EXHIBIT 10.2
AMENDED AND RESTATED
AGREEMENT TO PARTICIPATE IN PROFITS AND LOSSES
This Amended and Restated Agreement to Participate in Profits and
Losses (this "RESTATED AGREEMENT") is dated March 12, 2004, by and between
Cinemark USA, Inc. ("CINEMARK") and Xxxx X. Stock ("STOCK").
RECITALS
A. Cinemark is the owner or lessee of properties in the United
States upon which it operates multiplex movie theatres.
B. Cinemark and Stock entered into an Amended and Restated
Agreement to Participate in the Profits and Losses effective June 19, 2002, (the
"ORIGINAL AGREEMENT") pursuant to which Stock participates in the profits and
losses of the theatres listed on Exhibit A attached hereto and hereby
incorporated by reference (the "THEATRES").
C. This Restated Agreement is being entered into in connection
with the execution and delivery of the Merger Agreement, dated as of the date
hereof, between Cinemark, Inc. and Popcorn Merger Corp. (the "MERGER
AGREEMENT"), pursuant to which Popcorn Merger Corp. will merge with and into
Cinemark, Inc., with Cinemark, Inc. continuing as the surviving corporation.
D. Cinemark and Stock desire to amend and restate the Original
Agreement in accordance with the terms and provisions contained herein.
NOW, THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Cinemark and Stock agree as follows:
AGREEMENTS
1. TERM. The term (the "TERM") of this Agreement shall equal the
term of the lease entered into by Cinemark for the Theatres, plus the term of
any and all direct or indirect extensions or renewals thereof.
2. ALLOCATIONS.
(a) Operating Profits and Disposition Profits. Operating
Profits and Disposition Profits for any fiscal year shall be allocated
in the following order of priority:
(i) First, one hundred percent (100%) to
Cinemark until the cumulative Operating Profits and
Disposition Profits allocated pursuant to this Section 2(a)
are equal to the total Operating Losses and Distribution
Losses allocated pursuant to Section 2(b).
(ii) Second, to Cinemark and Stock in proportion
to the cumulative Distributions of Net Cash from Operations
and Net Cash from Dispositions which
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they have received (and to which they are entitled as of the
end of the subject fiscal year) pursuant to Section 3(a)
hereof.
(b) Operating Losses and Disposition Losses. Operating
Losses and Disposition Losses for any fiscal year shall be allocated
one hundred percent (100%) to Cinemark.
3. DISTRIBUTIONS. Subject to Section 5 hereof, Cinemark hereby
grants, bargains, sells, conveys and assigns to Stock a forty-nine percent (49%)
participation in the Net Cash from Operations and Net Cash from Dispositions
arising from the operation of the Theatres during the Term, after Cinemark has
recouped one hundred percent (100%) of any investment by Cinemark in the
Theatres plus interest on such amounts as more fully described below. Net Cash
from Operations and Net Cash from Dispositions shall be distributed as follows:
(a) Distribution of Net Cash from Operations. Subject to
Section 5 hereof, Net Cash from Operations from the Theatres, to the
extent reasonably deemed available by Cinemark for distribution, shall
be distributed as follows:
(i) First, one hundred percent (100%) of the Net
Cash from Operations from the Theatres to Cinemark until the
cumulative Net Cash from Operations distributed to Cinemark is
equal to Cinemark's Investment plus accrued interest on
Cinemark's Investment at Cinemark's average annual borrowing
rate compounded monthly; and
(ii) Second, fifty-one percent (51%) of the Net
Cash from Operations from the Theatres to Cinemark and
forty-nine percent (49%) of the Net Cash from Operations from
the Theatres to Stock.
(b) Distributions of Net Cash from Disposition of the
Theatres. Subject to Section 5 hereof, Net Cash Flow from Disposition
of the Theatres, to the extent reasonably deemed available by Cinemark,
shall be distributed as follows:
(i) First, one hundred percent (100%) of Net
Cash from Dispositions from the Theatres to Cinemark until the
cumulative Net Cash Flow from Operations from the Theatres
distributed to Cinemark pursuant to Section 3(a) above, plus
any portion of Net Cash from Disposition of the Theatres
received under this Section 3(b)(i) is equal to Cinemark's
Initial Investment plus accrued interest on Cinemark's
Investment at Cinemark's average annual borrowing rate
compounded monthly; and
(ii) Second, any remaining Net Cash from
Disposition of the Theatres shall be distributed fifty-one
percent (51%) to Cinemark and forty-nine percent (49%) to
Stock.
