REVOLVING LOAN AGREEMENT

Exhibit 10.4

 

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REVOLVING LOAN AGREEMENT

 

US$25,000,000.00

 

dated as of August 16, 2004

 

among

 

Cadena Mexicana de Exhibición, S.A. de C.V.,

as Borrower

 

Grupo Cinemex, S.A. de C.V., and

 

the Subsidiaries listed Herein, as

 

Guarantors

 

The Banks Listed Herein

 

 

Banco Inbursa, S.A., Institución de Banca Múltiple,

Grupo Financiero Inbursa

as Administrative Agent, Documentation Agent, Collateral Agent,

Bookrunner and Lead Arranger

 

 

Scotiabank Inverlat, S.A., Institución de Banca Múltiple,

Grupo Financiero Scotiabank Inverlat

as Syndication Agent

 

 

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TABLE OF CONTENTS

 

 

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AGREEMENT dated as of August 16, 2004 among Cadena Mexicana de Exhibición, S.A. de C.V. (the “ Borrower ”); the Subsidiaries listed on the signature pages hereof and Grupo Cinemex, S.A. de C.V., as guarantors and obligors (together with the Borrower, the “ Obligors ” the Banks listed on the signature pages hereof (the “ Banks ”); Banco Inbursa, S.A., Institucion de Banca Multiple, Grupo Financiero Inbursa as Administrative Agent, Documentation Agent, Collateral Agent, Bookrunner and Lead Arranger (the “ Administrative Agent ”); and Scotiabank Inverlat, S.A., Institución de Banca Multiple, Grupo Financiero Scotiabank Inverlat, as Syndication Agent (the “ Syndication Agent ”).

 

The parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

SECTION 1.01. Definitions . The following terms, as used herein, shall have the following meanings:

 

“ Administrative Agent ” means Banco Inbursa, S.A., Institución de Banca Múltiple, Grupo Financiero Inbursa in its capacity as administrative agent, documentation agent, collateral agent, bookrunner and lead arranger for the purposes of this Agreement.

 

“ Administrative Agent’s Account ” means the account number 2277000367, maintained by Banco de México under the name of Banco Inbursa, S.A., Institución de Banca Multiple, Grupo Financiero Inbursa.

 

“ Affiliate ” of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. As used herein, the term “ Control ” means possession, directly or indirectly, of the power to vote 51% or more of any class of voting securities of a Person or the authority to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“ Agents ” means, collectively, the Administrative Agent and the Syndication Agent.

 

“ Applicable Lending Office ” means, with respect to any Bank, its offices located at its address set forth on Schedule 1 hereto opposite its name under the heading “Applicable Lending Office” or in the Assignment and Assumption Agreement pursuant to which it became a Bank, or such other office as such Bank may designate as its Applicable Lending Office by notice to the Borrower and the Administrative Agent.

 

“ Applicable Margin ” means 175 basis points.

 

“ Assignee ” has the meaning set forth in Section 9.07(c).

 

“ Assignment and Assumption Agreement ” means an Assignment and Assumption Agreement entered into between a Bank and an Assignee, and accepted by the Administrative Agent and the Syndication Agent, substantially in the form of Exhibit A hereto.

 

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“ Bank ” means each of the Banks and financial institutions listed on the signature hereto and each Assignee which becomes a Bank pursuant to Section 9.07(c) and respective successors.

 

“ Borrower ” means Cadena Mexicana de Exhibición, S.A. de C.V., a Mexican corporation and its successors.

 

“ Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in Mexico City are authorized or required by law to close.

 

“ Capital Expenditures ” has the meaning set forth in Section 5.23.

 

“ Capital Expenditures Limit ” means, for the last four consecutive Fiscal Quarters, the addition of (i) Consolidated EBITDA, (ii) the amount of cash on hand and Temporary Cash Investments on the first day of such four consecutive Fiscal Quarters, (iii) proceeds received by the Consolidated Borrower in consideration for the issuance by the Consolidated Borrower of equity securities or capital stock, (iv) the proceeds from the incurrence of additional Debt (provided, that with respect to each incurrence of additional Debt, no Default has occurred and is continuing as of the date on which such Debt is incurred), and (v) the proceeds from the sale of assets, less the addition of (i) Net Taxes Paid, (ii) Consolidated Debt Service, and (iii) Restricted Payments.

 

“ CETE Rate ” has the meaning set forth in Section 8.01.

 

“ Closing Date ” means the date hereof.

 

“ Collateral Documents ” means the Pledge Agreement and the Subsidiaries’ Agreement, including the amendments and additions thereto as well as any other document executed and/or delivered pursuant to their terms.

 

“ Commitment ” means, (i) with respect to each Bank listed on Schedule 1 hereto, the amount set forth opposite the name of such Bank under the heading “Commitment,” and (ii) with respect to any Assignee, the Commitment assigned to such Assignee pursuant to Section 9.07(c).

 

“ Commitment Documents ” means the Fee Letters and the document named Summary of Terms and Conditions dated July 30, 2004, among the Borrower, Banco Inbursa, S.A., Institución de Banca Múltiple, Grupo Financiero Inbursa and Scotiabank Inverlat, S.A. Institución de Banca Multiple, Grupo Financiero Scotiabank Inverlat.

 

“ Consolidated Borrower ” means the Borrower and its Consolidated Subsidiaries taken as a whole.

 

“ Consolidated Debt Service ” means, with respect to the Consolidated Borrower for any relevant period, the addition of the Consolidated Interest Expense and the amortization during such period of all Debt with a maturity of one year or longer, determined in accordance with Mexican GAAP, excluding all interest expense generated by the Subordinated Debt.

