000 aggregate principal amount at maturity of which was issued in a private offering on March 31, 2004 (the Initial Notes) in exchange for an equivalent amount of the Companys 9 3/4% Senior Discount Notes due 2014 (the Exchange Notes), which have been registered under the Securities Act of 1933, as amended (the Securities Act), upon the terms and subject to the conditions set forth in the Prospectus dated , 2004 (as the same may be amended or supplemented from time to time, the Prospectus), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Prospectus, constitute the Exchange Offer).
Subject to and effective upon the acceptance for exchange of all or any portion of the Initial Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of the Company all right, title and interest in and to such Initial Notes as is being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of the Company in connection with the Exchange Offer) with respect to the tendered Initial Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) subject only to the right of withdrawal described in the Prospectus, to (i) deliver Certificates for Initial Notes to the Company together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company, upon receipt by the Exchange Agent, as the undersigneds agent, of the Exchange Notes to be issued in exchange for such Initial Notes, (ii) present Certificates for such Initial Notes for transfer, and to transfer the Initial Notes on the books of the Company, and (iii) receive for the account of the Company all benefits and otherwise exercise all rights of beneficial ownership of such Initial Notes, all in accordance with the terms and conditions of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, sell, assign and transfer the Initial Notes tendered hereby and that, when the same is accepted for exchange, the Company will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances, and that the Initial Notes tendered hereby are not subject to any adverse claims or proxies. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, assignment and transfer of the Initial Notes tendered hereby, and the undersigned will comply with its obligations under the Registration Rights Agreement relating to the Initial Notes. The undersigned has read and agrees to all of the terms of the Exchange Offer.
The name(s) and address(es) of the registered Holder(s) of the Initial Notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the Certificates representing such Initial Notes. The Certificate number(s) and the Initial Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above.
If any tendered Initial Notes are not exchanged pursuant to the Exchange Offer for any reason, or if Certificates are submitted for more Initial Notes than are tendered or accepted for exchange, Certificates for such nonexchanged or nontendered Initial Notes will be returned (or, in the case of Initial Notes tendered by book-entry transfer, such Initial Notes will be credited to an account maintained at DTC), without expense to the tendering Holder, promptly following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Initial Notes pursuant to any one of the procedures described in The Exchange Offer Procedures for Tendering Initial Notes in the Prospectus and in the instructions attached hereto will, upon the Companys acceptance for exchange of such tendered Initial Notes, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Initial Notes tendered hereby.
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Unless otherwise indicated herein in the box entitled Special Issuance Instructions below, the undersigned hereby directs that the Exchange Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Initial Notes, that such Exchange Notes be credited to the account indicated above maintained at DTC. If applicable, substitute Certificates representing Initial Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Initial Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under Special Delivery Instructions, please deliver Exchange Notes to the undersigned at the address shown below the undersigneds signature.
By tendering Initial Notes and executing this Letter of Transmittal or effecting delivery of an Agents Message in lieu thereof, the undersigned hereby represents and agrees that (i) the undersigned is not an affiliate of the Company, (ii) any Exchange Notes to be received by the undersigned are being acquired in the ordinary course of its business, (iii) the undersigned has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of Exchange Notes to be received in the Exchange Offer, and (iv) if the undersigned is not a broker-dealer, the undersigned is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such Exchange Notes. The Company may require the undersigned, as a condition to the undersigneds eligibility to participate in the Exchange Offer, to furnish to the Company (or an agent thereof) in writing information as to the number of beneficial owners within the meaning of Rule 13d-3 under the Exchange Act on behalf of whom the undersigned holds the Initial Notes to be exchanged in the Exchange Offer. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Initial Notes, it represents that the Initial Notes to be exchanged for Exchange Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a Prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a Prospectus, the undersigned will not be deemed to admit that it is an underwriter within the meaning of the Securities Act.