(c) With respect to Section 3(a), Net Cash from
Operations shall be distributed within 45 days after the end of each
fiscal quarter and shall at least be an amount equal to each of
Cinemark's and Stock's income taxes based upon such party's pro rata
share of Net Cash from Operations.
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4. OPTION TO PURCHASE PROFIT INTEREST. If, at any time, or from
time to time, Cinemark, Inc. (or a successor company by merger with Cinemark,
Inc.) shall propose to register with the Securities and Exchange Commission (the
"SEC") in a public offering on its own behalf or on behalf of any other security
holder of Cinemark, Inc., or any of Cinemark, Inc.'s affiliates, its capital
stock under the Securities Act of 1933, as amended (other than in connection
with a dividend reinvestment, employee stock purchase, stock option or similar
plan or a registration on Forms S-4 or S-8 or any successor form), Stock hereby
grants to Cinemark, Inc. the option (the "CALL OPTION") to purchase the Stock
profit participation interest contained herein. The Call Option may be exercised
by Cinemark, Inc. by delivery of written notice of exercise of the Call Option
(the "CALL NOTICE") to Stock at any time within thirty (30) days of the filing
of any registration statement with the SEC. The purchase price (the "PURCHASE
PRICE") shall be the greater of (i) the Minimum Payment (as defined herein) and
(ii) forty-nine percent (49%) of the amount of (1) the product of (a) Theatre
Level Cash Flow for the preceding twelve-month period, adjusted for nonrecurring
items of income or expense included therein, and (b) seven; plus (2) cash and
the value of inventory associated with the Theatres; minus (3) necessary
reserves mutually agreed upon by Stock and Cinemark (provided that both parties
shall act reasonably); minus (4) accrued liabilities and accounts payable
associated with the Theatres. The closing of the purchase of Stock's profit
participation interest shall take place within thirty (30) days of the
determination of the Purchase Price. At the closing, Cinemark, Inc. shall
deliver the purchase price for the profit participation interest against
delivery by Stock of a termination agreement terminating this Agreement in full.
5. TERMINATION OF EMPLOYMENT. In the event Stock's employment
with Cinemark, Inc. or Cinemark is terminated for other than Cause, as such term
is defined in the Employment Agreement by and between Stock and Cinemark, Inc.,
the distribution contemplated by Section 3(a)(ii) or Section 3(b)(ii), as
applicable, following the date of such termination shall be made to Cinemark and
Stock in the specified percentages even if Cinemark has not recouped one hundred
percent (100%) of Cinemark's Investment in the Theatres plus interest on such
amounts, and thereafter such limitation shall be deemed deleted in its entirety
from Section 3.
6. The following definitions shall apply to this Agreement:
"CINEMARK'S INVESTMENT" shall mean the aggregate total of (i)
initial hard and soft costs paid to third parties for designing, developing,
constructing, equipping and permitting for the Theatres (excluding the costs of
day to day operation of the Theatres after opening to the general public for
business), (ii) costs that are capitalized for maintaining, replacing or
repairing capital items in the Theatres and (iii) Cinemark's aggregate
allocation of Operating Losses and Disposition Losses in accordance with Section
2 hereof. Exhibit B attached hereto contains a summary for each Theatre of the
investment costs relating to the items specified in (i) above.
"DISPOSITION" shall mean any sale, exchange, assignment,
abandonment, condemnation (without rebuilding), destruction (without
rebuilding), foreclosure or any other taxable disposition, whether voluntary or
involuntary, of one or more of the Theatres.
"DISPOSITION LOSSES" shall mean all Losses attributable to
Disposition of one or more Theatres.
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"DISPOSITION PROFITS" shall mean all Profits attributable to
Disposition of one or more Theatres.