 

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“ Consolidated EBITDA ” means for any relevant period, EBITDA of the Consolidated Borrower in accordance with Mexican GAAP for such period plus, to the extent deducted in determining such EBITDA, the aggregate amount of non-cash charges similar to depreciation and amortization.

 

“ Consolidated Interest Expense ” means, for any relevant period, the aggregate of all Interest Expense of the Consolidated Borrower.

 

“ Consolidated Net Profit ” means, for any relevant period, the aggregate net profit (or loss) of the Consolidated Borrower for such period, determined in accordance with Mexican GAAP.

 

“ Consolidated Net Worth ” means, at any date, the consolidated stockholders’ equity of the Consolidated Borrower, computed as accounting assets, less liabilities and excluding convertible debt. Without limiting the generality of the foregoing, such Consolidated Net Worth includes capital, surplus and undivided profits, as well as common stock, and preferred stock.

 

“ Consolidated Rental Expense ” means, for any period, the aggregate rental expense of the Consolidated Borrower less, to the extent included in the determination thereof, any portion of lease payments that are (i) calculated as a percentage of the Consolidated Borrower’s revenues, (ii) a single lump sum amount agreed to be paid by the Consolidated Borrower at the time a lease is entered into as “key money” or transfer, even if payable in several instalments or (iii) paid as advance rent or rent deposits, all determined on a consolidated basis for such period; provided however , that “Consolidated Rental Expense” excludes Debt referred to in paragraph (iv) of Debt definition.

 

“ Consolidated Stockholders’ Equity ” means, at any date, the consolidated stockholder’s equity of the Consolidated Borrower.

 

“ Consolidated Subsidiary ” means at any date and for any Person, any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date in accordance with the Mexican GAAP.

 

“ Loan Agreement ” means the loan agreement entered into simultaneously to this Agreement, among the Obligors and the Agents, their successors and assignees for an amount in Pesos equal to US$100,000,000.00 (One Hundred Million Dollars 00/100), as amended and/or supplemented.

 

“ Debt ” of any Person means, at any date, without duplication, (i) all obligations of such Person for borrowed money, excluding Subordinated Debt, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except for trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with Mexican GAAP, (v) all non-contingent obligations (and, for purposes of Section 5.08 and the definitions of Material Debt, all contingent obligations) of such Person to reimburse any bank or other Person in respect of amounts paid

 

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under a letter of credit or similar instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person and (vii) all Guarantees by such Person of another Person’s Debt (each such Guarantee shall constitute Debt in an amount equal to the amount of such other Person’s Debt Guaranteed thereby, except for Subordinated Debt) and (viii) Revolving Debt; provided, however, that “Debt” excludes Subordinated Debt.

 

“ Default ” means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both, unless cured or waived, would become an Event of Default.

 

“ Delinquent Interest Rate ” has the meaning set forth in Section 2.04(a).

 

“ Derivatives Obligations ” of any Person means all obligations of such Person regarding any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions.

 

“ Disbursement Date ” has the meaning set forth in Section 2.01(b) hereof.

 

“ Dollar ”, “US $ ” or “ Dollars ” means the lawful currency of the United States of America. For purposes of obtaining the Peso equivalent of any amount in Dollars, the parties hereto agree to use the exchange rate published in the Official Gazette of the Federation as the Rate of Exchange to Settle Obligations denominated in Foreign Currency payable in Mexico on the date the conversion is made.

 

“ EBITDA ” means, for any Person, for any period, for such Person, the addition of the following (without duplication): (a) operating income (calculated before taxes, Interest Expenses, interest revenue, extraordinary and unusual items) for such period plus (b) depreciation and amortization (to the extent deducted in determining operating income) for such period, plus (c) the Pro-forma EBITDA for such period, all as determined in accordance with Mexican GAAP with the information provided in such Person’s financial statements.

 

“ Effective Date ” means the date this Agreement becomes effective in accordance with Section 9.10.

 

“ Event of Default ” has the meaning set forth in Section 6.01.

 

“ Executive Officer ” means the General Director, the executive director, the chief operating officer, the chief financial officer, the general counsel, the general comptroller, or the treasurer of the Borrower; provided that said officer is duly authorized to perform any obligations hereunder, as evidenced in a certificate substantially in the form of Exhibit “H”.

 

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“ Existing Loan ” means the Borrower’s Debt pursuant to the credit agreement entered into by and between the Borrower, Grupo Cinemex, Scotiabank Inverlat, S.A., Institucion de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, as Co-Lead Arranger, and other thin parties and financial institutions parties thereto, for an amount up to P$1,000,000,000.00 (One Billion Pesos 00/100) dated December 26, 2002, as amended and/or supplemented, as the case may be.

 

“ Expiration Date ” means August 16, 2005 or, if such day is not a Business Day, the immediate preceding Business Day.

 

“ Fee Letters ” means the Administrative Agent’s Fee Letter, dated August 13, 2004, between the Borrower and the Administrative Agent, relating to the payment of the fees, costs and other expenses.

 

“ Fiscal Quarter ” means a fiscal quarter of the Borrower (i.e. January 1 ^st through March 31 ^st ; April 1 ^st through June 30 ^th ; July 1 ^st through September 30 ^th ; and October 1 ^st through December 31 ^st ).

 

“ Fiscal Year ” means, pursuant to the applicable tax laws, the period comprised between January 1st and December 31st of every calendar year of the Borrower.

