AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1997
REGISTRATION NO. 333-27819
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
CLEARVIEW CINEMA GROUP, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7832 22-3338356
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
7 WAVERLY PLACE
MADISON, NJ 07940
(201) 377-4646
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE
OFFICES AND PRINCIPAL PLACE OF BUSINESS)
------------------------
A. DALE MAYO
CLEARVIEW CINEMA GROUP, INC.
7 WAVERLY PLACE
MADISON, NJ 07940
(201) 377-4646
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
LEONARD S. FERLEGER DOUGLAS L. GETTER
KIRKPATRICK & LOCKHART LLP DEWEY BALLANTINE
1500 OLIVER BUILDING 1301 AVENUE OF THE AMERICAS
PITTSBURGH, PA 15222-2312 NEW YORK, NY 10019-6092
(412) 355-6500 (212) 259-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
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. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
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. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
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 COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY PART I
OF FORM SB-2
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- -------- --------------------------------------------------- ---------------------------------------------------
<S> <C> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus.............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front and Outside Back Cover Pages;
Additional Information
3. Summary Information and Risk Factors............... Prospectus Summary; Risk Factors
4. Use of Proceeds.................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.................... Underwriting
6. Dilution........................................... Dilution
7. Selling Security Holders........................... Not applicable
8. Plan of Distribution............................... Outside Front Cover Page; Underwriting
9. Legal Proceedings.................................. Business
10. Directors, Executive Officers, Promoters and
Control Persons.................................. Management and Directors
11. Security Ownership of Certain Beneficial Owners and
Management....................................... Principal Stockholders
12. Description of Securities.......................... Description of Capital Stock
13. Interest of Named Experts and Counsels............. Not applicable
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not applicable
15. Organization within Last Five Years................ Certain Transactions
16. Description of Business............................ Prospectus Summary; Business
17. Management's Discussion and Analysis or Plan of
Operation........................................ Management's Discussion and Analysis of Financial
Condition and Results of Operation
18. Description of Property............................ Business
19. Certain Relationships and Related Transactions..... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters.......................................... Outside Front Cover; Risk Factors; Dividend Policy;
Principal Stockholders; Shares Eligible for
Future Sale; Underwriting
21. Executive Compensation............................. Management and Directors
22. Financial Statements............................... Summary; Pro Forma Consolidated Financial Data;
Financial Statements
23. Changes In and Disagreement With Accountants on
Accounting and Financial Disclosure.............. Experts
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such State.
SUBJECT TO COMPLETION, DATED AUGUST 11, 1997
PROSPECTUS
1,000,000 SHARES
[LOGO]
COMMON STOCK
------------------------
All of the shares of Common Stock, $.01 par value (the 'Common Stock'), of
Clearview Cinema Group, Inc. ('Clearview' or the 'Company') offered hereby (the
'Offering') are being sold for the account of the Company. Prior to the
Offering, there has been no public market for the Common Stock. It is
anticipated that the initial public offering price will be between $8.00 and
$10.00 per share. For information relating to the factors considered in
determining the initial offering price to the public, see 'Underwriting.' The
Common Stock has been approved for listing on the American Stock Exchange,
subject to official notice of issuance, under the symbol 'CLV.'
------------------------
SEE 'RISK FACTORS' ON PAGE EIGHT FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
THE PUBLIC AND COMMISSIONS(1) THE COMPANY(2)
<S> <C> <C> <C>
Per Share....................... $ $ $
Total(3)........................ $ $ $
</TABLE>
(1) Does not include a 2 1/2% non-accountable expense allowance payable to Prime
Charter Ltd. (the 'Representative') on behalf of the Underwriters and
warrants to purchase 100,000 shares of Common Stock issuable to the
Representative (the 'Underwriter Warrants'). The Company has also agreed to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
'Underwriting.'
(2) Before deducting expenses payable by the Company, estimated at $850,000,
which does not include the non-accountable expense allowance.
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date of this Prospectus, to purchase up to 150,000 additional
shares of Common Stock on the same terms as set forth above, solely to cover
over-allotments. If the option is exercised in full, the total Price to the
Public will be $ ; Underwriting Discounts and Commissions will be
$ ; and Proceeds to the Company will be $ .
The shares of Common Stock offered hereby are offered by the Underwriters,
subject to prior sale, when, as and if accepted by them and subject to certain
conditions, the right to withdraw, cancel, modify or reject any order in whole
or part, and approval of certain legal matters by counsel. The Underwriters are
committed to purchase and offer for sale all of the shares of Common Stock
offered hereby if any shares are purchased. It is expected that delivery of the
shares of Common Stock offered hereby will be made on or about August , 1997.
------------------------
PRIME CHARTER LTD.
THE DATE OF THIS PROSPECTUS IS AUGUST , 1997.
<PAGE>
[SET FORTH HERE IS A MAP OF THE NEW YORK/NEW JERSEY METROPOLITAN AREA WITH THE
COMPANY'S THEATER LOCATIONS (CURRENT AND PENDING) IDENTIFIED.]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Prospective investors should consider
carefully, among other things, the information set forth under 'Risk Factors'
below. Unless otherwise indicated, all information in this Prospectus assumes no
exercise of the over-allotment option and gives effect to the Concurrent
Transactions (as defined below). See 'The Concurrent Transactions' and
'Description of Capital Stock.' As used in this Prospectus, unless the context
indicates otherwise, the terms 'the Company' and 'Clearview' refer to Clearview
Cinema Group, Inc. and its subsidiaries.
THE COMPANY
Clearview Cinema Group, Inc. is a regional motion picture exhibitor that
operates in-town multiplex theaters primarily located in affluent suburban
communities in the New York/New Jersey metropolitan area. The Company's theaters
offer a mix of first-run commercial, art and family-oriented films designed to
appeal primarily to sophisticated moviegoers and families with younger children.
Since its inception in December, 1994, the Company has grown from four to 17
theaters and from eight to 69 screens. From 1995 to 1996, the Company's revenues
increased from $2.3 million to $8.2 million and theater level cash flow
increased from $344,000 to $1.6 million.
The Company's strategy is to grow primarily through the acquisition or
development of in-town multiplex theaters. The Company seeks locations in the
retail centers of suburban communities that have the characteristics of the
Company's target audiences. The Company intends to build upon its concentration
of existing theaters and to expand into retail centers in suitable communities
throughout the Middle Atlantic and New England states. The Company also will be
opportunistic when evaluating theaters and locations in communities that meet
many, but not necessarily all, of the Company's criteria. The Company intends to
grow by operating additional theaters, adding screens to its existing theaters
and developing theaters in locations not previously used for motion picture
exhibition.
The theatrical exhibition industry is fragmented. Although the fifty
largest theater circuits operated approximately 76% of the screens in use at May
1, 1995, there are a substantial number of small independent exhibitors with
four or fewer theaters. The large circuits that are growing most rapidly appear
to have begun to concentrate on building new mega-multiplex theaters, rather
than buying established theaters. The Company believes that, in the Middle
Atlantic and New England states, in-town theaters serve audiences that prefer
these theaters to the larger out-of-town multiplex theaters. The Company also
believes that in-town theaters can offer movie selections more attuned to their
local markets, better customer service and more convenience when compared to
out-of-town multiplexes. Primarily for these reasons, the Company thinks that
operating in-town theaters can be attractive, and the Company believes that
there are a large number of potential acquisition candidates. The Company seeks
to identify targets that will complement its existing theaters or provide entry
into new markets.
The Company seeks to improve the operating margins of its theaters by
controlling theater level costs through centralized management, by increased
efficiencies in concession purchasing and through film selection that is
sensitive to the local community's tastes. The Company intends to acquire or
develop clusters of theaters that will increase its flexibility by permitting
the sharing of theater managers and skilled and hourly wage personnel. Clearview
believes that its management information system and internal controls gives its
senior management timely access to comprehensive operating data, allows the
local theater managers to focus on day-to-day operations, and enables the
Company to expand its theater operations without incurring proportionate
increases in general and administrative expenses.
The Company seeks theaters that will be the sole or dominant exhibitors in
their geographic film licensing zones. A geographic film licensing zone or 'film
zone' is a geographic area, recognized by film distributors, that generally has
a three to five mile radius in metropolitan and suburban markets, in which a
film is licensed for exhibition at only one theater in that film zone.
Currently, 75% of the Company's theaters are the sole exhibitors in their film
zones.
Clearview's theaters are community-oriented and place a strong emphasis on
patron satisfaction and customer service. The theaters provide clean and
comfortable environments at convenient in-town locations and offer opportune
movie show times, courtesy telephones for local calls and a large variety of
specialty concession
3
<PAGE>
items. The Company's theaters are characterized by custom interiors and decor
designed to enhance the movie-going experience. In addition, the Company
provides party and special event facilities for community residents and
regularly participates in community fundraising and charity functions to
maintain patron loyalty.
The Company's executive offices are located at 7 Waverly Place, Madison,
New Jersey 07940 and its telephone number is (201) 377-4646.
RECENT DEVELOPMENTS
On June 30, 1997, Clearview repurchased warrants to purchase 94,200 shares
of Common Stock (the 'Provident Warrants') from The Provident Bank
('Provident'), the Company's senior lender, for $1.0 million (or $10.62 per
share), plus the right to receive up to an additional $300,000 (or $3.18 per
share) under certain circumstances. The Provident Warrants were issued to
Provident in 1996 in connection with the Company's current financing
arrangements and Provident owns no additional securities of the Company. The
Company believed that this repurchase of the Provident Warrants would facilitate
the Offering. See 'Business--Recent Developments' and 'Certain Transactions.'
On July 21, 1997, Clearview entered into an agreement (the 'UA Agreement')
with United Artists Theatre Circuit, Inc. ('United Artists') to acquire three
theaters and the underlying real estate and the leaseholds of two additional
theaters (the 'UA Theaters') for an aggregate purchase price of $8.65 million.
These five UA Theaters have a total of 14 screens and are located in Wayne, New
Jersey and Bronxville, Larchmont, Mamaroneck and New City, New York. Under the
UA Agreement, the Company may, at its option, acquire only the UA Theater in New
City, New York for $1.4 million. If Clearview determines not to make either
acquisition prior to October 20, 1997, Clearview has no further obligation to
United Artists. See 'Risk Factors--Expansion Plans--Need for Additional
Financing,' 'Use of Proceeds' and 'Business--Recent Developments.'
On July 30, 1997, Provident provided a commitment letter (the 'Commitment
Letter') to the Company for an amendment and expansion of the current financing
arrangements (the 'New Facility'). Under the Commitment Letter, the New Facility
would include a $1.0 million revolving credit line; a term loan for up to $12.0
million; and a $17.0 million facility to finance future capital expenditures and
acquisitions. The Commitment Letter contains customary terms with respect to
entering into the New Facility, including satisfactory documentation, the
completion of all necessary due diligence, no material adverse change in
Clearview's business and consummation of the Offering. There can be no
assurances that the Company and Provident will be able to agree on the terms of
the New Facility. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources.'
The Company has compiled preliminary results for the six month periods
ended June 30, 1996 and 1997, respectively. These results are being reviewed by
the Company and are subject to change, including normal adjustments. On this
preliminary basis, the Company's total revenues for the six months ended June
30, 1996 and 1997 were approximately $2.4 million and $6.2 million,
respectively. Operating income was approximately $89,000 and $106,000 and the
net losses were approximately $81,000 and $618,000 for the two periods,
respectively. The increase in the net loss for the six-month period ended June
30, 1997 as compared to the net loss for the six-month period ended June 30,
1996 appears to be primarily attributable to increases of approximately $675,000
in depreciation and amortization and $550,000 in interest expense. These
increased expenses are attributable to the acquisitions made by the Company in
1996. The change in total revenues from the first quarter of 1997 to the second
quarter of 1997 are primarily a result of the films available for exhibition
during the two periods. See "Risk Factors--Dependence on Films," "--Fluctuations
in Quarterly Results of Operations" and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations-- Overview.'
THE CONCURRENT TRANSACTIONS
Immediately prior to the consummation of the Offering, the Company will
make certain changes in its capital structure, including, among other things,
(i) issuing a dividend of 599 shares of Common Stock on each then-outstanding
share of Common Stock; (ii) exchanging 162.5 A/B Warrants (as defined below) for
66,000 shares of Common Stock; and (iii) issuing 60,000 shares of Common Stock
in exchange for the termination of the right of the holder of the outstanding
shares of the Company's Class A Convertible Preferred Stock, $.01 par value (the
'Class A Preferred Stock'), to sell, under certain circumstances, to the Company
those shares or the shares of Common Stock into which those shares had been
converted. See 'The Concurrent Transactions' and 'Description of Capital Stock.'
Unless otherwise indicated, all information in this Prospectus gives effect
to the Concurrent Transactions.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby............... 1,000,000 shares
Common Stock to be outstanding after the
Offering................................ 1,958,800 shares(1)
Use of proceeds........................... $600,000 will be used to repay certain subordinated indebtedness; and
the Company intends to use the remaining net proceeds of
approximately $6.6 million (based on an estimated offering price of
$9.00 per share) to pay a substantial portion of the purchase price
for the five UA Theaters. If for any reason the Company does not
exercise its right to purchase all five UA Theaters and this
acquisition is not consummated, then the remaining net proceeds will
be used either (i) to pay for one UA Theater in New City, New York
and to prepay, in part, the term loans outstanding under the
Company's current credit agreement with Provident (the 'Current
Facility'), or (ii) to prepay, in part, the term loans outstanding
under the Current Facility, depending upon the circumstances. See
'Risk Factors--Expansion Plans--Need For Additional Financing' and
'Use of Proceeds.'
Proposed American Stock Exchange symbol... CLV
</TABLE>
- ------------------
(1) Excludes the shares of Common Stock reserved for issuance (a) upon
conversion of the outstanding shares of Class A Preferred Stock, (b) upon
exercise of the A/B Warrants, the Underwriter Warrants and the Class A
Warrants (as defined below), and (c) under the 1997 Incentive Plan (as
defined below). See 'The Concurrent Transactions,' 'Management and
Directors--1997 Incentive Plan,' 'Certain Transactions,' 'Description of
Capital Stock' and 'Underwriting.'
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data should be read in
conjunction with 'Management's Discussion and Analysis of Financial Condition
and Results of Operations,' the unaudited pro forma consolidated financial data,
including the notes thereto, and the historical consolidated financial
statements, including the notes thereto, appearing elsewhere in this Prospectus.
The historical summary consolidated financial data presented below are derived
from the Company's consolidated financial statements audited by Wiss & Company,
LLP, independent accountants, whose report covering the Company's financial
statements as of December 31, 1996 and for each of the two years in the period
ended December 31, 1996 and the related financial statements are included
elsewhere herein, and the Company's unaudited consolidated financial statements
as of March 31, 1997 and for the periods ended March 31, 1996 and 1997, which
are included elsewhere herein, and from the Company's audited consolidated
balance sheet as of December 31, 1995, which is not included herein. The summary
pro forma consolidated financial data presented below are derived from the
unaudited pro forma consolidated financial data appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------- --------------------------------------
HISTORICAL(1) PRO FORMA(2) HISTORICAL PRO FORMA(2)
----------------------- ------------ ----------------------- ------------
1995 1996 1996 1996 1997 1997
---------- ---------- ------------ ---------- ---------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Theater Revenues:
Box office......................... $1,759,131 $6,195,399 $13,834,642 $ 781,073 $2,712,210 $3,673,397
Concession......................... 554,671 1,861,155 3,656,988 226,425 743,986 1,022,809
Other.............................. 31,895 141,420 491,823 5,505 49,739 88,977
---------- ---------- ------------ ---------- ---------- ------------
2,345,697 8,197,974 17,983,453 1,013,003 3,505,935 4,785,183
---------- ---------- ------------ ---------- ---------- ------------
Operating Expenses:
Film rental and booking fees....... 823,791 3,022,377 6,456,164 345,411 1,196,126 1,678,704
Cost of concession sales........... 99,261 279,549 540,670 33,097 108,605 151,899
Theater operating expenses......... 1,078,370 3,297,825 7,145,257 463,024 1,226,799 1,697,503
General and administrative
expenses......................... 375,262 589,822 1,125,240 95,525 191,806 211,696
Depreciation and amortization...... 99,632 635,007 1,902,452 35,874 413,011 508,153
Impairment of long-lived assets... -- -- 224,908 -- -- --
---------- ---------- ------------ ---------- ---------- ------------
2,476,316 7,824,580 17,394,691 972,931 3,136,347 4,247,955
---------- ---------- ------------ ---------- ---------- ------------
Operating Income..................... (130,619) 373,394 588,762 40,072 369,588 537,228
Interest Expense..................... 85,697 591,722 1,458,846 54,466 358,966 397,966
---------- ---------- ------------ ---------- ---------- ------------
Net Income (Loss).................... $ (216,316) $ (218,328) $ (870,084) $ (14,394) $ 10,622 $ 139,262
---------- ---------- ------------ ---------- ---------- ------------
---------- ---------- ------------ ---------- ---------- ------------
Net Income (Loss) Per Share of Common
Stock(3)........................... $ (.12) $ (.12) $ (.32) $ (.01) $ .01 $ .05
---------- ---------- ------------ ---------- ---------- ------------
---------- ---------- ------------ ---------- ---------- ------------
OTHER OPERATING DATA:
Theater level cash flow(4)......... $ 344,275 $1,598,223 $ 3,841,362 $ 171,471 $ 974,405 $1,257,077
EBITDA(5).......................... (30,987) 1,008,401 2,716,122 75,946 782,599 1,045,381
Cash flows from(6):
Operating activities............. 118,820 1,154,409 (77,092) 780,455
Investing activities............. (1,238,990) (7,302,199) (110,312) (398,528)
Financing activities............. 852,552 6,722,932 46,855 298,510
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31, 1997
------------------------- --------------------------
1995(7) 1996 HISTORICAL ADJUSTED(8)
---------- ----------- ----------- -----------
(HISTORICAL) (UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................................................... $ 176,203 $ 751,345 $ 1,431,782 $ 396,961
Total assets............................................ 2,029,151 15,760,544 16,630,415 24,330,415
Total long-term debt, including current maturities...... 948,262 10,252,129 10,663,311 12,158,311
Total liabilities....................................... 1,563,532 11,478,631 12,337,880 13,832,880
Redeemable preferred and common stock, at redemption
price(9).............................................. 112,832 2,489,599 3,138,008 --
Total stockholders' equity.............................. 352,787 1,792,314 1,154,527 10,497,535
</TABLE>
6
<PAGE>
NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA
(1) See Note 7 of the Notes to Consolidated Financial Statements of Clearview
Cinema Group, Inc. and Subsidiaries with respect to its acquisitions in
1996.
(2) See 'Pro Forma Consolidated Financial Data.'
(3) Net income (loss) per share is calculated by treating (i) all shares of
Common Stock issued after December 31, 1995 as outstanding for all reported
periods and (ii) all shares of Class A Preferred Stock as converted into
shares of Common Stock and all A/B Warrants, Provident Warrants and Class A
Warrants as exercised for shares of Common Stock for all reported periods,
because their conversion or exercise prices per share are less than the
contemplated initial public offering price of the shares of Common Stock to
be issued in the Offering. The Class A Warrants are exercisable for 282,600
shares of Common Stock. However, such Class A Warrants are not exercisable
until June 1, 2001 unless a change of control or similar transaction
involving the Company occurs. In addition, as a result of the Offering, the
number of shares of Common Stock issuable upon exercise of the Class A
Warrants will be subject to reduction. For example, if the average closing
price of the Common Stock is greater than $17.06 for 120 consecutive
business days and during that period the closing price was never less than
$11.37, then the Class A Warrants will cease to be exercisable and will
immediately terminate. See 'Description of Capital Stock--Warrants--Class A
Warrants.'
(4) Theater level cash flow represents total revenues less film rental and
booking costs, cost of concessions and theater operating expenses. Theater
level cash flow is presented because the Company believes that certain
investors find it useful in analyzing companies in the motion picture
exhibition industry.
(5) Earnings before interest, taxes, depreciation and amortization ('EBITDA') is
a financial measure commonly used in the Company's industry, but should not
be construed as an alternative to operating income (as determined in
accordance with generally accepted accounting principles) as an indicator of
the Company's operating performance or as an alternative to cash flows from
operating activities (as determined in accordance with generally accepted
accounting principles) as a measure of the Company's liquidity.
(6) This cash flow information is derived from the historical financial
statements included herein. Pro forma statements of cash flow are not
required under the applicable regulations and have not been prepared.
(7) This information is derived from the Company's audited consolidated balance
sheet as of December 31, 1995, which is not included herein.
(8) Gives effect to the consummation of the Offering, the application of the net
proceeds from the Offering as described under 'Use of Proceeds,' and the
Concurrent Transactions. See 'The Concurrent Transactions' and 'Use of
Proceeds.'
(9) Represents the aggregate redemption price (determined pursuant to formulas
set forth in the applicable agreements) for the outstanding shares of Class
A Preferred Stock and for 150,000 shares of Common Stock based on the
respective contractual rights of the holder of the Class A Preferred Stock
and a certain holder of Common Stock to sell their shares to the Company.
See 'Certain Transactions.'
7
<PAGE>
RISK FACTORS
The shares of Common Stock offered hereby involve a high degree of risk.
The following risk factors should be considered carefully in addition to the
other information in this Prospectus before purchasing any of the shares of
Common Stock offered hereby. This Prospectus contains certain forward-looking
statements that involve risks and uncertainties, such as statements concerning
the Company's plans, objectives, expectations and intentions. The cautionary
statements made in this Prospectus should be read as being applicable to all
related forward-looking statements wherever they appear in this Prospectus. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include those
discussed below, as well as those discussed elsewhere herein.
LIMITED OPERATING HISTORY AND RESULTS
The Company was incorporated on November 23, 1994 and acquired the
leaseholds of four theaters with eight screens on December 21, 1994. The
Company, which was organized as a vehicle to acquire theaters, acquired the
leaseholds of 10 additional theaters and two theaters and their underlying real
estate since its initial acquisition and had 60 screens in operation as of
December 31, 1996. Therefore, the Company has a limited combined operating
history. In addition, the Company had net losses of $216,316 and $218,328 in
1995 and 1996, respectively, and a net loss of $14,394 in the first quarter of
1996 and net income of $10,622 in the first quarter of 1997. There can be no
assurances that the Company will have net income in the future. See
'Summary--Recent Developments,' 'Pro Forma Consolidated Financial Data,'
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the consolidated financial statements, including the notes
thereto, appearing elsewhere in this Prospectus.
EXPANSION PLANS
The Company's strategy is to acquire or develop theaters at a rapid pace
and add screens in its theaters where appropriate. The Company's ability to
implement its expansion plans will depend on a number of factors, including
obtaining any required financing, the selection and availability of suitable
locations, the hiring and training of sufficiently skilled management and other
personnel and other factors, such as general economic and demographic
conditions, that are beyond the control of the Company. There can be no
assurances that the Company will be able to execute this strategy at its
contemplated pace or to operate profitably the theaters that it acquires the
right to operate or develops. See 'Business--Business Plan.'
NEED FOR ADDITIONAL FINANCING
The Company has entered into the UA Agreement with United Artists, under
which the Company has the right, but not the obligation, to acquire three
theaters and the underlying real estate and the leaseholds of two additional
theaters for an aggregate purchase price of $8.65 million. See 'Business--Recent
Developments.' The Company plans to fund this acquisition by using approximately
$6.6 million from the proceeds of the Offering (based on an estimated offering
price of $9.00 per share), by drawing down on the Company's then-available cash
reserves and by borrowing under the New Facility. See 'Use of Proceeds.' In
order to consummate the acquisition of all five UA Theaters, the Company will
need to secure additional financing. The Company has obtained the Commitment
Letter from Provident with respect to the New Facility. The Commitment Letter
contains customary terms with respect to entering into the New Facility,
including satisfactory documentation, the completion of all necessary due
diligence, no material adverse change in Clearview's business and consummation
of the Offering. There can be no assurances that Clearview and Provident will be
able to agree on the terms of the New Facility or that, if they are unable to do
so, Clearview will be able to obtain the necessary financing for the acquisition
of the five UA Theaters on a timely basis.
In addition, Clearview has entered into a lease for a four-screen theater
that is currently being operated by another exhibitor. See
'Business--Acquisitions.' The Company is obligated to spend approximately
$100,000 of its own funds in connection with the renovation of that four-screen
theater. Such funds should be available from the Company's cash reserves or by
borrowing under the New Facility.
In accordance with the Company's strategic plan, Clearview intends to
continue to acquire theaters and it is pursuing the acquisition of additional
locations. Any such transactions may require the Company to secure new financing
in addition to the New Facility. That new financing may be in the form of
additional equity, subordinated debt or bank financing. There can be no
assurances that the Company will be able to obtain such additional financing at
the time it is needed or that such additional financing, if available, will be
on terms that are acceptable to the Company. Furthermore, any such financing may
result in dilution of the interests of the then-current stockholders of the
Company.
8
<PAGE>
The Company's estimates of its cash requirements to develop or acquire and
renovate theaters and service any debts incurred in connection with such
development or acquisition and renovation are and will be based upon certain
assumptions, including assumptions as to the Company's revenues and cash flow
after any such acquisition or development. There can be no assurances that such
assumptions will prove to be accurate or that unforeseen costs will not be
incurred.
DEPENDENCE ON ABILITY TO SECURE FAVORABLE LOCATIONS AND LEASE TERMS
The success of the Company's strategic plan is dependent on its ability to
acquire or develop theaters in favorable locations with advantageous lease
terms. There can be no assurances that the Company will be able to locate or
develop theaters in appropriate communities or, if it does locate any such
theaters, lease them on favorable terms. The failure of the Company to acquire
or develop theaters in favorable locations or to lease theaters on advantageous
terms could result in an inability to fully implement its strategic plan. See
'Business-- Business Plan.'
POSSIBLE RISKS IN THEATER DEVELOPMENT AND RENOVATION
In connection with the development of new theaters, the Company either will
enter into an agreement with the property owner/developer who will oversee
almost all of the construction and completion of a theater or will oversee that
construction and completion itself. When acquiring the right to operate an
existing theater (either by entering into a lease or purchasing the theater and
its underlying real estate), the Company generally will take responsibility for
the completion of any proposed renovations or the construction of new screens.
As a result, the Company will, at times, be subject to some of the risks
inherent in the development of real estate, many of which are beyond its
control. Such risks include changes in Federal, state or local laws or
regulations, strikes, adverse weather, material shortages and increases in the
costs of labor and materials. There can be no assurances that any such theater
development or renovation will be successfully completed in a timely manner.
DEPENDENCE ON PRESIDENT AND CHIEF EXECUTIVE OFFICER
The Company's success depends upon the continued contributions of A. Dale
Mayo, its Chairman of the Board, President and Chief Executive Officer. The loss
or unavailability of Mr. Mayo to the Company for an extended period of time
could have a material adverse effect upon the Company's business and
development. To the extent that the services of Mr. Mayo are unavailable to the
Company for any reason, the Company will be required to hire other personnel to
manage and operate the Company. There can be no assurances that the Company will
be able to locate qualified personnel to manage and operate the Company or to
employ them on acceptable terms. The Company has entered into an employment
agreement with Mr. Mayo that provides for his employment through 2003. In
addition, the Company maintains 'key man' life insurance in the amount of $10
million on the life of Mr. Mayo. It is contemplated that, after the Offering,
the face value of such insurance will be reduced to $2.5 million. See
'Management and Directors.'
GEOGRAPHIC CONCENTRATION
Each of the Company's current theaters are located in the New York/New
Jersey metropolitan area and the theaters that it has agreed to or is
contemplating acquiring or developing are primarily in the same area. As a
result, negative economic or demographic changes in that area would have a
disproportionately large and adverse effect on the success of the Company's
operations when compared to the effect of any such changes on its competitors
that have a wider geographic distribution of theaters.
CONFLICTS OF INTEREST
Brett E. Marks, who is a director of and a consultant to Clearview, is also
a licensed real estate salesman with First New York Realty Co. Inc. ('First New
York'), a New York City-based realty brokerage firm. Mr. Marks' main consulting
work for Clearview relates to the identification of theaters that could be
suitable acquisition candidates for the Company, because of their locations and
the demographics of their communities, and of communities that could be
appropriate for the development of new theaters, given their demographics and
the available locations in such communities, and the performance of due
diligence with respect thereto. If the Company decides to acquire any such
theater, First New York may be entitled to a commission from the owner of that
theater and Mr. Marks would then be entitled to a commission from First New
York. In connection with Clearview's proposed acquisition of the leasehold of a
theater in Brooklyn, New York, First New York and Mr. Marks will be entitled to
fees of approximately $66,000 and $19,800, respectively, payable by the lessor,
if the transaction is consummated. In addition, in connection with the proposed
acquisition of the UA Theaters, First New York and Mr. Marks will be entitled to
fees of approximately $259,500 and $77,850, respectively,
9
<PAGE>
payable by United Artists, if the transaction is consummated. Mr. Marks and
First New York have entered into agreements with Clearview with respect to their
future business relationships. See 'Certain Transactions.'
COMPETITION
The motion picture exhibition industry is highly competitive, particularly
with respect to licensing films, attracting patrons and finding theater sites.
There are a number of well-established theater circuits with substantially
greater financial and other resources than the Company that operate in the New
York/New Jersey metropolitan area and in the Middle Atlantic and New England
states generally. Some of these theater operators have been in existence
significantly longer than the Company and may be better established in the
Company's markets and better capitalized. Moreover, alternative delivery systems
are available for the presentation of filmed entertainment, including cable
television, direct satellite delivery, video cassettes and pay-per-view
television. An expansion of such delivery systems could have a material adverse
effect on movie theater attendance in general and upon the Company's business
and results of operations in particular. See 'Business--Industry Overview' and
'--Competition.'
DEPENDENCE ON FILMS
The ability of the Company to operate successfully depends upon a number of
factors, the most important of which is the availability of marketable motion
pictures. Poor relationships with film distributors, a disruption in the
production of motion pictures or poor commercial success for motion pictures
could have a material adverse effect upon the Company. See 'Business--Film
Licensing.'
DEPENDENCE ON CONCESSION SALES
Concession sales accounted for approximately 24% and 23% of the Company's
revenues in the years ended December 31, 1995 and 1996, respectively; and,
therefore, the financial success of the Company depends, to a significant
extent, on its ability to successfully generate concession sales in the future.
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
Generally, the most marketable motion pictures have been released during
the summer and the Thanksgiving through year-end holiday season, so that the
motion picture exhibition industry's revenues have been seasonal. The emergence
of hit films during other periods can alter this traditional trend. In any case,
the timing of releases is likely to have a substantial effect on the Company's
results of operations and the results for any one quarter are not necessarily
indicative of results of operations for subsequent quarters. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Results and Seasonality.'
SIGNIFICANT LEVERAGE
The Company has incurred significant debt obligations in the past year in
connection with financing its acquisitions. As of March 31, 1997, Clearview's
total long-term debt, including current maturities thereof, was approximately
$10.7 million, its total assets were approximately $16.6 million and its
stockholders' equity was approximately $1.2 million (deducting approximately
$3.1 million in redeemable equity that, after the Offering, will no longer be
redeemable). As noted above, the Company expects to continue incurring debt to
finance future acquisitions. The Company's ability to meet its debt service
obligations, including the repayment of principal as it comes due, will be
dependent upon its future performance, which, in turn, will be subject to
general economic conditions and to financial, business and other factors
affecting the operations of the Company, many of which are beyond the Company's
control. If the Company fails to generate sufficient cash flow to repay its
debt, the Company may be required to refinance all or a portion of its existing
debt or to obtain additional financing. There can be no assurances that such
refinancing would be possible or that any additional financing could be
obtained.
CERTAIN ANTI-TAKEOVER EFFECTS
Certain provisions of Clearview's proposed Amended and Restated Certificate
of Incorporation (the 'New Certificate') and proposed Amended and Restated
By-laws (the 'New By-laws') could have the effect of delaying, deferring or
preventing a change of control of Clearview not approved by Clearview's Board of
Directors (the 'Board of Directors') or could affect the prices that investors
might be willing to pay in the future for shares of Common Stock. These
provisions include (i) the division of the directors to be elected by the
holders of the Common Stock into three classes; (ii) the right of the holders of
the Class A Preferred Stock to elect directors separately as a class; (iii) a
requirement that any action to be taken by the holders of the Common Stock be
taken at a meeting of the stockholders of the Company; (iv) advance notice
requirements for stockholder proposals and nominations; (v) a requirement that
the holders of two-thirds of the Common Stock and the
10
<PAGE>
Class A Preferred Stock, voting together, approve the amendment, alteration or
repeal of certain provisions of the New Certificate and the New By-laws; and
(vi) the authority of the Board of Directors to fix the rights and preferences
of, and issue, additional shares of the preferred stock, $.01 par value (the
'Preferred Stock'), of the Company without further action by the holders of the
Common Stock. See 'The Concurrent Transactions' and 'Description of Capital
Stock.'
OWNERSHIP AND SIGNIFICANT INFLUENCE OF PRINCIPAL STOCKHOLDERS
After consummation of the Offering, the current stockholders of the Company
will collectively own approximately 48.9% of the outstanding Common Stock
(approximately 45.5% if the over-allotment option is exercised in full) and
approximately 58.8% of the Common Stock assuming the conversion of all
outstanding shares of Class A Preferred Stock (approximately 55.4% if the
over-allotment option is exercised in full). As a result of this ownership, if
the current stockholders or some combination thereof act in concert, they will
have the ability to exert significant influence over the policies and affairs of
the Company and corporate actions requiring stockholder approval, including the
composition of the Board of Directors. This concentration of ownership could
have the effect of delaying, deferring or preventing a change of control of the
Company, including a business combination with an unaffiliated party, and could
also affect the prices that investors might be willing to pay in the future for
shares of Common Stock. See 'Management and Directors,' 'Principal Stockholders'
and 'Description of Capital Stock.'
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of shares of Common Stock in the Offering will experience
immediate and substantial dilution of $5.16 in net tangible book value per share
with respect to their shares of Common Stock. In addition, the Company intends
to grant options to certain officers of and a consultant to the Company to
purchase up to 110,000 shares of Common Stock at the initial public offering
price. See 'Dilution,' 'Management and Directors--1997 Incentive Plan' and
'Principal Stockholders.'
ABSENCE OF PRIOR PUBLIC MARKET
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurances that an active trading market for the Common
Stock will develop or be sustained. The initial public offering price for the
shares of Common Stock offered hereby will be determined by negotiation between
the Company and the Representative and may not be indicative of the market price
of the Common Stock after consummation of the Offering. See 'Underwriting.'
There can be no assurances that the market price of the Common Stock will not
decline below the initial public offering price. After consummation of the
Offering, the market price of the Common Stock will be subject to fluctuations
in response to a variety of factors, including variations in the Company's
operating results, changes in competitors' circumstances and general economic,
political and market conditions.
SHARES ELIGIBLE FOR FUTURE SALE
A total of 624,600 shares of Common Stock held by the Company's existing
stockholders will be eligible for sale pursuant to exemptions from registration
under the Securities Act of 1933, as amended (the 'Securities Act'), including
exemptions provided by Rule 144 under the Securities Act, following consummation
of the Offering. The Company has also granted registration rights to its
existing stockholders who will beneficially own 1,426,200 shares of Common Stock
following consummation of the Offering. In addition, the Company intends to
register 200,000 shares of Common Stock reserved for issuance pursuant to the
1997 Incentive Plan. See 'Management and Directors--1997 Incentive Plan.' On the
other hand, the Company and its existing stockholders have agreed that they will
not, directly or indirectly, without the prior written consent of the
Representative, for a period of one year after the date of this Prospectus,
sell, offer to sell, solicit an offer to buy, contract to sell, pledge, grant
any option for the sale of, or otherwise transfer or dispose of, or cause the
transfer or disposition of, any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for any shares of Common Stock,
or exercise any registration rights with respect to any shares of Common Stock
or any securities convertible into or exchangeable or exercisable for any shares
of Common Stock. No prediction can be made as to the effect, if any, that future
sales of any of these shares of Common Stock or the availability of these shares
for future sale will have on the market price of the Common Stock prevailing
from time to time. Any sales of a substantial number of these shares of Common
Stock in the public market following the Offering, or the perception that such
sales could occur, could adversely affect the market price of the Common Stock
and could impair the Company's ability to raise capital through an offering of
its equity securities. See 'Shares Eligible for Future Sale' and 'Underwriting.'
11
<PAGE>
THE CONCURRENT TRANSACTIONS
As of the date of this Prospectus: (i) the Company's outstanding capital
stock consists of 1,388 shares of Common Stock and 779 shares of Class A
Preferred Stock (which are convertible into 779 shares of Common Stock); (ii)
the holders of $1.1 million aggregate principal amount of 8% subordinated
promissory notes of the Company (the '8% Notes') hold 200 warrants to purchase
up to 200 shares of Common Stock (the 'A/B Warrants'); and (iii) the holder of
the outstanding shares of Class A Preferred Stock holds warrants to purchase 471
shares of Class A Preferred Stock.
Immediately prior to the consummation of the Offering, the New Certificate
will become effective (the 'Certificate Amendment'). Among the amendments to the
Company's current Certificate of Incorporation contained in the New Certificate
are changes to the terms of the Class A Preferred Stock that include the
following: The holders of the Class A Preferred Stock will only vote separately
as a class in connection with (i) any change in the New Certificate that would
adversely affect their rights, (ii) any proposed issuance of shares of Preferred
Stock that would rank senior or pari passu to the Class A Preferred Stock with
respect to dividends or upon liquidation or dissolution, (iii) and the election
of no more than two directors of the Company. The holders of the shares of Class
A Preferred Stock will otherwise vote with the holders of the shares of Common
Stock on all matters other than the election of directors while they have the
right to elect at least one director separately. The right of the holders of the
Class A Preferred Stock to vote separately as a class with respect to the
issuance of shares of Preferred Stock that rank pari passu to the Class A
Preferred Stock with respect to dividends or upon liquidation or dissolution
will terminate once the outstanding shares of Class A Preferred Stock represent
less than 5% of the combined voting power of the outstanding capital stock of
Clearview. Likewise, the right of the holders of the Class A Preferred Stock to
vote separately for the election of directors will terminate once the
outstanding shares of Class A Preferred Stock represent less than 5% of the
combined voting power of the outstanding capital stock of Clearview. In those
circumstances, those holders would be entitled to vote with the holders of
shares of Common Stock for the election of directors. See 'Description of
Capital Stock.'
Immediately prior to the consummation of the Offering, a 600 to 1 stock
split on the Common Stock will become effective and will be accomplished by a
dividend of 599 shares of Common Stock on each then-outstanding share of Common
Stock (the 'Stock Split').
The holders of the A/B Warrants have agreed that they will exchange 162.5
A/B Warrants for 66,000 shares of Common Stock after the Stock Split (the
'Warrant Exchange') and amend two sets of the 8% Notes, with an aggregate
principal amount of $500,000, so that they mature on October 31, 1997. At the
same time, CMNY Capital II, L.P. ('CMNY'), a holder of 75 A/B Warrants, will
terminate its right to sell, under certain circumstances, the shares of Common
Stock it owns as of the date of this Prospectus to the Company, and the Company
will terminate its right to purchase, under certain circumstances, those same
shares (the 'Put/Call Termination').
The holder of the outstanding shares of Class A Preferred Stock, MidMark
Capital, L.P. ('MidMark'), has agreed to terminate, immediately prior to the
consummation of the Offering, its right to sell, under certain circumstances, to
the Company those shares of Class A Preferred Stock or the shares of Common
Stock into which those shares had been converted (the 'Put Termination'). In
consideration for the termination of this right, the Company will issue to
MidMark 60,000 shares of Common Stock. In connection with the Put Termination,
the warrants to purchase 471 shares of Class A Preferred Stock will be exchanged
for a new warrant (the 'Class A Warrant') exercisable for up to 282,600 shares
of Common Stock (the 'Warrant Amendment').
The Certificate Amendment, the Stock Split, the Warrant Exchange, the
Put/Call Termination, the Put Termination and the Warrant Amendment are
sometimes referred to in this Prospectus as the 'Concurrent Transactions.' The
consummation of the Offering and the Concurrent Transactions are conditioned
upon one another.
Unless otherwise indicated, all information in this Prospectus gives effect
to the Concurrent Transactions.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deducting the underwriting discounts and commissions and
estimated offering expenses payable by the Company, are estimated to be
approximately $7.2 million (assuming an initial public offering price of $9.00
per share). The Company intends to use $600,000 of the net proceeds to repay a
senior subordinated promissory note (the 'Senior Note') and to use the remaining
net proceeds of approximately $6.6 million to pay a substantial portion of the
purchase price for the five UA Theaters. If the Company decides not to exercise
its right to purchase the five UA Theaters, but does decide to purchase one UA
Theater in New City, New York, the Company intends to use approximately $1.4
million of the net proceeds of the Offering to purchase that theater and will be
obligated under the Current Facility to use the remaining net proceeds of
approximately $5.2 million to prepay, in part, the outstanding term loans under
the Current Facility. If the Company does not acquire any UA Theater within 90
days after the consummation of the Offering, the Company will be obligated under
the Current Facility to use the remaining net proceeds of approximately $6.6
million to prepay, in part, the outstanding term loans under the Current
Facility. See 'Business--Recent Developments.' If the Company does acquire all
five UA Theaters within 90 days of the consummation of the Offering, the
Company's obligation to prepay the outstanding term loans under the Current
Facility with any of the net proceeds of the Offering will be permanently
waived. See 'Certain Transactions.' The Company will need to obtain additional
financing either under the New Facility or otherwise in order to consummate the
acquisition of all five UA Theaters. See 'Risk Factors--Expansion Plans--Need
for Additional Financing.' Pending any such uses, net proceeds will be invested
in short-term, interest bearing, investment grade securities.
The Senior Note that will be repaid with a portion of the net proceeds from
the Offering was issued by the Company as part of the consideration for three
theaters acquired by the Company in December, 1996. The principal amount of the
Senior Note is $600,000 and its interest rate until December 13, 1997 is 12% per
annum and increases 2% each year thereafter to a maximum of 18%. The Senior Note
will mature at the earlier to occur of December 13, 2001 or the consummation of
an initial public offering of debt or equity securities by the Company.
The term loans outstanding under the Current Facility as of July 31, 1997
were incurred to finance the acquisitions and capital expenditures that occurred
in 1996 to finance the renovations of the theaters in Chester and Summit, New
Jersey in 1997 and to repurchase the Provident Warrants. As of March 31, 1997,
the total outstanding principal amount of the term loans was approximately $9.0
million. The interest rate on the term loans is currently 10.5% and equals two
percent (2%) above Provident's prime rate other than the term loan used to
repurchase the Provident Warrants. Interest is payable monthly in arrears. The
final maturity of one of the original term loans is July 1, 2001, the final
maturity of the other original term loan is December 31, 2001 and the final
maturity of the third term loan is the earlier of June 30, 2002 or 90 days after
the consummation of the Offering. The Company is obligated to pay principal on a
quarterly basis pursuant to an amortization schedule set forth in the Current
Facility. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources.'
DIVIDEND POLICY
Clearview currently intends to retain its future earnings, if any, to
support its operations and to fund the development and growth of its business
and does not anticipate paying any cash dividends on its Common Stock or Class A
Preferred Stock in the foreseeable future. Clearview paid $30,000 in dividends
in the aggregate in 1995 and $10,000 in dividends in the aggregate in 1996. The
decision whether to pay future dividends will be in the discretion of the Board
of Directors and will depend upon the Company's earnings, financial condition,
capital requirements, level of indebtedness and other factors that the Board of
Directors deems relevant, subject to any contractual restrictions with respect
to the payment of dividends. The Current Facility does and it is likely that the
New Facility will prohibit the payment of any dividends. Payment of dividends on
the Common Stock is also subject to the requirement that the Company pay
dividends on the Class A Preferred Stock at the same time that dividends are
paid on the Common Stock in a per share amount equal to the product of the
dividend payable per share of Common Stock and the number of shares of Common
Stock into which a share of Class A Preferred Stock is then convertible.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 and as adjusted to reflect the sale of the 1,000,000 shares of
Common Stock offered hereby (at an assumed initial public offering price of
$9.00 per share), the application of the net proceeds therefrom as described
under 'Use of Proceeds' and the Concurrent Transactions. See 'The Concurrent
Transactions' and 'Use of Proceeds.' This table should be read in conjunction
with 'Pro Forma Consolidated Financial Data' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the consolidated
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
ACTUAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
SHORT-TERM DEBT:
Notes payable--bank and other............................................... $ 966,267 $ 1,046,267
Subordinated debt--related parties.......................................... 484,260 484,260
----------- --------------
Total..................................................................... 1,450,527 1,530,527
----------- --------------
----------- --------------
LONG-TERM DEBT (EXCLUDING CURRENT PORTIONS):
Notes payable--bank and other............................................... 8,016,314 10,031,314
Subordinated debt--related parties.......................................... 596,470 596,470
Subordinated debt--other.................................................... 600,000 --
----------- --------------
Total..................................................................... 9,212,784 10,627,784
----------- --------------
REDEEMABLE PREFERRED STOCK AT REDEMPTION PRICE................................... 2,780,703 --
----------- --------------
REDEEMABLE COMMON STOCK AT REDEMPTION PRICE...................................... 357,305 --
----------- --------------
STOCKHOLDERS' EQUITY:
Undesignated Preferred Stock:
Authorized 2,498,697 shares, issued and outstanding--none................. -- --
Class A Preferred Stock, par value $.01, authorized 1,303 shares;
outstanding 779 shares.................................................... 8 8
Common Stock, par value $.01, authorized 10,000,000 shares; outstanding
832,800 shares (actual) and 1,958,800 (as adjusted)....................... 8,328 19,588
Additional paid-in capital.................................................. 4,827,096 11,145,836
Accumulated deficit......................................................... (542,897) (667,897)
Less: Redemption price of redeemable stock.................................. (3,138,008) --
----------- --------------
Total stockholders' equity................................................ 1,154,527 10,497,535
----------- --------------
Total capitalization...................................................... $13,505,319 $ 21,125,319
----------- --------------
----------- --------------
</TABLE>
- ------------------
(1) Gives effect to (i) the Concurrent Transactions, the receipt of the
estimated net proceeds of the Offering of approximately $7.2 million and
repayment of the Senior Note, (ii) the Aquisition (as defined
below), and (iii) the Company's repurchase of the Provident Warrants. See
'The Concurrent Transactions,' 'Pro Forma Consolidated Financial Data' and
'Business--Recent Developments.'
14
<PAGE>
DILUTION
The net tangible book value of the Company as of March 31, 1997 was
$(1,584,007), or $(1.90) per share of Common Stock. Net tangible book value per
share represents the amount of the Company's tangible assets less total
liabilities divided by the number of shares of Common Stock outstanding. After
giving effect to (i) the sale of the shares of Common Stock offered hereby (at
an assumed initial public offering price of $9.00 per share), (ii) deduction of
the underwriting discounts and commissions and estimated offering expenses
payable by the Company, and (iii) after giving effect to the Concurrent
Transactions, the Probable Acquisition and the repurchase of the Provident
Warrants, the Company's net tangible book value as of March 31, 1997 would have
been $7,524,180, or $3.84 per share of Common Stock. This represents an
immediate increase in net tangible book value of $5.74 per share for existing
stockholders and an immediate dilution of $5.16 per share to the purchasers of
shares of Common Stock in the Offering. The following table illustrates the per
share dilution to investors in the Offering:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1).............................................. $9.00
-----
Net tangible book value per share before the Offering........................................... $(1.90)
------
Increase per share attributable to the sale of shares of Common Stock in the Offering(2)........ 5.74
------
Net tangible book value per share after the Offering(2)......................................... $3.84
-----
Dilution per share to new investors(3).......................................................... $5.16
-----
-----
</TABLE>
- ------------------
(1) Before deduction of underwriting discounts and commissions and estimated
offering expenses payable by the Company.
(2) After deduction of underwriting discounts and commissions and estimated
offering expenses payable by the Company and after giving effect to the
Concurrent Transactions, the Probable Acquisition and the repurchase of the
Provident Warrants. See 'The Concurrent Transactions,' 'Use of Proceeds,'
'Pro Forma Consolidated Financial Data' and 'Business--Recent Developments.'
(3) Dilution is determined by subtracting net tangible book value per share
after the Offering from the assumed initial public offering price per share.
This calculation does not include the 22,500 shares of Common Stock issuable
upon exercise of the 37.5 A/B Warrants that will be outstanding after the
Concurrent Transactions or the up to 282,600 shares of Common Stock issuable
upon exercise of the Class A Warrants that will be outstanding after the
Concurrent Transactions.
The following table summarizes as of March 31, 1997 the differences between
the existing stockholders and new investors with respect to the number of shares
of Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by existing stockholders and by new investors at an
assumed initial public offering price of $9.00 per share, before deduction of
the underwriting discounts and commissions and estimated offering expenses
payable by the Company:
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED ---------------------------------------
-------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 958,800(1) 48.9% $ 2,031,200(2) 18.4% $2.12
--------- ------- ----------- ------- ------
New investors....................................... 1,000,000 51.1% 9,000,000 81.6% $9.00
--------- ------- ----------- ------- ------
Total.......................................... 1,958,800 100.0% $11,031,200 100.0%
--------- -----------
</TABLE>
- ------------------
(1) Excludes the shares of Common Stock into which the shares of Class A
Preferred Stock are convertible.
(2) Total consideration from existing stockholders excludes the consideration
paid for the outstanding shares of Class A Preferred Stock and represents
the amounts paid in cash for shares of Common Stock and the valuation of
certain assets exchanged for shares of Common Stock. See 'Certain
Transactions.'
15
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
Set forth below are two sets of pro forma financial information and related
notes. The first set presents pro forma financial information for the
acquisitions that Clearview consummated in 1996 (the 'Acquisitions'). This set
includes an unaudited pro forma consolidated statement of operations of the
Company for the year ended December 31, 1996 giving effect to the Acquisitions
(see Note 1 of Notes to Pro Forma Consolidated Statement of Operations) as if
they had occurred on January 1, 1996.
The second set presents pro forma financial information for the proposed
acquisition of the UA Theaters from United Artists (the 'Probable Acquisition').
See 'Business--Recent Developments.' This set includes (i) an unaudited pro
forma consolidated balance sheet of the Company giving effect to the Probable
Acquisition as if it had occurred on March 31, 1997; (ii) an unaudited pro forma
consolidated statement of operations of the Company for the three months ended
March 31, 1997 giving effect to the Probable Acquisition as if it had occurred
on January 1, 1997; and (iii) an unaudited pro forma consolidated statement of
operations of the Company for the year ended December 31, 1996 giving effect to
the Acquisitions and the Probable Acquisition as if they had occurred on January
1, 1996.
This pro forma financial information is based on the estimates and
assumptions set forth herein and in the notes thereto and has been prepared
utilizing the consolidated and combined financial statements and notes thereto
appearing elsewhere in this Prospectus.
The following unaudited pro forma financial information is presented for
informational purposes only and is not necessarily indicative of (i) the results
of operations of the Company that actually would have occurred had the
Acquisitions or the Probable Acquisition been consummated on the dates indicated
or (ii) the results of operations of the Company that may occur or be obtained
in the future. The following information is qualified in its entirety by
reference to and should be read in conjunction with 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the Company's
consolidated financial statements, including the notes thereto, and the other
historical financial information appearing elsewhere in this Prospectus.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
NELSON
HISTORICAL FERMAN MAGIC LESSER ADJUSTMENTS PRO FORMA
----------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Theater Revenues:
Box office...................... $ 6,195,399 $1,515,839 $1,743,015 $ 802,043 $10,256,296
Concession...................... 1,861,155 114,922 521,737 110,882 2,608,696
Other........................... 141,420 23,308 149,986 2,775 317,489
----------- ---------- ---------- ----------- -----------
8,197,974 1,654,069 2,414,738 915,700 13,182,481
----------- ---------- ---------- ----------- -----------
Operating Expenses:
Film rental and booking fees.... 3,022,377 564,142 809,353 456,563 -- 4,852,435
Cost of concession sales........ 279,549 -- 85,090 -- -- 364,639
Theater operating expenses...... 3,297,825 622,997 865,639 530,704 -- 5,317,165
General and administrative
expenses...................... 589,822 282,220 169,032 12,800 -- 1,053,874
Depreciation and amortization... 635,007 67,317 168,704 11,634 639,636 1,522,298
----------- ---------- ---------- ----------- ----------- -----------
7,824,580 1,536,676 2,097,818 1,011,701 639,636 13,110,411
----------- ---------- ---------- ----------- ----------- -----------
Operating Income (Loss) 373,394 117,393 316,920 (96,001) (639,636 ) 72,070
Interest Expense.................. 591,722 35,965 45,408 -- 667,751 1,340,846
----------- ---------- ---------- ----------- ----------- -----------
Net Income (Loss) $ (218,328) $ 81,428 $ 271,512 $ (96,001) $(1,307,387) $(1,268,776)
----------- ---------- ---------- ----------- ----------- -----------
----------- ---------- ---------- ----------- ----------- -----------
Net Income (Loss) per share of
Common Stock.................... $ (.12) $ (.71)
----------- -----------
----------- -----------
</TABLE>
16
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NOTE 1--Theater Acquisitions:
During 1996, the Company acquired the right to operate nine theaters
located in New Jersey and New York. The acquisitions were accounted for under
the purchase method of accounting. Under the purchase method of accounting, the
results of operations of an acquired entity are included in the Company's
historical consolidated financial statements from its acquisition date. Under
that method of accounting, acquired assets are included therein based on an
allocation of their aggregate purchase price as of their dates of acquisition.
The financial information for each of the acquired entities reflects the results
of operations of that entity for the period from January 1, 1996 to their
respective dates of acquisition. The acquisitions are described as follows:
Nelson Ferman Acquisition
The Company purchased three New Jersey theaters and one New York theater in
May, 1996 from four entities that were affiliates of Nelson Ferman, Inc. The
aggregate acquisition cost of $6.11 million was paid by means of $5.0 million in
cash and the issuance of 208,200 shares of Common Stock.
