SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 13, 2007
(Exact Name of Registrant as Specified in Charter)
(State or Other Jurisdiction
3900 Dallas Parkway, Suite 500, Plano, Texas 75093
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code: 972.665.1000
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On July 15, 2005, we, through a wholly-owned subsidiary, joined National CineMedia, LLC (NCM
LLC), a joint venture with American Multi-Cinema, Inc. (AMC) and Regal CineMedia Holdings, LLC
(Regal, together with us and AMC, the Founding Members) which operates the largest
digital in-theatre network in the U.S. and combines the cinema advertising and non-film event businesses of the Founding Members. On February 13, 2007, National CineMedia, Inc. (NCM
INC), a newly formed entity that now serves as a member
and the sole manager of NCM LLC, completed an initial public offering of its common stock. In connection with the NCM INC
public offering, NCM INC became a member and the sole manager of NCM LLC, and we entered into or
amended various agreements with NCM LLC and NCM INC including the Third Amended and Restated Limited Liability Company Operating Agreement (the Third Restated LLC Agreement) of NCM
LLC, by and among the Founding Members and NCM INC and an Exhibitor Services Agreement, by and
between us and NCM LLC. Prior to the initial public offering of NCM INC common stock, our ownership interest in NCM LLC was approximately 25% and subsequent to the
completion of the offering we hold a 14% interest in NCM LLC.
Third Amended and Restated Operating Agreement of National CineMedia, LLC
On February 13, 2007, Cinemark, Regal, AMC and NCM INC entered into the
Third Restated LLC Agreement of NCM LLC.
Among other things, the Third Restated LLC Agreement provides for the following:
Appointment as Manager. NCM INC becomes a member and the sole manager of NCM LLC. As
the sole manager, NCM INC controls all of the day to day business affairs and decision-making of
NCM LLC without the approval of any other member.
Founding Member Approval Rights. If any director designee to the NCM INC board of
directors designated by Cinemark, Regal or AMC is not appointed to the NCM INC board, nominated by
NCM INC or elected by NCM INC stockholders, as applicable, then each of Cinemark, Regal or AMC (so
long as such member continues to own 5% of NCM LLCs issued and outstanding common membership
units, calculated in accordance with the Third Restated LLC Agreement) will be entitled to certain
approval rights over material actions of NCM LLC.
Distributions. Members are entitled to mandatory distributions of all Available Cash
(as defined in the Third Restated LLC Agreement) on a quarterly basis.
Transfer Restrictions. Members are generally permitted to transfer their membership
units in NCM LLC, subject to limited exceptions. In the event of a transfer of membership units by
us, the transferee will not have the rights and powers of Cinemark (such as the right to designate
directors for nomination), unless the transferee is an affiliate of Cinemark or is controlled by
Cinemark or certain owners of Cinemark.
Common Unit Redemption Right. The members are granted a redemption right in order to
exchange common units of NCM LLC for NCM INC shares of common stock on a one-for-one basis (as
adjusted to account for stock splits, recapitalization or similar events), or at the option of NCM
INC, a cash payment equal to the market price of one share of common stock. If NCM INC determines
to make a cash payment, we have the option to rescind its redemption request within the specified
Preferred Unit Redemption Right. Prior to pricing the initial public offering of NCM INC, NCM LLC completed a recapitalization
whereby (1) each issued and outstanding Class A unit of NCM LLC was split into 44,291 Class A
units, and (2) following such split of Class A Units each issued and outstanding Class A Unit was
recapitalized into one common unit and one preferred unit. As a result, we received 14,159,437
common units and 14,159,437 preferred units. All existing preferred units of NCM LLC, or
55,850,951 preferred units, held by Cinemark, Regal and AMC were redeemed on a pro rata basis upon
execution of the Third Restated LLC Agreement. NCM LLC utilized the proceeds of its new $725.0 million term loan facility and $59.8 million it
received from NCM INC from the proceeds of its initial public offering to redeem all of its
outstanding preferred units upon execution of the Third Restated LLC Agreement in accordance with
the terms thereof. Each preferred unit was redeemed for
$13.7782 and we received approximately $195.1 million as payment in full for
redemption of all of our preferred units in NCM LLC (the Redemption Proceeds). Upon payment of such amount, each preferred
unit was cancelled and the holders of the preferred units ceased to have any rights with respect to
the preferred units.
Amendments. The Third Restated LLC Agreement may generally be amended by a vote of
the members holding a majority of the outstanding common units plus each of Cinemark, Regal and AMC.