 

“ Governmental Authority ” means any government or any state, department or other political subdivision thereof, or any governmental body, agency, authority (including, without limitation, any central bank or taxing authority) or instrumentality (including, without limitation, any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned by or subject to the control of any of the foregoing.

 

“ Guarantee ” by any Person means any real and/or personal obligation, contingent or otherwise, granted directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or (ii) incurred for the purpose of assuring in any other manner the holder of such Debt or other obligation the payment thereof or to protect such holder against loss in respect thereof (in whole or in part), it being understood , that the term “Guarantee” shall not include endorsements for collection or deposits in the ordinary course of business of such Person. The term “Guarantee” used as a verb has a meaning that corresponds to the granting of a Guarantee.

 

“ Guarantors ” means: (i) Grupo Cinemex; and (ii) each Operating Subsidiary including the Operating Subsidiaries established after the date hereof (which adhere to this Agreement and/or to the Collateral Documents pursuant to Section 5.25), but excluding Operadora Moliere, S.A. de C.V., Teatro Polanco, S.A. de C.V., Producciones Expreso Astral, S.A. de C.V., Servicios Cinematograficos Especializados, S.A. de C.V., Serviuno, S.A. de C.V., FICC Ciudad de Mexico, S.A. de C.V. and Cinemex Producciones, S.A. de C.V., or any other Subsidiary of the Borrower established for labour and employee benefit purposes or the purpose of which is other than the operation of one or more movie theatres, as provided in Schedule 2 hereto, unless

 

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such excluded Subsidiaries become Operating Subsidiaries, in which case such excluded Subsidiaries shall become Guarantors.

 

“ Grupo Cinemex ” means Grupo Cinemex, S.A. de C. V., a Mexican corporation.

 

“ IMSS ” means Instituto Mexicano del Seguro Social.

 

“ Indemnified Party ” or “ Indemnified Parties ” has the meaning set forth in Section 7.10.

 

“ Indemnitee ” has the meaning set forth in Section 9.04(b).

 

“ INFONAVIT ” means Instituto del Fondo Nacional para la Vivienda de los Trabajadores.

 

“ Interest Coverage Ratio ” means the ratio of (i) Consolidated EBITDA divided by (ii) Consolidated Interest Expense, calculated on the four most recent Fiscal Quarters.

 

“ Interest Expense ” means, for any applicable period, the aggregate interest expense of the Consolidated Borrower for such applicable period, determined in accordance with Mexican GAAP, and excluding all interest expense generated by the Subordinated Debt; provided that, in the event of acquisitions by the Borrower or any of its Consolidated Subsidiaries that include an interest component, the interests related to such acquisitions shall also be taken into consideration.

 

“ Interest Period ” means, with respect to any disbursement made under the Loan, the period commencing on the 26 ^th day of any calendar month and ending on the 26 ^th day of the immediately following month, provided that the first Interest Period with respect to any disbursement made under the Loan, shall be irregular, commencing on the relevant Disbursement Date and ending on the 26 ^th day of the immediately following month; provided , however , that:

 

(a) any Interest Period which would otherwise end on a date which is not a Business Day shall end on the following Business Day; and

 

(b) any Interest Period which would otherwise end after the Expiration Date shall end on the Expiration Date.

 

“ Interest Rate ” means, for any day, a rate per annum equal to the TIIE Rate plus the Applicable Margin.

 

“ Investment ” means any investment in any Person, whether by means of share purchase, capital contribution, loans, Guarantees, time deposits or otherwise (but without including any demand deposit).

 

“ Investor ” or “ Investors ” has the meaning set forth in Section 6.01(n).

 

“ Lead Arranger ” means Banco Inbursa, S.A., Institution de Banca Multiple, Grupo Financiero Inbursa.

 

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“ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, guaranty trust, assignment, security interest or encumbrance of any kind, that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Consolidated Borrower shall be deemed to possess, subject to a Lien, any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

 

“ Loan ” has the meaning set forth in Section 2.01.

 

“ Loan Documents ” means this Agreement, the Promissory Notes and the Collateral Documents, as the same may be amended.

 

“ Loan Purpose ” means (i) capital expenditures and (ii) general corporate expenses.

 

“ Material Debt ” means Debt (except Debt outstanding hereunder and under the Loan Agreement) of the Consolidated Borrower, arising in one or more related or unrelated transactions, in an aggregate principal or face amount exceeding US$8,000,000.00 (Eight Million Dollars 00/100), or its equivalent amount in Pesos, and excluding Subordinated Debt.

 

“ Material Financial Obligations ” means a principal or face amount of Debt (other than the Loan and the Loan Agreement) and/or payment or collateralization obligations in respect of Derivatives Obligations of the Consolidated Borrower, arising in one or more related or unrelated transactions, exceeding in the aggregate US$8,000,000.00 (Eight Million Dollars 00/100) or its equivalent amount in Pesos.

 

“ Material Subsidiary ” means, at any time, a direct or indirect Subsidiary of the Borrower (A) that at any time during the preceding Fiscal Year has consolidated assets equal to or greater than 5% of the consolidated assets of the Consolidated Borrower or (B) whose operating earnings before interest, income tax expense, depreciation and amortization constitute 5% or more of the Consolidated EBITDA for the preceding Fiscal Year.

 

“ Mexican GAAP ” has the meaning set forth in Section 1.03.

 

“ Mexico ” means the United Mexican States.