Lesser Acquisition
The Company purchased two New York theaters in July, 1996 from Bedford
Cinema Corp. and Kisco Cinema, Inc. The acquisition cost of $1,499,000 was paid
in cash.
Magic Cinemas Acquisition
The Company purchased three New Jersey theaters in December, 1996 from
Magic Cinemas, LLC. The purchase price of $5.0 million was paid with a $4.4
million secured note and the Senior Note.
NOTE 2--Presentation and Pro forma Adjustments:
The unaudited pro forma consolidated statement of operations for the year
ended December 31, 1996 presented above has been prepared as if the acquisitions
described in Note 1 had been consummated as of January 1, 1996.
Pro forma adjustments have been made for the following:
(a) Depreciation expense based on the increase in the book value
of the acquired theaters' property and equipment, which resulted from the
recording of the three purchases and the depreciation of the leaseholds
over the terms of the respective leases.
(b) Amortization expense adjustments reflect, over a 15-year
period, the amortization of the excess of cost over the fair value of
assets acquired.
(c) Interest expense adjustments reflect interest costs on debt
obligations incurred as if the related acquisition financing had occurred
on January 1, 1996.
NOTE 3--Net Income (Loss) per share of Common Stock:
Net income (loss) per share is calculated by treating (i) all shares of
Common Stock issued after December 31, 1995 as outstanding for all reported
periods and (ii) all shares of Class A Preferred Stock as converted into shares
of Common Stock and all A/B Warrants, Provident Warrants and Class A Warrants as
exercised for shares of Common Stock for all reported periods, because their
conversion or exercise prices per share are less than the contemplated initial
public offering price of the shares of Common Stock to be issued in the
Offering. The Class A Warrants are exercisable for 282,600 shares of Common
Stock. However, such Class A Warrants are not exercisable until June 1, 2001
unless a change of control or similar transaction involving the Company occurs.
In addition, as a result of the Offering, the number of shares of Common Stock
issuable upon exercise of the Class A Warrants will be subject to reduction. For
example, if the average closing price of the Common Stock is greater than $17.06
for 120 consecutive business days and during that period the closing price was
never less than $11.37, then the Class A Warrants will cease to be exercisable
and will immediately terminate. See 'Description of Capital Stock--Warrants--
Class A Warrants.'
17
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
FOR THE PROBABLE ACQUISITION
MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
UA
HISTORICAL THEATERS ADJUSTMENTS PRO FORMA
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash........................................................ $ 1,431,782 $ 65,666 $(1,100,487)(B)(C)(D) $ 396,961
Inventories................................................. 47,624 22,930 -- 70,554
Other current assets........................................ 161,007 43,799 (43,799)(B) 161,007
----------- ---------- ----------- -----------
Total current assets...................................... 1,640,413 132,395 (1,144,286) 628,522
----------- ---------- ----------- -----------
Property and equipment, less accumulated depreciation......... 11,455,621 4,827,793 3,647,277(C) 19,930,691
----------- ---------- ----------- -----------
Other assets:
Intangible assets, less accumulated amortization............ 2,673,355 -- 300,000(C) 2,973,355
Due from parent and affiliate............................... -- 3,247,520 (3,247,520)(B) --
Project acquisition costs................................... 414,602 -- -- 414,602
Escrow deposits............................................. 294,529 -- -- 294,529
Deferred offering costs..................................... 65,179 -- (65,179)(D) --
Security deposits and other assets.......................... 86,716 2,000 -- 88,716
----------- ---------- ----------- -----------
3,534,381 3,249,520 (3,012,699) 3,771,202
----------- ---------- ----------- -----------
$16,630,415 $8,209,708 $ (509,708) $24,330,415
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........................ $ 966,267 $ -- $ 80,000(E) $ 1,046,267
Current maturities of subordinated notes payable, related
parties................................................... 484,260 -- -- 484,260
Accounts payable and accrued expenses....................... 1,674,569 932,282 (932,282)(B) 1,674,569
----------- ---------- ----------- -----------
Total current liabilities................................. 3,125,096 932,282 (852,282) 3,205,096
----------- ---------- ----------- -----------
Long-term liabilities:
Long-term debt, less current maturities..................... 8,016,314 -- 2,015,000(E) 10,031,314
Subordinated notes payable, less current maturities:
Related parties........................................... 596,470 -- -- 596,470
Other..................................................... 600,000 -- (600,000)(D) --
----------- ---------- ----------- -----------
9,212,784 -- 1,415,000 10,627,784
----------- ---------- ----------- -----------
Redeemable Preferred Stock at redemption price................ 2,780,703 -- (2,780,703)(F) --
----------- ---------- ----------- -----------
Redeemable Common Stock at redemption price................... 357,305 -- (357,305)(F) --
----------- ---------- ----------- -----------
Stockholders' equity:
Undesignated Preferred Stock:
Authorized 2,498,697 shares, issued and
outstanding--none....................................... -- -- -- --
Class A Preferred Stock, par value $.01, authorized 1,303
shares; outstanding 779 shares............................ 8 -- -- 8
Common Stock, par value $.01, authorized 10,000,000 shares;
outstanding 832,800 shares (historical) and 1,958,800
shares (pro forma)........................................ 8,328 -- 11,260(C)(D)(F) 19,588
Additional paid-in capital.................................. 4,827,096 -- 6,318,740(C)(D)(E)(F) 11,145,836
Accumulated deficit......................................... (542,897) 7,277,426 (7,402,426)(B)(D)(E)(F) (667,897)
Less: Redemption price of redeemable stock.................. (3,138,008) -- 3,138,008(F) --
----------- ---------- ----------- -----------
Total stockholders' equity................................ 1,154,527 7,277,426 2,065,582 10,497,535
----------- ---------- ----------- -----------
$16,630,415 $8,209,708 $ (509,708) $24,330,415
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
See the Notes to Pro Forma Financial Statements Reflecting the Probable
Acquisition.
18
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PROBABLE ACQUISITION
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
UA
HISTORICAL THEATERS ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Theater Revenues:
Box office.......................................... $2,712,210 $ 961,187 $ -- $3,673,397
Concession.......................................... 743,986 278,823 -- 1,022,809
Other............................................... 49,739 39,238 -- 88,977
---------- ---------- ----------- ----------
3,505,935 1,279,248 -- 4,785,183
---------- ---------- ----------- ----------
Operating Expenses:
Film rental and booking fees........................ 1,196,126 482,578 -- 1,678,704
Cost of concession sales............................ 108,605 43,294 -- 151,899
Theater operating expenses.......................... 1,226,799 470,704 -- 1,697,503
General and administrative expenses................. 191,806 19,890 -- 211,696
Depreciation and amortization....................... 413,011 49,142 46,000(C) 508,153
---------- ---------- ----------- ----------
3,136,347 1,065,608 46,000 4,247,955
---------- ---------- ----------- ----------
Operating Income (Loss)............................... 369,588 213,640 (46,000) 537,228
Interest Expense...................................... 358,966 112,304 (73,304)(D)(E) 397,966
---------- ---------- ----------- ----------
Net Income............................................ $ 10,622 $ 101,336 $ 27,304 $ 139,262
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Net Income (Loss) Per Share of Common Stock(G)........ $ .01 $ .05
---------- ----------
---------- ----------
</TABLE>
See the Notes to Pro Forma Financial Statements Reflecting the Probable
Acquisition.
19
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PROBABLE ACQUISITION
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA COMPANY,
NELSON FERMAN, UA
MAGIC AND LESSER THEATERS ADJUSTMENTS PRO FORMA
------------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Theater Revenues:
Box office................................ $ 10,256,296 $3,578,346 $ -- $13,834,642
Concession................................ 2,608,696 1,048,292 -- 3,656,988
Other..................................... 317,489 174,334 -- 491,823
------------ ---------- ----------- -----------
13,182,481 4,800,972 -- 17,983,453
------------ ---------- ----------- -----------
Operating Expenses:
Film rental and booking fees.............. 4,852,435 1,603,729 -- 6,456,164
Cost of concession sales.................. 364,639 176,031 -- 540,670
Theater operating expenses................ 5,317,165 1,828,092 -- 7,145,257
General and administrative expenses....... 1,053,874 71,366 -- 1,125,240
Depreciation and amortization............. 1,522,298 216,154 164,000(C) 1,902,452
Impairment of long-lived assets........... -- 224,908 -- 224,908
------------ ---------- ----------- -----------
13,110,411 4,120,280 164,000 17,394,691
------------ ---------- ----------- -----------
Operating Income (Loss)..................... 72,070 680,692 (164,000) 588,762
Other Expenses:
Interest Expense............................ 1,340,846 444,534 (326,534)(D)(E) 1,458,846
------------ ---------- ----------- -----------
Net Income (Loss)........................... $ (1,268,776) $ 236,158 $ 162,534 $ (870,084)
------------ ---------- ----------- -----------
------------ ---------- ----------- -----------
Net Income (Loss) Per Share of Common
Stock(G).................................. $ (.71) $ (.32)
------------ -----------
------------ -----------
</TABLE>
See the Notes to Pro Forma Financial Statements Reflecting the Probable
Acquisition.
20
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS REFLECTING THE PROBABLE ACQUISITION
NOTE A--As set forth in 'Business--Recent Developments,' the Company intends to
acquire the right to operate five theaters from United Artists for $8.65
million in cash, funded through the use of proceeds from the Offering.
Although there is no assurance that this transaction will be
consummated, management of the Company believes that this acquisition is
likely to occur. Accordingly, historical financial statements for the
five UA Theaters and these pro forma financial statements have been
presented in this Prospectus.
NOTE B--The acquisition, as contemplated, would be accounted for under the
purchase method of accounting. Under the purchase method of accounting,
the results of operations of an acquired entity are included in the
Company's historical consolidated financial statements from its
acquisition date. Under that method of accounting, the acquired assets
are included based on an allocation of their aggregate purchase price as
of their date of acquisition.
The unaudited pro forma balance sheet at March 31, 1997 presented herein
has been prepared as if the Probable Acquisition had been consummated on
March 31, 1997. The unaudited pro forma statements of operations for the
three months ended March 31, 1997 and the year ended December 31, 1996
have been prepared as if the Probable Acquisition had been consummated
as of January 1, 1996.
The Company will be acquiring the theater operations, certain real
estate or leasehold interests and the theater equipment of the five
theater locations. Cash, other current assets, amount due from the
parent or affiliates of the theaters and accounts payable and accrued
expenses of the acquired theaters will remain the property of, or
obligation of, the seller.
The net equity of the theaters to be acquired has been eliminated in
combination. Interest expense incurred by the UA Theaters has also been
eliminated in combination.
NOTE C--The purchase price of the Probable Acquisition is $8.65 million, plus
estimated costs of acquisition of approximately $150,000. An estimated
allocation of the purchase price is as follows:
<TABLE>
<S> <C> <C>
Land......................................................................... $2,005,000
Buildings and improvements................................................... 3,758,000
Leaseholds and improvements.................................................. 1,712,070
Equipment.................................................................... 1,000,000
Goodwill..................................................................... 300,000
Inventory and other assets................................................... 24,930
----------
$8,800,000
Less: Carrying value of assets in historical financial statements--
Property and equipment..................................................... 4,827,793
Inventory and other assets................................................. 24,930
----------
4,852,723
----------
Adjustment to the carrying value of assets acquired.......................... $3,947,277
----------
----------
The adjustment to the carrying value of assets acquired is recorded as
follows:
Increase in property and equipment......................................... $3,647,277
Increase in goodwill....................................................... 300,000
----------
$3,947,277
----------
----------
</TABLE>
NOTE D--The Company intends to finance the Probable Acquisition, in part,
through the use of proceeds from the Offering. For purposes of this pro
forma financial information, it has been assumed that gross proceeds
from the Offering will be $9.0 million, based on the sale of 1,000,000
shares of Common Stock at $9.00 per share. Expenses of the Offering are
estimated to be $1.8 million. The assumed net proceeds to the Company of
$7.2 million will be used to repay the Senior Note ($600,000), with the
remaining $6.6 million used to acquire the UA Theaters. See 'Use of
Proceeds.' It is assumed that Clearview will use approximately $1.4
million of its available cash resources and $800,000 of additional
borrowings under the New Facility. See 'Risk Factors--Expansion
Plans--Need For Additional Financing.' Interest expense on those
additional borrowings has been provided in the pro forma
21
<PAGE>
statements of operations based on the Company's current financing
arrangements. Interest expense has been reduced based on the anticipated
repayment of the Senior Note.
NOTE E--In June, 1997, the Company repurchased the Provident Warrants for $1.0
million, plus the right to receive up to another $300,000, under
certain circumstances. See 'Certain Transactions.' The pro forma
balance sheet gives effect to the $1.0 million purchase price as a
capital transaction, as the purchase price approximated the then
estimated fair value of the Provident Warrants. This purchase price was
financed by a term loan of $1.3 million from Provident. Pro forma
effect has also been given to interest expense based on the terms of
the $1.3 million loan. Unamortized debt discount originally recorded in
connection with the Current Facility and the issuance of the Provident
Warrants will continue to be charged to expense over the term of the
related debt.
NOTE F--The pro forma balance sheet and statements of operations also give
effect to the Concurrent Transactions as if they had occurred on
January 1, 1996.
The exchange of 162.5 A/B Warrants for 66,000 shares of Common Stock
has been included as a capital transaction. The difference between the
fair value of the shares issued and the fair value of the A/B Warrants
exchanged (estimated to be $81,000) will be charged to expense upon
consummation of the Concurrent Transactions, but has been charged to
retained earnings in the pro forma balance sheet due to the 'subsequent
events' nature of the transaction. The related unamortized debt
discount originally recorded in connection with the issuance of certain
8% Notes and these A/B Warrants will continue to be charged to expense
over the term of the related debt. Pro forma effect is also given to
the termination of a certain common stockholder's redemption right.
Pro forma effect has also been given to the issuance of 60,000 shares
of Common Stock to the holder of the Class A Preferred Stock in
consideration of the termination of its redemption right. A preferred
stock dividend will be recorded, upon consummation of the Concurrent
Transactions, to the extent that the fair value of the 60,000 shares
exceeds the fair value of the redemption right terminated, which
difference the Company estimates will be $44,000. This amount has been
charged to retained earnings in the pro forma balance sheet due to the
'subsequent events' nature of the transaction.
See 'The Concurrent Transactions.'
NOTE G--Net income (loss) per share is calculated by treating (i) all shares of
Common Stock issued after December 31, 1995 as outstanding for all
reported periods and (ii) all shares of Class A Preferred Stock as
converted into shares of Common Stock and all A/B Warrants, Provident
Warrants and Class A Warrants as exercised for shares of Common Stock
for all reported periods, because their conversion or exercise prices
per share are less than the contemplated initial public offering price
of the shares of Common Stock to be issued in the Offering. The Class A
Warrants are exercisable for 282,600 shares of Common Stock. However,
such Class A Warrants are not exercisable until June 1, 2001 unless a
change of control or similar transaction involving the Company occurs.
In addition, as a result of the Offering, the number of shares of
Common Stock issuable upon exercise of the Class A Warrants will be
subject to reduction. For example, if the average closing price of the
Common Stock is greater than $17.06 for 120 consecutive business days
and during that period the closing price was never less than $11.37,
then the Class A Warrants will cease to be exercisable and will
immediately terminate. See 'Description of Capital
Stock--Warrants--Class A Warrants.'
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's results of operations and
financial condition should be read in conjunction with 'Prospectus
Summary--Summary Consolidated Financial Data' and the Company's consolidated
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus.
OVERVIEW
The Company has achieved significant growth in theaters and screens since
its formation in December, 1994. Since inception, the Company has acquired the
right to operate 13 theaters with 55 screens, has added six screens to two
existing theaters, and is developing a new theater with 10 screens. The Company
expects that its future revenue growth will be derived primarily from the
operation of additional theaters, the development of new theaters and adding
screens to existing theaters. The Company has had no theater closings since
inception.
The Company's revenues are predominantly generated from box office
receipts, concession sales and on-screen advertising. Direct theater costs
include film rental and booking fees and the cost of concessions. Other theater
operating expenses consist primarily of theater labor and related fringe benefit
costs and occupancy costs (including rent and/or real estate taxes, utilities,
repairs and maintenance, cleaning costs and supplies). Film rental costs are
directly related to the popularity of a film and the length of time since that
film's release. Film rental costs generally decline as a percentage of box
office receipts the longer a film has been showing. As certain concession items,
such as fountain drinks and popcorn, are purchased in bulk and not prepackaged
for individual servings, the Company has significant gross profit margins on
those items.
The Company believes that any future increases in minimum wage requirements
or negotiated increases in union wages will not significantly increase its
theater operating expenses as a percentage of total revenues.
General and administrative expenses consist primarily of corporate overhead
costs, such as management and office salaries and related fringe benefit costs,
professional fees, insurance costs and general office expenses. The Company
believes that its current internal controls and management information system
will allow the Company to expand its number of screens without incurring
proportionate increases in general and administrative expenses.
In September, 1995, the Company acquired the right to operate three
theaters with 11 screens in Nassau County, New York in an all-cash transaction.
In May, 1996, the Company purchased the leaseholds of four theaters with 19
screens in New York and New Jersey for a combination of stock and cash. In July,
1996, Clearview purchased the leaseholds of two theaters with seven screens in
Westchester County, New York for cash. In December, 1996, Clearview acquired two
more theaters with the underlying real estate and the leasehold of another
theater with a total of 13 screens in Bergen County, New Jersey for cash. See
'Business--Acquisition History.'
The Company has compiled preliminary results for the six month periods
ended June 30, 1996 and 1997, respectively. These results are being reviewed by
the Company and are subject to change, including normal adjustments. On this
preliminary basis, the Company's total revenues for the six months ended June
30, 1996 and 1997 were approximately $2.4 million and $6.2 million,
respectively. Operating income was approximately $89,000 and $106,000 and the
net losses were approximately $81,000 and $618,000 for the two periods,
respectively. The increase in the net loss for the six-month period ended June
30, 1997 as compared to the net loss for the six-month period ended June 30,
1996 appears to be primarily attributable to increases of approximately $675,000
in depreciation and amortization and $550,000 in interest expense. These
increased expenses are attributable to the acquisitions made by the Company in
1996. The change in total revenues from the first quarter of 1997 to the second
quarter of 1997 are primarily a result of the films available for exhibition
during the two periods. See "Risk Factors--Dependence on Films" and
"--Fluctuations in Quarterly Results of Operations."
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Total Revenues. Total revenues for the first quarter of 1997 increased
246.1% to $3,505,935 from $1,013,003 in the comparable 1996 period. The increase
in revenues resulted primarily from a 259.5% increase in attendance to 539,748
attendees from 150,121 attendees in the first quarters of 1997 and 1996,
respectively. This increase is attributable primarily to the Company's operation
of nine additional theaters during 1996. For the three months ended March 31,
1997 and 1996, the Company had a total of 60 screens and 21 screens in
operation, respectively. Average ticket prices for the Company's theaters
remained relatively constant during the first quarters of 1997 and 1996. Total
concession sales increased 228.6% for the first quarter of 1997 to $743,986 from
$226,425 in the comparable 1996 period.
23
<PAGE>
Film Rental and Booking Fees. Film rental and booking fees increased
246.3% to $1,196,126 in the first quarter of 1997 from $345,411 in the first
quarter of 1996. As a percentage of box office receipts, film rental and booking
fees stayed relatively constant at 44.1% and 44.2% for the three months ended
March 31, 1997 and 1996, respectively.
Cost of Concession Sales. Cost of concession sales for the first quarter
of 1997 increased 228.1% to $108,605 from $33,097 for the first quarter of 1996.
As a percentage of concession revenues, the cost of concession sales remained
constant at 14.6% for the quarters ended March 31, 1997 and March 31, 1996.
Theater Operating Expenses. Theater operating expenses increased 165.0% to
$1,226,799 in the first quarter of 1997 from $463,024 during the first quarter
of 1996. This increase is attributable solely to the nine theaters acquired in
1996, which acquisitions occurred after the first quarter of 1996. As a
percentage of total revenues, theater operating expenses decreased to 35.0% in
the first quarter of 1997 from 45.7% in the first quarter of 1996. The decrease,
as a percentage of total revenues, is primarily due to the Company's efficient
management of its variable costs, such as labor and utilities, and the lower
average per-theater fixed costs, such as occupancy costs, taxes and common area
maintenance costs, of the theaters acquired in 1996 as compared to the Company's
other theaters.
General and Administrative Expenses. General and administrative expenses
increased by 100.8% to $191,806 in the first quarter of 1997 from $95,525 in the
first quarter of 1996. This increase is due principally to the hiring of
additional personnel and increases in salaries resulting from the transition
from seven locations and 21 screens at the beginning of 1996 to 16 locations and
60 screens at the beginning of 1997. As a percentage of total revenues, however,
general and administrative expenses decreased to 5.5% for the first quarter of
1997 from 9.4% for the first quarter of 1996. This decrease is primarily due to
the Company's internal controls and management information system which allowed
the Company to expand its number of screens without incurring proportionate
increases in general and administrative expenses.
Depreciation and Amortization. Depreciation and amortization expense in
the first quarter of 1997 increased 1051.3% to $413,011 from $35,874 in the
first quarter of 1996. This increase was primarily a result of the acquisition
of the nine theaters acquired in 1996, which significantly increased the
Company's depreciable and amortizable assets.
Operating Income. Operating income for the first quarter of 1997 increased
822.3% to $369,588 from $40,072 for the comparable 1996 period. As a percentage
of total revenues, operating income increased to 10.5% from 4.0% for the first
quarters of 1997 and 1996, respectively. Operating income increased as a
percentage of total revenues due primarily to the relatively fixed nature of
certain of the Company's other theater operating expenses, principally occupancy
costs, certain improvements in operating efficiency, the lower average occupancy
costs per-theater for the theaters acquired in 1996 as compared to the Company's
other theaters, and an increase in general and administrative expenses which was
less, on a percentage basis, than the growth in total revenues.
Interest Expense. Interest expense increased 559.1% in the first quarter
of 1997 to $358,966 from $54,466 in the first quarter of 1996. This increase was
attributable to the significant increase in the Company's total debt during
1996, which was primarily incurred in connection with the Company's acquisitions
in that year.
Net Income (Loss). Net income in the first quarter of 1997 increased to
$10,622 from a net loss of $14,394 in the first quarter of 1996. This increase
in net income is attributable primarily to the additional screens operated by
the Company in 1997 as a result of its acquisitions in 1996, improved theater
level operating margins and an increase in general and administrative expenses
which was less, on a percentage basis, than the growth in total revenues.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Total Revenues. Total revenues for 1996 increased 249.5% to $8,197,974
from $2,345,697 in 1995. This increase in total revenues was primarily a result
of an increase in attendance of 249.2% to 1,101,251 attendees from 315,406
attendees in 1996 and 1995, respectively. The increase in attendance occurred
principally because of the addition of 39 screens during 1996 and the first full
year of operation of the 13 screens added during 1995. Revenues from those
theaters operated by the Company throughout 1995 and 1996 increased 15.66% from
$1,541,843 to $1,783,260. This increase in same theater revenues was
attributable primarily to an overall increase
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<PAGE>
in attendance at two theaters and the conversion from a single-screen to a
triplex at another theater location. Average ticket prices for the Company's
theaters remained relatively constant during 1995 and 1996. Total concession
sales increased 235.5% in 1996 to $1,861,155 from $554,671 in 1995 principally
for the same reasons.
Film Rental and Booking Fees. Film rental and booking fees increased
266.9% for 1996 to $3,022,377 from $823,791 for 1995. As a percentage of box
office receipts, film rental and booking fees increased to 48.8% from 46.8% for
the years ended December 31, 1996 and 1995, respectively. This increase is
primarily attributable to the Company's acquisition of the six theaters acquired
in May and July of 1996 (film rental and booking fees as a percentage of box
office receipts are generally higher during the summer months than most of the
rest of the year).
Cost of Concession Sales. Cost of concession sales for 1996 increased
181.6% to $279,549 from $99,261 for 1995. As a percentage of concession
revenues, the cost of concession sales decreased to 15.0% from 17.9% for the
years ended December 31, 1996 and 1995, respectively. The Company's gross margin
on concession revenues improved in 1996 when compared to 1995 as a result of
obtaining volume discounts.
Theater Operating Expenses. Theater operating expenses increased 205.8% to
$3,297,825 for 1996 from $1,078,370 for 1995 primarily due to the Company's
acquisitions during 1996. As a percentage of total revenues, theater operating
expenses decreased to 40.2% from 46.0% for the years ended December 31, 1996 and
1995, respectively. This reduction was due to the Company's careful management
of its theater labor and fringe benefit costs and the lower average per-theater
fixed costs, such as occupancy costs, taxes and common area maintenance costs,
of the theaters acquired in 1996 as compared to the Company's other theaters. As
a percentage of box office receipts, theater labor and fringe benefit costs
decreased to 20.9% from 23.2% for the years ended December 31, 1996 and 1995,
respectively.
General and Administrative Expenses. General and administrative expenses
for 1996 increased 57.2% to $589,822 from $375,262 for 1995. This increase is
due principally to the hiring of additional personnel and increases in salaries
resulting from the transition from seven locations and 21 screens at the
beginning of 1996 to 16 locations and 60 screens by the end of 1996. As a
percentage of total revenues, however, general and administrative expenses
decreased to 7.2% from 16.0% for the years ended December 31, 1996 and 1995,
respectively. This decrease is primarily due to the Company's internal controls
and management information system which allowed the Company to expand its number
of screens without incurring proportionate increases in general and
administrative expenses.
Depreciation and Amortization. Depreciation and amortization expense for
1996 increased 537.4% to $635,007 from $99,632 for 1995. This increase was
primarily a result of the acquisition of the nine theaters acquired in 1996,
which significantly increased the Company's depreciable and amortizable assets.
Operating Income. Operating income for 1996 increased to $373,394 from an
operating loss of $130,619 for 1995. This increase in the Company's operating
income was primarily due to certain improvements in operating efficiency, the
lower average occupancy costs per-theater of the theaters acquired in 1996 as
compared to the Company's other theaters, and an increase in general and
administrative expenses which was less, on a percentage basis, than the growth
in total revenues.
Interest Expense. Interest expense for 1996 increased 590.5% to $591,722
from $85,697 for 1995. The increase was primarily attributable to the
significant increase in the Company's total debt during 1996, which was
primarily incurred to finance the Company's acquisitions during that year.
Net Loss. Net loss for 1996 increased 1.0% to $218,328 from a net loss of
$216,316 for 1995. The increase in net loss was primarily due to the Company's
acquisitions during 1996 that resulted in a significant increase in depreciation
and amortization expense, which is a non-cash expense, and a large increase in
interest expense, offset by better operating efficiencies indicated above.
LIQUIDITY AND CAPITAL RESOURCES
The Company derives substantially all of its revenues from box office
receipts and concession sales and, therefore, benefits from the fact that it
has, in effect, no accounts receivable and minimal inventory requirements. On
the other hand, the Company's most significant operating expenses, film rental
and booking fees, are typically
25
<PAGE>
paid to distributors 30 to 45 days following the receipt of the applicable cash
ticket payments. In addition, most of the rest of the Company's operating
expenses, such as theater payroll and theater rent, are paid bi-weekly or
monthly, respectively. The periods between the receipt of cash from operations
and use of that cash to pay the related expenses provides certain operating
capital to the Company.
Since the Company is in an industry which is capital intensive,
substantially all of its assets are non-current. The Company's primary current
asset is cash, while inventories are relatively insignificant throughout the
fiscal year. The Company had negative working capital of $1,484,683 at March 31,
1997, $1,710,825 at December 31, 1996 and $366,841 at December 31, 1995,
respectively. The increase in negative working capital is primarily attributable
to the increase in the current portion of long-term debt.
The Company has financed its day-to-day operations principally from the
cash flow generated by its operating activities. Such cash flow totaled
$1,154,409 in 1996, as compared to $118,820 in 1995. The difference between the
Company's net income and its cash flow from operating activities are principally
due to the Company's depreciation and amortization expenses of $635,007 in 1996
and $99,632 in 1995, which are non-cash expenses, and an increase in accounts
payable. The Company's cash flow generated by its operating activities was a
negative $77,092 and a positive $780,455 in the first quarters of 1996 and 1997,
respectively. The difference between the Company's net income and its cash flow
from operating activities in the first quarters of 1997 and 1996 is primarily
due to the Company's depreciation and amortization expenses of $413,011 and
$35,874 in the first quarters of 1997 and 1996, respectively, which are non-cash
expenses, and an increase in accounts payable.
The Company's capital requirements in 1995 and 1996 arose principally in
connection with theater acquisitions, the renovation of existing theaters, the
development of new theaters and the addition of screens to an existing theater.
Such capital expenditures were financed principally with bank borrowings,
seller-provided financing, equity financing and internally-generated cash.
Capital expenditures, exclusive of theater acquisitions, totaled approximately
$318,000 in 1996 and $631,000 in 1995. During 1996, the Company funded its
capital expenditures, including theater acquisitions, through approximately $4.3
million of bank borrowings, $5.0 million of seller-provided financing, $2.5
million of gross proceeds from the sale of shares of Class A Preferred Stock and
$1,110,000 from the issuance of shares of Common Stock to the seller of a
theater. In January, 1997, the Company retired $4.4 million of that
seller-provided financing with additional bank borrowings and $100,000 in cash.
The Current Facility consists of a $300,000 revolving credit facility and
two term loans (totalling approximately $9.0 million as of March 31, 1997) used
primarily to finance the acquisitions consummated by the Company in 1996 and the
capital expenditures of the Company in 1996 and 1997 and a third term loan used
to finance the repurchase of the Provident Warrants. The interest rate on all of
the loans under the Current Facility is currently 10.5% and equals two percent
(2%) above Provident's prime rate, other than the third term loan's interest
rate which is Provident's prime rate. Interest is payable monthly in arrears.
The final maturity of one of the original term loans is July 1, 2001 and the
final maturity of the other original term loan is December 31, 2001. The final
maturity of the third term loan is the earlier of June 30, 2002 or 90 days after
the consummation of the Offering. The Company is obligated to pay the principal
of the term loans on a quarterly basis pursuant to an amortization schedule set
forth in the Current Facility. The loans under the Current Facility are
collateralized by substantially all of the assets of the Company. See 'Certain
Transactions.'
The Company seeks to lease theaters rather than to purchase theaters with
their underlying real estate or to purchase properties for development as
theaters due to the significantly lower capital requirements for leasing and
because it believes that its potential return on investment when leasing a
theater is higher than its potential return on investment if it owns that
theater and the underlying real estate.
The Company anticipates that its capital expenditures, including for
acquisitions, in 1997 will be approximately $25.0 million. Of this amount,
$500,000 was used to add four screens to the Company's theater in Chester, New
Jersey, $900,000 was used to convert a part of a building into a theater in
Summit, New Jersey, $100,000 will be used to renovate a theater in Brooklyn, New
York that the Company has signed a lease to operate, but has not yet taken
possession of, and $8.65 million will be used to purchase the UA Theaters. The
Company has not entered into agreements with any other parties with respect to
the renovation, development or acquisition of any other theaters. The Company
believes that its capital needs for the acquisition, renovation and
26
<PAGE>
development of additional theaters for the next 12 to 18 months will be met by
means of the New Facility, from internally-generated cash flow and from the net
proceeds from the Offering.
Pursuant to the Commitment Letter, the New Facility will consist of a $1.0
million revolving credit facility, a term loan facility of up to $12.0 million
to refinance the existing term loans under the Current Facility and a term loan
facility of up to $17.0 million to finance capital expenditures and
acquisitions. The interest rate on all loans under the New Facility will be
between a half percent (0.5%) and one and a half percent (1.5%) over Provident's
prime rate depending upon the ratio of the Company's senior debt to EBITDA. The
amount available for borrowing under the acquisition and capital expenditure
facility will be increased in an amount equal to the net proceeds of the
Offering used to repay the term loans under the Current Facility or the other
term loan under the New Facility. Interest is payable monthly in arrears. The
final maturity of the term loans will be on the fifth anniversary of the
execution of the New Facility. The Company will be obligated to pay the
principal of the term loans on a quarterly basis pursuant to amortization
schedules to be established pursuant to the New Facility. The loans under the
New Facility will be collateralized by substantially all of the assets of the
Company.
QUARTERLY RESULTS AND SEASONALITY
Historically, the most successful films have been released during the
summer and Thanksgiving through year-end holiday season. Consequently, motion
picture exhibitors generally have had proportionately higher revenues during
such periods, although the seasonality of motion picture exhibition revenue has
become less pronounced in recent years as studios have begun to release major
motion pictures more evenly throughout the year. The Company believes that its
regular exhibition of art films has contributed to a moderation in the
seasonality of its own revenues as compared to the seasonality of the revenues
of some of its competitors. Nevertheless, the Company's revenues and income in
any particular quarter will be substantially the result of the commercial
success of the particular films being exhibited during such quarter.
EFFECT OF INFLATION
Inflation has not had a significant impact on the Company's operations to
date.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ('SFAS') No. 121, 'Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of,' requires that certain long-lived assets be reviewed for possible impairment
and written down to fair value, if appropriate. The Company adopted this
pronouncement in 1996 and adoption did not have a material effect on the
Company's financial statements.
SFAS No. 123, 'Accounting for Stock-Based Compensation,' requires companies
to measure employee stock compensation plans based on a fair value method of
accounting. However, the statement allows the alternative of continued use of
Accounting Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees,' with pro forma disclosure of net income and earnings per share
determined as if the fair value based method had been applied in measuring
compensation cost. The Company adopted the pro forma disclosure provisions of
this new pronouncement in 1996 and such adoption did not have a material effect
on the Company's financial statements.
SFAS No. 128, 'Earnings per Share,' was issued in February 1997, and is
effective for financial statements issued for periods ending after December 15,
1997. SFAS 128 requires that earnings per share be presented more in line with
earnings per share standards of other countries. The Company expects to adopt
SFAS 128 for the year ending December 31, 1997. The Company has not yet
determined the effect of adoption of this new pronouncement on its financial
statements.
27
<PAGE>
BUSINESS
GENERAL
Clearview is a regional motion picture exhibitor that operates in-town
multiplex theaters primarily located in affluent suburban communities in the New
York/New Jersey metropolitan area. The Company's theaters offer a mix of
first-run commercial, art and family-oriented films designed to appeal primarily
to sophisticated moviegoers and families with younger children. Since its
inception in December, 1994, the Company has grown from four to 17 theaters and
from eight to 69 screens. From 1995 to 1996, the Company's revenues increased
from $2.3 million to $8.2 million and theater level cash flow increased from
$344,000 to $1.6 million.
The Company's strategy is to grow primarily through the acquisition or
development of in-town multiplex theaters. The Company seeks locations in the
retail centers of suburban communities that have the characteristics of the
Company's target audiences. The Company intends to build upon its concentration
of existing theaters and to expand into retail centers in suitable communities
throughout the Middle Atlantic and New England states. The Company also will be
opportunistic when evaluating theaters and locations in communities that meet
many, but not necessarily all, of the Company's criteria. The Company intends to
grow by operating additional theaters, adding screens to its existing theaters
and developing theaters in locations not previously used for motion picture
exhibition.
The theatrical exhibition industry is fragmented. Although the fifty
largest theater circuits operated approximately 76% of the screens in use at May
1, 1995, there are a substantial number of small independent exhibitors with
four or fewer theaters. The large circuits that are growing most rapidly appear
to have begun to concentrate on building new mega-multiplex theaters, rather
than buying established theaters. The Company believes that, in the Middle
Atlantic and New England states, in-town theaters serve audiences that prefer
these theaters to the larger out-of-town multiplex theaters. The Company also
believes that in-town theaters can offer movie selections more attuned to their
local markets, better customer service and more convenience when compared to
out-of-town multiplexes. Primarily for these reasons, the Company thinks that
operating in-town theaters can be attractive, and the Company believes that
there are a large number of potential acquisition candidates. The Company seeks
to identify targets that will complement its existing theaters or provide entry
into new markets.
The Company seeks to improve the operating margins of its theaters by
controlling theater level costs through centralized management, by increased
efficiencies in concession purchasing and through film selection that is
sensitive to the local community's tastes. The Company intends to acquire or
develop clusters of theaters that will increase its flexibility by permitting
the sharing of theater managers and skilled and hourly wage personnel. Clearview
believes that its management information system and internal controls gives its
senior management timely access to comprehensive operating data, allows the
local theater managers to focus on day-to-day operations, and enables the
Company to expand its theater operations without incurring proportionate
increases in general and administrative expenses.
The Company seeks theaters that will be the sole or dominant exhibitors in
their geographic film licensing zones. A geographic film licensing zone or 'film
zone' is a geographic area, recognized by film distributors, that generally has
a three to five mile radius in metropolitan and suburban markets, in which a
film is licensed for exhibition at only one theater in that film zone.
Currently, 75% of the Company's theaters are the sole exhibitors in their film
zones.
Clearview's theaters are community-oriented and place a strong emphasis on
patron satisfaction and customer service. The theaters provide clean and
comfortable environments at convenient in-town locations and offer opportune
movie show times, courtesy telephones for local calls and a large variety of
specialty concession items. The Company's theaters are characterized by custom
interiors and decor designed to enhance the movie-going experience. In addition,
the Company provides party and special event facilities for community residents
and regularly participates in community fundraising and charity functions to
maintain patron loyalty.
28
<PAGE>
INDUSTRY OVERVIEW
Theatrical exhibition is the primary initial distribution channel for new
motion pictures. The Company believes that the success of most films produced in
the United States during their domestic theatrical exhibition remains the best
indicator of their overall success. Other forms of delivery systems, such as
cable television, direct satellite delivery, video cassettes and pay-per-view
television, do not appear to have adversely affected the level of theater
admissions in the United States or the number of films released for theatrical
exhibition in the United States. This is evidenced by the relatively stable
theater attendance numbers and the increase in the number of films released for
theatrical exhibition in recent years. The Company believes that the
proliferation of distribution channels and the growth of the overseas markets
for films produced in the United States have, in fact, raised the potential
revenues that successful U.S. films can generate. The Company also believes,
therefore, that the film industry will continue to increase the number of films
available for theatrical exhibition which will permit the U.S.-based theater
industry to continue to expand.
The National Association of Theater Owners estimates that there were
approximately 360 theatrical motion picture exhibitors in the United States at
the end of 1995. Of these, 235 operated four or fewer theaters. In the five-year
period 1991 to 1995, the average ticket price for movies shown by
publicly-traded exhibitors has increased approximately 6%; compared to the U.S.
Consumer Price Index, which has increased by approximately 12%. During the same
period, admission revenues for these exhibitors increased from approximately
$1.37 billion to approximately $2.32 billion.
The multiplex theater was introduced to the moviegoing public in the 1960's
and multiplexing is now considered the industry standard. The advantages of a
multiplex theatrical format include the following: (i) the ability to play a
range of movies to fit the various tastes of the moviegoing public; (ii) the
ability to accommodate the expected size of the audience for a particular movie;
(iii) the ability to run a popular movie for a longer period of time and to
exhibit newer films immediately upon their release; and (iv) the ability to show
a single film in two auditoriums simultaneously, thereby effectively increasing
the viewing capacity for a popular film.
BUSINESS PLAN
GROWTH STRATEGY
The Company intends to acquire or develop primarily in-town, four to eight
screen, multiplex theaters in affluent suburban communities in the New York/New
Jersey metropolitan area in retail centers that are the focus of community life
or are being revitalized. The Company also plans to expand its operations into
other Middle Atlantic and New England states.
o Selectively Acquire Theater Operations
The Company believes that one of its strengths is its ability to
successfully identify available theaters in appropriate locations. A significant
number of theaters in the types of communities in which Clearview would want to
operate a theater are closely-held businesses that often do not have sufficient
capital to expand or renovate or are not managed as efficiently as possible. In
addition, because many of the major movie theater circuits are focused on
acquiring or developing mega-multiplex theaters, the Company believes that it
can offer an attractive 'exit strategy' for small independent operators. The
Company has also identified certain larger motion picture circuits with theaters
that may be suitable for acquisition.
o Add Screens to Existing Theaters
The Company plans to add screens to existing theaters when the Company
believes that this will increase revenues and cash flow. By adding screens, the
Company is able to offer a larger selection of films that can attract more
patrons. Dividing an auditorium into two or more smaller auditoriums, thus, can
create additional revenue with only a marginal increase in expenses.
29
<PAGE>
o Develop New Theaters
The Company believes that it can successfully identify locations in
suitable communities that can be developed into theaters. Opportunities have
been presented by real estate developers who wish to enhance their properties
with the presence of a movie theater, which opportunities often would require
limited direct investment by the Company. In addition, Clearview has been
approached by the governments or community development agencies of towns in the
New York/New Jersey metropolitan area that are interested in revitalizing parts
of their communities and believe that a movie theater could provide impetus to
such redevelopment.
OPERATING STRATEGY
The Company believes that there are several aspects of its operating
strategy that help to differentiate it from other exhibitors.
o Theater Facilities/Environment
Clearview's theaters are located in towns and communities rather than in
shopping malls or on highways. Each of the Company's theaters is located on a
major street in its town and is easily accessible. They are generally surrounded
by upscale stores and restaurants and parking is typically available at each
location. An important aspect of Clearview's operating strategy is to provide a
clean, comfortable and visually appealing environment, which usually includes
silk flower arrangements, chandeliers and a decorative fireplace. When Clearview
acquires a theater it typically refurbishes the existing seats and equips them
with cup holders. In addition, Clearview will generally redecorate the lobby,
upgrade the concession stand and provide a courtesy phone so that patrons can
make local telephone calls. The concession stand at each theater offers
high-margin snack and food items, such as fruit juices, bottled water, ice
cream, cappuccino and Swiss chocolates, as well as soft drinks, popcorn and an
assortment of candy items.
o Film Selection
The Company believes that its mix of films is unique among the larger
motion picture circuits. By concurrently showing first-run commercial, art and
family-oriented films, Clearview seeks to appeal to three main groups: families
with younger children (10 years of age and younger), baby boomers generally and
older moviegoers in affluent suburban communities. Because Clearview regularly
plays art films in most of its theaters throughout the year, it has been able to
establish good relationships with the distributors of those types of films.
These relationships, in turn, have resulted in increased flexibility concerning
the movement of prints, length of run and film rent. Clearview is sensitive to
the tastes of its audience in each community and adjusts its mix of films
accordingly.
o Customer Satisfaction
Customer satisfaction is one of Clearview's highest priorities. Clearview
believes that its theaters are perceived as good neighbors and it encourages
community involvement through regular participation in community fundraising and
charity functions. Most of the Company's theaters accommodate birthday parties
and other special events. Typically, food and beverages are provided by the
theater at such events. As a service-oriented business where cleanliness,
upkeep, safety and interaction with the general public are integral to success,
Clearview believes that it is vital that its employees be dedicated and
energetic. The Company mandates an extensive set of procedures to keep its
theaters clean and to ensure proper film presentation. Adherence to employee
dress and appearance codes and to specific rules of behavior is also required of
all its theater employees.
o Centralized Decision Making
The Company has developed sophisticated internal controls and installed a
computerized management information system of the type used by some of the
largest movie circuits to control and account for all aspects of their
day-to-day operations. Clearview believes that its internal controls and
management information system enable it to expand the number of locations and
screens in its circuit without a proportionate increase in general and
administrative expenses. The Company can closely track and manage theater and
concession revenues. The
30
<PAGE>
management information system has on-line capabilities to collect information
concerning box office receipts, ticketing, concession sales, inventory control
and booking.
o Operating Efficiencies
The Company seeks to acquire or develop theaters in communities that are
close to the communities where the Company's existing theaters are located. This
enables theaters to share skilled personnel and for the appropriate district
manager to coordinate the theaters' activities. In addition, the Company has
begun experimenting with advertising under a single 'umbrella' in communities
where its theaters are close to each other to increase awareness and occupancy
levels. Adding screens at theaters that the Company acquires the right to
operate will enable it to offer a diverse selection of films, serve patrons from
common support facilities, and stagger movie showing times to increase
attendance and improve the utilization of seating capacity.
ACQUISITIONS
Since its initial acquisition of the leaseholds of four theaters in
December, 1994, Clearview has completed four transactions. From December 31,
1994 through the date of this Prospectus, the number of Clearview theaters has
increased from four to 17 and the number of Clearview screens has increased from
eight to 69. A summary of Clearview's acquisitions (both completed and pending)
is set forth in the following table.
<TABLE>
<CAPTION>
DATE OF NO. OF MEANS OF YEAR LEASE
ACQUISITION/OPENING COMMUNITY COUNTY, STATE SCREENS OWNERSHIP EXPIRES
- --------------------- ------------------- --------------- ------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Dec. 21, 1994 Bernardsville Somerset, NJ 3 Lease Dec. 31, 1999(4)
Dec. 21, 1994 Chester Morris, NJ 6 Lease Jan. 31, 2008(4)
Dec. 21, 1994 Madison Morris, NJ 4 Lease Dec. 31, 2000(4)
Dec. 21, 1994 Manasquan Monmouth, NJ 1 Lease Jan. 14, 2002
Sept. 8, 1995 Baldwin Nassau, NY 2 Lease Aug. 31, 2015
Sept. 8, 1995 New Hyde Park Nassau, NY 2 Lease Aug. 31, 2022
Sept. 8, 1995 Port Washington Nassau, NY 7 Lease Jan. 31, 2010
May 29, 1996 Clifton Passaic, NJ 6 Lease Jan. 14, 2007
May 29, 1996 Emerson Bergen, NJ 4 Lease Dec. 31, 2006
May 29, 1996 New City Rockland, NY 6 Lease Dec. 31, 2017
May 29, 1996 Washington Township Bergen, NJ 3 Lease Oct. 31, 2006
July 18, 1996 Bedford Westchester, NY 2 Lease Dec. 31, 2011
July 18, 1996 Mount Kisco Westchester, NY 5 Lease Dec. 31, 2003
Dec. 13, 1996 Bergenfield Bergen, NJ 5 Own (5)
Dec. 13, 1996 Closter Bergen, NJ 4 Lease Aug. 31, 1999(4)
Dec. 13, 1996 Tenafly Bergen, NJ 4 Own (5)
July 2, 1997 Summit Union, NJ 5 Lease Dec. 31, 2007(4)
Pending Brooklyn Kings, NY 4(1) Lease (5)
Pending Bayonne Hudson, NJ 10(2) Lease (5)
Pending Bronxville Westchester, NY 3(3) Own (5)
Pending Larchmont Westchester, NY 1(3) Lease (5)
Pending Mamaroneck Westchester, NY 4(3) Own (5)
Pending New City Rockland, NY 2(3) Own (5)
Pending Wayne Passaic, NJ 4(3) Lease (5)
--
Total 97
</TABLE>
- ------------------
(1) This is an existing theater that is to be leased from a party who is
acquiring it from its current owner.
(2) The site for this theater is being cleared so that construction can
commence.
(3) Part of the proposed acquisition of the UA Theaters.
(4) Under these leases, the Company has one or more renewal options.
(5) Not applicable because the theater is owned by the Company or the Company
has not yet acquired the leasehold interest for the theater or the theater
and its underlying real property.
31
<PAGE>
RECENT DEVELOPMENTS
On June 30, 1997, Clearview repurchased the Provident Warrants from
Provident for $1.0 million (or $10.62 per share), plus the right to receive up
to the lesser of (i) $300,000 (or $3.18 per share) or (ii) the product of (x)
89,400 and (y) the initial public offering price in the Offering minus $11.19
per share, but not less than zero. The Company believed that this repurchase of
the Provident Warrants would facilitate the Offering. At the same time,
Clearview and Provident amended the Current Facility to provide a term loan to
Clearview of $1.3 million, of which $1.0 million was used to pay the initial
purchase price for the Provident Warrants and $300,000 was to be used to pay
some of the costs already incurred or to be incurred by the Company in
connection with the Offering. See 'Certain Transactions.'
On July 21, 1997, Clearview entered into the UA Agreement with United
Artists to acquire either all the UA Theaters for an aggregate purchase price of
$8.65 million or one UA Theater in New City, New York for $1.4 million. The
Company has paid United Artists a $75,000 non-refundable deposit. These five UA
Theaters have a total of 14 screens and are located in Wayne, New Jersey and
Bronxville, Larchmont, Mamaroneck and New City, New York. Clearview can exercise
its right to acquire either all five UA Theaters or the UA Theater in New City,
New York at any time until October 20, 1997. If the Company exercises either
right by that date and does not consummate the applicable acquisition by
November 18, 1997, it will have the right to delay the closing for an additional
90 days upon payment of an additional $75,000 to United Artists. If Clearview
does not exercise either right prior to October 20, 1997, it has no further
obligation to United Artists. The Company will need to obtain additional
financing either under the New Facility or otherwise in order to consummate the
acquisition of all five UA Theaters. See 'Risk Factors--Expansion Plans--Need
for Additional Financing.' If the Company does not exercise its right to
purchase the UA Theaters, it intends to continue to implement its growth
strategy by selectively acquiring theater operations.
FILM LICENSING
The Company licenses films from distributors on a film-by-film and
theater-by-theater basis. Prior to negotiating for film licenses, senior
management of Clearview, working with three outside film buyers, evaluates the
prospects for upcoming films using many factors, including cast, director, plot,
performance of similar films, estimated film rental costs and expected Motion
Picture Association of America rating. Senior management makes the final
determination regarding which films to license. Clearview's success when
licensing particular films depends in large part upon its knowledge of trends
and the historical film preferences of the residents in the markets served by
its theaters, as well as on the availability of motion pictures that the Company
believes will be successful in those markets.
A film is licensed from one of the film distributors owned by the major
film production companies or from one of the independent film distributors that
generally distribute films for smaller production companies for exhibition at
only one theater in a particular film licensing zone. Film distributors
typically recognize geographic film licensing zones with radii of three to five
miles in metropolitan and suburban markets, depending primarily on population
density. Of Clearview's current theaters, 75% are the sole exhibitors in their
film zones, permitting the Company to choose which films it wishes to exhibit at
these theaters.
In film zones where Clearview is the sole exhibitor, a film license is
generally obtained by Clearview after selecting a film from among those offered
and negotiating directly with its distributor. In film zones where there are
multiple exhibitors, a distributor will either require the exhibitors in the
film zone to bid for a film or will allocate films among the exhibitors in the
film zone. When films are licensed under the allocation process, a distributor
will choose which exhibitor is to be offered a movie and then that exhibitor
will have to negotiate film rental terms directly with that distributor. Over
the past several years, distributors have almost exclusively used the allocation
process rather than the bidding process to license their films in the New
York/New Jersey metropolitan area. When films are licensed through a bidding
process, exhibitors compete for licenses based upon the film rental fees to be
paid. The Company currently does not bid for films in any of its film zones,
although it may be required to do so in the future.
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Clearview predominantly licenses 'first run' films. If the Company believes
that a film has substantial remaining potential following its first run, it may
license that film for a 'second run.' Second runs enable Clearview to exhibit a
variety of films during periods in which there are few new releases and to offer
its target audience an opportunity to see a film that did not fit into
Clearview's first run schedule. Film distributors establish second run
availability on a national or market-by-market basis after a film's release from
first run theaters and generally permit each theater within a market to exhibit
that film.
Each film license typically specifies that the rental fee is based on
either a gross box office receipts formula or a theater admissions revenue
formula depending upon which one results in the larger amount. In addition, if a
distributor deems a film to be extremely promising, exhibitors may be required
to pay non-refundable guarantees of film rental fees or to make refundable
advance payments of film rental fees or both in order to obtain a license for
that film. Under a gross box office receipts formula, the distributor receives a
specified percentage of box office receipts from the licensed film, with the
percentage declining over the term of the film run. First run commercial and
family-oriented film rental fees typically begin at approximately 70% to 50% of
box office receipts for the licensed film (depending on the type of film and its
distributor) and gradually decline, over a period of four to seven weeks, to as
low as 30% of box office receipts. First run art film rental fees and second run
commercial and family-oriented film rental fees typically begin at 35% of box
office receipts for the licensed film and often decline to 30% of box office
receipts after the first week. Under a theater admissions revenue formula
(commonly known as a '90/10' clause), the distributor receives a specified
percentage (i.e., 90%) of the excess of box office receipts for a given film
over a negotiated allowance for theater overhead expenses. Although generally
not specifically contemplated by the provisions of film licenses, the terms of a
film license often is adjusted or renegotiated subsequent to the initial release
of the film.
The Company's business is dependent upon the availability of marketable
first run commercial, family-oriented and art motion pictures and its
relationships with distributors. Many distributors provide first run movies to
the motion picture exhibition industry; however, distribution has been
historically dominated by a limited number of distributors (Warner Brothers,
Paramount, 20th Century Fox, Universal, Disney/Touchstone, MGM/UA and
Columbia/Tri-Star) which, since 1989, have typically accounted for well over 75%
of domestic admission revenues and virtually every one of the top 25 grossing
films in a given year. No single major distributor dominates the market.
Disruption in the production of motion pictures by the major studios and/or
independent producers, poor commercial success of motion pictures or poor
relationships with distributors could have a material adverse effect upon the
Company's business and results of operations.
The Company licenses films from each of the major distributors and believes
that its relationships with these distributors are good. The Company also
licenses films from independent film distributors on a consistent basis. Because
these distributors often have difficulty licensing films at theaters that are
well-maintained and technologically up-to-date, these distributors have
cooperated with the Company when it seeks to move prints, modify the length of a
film's run or change a film's rent. From year to year, the box office revenues
of the Company attributable to individual distributors will vary depending upon
the films they distribute. Set forth below are the top fifteen distributors for
the Company for 1995 and 1996, ranked by the number of films shown.
DISTRIBUTORS RANKED BY NUMBER OF FILMS EXHIBITED
<TABLE>
<CAPTION>
1995 1996
- ---------------------------------------------------------- -------------------------------------------------------
NAME # OF FILMS NAME # OF FILMS
- -------------------------------------------- ----------- ----------------------------------------- -----------
<S> <C> <C> <C>
Buena Vista 23 Buena Vista 31
Warner Brothers 19 Sony 22
20th Century Fox 14 Warner Brothers 21
Miramax 13 Miramax 20
Sony 13 Paramount 17
Paramount 12 20th Century Fox 16
MCA/Universal 11 MCA/Universal 15
MGM/UA 9 MGM/UA 13
New Line 6 New Line 9
Gramercy 4 Gramercy 6
Savoy 4 Fine Line 4
Fine Line 3 Orion 4
Columbia 1 Samuel Goldwyn 4
Samuel Goldwyn 1 Sony Classic 4
Triumph 1 October 3
</TABLE>
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<PAGE>
One of the three film buyers with whom the Company works is employed by
Cineplex Odeon. Some of the Company's theaters, excluding any theaters for which
that buyer helps acquire films, compete with theaters owned by Cineplex Odeon.
