<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1997
REGISTRATION NO. 333-27819
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
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 4, 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.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS AND SELLING GROUP
MEMBERS, IF ANY, MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SEE 'UNDERWRITING.'
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. See '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
---------- ---------- ------------ ---------- ---------- ------------
2,476,316 7,824,580 17,169,783 972,931 3,136,347 4,247,955
---------- ---------- ------------ ---------- ---------- ------------
Operating Income..................... (130,619) 373,394 813,670 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) $ (645,176 ) $ (14,394) $ 10,622 $ 139,262
---------- ---------- ------------ ---------- ---------- ------------
---------- ---------- ------------ ---------- ---------- ------------
Net Income (Loss) Per Share of Common
Stock(3)........................... $ (.12) $ (.12) $ (.24 ) $ (.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 Probable Acquisition (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)(B) --
------------------ ---------- ----------- -----------
13,110,411 4,120,280 (60,908) 17,169,783
------------------ ---------- ----------- -----------
Operating Income (Loss)..................... 72,070 680,692 60,908 813,670
Other Expenses:
Interest Expense............................ 1,340,846 444,534 (326,534)(D)(E) 1,458,846
------------------ ---------- ----------- -----------
Net Income (Loss)........................... $ (1,268,766) $ 236,158 $ 387,442 $ (645,176)
------------------ ---------- ----------- -----------
------------------ ---------- ----------- -----------
Net Income (Loss) Per Share of Common
Stock(G).................................. $ (.71) $ (.24)
------------------ -----------
------------------ -----------
</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. The charge for the impairment of long-lived assets has been
eliminated based on the pro forma assumption that the Probable
Acquisition had occurred on January 1, 1996. 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 66,000 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.
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
1977 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 15.67% 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
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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 $100,000 during 1996.
SUMMARY COMPENSATION TABLE FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------
NAME SALARY ($) BONUS ($)
- ------------------------------------ ---------- ---------
<S> <C> <C>
A. Dale Mayo $ 99,167(1) $37,371(1)
</TABLE>
- ------------------
(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
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<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:
<TABLE>
<CAPTION>
AUGUST 31, 1995 8% NOTES OCTOBER 11, 1995 8% NOTES
------------------------ -------------------------
<S> <C> <C>
CMNY 45,000 --
CMCO 7,500 7,500
Davidoff 7,500 7,500
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------------------------------------------
<S> <C>
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
----------
----------
</TABLE>
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.
<TABLE>
<CAPTION>
PERIOD: RATE
- -------------------------------------------------------------------- ----
<S> <C>
December 1996 through 1997.......................................... 12%
December 1997 through 1998.......................................... 14%
December 1998 through 1999.......................................... 16%
December 1999 and thereafter........................................ 18%
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -----------------------------------------------------------
<S> <C>
1997.................................................. $ 954,878
1998.................................................. 959,851
1999.................................................. 943,821
2000.................................................. 865,071
2001.................................................. 777,819
2002 and thereafter................................... 6,868,926
-----------
$11,370,366
-----------
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------------------------------------
<S> <C>
1997.................................................................. $ 479,986
1998.................................................................. 593,882
----------
$1,073,868
----------
----------
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------------------------------------
<S> <C>
1997.................................................................. $ 121,293
1998.................................................................. 121,293
1999.................................................................. 121,293
2000.................................................................. 121,293
2001.................................................................. 122,439
2002 and thereafter................................................... 961,689
----------
$1,569,300
----------
----------
</TABLE>
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
II-1
<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.
II-2
<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
II-3
<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**
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 July 31, 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 July 31, 1997
- --------------------------------------- Officer and Director
A. Dale Mayo
/s/ SUEANNE H. MAYO Director July 31, 1997
- ---------------------------------------
Sueanne H. Mayo
/s/ JOAN M. ROMINE Treasurer and Chief Financial Officer July 31, 1997
- ---------------------------------------
Joan M. Romine
* Director July 31, 1997
- ---------------------------------------
Wayne Clevenger
* Director July 31, 1997
- ---------------------------------------
Robert Davidoff
* Director July 31, 1997
- ---------------------------------------
Brett E. Marks
* Director July 31, 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**
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.
<PAGE>
Exhibit 2.01
AGREEMENT OF PURCHASE AND SALE
between
UNITED ARTISTS THEATRE CIRCUIT, INC.
UNITED ARTISTS PROPERTIES I CORP.
MAMARONECK PLAYHOUSE HOLDING CORP.
("Seller")
and
CCC BRONXVILLE CINEMA CORP.
CCC MAMARONECK CINEMA CORP.
CCC WAYNE CINEMA CORP.
CCC CINEMA 304 CORP.
CCC LARCHMONT CINEMA CORP.
CCC BC REALTY CORP.
("Purchaser")
and
CLEARVIEW CINEMA GROUP, INC.
("Clearview")
JULY 21, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS.................................................................1
A. Acceptance Date..........................................................1
B. Benefit Plan.............................................................1
C. Closing..................................................................2
D. Closing Date.............................................................2
E. Consents.................................................................2
F. Contract Rights..........................................................2
G. Earnest Money Deposit....................................................2
H. Encumbrances.............................................................2
I. Fee Theatres.............................................................2
J. Improvements.............................................................2
K. Inspection Period........................................................3
L. Leasehold Theatre........................................................3
M. Lease....................................................................3
N. Liabilities..............................................................3
O. Names....................................................................3
P. Permitted Exceptions.....................................................3
Q. Personal Property........................................................3
R. Purchased Assets.........................................................3
S. Purchase Price...........................................................3
T. Real Property............................................................3
U. Security Deposits........................................................3
V. Sublease Theatre.........................................................3
W. Theatres.................................................................4
2. AGREEMENT...................................................................4
3. PROPERTY TO BE SOLD.........................................................4
A. Real Property............................................................4
B. Improvements.............................................................4
C. Leasehold Theatre........................................................4
D. Sublease Theatre.........................................................4
E. Personal Property........................................................4
F. Contract Rights..........................................................5
G. Names....................................................................5
4. EARNEST MONEY DEPOSIT.......................................................5
5. LIABILITIES NOT ASSUMED.....................................................5
6. PURCHASE PRICE..............................................................6
A. Purchase Price...........................................................6
B. Payment of Purchase Price................................................7
7. SELLER'S WARRANTIES AND REPRESENTATIONS.....................................7
A. Title....................................................................7
B. Taxes....................................................................7
C. Rent Roll................................................................7
D. Organization.............................................................7
-i-
<PAGE>
E. Authorization; Enforceability............................................8
F. No Violation of Laws or Agreements; Consents.............................9
G. Contract Rights; Security Deposits.......................................8
H. Cash Flow Statements.....................................................8
I. Equipment; No Changes....................................................8
J. No Pending Litigation or Proceeding......................................9
K. Benefit Matters; Miscellaneous...........................................9
8. PURCHASER'S REPRESENTATIONS AND WARRANTIES AND ACKNOWLEDGMENT...............9
A. Joint and Several........................................................9
B. Authority................................................................9
C. Acknowledgment..........................................................10
D. Organization and Standing of the Purchaser and Clearview................10
E. Space Leases............................................................11
9. PURCHASER'S INSPECTION OF THE PURCHASED ASSETS.............................11
A. Delivery of Documents...................................................11
B. Purchaser's Access to the Assets........................................11
10. TERMINATION BY PURCHASER..................................................12
11. SELLER'S OBLIGATIONS PRIOR TO CLOSING.....................................12
A. Ordinary Course; Compliance.............................................12
B. Prohibited Transactions.................................................13
C. Lien Releases...........................................................13
12. FULFILLMENT OF AGREEMENTS.................................................13
13. EMPLOYMENT................................................................13
14. TRANSITIONAL MATTERS......................................................13
15. BOOKS AND RECORDS.........................................................14
16. EVIDENCE OF TITLE.........................................................14
A. Condition of Title......................................................14
B. Defects of Title........................................................14
C. Permitted Exceptions....................................................15
D. Change in Title.........................................................15
17. CONDITIONS PRECEDENT TO CLOSING...........................................15
A. Seller's Conditions.....................................................16
B. Purchaser's Conditions..................................................17
18. CLOSING...................................................................17
A. Date, Time, and Place...................................................17
B. Conveyances and Other Actions...........................................18
C. Apportionments..........................................................19
D. Closing Costs...........................................................20
E. Real Estate Transfer Tax................................................20
F. Possession..............................................................20
G. Allocation of Consideration.............................................20
19. PURCHASER'S CLOSING OBLIGATIONS...........................................20
A..........................................................................20
B..........................................................................20
C..........................................................................21
D..........................................................................21
-ii-
<PAGE>
E..........................................................................21
20. RISK OF LOSS..............................................................21
21. CONDEMNATION..............................................................21
22. BROKERAGE.................................................................21
23. FAILURE TO CLOSE..........................................................21
A. Purchaser's Default.....................................................22
B. Seller's Default........................................................22
C. Attorneys' Fees.........................................................22
24. SURVIVAL OF REPRESENTATIONS AND WARRANTIES................................22
A. Indemnification by Seller...............................................22
B. Indemnification by Purchaser and Clearview..............................22
25. BULK SALES LAW............................................................23
26. FILM BOOKING..............................................................23
27. MISCELLANEOUS.............................................................23
A. Notices.................................................................24
B. Parties in Interest.....................................................24
C. Entire Agreement........................................................24
D. Counterparts............................................................24
E. Time....................................................................25
F. Section and Other Headings..............................................25
G. Governing Law...........................................................25
H. Assignment of Agreement.................................................25
I. Recording...............................................................25
J. Binding Effect..........................................................25
K. Gender..................................................................25
L. No Joint Venture, Partnership, Agency, Etc..............................25
M. No Third Party Beneficiaries............................................25
N. No Waiver...............................................................26
O. Confidentiality.........................................................26
P. Non-Foreign Status Certification........................................26
Q. Antitrust Matters.......................................................26
R. Severability............................................................26
EXHIBIT A - LEGAL DESCRIPTIONS OF FEE THEATRES............................A-1
EXHIBIT B - LIST OF LEASEHOLD THEATRES AND SUBLEASE THEATRE...............B-1
EXHIBIT C - LIST OF PERSONAL PROPERTY AND ASSETS EXCLUDED FROM SALE.......C-1
EXHIBIT D - ENT ROLL AND SECURITY DEPOSITS................................D-1
EXHIBIT E - LIST OF CONTRACTS.............................................E-1
EXHIBIT F - EXCEPTIONS TO TITLE...........................................F-1
EXHIBIT G- LITIGATION MATTERS.............................................G-1
-iii-
<PAGE>
THIS AGREEMENT OF PURCHASE AND SALE (the "Agreement") is dated as
of the 21st day of July, 1997, by and among UNITED ARTISTS THEATRE CIRCUIT,
INC., a Maryland corporation, UNITED ARTISTS PROPERTIES I CORP., a Colorado
corporation, and MAMARONECK PLAYHOUSE HOLDING CORPORATION, a New York
corporation (collectively or individually as the case may be, the "Seller"), at
the address of 9110 E. Nichols Avenue, Suite 200, Englewood, Colorado 80112, and
CCC Bronxville Cinema Corp., a Delaware corporation ("CCC Bronxville"), CCC
Mamaroneck Cinema Corp., a Delaware corporation ("CCC Mamaroneck"), CCC Wayne
Cinema Corp., a Delaware corporation ("CCC Wayne"), CCC BC Realty Corp, a
Delaware corporation ("CCC Realty"), CCC Cinema 304 Corp., a Delaware
corporation ("CCC Cinema 304") and CCC Larchmont Cinema Corp., a Delaware
corporation ("CCC Larchmont"), all of the above collectively referred to herein
as "Purchaser," each of the parties named as Purchaser being a wholly owned
subsidiary of Clearview Cinema Group, Inc. ("Clearview").
RECITALS
Seller owns three parcels of real property together with the
improvements located thereon and certain personal property used in the operation
of or in connection with three motion picture theatres located in the State of
New York, as described in Exhibit A attached hereto, which property Seller
desires to sell to Purchaser. Seller is also the owner of a leasehold interest
and personal property in two motion picture theatres, one located in the State
of New Jersey, and the other in New York, listed on Exhibit B attached hereto,
which Seller desires to assign and sublease, respectively, to Purchaser.
Purchaser and Seller desire to enter into this Agreement pursuant to which the
foregoing transactions will be consummated.
AGREEMENTS
In consideration of the purchase price, the promises and
covenants contained herein, the parties agree as follows:
1. DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following capitalized terms have the meanings set forth below:
A. Acceptance Date. "Acceptance Date" means the date upon
which this Agreement is signed by both Seller and Purchaser.
B. Benefit Plan "Benefit Plan" means any written and
unwritten "employee benefit plans" within the meaning of Section 3(3) of ERISA,
and any other written and unwritten profit sharing, pension, savings, deferred
compensation, fringe benefit, insurance, medical, medical reimbursement, life,
disability, accident, post-retirement health or welfare
<PAGE>
benefit, stock option, stock purchase, sick pay, vacation, employment,
severance, termination or other plan, agreement, contract, policy, trust fund or
arrangement, whether or not funded and whether or not terminated, for current or
former employees of the Theatres (i) maintained or sponsored by Seller or an
affiliate of Seller, (ii) with respect to which Seller has or may have Liability
or is obligated to contribute, (iii) that otherwise covers any of the current or
former beneficiaries of Seller employees, or (iv) as to which any such
beneficiaries of Theatre employees participated or were entitled to participate
or accrue or have accrued any rights thereunder.
C. Closing. "Closing" means the consummation of the
transactions contemplated by Section 18 of this Agreement.
D. Closing Date. "Closing Date" has the meaning given
such term in Section 18A below.
E. Consents. "Consents" has the meaning given such term
in Section 17A below.
F. Contract Rights. "Contract Rights" has the meaning
given such term in Section 3F below.
G. Earnest Money Deposit. "Earnest Money Deposit" means
the amount to be paid by Purchaser pursuant to Section 4 below, which amount is
to be held by Rosen, Einbinder & Dunn, P.C., 641 Lexington Avenue, New York, New
York 10022 (the "Escrow Agent") in an interest-bearing account, pursuant to an
escrow agreement among Seller, the Purchaser and the Escrow Agent, executed
simultaneously herewith (the "Escrow Agreement").
H. Encumbrances. "Encumbrance" means any liability, debt,
mortgage, deed of trust, pledge, security interest, encumbrance, option, right
of first refusal, agreement of sale, adverse claim, easement, lien, assessment,
restrictive covenant, encroachment, burden or charge of any kind or nature
whatsoever.
I. Fee Theatres. "Fee Theatres" means the Real Property
and the Improvements.
J. Improvements. "Improvements" has the meaning given
such term in Section 3B below.
K. Inspection Period. "Inspection Period" means the
period ending at 5:00 p.m. Denver, Colorado time, 90 days after the date of
execution of this Agreement by Seller and Purchaser.
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L. Leasehold Theatre. "Leasehold Theatre" means those
certain leasehold rights under the Lease for the Wayne Theatre in Wayne, New
Jersey, as more particularly described in Section 3C below.
M. Lease. "Lease" means that certain written lease,
together with all amendments and modifications thereto, relating to the
Leasehold Theatre, described in Section 3C below.
N. Liabilities. "Liabilities" with respect to any person,
means all debts, liabilities and obligations of such person of any nature or
kind whatsoever, whether or not due or to become due, accrued, fixed, absolute,
matured, determined, determinable or contingent and whether or not incurred
directly by such person or by any predecessor of such person, and whether or not
arising out of any act, omission, transaction, circumstance, sale of goods or
service or otherwise.
O. Names. "Names" has the meaning given such term in
Section 3G below.
P. Permitted Exceptions. "Permitted Exceptions" means the
exceptions relating to Encumbrances, as more particularly described in Section
16C below.
Q. Personal Property. "Personal Property" has the meaning
given such term in Section 3E below.
R. Purchased Assets. "Purchased Assets" means the Fee
Theatres, Leasehold Theatre, Sublease Theatre, Personal Property, Contract
Rights and Names as more particularly described in Section 3 below.
S. Purchase Price. "Purchase Price" means the price
payable for the purchase of the Purchased Assets as more particularly described
in Section 6 below.
T. Real Property. "Real Property" has the meaning given
such term in Section 3A below.
U. Security Deposits. "Security Deposits" mean the
security deposits for each of the Space Leases and the security deposit for the
Lease, all of which amounts are identified on Exhibit D hereto.
V. Sublease Theatre. "Sublease Theatre" means the
leasehold rights related to the Larchmont Theatre, Larchmont, New York, to be
given to Purchaser via a sublease in the form annexed (the "Sublease").
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W. Theatres. "Theatres" means the Fee Theatres, the
Leasehold Theatre and the Sublease Theatre.
2. AGREEMENT. Subject to the terms and conditions set forth in
this Agreement, Seller will sell, assign and convey to Purchaser and Purchaser
will purchase from Seller the Purchased Assets at the Closing, free and clear of
all encumbrances, other than the Permitted Exceptions, as more particularly
described in Section 3 below. The Purchased Assets shall be allocated among the
Purchasers as follows: (i) CCC Bronxville shall purchase the Personal Property,
Contract Rights and names related to the Bronxville Theatre, (ii) CCC Mamaroneck
shall purchase the Personal Property, Contract Rights and names related to the
Mamaroneck Playhouse, (iii) CCC Larchmont shall purchase the Sublease, the
Personal Property, Contract Rights and names related to the Sublease Theatre,
(iv) CCC Cinema 304 shall purchase the Personal Property, Contract Rights and
names related to the New City Cinema 304, (v) CCC Wayne shall purchase the
Lease, Personal Property, Contract Rights and names related to the Leasehold
Theatre, and (vi) CCC Realty shall purchase the Real Property and the
Improvements.
3. PROPERTY TO BE SOLD. The Purchased Assets to be purchased and
sold are as follows:
A. Real Property. Fee simple title to those parcels known
as (i) the Bronxville Theatre located in the Village of Bronxville, Town of
Eastchester, County of Westchester, State of New York, (ii) Cinema 304, located
in New City, New York, and (iii) the Mamaroneck Playhouse located in the Town
and Village of Mamaroneck, County of Westchester, State of New York, as more
particularly described on Exhibit A attached hereto and by this reference
incorporated herein (collectively, the "Real Property"), together with all
easements, rights-of-way, privileges and appurtenances thereto.
B. Improvements. All improvements in, upon, and under the
Real Property, including, without limitation, all buildings, fixtures, utility
buildings, and covered and uncovered parking facilities (the "Improvements").
C. Leasehold Theatre. All of Seller's right, title and
interest as tenant in and under the Lease of the Leasehold Theatre which are
described on Exhibit B attached hereto and incorporated herein.
D. Sublease Theatre. All of Seller's right title and
interest as Tenant under a lease of the Sublease Theatre identified on Exhibit B
attached hereto.
E. Personal Property. All personal property and equipment
owned by Seller and located on or customarily used in connection with the
operation of the Theatres, including but not limited to seats, cleaning
equipment, concessions equipment, projection and sound equipment, screens,
carpets and draperies, soundfold, wall coverings, cash registers, signage
(including marquees), cleaning supplies, projection supplies and concession
supplies not
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held for sale to the public, Seller's rights to the telephone numbers for each
Theatre, projectors, projector bulbs, ticketing machines, books and records;
provided, however, that the items described on Exhibit C attached hereto and by
this reference incorporated herein shall be excluded from the definition of
Personal Property and the sale to Purchaser under this Agreement (the "Personal
Property").
F. Contract Rights. Any and all rights and obligations of
Seller under the contracts and commitments listed on Exhibit E, attached hereto
and made a part hereof, (the "Contract Rights"). Purchaser shall at Closing
assume and perform in full any and all Contract Rights, other than for breach or
nonfulfillment thereof by Seller prior to Closing, for film rentals prior to
Closing and for monies due and owing prior to Closing.
G. Names. All of Seller's right, title and interest, if
any, in and to the names of the Theatres and any symbol or logo related solely
to such names, but not including the name "United Artists" (the "Names").
Purchaser acknowledges that it shall have no rights to use of the name "United
Artists" nor any logo, trademark, starburst or similar mark for such name.
Purchaser agrees that it shall be responsible, at its cost, for the removal of
any signage on, outside or within the Theatres with the name "United Artists" on
them as soon as reasonably practicable after Closing, not to exceed 90 days
after the Closing Date.
4. EARNEST MONEY DEPOSIT. The Earnest Money Deposit under this
Agreement shall be as follows: on the Acceptance Date of this Agreement,
Purchaser shall deliver to Rosen, Einbinder & Dunn, P.C. (the "Escrow Agent")
Seventy-Five Thousand and no/100 ($75,000) Dollars in the form of cash, or other
immediately available funds, which is to be held by the Escrow Agent in
accordance with the terms and conditions of the Escrow Agreement (together with
any interest earned thereon, the "Initial Earnest Money Deposit"). The Initial
Earnest Money Deposit shall be nonrefundable except (i) in the event of Seller's
default as provided for in Section 23B; or (ii) in the event of the termination
of this Agreement as provided for in Sections 7E, 16B or 16D; (iii) or if the
conditions described in Section 11C have not been fulfilled, and Purchaser and
Seller shall proceed to Closing on the 120th day after the Acceptance Date. The
Initial Earnest Money Deposit and the Additional Earnest Money Deposit defined
in Section 18A below, if any, are collectively referred to herein as the
"Earnest Money Deposit." The Escrow Agent shall hold the Earnest Money Deposit
in an interest-bearing account bearing passbook savings interest, and all
accrued interest shall be delivered to the party entitled to the Earnest Money
Deposit under the Escrow Agreement. If there is a Closing hereunder, the Earnest
Money Deposit shall be credited against the Purchase Price at Closing.
5. LIABILITIES NOT ASSUMED. Notwithstanding anything to the
contrary contained in this Agreement, it is expressly agreed that Purchasers
will not be required to assume, and shall not assume, at the Closing, and the
Seller shall be solely responsible for and shall pay, perform and discharge or
shall cause to be paid, performed and discharged, promptly when due, any
obligations or liabilities of Seller not specifically set forth in this
Agreement, including, without limitation, the following;
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(i) any and all liabilities, obligations, costs and
expenses arising out of or incurred in connection with
any transaction, event, act or omission occurring prior
to the Closing Date, and any claims, suits or
proceedings, and any judgments or settlements arising
from any such claims, suits or proceedings, with respect
thereto, except as may be related to the repair,
maintenance or condition of the Purchased Assets or
otherwise under Paragraph 8C;
(ii) Seller's accounts payable;
(iii) Seller's indebtedness for borrowed money;
(iv) federal, state or local taxes relating to the
Seller's business or property or payable by Seller for
periods ending on or prior to the Closing Date;
(v) liabilities relating to any Benefit Plan, including,
without limitation, withdrawal liability or contributions
with respect to any multi-employer plan; liability due to
the Pension Benefit Guaranty Corporation, or any
beneficiary on account of the termination of any pension
plan; severance benefits arising out of the transactions
provided for in this Agreement; and liabilities accrued
to the Closing Date under any pension plan;
(vi) obligations of the Seller to holders of season or
trip passes, if any, issued by the Seller, for use at
Seller's premises, except as specified on Exhibit E
attached hereto;
(vii) all legal, accounting and other expenses
(including, without limitation, taxes of every kind,
nature and description) incurred in connection with the
negotiation, approval and performance of this Agreement
and the transactions contemplated hereby; and
(viii) the litigation matters identified on Exhibit G
attached hereto.
6. PURCHASE PRICE.
A. Purchase Price. The total Purchase Price for the
Purchased Assets shall be eight million, six hundred and fifty thousand
($8,650,000) dollars.
The Purchase Price shall be allocated among the
Purchasers during the Inspection Period by the mutual agreement of Seller and
Purchaser
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B. Payment of Purchase Price. The Purchase Price, which
amount shall be adjusted for apportionments as provided in Section 18C below,
and for closing costs as provided in Section 18D below, and the balance
remaining after applying the Earnest Money Deposit, shall be payable by
Purchaser to Seller at Closing in cash or by cashier's check, certified funds or
via federal wire transfer. Clearview shall be jointly and severally liable with
Purchaser for this obligation.
7. SELLER'S WARRANTIES AND REPRESENTATIONS. Seller represents
and warrants to Purchasers as follows:
A. Title. Seller is and will be at Closing the sole owner
of all the Purchased Assets and the Purchased Assets will be at Closing free and
clear of any and Encumbrances arising by, through or under Seller, other than
the Permitted Exceptions. Seller shall transfer to Purchaser at Closing good,
marketable and insurable title to the Fee Theatres, subject to the liens for
unpaid, but not yet due real estate taxes and assessments, free and clear of any
and all Encumbrances arising by, through or under Seller, other than the
Permitted Exceptions. In addition, subject to obtaining the Consents defined
herein, Seller shall assign to Purchaser at Closing good, marketable and
insurable title to the Leasehold under the Lease, subject to the Permitted
Exceptions, and shall, subject to obtaining the Approval defined herein,
sublease to Purchaser the leasehold interest in the Sublease Theatre, free and
clear of all Encumbrances arising by, through or under Seller, and will transfer
title to the Personal Property free and clear of any and all Encumbrances
arising by, through or under Seller except for any landlord's lien imposed by
the landlords under the Leases, if any, and the lien for unpaid but not yet due
personal property taxes. Fee title to the Leasehold Theatres may be subject to
the liens for unpaid real estate taxes and assessments, and all exceptions,
encumbrances, easements, reservations, rights-of-way, covenants and conditions
of record as of the Acceptance Date and the Closing Date, and that Seller shall
have no obligation to remove, cure or insure over any exceptions to title to the
Leasehold Theatres. All rental obligations under the Lease incurred through the
Closing Date shall have been paid by Seller as of the Closing, or shall be
prorated at Closing as provided in Section 18C below.
B. Taxes. Seller has paid, or will pay by credit to
Purchaser at Closing, in full all taxes and special assessments on the Fee
Theatres that have or will become due and payable through the date of the
Closing, and the Purchased Assets will not be subject to any lien for payment of
taxes, other than general property taxes and assessments and personal property
taxes constituting a lien for taxes not yet payable.
C. Rent Roll. Annexed hereto as Exhibit D (the "Rent
Roll") is a true and complete listing of all existing leases for space in the
Fee Theatres (the "Space Leases") which sets forth (i) the name of each tenant;
(ii) the rent amount being collected; and (iii) the expiration date of each
lease.
D. Organization. Each of the entities comprising the
Seller is a corporation, duly incorporated, validly existing and in good
standing under the laws of the State
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of its organization, as recited on page one hereof, and has the power and
authority to own or lease the Purchased Assets and enter into this Agreement
and perform its obligations hereunder.
E. Authorization; Enforceability. This Agreement has been
duly executed and delivered by and constitutes the legal, valid and binding
obligations of each Seller, enforceable against it in accordance with its
respective terms. All actions contemplated by this Section have been duly and
validly authorized by all necessary proceedings by Seller, including, without
limitation, approval by its board of directors, except that the sale of the
Larchmont Theatre and Cinema 304 have not yet been approved by the board of
directors, which approval Seller will undertake to obtain within 30 days of the
Acceptance Date. If that approval is not provided within 30 days of the
Acceptance Date, this Agreement shall be terminated and Purchaser's Earnest
Money Deposit shall be immediately refunded.
F. No Violation of Laws or Agreements; Consents. To the
best of Seller's knowledge, neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby nor the
compliance with or fulfillment of the terms, conditions or provisions hereof by
Seller will (i) contravene any provision of any organic document of Seller; (ii)
at Closing, conflict with, result in a breach of, constitute a default or an
event of default under any of the terms of, result in the termination of result
in the loss of any right under, or give to any other Person the right to cause
such a termination of or loss under, any Purchased Asset; (iii) violate any law
or violate any judgment or order of any governmental body by which any of the
Purchased Assets or any of its other assets may be bound or affected; or (iv)
result in the creation or imposition of any Encumbrance upon any of the
Purchased Assets or give to any other Person any interest or right therein.
Except for the Consent and Approval defined herein and the Lien Release, no
consent, approval or authorization of, or registration or filing with, any
Person is required in connection with the execution and delivery by Seller of
this Agreement or the consummation by Seller of the transactions contemplated
hereby.
G. Contract Rights; Security Deposits. To the best of
Seller's knowledge, each Contract Right is a legal, valid and binding obligation
of Seller and is in full force and effect. Seller holds no other Contract Rights
related to the Theatres that will be binding upon Purchaser subsequent to
Closing. All security deposits or like items with respect to the Space Leases
are identified on Exhibit D; all such amounts with respect to the Space Leases
are held by Seller and conform to the terms of the Space Leases.
H. Cash Flow Statements. Seller has made available to
Purchasers for their inspection statements of cash flows for the years 1994,
1995 and 1996 and for the Theatres (the "Cash Flow Statements"), which fairly
present the cash flows for the Theatres for those periods in accordance with
generally accepted accounting principles.
I. Equipment; No Changes. The Theatres are now being
operated by Seller as United Artists Theatres in the ordinary course of its
business considering the age of the theatres and shall be so operated until the
Closing. Seller shall use commercially reasonable efforts to maintain those
operations until Closing. Prior to Closing Seller shall notify Purchasers
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of (i) material adverse change in the Purchased Assets or Real Property; (ii)
damage or destruction to any Purchased Asset or Real Property, whether or not
covered by insurance; (iii) removal, changes, substitutions or replacements to
the Personal Property; or (iv) agreement or commitment to do any of the
foregoing. Between the Acceptance Date and Closing, Seller shall not commit
waste or damage the Purchased Assets.
J. No Pending Litigation or Proceeding. Except for
Exhibit G attached hereto, to Seller's knowledge, no action, suit,
investigation, claim or proceeding of any nature or kind whatsoever, whether
civil, criminal or administrative, by or before any governmental body or
arbitrator is pending against or affecting any of the Purchased Assets or any of
the transactions contemplated by this agreement. To Seller's knowledge, there is
presently no outstanding judgment, decree or order of any governmental body
against or affecting any of the Purchased Assets or any of the transactions
contemplated by this Agreement. Seller does not have pending any Litigation
against any third party related to the Purchased Assets. To Seller's knowledge,
Seller has received no notice of any violation of law which has not been
remedied or rectified nor does Seller have any actual knowledge of any
environmental condition related to the Purchased Assets that requires
remediation mandated by any governmental entity, other than as shall be
indicated on a schedule to be provided by Seller within 14 days of the
Acceptance Date, which schedule shall be incorporated into this Agreement and
made a part hereof. Seller's knowledge is limited to what it has been able to
ascertain from a review of the files and records maintained by its legal
department and its risk management department.
K. Benefit Matters; Miscellaneous. Seller does not
maintain any Benefit Plan for any employees employed at the Theatres that would
cause Purchasers to be liable thereunder or liable to any employees covered
thereby after Closing. No employee of Seller at the Theatres is represented by
any union or other labor organization except as shall be indicated on a schedule
to be delivered to Purchaser within 14 days of the Acceptance Date. No complaint
against Seller, the responsibility for which will be assumed by Purchaser, to
the knowledge of Seller is pending before the National Labor Relations Board,
the Equal Employment Opportunity Commission or any similar state or local
agency, by or on behalf of any employee of Seller. Except as provided in Section
16, neither Seller nor any of its officers, managers or employees has employed
any broker or finder or incurred any liability for any brokerage fee, commission
or finders' fee in connection with any of the transactions contemplated hereby.