"EXPENSES" shall be defined as all disbursements arising from
the ownership, operation, repair (excluding capital repairs generally), and
management of the theatre during such period, including, but not limited to,
payroll expenses and benefits, sales taxes, payroll and other withholding taxes
for employees working exclusively for the theatre, employee costs, supplies,
janitorial serves and supplies, maintenance expenses, utility charges, insurance
premiums, cost of concession items, rent expense, CAM, taxes, film rental,
advertising and marketing expenses, and all other amounts reasonably expended in
connection with the ownership, operation, and maintenance of the Theatres
(excluding allocation of any corporate, general and administrative expenses or
other expenses that are not allocated to all of Cinemark's theatres on a
consistent basis).
"GROSS BOX OFFICE RECEIPTS" shall mean the total charges
(whether for cash, credit or gift certificate) generated from operations at the
Theatres for admission to, or use of, the auditoriums in the Theatres
(including, but not limited to, group activity sales and tickets,
internet/moviefone sales, vouchers and redeemed gift certificates) and any
service charge or fee generated from operations at the Theatres, excluding
however, (a) any and all appropriate taxes on such Gross Box Office Receipts
required to be paid to any governmental authority, and (b) amounts credited or
refunded to customers in the ordinary course of business.
"GROSS CONCESSION RECEIPTS" shall mean the total charges for
all purchases or rentals (whether for cash, credit or gift certificates) at, in,
from or with respect to the Theatres (whether made by any licensee or
concessionaire and whether delivered at the Theatres or elsewhere) of any and
all food and beverage items and any and all goods, wares or merchandise and
shall include, without limitation (subject to the terms of this subsection
(iii)), all other revenues generated from operations at the Theatres, including
promotional revenues; provided, however, any and all taxes on such Gross
Concession Receipts required to be paid to any governmental authority shall be
excluded. Gross Concession Receipts shall also include any and all net receipts
(whether for cash or credit) from any vending machines, advertising of any kind,
payphones and games or other amusement devices less any and all taxes on such
charges required to be paid to any governmental authority, and less amounts
credited or refunded to customers in the ordinary course of business.
"GROSS REVENUES" shall mean the sum of all revenues resulting
from the operation of the theatres, including, but not limited to "gross box
office receipts," and "gross concession receipts."
"MINIMUM PAYMENT" shall mean an amount equal to $8,705,678
less the aggregate amount of distributions made to Stock hereunder since the
inception of this Restated Agreement.
"NET CASH" means, for each month or any other period for the
Theatres as chosen by Cinemark, the sum of (i) all cash receipts generated at
the Theatres, including without limitation, cash receipts from the operation of
the Theatres and receipts from the sale of the Theatres, plus (ii) reserves set
aside during prior periods which are no longer necessary as
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reserves, as determined by Cinemark in its reasonable discretion minus the sum
of: (i) all expenditures of Cinemark respecting the Theatres, including without
limitation, all expenses required to operate the Theatres, including without
limitation film rental expense, costs of concession, salaries and benefits,
janitorial services and supplies, general supplies, repairs and maintenance,
repairs and replacements of a capital nature which are made by Cinemark,
property taxes, insurance, common area maintenance, utilities, rent, security,
other direct operating expense at the Theatres and a reasonable allocation to
Cinemark for bulk purchases made by Cinemark for the Theatres' operations, all
calculated in accordance with GAAP, provided that Net Cash shall specifically
exclude allocation of any corporate general and administrative expenses or other
expenses that are not allocated to all of Cinemark's theatres on a consistent
basis, (ii) amounts required for payment of all outstanding current obligations
of the Theatres, and (iii) amounts set aside for reserves for the Theatres, as
determined by Cinemark. If Cinemark performs maintenance and repairs on the
Theatres, such expenses shall only include the direct out-of-pocket expenses
which are reasonable and consistent with the costs and expenses for similar
services performed by an independent third party.
"NET CASH FROM DISPOSITION OF THE THEATRES" means Net Cash
attributable to Disposition of one or more Theatres, including all principal and
interest payments with respect to any note or other obligation received by
Cinemark in connection with the Disposition of the Theatres.
"NET CASH FROM OPERATIONS" means all Net Cash other than Net
Cash from Disposition of the Theatres.
"OPERATING LOSSES" means all Losses (including each item of
income, expense and deduction comprising such Losses) derived from operations
during the fiscal year, determined without regard to Disposition Profits or
Disposition Losses.