The Company has agreed that, subject to the provisions of the Registration Rights Agreement relating to the Initial Notes, the Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer (as defined below) in connection with resales of Exchange Notes received in exchange for Initial Notes, where such Initial Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making activities or other trading activities, for a period ending 180 days after the effective date of the registration statement relating to the Exchange Notes (the Effective Date) (subject to extension under certain limited circumstances described in the Prospectus) or, if earlier, when all such Exchange Notes have been disposed of by such Participating Broker-Dealer. In that regard, each broker-dealer who acquired Initial Notes for its own account as a result of market-making or other trading activities (a Participating Broker-Dealer), by tendering such Initial Notes and executing this Letter of Transmittal or effecting delivery of an Agents Message in lieu thereof, agrees that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in the Prospectus untrue in any material respect or which causes the Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference therein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement relating to the Initial Notes, such Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to the Prospectus until the Company has amended or supplemented the Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to the Participating Broker-Dealer or the Company has given notice that the sale of the Exchange Notes may be resumed, as the case may be. If the Company gives such notice to suspend the sale of the Exchange Notes, it shall extend the 180-day period referred to above during which Participating Broker-Dealers are entitled to use the Prospectus in connection with the resale of Exchange Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the supplemented or amended Prospectus necessary to permit resales of the Exchange Notes or to and including the date on which the Company has given notice that the sale of Exchange Notes may be resumed, as the case may be.
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As a result, a Participating Broker-Dealer who intends to use the Prospectus in connection with resales of Exchange Notes received in exchange for Initial Notes pursuant to the Exchange Offer must notify the Company, or cause the Company to be notified, on or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such notice may be given in the space provided above or may be delivered to the Exchange Agent at the address set forth in the Prospectus under The Exchange Offer Exchange Agent.
The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Initial Notes tendered hereby. All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus, this tender is irrevocable.
The undersigned, by completing the box entitled Description of Initial Notes above and signing this letter, will be deemed to have tendered the Initial Notes as set forth in such box.
SPECIAL ISSUANCE INSTRUCTIONS
TO BE COMPLETED ONLY if Exchange Notes or Initial Notes not tendered are to be issued in the name of someone other than the registered Holder of the Initial Notes whose name(s) appear(s) above.
o Initial Notes not tendered to:
o Exchange Notes to:
Name
Address
TO BE COMPLETED ONLY if Exchange Notes or Initial Notes not tendered are to be sent to someone other than the registered Holder of the Initial Notes whose name(s) appear(s) above, or such registered Holder at an address other than that shown above.
o Initial Notes not tendered to:
o Exchange Notes to:
Name
Address:
5
IMPORTANT
Date:
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on Certificate(s) for the Initial Notes hereby tendered or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustee, executor, administrator, guardian, attorney-in-fact, officer of corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 2 below.)
Name(s):
Address:
(See Substitute Form W-9 herein)
GUARANTEE OF SIGNATURE(S)
Authorized Signature:
Name:
Name of Firm:
Address:
Date:
6
INSTRUCTIONS
1. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed either if (a) Certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in The Exchange Offer Procedures for Tendering Initial Notes in the Prospectus and an Agents Message is not delivered. Certificates, or timely confirmation of a book-entry transfer of such Initial Notes into the Exchange Agents account at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date. Tenders by book-entry transfer may also be made by delivering an Agents Message in lieu thereof. Initial Notes may be tendered in whole or in part in integral multiples of $1,000 principal amount at maturity.
Holders who wish to tender their Initial Notes and (i) whose Initial Notes are not immediately available or (ii) who cannot deliver their Initial Notes, this Letter of Transmittal and all other required documents to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete the procedures for delivery by book-entry transfer on a timely basis, may tender their Initial Notes by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in The Exchange Offer Procedures for Tendering Initial Notes in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Company, must be received by the Exchange Agent on or prior to the Expiration Date; and (iii) the Certificates (or a book-entry confirmation) representing all tendered Initial Notes, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in The Exchange Offer Procedures for Tendering Initial Notes in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent, and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. For Initial Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, Eligible Institution means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an eligible guarantor institution, including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association.
The method of delivery of Certificates, this Letter of Transmittal and all other required documents is at the option and sole risk of the tendering Holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, then registered mail with return receipt requested, properly insured, or overnight delivery service is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.
The Company will not accept any alternative, conditional or contingent tenders. Each tendering Holder, by execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender.
2. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required if:
i. this Letter of Transmittal is signed by the registered Holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Initial Notes (the Holder)) of Initial Notes tendered herewith, unless such Holder(s) has completed either the box entitled Special Issuance Instructions or the box entitled Special Delivery Instructions above, or | |
ii. such Initial Notes are tendered for the account of a firm that is an Eligible Institution. |
7
In all other cases, an Eligible Institution must guarantee the signature(s) on this Letter of Transmittal. See Instruction 5.
3. Inadequate Space. If the space provided in the box captioned Description of Initial Notes is inadequate, the Certificate number(s) and/or the principal amount of Initial Notes and any other required information should be listed on a separate signed schedule that is attached to this Letter of Transmittal.