8. PURCHASER'S REPRESENTATIONS AND WARRANTIES AND ACKNOWLEDGMENT.
A. Joint and Several. Each of the representations and
warranties made hereunder are made jointly and severally by Clearview, as well
as the Purchaser.
B. Authority. Purchaser represents, warrants, and agrees
that on and as of the Acceptance Date and on and as of Closing, Purchaser will
possess all right, authority and power to execute and perform under this
Agreement, and that this Agreement has been duly executed by Purchaser and is
enforceable against Purchaser in accordance with its terms.
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C. Acknowledgment. Purchaser acknowledges that Purchaser
is purchasing the Purchased Assets solely in reliance on Purchaser's own
investigation, and that no representations or warranties of any kind, either
express or implied have been made by Seller or Seller's agents, other than any
expressly contained in writing herein. Purchaser acknowledges that, subject to
Seller's representations and warranties herein, the Purchased Assets are being
sold "AS IS, WHERE IS, without any warranty of quality, condition or usefulness,
including, without limitation, any WARRANTY OF MERCHANTABILITY or any WARRANTY
OF FITNESS FOR THE PARTICULAR PURPOSE OF PURCHASER." In addition, Purchaser
acknowledges that as of the Closing, Purchaser will be aware of all zoning
regulations, other governmental requirements, site and physical conditions which
may affect the use and condition of the Purchased Assets, and, subject to the
conditions to Purchasers' obligations to close under 17B, agrees to purchase the
Purchased Assets in the condition that it is in at Closing, and, subject to
Seller's representations and warranties herein, Purchaser agrees to assume the
risks and liabilities pertaining to the ownership, use and operation of the
Purchased Assets, including, without limitation, any and all risks and
liabilities associated with or arising under federal, state or local laws
pertaining to the protection of health, welfare or the environment, and
including, without limitation, the Americans With Disabilities Act of 1990 (the
"ADA") and similar local, federal and state laws. Seller makes no representation
or warranty concerning the compliance or noncompliance of the Purchased Assets
under the ADA and similar local, federal and state laws. Purchaser further
acknowledges that, except for 7J, Seller has made no investigation and offers no
representation nor warranty as to whether the Purchased Assets contain hazardous
materials and substances, and that Purchaser will be responsible for its own
environmental investigation of the Purchased Assets and will, subject to
Seller's representations and warranties herein, rely solely on such
investigation. Purchaser agrees not to bring an action against Seller for and
agrees to release and waive any claim or cause of action of any nature
whatsoever which it may now have or have in the future against Seller resulting
from hazardous materials or substances (as those terms may be defined by
applicable local, state and federal law) located on, at or under the Purchased
Assets, other than for any claim or cause of action based upon fraud or
intentional misrepresentation of Seller. Purchaser shall fully release Seller
from any such claim, cause of action or liability resulting from any hazardous
or toxic materials or substances on, at or under the Purchased Assets, other
than for any deliberate act, fraud or gross negligence by Seller or its agents.
The provisions of this paragraph shall survive Closing and delivery of the deeds
and other conveyance documents.
D. Organization and Standing of the Purchaser and
Clearview. Purchaser and Clearview are corporations, duly organized, validly
existing and in good standing under the laws of the State of Delaware and each
have the authority to own, lease and operate its respective properties and to
carry on its business as now conducted, to enter into and perform this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. All resolutions and other proceedings required
to be taken by or on behalf of Purchaser and Clearview have been taken to
authorize each of Purchaser and Clearview to enter into this Agreement and to
perform its obligations hereunder, including without limitation, the execution
and delivery of the Assignment and Guaranty defined below.
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E. Space Leases. Purchaser shall acquire title to the
Purchased Assets subject to the Space Leases. Purchaser shall assume all
obligations and benefits of the Landlord under the Space Leases, arising from
and after the Closing, and the parties shall execute at Closing an assignment
and assumption of such Space Leases in form reasonably satisfactory to Purchaser
and Seller. Seller shall remain responsible and liable only for obligations
arising or having accrued under the Space Leases prior to the date of Closing,
except for those related to compliance with laws and repair or maintenance of
the property subject to the Space Leases.
9. PURCHASER'S INSPECTION OF THE PURCHASED ASSETS.
A. Delivery of Documents. Seller shall provide copies of
the following documents, if any, in Seller's possession relating to the
Purchased Assets, for Purchaser's review on or before the dates specified below:
(1) Within 10 days after the Acceptance Date, a
copy of the Lease, the Space Leases and any and all amendments thereto or
notices thereunder and all prior title work, surveys and deeds obtained by
Seller related to the Theatres.
(2) Within 10 days after the Acceptance Date, the
Contract Rights..
(3) Within 10 days after the Acceptance Date, all
warranties, service, maintenance and management contracts not terminable on 30
days notice.
(4) Within 10 days after the Acceptance Date, a
schedule of all prepaid rents or deposits of any kind, together with all rental
and concession agreements.
(5) Within 30 days after the Acceptance Date,
Seller shall make reasonable efforts to obtain the Approval of the Sublease and
the Consents to the assignment to Purchaser and the Release of Seller under the
Lease from the landlord of the Leasehold Theatre; provided, however, that it
shall not be an event of default by Seller or Purchaser if such Consent and
Release cannot be obtained. Purchaser agrees to fully cooperate with Seller's
efforts to obtain the Consent and Release of Seller under the Lease, which
cooperation may include, without limitation, providing Purchaser's financial and
theatre operation history information to the landlords of the Leasehold Theatre
and the Sublease Theatre.
(6) Within 10 days of the Acceptance Date, Seller
shall deliver those health department certificates and certificates of occupancy
in its possession in connection with the operation, use and occupancy of the
Purchased Assets.
B. Purchaser's Access to the Assets. Seller covenants and
agrees that from and after the Acceptance Date until Closing or earlier
termination of this Agreement, Purchaser and its contractors, agents and/or
representatives, at the sole expense of Purchaser, may enter upon any portion of
the Theatres (Purchaser acknowledges that its access to the
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Leasehold Theatre may be subject to consent of the landlord under the Lease)
from time to time during reasonable business hours, without any disruption of
the normal conduct of Seller's business in the Theatres, and with two business
days' prior written notice to Seller for the purposes of inspections, making
surveys and tests, staking and obtaining topographical information, including
environmental testing and examination of title and operating condition of the
Purchased Assets. All such inspections and tests shall be at Purchaser's sole
cost and expense, which shall not include any overhead, wages or other costs
incurred by Seller. Purchaser will, in the event that this Agreement does not
close, restore the Purchased Assets to substantially the same condition as
existed prior to such activities on the Purchased Assets with respect to any
change to such premises made by Purchasers or Purchasers' agents. Purchaser and
Clearview hereby agree to indemnify Seller and hold Seller harmless from any and
all losses, liabilities, claims, expenses, costs, damages and mechanics' liens
which may be brought or which may be filed against the Purchased Assets or any
portion thereof by reason of the performance of any of the acts of Purchasers or
their agents herein mentioned, and upon Seller's election to defend any action
brought by reason of any of the acts herein mentioned with counsel reasonably
satisfactory to Seller and reimburse Seller for reasonable attorneys' fees and
costs incurred by Seller by reason of any such action. This paragraph shall
survive Closing.
10. TERMINATION BY PURCHASER. The Purchaser may, in its sole
discretion, terminate this Agreement prior to the expiration of the Inspection
Period, by written notice to Seller, for any reason whatsoever or for no reason.
If Purchaser so terminates this Agreement within such time period, then the
Initial Earnest Money Deposit shall be paid to Seller and both parties shall
thereafter be released from all further obligations under this Agreement except
for 9B. Any failure by Purchaser to deliver its written notice of termination to
Seller within the time period specified above shall be deemed to be acceptance
by Purchaser of all such matters and its desire to proceed to Closing. It is
additionally provided that Purchaser may, upon its written election made prior
to the expiration of the Inspection Period, terminate this Agreement as to the
Bronxville Theatre, the Mamaroneck Playhouse, the Wayne Theatre and the
Larchmont Theatre, but proceed to Closing as to the acquisition of Cinema 304 in
New City, in which event the Purchase Price shall be amended to be one million
four hundred thousand ($1,400,000.00) dollars and the parties shall thereafter
proceed to Closing pursuant to all of the terms and conditions of this Agreement
as they relate to Cinema 304.
11. SELLER'S OBLIGATIONS PRIOR TO CLOSING. From and after the
date hereof and until the Closing Date, unless Purchaser shall otherwise consent
in writing, Seller shall conduct the affairs of the Theatres as follows:
A. Ordinary Course; Compliance. The Theatres shall be
conducted only in the ordinary course and consistent with past practice. Seller
shall maintain the Purchased Assets consistent with past practice and shall
comply in a timely fashion with all material provisions of all Contract Rights.
Seller shall use commercially reasonable efforts to keep the Theatre
organization intact and keep available the services of its present employees and
preserve the good will of its patrons and others having business relations with
it. Seller shall maintain in full force and effect its policies of insurance,
subject only to variations required by the ordinary
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operations of the Theatres, or else shall obtain, prior to the lapse of any
policy, substantially similar coverage with insurers of recognized standing.
B. Prohibited Transactions. Except in the ordinary course
of its business, Seller shall not, with respect to the Theatres; (i) amend or
terminate any Contract Right or enter into additional Contract Rights that are
not terminable on reasonably short notice; (ii) make any changes, substitutions
or replacements to the Personal Property or any other material change to the
Theatres to the extent any of the above causes a material diminishment in the
value of the Purchased Assets; or (iii) take any action or omit to take any
action that will cause a breach or termination of any Contract Rights, other
than termination by fulfillment of the terms thereunder.
C. Lien Releases. Seller shall have obtained, by Closing,
at its sole cost and expense, a full release of the Purchased Assets on terms
acceptable to Seller in its sole discretion, related to the theatre at
Bronxville, New York from the lien of that certain Mortgage, dated as of October
1, 1988 (the "Mortgage"), made by Seller for the benefit of Connecticut Bank and
Trust Company, National Association and Lese Amato as Trustees, as spread by a
Spreader and Release Agreement dated May 1, 1990 between those parties, together
with the termination of UCC-1 Financing Statements filed simultaneously
therewith. Seller's failure to obtain the release of Mortgage shall not be a
default under this Agreement but shall entitle Purchaser to a refund of its
Earnest Money Deposit, unless Purchaser proceeds to closing on Cinema 304.
12. FULFILLMENT OF AGREEMENTS. Except as otherwise provided in
this Agreement, each party hereto shall use commercially reasonably efforts to
cause all of those conditions to the obligations of the other that are not
beyond its reasonable control to be satisfied on or prior to the Closing and
shall use commercially reasonable efforts to take, or to cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement.
13. EMPLOYMENT. Seller agrees to pay, perform and discharge any
and all severance payments, payroll and employment related Liabilities with
respect to employees of Seller at the Theatres accruing up to the close of
business on the date immediately preceding the Closing Date except that
Purchaser agrees that Seller intends to give its employees at least two weeks'
notice prior to the Closing Date and Purchaser acknowledges that with respect to
any employees of Seller that it hires and employs after the Closing Date,
Purchaser will honor and pay all sick time and vacation, as well as honor the
seniority status of such employees. Purchasers shall have the right, but not the
obligation, to offer employment (under such terms as Purchasers deem appropriate
in their sole discretion) to any of the employees of Seller who are employed at
the Theatres. Seller shall remain liable for all Liability for all workers'
compensation and disability of or with respect to all of Seller's employees
attributable to injuries, claims, conditions, events and occurrences occurring
prior to the Closing Date.
14. TRANSITIONAL MATTERS. Seller shall reasonably cooperate with
and assist Purchasers and its authorized representatives in order to provide, to
the extent reasonably
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agreeable to Seller, an efficient transfer of control of the Purchased Assets
and the Real Property and to avoid any undue interruption in the activities and
operations of the Theatres and the Real Property following the Closing Date
provided that Seller is reimbursed for its costs incurred post-closing,
including wages and overhead. Seller shall not cause any utilities to be
disconnected until the Purchasers shall have established an account for such
utility in Purchasers' own name unless same has not occurred by Closing. Seller
shall assist in transferring to each Purchaser the telephone numbers for each
Theatre location.
15. BOOKS AND RECORDS. Seller shall not destroy or dispose of any
books, records or files relating to the Theatres to the extent that such
information is reasonably necessary for Purchasers' audit of Seller's financial
statements for the Theaters for 1994, 1995 and 1996 until Purchasers have
completed such audit and for the period of time thereafter that Seller would
ordinarily maintain those records but no longer than two years. Seller shall
permit and cooperate and assist Purchasers, at Purchaser's expense and at no
cost to Seller, in the preparation of an audit of the financial statements for
the Theaters for calendar years 1994, 1995 and 1996. Seller shall have no
liability or responsibility for such audit.
16. EVIDENCE OF TITLE.
A. Condition of Title. Seller shall deliver to
Purchasers, in the manner allocated in Paragraph 2, a limited warranty bill of
sale for all of the Personal Property in form and substance satisfactory to
Purchasers and Seller, free and clear of all Encumbrances arising by, through or
under Seller, other than Permitted Exceptions. Purchasers may obtain, at their
expense, such title insurance and surveys as Purchasers deem appropriate. Seller
shall deliver to CCC Realty Bargain and Sale deeds with covenants against
grantor's acts to the Real Property, free and clear of all Encumbrances arising
by, through or under Seller, other than Permitted Exceptions.
B. Defects of Title. If prior to the last day of the
Inspection Period, Purchaser asserts the existence of any encumbrance,
encroachment on or defect in or objection to title to any portion of the Fee
Theatres based on Purchaser's examination of the Title Commitment and the Title
Documents, or any other information received by Purchaser (other than a title
exception described on Exhibit F, in which case notice of a title defect must be
given by Purchaser to Seller within 10 days after the Acceptance Date) (any of
which is called a "Defect in Title"), Purchaser shall give Seller written notice
of such Defect in Title and Seller shall have 30 days after receipt of such
notice to elect to either (i) terminate this Agreement by written notice to
Purchaser, or (ii) remove, or otherwise cure to Purchaser's satisfaction, the
Defect in Title, and if necessary the date of Closing shall be extended for such
30-day period to allow Seller to so remove or cure the Defect in Title. In the
event Seller fails, refuses or is unable to remove or cure the Defect in Title,
then Purchaser shall have the right to either: (i) waive such Defect in Title,
override Seller's election to terminate and proceed to Closing or (ii) terminate
this Agreement on or before the date of Closing, by delivering written notice of
such to Seller as provided in Section 9 above. In the event Purchaser so
terminates this Agreement, Purchaser shall receive a refund of any refundable
portion of its Earnest Money Deposit, only if the Defect in Title is a material
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defect in title that prevents the use of the Fee Theatres for its intended
purpose, and both parties shall be released from all further obligations under
this Agreement.
C. Permitted Exceptions. "Permitted Exceptions" shall
mean, with respect to the Fee Theatres, the liens for unpaid, but not yet due
real estate taxes and assessments, the exceptions to title described on the
attached Exhibit F, which will be supplemented during the Inspection Period, and
all exceptions, encumbrances, easements, reservations, rights-of-way, covenants
and conditions of record as of the Acceptance Date and continuing as of the
Closing Date except those liens, claims, pledges, mortgages and other monetary
encumbrances arising by, through or under Seller. "Permitted Exceptions" shall
mean, with respect to the Leasehold Theatres, the liens for unpaid, but not yet
due real estate taxes and assessments, and all exceptions, encumbrances,
easements, reservations, rights-of-way, covenants and conditions of record as of
the Acceptance Date and the Closing Date. "Permitted Exceptions" shall mean,
with respect to the Personal Property, the Encumbrances of record, as of the
Acceptance Date, which continue on the Closing Date, except those Encumbrances
arising by, through or under Seller, but including any landlord's lien imposed
by the landlord under the Lease, if any, and including the lien for unpaid but
not yet due personal property taxes.
D. Change in Title. In the event any supplement to a
title commitment obtained by Purchasers discloses any material change to the
Permitted Exceptions or Purchaser otherwise obtains notice of any change or
addition to the Permitted Exceptions on or before the date of Closing, other
than changes caused by Purchaser (the "Additional Exception"), then Seller may,
at Seller's sole election either: (i) terminate this Agreement by written notice
to Purchaser, or (ii) reduce the Purchase Price for the Purchased Assets by an
amount mutually agreed to by the parties that would be necessary to satisfy the
Additional Exception (provided that Purchaser is willing to close subject to
such Additional Exception with such reduction in price), or (iii) remove the
Additional Exception. In the event the Additional Exception cannot be corrected
or cured on or before the Closing, Seller may extend the date of Closing for a
time period not to exceed 60 days in order to correct or cure such matter. If
Seller does not elect to correct or cure the Additional Exception or if such
Additional Exception cannot be corrected or cured within the 60-day extension of
the Closing Date, then Purchaser shall have the right to either: (i) waive any
such Additional Exception and elect to close under this Agreement with a
diminution in the Purchase Price equal to the amount the parties mutually agree
would be required to satisfy any lien or encumbrance or to correct or cure such
Additional Exception, or (ii) terminate this Agreement by delivering written
notice to Seller on or before the date of Closing (or as extended). In the event
Purchaser so terminates this Agreement, Purchaser shall receive a prompt refund
of its Earnest Money Deposit, only if the Additional Exception is a material
defect in title that prevents the use of the property for its intended purpose,
and the parties shall be relieved of all further obligations under this
Agreement. Notwithstanding the foregoing, Seller shall be obligated to cure or
remove any Additional Exception intentionally created by Seller.
17. CONDITIONS PRECEDENT TO CLOSING. The obligations of the
respective parties to close the purchase of the Purchased Assets will be subject
to the following conditions:
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A. Seller's Conditions. Seller will not be obligated to
close the purchase of the Purchased Assets unless (i) Purchaser has complied
with all of the terms and conditions of this Agreement to be met prior to
Closing, has delivered to Seller all funds, instruments, and documents required
to be deposited by Purchaser in connection with the Closing pursuant to the
terms of this Agreement, and all of the representations and warranties of
Purchaser and Clearview contained in this Agreement remain true and correct in
all material respects on and as of the Closing Date; (ii) Seller has received,
prior to the expiration of the Inspection Period, any required consents by the
landlord or other third parties to the assignment of the Lease and other
material agreements relating to the operation of the Theatres (the "Consents")
and has received executed release of Seller's obligations under the Lease by the
landlord of the Leasehold Theatre (the "Release"), which Release shall be in a
form satisfactory to Seller; subject, however, to the following paragraph; (iii)
Seller has obtained, prior to the expiration of the Inspection Period,
landlord's approval of the Sublease ("Approval"); (iv) Seller has obtained at
Closing the Lien Release of the Bronxville Theatre under the Indenture of
Mortgage, on terms and conditions satisfactory to Seller; and (v) Purchaser
proceeds to Closing on all five Theatres or just Cinema 304, as provided for in
Paragraph 10. Prior to the expiration of the Inspection Period, Seller shall
undertake to provide to Purchaser a letter from the mortgagee indicating that it
will release the Bronxville Theatre from the Indenture of Mortgage and under
what conditions that release will be given. Seller may at any time at or prior
to Closing waive any one or more of the preceding requirements by written notice
to Purchaser.
If the Consents to assignment of the Lease have been
obtained from the landlord of the Leasehold Theatre, but the Release of Seller
has not been obtained at the time of Closing as provided in clause (ii) above,
then such Release requirement shall be deemed waived by Seller, and the parties
shall proceed to Closing; provided, however, that the conditions set forth below
in this paragraph are satisfied. In the event a Release of Seller's obligations
under the Lease cannot be obtained from the landlord of the Leasehold Theatre
prior to Closing, then Purchaser agrees to (a) not assign or sublet such Lease
without the prior written consent of Seller in its sole discretion, (b) not
exercise any option to extend the term of the Lease without Seller's reasonable
prior written consent (and further provided that, in that event, Purchaser shall
make further efforts, in a commercially reasonable manner, to obtain the
Release), (c) operate the Leasehold Theatre in a manner consistent with the
Lease, (d) observe all of the covenants under the Lease and perform all of the
tenant's obligations thereunder in accordance with the terms of the Lease, (e)
indemnify and hold Seller harmless from and against any and all claims, losses,
damages, costs and expenses (including, but not limited to, attorneys' and legal
assistants' fees and expenses) arising out of the Lease for the Leasehold
Theatre after the date of Closing; and (f) not commit any act that would
jeopardize Seller's security interest. In the event that Purchaser fails to
observe any of the covenants contained in this paragraph or is in default (after
all applicable cure periods have expired under the Lease) under the terms of the
Lease of the Leasehold Theatre (the "Defaulted Theatre"), or under the
Assignment, Consent and Estoppel Agreement for the Defaulted Theatre in a form
to be agreed upon by the parties and executed at the Closing (the "Assignment,"
which shall include a collateral assignment, security agreement and UCC-1
Financing Statement), then Seller may pursue its remedies against Clearview
pursuant to the Guaranty of the Lease given under 24B hereof and may, without
any obligation, perform Purchasers' obligations and covenants under the Lease of
such Defaulted Theatre, and Seller shall
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be able to repossess the Defaulted Theatre and dispossess Purchaser and any
other permitted assignees, subtenants, licensees or parties in possession, and
Purchaser will be liable for any damages, costs and expenses, suffered by Seller
as to such Defaulted Theatre (including, but not limited to, attorneys' and
legal assistants' fees and expenses but excluding consequential damages) and the
cost of any premium for any bond required in connection with an injunction
brought to enforce Seller's remedies under this paragraph. The Assignment shall
provide that Seller shall not exercise its rights to repossess the Defaulted
Theatre unless Clearview has defaulted for the payment of money under its
Guaranty hereunder or if Purchaser defaults under the Lease by failing to
operate the Defaulted Theatre as a theatre on a continuous basis. In the event
the Release is obtained subsequent to Closing, the Assignment and UCC-1 will be
terminated, and the Guaranty shall be released as to the Wayne Theatre.
B. Purchaser's Conditions. Purchaser will not be
obligated to close the purchase of the Purchased Assets unless (i) Seller has
complied with all of the terms and conditions of this Agreement to be met prior
to and at the Closing, and has delivered to Purchaser all instruments and
documents required to be delivered by Seller in connection with the Closing
pursuant to the terms of this Agreement; (ii) Seller has obtained a release of
the Bronxville Theatre under the Indenture of Mortgage and the Purchased Assets
will be free of all other Encumbrances other than the Permitted Exceptions on
terms and conditions satisfactory to Seller prior to Closing; (iii) Seller has
obtained the consent of the landlord to the assignment of the Lease; (iv) Seller
has obtained the consent of the landlord to the Sublease; (v) Seller shall have
obtained prior to Closing a letter of Non-Applicability with respect to the
Leasehold Theatre subject to the Lease under the New Jersey Site Recovery Act
(PL 1993, ch. 39); (vi) each of the representations and warranties of Seller
contained in this Agreement shall be true and correct in all material respects
on and as of the Closing Date, with the same force and effect as though such
representations and warranties had been made on, as of and with reference to the
Closing Date; and (vii) no statute, regulation or order of any governmental body
shall be in effect from and after the Inspection Period that restrains or
prohibits the transactions contemplated hereby or that would, after Closing,
limit or adversely affect Purchasers' ownership of the Purchased Assets in a
manner different from Seller's ownership thereof, and there shall not have been
any threatened, nor shall there be pending, any action or proceeding by or
before any governmental body challenging the lawfulness of or seeking to prevent
or delay any of the transactions contemplated by this Agreement or seeking
monetary or other relief by reason of the consummation of any such transactions.
Purchaser may at any time at or prior to Closing waive any of the preceding
requirements by written notice to Purchaser.
18. CLOSING.
A. Date, Time, and Place. Closing will take place by mail
or at such location as agreed to by the parties, after all conditions precedent,
as set forth in Section 17 have been fully satisfied or waived by such party,
provided that the parties shall use all reasonable efforts to close by the date
that is 120 days from the Acceptance Date (the "Closing Date"). In the event
Purchaser desires to extend the Closing Date, not to exceed an additional 90
days, then Purchaser shall on or before the initial Closing Date, deposit with
Seller an additional deposit of
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$75,000 (the "Additional Earnest Money Deposit"), which shall be non-refundable
in all events except (i) in the event of a Seller's default as provided for in
Section 23B or (ii) in the event of the termination of this Agreement pursuant
to Sections 16B or 16D, or (iii) the failure to occur of the conditions set
forth in Section 11C in which event or events, the Earnest Money Deposit shall
be promptly refunded to Purchasers, without set-off of any kind. Purchaser
acknowledges and agrees that the Additional Earnest Money Deposit shall, if this
transaction is consummated, be applied toward the Purchase Price at Closing.
The transactions consummated at Closing, when effected,
will be deemed to be effective as of the close of business on the date of
Closing except as otherwise specifically provided in this Agreement. All action
to be taken at Closing will be considered as taken simultaneously and no paper,
document, or instrument will be considered to be delivered until all items to be
delivered have been delivered. At Closing, the net proceeds due and all Closing
documents contemplated herein required for Closing will be delivered to
Purchaser and Seller.
B. Conveyances and Other Actions.
(1) At Closing, Seller will deliver to Purchaser
the following:
(i) Duly executed and acknowledged Bargain
and Sale deeds with covenants against grantor's acts conveying the Fee Theatres
to Purchaser.
(ii) A duly executed Assignment together
with the Consent.
(iii) A duly executed limited warranty
bill of sale conveying the other Personal Property.
(iv) A Form TP-584 with the amount of the
New York State Real Estate Transfer Tax due in connection with this transaction
deducted from Closing proceeds.
(v) An assignment, duly executed and
acknowledged by Seller, of the Space Leases.
(vi) A duly executed and acknowledged
Sublease with the Approval.
(vii) Assignments of all transferable or
assignable licenses, permits and warranties relating to the Purchased Assets and
of any intellectual property included in the Purchased Assets, duly executed and
in forms reasonably acceptable to Purchasers and Seller.
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(viii) Keys for each Theatre location.
(ix) All assignable vendor warranties
(including those for the roofs on each Theatre) respecting the Purchased Assets
which are in Seller's possession.
(x) Notices to all tenants under the Space
Leases.
(xi) The Security Deposits under the
Tenant Leases (as a credit against the Purchase Price).
(xii) Any other documents contemplated to
be delivered by the terms of this Agreement or reasonably requested by the
Purchasers.
C. Apportionments. The following items will be prorated
to the Closing Date:
(1) General real estate, special assessments, and
personal property taxes applicable to the Purchased Assets for the year of the
Closing, based upon the then latest available levy and assessment.
(2) Any other governmental or special district
fees and assessments as are customarily adjusted in similar real estate
transactions.
(3) Such other items as are customarily adjusted
in similar real estate transactions, including without limitation, rent and
other charges under the Space Leases, rents and additional rents, utilities,
payments under the Lease for taxes and operating expenses, expenses pertaining
to the Purchased Assets and other items customarily prorated, including without
limitation monthly minimum rent, monthly CAM charges, monthly electrical charges
for Seller's pylon sign at or about the Theatres, monthly real estate tax
contributions and percentage rents, shall be apportioned between Purchaser and
Seller as of the close of business on the Closing Date. All prorations shall
constitute a final settlement between the parties, and no further adjustment
between Purchaser and Seller shall be made. All prorations regarding taxes and
assessments shall be based upon the most recently available tax bill presented
to Seller. Prorations for expenses under the Lease shall be based upon the most
recent billing therefor by the landlord under the Lease. Prorations for
percentage rent shall be as provided in Subsection (4) below. All prepaid and
unearned film rental expenses of Seller, if any, pertaining to the Theatres will
be credited to Seller at Closing, including reimbursement at Closing for any
advances and guaranties unearned. All unpaid film rental expenses of Seller
arising prior to Closing, if any, pertaining to the Theatres will remain
Seller's obligation.
(4) Any percentage rentals under the Lease shall
be prorated to the Closing Date by calculating an annualized sales amount for
the Leasehold Theatre based on
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actual sales information for the twelve months preceding Closing, minus the
breakpoint specified in the Lease.
D. Closing Costs. All documentary, transfer, use and
sales taxes arising out of the sale and assignment of the Purchased Assets to
Purchaser shall be divided and paid in equal shares by Purchaser and Seller.
Title insurance premiums for any owner's title insurance policies purchased by
Purchasers shall be paid by Purchaser. Any endorsements thereon, together with
any other costs incurred in connection with the title insurance policies,
including but not limited to survey costs for surveys purchased by Purchaser,
shall be paid by Purchaser. Deed taxes, recording costs, documentary, transfer,
sales, use and any other taxes arising from the sale and assignment of the
Purchased Assets shall be paid in equal shares by Purchaser and Seller. Seller
shall pay recording charges for the satisfaction or release of any mortgage and
financing statements encumbering the Real Property. Any other closing costs
shall be shared equally by Purchaser and Seller. Each party will pay the fees
and expenses incurred by its respective legal counsel in connection with the
transaction contemplated under this Agreement, except as provided in Section 23C
below.
E. Real Estate Transfer Tax. Seller and Purchaser agree
to comply in a timely manner with the requirements of Article 31 of the Tax Law
of the State of New York and the regulations applicable thereto, as the same
from time to time may be amended.
F. Possession. Possession of the Purchased Assets shall
be delivered to Purchaser at the Closing, subject to the occupancy rights of
tenants under the Space Leases.
G. Allocation of Consideration. The Purchase Price shall
be allocated among the Purchased Assets during the Inspection Period, which
allocation shall be mutually agreeable to Purchaser and Seller. Purchaser and
Seller hereby agree that neither party will take a position on any income tax
return or before any governmental agency charged with the collection of any
income tax or in any judicial proceeding that is in any way inconsistent with
the allocation agreed upon pursuant to this Section 18G, and that it will
prepare and file, promptly as and when due, all forms of returns required to be
filed by the Internal Revenue Service and any other governmental authority. The
provisions of this Section 18G shall survive Closing.
19. PURCHASER'S CLOSING OBLIGATIONS. At Closing, Purchaser will
deliver to Seller the following:
A. The amount of the Purchase Price payable at Closing as
provided in Section 6 above (as adjusted for apportionments under Section 17C
above) after credit for the Earnest Money Deposit.
B. The duly executed, and where appropriate acknowledged,
Assignment, Guaranty, UCC-1 and any other documents contemplated under Section
17A above.
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C. An assumption agreement of all obligations of Seller
under the Space Leases, the Lease and all outstanding Contracts and an executed
Sublease.
D. The closing costs and recording fees payable by
Purchaser as set forth in Section 18 above.
E. Any other documents required by this Agreement to be
delivered by Purchaser at Closing.
20. RISK OF LOSS. If, prior to Closing, a material portion of the
Purchased Assets are damaged by fire, vandalism, acts of God or other casualty
or cause, so that the use for which Purchaser intends the Purchased Assets is
materially and adversely impaired, Seller shall, prior to Closing, give
Purchaser notice of any such damage. In any such event, Purchaser shall have the
option of (a) taking the Purchased Assets as it is without any reduction to the
Purchase Price, but with the insurance proceeds applicable to the Purchased
Assets, if any, or the right to receive the same, subject to the terms of the
Lease, if applicable, or (b) terminating this Agreement and both parties shall
be released from all further obligations under this Agreement. If Purchaser
elects to proceed to Closing, Seller agrees to assign to Purchaser at the
Closing, Seller's rights to such insurance proceeds applicable to the Purchased
Assets. Seller shall be entitled to retain any business interruption insurance
proceeds and any insurance applicable to Seller's assets excluded from the
"Purchased Assets."