The Company believes that, to date, this arrangement has been beneficial.
COMPETITION
The motion picture exhibition industry is highly competitive, particularly
with respect to licensing films, attracting patrons and acquiring or developing
theaters to operate. The Company's theaters compete with theaters operated by
national and regional circuits and by smaller independent exhibitors. The
Company believes that the principal competitive factors with respect to film
licensing include licensing terms, the seating capacity, location and reputation
of an exhibitor's theaters, the quality of projection and sound equipment at an
exhibitor's theaters and an exhibitor's ability and willingness to promote
films. Competition for patrons is dependent upon factors such as the
availability of popular films, the location of theaters, the comfort and quality
of theaters and ticket prices. The Company believes that it competes favorably
with respect to each of these factors.
There were approximately 360 domestic motion picture exhibitors at the end
of 1995. Motion picture exhibitors vary substantially in size, from small
independent operators of single screen theaters to large national chains of
multi-screen theaters. Many of the Company's larger competitors have been in
existence significantly longer than the Company and may be better established in
the markets where the Company's theaters are or may, in the future, be located.
Certain of the Company's larger competitors have sought to increase the number
of theaters and screens in operation in particular markets. Such increases may
cause those markets or portions thereof to become overscreened, which could
negatively impact the earnings of the Company's theaters, if any, in those
markets.
The Company analyzes the level of competition in a geographic area prior to
and in the early stages of the negotiation of any development or acquisition of
a theater. This analysis is crucial as many of the Company's potential theater
locations are primarily in well-established communities that have previously
experienced the building of large out-of town multiplexes and the addition of
screens to in-town theaters.
The Company's theaters also face competition from a number of other motion
picture delivery systems, such as cable television, direct satellite delivery,
video cassettes and pay-per-view television. The impact of such delivery systems
on the motion picture exhibition industry is difficult to determine precisely,
and there can be no assurances that existing or future delivery systems will not
have an adverse impact on attendance at movie theaters. The Company believes
that the public will continue to recognize the advantages of viewing a movie on
a large screen with superior audio-visual quality as a shared experience in a
public forum and that alternative delivery systems do not provide an experience
comparable to the out-of-home entertainment experience of attending a movie in a
theater. The Company believes that movie theaters also face competition from
other forms of outside-the-home entertainment that compete for the public's
leisure time and disposable income. Clearview believes that movie exhibition is
priced competitively relative to other out-of-home entertainment options, such
as music concerts, sporting events and live theater.
EMPLOYEES
As of June 20, 1997, the Company had 276 employees, of which eight worked
at the corporate headquarters, 52 are theater managers and projectionists and
216 are hourly employees. Clearview employs one primary manager and one or more
relief managers at each of its theaters. In most of its theaters, each shift
(which is five to six hours) has a manager and a projectionist or a single
manager/projectionist. Generally, the theater manager serves as the
projectionist if the applicable theater has four or fewer screens. In the larger
theaters there are separate managers and projectionists. In addition, each of
the Company's four district managers, who is also a manager of a theater in his
district, has certain supervisory obligations. The Company has entered into an
agreement with the International Alliance of Theatrical Stage Employees union
that provides for a skilled projectionist for every shift at a substantial
number of its theaters. The Company believes that its relationship with such
union is good.
REGULATORY ENVIRONMENT
The distribution of motion pictures is in large part regulated by federal
and state antitrust laws and has been the subject of numerous antitrust cases.
The Company has never been a party to any of such cases or the resulting
decrees, but its licensing operations are subject to those decrees. The consent
decrees resulting from such cases
34
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bind certain major motion picture distributors and require the films of those
distributors to be offered and licensed to exhibitors, including the Company, on
a film-by-film and theater-by-theater basis. Consequently, exhibitors, such as
the Company, cannot assure themselves of a supply of films by entering into
long-term arrangements with major distributors, but must negotiate for licenses
on a film-by-film and theater-by-theater basis.
The Federal Americans With Disabilities Act (the 'Disabilities Act')
prohibits discrimination on the basis of disability in public accommodations and
employment. The Disabilities Act became effective as to public accommodations in
January, 1992 and as to employment in July, 1992. The Company will have new
theaters constructed to be accessible to the disabled and believes that it is
otherwise in substantial compliance with all current applicable regulations
relating to accommodations for the disabled. The Company intends to comply with
any future regulations relating to accommodating the needs of the disabled, and
the Company does not currently anticipate that such compliance will require the
Company to expend substantial funds.
The Company's theater operations are also subject to federal, state and
local laws governing such matters as wages and working conditions, health and
sanitation requirements and licensing. A significant portion of the Company's
employees are paid just above the federal minimum wage and, accordingly, already
adopted and further increases in that minimum wage could increase the Company's
labor costs.
In connection with the construction, renovation and operation of its
theaters, the Company and its contractors and landlords are required to obtain
proper building and operating permits and to comply with the other requirements
of local zoning and other laws and regulations. The Company does not anticipate
that compliance with such laws and regulations will have a material adverse
effect on its business.
PROPERTIES
The Company leases or sub-leases all of its theaters other than the two
theaters in Tenafly and Bergenfield, New Jersey, which are owned by the Company.
The three theaters in Nassau County are being operated under agreements under
which the Company pays rent to the landlords and has the right beginning in
September, 1997 to acquire the underlying leaseholds and related theater
equipment upon paying the optionor an amount to be calculated based on the
operating cash flow of the theaters. The option will expire in September, 2000
if not exercised, and the three theaters would then be returned to the optionor.
When a theater is developed for Clearview or Clearview acquires a theater
from a landlord, the term of the relevant lease, including all renewal options,
is usually about forty years. If a lease is acquired from an exhibitor,
typically the lease is assigned to Clearview and still has a substantial term.
Most of Clearview's current leases have terms, including all renewal options, of
at least ten years and provide for periodic rent increases. Only one theater
that is leased by the Company has a lease that expires in the next five years
under which the Company does not have one or more renewal options and that
theater is not material to the Company's business and future operations. All of
Clearview's landlords are unaffiliated third parties. The aggregate annual
minimum lease payments for all the Company's theaters over the next five years
are as follows: 1997: $954,878; 1998: $959,851; 1999: $943,821; 2000: $865,071;
and 2001: $777,819.
The Company's corporate office is located in approximately 2,000 square
feet of space in Madison, New Jersey, and is subject to a lease agreement, the
term of which expires on February 28, 1998.
LEGAL PROCEEDINGS
From time to time the Company is involved in litigation in the ordinary
course of its business. Currently, the Company does not have pending any
litigation that would have a material adverse effect upon the Company.
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<PAGE>
MANAGEMENT AND DIRECTORS
DIRECTORS AND EXECUTIVE OFFICERS
Under the Company's current Certificate of Incorporation and By- laws,
members of the Board of Directors serve one-year terms and are elected by the
holders of the Common Stock and Class A Preferred Stock voting as a single
class. Under the New Certificate and New By-laws, the members of the Board of
Directors will be divided into two groups, one group to be elected by the
holders of the Common Stock (the 'Common Directors') and the other group to be
elected by the holders of the Class A Preferred Stock (the 'Preferred
Directors'). Furthermore, under those organizational documents, the Common
Directors will be divided into three classes, with the classes as nearly equal
in the number of directors as possible, while the Preferred Directors will not.
At each annual meeting of stockholders, Common Directors will be elected for
three-year terms to succeed the Common Directors of the class whose terms are
expiring, while Preferred Directors will be elected for one-year terms. See
'Description of Capital Stock.'
Set forth below is certain information as of July 31, 1997 concerning the
Company's directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------------------
<S> <C> <C>
A. Dale Mayo 56 Chairman of the Board, President, Chief Executive
Officer, Director
Paul Kay 57 Vice President -- Operations
Sueanne Hall Mayo 50 Vice President -- Management Information Systems,
Secretary, Director
Joan M. Romine 46 Treasurer, Chief Financial Officer
Wayne L. Clevenger 54 Director
Robert Davidoff 70 Director
Brett E. Marks 35 Director
Denis Newman 67 Director
</TABLE>
A. DALE MAYO has been the Chairman of the Board, President and Chief
Executive Officer and a director of the Company since its incorporation. He was
the president of Clearview Cinema Corp.(1) from 1987 to 1993. Mr. Mayo is a
member of the Foundation of Motion Picture Pioneers and the Motion Picture Club.
He is married to Sueanne Hall Mayo. Mr. Mayo will be a Class III Common
Director, with a term expiring in 2000, after the Offering.
PAUL KAY has been the Vice President-Operations of the Company since its
incorporation. He was the vice president and general manager of Clearview Cinema
Corp.(1) from 1987 to 1993.
SUEANNE HALL MAYO has been the Vice President-Management Information
Systems and Secretary of the Company since 1997 and a director since its
incorporation. She joined the Company upon its incorporation as its Vice
President-Finance and Treasurer. Ms. Mayo was the treasurer of Clearview Cinema
Corp. from 1987 to 1993.(1) She is married to A. Dale Mayo. Ms. Mayo will be a
Class II Common Director, with a term expiring in 1999, after the Offering.
JOAN M. ROMINE has been the Treasurer and Chief Financial Officer of the
Company since 1997. Prior to joining the Company in 1996 as its Controller, she
was the controller of Magic Cinemas, L.L.C. from 1995 through 1996 and
controller, treasurer and secretary of Hanita Cutting Tools, Inc., a U.S.
subsidiary of an international metal working company, from 1988 through 1995.
WAYNE L. CLEVENGER has been a director of the Company since 1996. He has
been a managing director of MidMark Advisors, Inc., the general partner of
MidMark Equity Partners, L.P., since 1994 and a managing director of MidMark
Associates, Inc., the general partner of MidMark Capital, L.P., since 1994. Mr.
Clevenger was a managing director of MidMark Management, Inc., a private
investing management company, from 1989
- ------------------
(1) Clearview Cinema Corp. was formed in 1987 by Mr. Mayo and two other persons
to operate one theater and it acquired an additional three theaters over the
next several years. It was sold in 1993, after Mr. Mayo and his
then-partners were unable to agree on its future, with Mr. Mayo retaining
the rights to the Clearview name and trademark and one of those theaters.
36
<PAGE>
through 1994. He also serves on the board of directors of Exide Electronics
Group, Inc. Mr. Clevenger will be a Preferred Director after the Offering.
ROBERT G. DAVIDOFF has been a director of the Company since 1994. He is a
managing director of Carl Marks & Co., Inc., a general partner of CMNY Capital
II, L.P. and a managing director of CMCO, Inc. Mr. Davidoff also serves on the
boards of directors of Marisa Christina, Inc., Rex Stores, Inc., Hubco
Exploration, Inc., SIDARI Corp., Consco Enterprises, Inc., Paging Partners Corp.
and Audio Network Communications, Inc. Mr. Davidoff will be a Class II Common
Director, with a term expiring in 1999, after the Offering.
BRETT E. MARKS has been a director of the Company since its incorporation
and was its Vice President-- Development from such date to 1997. He has been an
executive vice president of First New York, a mid-sized realty brokerage firm
specializing in commercial leasing and investment sales, from 1987 to the
present, and the president of Marks Capital Management, a real estate management
company, from 1989 to the present. Mr. Marks will be a Class I Common Director,
with a term expiring in 1998, after the Offering.
DENIS NEWMAN has been a director of the Company since 1996. He has been a
managing director of MidMark Advisors, Inc., the general partner of MidMark
Equity Partners, L.P., since 1994; a managing director of MidMark Associates,
Inc., the general partner of MidMark Capital, L.P., since 1994; and a managing
director of MidMark Management, Inc. since 1989. Mr. Newman also serves on the
board of directors of First Brands Corporation. Mr. Newman will be a Preferred
Director after the Offering.
DIRECTOR COMPENSATION
The Company does not currently compensate its directors or reimburse them,
as such, for their expenses incurred in connection with attendance at Board of
Directors' meetings and has no current plans to change this policy after
consummation of the Offering. See 'Certain Transactions.'
THE BOARD OF DIRECTORS
The Board of Directors currently has six members. The Board of Directors
has no committees at the present time. Prior to the consummation of the
Offering, an audit committee will be created.
EXECUTIVE COMPENSATION
The following table set forth information concerning the compensation of
the Company's Chairman of the Board, President and Chief Executive Officer, who
was the only executive officer of the Company whose annual salary and bonus
exceeded $100,000 during 1996.
SUMMARY COMPENSATION TABLE FOR THE YEAR ENDED DECEMBER 31, 1996
ANNUAL COMPENSATION
----------------------------
NAME SALARY ($) BONUS ($)
- ------------------------------------ ---------- ---------
A. Dale Mayo $ 99,167(1) $37,371(1)
- ------------------
(1) Since May 29, 1996, Mr. Mayo's compensation has been calculated pursuant to
the Employment Agreement (as described below). Prior to that date, Mr.
Mayo's annual compensation was equal to 2% of the first $5,000,000 in gross
revenues of the Company, plus 1% of gross revenues in excess of $5,000,000.
1997 INCENTIVE PLAN
The Clearview Cinema Group, Inc. 1997 Stock Incentive Plan (the '1997
Incentive Plan') is intended to assist the Company in attracting and retaining
highly competent key employees and consultants and to act as an incentive for
such individuals to achieve long-term Company objectives. The 1997 Incentive
Plan will be administered by the Board of Directors.
The 1997 Incentive Plan provides for awards of up to 200,000 shares of
Common Stock. The number of shares available for issuance under the 1997
Incentive Plan will be subject to adjustment for changes in Clearview's capital
structure or upon the occurrence of certain significant corporate events such as
mergers. All key employees and consultants of the Company or any of its
subsidiaries will be eligible to participate, including officers who are also
directors of the Company. No participant can receive awards under the 1997
Incentive Plan in any calendar year in respect of more than 150,000 shares of
Common Stock.
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<PAGE>
The 1997 Incentive Plan has no fixed expiration date. The Board of
Directors will establish expiration and exercise dates for awards under the 1997
Incentive Plan on an award-by-award basis. However, for the purpose of awarding
incentive stock options ('incentive stock options') under Section 422 of the
Internal Revenue Code of 1986, as amended (the 'Code'), the 1997 Incentive Plan
will expire ten years from its effective date. In addition, certain provisions
of the 1997 Incentive Plan relating to 'performance-based' compensation under
Section 162(m) of the Code will expire five years from that effective date.
The Board of Directors may grant incentive stock options, options that do
not qualify as incentive stock options ('non-qualified stock options') or a
combination thereof. The terms and conditions of any stock options granted,
including the quantity, price, waiting periods and other conditions on exercise,
will be determined by the Board of Directors. The exercise price for each stock
option will be determined by the Board of Directors in its discretion; provided,
that the exercise price per share for each stock option will be at least equal
to the fair market value of one share of Common Stock on the date when that
stock option is granted.
Stock appreciation rights ('SARs') and limited SARs may be granted by the
Board of Directors either separately from or in tandem with non-qualified stock
options or incentive stock options. A SAR entitles its holder to receive, upon
its exercise, a payment equal to (i) the excess of the fair market value of a
share of Common Stock on its exercise date over the SAR exercise price, times
(ii) the number of shares of Common Stock with respect to which the SAR is
exercised. Upon exercise of a SAR, payment will be made in cash, shares of
Common Stock or a combination thereof, as determined by the Board of Directors.
The Board of Directors may also award shares of Common Stock subject to
restrictions specified by the Board of Directors in its discretion ('Restricted
Shares'). Restricted Shares are subject to forfeiture if their holder does not
meet certain conditions such as continued employment over a specified forfeiture
period (the 'Forfeiture Period') and/or the attainment of specified performance
targets over the Forfeiture Period. Any performance targets will be determined
by the Board of Directors and may, but need not, include specified levels of one
or more of operating income, earnings per share, return on investment, return on
stockholders' equity or earnings before interest, taxes, depreciation and
amortization.
The Board of Directors may grant performance awards upon such terms and
conditions as the Board of Directors deems appropriate. A performance award
would entitle its recipient to receive a payment from the Company, the amount of
which is based upon the attainment of predetermined performance targets over a
specified award period. Performance awards may be paid in cash, shares of Common
Stock or a combination thereof, as determined by the Board of Directors. Any
award periods will be established at the discretion of the Board of Directors.
The performance targets will also be determined by the Board of Directors and
may, but need not, include specified levels of one or more of operating income,
earnings per share, return on investment, return on stockholders' equity or
earnings before interest, taxes, depreciation and amortization. When
circumstances occur which cause predetermined performance targets to be an
inappropriate measure of achievement, the Board of Directors, in its discretion,
may adjust the performance targets.
In the event of a Change in Control (as defined in the 1997 Incentive
Plan), all stock options and SARs will immediately become exercisable, the
restrictions on all Restricted Shares will immediately lapse and all performance
awards will immediately become payable.
Upon consummation of the Offering, the Company will grant to the executive
officers of the Company and one consultant to the Company options for an
aggregate of 110,000 shares of Common Stock under the 1997 Incentive Plan. The
Board of Directors has determined to distribute those options as follows: Mr.
Mayo--an option to purchase 50,000 shares; Mr. Kay--an option to purchase 25,000
shares; Ms. Mayo--an option to purchase 15,000 shares; Ms. Romine--an option to
purchase 10,000 shares; and Mr. Marks--an option to purchase 10,000 shares.
Those options will (i) have an exercise price equal to the initial public
offering price (before underwriting discounts), (ii) provide for vesting over a
period of four years, subject to earlier vesting or termination in certain
circumstances, (iii) be exercisable for a period of ten years, subject to
earlier termination in certain circumstances, and (iv) constitute incentive
stock options to the maximum extent permitted under applicable law and otherwise
be non-statutory stock options.
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<PAGE>
EMPLOYMENT AGREEMENT
Pursuant to an Employment Agreement by and between the Company and Mr. Mayo
dated May 29, 1996 (the 'Employment Agreement'), Mr. Mayo has agreed to serve as
Chairman of the Board, President and Chief Executive Officer of the Company. As
compensation, Mr. Mayo is to receive an annual base salary of not less than
$120,000, plus an annual bonus equal to one percent of the Company's gross
revenues in excess of $7,000,000; provided, however, that such total
compensation may not exceed $750,000 in any one year. The initial term of the
Employment Agreement expires on May 29, 2003. Thereafter, the term of the
Employment Agreement will be automatically extended for successive one-year
periods ending on May 29, unless terminated by either party upon at least six
months' advance notice. The Employment Agreement also provides that, for a
period of three years after its termination, Mr. Mayo may not, directly or
indirectly, engage, have a financial interest in or become interested in any
other businesses similar to or in competition with the Company within a
fifty-mile radius of any theater owned or operated by the Company as of the date
of that termination.
CERTAIN TRANSACTIONS
Pursuant to a Contribution and Exchange Agreement dated December 21, 1994,
the Company issued to A. Dale Mayo ('Mayo') and Brett E. Marks ('Marks') 330,000
and 120,000 shares of Common Stock, respectively, in exchange for (i) all of the
outstanding shares of capital stock of Clearview Theater Group, Inc., CCC
Madison Triple Cinema Corp., CCC Chester Twin Cinema Corporation and CCC
Manasquan Cinema Corporation (collectively, the 'Subsidiaries') and (ii)
promissory notes of certain Subsidiaries with an aggregate principal amount of
$250,000. The principal assets of the Subsidiaries were the leases for the movie
theaters in Bernardsville, Chester, Madison and Manasquan, New Jersey and the
related leasehold improvements and equipment. Concurrently with that
contribution, pursuant to an Investment and Stockholders Agreement dated
December 21, 1994, the Company sold 150,000 shares of Common Stock to CMNY for
an aggregate purchase price of $500,000 in cash.
Mayo had formed CCC Chester Twin Cinema Corporation in August, 1993 to be
the lessee of the Chester Twin Theater. In September, 1993, as part of the
consideration in the sale of Clearview Cinema Corp., Mayo acquired the capital
stock of Clearview Theater Group, Inc. The terms of that sale were negotiated at
arm's length between the owners of Clearview Cinema Corp. and the purchaser. In
February, 1994, Mayo sold to Marks 49% of the capital stock of CCC Madison
Triple Cinema Corp. and of CCC Chester Twin Cinema Corporation for $10,000 and
$5,000, respectively. Simultaneously, Marks loaned CCC Madison Triple Cinema
Corp. $125,000 and received a promissory note in exchange. In May, 1994, Mayo
formed CCC Manasquan Cinema Corporation to be the lessee of the Algonquin
Theater in Manasquan, New Jersey.
No third party was retained by Clearview, Mayo, Marks or CMNY to value the
interests being exchanged by Mayo and Marks for shares of Common Stock or to
determine the relationship between those values and the purchase price paid by
CMNY for its shares of Common Stock. The valuation to be placed on those
interests and that relationship was determined by the arm's length negotiations
between Mayo and Marks and a representative of CMNY. Under the Investment and
Stockholders Agreement, CMNY has the right to sell its shares of Common Stock to
the Company for a 30-day period commencing in 2002 at a price based upon a
formula set forth therein and, if CMNY does not exercise that right, the Company
has the right to purchase those shares of Common Stock from CMNY for the 90-day
period commencing after the expiration of that 30-day period at a price based
upon the same formula. CMNY and Clearview have agreed to terminate those rights
in connection with the Offering. See 'The Concurrent Transactions.'
As of June 1, 1997, Marks and the Company entered into a consulting and
confidentiality agreement pursuant to which Marks as a consultant will assist
the Company in the identification of possible locations for the development of
theaters and of theaters that are potential acquisition candidates and provide
other services as requested by the Company. Marks is also an executive vice
president of First New York. To the extent, if any, that Marks identifies any
person who is interested in leasing a site to Clearview in his capacity as an
employee of First New York and Clearview determines to lease that site, First
New York could be entitled to a commission from that person and Marks would then
be entitled to a commission from First New York. In connection with the
Company's proposed acquisition of the leasehold of a theater in Brooklyn, New
York, First New York and Marks will be entitled to commissions of $66,000 and
$19,800, respectively, payable by the lessor, if the transaction is consummated.
In addition, in connection with the proposed acquisition of the UA Theaters,
First New York and Marks will be entitled to commissions of $259,500 and
$77,850, respectively, payable by United Artists, if the
39
<PAGE>
transaction is consummated. In order to formalize the relationships among the
parties, First New York, Marks and Clearview have entered into an agreement
dated as of May 23, 1997. In that agreement, First New York has acknowledged
that Marks, as a consultant to Clearview, will be engaged in activities that
might, under other circumstances, result in commissions being earned by First
New York and Marks, but that it will be within Clearview's sole discretion to
determine whether any such activity will result in commissions being payable to
them.
Robert G. Davidoff ('Davidoff'), a director of the Company, is a general
partner of CMNY and a managing director of CMCO, Inc. ('CMCO'). On August 31,
1995, CMNY, CMCO and Davidoff each purchased from the Company 8% Notes with the
principal amounts of $300,000, $50,000 and $50,000, respectively. Each of these
8% Notes matures on August 31, 1997, which term is to be amended in connection
with the Put/Call Termination to October 31, 1997. In connection with the sale
of these 8% Notes, the Company issued each purchaser two A/B Warrants to
purchase in the aggregate 45,000 shares, 7,500 shares and 7,500 shares of Common
Stock, respectively. See 'The Concurrent Transactions' and 'Description of
Capital Stock--Warrants.'
On October 11, 1995, Davidoff and CMCO each purchased an additional 8% Note
with a principal amount of $50,000 each. Each of these 8% Notes matures on
October 11, 1997, which term is to be amended in connection with the Put/Call
Termination to October 31, 1997. In connection with the sale of these 8% Notes,
the Company issued each purchaser two A/B Warrants to purchase in the aggregate
7,500 shares and 7,500 shares of Common Stock, respectively. See 'The Concurrent
Transactions' and 'Description of Capital Stock-- Warrants.'
On December 13, 1996, Davidoff and CMCO each purchased an additional 8%
Note with a principal amount of $300,000 each. Each of these 8% Notes matures on
December 13, 1998. In connection with the sale of these 8% Notes, the Company
issued each purchaser two A/B Warrants to purchase in the aggregate 22,500
shares and 22,500 shares of Common Stock, respectively. See 'Description of
Capital Stock--Warrants.'
If the Company does not pay the 8% Notes that are due on August 31, 1997
and October 31, 1997 (or, after their amendment, October 31, 1997), the Company
will extend the term of those 8% Notes an additional five years. If that occurs,
the Company must issue to each holder of one of those 8% Notes a warrant with
terms substantially similar to the A/B Warrants. Each of those holders would
receive warrants exercisable for the number of shares of Common Stock set forth
below:
AUGUST 31, 1995 8% NOTES OCTOBER 11, 1995 8% NOTES
------------------------ -------------------------
CMNY 45,000 --
CMCO 7,500 7,500
Davidoff 7,500 7,500
If the Company pays the 8% Notes that are due on December 13, 1998 by
December 13, 1997, then one of the A/B Warrants owned by each of Davidoff and
CMCO exercisable for 11,250 shares of Common Stock each will terminate. If the
Company does not pay those 8% Notes on December 13, 1998 and, instead extends
their term, the Company will have an obligation to issue new warrants to
Davidoff and CMCO exercisable for 22,500 shares of Common Stock each, which is
similar to the obligation described in the preceding paragraph.
The Company intends to pay all of the 8% Notes in 1997 from borrowings
under the New Credit Facility.
The terms of the 8% Notes and the A/B Warrants were negotiated at arm's
length by Davidoff, a representative of CMNY and CMCO, and the Company. In
connection with the consummation of the Offering, the Company, CMNY, CMCO and
Davidoff have agreed to exchange 162.5 of the A/B Warrants for an aggregate of
66,000 shares of Common Stock. See 'The Concurrent Transactions.'
Wayne L. Clevenger and Denis Newman, each of whom is a director of the
Company, are managing directors of MidMark Associates, Inc., which is the
general partner of MidMark. MidMark acquired from the Company a total of 779
shares of Class A Preferred Stock and two warrants to purchase a total of 471
shares of Class A Preferred Stock in two transactions in 1996. Pursuant to the
two Preferred Stock and Warrant Purchase Agreements under which MidMark acquired
its shares of Class A Preferred Stock and such warrants, MidMark has the right
exercisable on or after June 1, 2001 to sell to the Company all of those shares
or the shares of Common Stock into which they have been converted at a purchase
price determined in accordance with a formula set forth in those agreements that
is based on the Company's gross revenues or six times the Company's
40
<PAGE>
combined income for its theater operations (excluding general and administrative
expenses, interest and taxes, but including depreciation and amortization). In
connection with the Offering, MidMark has agreed to terminate this right and to
exchange its two warrants for one Class A Warrant exercisable for 282,600 shares
of Common Stock. See 'The Concurrent Transactions,' 'Description of Capital
Stock--Warrants--Class A Warrants' and 'Shares Eligible for Future Sale.' If the
Company issues additional warrants in connection with the extension of the
maturity of any 8% Notes, the Company would be obligated under the agreements
with MidMark to issue additional shares of Class A Preferred Stock and
additional Class A Warrants for no additional payment.
Pursuant to a Management Consulting Agreement by and between MidMark
Associates, Inc. ('MidMark Associates') and the Company dated May 23, 1997 (the
'Consulting Agreement'), MidMark Associates will provide the Company with
business and organizational strategy and financial and investment management
services for a fee equal to $60,000 per year. The Consulting Agreement
terminates on the sixth anniversary of the consummation of the Offering unless
terminated earlier because no officer of MidMark Associates is on the Board of
Directors and the holders of the Class A Preferred Stock are no longer entitled
to vote separately for directors.
Pursuant to an agreement by and among the Company, Roxbury Cinema, Inc.
(which owns the Cinema Ten Succasunna Theater), F&N Cinema, Inc. (which owns the
Parsipanny Twelve Theater), and John Nelson, Seth Ferman and Pamela Ferman, the
Company purchased a right of first refusal from each of those persons for
$200,000 with respect to those two theaters. The right must be exercised, if at
all, within a short period after any of the above persons delivers to Clearview
a notice of his, her or its desire to transfer any rights in these theaters. The
right of first refusal will expire on May 29, 1999 if not previously exercised.
In accordance with the agreement pursuant to which Clearview consummated
the acquisition of the leaseholds of four theaters in May, 1996, Mr. Nelson, Mr.
Ferman and Ms. Ferman entered into a Non-Competition Agreement with the Company,
in which they agreed not to, directly or indirectly, (i) engage or become
interested in the operation of any movie theater within a seven and one-half
mile radius of any of those theaters or (ii) disclose to anyone, or use in
competition with the Company, any information with respect to any confidential
or secret aspect of the operations of those theaters.
On June 30, 1997, Clearview repurchased the Provident Warrants from
Provident for $1.0 million (or $10.62 per share), plus the right to receive the
lesser of (i) $300,000 (or $3.18 per share) or (ii) the product of (x) 89,400
and (y) the initial public offering price in the Offering minus $11.19 per
share, but not less than zero. Under the terms of the Provident Warrants,
Provident had the right to sell Provident Warrants exercisable for 89,400 shares
of Common Stock to the Company immediately following the consummation of the
Offering for an amount based on the highest of (i) the initial public offering
price, (ii) an appraised value per share for the Common Stock or (iii) a value
per share calculated based on the Company's cash flow. Following that
transaction, Provident Warrants exercisable for 4,800 shares would have remained
outstanding. The Company believed that this repurchase of the Provident Warrants
would facilitate the Offering because it eliminated the uncertainty concerning
the possible cost of purchasing those Provident Warrants upon consummation of
the Offering.
At that time, Clearview and Provident amended the Current Facility to
provide a term loan to Clearview of $1.3 million, of which $1.0 million was used
to pay the initial purchase price for the Provident Warrants and $300,000 was to
be used to pay some of the costs already incurred or to be incurred by the
Company in connection with the Offering. This new term loan does not begin to
accrue interest until September 29, 1997 and has an interest rate equal to
Provident's prime rate. If the Offering is consummated, the Company is obligated
to pay this term loan within 90 days thereafter. Provident and Clearview also
modified the Current Facility in other ways in connection with the Offering, the
most significant of which was to provide that, if the Offering is consummated
and the acquisition of the UA Theaters is consummated within 90 days thereof,
Clearview's obligation to prepay all the term loans under the Current Facility
with any net proceeds of the Offering will be permanently waived.
All of these transactions were negotiated at arm's length among the various
parties thereto and the Company believes that all of these transactions have
terms that would be appropriate in a transaction between unaffiliated parties
and that are fair to the Company as a whole. Following consummation of the
Offering, Clearview plans to have any transaction with an affiliated party
reviewed and approved by the directors of the Company who have no relationship
with that party or that transaction.
41
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table (including the notes thereto) sets forth certain
information as of July 31, 1997 regarding the beneficial ownership of the Common
Stock as adjusted to reflect the sale of the shares of Common Stock being
offered hereby by: (i) each person (or group of affiliated persons) known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock; (ii) each director of the Company; (iii) each executive officer of the
Company; and (iv) all of the Company's directors and executive officers as a
group. Each stockholder possesses sole voting and investment power with respect
to the shares listed, unless otherwise noted.
<TABLE>
<CAPTION>
SHARES OF COMMON SHARES OF COMMON
STOCK BENEFICIALLY STOCK BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING OFFERING
-------------------- --------------------
NAME AND ADDRESS(1) NUMBER PERCENT NUMBER PERCENT
- --------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
A. Dale Mayo(2) 682,800 47.88 682,800 28.14
MidMark Capital, L.P.(3) 527,400 36.98 527,400 21.74
CMNY Capital II, L.P.(4) 184,080 12.91 184,080 7.59
Emerson Cinema, Inc.(2)(5) 208,200 14.60 208,200 8.58
Wayne L. Clevenger(3)(6) 527,400 36.98 527,400 21.74
Robert Davidoff(4)(7) 216,000 15.15 216,000 8.90
Brett E. Marks(2)(8) 117,600 8.25 117,600 4.85
Denis Newman(3)(6) 527,400 36.98 527,400 21.74
Paul Kay(2) 9,600 * 9,600 *
Sueanne Hall Mayo(9) 0 0 0 0
All directors and executive
officers as a group(2) 1,426,200 100.00 1,426,200 58.78
</TABLE>
- ------------------
* Less than 1%
(1) The address of each person set forth above is 7 Waverly Place, Madison, New
Jersey except as otherwise noted.
(2) Mr. Mayo owns directly 318,000 shares of Common Stock. The other 364,800
shares are owned by other stockholders of the Company, including Brett
Marks, Emerson Cinema, Inc. and Paul Kay, subject to voting trust agreements
for which Mr. Mayo is the trustee. Under those agreements, Mr. Mayo has the
right to exercise all voting rights with respect to those shares for a
period of twenty years or until they are sold in a public offering under the
Securities Act or in accordance with Rule 144 under the Securities Act.
(3) The address for MidMark Capital, L.P. and Messrs. Clevenger and Newman is
c/o MidMark Associates, Inc., 466 Southern Boulevard, Chatham, New Jersey.
MidMark Capital, L.P. beneficially owns its 527,400 shares of Common Stock
by means of its ownership of 779 shares of Class A Preferred Stock, which
represent all of the outstanding shares of Class A Preferred Stock, and
60,000 shares of Common Stock. MidMark is a small business investment
company registered with the Small Business Administration.
(4) The address for CMNY Capital II, L.P. and Mr. Davidoff is c/o Carl Marks &
Co., Inc., 135 East 57th Street, New York, New York. CMNY is a small
business investment company registered with the Small Business
Administration.
(5) The address for Emerson Cinema, Inc. is c/o Roxbury Cinemas, Inc., Route 10,
Succasunna, New Jersey.
(6) Both Mr. Clevenger and Mr. Newman disclaim beneficial ownership of the
shares of Common Stock beneficially owned by MidMark.
(7) Mr. Davidoff disclaims beneficial ownership of the shares of Common Stock
beneficially owned by either CMNY or CMCO.
(8) The address for Mr. Marks is c/o First New York Realty Co. Inc., 310 Madison
Avenue, New York, New York.
(9) Ms. Mayo disclaims beneficial ownership of all the shares beneficially owned
by Mr. Mayo.
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following is a description of the material provisions of the New
Certificate, the New By-laws, the A/B Warrants and the Class A Warrants but does
not purport to be complete. Copies of the New Certificate, the New By-laws, the
A/B Warrants and the Class A Warrants have been filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
Immediately prior to the consummation of the Offering, the authorized
capital stock of the Company will consist of 10,000,000 shares of Common Stock
and 2,500,000 shares of Preferred Stock.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote for each
share held on all matters submitted to a vote of the holders of the Common Stock
and the Class A Preferred Stock and do not have cumulative voting rights.
Holders of shares of Common Stock are entitled to receive dividends, if any, as
declared by the Board of Directors out of funds legally available therefor. Upon
liquidation, dissolution or winding up of the Company, holders of shares of
Common Stock are entitled to share ratably in the net assets of the Company
available after the payment of all debts and other liabilities of the Company,
subject to the prior rights of outstanding shares of Preferred Stock. Holders of
shares of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares of
Common Stock offered in the Offering will be, when issued and paid for, validly
issued, fully paid and nonassessable. The rights, preferences and privileges of
holders of shares of Common Stock are subject to, and may be adversely affected
by, the rights of the holders of shares of the Class A Preferred Stock or any
other series of Preferred Stock the Company may designate and issue in the
future.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue shares of Preferred Stock in one or more series and to
fix the number of shares, designations, voting powers, preferences, optional and
other special rights and the restrictions or qualifications thereof, subject to
the rights of the holders of the Class A Preferred Stock discussed below. The
rights, preferences, privileges and powers of each series of Preferred Stock may
differ with respect to dividend rates, amounts payable on liquidation, voting
rights, conversion rights, redemption provisions, sinking fund provisions and
other matters. The issuance of shares of Preferred Stock could decrease the
amount of earnings and assets available for distribution to holders of shares of
Common Stock and could adversely affect the rights and powers, including voting
rights, of holders of shares of Common Stock. The existence of authorized and
undesignated shares of Preferred Stock may also have a depressive effect on the
market price of the Common Stock. In addition, the issuance of any shares of
Preferred Stock could have the effect of delaying, deferring or preventing a
change of control of the Company by a third party. Upon consummation of the
Offering, no shares of Preferred Stock other than the Class A Preferred Stock
will be outstanding, and the Company has no current intention to issue any
additional shares of Preferred Stock.
CLASS A PREFERRED STOCK
The holders of the Class A Preferred Stock are entitled to receive
preferential dividends, when and as declared by the Board of Directors, in a per
share amount equal to the product of the dividend payable per share of Common
Stock and the number of shares of Common Stock into which a share of Class A
Preferred Stock is then convertible. So long as any shares of Class A Preferred
Stock are outstanding, unless all dividends on the Class A Preferred Stock have
been paid, no dividend or other distribution may be paid or made on the Common
Stock or any other capital stock of the Company ranking junior as to dividends
to the Class A Preferred Stock and no such capital stock may be acquired by the
Company, other than by means of a distribution or exchange of capital stock of
the Company ranking junior to the Class A Preferred Stock.
In the event of any sale of all or substantially all of the assets of the
Company or any liquidation, dissolution or winding up of the Company, the
holders of the Class A Preferred Stock will be entitled to receive an amount per
share equal to the Liquidation Value (as defined below) plus all declared but
unpaid dividends per share on the Class A Preferred Stock, prior to any
distribution to holders of the Common Stock or any other capital stock of the
Company ranking junior upon liquidation or dissolution to the Class A Preferred
Stock. Liquidation Value is equal to $2,558.85 per share, subject to adjustment
upon any changes in the Class A Preferred Stock by means of dividends of shares
of Class A Preferred Stock or subdivisions or combinations of the Class A
Preferred Stock.
43
<PAGE>
Generally, the holders of the Class A Preferred Stock will vote with the
holders of the Common Stock on all matters submitted to a vote of the
stockholders of the Company other than the election of members of the Board of
Directors for so long as those holders vote separately for Preferred Directors.
The holders of the Class A Preferred Stock will vote separately as a class for
two Preferred Directors so long as the outstanding shares of Class A Preferred
Stock represent more than 15% of the combined voting power of the outstanding
capital stock of the Company or for one Preferred Director so long as the
outstanding shares of Class A Preferred Stock represent at least 5% and no more
than 15% of the combined voting power of the outstanding capital stock of the
Company. The holders of the Class A Preferred Stock will vote separately as a
class with respect to any proposed amendment to the New Certificate that would
affect their rights as such holders adversely and with respect to any proposed
issuance of capital stock of the Company ranking senior to the Class A Preferred
Stock as to dividends or upon liquidation or dissolution. The holders of the
Class A Preferred Stock will also vote separately as a class with respect to any
proposed issuance of capital stock of the Company (other than Common Stock)
ranking pari passu to the Class A Preferred Stock as to dividends or upon
liquidation or dissolution so long as the outstanding shares of Class A
Preferred Stock represent more than 5% of the combined voting power of the
outstanding capital stock of the Company.
The shares of Class A Preferred Stock are convertible at any time at the
option of the holders thereof into shares of Common Stock at a conversion ratio
of 600 to one as of the consummation of the Offering which is equal to the
Liquidation Value divided by the Conversion Price of $4.26 as of the
consummation of the Offering. Upon the occurrence of any Qualifying Liquidity
Event, the shares of Class A Preferred Stock will automatically convert into
shares of Common Stock. A Qualifying Liquidity Event includes a bona fide
unconditional offer to purchase those shares at a price equal to the product of
the conversion ratio and four times the then-current Conversion Price from the
Company, a third party or an underwriter or the ability to sell the shares of
Common Stock into which such shares of Class A Preferred Stock are convertible
on the open market so long as certain trading price and liquidity conditions are
met. The Conversion Price is subject to adjustment if the Company pays a
dividend in shares of the Common Stock, subdivides or combines the Common Stock,
reclassifies the Common Stock or issues or is deemed to have issued shares of
Common Stock for a consideration per share less than the then-current Conversion
Price.
WARRANTS
The Company has outstanding the following warrants to acquire shares of
Common Stock as of the date of this Prospectus (which includes the 162.5 A/B
Warrants that will be exchanged for 66,000 shares of Common Stock in the
Concurrent Transactions).
<TABLE>
<CAPTION>
SECURITIES ISSUABLE NUMBER ISSUABLE
TITLE OR SERIES EXPIRATION DATE EXERCISE PRICE UPON EXERCISE UPON EXERCISE
- ---------------------------------- ------------------ --------------- -------------------- ---------------
<S> <C> <C> <C> <C>
A/B Warrants...................... August 31, 2000 $3.33/share Common Stock 30,000
A/B Warrants...................... August 31, 2001 $3.33/share Common Stock 30,000
A/B Warrants...................... October 11, 2000 $3.33/share Common Stock 7,500
A/B Warrants...................... October 11, 2001 $3.33/share Common Stock 7,500
A/B Warrants...................... December 13, 2001 $6.67/share Common Stock 22,500
A/B Warrants...................... December 13, 2002 $6.67/share Common Stock 22,500
Class A Warrants.................. June 1, 2006 $.01/share Common Stock 282,600
</TABLE>
A/B WARRANTS
All of the A/B Warrants are currently exercisable through their respective
expiration dates except for two A/B Warrants issued on December 13, 1996 which
will be cancelled if the Company pays the 8% Notes issued on that day in full no
later than December 13, 1997. The exercise price of the A/B Warrants and the
number of shares of Common Stock issuable upon exercise of the A/B Warrants are
subject to adjustment for subdivisions of the outstanding shares of Common Stock
or dividends in stock on the outstanding shares of Common Stock.
CLASS A WARRANTS
The Class A Warrants are not exercisable until June 1, 2001 unless, prior
to that date, the Company sells all or substantially all of its assets,
liquidates, dissolves or winds up or merges or consolidates with another
corporation in a transaction immediately after which persons who held voting
securities of the Company having
44
<PAGE>
more than 50% of the combined voting power of the outstanding voting securities
of the Company do not hold voting securities of the surviving corporation having
more than 50% of the combined voting power of the outstanding voting securities
of the surviving corporation or a majority of the outstanding shares of Common
Stock are acquired by a single person or group of affiliated persons (other than
the Company's current stockholders). The number of shares of Common Stock for
which the Class A Warrants are exercisable will be subject to reduction if any
of the events described in the preceding sentence occur or if there is an
underwritten public offering of shares of Common Stock pursuant to an effective
registration statement under the Securities Act or if the Common Stock is listed
on a national securities exchange or registered as a class under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and the Fair Market Value
(as defined below) of the Common Stock is greater than the Floor Price (at the
time of the closing of the Offering this will be equal to $11.37 per share).
Fair Market Value for purposes of any of such transactions is equal to the
consideration paid or payable or deemed paid to the holders of the Common Stock
assuming the exercise of all warrants to purchase shares of Common Stock and the
conversion of all securities convertible into shares of Common Stock (other than
the Class A Warrants). Fair Market Value for purposes of a public offering or
any such listing or registration of the Common Stock is based on the average
closing sale price or last bid price for the Common Stock for any 120-day
trading period following the closing of such offering or listing or
registration, so long as the closing sale price or last bid price on each day in
that period exceeds the Floor Price; provided, that the last day of any such
period may not occur during any 'lock up' period agreed to by the holder of the
Class A Warrants with respect to any public offering. The reduction in the
number of shares of Common Stock purchasable upon exercise of the Class A
Warrants is based upon a formula and, if the Fair Market Value is high enough
($17.06 at the time of the closing of the Offering), could result in the Class A
Warrants not being exercisable for any shares. The Floor Price and the number of
shares of Common Stock that the Class A Warrants are exercisable for are subject
to adjustment for subdivisions or combinations of the Common Stock, the issuance
of shares of Common Stock as a dividend and certain capital reorganizations and
reclassifications, mergers and consolidations.
PROVISIONS OF THE NEW CERTIFICATE AND THE NEW BY-LAWS
The New Certificate and the New By-laws contain a number of provisions
relating to corporate governance and the rights of stockholders. Certain of
these provisions may be deemed to have a potential 'anti-takeover' effect
insofar as such provisions may delay, defer or prevent a change of control of
the Company, including, but not limited, to the following provisions:
The New Certificate provides that the holders of the Common Stock may only
take action at a duly called meeting of the stockholders of the Company and may
not act by written consent.
The New By-laws contain certain notification requirements relating to
nominations to the Board of Directors and to the raising of business matters at
stockholder meetings. Such requirements provide that a notice of proposed
stockholder business must be timely given in writing to the Secretary of the
Company prior to the appropriate meeting. To be timely, notice relating to an
annual meeting must be given not less than 60, nor more than 90, days in advance
of such meeting; provided, that if the date of the annual meeting is changed by
more than 30 days from the anniversary date of the prior annual meeting, written
notice must be given no later than the fifth day after the first public
disclosure of the date of the meeting. The New By-laws provide that special
meetings of stockholders may be called only by certain officers of the Company
or the Board of Directors.
The New Certificate contains certain provisions permitted under the
Delaware General Corporation Law (the 'DCL') regarding the liability of
directors. These provisions eliminate the personal liability of a director to
the Company and its stockholders for monetary damages for breach of fiduciary
duty as a director other than for any breach of that director's duty of loyalty,
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, for any transaction from which the director
derived an improper personal benefit or for an unlawful payment of dividends or
redemption of stock. Those provisions do not affect the availability of
equitable remedies such as an action to enjoin or rescind a transaction
involving a breach of fiduciary duty. The New By-laws provide that the Company
will indemnify its directors and officers, and may indemnify any authorized
representative of the Company, to the fullest extent permitted by the DCL. The
Company believes that such provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors and officers.
45
<PAGE>
The New By-laws provide that the number of directors constituting the
entire Board of Directors will be established by the Board of Directors except
as otherwise provided in the New Certificate, but will consist of not less than
three Common Directors. Common Directors may be removed by the holders of the
Common Stock only for cause and new Common Directors may be elected
simultaneously with such removal. The New By-laws further provide that any
amendment of the New By-laws to permit the removal of Common Directors without
cause by the holders of the Common Stock will not apply to any incumbent
director for the balance of his or her term.
The New Certificate provides that the Common Directors will be divided into
three classes serving staggered three-year terms. Each class will consist, as
nearly as possible, of one-third of the whole number of Common Directors. The
classification of the Common Directors and the separate voting for the Preferred
Directors has the effect of making it more difficult for stockholders to change
the composition of the Board of Directors in a relatively short period of time.
At least three annual meetings of stockholders will generally be required to
effect a change in a majority of the Board of Directors.
The New By-laws may be amended by a majority of the Board of Directors,
subject to the right of the stockholders to amend the New By-laws by the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Common Stock and Class A Preferred Stock voting as a single class. The New
Certificate may be amended by the affirmative vote of the holders of a majority
of the outstanding shares of Common Stock and Class A Preferred Stock voting as
a single class, except that the affirmative vote of the holders of at least
two-thirds of such shares is required to amend certain provisions, including the
provisions establishing a classified board and prohibiting action by written
consent.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, 1,958,800 shares of Common Stock will be
outstanding (2,108,800 shares if the over-allotment option is exercised in
full). Of these shares, the 1,000,000 shares of Common Stock sold in the
Offering (1,150,000 shares if the over-allotment option is exercised in full)
will be freely tradeable under the Securities Act, except that any shares of
Common Stock purchased by affiliates of the Company ('Affiliates'), as that term
is defined in Rule 144 under the Securities Act ('Rule 144'), may generally be
sold only in compliance with the limitations of Rule 144 described below. The
remaining 958,800 shares of Common Stock (the 'Restricted Shares') held by
existing stockholders were sold by the Company in reliance on exemptions from
the registration requirements of the Securities Act and may be restricted
securities within the meaning of Rule 144.
In general, under Rule 144 as currently in effect, beginning after the
effective date of the Registration Statement of which this Prospectus is a part,
a stockholder, including an Affiliate, who has beneficially owned his or her
Restricted Shares for at least one year from the date those Restricted Shares
were acquired from the Company or an Affiliate, is entitled to sell, within any
three-month period, a number of such shares that does not exceed certain volume
restrictions; provided, that certain requirements concerning availability of
public information, manner of sale and notice of sale are satisfied. In
addition, under Rule 144(k), if a period of at least two years has elapsed from
the date any Restricted Shares were acquired from the Company or an Affiliate, a
stockholder that is not an Affiliate at the time of sale and has not been an
Affiliate for at least three months prior to the sale is entitled to sell those
shares without compliance with the above-referenced requirements of Rule 144. An
Affiliate must comply with the volume restrictions and the other requirements
referred to above whenever that Affiliate sells any securities of the Company.
Following consummation of the Offering, the Company intends to register on
Form S-8 under the Securities Act 200,000 shares of Common Stock reserved for
issuance under the 1997 Incentive Plan. Shares registered on Form S-8 will be
available for resale in the open market subject to the limitations applicable to
Affiliates as provided in Rule 144.
The Company and its existing stockholders have agreed that they will not,
directly or indirectly, without the prior written consent of the Representative,
for a period of one year after the date of this Prospectus sell, contract to
sell, pledge, grant any option for the sale of, or otherwise transfer or dispose
of, or cause the transfer or
46
<PAGE>
disposition of, any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for any shares of Common Stock or exercise any
registration rights with respect to any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for any shares of Common Stock.
The Representative may, in its sole discretion and at any time without notice,
release all or a portion of the shares subject to such restrictions therefrom,
although it has no present intention of doing so. See 'Underwriting.'
Prior to the Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that future sales
of shares of Common Stock, including Restricted Shares, or the availability of
shares of Common Stock, including Restricted Shares, for future sale, will have
on the market price of the Common Stock prevailing from time to time. Sales of a
substantial number of Restricted Shares in the public market following the
Offering, or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital through an offering of its equity securities.
Under a registration rights agreement that will be effective following
consummation of the Offering, Mayo, CMNY and MidMark will each have the right to
have the Company prepare and file up to two registrations statements for him or
it at any time after the first anniversary of the consummation of the Offering,
subject to certain conditions. In addition those stockholders and the other
stockholders who are parties to that agreement will have unlimited piggyback
registration rights so long as they are not eligible to sell shares of Common
Stock in accordance with Rule 144(k) and subject to customary 'cutback'
provisions. This agreement contains customary provisions relating to the
expenses of any such registration and the rights to indemnification among the
parties and the Company.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part (the 'Underwriting Agreement'),
the Underwriters named below, acting through Prime Charter Ltd. as the
Representative, have severally agreed to purchase from the Company, and the
Company has agreed to sell to the Underwriters, an aggregate of 1,000,000 shares
of Common Stock. The Underwriting Agreement provides that the Underwriters'
obligations to pay for and accept delivery of those shares of Common Stock are
subject to certain conditions precedent, and that the Underwriters are committed
to purchase all of those shares of Common Stock if any shares are purchased.
Under certain circumstances, the commitments of non-defaulting Underwriters may
be increased as set forth in the Underwriting Agreement.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------------------------------------------------------------------------- ---------
<S> <C>
Prime Charter Ltd....................................................................................
---------
Total........................................................................................... 1,000,000
---------
---------
</TABLE>
The Underwriters propose initially to offer the shares of Common Stock
offered hereby to the public at the offering price set forth on the front cover
page of this Prospectus and to certain dealers at such price less a concession
not in excess of $________ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $____________ per share to
certain other dealers. After the Offering, the public offering price, concession
and reallowance may be changed by the Underwriters.
The Company has agreed to pay to the Representative on behalf of the
Underwriters a non-accountable expense allowance equal to 2 1/2% of the gross
proceeds of the Offering, $100,000 of which has already been paid by the Company
to cover some of the underwriting costs and due diligence expenses related to
the Offering.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 150,000
additional shares of Common Stock at the initial public offering price, less the
underwriting discounts and commissions and a pro-rata portion of the
non-accountable expense allowance. The Underwriters may exercise this option
solely to cover over-allotments, if any, made in the sale of
47
<PAGE>
the shares of Common Stock offered hereby. To the extent that this option is
exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares of Common Stock as the percentage of shares of Common Stock it was
originally obligated to purchase pursuant to the Underwriting Agreement.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
At the request of the Company, the Underwriters have reserved up to 75,000
shares of Common Stock for sale at the initial offering price to certain
directors, officers, employees and agents of the Company and its subsidiaries.
The number of shares of Common Stock available to the general public will be
reduced to the extent that those persons purchase reserved shares. Any reserved
shares that are not so purchased by those persons at the closing of the Offering
will be offered by the Underwriters to the general public on the same terms as
the other shares offered by this Prospectus.
The Company has agreed to sell to the Representative or its designees, for
nominal consideration, the Underwriter Warrants to purchase an aggregate of
100,000 shares of Common Stock. The shares of Common Stock subject to the
Underwriter Warrants will be in all respects identical to the shares of Common
Stock offered to the public hereby. The Underwriter Warrants will be exercisable
for a four-year period commencing one year after the effective date of the
Registration Statement of which this Prospectus forms a part at a per share
exercise price equal to 120% of the initial offering price. During the period
beginning one year from the effective date of the Registration Statement and
ending five years after such effective date, the Company has agreed at its
expense to register under the Securities Act the shares of Common Stock issued
or issuable upon exercise of the Underwriter Warrants and, for the period
beginning one year from the effective date of the Registration Statement and
ending seven years after such effective date, to include such shares of Common
Stock in any appropriate registration statement which is filed by the Company.
The Underwriter Warrants will contain anti-dilution provisions providing for
appropriate adjustment of the exercise price and number of shares that may be
purchased upon the occurrence of certain events. The Underwriter Warrants may be
exercised by paying the exercise price in cash, through the surrender of shares
of Common Stock, through a reduction in the number of shares covered thereby, or
by using a combination of such methods. The Representative has the right for
five years after the Offering to send a representative to observe each meeting
of the Board of Directors. At the Representative's election, in lieu of such
representative, the Representative may require the Company to use its reasonable
best efforts to elect one designee of the Representative to the Board of
Directors for the longer of (i) two years following the consummation of the
Offering or (ii) up to five years following consummation of the Offering if the
Representative and its affiliates are the beneficial owners of at least 50% of
the Underwriter Warrants and/or the underlying shares of Common Stock.