4. Partial Tenders and Withdrawal Rights. Tenders of Initial Notes will be accepted only in integral multiples of $1,000 principal amount at maturity. If less than all the Initial Notes evidenced by any Certificate submitted are to be tendered, fill in the principal amount of Initial Notes which are to be tendered in the box entitled Principal Amount at Maturity of Initial Notes Tendered. In such case, new Certificate(s) for the remainder of the Initial Notes that were evidenced by your old Certificate(s) will only be sent to the Holder of the Initial Notes, promptly after the Expiration Date. All Initial Notes represented by Certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Initial Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective on or prior to that time, a written or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth above or in the Prospectus on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Initial Notes to be withdrawn, the aggregate principal amount at maturity of Initial Notes to be withdrawn, and (if Certificates for Initial Notes have been tendered) the name of the registered Holder of the Initial Notes as set forth on the Certificate for the Initial Notes, if different from that of the person who tendered such Initial Notes. If Certificates for the Initial Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Certificates for the Initial Notes, the tendering Holder must submit the serial numbers shown on the particular Certificates for the Initial Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Initial Notes tendered for the account of an Eligible Institution. If Initial Notes have been tendered pursuant to the procedures for book-entry transfer set forth in the Prospectus under The Exchange Offer Procedures for Tendering Initial Notes, the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Initial Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Initial Notes may not be rescinded. Initial Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described in the Prospectus under The Exchange Offer Procedures for Tendering Initial Notes.
All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. The Company, any affiliates or assigns of the Company, the Exchange Agent or any other person shall not be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Initial Notes that have been tendered but that are withdrawn will be returned to the Holder thereof without cost to such Holder promptly after withdrawal.
5. Signatures on Letter of Transmittal, Assignments and Endorsements. If this Letter of Transmittal is signed by the registered Holder(s) of the Initial Notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) without alteration, enlargement or any change whatsoever.
If any Initial Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Initial Notes are registered in different name(s) on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representa-
8
When this Letter of Transmittal is signed by the registered owner(s) of the Initial Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate bond power(s) is required unless Exchange Notes are to be issued in the name of a person other than the registered Holder(s). Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Initial Notes listed, the Certificates must be endorsed or accompanied by appropriate bond powers, signed exactly as the name or names of the registered owner(s) appear(s) on the Certificates, and also must be accompanied by such opinions of counsel, certifications and other information as the Company or the Trustee for the Initial Notes may require in accordance with the restrictions on transfer applicable to the Initial Notes. Signatures on such Certificates or bond powers must be guaranteed by an Eligible Institution.
6. Special Issuance and Delivery Instructions. If Exchange Notes are to be issued in the name of a person other than the signer of this Letter of Transmittal, or if Exchange Notes are to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Initial Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC. See Instruction 4.
7. Irregularities. The Company will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Initial Notes, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for which may, in the view of counsel to the Company be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under The Exchange Offer Conditions of the Exchange Offer or any conditions or irregularities in any tender of Initial Notes of any particular Holder whether or not similar conditions or irregularities are waived in the case of other Holders. The Companys interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Initial Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. The Company, any affiliates or assigns of the Company, the Exchange Agent, or any other person shall not be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification.
8. Questions, Requests for Assistance and Additional Copies. Questions and requests for assistance may be directed to the Exchange Agent at its address and telephone number set forth on the front of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, trust company or other nominee.
9. Backup Withholding; Substitute Form W-9. Under the U.S. Federal income tax law, a Holder whose tendered Initial Notes are accepted for exchange is required to provide the Exchange Agent with such Holders correct taxpayer identification number (TIN). The Holders TIN may be provided on an IRS Form W-9 or a Substitute Form W-9 as furnished below. If the Exchange Agent is not provided with the correct TIN, payments to such Holders or other payees with respect to Initial Notes exchanged pursuant to the Exchange Offer may be subject to 28% backup withholding. In addition, the Internal Revenue Service (the IRS) may subject the Holder or other payee to penalties for failure to provide a valid TIN or for providing false information in connection with a request for a TIN.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering Holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked, the Holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 2 is checked and the Certificate of
9
The Holder is required to give the Exchange Agent the TIN ( e.g. , social security number or employer identification number) of the registered owner of the Initial Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Initial Notes. If the Initial Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report.
Certain Holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to the backup withholding and reporting requirements. Such Holders should nevertheless complete the Substitute Form W-9 attached below, and write EXEMPT on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that Holders exempt status. Please consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which Holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the U.S. Federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained.