21. CONDEMNATION. If prior to Closing any governmental or other
entity having condemnation authority institutes an eminent domain proceeding or
takes any steps preliminary thereto to condemn any material portion of the
Purchased Assets such that the operation of any of the Purchased Assets will be
materially, adversely affected, Purchaser will have the right to terminate this
Agreement upon notice to Seller, and both parties shall be released from all
further obligations under this Agreement. If Purchaser does not so terminate
this Agreement, Purchaser shall proceed to Closing, without any reduction to the
Purchase Price, and Seller agrees to assign to Purchaser at the Closing,
Seller's rights to any compensation or damages relating to such taking,
excluding any amounts applicable to Seller's trade fixtures, equipment and
personal property.
22. BROKERAGE. The parties acknowledge that no real estate or
other broker is entitled to any commission as a result of the transactions
contemplated in this Agreement, other than Brett E. Marks of First New York
Realty Co., Inc., who shall be entitled to a commission paid by Seller and equal
to 3% of the Purchase Price under the terms of a separate agreement. In the
event that any other claim for a broker's fee or real estate commission is
asserted, the party against whom the claim is asserted shall indemnify and hold
harmless the other party from any and all claims, losses, damages, or expenses
of any nature whatsoever arising out of said claim, including, but not limited
to, reasonable attorneys' fees and costs.
23. FAILURE TO CLOSE.
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A. Purchaser's Default. If Purchaser, in default of its
obligations under this Agreement, fails to perform any of its material
obligations contemplated by this Agreement, Seller's exclusive remedy will be to
terminate this Agreement, and retain the Earnest Money Deposit received by
Seller up to that point as liquidated damages.
B. Seller's Default. If Seller, in default of its
obligations hereunder, fails to perform any of the material obligations
contemplated by this Agreement, Purchaser's exclusive remedies will be, in the
alternative, to either (i) terminate this Agreement, receive a refund of the
Earnest Money Deposit and recover from Seller its actual out-of-pocket costs
associated with this Agreement, for reimbursement of actual out of pocket costs,
limited to environmental review, survey, title work and the costs of any
applications or fees to governmental authorities, not to exceed $50,000, and
both parties shall be released from all further obligations under this
Agreement; or (ii) to seek specific performance. Purchaser shall have no other
remedies at law or in equity.
C. Attorneys' Fees. In the event of litigation arising
out of any alleged default or breach of this Agreement, the prevailing party
shall be entitled to recover all reasonable costs and expenses incurred in the
prosecution or defense of such litigation (including, without limitation,
reasonable attorneys' and legal assistants' fees and costs). For purposes of
this Section, "prevailing party" shall include a party who withdraws or moves to
dismiss a claim in consideration for payment received, performance owed, or
other consideration in substantial satisfaction of the claim withdrawn or
dismissed.
24. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by any party in this Agreement or pursuant
hereto shall survive the Closing for a period of one year, except for Paragraphs
7A (which shall be merged into the Deeds) and 7B, concerning which Purchaser may
elect to obtain title insurance.
A. Indemnification by Seller. Subsequent to the Closing
hereunder, Seller shall indemnify, defend, save and hold Purchasers and their
officers, directors, employees, agents and affiliates (collectively, "Purchasers
Indemnitees") harmless from and against all demands, claims, actions or causes
of action, assessments, losses, damages, deficiencies, Liabilities, costs and
expenses (including reasonable legal fees, interest, penalties, and all
reasonable amounts paid in investigation, defense or settlement of any of the
foregoing but excluding any Liability for lost profits or consequential damages
(collectively, "Purchasers Damages") asserted against, imposed upon, resulting
to, required to be paid by, or incurred by any Purchasers Indemnitees, directly
or indirectly, in connection with, arising out of, resulting from, or which
would not have occurred but for, (i) an intentional misrepresentation of any
representation or warranty made by Seller in this Agreement (for the period of
survival described above), and (ii) any Liabilities Not Assumed.
B. Indemnification by Purchaser and Clearview. Subsequent
to the Closing hereunder, Purchasers and Clearview shall indemnify, defend, save
and hold Seller and its officers, directors, employees, agents and affiliates
(collectively, "Seller Indemnitees") harmless
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from and against all demands, claims, actions or causes of action, assessments,
losses, damages, deficiencies, Liabilities, costs and expenses (including
reasonable legal fees, interest, penalties, and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing but excluding any
Liability for lost profits (collectively, "Seller Damages") asserted against,
imposed upon, resulting to, required to be paid by, or incurred by any Seller
Indemnitees, directly or indirectly, in connection with, arising out of,
resulting from, or which would not have occurred but for, (i) an intentional
misrepresentation of any representation or warranty made by Purchasers in this
Agreement (for the period of survival described above) or in any certificate or
document furnished pursuant hereto by Purchasers, (ii) any Contract Rights
(other than in respect of any breach or noncompliance therewith prior to the
Closing); (iii) a breach by CCC Larchmont under the Sublease; and (iv) in the
event that the Release of Seller described in Section 17 above is not obtained,
a breach by CCC Wayne of any of the payment and performance obligations imposed
by the Lease; the obligations of CCC Wayne and CCC Larchmont under the Lease and
Sublease, respectively, being specifically and unconditionally guaranteed by
Clearview hereunder, said guaranty being absolute, present and continuing and in
no way contingent upon any attempt to collect from or enforce any obligations
first from CCC Wayne or CCC Larchmont or any other condition of contingency.
Said guaranty shall be effectuated by a separate guaranty to be executed by
Clearview at Closing, in a form to be mutually agreed upon by the parties prior
to Closing (the "Guaranty"). Nothing shall discharge this guaranty liability
until all obligations of CCC Wayne as assignee under the Lease and CCC Larchmont
under the Sublease have been performed in full and all sums due thereunder paid
in full, or until the Release is obtained.
25. BULK SALES LAW. Purchaser and Seller hereby waive compliance
with the provisions of any bulk sales law which may apply to the sale of the
Purchased Assets under this Agreement; provided, however, that Seller shall pay
and discharge when due or contest or litigate all claims of creditors which may
be asserted against Purchaser or the Purchased Assets by reason of such
non-compliance and to indemnify and hold Purchaser harmless from and against any
and all such claims from obligations arising prior to the Closing Date; and
further, Seller shall promptly take all necessary action to remove any liens or
encumbrance which are placed on the Purchased Assets as a result of such
non-compliance with applicable bulk sales laws.
26. FILM BOOKING. Purchaser acknowledges that Seller may own or
operate other theatres in competition with the Theatres, and Purchaser shall
have no claim, and agrees to waive and release Seller from and against any and
all claims with respect to the operation of such other theatres, including any
claim that the selection of motion pictures or other attractions for such other
theatres are being booked in a manner as to give preference or advantage to such
other theatres operated by Seller.
27. MISCELLANEOUS.
A. Notices. All notices hereunder to the respective
parties will be in writing and will be served by personal delivery or by
prepaid, express mail via a reputable courier service, or by prepaid, registered
or certified mail, addressed to the respective parties at their addresses set
forth below. Any such notice to Seller or Purchaser will be deemed to be given
and effective: (i) if personally delivered, then on the date of such delivery,
(ii) if sent via express mail,
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then twenty-four (24) hours after the date such notice is sent, or (iii) if sent
by registered or certified mail, then three (3) days following the date on which
such notice is deposited in the United States mail addressed as aforesaid.
Copies of all notices will be sent to the following:
If to Purchaser: Clearview Cinema Group, Inc.
7 Waverly Place
Madison, NJ 07940
Attn: A. Dale Mayo
President and CEO
with a copy to: Kirkpatrick & Lockhart, L.L.P.
Pittsburgh, PA 15222-2312
Attn: David L. Forney, Esq.
If to Seller: United Artists Theatre Circuit, Inc.
9110 E. Nichols Avenue, Suite 200
Englewood, CO 80112
Attn: Mr. Hal Cleveland and
Rebecca Wilcox Dow, Esq.
with a copy to: Rosen, Einbinder & Dunn, P.C.
641 Lexington Avenue
New York, NY 10022
Attn: Terrence M. Dunn, Esq.
All such addresses may be changed by notice given in accordance with this
Section 21A.
B. Parties in Interest. All of the terms and provisions
of this Agreement will be binding upon and inure to the benefit of and be
enforceable by the successors and permitted assigns of Seller and Purchaser.
C. Entire Agreement. There are and were no verbal or
written representations, warranties, understandings, stipulations, agreements,
or promises pertaining to the subject matter of this Agreement made by either
party or any agent, employee, or other representative of either party or by any
broker or any other person representing or purporting to represent either party,
not incorporated in writing in this Agreement. Neither this Agreement nor any of
the terms, provisions, conditions, representations, or covenants contained in
this Agreement can be modified, changed, terminated, amended, superseded,
waived, or extended except by an appropriate written instrument duly executed by
the parties.
D. Counterparts. This Agreement may be executed in two or
more counterparts, each of which, taken together, shall constitute one original.
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E. Time. Time is of the essence under this Agreement. In
the event the last day permitted for the performance of any act required or
permitted under this Agreement falls on a Saturday, Sunday, or holiday, the time
for such performance will be extended to the next succeeding business day. Time
periods under this Agreement will exclude the first day and include the last day
of such time period.
F. Section and Other Headings. The section and other
headings contained in this Agreement are for reference purposes only and will
not in any way affect the meaning or interpretation of the text of this
Agreement.
G. Governing Law. This Agreement will be construed and
enforced in accordance with the laws of the state in which the relevant Real
Property or Purchased Asset is located.
H. Assignment of Agreement. The Purchaser may not assign
all or any interest in this Agreement, nor any of the benefits or obligations of
this Agreement, without the prior written consent of Seller; provided, however,
that Purchasers may collaterally assign this Agreement without the consent of
Seller to any secured commercial lender of Purchasers or affiliate of Purchasers
and Purchasers may assign their rights hereunder to another investor, provided
Clearview is not released and remains liable under the terms of this Agreement.
Seller shall not be entitled to assign all or any interest in this Agreement
without the prior written consent of Purchaser except in the event of the
assignment or sale of all of its theatre assets. Any assignment in violation
hereof will be void.
I. Recording. This Agreement may not be recorded in whole
or in part, and any recordation in violation hereof shall be deemed to be a
default under this Agreement by the recording party.
J. Binding Effect. This Agreement will not be binding or
effective until properly executed and delivered by Seller and Purchaser.
K. Gender. As used in this Agreement, the masculine will
include the feminine and neuter, the singular will include the plural, and the
plural will include the singular, as the context may require.
L. No Joint Venture, Partnership, Agency, Etc. This
Agreement shall not be construed as in any way establishing a partnership, joint
venture, express or implied agency, or employer-employee relationship between
Purchaser and Seller.
M. No Third Party Beneficiaries. This Agreement is for
the sole benefit of Purchaser and Seller and their respective successors and
permitted assigns, and no other person or entity shall be entitled to rely upon
or receive any benefit from this Agreement.
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<PAGE>
N. No Waiver. No consent or waiver, express or implied,
by Purchaser to or of any breach of any representation, covenant or warranty of
Seller shall be construed as a consent or waiver to or of any other breach of
the same or any other representation, covenant or warranty.
O. Confidentiality. Seller and Purchaser agree that prior
to Closing under this Agreement, except as otherwise provided by law, neither
party, without the written consent of the other, will issue or authorize the
issuance of any press release, publicity, or information concerning the
transaction contemplated by this Agreement, and any information obtained by
either party as a result of this Agreement or investigations of the Purchased
Assets, shall be treated as strictly confidential, except for any such
communications that may be required by applicable laws.
P. Non-Foreign Status Certification. At Closing, Seller
shall provide Purchaser with a fully executed certification of non-foreign
status in a form which satisfies Section 1445 of the Internal Revenue Code.
Q. Antitrust Matters. To the extent permitted by
applicable laws, Purchaser shall indemnify and hold Seller harmless from and
against any and all claims, losses, damages, costs and expenses, including
reasonable attorneys' fees, arising out of any claim that this Agreement, or the
transactions contemplated herein, violate state or federal antitrust laws, rules
or regulations to the extent such claim is based upon the relative competitive
position of Purchaser from and after consummation of the transactions
contemplated hereunder.
R. Severability. If any term or other provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced under any rule of law in any particular respect or
under any particular circumstances, such term or provision shall nevertheless
remain in full force and effect in all other respects and under all other
circumstances, and all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect as long as the economic or
legal substance of the transaction contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
fullest extent possible.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date specified below.
SELLER:
UNITED ARTISTS THEATRE CIRCUIT,
INC., a Maryland corporation
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By: /s/ Hal Cleveland
-------------------------------
Its: Executive Vice President
Date: July 18, 1997
UNITED ARTISTS PROPERTIES I CORP.,
a Colorado corporation
By: /s/ Hal Cleveland
-------------------------------
Its: Executive Vice President
Date: July 18, 1997
MAMARONECK PLAYHOUSE HOLDING
CORP., a New York corporation
By: /s/ Hal Cleveland
-------------------------------
Its: Executive Vice President
Date: July 18, 1997
PURCHASER:
CCC BRONXVILLE CINEMA CORP.,
a Delaware corporation
By: /s/ A. Dale Mayo
-------------------------------
Its: President
Date: July 21, 1997
CCC MAMARONECK CINEMA CORP.,
a Delaware corporation
By: /s/ A. Dale Mayo
-------------------------------
Its: President
Date: July 21, 1997
a Delaware corporation
CC WAYNE CINEMA CORP.,
a Delaware corporation
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<PAGE>
By: /s/ A. Dale Mayo
-------------------------------
Its: President
Date: July 21, 1997
CCC B.C. REALTY CORP, a Delaware
corporation
By: /s/ A. Dale Mayo
-------------------------------
Its: President
Date: July 21, 1997
CCC CINEMA 304 CORP.,
a Delaware corporation
By: /s/ A. Dale Mayo
-------------------------------
Its: President
Date: July 21, 1997
CCC LARCHMONT CINEMA CORP.
a Delaware corporation
By: /s/ A. Dale Mayo
-------------------------------
Its: President
Date: July 21, 1997
CLEARVIEW CINEMA GROUP, INC. a
Delaware corporation
By: /s/ A. Dale Mayo
-------------------------------
Its: President and Chief Executive
Officer
Date: July 21, 1997
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<PAGE>
Exhibit 3.01(b)
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CLEARVIEW CINEMA GROUP, INC.
FIRST. The name of the corporation is Clearview Cinema Group,
Inc. The corporation's original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on November 23, 1994.
SECOND. The certificate of incorporation of the corporation, as
previously amended and restated, is hereby amended and restated to read in its
entirety as follows:
ARTICLE I
The name of the corporation is Clearview Cinema Group, Inc.
ARTICLE II
The address of the corporation's registered office in the State
of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is Corporation Service
Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
1. The total number of shares of capital stock that the corporation
shall have authority to issue is 12,500,000 shares consisting of (a) 10,000,000
shares of Common Stock, with a par value of one cent ($.01) per share (the
"Common Stock"); and (b) 2,500,000 shares of Preferred Stock, with a par value
of one cent ($.01) per share (the "Preferred Stock").
<PAGE>
2. Shares of the capital stock of the corporation may be issued by the
corporation from time to time for such legally sufficient consideration as may
be fixed from time to time by the Board of Directors of the corporation (the
"Board of Directors"). Except for and subject to the rights expressly granted to
the holders of shares of Preferred Stock (a) in this Amended and Restated
Certificate of Incorporation, (b) pursuant to the authority vested by this
Amended and Restated Certificate of Incorporation in the Board of Directors, or
(c) by the laws of the State of Delaware, the holders of shares of Common Stock
shall have exclusively all rights of stockholders.
3. Subject to the rights, if any, of the holders of shares of any class
or series of Preferred Stock and to the requirements of the laws of the State of
Delaware, authority is hereby expressly vested in the Board of Directors at any
time and from time to time by resolution to divide the Preferred Stock into one
or more classes or series, to determine for any such class or series its
designation and the number of shares of Preferred Stock of such class or series
and the voting powers, preferences, optional and other special rights, if any,
of the shares of Preferred Stock of such class or series and the restrictions or
qualifications thereof, and to issue such Preferred Stock.
4. As of the date of this Amended and Restated Certificate of
Incorporation, there is a class of Preferred Stock outstanding with the
following terms:
(a) Designation. This class of Preferred Stock shall consist of 1,303
shares and shall be designated as the "Class A Convertible Preferred Stock" (the
"Class A Convertible Preferred Stock").
(b) Dividends. The holder of each share of Class A Convertible Preferred
Stock shall be entitled to receive out of any funds legally available therefor,
when and as declared by the Board of Directors, preferential dividends thereon
in a per share amount equal to the product of (i) the per share dividend amount
declared from time to time (and not revoked), in cash or property, on the Common
Stock multiplied by (ii) the number of shares of Common Stock into which each
share of Class A Convertible Preferred Stock shall be convertible on the record
date for the payment of such Common Stock dividend. Such preferential dividend
shall be declared by the Board of Directors contemporaneously with the
declaration of any dividend on the Common Stock.
So long as any shares of Class A Convertible Preferred Stock
shall remain outstanding, no dividend or other distribution (except in capital
stock of the corporation of a class ranking junior to the Class A Convertible
Preferred Stock as to dividends and the distribution of assets upon liquidation)
shall be paid or made on the Common Stock or on any other shares of capital
stock of the corporation ranking junior to the Class A Convertible Preferred
Stock as to dividends or the distribution of assets upon liquidation ("Junior
Stock") and no Common Stock or Junior Stock shall be purchased or otherwise
acquired by the corporation or any corporation, limited liability company,
partnership or other entity of which more than fifty percent (50%) of the voting
power of the shares of capital stock or other ownership interests having
ordinary voting power (including capital stock or other ownership interests
having such voting power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, limited liability company,
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<PAGE>
partnership or other entity is at the time owned, directly or indirectly,
through one or more intermediaries, by the corporation (each, a "Subsidiary" and
collectively, "Subsidiaries"), other than by exchange therefor of shares of
Common Stock or Junior Stock, or out of the proceeds of the substantially
concurrent sale of shares of Common Stock or Junior Stock, unless all dividends
on the Class A Convertible Preferred Stock shall have been paid.
Subject to the above limitation and any limitations contained
elsewhere herein, dividends may be paid on the Common Stock or Junior Stock if
such payment is not otherwise restricted or prohibited by law.
(c) Liquidation Rights. In the event of any Liquidation Event (as
defined herein), the holders of shares of Class A Convertible Preferred Stock
shall be entitled to receive from the assets of the corporation, whether
represented by capital stock, paid-in capital or retained earnings, payment in
cash of an amount equal to the aggregate Liquidation Value (as defined herein)
of such Class A Convertible Preferred Stock, plus a further amount equal to any
dividends that have been (or, pursuant to Section (b) hereof, were required to
have been) declared on the Class A Convertible Preferred Stock but which remain
unpaid, before any distribution of assets shall be made to the holders of the
Common Stock or Junior Stock. If, upon such Liquidation Event, the assets
distributable to the holders of shares of Class A Convertible Preferred Stock
shall be insufficient to permit the payment in full to such holders of the
preferential amounts to which they are entitled, then such assets shall be
distributed ratably among the shares of Class A Convertible Preferred Stock.
The Liquidation Value of each share of Class A Convertible
Preferred Stock shall initially be equal to $2,558.85. In case the corporation
shall (i) pay a dividend on the Class A Convertible Preferred Stock in shares of
Class A Convertible Preferred Stock, (ii) subdivide the outstanding shares of
Class A Convertible Preferred Stock, or (ii) combine the outstanding shares of
Class A Convertible Preferred Stock into a smaller number of shares, the
Liquidation Value in effect immediately prior thereto shall be proportionately
adjusted so that the aggregate Liquidation Value of the Class A Convertible
Preferred Stock immediately after such event shall equal the aggregate
Liquidation Value of the Class A Convertible Preferred Stock immediately prior
thereto. An adjustment made pursuant to this paragraph shall become effective
(x) upon the effective date in the case of a subdivision or combination or (y)
upon the record date in the case of a dividend of shares.
After payment in full of the aggregate Liquidation Value and
dividends, as set forth above, to the holders of shares of Class A Convertible
Preferred Stock, the remaining assets of the corporation available for payment
and distribution to stockholders may be paid and distributed to the holders of
the Common Stock and any Junior Stock.
For the purposes hereof, the term "Liquidation Event" shall mean
any (A) merger or consolidation other than a merger or consolidation in which
persons who, immediately prior to the closing of such transaction, were the
holders of voting securities of the corporation having more than fifty percent
(50%) of the voting power of the outstanding voting securities of the
corporation (which includes for all purposes of this Amended and Restated
Certificate of Incorporation, other than the election of directors, the Class A
Convertible Preferred Stock) hold, immediately after such transaction, voting
securities of the surviving entity having more
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<PAGE>
than fifty percent (50%) of the voting power of the outstanding voting
securities of the surviving entity, (B) sale of all or substantially all of the
assets of the corporation, or (C) liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary.
(d) Voting Rights.
(i) General. Holders of shares of Class A Convertible Preferred
Stock shall be entitled to that number of votes per share (including fractions
thereof) as shall be equal to the number of shares of Common Stock into which
each share of Class A Convertible Preferred Stock shall be convertible on the
relevant record date (calculated to the nearest 1/100th of a share), voting as a
single class with the holders of shares of Common Stock at all meetings of
stockholders, upon all matters that are required to be submitted to the
stockholders of the corporation, except upon matters with respect to which the
holders of shares of Class A Convertible Preferred Stock and Common Stock have
separate voting rights as provided elsewhere in this Amended and Restated
Certificate of Incorporation (including the election of directors) or as
required by Delaware law. Notwithstanding anything to the contrary set forth
herein, if the holders of the Class A Convertible Preferred Stock are no longer
entitled, voting separately as a single class, to elect one or more directors of
the corporation in accordance with Section (d)(ii), then, from and after such
time, the holders of shares of Class A Convertible Preferred Stock shall be
entitled to that number of votes per share (including fractions thereof) as
shall be equal to the number of shares of Common Stock into which each share of
Class A Convertible Preferred Stock shall be convertible on the relevant record
date (calculated to the nearest 1/100th of a share), voting as a single class
with the holders of shares of Common Stock at all meetings of stockholders, upon
the election of directors.
(ii) Election of Directors. So long as the outstanding shares of
Class A Convertible Preferred Stock have in the aggregate at least fifteen
percent (15%) of the voting power of the outstanding voting securities of the
corporation, the holders of the Class A Convertible Preferred Stock, voting
separately as a single class, shall be entitled to elect up to two directors of
the corporation. So long as the outstanding shares of Class A Convertible
Preferred Stock have in the aggregate less than fifteen percent (15%) but at
least five percent (5%) of the voting power of the outstanding voting
securities of the corporation, the holders of the Class A Convertible Preferred
Stock, voting separately as a single class, shall be entitled to elect up to one
director of
the corporation. If the outstanding shares of Class A Convertible Preferred
Stock have in the aggregate less than fifteen percent (15%) but at least five
percent (5%) of the voting power of the outstanding voting securities of the
corporation and as of said date there are two directors of the corporation who
had been elected by the holders thereof, then such directors may both remain in
office only until the next meeting held for the purpose of electing directors
and shall be treated as having resigned at such meeting regardless of whether
the holders of the Class A Convertible Preferred Stock vote to elect a director
at such meeting. If the outstanding shares of Class A Convertible Preferred
Stock have in the aggregate less than five percent (5%) of the voting power of
the outstanding voting securities of the corporation, the holders of the Class A
Convertible Preferred Stock shall not be entitled, voting separately as a single
class, to elect any directors of the corporation and any director as of said
date who had been so elected by the holders of the Class A Convertible Preferred
Stock shall be treated as having immediately resigned without the necessity of
such person taking any action. Any directors to be elected by the holders of the
Class A Convertible Preferred Stock shall be elected
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<PAGE>
annually. At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of more than fifty percent (50%)
of the shares of Class A Convertible Preferred Stock then outstanding shall
constitute a quorum of the Class A Convertible Preferred Stock for the election
of directors to be elected solely by the holders of the Class A Convertible
Preferred Stock. In lieu of an election at a meeting, the holders of not less
than the minimum number of shares of Class A Convertible Preferred Stock
necessary to take action by written consent under applicable law may elect the
directors or director to be elected solely by the holders of the Class A
Convertible Preferred Stock by executing one or more written consents setting
forth the action so taken. A vacancy in any directorship elected solely by the
holders of the Class A Convertible Preferred Stock shall be filled only by the
vote or written consent of holders of shares of Class A Convertible Preferred
Stock.
(iii) Certain Corporate Actions. The affirmative vote of the
holders of more than fifty percent (50%) of the outstanding shares of Class A
Convertible Preferred Stock, voting separately as a single class, shall be
required to authorize any of the following transactions: (x) any amendment to
this Amended and Restated Certificate of Incorporation if such amendment would
alter the aggregate number of authorized shares, or the par value, of the Class
A Convertible Preferred Stock or would adversely affect the powers, preferences
or rights of the Class A Convertible Preferred Stock; (y) any issuance by the
corporation of capital stock having a dividend or liquidation preference senior
to the Class A Convertible Preferred Stock; or (z) any issuance by the
corporation of capital stock having a dividend or liquidation preference on a
parity with the Class A Convertible Preferred Stock; provided, however, that the
right of the holders of the Class A Convertible Preferred Stock to vote
separately as a class with respect to any event of the type described in this
clause (z) shall immediately terminate when the outstanding shares of Class A
Convertible Preferred Stock have in the aggregate less than five percent (5%)
of the voting power of the outstanding voting securities of the corporation.
(e) Conversion Rights.
(i) (A) Optional Conversion Upon Election by Holder. The holder
of any share or shares of Class A Convertible Preferred Stock shall have the
right to convert, at such holder's option and subject to the provisions of this
Section (e), any such share, plus all accrued and unpaid dividends thereon, into
such number of fully paid and non-assessable shares of Common Stock (calculated
as to each conversion to the nearest 1/100th of a share) as is obtained by
dividing the Liquidation Value at the time of conversion, plus all accrued and
unpaid dividends thereon, by $2,558.85 (the "Conversion Price"); provided,
however, that the Conversion Price shall be adjusted upon the happening of
certain contingencies as provided in paragraph (ii) of this Section (e).
The transfer books of the corporation shall not be closed at any
time prior to the termination of the conversion rights of the holders of the
Class A Convertible Preferred Stock, but this provision shall not prevent the
fixing of a record date for the determination of stockholders for any proper
purpose.
For purposes of this Section (e), "Common Stock" shall mean only
the Common Stock authorized at the time of the original issuance of the Class A
Convertible Preferred Stock and capital stock of any other class into which the
then authorized Common Stock may thereafter
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<PAGE>
have been changed. In determining the number of shares of Common Stock
outstanding at any particular time for the purpose of computations pursuant to
the formulas in paragraph (ii) of this Section (e), there shall not be included
Common Stock then owned of record or beneficially by the corporation or any
Subsidiary.
(B) Mandatory Conversion Upon Consummation of Qualifying
Liquidity Event. (1) Upon the occurrence of a Qualifying Liquidity Event (as
defined herein) as to any holder, each of the outstanding shares of Class A
Convertible Preferred Stock then held by such holder, plus all accrued and
unpaid dividends thereon, shall automatically convert into such number of fully
paid and non-assessable shares of Common Stock (calculated as to each conversion
to the nearest 1/100th of a share) as is obtained by dividing the Liquidation
Value at the time of conversion, plus all accrued and unpaid dividends thereon,
by the Conversion Price then in effect.
(2) As used herein, a "Qualifying Liquidity Event" shall
mean the first to occur of any of the following events:
(x) Following the receipt by all of the holders of shares
of Class A Convertible Preferred Stock of a binding, unconditional written offer
to purchase all of the shares of Common Stock into which such shares are then
convertible for a cash purchase price equal to or greater than the Minimum
Purchase Price (as defined herein) from the corporation, any holder of Common
Stock and/or any third party (including in connection with any merger or
consolidation involving the corporation), the first to occur of (A) the date
upon which a specific, written rejection notice is delivered to such offeror by
the holder declining such offer, or (B) if no such rejection notice is
delivered, the date thirty (30) days after the date of receipt of such written
offer by such holder.
(y) Following the receipt by all of the holders of shares
of Class A Convertible Preferred Stock of a binding, unconditional written offer
from an underwriter to purchase all of the shares of Common Stock into which
such shares are then convertible at a purchase price equal to or greater than
the Minimum Purchase Price in connection with a firm commitment underwritten
public offering of Common Stock pursuant to a registration statement under the
Securities Act of 1933, as amended, the date of the successful closing of such
underwritten public offering.
(z) Following the listing by the corporation of shares of
Common Stock on the New York Stock Exchange or the American Stock Exchange or
with the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), and/or the registration of the Common Stock as a class under the
Securities Exchange Act of 1934, as amended, the date upon which all of the
shares of Common Stock into which the shares of Class A Convertible Preferred
Stock held by a holder are convertible become freely transferable pursuant to
Securities and Exchange Commission Rule 144 (or any successor rule or
regulation) as then in effect and may be disposed of by such holder in a single
transaction in compliance with the volume limitations of such Rule 144;
provided, that the daily Common Stock Market Prices (as defined herein) for each
of the one hundred and twenty (120) consecutive Trading Days (as defined herein)
immediately preceding such date shall have been equal to or greater than the
Minimum Purchase Price; and provided, further, that the average weekly reported
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<PAGE>
volume of trading in the Common Stock during the four calendar weeks preceding
such date shall have been equal to or greater than the number of shares of
Common Stock into which such shares are convertible.
(3) As used herein, the term "Minimum Purchase Price"
shall mean that price per share of Common Stock which shall equal four hundred
percent (400%) of the then applicable Conversion Price.
(4) As used herein, the term "Common Stock Market Price"
for any Trading Day shall mean (x) if the Common Stock is listed or admitted for
trading on the New York Stock Exchange (or any successor to such exchange) or
any other national or regional securities exchange, the last sale price, or the
closing bid price if no sale occurred, of the Common Stock on the principal
securities exchange on which the Common Stock is listed or traded, or (y) if not
listed or traded as described in clause (x), the last sale price of the Common
Stock quoted on the National Market System of NASDAQ, or any similar system of
automated dissemination of quotations of securities prices then in common use,
if so quoted, or (z) if not listed or traded as described in clause (x) or
quoted as described in clause (y), the mean between the high bid and the low
asked quotations for the Common Stock as reported by the National Quotation
Bureau Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least five of the ten preceding
Trading Days. If the Common Stock is quoted on a national securities or central
market system in lieu of any market or quotation system described above, then
the Common Stock Market Price shall be determined in the manner set forth in
clause (x) of the preceding sentence if actual transactions are reported and in
the manner set forth in clause (z) of the preceding sentence if bid and asked
quotations are reported but actual transactions are not.
(5) As used herein, the term "Trading Day" shall mean (v)
any day on which the New York Stock Exchange (or any successor to such exchange)
is open for the transaction of business, or (w) if the Common Stock is not at
such time listed or admitted for trading on the New York Stock Exchange (or any
successor to such exchange), a day upon which the principal national or regional
securities exchange on which the Common Stock is listed or admitted for trading
is open for the transaction of business, or (x) if not listed or admitted for
trading as described in clause (v) or (w), and if at such time the sale price of
the Common Stock is quoted on the National Market System of NASDAQ or any
similar system of automated dissemination of quotations of securities prices
then in common use, any day for which such system provides quotations with
respect to securities upon which it reports, or (y) if not so listed or admitted
for trading or quoted, and if at such time bid and asked quotations for the
Common Stock are reported by the National Quotation Bureau Incorporated, any day
for which the National Quotation Bureau Incorporated provides bid and asked
quotations with respect to securities upon which it reports, or (z) if not so
listed or admitted for trading or quoted, any business day.