 

“ Net Cash Proceeds ” means, with respect to any asset sale pursuant to Section 5.07 (b) by the Consolidated Borrower, the aggregate amount of cash received from time to time by or on behalf of such Person in connection with such transaction after deducting therefrom (i) the principal amount and premiums due, if any, received in connection with the sale of assets securing Debt, provided however, that such proceeds are used to repay such Debt, (ii) reasonable and customary brokerage fees, legal fees, accountants’ fees and other similar fees, expenses and commissions, if any, (iii) the amount of taxes payable or estimated in good faith to be payable in connection with or as a result of such transaction, , and (iv) any reserves for the adjustment with respect to the sale price of such assets or any obligation related to such assets, if any, to the extent that in all cases the amounts so deducted are payable to a Person that is not an Affiliate and are properly attributable to such transaction or to the asset that is the subject thereof.

 

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“ Net Taxes Paid ” means, for any relevant period, the aggregate Mexican income taxes actually paid by the Consolidated Borrower, net of all Mexican income tax reimbursements, compensations or other cash received as a consequence of Mexican income taxes paid by Consolidated Borrower.

 

“ Obligors ” means the Borrower and the Guarantors, acting as joint and several obligors, and “Obligor” means any of the foregoing.

 

“ Operating Subsidiary ” means a direct or indirect subsidiary of the Borrower which operates one or more movie theatres and which contributes to the consolidated revenues or operating income of the Consolidated Borrower. For information purposes, the current Operating Subsidiaries are listed in Schedule 2 hereto, this list shall be updated every six months.

 

“ Parent ” means, with respect to any Bank, any Person controlling such Bank.

 

“ Participant ” has the meaning set forth in Section 9.07(b).

 

“ Person ” means any individual or legal entity, a trust or any other entity or organization, including a government or political subdivisions or agencies or instrumentalities thereof.

 

“ Permitted Holders ” means, directly or indirectly, each of (a) of Bain Capital Holdings (Loews) I, L.P. (and its members), Bain Capital AIV (Loews) II, L.P. (and its members) TC Group L.L.C., Carlyle Partners III Loews, L.P., CP II Coinvestment, L.P. Spectrum Equity Investors IV, L.P., Spectrum Equity Investors Parallel IV, L.P., Spectrum IV Investment Managers’ Fund, L.P., and their respective Affiliates or (b) Loews Cineplex Entertainment Corporation or its Subsidiaries or investment funds or other direct or indirect investors of Loews Cineplex Entertainment Corporation.

 

“ Peso ”, “ Pesos ” or “ MXP$ ” means, the lawful currency of Mexico. For purposes of obtaining the Peso equivalent of any amount in Dollars, the parties hereto agree to use the exchange rate published in the Official Gazette of the Federation as the Rate of Exchange to Settle Obligations denominated in Foreign Currency payable in Mexico on the date the conversion is made.

 

“ Pledge Agreement ” means the Stock Pledge Agreement dated as of the date hereof, substantially in the form of Exhibit B hereto, as the same may be amended or otherwise modified from time to time.

 

“ Pledged Properties ” means the property pledged under the Pledge Agreement.

 

“ Pledged Subsidiary ” shall have the meaning set forth in Section 5.05(b) herein.

 

“ Pro-forma EBITDA ” means for any relevant period (i) EBITDA of the Consolidated Subsidiaries in respect of newly opened theatres that have been operating for a period of at least six (6) months, on an annualized basis, provided that EBITDA in respect of newly opened theatres for the estimated period shall be calculated by multiplying it times 0.8 and (ii) EBITDA for the relevant period corresponding to any company, entity or operating assets acquired by the

 

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Borrower or any of its Subsidiaries, determined as if such acquisition had occurred on the first day of the relevant period.

 

“ Promissory Notes ” means promissory notes subscribed by the Borrower and signed by the Guarantors as avales, substantially in the form of Exhibit C hereto, evidencing the obligation of the Borrower to repay each Loan, and “Promissory Note” means any one of such promissory notes issued hereunder.

 

“ Replacement Subsidiary ” means, as of the date of determination, a Subsidiary of the Borrower whose attributable portion of Consolidated EBITDA for the four most recently ended Fiscal Quarter period is at least equal to the attributable portion of Consolidated EBITDA (for the same period) of the applicable Pledged Subsidiary, subject to the occurrence of any of the events described in Section 6.01(m).

 

“ Required Banks ” means at any time Banks having at least 66% (sixty six percent) of the aggregate outstanding amount of the Loans.

 

“ Restricted Payment ” means (i) any dividend or other distribution on any shares representing the Borrower’s capital stock or any of its Consolidated Subsidiaries’ capital stock (except dividends payable solely in shares of its capital stock or dividends paid by the Borrower to Grupo Cinemex); or (ii) any payment on account of the purchase, redemption, withholding or acquisition of (a) any shares of the Borrower’s or any of its Consolidated Subsidiaries’ capital stock or (b) any option, warrant or other rights to acquire shares of the Borrower or any of its Consolidated Subsidiaries’ capital stock (but excluding payments of principal, premium (if any) or interest made pursuant to the terms of convertible debt securities prior to conversion); and (iii) any dividend or other distribution on any shares representing the capital stock of Grupo Cinemex (except for dividends exclusively paid with shares of its capital stock).

 

“ Revolving Debt ” means the Debt under this Agreement.

 

“ Sale and Leaseback Transaction ” means an arrangement by any Person providing for the leasing by such Person of any property or asset acquired by such Person to the Person that sold or transferred such property or assets, not more than 270 days after the acquisition thereof, or the completion of construction or commencement of operations thereof.

 

“ SAR ” means Sistema de Ahorro para el Retiro or the Mexican mandatory retirement fund system.