The Company and its existing stockholders have agreed that they will not,
directly or indirectly, without the prior written consent of the Representative,
for a period of one year after the date of this Prospectus sell, offer to sell,
solicit an offer to buy, contract to sell, pledge, grant any option for the sale
of, or otherwise transfer or dispose of or cause the transfer or disposition of,
any shares of Common Stock or any securities convertible into or exchangeable or
exercisable for any shares of Common Stock or exercise any registration rights
with respect to any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for any shares of Common Stock. See 'Shares Eligible
for Future Sale.'
The Common Stock has been approved for listing on the American Stock
Exchange, subject to official notice of issuance.
Prior to the Offering, there has been no public market for the Common
Stock. Accordingly, the initial public offering price for the shares of Common
Stock offered hereby will be determined by negotiation between the Company and
the Representative. In determining that price, consideration will be given to
various factors, including market conditions for initial public offerings, the
history of and prospects for the Company's business, the Company's past and
present operations, its past and present earnings and current financial
position, an assessment of the Company's management, the market for securities
of companies in businesses similar to those of the Company, the general
condition of the securities markets and other relevant factors. There can be no
assurances, however, that the initial public offering price will correspond to
the prices at which the Common Stock will trade in the public market subsequent
to the Offering or that an active trading market for the Common Stock will
develop and continue after the Offering.
48
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain other
legal matters relating to the Offering will be passed upon for the Company by
Kirkpatrick & Lockhart LLP, Pittsburgh, Pennsylvania. Certain legal matters
relating to the Offering will be passed upon for the Underwriters by Dewey
Ballantine, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and for each of the two years in the period ended December 31, 1996, the
combined statements of income of Nelson Ferman Theaters at Emerson, New City,
Allwood and Washington Township for the periods ended May 29, 1996 and December
31, 1995, the combined statements of income of Magic Cinemas at Bergenfield,
Tenafly and Closter for the periods ended December 13, 1996 and December 31,
1995 and the combined financial statements of United Artists Theaters at
Bronxville, Larchmont, Wayne, New City and Mamaroneck as of December 31, 1996
and for each of the two years in the period ended December 31, 1996 included in
this Prospectus have been so included in reliance on the reports of Wiss &
Company, LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
In October, 1996, the Board of Directors retained the firm of Wiss &
Company, LLP to act as the Company's principal independent accountants and
dismissed the firm of Dorfman, Abrams, Music & Co. as the Company's principal
independent accountants.
The reports prepared by Dorfman, Abrams, Music & Co. on the Company's
financial statements as of December 31, 1994 and for the period then ended and
as of December 31, 1995 and for the year then ended did not contain any adverse
opinion or disclaimer of opinion and was not modified as to uncertainty, audit
scope or accounting principles. There were no disagreements between the Company
and Dorfman, Abrams, Music & Co. on any matter concerning accounting principles
or practices, financial statement disclosure or auditing scope or procedure,
which, if not resolved to that firm's satisfaction, would have caused it to make
reference to the subject matter of such disagreement in connection with its
report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form SB-2 under the Securities Act and
the rules and regulations promulgated thereunder covering the shares of Common
Stock offered hereby. For the purposes hereof, the term 'Registration Statement'
means that original Registration Statement, any and all amendments thereto and
the schedules and exhibits to such original Registration Statement or any such
amendment. This Prospectus omits certain information contained in the
Registration Statement and reference is made to the Registration Statement for
further information with respect to the Company and the shares of Common Stock
offered hereby. Each statement contained in this Prospectus as to the contents
of any contract, agreement or other document filed as an exhibit to the
Registration Statement is qualified in its entirety by reference to such exhibit
for a more complete description of the matter involved. The Registration
Statement may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission maintained
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such materials may be obtained from the Public Reference Section of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the prescribed rates. The Commission also maintains a web
site at http://www.sec.gov which contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
As a result of the Offering, the Company will be subject to the
informational requirements of the Exchange Act. The Company will fulfill its
obligations with respect to the requirements of the Exchange Act by filing
periodic reports and other information with the Commission and by distributing
such information, to the extent required by the Exchange Act, to its
stockholders.
49
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................................................. F-2
Consolidated Balance Sheets at December 31, 1996 and (unaudited) March 31, 1997.......................... F-3
Consolidated Statements of Operations for the years ended December 31, 1995 and 1996 and the (unaudited)
three months ended March 31, 1996 and 1997............................................................ F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1995 and 1996
and the (unaudited) three months ended March 31, 1997................................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1995 and 1996 and the (unaudited)
three months ended March 31, 1996 and 1997............................................................ F-6
Notes to Consolidated Financial Statements............................................................... F-7
NELSON FERMAN THEATERS AT EMERSON, NEW CITY, ALLWOOD AND WASHINGTON TOWNSHIP
Independent Auditors' Report............................................................................. F-16
Combined Statements of Income for the year ended December 31, 1995 and the period ended May 29, 1996..... F-17
Notes to Combined Statements of Income................................................................... F-18
MAGIC CINEMAS AT BERGENFIELD, TENAFLY AND CLOSTER
Independent Auditors' Report............................................................................. F-19
Combined Statements of Income for the year ended December 31, 1995 and the period ended December 13,
1996.................................................................................................. F-20
Notes to Combined Statements of Income................................................................... F-21
UNITED ARTISTS THEATERS AT BRONXVILLE, LARCHMONT, WAYNE, NEW CITY AND MAMARONECK
Independent Auditors' Report............................................................................. F-23
Combined Balance Sheets at December 31, 1996 and (unaudited) March 31, 1997.............................. F-24
Combined Statements of Income and Divisional Equity for the years ended December 31, 1995 and 1996 and
the (unaudited) three months ended March 31, 1996 and 1997............................................ F-25
Combined Statements of Cash Flows for the years ended December 31, 1995 and 1996 and the (unaudited)
three months ended March 31, 1996 and 1997............................................................ F-26
Notes to Combined Financial Statements................................................................... F-27
</TABLE>
F-1
<PAGE>
The stock split described in Note 8 had not been effected at the date of
this report. When it has been consummated, we would be in a position to render
the following report:
INDEPENDENT AUDITORS' REPORT
'Board of Directors
Clearview Cinema Group, Inc.
We have audited the consolidated balance sheet of Clearview Cinema Group,
Inc. and subsidiaries as of December 31, 1996 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Clearview
Cinema Group, Inc. and subsidiaries at December 31, 1996 and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
February 10, 1997 (except as to Note 8
for which the date is 1997)'
F-2
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................................. $ 751,345 $ 1,431,782
Inventories...................................................................... 45,102 47,624
Other current assets............................................................. 34,866 161,007
------------ -----------
Total current assets.......................................................... 831,313 1,640,413
------------ -----------
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION.............................. 11,412,217 11,455,621
------------ -----------
OTHER ASSETS:
Intangible assets, less accumulated amortization................................. 2,711,518 2,673,355
Project acquisition costs........................................................ 434,326 414,602
Escrow deposits.................................................................. 294,529 294,529
Deferred offering costs.......................................................... -- 65,179
Security deposits and other assets............................................... 76,641 86,716
------------ -----------
3,517,014 3,534,381
------------ -----------
$ 15,760,544 $16,630,415
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............................................. $ 835,650 $ 966,267
Current maturities of subordinated notes payable, related parties................ 479,986 484,260
Accounts payable and accrued expenses............................................ 1,226,502 1,674,569
------------ -----------
Total current liabilities..................................................... 2,542,138 3,125,096
------------ -----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities.......................................... 7,742,611 8,016,314
Subordinated notes payable, less current maturities:
Related parties............................................................... 593,882 596,470
Other......................................................................... 600,000 600,000
------------ -----------
8,936,493 9,212,784
------------ -----------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK AT REDEMPTION PRICE..................................... 2,132,294 2,780,703
------------ -----------
REDEEMABLE COMMON STOCK AT REDEMPTION PRICE........................................ 357,305 357,305
------------ -----------
STOCKHOLDERS' EQUITY:
Undesignated Preferred Stock:
Authorized 2,498,697 shares, issued and outstanding--none..................... -- --
Class A Preferred Stock, par value $.01, authorized 1,303 shares; outstanding 779
shares........................................................................ 8 8
Common Stock, par value $.01, authorized 10,000,000 shares; outstanding 832,800
shares........................................................................ 8,328 8,328
Additional paid-in capital....................................................... 4,827,096 4,827,096
Accumulated deficit.............................................................. (553,519) (542,897)
Less: Redemption price of redeemable stock....................................... (2,489,599) (3,138,008)
------------ -----------
Total stockholders' equity.................................................... 1,792,314 1,154,527
------------ -----------
$ 15,760,544 $16,630,415
------------ -----------
------------ -----------
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------ ------------------------
1995 1996 1996 1997
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
THEATER REVENUES:
Box office............................................. $1,759,131 $6,195,399 $ 781,073 $2,712,210
Concession............................................. 554,671 1,861,155 226,425 743,986
Other.................................................. 31,895 141,420 5,505 49,739
---------- ---------- ---------- ----------
2,345,697 8,197,974 1,013,003 3,505,935
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Film rental and booking fees........................... 823,791 3,022,377 345,411 1,196,126
Cost of concession sales............................... 99,261 279,549 33,097 108,605
Theater operating expenses............................. 1,078,370 3,297,825 463,024 1,226,799
General and administrative expenses.................... 375,262 589,822 95,525 191,806
Depreciation and amortization.......................... 99,632 635,007 35,874 413,011
---------- ---------- ---------- ----------
2,476,316 7,824,580 972,931 3,136,347
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS).................................. (130,619) 373,394 40,072 369,588
INTEREST EXPENSE......................................... 85,697 591,722 54,466 358,966
---------- ---------- ---------- ----------
NET INCOME (LOSS)........................................ $ (216,316) $ (218,328) $ (14,394) $ 10,622
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
WEIGHTED AVERAGE COMMON SHARES AND EQUIVALENTS
OUTSTANDING............................................ 1,797,000 1,797,000 1,797,000 1,797,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET INCOME (LOSS) PER COMMON SHARE....................... $ (.12) $ (.12) $ (.01) $ .01
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------- -------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------ ------- --------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1995................. -- $ -- 600,000 $ 6,000 $ 765,200 $ (78,875)
YEAR ENDED DECEMBER 31, 1995:
Dividends paid.......................... -- -- -- -- -- (30,000)
Issuance of warrants in connection with
subordinated debt.................... -- -- -- -- 19,610 --
Net loss................................ -- -- -- -- -- (216,316)
------ ------- --------- ------- ---------- -----------
BALANCES, DECEMBER 31, 1995............... -- -- 600,000 6,000 784,810 (325,191)
YEAR ENDED DECEMBER 31, 1996:
Proceeds from sale of preferred stock,
net of related costs of $154,911..... 779 8 -- -- 2,345,081 --
Dividends paid.......................... -- -- -- -- -- (10,000)
Issuance of common stock:
For cash............................. -- -- 12,600 126 69,874 --
Upon conversion of debt.............. -- -- 12,000 120 79,880 --
For assets acquired.................. -- -- 208,200 2,082 1,107,918 --
Issuance of warrants in connection with:
Subordinated debt.................... -- -- -- -- 23,532 --
Bank financing....................... -- -- -- -- 416,001 --
Net loss.................................. -- -- -- -- -- (218,328)
------ ------- --------- ------- ---------- -----------
BALANCES, DECEMBER 31, 1996............... 779 8 832,800 8,328 4,827,096 (553,519)
THREE MONTHS ENDED MARCH 31, 1997
(Unaudited):
Net income.............................. -- -- -- -- -- 10,622
------ ------- --------- ------- ---------- -----------
779 $ 8 832,800 $ 8,328 $4,827,096 $(542,897)
------ ------- --------- ------- ---------- -----------
------ ------- --------- ------- ---------- -----------
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- -----------------------
1995 1996 1996 1997
----------- ----------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $ (216,316) $ (218,328) $ (14,394) $ 10,622
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation and amortization.......................... 99,632 635,007 35,874 413,011
Amortization of debt discount.......................... 5,320 42,715 3,805 47,493
Changes in operating assets and liabilities:
Inventories......................................... (4,938) (28,455) (3,042) (2,522)
Other current assets................................ (62,014) 32,954 (2,012) (126,141)
Security deposits and other assets.................. (9,600) (40,716) (1,667) (10,075)
Accounts payable and accrued liabilities............ 306,736 731,232 (95,656) 448,067
----------- ----------- --------- ----------
Net cash flows from operating activities.......... 118,820 1,154,409 (77,092) 780,455
----------- ----------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....................... (630,675) (317,946) (56,353) (305,347)
Purchase of property and equipment upon acquisition of
theaters............................................... -- (6,290,000) -- --
Purchase of intangible assets............................ (35,576) (686,906) -- (93,181)
Project acquisition costs................................ (285,557) -- (3,959) --
Escrow deposits.......................................... (287,182) (7,347) (50,000) --
----------- ----------- --------- ----------
Net cash flows from investing activities.......... (1,238,990) (7,302,199) (110,312) (398,528)
----------- ----------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long term debt............................. 400,000 4,317,228 32,192 625,000
Payments on long term debt............................... (17,448) (136,543) (2,337) (261,311)
Proceeds from subordinated notes payable,
related parties........................................ 580,000 600,000 72,000 --
Proceeds from issuance of preferred stock................ -- 2,500,000 -- --
Proceeds from issuance of common stock................... -- 70,000 -- --
Payments on option....................................... (80,000) (120,000) (45,000) --
Costs related to issuance of
preferred stock........................................ -- (154,911) -- --
Debt issuance costs...................................... -- (342,842) -- --
Deferred offering costs.................................. -- -- -- (65,179)
Dividends paid........................................... (30,000) (10,000) (10,000) --
----------- ----------- --------- ----------
Net cash flows from financing activities.......... 852,552 6,722,932 46,855 298,510
----------- ----------- --------- ----------
NET CHANGE IN CASH......................................... (267,618) 575,142 (140,549) 680,437
CASH, BEGINNING OF PERIOD.................................. 443,821 176,203 176,203 751,345
----------- ----------- --------- ----------
CASH, END OF PERIOD........................................ $ 176,203 $ 751,345 $ 35,654 $1,431,782
----------- ----------- --------- ----------
----------- ----------- --------- ----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................ $ 42,877 $ 623,656 $ 58,161 $ 235,371
----------- ----------- --------- ----------
----------- ----------- --------- ----------
Income taxes paid........................................ $ 1,670 $ 2,814 $ 1,230 $ 1,746
----------- ----------- --------- ----------
----------- ----------- --------- ----------
Non-cash investing and financing activities:
Conversion of subordinated note payable--related party
into common stock................................... $ -- $ 80,000 $ -- $ --
----------- ----------- --------- ----------
----------- ----------- --------- ----------
Project acquisition costs in exchange for option
payable............................................. $ 200,000 $ -- $ -- $ --
----------- ----------- --------- ----------
----------- ----------- --------- ----------
Common stock issued for purchase of assets............. $ -- $ 1,110,000 $ -- $ --
----------- ----------- --------- ----------
----------- ----------- --------- ----------
Acquisition of assets through issuance of note payable
and subordinated note payable....................... $ -- $ 5,000,000 $ -- $ --
----------- ----------- --------- ----------
----------- ----------- --------- ----------
Fair value of warrants issued in connection with
subordinated debt and bank financing................ $ 19,610 $ 439,533 $ -- $ --
----------- ----------- --------- ----------
----------- ----------- --------- ----------
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information after February 10, 1997 is unaudited)
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation--The consolidated financial statements include
the accounts of Clearview Cinema Group, Inc. ('Clearview') and its wholly-owned
subsidiaries (collectively referred to as 'the Company'). All significant
intercompany balances and transactions have been eliminated in consolidation.
Nature of the Business--The Company is a regional motion picture exhibitor
that operates in-town multiplex theaters primarily located in affluent suburban
communities in the New York/New Jersey metropolitan area. The Company's theaters
show a mix of first-run commercial, art and family-oriented films that is
designed to appeal primarily to sophisticated moviegoers and families with
younger children.
The Company has a limited operating history. Its future success is
dependent upon, among other things, its ability to secure favorable leases,
develop new theaters, obtain significant financing, and continue the employment
of its Chief Executive Officer. See 'Risk Factors' elsewhere in this Prospectus
concerning these and other risks.
Revenues and Film Rental Costs--The Company recognizes revenues from box
office admissions and concession sales at the time of sale. Film rental costs
are based on a film's box office receipts and length of a film's run.
Seasonality--The Company's business is seasonal with a substantial portion
of its revenues and profits being derived during the summer months (June through
August) and the holiday season (November and December).
Estimates and Uncertainties--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
Inventories--Inventories consist of concession products and are stated at
the lower of cost (first-in, first-out method) or market.
Property and Equipment--Property and equipment are stated at cost. Acquired
assets are included based on an allocation of their respective aggregate
purchase prices (see Note 7). Buildings and improvements, theater equipment and
office furniture and equipment are depreciated using straight line and
accelerated methods over the estimated useful lives of the assets. In general,
the estimated useful lives used in computing depreciation and amortization are:
buildings and improvements--39 years; theater equipment--5 to 7 years; office
furniture and equipment--5 to 7 years. Leasehold improvements are amortized
using the straight-line method over the term of the respective lease or the
estimated useful life of the asset, whichever is less. Leaseholds are amortized
using the straight-line method over the term of the respective leases.
Intangible Assets--Intangible assets consist of cost in excess of fair
value of businesses acquired (goodwill), organization costs, covenant not
compete, and debt issuance costs. Costs are amortized on a straight line basis
over the following lives: goodwill--15 years, organization costs--5 years and
covenant not to compete--3 years.
Costs related to the issuance of debt are capitalized. Debt issuance costs
and debt discounts are amortized over the term of the related debt.
Deferred Offering Costs--Offering costs have been deferred, pending the
outcome of the offering contemplated herein. If the offering is successful,
these costs will be charged against additional paid-in capital; otherwise, they
will be charged to expense.
Rent Expense--Certain of the Company's theaters have operating leases that
contain predetermined increases in the rentals payable during the terms of such
leases. For these leases, the aggregate rental expense over the lease term is
recognized on a straight-line basis over the lease term. The differences between
the expense charged to operations and amounts payable under such leases are
recorded annually as deferred rent expense, which will ultimately reverse over
the lease term.
F-7
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Information after February 10, 1997 is unaudited)
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:--(CONTINUED)
Additional rent is paid for common area maintenance and may also be charged
based on a percentage of net revenue in excess of a predetermined amount.
Financial Instruments--Financial instruments include cash, other assets,
subordinated notes and accounts payable, accrued expenses and long-term debt.
The amounts reported for financial instruments are considered to be reasonable
approximations of their fair values, based on market information concerning
financial instruments with similar characteristics available to management. The
use of different market assumptions and/or estimation methodologies could have a
material effect on the estimated fair value amounts.
Concentration of Credit Risk--The Company maintains its cash balances in
several financial institutions in accounts which are insured by the Federal
Deposit Insurance Corporation for up to $100,000 each. At December 31, 1996, the
Company had uninsured balances totaling approximately $763,000.
Income Taxes--Deferred tax assets and liabilities are computed annually for
temporary differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
temporary differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.
Net Income (Loss) Per Common Share--Net income (loss) per common share is
based upon the weighted average number of outstanding common shares. However,
common shares, preferred shares and warrants issued after December 31, 1995 have
been treated as outstanding for all reported periods due to their per share
prices being significantly less than the price of the shares in the offering
contemplated herein.
Had the offering contemplated in this Prospectus been consummated as of
January 1, 1997 and a portion of its proceeds used to retire the $600,000
subordinated note payable (see Note 5), earnings per share for the three months
ended March 31, 1997 would remain unchanged.
Interim Reporting--The interim financial statements included herein reflect
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. Such adjustments
consist solely of normal recurring accruals. Results for interim periods are not
necessarily indicative of results for a full year.
New Accounting Pronouncements--Statement of Financial Accounting Standards
('SFAS') No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of', requires that certain long-lived assets be
reviewed for possible impairment and written down to fair value, if appropriate.
The Company adopted this pronouncement in 1996 and adoption did not have a
material effect on the Company's financial statements.
SFAS No. 123, 'Accounting for Stock-Based Compensation', requires companies
to measure employee stock compensation plans based on a fair value method of
accounting. However, the statement allows the alternative of continued use of
Accounting Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees', with pro forma disclosure of net income and earnings per share
determined as if the fair value based method had been applied in measuring
compensation cost. The Company adopted the pro forma disclosure provisions of
this new pronouncement in 1996 and such adoption did not have a material effect
on the Company's financial statements.
SFAS No. 128, 'Earnings per Share', was issued in February 1997, and is
effective for financial statements issued for periods ending after December 15,
1997. SFAS 128 requires that earnings per share be presented more in line with
earnings per share standards of other countries. The Company expects to adopt
SFAS 128 for the year ending December 31, 1997. The Company has not yet
determined the effect of adoption of this new pronouncement on its financial
statements.
F-8
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Information after February 10, 1997 is unaudited)
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
<S> <C> <C>
Land........................................................... $ 400,000 $ 400,000
Buildings and improvements..................................... 1,302,098 1,302,767
Leaseholds and improvements.................................... 8,095,097 8,199,530
Office furniture and equipment................................. 2,347,117 2,564,016
------------ -----------
12,144,312 12,466,313
Less: Accumulated depreciation and amortization................ 732,095 1,010,692
------------ -----------
$ 11,412,217 $11,455,621
------------ -----------
------------ -----------
</TABLE>
NOTE 3--INTANGIBLE ASSETS:
Intangible assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
<S> <C> <C>
Goodwill....................................................... $ 2,151,437 $ 2,207,361
Debt issue costs............................................... 378,264 409,649
Covenant not to compete........................................ 210,000 210,000
Organization costs and other................................... 36,362 42,234
------------ -----------
2,776,063 2,869,244
Less: Accumulated amortization................................. 64,545 195,889
------------ -----------
$ 2,711,518 $ 2,673,355
------------ -----------
------------ -----------
</TABLE>
NOTE 4--ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ -----------
<S> <C> <C>
Film rental and booking fees payable........................... $ 699,444 $ 916,767
Accounts payable--other........................................ 243,278 366,772
Sales taxes.................................................... 49,228 49,866
Accrued payroll................................................ 68,632 42,394
Accrued interest............................................... 55,351 76,663
Other accrued expenses......................................... 110,569 222,107
------------ -----------
$ 1,226,502 $ 1,674,569
------------ -----------
------------ -----------
</TABLE>
F-9
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Information after February 10, 1997 is unaudited)
NOTE 5--LONG-TERM DEBT, CREDIT AGREEMENT AND SUBORDINATED NOTE PAYABLE:
Long-term debt--A summary of long-term debt follows:
<TABLE>
<CAPTION>
INTEREST DECEMBER 31, MARCH 31,
DESCRIPTION RATE 1996 1997
- ----------------------------------------------------------------------- ----------- ------------ -----------
<S> <C> <C> <C>
Notes payable to bank, issued under a credit agreement, interest 2% above
payable in monthly installments, principal due in quarterly bank's
installments through July 2002, net of unamortized debt discount of prime rate
$384,976 and $344,345................................................ $3,790,024 $8,602,095
Note payable--seller, refinanced as described below.................... -- 4,400,000 --
Notes payable in monthly installments of principal and interest of
$5,029, due October 2004............................................. 11.25% 337,009 331,343
Other.................................................................. 51,228 49,143
------------ -----------
8,578,261 8,982,581
Less: Current maturities............................................... 835,650 966,267
------------ -----------
$7,742,611 $8,016,314
------------ -----------
------------ -----------
</TABLE>
Long-term debt matures as follows:
YEAR ENDING DECEMBER 31,
-----------------------------------------
1997..................................... $ 835,650
1998..................................... 1,276,870
1999..................................... 1,518,476
2000..................................... 1,777,516
2001..................................... 2,982,499
2002 and thereafter...................... 187,250
----------
$8,578,261
----------
----------
The notes payable to the bank are collateralized by substantially all of
the assets of the Company and the related credit agreement contains various
restrictive covenants, including maintenance of specified levels of net worth
and debt coverage ratios. All such covenants were satisfied or waived by the
Bank at December 31, 1996.
Refinancing--In January 1997, seller-financing of $4,400,000 was paid with
$100,000 from the Company's operating cash and the proceeds from a $4,300,000
bank term note, issued under the Company's credit agreement with its principal
lender. The bank term note bears interest at 2% above the bank's prime rate
(payable monthly), with quarterly principal payments, commencing in July 1997
and ending October 2001, with a balloon payment of $1,225,000 due in December
2001. Accordingly, the note payable at December 31, 1996 has been classified in
accordance with the terms of this new bank term note.
Under a second amendment to this credit agreement with its principal
lender, the Company has additional borrowing availability of $1,250,000, of
which $625,000 was drawn in March 1997.
In accordance with this credit agreement, the Company maintains a
$10,000,000 key-man life insurance policy on its President and Chief Executive
Officer.
Subordinated note payable, other--The Company has a $600,000 subordinated
note payable to the seller of the Bergen County theaters (see Note 7). Interest
is due monthly at rates set forth below. The principal and any
F-10
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Information after February 10, 1997 is unaudited)
NOTE 5--LONG-TERM DEBT, CREDIT AGREEMENT AND SUBORDINATED NOTE
PAYABLE:--(CONTINUED)
unpaid interest is due December 2001 or immediately upon the consummation of any
public offering, including the offering contemplated by this Prospectus.
PERIOD: RATE
- -------------------------------------------------------------------- ----
December 1996 through 1997.......................................... 12%
December 1997 through 1998.......................................... 14%
December 1998 through 1999.......................................... 16%
December 1999 and thereafter........................................ 18%
See Note 10 for subordinated notes payable to related parties.
NOTE 6--INCOME TAXES:
Deferred income taxes reflect the net effects of temporary differences
between the amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The principal temporary difference
arises from the net operating loss carryforwards and results in a non-current
deferred tax asset of approximately $172,000 at December 31, 1996 and $85,000 at
December 31, 1995.
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company has
determined, based on its recurring net losses since inception, that a full
valuation allowance is appropriate at December 31, 1996 and 1995.
A reconciliation of the provision (benefit) for income taxes computed at
the federal statutory rate of 34% and the effective tax rate of income (loss)
before income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- -------------------
1995 1996 1996 1997
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Computed expense (benefit) on net loss at federal statutory rate.... $(72,000) $(74,000) $(4,000) $ 4,000
State income expense (benefit), net of federal income tax effect.... (13,000) (13,000) (1,000) 1,000
Tax effect of net operating losses not currently usable............. 85,000 87,000 5,000 --
Recognition of tax benefit of prior year losses..................... -- -- -- (5,000)
-------- -------- ------- --------
Provision (benefit) for income taxes................................ $ -- $ -- $ -- $ --
-------- -------- ------- --------
-------- -------- ------- --------
</TABLE>
The Company has available at December 31, 1996 net operating loss
carryforwards totaling approximately $447,000 that may be applied against future
consolidated federal taxable income and the future state taxable income of the
respective subsidiary companies. The loss carryforwards will expire through
2011.
Current tax law limits the use of net operating loss carryforwards after
there has been a substantial change in ownership (as defined) during a
three-year period. Because of the possible future changes in common stock
ownership, the use of the Company's net operating loss carryforwards may be
subject to an annual limitation. To the extent amounts available under the
annual limitation are not used, they may be carried forward for the remainder of
15 years from the year the losses were originally incurred.
NOTE 7--THEATER ACQUISITIONS:
During 1996, the Company acquired the leaseholds of seven theaters and two
theaters and the underlying real estate, all located in New Jersey and New York.
The acquisitions have been accounted for under the purchase method of
accounting. Under the purchase method of accounting, the purchase price for each
transaction has been allocated at fair value to the separately identifiable
assets (principally property, equipment and leaseholds) of the respective
theater locations with the remaining balance allocated to goodwill. Also, the
results of operations of
F-11
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Information after February 10, 1997 is unaudited)
NOTE 7--THEATER ACQUISITIONS:--(CONTINUED)
the acquired theaters are included in the accompanying consolidated financial
statements from their respective acquisition dates. The acquisitions are
described as follows:
May 1996--The Company purchased the leaseholds of three New Jersey theaters
and one New York theater in May 1996 for $5,000,000 in cash and the issuance of
208,200 shares of the Company's Common Stock. The total cost was allocated as
follows: $835,000--theater equipment, $5,075,000--leasehold interests and
$200,000--covenant not to compete.
July 1996--The Company purchased the leaseholds of two New York theaters in
July 1996. The total cost of $1,499,000 was paid in cash and was allocated as
follows: $1,489,000--leasehold interests and $10,000-- covenant not to compete.
December 1996--The Company purchased two theaters and the underlying real
estate and the leasehold of another theater in New Jersey in December 1996. The
total cost of $5,000,000 was paid with a $4,400,000 secured note and $600,000
subordinated note (see Note 5). The purchase price was allocated as follows:
$400,000--land, $1,300,000--buildings and leasehold improvements,
$832,000--theater equipment, $848,000-- leasehold interests and
$1,620,000--goodwill.
The following unaudited pro forma results of operations for the years ended
December 31, 1995 and 1996 and the three months ended March 31, 1996 assume all
of the Company's acquisitions occurred as of January 1, 1995 after giving effect
to certain adjustments, including depreciation and increased interest expense on
acquisition debt. The pro forma results have been prepared for comparative
purposes only and do not purport to indicate the results of operations which
would actually have occurred had the combinations been in effect on the dates
indicated, or which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, THREE MONTHS
-------------------------- ENDING
1995 1996 MARCH 31, 1996
----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues........................................................... $10,754,531 $13,182,481 $2,998,294
Net loss........................................................... $(1,658,987) $(1,268,766) $ (453,762)
Net loss per common share.......................................... $ (.92) $ (.71) $ (.25)
</TABLE>
NOTE 8--STOCKHOLDERS' EQUITY:
Stock Split--In May 1997, the Company's Board of Directors approved a 600 to 1
stock split which has been retroactively reflected in the accompanying
consolidated financial statements.
Preferred Stock--The Company's Certificate of Incorporation authorizes the
issuance of up to 2,500,000 shares of Preferred Stock. The Board of Directors is
authorized to issue shares of Preferred Stock from time to time in one or more
series and to establish and designate any such series and to fix the number of
shares and the relative conversion rights, voting rights, terms of redemption
and liquidation.
During May and July, 1996, the Company sold a total of 779 shares of Class
A Convertible Preferred Stock and preferred warrants for $2,500,000. The
warrants, which expire in June 2006, entitle the holder to purchase up to 471
shares of Class A Convertible Preferred Stock at an exercise price defined in
the warrants.
The holders of the Class A Convertible Preferred Stock are entitled to
receive preferential dividends, when and as declared by the Board of Directors.
So long as any shares of Class A Convertible Preferred Stock are outstanding,
unless all dividends on the Class A Convertible Preferred Stock have been paid,
no dividend or other distribution may be paid or made on the Common Stock or any
other capital stock of the Company ranking junior as to dividends to the Class A
Convertible Preferred Stock. In the event of any sale of all or substantially
all of the assets of the Company or any liquidation, dissolution or winding up
of the Company, the holders of the Class A Convertible Preferred Stock will be
entitled to receive an amount per share equal to a Liquidation Value (as
defined) plus all declared but unpaid dividends per share on the Class A
Convertible Preferred Stock, prior to
F-12
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Information after February 10, 1997 is unaudited)
NOTE 8--STOCKHOLDERS' EQUITY:--(CONTINUED)
any distribution to holders of the Common Stock or any other capital stock of
the Company ranking junior upon liquidation or dissolution to the Class A
Convertible Preferred Stock. The shares of Class A Convertible Preferred Stock
are convertible at any time at the option of the holders thereof into shares of
Common Stock at a conversion ratio of 600 to 1 as of the consummation of the
offering contemplated herein. Upon the occurrence of certain events, the shares
of Class A Convertible Preferred Stock will automatically convert into shares of
common stock.
The preferred warrants are not exercisable until June 1, 2001 unless, prior
to that date, the Company sells all or substantially all of its assets,
liquidates, dissolves or winds up or merges or consolidates with another
corporation in a transaction in which certain voting rights are not maintained
by the holders of the Company's voting stock. The number of shares of Class A
Convertible Preferred Stock for which the preferred warrants are exercisable
will be subject to reduction upon the occurrence of certain events. See 'The
Concurrent Transactions' and 'Description of Capital Stock' included elsewhere
in this Prospectus for additional information.
Redemption Rights--A certain common stockholder has the right to sell its
shares of Common Stock to the Company for a 30-day period commencing in 2002 at
a redemption price based upon a formula. If such stockholder does not exercise
that right, the Company has the right to purchase those shares of Common Stock
from such stockholder for the 90-day period commencing after the expiration of
that 30-day period at a price based upon the same formula. Those rights
terminate upon the occurrence of certain events. Such stockholder and the
Company have agreed to terminate those rights in connection with the offering
contemplated herein.
The holder of the Class A Convertible Preferred Stock has the right,
exercisable on or after June 1, 2001, to sell to the Company all of those shares
or the shares of Common Stock into which they have been converted at a
redemption price determined in accordance with a specified formula. In
connection with the offering contemplated in this Prospectus, such holder has
agreed to terminate this right.
The Company reports this redeemable stock at the current redemption value
separately between liabilities and stockholders' equity, since redemption is
outside of the Company's control. A corresponding reduction is made to
stockholders' equity, as the equivalent of treasury stock. The per share
redemption value of the Class A Convertible Preferred Stock is based on the
greater of gross revenues (as defined) or six times theater operating income
before general and administrative expenses, interest and taxes for the preceding
twelve months divided by the number of shares of Common Stock issued and, as if
converted or exercised, all convertible securities, options, warrants and
similar instruments. The redemption value of the Common Stock is based on book
value per share computed on a fully diluted basis.
As described above, the Company and the respective stockholders have agreed
to terminate their redemption rights in connection with the offering
contemplated in this Prospectus. See 'The Concurrent Transactions' included
elsewhere in this Prospectus for additional information.
Other Warrants--In connection with the bank financing as described in Note
5 and pursuant to a May 1996 warrant agreement (amended in December 1996), the
Company issued seven-year warrants in May and December 1996 to its principal
lender to purchase 43,800 and 50,400 shares of the Common Stock, respectively,
at an exercise price of $.01 per share. The warrants issued in connection with
the bank financing and the related debt discount have been recorded based upon
their estimated fair values.
NOTE 9--COMMITMENTS AND CONTINGENCIES:
Theater Leases--Certain of the Company's subsidiaries have entered into
lease arrangements for their respective theater facilities. The following is a
schedule of future minimum rental payments required for all
F-13
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Information after February 10, 1997 is unaudited)
NOTE 9--COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
non-cancellable operating leases (for theater facilities) that have initial or
remaining lease terms in excess of one year at December 31, 1996:
YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------
1997.................................................. $ 954,878
1998.................................................. 959,851
1999.................................................. 943,821
2000.................................................. 865,071
2001.................................................. 777,819
2002 and thereafter................................... 6,868,926
-----------
$11,370,366
-----------
Rent expense for theater operating leases in 1996 and 1995 was
approximately $802,000 and $290,000, respectively.
In addition, the Company leases its administrative facilities under a
lease, expiring in February 1998, which requires minimum annual payments of
$22,200.
Lease, Project Acquisition Costs and Escrow Deposits--During September
1995, the Company entered into an option agreement providing for the lease of
three New York theater locations with the option to purchase certain assets
relating to the three theaters. In consideration of the option granted by the
agreement, the Company made an initial $200,000 payment which was financed by
the potential seller. The option to purchase the assets for $1,500,000 is
initially exercisable in September 1997. Until then, the Company is required to
make two annual payments of at least $150,000, which it considers to be the
equivalent of interest expense. An annual payment of $186,402 was made in 1996.
If the Company does not exercise the option in 1997, it will be required to make
three additional annual payments of at least $150,000 through the second
exercisable date of September 2000. However, if, at the first exercisable date,
revenues generated from the three theaters do not reach levels specified by the
agreement, the Company has the right to terminate the agreement and would no
longer be obligated for any remaining payments. The agreement also requires the
Company to maintain an escrow deposit, which totaled approximately $294,000 at
December 31, 1996 and March 31, 1997. Capitalized costs related to this project
were approximately $274,000 at December 31, 1996 and March 31, 1997 and are
included in project acquisition costs. It is the Company's present intention to
ultimately exercise this option.
The Company has also incurred certain costs associated with the development
of an additional theater location, principally architect, legal and engineering
fees. At December 31, 1996 and March 31, 1997, these project costs amounted to
approximately $160,000 and $140,000, respectively.
Employment Agreement--The Company is obligated through May 2003 to pay its
President and Chief Executive Officer an annual base salary of $120,000, plus an
additional amount based on gross revenue, such total not to exceed $750,000.
Consulting Agreement--The Company has entered a consulting agreement with
an affiliate of a stockholder, wherein for certain management services, the
Company will pay $50,000 per year through May 1998, then at the rate of 50% of
the Chief Executive Officer's base salary through May 2003 or until the
shareholder should sell its shares.
F-14
<PAGE>
CLEARVIEW CINEMA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Information after February 10, 1997 is unaudited)
NOTE 10--RELATED PARTY TRANSACTIONS:
Subordinated notes payable to related parties are subordinate to the bank
debt described in Note 5, are due two years from date of issuance and are
summarized as follows:
<TABLE>
<CAPTION>
INTEREST
DESCRIPTION RATE DECEMBER 31, 1996 MARCH 31, 1997
- --------------------------------------------------------------------- -------- ----------------- --------------
<S> <C> <C> <C>
Notes payable of $400,000 to a director of the Company, $50,000 due
in each of August and October 1997 and $300,000 due in December
1998, all with interest payable quarterly, less unamortized
discount of $12,360 and $9,341..................................... 8% $ 387,640 $ 390,659
Notes payable of $400,000 to an affiliated entity of a director,
$50,000 due in each of August and October 1997 and $300,000 due in
December 1998, all with interest payable quarterly, less
unamortized discount of $12,360 and $9,341......................... 8% 387,640 390,659
Note payable of $300,000 to a stockholder, due in August 1997, with
interest payable quarterly, less unamortized discount of $1,412 and
$588............................................................... 8% 298,588 299,412
----------------- --------------
1,073,868 1,080,730
Less: Current maturities............................................. 479,986 484,260
----------------- --------------
$ 593,882 $ 596,470
----------------- --------------
----------------- --------------
</TABLE>
In connection with the issuance of this subordinated debt, the Company
issued warrants to purchase a total of 75,000 shares of the Common Stock at
$3.33 per share, expiring through October 2001; and warrants to purchase 45,000
shares of the Common Stock at $6.67 per share, expiring through December 2002.
Of such warrants, all are currently exercisable, except for the warrants
exercisable for 22,500 shares that would expire in December 2002. Those warrants
will be canceled if the Company pays the related debt in full no later than
December 13, 1997.
The warrants issued in connection with these transactions and the related
debt discount have been recorded based upon their estimated fair values.
The Company has the option of converting the outstanding principal of each
of the above notes on their maturity dates to new notes. The new notes will bear
interest at the rate of 8% per annum with interest and principal due in 20 equal
quarterly installments. Upon exercising its option, the Company would
concurrently issue 5-year warrants to purchase 75,000 shares of the Company's
Common Stock at an exercise price of $3.33 per share or warrants to purchase
45,000 shares of the Company's Common Stock at $6.67 per share.
The related party subordinated notes payable mature as follows:
YEAR ENDING DECEMBER 31,
--------------------------------------------------
1997.............................................. $ 479,986
1998.............................................. 593,882
----------
$1,073,868
----------
----------
F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Clearview Cinema Group, Inc.
We have audited the combined statements of income of the Nelson Ferman Theaters
at Emerson, New City, Allwood and Washington Township, movie theaters formerly
owned by affiliates of Nelson Ferman, Inc., for the period of January 1, 1996
through May 29, 1996 (date of sale) and the year ended December 31, 1995. These
combined financial statements are the responsibility of the management of the
Nelson Ferman Theaters. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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, combined financial statements referred to above present fairly,
in all material respects, the results of operations of Nelson Ferman Theaters at
Emerson, New City, Allwood and Washington Township, for the periods then ended
in conformity with generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
April 1, 1997
F-16
<PAGE>
NELSON FERMAN THEATERS AT EMERSON, NEW CITY, ALLWOOD AND
WASHINGTON TOWNSHIP
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED JANUARY 1, THROUGH
DECEMBER 31, MAY 29,
1995 1996
------------ ------------------
<S> <C> <C>
THEATER REVENUES:
Box office.................................................................... $3,679,118 $1,515,839
Concession.................................................................... 584,946 114,922
Other......................................................................... 21,797 23,308
------------ ------------------
4,285,861 1,654,069
------------ ------------------
OPERATING EXPENSES:
Film rental and booking fees.................................................. 1,787,212 564,142
Theater operating expenses.................................................... 1,370,367 622,997
General and administrative expenses........................................... 705,300 282,220
Depreciation and amortization................................................. 161,563 67,317
------------ ------------------
4,024,442 1,536,676
------------ ------------------
OPERATING INCOME................................................................ 261,419 117,393
INTEREST EXPENSE................................................................ 20,613 35,965
------------ ------------------
NET INCOME...................................................................... $ 240,806 $ 81,428
------------ ------------------
------------ ------------------
</TABLE>
See accompanying Notes to Combined Statements of Income.
F-17
<PAGE>
NELSON FERMAN THEATERS AT EMERSON, NEW CITY,
ALLWOOD AND WASHINGTON TOWNSHIP
NOTES TO COMBINED STATEMENTS OF INCOME
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination and Nature of the Business--The combined
financial statements include the accounts of four theater affiliates of Nelson
Ferman, Inc. ('Nelson Ferman'): Emerson ('Emerson'), New City ('New City'),
Allwood ('Allwood') and Washington Township ('Washington'), collectively, the
'NF Theater Group'. Until May 29, 1996, these theaters were part of an
independent theater circuit with locations in New Jersey and New York. All
significant intercompany balances and transactions have been eliminated in
combination.
The NF Theater Group operated multi-screen first run theaters in New Jersey
and New York.
Revenue Recognition--The NF Theater Group recognizes revenue from ticket
sales at the time of sale. Concessions sales are recognized as a commission from
a third party, when earned.
Estimates and Uncertainties--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
Property and Equipment--Property and equipment are stated at cost. Theater
equipment is depreciated over a period of 5 to 7 years using straight line and
accelerated methods over the estimated useful lives of the assets. Leasehold
improvements are amortized using the straight-line method over the term of the
related lease or the estimated useful life of the asset, whichever is less.
Rent Expense--The NF Theater Group leased its theater facilities pursuant
to various long-term leases. Additional rent was paid for common area
maintenance and was also charged based on a percentage of net revenue in excess
of a predetermined amount. Rent for the NF Theater Group amounted to
approximately $162,000 for the period ended May 29, 1996 and $344,000 for the
year ended December 31, 1995.
Income Taxes--The members of the NF Theater Group had elected under Section
1361 of the Internal Revenue Code of 1986, as amended, to be taxed as 'S'
corporations. Under those provisions, all earnings and losses of the members of
the NF Theater Group were reported on the tax returns of their shareholders.
Accordingly, no provisions have been made for federal income tax reporting
purposes. The NF Theater Group continues to be subject to state income taxes at
reduced rates.
NOTE 2--RELATED PARTY TRANSACTIONS:
Operating Expenses and Management Fees--The NF Theater Group's operations
through the date of sale were significantly controlled by Nelson Ferman. In that
regard, the cash deposited in the operating accounts of each theater was
transferred to Nelson Ferman, which used the funds to pay operating expenses,
along with the funds from other Nelson Ferman affiliated theaters, using an
integrated system.
In addition to the normal operating expenses, the NF Theater Group was
allocated a management fee from Nelson Ferman based on total corporate overhead.
The management fee allocation amounted to approximately $705,000 for the year
ended December 31, 1995 and $282,000 for the period ended May 29, 1996.
NOTE 3--SUBSEQUENT EVENT:
On May 29, 1996, substantially all of the NF Theater Group's assets,
including leasehold interests, equipment and various operating contracts were
sold to Clearview Cinema Group, Inc. ('Clearview') for $5,000,000 in cash and
208,200 shares of common stock of Clearview.
The theaters began operating, effective May 30, 1996, as Clearview theaters
at which time the third party concession commission arrangements were
discontinued and Clearview commenced operating the concession facilities. The
results of operations of the NF Theater Group subsequent to the acquisition are
included in Clearview's results of operations.
See Note 7 of the Notes to Consolidated Financial Statements of Clearview
Cinema Group, Inc. and Subsidiaries included elsewhere in this Prospectus for
additional information.
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Clearview Cinema Group, Inc.
We have audited the combined statements of income of Magic Cinemas at
Bergenfield, Tenafly and Closter, movie theaters formerly owned by Magic
Cinemas, LLC, for the period of January 1, 1996 through December 13, 1996 (date
of sale) and the year ended December 31, 1995. These combined financial
statements are the responsibility of the management of Magic Cinemas, LLC. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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, combined financial statements referred to above present fairly,
in all material respects, the results of operations of Magic Cinemas at
Bergenfield, Tenafly and Closter, for the periods then ended in conformity with
generally accepted accounting principles.
WISS & COMPANY, LLP
Woodbridge, New Jersey
April 10, 1997
F-19
<PAGE>
MAGIC CINEMAS AT BERGENFIELD, TENAFLY AND CLOSTER
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
THROUGH
YEAR ENDED DECEMBER 13,
DECEMBER 31, 1995 1996
------------------ ------------
<S> <C> <C>
THEATER REVENUES:
Box office.................................................................... $1,772,745 $1,743,015
Concession.................................................................... 504,905 521,737
Other......................................................................... 136,225 149,986
------------------ ------------
2,413,875 2,414,738
------------------ ------------
OPERATING EXPENSES:
Film rental and booking fees.................................................. 832,834 809,353
Cost of concession sales...................................................... 89,925 85,090
Theater operating expenses.................................................... 768,530 865,639
General and administrative expenses........................................... 173,186 169,032
Depreciation and amortization................................................. 255,067 168,704
------------------ ------------
2,119,542 2,097,818
------------------ ------------
OPERATING INCOME................................................................ 294,333 316,920
INTEREST EXPENSE................................................................ 243,290 45,408
------------------ ------------
NET INCOME...................................................................... $ 51,043 $ 271,512
------------------ ------------
------------------ ------------
</TABLE>
See accompanying Notes to Combined Statements of Income.
F-20
<PAGE>
MAGIC CINEMAS AT BERGENFIELD, TENAFLY AND CLOSTER
NOTES TO COMBINED STATEMENTS OF INCOME
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination and Nature of the Business--The combined
financial statements include the accounts of three theater divisions of Magic
Cinemas, LLC: Bergenfield ('Bergenfield'), Tenafly ('Tenafly') and Closter
('Closter'), collectively, the 'Magic Theater Group'. Until December 13, 1996,
these theaters were divisions of Magic Cinemas, LLC ('Magic'), an independent
theater circuit with locations in New Jersey and Pennsylvania. All significant
intercompany balances and transactions have been eliminated in combination.
The Magic Theater Group operated multi-screen first run theaters in New
Jersey.
Revenue Recognition--The Magic Theater Group recognizes revenue from ticket
and concessions sales at the time of sale. Rental income is recognized in the
month that it is earned.
Estimates and Uncertainties--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
Property and Equipment--Property and equipment are stated at cost.
Buildings and improvements, theater equipment and office furniture and equipment
are depreciated using straight line and accelerated methods over the estimated
useful lives of the assets. In general, the estimated useful lives used in
computing depreciation and amortization are: buildings and improvements--39
years; theater equipment--5 to 7 years; office furniture and equipment--5 to 7
years. Leasehold improvements are amortized using the straight-line method over
the term of the related lease or the estimated useful life of the asset,
whichever is less.
Rent Expense--The Closter facility has an operating lease which contains
predetermined increases in the rental payable during the term of such lease. For
this lease, the aggregate rental expense is recognized on a straight-line basis
over the lease term. The differences between the expense charged to operations
and amounts payable under such leases are recorded annually as deferred rent
expense, which will ultimately reverse over the lease term. Additional rent is
paid for common area maintenance and may also be charged based on a percentage
of net revenue in excess of a predetermined amount.
Rent expense for the Closter theater amounted to approximately $77,000 for
the period ended December 13, 1996 and $50,000 for the year ended December 31,
1995.
Theaters located in Bergenfield and Tenafly were owned by the Magic Theater
Group.
Income Taxes--For the year ended December 31, 1995, the Magic Theater Group
had elected under Section 1361 of the Internal Revenue Code of 1986, as amended,
to be taxed as 'S' corporations and, for the period ended December 13, 1996,
Magic was treated as a partnership for Federal and New Jersey state income tax
reporting purposes. Under these provisions, all earnings and losses were
reported on the tax returns of the respective shareholders, partners or members.
Accordingly, no provisions have been made for federal income tax reporting
purposes.
NOTE 2--RELATED PARTY TRANSACTIONS:
Operating Expenses and Management Fees--The Magic Theater Group's
operations through the date of sale by Magic were significantly controlled by
Magic. In that regard, the cash deposited to the Magic Theater Group's operating
accounts was transferred to Magic which used the funds to pay operating
expenses, along with funds from other Magic-owned theaters, on a company-wide
basis using an integrated system.
In addition to the normal operating expenses, the Magic Theater Group was
allocated a management fee from the corporate division of Magic based on
corporate overhead. The management fee amounted to approximately $149,000 for
the year ended December 31, 1995. For the period ended December 13, 1996, an
administrative charge was provided based on Magic's historical percentage of
corporate overhead.
F-21
<PAGE>
MAGIC CINEMAS AT BERGENFIELD, TENAFLY AND CLOSTER
NOTES TO COMBINED STATEMENTS OF INCOME--(CONTINUED)
NOTE 2--RELATED PARTY TRANSACTIONS:--(CONTINUED)
Interest Expense--Interest expense for the period ended December 13, 1996
and the year ended December 31, 1995 was for interest paid and/or owed to
related parties. On March 22, 1996, the underlying related party debt was
restructured into equity.
NOTE 3--SUBSEQUENT EVENTS:
On December 13, 1996, substantially all of the Magic Theater Group's
assets, including land, building, equipment and various operating contracts and
leases were sold to Clearview Cinema Group, Inc. ('Clearview') at a sale price
of $5,000,000. The theaters began operating, effective December 14, 1996, as
Clearview theaters and the results of operations subsequent to the acquisition
are included in Clearview's results of operations.
See Note 7 of the Notes to the Consolidated Financial Statements of
Clearview Cinema Group, Inc. and Subsidiaries included elsewhere in this
Prospectus for additional information.
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Clearview Cinema Group, Inc.
We have audited the combined balance sheet of the United Artist Theatre Circuit,
Inc. Theaters at Bronxville, Larchmont, Wayne, New City and Mamaroneck (the 'UA
Theaters'), as of December 31, 1996 and the related combined statements of
income and divisional equity and cash flows for each of the two years in the
period ended December 31, 1996. These combined financial statements are the
responsibility of the management of United Artist Theatre Circuit, Inc. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined 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, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the UA Theaters at
December 31, 1996 and the results of their operations and their cash flows for
each of the two years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the combined financial statements, United Artist
Theatre Circuit, Inc. changed its method of accounting for impairment of
long-lived assets in accordance with SFAS 121 in 1996.
WISS & COMPANY, LLP
Woodbridge, New Jersey
June 4, 1997
F-23
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................................... $ 61,716 $ 65,666
Inventories........................................................................ 22,122 22,930
Other current assets............................................................... 19,366 43,799
------------ ----------
Total current assets............................................................ 103,204 132,395
------------ ----------
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION................................ 4,846,814 4,827,793
------------ ----------
OTHER ASSETS:
Due from parent and affiliate...................................................... 2,955,667 3,247,520
Security deposits.................................................................. 2,000 2,000
------------ ----------
2,957,667 3,249,520
------------ ----------
$7,907,685 $8,209,708
------------ ----------
------------ ----------
LIABILITIES AND DIVISIONAL EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............................................. $ 731,595 $ 932,282
DIVISIONAL EQUITY.................................................................... 7,176,090 7,277,426
------------ ----------
$7,907,685 $8,209,708
------------ ----------
------------ ----------
</TABLE>
See accompanying notes to combined financial statements.
F-24
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED STATEMENTS OF INCOME AND DIVISIONAL EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
-------------------------- --------------------------
1995 1996 1996 1997
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
THEATER REVENUES:
Box office................................. $3,503,949 $3,578,346 $ 864,313 $ 961,187
Concession................................. 1,004,651 1,048,292 239,725 278,823
Other...................................... 147,248 174,334 35,051 39,238
---------- ---------- ---------- ----------
4,655,848 4,800,972 1,139,089 1,279,248
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Film rental and booking fees............... 1,556,970 1,603,729 362,806 482,578
Cost of concession sales................... 171,003 176,031 42,005 43,294
Theater operating expenses................. 1,734,320 1,828,092 444,099 470,704
General and administrative................. 71,634 71,366 16,933 19,890
Depreciation and amortization.............. 224,947 216,154 56,033 49,142
Impairment of long-lived assets............ -- 224,908 -- --
---------- ---------- ---------- ----------
3,758,874 4,120,280 921,876 1,065,608
---------- ---------- ---------- ----------
OPERATING INCOME............................. 896,974 680,692 217,213 213,640
INTEREST EXPENSE............................. 588,577 444,534 111,000 112,304
---------- ---------- ---------- ----------
NET INCOME................................... 308,397 236,158 106,213 101,336
DIVISIONAL EQUITY:
Beginning of period........................ 6,631,535 6,939,932 6,939,932 7,176,090
---------- ---------- ---------- ----------
End of period.............................. $6,939,932 $7,176,090 $7,046,145 $7,277,426
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to combined financial statements.