(ii) Adjustment of Conversion Price. The Conversion Price shall
be subject to adjustment as follows:
(A) In case the corporation shall (1) pay a dividend in shares of
Common Stock, (2) subdivide the outstanding shares of Common Stock, (3) combine
the outstanding shares of
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<PAGE>
Common Stock into a smaller number of shares, or (4) issue by reclassification
of the shares of Common Stock any capital stock of the corporation, the
Conversion Price in effect immediately prior thereto shall be appropriately
adjusted so that the aggregate Conversion Price of the Class A Convertible
Preferred Stock immediately after such event shall equal the aggregate
Conversion Price of the Class A Convertible Preferred Stock immediately prior
thereto. An adjustment made pursuant to this subparagraph (A) shall become
effective (x) upon the effective date in the case of a subdivision, combination
or reclassification or (y) upon the record date in the case of a dividend.
(B) Subject to subparagraph (ii)(E) below, in case the
corporation shall issue or sell any shares of Common Stock for a consideration
per share less than the Conversion Price in effect immediately prior to such
issuance or sale, then in any such event the Conversion Price shall be reduced
to a lower price (calculated to the nearest full cent) determined by dividing
(1) the sum of (x) the number of shares of Common Stock outstanding or deemed to
be outstanding pursuant to subparagraph (ii)(C) below immediately prior to such
issuance or sale, multiplied by the Conversion Price in effect immediately prior
to such issuance or sale, and (y) the aggregate amount of the consideration
received by the corporation upon such issuance or sale by (2) the total number
of shares of Common Stock outstanding or deemed to be outstanding pursuant to
subparagraph (ii)(C) below immediately after such issuance or sale.
(C) Subject to subparagraph (ii)(E) below, in case the
corporation shall issue or sell options, rights or warrants entitling the
holders thereof to subscribe for or purchase shares of Common Stock, the
Conversion Price shall be adjusted on the date of such issuance or sale,
pursuant to the formula set forth in subparagraph (ii)(B) above, based on a
price per share of Common Stock equal to the sum of (1)(x) the price paid for
any such instrument divided by (y) the number of shares of Common Stock for
which such instrument is exercisable, and (2) the exercise price per share of
Common Stock set forth in such instrument if such total is less than the
Conversion Price in effect immediately prior to such issuance or sale and
assuming the exercise of all such options, rights or warrants.
(D) In case the corporation shall issue or sell any other
security or instrument directly or indirectly convertible into or exchangeable
for shares of Common Stock (each, a "Convertible Security"), the Conversion
Price shall be adjusted on the date of such issuance or sale, pursuant to the
formula set forth in subparagraph (ii)(B) above, based on a price per share of
Common Stock equal to the sum of (1)(x) the price paid for any such Convertible
Security divided by (y) the number of shares of Common Stock into which such
Convertible Security is convertible or for which such Convertible Security is
exchangeable and (2) the additional amount per share of Common Stock, if any,
payable in connection with any such conversion or exchange if such total is less
than the Conversion Price in effect immediately prior to such issuance or sale
and assuming the conversion or exchange of all such Convertible Securities.
(E) Notwithstanding any of the other provisions contained in this
Section (e)(ii), in no event shall there be an adjustment of the Conversion
Price as a result of (1) the exercise of any options, rights, warrants or
conversion privileges that were outstanding as of the date of the initial
issuance of shares of Class A Convertible Preferred Stock, or (2) the exercise
of any options, rights or warrants issued or sold after such date for which
adjustment has already been
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made pursuant to subparagraph (ii)(C) above or which were issued or sold without
adjustment in accordance with the terms of such subparagraph (ii)(C).
(F) If any options, rights or warrants or Convertible Securities
shall by their terms provide for an increase or decrease, with the passage of
time or the occurrence or non-occurrence of an event, in the amount of
additional consideration payable to the corporation upon the exercise,
conversion or exchange thereof, the Conversion Price then applicable shall,
forthwith upon any such increase or decrease becoming effective, be
appropriately readjusted to reflect such increase or decrease in such amount.
If any options, rights or warrants or Convertible Securities on
account of which an adjustment has been previously made pursuant to this Section
(e)(ii) shall expire or be redeemed, repurchased or paid without having been
exercised, converted or exchanged, then the Conversion Price shall forthwith be
appropriately adjusted to the Conversion Price that would have been in effect
had no adjustment been made on account of such options, rights or warrants or
Convertible Securities.
(G) No adjustment in the Conversion Price need be made under this
Section (e)(ii) unless the adjustment would result in an increase or decrease of
at least one percent (1%) in the number of shares of Common Stock into which
each share of Class A Convertible Preferred Stock would have been converted at
the time such adjustment is otherwise required to be made; provided, however,
that such adjustment shall be carried forward and made at the time of and
together with any subsequent adjustment which, together with such adjustment and
any other adjustment so carried forward, shall aggregate at least one percent
(1%) of the number of shares of Common Stock into which each share of Class A
Convertible Preferred Stock would have otherwise been converted.
(H) No adjustment in the Conversion Price need be made under this
Section (e)(ii) for any change in the par value of the Common Stock. If an
adjustment is made in the Conversion Price as of a record date for a
distribution in accordance with this Section (e)(ii) and if such distribution is
subsequently canceled, then the Conversion Price then in effect shall be
readjusted, effective as of the date when the Board of Directors determines to
cancel such distribution, to the Conversion Price that would have been in effect
if such record date had not been fixed. No adjustment need be made under this
Section (e)(ii) if the corporation issues or distributes to each holder of
shares of Class A Convertible Preferred Stock the shares of Common Stock,
options, rights or warrants which such holder would have been entitled to
receive had all the Class A Convertible Preferred Stock been converted into
Common Stock immediately prior to the record date for such issuance or
distribution or, if there is no such record date, immediately prior to such
issuance or distribution.
(iii) Adjustment upon Certain Events. In case of:
(A) any capital reorganization of the corporation; or
(B) the consolidation or merger of the corporation with or into
another corporation; or
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<PAGE>
(C) a statutory share exchange whereby the Common Stock is
converted into property other than cash; or
(D) the sale, transfer or other disposition of all or
substantially all of the property, assets or business of the corporation, as a
result of which sale, transfer or other disposition property other than cash
shall be payable or distributable to the holders of the Common Stock;
which, in each such case, does not constitute a Liquidation Event, each share of
Class A Convertible Preferred Stock then outstanding shall thereafter be
convertible into the number and class of shares or other securities or property
of the corporation or of the entity resulting from such consolidation or merger
or with which such statutory share exchange or to which such sale, transfer or
other disposition shall have been made, to which the shares of Common Stock
otherwise issuable upon conversion of such share of Class A Convertible
Preferred Stock would have been entitled upon such reorganization,
consolidation, merger, statutory share exchange, sale, transfer or other
disposition if outstanding at the time thereof. In any such case, appropriate
adjustments shall be made in the application of the provisions in this Section
(e) with respect to the conversion rights thereafter of the holders of the Class
A Convertible Preferred Stock, to the end that such provisions shall thereafter
be applicable, as nearly as reasonably may be, in relation to any shares or
other securities or property thereafter issuable or deliverable upon the
conversion of shares of Class A Convertible Preferred Stock. Proper provision
shall be made as a part of the terms of any such reorganization, consolidation,
merger, statutory share exchange, sale, transfer or other disposition so that
the conversion rights of the holders of the Class A Convertible Preferred Stock
shall be protected and preserved in accordance with the provisions of this
paragraph (iii). The provisions of this paragraph (iii) shall similarly apply to
successive capital reorganizations, consolidations, mergers, statutory share
exchanges, sales, transfers or other dispositions of property as aforesaid.
(iv) Notice of Adjustments. Whenever the Conversion Price shall
be adjusted as provided in Section (e)(ii), the corporation, as soon as
practicable and in no event later than ten (10) full business days thereafter,
shall mail a notification to each holder of shares of Class A Convertible
Preferred Stock and/or securities which by their terms are exercisable for
shares of Class A Convertible Preferred Stock, stating the adjusted Conversion
Price determined as provided in Section (e)(ii) and setting forth in reasonable
detail the facts requiring such adjustment, at the address of such holder then
appearing on the record books of the corporation. If any question shall at any
time arise with respect to any adjustment of the Conversion Price, such question
shall be determined by a firm of independent public accountants selected by the
corporation, who may be the corporation's auditors, and such determination shall
be binding upon the corporation and the holders of the Class A Convertible
Preferred Stock. Any adjustment to the Conversion Price which is required by
this Section (e) shall be effective at any time that there shall be outstanding
any shares of Class A Convertible Preferred Stock and/or securities which by
their terms are exercisable for shares of Class A Convertible Preferred Stock.
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(v) Notice of Corporate Action. In case the corporation shall
propose to:
(A) pay any dividend in shares of capital stock upon the Common
Stock or make any other distribution (other than the payment of cash dividends)
to the holders of the Common Stock; or
(B) offer to the holders of the Common Stock rights to subscribe
for any shares of any class of capital stock of the corporation or any other
rights or options; or
(C) effect any reclassification of the Common Stock (other than a
reclassification involving merely the subdivision or combination of the
outstanding shares of Common Stock) or capital reorganization, consolidate with
or merge into another corporation, engage in any statutory share exchange
requiring the approval of its stockholders or sell, transfer or otherwise
dispose of all or substantially all of its property, assets or business; or
(D) engage in any Liquidation Event;
then, in each such case, the corporation shall deliver to the holders of the
Class A Convertible Preferred Stock at their respective addresses then appearing
on the record books of the corporation notice of such proposed action, such
notice to be delivered at least seven (7) business days prior to the record date
for the purpose of determining the holders of the Common Stock entitled to the
benefits of the action referred to in subparagraph (A) or (B) or to vote with
respect to the action referred to in subparagraph (C) or (D) or, if no record
date is taken for any such purpose, the date of the taking of such proposed
action. Such notice shall specify the date on which the books of the corporation
shall close or a record be taken for such stock dividend, distribution or offer
of such rights or options, or the date on which such reclassification,
reorganization, consolidation, merger, statutory share exchange, sale, transfer,
disposition or Liquidation Event shall take place, as the case may be, and the
date of participation therein by the holders of the Common Stock if any such
date is to be fixed. If such notice relates to any proposed action referred to
in subparagraph (C) or (D) above, it shall set forth such facts with respect
thereto as shall be reasonably necessary to inform the holders of the Class A
Convertible Preferred Stock as to the effect of such action upon their
conversion rights.
(vi) Surrender of Certificate Upon Conversion. In order to
convert shares of Class A Convertible Preferred Stock into shares of Common
Stock in accordance with the provisions of paragraph (i) of this Section (e),
the holder thereof shall surrender, at the office in the United States
designated by the corporation in writing from time to time for registration of
transfers and exchanges, the certificate or certificates therefor, duly endorsed
to the corporation or in blank, give written notice to the corporation at said
office that such holder elects to convert such shares, and state therein the
name or names (with addresses) in which such holder wishes the certificate or
certificates for such shares of Common Stock to be issued. Shares of Class A
Convertible Preferred Stock shall be deemed to have been converted as of the
date of the surrender of the certificate or certificates for such shares for
conversion as provided above, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock as of
such date. As soon as practicable on or after the date of conversion as
aforesaid, the corporation will issue and deliver a certificate or certificates
for the number of full
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<PAGE>
shares of Common Stock issuable upon such conversion, together with cash for any
fraction of a share, as hereinafter in paragraph (viii) provided, to the person
or persons entitled to receive the same.
(vii) Cancellation. All shares of Class A Convertible Preferred
Stock converted into shares of Common Stock shall have the status of authorized
and unissued shares of Preferred Stock undesignated as to class or series and
shall not be reissued as shares of Class A Convertible Preferred Stock.
(viii) No Fractional Shares. The corporation shall not issue
fractional shares of Common Stock upon any conversion of shares of Class A
Convertible Preferred Stock. As to any final fraction of a share which a holder
of one or more shares of Class A Convertible Preferred Stock would be entitled
to receive upon conversion, the corporation shall pay a cash adjustment in an
amount equal to the same fraction of the Conversion Price.
(ix) Reservation of Shares. The corporation shall at all times
have reserved for issuance that number of authorized and unissued shares of
Common Stock sufficient for the conversion of all shares of Class A Convertible
Preferred Stock at the time outstanding, as such number may vary from time to
time.
(x) Fully Paid and Nonassessable Shares. The corporation warrants
that all shares of Common Stock issued upon conversion of shares of Class A
Convertible Preferred Stock will, upon issuance, be fully paid and
non-assessable by the corporation and free from original issue taxes.
5. All actions that are required by the General Corporation Law of the
State of Delaware to be taken at an annual or special meeting of stockholders or
that may be taken at such a meeting must be taken at such a meeting and no such
action may be taken by means of signed consents in accordance with Section 228
of the General Corporation Law of the State of Delaware other than by the
holders of the Class A Convertible Preferred Stock in accordance with Sections
4(d)(ii) and 4(d)(iii) of this Article IV or by the holders of any other class
or series of Preferred Stock hereafter established with respect to any matters
on which such class or series vote separately as a single class.
ARTICLE V
The corporation is to have perpetual existence.
ARTICLE VI
The directors of the corporation to be elected by the holders of
the outstanding shares of capital stock of the corporation entitled to vote
generally for the election of directors (the "Common Directors") shall be
divided into three classes: Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the whole number of
Common Directors. The initial Class I, II and III Common Directors shall be
those elected and
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designated to serve as such pursuant to the written consent of the stockholders
of the corporation dated as of May __, 1997 (the "Stockholders Consent"). Such
Class I Common Directors shall hold office for a term to expire at the first
annual meeting of the stockholders after the Stockholders Consent; such Class II
Common Directors shall hold office for a term to expire at the second annual
meeting of the stockholders after the Stockholders Consent; and such Class III
Common Directors shall hold office for a term to expire at the third annual
meeting of the stockholders after the Stockholders Consent, subject, in the case
of each such Common Director, to his or her earlier death, resignation or
removal. At each election of Common Directors, the Common Directors elected to
succeed those whose terms have expired shall be identified as being of the same
class as the Common Directors they succeed and shall be elected to hold office
for a term to expire at the third annual meeting of the stockholders after their
election or until their respective successors are duly elected and qualified or
until their earlier death, resignation or removal. If the number of Common
Directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain all classes as equal in number as possible, and any
additional Common Director elected to any class shall hold office for a term
which shall coincide with the terms of the other Common Directors in such class
or until his or her successor is duly elected and qualified or until his or her
earlier death, resignation or removal. No decrease in the number of directors of
the corporation shall shorten the term of any incumbent Common Director.
Subject to the rights of the holders of shares of any class or
series of Preferred Stock then outstanding, any director or directors may be
removed from office by vote of the stockholders entitled to vote thereon only
for cause at a special meeting of the stockholders called for such purpose. In
case any one or more directors are so removed, new directors may be elected at
the same meeting. The repeal of a provision of this Amended and Restated
Certificate of Incorporation or the By-laws of the corporation prohibiting, or
the addition of a provision to this Amended and Restated Certificate of
Incorporation or the By-laws of the corporation permitting, the removal by the
stockholders of a director or directors without assigning any cause shall not
apply to any incumbent director during the balance of the term for which he or
she was elected.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
1. To adopt, alter or repeal By-laws of the corporation in the manner
and to the extent permitted in those By-laws.
2. To authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation.
3. To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to abolish any such
reserve in the manner in which it was created.
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4. By a majority of the directors in office, to establish one or more
committees, each committee to consist of one or more directors. The Board of
Directors may appoint one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. The By-laws of the corporation may provide that, in the absence
or disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
she or they constitute a quorum, may by unanimous action appoint another
director to act at such meeting in the place of any such absent or disqualified
member. Any committee, to the extent provided in a resolution of the Board of
Directors or in the By-laws of the corporation, shall have and may exercise all
of the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, except to the extent prohibited by law.
To the extent a resolution of the Board of Directors or the By-laws of the
corporation expressly so provide, any such committee may have the power and
authority to declare a dividend or to authorize the issuance of shares of
capital stock of the corporation.
ARTICLE VIII
Meetings of the stockholders may be held within or without the
State of Delaware, as the By-laws of the corporation may provide. The books of
the corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the By-laws of the corporation.
Elections of directors need not be by written ballot unless the By-laws of the
corporation shall so provide.
ARTICLE IX
The personal liability of the directors of the corporation is
hereby eliminated to the fullest extent permitted by Section 102(b)(7) of the
General Corporation Law of the State of Delaware, as the same may be amended or
supplemented. Without limiting the generality of the foregoing, no director
shall be personally liable to the corporation 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
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which such director derived an improper
personal benefit. The rights conferred by this Article IX shall be presumed to
have been relied upon by directors of the corporation in serving or continuing
to serve the corporation and shall be enforceable as contract rights. Said
rights shall not be exclusive of any other rights to which the directors of the
corporation may otherwise be entitled. The corporation may enter into contracts
to provide the directors of the corporation with rights to indemnification to
the maximum extent permitted by the General Corporation Law of the State of
Delaware. The corporation may create trust funds, grant security interests in
the assets of the corporation, 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 this Article IX, the By-laws of the corporation or any such
contract. The rights conferred by this Article IX shall continue as to any
person who has ceased to be a director of
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the corporation and shall inure to the benefit of the heirs, executors and
administrators of such person. Any repeal or modification of this Article IX by
the stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification with respect to acts or omissions occurring prior to such repeal
or modification.
ARTICLE X
In addition to the requirements of law and any other provision of
this Amended and Restated Certificate of Incorporation, the affirmative vote of
the holders of at least two-thirds of the voting power of the outstanding voting
securities of the corporation shall be required to delete, amend or supplement
any term or provision of this Article X, Article VI or Article IX or paragraph 5
of Article IV.
ARTICLE XI
The corporation reserves the right to amend, supplement or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
THIRD. The foregoing amendment and restatement of the Certificate
of Incorporation has been approved by the Board of Directors.
FOURTH. The foregoing amendment and restatement of the
Certificate of Incorporation has been duly adopted in accordance with the
provisions of Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, Clearview Cinema Group, Inc. has caused this
Amended and Restated Certificate of Incorporation to be signed and attested this
____ day of __________, 1997.
Attest: CLEARVIEW CINEMA GROUP, INC.
By: By:
---------------------------------- --------------------------------
Sueanne Hall Mayo A. Dale Mayo
Vice President-Management Chairman of the Board, President
Information Systems and Secretary and Chief Executive Officer
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<PAGE>
Exhibit 3.02(b)
AMENDED AND RESTATED
BY-LAWS
OF
CLEARVIEW CINEMA GROUP, INC.
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I MEETINGS OF STOCKHOLDERS
Section 1.1. Place of Meetings............................................... 1
Section 1.2. Annual Meetings................................................. 1
Section 1.3. Special Meetings................................................ 1
Section 1.4. Notice of Meetings.............................................. 1
Section 1.5. Quorum; Adjournments............................................ 1
Section 1.6. Advance Notice of Stockholder Proposals......................... 2
Section 1.7. Advance Notice of Stockholder Nominations....................... 3
Section 1.8. Voting.......................................................... 4
Section 1.9. Presence at Meeting............................................. 5
ARTICLE II DIRECTORS
Section 2.1. Powers of Directors............................................. 5
Section 2.2. Number, Qualifications, Election and Term of Office............. 5
Section 2.3. Vacancies....................................................... 6
Section 2.4. Removal of Directors............................................ 6
Section 2.5. Annual Meeting; Other Regular Meetings.......................... 6
Section 2.6. Special Meetings................................................ 7
Section 2.7. Quorum.......................................................... 7
Section 2.8. Informal Action................................................. 7
Section 2.9. Telephone Participation in Meetings............................. 7
Section 2.10. Compensation of Directors....................................... 8
ARTICLE III COMMITTEES OF DIRECTORS
Section 3.1. Appointment and Powers.......................................... 5
Section 3.2. Appointment by Committees of Substitute Members................. 8
Section 3.3. Procedure....................................................... 8
ARTICLE IV OFFICERS
Section 4.1. Enumeration..................................................... 8
Section 4.2. Chairman of the Board........................................... 9
Section 4.3. Chief Executive Officer......................................... 9
Section 4.4. President....................................................... 9
Section 4.5. Vice President.................................................. 9
Section 4.6. Secretary....................................................... 9
Section 4.7. Treasurer...................................................... 10
Section 4.8. Other Officers and Assistant Officers.......................... 10
Section 4.9. Compensation................................................... 10
Section 4.10. Additional Duties of Officers.................................. 10
<PAGE>
ARTICLE V INDEMNIFICATION
Section 5.1. Indemnification in Actions, Suits or Proceedings Other
Than Those by or in the Right of the Corporation............... 11
Section 5.2. Indemnification in Actions, Suits or Proceedings by or
in the Right of the Corporation................................ 11
Section 5.3. Authorization of Indemnification............................... 12
Section 5.4. Reliance....................................................... 12
Section 5.5. Indemnification by a Court..................................... 13
Section 5.6. Expenses Payable in Advance.................................... 13
Section 5.7. Non-exclusiveness.............................................. 13
Section 5.8. Effectiveness.................................................. 14
Section 5.9. Insurance...................................................... 14
Section 5.10. Indemnification Expenditures................................... 14
Section 5.11. Certain Definitions............................................ 14
Section 5.12. Survival of Indemnification and Advancement of Expenses........ 15
Section 5.13. Limitation on Indemnification.................................. 15
Section 5.14. Repeal or Modification......................................... 15
Section 5.15. Indemnification of Employees and Agents........................ 15
ARTICLE VI SHARES OF CAPITAL STOCK
Section 6.1. Issuance of Shares............................................. 15
Section 6.2. Shares Certificates............................................ 15
Section 6.3. Transfer of Shares............................................. 16
Section 6.4. Lost, Stolen, Destroyed or Mutilated Certificates.............. 16
Section 6.5. Regulations.................................................... 16
Section 6.6. Holders of Record.............................................. 16
Section 6.7. Record Date.................................................... 17
Section 6.8. Restriction on Transfer........................................ 17
ARTICLE VII GENERAL PROVISIONS
Section 7.1. Corporate Seal................................................. 17
Section 7.2. Fiscal Year.................................................... 17
Section 7.3. Authorization.................................................. 18
Section 7.4. Financial Reports.............................................. 18
Section 7.5. Effect of By-laws.............................................. 18
ARTICLE VIII AMENDMENTS
Section 8.1. General........................................................ 18
<PAGE>
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1.1. Place of Meetings. Meetings of the stockholders shall
be held at such place within or without the State of Delaware as shall be
designated by the Board of Directors or the person or persons calling the
meeting.
Section 1.2. Annual Meetings. Each annual meeting of the
stockholders for the election of directors and the transaction of such other
business as may properly come before the meeting shall be held on the of
May of each year, at 10:00 a.m., prevailing time, or on such other date and at
such other time as shall be designated by the Board of Directors. If the day
fixed for an annual meeting is a legal holiday, the meeting shall be held at the
same hour on the next succeeding full business day or as soon thereafter as
practicable.
Section 1.3. Special Meetings. Special meetings may be called at
any time only by the Chairman of the Board, the Chief Executive Officer, the
President or a majority of the directors then in office; provided, however, that
the holders of more than fifty percent (50%) of the outstanding shares of Class
A Convertible Preferred Stock, $.01 par value (the "Class A Preferred Stock"),
of the Corporation may call a special meeting of the holders of the outstanding
shares of Class A Preferred Stock to vote on any matter upon which such holders
have the right to vote separately as a class. The only business to be transacted
at a special meeting of stockholders shall be the business stated in the notice
provided pursuant to Section 1.4 of these By-laws.
Section 1.4. Notice of Meetings. A written notice stating the
place, date and hour of each meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called shall be given by, or at the
direction of, the Secretary or the person or persons authorized to call the
meeting to each stockholder of record entitled to vote at such meeting, at such
address as appears upon the records of the Corporation, not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, unless a
greater period of time is required by law in a particular case.
Section 1.5. Quorum; Adjournments. The presence, in person or by
proxy, of the holders of at least fifty percent (50%) of the outstanding shares
of capital stock entitled to vote on any matter shall constitute a quorum with
respect to such matter unless the affirmative vote of the holders of a greater
percentage of such outstanding shares is required in order to approve such
matter, in which case such percentage shall constitute a quorum with respect to
such matter. The stockholders present at a duly authorized meeting can continue
to do business until adjournment if a quorum
<PAGE>
was initially present, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum; provided, however, that such ability to conduct
business shall not affect the vote required to take any particular action. If a
meeting cannot be organized or a particular matter cannot be voted upon because
a quorum is not present, those present may, except as otherwise provided by law,
adjourn the meeting to such date, time and place as they may determine. In the
case of any meeting called for the election of directors, those who attend the
reconvening of an adjourned meeting, although they are the holders of less than
fifty percent (50%) of the outstanding shares of capital stock of the
Corporation entitled to vote generally for the election of directors, shall
nevertheless constitute a quorum for the purpose of electing those directors.
When a meeting is adjourned, it shall not be necessary to give any notice of the
date on and time and place at which such meeting shall be reconvened or of the
business to be transacted at a reconvened meeting other than by announcement at
the meeting at which such adjournment is taken, unless, after the adjournment is
taken, a new record date is fixed for the reconvening of such meeting, in which
case, a notice of the reconvening of such meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.6. Advance Notice of Stockholder Proposals. At any
annual meeting of the stockholders, only such business shall be conducted as
shall have been brought before such meeting (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the Corporation who complies
with the notice procedure set forth in this Section 1.6. For business to be
properly brought before any annual meeting of the stockholders by a stockholder,
such stockholder must be entitled under Delaware law to present such business
and such stockholder must give timely notice of such stockholder's intent to
make such presentation. To be timely, a stockholder's notice must be received by
the Secretary not less than sixty (60) days nor more than ninety (90) days in
advance of the first anniversary of the previous year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
changed by more than thirty (30) days from such anniversary date, notice by the
stockholder to be timely must be received no later than the close of business on
the fifth day following the day on which public announcement of the date of such
meeting is first made. Each such notice shall set forth: (a) a brief description
of each item of business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (b) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business; (c) a representation by the stockholder proposing such business that
such stockholder will be a holder of record of shares of capital stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at such meeting; (d) the class and number of shares of capital stock of
the Corporation that are beneficially owned by such stockholder; and
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(e) as to each item of business the stockholder proposes to bring before the
meeting, any material interest of the stockholder in such business other than as
a stockholder of the Corporation. In addition, the stockholder submitting such
proposal shall promptly provide any other information reasonably requested by
the Corporation.
Only such business shall be conducted at any annual meeting of
stockholders as shall have been brought before such meeting in accordance with
the requirements set forth in this Section 1.6. A stockholder must also comply
with all applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations thereunder with
respect to the matters set forth in this Section 1.6 in order to bring business
before any annual meeting, including, without limitation, Rule 14a-8 under the
Exchange Act. Except as otherwise required by law, the chairman of any annual
meeting of stockholders shall have the power and duty (x) to determine whether
any business proposed to be brought before the meeting was brought in accordance
with the requirements set forth in this Section 1.6 and (y) if any proposed
business was not brought in compliance with this Section 1.6, to declare that
such defective proposal shall be disregarded. For purposes of this Section 1.6
and Section 1.7: "public announcement" shall mean disclosure in a press release
reported by the Dow Jones News Service, the Associated Press or any comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act.
Section 1.7. Advance Notice of Stockholder Nominations.
Nominations for the election of directors to be elected by the holders of the
outstanding shares of capital stock of the Corporation entitled to vote
generally for the election of directors (the "Common Directors") may be made by
the Board of Directors or by any stockholder entitled to vote generally for the
election of directors; provided, however, that a stockholder may nominate a
person for election as a Common Director at a meeting only if timely notice of
such stockholder's intent to make such nomination has been given to the
Secretary. To be timely, a stockholder's notice must be received by the
Secretary (i) in the case of an annual meeting, not less than sixty (60) days
nor more than ninety (90) days in advance of the first anniversary of the
previous year's annual meeting; provided, however, that in the event that the
date of the annual meeting is changed by more than thirty (30) days from such
anniversary date, notice by the stockholder to be timely must be received no
later than the close of business on the fifth day following the day on which
public announcement of the date of such meeting is first made; and (ii) in the
case of a special meeting at which any Common Directors are to be elected, no
later than the close of business on the fifth day following the day on which
public announcement of the date of such meeting is first made. Each such notice
shall set forth: (a) the
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name and address, as they appear on the Corporation's books, of the stockholder
who intends to make the nomination and the name or names and address or
addresses of the person or persons to be nominated; (b) a representation that
the stockholder proposing such nomination will be a holder of record of shares
of capital stock of the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at such meeting and nominate the person or
persons specified in such notice; (c) the class and number of shares of capital
stock of the Corporation that are beneficially owned by such stockholder; (d) a
description of all arrangements or understandings between such stockholder and
each of his, her or its nominees and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by such stockholder; (e) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission had such nominee been nominated, or intended to be nominated, by the
Board of Directors; and (f) the consent of each such nominee to serve as a
director of the Corporation, if so elected. In addition, the stockholder making
such nomination shall promptly provide any other information reasonably
requested by the Corporation. No person shall be eligible for election as a
Common Director unless nominated in accordance with the procedures set forth in
this Section 1.7. A stockholder must also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 1.7 in order to nominate any
person as a Common Director.
Except as otherwise required by law, the chairman of any meeting
of stockholders shall have the power and duty (x) to determine whether a
nomination was made in accordance with the requirements set forth in this
Section 1.7 and (y) if any proposed nomination was not made in compliance with
this Section 1.7, to declare that such defective nomination shall be
disregarded.
Section 1.8. Voting. Except to the extent otherwise provided by
law, the Amended and Restated Certificate of Incorporation of the Corporation,
as it may be subsequently amended (the "Certificate of Incorporation"), or these
By-laws, every stockholder of record shall have the right at every meeting of
stockholders to one (1) vote for every share of capital stock of the Corporation
standing in such stockholder's name on the books of the Corporation. A majority
of the votes cast shall decide every question or matter submitted to the
stockholders, except to the extent otherwise provided by law, the Certificate of
Incorporation or these By-laws. The vote upon any matter submitted to the
stockholders may be taken viva voce; provided, however, that the vote upon any
question shall be by ballot if demand for the same is made by any stockholder or
it is so directed by the chairman of the relevant meeting.
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Section 1.9. Presence at Meeting. A stockholder may participate in
a meeting of the stockholders only if such stockholder or such stockholder's
duly authorized proxy is physically present in person at the meeting. A
stockholder or a proxy may not participate in a meeting of the stockholders by
means of conference telephone or similar communications equipment.
ARTICLE II
DIRECTORS
Section 2.1. Powers of Directors. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. All powers that may be exercised or performed by the Corporation
shall be exercised or performed by or under the authority of the Board of
Directors, except as otherwise provided by law, the Certificate of Incorporation
or these By-laws.
Section 2.2. Number, Qualifications, Election and Term of Office.
Subject to the rights, if any, of the holders of shares of any class or series
of Preferred Stock, $.01 par value (the "Preferred Stock"), of the Corporation
then outstanding, the number of directors to manage the business and affairs of
the Corporation shall be as determined by the Board of Directors from time to
time, but shall not be less than three (3). Directors need not be stockholders
of the Corporation nor residents of the State of Delaware. Each Common Director
shall be elected by the holders of the outstanding shares of capital stock of
the Corporation entitled to vote therefor at the annual meeting or any special
meeting called for such purpose. Each Common Director shall be elected to serve
until his or her successor is duly elected and qualified or until his or her
earlier death, resignation or removal.