 

“ Scheduled Payment ” has the meaning set forth in Section 2.03.

 

“ Solvent ” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the liability of such Person on its debts as they become due and payable. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances prevailing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

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“ Subordinated Debt ” means the Borrower’s subordinated Debt, with principal and interests payable on any date after the Expiration Date hereunder and under the ______ Agreement.

 

“ Subsidiary ” of any Person means any legal entity, joint venture, trust or estate of which (or in which) more than 50% of (a) the voting stock or equity interests of such corporation, (b) the interest in the capital or profits of such legal entity, partnership, corporation or joint venture or (c) the beneficial interest in such trust or estate is directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

 

“ Subsidiaries’ Agreement ” means, the Subsidiaries’ Agreement, as the same may be amended or otherwise modified from time to time, substantially in the form of Exhibit D hereto, to be entered into by each Subsidiary of the Borrower that becomes an Operating Subsidiary, by acquisition or otherwise, if any.

 

“ Substitute Interest Rate ” shall have the meaning set forth in Section 8.01.

 

“ Substitute Subsidiary ” shall have the meaning set forth in Section 5.05(b) herein.

 

“ Syndication Agent ” means Scotiabank Inverlat, S.A., Institución de Banca Multiple, Giupo Financiero Scotiabank Inverlat in its capacity as syndication agent for the Banks hereunder and its successors in such capacity.

 

“ Temporary Cash Investment ” means any Investment in (i)(x) direct obligations of the government of the United States of America or any agency or instrumentality thereof, or obligations Guaranteed by the United States of America or any agency or instrumentality thereof and (y) direct obligations of the government of Mexico or any agency or instrumentality thereof, or obligations Guaranteed by Mexico or any agency thereof, (ii) commercial paper rated at least A-1 by Standard & Poor’s Ratings Services or P-1 by Moody’s Investors Service, Inc., (iii)(x) time deposits with, including certificates of deposit issued by, any office located in the United States of America of any bank or trust company which is organized under the laws of the United States of America or any state thereof and has capital, surplus and undivided profits aggregating at least US$1,000,000,000.00 (One Billion Dollars 00/100) and (y) Promissory Notes issued by, or time deposits with BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, Banco Inbursa, S.A., Institución de Banca Múltiple Grupo Financiero Inbursa, Banco J.P. Morgan, S.A., Chase Manhattan Bank Mexico, S.A., Scotiabank Inverlat, S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Banco Nacional de Mexico, S.A., or any other bank or trust company which is organized under the laws of the United States of America or any state thereof or Mexico and has capital, surplus and undivided profits aggregating at least US$1,000,000,000.00, (One Billion Dollars 00/100) including certificates of deposit issued by, any office or Subsidiary of such banks located in Mexico or (iv) repurchase agreements with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above, provided , in each case that such Investment matures within one year from the date of acquisition thereof by the Consolidated Borrower.

 

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“ TIIE Rate ” means for each Interest Period, the 28-day Equilibrium Interbank Interest Rate published by Banco de México in the Official Gazette of the Federation on the first Business Day of each Interest Period.

 

“ Total Net Debt ” means, on any date, Debt of the Consolidated Borrower’s Debt minus cash and Temporary Cash Investments.

 

“ Total Net Debt/ EBITDA Ratio ” means, on the last day of any Fiscal Quarter, the Total Net Debt divided by the Consolidated EBITDA, on such date (based on the last four Fiscal Quarters ending on that date).

 

“ Total Net Debt/Capital ” means, the Total Net Debt divided by Consolidated Net Worth.

 

“ True-Lease/Adjusted Leverage Ratio ” means, the Total Net Debt plus Consolidated Rental Expense of the last four Fiscal Quarters times 8 (eight) divided by the sum resulting from the addition of the Consolidated EBITDA for the last four Fiscal Quarters plus the Consolidated Rental Expense for the last four Fiscal Quarters.

 

“ Unrestricted Subsidiary ” means any Subsidiary of the Borrower whose shares representing its capital stock or other ownership interests are not subject to the terms of the Pledge Agreement.

 

“ Wholly-Owned Subsidiary ” means any Subsidiary all of the shares representing its capital stock or other ownership interests of which (except for shares constituting less than 1% of the voting right and economic interest of any class of capital stock) are at that time directly or indirectly owned by the Borrower.

 

SECTION 1.02. Construction Principles . Capitalized terms used and defined herein shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neutral forms. All references in this Agreement to Clauses, sections, paragraphs and exhibits shall be deemed to be references to Clauses, sections paragraphs and exhibits of this Agreement, unless the context otherwise requires. Any and all exhibits attached hereto shall be deemed an integral part hereof. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, unless such phrase otherwise appears.

 

SECTION 1.03. Accounting Terms and Determinations . Unless otherwise specified herein, all accounting terms used herein or in any of the Loan Documents shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles in Mexico as in effect from time to time (“ Mexican GAAP ”), applied on a basis consistent (except for changes concurred by the Borrower’s independent public accountants) with the most recent audited consolidated financial statements of the Consolidated Borrower, its respective Consolidated Subsidiaries and the Guarantors delivered to the Banks; provided , that if the Borrower notifies the Administrative Agent that the Borrower reasonably wishes to amend any provision hereof to eliminate the effect of any change in Mexican GAAP (or if the Administrative Agent and the Syndication Agent notify the Borrower that the Required

 

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Banks reasonably wish to amend any provision for such purpose), then the Consolidated Borrower’s compliance with such provision shall be determined on the basis of Mexican GAAP in effect immediately before the relevant change in Mexican GAAP became effective, until either such notice is withdrawn or such provision is amended in a manner satisfactory to the Borrower and the Required Banks.