F-25
<PAGE>
UNITED ARTISTS THEATRES AT BRONXVILLE, LARCHMONT, WAYNE,
NEW CITY AND MAMARONECK
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER THREE MONTHS ENDED
31, MARCH 31,
---------------------- --------------------
1995 1996 1996 1997
-------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................... $308,397 $ 236,158 $106,213 $101,336
Adjustments to reconcile net income (loss) to net cash flows
from operating activities:
Depreciation and amortization.............................. 224,947 216,154 56,033 49,142
Loss in impairment of long-lived asset..................... -- 224,908 -- --
Changes in operating assets and liabilities:
Inventories.............................................. 299 (1,442) (1,073) (808)
Other current assets..................................... 471 19,510 14,586 (24,433)
Security deposits........................................ -- (2,000) (2,000) --
Accounts payable and accrued expenses.................... (73,043) 274,470 51,129 200,687
-------- ---------- -------- --------
Net cash flows from operating activities.............. 461,071 967,758 224,888 325,924
-------- ---------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............................ (180,994) (46,942) (28,277) (30,121)
Advances to parent and affiliate.............................. (250,028) (1,004,461) (289,193) (291,853)
-------- ---------- -------- --------
Net cash flows from investing activities.............. (431,022) (1,051,403) (317,470) (321,974)
-------- ---------- -------- --------
NET CHANGE IN CASH.............................................. 30,049 (83,645) (92,582) 3,950
CASH, BEGINNING OF PERIOD....................................... 115,312 145,361 145,361 61,716
-------- ---------- -------- --------
CASH, END OF PERIOD............................................. $145,361 $ 61,716 $ 52,779 $ 65,666
-------- ---------- -------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid................................................. $ -- $ -- $ -- $ --
-------- ---------- -------- --------
Income taxes paid............................................. $ -- $ -- $ -- $ --
-------- ---------- -------- --------
</TABLE>
See accompanying notes to combined financial statements.
F-26
<PAGE>
UNITED ARTISTS THEATRE CIRCUIT, INC. CINEMAS AT
BRONXVILLE, LARCHMONT, WAYNE, NEW CITY AND MAMARONECK
NOTES TO COMBINED FINANCIAL STATEMENTS
(Data relating to March 31, 1997 and 1996 are unaudited)
NOTE 1--NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Combination--The combined financial statements include the
accounts of the United Artist Theatre Circuit, Inc. theaters at Bronxville,
Larchmont, Wayne, New City and Mamaroneck (the 'UA Theaters'). All significant
inter-location balances and transactions have been eliminated in combination.
Nature of the Business--The UA Theaters are regional motion picture houses
located in suburban communities in the New York/New Jersey metropolitan area.
Revenues and Film Rental Costs--The UA Theaters recognize revenues from box
office admissions and concession sales at the time of sale. Film rental costs
are based a film's box office receipts and length of a film's run.
Seasonality--The UA Theaters' business is seasonal with a large portion of
their revenues and profits being derived during the summer months (June through
August) and the holiday season (November and December).
Estimates and Uncertainties--The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results, as determined at a later date,
could differ from those estimates.
Inventories--Inventories consist of concession products and are stated at
the lower of cost (first-in, first-out method) or market.
Property and Equipment--Property and equipment are stated at cost.
Buildings and improvements, theater equipment and office furniture and equipment
are depreciated using straight line and accelerated methods over the estimated
useful lives of the assets. In general, the estimated useful lives used in
computing depreciation and amortization are: buildings and improvements--39
years; theater equipment--5 to 10 years; office furniture and equipment--5 to 10
years. Leasehold improvements are amortized using the straight-line method over
the term of the related lease or the estimated useful life of the asset,
whichever is less.
Rent Expense--The Wayne theater included in the combined financial
statements is operated under a lease that contains predetermined increases in
the rent payable during the term of such lease. For this lease, the aggregate
rental expense over the lease term is recognized on a straight-line basis over
the lease term. The differences between the expense charged to operations and
the amount payable under that lease are recorded annually as deferred rent
expense, which will ultimately reverse over the lease term.
Additional rent is paid for common area maintenance and may also be charged
based on a percentage of net revenue in excess of a predetermined amount.
Financial Instruments--Financial instruments include cash, security
deposits, accounts payable and accrued expenses The amounts reported for
financial instruments are considered to be reasonable approximations of their
fair values, based on market information concerning financial instruments with
similar characteristics available to management.
Impairment of Long-Lived Assets--In 1996, the United Artists Theatre
Circuit, Inc. ('UA') adopted Statement of Financial Accounting Standards
('SFAS') No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of' (See Note 4). SFAS No. 121 prescribes that
an impairment loss is recognized in the event that facts and circumstances
indicate that the carrying amount of an asset may not be recoverable.
Interim Reporting--The interim financial statements included herein reflect
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. Such adjustments
consist solely of normal recurring accruals. Results for interim periods are not
necessarily indicative of results for a full year.
F-27
<PAGE>
UNITED ARTISTS THEATRE CIRCUIT, INC. CINEMAS AT
BRONXVILLE, LARCHMONT, WAYNE, NEW CITY AND MAMARONECK
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(Data relating to March 31, 1997 and 1996 are unaudited)
NOTE 2--PROPERTY AND EQUIPMENT:
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ----------
<S> <C> <C>
Land............................................................. $1,520,650 $1,520,650
Buildings and improvements....................................... 1,584,363 1,584,363
Leasehold improvements........................................... 1,922,135 1,928,550
Office furniture and equipment................................... 874,058 897,702
------------ ----------
5,901,206 5,931,265
Less: Accumulated depreciation and amortization.................. 1,054,392 1,103,472
------------ ----------
$4,846,814 $4,827,793
------------ ----------
------------ ----------
</TABLE>
NOTE 3--COMMITMENTS AND CONTINGENCIES:
Theater Leases--Certain of the UA Theaters are operated under lease
arrangements. The following is a schedule of future minimum rental payments
required for all non-cancellable operating leases (for theater facilities) that
have initial or remaining lease terms in excess of one year at December 31,
1996:
YEAR ENDING DECEMBER 31,
-----------------------------------------------------
1997................................................. $ 121,293
1998................................................. 121,293
1999................................................. 121,293
2000................................................. 121,293
2001................................................. 122,439
2002 and thereafter.................................. 961,689
----------
$1,569,300
----------
----------
Rent expense for theater operating leases in 1995 and 1996 was
approximately $108,000 and $151,000, respectively.
NOTE 4--IMPAIRMENT OF LONG-LIVED ASSETS:
In the third quarter of 1996, UA recorded a $224,908 charge for the
difference between the fair value and the carrying value of the New City theater
location. The fair value was determined based on an offer received by UA to sell
such location for approximately $1,300,000, reduced further for estimated sales
costs.
NOTE 5--RELATED PARTY TRANSACTIONS:
Operating Expenses, Management Fees and Interest Expense--The UA Theaters'
operations through the date of sale were significantly controlled by UA. In that
regard, the cash deposited to the UA Theaters' operating accounts was
transferred to UA which used the funds to pay operating expenses, along with the
funds from other UA affiliated theaters, on a company-wide basis using an
integrated system.
Interest expense represents an allocation of interest costs incurred by UA
and is charged to the UA Theaters based on each theater's respective net assets.
NOTE 6--SUBSEQUENT EVENTS (UNAUDITED):
In July, 1997, UA entered into an agreement to sell substantially all of
the assets, including leasehold interests, equipment and various operating
contracts, of the UA Theaters to Clearview Cinema Group, Inc. for $8,650,000.
F-28
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. ANY INFORMATION OR REPRESENTATIONS NOT HEREIN CONTAINED, IF GIVEN OR
MADE, MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN
RESPECT OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS SHALL NOT,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. HOWEVER, IN THE EVENT
OF A MATERIAL CHANGE, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED
ACCORDINGLY.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 8
The Concurrent Transactions.................... 12
Use of Proceeds................................ 13
Dividend Policy................................ 13
Capitalization................................. 14
Dilution....................................... 15
Pro Forma Consolidated Financial Data.......... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 28
Management and Directors....................... 36
Certain Transactions........................... 39
Principal Stockholders......................... 42
Description of Capital Stock................... 43
Shares Eligible For Future Sale................ 46
Underwriting................................... 47
Legal Matters.................................. 49
Experts........................................ 49
Additional Information......................... 49
Index to Financial Statements.................. F-1
</TABLE>
UNTIL ____________, 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
1,000,000 SHARES
[LOGO CLEARVIEW CINEMA GROUP, INC.]
COMMON STOCK
------------------
PROSPECTUS
-------------------
PRIME CHARTER LTD.
August , 1997
================================================================================
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is hereby made to Section 145 of the General Corporation Law of
the State of Delaware (the 'DCL'), which provides that a corporation will have
the power to 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 or investigative (a 'proceeding'), by
reason of the fact the he is or was a director, officer, employee or agent of
the corporation, or is 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, with respect to the payment of certain
amounts under certain circumstances.
Article V ('Article V') of the proposed Amended and Restated By-laws of
Clearview Cinema Group, Inc. (the 'Company') provides that the Company will
indemnify and hold harmless, to the fullest extent permitted by applicable law,
any person who was or is made or is threatened to be made a party or is
otherwise involved in any proceeding by reason of the fact that he, or a person
for whom he is the legal representative, is or was a director or officer of the
Company or is or was a director or officer of the Company and is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust, enterprise or
non-profit entity, including service with respect to employee benefit plans.
Any indemnification pursuant to Article V (unless ordered by a court) will
be made by the Company only upon a determination that indemnification is proper
in the circumstances because the director or officer, as the case may be, has
met the applicable standard of conduct set forth in Article V. Such
determination will be made (a) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(b) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (c) by the stockholders. To
the extent, however, that a director or officer of the Company has been
successful on the merits or otherwise in defense of a proceeding, or in defense
of any claim, issue or matter therein, he or she will be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith, without the necessity of authorization in the
specific case. Except for proceedings to enforce rights to indemnification
(which are governed by Section 5.5 of Article V), the Company is not obligated
to indemnify any director or officer in connection with a proceeding (or part
thereof) initiated by that person unless that proceeding was authorized or
consented to by the Board of Directors of the Company.
Expenses (including attorneys' fees) incurred by a director or officer in
defending or investigating any threatened or pending civil, criminal,
administrative or investigative action, suit or proceeding will be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of that director or officer to
repay those amounts if it ultimately is determined that he or she is not
entitled to be indemnified by the Company as authorized in Article V, if such an
undertaking is required at the time by the DCL. In addition, the Board of
Directors of the Company, without approval from the stockholders, may borrow
money on behalf of the Company from time to time to discharge the Company's
obligations with respect to indemnification, the advancement and reimbursement
of expenses, and the purchase and maintenance of insurance on behalf of any
person, whether or not the Company would have the power or the obligation to
indemnify him or her against such liability under the provisions of Article V.
Article V provides that the rights to indemnification and advancement of
expenses conferred by Article V are not exclusive of any other rights to which
those seeking indemnification or advancement of expenses may otherwise be
entitled. Article V further provides that the Board of Directors of the Company
is authorized to provide rights to indemnification and the advancement of
expenses to employees and agents of the Company similar to those conferred in
Article V on directors and officers of the Company. Nothing in Article V
precludes the indemnification of any person whom the Company has the power or
obligation to indemnify under the provisions of the DCL, including, without
limitation, the provisions of Section 145 thereof, or otherwise.
Article V states that any repeal or modification of the Article will not
adversely affect any right or protection of a director of the Company existing
at the time of such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification. Further, the rights conferred by
Article V, unless otherwise
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<PAGE>
provided when authorized or ratified, continue as to any person who has ceased
to be a director of the Company and inure to the benefit of the heirs, executors
and administrators of such person.
Article IX ('Article IX') of the proposed Amended and Restated Certificate
of Incorporation of the Company provides that the personal liability of a
director of the Company is eliminated to the fullest extent permitted by Section
102(b)(7) of the DCL, as the same may be amended and supplemented. Article IX
states that, without limiting the generality of the foregoing, no director will
be personally liable to the Company or any of its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DCL (relating to
unlawful distributions and redemptions of shares), or (iv) for any transaction
from which the director derived an improper personal benefit.
The rights conferred by Article IX are presumed to have been relied upon by
directors of the Company in serving or continuing to serve the Company and are
enforceable as contract rights. Those rights are not exclusive of any other
rights to which the directors of the Company may otherwise be entitled. The
Company may enter into contracts to provide the directors of the Company with
rights to indemnification to the maximum extent permitted by the DCL. The
Company may create trust funds, grant security interests in the assets of the
Company, obtain letters of credit or use other means to ensure payment of such
amounts as may be necessary to perform the obligations provided for in Article
IX, the Amended and Restated By-laws of the Company or any such contract.
The rights conferred by Article IX continue as to any person who has ceased
to be a director of the Company and inure to the benefit of the heirs, executors
and administrators of such person. Any repeal or modification of Article IX by
the stockholders of the Company will not adversely affect any right or
protection of a director of the Company existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such repeal or
modification.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees payable to the Securities and
Exchange Commission and other estimated expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................................. $ 3,484.85
Listing Fee......................................................................... 27,500.00
Printing and Engraving Expenses..................................................... 100,000
Accounting Fees and Expenses........................................................ 130,000
Legal Fees and Expenses............................................................. 510,000
Blue Sky Qualification Fees and Expenses............................................ 25,000
Transfer Agent Fees and Expenses.................................................... 10,000
Miscellaneous....................................................................... 44,015.15
-----------
Total.......................................................................... $850,000.00
-----------
-----------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to an Investment and Stockholders Agreement dated December 21,
1994, the Company sold 250 shares of its common stock, $.01 par value (the
'Common Stock'), to CMNY Capital II, L.P. ('CMNY') for an aggregate purchase
price of $500,000 in cash. Concurrently, the Company, pursuant to a Contribution
and Exchange Agreement dated December 21, 1994, issued to A. Dale Mayo ('Mayo')
and Brett E. Marks ('Marks') 550 and 200 shares of Common Stock, respectively,
in exchange for (i) all of the outstanding shares of capital stock of Clearview
Theater Group, Inc., CCC Madison Triple Cinema Corp., CCC Chester Twin Cinema
Corporation and CCC Manasquan Cinema Corporation (collectively, the
'Subsidiaries') and (ii) promissory notes of certain Subsidiaries with an
aggregate principal amount of $250,000.
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<PAGE>
On June 20, 1995, Michael C. Rush ('Rush') purchased (i) 20 shares of
Common Stock, pursuant to a Stock Purchase Agreement, for an aggregate purchase
price of $40,000 in cash from Mayo and (ii) a convertible promissory note in the
principal amount of $80,000 from the Company. The terms of the convertible
promissory note provided Rush with the right to convert that note at any time on
or prior to June 20, 1996 into 20 shares of Common Stock, and Rush exercised
that right on May 15, 1996.
On August 31, 1995, the Company issued three 8% Subordinated Promissory
Notes with the principal amounts of $300,000, $50,000 and $50,000 (each a
'Subordinated Note') to CMNY, CMCO, Inc. ('CMCO') and Robert G. Davidoff
('Davidoff'), respectively. The principal of these Subordinated Notes is payable
in one installment on August 31, 1997. With each Subordinated Note sold, the
Company issued one Common Stock Purchase Warrant A ('Warrant A') and one Common
Stock Purchase Warrant B ('Warrant B'; Warrants A and Warrants B being
collectively referred to herein as the 'Warrants'). Each of these Warrants
entitles its holder for a five-year period to purchase a specified number of
shares of Common Stock at an exercise price of $2,000 per share, subject to
adjustment as set forth in each Warrant. Each Warrant A is exercisable from
September 1, 1996 through August 31, 2001, and each Warrant B is exercisable
from August 31, 1995 through August 31, 2000.
On October 11, 1995, the Company issued two additional Subordinated Notes
with a principal amount of $50,000 each to Davidoff and CMCO. The principal of
these Subordinated Notes is payable in one installment on October 11, 1997. With
each Subordinated Note sold, the Company issued one Warrant A and one Warrant B.
Each of these Warrants entitles its holder for a five-year period to purchase a
specified number of shares of Common Stock at an exercise price of $2,000 per
share, subject to adjustment as set forth in each Warrant. Each of these
Warrants is the same as the Warrants previously issued with an exercise price of
$2,000 per share, except that these Warrant A's are exercisable from October 11,
1996 through October 11, 2001, and these Warrant B's are exercisable from
October 11, 1995 through October 11, 2000.
On December 13, 1996, the Company issued two more Subordinated Notes with a
principal amount of $300,000 each to Davidoff and CMCO. The principal of these
Subordinated Notes is payable in one installment on December 13, 1998. With each
Subordinated Note sold, the Company issued one Warrant A and one Warrant B. Each
of these Warrants entitles its holder for a five-year period to purchase a
specified number of shares of Common Stock at an exercise price of $4,000 per
share, subject to adjustment as set forth in each Warrant. However, each Warrant
A is cancelable and non-exercisable if the Company repays the corresponding
Subordinated Note in full prior to December 13, 1997. These Warrant A's are
exercisable from December 13, 1997 through December 13, 2002, and these Warrant
B's are exercisable from December 13, 1996 through December 13, 2001.
The holders of the Subordinated Notes received Warrants exercisable for the
number of shares of Common Stock set forth below:
<TABLE>
<CAPTION>
AUGUST 31, 1995 OCTOBER 11, 1995 DECEMBER 13, 1996
SUBORDINATED SUBORDINATED SUBORDINATED
NOTES NOTES NOTES
--------------- ---------------- -----------------
<S> <C> <C> <C>
CMNY 75 -- --
CMCO 12.5 12.5 37.5
Davidoff 12.5 12.5 37.5
</TABLE>
The Company acquired the assets of Emerson Cinema, Inc. in exchange for 347
shares of Common Stock pursuant to the Agreement and Plan of Reorganization
dated May 29, 1996 ('Plan of Reorganization').
In connection with an Asset Purchase Agreement dated December 31, 1996, the
Company, as purchaser, issued on that same date a Senior Subordinated Note (the
'Senior Note') to the seller, Magic Cinemas, L.L.C. in the principal amount of
$600,000. The principal of the Senior Note is payable in full on the earlier of
(i) December 13, 2001 and (ii) the date of the closing of an initial public
offering of the Company's debt or equity securities.
Pursuant to a Subscription Agreement dated July 31, 1996, Rush purchased
another 5 shares of Common Stock at $4,000 per share for an aggregate purchase
price of $20,000. Also on that date, Paul and Cindy Kay
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<PAGE>
purchased 16 shares of Common Stock from the Company at $3,124 per share for an
aggregate purchase price of $50,000.
The Company sold a total of 779 shares of its Class A Convertible Preferred
Stock, $.01 par value ('Class A Preferred Stock'), to MidMark Capital, L.P.
('MidMark'). Pursuant to a Preferred Stock and Warrant Purchase Agreement dated
May 29, 1996 and for a purchase price of $1,750,000, MidMark purchased 684
shares of Class A Preferred Stock. Pursuant to a Preferred Stock and Warrant
Purchase Agreement dated July 2, 1996 and for a purchase of $750,000, MidMark
purchased another 95 shares of Class A Preferred Stock.
In connection with the above-described sales of securities (the
'transactions'), the Company relied upon the exemption from registration set
forth in Section 4(2) of the Securities Act of 1933, as amended (the 'Act'), as
construed by the United States Supreme Court in Securities and Exchange
Commission v. Ralston Purina Co., (1953).
Each of the transactions was the result of arm's length negotiations with
purchasers who were knowledgeable about the Company due to their relationships
with the Company or otherwise had access to the same kinds of information
required by the Act to be disclosed in the form of a registration statement. In
addition, each purchaser possessed the experience and skills necessary to
evaluate the risks involved with the purchase of securities of the Company.
At the time of their purchases, Mayo and Marks were both directors and
officers and Paul Kay was an officer of the Company. MidMark and CMNY are small
business investment companies licensed by the Small Business Administration
under the Small Business Investment Act of 1958, as amended. In addition,
Davidoff, a managing director of CMCO and a general partner of CMNY, was a
director of the Company at the time CMCO purchased securities of the Company.
Emerson Cinema, Inc. and Magic Cinema, L.L.C. had been involved in the movie
exhibition industry for several years. A former chief executive officer of Home
Unity Savings Bank, a $900,000,000 asset savings bank and a former managing
director of Lehman Brothers, New York, Rush is a sophisticated investor with a
net income in excess of $200,000 in each year during the period 1993-1996.
ITEM 27. EXHIBITS.
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------
<S> <C>
1.01 Form of Underwriting Agreement**
2.01 Agreement of Purchase and Sale by and among United Artists Theatre Circuit, Inc., United Artists
Properties I Corp., Mamaroneck Playhouse Holding Corporation and CCC Bronxville Cinema Corp., CCC
Mamaroneck Cinema Corp., CCC Wayne Cinema Corp., CCC BC Realty Corp., CCC Cinema 304 Corp., CCC
Larchmont Cinema Corp. and the Company, dated July 21, 1997.*
3.01(a) Current Certificate of Incorporation of Clearview Cinema Group, Inc.*
3.01(b) Proposed Amended and Restated Certificate of Incorporation of Clearview Cinema Group, Inc.*
3.02(a) Current By-laws of Clearview Cinema Group, Inc.*
3.02(b) Proposed Amended and Restated By-laws of Clearview Cinema Group, Inc.
4.01 Specimen Common Stock Certificate**
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the validity of the securities being registered**
9.01 Voting Trust Agreement by and between Brett E. Marks and A. Dale Mayo as Voting Trustee, dated
December 21, 1994*
9.02 Voting Trust Agreement by and between Michael C. Rush and A. Dale Mayo as Voting Trustee, dated
June 20, 1995*
9.03 Voting Trust Agreement by and between Emerson Cinema, Inc. and A. Dale Mayo as Voting Trustee,
dated May 29, 1996*
9.04 Voting Trust Agreement by and among Paul Kay, Cindy Kay and A. Dale Mayo as Voting Trustee, dated
July 31, 1996*
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------
<S> <C>
9.05 Voting Trust Agreement by and between Louis G. Novick and A. Dale Mayo as Voting Trustee, dated
August 30, 1996.*
10.01 Contribution, Exchange & Termination Agreement by and among Clearview Cinema Group, Inc. (the
'Company'), A. Dale Mayo, and Brett E. Marks, dated December 21, 1994*
10.02 Investment and Stockholders Agreement by and among the Company, A. Dale Mayo, Brett E. Marks and
CMNY Capital II, L.P., dated December 21, 1994*
10.03 First Amendment to Investment and Stockholders Agreement by and among the Company, A. Dale Mayo,
Brett E. Marks and CMNY Capital II, L.P., dated May 29, 1996*
10.04 Agreement by Michael C. Rush, dated June 20, 1995, to join the Investment and Stockholders
Agreement dated December 21, 1994*
10.05 Stockholders and Registration Rights Agreement by and among the Company, A. Dale Mayo, Brett E.
Marks, Michael C. Rush, MidMark Capital, L.P. and Emerson Cinema, Inc., dated May 29, 1996*
10.06 Agreement by Paul Kay and Cindy Kay, dated July 31, 1996, to join the Stockholders and
Registration Rights Agreement dated May 29, 1996*
10.07 Agreement by Louis G. Novick, dated April 11, 1996, to join the Stockholders and Registration
Rights Agreement dated May 29, 1996.*
10.08 Employment Agreement by and between the Company and A. Dale Mayo, dated May 29, 1996*
10.09 Management and Monitoring Fee Agreement by and between the Company and MidMark Associates, Inc.,
dated May 29, 1996*
10.10 Credit Agreement by and among the Company, CCC Madison Triple Cinema Corp., CCC Chester Twin
Cinema Corporation, CCC Manasquan Cinema Corporation, Clearview Theater Group, Inc., CCC Herricks
Cinema Corp., CCC Port Washington Cinema Corp., CCC Grand Avenue Cinema Corp., CCC Washington
Cinema Corp., CCC Allwood Cinema Corp., CCC Emerson Cinema Corp., CCC New City Cinema Corp. and
343-349 Springfield Avenue Corp. (n/k/a CCC Summit Cinema Corp.), and The Provident Bank, dated
May 29, 1996*
10.11 Joinder Agreement by CCC Bedford Cinema Corp. and CCC Kisco Cinema Corp., dated July 18, 1996*
10.12 Joinder Agreement and First Amendment to Credit Agreement, by and among the Company, CCC Madison
Triple Cinema Corp., CCC Chester Twin Cinema Corporation, CCC Manasquan Cinema Corporation,
Clearview Theater Group, Inc., CCC Herricks Cinema Corp., CCC Port Washington Cinema Corp., CCC
Grand Avenue Cinema Corp., CCC Washington Cinema Corp., CCC Allwood Cinema Corp., CCC Emerson
Cinema Corp., CCC New City Cinema Corp., 343-349 Springfield Avenue Corp. (n/k/a CCC Summit Cinema
Corp.), CCC Bedford Cinema Corp., CCC Kisco Cinema Corp., CCC Closter Cinema Corp., CCC
Bergenfield Cinema Corp., CCC Tenafly Cinema Corp. and CCC B.C. Realty Corp. and The Provident
Bank, dated December 13, 1996*
10.13 Second Amendment to Credit Agreement, by and among the Company, CCC Madison Triple Cinema Corp.,
CCC Chester Twin Cinema Corporation, CCC Manasquan Cinema Corporation, Clearview Theater Group,
Inc., CCC Herricks Cinema Corp., CCC Port Washington Cinema Corp., CCC Grand Avenue Cinema Corp.,
CCC Washington Cinema Corp., CCC Allwood Cinema Corp., CCC Emerson Cinema Corp., CCC New City
Cinema Corp., 343-349 Springfield Avenue Corp. (n/k/a CCC Summit Cinema Corp.), CCC Bedford Cinema
Corp., CCC Kisco Cinema Corp., CCC Closter Cinema Corp., CCC Bergenfield Cinema Corp., CCC Tenafly
Cinema Corp. and CCC B.C. Realty Corp. and The Provident Bank, dated March 27, 1997*
10.14 Amended and Restated Pledge Agreement by and between the Company and The Provident Bank, dated
July 18, 1996*
10.15 Amendment No. 1 to Pledge Agreement by and between the Company and The Provident Bank, dated
December 13, 1996*
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------
<S> <C>
10.16 Subordination Agreement by and among The Provident Bank, the Company, CMNY Capital II, L.P. and
Robert G. Davidoff, dated May 29, 1996*
10.17 8% Subordinated Promissory Note for the principal amount of $300,000 payable to CMNY Capital II,
L.P., dated August 31, 1995*
10.18 8% Subordinated Promissory Note for the principal amount of $50,000 payable to CMCO, Inc., dated
August 31, 1995*
10.19 8% Subordinated Promissory Note for the principal amount of $50,000 payable to Robert G. Davidoff,
dated August 31, 1995*
10.20 8% Subordinated Promissory Note for the principal amount of $50,000 payable to CMCO, Inc., dated
October 11, 1995*
10.21 8% Subordinated Promissory Note for the principal amount of $50,000 payable to Robert G. Davidoff,
dated October 11, 1995*
10.22 8% Subordinated Promissory Note for the principal amount of $300,000 payable to CMCO, Inc., dated
December 13, 1996*
10.23 8% Subordinated Promissory Note for the principal amount of $300,000 payable to Robert G.
Davidoff, dated December 13, 1996*
10.24 Senior Subordinated Promissory Note for the principal amount of $600,000 payable to Magic Cinemas
L.L.C., dated December 13, 1996*
10.25 Preferred Stock and Warrant Purchase Agreement by and among MidMark Capital, L.P., the Company and
A. Dale Mayo, dated May 29, 1996*
10.26 Preferred Stock and Warrant Purchase Agreement by and among MidMark Capital, L.P., the Company and
A. Dale Mayo, dated July 2, 1996*
10.27 Warrant Agreement by and between the Company and The Provident Bank, dated May 29, 1996*
10.28 Amendment No. 1 to Warrant Agreement by and between the Company and The Provident Bank, dated
December 13, 1996*
10.29 Form of Common Stock Purchase Warrant A*
10.30 Form of Common Stock Purchase Warrant B*
10.31 Clearview Cinema Group, Inc. Common Stock Purchase Warrant No. 1 issued to The Provident Bank,
dated May 29, 1996*
10.32 Clearview Cinema Group, Inc. Common Stock Purchase Warrant No. 2 issued to The Provident Bank,
dated May 29, 1996*
10.33 Clearview Cinema Group, Inc. Common Stock Purchase Warrant No. 3 issued to The Provident Bank,
dated December 13, 1996*
10.34 Clearview Cinema Group, Inc. Preferred Stock Warrant W-1 issued to MidMark Capital, L.P., dated
May 29, 1996*
10.35 Clearview Cinema Group, Inc. Preferred Stock Warrant W-2 issued to MidMark Capital, L.P., dated
July 2, 1996*
10.36 Agreement by and among Cinema Grand Avenue, Inc., Triplex Movies at Port Washington, Inc. and the
Company, CCC Grand Avenue Cinema Corp., CCC Port Washington Cinema Corp., dated September 8, 1995
(the 'Collective Agreement')*
10.37 Agreement by and among Cinema Herricks, Inc., the Company, and CCC Herricks Cinema Corp. dated
September 8, 1995 (the 'Management Agreement')*
10.38 Letter modifying Management Agreement and Collective Agreement dated November 17, 1995*
10.39 Escrow Agreement by and among Cinema Grand Avenue, Inc., Triplex Movies at Port Washington, Inc.,
the Company, CCC Grand Avenue Cinema Corp. and CCC Port Washington Cinema Corp., dated September
8, 1995*
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------
<S> <C>
10.40 Escrow Agreement by and among Cinema Herricks, Inc., the Company and CCC Cinema Herricks Corp.,
dated September 8, 1995*
10.41 Agreement and Plan of Reorganization among the Company, CCC Emerson Cinema Corp. and Emerson
Cinema, Inc., dated May 29, 1996*
10.42 Indemnification Escrow Agreement, by and among the Company, CCC Emerson, Inc. and Jack Wenarsky
('Escrow Agent'), dated May 29, 1996*
10.43 Asset Purchase Agreement among the Company, CCC Washington Cinema Corp., CCC Allwood Cinema Corp.,
CCC New City Cinema Corp., Township of Washington Cinema, Inc., Allwood Clifton Cinema, Inc., and
New City Cinema, Inc., dated May 29, 1996*
10.44 Indemnification Escrow Agreement by and among the Company, CCC Washington Cinema Corp., CCC
Allwood Cinema Corp., CCC New City Cinema Corp. and Township of Washington Theatre, Inc., Allwood
Clifton Cinema, Inc., New City Cinema, Inc. and Jack Wenarsky ('Escrow Agent'), dated May 29,
1996*
10.45 Right of First Refusal Agreement by and among the Company, Roxbury Cinema, Inc., F&N Cinema, Inc.,
John Nelson, Seth Ferman and Pamela Ferman, dated May 29, 1996*
10.46 Non-Competition Agreement, by and among the Company, CCC Emerson Cinema, Inc. and John Nelson,
Pamela Ferman and Seth Ferman, dated May 29, 1996*
10.47 Asset Purchase Agreement among Magic Cinemas L.L.C., CCC Tenafly Cinema Corp., CCC Bergenfield
Cinema Corp., CCC Closter Cinema Corp. and the Company, dated December 13, 1996*
10.48 Assignment of Real Estate Lease by and between Allwood Clifton Cinema, Inc. ('Assignor') and CCC
Allwood Cinema Corp. ('Assignee'), dated May 29, 1996, assigning that certain lease dated November
5, 1986, by and between 96 Market Associates, as lessor and Assignor, as amended pursuant to the
Lease Modification Agreement dated October 10, 1989 (collectively, the 'CCC Allwood Lease')*
10.49 Assignment of Real Estate Lease by and between New City Cinema's, Inc. ('Assignor') and CCC New
City Cinema Corp. ('Assignee'), dated May 29, 1996, assigning that certain lease dated January 18,
1965, by and between Bridon Realty Co. as lessor and Irving Sherman and David Sanders, as assigned
by Irving Sherman and David Sanders to New City Town Theater, Inc. pursuant to an Assignment
Agreement dated February 10, 1981, as further amended pursuant to an Addendum to Lease dated
November 14, 1990, as further assigned by New City Town Theater, Inc. to Assignor pursuant to an
Assignment and Assumption of Lease dated November 14, 1990 (collectively, the 'CCC New City
Lease')*
10.50 Assignment of Real Estate Lease by and between Emerson Cinema, Inc. ('Assignor') and CCC Emerson
Cinema Corp. ('Assignee'), dated May 29, 1996, assigning that certain lease by and between Robert
Nelson, Bernat Nelson and Leo Zucker doing business as Robert Lee Realty Co., a partnership
('Lessor') and Irving Sherman, David Sanders and Albert Margulies, dated January 18, 1965, as
further amended by Lessor and Emerson Town Theatre, Inc. pursuant to an Extension and Modification
of Lease dated July 12, 1982, as further amended by Lessor and Emerson Town Theatre, Inc. pursuant
to an Addendum to Lease dated June 1, 1986, and further amended and assigned by Emerson Town
Theatre, Inc. to Emerson Cinema, Inc. pursuant to an Addendum to Lease dated November 18, 1988
among Lessor, Emerson Town Theatre, Inc. and Assignor (collectively, the 'CCC Emerson Lease')*
10.51 Subordination Agreement by and among the Company, The Provident Bank and Magic Cinemas, L.L.C.
dated December 13, 1996*
10.52 Form of Lock-up Agreement**
10.53 Form of Consent and Waiver Agreement by and among the Company, CMNY Capital II, L.P., MidMark
Capital, L.P., Emerson Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul and Cindy
Kay and Louis G. Novick*
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------
<S> <C>
10.54 Form of Termination Agreement for Stockholders and Registration Rights Agreement by and among the
Company, CMNY Capital II, L.P., MidMark Capital, L.P., A. Dale Mayo, Brett E. Marks, Michael C.
Rush, Emerson Cinema, Inc., Paul and Cindy Kay and Louis G. Novick*
10.55 Form of Exchange and Termination Agreement by and among the Company, MidMark Capital, L.P., and A.
Dale Mayo*
10.56 Form of Exchange and Termination Agreement by and among the Company, CMNY Capital II, L.P., CMCO,
Inc., Robert G. Davidoff, A. Dale Mayo, Brett E. Marks and Michael C. Rush*
10.57 Form of Addendum to 8% Subordinated Promissory Note*
10.58 Form of Registration Rights Agreement by and among the Company, CMNY Capital II, L.P., MidMark
Capital, L.P., Emerson Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Paul and Cindy
Kay and Louis G. Novick*
10.59 Form of Consulting Agreement by and between the Company and MidMark Associates, Inc.*
10.60 Form of Warrant No. W-1 issued to MidMark Capital, L.P.*
10.61 The Provident Bank commitment letter, dated July 30, 1997*
10.62 Third Amendment to Credit Agreement, by and among the Company, CCC Madison Triple Cinema Corp.,
CCC Chester Twin Cinema Corporation, CCC Manasquan Cinema Corporation, Clearview Theater Group,
Inc., CCC Herricks Cinema Corp., CCC Port Washington Cinema Corp., CCC Grand Avenue Cinema Corp.,
CCC Washington Cinema Corp., CCC Allwood Cinema Corp., CCC Emerson Cinema Corp., CCC New City
Cinema Corp., CCC Summit Cinema Corp., (f/k/a 343-349 Springield Avenue Corp.), CCC Bedford Cinema
Corp., CCC Kisco Cinema Corp., CCC Closter Cinema Corp., CCC Bergenfield Cinema Corp., CCC Tenafly
Cinema Corp. and CCC B.C. Realty Corp. and The Provident Bank, dated June 30, 1997*
10.63 Clearview Cinema Group, Inc. 1997 Stock Incentive Plan**
10.64 Consulting and Confidentiality Agreement by and between the Company and Brett E. Marks**
10.65 Form of Waiver and Consent, dated July 1, 1997, with respect to Credit Agreement by and among the
Company, CCC Madison Triple Cinema Corp., CCC Chester Twin Cinema Corporation, CCC Manasquan
Cinema Corporation, Clearview Theater Group, Inc., CCC Herricks Cinema Corp., CCC Port
Washington Cinema Corp., CCC Grand Avenue Cinema Corp., CCC Washington Cinema Corp., CCC
Allwood Cinema Corp., CCC Emerson Cinema Corp., CCC New City Cinema Corp. and 343-349
Springfield Avenue Corp. (n/k/a CCC Summit Cinema Corp.), and The Provident Bank, dated May 29,
1996**
11.01 Statement regarding computation of per share earnings*
16.01 Letter from Dorfman, Abrams, Music & Co., dated July 30, 1997*
21.01 Subsidiaries of the Company**
23.01 Consent of Wiss & Company LLP**
27.01 Financial Data Schedules*
</TABLE>
- ------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the 'Securities Act'), may be permitted to directors,
officers and controlling persons of the registrant pursuant to the provisions
described under Item 24 above, 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 Securities 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 hereunder, the registrant will, unless in the opinion of its counsel
the question 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-8
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this amendment to its registration
statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Madison, State of New Jersey, on August 11,
1997.
CLEARVIEW CINEMA GROUP, INC.
By: /s/ A. DALE MAYO
----------------------------------
A. Dale Mayo
Chairman of the Board,
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------------------------------------- ------------------------------------------------------- --------------
<S> <C> <C>
/s/ A. DALE MAYO Chairman of the Board, President, Chief Executive August 11, 1997
- --------------------------------------- Officer and Director
A. Dale Mayo
/s/ SUEANNE H. MAYO Director August 11, 1997
- ---------------------------------------
Sueanne H. Mayo
/s/ JOAN M. ROMINE Treasurer and Chief Financial Officer August 11, 1997
- ---------------------------------------
Joan M. Romine
* Director August 11, 1997
- ---------------------------------------
Wayne Clevenger
* Director August 11, 1997
- ---------------------------------------
Robert Davidoff
* Director August 11, 1997
- ---------------------------------------
Brett E. Marks
* Director August 11, 1997
- ---------------------------------------
Denis Newman
By: /s/ A. DALE MAYO
- ---------------------------------------
A. Dale Mayo
Attorney-in-Fact, pursuant to the power
of attorney previously filed as part of
this registration statement.
</TABLE>
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ----------- -------------------------------------------------------------------------------------- -----------
<S> <C> <C>
1.01 Form of Underwriting Agreement**
2.01 Agreement of Purchase and Sale by and among United Artists Theatre Circuit, Inc.,
United Artists Properties I Corp., Mamaroneck Playhouse Holding Corporation and CCC
Bronxville Cinema Corp., CCC Mamaroneck Cinema Corp., CCC Wayne Cinema Corp., CCC BC
Realty Corp., CCC Cinema 304 Corp., CCC Larchmont Cinema Corp. and the Company, dated
July 21, 1997.*
3.01(a) Current Certificate of Incorporation of Clearview Cinema Group, Inc.*
3.01(b) Proposed Amended and Restated Certificate of Incorporation of Clearview Cinema Group,
Inc.*
3.02(a) Current By-laws of Clearview Cinema Group, Inc.*
3.02(b) Proposed Amended and Restated By-laws of Clearview Cinema Group, Inc.*
4.01 Specimen Common Stock Certificate**
5.01 Opinion of Kirkpatrick & Lockhart LLP as to the validity of the securities being
registered**
9.01 Voting Trust Agreement by and between Brett E. Marks and A. Dale Mayo as Voting
Trustee, dated December 21, 1994*
9.02 Voting Trust Agreement by and between Michael C. Rush and A. Dale Mayo as Voting
Trustee, dated June 20, 1995*
9.03 Voting Trust Agreement by and between Emerson Cinema, Inc. and A. Dale Mayo as Voting
Trustee, dated May 29, 1996*
9.04 Voting Trust Agreement by and among Paul Kay, Cindy Kay and A. Dale Mayo as Voting
Trustee, dated July 31, 1996*
9.05 Voting Trust Agreement by and between Louis G. Novick and A. Dale Mayo as Voting
Trustee, dated August 30, 1996.*
10.01 Contribution, Exchange & Termination Agreement by and among Clearview Cinema Group,
Inc. (the 'Company'), A. Dale Mayo, and Brett E. Marks, dated December 21, 1994*
10.02 Investment and Stockholders Agreement by and among the Company, A. Dale Mayo, Brett E.
Marks and CMNY Capital II, L.P., dated December 21, 1994*
10.03 First Amendment to Investment and Stockholders Agreement by and among the Company, A.
Dale Mayo, Brett E. Marks and CMNY Capital II, L.P., dated May 29, 1996*
10.04 Agreement by Michael C. Rush, dated June 20, 1995, to join the Investment and
Stockholders Agreement dated December 21, 1994*
10.05 Stockholders and Registration Rights Agreement by and among the Company, A. Dale Mayo,
Brett E. Marks, Michael C. Rush, MidMark Capital, L.P. and Emerson Cinema, Inc., dated
May 29, 1996*
10.06 Agreement by Paul Kay and Cindy Kay, dated July 31, 1996, to join the Stockholders and
Registration Rights Agreement dated May 29, 1996*
10.07 Agreement by Louis G. Novick, dated April 11, 1996, to join the Stockholders and
Registration Rights Agreement dated May 29, 1996.*
10.08 Employment Agreement by and between the Company and A. Dale Mayo, dated May 29, 1996*
10.09 Management and Monitoring Fee Agreement by and between the Company and MidMark
Associates, Inc., dated May 29, 1996*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ----------- -------------------------------------------------------------------------------------- -----------
<S> <C> <C>
10.10 Credit Agreement by and among the Company, CCC Madison Triple Cinema Corp., CCC
Chester Twin Cinema Corporation, CCC Manasquan Cinema Corporation, Clearview Theater
Group, Inc., CCC Herricks Cinema Corp., CCC Port Washington Cinema Corp., CCC Grand
Avenue Cinema Corp., CCC Washington Cinema Corp., CCC Allwood Cinema Corp., CCC
Emerson Cinema Corp., CCC New City Cinema Corp. and 343-349 Springfield Avenue Corp.
(n/k/a CCC Summit Cinema Corp.), and The Provident Bank, dated May 29, 1996*
10.11 Joinder Agreement by CCC Bedford Cinema Corp. and CCC Kisco Cinema Corp., dated July
18, 1996*
10.12 Joinder Agreement and First Amendment to Credit Agreement, by and among the Company,
CCC Madison Triple Cinema Corp., CCC Chester Twin Cinema Corporation, CCC Manasquan
Cinema Corporation, Clearview Theater Group, Inc., CCC Herricks Cinema Corp., CCC Port
Washington Cinema Corp., CCC Grand Avenue Cinema Corp., CCC Washington Cinema Corp.,
CCC Allwood Cinema Corp., CCC Emerson Cinema Corp., CCC New City Cinema Corp., 343-349
Springfield Avenue Corp. (n/k/a CCC Summit Cinema Corp.), CCC Bedford Cinema Corp.,
CCC Kisco Cinema Corp., CCC Closter Cinema Corp., CCC Bergenfield Cinema Corp., CCC
Tenafly Cinema Corp. and CCC B.C. Realty Corp. and The Provident Bank, dated December
13, 1996*
10.13 Second Amendment to Credit Agreement, by and among the Company, CCC Madison Triple
Cinema Corp., CCC Chester Twin Cinema Corporation, CCC Manasquan Cinema Corporation,
Clearview Theater Group, Inc., CCC Herricks Cinema Corp., CCC Port Washington Cinema
Corp., CCC Grand Avenue Cinema Corp., CCC Washington Cinema Corp., CCC Allwood Cinema
Corp., CCC Emerson Cinema Corp., CCC New City Cinema Corp., 343-349 Springfield Avenue
Corp. (n/k/a CCC Summit Cinema Corp.), CCC Bedford Cinema Corp., CCC Kisco Cinema
Corp., CCC Closter Cinema Corp., CCC Bergenfield Cinema Corp., CCC Tenafly Cinema
Corp. and CCC B.C. Realty Corp. and The Provident Bank, dated March 27, 1997*
10.14 Amended and Restated Pledge Agreement by and between the Company and The Provident
Bank, dated July 18, 1996*
10.15 Amendment No. 1 to Pledge Agreement by and between the Company and The Provident Bank,
dated December 13, 1996*
10.16 Subordination Agreement by and among The Provident Bank, the Company, CMNY Capital II,
L.P. and Robert G. Davidoff, dated May 29, 1996*
10.17 8% Subordinated Promissory Note for the principal amount of $300,000 payable to CMNY
Capital II, L.P., dated August 31, 1995*
10.18 8% Subordinated Promissory Note for the principal amount of $50,000 payable to CMCO,
Inc., dated August 31, 1995*
10.19 8% Subordinated Promissory Note for the principal amount of $50,000 payable to Robert
G. Davidoff, dated August 31, 1995*
10.20 8% Subordinated Promissory Note for the principal amount of $50,000 payable to CMCO,
Inc., dated October 11, 1995*
10.21 8% Subordinated Promissory Note for the principal amount of $50,000 payable to Robert
G. Davidoff, dated October 11, 1995*
10.22 8% Subordinated Promissory Note for the principal amount of $300,000 payable to CMCO,
Inc., dated December 13, 1996*
10.23 8% Subordinated Promissory Note for the principal amount of $300,000 payable to Robert
G. Davidoff, dated December 13, 1996*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ----------- -------------------------------------------------------------------------------------- -----------
<S> <C> <C>
10.24 Senior Subordinated Promissory Note for the principal amount of $600,000 payable to
Magic Cinemas L.L.C., dated December 13, 1996*
10.25 Preferred Stock and Warrant Purchase Agreement by and among MidMark Capital, L.P., the
Company and A. Dale Mayo, dated May 29, 1996*
10.26 Preferred Stock and Warrant Purchase Agreement by and among MidMark Capital, L.P., the
Company and A. Dale Mayo, dated July 2, 1996*
10.27 Warrant Agreement by and between the Company and The Provident Bank, dated May 29,
1996*
10.28 Amendment No. 1 to Warrant Agreement by and between the Company and The Provident
Bank, dated December 13, 1996*
10.29 Form of Common Stock Purchase Warrant A*
10.30 Form of Common Stock Purchase Warrant B*
10.31 Clearview Cinema Group, Inc. Common Stock Purchase Warrant No. 1 issued to The
Provident Bank, dated May 29, 1996*
10.32 Clearview Cinema Group, Inc. Common Stock Purchase Warrant No. 2 issued to The
Provident Bank, dated May 29, 1996*
10.33 Clearview Cinema Group, Inc. Common Stock Purchase Warrant No. 3 issued to The
Provident Bank, dated December 13, 1996*
10.34 Clearview Cinema Group, Inc. Preferred Stock Warrant W-1 issued to MidMark Capital,
L.P., dated May 29, 1996*
10.35 Clearview Cinema Group, Inc. Preferred Stock Warrant W-2 issued to MidMark Capital,
L.P., dated July 2, 1996*
10.36 Agreement by and among Cinema Grand Avenue, Inc., Triplex Movies at Port Washington,
Inc. and the Company, CCC Grand Avenue Cinema Corp., CCC Port Washington Cinema Corp.,
dated September 8, 1995 (the 'Collective Agreement')*
10.37 Agreement by and among Cinema Herricks, Inc., the Company, and CCC Herricks Cinema
Corp. dated September 8, 1995 (the 'Management Agreement')*
10.38 Letter modifying Management Agreement and Collective Agreement dated November 17,
1995*
10.39 Escrow Agreement by and among Cinema Grand Avenue, Inc., Triplex Movies at Port
Washington, Inc., the Company, CCC Grand Avenue Cinema Corp. and CCC Port Washington
Cinema Corp., dated September 8, 1995*
10.40 Escrow Agreement by and among Cinema Herricks, Inc., the Company and CCC Cinema
Herricks Corp., dated September 8, 1995*
10.41 Agreement and Plan of Reorganization among the Company, CCC Emerson Cinema Corp. and
Emerson Cinema, Inc., dated May 29, 1996*
10.42 Indemnification Escrow Agreement, by and among the Company, CCC Emerson, Inc. and Jack
Wenarsky ('Escrow Agent'), dated May 29, 1996*
10.43 Asset Purchase Agreement among the Company, CCC Washington Cinema Corp., CCC Allwood
Cinema Corp., CCC New City Cinema Corp., Township of Washington Cinema, Inc., Allwood
Clifton Cinema, Inc., and New City Cinema, Inc., dated May 29, 1996*
10.44 Indemnification Escrow Agreement by and among the Company, CCC Washington Cinema
Corp., CCC Allwood Cinema Corp., CCC New City Cinema Corp. and Township of Washington
Theatre, Inc., Allwood Clifton Cinema, Inc., New City Cinema, Inc. and Jack Wenarsky
('Escrow Agent'), dated May 29, 1996*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ----------- -------------------------------------------------------------------------------------- -----------
<S> <C> <C>
10.45 Right of First Refusal Agreement by and among the Company, Roxbury Cinema, Inc., F&N
Cinema, Inc., John Nelson, Seth Ferman and Pamela Ferman, dated May 29, 1996*
10.46 Non-Competition Agreement, by and among the Company, CCC Emerson Cinema, Inc. and John
Nelson, Pamela Ferman and Seth Ferman, dated May 29, 1996*
10.47 Asset Purchase Agreement among Magic Cinemas L.L.C., CCC Tenafly Cinema Corp., CCC
Bergenfield Cinema Corp., CCC Closter Cinema Corp. and the Company, dated December 13,
1996*
10.48 Assignment of Real Estate Lease by and between Allwood Clifton Cinema, Inc.
('Assignor') and CCC Allwood Cinema Corp. ('Assignee'), dated May 29, 1996, assigning
that certain lease dated November 5, 1986, by and between 96 Market Associates, as
lessor and Assignor, as amended pursuant to the Lease Modification Agreement dated
October 10, 1989 (collectively, the 'CCC Allwood Lease')*
10.49 Assignment of Real Estate Lease by and between New City Cinema's, Inc. ('Assignor')
and CCC New City Cinema Corp. ('Assignee'), dated May 29, 1996, assigning that certain
lease dated January 18, 1965, by and between Bridon Realty Co. as lessor and Irving
Sherman and David Sanders, as assigned by Irving Sherman and David Sanders to New City
Town Theater, Inc. pursuant to an Assignment Agreement dated February 10, 1981, as
further amended pursuant to an Addendum to Lease dated November 14, 1990, as further
assigned by New City Town Theater, Inc. to Assignor pursuant to an Assignment and
Assumption of Lease dated November 14, 1990 (collectively, the 'CCC New City Lease')*
10.50 Assignment of Real Estate Lease by and between Emerson Cinema, Inc. ('Assignor') and
CCC Emerson Cinema Corp. ('Assignee'), dated May 29, 1996, assigning that certain
lease by and between Robert Nelson, Bernat Nelson and Leo Zucker doing business as
Robert Lee Realty Co., a partnership ('Lessor') and Irving Sherman, David Sanders and
Albert Margulies, dated January 18, 1965, as further amended by Lessor and Emerson
Town Theatre, Inc. pursuant to an Extension and Modification of Lease dated July 12,
1982, as further amended by Lessor and Emerson Town Theatre, Inc. pursuant to an
Addendum to Lease dated June 1, 1986, and further amended and assigned by Emerson Town
Theatre, Inc. to Emerson Cinema, Inc. pursuant to an Addendum to Lease dated November
18, 1988 among Lessor, Emerson Town Theatre, Inc. and Assignor (collectively, the 'CCC
Emerson Lease')*
10.51 Subordination Agreement by and among the Company, The Provident Bank and Magic
Cinemas, L.L.C. dated December 13, 1996*
10.52 Form of Lock-up Agreement**
10.53 Form of Consent and Waiver Agreement by and among the Company, CMNY Capital II, L.P.,
MidMark Capital, L.P., Emerson Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C.
Rush, Paul and Cindy Kay and Louis G. Novick*
10.54 Form of Termination Agreement for Stockholders and Registration Rights Agreement by
and among the Company, CMNY Capital II, L.P., MidMark Capital, L.P., A. Dale Mayo,
Brett E. Marks, Michael C. Rush, Emerson Cinema, Inc., Paul and Cindy Kay and Louis G.
Novick*
10.55 Form of Exchange and Termination Agreement by and among the Company, MidMark Capital,
L.P., and A. Dale Mayo*
10.56 Form of Exchange and Termination Agreement by and among the Company, CMNY Capital II,
L.P., CMCO, Inc., Robert G. Davidoff, A. Dale Mayo, Brett E. Marks and Michael C.
Rush*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DESCRIPTION PAGE NO.
- ----------- -------------------------------------------------------------------------------------- -----------
<S> <C> <C>
10.57 Form of Addendum to 8% Subordinated Promissory Note*
10.58 Form of Registration Rights Agreement by and among the Company, CMNY Capital II, L.P.,
MidMark Capital, L.P., Emerson Cinema, Inc., A. Dale Mayo, Brett E. Marks, Michael C.
Rush, Paul and Cindy Kay and Louis G. Novick*
10.59 Form of Consulting Agreement by and between the Company and MidMark Associates, Inc.*
10.60 Form of Warrant No. W-1 issued to MidMark Capital, L.P.*
10.61 The Provident Bank commitment letter, dated July 30, 1997*
10.62 Third Amendment to Credit Agreement, by and among the Company, CCC Madison Triple
Cinema Corp., CCC Chester Twin Cinema Corporation, CCC Manasquan Cinema Corporation,
Clearview Theater Group, Inc., CCC Herricks Cinema Corp., CCC Port Washington Cinema
Corp., CCC Grand Avenue Cinema Corp., CCC Washington Cinema Corp., CCC Allwood Cinema
Corp., CCC Emerson Cinema Corp., CCC New City Cinema Corp., CCC Summit Cinema Corp.,
(f/k/a 343-349 Springield Avenue Corp.), CCC Bedford Cinema Corp., CCC Kisco Cinema
Corp., CCC Closter Cinema Corp., CCC Bergenfield Cinema Corp., CCC Tenafly Cinema
Corp. and CCC B.C. Realty Corp. and The Provident Bank, dated June 30, 1997*
10.63 Clearview Cinema Group, Inc. 1997 Stock Incentive Plan**
10.64 Consulting and Confidentiality Agreement by and between the Company and Brett E. Marks**
10.65 Form of Waiver and Consent, dated July 1, 1997, with respect to Credit Agreement by and among the
Company, CCC Madison Triple Cinema Corp., CCC Chester Twin Cinema Corporation, CCC Manasquan
Cinema Corporation, Clearview Theater Group, Inc., CCC Herricks Cinema Corp., CCC Port
Washington Cinema Corp., CCC Grand Avenue Cinema Corp., CCC Washington Cinema Corp., CCC
Allwood Cinema Corp., CCC Emerson Cinema Corp., CCC New City Cinema Corp. and 343-349
Springfield Avenue Corp. (n/k/a CCC Summit Cinema Corp.), and The Provident Bank, dated May 29,
1996**
11.01 Statement regarding computation of per share earnings*
16.01 Letter from Dorfman, Abrams, Music & Co., dated July 30, 1997*
21.01 Subsidiaries of the Company**
23.01 Consent of Wiss & Company LLP**
27.01 Financial Data Schedules*
</TABLE>
- ------------------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
Exhibit 1.01
Draft of 8/8/97
CLEARVIEW CINEMA GROUP, INC.