10. Waiver of Conditions. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus.
11. No Conditional Tenders. No alternative, conditional or contingent tenders will be accepted. All tendering Holders of Initial Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of Initial Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Initial Notes nor shall any of them incur any liability for failure to give any such notice.
12. Lost, Destroyed or Stolen Certificates. If any Certificate(s) representing Initial Notes have been lost, destroyed or stolen, the Holder should promptly notify the Exchange Agent. The Holder will then be instructed as to the steps that must be taken in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Certificate(s) have been followed.
13. Security Transfer Taxes. Holders who tender their Initial Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, Exchange Notes are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the Initial Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Initial Notes in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder.
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NOTE: | FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY PAYMENTS MADE TO YOU IN CONNECTION WITH THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. |
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 28% of all reportable payments made to me thereafter will be withheld until I provide a number.
Signature
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Date
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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payer. Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
(1) | List first and circle the name of the person whose number you furnish. |
(2) | Circle the minors name and furnish the minors social security number. |
(3) | Circle the wards, minors or incompetent persons name and furnish such persons social security number. |
(4) | Show the name of the owner. |
(5) | List first and circle the name of the legal trust, estate, or pension trust. |
Note: | If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. |
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Obtaining A Number
Payees Exempt from Backup Withholding
| A corporation. | |
| A financial institution. | |
| An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under section 403(6)(7). | |
| The United States or any agency or instrumentality thereof. | |
| A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. | |
| A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. | |
| An international organization or any agency, or instrumentality thereof. | |
| A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. | |
| A real estate investment trust. | |
| A common trust fund operated by a bank under section 584(a) | |
| An exempt charitable remainder trust under section 664, or a non-exempt trust described in section 4947. | |
| An entity registered at all times under the Investment Company Act of 1940. | |
| A foreign central bank of issue. | |
| A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc. Nominee List. |
| Payments to nonresident aliens subject to withholding under section 1441. | |
| Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. | |
| Payments of patronage dividends where the amount received is not paid in money. | |
| Payments made by certain foreign organizations. |
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Payments of interest on obligations issued by
individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payers trade or business and you have not provided your correct taxpayer identification number to the payer. |
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| Payments of tax-exempt interest (including exempt-in-interest dividends under section 852). | |
| Payments described in section 6049(b)(5) to non-resident aliens. | |
| Payments on tax-free covenant bonds under section 1451. | |
| Payments made by certain foreign organizations. | |
| Mortgage interest paid to the payer. |
Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE EXEMPT ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details see section 6041, 6041A, 6042, 6044, 6045, 6049, 6050A, and 6050N and their regulations.
Privacy Act Notice. Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes and to help verify the accuracy of your return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 28% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE
NOTICE OF GUARANTEED DELIVERY
Cinemark, Inc.
Offer to Exchange its 9 3/4% Senior Discount Notes due 2014
Pursuant to the Prospectus dated , 2004
This Notice of Guaranteed Delivery, or one
substantially equivalent to this form, must be used to accept
the Exchange Offer (as defined below) if certificates for the
Companys 9 3/4% Senior Discount Notes due 2014,
$577,173,000 aggregate principal amount at maturity which were
issued in a private offering on March 31, 2004 (the
Initial Notes) are not immediately available,
(ii) Initial Notes, the Letter of Transmittal and all other
required documents cannot be delivered to The Bank of New York
Trust Company, N.A. (the Exchange Agent) on or prior
to the Expiration Date or (iii) the procedures for delivery
by book-entry transfer cannot be completed on a timely basis.
This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See The Exchange
Offer Procedures for Tendering Initial Notes
in the Prospectus. In addition, in order to utilize the
guaranteed delivery procedure to tender Initial Notes pursuant
to the Exchange Offer, a completed, signed and dated Letter of
Transmittal relating to the Initial Notes (or facsimile thereof)
must also be received by the Exchange Agent on or prior to the
Expiration Date. Capitalized terms not defined herein have the
meanings assigned to them in the Prospectus.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME,
ON ,
2004, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
The Exchange Agent for the Exchange Offer
is:
THE BANK OF NEW YORK TRUST COMPANY, N.A.
The Bank of New York Trust
Company, N.A.
Corporate Trust Operations
Reorganization Unit
101 Barclay Street, 7 East
New York, New York 10286
Attn: Kin Lau
By Hand or Overnight Delivery:
The Bank of New York Trust
Company, N.A.