 

ARTICLE 2

 

LOANS

 

SECTION 2.01. Commitments to Lend . (a) each Bank severally, and not jointly, agrees, on the terms and conditions set forth in this Agreement, to grant a current account loan facility (the “ Loan ”), on a revolving basis, to the Borrower on and after the Closing Date, in an aggregate principal amount not to exceed the amount of such Bank’s Commitment. The Borrower may borrow amounts hereunder in one or more disbursements until the Expiration Date. Each disbursement may be for a term of up to 90 days, at the Borrower’s election, provided such term does not exceed the Expiration Date. Each disbursement shall be made on a prorata basis by the Banks, provided that any disbursement shall be made in Pesos at the exchange rate published by Banco de México in the Official Gazelle of the Federation on the relevant Disbursement Date (as defined below). The Loan does not include interest, fees and expenses to be paid by the Borrower and that are set forth herein.

 

(b) Loan Disbursement . The Borrower may disburse amounts under the Loan only if it delivers to each Bank, through the Administrative Agent, a written disbursement request, under the terms of Exhibit E at least 2 (two) Business Days prior to the proposed disbursement under the Loan (the “ Disbursement Date ”). The parties hereto agree that each Bank shall only be required to lend an amount under the Loan in accordance with any disbursement request, in proportion to the Bank’s Commitment and provided that all the Conditions set forth in Section 3 herein have been met.

 

(c) Revolving Facility; Loan Ratable . Each Bank’s Commitment is revolving in nature, and any portion of the Loan repaid or prepaid may be reborrowed by the Borrower. The Loan shall be granted by the Banks ratably in proportion to their respective Commitment. Each Bank’s Commitment shall terminate on the Expiration Date in proportion to the amount of such Bank’s Commitment.

 

SECTION 2.02. Promissory Notes . Each disbursement made by the Borrower under the Loan shall be evidenced by one or more Promissory Notes, guaranteed por aval by the Guarantors, payable to the order of the relevant Bank in the account of its Applicable Lending Office, or in the account determined in writing by the Administrative Agent.

 

SECTION 2.03. Repayment . The Borrower shall pay the principal amount of each disbursement under the Loan in the maturity date of the relevant disbursement, provided that such maturity date shall not exceed the Expiration Date. Each payment of any outstanding principal amount made pursuant to each disbursement shall be equal to the amount borrowed by .the Borrower under the Loan pursuant to such disbursement plus the applicable interests at the

 

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exchange rate published by Banco de Mexico in the Official Gazette of the Federation on the Disbursement Date (the “ Scheduled Payment ”).

 

The Borrower shall make each Scheduled Payment in the account maintained by the Borrower with the Administrative Agent, who shall make the corresponding payments to each Bank from the amounts paid by the Borrower in such account.

 

SECTION 2.04. Interest Rates . (a) The outstanding balance of each Loan disbursement shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Interest Rate. Such interest shall be payable monthly in arrears on the last Business Day of the applicable Interest Period. Any amount due hereunder and not paid at maturity (whether on the stated maturity date, upon acceleration or otherwise), shall bear delinquent interests until the date on which payment is made in full, including overdue interests, but only to the extent permitted by law (after as well as before judgment) on such amounts at a rate per annum equal to 150% of the TIIE Rate that would have been applicable to calculate the Interest Rate corresponding to such payment, plus the Applicable Margin (the “ Delinquent Interest Rate ”).

 

(b) The Administrative Agent shall determine each Interest Rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Banks of each Interest Rate so determined.

 

(c) If the TIIE Rate may not be used as reference, the provisions of Section 8.01 shall apply.

 

SECTION 2.05. Optional Prepayments . (a) Subject to Section 2.07, the Borrower may, upon at least three Business Day’s notice to the Administrative Agent, prepay any Loan disbursement, at any time, in whole or in part, in amounts exceeding MXP$10,000,000.00 (Ten Million Pesos 00/100) or any larger multiple of MXP$5,000,000.00 (Five Million Pesos 00/100), by paying the principal amount to be prepaid together with any accrued interest thereon until the prepayment date. Each such optional prepayment shall be applied in payment of Scheduled Payments in order of their maturity.

 

(b) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall notify each Bank of the contents thereof and of such Bank’s ratable share of such prepayment and such notice shall not thereafter be revoked by the Borrower.

 

Prepayments made according to this Section shall be made on a date on which any Interest Period ends and shall be applied to the Scheduled Payments in order of their maturity; provided that in the event prepayments are not made on a date on which any Interest Period ends, Section 2.07 will be applicable.

 

SECTION 2.06. [Intentionally Omitted]

 

SECTION 2.07. General Provisions as to Scheduled Payments . (a) The Borrower shall make each payment of principal of, and interest on, the Loans, not later than 13:00 hours (Mexico City time) on the date when due, in Pesos, in immediately available funds, in Mexico City, at the Administrative Agent’s Account. The Administrative Agent shall

 

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distribute to each Bank its ratable share from each payment received by the Administrative Agent to be credited to the Banks. Whenever payments of principal, or interest on, Loans or other amounts due hereunder shall be paid on a day which is not a Business Day, the payment date thereof shall be extended to the following Business Day. If the payment date of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended period.