_____________ Shares
Common Stock
(Par Value $.01 Per Share)
UNDERWRITING AGREEMENT
________ , 1997
PRIME CHARTER LTD.
810 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
1. Introduction. Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), proposes to issue and sell to Prime Charter Ltd. and the other
Underwriters listed on Schedule A hereto (collectively, the "Underwriters") an
aggregate of _____________ shares (the "Primary Shares") of the Company's common
stock, par value $.01 per share (the "Common Stock"). The Company also proposes
to issue and sell to the Underwriters an aggregate of not more than _________
additional shares of Common Stock (the "Additional Shares") if requested by the
Representative (as defined below) in accordance with Section 9 hereof. The
Primary Shares and the Additional Shares are collectively referred to herein as
the "Shares." The words "you" and "your" refer to the Underwriters. Prime
Charter Ltd. is acting as representative (in such capacity, the
"Representative") of the several Underwriters.
2. Representations and Warranties. The Company represents, warrants
and agrees with the Underwriters that:
(a) A registration statement on Form SB-2 (File No. 333-27819)
under the Securities Act of 1933, as amended (the "Act"), with respect to the
Shares, including a form of prospectus subject to completion, has been prepared
by the Company in conformity with the requirements of the Act and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder. Such registration statement has been
filed with the Commission under the Act, and one or more amendments to such
registration statement may also have been so filed. After the execution of this
Agreement, the Company shall file with the Commission either (i) if such
registration statement, as it may have been amended, has been declared by the
Commission to be effective under the Act, a prospectus in the form most recently
included in an amendment to such registration statement filed with the
Commission (or, if no such amendment shall have been filed, in such registration
statement), with such insertions and changes as are required by Rule 430A under
the Act or permitted by Rule 424(b) under the Act as shall have been provided to
and approved by the Representative prior to the filing thereof, or (ii) if such
registration statement, as it may have been amended, has not been declared by
the Commission to be effective under the Act, an amendment to such registration
statement, including a form of prospectus, a copy of which amendment has been
furnished to and approved by the Representative prior to the filing thereof. As
used in this Agreement, the term "Registration
<PAGE>
Statement" means such registration statement, as amended at the time when it was
or is declared effective, including all financial schedules and exhibits
thereto; the Registration Statement shall be deemed to include any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Preliminary Prospectus" means
each prospectus subject to completion that was distributed to prospective
investors; and the term "Prospectus" means the prospectus first filed with the
Commission pursuant to Rule 424(b) under the Act or, if no prospectus is
required to be filed pursuant to said Rule 424(b), such term means the
prospectus included in the Registration Statement at the time when it was or is
declared effective.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus and has not instituted or, to
the best knowledge of the Company, threatened to institute any proceedings with
respect to such an order. When any Preliminary Prospectus was filed with the
Commission it (i) complied in all material respects with the requirements of the
Act and the Rules and Regulations, and (ii) did not include any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. When the Registration Statement or any amendment thereto
was or is declared effective and at all times subsequent thereto up to and
including the Closing Date (as defined in Section 3 hereof) and any Additional
Closing Date (as defined in Section 9 hereof), it (i) complied or will comply in
all material respects with the requirements of the Act and the Rules and
Regulations and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus and any amendment or
supplement thereto is filed with the Commission pursuant to Rule 424(b) (or, if
the Prospectus or such amendment or supplement is not required to be so filed,
when the Registration Statement and any amendment thereto containing such
amendment or supplement to the Prospectus was or is declared effective) and at
all times subsequent thereto up to and including the Closing Date and any
Additional Closing Date, the Prospectus, as amended or supplemented at any such
time (i) complied or will comply in all material respects with the requirements
of, the Act and the Rules and Regulations, and (ii) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The foregoing provisions of this
paragraph (b) shall not apply to statements or omissions made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any amendment or
supplement thereto in reliance upon, and in conformity with, information
furnished in writing to the Company by or on behalf of the Underwriters
expressly for use therein.
(c) Each of the Company and the subsidiaries listed on Annex A
hereto (each a "Subsidiary" and, collectively, the "Subsidiaries"), (i) is a
duly incorporated and validly existing corporation in good standing under the
laws of its jurisdiction of incorporation, with full power and authority
(corporate and other) to own or lease its properties and to conduct its business
as described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus); and
(ii) is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the conduct of its business requires such
qualification or in which it owns or leases property, in each case except for
those jurisdictions in which the failure to so qualify or be in good standing,
individually or in the aggregate, has not had and is not reasonably likely to
have a Material Adverse Effect (as defined below). As of the Closing Date, the
Subsidiaries
2
<PAGE>
will constitute the only subsidiaries of the Company. "Material Adverse Effect"
means any development or change could be materially adverse to the business,
properties, assets, condition (financial or other) or results of operations of
the Company and the Subsidiaries, taken as a whole.
(d) The Company will have the duly authorized and validly
outstanding capitalization and the adjusted capitalization set forth under the
caption "Capitalization" in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) on the Closing Date, based on
the assumptions set forth therein. The Common Stock, Class A Preferred Stock,
A/B Warrants, Class A Warrants and the Underwriters Warrants (the "Securities")
conform to the descriptions thereof contained in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus). The
outstanding shares of Common Stock have been duly authorized and validly issued
by the Company and are fully paid and non-assessable. Except as created hereby
or referred to in the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), as of the Closing Date, there will be no
outstanding options, warrants, rights or other arrangements requiring the
Company or any Subsidiary at any time to issue any capital stock. As of the
Closing Date, no holders of outstanding shares of capital stock of the Company
will be entitled as such to any preemptive or other rights to subscribe for any
of the Shares and neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives rise to
any rights for or relating to the registration of any securities of the Company.
The Shares have been duly authorized by all necessary corporate action on the
part of the Company, and on the Closing Date or any Additional Closing Date, as
the case may be, after payment therefor in accordance with the terms of this
Agreement, (i) the Shares to be sold by the Company hereunder on such date will
be validly issued, fully paid and non-assessable, and (ii) good and marketable
title to the Shares to be sold by the Company hereunder on such date will pass
to the Underwriters free and clear of any lien, encumbrance, security interest,
claim or other restriction whatsoever. Except for its equity interest in the
Subsidiaries or as set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), the Company does not,
directly or indirectly, own any stock or other equity interest in any
corporation, partnership or other entity. All of the outstanding shares of
capital stock of each Subsidiary have been duly authorized and validly issued,
are fully paid and non-assessable and, as of the Closing Date, will be owned by
the Company free and clear of any lien, encumbrance, security interest, claim or
other restriction whatsoever, except as disclosed in the Registration Statement.
The Company has reserved sufficient shares of Common Stock for issuance upon the
exercise of all outstanding options and warrants (including the Underwriter
Warrants (as defined in Section 3(c) hereof)). The Company has received, subject
to official notice of issuance, approval to have the Shares listed on the
American Stock Exchange (the "ASE"), and the Company does not know of any reason
or set of facts which is likely to adversely affect such approval.
(e) The financial statements and the related notes and
schedules thereto included in the Registration Statement and the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus)
fairly present in all material respects the consolidated financial condition,
results of operations, stockholders' equity and cash flows of the entities to
which they relate at the dates and for the periods specified therein. Such
consolidated financial statements and the related notes and schedules thereto
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved (except as otherwise noted
therein). The audited financial
3
<PAGE>
statements for the businesses, which have been acquired or are to be acquired by
the Company (collectively, the "Acquired Companies") included in the
Registration Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) have been examined and
certified by Wiss & Company LLP, which are independent public accountants within
the meaning of the Act and the Rules and Regulations, as indicated in their
reports filed therewith. The selected historical financial information set forth
under the caption "Summary Consolidated Financial Data" in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary Prospectus)
is consistent with the financial statements contained in the Registration
Statement. The pro forma financial statements of the Company and the
Subsidiaries, and the related notes thereto, set forth in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus), have been prepared in conformity with the
requirements of the Act and the Rules and Regulations and present fairly in all
material respects the pro forma information shown therein; and the pro forma
adjustments on such pro forma financial statements have been properly applied on
the basis described in the related notes thereto. The pro forma financial data
set forth in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) under the caption "Summary Consolidated Financial
Data" has been prepared in conformity with the Act and the Rules and Regulations
with respect to pro forma financial information, the assumptions used in
preparing the pro forma financial statements included in the Registration
Statement and the Prospectus provide a reasonable basis for presenting the
effects directly attributable to the transactions or events described therein,
the related pro forma adjustments give appropriate effect to those assumptions,
and the pro forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial amounts.
(f) The Company and each of the Subsidiaries have filed all
necessary federal, state and local income, franchise and other tax returns, and
have paid all taxes shown as due thereunder. The Company has no knowledge of any
tax deficiency which might be assessed against the Company or any Subsidiary,
which has had or is reasonably likely to have a Material Adverse Effect.
(g) The Company and each of the Subsidiaries maintain insurance
of the types and in amounts which they reasonably believe to be adequate for
their business, in such amounts and with such deductibles as is customary for
companies in the same or similar business, all of which insurance is in full
force and effect. The Company has no reason to believe that the Company or the
Subsidiaries will not be able to renew their existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
to the extent necessary to continue their business at a cost that would not have
or would not be reasonably likely to have a Material Adverse Effect, except as
described in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(h) The Company maintains the "key man" life insurance
described in the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(i) There is no action, suit, proceeding or investigation
(including, without limitation, in connection with any Environmental Laws (as
defined in Section 2(v) hereof)) pending or, to the Company's best knowledge,
threatened, before or by any court, regulatory body or administrative agency or
any other governmental agency or body, domestic or foreign
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which (i) questions the validity of the capital stock of the Company or this
Agreement or the Underwriter Warrant Agreement (as defined in Section 3(c)
hereof) or of any action taken or to be taken by the Company pursuant to or in
connection with this Agreement or the Underwriter Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not so disclosed
(and such proceedings, if any, as are summarized in the Registration Statement
are accurately summarized in all material respects), or (iii) could have or is
reasonably likely to have a Material Adverse Effect.
(j) The Company has full legal right, power and authority to
enter into this Agreement and to consummate the transactions provided for
herein. This Agreement has been duly authorized, executed and delivered by the
Company; and this Agreement, assuming due authorization, execution and delivery
by each other party hereto, is a valid and binding agreement of the Company
(except as enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and other similar laws
affecting creditors' rights generally and to general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or at
law). None of the Company's execution or delivery of this Agreement or the
Underwriter Warrant Agreement, its performance hereunder or thereunder, its
consummation of the transactions contemplated herein or therein, its application
of the net proceeds of the offering in the manner set forth under the caption
"Use of Proceeds," or the conduct of its business as described in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes or will
constitute a default under, or causes or will cause (or permits or will permit)
the maturation or acceleration of any liability or obligation or the termination
of any right under, or results in the creation or imposition of any lien, charge
or encumbrance upon, any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of (i) the certificate or articles of
incorporation or bylaws (or other organizational documents, as applicable) of
the Company or any of the Subsidiaries, (ii) any indenture, mortgage, deed of
trust, voting trust agreement, stockholders' agreement, note agreement,
partnership agreement, joint venture agreement or other agreement or instrument
to which the Company or any of the Subsidiaries is a party or by which it is or
any of them are or may be bound or to which any of their respective properties
is or may be subject, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company or any of the Subsidiaries of any
government, arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of the Subsidiaries or any of their respective activities or
properties, except as described in the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) or with respect to matters
described in clause (ii) or (iii) above that have not and that are not
individually or in the aggregate reasonably likely to have a Material Adverse
Effect.
(k) There is no document or agreement of a character required
to be described in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) or to be filed as an exhibit to the
Registration Statement which is not described or filed as required. All
agreements which are in existence on the date hereof or as of the Closing Date,
copies of which are filed as exhibits to the Registration Statement to which the
Company or any of the Subsidiaries is a party or by which it is or any of them
are or may be bound or to which any of their assets or properties is or may be
subject have been duly and authorized, executed and delivered by the Company or
such Subsidiary, as the case may be, and constitute the legal, valid and binding
agreements of the Company or such Subsidiary, as the case
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may be, enforceable against it in accordance with their respective terms (except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement of creditors'
rights generally and general equitable principles relating to the availability
of remedies). The descriptions in the Registration Statement of such documents
or agreements fairly present in all material respects the information required
to be shown with respect thereto by the Act and the Rules and Regulations, and
there are no such documents or agreements which are required by the Act or the
Rules and Regulations to be described in the Registration Statement or filed as
exhibits to the Registration Statement which are not so described or filed as
required, and the exhibits which have been filed are complete and correct copies
(excluding schedules and other attachments not required to be filed under the
Act or the Rules and Regulations) of the documents of which they purport to be
copies.
(l) Subsequent to the most recent respective dates as of which
information is given in the Registration Statement and the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus) and
except as expressly contemplated therein, neither the Company nor any of the
Subsidiaries has incurred, other than in the ordinary course of its business,
any liabilities or obligations, direct or contingent, or entered into any
material transactions not in the ordinary course of business, and the Company
has not purchased any of its outstanding capital stock or paid or declared any
dividends or other distributions on its capital stock, and there has been no
change in capital stock or indebtedness of the Company or any Subsidiary or any
other event or circumstance that could result in a Material Adverse Effect.
Neither the Company nor any of the Subsidiaries is in breach or violation of, or
in default under, any term or provision of (i) its certificate or articles of
incorporation or bylaws (or other organizational documents, as applicable), (ii)
any indenture, mortgage, deed of trust, voting trust agreement, stockholders'
agreement, note agreement, partnership agreement, joint venture agreement or
other agreement or instrument to which it is a party by which it is or may be
bound or to which any of its properties is or may be subject, or any
indebtedness, which breach, violation or default individually or in the
aggregate is reasonably likely to have a Material Adverse Effect, or (iii) any
statute, judgment, decree, order, rule or regulation applicable to it of any
government, arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or any of the Subsidiaries or any of their respective activities or
properties, which breach, violation or default individually or in the aggregate
is reasonably likely to have a Material Adverse Effect.
(m) The Company has obtained and delivered to the
Representative agreements (the "Lock-Up Agreements") from each of the persons
and entities listed on Schedule B hereto, representing all of the Company's
executive officers and directors and the holders of the outstanding equity
securities of the Company (or securities convertible into or exchangeable or
exercisable for equity securities of the Company), to the effect that such
person or entity will not, commencing on the date of the Prospectus and
continuing for a 12-month period thereafter, without the Representative's prior
written consent (not to be unreasonably withheld), directly or indirectly,
offer, sell, pledge or otherwise encumber, or grant any option to purchase or
otherwise dispose of, any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for Common Stock.
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(n) No labor disturbance by the employees of the Company or any
of the Subsidiaries exists or is, to the Company's best knowledge, imminent
which in any case is reasonably likely to have a Material Adverse Effect.
(o) The Company and the Subsidiaries neither have nor use any
material inventions, proprietary knowledge, patents or service marks. The
Company and the Subsidiaries own, or are licensed or otherwise possess
sufficient rights to use, the trademarks, trade names, logo marks and copyrights
used in or necessary for the conduct of their business (collectively, "Rights").
No claims have been asserted against the Company or any of the Subsidiaries by
any person with respect to the use of any such Rights or which challenge or
question the validity or effectiveness of any such Rights, except for any of the
foregoing which is not reasonably likely to have a Material Adverse Effect. The
use in connection with the business and operations of the Company and the
Subsidiaries of the Rights does not infringe in any material respect on the
rights of any person.
(p) No consent, approval, authorization or order of or filing
with any court, regulatory body, administrative agency or any other governmental
agency or body, domestic or foreign, is required for the Company's performance
of this Agreement or the Underwriter Warrant Agreement or the consummation of
the transactions contemplated hereby or thereby, except such as has been or may
be obtained under the Act or may be required under state securities or blue sky
laws in connection with the Underwriters' purchase and distribution of the
Shares.
(q) Except for the Registration Rights Agreement (as defined in
Section 3(c) below), as of the Closing Date, there will be 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 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 under the
Registration Statement.
(r) None of the Company or any of its officers, directors or
affiliates (within the meaning of the Rules and Regulations) has taken, directly
or indirectly, any action which violates Regulation M of the Exchange Act.
(s) Except as may be described in the Prospectus (or, if the
Prospectus is not yet in existence, the most recent Preliminary Prospectus)
neither the Company nor any of the Subsidiaries (A) has made any material
investment in any affiliate; (B) has any commitments to make any material
investments in any affiliate after the date hereof; or (C) has any material
liability or obligation (absolute, accrued, contingent or otherwise), whether
due or to become due, which arises out of or relates to the operations or assets
of any related affiliate.
(t) Each of the Company and the Subsidiaries has good and
marketable title to, or valid and enforceable leasehold interests in, all
properties and assets owned or leased by it, free and clear of all liens,
encumbrances, security interests, claims, restrictions, equities and defects,
except (i) such as are described in the Registration Statement or the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) or the schedules to the Current Facility or such as do not affect
the value of any such leasehold interests, properties or assets taken as a whole
or interfere with the use made or proposed to be
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<PAGE>
made of any of such properties and assets, in a manner that is reasonably likely
to have a Material Adverse Effect, and (ii) liens for taxes not yet due and
payable as to which appropriate reserves have been established and reflected in
the financial statements included in the Registration Statement. The Company and
the Subsidiaries own or lease all such properties as are necessary to their
operations as now conducted or as proposed to be conducted, as set forth in the
Registration Statement or the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), it being understood that as
of the date hereof, the Company does not own or lease the United Artist Theaters
or Bayonne and Bensonhurst theaters, all of which are described in the
Prospectus; and the properties and business of the Company and the Subsidiaries
conform in all material respects to the descriptions thereof contained in the
Registration Statement or the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). All the leases and subleases
under which the Company or any Subsidiary holds properties or assets as lessee
or sublessee, constitute valid leasehold interests of the Company or such
Subsidiary, free and clear of any lien, encumbrance, security interest, claim,
restriction, equity or defect, except as described in the Registration
Statement, and are in full force and effect. Neither the Company nor any
Subsidiary is in default in respect of any of the terms or provisions of any
such leases or subleases or has notice of any claim which has been asserted by
anyone adverse to the Company's or any of the Subsidiaries' rights as lessee or
sublessee under any such leases or subleases or affecting or questioning the
Company's or any of the Subsidiaries' right to the continued possession of the
leased or subleased premises under any such lease or sublease, except which, in
each case, are not reasonably likely to have a Material Adverse Effect.
(u) Neither the Company nor any Subsidiary has violated any
federal or state law relating to discrimination in the hiring, promotion or pay
of employees, nor any applicable federal or state wages and hours law, nor any
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or the rules and regulations promulgated thereunder, which violation
has had or is reasonably likely to have a Material Adverse Effect. Neither the
Company nor any Subsidiary is subject to any decree, order, judgment or similar
adjudication which would prohibit the Company or any Subsidiary from conducting
its business, in all material respects, as its business is described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(v) Except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) and
except as could not reasonably be expected to have a Material Adverse Effect,
the properties, assets and operations of each of the Company and the
Subsidiaries are in compliance with all applicable federal, state and local laws
(including, without limitation, common law), rules and regulations, orders,
decrees, judgments, permits and licenses relating to worker health and safety,
and to the protection and clean-up of the natural environment and to the
protection or preservation of natural resources, including, without limitation,
those relating to the processing, manufacturing, generation, handling, disposal,
transportation or release of hazardous materials (collectively, "Environmental
Laws"). With respect to such properties, assets and operations, there are no
events, conditions, circumstances, activities, practices, incidents, actions or
plans of the Company or any of its Subsidiaries of which the Company is aware
that may interfere with or prevent compliance or continued compliance with
applicable Environmental Laws or otherwise result in liability to the Company or
any of its Subsidiaries pursuant to applicable Environmental Laws in a manner
that could reasonably be expected to have a Material Adverse Effect. Except as
described in the Prospectus (or, if the Prospectus is not in
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existence, the most recent Preliminary Prospectus) or except as could not
reasonably be expected to have a Material Adverse Effect, (A) to the Company's
knowledge, none of the Company or any of its Subsidiaries is the subject of any
federal, state or local investigation pursuant to Environmental Laws and (B)
none of the Company or any of its Subsidiaries has received any written notice
or claim pursuant to Environmental Laws. The term "hazardous materials" shall
mean those substances that are regulated by or pursuant to any applicable
Environmental Laws.
(w) The Underwriter Warrants will conform to the description
thereof in the Registration Statement and in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) and,
when sold to and paid for by the Representative (or its designee(s)) in
accordance with the Underwriter Warrant Agreement, will have been duly
authorized and validly issued and will constitute valid and binding obligations
of the Company and the holders thereof will be entitled to the benefits of the
Underwriter Warrant Agreement and the Registration Rights Agreement. As of the
Closing Date the Warrant Shares (as defined in Section 3(c) hereof) will have
been duly authorized and reserved for issuance upon exercise of the Underwriter
Warrants by all necessary corporate action on the part of the Company and, when
issued upon such exercise in accordance with the terms of the Underwriter
Warrant Agreement at the price therein provided, will be validly issued, fully
paid, non-assessable and free of preemptive rights and will conform to the
description thereof in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(x) Each of the Company and the Subsidiaries holds all
franchises, licenses, permits, approvals, certificates and other authorizations
from federal, state and other governmental or regulatory authorities necessary
for the ownership, leasing and operation of its properties or required for the
present and proposed conduct of its business (other than the proposed
acquisition of the United Artist Theaters described in the Prospectus), and such
franchises, licenses, permits, approvals, certificates and other governmental
authorizations are in full force and effect and the Company and the Subsidiaries
are in compliance therewith, except as described in the Schedules to the Current
Facility or where any such failure is not reasonably likely to have a Material
Adverse Effect.
(y) Except as described in the Registration Statement
(including the exhibits thereto), no Subsidiary will be prohibited or restricted
as of the Closing Date, directly or indirectly, from paying any dividends to the
Company, from making any other distributions on its capital stock, from repaying
to the Company any loans or advances to it from the Company or from transferring
any of its property or assets to the Company or any other Subsidiary.
(z) None of the Company or any of the Subsidiaries is subject
to registration as an "investment company" under the Investment Company Act of
1940, as amended, or will be subject to such registration following issuance of
the Shares.
(aa) None of the Company or any Subsidiary or, to the Company's
knowledge, any director, officer, agent, employee, or other person associated
with, or acting on behalf of, the Company or any Subsidiary has, directly or
indirectly, used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; made
any unlawful payment to foreign or domestic government officials or
9
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employees or to foreign or domestic political parties or campaigns from
corporate funds; violated any provision of the Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"); or made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply in all
material respects with the FCPA.
(ab) Except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), the
Company has not incurred any liability for a fee, commission or other
compensation on account of the employment of a broker or finder in connection
with the transactions contemplated by this Agreement.
(ac) Except as previously disclosed to the Representative in
writing, no officer, director or stockholder of the Company has any affiliation
or association with the NASD or any member thereof.
(ad) All issuances of securities by the Company described in
response to Item 26 of Part II of the Registration Statement were exempt from
registration under the Act and were exempt from or complied in all respects with
the provisions of all applicable state securities laws.
3. Purchase, Sale and Delivery of the Shares and Underwriter
Warrants.
(a) On the basis of the representations, warranties, covenants
and agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to each Underwriter, and each Underwriter
severally and not jointly agrees to purchase from the Company, the number of
Primary Shares set forth opposite its name on Schedule A hereto, in each case at
a purchase price of $________ per Share.
(b) Delivery of certificates, and payment of the purchase
price, for the Primary Shares shall be made at the offices of the Representative
at 810 Seventh Avenue, New York, New York 10019, or such other location as shall
be agreed upon by the Company and the Representative. Such delivery and payment
shall be made at 10:00 a.m., New York City time, on ________ , 1997 or at such
other time and date thereafter as shall be agreed upon by the Company and the
Representative. The time and date of such delivery and payment are herein called
the "Closing Date." Delivery of the certificates for the Primary Shares shall be
made to the Representative for the respective accounts of the Underwriters
against payment of the purchase price therefor by a wire transfer in Federal
(same day) funds drawn to the order of the Company. The certificates for the
Primary Shares to be so delivered will be in definitive, fully registered form,
will bear no restrictive legends and will be in such denominations and
registered in such names as the Representative shall request not less than two
full business days prior to the Closing Date. The certificates for the Primary
Shares will be made available to the Representative at such office or such other
place as the Representative may designate for inspection, checking and packaging
not later than 12:00 p.m., New York City time, on the business day prior to the
Closing Date.
(c) On the Closing Date, the Company will issue and sell to the
Representative, or at the direction of the Representative to its designees
including one or more of the Underwriters, other members of the National
Association of Securities Dealers, Inc. (the "NASD") participating in the
offering and their respective bona fide officers or partners, for a
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purchase price of $.01 per warrant, warrants (the "Underwriter Warrants")
entitling the holders thereof initially to purchase an aggregate of ____________
shares of Common Stock, subject to adjustment as provided in the Underwriter
Warrants, for a period of five years commencing on the effective date of the
Registration Statement. The Underwriter Warrants shall be exercisable at a price
equal to 120% of the initial public offering price per Share and shall be
subject to and entitled to the benefits of the terms and provisions set forth
more particularly in the warrant agreement relating thereto executed by the
Company on the Closing Date in substantially the form of Exhibit A hereto (the
"Underwriter Warrant Agreement") and a registration rights agreement (including
any side-letters thereto) substantially in the form of Exhibit B hereto
("Registration Rights Agreement"). The shares of Common Stock issuable upon
exercise of the Underwriter Warrants are referred to herein as the "Warrant
Shares."
4. Public Offering of the Shares. It is understood that the
Underwriters propose to make a public offering of the Shares at the price and
upon the other terms set forth in the Prospectus.
5. Covenants of the Company. The Company covenants and agrees with
the Underwriters that:
(a) The Company will use its reasonable best efforts to cause
the Registration Statement and any amendments thereto to become effective as
promptly as practicable. If required, the Company will file the Prospectus and
any amendment or supplement thereto with the Commission in the manner and within
the appropriate time period required by Rule 424(b) under the Act. During any
time when a Prospectus relating to the Shares is required to be delivered under
the Act, the Company (i) will comply with all requirements imposed upon it by
the Act and the Rules and Regulations to the extent necessary to permit the
continuance of sales of or dealings in the Shares in accordance with the
provisions hereof and of the Prospectus, as then amended or supplemented, and
(ii) will not file with the Commission the Prospectus or the amendment referred
to in the third sentence of Section 2(a) hereof, any amendment or supplement to
the Prospectus or any amendment to the Registration Statement of which the
Representative shall not previously have been advised and furnished with a copy
a reasonable period of time prior to the proposed filing or as to which filing
the Representative shall reasonably object, unless (with respect to any time
after the Closing Date) the Company has received the written advice of its
counsel that such amendment or supplement may be required by law, rule or
regulation. If, at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A
under the Act, then promptly following the execution of this Agreement the
Company will prepare and file or transmit for filing with the Commission in
accordance with said Rule 430A copies of the Prospectus including the
information omitted in reliance on Rule 430A.
(b) The Company shall cause each Subsidiary to comply with the
covenants and agreements set forth herein that are applicable to it.
(c) Promptly after the Company is advised or obtains knowledge
thereof, the Company will advise the Representative (i) when the Registration
Statement has become effective and, if the provisions of Rule 430A promulgated
under the Act will be relied upon, when the Prospectus has been filed in
accordance with said Rule 430A and when any post-effective amendment to the
Registration Statement has been filed and becomes effective;
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(ii) of any request made by the Commission for amending the Registration
Statement, for supplementing any Preliminary Prospectus or the Prospectus or for
additional information; (iii) of any suspension of the qualification of the
Shares for offering or sale in any jurisdiction; or (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or the institution or threat of any
investigation or proceeding for that purpose. The Company will use its
reasonable best efforts to prevent the issuance of any such stop order and, if
issued, to obtain the lifting thereof as soon as possible.
(d) The Company will (i) use its reasonable best efforts to
arrange for the qualification of the Shares for offer and sale under the state
securities or blue sky laws of such jurisdictions as the Underwriters may
designate, (ii) continue such qualifications in effect for as long as may be
necessary to complete the distribution of the Shares, and (iii) make such
applications, file such documents and furnish such information as may be
required for the purposes set forth in clauses (i) and (ii) of this subsection
(d); provided, however, that the Company shall not be required to qualify as a
foreign corporation or file a general or unlimited consent to service of process
in any such jurisdiction or take any action that would subject the Company to
taxation in such jurisdiction if it is not already so subject.
(e) The Company consents to the use of the Prospectus and any
amendment or supplement thereto by the Underwriters and all dealers to whom the
Shares may be sold in connection with the offering or sale of the Shares and for
such period of time thereafter as the Prospectus is required by law to be
delivered in connection therewith. If, at any time when a prospectus relating to
the Shares is required to be delivered under the Act, any event occurs as a
result of which the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading, or if it becomes
necessary at any time to amend or supplement the Prospectus to comply with the
Act or the Rules and Regulations, the Company promptly will so notify the
Representative and, subject to Section 5(a)(ii) hereof, promptly will prepare
and file with the Commission an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that will correct such statement or
omission or effect such compliance, each such amendment or supplement to be
reasonably satisfactory to counsel to the Underwriters.
(f) As soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), the Company will make
generally available to its security holders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriters an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Act and Rule 158(a) of the Rules
and Regulations.
(g) The Company will furnish to its stockholders, as soon as
practicable, annual reports (including financial statements audited by
independent public accountants) and unaudited quarterly reports of earnings, and
during the period of three years after the date hereof will deliver to the
Representative for the benefit of the Underwriters:
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(i) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as of the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity and cash flows of the Company for such fiscal year,
accompanied by a copy of the report thereon of independent public
accountants;
(ii) concurrently with furnishing such quarterly reports to its
stockholders, statements of income for the Company for each quarter in the
form furnished to the Company's stockholders;
(iii) as soon as they are available, copies of
all information (financial or other) mailed to stockholders;
(iv) as soon as they are available, copies of all publicly
available reports and financial statements furnished to or filed with the
Commission, the NASD or the ASE;
(v) every press release and every material news item or article
of interest to the financial community in respect of the Company or its
affairs which was released or prepared by the Company; and
(vi) any additional information of a public nature concerning
the Company or its business which the Representative may reasonably
request.
During such three-year period the foregoing financial statements will be
on a consolidated basis to the extent that the accounts of the Company and its
subsidiaries are consolidated, and will be accompanied by similar financial
statements for any subsidiary which is not so consolidated to the extent that
such financial statements are prepared by the Company.
(h) The Company will appoint a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which may
be the same entity as the transfer agent) for the Common Stock approved by the
Representative; and the Company will not change or terminate such appointment
for a period of two years after the Closing Date without first obtaining the
Representative's consent which shall not be unreasonably withheld.
(i) The Company will furnish, without charge, to the
Representative or on the Representative's order, at such place as the
Representative may designate, copies of each Preliminary Prospectus, the
Registration Statement, and any pre-effective or post-effective amendments
thereto (two of which copies will manually be signed and will include all
financial statements and exhibits) and the Prospectus and all amendments and
supplements thereto, in each case as soon as available and in such quantities as
the Representative may reasonably request. The Company will provide the
Representative copies of its report on Form SR required by Rule 463 under the
Act and any amendments thereto, including all exhibits, concurrently with the
filing thereof with the Commission.
(j) The Company will not, directly or indirectly, without the
prior written consent of the Representative, issue, offer, sell, pledge or
otherwise encumber, or grant any option to purchase or otherwise dispose of, any
shares of Common Stock or any securities
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convertible into or exchangeable or exercisable for shares of Common Stock for a
12-month period after the date of the Prospectus except pursuant to this
Agreement or the Underwriter Warrant Agreement or except for (i) issuances of
Common Stock pursuant to the exercise of stock options outstanding on or granted
subsequent to the date hereof pursuant to a stock option or other employee
benefit plan described in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and in existence on the date
of this Agreement, or (ii) issuances of Common Stock pursuant to the exercise of
warrants disclosed in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus); provided, however, that the
Representative shall not unreasonably withhold such consent in connection with
the issuance, offer or sale of shares of Common Stock (or securities convertible
into or exchangeable or exercisable for Common Stock) by the Company to an
unaffiliated third party in connection with an acquisition in which the Company
uses such securities as part or all of the consideration paid by it.
(k) The Company will cause the Shares to be duly listed on the
ASE prior to the Closing Date, subject to official notice of issuance.
(l) None of the Company, any of its officers or directors or
any of their affiliates (within the meaning of the Rules and Regulations) will
take, directly or indirectly, any action designed to, or which might in the
future reasonably be expected to violate Regulation M of the Exchange Act,
although no representation or warranty is hereby expressed for actions taken in
connection with the Concurrent Transactions.
(m) The Company will apply the net proceeds of the offering
received by it in substantially the manner set forth under the caption "Use of
Proceeds" in the Prospectus. Prior to the application of such net proceeds, the
Company will invest or reinvest such proceeds only in the following investments
so long as they have maturities of one year or less: (i) obligations issued or
guaranteed by the United States or by any person controlled or supervised by or
acting as an instrumentality of the United States pursuant to authority granted
by Congress; (ii) obligations issued or guaranteed by any state or political
subdivision thereof rated either Aa or higher or MIG 1 or higher, by Moody's
Investors Service, Inc. or AA or higher, or an equivalent, by Standard & Poor's
Corporation; (iii) commercial paper which is rated either Prime-1 or higher or
an equivalent by Moody's Investors Service, Inc. or A-1 or higher or an
equivalent by Standard & Poor's Corporation; and (iv) fully insured certificates
of deposit or time deposits of banks or trusts companies organized under the
laws of the United States having a minimum equity of $50,000,000.
(n) The Company will timely file all such reports, forms or
other documents as may be required from time to time under the Act, the Rules
and Regulations and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder; and all such reports,
forms and documents filed will comply as to form and substance with the
applicable requirements under the Act, the Rules and Regulations and the
Exchange Act and the rules and regulations thereunder.
(o) The Company will not take any action to facilitate the sale
of any shares of Common Stock pursuant to Rule 144 under the Act if any such
sale would violate any of the Lock-Up Agreements.
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(p) During a period of three years after the date hereof, the
Company will retain Wiss & Company LLP as its independent auditors; provided,
however, that, upon written notice to the Representative during such period, the
Company may retain a "Big Six" firm of independent certified public accountants,
or in the alternative, the Company may retain another firm of independent
certified public accountants qualified to practice in front of the Commission,
which firm is reasonably acceptable to the Representative.
(q) The Company will supply the Representative, within 30 days
prior to the end of each of the fiscal years ending December 31, 1997, 1998 and
1999, with any internal forecasts or reports prepared in the ordinary course of
business for the succeeding fiscal year. For each period covered by any internal
forecast or report to be supplied to the Representative, the Company also will
supply financial statements prepared in detail substantially similar to the
financial statements previously delivered to the Representative so as to allow
comparison to the internal forecast or report.
(r) During a period of five years after the date of the
Prospectus, the Company will permit an agent of the Representative to attend all
meetings of the Company's Board of Directors (the "Board") as a non-voting
observer, will give such agent notice of all meetings of the Board at the same
time and in the same manner that directors are notified and will reimburse such
agent for all expenses incurred in attending Board meetings (including but not
limited to food, transportation and lodging) and compensate such agent in the
same manner as an independent director is reimbursed and compensated for each
meeting attended. During such five-year period, the Company will hold no less
than four formal meetings of the Board each year. In lieu of the foregoing, for
a period of two years following completion of the offering or, if longer, for a
period of up to five years following the completion of the offering so long as
the Representative and its affiliates are the beneficial owners of at least 50%
of the Underwriter Warrants and/or the Warrant Shares, at the request of the
Representative, the Company shall nominate Philip M. Getter or another mutually
acceptable agent of the Representative to serve as a director of the Company and
shall exercise reasonable best efforts (including the solicitation of proxies
from stockholders of the Company) to cause such person to be elected to the
Board.
(s) During a period of three years after the date hereof, the
Company shall provide at its sole expense to the Representative (i) copies of
its daily transfer sheets and (ii) copies of the ASE monthly summaries of
trading activity of the Company.
(t) During such period as the Company is subject to the
periodic reporting requirements of the Exchange Act, the Company shall use its
reasonable best efforts so that during such period the Company will be listed in
one or more of the securities manuals published by Standard & Poor's Corporation
or Moody's Investors Service, Inc. or another comparable publisher and that, at
all times during such period, such listing will, at a minimum, contain the names
of the Company's officers and directors, a balance sheet as of a date not more
than 15 months prior to such time and a statement of operations for either the
fiscal year preceding such date or the most recent fiscal year of operations.
6. Expenses.
(a) Regardless of whether the transactions contemplated by this
Agreement are consummated, and regardless of whether for any reason this
Agreement is terminated, the
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Company will pay, and hereby agrees to indemnify the Underwriters against, all
fees and expenses incident to the performance of the obligations of the Company,
including, but not limited to, (i) fees and expenses of accountants and counsel
for the Company; (ii) all costs and expenses incurred in connection with the
preparation, duplication, printing, filing, delivery and shipping of copies of
the Registration Statement and any pre-effective or post-effective amendments
thereto, any Preliminary Prospectus and the Prospectus and any amendments or
supplements thereto (including postage costs related to the delivery by the
Underwriters of any Preliminary Prospectus or Prospectus or any amendment or
supplement thereto); (iii) all fees and expenses relating to the qualification
of the Shares under state securities or blue sky laws, including the costs of
preparing and mailing the preliminary and final blue sky memoranda and filing
fees and disbursements and fees of counsel and other related expenses, if any,
in connection therewith; provided, however, that the maximum amount that the
Company shall be obligated to pay with respect to disbursements (other than
filing fees) and fees of counsel shall not exceed $25,000; (iv) all filing fees
of the Commission and the NASD relating to the Shares; (v) any fees and expenses
in connection with the listing of the Shares on the ASE; (vi) costs and expenses
incident to the preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Shares, including transfer agent's and registrar's
fees and any applicable transfer taxes incurred in connection with the delivery
to the Underwriters of the Shares to be sold by the Company pursuant to this
Agreement; (vii) all costs and expenses of the Company incident to any meetings
with prospective investors in the Shares; and (viii) the fees and expenses of
the Representative's counsel which shall not exceed $75,000 (including $25,000
for blue sky counsel fees referred to above) in the event the transactions
contemplated by this Agreement are not consummated (other than blue sky filing
and registration fees payable to applicable blue sky authorities, all of which
shall be paid by the Company). In addition to the foregoing, the Company shall
provide the Representative on behalf of the Underwriters with a non-accountable
expense allowance in an amount equal to 2.5% of the gross offering proceeds
received by the Company, $100,000 of which has previously been paid by the
Company to the Representative in two installments of $50,000 each. The
Representative hereby acknowledges receipt of such $100,000 which payment shall
be credited against the non-accountable expense allowance to be paid by the
Company. The unpaid portion of the expense allowance based on gross proceeds
from the sale of the Primary Shares shall be deducted from the funds to be paid
by the Underwriters in payment for the Primary Shares pursuant to Section 3 of
this Agreement on the Closing Date. To the extent any Additional Shares are
sold, any remaining expense allowance based on the gross proceeds from the sale
of the Additional Shares shall be deducted from the funds to be paid by the
Underwriters in payment for the Additional Shares, pursuant to Section 9 of this
Agreement on any Additional Closing Date. The Company represents, warrants and
agrees that all such payments and reimbursements will be promptly and fully
made.
(b) If the purchase of the Shares as herein contemplated is not
consummated for any reason other than by reason of the Representative's election
pursuant to Section 11(a) or in the case of an individual Underwriter other than
such Underwriter's default under this Agreement, then the Company shall
reimburse each non-defaulting Underwriter (other than the Representative, whose
fees and expenses shall be covered by subsection (a) above) for its
out-of-pocket expenses (including counsel fees and disbursements) incurred in
connection with any investigation and preparation made by it in respect of
marketing of the Shares or in contemplation of the performance by it of its
obligations hereunder, and the Representative may retain any portion of the
expense allowance referred to in subsection (a) above that was previously paid
to it.
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7. Conditions of the Underwriters' Obligations. The obligation of the
Underwriters to purchase and pay for the Shares is subject to the continuing
accuracy in all material respects of the representations and warranties of the
Company herein as of the date hereof and as of the Closing Date as if they had
been made on and as of the Closing Date; the accuracy in all material respects
on and as of the Closing Date of the statements of officers of the Company made
pursuant to subsection (f) below; the performance in all material respects by
the Company on and as of the Closing Date of its covenants and agreements
hereunder; and the following additional conditions:
(a) If the Company has elected to rely on Rule 430A under the
Act, the Registration Statement shall have been declared effective and the
Prospectus containing the information omitted pursuant to Rule 430A shall have
been filed with the Commission not later than the Commission's close of business
on the second business day following the date hereof or such later time and date
to which the Representative shall have consented; if the Company does not elect
to rely on Rule 430A, the Registration Statement shall have been declared
effective not later than 11:00 a.m., New York City time, on the date hereof or
such later time and date to which the Representative shall have consented; if
required, in the case of any changes in or amendments or supplements to the
Prospectus in addition to those contemplated above, the Company shall have filed
such Prospectus as amended or supplemented with the Commission in the manner and
within the time period required by Rule 424(b) under the Act; no stop order
suspending the effectiveness of the Registration Statement or any amendment
thereto shall have been issued, and no proceedings for that purpose shall have
been instituted or, to the knowledge of the Company or the Representative, shall
be threatened or contemplated by the Commission; and the Company shall have
complied with any request of the Commission for additional information to be
included in the Registration Statement or the Prospectus or otherwise.
(b) The Representative shall not have in good faith advised the
Company that the Registration Statement or any amendment thereto contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or is necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representative shall
have received the favorable opinion of Dewey Ballantine, counsel to the
Underwriters, with respect to the issuance and sale of the Shares, the
Registration Statement, the Prospectus and such other related matters as the
Representative reasonably may request, and such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State of
New York, the general corporate law of the State of Delaware and the federal law
of the United States, upon the opinions of counsel satisfactory to the
Representative and such counsel shall have received such documents and other
information as they request to enable them to pass upon such matters.
(d) On the Closing Date, the Representative shall have received
the opinion of Kirkpatrick & Lockhart LLP, counsel to the Company, addressing
the matters set forth below:
(i) Each of the Company and the Subsidiaries (A) is a duly
incorporated (other than ______ (the "Other Subsidiaries") as to which no
opinion need be given as
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to due incorporation) and validly existing corporation in good standing
under the laws of its jurisdiction of incorporation, with the corporate
power and authority to own or lease its properties and to conduct its
business as described in the Registration Statement or the Prospectus, and
(B) is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction (x) in which the conduct of its
business requires such qualification or (y) in which it owns or leases
property, in each case except for those jurisdictions in which the failure
to so qualify has not had and is not reasonably likely to have a Material
Adverse Effect.
(ii) The Company has the authorized capital stock set forth in
the Prospectus; the Securities conform as to legal matters in all material
respects to the descriptions thereof contained in the Prospectus; the
outstanding shares of Common Stock have been duly authorized and validly
issued by the Company, are fully paid and nonassessable, and are free of
any preemptive or similar rights to subscribe for any of the Shares; the
Company has duly authorized the issuance and sale of the Shares to be sold
by it hereunder; such Shares, when issued by the Company and paid for in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and will conform as to legal matters in all material
respects to the description thereof contained in the Prospectus and will
not be subject to any preemptive or similar rights; the Shares have been
approved for listing on the ASE, subject to official notice of issuance;
and, to such counsel's knowledge, there are no outstanding warrants,
options or other rights granted by the Company to purchase shares of its
Common Stock or other securities other than as described in the
Prospectus.
(iii) The Registration Statement is effective under the Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration Statement
or any amendment thereto has been issued; and no proceedings for that
purpose, to the knowledge of such counsel, have been instituted or are
pending or are threatened or contemplated under the Act. The Registration
Statement and the Prospectus (except for the financial statements,
schedules and other financial, market and statistical data included
therein and information provided by the Underwriters for inclusion therein
(which for the purposes hereof shall be the information described in
Section 8(b)(ii) below, as to all of which such counsel need not express
any opinion), complied as to form in all material respects with the
requirements of the Act and the Rules and Regulations; the descriptions
contained and summarized in the Registration Statement or the Prospectus
of contracts and other documents as they pertain to legal matters are
accurate and fairly represent in all material respects the information
required to be shown by the Act and the Rules and Regulations; to the
knowledge of such counsel, there are no contracts or documents which are
required by the Act to be described in the Registration Statement or the
Prospectus or to be filed as exhibit to the Registration Statement which
are not so described or filed as required by the Act and the Rules and
Regulations; to the knowledge of such counsel, there are no statutes or
regulations and there is not pending or threatened against the Company or
any Subsidiary any action, suit, proceeding or investigation before or by
any court, regulatory body, or administrative agency or any other
governmental agency or body, domestic or foreign, of a character required
to be disclosed in the Registration Statement or the Prospectus which is
not so
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<PAGE>
disclosed therein; and the statements set forth under the headings
"Business," "Management and Directors," "Principal Stockholders," "The
Concurrent Transactions," "Certain Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as
such statements constitute a summary of the legal matters, documents or
proceedings referred to therein, provide an accurate summary of such legal
matters, documents and proceedings.
(iv) The Company has the full corporate power and authority to
enter into this Agreement and to consummate the transactions provided for
herein; this Agreement has been duly authorized, executed and delivered by
the Company; and this Agreement, assuming due authorization, execution and
delivery by each other party hereto, is a valid and binding agreement of
the Company (except as enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and other
similar laws affecting creditors' rights generally and to general
principles of equity, regardless of whether enforcement is considered in a
proceeding in equity or at law). None of the Company's execution or
delivery of this Agreement, its performance hereof, its consummation of
the transactions contemplated herein or its application of the net
proceeds of the offering in the manner set forth under the caption "Use of
Proceeds" conflicts or will conflict with or results or will result in any
breach or violation of any of the terms or provisions of, or constitutes a
default under, or results in the creation or imposition of any lien,
charge or encumbrance upon, any property or assets of the Company or any
of the Subsidiaries pursuant to the terms of (A) the certificate or
articles of incorporation or bylaws of the Company or any of the
Subsidiaries (other than the Other Subsidiaries), (B) any indenture,
mortgage, deed of trust, voting trust agreement, stockholders' agreement,
note agreement, partnership agreement, joint venture agreement or other
agreement or instrument listed in the Exhibit Index to the Registration
Statement (together "Contracts"), or (C) any statute, rule or regulation
of any regulatory body or administrative agency or other regulatory body
or administrative agency or other governmental agency or body, domestic or
foreign, having jurisdiction over the Company or any of the Subsidiaries
or any of their respective activities or properties, or any judgment,
decree or order (together "Orders") identified to such counsel by the
Company as the only material Orders of any government, arbitrator, court,
regulatory body or administrative agency or other governmental agency or
body, domestic or foreign, having such jurisdiction, except with respect
to clauses (B) or (C) above that is not reasonably likely to have a
Material Adverse Effect; and, to the knowledge of such counsel, no
consent, approval, authorization or order of any court, governmental
agency or body, domestic or foreign, has been or is required for the
Company's performance of this Agreement or the consummation of the
transactions contemplated hereby, except such as have been obtained under
the Act or may be required under state securities or blue sky laws in
connection with the purchase and distribution by the Underwriters of the
Shares.
(v) To such counsel's knowledge, no claims have been asserted
against the Company to the effect that the conduct of the business of the
Company and the Subsidiaries is in violation of any federal, state or
local statute, administrative regulation or other law, domestic or
foreign, or that the Company and the Subsidiaries have failed to obtain
all licenses, permits, franchises, certificates and other authorizations
from state, federal and other regulatory authorities as are necessary or
required for the ownership, leasing and operation of their properties and
the conduct of
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their business as presently conducted and as contemplated in the
Prospectus (other than the proposed acquisition of the United Artist
Theaters described in the Prospectus).
(vi) The issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid
and non-assessable and, except as otherwise described in the Prospectus,
are owned directly or indirectly by the Company, free and clear of any
perfected security interests or, to the knowledge of such counsel, any
other liens, encumbrances, claims or security interests; to the best
knowledge of such counsel no Subsidiary is currently prohibited, directly
or indirectly, from paying any dividends to the Company from making any
other distribution on its capital stock, from repaying to the Company any
loans or advances to it from the Company or from transferring any of its
property or assets to the Company or any Subsidiary, except in each case
as described herein or as described in or contemplated by the Registration
Statement and the exhibits thereto.
(vii) The Company has full corporate power and authority to
enter into the Underwriter Warrant Agreement and the Registration Rights
Agreement and to consummate the transactions provided for therein; and the
Underwriter Warrant Agreement and Registration Rights Agreement have been
duly authorized, executed and delivered by the Company, and are valid,
legal and binding agreements of the Company, enforceable against the
Company in accordance with their terms (except as enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other similar laws affecting creditors' rights generally
and to general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law).
(viii) The Underwriter Warrants conform as to legal matters to
the description thereof in the Registration Statement and in the
Prospectus and are duly authorized and validly issued and constitute
valid, legal and binding obligations of the Company enforceable in
accordance with the terms thereof (except as enforceability may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other similar laws affecting creditors' rights generally
and to general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law); the Warrant Shares have
been duly and validly authorized and reserved for issuance upon exercise
of the Underwriter Warrants and, when issued upon exercise in accordance
with the terms of and for the consideration set forth in the Underwriter
Warrant Agreement, will be duly and validly issued, fully paid and
non-assessable and free of preemptive rights and shall be entitled to the
benefit of the terms and provisions of the Registration Rights Agreement.
(ix) The Company is not and, after giving effect to the
offering and sale of the Shares pursuant hereto, will not be an
"investment company" as defined in Section 3(a) of the Investment Company
Act of 1940, as amended.
(x) The issuances of securities by the Company referred to in
response to Item 26 of Part II of the Registration Statement were exempt
from registration under the Act and were exempt from or complied with the
provisions of all applicable state securities laws.
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In addition, such counsel shall state that, in the course of the
preparation of the Registration Statement and the Prospectus, it has
participated in conferences with officers and representatives of the Company,
representatives of the Company's independent public accountants and with your
representatives and your counsel, at which the contents of the Registration
Statement and the Prospectus and related matters were discussed, and (without
taking any further action to verify independently the statements made in the
Registration Statement and the Prospectus and, except as stated in the foregoing
opinion, without assuming responsibility for the accuracy, completeness or
fairness of such statements) nothing has come to such counsel's attention that
causes it to believe that either the Registration Statement as of the date it is
declared effective and as of the Closing Date contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus as of the date thereof and as of the Closing
Date contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need not express any
opinion with respect to the financial statements, schedules and other financial,
market or statistical data included in or excluded from the Registration
Statement or the Prospectus or any information provided by the Underwriters
expressly for inclusion therein (which for the purposes hereof shall be the
information described in Section 8(b)(ii) below.)).
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdiction other than the law of the State of New
York, the general corporate law of the State of Delaware, the unofficial
compilation of the laws of the State of New Jersey and the federal law of the
United States, such counsel may rely upon or substitute the opinion of other
counsel reasonably satisfactory to the Representative. The foregoing opinion
shall also state that the Representative is justified in relying upon such
opinion of other counsel, and copies of such opinion shall be delivered to the
Representative and counsel to the Underwriters. Such counsel need express no
opinion as to the enforceability of the indemnification provisions contained in
this Agreement.
References to the Registration Statement and the Prospectus in this
paragraph (d) shall include any amendment or supplement thereto at the date of
such opinion.
