Global City Holdings
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24

Oct

Signing of a deferred payment agreement with respect to the transaction involving the sale of Bulgarian real estate assets to subsidiaries of Israel Theatres Ltd.

With reference to the current reports No. 6/2010 dated 3 March 2010, No. 8/2010 dated 25 March 2010 and No. 10/2010 dated 22 April 2010, the Board of the Managing Directors of Cinema City International, N.V. (the “Company”) hereby announces that due to the unfavorable real estate market conditions in Bulgaria, on 23 October 2011 the Company signed a deferred payment agreement (the “Agreement”) with Israel Theatres Real Estate Holding B.V. and Pan-Europe Finance B.V. (together, the "Buyers" and both subsidiaries of Israel Theaters Ltd. ("IT")) according to which the payment from the Buyers to the Company of the remaining EUR 15 million of the purchase price for assets related to real estate development and related activities in Bulgaria (the “Assets”) has been deferred, while the period that the Buyers are required to pay the company a share of their profits from the Assets was extended.

Deterioration of the real estate market in Bulgaria led to cancellation and/or renegotiation of the lease agreements with tenants and the necessity of re-leasing the space on much less favorable conditions with significantly reduced rents, and to the request by the Buyers to defer the payment. The EUR 15 million payment is deferred in the following way:

[1] EUR 5 million will be paid until 22 October 2013, EUR 5 million will be paid until 22 October 2014 and EUR 5 million will be paid until 22 October 2015,

[2] Each amount can be paid sooner without penalty. The unpaid amounts will bear interest payable annually as follows: 5% for the first year, 6% for the second year and 7% for the next two years but in each case not less than 1% greater than CCI's borrowing cost of funds,

[3] The Buyers are required to pay to the Company 25% of any gain realized from selling the Assets for the extended period until 31 December 2018,

[4] The Buyers have released the Company from any claims thay may have against the Company.

Since IT indirectly controls the majority of the shares in the Company, the Agreement was treated as a “related-party transaction”. Consequently, the Supervisory Board of the Company formed a special committee of independent board members who, together with the Company’s audit committee, considered and approved the execution of the Agreement.