The Common Directors shall be divided into three classes: Class I,
Class II and Class III. Each class shall consist, as nearly as may be possible,
of one-third of the whole number of Common Directors. The initial Class I, II
and III Common Directors shall be those elected and designated to serve as such
pursuant to the written consent of the stockholders of the Corporation dated as
of May ___, 1997 (the "Stockholders Consent"). Such Class I Common Directors
shall hold office for a term to expire at the first annual meeting of the
stockholders after the Stockholders Consent; such Class II Common Directors
shall hold office for a term to expire at the second annual meeting of the
stockholders after the Stockholders Consent; and such Class III Common Directors
shall hold office for a term to expire at the third annual meeting of the
stockholders after the Stockholders Consent, subject, in the case of each such
Common Director, to his or her earlier death, resignation or removal. At each
election of Common Directors, the Common Directors elected to succeed those
whose terms have expired
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shall be identified as being of the same class as the Common Directors they
succeed and shall be elected to hold office for a term to expire at the third
annual meeting of the stockholders after their election or until their
respective successors are duly elected and qualified or until their earlier
death, resignation or removal. If the number of Common Directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
all classes as equal in number as possible, and any additional Common Director
elected to any class shall hold office for a term which shall coincide with the
terms of the other Common Directors in such class or until his or her successor
is duly elected and qualified or until his or her earlier death, resignation or
removal. No decrease in the number of directors of the Corporation shall shorten
the term of any incumbent Common Director.
Section 2.3. Vacancies. Subject to the rights of the holders of
shares of any class or series of Preferred Stock then outstanding: Vacancies and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority vote of the Common Directors then in
office, although less than a quorum, or by a sole remaining Common Director. The
occurrence of a vacancy which is not filled by action of the Board of Directors
within ninety (90) days of the occurrence of such vacancy shall constitute a
determination by the Board of Directors that the number of Common Directors is
to be reduced so as to eliminate such vacancy, unless the Board of Directors
shall specify otherwise. When one or more Common Directors shall resign from the
Board of Directors, effective at a future date, a majority of the Common
Directors then in office, including those who have so resigned, shall have the
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective.
Section 2.4. Removal of Directors. Subject to the rights of the
holders of shares of any class or series of Preferred Stock then outstanding,
any director or directors may be removed from office by vote of the stockholders
entitled to vote thereon only for cause at a special meeting of the stockholders
called for such purpose. In case any one or more directors are so removed, new
directors may be elected at the same meeting. The repeal of a provision of the
Certificate of Incorporation or these By-laws prohibiting, or the addition of a
provision to the Certificate of Incorporation or these By-laws permitting, the
removal by stockholders of a director or directors without assigning any cause
shall not apply to any incumbent director during the balance of the term for
which he or she was then elected.
Section 2.5. Annual Meeting; Other Regular Meetings. An annual
meeting of the Board of Directors shall be held each year as soon as practicable
after the annual meeting of stockholders, at the place where such meeting of
stockholders was held or at such
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other place as the Board of Directors may determine, for the purposes of
organization, election or appointment of officers and the transaction of such
other business as shall come before such annual meeting. No notice of the annual
meeting of the Board of Directors need be given. Other regular meetings of the
Board of Directors shall be held on such dates and at such times and places as
the Board of Directors may from time to time by resolution appoint; and no
notice shall be required to be given of any such regular meeting. No minimum
number of regular meetings and no more than one annual meeting of the Board of
Directors need be called in any year.
Section 2.6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the Chief Executive
Officer, the President or a majority of the directors then in office, to be held
on such date and at such time (as will permit the giving of notice as provided
in this Section 2.6) and at such place as may be designated by the person or
persons calling the meeting. Notice of the place, date and hour of any such
special meeting shall be given to each director by the Secretary (i) by written
notice deposited in the United States mail not later than during the third full
business day preceding the date of such meeting, or (ii) by telephone, telex,
facsimile transmission or other oral, written or electronic means received not
later than 24 hours before the time set for such meeting. Such notice need not
refer to the business to be transacted at such meeting except action under
Article V of these By-laws. No minimum number of special meetings of the Board
of Directors need be called in any year.
Section 2.7. Quorum. More than fifty percent (50%) of the
directors then in office shall constitute a quorum for the transaction of
business and action may be taken by a majority of the directors present at any
meeting at which a quorum is present; unless the consent of a different
percentage of the directors is required with respect to any matter as provided
by law, the Certificate of Incorporation, these By-laws or any resolution of the
Board of Directors or the stockholders; in which case such percentage shall
constitute a quorum and the necessary vote for such matter.
Section 2.8. Informal Action. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board of Directors or such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of the proceedings of the Board of Directors
or such committee.
Section 2.9. Telephone Participation in Meetings. Members of the
Board of Directors or any committee thereof may participate in a meeting of the
Board of Directors or such
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committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 2.9 shall constitute
presence in person at such meeting.
Section 2.10 Compensation of Directors. Each director of the
Corporation, who is not a salaried officer or employee of the Corporation or of
a subsidiary of the Corporation, shall receive such compensation (whether in
cash or other property) and reimbursement of expenses for serving as a director
and for attendance at meetings of the Board of Directors or any committee
thereof as the Board of Directors may from time to time determine.
ARTICLE III
COMMITTEES OF DIRECTORS
Section 3.1. Appointment and Powers. The Board of Directors may,
by resolution adopted by a majority of the directors in office, establish one or
more committees, each of which shall consist of one or more of the directors of
the Corporation. To the extent provided in the resolution establishing any
committee, such committee shall have and may exercise all of the powers and
authority of the Board of Directors, except to the extent prohibited by law or
the Certificate of Incorporation.
Section 3.2 Appointment by Committees of Substitute Members. In
the absence or disqualification of any member of any such committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may by unanimous action
appoint another director to act at such meeting in the place of any such absent
or disqualified member.
Section 3.3 Procedure. The Board of Directors may establish
reasonable rules and regulations for the conduct of the proceedings of any such
committee and may appoint a chairman of such committee who shall be a member
thereof and a secretary of such committee who need not be a member thereof. To
the extent that the Board of Directors does not exercise such powers, they may
be exercised by such committee.
ARTICLE IV
OFFICERS
Section 4.1. Enumeration. The officers of the Corporation shall be
elected by the Board of Directors and shall consist of a Chairman of the Board,
a Chief Executive Officer, a
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President, such number of Vice Presidents (if any) as the Board of Directors
shall from time to time elect, a Secretary, a Treasurer, and such other officers
(if any) as the Board of Directors shall from time to time choose and appoint or
elect.
Section 4.2. Chairman of the Board. The Chairman of the Board
shall be a Common Director and preside at meetings of the Board of Directors and
of the stockholders and shall have such powers and perform such duties as shall
from time to time be prescribed by the Board of Directors.
Section 4.3. Chief Executive Officer. The Chief Executive Officer
shall have general charge and control over the affairs of the Corporation,
subject to the Board of Directors. The Chief Executive Officer shall sign
certificates for shares of capital stock of the Corporation and may execute on
behalf of the Corporation any contract which has been authorized by the Board of
Directors. If there shall be no Chairman of the Board, or in his or her absence
or during his or her incapacitation, the Chief Executive Officer shall preside
at meetings of the stockholders. In the absence of the President or if the Board
of Directors has not elected a person holding the title of "President," the
Chief Executive Officer shall also perform the duties and have the powers that
are incident to the office of the president of a corporation under Delaware law.
Section 4.4 President. In the absence of the Chief Executive
Officer or if the Board of Directors has not appointed a person holding the
title of "Chief Executive Officer," the President shall perform the duties and
exercise the powers of a chief executive officer of the Corporation, and shall
report to the Board of Directors. The President shall perform such other duties
and have such other powers as are incident to the office of the president of a
corporation under Delaware law, except to the extent such duties and powers have
been delegated to the Chief Executive Officer, or as may from time to time be
prescribed by the Board of Directors. If there shall be no Chairman of the Board
or Chief Executive Officer, or in their absence or during their incapacitation,
the President shall preside at meetings of the stockholders.
Section 4.5. Vice President. The Vice President or, if there shall
be more than one, the Vice Presidents, in the order determined by the Board of
Directors, shall have all of the powers and perform all of the duties of the
President in the absence or during the incapacitation of the President. Each
Vice President shall perform such other duties and have such other powers as may
from time to time be prescribed by, or pursuant to authority delegated by, the
Board of Directors.
Section 4.6. Secretary. The Secretary shall keep a record of the
proceedings of the meetings of the stockholders and
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directors and shall give notice as required by law or these By-laws of all such
meetings. The Secretary shall have custody of the seal of the Corporation and of
all books, records and papers of the Corporation, except such as shall be in the
charge of the Treasurer or of some other person authorized to have custody and
be in possession thereof by resolution of the Board of Directors. The Secretary
shall countersign certificates for shares of the capital stock of the
Corporation. The Secretary shall perform such other duties and have such other
powers as are incident to the office of the secretary of a corporation under
Delaware law or as may from time to time be prescribed by, or pursuant to
authority delegated by, the Board of Directors.
Section 4.7. Treasurer. The Treasurer shall keep full and accurate
accounts of the receipts and disbursements of the Corporation in books belonging
to the Corporation, shall deposit all moneys and other valuable effects of the
Corporation in the name and to the credit of the Corporation in such banks and
depositories as the Board of Directors shall designate, and shall perform such
other duties and have such other powers as are incident to the office of the
treasurer of a corporation under Delaware law or as may from time to time be
prescribed by, or pursuant to authority delegated by, the Board of Directors.
Section 4.8. Other Officers and Assistant Officers. The powers and
duties of each other officer or assistant officer who may from time to time be
chosen by the Board of Directors shall be as prescribed by, or pursuant to
authority delegated by, the Board of Directors at the time of the appointment of
such other officer or assistant officer or from time to time thereafter. In
addition, each officer designated as an assistant officer shall assist in the
performance of the duties of the officer to whom he or she is an assistant, and
shall perform the duties and have the powers of such officer in the absence or
during the incapacitation of such officer.
Section 4.9. Compensation. The salaries and other compensation of
all officers shall be fixed by, or pursuant to authority delegated by, the Board
of Directors from time to time.
Section 4.10. Additional Duties of Officers. The Board of
Directors may from time to time by resolution increase or decrease the duties
and powers of the Chairman of the Board, the Chief Executive Officer, the
President, one or more Vice Presidents, the Secretary, the Treasurer or any
other officer.
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ARTICLE V
INDEMNIFICATION
Section 5.1. Indemnification in Actions, Suits or Proceedings
Other Than Those by or in the Right of the Corporation. Subject to Section 5.3,
the Corporation shall 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
(other than an action by or in the right of the Corporation), by reason of the
fact that he or she is or was a director or officer of the Corporation or is or
was a director or officer of the Corporation and 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, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that a person did not act in good faith and in a manner which he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Section 5.2. Indemnification in Actions, Suits or Proceedings by
or in the Right of the Corporation. Subject to Section 5.3, the Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a director or officer of the Corporation or is or was a
director or officer of the Corporation and 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 against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the Corporation; except that no
indemnification under this Section 5.2 shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the Corporation unless and only to the extent that the
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Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 5.3. Authorization of Indemnification. Any indemnification
under Sections 5.1 and 5.2 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 5.1 or 5.2, as the case may be. Such determination shall 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 Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding described in Section 5.1
or 5.2, or in defense of any claim, issue or matter therein, he or she shall 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.
Section 5.4. Reliance. For purpose of any determination under
Section 5.3, a person shall be deemed to have acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his or her conduct was
unlawful, if his or her actions were based on the records or books of account of
the Corporation or Another Enterprise (as defined below), on information
supplied to him or her by the officers of the Corporation or Another Enterprise
in the course of their duties, on the advice of legal counsel for the
Corporation or Another Enterprise or on information or records given or reports
made to the Corporation or Another Enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or Another Enterprise. Notwithstanding the foregoing, the fact
that such person's actions were not so based on any of the foregoing shall not
result in it being deemed that, and shall not be considered when making a
determination whether, he or she did not act in good faith or in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation or, with respect to any criminal action or proceeding, he or she had
reasonable cause to believe his or her conduct was unlawful. The term "Another
Enterprise" as used in this Section 5.4 shall mean any corporation (other than
the Corporation), partnership, joint venture, trust or other
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enterprise, which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 5.4 are not exclusive and do not limit in any way the manner in which a
person may have met the applicable standard of conduct set forth in Section 5.1
or 5.2, as the case may be.
Section 5.5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 5.3 or the absence of
any determination thereunder, any director or officer may apply to any court of
competent jurisdiction in the State of Delaware for indemnification to the
extent otherwise provided under Sections 5.1 and 5.2. The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 5.1 or 5.2, as the case may be. Neither a contrary determination in the
specific case under Section 5.3 nor the absence of any determination thereunder
shall be a defense to such application or create a presumption that the director
or officer seeking indemnification has not met any applicable standard of
conduct. Any application for indemnification made to any court pursuant to this
Section 5.5 shall be made in such manner and form as may be required by the
applicable rules of such court or, in the absence thereof, by direction of the
court to which such application is made. Notice of any application for
indemnification pursuant to this Section 5.5 shall be given to the Corporation
promptly upon the filing of such application. If successful, in whole or in
part, the director or officer seeking indemnification shall also be entitled to
be paid the expense of prosecuting such application.
Section 5.6. Expenses Payable in Advance. 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 shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation as authorized in this Article V if such an
undertaking is required at the time by the General Corporation Law of the State
of Delaware.
Section 5.7. Non-exclusiveness. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article V
shall not be exclusive of any other rights to which any person seeking
indemnification or advancement of expenses may be entitled under any other
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his or her official capacity and as to action in another
capacity while holding such office, it being the policy of the Corporation that
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indemnification of the persons specified in Sections 5.1 and 5.2 shall be made
to the fullest extent permitted by law. The provisions of this Article V shall
not be deemed to preclude the indemnification of any person who is not specified
in Section 5.1 or 5.2 but whom the Corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law of the State of
Delaware, including, without limitation, the provisions of subsection (h) of
Section 145 thereof, or otherwise.
Section 5.8. Effectiveness. A finding that any provision of this
Article V is invalid or of limited application shall not affect any other
provision of this Article V nor shall a finding that any portion of any
provision of this Article V is invalid or of limited application affect the
balance of such provision.
Section 5.9. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who 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 against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would have the power
or the obligation to indemnify him or her against such liability under the
provisions of this Article V.
Section 5.10. Indemnification Expenditures. The Board of
Directors, without approval of the stockholders, shall have the power to borrow
money on behalf of the Corporation, including the power to pledge the assets of
the Corporation, from time to time to discharge the Corporation's obligations
with respect to indemnification, the advancement and reimbursement of expenses,
and the purchase and maintenance of insurance referred to in this Article V.
Section 5.11. Certain Definitions. For purposes of this Article V,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director or officer of the
Corporation which imposes duties on, or involves services by, such director or
officer with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
V.
-14-
<PAGE>
Section 5.12. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 5.13. Limitation on Indemnification. Notwithstanding
anything contained in this Article IV to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5.5), the
Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.
Section 5.14. Repeal or Modification. Any repeal or modification
of this Article V shall not adversely affect any rights to indemnification and
advancement of expenses of a director or officer of the Corporation existing
pursuant to this Article V with respect to any acts or omissions occurring prior
to such repeal or modification.
Section 5.15. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses
to employees and agents of the Corporation similar to those conferred in this
Article V on directors and officers of the Corporation.
ARTICLE VI
SHARES OF CAPITAL STOCK
Section 6.1. Issuance of Shares. Shares of capital stock of any
class now or hereafter authorized, securities convertible into or exchangeable
for such shares, or options or other rights to purchase such shares or
securities may be issued or granted only in accordance with the authority
granted by resolution of the Board of Directors.
Section 6.2. Share Certificates. Certificates for shares of the
capital stock of the Corporation shall be in the form adopted by the Board of
Directors, shall be signed by the Chief Executive Officer or the President and
by the Secretary or Assistant Secretary, and may be sealed with the seal of the
Corporation. Where any such certificate is signed by a registrar other than the
Corporation or its employee, the signatures thereon of any officer of the
Corporation and, where authorized by the
-15-
<PAGE>
Board of Directors, any transfer agent, may be facsimiles. All such certificates
shall be numbered consecutively; and the name of the person owning the shares
represented thereby, the number of such shares and the date of issue shall be
stated on each certificate and entered on the books of the Corporation. In case
any officer, transfer agent or registrar who has executed, by facsimile or
otherwise, any share certificate shall have ceased to be such officer, transfer
agent or registrar by reason of death, resignation or removal before the
certificate is issued, it may be issued by the Corporation with the same effect
as if such officer, transfer agent or registrar had not ceased to be such at the
date of its issue.
Section 6.3. Transfer of Shares. Shares of capital stock of the
Corporation shall be transferred on the books of the Corporation only by the
holder of record thereof in person or by such holder's duly authorized
representative upon surrender to the Corporation of the certificate for such
shares, duly endorsed for transfer, together with such other documents (if any)
as may be required to effect such transfer.
Section 6.4. Lost, Stolen, Destroyed or Mutilated Certificates.
New share certificates may be issued to replace certificates alleged to have
been lost, stolen, destroyed or mutilated, upon such terms and conditions,
including proof of loss or destruction, and, if appropriate, the giving of a
satisfactory bond of indemnity, as the Board of Directors or as one or more of
the officers of the Corporation, as delegated to by the Board of Directors, from
time to time may determine.
Section 6.5. Regulations. The Board of Directors shall have power
and authority to make all such rules and regulations not inconsistent with these
By-laws as it may deem expedient concerning the issue, transfer and registration
of shares of capital stock of the Corporation. The Board of Directors may
appoint one or more transfer agents or assistant transfer agents and one or more
registrars of transfer and may require all share certificates to bear the
signature of a transfer agent or assistant transfer agent and a registrar of
transfer. The Board of Directors may at any time terminate the appointment of
any transfer agent or any assistant transfer agent or any registrar of transfer.
Section 6.6. Holders of Record. The Corporation shall be entitled
to treat the holder of record of any share or shares of capital stock of the
Corporation as the holder and owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or right, title, or
interest in, such share or shares on the part of any other person, whether or
not the Corporation shall have express or other notice thereof, except as
otherwise provided by Delaware law.
-16-
<PAGE>
Section 6.7. Record Date. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or to express
consent to corporate action in writing without a meeting, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) days
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action. Only stockholders of record on the date
fixed shall be so entitled notwithstanding any transfer of shares on the books
of the Corporation after any record date fixed as provided herein. The Board of
Directors may similarly fix a record date for the determination of stockholders
of record for any other purpose. If no record date is fixed by the Board of
Directors: (i) the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held; and (ii) the record date for determining stockholders entitled
to express consent or dissent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the close
of business or the day on which the first written consent or dissent is filed
with the Secretary. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any reconvening of
such meeting if it is adjourned; provided, however, that the Board of Directors
may fix a new record date for the reconvened meeting.
Section 6.8. Restriction on Transfer. A restriction on the
hypothecation, transfer or registration of transfer of shares of capital stock
of the Corporation may be imposed either by these By-laws or by an agreement
among any number of stockholders or such holders and the Corporation. No
restriction so imposed shall be binding with respect to shares of capital stock
of the Corporation issued prior to the adoption of the restriction unless the
holders of such shares parties to such agreement or voted in favor of such
restriction.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Corporate Seal. The Corporation may adopt a corporate
seal in such form as the Board of Directors shall from time to time determine.
Section 7.2. Fiscal Year. The fiscal year of the Corporation shall
be as designated by the Board of Directors from time to time.
-17-
<PAGE>
Section 7.3. Authorization. All checks, notes, vouchers, warrants,
drafts, acceptances and other orders for the payment of moneys of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 7.4. Financial Reports. Subject to the requirements of
applicable law, financial statements or reports shall not be required to be sent
to the stockholders of the Corporation, but may be so sent in the discretion of
the Board of Directors, in which event the scope of such statements or reports
shall be within the discretion of the Board of Directors, and such statements or
reports shall not be required to have been examined by or to be accompanied by
an opinion of an accountant or firm of accountants.
Section 7.5. Effect of By-laws. No provision in these By-laws
shall vest any property right in any stockholder.
ARTICLE VIII
AMENDMENTS
Section 8.1. General. The authority to adopt, amend or repeal
By-laws of the Corporation is expressly conferred upon the Board of Directors,
which may take such action by the affirmative vote of a majority of the whole
Board of Directors at any regular or special meeting duly convened after notice
of that purpose, subject always to the power of the stockholders to adopt, amend
or repeal By-laws by the affirmative vote of the holders of at least two-thirds
of the outstanding shares of capital stock of the Corporation generally entitled
to vote together (including the Class A Preferred Stock). Any change in the
By-laws shall take effect when adopted unless otherwise provided in the
resolution effecting the change.
<PAGE>
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. ________
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 or 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 corporation will furnish to any stockholder upon request and without
charge a full statement of the powers, designations, limitations and relative,
participating, optional or other special rights of the shares of each class
authorized to be issued, the qualifications, limitations and restrictions of
such preferences and rights, the variations in the relative rights and
preferences between shares of any series of any authorized preferred class so
far as they have been fixed and determined, and the authority of the Board of
Directors to fix and determine the relative rights and preferences of subsequent
series of any such preferred class.
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 stock savings bank
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.
<PAGE>
Exhibit 5.01
July 31, 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 and July 31, 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.
July 31, 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
<PAGE>
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
<PAGE>
Exhibit 10.53
CONSENT AND WAIVER
Consent and Waiver, dated as of May 23, 1997, is under and with respect
to the Stockholders and Registration Rights Agreement, dated as of May 29, 1996,
as amended (the "Agreement"), by and among Clearview Cinema Group, Inc. (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.
WHEREAS, the Company is contemplating an initial public offering (the
"Offering") of shares of its Common Stock, $.01 par value (the "Common Stock"),
pursuant to a registration statement on Form SB-2 (the "Registration Statement")
to be filed with the Securities and Exchange Commission on May 27, 1997; and
WHEREAS, the undersigned may have certain rights under Sections 2 and 3
of the Agreement with respect to the issuance and registration of such shares
pursuant to the Registration Statement; and
WHEREAS, the proposed managing underwriter for the Offering has
requested that the parties hereto waive any such rights and consent to the
consummation of the Offering as described in the Registration Statement, as the
same may be amended hereafter.
NOW, THEREFORE, the parties hereto, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound hereby, agree as follows:
1. Each of the undersigned hereby waives any and all rights he, she or
it may have under Sections 2 and 3 of the Agreement with respect to the
Offering, including without limitation any right to purchase any of the shares
of Common Stock being so offered and any right to sell shares of Common Stock in
the Offering under the Registration Statement.
2. This Consent and Waiver shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
3. This Consent and Waiver shall be construed and enforced in accordance
with the laws of the state of Delaware without regard to any of its principles
of conflicts of law.
4. This Consent and Waiver may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Consent
and Waiver as of the date first set forth above.
CLEARVIEW CINEMA GROUP, INC.
By:
--------------------------- -----------------------------
A. Dale Mayo A. Dale Mayo
President
CMNY CAPITAL II, L.P. -----------------------------
Brett E. Marks
By:
--------------------------- -----------------------------
Robert G. Davidoff Michael C. Rush
General Partner
MIDMARK CAPITAL, L.P.
By: MidMark Associates, Inc. -----------------------------
General Partner Paul Kay
By:
--------------------------- -----------------------------
Denis Newman Cindy Kay
President
EMERSON CINEMA, INC. -----------------------------
Louis G. Novick
By: ---------------------------
John Nelson
President
<PAGE>
Exhibit 10.54
TERMINATION AGREEMENT FOR
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
Termination Agreement, dated as of May 23, 1997, by and among Clearview
Cinema Group, Inc. (the "Company"), CMNY Capital II, L.P., MidMark Capital,
L.P., A. Dale Mayo, Brett E. Marks, Michael C. Rush, Emerson Cinema, Inc., Paul
Kay, Cindy Kay and Louis G. Novick.
WHEREAS, the parties hereto are parties to a Stockholders and
Registration Rights Agreement, dated as of May 29, 1996, as amended (the
"Agreement"); and
WHEREAS, the Company is contemplating an initial public offering (the
"Offering") of shares of its Common Stock, $.01 par value, pursuant to a
registration statement on Form SB-2 to be filed with the Securities and Exchange
Commission on May 27, 1997; and
WHEREAS, the proposed managing underwriter for the Offering has
requested that, in connection with the Offering, the Agreement be terminated and
that the parties thereto enter into a new registration rights agreement; and
WHEREAS, the parties hereto are executing a new registration rights
agreement as of the date hereof and are willing to terminate the Agreement in
connection with the Offering.
NOW, THEREFORE, the parties hereto, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound hereby, agree as follows:
1. Effective as of immediately prior to the consummation of the
Offering, all rights and obligations of the parties hereto under the Agreement
shall terminate and the Agreement shall have no further force and effect.
2. This Termination Agreement constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof. Any changes in or
additions to this Termination Agreement may be made only upon the written
consent of all parties hereto.
3. This Termination Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
4. This Termination Agreement shall be construed and enforced in
accordance with the laws of the state of Delaware without regard to any of its
principles of conflicts of law.
<PAGE>
5. This Termination Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Termination
Agreement as of the date first set forth above.
MIDMARK CAPITAL, L.P. CLEARVIEW CINEMA GROUP, INC.
By: MidMark Associates, Inc.
General Partner
By: By:
------------------------- --------------------------
Denis Newman A. Dale Mayo
President President
EMERSON CINEMA, INC. CMNY CAPITAL II, L.P.
By: By:
----------------------- --------------------------
John Nelson Robert G. Davidoff
President General Partner
- -------------------------- -------------------------------
Paul Kay A. Dale Mayo
- -------------------------- -------------------------------
Cindy Kay Brett E. Marks
-------------------------------
Michael C. Rush
-------------------------------
Louis G. Novick
<PAGE>
Exhibit 10.55
EXCHANGE AND TERMINATION AGREEMENT
Exchange and Termination Agreement, dated as of May 23, 1997 (the
"Agreement"), by and among Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), MidMark Capital, L.P., a Delaware limited partnership
("MidMark"), and A. Dale Mayo, an individual.
WHEREAS, the parties hereto are parties to a Preferred Stock and
Warrant Purchase Agreement dated May 29, 1996 and a Preferred Stock and Warrant
Purchase Agreement dated July 2, 1996 (together, the "Purchase Agreements"); and
WHEREAS, pursuant to the Purchase Agreements, MidMark acquired
from the Company, in the aggregate, 779 shares of Class A Convertible Preferred
Stock, $.01 par value (the "Class A Preferred Stock"), of the Company and two
warrants (the "Preferred Warrants") to purchase up to 471 shares of Class A
Preferred Stock; and
WHEREAS, the Company is contemplating an initial public offering
(the "Offering") of shares of its Common Stock, $.01 par value (the "Common
Stock"), pursuant to a registration statement on Form SB-2 ("Registration
Statement") to be filed with the Securities and Exchange Commission on May 27,
1997; and
WHEREAS, the proposed managing underwriter for the Offering has
requested that, in connection with the Offering, the Purchase Agreements be
terminated; and
WHEREAS, in connection with the Offering, the parties thereto
have discussed terminating the Purchase Agreements in consideration of the
issuance by the Company of 100 shares of Common Stock to MidMark; and
WHEREAS, in connection with the Offering, the Company and MidMark
have discussed exchanging the Preferred Warrants for a warrant (the "New
Warrant") to purchase up to 471 shares of Common Stock.
NOW, THEREFORE, the parties hereto, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, agree as follows:
1. Termination of the Purchase Agreements. Immediately prior to
the consummation of the Offering, (a) all rights and obligations of the parties
thereto under the Purchase Agreements shall terminate and the Purchase
Agreements shall have no further force and effect (the "Termination"); and (b)
the Company shall deliver to MidMark a stock certificate for 100 shares of
Common Stock in consideration of the termination of the Purchase Agreements.
<PAGE>
2. Exchange. Immediately prior to the consummation of the
Offering, MidMark and the Company shall exchange (the "Exchange") the Preferred
Warrants for the New Warrant. At such time, (a) MidMark shall deliver its
Preferred Warrants to the Company, duly endorsed and otherwise in proper form
for transfer to the Company, and (b) the Company shall deliver to MidMark the
New Warrant to purchase up to 471 shares of Common Stock, in substantially the
form of Annex A attached hereto.
3. Stock Split. If, prior to the occurrence of the Termination
and the Exchange, the Company splits its Common Stock by means of a dividend of
shares of Common Stock on its outstanding shares of Common Stock as described in
the Registration Statement, then the number of shares of Common Stock to be
issued in the Termination and the number of shares of Common Stock issuable upon
the exercise of the New Warrant shall be proportionately adjusted.
4. Representations and Warranties.
4.1 MidMark represents and warrants to the Company as follows:
a. MidMark is an "accredited investor" as defined under
Regulation D promulgated under the Securities Act of 1933, as amended, and is
acquiring the shares of Common Stock and the New Warrant to be received by it in
connection with the Termination and in the Exchange, respectively, for its own
account, for investment and not with a view to, or for sale in connection with,
any distribution thereof. MidMark has no present intention of distributing or
reselling any of the shares of Common Stock or the New Warrant it receives in
connection with the Termination and in the Exchange, respectively.
b. MidMark, in making the decision to terminate the
Purchase Agreements in consideration of the payment of 100 shares of Common
Stock to it and to exchange the Preferred Warrants for the New Warrant pursuant
to this Agreement, has not relied upon any representations or warranties,
express or implied, except for the representations and warranties expressly set
forth in this Agreement; and MidMark has been provided by the Company with such
access to the books and records and personnel and other representatives of the
Company and to such other information as MidMark has requested in order to make
an informed decision as to the advisability of participating in the Termination
and the Exchange.
4.2 The Company represents and warrants to MidMark that:
a. The Company is a corporation duly organized and
existing and in good standing under the laws of the State of Delaware.
b. The shares of Common Stock to be issued in connection
with the Termination have been duly authorized and, when so issued, will be
fully paid and non-assessable and free and clear of any lien, claim or right of
any other person. The New Warrant to be issued in the Exchange has been duly
authorized and, when so issued, will be validly issued and the
-2-
<PAGE>
shares of Common Stock issuable upon exercise thereof have been duly authorized
and, upon such exercise, including payment therefor, will be fully paid and
non-assessable.
c. The Company has all requisite power and authority and
all necessary licenses, permits, franchises and other governmental
authorizations necessary to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted, except where the
failure to do so would not have a material adverse effect on the business,
assets, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
d. This Agreement and the transactions contemplated
hereby have been duly authorized by all necessary corporate and stockholder
action of the Company. Neither this Agreement nor any of the transactions
contemplated hereby conflicts with or violates (i) any provision of the
Certificate of Incorporation or the By-laws of the Company, as of the date
hereof or as amended as described in the Registration Statement; (ii) any
agreement by which the Company, any subsidiary of the Company or any of its or
their respective properties is bound in any manner that, individually or in the
aggregate, would have a material adverse effect on the business, assets,
financial condition or results of operations of the Company and its subsidiaries
taken as a whole; (iii) any federal or state law, rule or regulation or judicial
order; or (iv) any local law, rule or regulations in any manner that,
individually or in the aggregate, would have material adverse effect on the
business, assets, financial condition or results of operations of the Company
and its subsidiaries taken as a whole. This Agreement is binding on the Company
and enforceable against the Company in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, moratorium, fraudulent
transfer, preference and other laws and equitable principles affecting the scope
and enforcement of creditors' rights generally, and are also limited by
MidMark's implied covenants of good faith, fair dealing and commercially
reasonable conduct, and by the effects of judicial discretion on the
availability of remedies and realization of benefits under and enforceability of
this Agreement in all respects as written.
e. No consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority or any other
person on the part of the Company is required in connection with the execution,
delivery and performance of this Agreement or the issuance of the 100 shares of
Common Stock or the New Warrant pursuant to this Agreement.
5. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof.
Any changes in or additions to this Agreement may be made only upon the written
consent of all parties hereto.
6. Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
7. Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the state of Delaware without regard to any of
its principles of conflicts of laws.
-3-
<PAGE>
8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Exchange and Termination Agreement as of the date first set forth above.
CLEARVIEW CINEMA GROUP, INC.
By:
------------------------------
A. Dale Mayo
President
MIDMARK CAPITAL, L.P.
By: MIDMARK ASSOCIATES, INC.
General Partner
By:
-------------------------
Denis Newman
President
----------------------------
A. Dale Mayo
<PAGE>
Exhibit 10.56
EXCHANGE AND TERMINATION AGREEMENT
Exchange and Termination Agreement, dated as of May 23, 1997 (the
"Agreement"), by and among Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), CMNY Capital II, L.P., a Delaware limited partnership ("CMNY"),
CMCO, Inc., a New York corporation ("CMCO"), Robert G. Davidoff ("Davidoff" and,
together with CMNY and CMCO, the "Warrantholders"), A. Dale Mayo, Brett E. Marks
and Michael C. Rush.
WHEREAS, the Warrantholders are holders of warrants (the
"Warrants") to purchase from the Company, in the aggregate, 200 shares of its
Common Stock, $.01 par value (the "Common Stock"), as set forth in more detail
in Annex A attached hereto; and
WHEREAS, the Company, CMNY, A. Dale Mayo, Brett E. Marks and
Michael C. Rush are parties to an Investment and Stockholders Agreement, dated
December 21, 1994, as amended (the "Investment Agreement"); and
WHEREAS, pursuant to the Investment Agreement, CMNY has the right
to sell, under certain conditions, 250 shares of Common Stock to the Company,
and the Company has the right to purchase, under certain conditions, those same
shares (the "Put/Call Rights"); and
WHEREAS, the Company is contemplating an initial public offering
(the "Offering") of shares of Common Stock, pursuant to a registration statement
on Form SB-2 (the "Registration Statement") to be filed with the Securities and
Exchange Commission on May 27, 1997; and
WHEREAS, the proposed managing underwriter for the Offering has
requested that, in connection with the Offering, the Investment Agreement be
terminated and the parties thereto are willing to terminate the Investment
Agreement in connection with the Offering; and
WHEREAS, the Company and the Stockholders have discussed
exchanging Warrants to purchase 162.50 shares of Common Stock for 110 shares of
Common Stock in connection with the Offering.
NOW, THEREFORE, the parties hereto, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, agree as follows:
1. Exchange. In accordance with the table set forth in Annex B
attached hereto, immediately prior to the consummation of the Offering, CMNY,
CMCO and Davidoff shall exchange (the "Exchange") Warrants to purchase 162.50
shares of Common Stock, in the aggregate, for 110 shares of Common Stock, in the
aggregate. At such time, (a) each Warrantholder shall deliver his or its
Warrants to the Company, duly endorsed and otherwise in proper form for transfer
to the Company, and (b) the Company shall deliver to such Warrantholder stock
certificates for the shares of Common Stock to which such Warrantholder is
entitled as set forth in Annex B attached hereto.
2. Termination of the Investment Agreement. Effective as of
immediately prior to the consummation of the Offering, all rights and
obligations of the parties hereto under
<PAGE>
the Investment Agreement, including without limitation the Put/Call Rights,
shall terminate and the Investment Agreement shall have no further force and
effect.
3. Stock Split. If, prior to the occurrence of the Exchange, the
Company splits its Common Stock by means of a dividend of shares of Common Stock
on its outstanding shares of Common Stock as described in the Registration
Statement, then the number of shares of Common Stock to be issued in the
Exchange shall be proportionately adjusted.
4. Representations and Warranties.
4.1 Each of the Warrantholders represents and warrants to the
Company as follows:
a. Such Warrantholder is an "accredited investor" as
defined under Regulation D promulgated under the Securities Act of 1933, as
amended (the "Act"), and is acquiring the shares of Common Stock to be received
in the Exchange by him or it for such Warrantholder's own account, for
investment and not with a view to, or for sale in connection with, any
distribution thereof. Such Warrantholder has no present intention of
distributing or reselling any of the shares of Common Stock that such
Warrantholder receives in the Exchange.
b. Such Warrantholder, in making the decision to exchange
Warrants for shares of Common Stock pursuant to this Agreement, has not relied
upon any representations or warranties, express or implied, except for the
representations and warranties expressly set forth in this Agreement; and such
Warrantholder has been provided by the Company with such access to the books and
records and personnel and other representatives of the Company and to such other
information as such Warrantholder has requested in order to make an informed
decision as to the advisability of participating in the Exchange.
4.2 The Company represents and warrants to each of the
Warrantholders as follows:
a. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has the corporate power and adequate authority, rights and franchises to
own its property and carry on its business as now being conducted and is now
duly qualified and in good standing in each state or other jurisdiction in which
the character of the properties owned by it therein or the conduct of its
present business would make such qualification necessary and where failure to so
qualify would have a materially adverse impact on the business or financial
condition of the Company and its subsidiaries taken as a whole (a "Material
Adverse Affect"). The Company has the corporate power and adequate authority to
enter into and perform this Agreement and to issue shares of Common Stock in the
Exchange.
b. The shares of Common Stock to be issued in the
Exchange, when so issued, will be validly issued, fully paid and non-assessable.
<PAGE>
c. The execution and delivery of this Agreement and the
performance of the provisions hereof have been duly authorized by the Company
and do not require the consent or approval of any governmental body or other
regulatory authority or any third party not yet obtained. All corporate action
for the due execution and delivery of this Agreement and the performance of the
Exchange and all other transactions contemplated hereby has been duly and
validly taken. No right of any of the Company's stockholders or creditors is
impaired or infringed upon by this Agreement. This Agreement constitutes a valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms except as limited by bankruptcy, insolvency or other
similar laws affecting the enforceability of creditors' rights generally and by
general principles of equity.
d. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not:
(i) Constitute a violation of the Certificate of
Incorporation or the By-laws of the Company, as of the date
hereof or as amended as described in the Registration Statement;
(ii) Conflict with, result in a breach of, constitute a
default (with or without notice and/or the lapse of time) under,
result in being declared void or voidable any provision of, or
result in any right to terminate or cancel, any contract, lease,
agreement, license, commitment or purchase order to which the
Company or any of its properties is bound;
(iii) Constitute a violation of any statute, judgment,
order, decree, regulation or rule of any court, governmental
authority or arbitrator applicable or relating to the Company or
the business of the Company that could constitute a Material
Adverse Effect; or
(iv) Result in (A) the acceleration of any debt or other
obligation of the Company, (B) the creation of any lien, charge
or other encumbrance upon any of the assets of the Company, or
(C) the termination or cancellation or right to terminate or
cancel any obligation owed to the Company.
5. Registration Rights Agreement. CMCO and Davidoff shall
execute, upon receipt of the stock certificates representing the shares of
Common Stock received in the Exchange, an agreement, in the form attached hereto
in Annex C, that provides that they shall be entitled to the benefits of and
shall be subject to the obligations under the Registration Rights Agreement,
dated as of May 23, 1997, by and among the Company and certain of its
stockholders upon execution thereof.
6. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof.
Any changes in or additions to this Agreement may be made only upon the written
consent of all parties hereto.
7. Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
<PAGE>
8. Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the state of Delaware without regard to any of
its principles of conflicts of laws.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Exchange and Termination Agreement as of the date first set forth above.
CLEARVIEW CINEMA GROUP, INC.
By:
-------------------------- ----------------------------
A. Dale Mayo Robert G. Davidoff
President
----------------------------
CMNY CAPITAL II, L.P. A. Dale Mayo
By:
-------------------------- ----------------------------
Robert G. Davidoff Brett E. Marks
General Partner
CMCO, INC. ----------------------------
Michael C. Rush
By:
---------------------------
Robert G. Davidoff
Managing Director
[Exhibits will be provided by the Company upon request.]
<PAGE>
Exhibit 10.57
FORM OF ADDENDUM TO 8% SUBORDINATED PROMISSORY NOTE
This Addendum to the 8% Subordinated Promissory Note dated
________________ (the "Note") in the original principal amount of $______ issued
by Clearview Cinema Group, Inc. to the order of CMCO, Inc. is given to amend the
Initial Maturity Date of the Note.
The first sentence of Section 2(a) of the Note, which reads as follows:
"Principal shall be payable on the Note in one installment on _______ (the
'Initial Maturity Date')" is hereby amended to read as follows: "Principal shall
be payable on the Note in one installment on October 31, 1997 (the 'Initial
Maturity Date')".
This Addendum is given solely to amend the aforesaid section and shall
not be deemed to be a novation, restatement or renewal or otherwise to affect
the Note.
Capitalized terms used in this Addendum without definition shall have
the meanings ascribed to such terms in the Note.
CLEARVIEW CINEMA GROUP, INC.
By:
------------------------------
A. Dale Mayo
President
Date:
-----------------------------
Accepted and agreed:
By: ________________________________
Title:________________________________
Date: ________________________________
<PAGE>
Schedule to Form of Addendum to 8% Promissory Note
Payee Principal Date
- ----- --------- ----
CMNY Capital II, L.P. $300,000 August 31, 1995
CMCO, Inc. $50,000 August 31, 1995
Robert G. Davidoff $50,000 August 31, 1995
CMCO, Inc. $50,000 October 11, 1995
Robert G. Davidoff $50,000 October 11, 1995
<PAGE>
Exhibit 10.58
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of May 23, 1997 (the
"Agreement"), by and among Clearview Cinema Group, Inc., a Delaware corporation
(the "Company"), CMNY Capital II, L.P., a Delaware limited partnership
("CMNY"), MidMark Capital, L.P., a Delaware limited partnership ("MidMark"),
Emerson Cinema, Inc., a New Jersey corporation, A. Dale Mayo ("Mayo"), Brett E.
Marks, Michael C. Rush, Paul and Cindy Kay and Louis G. Novick (collectively,
other than the Company, the "Stockholders").
The parties hereto, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, agree as follows:
1. Definitions. The following terms have the meanings set forth in
this Section 1 unless the context clearly otherwise requires:
(a) "Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(b) "Commission" means the Securities and Exchange
Commission.
(c) "Common Stock" means the Common Stock, $.01 par value, of
the Company.
(d) "Holder" means any Stockholder so long as such
Stockholder is a holder of any Registrable Securities and such Stockholder's
permitted successors, transferees and assigns so long as any such successor,
transferee or assignee executes and delivers a written agreement, in form and
substance satisfactory to the Company, agreeing to be bound by the provisions
of this Agreement.
(e) "Offering" means any public offering of shares of Common
Stock by the Company or any holder thereof in accordance with the registration
requirements of the Act other than the initial public offering of shares of
Common Stock pursuant to the Company's registration statement on Form SB-2 to
be filed with the Commission on May 27, 1997 (the "Initial Offering").
(f) "Registrable Securities" means any shares of Common Stock
now or hereafter held by the Stockholders other than Unrestricted Securities.
(g) "Registration", "register" and like words mean compliance
with all of the laws, rules and regulations (federal, state and local), and
provisions of agreements and corporate documents pertaining to the public
offering of securities, including registration of any public offering of
securities on any form under the Act.
(h) "Unrestricted Securities" means, at any time, any shares
of Common Stock beneficially owned by any Stockholder that can be transferred
by such Stockholder without registration under the Act, excluding any shares of
Common Stock that are held by any Stockholder who is an affiliate of the
Company (as such term is defined in Rule 144(a) under the Act).
<PAGE>
2. Requested Registration.
(a) If any of Mayo, CMNY or MidMark shall notify the Company
after the first anniversary of the consummation of the Initial Offering that he
or it proposes to sell or transfer any of his or its Registrable Securities and
requests registration thereof, the Company shall promptly give notice of such
request to all other Holders and comply with Section 2(b). Upon receipt of such
notice, each such Holder may elect to participate in the applicable Offering.
To make such election, any such Holder must give notice to the Company of such
Holder's election and the number of shares of Common Stock that such Holder
wishes to sell in such Offering within fifteen (15) days of the day that the
Company gave notice of such request. If the managing underwriter or sole
underwriter of any Offering being registered pursuant to this Section 2(a)
advises the Holders participating therein in writing that marketing factors
require a limitation on the number of shares of Common Stock to be underwritten
in such Offering, then the number of shares of Common Stock that may be
included in such Offering shall be allocated among all Holders participating in
such offering in proportion, as nearly as practicable, to the respective
numbers of shares of Common Stock held by or issuable to such Holders at the
time of the filing of the registration statement for such Offering. Any
provision herein to the contrary notwithstanding, the right to request
registration pursuant to this Section 2 shall be limited to two registrations
initiated by each of Mayo, CMNY and MidMark; provided, however, that (i) no
such request shall require that a registration statement therefor shall become
effective prior to 180 days after the effective date of a registration
statement that shall have been filed by the Company covering a firm commitment
underwritten Offering, if the Company shall theretofore have given notice of
such registration statement to the Holders pursuant to this Section 2(a) or
Section 5 and shall have pursued the preparation, filing and effectiveness of
such registration statement with reasonable diligence; and (ii) the Company
shall not be required to effect such a registration unless the Holder
requesting registration proposes to dispose of Registrable Securities having an
aggregate disposition price (before deduction of underwriting discounts and
expenses of sale) of at least $1,000,000. A right to demand registration shall
be deemed to have been exercised when the registration statement filed on
account of such exercise has been declared effective by the Commission.
(b) Following receipt of a request pursuant to Section 2(a),
the Company shall (i) file within 90 days a registration statement on the
appropriate form under the Act for the shares of Common Stock that the Company
has been requested to register, including the shares of Common Stock of any
Holder who elects to participate in response to the notice from the Company to
the Holders as provided in Section 2(a); (ii) if the applicable Offering is
pursuant to an underwriting agreement (the managing underwriter or sole
underwriter, as applicable, being the person selected by the Holders of more
than fifty percent of the shares of Common Stock to be registered), enter into
an underwriting agreement in such form as said managing or sole underwriter
shall require (which must only contain terms and conditions customary for
offerings of equity securities of entities with market capitalizations that are
approximately equal to the Company's then-market capitalization and may contain
customary provisions requiring the Company and the relevant Holders to
indemnify and provide contribution to the underwriter or underwriters of such
Offering); (iii) use its reasonable best efforts to have such registration
statement declared effective as promptly as practicable and remain effective
for at least 180 days; (iv) notify the relevant Holders, promptly after it has
received notice thereof, of the time when such registration statement has
become effective or
- 2 -
<PAGE>
any supplement to any prospectus forming a part of such registration statement
has been filed; (v) notify the relevant Holders promptly of any request by the
Commission for the amending of such registration statement or for the
supplementing of any prospectus forming a part of such registration statement
or for additional information; (vi) prepare and file with the Commission,
promptly upon any relevant Holder's request, any amendment to such registration
statement or supplement to such prospectus that, in the opinion of counsel for
such Holder, may be necessary or advisable in connection with the distribution
of the shares of Common Stock registered under such registration statement;
(vii) prepare and promptly file with the Commission and promptly notify the
Holders of the filing of such amendment to such registration statement or
supplement to such prospectus as may be necessary to correct any statement or
omission; (viii) in case any Holder is required to deliver a prospectus with
respect to the applicable Offering at a time when the prospectus forming a part
of such registration statement which is then in effect may no longer be used
under the Act, prepare promptly upon request such amendment or amendments to
such registration statement as may be necessary to permit compliance with the
requirements of Section 5 of the Act; (ix) not file any amendment to such
registration statement or supplement to such prospectus to which any relevant
Holder shall reasonably object after having been furnished a copy thereof at a
reasonable time prior to the filing thereof; (x) advise each applicable Holder
promptly, after it has received notice or obtained knowledge thereof, of the
issuance of any stop order by the Commission suspending the effectiveness of
such registration statement or the initiation or threatening of any proceeding
for that purpose and promptly use its reasonable best efforts to prevent the
issuance of any such stop order or to obtain its withdrawal if any such stop
order shall have been issued; (xi) use its reasonable best efforts to qualify
the shares of Common Stock being registered on such registration statement for
sale under the securities laws of such states as the relevant Holders may
reasonably request, except that it shall not be required in connection
therewith or as a condition thereof to execute a general consent to service or
qualify to do business in any such states or otherwise to subject itself to
taxation therein solely because of such qualification; (xii) furnish to each
applicable Holder as soon as available copies of such registration statement
and each preliminary or final prospectus forming a part of such registration
statement and any supplement thereto required to be prepared pursuant to this
Section 2, all in such quantities as such Holder may from time to time
reasonably request; and (xiii) refrain from issuing or selling or registering
for sale by any other person, during the 90-day period commencing 30 days
before and ending 60 days after the effective date of such registration
statement, any securities other than the shares of Common Stock registered for
sale under such registration statement.
3. Information to be Furnished by Holders. Each Holder participating
in an Offering pursuant to Section 2 or Section 5 shall furnish to the Company
in writing all information within such Holder's possession or knowledge
required by the applicable rules and regulations of the Commission and by any
applicable state securities or blue sky laws concerning such Holder, the
proposed method of sale or other disposition of the shares of Common Stock
being sold by such Holder in such Offering, and the identity of and
compensation to be paid to any proposed underwriter or underwriters to be
employed in connection with such Offering.
4. Costs and Expenses. Except as provided in the last sentence of this
Section 4, the Company shall pay all costs and expenses in connection with the
registration of any Offering under this Agreement. Such costs and expenses for
any Offering, include: (a) the
- 3 -
<PAGE>
reasonable fees and expenses of the Company's counsel and one special counsel
selected by the Holders offering shares of Common Stock in such Offering; (b)
the fees and expenses of the Company's accountants and auditors; (c) the costs
and expenses incident to the preparation, printing and filing of any and all
documents to be filed under the Act and any applicable state securities or blue
sky laws in connection with such Offering, each prospectus forming a part of
the relevant registration statement and all amendments thereof and supplements
thereto; (d) the costs incurred in connection with the qualification of the
Offering and the shares of Common Stock being offered in such Offering under
any applicable state securities or blue sky laws (including any related fees
and disbursements); (e) the cost of listing the shares of Common Stock being
offered in such Offering on any exchange; (f) the cost of furnishing to each
Holder such copies as such Holder shall reasonably request of the relevant
registration statement, each preliminary prospectus and the final prospectus
forming part of such registration statement and each amendment thereof or
supplement thereto; and (g) all expenses incident to delivery of the shares of
Common Stock being offered in such Offering to any underwriter or underwriters.
Notwithstanding anything to the contrary set forth herein, the Company shall
not be obligated to pay (i) the commissions or discounts payable to any
underwriter for any shares of Common Stock sold by any Holder or (ii) any costs
or expenses incurred in connection with any registration statement referred to
in Section 5 which any other person on whose behalf such registration statement
is being filed has agreed to pay.
5. Incidental Registration. If the Company shall at any time propose
for itself or any other person the registration under the Act of any Offering
(other than any Offering in connection with any employee benefit plan or a
transaction required to be registered by means of a registration statement on
Form S-4), the Company shall give notice of such proposed registration to all
Holders. Upon receipt of such notice, each Holder may elect to participate in
such Offering. To make such election, any such Holder must give notice to the
Company of such Holder's election and the number of Registrable Securities that
such Holder wishes to sell in such Offering within fifteen (15) days of the day
that the Company gave notice of such Offering. Subject to the provisions of the
last sentence of this Section 5, the Company shall include in such Offering
such Registrable Securities and shall cause the managing underwriter or sole
underwriter of such Offering, if any, to enter into an underwriting agreement
that will have all such electing Holders as parties thereto. Except to the
extent governed by an agreement between the Company and another person, the
provisions of Sections 2(b) and 4 of this Agreement shall be applicable to any
registration of Registrable Securities under this Section 5. The right to
registration provided in this Section 5 is in addition to and not in lieu of
the demand registration rights provided in Section 2. The rights provided in
this Section 5 are available to any Holder even though such Holder may be free
at the time to sell all of the Registrable Securities of such Holder with
respect to which registration is requested in accordance with Rule 144 (or any
similar rule or regulation) under the Act. If the Company proposes to sell any
shares of Common Stock for its own account or any person who is not a Holder
has the right to sell any shares of Common Stock under any registration
statement filed pursuant to Section 2, then the Holder who requested that such
registration statement be filed shall have the option to require that such
registration statement be deemed a registration under this Section 5 and not
constitute an exercise of such Holder's rights under Section 2. If the managing
underwriter or sole underwriter of any Offering subject to the provisions of
this Section 5 advises the Holders participating therein in writing that
marketing factors require a limitation on the number of shares of Common Stock
to be underwritten in such Offering, then
- 4 -
<PAGE>
the number of shares of Common Stock that may be included in such Offering
shall be allocated as follows: (i) all shares of Common Stock to be sold for
the account of the Company shall be included; and (ii) the remaining shares of
Common Stock that may be sold pursuant to the advice of such managing
underwriter shall be allocated among all Holders and other persons
participating in such Offering in proportion, as nearly as practicable, to the
respective numbers of shares of Common Stock held by or issuable to all such
persons at the time of the filing of the registration statement for such
Offering.
6. Indemnification by Company. The Company shall, to the maximum
extent permitted by law, indemnify and hold harmless each Holder participating
in any Offering pursuant to this Agreement, any underwriter for such Holder and
each person, if any, who controls (as defined in the Act) such Holder or such
underwriter against any losses, claims, damages, liabilities, judgments,
settlements, awards and expenses (including attorneys' fees) (each a "Loss" and
collectively "Losses") to which such Holder or underwriter or controlling
person may become subject under the Act or otherwise, insofar as such Losses
are caused by, based upon, arise out of, or relate to, any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement for such Offering, any prospectus contained therein, or any amendment
thereof or supplement thereto, or 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; provided, however, that the Company shall
not be liable in any such case to the extent that any such Loss is caused by,
is based upon, arises out of, or relates to, an untrue statement or alleged
untrue statement or omission or alleged omission made in conformity with
written information furnished by such Holder or underwriter specifically for
use in preparation of such registration statement, prospectus, amendment or
supplement or if, in respect to such statement, alleged statement, omission or
alleged omission, the final prospectus for such registration statement
corrected such statement, alleged statement, omission or alleged omission and a
copy of such final prospectus was not sent or given by or on behalf of such
Holder at or prior to the confirmation of the sale of shares of Common Stock of
such Holder with respect to which such Loss relates. The Company shall
reimburse each such Holder, underwriter or controlling person for any legal or
other expenses incurred by such Holder, underwriter or controlling person in
connection with investigating or defending against any such Loss as incurred if
such Holder, underwriter or controlling person has provided to the Company an
undertaking to repay such reimbursed expenses if it is determined that such
Holder, underwriter or controlling person was not entitled to indemnification
hereunder.
7. Indemnification by Holder. Each Holder participating in any
Offering pursuant to this Agreement shall, to the maximum extent permitted by
law, indemnify and hold harmless the Company, each of its directors, each of
its officers who has signed the applicable registration statement and each
person, if any, who controls the Company against any Losses to which the
Company or any such director, officer or controlling person may become subject
under the Act or otherwise, insofar as such Losses are caused by, based upon,
arise out of, or relate to, (a) any untrue or alleged untrue statement of any
material fact contained in the registration statement for such Offering, any
prospectus contained therein, or any amendment thereof or supplement thereto,
or 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, in each case to the extent, but only to the extent, that such
Losses are caused by, based upon, arise out of, or relate to, an untrue
statement or alleged untrue statement or omission or alleged
- 5 -
<PAGE>
omission made in conformity with written information furnished by such Holder
specifically for use in preparation of such registration statement, prospectus,
amendment or supplement; or (b) any untrue statement or alleged untrue
statement or omission or alleged omission made in any preliminary prospectus
for such registration statement if, in respect to such statement, alleged
statement, omission or alleged omission, the final prospectus for such
registration statement corrected such statement, alleged statement, omission or
alleged omission and a copy of such final prospectus was not sent or given by
or on behalf of such Holder at or prior to the confirmation of the sale of
shares of Common Stock of such Holder with respect to which such Loss relates.
Each Holder's obligation under this Section 7 shall be several and not joint
and in no event shall exceed the net proceeds received by such Holder in the
Offering to which the applicable Loss relates.
8. Notice to Indemnitor. Promptly after receipt by any indemnified
party of notice of the commencement of any action which may involve an
indemnifiable Loss, such indemnified party shall, if a claim is to be made
against an indemnifying party with respect to such Loss pursuant hereto, notify
such indemnifying party of the commencement thereof; but the failure to so
notify such indemnifying party shall not relieve it from any liability that it
may have to such indemnified party hereunder unless such indemnifying party
shall have been actually and materially prejudiced by such failure. In case any
such action is brought against any indemnified party and it notifies an
indemnifying party of the commencement thereof, and such indemnifying party,
without acknowledging any validity of the underlying claim, acknowledges that
it may be obligated to indemnify such indemnified party therefor, such
indemnifying party shall be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, but may not settle such action without the consent of such
indemnified party, which consent shall not be unreasonably withheld, unless
such settlement involves no payment by such indemnified party, no equitable
relief against such indemnified party and a complete release of all claims
against such indemnified party. If an indemnifying party undertakes the defense
of any matter for which indemnity is claimed under this Agreement, and if the
relevant indemnified party wishes nevertheless to retain counsel to represent
it in such matter, the fees of such counsel shall be the responsibility solely
of the party retaining such counsel unless such indemnified party and such
indemnifying party have conflicting or separate defenses in such action, in
which case the attorneys' fees of such indemnified party will be borne by such
indemnifying party.
9. Additional Obligations. If, in order to effect any Offering in
accordance with this Agreement, such Offering or the shares of Common Stock
being offered in such Offering require a declaration of, registration with, or
approval of, any federal or state governmental official or authority (other
than registration under the Act or qualification or registration under state
securities or blue sky laws) before such shares of Common Stock may be sold,
the Company at its own expense shall take all reasonable actions in connection
with such registration, declaration or approval and will use its reasonable
best efforts to cause such shares of Common Stock to be duly registered or
approved as may be required; provided, however, that in connection therewith or
as a condition thereof, the Company may not be required to execute a general
consent to service or to qualify to do business in any jurisdiction. The
foregoing shall not be applicable to any regulatory requirements applicable
solely to any Holder wishing to participate in any such Offering.
- 6 -
<PAGE>
10. Rule 144 Covenants. With a view to making available to each Holder
the benefits of Rule 144 under the Act (which term as used in this Section 10
includes the present Rule 144 and any other, additional, substitute,
supplemental or analogous rule or regulation of the Commission that may at any
time permit a Holder to sell Registrable Securities to the public without
compliance with the registration requirements of the Act), the Company (a)
shall maintain registration of the Common Stock under Section 12 or 15(d) of
the Securities Exchange Act of 1934, as amended; (b) shall file with the
Commission in a timely manner all reports and other documents required to be
filed by an issuer of securities registered under the Securities Exchange Act
of 1934, as amended, so as to maintain the availability of Rule 144 to the
Holders; (c) at its expense, forthwith upon any Holder's request, shall deliver
to such Holder a certificate, signed by one of the Company's principal
officers, stating (i) the Company's name, address and telephone number
(including area code); (ii) the Company's I.R.S. taxpayer identification
number; (iii) the Company's Commission file number; (iv) the number of shares
of Common Stock outstanding as shown by the most recent report or statement
published by the Company or filed by the Company with the Commission; and (v)
that the Company has filed the reports required to be filed under the
Securities Exchange Act of 1934, as amended, for a period of at least 90 days
prior to the date of such certificate and in addition has filed the most recent
annual report required to be filed thereunder and such other or additional
information as shall be necessary to make available to such Holder the ability
to offer and sell the maximum number of shares of Common Stock under Rule 144;
and (d) when Rule 144 is being complied with, shall deliver securities not
bearing any legend restricting transfer of such securities, as requested from
time to time by any Holder subject to this Agreement.
11. Notices. All notices and other communications provided for
hereunder must be in writing and shall be deemed to have been given on the same
day when personally delivered or sent by confirmed facsimile transmission or on
the next business day when delivered by receipted courier service or on the
third business day when mailed with sufficient postage, registered or certified
mail, return receipt requested, to the following addresses:
(a) if to the Company or Mayo: Clearview Cinema Group, Inc.,
7 Waverly Place, Madison, New Jersey 07940, Telecopy No. (201) 377-4303, marked
"Attention: President," with a copy to: Kirkpatrick & Lockhart LLP, 1251 Avenue
of the Americas, New York, New York 10020, Attention: Warren H. Colodner, Esq.;
(b) if to CMNY: CMNY Capital II, L.P., 135 East 57th Street,
26th Floor, New York, New York 10022, Telecopy No. (212) 980-2630, Attention:
Robert Davidoff, with a copy to: Reid & Priest LLP, 40 West 57th Street, New
York, New York 10019, Attention: Thomas More Griffin, Esq.;
(c) if to MidMark: MidMark Capital, L.P., 466 Southern
Boulevard, Chatham, New Jersey 07928, Telecopy No. (201) 822-8911, with a copy
to: McCarter & English, Four Gateway Center, 100 Mulberry Street, Newark, New
Jersey 07101, Attention: David F. Broderick, Esq.;
(d) if to Emerson Cinema, Inc.: Emerson Cinema, Inc. 93 Hope
Road, Blairsville, New Jersey 07825, with a copy to Jack Wenarsky, Esq., 225
Route 10, Succasunna, New Jersey 07876;
- 7 -
<PAGE>
(e) if to Brett E. Marks: First New York Realty, 310 Madison
Avenue, New York, New York 10017, Telecopy No. (212) 682-0151;
(f) if to Michael C. Rush: 1 Kenneth Court, Summit New
Jersey, 07901, Telecopy: (908) 522-0206; or
(g) if to Paul and Cindy Kay: 39 Tamarack Lane, Pomona, NY
10970; and
(h) if to Louis G. Novick: RIPCO Real Estate Corp., 2 Robbins
Lane, Jericho, NY 11753;
or to such other address as any party shall have furnished to the other parties
pursuant to this Section 11. Failure to send a copy of a notice to any attorney
shall not vitiate any notice sent to a party.
12. Entire Agreement; Modification of Agreement; Consents. This
Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. Changes in or additions to this Agreement
may be made and/or compliance with any covenant or condition herein set forth
may be omitted only upon written consent of all the parties hereto; provided,
however, that any agreement by any person to become a party to this Agreement
because such person has acquired shares of Common Stock from any Stockholder or
from the Company only needs to be executed by such person and the Company to be
binding upon all of the parties hereto.