(e) The Representative shall have received a letter (the "Comfort
Letter"), dated the date of delivery thereof (which, if the Effective Time is
prior to the execution and delivery of this Agreement, shall be on or prior to
the date of this Agreement or, if the Effective Time is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of the
amendment or post-effective amendment to the Registration Statement to be filed
shortly prior to the Effective Time), of Wiss & Company LLP confirming that they
are independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating in effect
that:
(i) in their opinion the financial statements and schedules audited
by them and included in the Registration Statement and the
Prospectus comply in form in all material respects with the
applicable accounting
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requirements of the Act and the related published Rules
and Regulations;
(ii) they have performed the procedures specified by the American
Institute of Certified Public Accountants for review of interim
financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the
unaudited financial statements included in the Registration
Statement and the Prospectus;
(iii) on the basis of the review referred to in clause (ii) above, a
reading of the latest available interim financial statements of
the Company, a reading of the minutes of all meetings of the
stockholders and directors (including each committee thereof)
of the Company and its subsidiaries, inquiries of officials of
the Company who have responsibility for financial and
accounting matters and other specified procedures, nothing came
to their attention that caused them to believe that:
(A) the unaudited financial statements included in the
Registration Statement and the Prospectus do not comply in form in
all material respects with the applicable accounting requirements of
the Act and the related published Rules and Regulations or are not in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the audited financial
statements in the Registration Statement and the Prospectus;
(B) the information set forth in the Prospectus under the
captions "Summary Consolidated Financial Data" or "Pro Forma
Consolidated Financial Data" does not agree with the amounts set
forth in the unaudited consolidated financial statements or the
audited consolidated financial statements, as the case may be, from
which it was derived or was not determined on a basis substantially
consistent with that of the corresponding amounts in the audited
financial statements included in the Registration Statement and the
Prospectus;
(C) at the date of the latest available balance sheet read by
such accountants, and at a subsequent specified date not more than
five days prior to the date of such letter, there was any decrease in
stockholders' equity or change in the capital stock or any increase
in short-term indebtedness or long-term debt of the Company and its
consolidated Subsidiaries or, at the date of the latest available
balance sheet read by such accountants, there was any decrease in
consolidated net current assets or net assets, as compared with
amounts shown on the latest balance sheet included in the
Registration Statement and the Prospectus; or
(D) for the period from the closing date of the latest income
statement included in the Registration Statement and the Prospectus
to the closing date of the latest available income statement read by
such accountants, there were any decreases, as compared with the
corresponding period of the previous year and with the period of
corresponding length ended the date of the latest income
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statement included in the Registration Statement and the Prospectus,
in sales or in the total or per share amounts of consolidated
net operating income, income from continuing operations or net
income or any increases or decreases, as the case may be, in other
items specified by the Representatives;
except in all cases set forth in clauses (C) and (D) above for changes,
increases or decreases which the Prospectus discloses have occurred or may
occur;
(iv) they have proved the arithmetic accuracy of the application of
the pro forma adjustments to the historical amounts in the
unaudited pro forma financial information included in the
Registration Statement and the Prospectus and on the basis of
the foregoing procedure and a reading of the unaudited pro
forma financial statements included in the Registration
Statement and the Prospectus, a reading of the minutes of all
meetings of the stockholders and directors (including each
committee thereof) of the Company and its subsidiaries,
inquiries of officials of the Company who have responsibility
for financial and accounting matters and other specified
procedures, nothing came to their attention that caused them to
believe that the pro forma financial statements included in the
Registration Statement and the Prospectus do not comply in all
material respects with the applicable accounting requirements
of Regulation S-X or that the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of such financial statements or on the pro forma
basis described in the notes thereto; and
(v) they have compared specified dollar amounts (or percentages
derived from such dollar amounts), numerical data and other
financial information contained in the Registration Statement
and the Prospectus (in each case to the extent that such dollar
amounts, percentages, numerical data and other financial
information are derived from the general accounting records of
the Company and its subsidiaries subject to the internal
controls of the Company's accounting system or are derived
directly from such records by analysis or computation) with the
results obtained from inquiries, a reading of such general
accounting records and other procedures specified in such
letter and have found such dollar amounts, percentages,
numerical data and other financial information to be in
agreement with such results.
For purposes of this subsection, if the Effective Time is subsequent
to the execution and delivery of this Agreement, "Registration Statement" shall
mean the registration statement as proposed to be amended by the amendment or
post-effective amendment to be filed shortly prior to the Effective Time, and
"Prospectuses" shall mean the prospectus included in the Registration Statement.
In addition, on the Closing Date the Representative shall have
received from Wiss & Company LLP a letter dated the Closing Date stating that,
as of a specified date not earlier than five days prior to the Closing Date,
nothing has come to the attention of such firm to suggest that the statements
made in the Comfort Letter are not true and correct.
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<PAGE>
(f) On the Closing Date, the Representative shall have received a
certificate, dated the Closing Date, of the principal executive officer and the
principal financial officer of the Company to the effect that each of such
persons has carefully examined the Registration Statement and the Prospectus and
any amendments or supplements thereto and this Agreement the Underwriter Warrant
Agreement and the Registration Rights Agreement and that to their knowledge:
(i) The representations and warranties of the Company in this
Agreement, the Underwriter Warrant Agreement and the Registration Rights
Agreement are true and correct in all material respects, as if made on and
as of the Closing Date, and the Company has complied in all material
respects with all agreements and covenants and satisfied in all material
respects all conditions contained in this Agreement, the Underwriter
Warrant Agreement and the Registration Rights Agreement on its part to be
performed or satisfied at or prior to the Closing Date.
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or are pending or are contemplated or
threatened under the Act, and any and all filings required by Rule 424 and
Rule 430A have been timely made.
(iii) The Registration Statement and Prospectus and each
amendment and each supplement thereto, if any, contain all statements and
information required to be included therein under the Act and the Rules
and Regulations, and neither the Registration Statement nor any amendment
thereto includes any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and neither the Prospectus (or any
supplement thereto) nor any Preliminary Prospectus includes or included
any untrue statement of a material fact or omits or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, up to and
including the Closing Date, neither the Company nor any of the
Subsidiaries has incurred, other than in the ordinary course of its
business, any material liabilities or obligations, direct or contingent;
neither the Company nor any of the Subsidiaries has purchased any of its
outstanding capital stock or paid or declared any dividends or other
distributions on its capital stock; neither the Company nor any of the
Subsidiaries has entered into any material transactions not in the
ordinary course of business; and there has not been any change in the
capital stock or consolidated long-term debt or any increase in the
consolidated short-term borrowings (other than any increase in short-term
borrowings in the ordinary course of business) of the Company or any
Material Adverse Effect; and neither the Company nor any of the
Subsidiaries has sustained any material loss or damage to its property or
assets, whether or not insured.
References to the Registration Statement and the Prospectus in this
paragraph (f) are to such documents as amended and supplemented at the date of
the certificate.
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<PAGE>
(g) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, up to and including
the Closing Date, there has not been (i) any change in the capital stock or debt
of the Company or decrease in the net current assets or stockholders equity of
the Company from the amounts specified in the Comfort Letter, or (ii) any
change, or any development involving a prospective change, in the business or
properties of the Company and the Subsidiaries, taken as a whole, which change
or decrease in the case of clause (i) or change or development in the case of
clause (ii) makes it impractical or inadvisable in the Representative's judgment
to proceed with the public offering or the delivery of the Shares as
contemplated by the Prospectus.
(h) The Representative shall have received a Lock-Up Agreement
from each person who is a director or executive officer of the Company or who
prior to the Closing Date owns any outstanding shares of equity securities of
the Company (or securities convertible into or exchangeable or exercisable for
equity securities of the Company) as contemplated by Section 2(l) hereof.
(i) The Shares shall have been duly approved for trading on the
ASE subject only to official notice of issuance.
(j) The Company shall have furnished the Representative with
such further opinion letters, certificates or documents as the Representative or
counsel to the Underwriters may reasonably request. All opinions, certificates,
letters and documents to be furnished by the Company pursuant to the provisions
hereof shall be reasonably satisfactory to the Representative and its counsel
and in such quantities as the Representative reasonably requests. The
certificates delivered hereunder shall constitute representations, warranties
and agreements of the Company as to all matters set forth therein as fully and
effectively as if such matters had been set forth in this Agreement.
(k) The Common Stock shall be qualified in such states as the
Representative may request pursuant to Section 5(d), and each such qualification
shall be in effect and not subject to any stop order or other proceeding on the
Closing Date.
(l) The Company shall have executed and delivered to the
Representative the Underwriter Warrant Agreement and Registration Rights
Agreement in the forms attached hereto. Until the expiration of the Underwriter
Warrants, the Company shall keep reserved sufficient shares of Common Stock for
issuance upon exercise thereof.
(m) On the Closing Date, the Concurrent Transactions shall have
been completed as described in the Prospectus, and the Company shall have
provided to the Representative copies of all documents with respect thereto as
it may reasonably request.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several (and actions in
respect thereof) to which such Underwriter or such controlling person may become
subject under the Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
25
<PAGE>
actions arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the
Prospectus or any Preliminary Prospectus, or any amendment or supplement
thereto, or any blue sky application or other document executed by the Company
specifically for the purpose of qualifying, or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify, any or all of the Shares under the securities or blue sky laws thereof
(any such application, document or information being hereinafter called a "Blue
Sky Application"), 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 not misleading and will reimburse, as
incurred, such Underwriter or such controlling persons for any reasonable legal
or other expenses incurred by such Underwriter or such controlling persons in
connection with investigating, defending or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of or is based upon
any untrue statement or alleged untrue statement or omission or alleged omission
made in any of such documents in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such
Underwriter expressly for use therein; and provided, further, that such
indemnity with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) from whom the person asserting any such loss, claim, damage,
liability or action purchased Shares which are the subject thereof to the extent
that any such loss, claim, damage, liability or action (i) results from the fact
that such Underwriter failed to send or give a copy of the Prospectus (as
amended or supplemented) to such person at or prior to the confirmation of the
sale of such Shares to such person in any case where such delivery is required
by the Act and (ii) arises out of or is based upon an untrue statement or
omission of a material fact contained in such Preliminary Prospectus that was
corrected in the Prospectus (as amended and supplemented), unless such failure
resulted from noncompliance by the Company with Section 5(i) hereof. The Company
acknowledges that the statements set forth in Section 8(b)(ii) below have been
furnished by the Underwriters to the Company expressly for use therein and
constitute the only information furnished in writing by or on behalf of the
Underwriters for inclusion in the Prospectus. The indemnity agreement contained
in this subsection (a) shall be in addition to any liability which the Company
may have at common law or otherwise.
(b) (i) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any and all losses, claims, damages or liabilities
(and actions in respect thereof) to which the Company or any such director,
officer, or controlling person may become subject under the Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or the Prospectus or any Preliminary
Prospectus, or any amendment or supplement thereto; or in any Blue Sky
Application, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with information furnished in writing by such Underwriter to the
Company
26
<PAGE>
expressly for use therein; and will reimburse, as incurred, all reasonable legal
or other expenses incurred by or on behalf of the Company or any such director,
officer or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action.
(ii) The Company acknowledges that the information furnished by the
Underwriters consists only of the following information in the Prospectus: the
last paragraph at the bottom of the cover page concerning the terms of the
offering by the Underwriters, the legends concerning over-allotments and
stabilizing on the inside front cover page and the concession and reallowance
figures appearing in the second paragraph under the caption "Underwriting." Such
statements have been furnished by the Underwriters to the Company expressly for
use therein and constitute the only information furnished in writing by or on
behalf of the Underwriters for inclusion in the Prospectus.
(iii) The indemnity agreement contained in this subsection (b) shall
be in addition to any liability which any Underwriter may have at common law or
otherwise.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 8, notify such indemnifying party or
parties of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under this Section 8 or to the extent that
the indemnifying party was not adversely affected by such omission. In case any
such action is brought against an indemnified party and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties against which a claim is to be made will be entitled to
participate therein and, to the extent that it or they may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party has
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select one separate counsel to assume such legal defenses and
otherwise to participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses (other than the reasonable costs of investigation)
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party has employed such counsel in connection
with the assumption of such different or additional legal defenses in accordance
with the proviso to the immediately preceding sentence, (ii) the indemnifying
party has not employed counsel reasonably satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action, or (iii) the indemnifying party has authorized in
writing the employment of counsel to the indemnified party at the expense of the
indemnifying party. In addition to the foregoing, no indemnifying party shall,
without the prior written consent (not to be unreasonably withheld) of an
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not any such
indemnified party or any person who
27
<PAGE>
controls any such indemnified party within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Underwriters and any such indemnified party and
each such controlling person from all liability arising out of such claim,
action, suit or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to hold harmless an indemnified party under this Section 8 in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof referred to herein, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) (i) in such
proportion as is appropriate to reflect the relative benefits received by each
of the contributing parties, on the one hand, and the party to be indemnified,
on the other hand, from the offering of the Shares 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 each of the contributing
parties, on the one hand, and the party to be indemnified, on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. In any case where the Company is a contributing party and any
Underwriter is the indemnified party, the relative benefits received by the
Company on the one hand and such Underwriter on the other hand shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Shares (before deducting expenses) bear to the total underwriting discounts
received by such Underwriter hereunder, in each case as set forth in the table
on the cover page of the Prospectus. Relative fault 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 the Company or by such Underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include 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 subsection (d), no
Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder. 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
subsection (d), (i) each person, if any, who controls an Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Underwriter and (ii) each director of
the Company, each officer of the Company who has signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company, subject in each case to this subsection
(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
to which a claim for contribution may be made against another party or parties
under this subsection (d), notify such party or parties from whom contribution
may be sought, but the omission so to notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from any other
obligation (x) it or they may have hereunder or otherwise than under
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<PAGE>
this subsection (d), or (y) to the extent that such party or parties were not
adversely affected by such omission. The contribution agreement contained in
this subsection (d) shall be in addition to any liabilities which any
indemnifying party may have at common law or otherwise.
9. Right to Increase Offering. At any time during a period of 30 days
after the date of the Prospectus, the Representative, by no less than two
business days' prior notice to the Company, may designate one or more closings
(which may be concurrent with, and part of, the closing on the Closing Date or
may be an additional closing or closings held on a date subsequent to the
Closing Date; in either case any such date shall be referred to herein as an
"Additional Closing Date") at which the Underwriters may purchase all or less
than all of the Additional Shares in accordance with the provisions of this
Section 9 at the purchase price per share to be paid for the Primary Shares;
provided, however, that a maximum of three Additional Closing Dates shall be
allowed pursuant to this Section 9. In no event shall any Additional Closing
Date be later than 10 business days after written notice of election to purchase
Additional Shares is given.
The Company agrees to sell to each Underwriter on each Additional
Closing Date such Underwriter's pro rata portion (equal to the percentage
determined by dividing the number of Primary Shares to be purchased by such
Underwriter by the total number of Primary Shares to be purchased by all
Underwriters) of the number of Additional Shares specified in such notice, and
each Underwriter agrees to purchase such Additional Shares from the Company on
such Additional Closing Date. Such Additional Shares may be purchased by the
Underwriters solely for the purpose of covering over-allotments made in
connection with the sale of the Primary Shares.
No Additional Shares shall be sold or delivered unless the Primary
Shares previously have been, or simultaneously are, sold and delivered. The
right to purchase the Additional Shares or any portion thereof may be
surrendered and terminated at any time upon notice by the Representative to the
Company.
Except to the extent modified by this Section 9, all provisions of
this Agreement relating to the transactions contemplated to occur on the Closing
Date for the sale of the Primary Shares shall apply, mutatis mutandis, to any
Additional Closing Date for the sale of Additional Shares.
10. Representations, Etc. to Survive Delivery. The respective
representations, warranties, agreements, covenants, indemnities and statements
of, and on behalf of, the Company and the Underwriters, respectively, set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Underwriters, and
will survive delivery of and payment for the Shares. Any successor or successors
to any Underwriter shall be entitled to the indemnity, contribution and
reimbursement agreements contained in this Agreement.
11. Effective Date and Termination.
(a) This Agreement shall become effective at 11:00 a.m., New
York City time, on the first business day following the date hereof or at such
earlier time after the Registration Statement becomes effective as the
Representative in its sole discretion shall
29
<PAGE>
release the Shares for sale to the public, unless prior to such time the
Representative shall have received written notice from the Company that it
elects that this Agreement shall not become effective or the Representative
shall have given written notice to the Company that the Representative on behalf
of the Underwriters elects that this Agreement shall not become effective;
provided, however, that the provisions of Sections 6 and 8 hereof and this
Section 11 shall at all times be effective. For purposes of this subsection (a),
the Shares to be purchased hereunder shall be deemed to have been so released
upon the earlier of notification by the Representative to securities dealers
releasing such Shares for offering or the release by the Representative for
publication of the first newspaper advertisement which is subsequently published
relating to the Shares.
(b) This Agreement (except for the provisions of Sections 6 and
8 hereof) may be terminated by the Representative on behalf of the Underwriters
by notice to the Company in the event that the Company has failed to comply in
any material respect with any of the provisions of this Agreement required to be
performed at or prior to the Closing Date or any Additional Closing Date, or if
any of the representations or warranties of the Company are not accurate in any
material respect, or if the covenants, agreements or conditions of or applicable
to the Company herein contained have not been complied with in any material
respect or materially satisfied within the time specified on the Closing Date or
any Additional Closing Date, respectively, or if prior to the Closing Date or
any Additional Closing Date:
(i) the Company or any of the Subsidiaries shall have sustained
a loss (regardless of whether or not such loss was insured) by explosion,
strike, fire, flood, accident or other calamity of such a character as to
interfere materially with the conduct of the business and operations of
the Company and the Subsidiaries, taken as a whole;
(ii) trading in the Common Stock shall have been suspended by
the Commission or the ASE or trading in securities generally on the New
York Stock Exchange or the Nasdaq National Market shall have been
suspended or a material limitation on such trading shall have been imposed
or minimum or maximum prices shall have been established on any such
exchange or market system;
(iii) a banking moratorium shall have been declared by New York
or United States authorities;
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an outbreak
or escalation of any other insurrection or armed conflict involving the
United States; or
(v) there shall have been a material adverse change in (A)
general economic, political or financial conditions or (B) the present or
prospective business, financial condition or results of operations of the
Company and the Subsidiaries, taken as a whole that, in each case, in the
Representative's judgment makes it impracticable or inadvisable to make or
consummate the public offering or the sale or delivery of the Shares on
the terms and in the manner contemplated in the Prospectus and the
Registration Statement.
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<PAGE>
(c) Termination of this Agreement under this Section 11 after
the Primary Shares have been purchased by the Underwriters hereunder shall be
applicable only to the Additional Shares. Termination of this Agreement shall be
without liability of any party to any other party other than as provided in
Sections 6 and 8 hereof.
12. Default by One of More of the Underwriters. If one or more of the
Underwriters shall fail to purchase the Primary Shares to be purchased by it on
the Closing Date (the "Defaulted Shares"), the Representative shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all but not
less than all of the Defaulted Shares in such amounts as may be agreed upon and
upon the terms set forth herein. If, however, the Representative shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Shares does not exceed 10% of
the Primary Shares, the non-defaulting Underwriters shall be obligated to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Shares exceeds 10% of the
Primary Shares, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter.
No action pursuant to this Section 12 shall relieve any defaulting Underwriter
from liability in respect of its default. In the event of any such default which
does not result in a termination of this Agreement, the Representative and the
Company shall each have the right to postpone the Closing Date for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or the Prospectus or in any other documents or arrangements.
13. Notices. All communications hereunder shall be in writing and (i)
if sent to the Representative, shall be mailed or delivered or telecopied and
confirmed by letter to Prime Charter Ltd. at 810 Seventh Avenue, New York, New
York 10019, Attention: [Mary Celeste Anthes], and (ii) if sent to the Company,
shall be mailed or delivered or telecopied and confirmed to the Company at 7
Waverly Place, Madison, NJ 07940, Attention: A. Dale Mayo.
14. Successors. This Agreement shall inure to the benefit of and be
binding upon the Company and the Underwriters and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person, except that the Company's
representations, warranties, indemnity and contribution agreements shall also be
for the benefit of any person or persons, if any, who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
and except that the Underwriters' indemnity and contribution agreements shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement, and any person or persons,
if any, who control the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Shares from any Underwriter will
be deemed a successor because of such purchase.
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<PAGE>
15. Applicable Law, Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to the choice of law or conflict of law principles thereof. Each
party hereto consents to the jurisdiction of each court in which any action is
commenced seeking indemnity or contribution pursuant to Section 8 hereof and
agrees to accept, either directly or through an agent, service of process of
each such court.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
If the foregoing correctly sets forth our understanding, please
indicate the Underwriters' acceptance thereof in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
CLEARVIEW CINEMA GROUP, INC.
By:_______________________________________________
A. Dale Mayo
Chairman of the Board, President and
Chief Executive Officer
Accepted as of the date first written:
PRIME CHARTER, LTD.,
Individually
and as Representative of the
several Underwriters
By:_____________________________________
Name:
Title:
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SCHEDULE A
Underwriters
Underwriter Primary Shares
33
<PAGE>
SCHEDULE B
Parties to Lock-Up Agreements
CMCO, Inc.
CMNY Capital II, L.P.
Robert Davidoff
Emerson Cinema, Inc.
Paul Kay
Brett E. Marks
A. Dale Mayo
Sueanne Hall Mayo
MidMark Capital, L.P.
Louis G. Novick
Michael C. Rush
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<PAGE>
ANNEX A
Subsidiaries of the Company
COMPANY INCORPORATION
- ------- -------------
Clearview Theater Group, Inc. New Jersey
CCC Madison Triple Cinema Corp. New Jersey
CCC Chester Twin Cinema Corporation New Jersey
CCC Manasquan Cinema Corporation New Jersey
CCC Summit Cinema Corp. New Jersey
CCC Grand Avenue Cinema Corp. Delaware
CCC Herricks Cinema Corp. Delaware
CCC Port Washington Corp. Delaware
CCC Allwood Cinema Corp. Delaware
CCC Emerson Cinema Corp. Delaware
CCC New City Cinema Corp. Delaware
CCC Washington Cinema Corp. Delaware
CCC Bedford Cinema Corp. Delaware
CCC Kisco Cinema Corp. Delaware
CCC B.C. Realty Corp. Delaware
CCC Bergenfield Cinema Corp. Delaware
CCC Closter Cinema Corp. Delaware
CCC Tenafly Cinema Corp. Delaware
<PAGE>
DRAFT OF AUGUST 8, 1997
EXHIBIT A
WARRANT AGREEMENT
BETWEEN
CLEARVIEW CINEMA GROUP, INC.
AND
PRIME CHARTER LTD.
DATED AS OF August , 1997
<PAGE>
WARRANT AGREEMENT, dated as of August , 1997 (the "Effective Date"),
between CLEARVIEW CINEMA GROUP, INC., a Delaware corporation (the "Company"),
and PRIME CHARTER LTD., a Delaware corporation ("Prime Charter").
The Company proposes to sell to Prime Charter and/or its
designee(s)______, warrants (the "Warrants") to purchase an aggregate of
____________ shares (the "Warrant Shares") of the Company's common stock, par
value $.01 per share (the "Common Stock"), in connection with a public offering
by the Company of ________________ shares of Common Stock (the "Offering")
pursuant to a registration statement (the "Registration Statement") on Form SB-2
(File No. 333-27819) filed by the Company with the Securities and Exchange
Commission.
THEREFORE, in consideration of the mutual undertakings contained herein,
the Company and Prime Charter hereby agree as follows:
1. Issuance of Warrants. Concurrently with the initial closing (the
"Closing") under the Underwriting Agreement of even date herewith between the
Company and Prime Charter as representative of the several underwriters named
therein (the "Underwriting Agreement") related to the Offering, the Company
shall issue, sell and deliver the Warrants to Prime Charter and/or, at Prime
Charter's direction, to one or more underwriters or other members of the
National Association of Securities Dealers, Inc. that participate in the
Offering and/or the bona fide officers or partners of Prime Charter or such
other participants (each a "Permitted Designee") for a purchase price of $.01
per Warrant. The certificate for the Warrants (the "Warrant Certificate") shall
be substantially in the form of Annex A attached hereto.
2. Registration. The Company shall maintain a register for the
Warrants at its principal executive offices for the registration of the issuance
and transfer of Warrants. The Company shall be entitled to treat the registered
holder of any Warrant (the "Holder") as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Warrant on the part of any other person. The Warrants shall be
registered initially in the name of Prime Charter and/or one or more Permitted
Designees in such denominations as Prime Charter may request not less than two
business days prior to the scheduled date of the Closing as set forth in the
Underwriting Agreement.
3. Transfer and Exchange of Warrants. Any Warrant shall be
transferable only upon surrender thereof at the Company's principal executive
offices duly endorsed by its Holder or by such Holder's duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment
or authority to transfer. Upon any registration of transfer, the Company shall
deliver a new Warrant or Warrants to the persons entitled thereto. In addition,
a Warrant Certificate may be exchanged, at the option of the Holder thereof, for
another Warrant Certificate or Warrant Certificates of different denominations,
of like tenor and representing in the aggregate the right to purchase a like
number of Warrant Shares upon surrender at the Company's principal executive
offices. Notwithstanding the foregoing, the Warrants may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of until after the
first anniversary of the Effective Date, except to a Permitted Designee, by
operation of law or by reason of a reorganization of the Company. Thereafter,
the Warrants and any Warrant Shares shall be freely transferable subject only to
compliance with applicable securities laws.
<PAGE>
4. Exercise of Warrants.
4.1 Exercise Price and Term. Each Warrant shall entitle the Holder
thereof to purchase from the Company one Warrant Share at a purchase price per
share of $[120% of IPO price] (the "Exercise Price"), as such purchase price and
number of Warrant Shares may be adjusted from time to time pursuant to the
provisions of Section 8 hereof payable in full at the time of exercise of such
Warrant. The Warrants may be exercised, in whole or in part, at any time or from
time to time during the four-year period commencing on the first anniversary of
the Effective Date and ending at 5:00 p.m., New York City time, on the fifth
anniversary of the Effective Date (the "Expiration Date"). After the Expiration
Date, any unexercised Warrants shall be void and all rights of the Holders with
respect thereto shall cease.
4.2 Payment of Exercise Price. At the election of any Holder, the
aggregate Exercise Price for any Warrants being exercised may be paid: (a) in
cash in the amount of the aggregate Exercise Price then in effect for the number
of Warrants being exercised, (b) by surrender to the Company of shares of Common
Stock having an aggregate Fair Market Value (as defined below) on the date of
exercise equal to the aggregate Exercise Price then in effect for the number of
Warrants being exercised, (c) by a surrender of Warrants covering a number of
Warrant Shares having an aggregate Fair Market Value, net of the applicable
aggregate Exercise Price therefor, equal to the aggregate Exercise Price then in
effect for the number of Warrants being exercised, or (d) by a combination of
the aforementioned methods of payment. For purposes of this Agreement, the "Fair
Market Value" per share of Common Stock on a given date shall be: (i) if the
Common Stock is listed on a national securities exchange or included on the
Nasdaq National Market, the closing price per share of Common Stock on such date
(or, if there was no trading on such date, on the next preceding day on which
there was trading); (ii) if the Common Stock is not listed on a national
securities exchange or included on the Nasdaq National Market, the average of
the closing bid and asked quotations per share of Common Stock as reported by
Nasdaq (or the National Quotation Bureau Incorporated or any similar
organization) on such date (or, if there were no quotations for the Common Stock
on such date, on the next preceding day on which there were quotations) as
provided by such organization; and (iii) if the Common Stock is not traded on a
national securities exchange or included on the Nasdaq National Market and bid
and asked quotations are not provided by Nasdaq (or the National Quotation
Bureau Incorporated or any similar organization), as determined by the agreement
of the parties in good faith or, in the absence of such agreement, as determined
pursuant to arbitration under the auspices of the American Arbitration
Association.
4.3 Exercise Procedure. Warrants may be exercised by their surrender
at the Company's principal executive offices, with the Election to Purchase form
attached thereto duly completed and executed, accompanied by payment of the
aggregate Exercise Price for the Warrant Shares to be purchased upon such
exercise. Payment for the Warrant Shares shall be made (a) if payment is to be
made in cash, by a certified or bank cashier's check payable to the order of the
Company or by wire transfer to an account designated by the Company, (b) if
payment is to be made through a surrender of shares of Common Stock, by
surrender of certificates duly endorsed for transfer (with all transfer taxes
paid or provided for), and (c) if payment is to be made by a surrender of
Warrants, by surrender of certificates representing such Warrants. Promptly
after the exercise of any Warrants, upon compliance with Section 5 hereof, the
Company shall issue a certificate or certificates for the number of full Warrant
Shares to which the Holder thereof is entitled, registered in accordance with
the instructions
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<PAGE>
set forth in the Election to Purchase, together with cash as provided in Section
10 of this Warrant Agreement payable in respect of fractional shares and (if
applicable) a new Warrant Certificate or Certificates representing all remaining
unexercised Warrants. All Warrant Shares shall be duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights, and free from
all liens and charges other than those created by the Holder. Upon compliance
with Section 5 hereof, Certificates representing such Warrant Shares and
remaining unexercised Warrants shall be issued by the Company in such names and
denominations, and shall be delivered to such persons, as are specified by
written instructions of the Holder.
4.4 Record Holder. Each person in whose name any such certificate for
Warrant Shares is issued shall for all purposes be deemed to have become the
holder of record of the Warrant Shares represented thereby on the date upon
which such Warrants were surrendered for exercise, accompanied by payment of the
aggregate Exercise Price as aforesaid, irrespective of the date of issuance or
delivery of such certificate for Warrant Shares; provided, however, that if, at
the date of the surrender of such Warrants and payment of the aggregate Exercise
Price, the transfer books for the Common Stock or any other class of stock
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the Warrant Shares or for shares of such other class of stock in respect of
which such Warrants are then exercisable shall be issuable as of the date on
which such books shall next be opened (whether before or after the Expiration
Date) and, until such date, the Company shall be under no duty to deliver any
certificate for such Warrant Shares or for shares of such other class of stock;
and, provided, further, that the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than 20
days.
5. Payment of Taxes. The Company shall promptly pay all documentary
stamp taxes attributable to the issuance of Warrants or the issuance of Warrant
Shares upon the exercise of any Warrants, except that any transfer taxes payable
in connection with the issuance of Warrants or Warrant Shares in any name other
than that of the Holder of the Warrants surrendered shall be paid by such Holder
and, if any such tax would otherwise be payable by the Company, no such issuance
or delivery shall be made unless and until the person requesting such issuance
has paid to the Company the amount of any such tax or it is established to the
reasonable satisfaction of the Company that any such tax has been paid.
6. Replacement Warrants. In case any Warrant Certificate shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate or in lieu of and substitution for the lost, stolen or destroyed
Warrant Certificate, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
Certificate, together with an appropriate agreement regarding indemnification of
the Company relating to the issuance of a replacement Warrant Certificate.
7. Reservation of Warrant Shares. The Company shall at all times
reserve and keep available for issuance the number of its authorized but
unissued shares of Common Stock or other stock sufficient to permit the exercise
in full of the Warrants and any transfer agent for the Common Stock or other
stock issuable upon the exercise of Warrants shall be directed at all times to
reserve such number as shall be sufficient for such purpose. The Company will
keep a copy of this Warrant Agreement on file with each such transfer agent and
will supply such transfer agent with duly executed stock certificates for such
purpose and will provide or
3
<PAGE>
otherwise make available any cash that may be payable as provided in Section 10
hereof. All Warrants surrendered upon the exercise thereof shall be canceled.
After the Expiration Date, no shares shall be subject to reservation in respect
of any unexercised Warrants.
8. Adjustments.
8.1 Adjustment of Exercise Price.
8.1.1 Initial Exercise Price. The Exercise Price, which initially
will be $_________, shall be adjusted and readjusted from time to time as
provided in this Section 8.1 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
Section 8.1.
8.1.2 Issuance of Additional Shares of Common Stock. In case the
Company, at any time after the date of the Closing, shall issue additional
shares of Common Stock for no consideration in connection with a dividend, stock
split or other distribution on the Common Stock (including, without limitation,
any distribution of Common Stock by way of spin-off, reclassification or
corporate rearrangement), then, and in each such case, the Exercise Price shall
be reduced concurrently with such issuance to a price (calculated to the nearest
cent) determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the number of shares of
Common Stock outstanding immediately prior to such issuance, and
(b) the denominator shall be the number of shares of Common
Stock outstanding immediately after such issuance.
8.1.3 Dividends and Distributions. In case the Company, at any time
after the Effective Date, shall pay or make a dividend or other distribution on
the Common Stock (including, without limitation, any distribution of stock
(other than Common Stock), or other securities, including securities that are
convertible into or exchangeable or exercisable for Common Stock, property or
options by way of dividend, spin-off, reclassification, or corporate
rearrangement) then, and in each such case, the Exercise Price in effect
immediately prior to the close of business on the record date fixed for the
determination of the holders of the Common Stock entitled to receive such
dividend or other distribution shall be reduced, effective as of the close of
business on such record date, to a price (calculated to the nearest cent)
determined by multiplying such Exercise Price by a fraction of which:
(a) the numerator shall be the Exercise Price in effect
immediately prior to the close of business on such record date minus the value
of such dividend or other distribution (as determined in good faith by the Board
of Directors of the Company) applicable to one share of Common Stock, and
(b) the denominator shall be such Exercise Price in
effect immediately prior to the close of business on such record date;
provided, however, that no such reduction shall be made pursuant to this Section
8.1.3 for a dividend payable in shares of Common Stock or payable in cash or
other property and declared out of the earned surplus (i.e., retained earnings)
of the Company (excluding any
4
<PAGE>
portion thereof resulting from a revaluation of property) or which is declared
but is then not paid or made. For purposes of the foregoing, a dividend or
distribution payable other than in cash shall be considered payable out of
earned surplus only to the extent that such earned surplus is charged an amount
equal to the fair value of such dividend or distribution at the time of payment
as determined in good faith by the Board of Directors of the Company. In the
event a dividend or distribution covered under this Section 8.1.3 is declared
prior to the Expiration Date but not paid by such date, the Expiration Date
shall be extended until the payment thereof.
8.1.4 Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall be
proportionately increased concurrently with the effectiveness of such
combination or consolidation.
8.1.5 Minimum Adjustment of Exercise Price. If the amount of any
adjustment of the Exercise Price required pursuant to this Section 8.1 would be
less than $.01, such amount shall be carried forward, and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment that, together with such amount and any other amount or amounts so
carried forward, shall aggregate at least $.01.
8.1.6 Minimum Exercise Price. Notwithstanding anything to the
contrary set forth herein, no adjustment provided for in this Section 8.1 shall
reduce the Exercise Price below the par or stated value of the Common Stock and
the Company shall have no obligation to change such value to permit a further
reduction of the Purchase Price; provided, however, that, except in the event of
transactions contemplated under Section 8.1.4 hereof, the Company agrees not to
change the par or stated value of the Common Stock.
8.2 Adjustment of Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to the provisions of Section 8.1, the number of
Warrant Shares that the Holder of a Warrant shall be entitled to receive upon
exercise thereof shall be adjusted to equal that number of Warrant Shares
determined by multiplying the number of Warrant Shares issuable upon exercise of
such Warrant immediately prior to such adjustment of the Exercise Price by a
fraction of which:
(a) the numerator shall be the Exercise Price in effect immediately
prior to such adjustment of the Exercise Price, and
(b) the denominator shall be the Exercise Price in effect immediately
following such adjustment of the Exercise Price.
8.3 Notice, Evidence of Adjustments. Whenever the Exercise Price is
adjusted as herein provided, the Company shall promptly cause a notice setting
forth the adjusted Exercise Price and adjusted number of Warrant Shares issuable
upon exercise of each Warrant to be mailed to the Holders, at their last
addresses appearing in the Warrant register, and shall cause a copy thereof to
be mailed to each transfer agent for the Common Stock. The Company shall retain
a firm of independent public accountants of recognized standing selected by the
Board of Directors (who may be the regular accountants employed by the Company)
to
5
<PAGE>
make any computation required by this Section 8, and a certificate signed by
such firm shall accompany said notice and shall be conclusive evidence of the
correctness of such adjustments.
9. Consolidation, Merger, Sale of Assets,
Reorganization, etc.
9.1 General Provisions. In case the Company at any time after the
Effective Date (a) shall consolidate with or merge into any other person and not
be the continuing or surviving person of such consolidation or merger, or (b)
shall permit any other person to consolidate with or merge into the Company and
the Company shall be the continuing or surviving person but, in connection with
such consolidation or merger, the Common Stock or other securities then issuable
upon exercise of the Warrants shall be changed into or exchanged for cash, stock
or other securities or property, or (c) shall transfer, directly or indirectly,
all or substantially all its properties and assets to any other person, or (d)
shall effect a capital reorganization or reclassification of the Common Stock or
other securities then issuable upon exercise of the Warrants (other than a
capital reorganization or reclassification resulting in an adjustment of the
Exercise Price as provided in Section 8.1), then, and in the case of each such
transaction, the Company shall make proper provision such that, upon the terms
and in the manner provided in this Warrant Agreement, the Holder of each
Warrant, upon the exercise thereof at any time after the consummation of such
transaction, shall be entitled to receive, at the Exercise Price then in effect,
in lieu of the Common Stock or other securities issuable upon such exercise
immediately prior to such transaction, the amount of cash, stock or other
securities or property to which such Holder would have been entitled if such
Warrant had been exercised in full immediately prior to such transaction,
subject to adjustments subsequent to such transaction as nearly equivalent as
possible to the adjustments provided for in Section 8 and this Section 9.
9.2 Assumption of Obligation. Notwithstanding anything contained in
this Warrant Agreement to the contrary, the Company shall not effect any of the
transactions described in subdivisions (a) through (d) of Section 9.1 unless,
prior to the consummation thereof, the person (other than the Company) that may
be required to deliver any cash, stock or other securities or property upon
exercise of any Warrant as provided herein shall assume, by written instrument
delivered to the Holders of the Warrants, (a) the obligations of the Company
under this Warrant Agreement and the Warrants (and if the Company shall survive
the consummation of any such transaction, such assumption shall not release the
Company from, any continuing obligations of the Company under this Warrant
Agreement and the Warrants), provided that this paranthetical is not intended to
and shall not multiply or increase the expected benefits otherwise derived from
ownership of the Warrants and (b) the obligation to deliver to such Holder such
cash, stock or other securities or other property as such Holder may be entitled
to receive in accordance with the provisions of this Section 9. Such person
shall similarly deliver to the Company an opinion of counsel to the effect that
this Warrant Agreement and the Warrants shall continue in full force and effect
after any such transaction and that the terms hereof (including, without
limitation, all of the provisions of Section 8 and this Section 9.2) and thereof
shall be applicable to the cash, stock or other securities or property that such
person may be required to deliver upon any exercise of the Warrants.
9.3 No Dilution or Impairment. The Company shall not, by amendment of
its certificate of incorporation or by-laws or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue, sale, grant or
assumption of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of
6
<PAGE>
this Warrant Agreement or the Warrants, but will at all times, whether or not
requested to do so, in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holders against dilution or other impairment.
Without limiting the generality of the foregoing, the Company agrees that it
shall take all such reasonable action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of stock upon the exercise of all Warrants from time to
time outstanding.
10. Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock upon the exercise of any Warrants. If more
than one Warrant shall be presented for exercise at the same time by the same
Holder, the number of Warrant Shares that shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a share
of Common Stock would, except for the provisions of this Section 10, be issuable
on the exercise of any Warrant, the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Fair Market Value of one share
of Common Stock on the date of exercise.
11. Restrictions on Dispositions. The Warrant Shares have not been
registered under the Act pursuant to the Registration Statement. Prime Charter
acknowledges that the Warrants and the Warrant Shares may not be transferred
except pursuant to (i) an effective registration statement under the Act, or
(ii) any available exemption from registration under the Act permitting such
disposition of securities and upon delivery to the Company of an opinion of
counsel, reasonably satisfactory to counsel for the Company, that such exemption
from registration is available. Prime Charter agrees that the certificates
representing the Warrants and Warrant Shares shall bear an appropriate
restrictive legend to such effect.
12. Registration Rights. The Company will provide such registration
rights to the Holders of the Warrants as are set forth in the Registration
Rights Agreement dated as of May 23, 1997 (and related side letter) attached as
Exhibit B to the Underwriting Agreement.
13. Notices to Holders.
13.1 Nothing contained in this Warrant Agreement or in any of the
Warrants shall be construed as conferring upon the Holders thereof as such the
right to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of the meetings of stockholders or the election of
directors of the Company or any other matter or any other rights whatsoever as
stockholders of the Company.
13.2 In the event the Company intends to:
(a) make any distribution on or with respect to its Common
Stock (or other securities that may then be issuable in lieu thereof upon the
exercise of Warrants), including without limitation any dividend or distribution
from earned surplus, any dividend or distribution of stock, assets or evidences
of indebtedness, or any similar distribution,
(b) issue subscription rights or warrants to holders of its
Common Stock,
(c) consolidate or merge with or into another entity,
7
<PAGE>
(d) liquidate, dissolve or sell or otherwise dispose of
substantially all its assets, or
(e) take any other action that would result in an adjustment to
the Exercise Price or an adjustment to the number of Warrant Shares that the
Holder of a Warrant shall be entitled to receive upon exercise thereof,
then the Company shall cause a notice of its intention to take such action to be
sent by first-class mail, postage prepaid, at least 20 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such distribution or issuance or
to vote upon such proposed consolidation, merger, liquidation, sale or
conveyance to each Holder at its address appearing on the Warrant register, but
failure to mail or to receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in connection
with such distribution, issuance, consolidation, merger, liquidation, sale or
conveyance.
14. Notices. Any notice or demand required by this Warrant Agreement
to be given or made by any Holder to or on the Company shall be sufficiently
given or made if sent by registered or certified mail, postage prepaid, or by
facsimile transmission addressed as follows:
Clearview Cinema Group, Inc.
7 Waverly Place
Madison, NJ 07940
Telephone: (201) 377-4646
Facsimile: (201) 377-4303
Attention: A. Dale Mayo
Any notice or demand required by this Warrant Agreement to be given or made by
the Company to or on the Holder of any Warrant shall be sufficiently given or
made, whether or not such Holder receives the notice, if sent by first-class
mail, postage prepaid, addressed to such Holder at his last address as shown on
the books of the Company.
15. Governing Law. The validity, interpretation and performance of
this Warrant Agreement, of each Warrant issued hereunder and of the respective
terms and provisions thereof shall be governed by the laws of the State of New
York without giving effect to principles of conflicts of law.
16. Counterparts. This Warrant Agreement may be executed in two
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts shall together constitute but one and the same instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Warrant Agreement as of
the date first set forth above.
CLEARVIEW CINEMA GROUP, INC.
By:
----------------------------------------------
Name: A. Dale Mayo
Title: Chairman of the Board, President and
Chief Executive Officer
PRIME CHARTER LTD.
By:
----------------------------------------------
Name:
Title:
9
<PAGE>
ANNEX A
NEITHER THE WARRANTS REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). NONE OF SUCH SECURITIES MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (ii) AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION
OF SECURITIES AND UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH EXEMPTION FROM
REGISTRATION UNDER THE ACT IS AVAILABLE. IN ADDITION, THE WARRANTS REPRESENTED
HEREBY MAY NOT BE TRANSFERRED OR EXERCISED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF THE WARRANT AGREEMENT DATED AS OF ________ __, 1997 BETWEEN
CLEARVIEW CINEMA GROUP, INC. AND PRIME CHARTER LTD.
No._____ _____ Warrants
Void After 5:00 p.m. New York City Time
On ________ , 2002
CLEARVIEW CINEMA GROUP, INC.
Warrant Certificate
THIS CERTIFIES THAT, for value received, _________________. or registered
assigns, is the Holder of the number of Warrants set forth above, each Warrant
entitling the owner thereof to purchase at any time after ______________, 1998
and prior to 5:00 p.m., New York City time, on ________ __, 2002 (the
"Expiration Date"), one fully paid and nonassessable share of common stock, par
value $.01 per share ("Common Stock"), of Clearview Cinema Group, Inc., a
Delaware corporation (the "Company"), at a purchase price per share (the
"Exercise Price") initially equal to $[120% of IPO price], upon presentation and
surrender of this Warrant Certificate with the Form of Election to Purchase
(attached hereto) duly executed. The number of Warrants evidenced by this
Warrant Certificate (and the number of shares that may be purchased upon
exercise thereof, any such shares of Common Stock being referred to as "Warrant
Shares") set forth above and the Exercise Price set forth above are the number
and Exercise Price as of the date of original issuance of this Warrant
Certificate, based on the Common Stock as constituted at such date. As provided
in the Warrant Agreement referred to below, the Exercise Price and the number or
kind of shares that may be purchased upon the exercise of the Warrants evidenced
by this Warrant Certificate are subject to modification and adjustment upon the
happening of certain events.
This Warrant Certificate is subject to, and entitled to the benefits of,
all of the terms, provisions and conditions of the Warrant Agreement dated as of
________ __, 1997 between the Company and Prime Charter Ltd., which Warrant
Agreement is hereby incorporated herein by reference and made a part hereof and
to which reference is hereby made for a full description of the rights,
limitations of rights, duties and immunities hereunder of the Company and the
Holders of the Warrant Certificates. A copy of the Warrant Agreement is on file
at the principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates, upon
surrender at the principal office of the Company, may be exchanged for another
Warrant Certificate or
<PAGE>
Warrant Certificates of like tenor, evidencing Warrants entitling the Holder to
purchase a like aggregate number of shares of Common Stock as the Warrants
evidenced by the Warrant Certificate or Warrant Certificates surrendered
entitled such Holder to purchase. If this Warrant Certificate shall be exercised
in part, the Holder hereof shall be entitled to receive upon surrender hereof
another Warrant Certificate or Warrant Certificates for the number of whole
Warrants not exercised.
The Exercise Price may be paid in cash or by surrender of the appropriate
number of Warrants or Warrant Shares in a cashless exercise or in a combination
thereof as provided in Section 4.2 of the Warrant Agreement.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made as provided in the Warrant Agreement.
No Holder of this Warrant Certificate as such shall be entitled to vote or
to receive dividends or to consent or to receive notice as a stockholder of the
meetings of stockholders for the election of directors of the Company or any
other matter or to any rights whatsoever as stockholder of the Company, until
the Warrant or Warrant evidenced by this Warrant Certificate shall have been
exercised and the Warrant Shares shall have become delivered as provided in the
Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Common Stock or other class of
stock issuable upon exercise of this Warrant Certificate are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares issuable upon such exercise until the date of the reopening of said
transfer books as provided in the Warrant Agreement.
IN WITNESS WHEREOF, Clearview Cinema Group, Inc. has caused the signature
(or facsimile signature) of its Chairman and Secretary to be printed hereon.
Dated: ________ __, 1997
CLEARVIEW CINEMA GROUP, INC.
By:
--------------------------
Name:
Title:
Attest:
- -----------------------------
Secretary
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the Holder if such Holder desires to transfer the Warrant
Certificates).
TO CLEARVIEW CINEMA GROUP, INC.
FOR VALUE RECEIVED, _______________________________ hereby sells
assigns and transfers unto ____________________ this Warrant Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint _______________________, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
DATED:______________________, 19__
Signature_____________________________
Signature Guaranteed:
NOTICE:
The signature on the foregoing assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if Holder desires to exercise the Warrants evidenced by this
Warrant Certificate).
TO CLEARVIEW CINEMA GROUP, INC.
The undersigned hereby (1) irrevocably elects to exercise_______________
Warrants represented by this Warrant Certificate to purchase__________ shares of
Common Stock issuable upon the exercise of such Warrants, (2) makes payment in
full of the aggregate Exercise Price for such Warrants by enclosure of a bank
cashier's check or money order therefor or by surrendering Warrants or shares of
Common Stock for application to the aggregate Exercise Price, upon condition
that new Warrants be issued for the balance of the Warrants remaining, and (3)
requests that certificates for shares and Warrants be issued in the name of:
(Please insert social security or other
identifying number) ____________
- --------------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security or other
identifying number) ____________
- --------------------------------------
(Please print name and address)
DATED:______________________, 19__
-----------------------------------
Signature
Signature Guaranteed:
NOTICE:
The signature on the foregoing assignment must correspond to the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Exhibit 4.01
[FRONT OF CERTIFICATE]
[LOGO]
NUMBER CLEARVIEW CINEMAS SHARES
WE BRING NEIGHBORS TO THE MOVIES
SEE REVERSE FOR CERTAIN DEFINITIONS
AND RESTRICTIONS ON TRANSFER
CUSIP NO. 185070 10 9
Clearview Cinema Group, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
Clearview Cinema Group, Inc. (hereinafter called the Corporation) transferable
on the books of the Corporation by the holder hereof in person or by duly
authorized Attorney, upon surrender of this Certificate properly endorsed. This
Certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and facsimile signatures
of its duly authorized officers.
Dated:
By /s/ Sueanne Hall Mayo By /s/ A. Dale Mayo
------------------------- --------------------------------
Secretary Chairman of the Board, President
and Chief Executive Officer
COUNTERSIGNED AND REGISTERED:
THE BANK OF NEW YORK, A TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT
AND REGISTRAR
BY ______________________________
AUTHORIZED SIGNATURE
<PAGE>
[REVERSE OF CERTIFICATE]
Clearview Cinema Group, Inc.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
----------------------------------
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN -- as joint tenants with right Act
of survivorship and not as ---------------------------------
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above
list.
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________ shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________ Attorney
2
<PAGE>
to transfer the said shares on the books of the within-named corporation with
full power of substitution in the premises.
Dated ______________ __________________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the Certificate, in every particular, without
alteration or enlargement or any change whatever.
Exhibit 5.01
August 11, 1997
Clearview Cinema Group, Inc.
7 Waverly Place
Madison, NJ 07940
Re: Registration Statement on Form SB-2
(File No. 333-27819)
-----------------------------------
Ladies and Gentlemen:
We are acting as counsel to Clearview Cinema Group, Inc., a
Delaware corporation (the "Company"), in connection with the Registration
Statement on Form SB-2 (File No. 333-27819) filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, by the
Company on May 27, 1997 and amended on July 18, 1997, August 4, 1997 and August
11, 1997 (the "Registration Statement"). The Registration Statement relates to
the public offering (the "Offering") of up to 1,150,000 shares (the "Shares") of
the Company's Common Stock, $.01 par value, including up to 150,000 Shares that
the underwriters for whom Prime Charter Ltd. is acting as the representative
(the "Underwriters") will have an option to purchase from the Company solely for
the purpose of covering over-allotments.
We are familiar with the Registration Statement. We have
examined and are familiar with (i) the Company's Amended and Restated
Certificate of Incorporation; (ii) the Company's By-laws; (iii) the Company's
proposed Amended and Restated Certificate of Incorporation (the "New
Certificate") in the form in which it is to be filed with the Secretary of
State of the State of Delaware prior to the consummation of the Offering; (iv)
the Company's proposed Amended and Restated By-laws (the "New By-laws") in the
form in which they are proposed to become effective prior to the consummation
of the Offering; (v) the proceedings of the Board of Directors of the Company
with respect to the approval and adoption of the New Certificate and the New
By-laws; and (vi) the form of consent (the "Consent") to be executed by
stockholders of the Company with respect to the approval and adoption of the
New Certificate and the New By-laws. We have also examined such other
documents, corporate records, certificates of public officials, instruments,
statutes and questions of law as we deemed necessary or appropriate to enable
us to express an informed opinion on the matters hereinafter set forth. In
making such examinations and rendering the opinions on the matters set forth
below, we have assumed the genuineness of all signatures, the authenticity of
all documents submitted to us as
<PAGE>
Clearview Cinema Group, Inc.
August 11, 1997
Page 2
originals, the conformity to original documents of all documents submitted to
us as certified, conformed, telecopied, photostatic or other reproduced copies
and the authenticity of the originals of such documents, the due execution and
delivery of all such documents, and the accuracy and completeness of the
records of the Company.
We express no opinion as to the laws of any jurisdiction
other than the General Corporation Law of the State of Delaware or as to any
laws of the United States of America other than the Securities Act of 1933, as
amended.
Based upon and subject to the foregoing and subject to the
filing of the New Certificate with the Secretary of State of the State of
Delaware and the execution of the Consent by the holders of the requisite
percentages of the Company's capital stock in accordance with the Company's
current organizational documents and the General Corporation Law of the State
of Delaware, we are of the opinion that:
(a) The Company has been duly organized and is validly
existing under the laws of the State of Delaware.
(b) The Shares, when issued and sold in accordance with the
plan of distribution set forth in the Registration Statement, will be validly
issued, fully paid and non-assessable.
We consent to the filing of this opinion as Exhibit 5.01 to
the Registration Statement and to the reference to the undersigned in the
prospectus forming a part thereof under the caption "Legal Matters."
Yours truly,
/s/ Kirkpatrick & Lockhart LLP
Kirkpatrick & Lockhart LLP
Exhibit 10.52
CLEARVIEW CINEMA GROUP, INC.
FORM OF LOCK-UP AGREEMENT
July 21, 1997
PRIME CHARTER LTD.
810 Seventh Avenue
New York, New York 10019
Ladies and Gentlemen:
The undersigned has been advised that Prime Charter Ltd., as
Representative of the several Underwriters, proposes to enter into an
Underwriting Agreement with Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), with respect to the initial public offering (the "Offering") of
shares of the common stock, $.01 par value, of the Company (the "Common Stock").
In consideration of the Underwriters' agreement to purchase shares of the Common
Stock and to participate in the Offering, and for other good and valuable
consideration, the undersigned hereby irrevocably agrees that the undersigned
will not, directly or indirectly, without the prior written consent of Prime
Charter Ltd., for a period of one year after the date of the Prospectus relating
to the Offering sell, offer to sell, solicit an offer to buy, contract to sell,
pledge, grant any option for the sale of, or otherwise transfer or dispose of,
or cause the transfer or disposition of, any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for any shares of
Common Stock or exercise any registration rights, whether held by the
undersigned on the date hereof or hereafter acquired, with respect to any shares
of Common Stock or any securities convertible into or exchangeable or
exercisable for any shares of Common Stock. Prior to the expiration of such
one-year period, the undersigned will not announce or disclose any intention to
do anything after the expiration of such period which the undersigned is
prohibited, as provided in the preceding sentence, from doing during such
period.
The undersigned agrees that the provisions of this agreement
shall be binding also upon the successors, assigns, heirs and personal
representatives of the undersigned.
In furtherance of the foregoing, the Company and Bank of New
York, the Company's transfer agent and registrar, are hereby authorized to
decline to make any transfer of securities if such transfer would constitute a
violation or breach of this agreement. This agreement shall lapse and become
null and void if the Underwriting Agreement has not been signed by September 1,
1997.
Very truly yours,
--------------------------
Name:
<PAGE>
Schedule of Lock-up Agreements
Shareholder
- -----------
A. Dale Mayo
CMNY Capital II, L.P.
CMCO, Inc.
Robert G. Davidoff
Brett E. Marks
Paul Kay
Cindy Kay
Sueanne Hall Mayo
MidMark Capital, L.P.
CLEARVIEW CINEMA GROUP, INC.
1997 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01 Purpose. The purpose of the Clearview Cinema Group, Inc. 1997
Stock Incentive Plan (hereinafter referred to as the "Plan") is to assist in
attracting and retaining highly competent key employees and consultants and to
act as an incentive in motivating selected key employees and consultants of
Clearview Cinema Group, Inc. and its Subsidiaries (as defined below) to achieve
long-term corporate objectives.