 

SECTION 2.08. Break Funding Cost . If the Borrower makes any payment of principal with respect to any Loan pursuant to Section 2.05 on any day other than the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow or prepay any Loans after notice has been given to any Bank in accordance with Section 2.05(b) or 3.01(k), the Borrower shall reimburse each Bank, within 15 days after demand, for any resulting expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss of margin until the then current Interest Period ends, which shall be paid only in the event the TIIE Rate published pre-payment date or failure to borrow is lower than the TIIE Rate applicable for the relevant Interest Period, in which case the loss of margin shall be calculated as the difference between such rates multiplied, by the amount of the Loan to be prepaid or which the Borrower failed to borrow, divided by 360 (three hundred and sixty) and further multiplied times the days pending from the pre-payment date through the date in which the then applicable Interest Period expires; provided , that such Bank shall have delivered to the Borrower a certificate describing the amount of such loss or expense.

 

SECTION 2.09. Computation of Interest . Interest based on the Interest Rate hereunder shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).

 

ARTICLE 3

 

CONDITIONS

 

SECTION 3.01. Closing . The execution of this Agreement shall occur on the Closing Date, and the obligation of each Bank to grant the Loans hereunder is subject to the satisfaction of the following conditions (with respect to each document, dated on the Closing Date unless otherwise indicated):

 

(a) receipt by the Administrative Agent, in the event that any disbursement under the Loan is made on such date, of Promissory Notes duly executed by the Borrower on account of each Bank, dated on the Disbursement Date and complying with the provisions of Section 2.02, and substantially in the form and substance of Exhibit C hereto;

 

(b) receipt by the Administrative Agent of an opinion issued by Ritch, Heather y Mueller, S.C., Mexican counsel for the Borrower and the Guarantors, in form and substance reasonably satisfactory to the Administrative Agent and covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent may reasonably request;

 

(c) receipt by the Administrative Agent of an opinion issued by Franck, Galicia y Robles, S.C., in form and substance reasonably satisfactory to the Administrative Agent,

 

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covering such additional matters relating to the transactions contemplated hereby as the Administrative Agent may reasonably request;

 

(d) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto;

 

(e) receipt by the Administrative Agent of duly executed counterparts of the Pledge Agreement, together with delivery to the Administrative Agent of (i) stock certificates of the Subsidiaries which shares are granted as collateral thereunder, endorsed in guaranty in favour of the Administrative Agent for the benefit of the Banks; (ii) copies of the stock registry books of the relevant Subsidiary, certified by the Secretary, assistant Secretary or authorized officer of each such Subsidiary, with respect to the shares granted as collateral thereunder, evidencing registration of the pledge in the relevant stock registry book; and (iii) such other instruments and documents as are required to be delivered thereunder and such additional evidence as shall be satisfactory to the Administrative Agent of the creation and perfection of the Liens intended to be created thereby;

 

(f) receipt by the Administrative Agent of a certificate, substantially in form of Exhibit F hereto, and any other form of evidence satisfactory to each of them that all Liens granted in connection with the Existing Loan have been terminated and released;

 

(g) at the Closing Date, the Administrative Agent shall not have received notice from the Required Banks that such Banks:

 

(i) have determined in their good faith judgment that (x) there has occurred any material adverse change in the condition, financial or otherwise, results of operations, business, assets, debt service capacity, tax position, environmental liability or liabilities, or operations of the Consolidated Borrower, since the date of the most recent audited financial statements heretofore received by the Banks; or (y) a material adverse change in the ability of any of the Obligors or any of their Consolidated Subsidiaries to perform their obligations provided for in the Loan Documents; and;

 

(ii) have determined in their good faith judgment that, since the date hereof, there has been a material disruption or adverse change either in (A) the international financial, banking or capital markets, (B) the Mexican financial, economic or political conditions, which in the sole judgment of the Required Banks would make it impractical or inadvisable to proceed with the Loan;

 

(h) the Administrative Agent shall have received a certificate of an Executive Officer of the Borrower, substantially in the form of Exhibit G hereto, to the effect that (A) immediately before and after the Closing Date, no Default or event or condition known to the Borrower or its direct or indirect Subsidiaries, which requires only the giving of notice and/or the lapse of time to become an Event of Default shall have occurred and be continuing; (B) the representations and warranties of such Obligor contained in this Agreement are true and correct on and as of the Closing Date; (C) the execution, delivery and performance by such Obligor of this Agreement or any Loan Document have been duly authorized by all necessary corporate action (if any is necessary) and (D) do not contravene, or constitute a default under, any provision of applicable law, regulation or decree or of the bylaws of such Obligor or of any other agreement, or of any

 

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judgment, injunction or order known thereto or that has been notified or communicated to the Obligors or to the Consolidated Subsidiaries, or other instrument binding on such Obligor;

 

(i) receipt by the Agents of payment of the documented fees and expenses payable to the Agents in their own accounts and for the Bank’s several accounts, pursuant to the Commitment Documents (including, without limitation, any fees and expenses of special counsel for the Agents);

 

(j) receipt of all documents the Administrative Agent may reasonably request relating to the existence of each of the Borrower, its Consolidated Subsidiaries and the Guarantors, the validity of and receipt of all filings, consents and approvals (corporate and/or governmental), if any, required to execute and perform its obligations under this Agreement, the other Loan Documents, the continuing operations in all material respects of the Consolidated Borrower and the Guarantors, and any other matters relevant hereto, all of them in form and substance satisfactory to the Administrative Agent, including, without limitation, the following:

 

(i) photostatic copies of the bylaws of each Obligor in full force and effect in its delivered form on the Closing Date;

 