Corporate Trust Operations
Reorganization Unit
101 Barclay Street 7 East
New York, New York 10286
Attn: Kin Lau
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 298-1915
To Confirm by Telephone or for Information Call:
Kin Lau
(212) 815-3750
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
The undersigned hereby tenders to Cinemark, Inc., a Delaware corporation (the Company), upon the terms and subject to the conditions set forth in the Prospectus dated , 2004 (as the same may be amended or supplemented from time to time, the Prospectus), and the related Letter of Transmittal (which together constitute the Exchange Offer), receipt of which is hereby acknowledged, the aggregate principal amount at maturity of Initial Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption The Exchange Offer Procedures for Tendering Initial Notes.
All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.
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PLEASE SIGN HERE | ||
X
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X
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X
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X
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Signature(s) of Owner(s) or Authorized
Signatory
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Date | |
Area Code and Telephone Number: | ||
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Must be signed by the holder(s) of the Initial Notes as their name(s) appear(s) on certificates for Initial Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below and, unless waived by the Company, provide proper evidence satisfactory to the Company of such persons authority to so act.
Please print name(s) and address(es)
Name(s):
Capacity:
Address(es):
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GUARANTEE OF DELIVERY
The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as an eligible guarantor institution, including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker, government securities broker or government securities dealer, (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association (each of the foregoing being referred to as an Eligible Institution), hereby guarantees to deliver to the Exchange Agent, at one of its addresses set forth above, either the Initial Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Initial Notes to the Exchange Agents account at The Depository Trust Company (DTC), pursuant to the procedures for book-entry transfer set forth in the Prospectus, in either case together with one or more properly completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and any other required documents within three New York Stock Exchange trading days after the date of execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver
the Letter(s) of Transmittal (or facsimile thereof) and the
Initial Notes tendered hereby to the Exchange Agent within
the time period set forth above and that failure to do so could
result in a financial loss to the undersigned.
Authorized Signature
Title
(Please Type or Print)
Area Code and
Telephone Number:
Date:
NOTE: | DO NOT SEND CERTIFICATES FOR INITIAL NOTES WITH THIS FORM. CERTIFICATES FOR INITIAL NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL. |
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NOTICE TO INVESTORS
Cinemark, Inc.
Offer to Exchange its 9 3/4% Senior Discount Notes due 2014
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2004 UNLESS EXTENDED BY CINEMARK, INC. IN ITS SOLE DISCRETION (THE EXPIRATION DATE). TENDERS OF NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To our clients:
Enclosed for your consideration is a Prospectus, dated , 2004 (as the same may be amended from time to time, the Prospectus ), and a Letter of Transmittal (the Letter of Transmittal ) relating to the offer by Cinemark, Inc., a Delaware corporation (the Company ), to exchange (the Exchange Offer ) up to $577,173,000 aggregate principal amount at maturity of its 9 3/4% Senior Discount Notes due 2014, which have been registered under the Securities Act of 1933, as amended (the Exchange Notes ) for an equal principal amount of its 9 3/4% Senior Discount Notes due 2014, which were issued in a private offering on March 31, 2004 (the Initial Notes ) upon the terms and conditions set forth in the Prospectus and in the related Letter of Transmittal. As set forth in the Prospectus, the terms of the Exchange Notes are identical in all material respects to those of the Initial Notes except for transfer restrictions, registration rights and rights to additional interest that do not apply to the Exchange Notes and different administrative terms. The Exchange Offer is subject to certain customary conditions. See The Exchange Offer Conditions of the Exchange Offer in the Prospectus. The Initial Notes may be tendered only in integral multiples of $1,000 principal amount at maturity.
The material is being forwarded to you as the beneficial owner of Initial Notes carried by us for your account or benefit but not registered in your name. An exchange of any Initial Notes may only be made by us as the registered holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Initial Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such holder promptly if they wish to exchange the Initial Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to exchange any or all such Initial Notes held by us for your account or benefit, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to exchange your Initial Notes.