Amendments to specified provisions also require the additional consent of NCM INC as the sole
Exhibitor Services Agreement with National CineMedia, LLC
On February 13, 2007, we entered into the Exhibitor Services Agreement with NCM LLC. Among other
things the Exhibitor Services Agreement provides for the following:
Services Provided. NCM LLC will be the exclusive provider within the United States of
advertising services in the Companys theatres (subject to limited exceptions), as well as of the
exclusive provider of meeting events (known as CineMeetings) and digital programming events.
Term. The Exhibitor Services Agreement has a term of 30 years for advertising. The
terms for CineMeetings and digital programming will each be approximately five years with
provisions for automatic renewal if certain financial performance conditions are met by the
CineMeetings or digital programming businesses, as applicable. Beginning one year prior to the end
of the term and ending four years after the end of the term of the Exhibitor Services
Agreement, NCM LLC will have a right of first refusal to enter into a services agreement for the
services provided under the Exhibitor Services Agreement on terms equivalent to those offered by a
Termination. Either party may terminate the agreement upon (1) a material breach of
the Exhibitor Services Agreement by the other party after notice and a cure period; (2) a
government, regulatory or judicial injunction, order or decree; or (3) bankruptcy, insolvency or
dissolution of the other party, appointment of a receiver or trustee for the other party who is not
dismissed within 60 days or cessation of business or inability to pay debts.
Theatres. The Company is required to make all of its theatres available for the
services, including theatres that are newly acquired or built during the term of the Exhibitor
Services Agreement, subject to certain limited exceptions.
Payments. In consideration for NCM LLCs access to the Companys theatre attendees for
on-screen advertising and use of off-screen locations within the Companys theatres for the lobby
entertainment network and lobby promotions, the Company will receive a monthly theatre access fee
under the Exhibitor Services Agreement. The theatre access fee is composed of a fixed payment per
patron, initially $0.07, and a fixed payment per digital screen, which may be adjusted for certain
enumerated reasons. The payment per theatre patron will increase by 8% every five years with the
first such increase taking effect after the end of fiscal 2011 and the payment per digital screen,
initially $66.67, will increase annually by 5%, beginning after the end of fiscal 2007. The theatre
access fee paid in the aggregate to Regal, AMC and Cinemark will not be less than 12% of NCM LLCs
Aggregate Advertising Revenue (as defined in the Exhibitor Services Agreement), or it will be
adjusted upward to reach this minimum payment.
NCM LLC will also pay a portion of the proceeds it receives from NCM INC in the initial public
offering to us for agreeing to modify NCM LLCs payment obligation under the prior exhibitor
services agreement. The modification agreed to by us reflects a shift from circuit share expense
under the prior exhibitor service agreement with us, which previously obligated NCM LLC to pay us a
percentage of revenue, to the above-described monthly theatre access fee. The theatre access fee
will significantly reduce the contractual amounts paid to us by NCM LLC. In exchange for our
agreement to so modify the agreement, NCM LLC paid us approximately $174 million upon execution of,
and as required by, the Exhibitor Services Agreement on February 13, 2007 (the ESA Payment).
In consideration for the exhibition of digital programming events, we will retain 15% of the
revenue from ticket sales, net of taxes and refunds and 100% of the concession sales. NCM LLC will
distribute a total of 15% of the net revenue received from any promotional fee for a digital
programming event to those theatres that participated in such digital programming event, allocated
based upon the number of tickets sold. Revenue from meeting events will be shared based on the
type of event. For meetings that include a movie, we will retain the proceeds of movie ticket
sales for a full sale of the auditorium (at adult ticket prices) and NCM LLC will retain other fees
with the meeting. For meetings without a movie, NCM LLC will pay us 15% of the rental revenue
for the meeting. For church worship services, NCM LLC in the United States will pay us 50% of the rental revenue for the
Non-Competition. Subject to certain limited exceptions, the Exhibitor Services
Agreement includes a broad non-compete provision, whereby we agree not to compete with NCM LLC with
respect to the services that the Exhibitor Services Agreement grants exclusivity to NCM LLC to
Certain Other Provisions. If the exhibitor services
agreements of AMC or Regal are amended, then we have the right to amend the Exhibitor Services
Agreement to match such change pursuant to a most-favored nation provision.
We intend to use the net proceeds, after taxes, from the Redemption
Proceeds, the ESA Payment described above and the approximately $19.9 million we received by selling common units in NCM LLC to NCM INC in connection
with the exercise of the underwriters over-allotment option in the NCM INC initial public offering to repay outstanding debt. However we may decide to use these
proceeds for a purpose other than the repayment of our indebtedness.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The information described above in Item 1.01 with respect to
disposition of assets is incorporated herein by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
||/s/ Michael D. Cavalier
||Michael D. Cavalier
||Senior Vice President General Counsel
Date: February 20, 2007