1.02 Adoption and Term. The Plan has been approved by the Board of
Directors (hereinafter referred to as the "Board") of Clearview Cinema Group,
Inc. (hereinafter referred to as the "Company"), to be effective as of the
closing date of the initial public offering of equity securities by the Company
(the "Effective Date"), subject to the approval of the stockholders of the
Company. The Plan shall remain in effect until terminated by action of the
Board; provided, however, that no Incentive Stock Option (as defined below) may
be granted hereunder after the tenth anniversary of the Effective Date and the
provisions of Articles VII and VIII with respect to performance-based awards to
"covered employees" under Section 162(m) of the Code (as defined below) shall
expire as of the fifth anniversary of the Effective Date.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, capitalized terms shall have the
following meanings:
2.01 Award means any grant to a Participant of one or a combination of
Non-Qualified Stock Options or Incentive Stock Options described in Article VI,
Stock Appreciation Rights described in Article VI, Restricted Shares described
in Article VII and Performance Awards described in Article VIII.
2.02 Award Agreement means a written agreement between the Company and
a Participant or a written notice from the Company to a Participant specifically
setting forth the terms and conditions of an Award granted under the Plan.
2.03 Award Period means, with respect to an Award, the period of time
set forth in the Award Agreement during which specified target performance goals
must be achieved or other conditions set forth in the Award Agreement must be
satisfied.
2.04 Beneficiary means an individual, trust or estate who or which, by
a written designation of the Participant filed with the Company or by operation
of law, succeeds to the rights and obligations of the Participant under the Plan
and an Award Agreement upon the Participant's death.
<PAGE>
2.05 Board means the Board of Directors of the Company.
2.06 Change in Control means, and shall be deemed to have occurred upon
the occurrence of, any one of the following events:
(a) The acquisition in one or more transactions by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of shares or other securities (as defined in Section 3(a)(10) of the
Exchange Act) representing 30% or more of either (i) the Outstanding
Common Stock or (ii) the Company Voting Securities; provided, however,
that a Change in Control as defined in this clause (a) shall not be
deemed to occur in connection with any acquisition by the Company, an
employee benefit plan of the Company or any Person who on the Effective
Date is a holder of Outstanding Common Stock or Company Voting
Securities (a "Current Stockholder") so long as such acquisition does
not result in any Person other than the Company, such employee benefit
plan or such Current Stockholder beneficially owning shares or
securities representing 30% or more of either the Outstanding Common
Stock or Company Voting Securities; or
(b) Any election has occurred of persons as directors of the
Company that causes two-thirds or more of the Board to consist of
persons other than (i) persons who were members of the Board on the
Effective Date and (ii) persons who were nominated by the Board for
election as members of the Board at a time when at least two-thirds of
the Board consisted of persons who were members of the Board on the
Effective Date; provided, however, that any person nominated for
election by the Board when at least two-thirds of the members of the
Board are persons described in subclause (i) or (ii) and persons who
were themselves previously nominated in accordance with this clause (b)
shall, for this purpose, be deemed to have been nominated by a Board
composed of persons described in subclause (ii);
(c) Approval by the stockholders of the Company of a
reorganization, merger, consolidation or similar transaction (a
"Reorganization Transaction"), in each case, unless, immediately
following such Reorganization Transaction, more than 50% of,
respectively, the outstanding shares of common stock (or similar equity
security) of the corporation or other entity resulting from or
surviving such Reorganization Transaction and the combined voting power
of the securities of such corporation or other entity entitled to vote
generally in the election of directors, is then beneficially owned,
directly or indirectly, by the individuals and entities who were the
respective beneficial owners of the Outstanding Common Stock and the
Company Voting Securities immediately prior to such Reorganization
Transaction in substantially the same proportions as their ownership of
the Outstanding Common Stock and Company Voting Securities immediately
prior to such Reorganization Transaction; or
(d) Approval by the stockholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or
other disposition of all or substantially all of the assets of the
Company to a corporation or other entity, unless, with respect to such
corporation or other entity, immediately following such sale or other
disposition more than
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50% of, respectively, the outstanding shares of common stock (or
similar equity security) of such corporation or other entity and the
combined voting power of the securities of such corporation or other
entity entitled to vote generally in the election of directors, is then
beneficially owned, directly or indirectly, by the individuals and
entities who were the respective beneficial owners of the Outstanding
Common Stock and the Company Voting Securities immediately prior to
such sale or disposition in substantially the same proportions as their
ownership of the Outstanding Common Stock and Company Voting Securities
immediately prior to such sale or disposition.
2.07 Code means the Internal Revenue Code of 1986, as amended.
References to a section of the Code include that section and any comparable
section or sections of any future legislation that amends, supplements or
supersedes said section.
2.08 Committee means the committee established in accordance with
Section 3.01.
2.09 Company means Clearview Cinema Group, Inc., a Delaware
corporation, and its successors.
2.10 Common Stock means Common Stock of the Company, par value $.01 per
share.
2.11 Company Voting Securities means the combined voting power of all
outstanding securities of the Company entitled to vote generally in the election
of directors of the Company.
2.12 Date of Grant means the date designated by the Committee as the
date as of which it grants an Award, which shall not be earlier than the date on
which the Committee approves the granting of such Award.
2.13 Effective Date shall have the meaning given to such term in
Section 1.02.
2.14 Exchange Act means the Securities Exchange Act of 1934, as
amended.
2.15 Exercise Price means, with respect to a Stock Appreciation Right,
the amount established by the Committee in the related Award Agreement as the
amount to be subtracted from the Fair Market Value on the date of exercise in
order to determine the amount of the payment to be made to the Participant, as
further described in Section 6.02(b).
2.16 Fair Market Value means, as of any applicable date: (i) if the
Common Stock is listed on a national securities exchange or is authorized for
quotation on The Nasdaq National Market System ("NMS"), the closing price,
regular way, of the Common Stock on such exchange or NMS, as the case may be, on
such date or if no sale of the Common Stock shall have occurred on such date, on
the next preceding date on which there was such a reported sale; or (ii) if the
Common Stock is not listed for trading on a national securities exchange or
authorized for quotation on NMS, the closing bid price as reported by The Nasdaq
SmallCap Market on such date, or if no such price shall have been reported for
such date, on the next preceding date for which such price was so reported; or
(iii) if the Common Stock is not listed for trading on a national securities
exchange or authorized for quotation on NMS or The Nasdaq SmallCap Market (if
applicable), the last reported bid price published in the "pink sheets" or
displayed on the National Association of Securities Dealers, Inc. ("NASD")
Electronic Bulletin Board, as the
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case may be; or (iv) if the Common Stock is not listed for trading on a national
securities exchange, is not authorized for quotation on NMS or The Nasdaq
SmallCap Market and is not published in the "pink sheets" or displayed on the
NASD Electronic Bulletin Board, the fair market value of the Common Stock as
determined in good faith by the Committee.
2.17 Incentive Stock Option means a stock option within the meaning of
Section 422 of the Code.
2.18 Merger means any merger, reorganization, consolidation, share
exchange, transfer of assets or other transaction having similar effect
involving the Company.
2.19 Non-Qualified Stock Option means a stock option which is not an
Incentive Stock Option.
2.20 Options means all Non-Qualified Stock Options and Incentive Stock
Options granted at any time under the Plan.
2.21 Outstanding Common Stock means, at any time, the issued and
outstanding shares of Common Stock.
2.22 Participant means a person designated to receive an Award under
the Plan in accordance with Section 5.01.
2.23 Performance Awards means Awards granted in accordance with
Article VIII.
2.24 Plan means the Clearview Cinema Group, Inc. 1997 Stock Incentive
Plan as described herein, as the same may be amended from time to time.
2.25 Purchase Price, with respect to Options, shall have the meaning
set forth in Section 6.01(b).
2.26 Restricted Shares means Common Stock subject to restrictions
imposed in connection with Awards granted under Article VII.
2.27 Retirement means early or normal retirement under a pension plan
or arrangement of the Company or one of its Subsidiaries in which the
Participant participates.
2.28 Stock Appreciation Rights means Awards granted in accordance with
Article VI.
2.29 Subsidiary means a subsidiary of the Company within the meaning of
Section 424(f) of the Code.
2.30 Termination of Employment means the voluntary or involuntary
termination of a Participant's employment with the Company or a Subsidiary for
any reason, including death, disability, retirement or as the result of the
divestiture of the Participant's employer or any similar transaction in which
the Participant's employer ceases to be the Company or one of its Subsidiaries.
Whether entering military or other government service shall constitute
Termination of Employment, or whether a Termination of Employment shall occur as
a result of disability,
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shall be determined in each case by the Committee in its sole discretion. In the
case of a consultant who is not an employee of the Company or a Subsidiary,
Termination of Employment shall mean voluntary or involuntary termination of the
consulting relationship for any reason.
ARTICLE III
ADMINISTRATION
3.01 Committee. The Plan shall be administered by a committee of the
Board (the "Committee") comprised of at least two persons. The Committee shall
have exclusive and final authority in each determination, interpretation or
other action affecting the Plan and its Participants. The Committee shall have
the sole discretionary authority to interpret the Plan, to establish and modify
administrative rules for the Plan, to impose such conditions and restrictions on
Awards as it determines appropriate, and to take such steps in connection with
the Plan and Awards granted hereunder as it may deem necessary or advisable. The
Committee may, subject to compliance with applicable legal requirements, with
respect to Participants who are not subject to Section 16(b) of the Exchange
Act, delegate such of its powers and authority under the Plan as it deems
appropriate to designated officers or employees of the Company. In addition, the
Board may exercise any of the authority conferred upon the Committee hereunder.
In the event of any such delegation of authority or exercise of authority by the
Board, references in the Plan to the Committee shall be deemed to refer to the
delegate of the Committee or the Board, as the case may be.
ARTICLE IV
SHARES
4.01 Number of Shares Issuable. The total number of shares initially
authorized to be issued under the Plan shall be 200,000 shares of Common Stock.
The number of shares available for issuance under the Plan shall be subject to
adjustment in accordance with Section 9.07. The shares to be offered under the
Plan shall be authorized and unissued shares of Common Stock, or issued shares
of Common Stock which will have been reacquired by the Company.
4.02 Shares Subject to Terminated Awards. Shares of Common Stock
covered by any unexercised portions of terminated Options (including canceled
Options) granted under Article VI, shares of Common Stock forfeited as provided
in Section 7.02(a) and shares of Common Stock subject to any Award that are
otherwise surrendered by a Participant may be subject to new Awards under the
Plan. Shares of Common Stock subject to Options, or portions thereof, that have
been surrendered in connection with the exercise of Stock Appreciation Rights
shall not be available for subsequent Awards under the Plan, but shares of
Common Stock issued in payment of such Stock Appreciation Rights shall not be
charged against the number of shares of Common Stock available for the grant of
Awards hereunder.
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ARTICLE V
PARTICIPATION
5.01 Eligible Participants. Participants in the Plan shall be such key
employees and consultants of the Company and its Subsidiaries, whether or not
members of the Board, as the Committee, in its sole discretion, may designate
from time to time. The Committee's designation of a Participant in any year
shall not require the Committee to designate such person to receive Awards in
any other year. The designation of a Participant to receive an Award under one
portion of the Plan does not require the Committee to include such Participant
under other portions of the Plan. The Committee shall consider such factors as
it deems pertinent in selecting Participants and in determining the types and
amounts of their respective Awards. Subject to adjustment in accordance with
Section 9.07, during any calendar year no Participant shall be granted Awards in
respect of more than 150,000 shares of Common Stock (whether through grants of
Options or Stock Appreciation Rights or other grants of Common Stock or rights
with respect thereto).
ARTICLE VI
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.01 Option Awards.
(a) Grant of Options. The Committee may grant, to such Participants as
the Committee may select, Options entitling the Participants to purchase shares
of Common Stock from the Company in such numbers, at such prices, and on such
terms and subject to such conditions, not inconsistent with the terms of the
Plan, as may be established by the Committee. The terms of any Option granted
under the Plan shall be set forth in an Award Agreement.
(b) Purchase Price of Options. The Purchase Price of each share of
Common Stock which may be purchased upon exercise of any Option granted under
the Plan shall be determined by the Committee; provided, however, that the
Purchase Price shall in all cases be equal to or greater than the Fair Market
Value on the Date of Grant.
(c) Designation of Options. Except as otherwise expressly provided in
the Plan, the Committee may designate, at the time of the grant of an Option,
such Option as an Incentive Stock Option or a Non-Qualified Stock Option;
provided, however, that an Option may be designated as an Incentive Stock Option
only if the applicable Participant is an employee of the Company or a Subsidiary
on the Date of Grant.
(d) Incentive Stock Option Share Limitation. No Participant may be
granted Incentive Stock Options under the Plan (or any other plans of the
Company and its Subsidiaries) that would result in Incentive Stock Options to
purchase shares of Common Stock with an aggregate Fair Market Value (measured on
the Date of Grant) of more than $100,000 first becoming exercisable by such
Participant in any one calendar year.
(e) Rights as a Stockholder. A Participant or a transferee of an Option
pursuant to Section 9.04 shall have no rights as a stockholder with respect to
the shares of Common Stock covered by an Option until that Participant or
transferee shall have become the holder of record of
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any such shares, and no adjustment shall be made with respect to any such shares
of Common Stock for dividends in cash or other property or distributions of
other rights on the Common Stock for which the record date is prior to the date
on which that Participant or transferee shall have become the holder of record
of any shares covered by such Option; provided, however, that Participants are
entitled to share adjustments to reflect capital changes under Section 9.07.
6.02 Stock Appreciation Rights.
(a) Stock Appreciation Right Awards. The Committee is authorized to
grant to any Participant one or more Stock Appreciation Rights. Such Stock
Appreciation Rights may be granted either independent of or in tandem with
Options granted to the same Participant. Stock Appreciation Rights granted in
tandem with Options may be granted simultaneously with, or, in the case of
Non-Qualified Stock Options, subsequent to, the grant to such Participant of the
related Options; provided, however, that: (i) any Option covering any share of
Common Stock shall expire and not be exercisable upon the exercise of any Stock
Appreciation Right with respect to the same share, (ii) any Stock Appreciation
Right covering any share of Common Stock shall expire and not be exercisable
upon the exercise of any Option with respect to the same share, and (iii) an
Option and a Stock Appreciation Right covering the same share of Common Stock
may not be exercised simultaneously. Upon exercise of a Stock Appreciation Right
with respect to a share of Common Stock, the Participant shall be entitled to
receive an amount equal to the excess, if any, of (A) the Fair Market Value of a
share of Common Stock on the date of exercise over (B) the Exercise Price of
such Stock Appreciation Right established in the Award Agreement, which amount
shall be payable as provided in Section 6.02(c).
(b) Exercise Price. The Exercise Price established for any Stock
Appreciation Right granted under this Plan shall be determined by the Committee,
but in the case of Stock Appreciation Rights granted in tandem with Options
shall not be less than the Purchase Price of the related Options. Upon exercise
of Stock Appreciation Rights, the number of shares issuable upon exercise under
any related Options shall automatically be reduced by the number of shares of
Common Stock represented by such Options which are surrendered as a result of
the exercise of such Stock Appreciation Rights.
(c) Payment of Incremental Value. Any payment that may become due from
the Company by reason of a Participant's exercise of a Stock Appreciation Right
may be paid to the Participant as determined by the Committee (i) all in cash,
(ii) all in Common Stock, or (iii) in any combination of cash and Common Stock.
In the event that all or a portion of the payment is to be made in Common Stock,
the number of shares of Common Stock to be delivered in satisfaction of such
payment shall be determined by dividing the amount of such payment or portion
thereof by the Fair Market Value on the date of exercise . No fractional share
of Common Stock shall be issued to make any payment in respect of Stock
Appreciation Rights; if any fractional share would otherwise be issuable, the
combination of cash and Common Stock payable to a Participant shall be adjusted
as directed by the Committee to avoid the issuance of any fractional share.
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6.03 Terms of Stock Options and Stock Appreciation Rights.
(a) Conditions on Exercise. An Award Agreement with respect to Options
and/or Stock Appreciation Rights may contain such waiting periods, exercise
dates and restrictions on exercise (including, but not limited to, periodic
installments) as may be determined by the Committee at the time of grant.
(b) Duration of Options and Stock Appreciation Rights. Options and
Stock Appreciation Rights shall terminate after the first to occur of the
following events:
(i) Expiration of the Option or Stock Appreciation Right as
provided in the related Award Agreement; or
(ii) Termination of the Award as provided in Section 6.03(e),
following the applicable Participant's Termination of Employment; or
(iii) In the case of an Incentive Stock Option, ten years from
the Date of Grant; or
(iv) Solely in the case of a Stock Appreciation Right granted
in tandem with an Option, upon the expiration of the related Option.
(c) Acceleration of Exercise Time. The Committee, in its sole
discretion, shall have the right (but shall not in any case be obligated),
exercisable at any time after the Date of Grant, to permit the exercise of any
Option or Stock Appreciation Right prior to the time such Option or Stock
Appreciation Right would otherwise become exercisable under the terms of the
related Award Agreement.
(d) Extension of Exercise Time. In addition to the extensions permitted
under Section 6.03(e) in the event of Termination of Employment, the Committee,
in its sole discretion, shall have the right (but shall not in any case be
obligated), exercisable on or at any time after the Date of Grant, to permit the
exercise of any Option or Stock Appreciation Right after its expiration date
described in Section 6.03(e), subject, however, to the limitations described in
Sections 6.03(b)(i), (iii) and (iv).
(e) Exercise of Options or Stock Appreciation Rights Upon Termination
of Employment.
(i) Termination of Vested Options and Stock Appreciation
Rights Upon Termination of Employment.
(A) Termination. In the event of Termination of
Employment of a Participant other than by reason of death,
disability or Retirement, the right of the Participant to
exercise any Option or Stock Appreciation Right shall
terminate on the date of such Termination of Employment,
unless the exercise period is extended by the Committee in
accordance with Section 6.03(d).
(B) Disability or Retirement. In the event of a
Participant's Termination of Employment by reason of
disability or Retirement, the right of the Participant to
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exercise any Option or Stock Appreciation Right which he or
she was entitled to exercise upon Termination of Employment
(or which became exercisable at a later date pursuant to
Section 6.03(e)(ii)) shall terminate one year after the date
of such Termination of Employment, unless the exercise period
is extended by the Committee in accordance with Section
6.03(d). In no event, however, may any Option or Stock
Appreciation Right be exercised later than the date of
expiration of the Option determined pursuant to Section
6.03(b)(i), (iii) or (iv).
(C) Death. In the event of the death of a Participant
while employed by the Company or a Subsidiary or within any
additional period of time from the date of the Participant's
Termination of Employment and prior to the expiration of any
Option or Stock Appreciation Right as provided pursuant to
Section 6.03(e)(i)(B) or Section 6.03(d) above, to the extent
the right to exercise the Option or Stock Appreciation Right
was accrued as of the date of such Termination of Employment
and had not expired during such additional period, the right
of the Participant's Beneficiary to exercise the Option or
Stock Appreciation Right shall terminate one year after the
date of the Participant's death (but in no event more than one
year from the date of the Participant's Termination of
Employment by reason of disability or Retirement), unless the
exercise period is extended by the Committee in accordance
with Section 6.03(d). In no event, however, may any Option or
Stock Appreciation Right be exercised later than the date of
expiration of the Option determined pursuant to Section
6.03(b)(i), (iii) or (iv).
(ii) Termination of Unvested Options or Stock Appreciation
Rights Upon Termination of Employment. Subject to Section 6.03(c), to
the extent the right to exercise an Option or a Stock Appreciation
Right, or any portion thereof, has not accrued as of the date of
Termination of Employment, such right shall expire at the date of such
Termination of Employment. Notwithstanding the foregoing, the
Committee, in its sole discretion and under such terms as it deems
appropriate, may permit, for a Participant who terminates employment by
reason of Retirement and who will continue to render significant
services to the Company or one of its Subsidiaries after his or her
Termination of Employment, the continued vesting of his or her Options
and Stock Appreciation Rights during the period in which that
individual continues to render such services.
6.04 Exercise Procedures. Each Option and Stock Appreciation Right
granted under the Plan shall be exercised by written notice to the Company which
must be received by the officer or employee of the Company designated in the
Award Agreement at or before the close of business on the expiration date of the
Award. The Purchase Price of shares purchased upon exercise of an Option granted
under the Plan shall be paid in full in cash by the Participant pursuant to the
Award Agreement; provided, however, that the Committee may (but shall not be
required to) permit payment to be made by delivery to the Company of either (a)
shares of Common Stock (which may include Restricted Shares or shares otherwise
issuable in connection with the exercise of the Option, subject to such rules as
the Committee deems appropriate) or (b) any combination of cash and Common Stock
or (c) such other consideration as the Committee deems appropriate and in
compliance with applicable law (including payment in accordance with a cashless
exercise program under which, if so instructed by a Participant, shares of
Common Stock may be issued directly to the Participant's broker or dealer upon
receipt of an irrevocable written notice of exercise from the Participant). In
the event that any shares of Common Stock shall be transferred
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to the Company to satisfy all or any part of the Purchase Price, the part of the
Purchase Price deemed to have been satisfied by such transfer of shares of
Common Stock shall be equal to the product derived by multiplying the Fair
Market Value as of the date of exercise times the number of shares of Common
Stock transferred to the Company. The Participant may not transfer to the
Company in satisfaction of the Purchase Price any fractional share of Common
Stock. Any part of the Purchase Price paid in cash upon the exercise of any
Option shall be added to the general funds of the Company and may be used for
any proper corporate purpose. Unless the Committee shall otherwise determine,
any shares of Common Stock transferred to the Company as payment of all or part
of the Purchase Price upon the exercise of any Option shall be held as treasury
shares.
6.05 Change in Control. Unless otherwise provided by the Committee in
the applicable Award Agreement, in the event of a Change in Control, all Options
and Stock Appreciation Rights outstanding on the date of such Change in Control
shall become immediately and fully exercisable. The provisions of this Section
6.05 shall not be applicable to any Options or Stock Appreciation Rights granted
to a Participant if any Change in Control results from such Participant's
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of Common Stock or Company Voting Securities.
ARTICLE VII
RESTRICTED SHARES
7.01 Restricted Share Awards. The Committee may grant to any
Participant an Award of such number of shares of Common Stock on such terms,
conditions and restrictions, whether based on performance standards, periods of
service, retention by the Participant of ownership of purchased or designated
shares of Common Stock or other criteria, as the Committee shall establish. With
respect to performance-based Awards of Restricted Shares intended to qualify for
deductibility under Section 162(m) of the Code, performance targets will include
specified levels of one or more of [operating income, return or investment,
return on stockholders' equity, earnings before interest, taxes, depreciation
and amortization and/or earnings per share]. The terms of any Restricted Share
Award granted under this Plan shall be set forth in an Award Agreement which
shall contain provisions determined by the Committee and not inconsistent with
this Plan.
(a) Issuance of Restricted Shares. As soon as practicable
after the Date of Grant of a Restricted Share Award by the Committee,
the Company shall cause to be transferred on the books of the Company
or its agent, shares of Common Stock, registered on behalf of the
Participant, evidencing the Restricted Shares covered by the Award,
subject to forfeiture to the Company as of the Date of Grant if an
Award Agreement with respect to the Restricted Shares covered by the
Award is not duly executed by the Participant and timely returned to
the Company. All shares of Common Stock covered by Awards under this
Article VII shall be subject to the restrictions, terms and conditions
contained in the Plan and the applicable Award Agreements entered into
by the appropriate Participants. Until the lapse or release of all
restrictions applicable to an Award of Restricted Shares the share
certificates representing such Restricted Shares may be held in custody
by the Company, its designee, or, if the certificates bear a
restrictive legend, by the Participant.
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Upon the lapse or release of all restrictions with respect to an Award
as described in Section 7.01(d), one or more share certificates,
registered in the name of the Participant, for an appropriate number of
shares as provided in Section 7.01(d), free of any restrictions set
forth in the Plan and the related Award Agreement shall be delivered to
the Participant.
(b) Stockholder Rights. Beginning on the Date of Grant of a
Restricted Share Award and subject to execution of the related Award
Agreement as provided in Section 7.01(a), and except as otherwise
provided in such Award Agreement, the Participant shall become a
stockholder of the Company with respect to all shares subject to the
Award Agreement and shall have all of the rights of a stockholder,
including, but not limited to, the right to vote such shares and the
right to receive dividends; provided, however, that any shares of
Common Stock distributed as a dividend or otherwise with respect to any
Restricted Shares as to which the restrictions have not yet lapsed,
shall be subject to the same restrictions as such Restricted Shares and
held or restricted as provided in Section 7.01(a).
(c) Restriction on Transferability. None of the Restricted
Shares may be assigned or transferred (other than by will or the laws
of descent and distribution or to an inter vivos trust with respect to
which the Participant is treated as the owner under Sections 671
through 677 of the Code), pledged or sold prior to the lapse of the
restrictions applicable thereto.
(d) Delivery of Shares Upon Vesting. Upon expiration or
earlier termination of the forfeiture period without a forfeiture and
the satisfaction of or release from any other conditions prescribed by
the Committee, or at such earlier time as provided under the provisions
of Section 7.03, the restrictions applicable to the Restricted Shares
shall lapse. As promptly as administratively feasible thereafter,
subject to the requirements of Section 9.05, the Company shall deliver
to the Participant or, in case of the Participant's death, to the
Participant's Beneficiary, one or more share certificates for the
appropriate number of shares of Common Stock, free of all such
restrictions, except for any restrictions that may be imposed by law.
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7.02 Terms of Restricted Shares.
(a) Forfeiture of Restricted Shares. Subject to Sections
7.02(b) and 7.03, Restricted Shares shall be forfeited and returned to
the Company and all rights of the Participant with respect to such
Restricted Shares shall terminate unless the Participant continues in
the service of the Company or a Subsidiary as an employee until the
expiration of the forfeiture period for such Restricted Shares and
satisfies any and all other conditions set forth in the Award
Agreement. The Committee shall determine the forfeiture period (which
may, but need not, lapse in installments) and any other terms and
conditions applicable with respect to any Restricted Share Award.
(b) Waiver of Forfeiture Period. Notwithstanding anything
contained in this Article VII to the contrary, the Committee may, in
its sole discretion, waive the forfeiture period and any other
conditions set forth in any Award Agreement under appropriate
circumstances (including the death, disability or Retirement of the
Participant or a material change in circumstances arising after the
date of an Award) and subject to such terms and conditions (including
forfeiture of a proportionate number of the Restricted Shares) as the
Committee shall deem appropriate.
7.03 Change in Control. Unless otherwise provided by the Committee in
the applicable Award Agreement, in the event of a Change in Control, all
restrictions applicable to the Restricted Share Award shall terminate fully and
the Participant shall immediately have the right to the delivery of share
certificates for such shares in accordance with Section 7.01(d).
ARTICLE VIII
PERFORMANCE AWARDS
8.01 Performance Awards.
(a) Award Periods and Calculations of Potential Incentive
Amounts. The Committee may grant Performance Awards to Participants. A
Performance Award shall consist of the right to receive a payment
(measured by the Fair Market Value of a specified number of shares of
Common Stock, increases in such Fair Market Value during the Award
Period and/or a fixed cash amount) contingent upon the extent to which
certain predetermined performance targets have been met during an Award
Period. Performance Awards may be made in conjunction with, or in
addition to, Restricted Share Awards made under Article VII. The Award
Period shall be two or more fiscal or calendar years as determined by
the Committee. The Committee, in its discretion and under such terms as
it deems appropriate, may permit newly eligible employees, such as
those who are promoted or newly hired, to receive Performance Awards
after an Award Period has commenced.
(b) Performance Targets. The performance targets may include
such goals related to the performance of the Company and/or the
performance of a Participant as may be established by the Committee in
its discretion. In the case of Performance Awards intended to qualify
for deductibility under Section 162(m) of the Code, the targets will
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include specified levels of one or more of [operating income, return on
investment, return on stockholders' equity, earnings before interest,
taxes, depreciation and amortization and/or earnings per share]. The
performance targets established by the Committee may vary for different
Award Periods and need not be the same for each Participant receiving a
Performance Award in an Award Period. Except to the extent inconsistent
with the performance-based compensation exception under Section 162(m)
of the Code, in the case of Performance Awards granted to employees to
whom such section is applicable, the Committee, in its discretion, but
only under extraordinary circumstances as determined by the Committee,
may change any prior determination of performance targets for any Award
Period at any time prior to the final determination of the value of a
related Performance Award when events or transactions occur to cause
such performance targets to be an inappropriate measure of achievement.
(c) Earning Performance Awards. The Committee, on or as soon
as practicable after the Date of Grant, shall prescribe a formula to
determine the percentage of the applicable Performance Award to be
earned based upon the degree of attainment of performance targets.
(d) Payment of Earned Performance Awards. Payments of earned
Performance Awards shall be made in cash or shares of Common Stock or a
combination of cash and shares of Common Stock, in the discretion of
the Committee. The Committee, in its sole discretion, may provide such
terms and conditions with respect to the payment of earned Performance
Awards as it may deem desirable.
8.02 Terms of Performance Awards.
(a) Termination of Employment. Unless otherwise provided below
or in Section 8.03, in the case of a Participant's Termination of
Employment prior to the end of an Award Period, the Participant will
not have earned any Performance Awards for that Award Period.
(b) Retirement. If a Participant's Termination of Employment
is because of Retirement prior to the end of an Award Period, the
Participant will not be paid any Performance Award, unless the
Committee, in its sole and exclusive discretion, determines that an
Award should be paid. In such a case, the Participant shall be entitled
to receive a pro-rata portion of his or her Award as determined under
subsection (d).
(c) Death or Disability. If a Participant's Termination of
Employment is due to death or to disability (as determined in the sole
and exclusive discretion of the Committee) prior to the end of an Award
Period, the Participant or the Participant's personal representative
shall be entitled to receive a pro-rata share of his or her Award as
determined under subsection (d).
(d) Pro-Rata Payment. The amount of any payment to be made to
a Participant whose employment is terminated by Retirement, death or
disability (under the circumstances described in subsections (b) and
(c)) will be the amount determined by multiplying (i) the amount of the
Performance Award that would have been earned through the end of the
Award Period had such employment not been terminated by (ii) a
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fraction, the numerator of which is the number of whole months such
Participant was employed during the Award Period, and the denominator
of which is the total number of months of the Award Period. Any such
payment made to a Participant whose employment is terminated prior to
the end of an Award Period shall be made at the end of such Award
Period, unless otherwise determined by the Committee in its sole
discretion. Any partial payment previously made or credited to a
deferred account for the benefit of a Participant in accordance with
Section 8.01(d) of the Plan shall be subtracted from the amount
otherwise determined as payable as provided in this Section 8.02(d).
(e) Other Events. Notwithstanding anything to the contrary in
this Article VIII, the Committee may, in its sole and exclusive
discretion, determine to pay all or any portion of a Performance Award
to a Participant who has terminated employment prior to the end of an
Award Period under certain circumstances (including the death,
disability or Retirement of the Participant or a material change in
circumstances arising after the Date of Grant), subject to such terms
and conditions as the Committee shall deem appropriate.
8.03 Change in Control. Unless otherwise provided by the Committee in
the applicable Award Agreement, in the event of a Change in Control, all
Performance Awards for all Award Periods shall immediately become fully payable
to all Participants and shall be paid to Participants within 30 days after such
Change in Control.
ARTICLE IX
TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN
9.01 Plan Provisions Control Award Terms. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the Committee
have the power to grant any Award under the Plan the terms of which are contrary
to any of the provisions of the Plan. In the event any provision of any Award
granted under the Plan shall conflict with any term in the Plan as constituted
on the Date of Grant of such Award, the term in the Plan as constituted on the
Date of Grant of such Award shall control. Except as provided in Section 9.03
and Section 9.07, the terms of any Award granted under the Plan may not be
changed after the Date of Grant of such Award so as to materially decrease the
value of the Award without the express written approval of the holder.
9.02 Award Agreement. No person shall have any rights under any Award
granted under the Plan unless and until the Company and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement or the Participant shall have received and acknowledged notice of the
Award authorized by the Committee expressly granting the Award to such person
and containing provisions setting forth the terms of the Award.
9.03 Modification of Award After Grant. No Award granted under the Plan
to a Participant may be modified (unless such modification does not materially
decrease the value of that Award) after its Date of Grant except by express
written agreement between the Company and such Participant, provided that any
such change (a) may not be inconsistent with the terms of the Plan, and (b)
shall be approved by the Committee.
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<PAGE>
9.04 Limitation on Transfer. Except as provided in Section 7.01(c) in
the case of Restricted Shares, a Participant's rights and interest under the
Plan may not be assigned or transferred other than by will or the laws of
descent and distribution and, during the lifetime of a Participant, only the
Participant personally (or the Participant's personal representative) may
exercise rights under the Plan. The Participant's Beneficiary may exercise the
Participant's rights to the extent they are exercisable under the Plan following
the death of the Participant. Notwithstanding the foregoing, the Committee may
grant Non-Qualified Stock Options that are transferable, without payment of
consideration, to immediate family members of the Participant or to trusts or
partnerships for such family members, and the Committee may also amend
outstanding Non-Qualified Stock Options to provide for such transferability.
9.05 Taxes. The Company shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Company with respect to any amount payable and/or
shares issuable under such Participant's Award or with respect to any income
recognized upon a disqualifying disposition of shares received pursuant to the
exercise of an Incentive Stock Option, and the Company may defer payment of cash
or issuance of shares upon exercise or vesting of an Award unless indemnified to
its satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee and shall be
payable by the Participant at such time as the Committee determines in
accordance with the following rules:
(a) The Participant shall have the right to elect to meet his
or her withholding requirement (i) by having withheld from such Award
at the appropriate time that number of shares of Common Stock, rounded
up to the next whole share, the Fair Market Value of which is equal to
the amount of withholding taxes due, (ii) by direct payment to the
Company in cash of the amount of any taxes required to be withheld with
respect to such Award or (iii) by a combination of withholding such
shares and paying cash.
(b) The Committee shall have the discretion as to any Award to
cause the Company to pay to tax authorities for the benefit of the
applicable Participant, or to reimburse such Participant for, the
individual taxes which are due on the grant, exercise or vesting of any
Award or the lapse of any restriction on any Award (whether by reason
of such Participant's filing of an election under Section 83(b) of the
Code or otherwise), including, but not limited to, Federal income tax,
state income tax, local income tax and excise tax under Section 4999 of
the Code, as well as for any such taxes as may be imposed upon such tax
payment or reimbursement.
(c) In the case of Participants who are subject to Section 16
of the Exchange Act, the Committee may impose such limitations and
restrictions as it deems necessary or appropriate with respect to the
delivery or withholding of shares of Common Stock to meet tax
withholding obligations.
9.06 Surrender of Awards. Any Award granted under the Plan may be
surrendered to the Company for cancellation on such terms as the Committee and
the Participant approve.
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9.07 Adjustments to Reflect Capital Changes.
(a) Recapitalization. The number and kind of shares subject to
outstanding Awards, the Purchase Price or Exercise Price for such
shares, the number and kind of shares available for Awards subsequently
granted under the Plan and the maximum number of shares in respect of
which Awards can be made to any Participant in any calendar year shall
be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other
change in capitalization with a similar substantive effect upon the
Plan or the Awards granted under the Plan. The Committee shall have the
power and sole discretion to determine the amount of the adjustment to
be made in each case.
(b) Merger. After any Merger in which the Company is the
surviving corporation, each Participant shall, at no additional cost,
be entitled upon any exercise of an Option or receipt of any other
Award to receive (subject to any required action by stockholders), in
lieu of the number of shares of Common Stock receivable or exercisable
pursuant to such Award prior to such Merger, the number and class of
shares or other securities to which such Participant would have been
entitled pursuant to the terms of the Merger if, at the time of the
Merger, such Participant had been the holder of record of a number of
shares of Common Stock equal to the number of shares of Common Stock
receivable or exercisable pursuant to such Award. Comparable rights
shall accrue to each Participant in the event of successive Mergers of
the character described above. In the event of a Merger in which the
Company is not the surviving corporation, the surviving, continuing,
successor or purchasing corporation, as the case may be (the "Acquiring
Corporation"), will either assume the Company's rights and obligations
under outstanding Award Agreements or substitute awards in respect of
the Acquiring Corporation's stock for outstanding Awards, provided,
however, that if the Acquiring Corporation does not assume or
substitute for such outstanding Awards, the Board shall provide prior
to the Merger that any unexercisable and/or unvested portion of the
outstanding Awards shall be immediately exercisable and vested as of a
date prior to such merger or consolidation, as the Board so determines.
The exercise and/or vesting of any Award that was permissible solely by
reason of this Section 9.07(b) shall be conditioned upon the
consummation of the Merger. Any Options which are neither assumed by
the Acquiring Corporation not exercised as of the date of the Merger
shall terminate effective as of the effective date of the Merger.
(c) Options to Purchase Shares or Stock of Acquired Companies.
After any merger in which the Company or a Subsidiary shall be a
surviving corporation, the Committee may grant substituted options
under the provisions of the Plan, pursuant to Section 424 of the Code,
replacing old options granted under a plan of another party to the
merger whose shares of stock subject to the old options may no longer
be issued following the merger. The manner of application of the
foregoing provisions to such options and any appropriate adjustments
shall be determined by the Committee in its sole discretion. Any such
adjustments may provide for the elimination of any fractional shares
which might otherwise become subject to any Options.
9.08 No Right to Employment. No employee or other person shall have any
claim of right to be granted an Award under the Plan. Neither the Plan nor any
action taken hereunder
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shall be construed as giving any employee any right to be
retained in the employ of the Company or any of its Subsidiaries.
9.09 Awards Not Includable for Benefit Purposes. Payments received by a
Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any pension, group insurance or other benefit
plan applicable to the Participant which is maintained by the Company or any of
its Subsidiaries, except as may be provided under the terms of such plans or
determined by the Board.
9.10 Governing Law. All determinations made and actions taken pursuant
to the Plan shall be governed by the laws of the State of Delaware and construed
in accordance therewith.
9.11 No Strict Construction. No rule of strict construction shall be
implied against the Company, the Committee or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Committee.
9.12 Captions. The captions (i.e., all Section headings) used in the
Plan are for convenience only, do not constitute a part of the Plan, and shall
not be deemed to limit, characterize or affect in any way any provisions of the
Plan, and all provisions of the Plan shall be construed as if no captions had
been used in the Plan.
9.13 Severability. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited by or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan, such Award and every other Award at any time granted under the Plan
shall remain in full force and effect.
9.14 Amendment and Termination.
(a) Amendment. The Board shall have complete power and
authority to amend the Plan at any time. No termination or amendment of
the Plan may, without the consent of the Participant to whom any Award
shall theretofore have been granted under the Plan, materially
adversely affect the right of such individual under such Award.
(b) Termination. The Board shall have the right and the power
to terminate the Plan at any time. No Award shall be granted under the
Plan after the termination of the Plan, but the termination of the Plan
shall not have any other effect and any Award outstanding at the time
of the termination of the Plan may be exercised after termination of
the Plan at any time prior to the expiration date of such Award to the
same extent such Award would have been exercisable had the Plan not
been terminated.
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CONSULTING AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of
June, 1997, by and between Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), and Brett E. Marks (the "Consultant").
WITNESSETH:
WHEREAS, the Company desires that the Consultant perform the
services set forth herein in accordance with the terms and conditions of this
Agreement; and
WHEREAS, the Consultant is willing to provide such services to
the Company in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Consultant's Duties. The Company hereby engages the
Consultant to assist the Company in the identification of possible locations for
the development of movie exhibition theaters and of movie exhibition theaters
that are potential acquisition candidates (collectively, the "Services"). The
Consultant shall, at the request of the Company, furnish all necessary technical
support of any nature whatsoever in connection with performing the Services. The
Consultant shall perform the Services for the Company as an independent
contractor, and no provision of this Agreement shall create, or be deemed to
have created, an employer/employee relationship between the Company and the
Consultant.
2. Compensation; Reimbursement of Expenses.
(a) In return for the provision of the Services
during the term of this Agreement, the Consultant will be compensated by the
Company as follows: One Thousand Dollars ($1,000) per month, payable monthly in
arrears.
(b) In addition, during such term, the Company shall
provide or make available to the Consultant and his family, in the same manner
and on the same terms as if the Consultant were an employee of the Company,
participation in the medical, health and other insurance plans and other welfare
benefit plans
<PAGE>
(as defined in the Employee Retirement Income Security Act of 1974, as amended)
of the Company.
(c) The Company shall pay, or reimburse the
Consultant for, all reasonable travel and other expenses incurred by the
Consultant in the performance of the Services.
(d) The Company may withhold from any amounts payable
under this Agreement all federal, state, local or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
3. Termination. Either party may terminate this Agreement at
any time. The Company shall have no obligation to the Consultant for any period
subsequent to the effective date of any termination of this Agreement, except
for the payment of salary for Services rendered and reimbursement of expenses
incurred prior to such termination and as required by law with respect to the
continuation of benefits under welfare benefit plans.
4. Confidentiality.
(a) All reports, data, notes, memoranda, records or other
documents or information (collectively, the "Information") compiled or produced
by the Consultant as part of the Services are and shall remain the property of
the Company. The Consultant shall protect the proprietary nature of the
Information and not disclose such Information to anyone outside of the
Company or its affiliates (other than in the ordinary course of the Consultant's
duties), either during or after the term of this Agreement, except with the
Company's prior written consent or as required by law. The Consultant further
agrees to deliver promptly to the Company upon the termination of this Agreement
all Information (and all copies or summaries thereof) in his possession.
(b) During and after the term of this Agreement, the
Consultant shall protect the secrecy of all confidential matters of the Company
and shall not, at any time, divulge, furnish or make accessible to anyone any
knowledge or information with respect to confidential plans, material, research
or development work of the Company or any subsidiary thereof or with respect to
any other confidential or secret aspect of the business of the Company or any
subsidiary thereof.
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5. Non-Competition. For a period of one year after the
termination of this Agreement, the Consultant shall not, directly or indirectly,
engage or become interested in (as owner, stockholder, partner or otherwise) the
operation of any business similar to or in competition (directly or indirectly)
with the Company within a 15-mile radius of any theater owned and/or operated by
the Company or any of its subsidiaries as of the date of termination of this
Agreement. If any court construes the covenant in this Section 5, or any part
thereof, to be unenforceable because of its duration or the geographical area
covered thereby, such court shall have the power to reduce the duration or
geographical area to the maximum permissible period or geographical area, as the
case may be, so that this provision is enforceable.
6. Relationship with First New York.
(a) The Company acknowledges that the Consultant is also
an executive vice-president of First New York Realty Co. Inc. ("First New
York"). The Consultant hereby represents to the Company that the Services
contemplated by this Agreement will be performed by the Consultant as an
independent contractor and not as an agent for or employee of First New York.
(b) The Consultant further represents that First New York
will not be entitled to a commission if the Company acquires any theater
identified by the Consultant during the course of the performance of his
Services.
7. Modification and Waiver.
(a) Amendment of Agreement. This Agreement may not be
modified or amended except by an instrument in writing signed by the parties
hereto.
(b) Waiver. No term or condition of this Agreement shall
be deemed to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement, except by written instrument of
the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless specifically stated therein, and each such
waiver shall operate only as to the specific term or condition waived and shall
not constitute a waiver of such term or condition for the future or as to any
act other than that specifically waived.
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<PAGE>
8. General Provisions.
(a) Entire Agreement. This Agreement contains the entire
understanding between the parties hereto and supersedes any prior consulting or
employment agreement between the Company or any predecessor of the Company and
the Consultant.
(b) Nonassignability. Neither this Agreement nor any right
or interest hereunder shall be assignable by the Company or the Consultant
without the prior written consent of the other party hereto.
(c) Survival. Each of the provisions of this Agreement
allocating responsibility between the Company and the Consultant shall survive
the completion of the Services and the termination of this Agreement.
(d) Binding Agreement. This Agreement shall be binding
upon and inure to the benefit of the Consultant and the Company and their
respective heirs, permitted successors and assigns.
(e) Headings. The headings of sections herein are included
solely for convenience of reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
9. Severability. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held so invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect. If any
provision of this Agreement shall be held invalid in part, such invalidity shall
in no way affect the rest of such provision not held so invalid, and the rest of
such provision, together with all other provisions of this Agreement, shall to
the full extent consistent with law continue in full force and effect
10. Governing Law. This Agreement has been executed and
delivered in the State of New Jersey, and its validity, interpretation,
performance, and enforcement shall be governed by the laws of said State other
than the conflict of laws provisions of such laws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its officer thereunto duly authorized, and the Consulant has
signed this Agreement, all as of the day and year first above written.
CLEARVIEW CINEMA GROUP, INC.
By:
------------------------------
A. Dale Mayo
President, Chief Executive
Officer and Chairman of
the Board
CONSULTANT
---------------------------------
Brett E. Marks
Exhibit 10.65
WAIVER AND CONSENT
July 1, 1997
Reference is made to that certain Credit Agreement, dated as of May 29,
1996, as amended prior to the date hereof (the "Credit Agreement"), among
The Provident Bank ("Provident"), as Agent, Clearview Cinema Group, Inc.
("CCC"), its various subsidiaries, and Provident, as lender, that certain
Subordination Agreement dated December 13, 1996 (the "Magic Cinemas
Subordination Agreement") among CCC, Provident and Magic Cinemas, L.L.C.
and that certain Subordination Agreement, dated as of May 29, 1996, as
amended (the "CMNY Subordination Agreement"), among CCC, Provident, CMNY
Capital II, L.P. ("CMNY"), CMCO, Inc. ("CMCO"), and Robert G. Davidoff
("Davidoff"). The Credit Agreement, the Magic Cinemas Subordination
Agreement, and the CMNY Subordination Agreement are referred to herein
collectively as the "Subject Agreements." Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to such terms in the
Credit Agreement.
CCC has requested that Provident consent to and waive any default under
the Subject Agreements resulting from, certain actions taken and to be
taken by CCC and Provident has agreed to do so to the extent expressly set
forth in this Waiver and Consent.
1. Provident hereby waives any obligation of CCC pursuant to Section
2.6(g) of the Credit Agreement to pay or prepay the Loans from the
proceeds, after payment of the underwriters' discounts and
commissions and the expenses of the sale (the "Net Proceeds"), from
the sale of shares of its common stock, $.01 par value (the
"Shares"), pursuant to a registration statement (the "Registration
Statement"), originally filed by CCC with the Securities and
Exchange Commission on May 27, 1997; provided, however, that if CCC
or its subsidiaries shall not have consummated the United Artists
Transaction (as defined in Section 3 hereof) prior to the end of
the period (the "Waiver Period") beginning on the date of the
consummation of such sale of the Shares and ending on a date ninety
calendar days therafter, CCC shall immediately prepay the Loans
from the Net Proceeds less any amounts paid by CCC to retire the
Magic Cinemas Note as permitted by Section 4 hereof.
2. Provident hereby waives any obligation of CCC to pay or prepay Term
Loan C from the Net Proceeds or other funds of CCC pursuant to
clause (ii) of the second sentence of Section 2.6(1) of the Credit
Agreement.
3. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, the use of the Net Proceeds and
other funds of CCC at any time during the Waiver Period by certain
subsidiaries of CCC to purchase various assets related to the
operation of up to five movie theaters from United Artists Theatre
Circuit, Inc., United Artists Properties I Corp., and/or Mamaroneck
Playhouse Holding Corporation (the purchase of one or more such
theaters, the "United Artists Transaction").
4. Provident hereby consents to, and waives any default under the
Subject Agreements resulting from, the use by CCC of the Net
Proceeds or other funds of CCC at any time during the Waiver Period
to pay the outstanding principal and interest due under the
<PAGE>
Subordinated Promissory Note dated December 13, 1996 in the
original principal amount of $600,000 issued by CCC to Magic
Cinemas, L.L.C. (the "Magic Cinemas Note").
5. Provident hereby consents to, and waives any default under the
Subject Agreements resulting from, the use by CCC of the Net
Proceeds or other funds of CCC at any time during the Waiver Period
to pay the outstanding principal and interest due under the 8%
Subordinated Promissory Note dated August 31, 1995 in the original
principal amount of $300,000 issued by CCC to CMNY, the 8%
Subordinated Promissory Note dated August 31, 1995 in the original
principal amount of $50,000 issued by CCC to CMCO, the 8%
Subordinated Promissory Note dated August 31, 1995 in the original
principal amount of $50,000 issued by CCC to Davidoff, the 8%
Subordinated Promissory Note dated October 11, 1995 in the original
principal amount of $50,000 issued by CCC to CMCO, the 8%
Subordinated Promissory Note dated October 11, 1995 in the original
principal amount of $50,000 issued by CCC to Davidoff, the 8%
Subordinated Promissory Note dated December 13, 1996 in the
original principal amount of $300,000 issued by CCC to CMCO, and
the 8% Subordinated Promissory Note dated December 13, 1996 in the
original principal amount of $300,000 issued by CCC to Davidoff.
6. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, the acquisition by any
underwriters of the Shares solely in connection with the sale
contemplated by the Registration Statement.
7. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, CCC (for all purposes of the
Credit Agreement) treating the rights of certain holders of its
preferred stock, $0.1 par value, and of its common stock, $.01 par
value, which require CCC to purchase the stock of such
stockholders, as if such rights did not or do not exist.
8. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, the existence of, and the issuance
of options pursuant to, the Clearview Cinema Group, Inc. 1997 Stock
Incentive Plan but not to any amendments, modifications or
restatements thereof after the Waiver Period.
9. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, CCC's entering into and performing
under a consulting agreement with MidMark Capital, L.P.
("MidMark"), replacing the Management and Monitoring Agreement
dated as of May 29, 1996 (the "Existing Management Agreement")
between CCC and MidMark.
10. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, CCC's entering into and performing
under a consulting and confidentiality agreement with Brett Marks
("Marks"), pursuant to which Marks will
<PAGE>
assist CCC in the identification of possible locations for the
development of theaters and perform other services as requested by
CCC.
11. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, CCC's entering into and performing
under an agreement with Marks and First New York Realty Co. Inc.
("First New York") concerning the payment of commissions to First
New York as a result of services of Marks to CCC.
12. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, CCC's amending and restating its
Certificate of Incorporation in a form substantially similar to the
Amended and Restated Certificate of Incorporation of Clearview
Cinema Group, Inc. attached hereto as Exhibit A.
13. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, the issuance by CCC of a stock
dividend to the holders of its common stock in connection with the
Registration.
14. Provident hereby consents to, and waives any default under the
Credit Agreement resulting from, CCC's amending and restating its
Bylaws in a form substantially similar to the Amended and Restated
By-laws of Clearview Cinema Group, Inc. attached hereto as Exhibit
B.
15. Provident hereby consents to, and waives any default under the
Subject Agreements resulting from, CCC's entering into and
performing under the Addenda to 8% Subordinated Promissory Notes,
each substantially in the form attached hereto as Exhibit C.
16. Provident hereby consents to, and waives any default under the
Subject Agreements resulting from, CCC's entering into and
performing under the Exchange and Termination Agreement dated as of
May 23, 1997 among CCC, CMNY, CMCO, and Davidoff.
17. Provident hereby consents to, and waives any default under the
Subject Agreement resulting from, CCC's entering into and
performing under the Exchange and Termination Agreement dated as of
May 23, 1997, among CCC, MidMark, and A. Dale Mayo.
18. Provident hereby waives any default under the Credit Agreement
resulting from CCC's failure to meet the financial covenants set
forth in Article 7 of the Credit Agreement.
This Waiver and Consent applies only to the extent described and does not
otherwise modify or waive any other covenant or agreement contained in any
of the Subject Agreements. This Waiver and Consent shall not modify or
waive any covenant or agreement to be contained in the Amended and Restated
Credit Agreement which may be entered into among CCC, its subsidiaries and
Provident.
IN WITNESS WHEREOF, The Provident Bank has executed this Waiver and Consent
as of the date first set forth above.
THE PROVIDENT BANK
BY: ------------------------
Christopher B. Gribble
Assistant Vice President
SUBSIDIARIES OF CLEARVIEW CINEMA GROUP, INC.
STATE OF
COMPANY INCORPORATION
------- -------------
Clearview Theater Group, Inc. New Jersey
CCC Madison Triple Cinema Corp. New Jersey
CCC Chester Twin Cinema Corporation New Jersey
CCC Manasquan Cinema Corporation New Jersey
CCC Summit Cinema Corp. New Jersey
CCC Grand Avenue Cinema Corp. Delaware
CCC Herricks Cinema Corp. Delaware
CCC Port Washington Corp. Delaware
CCC Allwood Cinema Corp. Delaware
CCC Emerson Cinema Corp. Delaware
CCC New City Cinema Corp. Delaware
CCC Washington Cinema Corp. Delaware
CCC Bedford Cinema Corp. Delaware
CCC Kisco Cinema Corp. Delaware
CCC B.C. Realty Corp. Delaware
CCC Bergenfield Cinema Corp. Delaware
CCC Closter Cinema Corp. Delaware
CCC Tenafly Cinema Corp. Delaware
CCC Bronxville Cinema Corp. Delaware
CCC Cinema 304 Corp. Delaware
CCC Larchmont Cinema Corp. Delaware
CCC Mamaroneck Cinema Corp. Delaware
CCC Wayne Cinema Corp. Delaware
<PAGE>
STATE OF
COMPANY INCORPORATION
------- -------------
CCC Bayonne Cinema Corp. Delaware
CCC Marboro Cinema Corp. Delaware
2
Exhibit 23.01
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 or our reports dated February 10, 1997
relating to the consolidated financial statements of Clearview Cinema Group,
Inc.; April 1, 1997 relating to the combined financial statements of the Nelson
Ferman Theaters at Emerson, New City, Allwood and Washington Township; April 10,
1997 relating to the combined financial statements of Magic Cinemas at
Bergenfield, Tenafly and Closter; and June 4, 1997 relating to the combined
financial statements of United Artists Theaters at Bronxville, Larchmont, Wayne,
New City and Mamaroneck, which appear in such Prospectus.
We also consent to reference to us under the headings "Experts" and "Summary
Consolidated Financial Data" which appear in such Prospectus. However, it should
be noted that Wiss and Company, LLP did not prepare or certify such "Summary
Consolidated Financial Data."
WISS & COMPANY, LLP
Woodbridge, New Jersey
August 11, 1997