13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors, transferees and assigns. For purposes of this Agreement, any person
who is a successor to or assignee of any party hereto by operation of law,
including by means of a merger, consolidation or share exchange or by the laws
of intestacy or inheritance or pursuant to a will (but only if such person is
the administrator or executor of the applicable estate) and excluding any
person who receives a distribution of shares of Common Stock as an heir, upon
dissolution or liquidation (whether full or partial), as a dividend on or a
redemption (whether full or partial) of such person's interest in such party or
by any other means, shall be deemed to be a permitted successor or assignee
hereunder upon execution of an agreement to become a party hereto. Any person
who receives a distribution of shares of Common Stock from any party hereto by
any other means or for any other reason shall only be permitted to become a
party hereto if (a) such person, after such distribution, beneficially owns at
least five percent of the then outstanding shares of Common Stock, on a fully
diluted basis, or (b) such person is an affiliate of the Company (as defined in
Rule 144 under the Act), and such person executes an agreement to become a
party hereto.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware without regard to any of its
principles of conflicts of law.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement.
- 8 -
<PAGE>
16. Term. This Agreement shall remain in full force and effect until
the earliest to occur of (a) the liquidation or dissolution of the Company, (b)
the sale of all or substantially all of the assets of the Company, (c) no
Stockholder beneficially owning more than five percent of the then-outstanding
shares of Common Stock, on a fully diluted basis, and (d) the tenth anniversary
of the consummation of the Initial Offering.
17. Construction.
(a) The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
(b) As used in this Agreement, the term "person" means any
individual, corporation, partnership, joint venture, trust, limited liability
company, governmental authority or other entity.
(c) The invalidity or unenforceability of any particular
provision of this Agreement in any jurisdiction shall not affect the other
provisions hereof or such provision in other jurisdictions, and this Agreement
shall be construed in such jurisdiction in all respects as if such invalid or
unenforceable provision were omitted. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision in such jurisdiction there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
18. Effectiveness. This Agreement shall become effective immediately
following consummation of the Initial Offering and shall terminate and be of no
further force and effect if the Initial Offering is not consummated.
- 9 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date first set
forth above.
CLEARVIEW CINEMA GROUP, INC.
________________________________
By: _________________________ A. Dale Mayo
A. Dale Mayo
President
________________________________
CMNY CAPITAL II, L.P. Brett E. Marks
By: _________________________ ________________________________
Robert Davidoff Michael C. Rush
General Partner
MIDMARK CAPITAL, L.P. ________________________________
Paul Kay
By: MidMark Associates, Inc.
General Partner
________________________________
Cindy Kay
By: _____________________
Denis Newman
President ________________________________
Louis G. Novick
EMERSON CINEMA, INC.
By: _________________________
John Nelson
President
- 10 -
<PAGE>
CONSULTING AGREEMENT
THIS AGREEMENT is made as of May 23, 1997, between Clearview
Cinema Group, Inc., a Delaware corporation (the "Company"), and MidMark
Associates, Inc., a New Jersey corporation ("MidMark").
WHEREAS, the Company is engaged in the business of the
ownership and operation of cinemas, and MidMark is experienced in business and
organizational strategy and financial and investment management; and
WHEREAS, the parties hereto are parties to a Management and
Monitoring Fee Agreement, dated as of May 29, 1996 (the "Monitoring
Agreement"), pursuant to which MidMark has been providing business and
organizational strategy and financial and investment management services to the
Company; and
WHEREAS, the Company is contemplating an initial public
offering (the "Offering") of shares of its Common Stock, $.01 par value,
pursuant to a registration statement on Form SB-2 to be filed with the
Securities and Exchange Commission on May 27, 1997; and
WHEREAS, the parties hereto have been discussing terminating
the Monitoring Agreement in connection with the Offering; and
WHEREAS, the Company desires to retain MidMark after the
Offering to provide business and organizational strategy and financial and
investment management consulting services to the Company, upon the terms and
conditions hereinafter set forth, and MidMark is willing to undertake such
obligations.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment.
From and after the date of the consummation of the Offering,
the Company hereby engages MidMark and MidMark hereby agrees under the terms
and conditions set forth herein to provide certain services to the Company as
described in Section 2 hereof.
2. Duties of MidMark.
MidMark shall provide the Company with business and
organizational strategy and financial and investment management consulting
services. The Company is free to accept or reject any advice rendered to it by
MidMark hereunder.
<PAGE>
In addition, officers of MidMark may serve as directors of
the Company following the consummation of the Offering and the Consulting Fee
(as defined below) provided for herein shall serve as full compensation for
such service, in lieu of any separate or additional directors' fees.
3. Compensation of MidMark.
During the term of this Agreement, the Company agrees to pay
MidMark, on a monthly basis, a consulting fee (the "Consulting Fee") in cash at
the rate of $60,000 per year.
4. Term and Termination of Agreement.
This Agreement shall be for a term of six years commencing on
the date of the consummation of the Offering; provided, however, that this
Agreement shall be automatically terminated and the obligation of the Company
to pay the Consulting Fee shall immediately cease if (a) no officer of MidMark
is serving as a director of the Company, and (b) the holders of the Class A
Convertible Preferred Stock, $.01 par value, of the Company no longer have the
right, voting separately as a single class, to elect directors of the Company.
5. Liability.
MidMark is not and never shall be liable to any creditor of
the Company and the Company agrees to indemnify and hold MidMark harmless from
and against any and all claims of alleged creditors and against all costs,
charges and expenses (including reasonable attorneys' fees and expenses)
incurred or sustained by MidMark in connection with any action, suit or
proceeding to which it may be made a party by any alleged creditor in
connection with this Agreement. The Company also agrees to indemnify and hold
MidMark harmless from and against any and all liabilities, losses or damages
suffered, paid or incurred by MidMark arising out of, or in any way connected
with, or as a result of, the execution and delivery of this Agreement, or the
performance by MidMark of services hereunder, except for claims arising out of
or related to the negligence or willful misconduct of MidMark.
6. Assignment.
This Agreement shall be binding upon and inure to the benefit
of the parties' successors. Neither this Agreement nor any of the rights of the
parties hereunder may be transferred or assigned by either party hereto. Any
attempted transfer or assignment in violation of this Section 6 shall be void.
-2-
<PAGE>
7. Relationship of the Parties.
Nothing contained in this Agreement is intended or is to be
construed to constitute MidMark and the Company as partners or joint venturers
or either party as an employee of the other party. Neither party hereto shall
have any express or implied right or authority to assume or create any
obligations on behalf of or in the name of the other party or to bind the other
party to any contract, agreement or undertaking with any third party.
8. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties hereto or, in the case of waiver, by the party waiving compliance.
(b) Notices. Any notice or other communication required
or which may be given hereunder shall be in writing and shall be delivered
personally, telecopied, or sent by certified, registered, or express mail,
postage prepaid, to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice, and shall be
deemed given when so delivered personally or telecopied, or if mailed, two days
after the date of mailing, as follows:
(i) if to the Company, to:
Mr. A. Dale Mayo
Chief Executive Officer
Clearview Cinema Group, Inc.
7 Waverly Place
Madison, NJ 07940
Telecopy: 201-377-4303
(ii) if to MidMark, to:
MidMark Associates, Inc.
466 Southern Boulevard
Chatham, New Jersey 07928
Telecopy: 201-822-8911
(c) Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior contracts and other agreements (including, without
limitation, subject to Section 8(h) below, the Monitoring Agreement).
-3-
<PAGE>
(d) Headings. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(e) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
(f) Governing Law; Consent to Jurisdiction. This
Agreement shall be governed by, and construed and enforced in accordance with
and subject to, the laws of the State of New Jersey applicable to agreements
made and to be performed entirely within such State. Each of the parties hereto
consents and agrees to the jurisdiction of any State or Federal court sitting
in the County of Morris, State of New Jersey, and waives any objection based on
venue or forum non conveniens with respect to any action instituted therein,
and agrees that any dispute concerning the conduct of any party in connection
with this Agreement shall be heard only in the courts described above.
(g) Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
(h) Termination. Effective as of the date of the
consummation of the Offering, all rights and obligations of the parties thereto
under the Monitoring Agreement shall terminate and the Monitoring Agreement
shall have no further force or effect.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
CLEARVIEW CINEMA GROUP, INC.
By: ________________________
Name: A. Dale Mayo
Title: President
MIDMARK ASSOCIATES, INC.
By: ________________________
Name:
Title:
-5-
<PAGE>
Neither this Warrant nor the shares of Common Stock issuable upon
exercise of this Warrant have been registered under the Securities Act
of 1933, as amended, and this Warrant cannot be exercised, sold or
transferred, and the shares of Common Stock issuable upon exercise of
this Warrant cannot be sold or transferred, unless and until they are
so registered or unless such registration is not then required under
the circumstances of such exercise, sale or transfer.
No. W -1
Dated: ____________, 1997 Warrant to Purchase an Aggregate
of 471 Shares of Common Stock.
CLEARVIEW CINEMA GROUP, INC.
WARRANT
Exercisable at or before 5:00 P.M., June 1, 2006
(unless extended)
This certifies that, for value received, MIDMARK CAPITAL, L.P., the
registered holder hereof ("Holder"), is entitled, subject to the terms and
conditions set forth herein, to purchase from CLEARVIEW CINEMA GROUP, INC., a
Delaware corporation (the "Corporation"), at any time or from time to time
during the period specified in Section 1 hereof, up to 471 shares of common
stock, $.01 par value (the "Common Stock"), of the Corporation. The shares of
Common Stock purchasable pursuant to this Warrant are collectively referred to
herein as the "Warrant Shares." The Warrant Shares shall be purchasable
initially at a price of $.01 per share (the "Exercise Price"). The Exercise
Price and the number of Warrant Shares issuable upon exercise of this Warrant
are subject to adjustment as provided in Sections 1(g) and 7 hereof. As used
herein, the term "Warrant" shall include this Warrant and any warrants delivered
in substitution or exchange herefor as provided herein.
1. Term of Warrant; Exercise Period; Early Termination.
(a) Subject to the terms and conditions set forth herein, this Warrant
shall be exercisable, in whole or in part (but not for fractional shares),
during the period (the "Exercise Period") commencing on the earlier of (i) June
1, 2001 or (ii) the date of the first Liquidity Event (the "Commencement Date")
and, unless extended by the Corporation, ending at 5:00 p.m., Eastern Time, on
June 1, 2006, and shall be void thereafter. Exercise of this Warrant, in whole
or in part, during the Exercise Period shall be done in accordance with the
provisions of Section 2(a)
<PAGE>
hereof.
(b) As used herein, a "Liquidity Event" shall mean any of the
following:
(i) a sale or other transfer of more than fifty percent (50%) of
the outstanding shares of Common Stock in one transaction or a series of
transactions to a single person or group (as defined for purposes of Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
if, as a result of such transaction or transactions, such person or group
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act)
of voting securities of the Corporation having more than fifty percent (50%) of
the voting power of the outstanding voting securities of the Corporation;
(ii) a merger or consolidation involving the Corporation, other
than a merger or consolidation in which persons who, immediately prior to the
closing of such transaction, were the holders of voting securities of the
Corporation having more than fifty percent (50%) of the voting power of the
outstanding voting securities of the Corporation hold, immediately after such
transaction, voting securities of the surviving entity having more than fifty
percent (50%) of the voting power of the outstanding voting securities of the
surviving entity;
(iii) a sale of all or substantially all of the assets of the
Corporation; or
(iv) a liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary.
(c) As used herein, a "Pricing Event" shall mean any of the following:
(i) any Liquidity Event;
(ii) the consummation of an initial public offering of shares of
Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act");
(iii) the listing of shares of Common Stock on the New York Stock
Exchange or the American Stock Exchange or with the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"); or
(iv) the registration of the Common Stock as a class under
Section 12 of the Exchange Act.
(d) As used herein, the "Fair Market Value" of a share of Common Stock
shall equal:
(i) in the case of a Pricing Event described in
<PAGE>
Section 1(b)(i) hereof, the aggregate cash and the aggregate fair market value
(as agreed upon by the Corporation and the Holder) of any other consideration
paid by the relevant person or group, divided by the number of shares of Common
Stock acquired by such person or group in such transaction or transactions;
(ii) in the case of a Pricing Event described in Section 1(b)(ii)
hereof, the aggregate cash and the aggregate fair market value (as agreed upon
by the Corporation and the Holder) of any other consideration received by all
holders of shares of Common Stock and warrants and options exercisable for and
securities convertible into or exchangeable for shares of Common Stock as a
result of such event, divided by the number of outstanding shares of Common
Stock on a fully diluted basis, assuming the exercise of all warrants and
options exercisable for, and the conversion or exchange of all securities
convertible into or exchangeable for, shares of Common Stock;
(iii) in the case of a Pricing Event described in Section
1(b)(iii) hereof, the aggregate cash and the aggregate fair market value (as
agreed upon by the Corporation and the Holder) of any other consideration
received by the Corporation, less all debts and other obligations of the
Corporation and less all payments that would be made upon liquidation,
dissolution or winding up to holders of securities that are entitled to
preferential payment upon liquidation, dissolution or winding up (other than any
such securities that are convertible into or exchangeable for shares of Common
Stock), divided by the number of outstanding shares of Common Stock on a fully
diluted basis, assuming the exercise of all warrants and options exercisable
for, and the conversion or exchange of all securities convertible into or
exchangeable for, shares of Common Stock;
(iv) in the case of a Pricing Event described in Section l(b)(iv)
hereof, the aggregate cash and the aggregate fair market value (as agreed upon
by the Corporation and the Holder) of any other consideration received by the
holders of the outstanding shares of Common Stock as a result of such event,
divided by the number of outstanding shares of Common Stock; and
(v) in the case of any Pricing Event described in Section
1(c)(ii), (iii) or (iv) hereof, the average of the daily Common Stock Market
Prices for any period of 120 consecutive Trading Days commencing on or after the
date of such Pricing Event; provided, that the Common Stock Market Price for
each Trading Day during such period shall exceed the product of (x) 2.6667 and
(y) the then-current Conversion Price of the Company's Class A Convertible
Preferred Stock, $.01 par value (as defined in and as adjusted pursuant to the
Amended and Restated Certificate of Incorporation of the Corporation, as it may
be subsequently amended); and, provided, further, that any Trading Day on which
the Holder is prohibited from selling all its shares of Common Stock pursuant to
any agreement between the Holder and the representative of the underwriters of
the initial public offering
<PAGE>
described in Section 1(c)(ii), or pursuant to any similar agreement between the
Holder and any underwriter entered into in connection with any other public
offering of Common Stock, may not be a Testing Day (as defined below).
(e) As used herein, "Common Stock Market Price" shall mean for any
Trading Day (i) if the Common Stock is listed or admitted for trading on the New
York Stock Exchange (or any successor to such exchange) or any other national or
regional securities exchange, the last sale price, or the closing bid price if
no sale occurred, of the Common Stock on the principal securities exchange on
which the Common Stock is listed or traded, or (ii) if not listed or traded as
described in clause (i), the last sale price of the Common Stock quoted on the
National Market System of NASDAQ or any similar system of automated
dissemination of quotations of securities prices then in common use, if so
quoted, or (iii) if not listed or traded as described in clause (i) or quoted as
described in clause (ii), the mean between the high bid and the low asked
quotations for the Common Stock as reported by the National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid and asked
quotations for the Common Stock on at least five of the ten preceding Trading
Days. If the Common Stock is quoted on a national securities or central market
system in lieu of any market or quotation system described above, then the
Common Stock Market Price shall be determined in the manner set forth in clause
(i) of the preceding sentence if actual transactions are reported and in the
manner set forth in clause (iii) of the preceding sentence if bid and asked
quotations are reported but actual transactions are not.
(f) As used herein, "Trading Day" shall mean (i) any day on which the
New York Stock Exchange (or any successor to such exchange) is open for the
transaction of business, or (ii) if the Common Stock is not at such time listed
or admitted for trading on the New York Stock Exchange (or any successor to such
exchange), a day upon which the principal national or regional securities
exchange on which the Common Stock is listed or admitted for trading is open for
the transaction of business, or (iii) if not listed or admitted for trading as
described in clause (i) or (ii), and if at such time the sale price of the
Common Stock is quoted on the National Market System of NASDAQ or any similar
system of automated dissemination of quotations of securities prices then in
common use, any day for which such system provides quotations with respect to
securities upon which it reports, or (iv) if not so listed or admitted for
trading or quoted, and if at such time bid and asked quotations for the Common
Stock are reported by the National Quotation Bureau Incorporated, any day for
which the National Quotation Bureau Incorporated provides bid and asked
quotations with respect to securities upon which it reports, or (v) if not so
listed or admitted for trading or quoted, any business day.
(g) Notwithstanding anything to the contrary contained herein, the
number of Warrant Shares for which this Warrant shall be exercisable during the
Exercise Period shall be subject to adjustment as provided in this Section 1(g).
If, at any time
<PAGE>
after July 1, 1997, a Pricing Event shall occur and the Fair Market Value of the
Common Stock on the date of such Pricing Event or any day thereafter (a "Testing
Date") exceeds the product of (i) 2.6667 and (ii) the then-current Conversion
Price, then the number of Warrant Shares for which this Warrant is exercisable
shall be reduced in accordance with the formula set forth below. On each Testing
Date, the number of Warrant Shares for which this Warrant is then exercisable
shall be reduced to a number determined by multiplying the original number of
Warrant Shares for which this Warrant was exercisable, as adjusted in accordance
with Section 7 hereof, by a percentage determined in accordance with the
following chart (or as determined by straight line interpolation between the two
closest percentages set forth in such chart):
Fair Market Value New % of Warrant Shares
------------------------- -----------------------
2.6667 x Conversion Price 100%
3.0000 x Conversion Price 75%
3.3333 x Conversion Price 50%
3.6667 x Conversion Price 25%
4.0000 x Conversion Price 0%
For example, if (i) the original number of Warrant Shares for which this Warrant
was exercisable is 471, (ii) there has been no adjustment pursuant to Section 7
hereof, (iii) a Pricing Event has occurred, and (iv) the Fair Market Value on a
Testing Date equals the product of 3.8000 and the then-current Conversion Price,
the number of Warrant Shares for which this Warrant is exercisable as of such
Testing Date shall equal the product of (x) 471 and (y) .25 and (z) a fraction,
the numerator of which is 4.0000 minus 3.8000 and the denominator of which is
4.0000 minus 3.6667. Notwithstanding anything to the contrary contained herein,
the number of Warrant Shares shall only be subject to reduction in accordance
with the formula set forth above and if on any Testing Date the use of such
formula would result in an increase in the number of Warrant Shares, then, on
such date, such formula shall not be applied and such number shall remain
unchanged. If, at any time after a Pricing Event, the number of Warrant Shares
for which this Warrant is then exercisable shall have been reduced to zero in
accordance with this Section 1(g), then, regardless of whether the Commencement
Date has occurred, this Warrant shall be deemed automatically terminated and
shall no longer be exercisable on or after the date of such event.
2. Exercise of Warrant.
(a) This Warrant may be exercised by the Holder, in whole or in part,
at any time during the Exercise Period by mailing or otherwise delivering this
Warrant, together with an
<PAGE>
Exercise Notice in the form attached hereto as Annex A duly executed by the
Holder or the Holder's duly authorized attorney or representative and payment of
the aggregate Exercise Price for the Warrant Shares to be purchased, to the
address of the Corporation designated pursuant to Section 9 hereof. Following
receipt of notice of any contemplated Liquidity Event pursuant to Section 8
hereof, the Holder may, at any time prior to such Liquidity Event, deliver this
Warrant, together with a duly executed Exercise Notice and payment of the
aggregate Exercise Price for the Warrant Shares to be purchased, to the
Corporation for exercise effective upon the consummation of such Liquidity
Event. Any such attempted exercise shall be effective only as to those Warrant
Shares that, pursuant to Section 1(g) hereof, remain available following such
Liquidity Event; any excess payment by the Holder shall be promptly returned by
the Corporation to the Holder.
(b) Payment for the Warrant Shares to be purchased shall be made (i)
in cash or by check, (ii) by cancellation by the Holder of indebtedness of the
Corporation to the Holder or (iii) by a combination of (i) and (ii).
(c) In the event that this Warrant is exercised for less than all of
the Warrant Shares purchasable hereunder at the time of such exercise, the
Corporation shall, upon surrender of this Warrant to the Corporation, execute
and deliver a new Warrant of like tenor and exercisable for the balance of the
Warrant Shares for which this Warrant may then be exercised.
(d) This Warrant shall be deemed to have been exercised immediately
following the close of business on the date of its delivery to the Corporation
except as provided above, and the Holder shall be treated for all purposes as
the holder of record of the Warrant Shares issuable upon such exercise as of the
close of business on such date except as provided above.
3. Replacement of Warrant. On receipt of evidence of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, upon delivery of indemnity and/ or security reasonably satisfactory
to the Corporation or, in the case of mutilation, following the surrender and
cancellation of this Warrant, the Corporation shall execute and deliver a new
Warrant of like tenor in substitution herefor.
4. No Rights as Stockholder. Nothing contained in this Warrant shall be
construed to confer upon the Holder of this Warrant, in its capacity as such,
any right to vote for the election of directors or upon any other matter
submitted to the stockholders of the Corporation at any meeting thereof, or to
give or withhold consent to any corporate action, or to receive notice of
meetings, or to receive dividends or subscription rights, or any other rights or
privileges of a stockholder of the Corporation, until this Warrant shall have
been exercised as provided herein.
<PAGE>
5. Transfer of Warrant.
(a) Restrictions on Transferability of Warrant. Neither this Warrant
nor any rights of the Holder hereof, in its capacity as such, may be transferred
or assigned, in whole or in part, except with the prior consent of the
Corporation. Notwithstanding anything to the contrary contained herein, this
Warrant, together with all rights of the Holder hereof, in its capacity as such,
may be transferred or assigned, without the consent of the Corporation, to any
(i) affiliate of the Holder, (ii) successor of the Holder pursuant to a merger,
consolidation or sale of substantially all of the Holder's assets, or (iii)
partner of the Holder or of MidMark Equity Partners, L.P. For the purposes of
the immediately preceding sentence the term "affiliate" shall have the meaning
set forth in Rule 405 under the Securities Act.
(b) Exchange of Warrant Upon Transfer. In order for this Warrant to be
presented for transfer in accordance with the terms hereof, it shall be
surrendered by the Holder at the office of the Corporation designated pursuant
to Section 9 hereof, accompanied by an assignment in form and substance
reasonably satisfactory to the Corporation, duly executed by the Holder or the
Holder's duly authorized attorney or representative. Upon due surrender of this
Warrant for transfer, the Corporation shall issue a new Warrant or Warrants to
the Holder's transferee or transferees (if transferred in whole) or to the
Holder and the Holder's transferee or transferees (if transferred in part), as
appropriate, for the aggregate number of Warrant Shares then issuable upon
exercise hereof.
(c) Warrant Register. The Corporation shall maintain a register (the
"Warrant Register") containing the names and addresses of the Holder and the
holders of the other Warrants issued by the Corporation. The Holder of this
Warrant may change its address as shown on the Warrant Register by notice to the
Corporation requesting such change. Until a Warrant is transferred on the
Warrant Register, the Corporation shall be entitled to treat the registered
holder as shown on the Warrant Register as the owner of such Warrant for all
purposes, notwithstanding any notice to the contrary, 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.
6. Reservation of Stock. The Corporation covenants that until the
expiration or termination of this Warrant, the Corporation shall keep reserved
from its authorized and unissued shares of Common Stock a sufficient number of
such shares to provide for the issuance of all Warrant Shares issuable upon
exercise of this Warrant, as such number may vary from time to time. The
Corporation further covenants that all shares of Common Stock issued upon
exercise of this Warrant and payment of the aggregate Exercise Price therefor in
accordance with the terms hereof will, when so issued, be duly authorized,
validly issued
<PAGE>
and fully paid and non-assessable.
7. Adjustments. The Exercise Price and the number of Warrant Shares
issuable upon exercise of this Warrant shall be subject to adjustment from time
to time as provided in this Section 7.
(a) Subdivision or Combination of Stock. In case the Corporation shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares by way of stock split, stock dividend or similar event, the
number of Warrant Shares issuable upon exercise of this Warrant shall be
proportionately increased. Conversely, in case the outstanding shares of Common
Stock shall be combined into a smaller number of shares by way of reverse stock
split or similar event, the number of Warrant Shares issuable upon exercise of
this Warrant shall be proportionately reduced.
(b) Reorganization, Reclassification, Consolidation, Mercer or Sale.
If any capital reorganization or reclassification of the capital stock of the
Corporation, any consolidation or merger of the Corporation with another entity,
or any sale of all or substantially all of the Corporation's assets to another
entity is to be effected in such a way that the holders of the Common Stock
shall be entitled to receive stock, securities or other assets with respect to
or in exchange for their shares of Common Stock, then, as a condition of any
such reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made so that the Holder shall thereafter have the
right to purchase and receive upon the basis and subject to the terms and
conditions set forth herein and in lieu of the number of shares of Common Stock
immediately theretofore purchasable and receivable upon the exercise of the
right represented hereby, such quantity of stock, securities or other assets as
would have been issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore purchasable and receivable
upon the exercise of the right represented hereby had such reorganization,
reclassification, consolidation, merger or sale not taken place but had the
Exercise Period commenced. In any such case, appropriate provision shall be made
with respect to this Warrant to the end that the provisions hereof (including
without limitation the provisions for adjustments of the Exercise Price and of
the number of shares of Common Stock purchasable and receivable upon exercise of
this Warrant) shall thereafter be applicable, as nearly as may be possible, in
relation to any stock, securities or other assets thereafter deliverable upon
the exercise hereof. The Corporation shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof the surviving entity
(if other than the Corporation) resulting from such consolidation or merger or
the entity purchasing such assets shall assume by written instrument, executed
and mailed or delivered to the Holder at its address as shown on the Warrant
Register, the obligation to deliver to the
<PAGE>
Holder such stock, securities or other assets as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase.
(c) Change in Par Value. If, at any time, the Company takes any action
an effect of which is to change the par value of the Common Stock, then the
Exercise Price shall be automatically adjusted at the time of such event to be
equal to the new par value of the Common Stock. If, at any time, the Company
takes any action an effect of which is to change the par value of the Common
Stock to no par value, then the Exercise Price from and after such event shall
be no less than the stated value of the Common Stock, if any, after such event
and if there is no stated value shall remain unchanged.
(d) Notice of Adjustment. Upon any adjustment of the Exercise Price
and/or the number of Warrant Shares pursuant to this Section 7, then and in each
such case the Corporation shall give notice thereof, by first class mail,
postage prepaid, addressed to the Holder at its address as shown on the Warrant
Register. The notice shall state the Exercise Price and/or the number of Warrant
Shares resulting from such adjustment, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
(e) No Change of Warrant. The form of this Warrant need not be changed
because of any adjustment in the number and kind of Warrant Shares purchasable
hereunder pursuant to this Section 7. Any Warrant issued after any such
adjustment upon any partial exercise or upon replacement or transfer may
continue to express the same terms as are stated in this Warrant as initially
issued, and the number and kind of Warrant Shares purchasable hereunder shall be
considered to have been changed as of the close of business on the date or dates
of adjustment as provided herein.
8. Notice of Corporate Events. In the event the Corporation shall propose
to:
(a) issue after the Commencement Date to the holders of the
outstanding shares of Common Stock any options, warrants or other
rights to subscribe for or purchase any shares of capital stock of
any class or any other securities of the Corporation, or
(b) effect a merger or consolidation of the Corporation with or into
another entity, or
(c) undertake any Liquidity Event;
then, in each such case, the Corporation shall give the Holder notice thereof at
least 60 days prior to the earlier of (i) the record date for determining the
stockholders entitled to receive such dividend, distribution or right or to vote
upon such
<PAGE>
merger or consolidation, or (ii) the contemplated effective date of the
Liquidity Event.
9. Notices. All notices, consents or other communications required or
permitted hereunder shall be in writing and shall be sufficiently given if: (a)
hand delivered (in which case such communication shall be effective upon
delivery); (b) telecopied; provided, that in such case a copy of such
communication shall be concurrently sent by registered or certified mail, return
receipt requested, postage prepaid (in which case such communication shall be
effective two days following its dispatch); (c) delivered by Express Mail,
Federal Express or other nationally recognized overnight courier service (in
which case such communication shall be effective one business day following its
dispatch); or (d) delivered or mailed by registered or certified mail, return
receipt requested, postage prepaid (in which case such communication shall be
effective three days following its dispatch), to the parties at the following
addresses and/or telecopier numbers, or to such other address or number as a
party shall specify by notice to the others in accordance with this Section 9.
If to the Holder:
MidMark Capital, L.P.
466 Southern Blvd.
Chatham, New Jersey 07928
Fax: 201-822-8911
with a copy to:
David F. Broderick, Esq.
McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07101
Fax: 201-624-7070
If to the Corporation:
Clearview Cinema Group, Inc.
7 Waverly Place
Madison, New Jersey 07940
Attention: A. Dale Mayo, President
Fax: 201-377-4303
with a copy to:
Warren H. Colodner, Esq.
Kirkpatrick & Lockhart LLP
1251 Avenue of the Americas
45th Floor
New York, New York 10020
Fax: 212-536-3901
<PAGE>
10. Governing Law. This Warrant shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without regard to
any principles of conflicts of laws.
11. Registration Rights Agreement. All shares of Common Stock or other
securities issuable upon exercise of this Warrant shall be subject to all of the
provisions of and shall be entitled to the benefits of the Registration Rights
Agreement dated as of May 23, 1997, by and among the Corporation and the
stockholders of the Corporation as of such date (the "Registration Rights
Agreement"). Upon such exercise, the holder of the Common Stock or other
securities issuable hereunder shall become a "Stockholder" under such agreement,
as the Registration Rights Agreement may have been modified, supplemented or
amended prior to the date of such exercise. The provisions of this Section 11
shall not apply if the Registration Rights Agreement has been terminated, either
by agreement of the parties thereto or by its own terms, prior to the date of
such exercise.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its duly authorized officer on the date first above written.
CLEARVIEW CINEMA GROUP, INC.
By: _______________________________
A. Dale Mayo
President
<PAGE>
Annex A
EXERCISE NOTICE
The undersigned hereby elects to exercise the right to purchase:
(i) __________ shares of Common Stock, $.01 par value, of Clearview
Cinema Group, Inc., covered by this Warrant in accordance with the
terms and conditions hereof
The undersigned herewith makes payment of the aggregate Exercise Price of such
shares in full in the following manner:
( ) Cash in the amount of $__________,
( ) Check, bank draft or money order payable to the order of
"Clearview Cinema Group, Inc." in the amount of $__________,
and/or
( ) Discharge of Indebtedness in principal amount of $__________, due
to the Holder pursuant to _______________________.
Dated: _________________
___________________________________
Holder
By: _______________________________
Name:
Title:
___________________________________
Social Security Number or
Taxpayer's Identification
Number of Holder
<PAGE>
Exhibit 10.61
The Provident Bank
Corporate Finance
One East Fourth Street
Cincinnati, Ohio 45202
513/579-2760
513/579-2858
CHRISTOPHER B. GRIBBLE
Assistant Vice President
July 30, 1997
PERSONAL AND CONFIDENTIAL
- -------------------------
Mr. A. Dale Mayo
President
Clearview Cinema Group, Inc.
7 Waverly Place
Madison, New Jersey 07940
Dear Bud:
The Provident Bank ("Provident") is pleased to submit the following committed
terms and conditions of a credit facility for Clearview Cinema Group, Inc.
("Clearview" or the "Company"). If you are in agreement with these terms and
conditions, please indicate your acceptance by signing in the space provided
below and returning a copy of this document to my attention.