(ii) photostatic copies of the public deeds which contain the powers of attorney, certified by a Mexican notary public, authorizing the relevant officers of each Obligor to execute this Agreement and the other Loan Documents and any other document or certificate to be delivered on or prior to the Closing Date in connection with the transactions contemplated by this Agreement;

 

(iii) Secretary’s Certificates, as the case may be, duly completed by each Obligor in form and substance satisfactory to the Administrative Agent;

 

(k) receipt by the Administrative Agent, on the Closing Date, of a disbursement request executed by the Borrower substantially in the form of Exhibit E hereto, (i) on the Closing Date, in the event the Borrower makes a disbursement request on the same day and (ii) with at least two (2) days in advance to each disbursement, for the subsequent disbursements;

 

(l) there shall exist no pending litigation, proceedings or investigations, notified or communicated to the Obligors or to the Consolidated Subsidiaries and which could reasonably be expected to have a material adverse change on the financial condition, operation, assets, business, properties or prospects of the Consolidated Borrower or the Guarantors, and which exceed, in the aggregate, US$8,000,000.00 (Eight Million Dollars 00/100), or its equivalent amount in Pesos.

 

ARTICLE 4

 

REPRESENTATIONS

 

Each Obligor represents to each Bank that:

 

SECTION 4.01. Corporate Existence, Powers and Ownership . Each Obligor is a mercantile corporation, duly incorporated and validly existing under the laws of Mexico, and has

 

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all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Each Operating Subsidiary acting as a Guarantor is a Wholly-Owned Subsidiary of the Borrower and Borrower owns the shares of the Wholly-Owned Subsidiaries free and clear of any Liens or restrictions on transfer, except for such Liens derived from the Existing Loan, which are terminated and released on the date hereof and the Liens granted pursuant to the Loan Documents.

 

SECTION 4.02. Corporate and Governmental Authorization; No Contravention . The execution, delivery and performance by each Obligor of the Loan Documents to which it is a party, as well as the continuing operations in all material respects of each Obligor are within the corporate powers of such party, have been duly authorized by all necessary corporate action (if necessary) and require no action by or in respect of, or filing with, any Governmental Authority or any other Person (including, without limitation, any action or filing in connection with pledging of the Pledged Properties and performance of the Collateral Documents) and do not contravene, or constitute a default under, any provision of any applicable law, regulation or decree, or of the bylaws of such party or of any material agreement, or of any judgment, injunction, or order known or that has been notified or communicated to the Obligors or to the Consolidated Subsidiaries, or other instrument binding upon such party or any of its Consolidated Subsidiaries or result in the creation or imposition of any Lien on any asset of an Obligor or of any Consolidated Subsidiary, other than Liens the created under the Pledge Agreement.

 

SECTION 4.03. Binding Effect; Enforceability of Loan Documents; No Default Under Contracts . (a) Each Loan Document (other than the Promissory Notes and the Subsidiaries’ Agreement) constitutes a valid and binding agreement of each Obligor thereto, and each Promissory Note as well as the Subsidiaries’ Agreement, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of each Obligor party thereto, in each case enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency procedures (“ concurso mercantil ”) or similar laws affecting creditors’ rights generally.

 

(b) In addition, each of the Loan Documents is in proper legal form for purposes of enforcement in Mexico by the Administrative Agent, the Syndication Agent or any Bank, as the case may be, of any Obligor’s obligations thereunder, and to ensure the legality, validity, enforceability or admissibility as evidence of any of the Loan Documents in Mexico, it is not necessary that such Loan Document or any other document be filed or recorded with any court or other authority in Mexico.

 

(c) All material leases, contracts and agreements to which any Obligor is a party are in full force and effect and not subject to any dispute between the parties thereto. No Obligor is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any contract, indenture, lease or other agreement to which it is a party which could adversely affect the business, consolidated financial position or consolidated results of operations of each such Obligor.

 

SECTION 4.04. Financial Information; Solvency . (a) The balance sheet of the Consolidated Borrower and Grupo Cinemex as of December 31, 2003 and the related

 

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consolidated statements of income, changes in stockholders’ equity and changes in financial position for the Fiscal Year then ended, reported on by PriceWaterhouseCoopers, S.C., a copy of which has been delivered to each of the Banks, fairly present, in conformity with Mexican GAAP, the consolidated financial position of the Consolidated Borrower and Grupo Cinemex as of such date and their consolidated results of operations and cash flows for such Fiscal Year.

 

(b) Since December 31, 2003 there has been no material adverse change in the business, financial condition, results, assets, properties, operations or prospects of the Consolidated Borrower and Grupo Cinemex.

 

(c) Each of the Obligors and each of the Consolidated Subsidiaries is Solvent, except for Cinemex Masaryk, S.A. de C.V., Cinemex Toluca II, S.A. de C.V., Cinemex San Antonio, S.A. de C.V., Cinemex Tenayuca, S.A. de C.V., Cinemex Jacarandas, S.A. de C.V., Cinemex El Rosario, S.A. de C.V., Cinemex Coacalco, S.A. de C.V., FICC Ciudad de Mexico, S.A. de C.V., Cinemex Producciones, S.A. de C.V., Producciones Expreso Astral, S.A. de C.V., Operadora Moliere, S.A. de C.V. and Teatro Polanco, S.A. de C.V.

 

SECTION 4.05. Compliance with Laws and Licenses. Limited Liability . Each of the Obligors and their Consolidated Subsidiaries are in compliance with (i) all applicable laws, ordinances, rules, regulations and requirements of Governmental Authorities (including, without limitation, IMSS, INFONAVIT, SAR, environmental laws an