Your instructions to us should be forwarded as promptly as possible in order to permit us to exchange Initial Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer expires at 5:00 p.m., New York City time, on , 2004, unless extended. Tenders of Initial Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount at maturity of the Exchange Notes for each $1,000 principal amount at maturity of Initial Notes. The terms of the Exchange Notes are identical in all material respects to the Initial Notes except that the Exchange Notes will not contain certain transfer restrictions relating to the Initial Notes, will not contain registration rights and will not contain certain provisions relating to an increase in the interest rate under certain circumstances relating to, among other things, the timing of the Exchange Offer. | |
2. The Exchange Offer is subject to certain conditions. See The Exchange Offer Conditions of the Exchange Offer in the Prospectus. | |
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on , 2004, unless extended. | |
4. The Company has agreed to pay the expenses of the Exchange Offer. | |
5. Any transfer taxes incident to the transfer of the Initial Notes from the tendering holder to the Company will be paid by the Company, except as provided in the Prospectus and the Letter of Transmittal. |
The Exchange Offer is not being made to, nor will exchanges be accepted from or on behalf of, holders of Initial Notes residing in any jurisdiction in which the making of the Exchange Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction.
If you wish to exchange any or all of your Initial Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to exchange Initial Notes held by us and registered in our name for your account or benefit.
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INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of Cinemark, Inc.
THIS WILL INSTRUCT YOU TO EXCHANGE THE AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF INITIAL NOTES INDICATED BELOW (OR, IF NO AGGREGATE PRINCIPAL AMOUNT IS INDICATED BELOW, ALL INITIAL NOTES) HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED, PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL.
o | Please TENDER my Initial Notes held by you for the account or benefit of the undersigned. I have identified on a signed schedule attached hereto the principal amount of Initial Notes to be tendered if I wish to tender less than all of my Initial Notes. |
o | Please DO NOT TENDER my Initial Notes held by you for the account of the undersigned. |
Date: __________________________________________________________________ , 2004
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NOTICE TO BROKER-DEALERS
Cinemark, Inc.
Offer to Exchange its 9 3/4% Senior Discount Notes due 2014
, 2004
To Brokers, Dealers, Commercial Banks,
Cinemark, Inc., a Delaware corporation (the Company ), is offering upon the terms and conditions set forth in the Prospectus, dated , 2004 (as the same may be amended from time to time, the Prospectus ), and in the related Letter of Transmittal enclosed herewith, to exchange (the Exchange Offer ) up to $577,173,000 aggregate principal amount at maturity of its 9 3/4% Senior Discount Notes due 2014, which have been registered under the Securities Act of 1933, as amended (the Exchange Notes ) for an equal principal amount of its 9 3/4% Senior Discount Notes due 2014, which were issued in a private offering on March 31, 2004 (the Initial Notes ). As set forth in the Prospectus, the terms of the Exchange Notes are identical in all material respects to those of the Initial Notes except for transfer restrictions, registration rights and rights to additional interest that do not apply to the Exchange Notes and will contain different administrative terms. Initial Notes may only be tendered in integral multiples of $1,000 principal amount at maturity.
THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE THE EXCHANGE OFFER CONDITIONS OF THE EXCHANGE OFFER IN THE PROSPECTUS.
Enclosed herewith for your information and forwarding to your clients are copies of the following documents:
1. The Prospectus, dated , 2004. | |
2. A Letter of Transmittal to exchange the Initial Notes for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to exchange the Initial Notes. | |
3. A form of letter which may be sent to your clients for whose accounts you hold the Initial Notes registered in your name or in the name of your nominee, with space provided for obtaining such clients instructions with regard to the Exchange Offer. | |
4. A Notice of Guaranteed Delivery. | |
5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. |
Your prompt attention is requested. We urge you to contact your clients as promptly as possible. Please note the Exchange Offer will expire at 5:00 p.m., New York City time, on , 2004, unless extended.
In most cases, exchanges of the Initial Notes accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (a) certificates representing such Initial Notes, (b) the Letter of Transmittal (or facsimile thereof) properly completed and duly executed with any required signature guarantees, and (c) any other documents required by the Letter of Transmittal.
If holders of the Initial Notes wish to tender, but it is impracticable for them to forward their certificates for the Initial Notes prior to the expiration of the Exchange Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be offered by following the guaranteed delivery procedure described in the Prospectus under The Exchange Offer Procedures for Tendering Initial Notes.
The Exchange Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Initial Notes residing in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction.
The Company will not pay any fees or commissions to brokers, dealers or other persons for soliciting exchanges of the Initial Notes pursuant to the Exchange Offer. The Company will pay or cause to be paid any transfer taxes payable on the transfer of the Initial Notes to it, except as otherwise provided in Instruction 13 of the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange Offer or for copies of the Prospectus and Letter of Transmittal may be directed to the Exchange Agent at its address set forth in the Prospectus.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON TO BE DEEMED TO BE THE AGENT OF THE COMPANY, OR ANY AFFILIATE THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
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