1. Borrower: Clearview Cinema Group, Inc.
2. Agent: The Provident Bank ("Provident" or "Agent").
3. Lenders: Provident and other banks or institutions acceptable
to Provident.
4. Amount: Up to $30,000,000, consisting of:
Facility A: Up to $1,000,000 Revolving Credit Facility;
Facility B: $12,000,000 Term Loan;
Facility C: Up to $17,000,000 CAPEX/Acquisition
Facility.
<PAGE>
Mr. A. Dale Mayo
July 30, 1997
Page 2
The amounts set forth for the Facilities B and C are
subject to change, depending upon whether Borrower
acquires certain properties from United Artists ("UA
Properties"). Under a Waiver and Consent, if the UA
Properties are not acquired within 90 days from the
closing of Borrower's IPO, certain proceeds from
Borrower's IPO will be used to prepay the outstanding
loans under Facility B. Such prepaid amounts will then
be included in Facility C availability, and subject to
availability requirements thereunder.
5. Purpose: Facility B will be used to refinance existing
indebtedness and pay related transaction costs.
Facility A will be used to fund Borrower's ongoing
working capital requirements. Facility C will be used
to fund future acquisitions and expansion, subject to
Provident's approval, as outlined below.
6. Final Maturity: Five years from closing (All Facilities).
7. Borrowing Rate: Interest rate shall be determined in accordance with
the following levels of Borrower's Debt Ratio (defined
as the ratio of Borrower's Senior Debt to
post-corporate EBITDA for the preceeding four fiscal
quarters):
Debt Ratio Borrowing Rate
------------------------------------------------------
Below 2.50x Prime + 0.50%
2.50x (less than)X (less than)2.75x Prime + 0.75%
2.75x (less than)X (less than)3.00x Prime + 1.00%
3.00x (less than)X (less than)3.25x Prime + 1.25%
Greater than 3.25x Prime + 1.50%
Interest shall be due and payable monthly in arrears,
calculated on the basis of the actual number of days
elapsed over an assumed year consisting of three
hundred sixty (360) days. If a default or an event of
default exists or is continuing, the otherwise
applicable Borrowing Rate shall be increased by 2% per
annum.
8. Common Equity: Total equity proceeds of not less than $8.0 million,
pursuant to an IPO, will be required at or prior to
closing. Net proceeds to Clearview from the IPO shall
not be less than $6.7 million. If the overallotment is
fully subscribed, net proceeds shall not be less than
$7.8 million.
9. Closing Fee: $400,000, payable at closing.
<PAGE>
Mr. A. Dale Mayo
July 30, 1997
Page 3
10. Amortization: Facility B: Twenty equal quarterly installments,
beginning six months from closing.
Facility C: Borrowings under Facility C may occur for
the first three years after closing. Each
such borrowing shall be repaid according
to a five-year amortization schedule, to
be agreed upon at time of funding, with
the first payment beginning six months
from the date of borrowing and the final
payment due five years from closing.
Payments shall be made in arrears on
January 1, April 1, July 1, and October 1
of each year.
11. Mandatory Prepayments: a) Asset Disposition. If at any time the
Company makes an asset disposition,
then (i) the Company shall promptly
notify Provident in writing and (ii)
to the extent the net proceeds of such
disposition exceed $100,000, such net
proceeds shall be used to prepay the
Senior Debt.
b) Acquisition Adjustments. Borrower
shall prepay the Senior Debt from 100%
of favorable post-acquisition
adjustments.
c) Excess Cash Flow. The Company shall
prepay the Senior Debt within 120 days
of the end of each fiscal year in an
amount equal to 25% of the Excess Cash
Flow for the preceeding fiscal year
commencing with the fiscal year ended
December 31, 1997.
d) Change of Control. Upon the sale of
the Company, or such other event which
shall constitute a Change of Control,
the Company shall repay the Senior
Debt in full.
e) General. Any mandatory prepayment
shall be applied to the Senior Debt in
the inverse order of stated
maturities.
Upon any mandatory prepayment, the
Commitment shall automatically be
reduced by an amount equal to the
Required Prepayment Amount.
<PAGE>
Mr. A. Dale Mayo
July 30, 1997
Page 4
12. Optional Prepayments: Clearview shall have the right to prepay
the Facilities, in whole or in part,
accompanied by accrued interest, if any,
subject to a prepayment premium on the
committed amount of Facility A and
outstanding amounts under Facilities B and
C as follows:
Year 1 1%
Year 2 1%
Thereafter 0%
Facility A shall terminate and become due
and payable in full, together with any
applicable prepayment premium, if Facility
B and Facility C are paid in full.
Prepayment premiums shall not apply for
mandatory prepayments, including any
prepayment from the proceeds of Borrower's
IPO.
13. Facility C Availability: The Borrower shall be permitted to borrow
under Facility C for the purpose of making
Permitted Acquisitions. Permitted
Acquisitions shall be defined as those
that meet the following conditions:
o Acquired company is in the same
business as Borrower;
o Prior to, and after giving
consideration to the acquisition on a
pro forma basis, Borrower maintains
compliance with all loan covenants;
o Combined proforma Debt Ratio shall not
exceed 3.5x.
Borrowing availability for each
acquisition would be subject to
Provident's specific approval.
With regard to each acquisition, the
Lender shall be granted a first priority
security interest in all assets purchased.
<PAGE>
Mr. A. Dale Mayo
July 30, 1997
Page 5
14. Security: The credit facilities will be secured by a
first lien on all assets of Borrower now
owned or hereafter acquired (which lien
will include leasehold mortgages on all
leased theater properties, which leasehold
mortgages will require landlord consents),
including but not limited to, all accounts
receivable, inventory, real and personal
property, equipment, intangibles,
franchise rights, trademarks, contract
rights, etc., and a pledge of 100% of the
common stock of Borrower's operating
companies, whether now existing or
hereafter created or acquired.
15. Risk Management: Borrower will enter into interest rate
risk management agreements acceptable to
Provident, if and when requested by
Provident.
16. Banking Services: All primary depository accounts, including
without limitation, all operating and cash
management accounts of Borrower, shall be
maintained at Provident during the term of
the credit facilities.
17. Documentation/Covenants: Loan Agreement between Provident and
Borrower to include standard
representations and warranties; events of
default; conditions precedent;
affirmative, financial and other operating
covenants customary to transactions of
this nature. Financial covenants will
include, but not be limited to, interest
coverage, debt service coverage, minimum
net worth, and limitation on capital
expenditures. Other covenants and
provisions of the loan agreement to
include, without limitation, the
following:
Affirmative Covenants Similar to those found in the existing
Loan Agreement between Provident and
Borrower.
Negative Covenants Similar to those found in the existing
Loan Agreement between Provident and
Borrower, which shall include, but not be
limited to:
i) Limitation on disposition of assets,
acquisitions, change of business, and
change of control;
ii) No dividends shall be declared or
payable on Borrower's existing or
future common or preferred equity;
<PAGE>
Mr. A. Dale Mayo
July 30, 1997
Page 6
iii) Provident shall be permitted to
syndicate or assign its rights and
Borrower shall assist in syndication
efforts, if requested;
iv) Limitations on additional debts
incurrence, liens, mergers and
transactions with affiliates.
18. Conditions Precedent: Customary for financings of this nature,
including but not limited to:
a) Satisfactory documentation of
Facilities A, B and C;
b) Completion of all legal and financial
due diligence;
c) Repayment of all outstandings under
current Loan Agreement and Notes from
Facility B;
d) Payment of Contingent Warrant Payment
(as defined);
e) The sum of cash on hand and
availability under Facility A at
closing shall be no less than
$500,000;
f) Provident shall have reviewed all
other material agreements, including
but not limited to: asset purchase
agreements, any non-compete agreements
with sellers, film buying agreements,
insurance programs, pension plan
review, tax audits, litigation, and
any other matter Provident and/or its
counsel may deem necessary;
g) Satisfactory terms and conditions of
common equity as outlined in Section
8;
h) Corporate structure of Borrower shall
be acceptable to Provident and its
counsel;
i) No material adverse change in
financial condition, business,
operations or prospects of the
Borrower, or in any information
furnished or to be furnished to
Provident regarding the Borrower or
the UA properties;
j) Satisfactory review, including
discussions with Borrower's
accountants, of the unaudited
financial statements of Borrower for
the quarter ended 3/31/97, historical
financial statements with respect to
the UA Properties, as well as the
unaudited proforma financial
statements of Borrower, which Borrower
intends to include in its prospectus.
<PAGE>
Mr. A. Dale Mayo
July 30, 1997
Page 7
20. Events of Default: Events of Default shall include events of
default as are deemed appropriate by
Provident for financings generally and for
this transaction in particular, including
but not limited to, failure to pay
principal and/or interest or any debt,
failure to perform or observe any covenant
or obligation, failure to maintain or
comply with the financial covenants, as
well as provisions relating to breach of
representations and warranties,
bankruptcy, dissolution, judgments, ERISA
matters, change of control or ownership,
cross default provisions, enforceability
of security documents, priority of
security interest and other events to be
specified.
21. Other General Terms
and Conditions: Terms of the financing would also include,
but not be limited to provisions for the
following:
a) Key man life insurance on Mr. A. Dale
Mayo in a minimum amount of $2.5
million.
b) Review of all operating accounts.
22. Expenses: Borrower shall reimburse Provident for all
reasonable out of-pocket expenses
including legal fees, audit expenses,
recording fees, filing fees, and other
related expenses whether or not this
Transaction is consummated.
23. Expiration: This offer for commitment shall expire
unless accepted by 3:00 P.M. E.S.T. August
1, 1997.
24. Governing Law: State of Ohio.
This letter may be circulated as considered necessary or desirable by Borrower
solely in connection with its IPO, including disclosure in Borrower's
prospectus and filing by Borrower with the SEC.
If you are in agreement with the terms and conditions of this commitment,
please execute in the space provided below and return the original to my
attention.
As always, I look forward to working with you on this transaction.
<PAGE>
Mr. A. Dale Mayo
July 30, 1997
Page 8
Very truly yours,
Christopher B. Gribble
Assistant Vice President
AGREED TO AND ACCEPTED THIS _____ DAY OF __________, 1997.
By: ______________________________________
Title: ______________________________________
<PAGE>
=================================
THIRD AMENDMENT TO
CREDIT AGREEMENT
BY AND AMONG
CLEARVIEW CINEMA GROUP, ET AL.
AND
THE PROVIDENT BANK,
Agent and Lender
dated as of
June 30, 1997
=================================
<PAGE>
THIRD AMENDMENT TO
CREDIT AGREEMENT
AND WARRANT REPURCHASE AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (as hereinafter defined) ("Third
Amendment") dated as of June 30, 1997, by and among CLEARVIEW CINEMA GROUP,
INC., a Delaware corporation (hereinafter, together with its successors in title
and assigns called "Holdings"), CCC MADISON TRIPLE CINEMA CORP., a New Jersey
corporation, CCC CHESTER TWIN CINEMA CORPORATION, a New Jersey corporation, CCC
MANASQUAN CINEMA CORPORATION, a New Jersey corporation, CLEARVIEW THEATRE GROUP,
INC., a New Jersey corporation, CCC HERRICKS CINEMA CORP., a Delaware
corporation, CCC PORT WASHINGTON CINEMA CORP., a Delaware corporation, CCC GRAND
AVENUE CINEMA CORP., a Delaware corporation, CCC WASHINGTON CINEMA CORP., a
Delaware corporation, CCC ALLWOOD CINEMA CORP., a Delaware corporation, CCC
EMERSON CINEMA CORP., a Delaware corporation, CCC NEW CITY CINEMA CORP., a
Delaware corporation, and CCC SUMMIT CINEMA CORP. (formerly known as 343-349
SPRINGFIELD AVENUE CORP.), a New Jersey corporation, (hereinafter collectively
the Original Borrowers), and CCC BEDFORD CINEMA CORP., a Delaware corporation
("CCC Bedford") and CCC KISCO CINEMA CORP., a Delaware corporation ("CCC
Kisco"), CCC CLOSTER CINEMA CORP., a Delaware corporation, ("CCC Closter"), CCC
BERGENFIELD CINEMA CORP., a Delaware corporation, ("CCC Bergenfield"), CCC
TENAFLY CINEMA CORP., a Delaware corporation, ("CCC Tenafly") and CCC B.C.
REALTY CORP., a Delaware corporation, ("CCC Realty"), (hereinafter, together
with their successors in title and assigns and the Original Borrowers,
collectively called "Borrowers" and each of which is a "Borrower") and THE
PROVIDENT BANK, an Ohio banking corporation ("Agent") and various Lenders as set
forth in the Credit Agreement.
PRELIMINARY STATEMENT
WHEREAS, Original Borrowers, Agent and Lenders have entered into a Credit
Agreement dated as of May 29, 1996, as amended by a Joinder Agreement and First
Amendment dated as of December 13, 1996 ("First Amendment") and as further
amended by a Second Amendment dated as of March 27, 1997 ("Second Amendment")
(collectively the "Credit Agreement");
WHEREAS, CCC Bedford and CCC Kisco were joined as borrowers to the Credit
Agreement by that certain Joinder Agreement dated as of July 18, 1996, and CCC
Closter, CCC Bergenfield, CCC Tenafly, and CCC Realty were joined as borrowers
by the First Amendment;
<PAGE>
-2-
WHEREAS, Holdings has agreed to purchase from Lenders the warrants granted
to Lenders pursuant to that certain Warrant Agreement made and entered into as
of May 29, 1996, by and between Holdings and Agent, as amended by Amendment No.
1. To Warrant Agreement, dated as of December 13, 1996, (the "Warrant
Agreement");
WHEREAS, Lenders are willing to finance Borrower's repurchase the
aforementioned warrants and to make certain other changes in the terms of the
Credit Agreement which are mutually beneficial to Lenders and Borrower; and
WHEREAS, Borrower and Lender now wish to amend the Credit Agreement
supplement and upon such terms and provisions hereof.
NOW, THEREFORE, the parties hereto agree to supplement and amend the Credit
Agreement upon such terms and conditions as follows:
1. Definitions, Schedules and Exhibits
(a) The Credit Agreement is hereby amended to replace Schedule 1, Lenders,
in its entirety by Schedule 1 to this Third Amendment.
(b) The Credit Agreement is hereby amended to replace Schedule 5.1(b),
Capital Stock, in its entirety by Schedule 5.1(b) to this Third Amendment.
(c) The Credit Agreement is hereby amended to replace Exhibit J-1, Form of
Revolving Promissory Note, in its entirety by Exhibit J-1 to this Third
Amendment.
(d) The Credit Agreement is hereby amended to add a new Exhibit J-4 to
read in its entirety as Exhibit J-4 to this Third Amendment.
(e) All capitalized terms used herein shall have the meanings assigned to
them in the Credit Agreement unless the context hereof requires otherwise. Any
definitions as capitalized terms set forth herein shall be deemed incorporated
into the Credit Agreement as amended by this Third Amendment. The following
definitions contained in the Credit Agreement are amended and restated as
follows:
"Interest Rate" (i) for the Revolving Credit Notes, the Term Loan A
Notes, and the Term Loan B Notes, means the rate of interest per annum
equal to two percent (2.0%) in excess of the Prime Rate, and (ii) for the
Term Loan C Notes, shall mean the Prime Rate.
<PAGE>
-3-
"Maximum Revolving Commitment" means Four Hundred Thousand Dollars
($400,000).
"Term Loans" means Term Loan A, Term Loan B and Term Loan C.
"Termination Date" means (A) with respect to the Revolving Credit
Loan, the earlier of (i) December 31, 2001; (ii) the date upon which the
entire principal of the Notes shall become due pursuant to the provisions
hereof (whether as a result of acceleration by Agent or the Requisite
Lenders or otherwise); or (iii) the date upon which the Credit Commitments
terminate pursuant to Section 9.2 hereof; (B) with respect to Term Loan A
and Term Loan B, the earlier of (i) December 31, 2001; (ii) the date upon
which the entire principal of the Notes shall become due pursuant to the
provisions hereof (whether as a result of acceleration by Agent or the
Requisite Lenders or otherwise); or (iii) the date on which the Term Loan A
or Term Loan B, as the case may be, shall be paid in full; (C) with respect
to Term Loan C, the earlier of (i) June 30, 20002; (ii) the date upon which
the entire principal of the Notes shall become due pursuant to the
provisions hereof (whether as a result of acceleration by Agent or the
Requisite Lenders or otherwise); or (iii) the date on which the Term Loan C
shall be paid in full.
"Notes" mean, collectively, the Revolving Credit Notes, the Term Loan
A Notes, the Term Loan B Notes and the Term Loan C Notes. "Note" shall mean
any one of the Notes, unless specifically identified.
(f) The Credit Agreement is hereby amended to add the following terms
to Section 1.2
"Public Offering" means any underwritten public offering of the Common
Stock.
"Public Offering Expenses" means expenses incurred by Holdings
relative to a Public Offering.
"Contingent Warrant Purchase Price" means an amount equal to the
lesser of (i) the product of (A) 149 (being an amount equal to the number
of shares represented by the Warrants), as adjusted by multiplying 149 by
the number of shares into which the stock of Holdings are split at or prior
to the Public Offering, and (B) the difference between the gross sale price
per share of Common Stock sold to the public (without consideration of
underwriters' discounts) in the Public Offering and $6,711.41 (such amount
being divided by the multiple used in (A) above to reflect the stock split
of Holdings occurring at or prior to the Public Offering), and (ii) Three
Hundred Thousand and 00/100 Dollars ($300,000).
<PAGE>
-4-
"Term Loan C" means the loan made pursuant to Section 2.2(d) of the
Credit Agreement.
"Term Loan C Note" means, with respect to Term Loan C, the Promissory
Note of Borrowers, in the face amount of each Lender's Participation
Percentage of the Term Loan C in or substantially in the form of Exhibit
J-4 to the Credit Agreement.
"Third Amendment Closing Date" means Monday, June 30, 1997.
References in the Loan Documents to the "Loan Documents", "Loans", "Notes",
"Warrants", "Warrant Agreement" and other documents, instruments, and other
agreements executed in connection with the Loans shall in each case refer to
each such document, instrument or other agreement, as it may be amended or
restated from time to time.
2. Commitments. Section 2.1 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"Section 2.1 Commitments. Each Lender, severally and not jointly,
agrees, upon the terms and subject to the conditions contained in this
Agreement, to make the Revolving Credit Loans to Borrowers from time to
time prior to the Termination Date for such Loans, the Term Loan A on the
Closing Date in a principal amount equal to such Lender's Participation
Percentage of the aggregate principal amount of such Loan requested by
Borrowers on each occasion, the Term Loan B upon satisfaction of the
conditions contained in Section 4.2 of this Agreement and Term Loan C on
the Third Amendment Closing Date in a principal amount equal to such
Lender's Participation Percentage of the aggregate principal amount of such
loan."
3. Making the Loans. Section 2.2. of the Credit Agreement is hereby
amended to include Section 2.2(d) to read, in its entirety, as follows:
"(d) Term Loan C. Subject to the terms and conditions of this
Agreement and in reliance upon the representation and warranties of each
Borrower herein set forth, each Lender severally agrees to lend to
Borrowers on the Third Amendment Closing Date its Participation Percentage
of the Term Loan C. The aggregate amount of the Term Loan C shall not
exceed One Million Three Hundred Thousand and 00/100 Dollars
($1,300,000.00). Amounts borrowed under this Subsection and repaid or
prepaid may not be reborrowed."
4. Draws, Advances and Settlement of Payments and Advances. Sections
2.3(a) of the Credit Agreement is hereby amended in its entirety to read as
follows:
<PAGE>
-5-
"(a) [INTENTIONALLY OMITTED]."
5. The Notes. Section 2.4 of the Credit Agreement is hereby amended in
its entirety to read as follows:
"Section 2.4 The Notes. The absolute and unconditional obligation of
Borrowers to repay to each Lender its respective Pro Rata Share of the
principal of each Loan and the interest thereon shall be evidenced by a
separate Revolving Credit Note, Term Loan A Note, Term Loan B Note and Term
Loan C Note for each Lender in the amount of its respective Credit
Commitment for each Loan. All payments under the Notes shall be made to
Agent at its Head Office, for the account of Lenders, and Agent shall
allocate all payments on each Loan received from Borrowers among all
Lenders in accordance with each Lender's Pro Rata Share of such Loan in
accordance with Section 2.7(b)."
6. Maturity. Section 2.6(i) of the Credit Agreement is hereby amended in
its entirety to read as follows:
"(i) Maturity. Subject to the terms and conditions of this
Agreement, Borrowers will be entitled to reborrow all or any part of the
principal of the Revolving Credit Notes repaid or prepaid prior to the
Termination Date. The Credit Commitments shall terminate and all of the
indebtedness evidenced by the Revolving Credit Notes and the Term Loan B
Notes shall, if not sooner paid, be in any event absolutely and
unconditionally due and payable in full by Borrower on December 31, 2001,
the date of the final maturity of such Notes. The Term Loan A Notes shall,
if not sooner paid, be in any event absolutely and unconditionally due and
payable in full by Borrowers on December 31, 2001, the date of the final
maturity of such Notes. The Term Loan C Notes shall, if not sooner paid, be
in any event absolutely and unconditionally due and payable in full by
Borrowers on June 30, 2002, the date of Final Maturity of such Notes."
7. Prepayment Fees. Section 2.6(k) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"(k) Prepayment Fees. Except for a prepayment of Term Loan C, if
Borrowers voluntarily prepay the Term Loans in full prior to the third
anniversary of the Closing Date, the Revolving Credit Loan shall, in
accordance with Section 2.2(a) become due and payable in full, and
Borrowers shall pay to Agent, for the ratable benefit of Lenders, as
liquidated damages and compensation for the costs of being prepared to make
funds available to Borrowers under this Agreement, and not as a penalty, an
amount determined by multiplying (x) the amount of the Credit Commitment
times (y) three percent (3%) upon prepayment during the first Loan Year,
two percent (2%) upon prepayment during the second Loan Year;
<PAGE>
-6-
and one percent (1%) upon prepayment during the third Loan Year (the
"Prepayment Fee"). Borrowers shall also pay a Prepayment Fee in connection
with any partial prepayment of any Term Loan, except a partial prepayment
of Term Loan C; provided, however, that if such prepayment, either in full
or in part, occurs as a result of any event described in paragraphs 2.6(e),
2.6(f), 2.6(g) or 2.6(h) above, no such Prepayment Fee shall be required.
8. Payments on Term Loan C. Section 2.6 of the Credit Agreement is hereby
amended to add a new paragraph (l) to read in its entirety as follows:
"(l) Payments on Term Loan C. Borrowers shall pay to Agent, for the
account of Lenders in accordance with their respective Pro Rata Share on
Term Loan C, monthly in arrears on the first Business Day of each month
beginning on November 1, 1997, interest on the outstanding principal amount
of the Term Loan C equal to the Interest Rate applicable thereto, provided,
however, that interest in the Term Loan C shall not begin to accrue until
September 29, 1997. Borrowers shall pay to Agent, and Borrowers hereby
authorize Agent to charge the respective accounts of Borrowers maintained
with Agent, on the earlier of (i) June 30, 2002, or (ii) the third Business
Day following the date of a Public Offering, as defined herein, an amount
sufficient to pay in full the entire unpaid principal amount of the Term
Loan C.
9. Financial Covenants. Sections 7.1, 7.2, 7.3, 7.4, and 7.5 of the
Credit Agreement are hereby amended to the extent necessary to exclude from the
calculations contained therein the principal amount of the Term Loan C and the
Indebtedness represented therein and any accrued interest thereon.
10. Repurchase of Warrant. Holdings hereby agrees to purchase from Agent,
and Agent hereby agrees to sell to Holdings the warrants issued to Agent
pursuant to the Warrant Agreement. In consideration therefor and as additional
consideration for the closing of the Third Amendment, Borrowers shall pay to
Agent:
(a) on the Third Amendment Closing Date, the sum of $1,000,000; and
(b) in the event that Holdings or any Borrower closes a Public
Offering of any class of its Capital Stock on or prior to June 30, 1998, on
the date of the initial closing with its underwriters of such Public
Offering, the Contingent Warrant Purchase Price in cash or other
immediately available funds.
Upon receipt of the consideration set forth in clause (a) above, Agent shall
deliver to Holdings as soon thereafter as reasonably practicable thereafter, the
original warrants issued pursuant to the Warrant Agreement, endorsed in blank or
canceled.
<PAGE>
-7-
11. Reaffirmation of Covenants, Warranties and Representations. Borrower
hereby agrees and covenants that all representations and warranties in the
Credit Agreement, including without limitation, all of those warranties and
representations set forth in Article 5, are true and accurate as of the date
hereof. Borrower further reaffirms all covenants in the Loan Agreement, and
reaffirms each of the affirmative covenants set forth in Article 6 and the
financial and negative covenants set forth in Articles 7 and 8, respectively,
thereof, as if fully set forth herein, except to the extent modified by this
Third Amendment.
12. Conditions Precedent to Closing of Third Amendment. On or prior to
the Third Amendment Closing Date, each of the following conditions precedent
shall have been satisfied.
(a) Proof of Corporate Authority. Lender shall have received from
Borrowers copies, certified by a duly authorized officer to be true and
complete on and as of the Third Amendement Closing Date, of records of all
action taken by each Borrower to authorize (i) the execution and delivery
of this Third Amendment and all other certificates, documents and
instruments to which it is or is to become a party as contemplated or
required by this Third Amendment, and (ii) its performance of all its
obligations under each of such documents.
(b) Documents. Each of the documents to be executed and delivered at
the closing and all other certificates, documents and instruments to be
executed in connection herewith shall have been duly and properly
authorized, executed and delivered by Borrowers and shall be in full force
and effect on and as of the Third Amendment Closing Date.
(c) Legal Opinion. Agent and each Lender shall have received a
written legal opinion, addressed to Agent and each Lender and dated as of
the Third Amendment Closing Date, from legal counsel for Borrowers, which
shall be in form and substance acceptable to Lender, opining as to the due
execution, delivery and enforceability of the documents to be delivered in
connection herewith.
(d) Legality of Transactions. No change in applicable law shall have
occurred as a consequence of which it shall have become and continue to be
unlawful (i) for Lender to perform any of its agreements or obligations
under any of the Loan Documents, or (ii) for Borrower to perform any of its
agreements or obligations under any of the Loan Documents.
(e) Performance, Etc. Borrower shall have duly and properly
performed, complied with and observed each of its covenants, agreements and
obligations contained in each of the Loan Documents. Except as set forth
herein, no event shall have occurred on or prior to the Third Amendment
Closing Date, and no condition shall exist on the Third Amendment Closing
Date, which constitutes a Default or an Event of Default.
<PAGE>
-8-
13. Miscellaneous:
(a) Borrower shall reimburse Lender for all fees and disbursements of
legal counsel to Lender which shall have been incurred by Lender in
connection with the preparation, negotiation, review, execution and
delivery of this Third Amendment and the handling of any other matters
incidental hereto.
(b) All of the terms, conditions and provisions of the Credit
Agreement not herein modified shall remain in full force and effect. In the
event a term, condition or provision of the Credit Agreement conflicts with
a term, condition or provision of this Third Amendment, the latter shall
govern.
(c) This Third Amendment shall be governed by and shall be construed
and interpreted in accordance with the laws of the State of Ohio.
(d) This Third Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.
(e) This Third Amendment may be executed in several counterparts,
each of which shall constitute an original, but all which together shall
constitute one and the same agreement.
[space intentionally left blank. Signature page follows.]
<PAGE>
IN WITNESS WHEREOF, this Third Amendment has been duly executed and
delivered by or on behalf of each of the parties as of the day and in the year
first above written.
SIGNED IN THE PRESENCE OF: BORROWERS
CLEARVIEW CINEMA GROUP, INC.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC MADISON TRIPLE CINEMA CORP.,
a New Jersey corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC CHESTER TWIN CINEMA
CORPORATION
a New Jersey corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC MANASQUAN CINEMA CORPORATION,
a New Jersey corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
<PAGE>
CLEARVIEW THEATRE GROUP, INC.,
a New Jersey corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC HERRICKS CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC PORT WASHINGTON CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC GRAND AVENUE CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC WASHINGTON CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
<PAGE>
CCC ALLWOOD CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC EMERSON CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC NEW CITY CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC SUMMIT CINEMA CORP. (formerly known
as 343-349 SPRINGFIELD AVENUE CORP.),
a New Jersey corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
<PAGE>
CCC BEDFORD CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC KISCO CINEMA CORP.,
a Delaware corporation ("CCC Kisco"),
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC CLOSTER CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC BERGENFIELD CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
CCC TENAFLY CINEMA CORP.,
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
<PAGE>
CCC B.C. REALTY CORP.
a Delaware corporation
_________________________ By: ______________________________
Name: A. Dale Mayo
_________________________ Title: President
THE PROVIDENT BANK, Agent
_________________________ By: ______________________________
Name: Christopher B. Gribble
_________________________ Title: Assistant Vice President
THE PROVIDENT BANK, Lender
_________________________ By: ______________________________
Name: Christopher B. Gribble
_________________________ Title: Assistant Vice President
[Exhibits will be provided by the Company upon request.]
<PAGE>
EXHIBIT 11.01
A Summary of the Shares of Common Stock and equivalents treated as
outstanding for purposes of calculating net income (loss) per Common Share for
all reported periods herein is as follows:
Shares of Common Stock outstanding 832,800
Shares of Common Stock issuable upon:
Conversion of 779 shares of Class A
Preferred Stock 467,400
Exercise of Warrants--
200 A/B Warrants 120,000
157 Provident Warrants 94,200
Class A Warrants 282,600
---------
1,797,000
=========
<PAGE>
Exhibit 16.01
[DORFMAN, ABRAMS, MUSIC & CO. LETTERHEAD]
July 30, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Clearview Cinema Group, Inc.
Registration Statement on Form SB-2
File No. 333-27819 (the "Registration Statement")
-------------------------------------------------
Ladies and Gentlemen:
Our firm served as the independent public accountant of Clearview Cinema
Group, Inc. (the "Company") for the period of December 1994 through October
1996. We are aware that, pursuant to Item 304 of Regulation S-B, the Company is
required to make certain disclosures in the Registration Statement regarding any
change in the Company's accountant within the past two fiscal years. We have
reviewed the Company's disclosure contained in the Registration Statement and
agree with the statements made therein.
Very truly yours,
/s/ DORFMAN, ABRAMS, MUSIC & CO.
DORFMAN, ABRAMS, MUSIC & CO.
<PAGE>
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 1, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CLEARVIEW CINEMA GROUP, INC. DECEMBER 31, 1996 AND MARCH 31, 1997 FINANCIAL
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUANTIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 751 1,432
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 45 48
<CURRENT-ASSETS> 831 1,640
<PP&E> 12,144 12,466
<DEPRECIATION> (732) (1,011)
<TOTAL-ASSETS> 15,761 16,630
<CURRENT-LIABILITIES> 2,542 3,125
<BONDS> 0 0
0 0
0 0
<COMMON> 8 8
<OTHER-SE> 1,784 1,146
<TOTAL-LIABILITY-AND-EQUITY> 15,761 16,630
<SALES> 8,198 3,506
<TOTAL-REVENUES> 8,198 3,506
<CGS> 0 0
<TOTAL-COSTS> 7,825 3,136
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 592 359
<INCOME-PRETAX> (218) 11
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (218) 11
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (218) 11
<EPS-PRIMARY> (.12) (.01)
<EPS-DILUTED> (.12) (.01)
</TABLE>