"OPERATING PROFITS" means all Profits (including each item of
income, expense and deduction comprising such Profits) derived from operations
during the fiscal year, determined without regard to Disposition Profits or
Disposition Losses.
"PROFITS" and "LOSSES" means, for each fiscal year or other
period, an amount equal to Cinemark's taxable income or loss for such year or
period attributable to the Theatres.
"THEATRE LEVEL CASH FLOW" shall be defined as Gross Revenues
minus Expenses for each fiscal year during the operation of the Theatres.
7. MANAGEMENT AND OPERATION. Stock shall not, and hereby
acknowledges that he shall not, have any right or authority to participate in
the management or operation of the Theatres, except during any period he is
employed by Cinemark as an executive officer. It is understood and agreed that
Cinemark will operate and manage the Theatres.
8. OWNERSHIP. It is understood and agreed by the parties that
Cinemark is granting Stock hereunder solely an interest in the net profits or
net losses of the operation of the Theatre. Nothing herein shall be construed as
granting Stock any right or authority to participate in the ownership,
management or control of the Theatres, the lease agreement with respect to any
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Theatre or any equipment at any Theatre or property associated with any Theatre
or any other theatre operated by Cinemark during the term of this Agreement.
9. ASSIGNMENT. Stock shall not assign, transfer, convey, encumber
or hypothecate the interest granted herein without the prior written consent of
Cinemark which Cinemark may grant or withhold in its sole and absolute
discretion.
10. NO PARTNERSHIP. Nothing herein contained shall be deemed or
construed as creating a relationship of principal or agent, partnership or joint
venture among the parties.
11. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be delivered in person, by receipted
overnight courier, or by registered or certified mail, return receipt requested,
postage and fees prepaid, first class mail:
To: Stock: Xxxx X. Stock
0000 Xx. Xxxxxxxx Xxxxx
Xxxxx, Xxxxx 00000
To: Cinemark: Cinemark USA, Inc.
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Attention: Chief Executive Officer
Telecopy Number: (000) 000-0000
With Copy to: Cinemark USA, Inc.
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Attention: General Counsel
Telecopy Number: (000) 000-0000
or such other address as either party may from time to time specify in writing
to the other in the manner aforesaid.
12. GOVERNING LAW. This Agreement and all of the rights and duties
of the parties arising from or relating in any way to the subject matter of this
Agreement shall be governed, enforced and construed in accordance with the laws
of the State of Texas.
13. SEVERABILITY. In the event any of the provisions, or portions
thereof, of this Agreement is held to be unenforceable or invalid by any court
of competent jurisdiction, the validity and enforceability of the remaining
provisions, or portions thereof, shall not be affected thereby. Any provisions
so held unenforceable or invalid shall be reformed by such court to reflect the
construction most nearly approximating the intent of such provision which shall
be valid and enforceable, and the parties hereto hereby agree to such provision
as reformed.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
replaces and supercedes the Original Agreement which shall hereinafter be deemed
terminated and of no further force or effect.
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15. BINDING EFFECT; EFFECTIVE DATE. This Agreement shall be
binding upon and inure to the benefit of all the parties hereto and their
respective heirs, legatees, legal representatives, successors and permitted
assigns. This Restated Agreement shall become effective automatically without
further actions by the Cinemark or Stock immediately upon the consummation of
the Merger (the "EFFECTIVE DATE"). However, this Restated Agreement shall
terminate and shall be of no further force and effect if the Merger Agreement is
terminated prior to the Effective Date in accordance with its terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CINEMARK USA, INC.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Senior Vice President
/s/ Xxxx X. Stock
----------------------------------------
Xxxx X. Stock
With respect to the provisions of Section 4, acknowledged and agreed to by:
CINEMARK, INC.
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------
Name: Xxxxxxx Xxxxxxxx
Its: Secretary
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EXHIBIT A
THEATRES
Holiday Village 4
0000 Xxxx Xxxxxx, #0
Xxx 000-000
Xxxx Xxxx, Xxxx 00000
(4 screens)
Kentucky Oaks Mall (II)
5159 Hinkleville, Xxxx #000
Xxxxxxx, Xxxxxxxx 00000
(12 screen)
